$140,000,000 ILLINOIS FINANCE AUTHORITY Variable Rate Demand Revenue Bonds Series 2009D and Series 2009E (The University of Chicago Medical Center)

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1 SUPPLEMENT TO OFFICIAL STATEMENT DATED AUGUST 14, 2009 $140,000,000 ILLINOIS FINANCE AUTHORITY Variable Rate Demand Revenue Bonds Series 2009D and Series 2009E (The University of Chicago Medical Center) The Official Statement dated August 14, 2009 (the Official Statement ) relating to the above-referenced bonds (the Series 2009 Bonds ) is hereby supplemented and amended to change certain provisions relating to Book-Entry Tenders. Terms used herein and not otherwise defined shall have the meanings assigned to such terms in the Official Statement. On page 8 of the Official Statement, the fifth full paragraph is hereby amended and restated in its entirety to read as follows: The principal and Tender Price of and premium, if any, and interest on the Series 2009 Bonds will be paid by the Bond Trustee. Such amounts will be payable on the applicable payment date by wire transfer of immediately available funds to the respective holders thereof on the applicable Record Date to an account specified by the holder thereof in writing delivered to the Bond Trustee. The Record Date with respect to any Interest Payment Date for the Series 2009 Bonds bearing interest at a Daily Interest Rate, a Two-Day Interest Rate or a Weekly Interest Rate is the Business Day immediately preceding such Interest Payment Date. Notwithstanding the foregoing, so long as records of ownership of the Series 2009 Bonds are maintained through the Book-Entry Only System described under the caption BOOK-ENTRY ONLY SYSTEM herein, all payments to the Beneficial Owners of such Series 2009 Bonds will be made in accordance with the procedures described under the caption BOOK-ENTRY ONLY SYSTEM herein. On page 13 of the Official Statement, the paragraph under the subheading Inadequate Funds for Tenders is hereby amended and restated in its entirety to read as follows: Inadequate Funds for Tenders. If sufficient funds are not available for the purchase of all Series 2009 Bonds tendered or deemed tendered and required to be purchased on any Tender Date, the failure to pay Tender Price of all Tendered Bonds shall constitute an Event of Default under the applicable Bond Indenture, all Tendered Bonds shall be returned to their respective holders and shall bear interest at the Maximum Rate from the date of such failed purchase until all such Tendered Bonds are purchased or otherwise paid. On page 14 of the Official Statement, the subheading Book-Entry Tenders and the four paragraphs under such subheading are hereby deleted in their entirety. On page D-21 of the Official Statement, the paragraph (c) under the subheading EVENTS OF DEFAULT is hereby amended and restated in its entirety to read as follows: (c) payment of Tender Price of any Bonds shall not be made when due and payable; or On pages D-31 and D-32 of the Official Statement, the subheading BOOK ENTRY TENDERS and the three paragraphs under such subheading are hereby deleted in their entirety. On page D-40 of the Official Statement, the paragraph (c) under the subheading DEFAULTS AND REMEDIES is hereby amended and restated in its entirety to read as follows: (c) payment of any amount due in respect of the Tender Price of Tendered Bonds shall not be made from any source (including the Corporation) when the same shall become due and payable; or Dated: August 19, 2009 This Supplement should be affixed to and made a part of the Official Statement

2 NEW ISSUE RATINGS * BOOK-ENTRY ONLY In the opinion of Jones Day, Bond Counsel, assuming compliance with certain covenants, under present law, interest on the Series 2009 Bonds will not be includible in gross income of the owners thereof for federal income tax purposes and will not be treated as an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations or as an adjustment in computing a corporation s alternative minimum taxable income for purposes of the federal alternative minimum tax imposed on certain corporations. Interest on the Series 2009 Bonds will be taken into account, however, in computing the branch profits tax. See the caption TAX EXEMPTION herein for a more detailed discussion of some of the federal tax consequences of owning the Series 2009 Bonds. The interest on the Series 2009 Bonds is not exempt from present Illinois income taxes. $140,000,000 ILLINOIS FINANCE AUTHORITY Variable Rate Demand Revenue Bonds Series 2009D and Series 2009E (The University of Chicago Medical Center) Dated: Date of Issuance Price: 100% Due: August 1, 2043 The Illinois Finance Authority (referred to as the Authority) is issuing its $70,000,000 Variable Rate Demand Revenue Bonds, Series 2009D (The University of Chicago Medical Center) (referred to as the Series 2009D Bonds) consisting of two subseries, and its $70,000,000 Variable Rate Demand Revenue Bonds, Series 2009E (The University of Chicago Medical Center) (referred to as the Series 2009E Bonds and, together with the Series 2009D Bonds, the Series 2009 Bonds) consisting of two subseries, all as further described on the inside cover. The Series 2009 Bonds will be issued pursuant to two separate but substantially similar Bond Trust Indentures, each dated as of August 1, 2009 (collectively referred to as the Bond Indentures), each between the Authority and Wells Fargo Bank, N.A., Chicago, Illinois, as bond trustee. Commencing on the date of the initial authentication and delivery of the Series 2009 Bonds, each subseries of the 2009D Bonds and each subseries of the Series 2009E Bonds will bear interest at a Daily Interest Rate for a Daily Interest Rate Period until successfully converted to bear interest for a different Interest Rate Period as described herein. The Daily Interest Rate, as applicable, for each subseries of the 2009D Bonds and each subseries of the Series 2009E Bonds will be initially determined by J.P. Morgan Securities Inc. and thereafter will be determined for the Series 2009D-1 Bonds by Wells Fargo Brokerage Services, LLC, for the Series 2009D-2 Bonds by Barclays Capital Inc., for the Series 2009E 1 Bonds by J.P. Morgan Securities Inc. and, for the Series 2009E-2 Bonds by Loop Capital Markets, LLC in the manner described herein. Wells Fargo Brokerage Services, LLC, Barclays Capital Inc., J.P. Morgan Securities Inc. and Loop Capital Markets, LLC are collectively referred to as the Remarketing Agents. Each subseries of the Series 2009 Bonds is subject to conversion to other Interest Rate Periods, as described herein. Interest on the Series 2009 Bonds will be paid on each Interest Payment Date as described herein, commencing September 1, AS FURTHER DESCRIBED HEREIN, ANY SUBSERIES OF THE SERIES 2009 BONDS MAY BE CONVERTED TO A DAILY INTEREST RATE PERIOD, WEEKLY INTEREST RATE PERIOD, TWO-DAY INTEREST RATE PERIOD, SHORT TERM INTEREST RATE PERIOD, LONG-TERM INTEREST RATE PERIOD, LIBOR BASED INTEREST RATE PERIOD OR AUCTION RATE PERIOD. OWNERS OF SUCH SUBSERIES OF THE SERIES 2009 BONDS WILL BE MAILED NOTICE OF SUCH EVENT. THEREAFTER, SUCH SUBSERIES OF THE SERIES 2009 BONDS SHALL BE IN THE RATE PERIOD OR BEAR INTEREST AS PROVIDED IN SUCH NOTICE. EXCEPT FOR CONVERSIONS AMONG DAILY INTEREST RATE PERIODS, TWO-DAY INTEREST RATE PERIODS AND WEEKLY INTEREST RATE PERIODS, THE SERIES 2009 BONDS WILL BE SUBJECT TO MANDATORY TENDER UPON CONVERSION TO A DIFFERENT INTEREST RATE PERIOD. DETAILED INFORMATION WITH RESPECT TO THE SHORT TERM INTEREST RATE PERIOD, LONG-TERM INTEREST RATE PERIOD, LIBOR BASED INTEREST RATE PERIOD AND AUCTION RATE PERIOD IS NOT PROVIDED HEREIN. AS PART OF ANY CONVERSION TO SUCH RATE PERIODS, ADDITIONAL INFORMATION DESCRIBING SUCH RATE PERIODS WILL BE PROVIDED TO PROSPECTIVE INVESTORS. So long as the Series 2009 Bonds bear interest during a Daily Interest Rate Period, a Two-Day Interest Rate Period or a Weekly Interest Rate Period, such Series 2009 Bonds are issuable in authorized denominations of $100,000 and multiples of $5,000 in excess thereof. The Series 2009 Bonds will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York (referred to as DTC). DTC will act as securities depository for the Series 2009 Bonds. Purchases will be made only in book entry form through DTC Participants, as defined in BOOK-ENTRY ONLY SYSTEM herein, and no physical delivery of the Series 2009 Bonds will be made to Beneficial Owners, as defined in BOOK-ENTRY ONLY SYSTEM herein, except as described herein. So long as Cede & Co. is the registered owner, as nominee of DTC, references herein to the holders or registered owners shall mean Cede & Co., as aforesaid, and shall not mean the Beneficial Owners of the Series 2009 Bonds. See BOOK-ENTRY ONLY SYSTEM herein. The principal of and premium, if any, and interest on the Series 2009 Bonds will be paid to Cede & Co. as long as Cede & Co. is the registered owner thereof. Disbursement of such payments to DTC Participants is the responsibility of DTC, and disbursement of such payments to the Beneficial Owners is the responsibility of DTC Participants, as more fully described herein. The Series 2009 Bonds are subject to mandatory and optional tender for purchase, in each case, in the manner, upon the conditions and at such times as described herein. The Series 2009 Bonds are subject to optional, extraordinary and mandatory sinking fund redemption, prior to maturity, in each case in the manner and at the times described herein. The Series 2009 Bonds are special limited obligations of the Authority secured under provisions of the Bond Indentures and Loan Agreements, and will be payable from payments made by The University of Chicago Medical Center, referred to as the Corporation, under the Loan Agreements, and from certain funds held under the Bond Indentures securing the Series 2009 Bonds. The obligation of the Corporation to make such payments is evidenced and secured by the Series 2009 Obligations issued under the Master Indenture described in this Official Statement. Payments on the Series 2009 Obligations are required to be made in an amount sufficient to pay when due the principal of, interest on and Tender Price of the Series 2009 Bonds. The Series 2009D Bonds operating in the Daily Interest Rate Period, the Two-Day Interest Rate Period or the Weekly Interest Rate Period will be secured by an irrevocable transferable direct pay letter of credit (referred to as the Series 2009D Letter of Credit) issued in favor of the Bond Trustee by The Series 2009E Bonds operating in the Daily Interest Rate Period, the Two-Day Interest Rate Period or the Weekly Interest Rate Period will be secured by an irrevocable transferable direct pay letter of credit (referred to as the Series 2009E Letter of Credit and, together with the Series 2009D Letter of Credit, the Letters of Credit) issued in favor of the Bond Trustee by Each Letter of Credit will terminate on August 17, 2012, subject to prior expiration upon the occurrence of certain specified events described herein, unless otherwise extended or replaced as described herein. THE SERIES 2009 BONDS AND THE INTEREST THEREON DO NOT CONSTITUTE AN INDEBTEDNESS OR AN OBLIGATION, GENERAL OR MORAL, OR A PLEDGE OF THE FULL FAITH OR A LOAN OF THE CREDIT OF THE AUTHORITY, THE STATE OF ILLINOIS OR ANY POLITICAL SUBDIVISION OF THE STATE, WITHIN THE PURVIEW OF ANY CONSTITUTIONAL OR STATUTORY LIMITATION OR PROVISION. THE AUTHORITY IS OBLIGATED TO PAY THE PRINCIPAL OF, PREMIUM, IF ANY, AND INTEREST ON THE SERIES 2009 BONDS AND OTHER COSTS INCIDENTAL THERETO ONLY FROM THE SOURCES SPECIFIED IN THE BOND INDENTURES. NEITHER THE FULL FAITH AND CREDIT NOR THE TAXING POWERS, IF ANY, OF THE AUTHORITY OR THE STATE OF ILLINOIS OR ANY POLITICAL SUBDIVISION OF THE STATE IS PLEDGED TO THE PAYMENT OF THE PRINCIPAL OF, PREMIUM, IF ANY, AND INTEREST ON THE SERIES 2009 BONDS OR OTHER COSTS INCIDENTAL THERETO, EXCEPT AS OTHERWISE PROVIDED IN THE BOND INDENTURES. NO OWNER OF ANY SERIES 2009 BOND SHALL HAVE THE RIGHT TO COMPEL THE TAXING POWER, IF ANY, OF THE AUTHORITY, OF THE STATE OF ILLINOIS OR ANY POLITICAL SUBDIVISION OF THE STATE TO PAY THE PRINCIPAL OF, PREMIUM, IF ANY, OR INTEREST ON THE SERIES 2009 BONDS. THE AUTHORITY DOES NOT HAVE THE POWER TO LEVY TAXES FOR ANY PURPOSE WHATSOEVER. This cover page contains certain information for quick reference only. It is not intended as a summary of this transaction. Investors are advised to read the entire Official Statement to obtain information essential to making an informed investment decision. The Series 2009 Bonds are offered when, as and if issued and received by the Underwriters, subject to prior sale, withdrawal or modification of the offer without notice, and to the approval of legality of the Series 2009 Bonds by Jones Day, Chicago, Illinois, Bond Counsel. Certain legal matters will be passed upon for the Authority by its special counsel, Charity & Associates, P.C., Chicago, Illinois; for the Corporation by its Acting General Counsel, John Satalic, Esq., and by its special counsel, Katten Muchin Rosenman LLP, Chicago, Illinois; for the Initial Credit Facility Issuers by their counsel, Chapman and Cutler LLP, Chicago, Illinois; and for the Underwriters by their counsel, Foley & Lardner LLP, Chicago, Illinois. It is expected that the Series 2009 Bonds will be available for delivery though the facilities of DTC to the Underwriters on or about August 20, * See RATINGS herein. J.P. Morgan Loop Capital Markets, LLC The date of this Official Statement is August 14, Barclays Capital Cabrera Capital Markets, LLC

3 SUMMARY OF THE OFFERING $70,000,000 Variable Rate Demand Revenue Bonds, Series 2009D (The University of Chicago Medical Center) consisting of: $35,000,000 Subseries 2009D-1 Bonds CUSIP No FZR3* Rate Period: Daily Interest Rate Initial Credit Facility Issuer: Bank of America, N.A. Expiration Date: August 17, 2012 Remarketing Agent: Wells Fargo Brokerage Services, LLC Underwriters: J.P. Morgan Securities Inc. Barclays Capital Inc. Loop Capital Markets, LLC Cabrera Capital Markets, LLC $35,000,000 Subseries 2009D-2 Bonds CUSIP No FZT9* Rate Period: Daily Interest Rate Initial Credit Facility Issuer: Bank of America, N.A. Expiration Date: August 17, 2012 Remarketing Agent: Barclays Capital Inc. Underwriters: J.P. Morgan Securities Inc. Barclays Capital Inc. Loop Capital Markets, LLC Cabrera Capital Markets, LLC $70,000,000 Variable Rate Demand Revenue Bonds, Series 2009E (The University of Chicago Medical Center) $60,000,000 Subseries 2009E-1 Bonds CUSIP No FZV4* consisting of: $10,000,000 Subseries 2009E-2 Bonds CUSIP No FZX0* Rate Period: Daily Interest Rate Initial Credit Facility Issuer: JPMorgan Chase Bank, N.A. Expiration Date: August 17, 2012 Remarketing Agent: J.P. Morgan Securities Inc. Underwriters: J.P. Morgan Securities Inc. Loop Capital Markets, LLC Cabrera Capital Markets, LLC Rate Period: Daily Interest Rate Initial Credit Facility Issuer: JPMorgan Chase Bank, N.A. Expiration Date: August 17, 2012 Remarketing Agent: Loop Capital Markets, LLC Underwriters: J.P. Morgan Securities Inc. Loop Capital Markets, LLC Cabrera Capital Markets, LLC * Copyright 2009, 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 are provided for convenience and reference only.

4 REGARDING USE OF THIS OFFICIAL STATEMENT No dealer, broker, salesperson or other person has been authorized by the Authority, the Corporation, Bank of America, N.A., as the Series 2009D Initial Credit Facility Issuer, JPMorgan Chase Bank, N.A., as the Series 2009E Initial Credit Facility Issuer, the Remarketing Agents or the Underwriters to give any information or to make any representations concerning the Series 2009 Bonds, other than those 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 them. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy, and there shall not be any sale of the Series 2009 Bonds by any person in any state or other jurisdiction in which it is unlawful for such person to make such offer, solicitation or sale. Other than with respect to the information concerning the Initial Credit Facility Issuers, the Letters of Credit and the Reimbursement Agreements under the captions THE LETTERS OF CREDIT AND REIMBURSEMENT AGREEMENTS and APPENDIX F Information Regarding the Initial Credit Facility Issuers, none of the information in this Official Statement has been supplied or verified by either Initial Credit Facility Issuer, and the Initial Credit Facility Issuers make no representation or warranty, express or implied, as to (i) the accuracy or completeness of such information, (ii) the validity of the Series 2009 Bonds or (iii) the tax status of the interest on the Series 2009 Bonds. The Underwriters have provided the following sentence for inclusion in this Official Statement. The Underwriters have reviewed the information in this Official Statement in accordance with and as part of their responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriters do not guarantee the accuracy or completeness of such information. This Official Statement has been approved by the Corporation, and the use and distribution of this Official Statement for the purposes described in this Official Statement have been authorized by the Authority and by the Corporation. The information under the captions, THE AUTHORITY and LITIGATION The Authority, has been furnished by the Authority. The information in APPENDIX G has been furnished by DTC. The information in APPENDIX F has been furnished by the respective Initial Credit Facility Issuer. All other information set forth herein has been furnished by the Corporation, unless otherwise indicated. The information and expressions of opinion herein are subject to change without notice, and neither the delivery of this Official Statement nor the sale of any Series 2009 Bonds shall, in any circumstances, create any implication that there has been no change in the affairs of the Authority or the Corporation since the date of this Official Statement. The Authority has consented to the use of this Official Statement. The Authority does not assume any responsibility for the accuracy or completeness of any information contained in this Official Statement, except such information relating specifically to the Authority under the captions, THE AUTHORITY and LITIGATION The Authority. Neither the Authority, its counsel, nor any of its officers, agents, employees or representatives have reviewed this Official Statement or investigated the statements or representations contained herein, except for those statements relating to the Authority set forth under the captions, THE AUTHORITY and LITIGATION The Authority. Except with respect to the information contained under such captions, neither the Authority, its counsel, nor any of its officers, agents, employees or representatives make any representation as to the completeness, sufficiency and truthfulness of the statements set forth in this Official Statement. Officers, employees and agents of the Authority and any other person executing the Series 2009 Bonds are not subject to personal liability by reason of the issuance of the Series 2009 Bonds. IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SERIES 2009 BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. i

5 The CUSIP numbers are included on the front cover page of this Official Statement for the convenience of the holders and potential holders of the Series 2009 Bonds. No assurance can be given that the CUSIP numbers for the Series 2009 Bonds will remain the same after the date of issuance and delivery of the Series 2009 Bonds. Wells Fargo Brokerage Services, LLC ( WFBS ) is a registered broker/dealer and a member of the FINRA and SIPC. WFBS is a brokerage affiliate of Wells Fargo & Company. WFBS is solely responsible for its contractual obligations and commitments. Nondeposit investment products offered by WFBS are not FDIC insured, are subject to investment risk, including loss of principal, and are not guaranteed by a bank unless otherwise specified. From time to time, Wells Fargo Bank, N. A. and other banks and companies affiliated with WFBS may lend money to an issuer of securities or debt that are underwritten or dealt in by WFBS. Within the prospectus or other documentation provided with each such underwriting or placement there will be a disclosure of any material lending relationship by an affiliate of WFBS with such an issuer and whether the proceeds of such an issuance of such debt securities will be used by the issuer to repay any outstanding indebtedness of any WFBS affiliate. From time to time, WFBS may participate in a primary of secondary distribution of securities bought or sold by a purchaser of the Series 2009 Bonds. WFBS and its affiliates may also act as an investment advisor to issuers whose securities may be sold to a purchaser of those Series 2009 Bonds. The Series 2009 Bonds have not been registered under the Securities Act of 1933, as amended, or the securities laws of any state, nor have the Bond Indentures or the Master Indenture been qualified under the Trust Indenture Act of 1939, as amended, in reliance upon exemptions contained in such acts. The Series 2009 Bonds have not been registered or qualified under the securities laws of any state (except as may be required in the State of Illinois) in reliance upon the state securities law preemption provisions under the Securities Act of 1933, as amended. In certain states, however, the filing of a notice with the state securities commission is required for the public sale of the Series 2009 Bonds in such states. The fact that a notice may have been filed in certain states or that registration or qualification may have been obtained in the State of Illinois cannot be regarded as a recommendation. Neither such states nor any of their respective agencies have passed upon the merits of the Series 2009 Bonds or the accuracy or completeness of this Official Statement. Any representation to the contrary may be a criminal offense. CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS IN THIS OFFICIAL STATEMENT Certain statements included or incorporated by reference in this Official Statement constitute projections or estimates of future events, generally known as forward-looking statements. These statements are generally identifiable by the terminology used such as plan, expect, estimate, budget or other similar words. These forward-looking statements include, but are not limited to, the information under the caption BONDHOLDERS RISKS in the forepart of this Official Statement and the information in APPENDIX A to this Official Statement. The achievement of certain results or other expectations contained in such forward-looking statements involves known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements described to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. The Corporation does not plan to issue any updates or revisions to those forward-looking statements if or when changes in its expectations, or events, conditions or circumstances on which such statements are based occur. ii

6 TABLE OF CONTENTS INTRODUCTION... 1 Purpose of this Official Statement... 1 Letters of Credit... 2 Concurrent Financing... 2 The Master Indenture... 2 The Series 2009 Obligations... 3 Series 2009 Bank Obligations... 3 Series 2009C Obligation... 3 Existing Obligations... 3 Additional Indebtedness; Additional Obligations... 4 Bondholders Risks... 4 Underlying Documents... 4 THE PLAN OF FINANCE... 4 ADDITIONAL FINANCING PLANS... 5 ESTIMATED SOURCES AND USES OF FUNDS... 5 ESTIMATED ANNUAL DEBT SERVICE REQUIREMENTS... 6 THE SERIES 2009 BONDS... 7 General... 7 Determination of the Daily Interest Rate... 9 Determination of the Two-Day Interest Rate... 9 Determination of the Weekly Interest Rate Maximum Rate or Alternate Rate to Apply Under Certain Circumstances Conversion of Interest Rates on the Series 2009 Bonds.. 11 Tender and Purchase of the Series 2009 Bonds Sources of Funds for Purchase of the Series 2009 Bonds 14 Credit Facility; Self Liquidity Agreement Redemption Exchange and Transfer THE REMARKETING AGENTS The Remarketing Agents are Paid by the Corporation The Remarketing Agents Routinely Purchases Bonds for their Own Accounts Series 2009 Bonds May be Offered at Different Prices on any Date The Ability to Sell the Series 2009 Bonds other than through Tender Process May Be Limited Under Certain Circumstances, a Remarketing Agent May Be Removed, Resign or Cease Remarketing the Bonds, Without a Successor Being Named THE LETTERS OF CREDIT AND REIMBURSEMENT AGREEMENTS The Letters of Credit Reimbursement Agreement Events of Default Remedies BOOK-ENTRY ONLY SYSTEM General Limitations Discontinuation of Book-Entry Only System SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2009 BONDS Limited Obligations The Letters of Credit; Substitute Letters of Credit The Series 2009 Obligations Additional Obligations The Master Indenture Bank Agreements The Loan Agreements and Bond Indentures State of Illinois Not Liable on the Series 2009 Bonds THE AUTHORITY Powers BONDHOLDERS RISKS General The Initial Credit Facility Issuers Impact of Market Turmoil Health Care Reform Interest Rate Swap Risk Construction Risk Nonprofit Healthcare Environment Charity Care Illinois Health Facilities Planning Act Security and Enforceability Patient Service Revenues Alternative or Integrated Delivery System Development Regulatory Environment Tax Matters Other Industry and Investment Risks LITIGATION The Authority The Corporation LEGAL MATTERS EXEMPTION FROM CONTINUING DISCLOSURE The Authority The Corporation TAX EXEMPTION FINANCIAL STATEMENTS FINANCIAL ADVISOR UNDERWRITING RATINGS MISCELLANEOUS Appendix A Information Concerning the Corporation Appendix B Combined Financial Statements of the Corporation and Independent Auditor s Report Appendix C Summary of Certain Provisions of the Master Indenture Appendix D Summary of Certain Provisions of the Bond Indentures and the Loan Agreements Appendix E Form of Proposed Opinion of Bond Counsel Appendix F Information Regarding the Initial Credit Facility Issuers Appendix G Information Regarding Book-Entry Only System iii

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8 OFFICIAL STATEMENT relating to $70,000,000 Illinois Finance Authority Variable Rate Demand Revenue Bonds, Series 2009D (The University of Chicago Medical Center) $70,000,000 Illinois Finance Authority Variable Rate Demand Revenue Bonds, Series 2009E (The University of Chicago Medical Center) Purpose of this Official Statement INTRODUCTION The purpose of this Official Statement is to provide certain information in connection with the offering by the Illinois Finance Authority (referred to as the Authority) of $70,000,000 in aggregate principal amount of its Variable Rate Demand Revenue Bonds, Series 2009D (The University of Chicago Medical Center) (referred to as the Series 2009D Bonds) being issued in two subseries and $70,000,000 in aggregate principal amount of its Variable Rate Demand Revenue Bonds, Series 2009E (referred to as the Series 2009E Bonds and, together with the Series 2009D Bonds, the Series 2009 Bonds) being issued in two subseries. The terms of the Series 2009 Bonds are described on the inside front cover page hereof and under the caption THE SERIES 2009 BONDS herein. The Series 2009 Bonds will be issued pursuant to two separate but substantially similar Bond Trust Indentures each dated as of August 1, 2009 (each referred to as a Bond Indenture and collectively referred to as the Bond Indentures) between the Authority and Wells Fargo Bank, N.A., as Bond Trustee (referred to as the Bond Trustee). The University of Chicago Medical Center (referred to as the Corporation), formerly known as The University of Chicago Hospitals and Health System, an Illinois not for profit corporation, was incorporated in 1986 to assume the operations of the hospital and clinic facilities of The University of Chicago (referred to as the University). These hospital and clinic facilities are located on the University s main campus and have been in continuous operation since These facilities include Bernard A. Mitchell Hospital, Chicago Lying-in Hospital and Comer Children s Hospital. The Corporation s ambulatory care facility, the Duchossois Center for Advanced Medicine, houses the Corporation s specialty outpatient clinics. See APPENDIX A for further information concerning the Corporation. The proceeds of the sale of the Series 2009 Bonds will be loaned to the Corporation pursuant to two separate but substantially similar Loan Agreements each dated as of August 1, 2009 (each referred to as a Loan Agreement and collectively as the Loan Agreements), between the Corporation and the Authority. The proceeds of the sale of the Series 2009 Bonds will be used, together with certain other funds, including the hereinafter defined Series 2009C Bonds, (i) to pay or reimburse the Corporation for the costs of acquiring, constructing, renovating and equipping certain of the Corporation s health facilities, including, without limitation, a portion of the costs of the construction and equipping of a new 10-story, approximately 1.2 million square foot hospital pavilion with approximately 240 beds (the Project ), (ii) pay a portion of the interest on the Series 2009 Bonds, and (iii) pay certain expenses incurred in connection with the issuance of the Series 2009 Bonds. See THE UNIVERSITY OF CHICAGO MEDICAL CENTER Description of the New Hospital Pavilion in APPENDIX A for a more detailed description of the Project.

9 The Authority makes no representation, whether express or implied, with respect to the Project or the location, use, operation, design, workmanship, merchantability, fitness, suitability or use for particular purpose, condition or durability thereof or title thereto. Letters of Credit The Series 2009D Bonds operating in the Daily Interest Rate Period, the Two-Day Interest Rate Period or the Weekly Interest Rate Period will be secured by an irrevocable transferable direct pay letter of credit (referred to as the Series 2009D Letter of Credit) issued in favor of the Bond Trustee by Bank of America, N.A. (referred to as the Series 2009D Initial Credit Facility Issuer). The Series 2009E Bonds operating in the Daily Interest Rate Period, the Two-Day Interest Rate Period or the Weekly Interest Rate Period will be secured by an irrevocable transferable direct pay letter of credit (referred to as the Series 2009E Letter of Credit and, together with the Series 2009D Letter of Credit, the Letters of Credit) issued in favor of the Bond Trustee by JPMorgan Chase Bank, N.A., (referred to as the Series 2009E Initial Credit Facility Issuer and, together with the Series 2009D Initial Credit Facility Issuer, the Initial Credit Facility Issuers). Concurrent Financing As part of the plan of financing that includes the issuance of the Series 2009 Bonds, the Authority intends to issue its Revenue Bonds, Series 2009C (The University of Chicago Medical Center) for the benefit of the Corporation in an aggregate principal amount of $85,000,000 (the Series 2009C Bonds ) to provide additional funds for the Project. The Corporation presently anticipates that such Series 2009C Bonds would be issued and delivered concurrently with the issuance and delivery of the Series 2009 Bonds but the issuance of the Series 2009 Bonds is not contingent upon the issuance of the Series 2009C Bonds. The Master Indenture The Series 2009D Bonds will be secured by a Direct Note Obligation, Series 2009D (Illinois Finance Authority) (referred to as the Series 2009D Obligation) of the Corporation and the Series 2009E Bonds will be secured by a Direct Note Obligation, Series 2009E (Illinois Finance Authority) (referred to as the Series 2009E Obligation and, together with the Series 2009D Obligation, the Series 2009 Obligations) of the Corporation each issued pursuant to a Master Trust Indenture (Amended and Restated) dated as of November 1, 1998, as supplemented and amended, between the Corporation, as the sole Member of the Obligated Group created thereunder, and Wells Fargo Bank, N.A., as successor master trustee (referred to herein as the Master Trustee) (such Master Trust Indenture, as supplemented and amended, is hereinafter referred to as the Master Indenture). Persons may become Members of the Obligated Group, and Members may cease being Members of the Obligated Group, in accordance with the procedures set forth in the Master Indenture. See SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE Entrance into the Obligated Group and Cessation of Status as a Member of the Obligated Group in APPENDIX C hereto. The Corporation is presently the only Member of the Obligated Group, and it has no intention of adding additional Members to the Obligated Group in the immediately foreseeable future. See APPENDIX A for a brief description of the Corporation and APPENDIX B for certain audited financial statements of the Corporation. Certain amendments to the Master Indenture are being made pursuant to the Tenth Supplemental Master Trust Indenture that is being executed and delivered in connection with the issuance of the Series 2009 Bonds. By purchasing a Series 2009 Bond, the holder thereof is deemed to have consented to the amendments contained in the Tenth Supplemental Master Trust Indenture and described under the caption SUMMARY OF CERTAIN PROVISIONS OF THE TENTH SUPPLEMENTAL MASTER INDENTURE in APPENDIX C. Such amendments will not become effective until, among other things, the owners of not less than 51% in the aggregate principal amount of the Obligations outstanding under the Master Indenture have consented to the amendments. 2

10 The Series 2009 Obligations In order to evidence and secure the loan made by the Authority pursuant to the Series 2009D Loan Agreement, the Corporation will issue and deliver to the Authority its Series 2009D Obligation. The aggregate principal amount of the Series 2009D Obligation will equal the aggregate principal amount of the Series 2009D Bonds. The Authority will pledge and assign the Series 2009D Obligation and its rights under the Series 2009D Loan Agreement to the Bond Trustee as security for the Series 2009D Bonds. The Series 2009D Obligation will entitle the Bond Trustee, as the holder thereof, to the protection of the covenants, restrictions and other obligations imposed upon the Members of the Obligated Group by the Master Indenture. In order to evidence and secure the loan made by the Authority pursuant to the Series 2009E Loan Agreement, the Corporation will issue and deliver to the Authority its Series 2009E Obligation. The aggregate principal amount of the Series 2009E Obligation will equal the aggregate principal amount of the Series 2009E Bonds. The Authority will pledge and assign the Series 2009E Obligation and its rights under the Series 2009E Loan Agreement to the Bond Trustee as security for the Series 2009E Bonds. The Series 2009E Obligation will entitle the Bond Trustee, as the holder thereof, to the protection of the covenants, restrictions and other obligations imposed upon the Members of the Obligated Group by the Master Indenture. The Series 2009 Obligations and any additional Obligations issued by any Member of the Obligated Group under the Master Indenture (whether or not pledged under the Bond Indentures), together with the Existing Obligations described herein and the Series 2009 Bank Obligations (as said terms are hereinafter defined) to be outstanding after the issuance of the Series 2009 Bonds, are collectively referred to herein as the Obligations. The Corporation and any future Member of the Obligated Group will jointly and severally agree, pursuant to the Series 2009 Obligations, to pay when due the principal of, premium, if any, and interest on the Series 2009 Bonds. See the information contained herein under the caption SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2009 BONDS The Master Indenture. Obligations issued under the Master Indenture, including the Series 2009 Obligations, are secured by a security interest in the Unrestricted Receivables of the Obligated Group, but are not presently secured by a pledge, grant or mortgage of any of the other property of the Obligated Group. Notwithstanding the pledge of Unrestricted Receivables, the Members of the Obligated Group may sell or otherwise transfer Unrestricted Receivables in accordance with the provisions of the Master Indenture. See SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE The Obligations; Payments of the Obligations in APPENDIX C hereto. Series 2009 Bank Obligations The Corporation will issue two Obligations under the Master Indenture (referred to as the Series 2009 Bank Obligations) to secure the Corporation s obligation to pay or reimburse the Initial Credit Facility Issuers. The Series 2009 Bank Obligations will be equally and ratably secured under the Master Indenture on a parity with the Series 2009 Obligations and the Existing Obligations described herein. Series 2009C Obligation On the date of issuance of the Series 2009 Bonds, it is anticipated that the Authority will issue the Series 2009C Bonds for the benefit of the Corporation in an aggregate principal amount of $85,000,000. The Corporation will issue an Obligation under the Master Indenture (referred to as the Series 2009C Obligation) to secure the Corporation s obligation to pay principal and interest and premium, if any, on the Series 2009C Bonds. Existing Obligations The Corporation has previously issued four Obligations securing, respectively, bonds issued for the benefit of the Corporation in February 2009 ($165,000,000 of which is currently outstanding (referred to as the Series 2009A/B Bonds)), 2003 ($39,535,000 of which is currently outstanding) and 2001 ($82,605,000 of which is currently outstanding), and an Obligation securing certain commercial paper notes (referred to as the Commercial 3

11 Paper Notes) issued for the benefit of the Corporation ($88,488,000 of which is currently outstanding). The Corporation also previously issued Obligations that secure the Corporation s obligations to pay or reimburse the commercial banks that issued three separate letters of credit securing the Series 2009A/B Bonds (referred to as the Series 2009A/B Bank Obligations) and the Corporation s commercial paper notes (referred to as the Commercial Paper Bank Obligation). These Obligations are collectively referred to herein as the Existing Obligations. The Series 2009C Obligation, the Series 2009 Obligations and the Series 2009 Bank Obligations will be equally and ratably secured on a parity with the Existing Obligations. Additional Indebtedness; Additional Obligations The Corporation or any future Member of the Obligated Group may incur Additional Indebtedness that may, but need not be, evidenced or secured by an Additional Obligation issued under the Master Indenture. Additional Obligations may be issued to the Authority and to parties other than the Authority. Additional Obligations need not be pledged under the Bond Indentures, but will be equally and ratably secured (except as described in this Official Statement) with all Obligations (including the Series 2009 Obligations). Under the terms of the Master Indenture, Additional Obligations may also be entitled to be secured by security (including, without limitation, letters or lines of credit or insurance) or Liens on property (including health care facilities of the Obligated Group) in addition to any security that extends to Obligations (including the Series 2009 Obligations), which security need not be extended to any other Obligation (including the Series 2009 Obligations). See DEFINITIONS OF CERTAIN TERMS - Permitted Encumbrances SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE Liens on Property and Other Covenants of the Members in APPENDIX C hereto. The Master Indenture does not limit the amount of Additional Indebtedness that the Obligated Group may incur and does not require the Obligated Group to satisfy any financial tests in order to incur such Additional Indebtedness; provided, however, the MBIA Covenants and Bank Covenants (as defined below under the heading SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2009 BONDS Bank Agreements ) contain certain restrictions on the Obligated Group s ability to incur Additional Indebtedness. Bondholders Risks There are certain risks involved in the purchase of the Series 2009 Bonds. See the information contained herein under the caption, BONDHOLDERS RISKS. Underlying Documents The descriptions and summaries of various documents set forth in this Official Statement, including APPENDIX C and APPENDIX D hereto, do not purport to be comprehensive or definitive, and reference is made to each document for complete details of all terms and conditions thereof. All statements herein are qualified in their entirety by the terms of each such document. Upon the issuance of such Series 2009 Bonds, copies of the Bond Indentures and Loan Agreements will be available for inspection at the designated corporate trust office of the Bond Trustee. Copies of the Master Indenture are available for inspection at the designated office of the Master Trustee. THE PLAN OF FINANCE The proceeds of the sale of the Series 2009 Bonds will be used, together with certain other funds to (i) pay or reimburse the Corporation for the costs of acquiring, constructing, renovating and equipping the Project, (ii) pay a portion of the interest on the Series 2009 Bonds, and (iii) pay certain expenses incurred in connection with the issuance of the Series 2009 Bonds. See THE UNIVERSITY OF CHICAGO MEDICAL CENTER Description of the New Hospital Pavilion in APPENDIX A for a more detailed description of the Project. 4

12 See the information contained herein under the caption ESTIMATED SOURCES AND USES OF FUNDS. ADDITIONAL FINANCING PLANS As described in APPENDIX A under the caption Description of the New Hospital Pavilion, the Corporation intends to borrow a total of $500 million to finance the Project. The Corporation plans to request the issuance of an additional $275 million of tax-exempt bonds, and presently anticipates that a portion of these bonds would be issued in 2010, and the remainder in Each such series of bonds, if issued, would be secured by an Additional Obligation issued under the Master Indenture on a parity with the Series 2009 Obligations. ESTIMATED SOURCES AND USES OF FUNDS Set forth below are the estimated sources and uses of funds net of any anticipated investment earnings. Series 2009 Bonds Series 2009C Bonds Sources: Principal amount of Series 2009 Bonds $140,000,000 $ - Principal amount of Series 2009C Bonds - 85,000,000 Minus original issue discount - (2,107,762) Total Sources $140,000,000 $82,892,238 Uses: Project $123,327,077 $68,151,810 Capitalized Interest 15,363,158 13,524,590 Costs of issuance (1) 1,309,765 1,215,838 Total Uses $140,000,000 $82,892,238 (1) Includes Underwriters discount, letter of credit fees, legal, printing, rating agencies, trustee and Authority s fees, and other miscellaneous costs of issuance. 5

13 ESTIMATED ANNUAL DEBT SERVICE REQUIREMENTS The amounts required in each fiscal year of the Corporation ending June 30 for the payment of principal and interest on the Series 2009 Bonds and certain other long-term Indebtedness are as follows: Fiscal Year Series 2009C Bonds Series 2009 Bonds Total Ending Existing Debt Service June 30 Principal Interest Principal Interest (1) Obligations (2) Requirements 2010 $ -- $ 2,243,281 $ -- $ 3,388,767 $24,918,879 $30,550, ,614, ,340,000 24,872,650 33,827, ,614, ,177,215 24,931,258 34,723, ,614, ,465,853 24,939,481 35,020, ,614, ,431,079 24,991,149 35,036, ,614, ,431,079 24,874,804 34,920, ,614, ,455,988 25,674,441 35,745, ,614, ,436,012 25,639,279 35,690, ,614, ,446,000 25,796,572 35,857, ,614, ,475,841 25,950,126 36,040, ,614, ,426,228 26,204,529 36,245, ,614, ,436,012 26,409,093 36,459, ,614, ,446,000 26,624,578 36,685, ,614, ,446,000 26,421,707 36,482, ,614, ,485,747 26,708,910 36,809, ,614, ,421,092 27,051,914 37,087, ,614, ,431,079 27,192,594 37,238, ,614, ,446,000 27,504,603 37,565, ,040,000 4,429, ,455,988 11,016,164 27,942, ,425,000 4,050, ,436,012 11,029,386 27,940, ,635,000 3,602, ,475,841 9,257,758 27,971, ,170,000 3,152, ,431,079 9,270,704 25,024, ,560,000 2,747, ,441,108 9,282,846 25,031, ,985,000 2,319, ,436,012 9,289,953 25,030, ,415,000 1,868, ,446,000 9,310,064 25,039, ,880,000 1,393, ,446,000 9,319,281 25,038, ,365, , ,470,868 9,335,562 25,062, ,525, ,938 2,000,000 5,356,402 7,748,913 26,947, ,360,000 4,805,755 2,326,914 24,492, ,080,000 4,107, ,187, ,880,000 3,383, ,263, ,680,000 2,626, ,306, ,480,000 1,817, ,297, ,280, , ,278, ,240, , ,384,584 TOTAL $85,000,000 $105,466,244 $140,000,000 $166,864,806 $563,894,112 $1,061,225,162 (1) Assumes an average annual interest rate of approximately 3.10% from date of issuance of the Series 2009 Bonds to September 1, 2011 and assumes the swap rate of 3.89% thereafter. No assurance can be given that such interest rate for such variable rate indebtedness will be achieved or maintained. Includes de minimus rounding adjustments. Excludes liquidity and credit support and remarketing fees. (2) Assumes an average annual interest rate of approximately 3.10% per annum for any indebtedness bearing interest at variable rates. No assurance can be given that such interest rate for such variable rate indebtedness will be achieved or maintained. Includes de minimus rounding adjustments. Excludes liquidity and credit support and remarketing fees. Includes debt service requirements relating to the tax-exempt bonds issued for the benefit of the Corporation in 2001, 2003 and February 2009 and the Corporation s repayment obligations with respect to the Commercial Paper Notes. Note: Numbers in certain rows and columns may not total due to rounding. 6

14 THE SERIES 2009 BONDS The following is a summary of certain provisions of the Series 2009 Bonds. Terms not otherwise defined in the following summary have the meanings assigned thereto in APPENDIX D hereto. So long as DTC acts as securities depository for the Series 2009 Bonds, as described under the caption BOOK-ENTRY ONLY SYSTEM herein, all references herein to Bondholder or Bondholders and to owners and holders of Series 2009 Bonds shall be deemed to refer to Cede & Co., as nominee for DTC, and not to DTC Participants, Indirect Participants or Beneficial Owners (as said terms are hereinafter defined). THIS OFFICIAL STATEMENT ONLY DESCRIBES THE TERMS AND PROVISIONS OF THE SERIES 2009 BONDS AND THE DOCUMENTS RELATING THERETO WHILE THE SERIES 2009 BONDS BEAR INTEREST AT A DAILY INTEREST RATE, A TWO-DAY INTEREST RATE OR WEEKLY INTEREST RATE. If the Interest Rate Period for the Series 2009 Bonds is changed to a different Interest Rate Period other than those described herein, the Corporation will supplement this Official Statement to describe the new Interest Rate Period. The Series 2009D Bonds and the Series 2009E Bonds are each an entirely separate series and are separately secured under their respective Bond Indentures. However, all of the Series 2009 Bonds will be considered to be a single series for tax purposes. All references in this Official Statement to a related Series 2009 Bond, Bond Trustee, Loan Agreement, Bond Indenture, Credit Facility, Credit Facility Issuer or Reimbursement Agreement will refer to (i) in the case of the Series 2009D Bonds, a Series 2009D Bond, the Bond Trustee for the Series 2009D Bonds, the Loan Agreement for the Series 2009D Bonds, the Bond Indenture for the Series 2009D Bonds, the Credit Facility for the Series 2009D Bonds, the Credit Facility Issuer for the Series 2009D Bonds and the Reimbursement Agreement for the Series 2009D Bonds and (ii) in the case of the Series 2009E Bonds, a Series 2009E Bond, the Bond Trustee for the Series 2009E Bonds, the Loan Agreement for the Series 2009E Bonds, the Bond Indenture for the Series 2009E Bonds, the Credit Facility Issuer for the Series 2009E Bonds and the Reimbursement Agreement for the Series 2009E Bonds. Each Series of the Series 2009 Bonds consists of two subseries. All references to a related Series 2009 Bond, Remarketing Agent and Remarketing Agreement will refer (i) in the case of the Series 2009D-1 Bonds, to a Series 2009D-1 Bond, the Remarketing Agent and Remarketing Agreement for the Series 2009D-1 Bonds; (ii) in the case of the Series 2009D-2 Bonds, to a Series 2009D-2 Bond, the Remarketing Agent and Remarketing Agreement for the Series 2009D-2 Bonds; (iii) in the case of the Series 2009E-1 Bonds, to a Series 2009E-1 Bond, the Remarketing Agent and Remarketing Agreement for the Series 2009E-1 Bonds; and (iv) in the case of the Series 2009E-2 Bonds, to a Series 2009E-2 Bond, the Remarketing Agent and Remarketing Agreement for the Series 2009E-2 Bonds. The Letters of Credit and Reimbursement Agreements are hereinafter sometimes referred to as the Credit Facilities and Credit Facility Agreements, respectively. General Each Subseries of the Series 2009 Bonds initially will bear interest at the Daily Interest Rate as described below under Determination of the Daily Interest Rate unless and until, at the direction of the Corporation on behalf of the Authority and upon compliance with the conditions set forth in the Bond Indentures and the Loan Agreements, the interest rate borne by the Series 2009 Bonds is converted to a Two-Day Interest Rate, a Weekly Interest Rate, a Long-Term Interest Rate, Bond Interest Term Rates, the LIBOR-Based Interest Rate or the Auction Period Rate. The Series 2009 Bonds are to (i) mature on August 1, 2043, subject to prior redemption as described under THE SERIES 2009 BONDS Redemption below, (ii) be dated the date of their issuance and (iii) bear interest from that date until paid. Except for Bank Bonds, so long as the Series 2009 Bonds bear interest at a Daily Interest Rate, a Two-Day Interest Rate or a Weekly Interest Rate, interest will be computed on the basis of a 365- or 366-day 7

15 year for the actual days elapsed for the Series 2009 Bonds. Interest on Bank Bonds will accrue on the basis set forth in the Reimbursement Agreements. The Series 2009 Bonds will be issued as fully registered Series 2009 Bonds in book-entry form only and when issued will be registered in the name of Cede & Co., as nominee of DTC. The Series 2009 Bonds may be purchased by the beneficial owners in denominations, during a Daily Interest Rate Period, a Two-Day Interest Rate Period or a Weekly Interest Rate Period, of $100,000 and integral multiples of $5,000 in excess of $100,000 (during a Daily Interest Rate Period, a Two-Day Interest Rate Period or a Weekly Interest Rate Period, an Authorized Denomination ). While the Series 2009 Bonds bear interest at the Daily Interest Rate, a Two-Day Interest Rate or the Weekly Interest Rate, interest on the Series 2009 Bonds will be payable monthly in arrears on the first Business Day of each month, commencing on September 1, 2009 (an Interest Payment Date ). Interest on the Series 2009 Bonds while such Series 2009 Bonds bear interest at the Daily Interest Rate, the Two-Day Interest Rate or the Weekly Interest Rate will be payable on each Interest Payment Date for the period commencing on the prior Interest Payment Date and ending on and including the day immediately preceding the Interest Payment Date (or, if sooner, the last day of the Interest Rate Period). In any event, interest on the Series 2009 Bonds will be payable for the final Interest Rate Period to the date on which the Series 2009 Bonds have been paid in full. At no time will any Bond bear interest at a Daily Interest Rate, a Two-Day Interest Rate or a Weekly Interest Rate that is in excess of the Maximum Rate. The Maximum Rate means the lesser of (i) 12% per annum, (ii) the maximum rate from time to time permitted to be drawn on the Credit Facility to pay interest on the Series 2009 Bonds (initially, 12% per annum) and (iii) the Maximum Lawful Rate, provided, however, that the Maximum Rate for the Bank Bonds shall be the lesser of 25% per annum and the Maximum Lawful Rate. The principal and Tender Price of and premium, if any, and interest on the Series 2009 Bonds will be paid by the Bond Trustee. Such amounts will be payable on the applicable payment date by wire transfer of immediately available funds to the respective holders thereof on the applicable Record Date to an account specified by the holder thereof in writing delivered to the Bond Trustee. The Record Date with respect to any Interest Payment Date for the Series 2009 Bonds bearing interest at a Daily Interest Rate, a Two-Day Interest Rate or a Weekly Interest Rate is the Business Day immediately preceding such Interest Payment Date. Notwithstanding the foregoing, so long as records of ownership of the Series 2009 Bonds are maintained through the Book-Entry Only System described under the caption BOOK-ENTRY ONLY SYSTEM herein, all payments to the Beneficial Owners of such Series 2009 Bonds will be made in accordance with the procedures described under the caption BOOK-ENTRY ONLY SYSTEM herein. All tenders for purchase will be exercised through the book-entry system as described under the heading THE SERIES 2009 BONDS Tender and Purchase of Series 2009 Bonds Book-Entry Tenders below. The initial Daily Interest Rate for the Series 2009 Bonds will be determined by the J.P. Morgan Securities Inc. Pursuant to the Bond Indentures and the Remarketing Agreements, each Remarketing Agent will thereafter determine the Daily Interest Rate on the related Subseries of Series 2009 Bonds and use its best efforts to remarket the related Subseries of Series 2009 Bonds subject to optional and mandatory tender for purchase. A Remarketing Agent may resign or be removed without a successor having been named. If a Remarketing Agent resigns or is removed without a successor in place, the Bond Trustee will assume such duties until a successor is appointed and the interest rate on the applicable Series 2009 Bonds will be determined as described under the heading THE SERIES 2009 BONDS Maximum or Alternate Rate to Apply Under Certain Circumstances below. If a Remarketing Agent is removed without a successor in place, the Bond Trustee will assume such duties until a successor is appointed and the interest rate on the applicable Series 2009 Bonds will be the Maximum Rate until a successor is named. The Bond Trustee will serve as the Tender Agent upon the initial issuance of the Series 2009 Bonds. 8

16 Determination of the Daily Interest Rate During each Daily Interest Rate Period, the Series 2009 Bonds will bear interest at the Daily Interest Rate, which will be determined by the Remarketing Agent on each Business Day for such Business Day. The Daily Interest Rate will be the rate of interest per annum determined by the Remarketing Agent (based on the examination of tax-exempt obligations comparable, in the judgment of the Remarketing Agent, to the Series 2009 Bonds and known by the Remarketing Agent to have been priced or traded under then prevailing market conditions) on or before 10:00 a.m. on a Business Day to be the minimum interest rate which, if borne by the Series 2009 Bonds, would enable the Remarketing Agent to sell all of the Series 2009 Bonds on such date of determination at a price (without regarding accrued interest) equal to the principal amount thereof. The Daily Interest Rate for any day which is not a Business Day shall be the same as the Daily Interest Rate for the immediately preceding Business Day. In the event that the Remarketing Agent fails to establish a Daily Interest Rate for the Series 2009 Bonds bearing interest at such rate, then the Daily Interest Rate for such Business Day will be the same as the Daily Interest Rate for the immediately preceding day and such rate will continue until the earlier of (A) the date on which the Remarketing Agent determines a new Daily Interest Rate or (B) the seventh day succeeding the first such day on which such Daily Interest Rate is not determined by the Remarketing Agent. If the Daily Interest Rate determined by the Remarketing Agent is held to be invalid or unenforceable by a court of law or the Remarketing Agent fails to determine a new Daily Interest Rate for a period of seven days as described in clause (B) above, then the Daily Interest Rate applicable to the Series 2009 Bonds, as determined by the Remarketing Agent, will be equal to 110% of the SIFMA Swap Index or, if such index is no longer made available, 85% of the interest rate on 30-day high grade unsecured commercial paper notes sold through dealers by major corporations as reported in The Wall Street Journal for each Business Day (and for the immediately preceding Business Day for each day which is not a Business Day) until the Daily Interest Rate is again validly determined by the Remarketing Agent. Determination of the Two-Day Interest Rate During each Two-Day Interest Rate Period, the Series 2009 Bonds will bear interest at the Two-Day Interest Rate, which will be determined by the Remarketing Agent on or before 10:00 a.m., New York City time, on the first day of a period during which the Bonds bear interest at a Two-Day Interest Rate and on each Monday, Wednesday and Friday thereafter so long as interest on the Series 2009 Bonds is to be payable at a Two-Day Rate or, if any Monday, Wednesday or Friday is not a Business Day, on the next Monday, Wednesday or Friday that is a Business Day. The Two-Day Interest Rate set on any Business Day will be effective as of such Business Day and will remain in effect until the next day on which a Two-Day Interest Rate is required to be set in accordance with the terms of the first sentence of this paragraph. The Two-Day Interest Rate will be the minimum rate necessary (based on the examination of tax-exempt obligations comparable, in the judgment of the Remarketing Agent, to the Series 2009 Bonds and known by the Remarketing Agent to have been priced or traded under then prevailing market conditions) which would enable the Remarketing Agent to sell all of the Series 2009 Bonds on such of determination at a price (without regarding accrued interest) equal to the principal thereof. In the event that the Remarketing Agent fails to establish a Two-Day Interest Rate for the Series 2009 Bonds bearing interest at such rate, then the Series 2009 Bonds shall remain in the Two-Day Interest Rate Period and the Two-Day Interest Rate applicable to the Series 2009 Bonds, as determined by the Remarketing Agent, will be equal to the SIFMA Swap Index multiplied by the SIFMA Percentage or, if the SIFMA Swap Index or the SIFMA Percentage is unavailable, the LIBOR Index multiplied by the LIBOR Percentage or, if the LIBOR Index or the LIBOR Percentage is unavailable, the Applicable Percentage of the SIFMA Index or, if the SIFMA Swap Index or the Applicable Percentage is unavailable, 90% of the 30-day Treasury rate as provided to the Bond Trustee by the Remarketing Agent, until the Two-Day Interest Rate is again validly determined by the Remarketing Agent. 9

17 Determination of the Weekly Interest Rate During each Weekly Interest Rate Period, the Series 2009 Bonds will bear interest at the Weekly Interest Rate, which will be determined by the Remarketing Agent by 5:00 p.m. on Wednesday of each week during such Weekly Interest Rate Period, or if such day is not a Business Day, then on the next succeeding Business Day. The first Weekly Interest Rate for each Weekly Interest Rate Period will be determined on or prior to the first day of such Weekly Interest Rate Period and will apply to the period commencing on the first day of such Weekly Interest Rate Period and ending on and including the next succeeding Wednesday. Thereafter, each Weekly Interest Rate will apply to the period commencing on and including Thursday and ending on and including the next succeeding Wednesday, unless such Weekly Interest Rate Period will end on a day other than Wednesday, in which event the last Weekly Interest Rate for such Weekly Interest Rate Period will apply to the period commencing on and including Thursday preceding the last day of such Weekly Interest Rate Period and ending on and including the last day of such Weekly Interest Rate Period. The Weekly Interest Rate will be the rate of interest per annum determined by the Remarketing Agent (based on the examination of tax-exempt obligations comparable, in the judgment of the Remarketing Agent, to the Series 2009 Bonds and known by the Remarketing Agent to have been priced or traded under then prevailing market conditions) to be the minimum interest rate which, if borne by the Series 2009 Bonds, would enable the applicable Remarketing Agent to sell all of the Series 2009 Bonds of a Subseries on such date of determination at a price (without regarding accrued interest) equal to the principal amount thereof. In the event that the Remarketing Agent fails to establish a Weekly Interest Rate for any week with respect to a Subseries of the Series 2009 Bonds bearing interest at such rate, then the Weekly Interest Rate for such week with respect to such Subseries will be the same as the immediately preceding Weekly Interest Rate if such Weekly Interest Rate was determined by the Remarketing Agent. If the immediately preceding Weekly Interest Rate was not determined by the Remarketing Agent, or if the Weekly Interest Rate determined by the Remarketing Agent is held to be invalid or unenforceable by a court of law, then the Weekly Interest Rate for such week, as determined by the Remarketing Agent, will be equal to 110% of the SIFMA Swap Index or, if such index is no longer made available, 85% of the interest rate on 30-day high grade unsecured commercial paper notes sold through dealers by major corporations as reported in The Wall Street Journal on the day such Weekly Interest Rate would otherwise be determined as provided in the Bond Indenture. Maximum Rate or Alternate Rate to Apply Under Certain Circumstances If a Subseries of the Series 2009 Bonds are bearing interest at a Daily Interest Rate, a Two-Day Interest Rate or a Weekly Interest Rate and a Remarketing Agent is (i) removed and no successor has been appointed as of the effective date of such removal, then the applicable Series 2009 Bonds shall bear interest at the Maximum Rate until a successor Remarketing Agent has been appointed and begins determining the Weekly Interest Rate or Daily Interest Rate or (ii) resigns and no successor has been appointed as of the effective date of such resignation, then, in the case of the Series 2009 Bonds in a Daily Interest Rate Period or a Weekly Interest Rate Period, the Series 2009 Bonds shall bear interest at 110% of SIFMA Swap Index or if such Index is no longer available, 85% of the interest rate on 30 day high grade unsecured commercial paper notes sold through dealers by major corporations as reported in the Wall Street Journal on the day such Daily Interest Rate or Weekly Interest Rate would otherwise be determined and, in the case of Series 2009 Bonds in a Two-Day Interest Rate Period, then the Series 2009 Bonds shall bear interest at a rate equal to the SIFMA Swap Index multiplied by the SIFMA Percentage or, if the SIFMA Swap Index or the SIFMA Percentage is unavailable, the LIBOR Index multiplied by the LIBOR Percentage or, if the LIBOR Index or the LIBOR Percentage is unavailable, the Applicable Percentage of the SIFMA Index or, if the SIFMA Swap Index or the Applicable Percentage is unavailable, 90% of the 30-day Treasury rate on the day such Two-Day Interest Rate would otherwise be determined. In addition, if a Credit Facility is required to be maintained pursuant to the provisions of the Bond Indenture and no Self Liquidity Agreement or Credit Facility is in effect, then the applicable Subseries of the Series 2009 Bonds shall bear interest at the Maximum Rate until a Credit Facility is delivered to the Bond Trustee or a Self Liquidity Agreement becomes effective. 10

18 Conversion of Interest Rates on the Series 2009 Bonds Conversion from Daily Interest Rate, a Two-Day Interest Rate or Weekly Interest Rate. While the Series 2009 Bonds bear interest in a Daily Interest Rate Period, a Two-Day Interest Rate Period or a Weekly Interest Rate Period, the Corporation on behalf of the Authority may direct that the interest rate on a Subseries of the Series 2009 Bonds be converted to a Daily Interest Rate, a Two-Day Interest Rate or a Weekly Interest Rate (as applicable), a Long-Term Interest Rate, Bond Interest Term Rates, the LIBOR-Based Interest Rate or the Auction Period Rate upon satisfaction of certain conditions set forth in the Bond Indenture. Series 2009 Bonds in a Daily Interest Rate Period, a Two-Day Interest Rate Period or a Weekly Interest Rate Period may be converted to another Interest Rate Period on any Business Day. If the proposed conversion is from the Daily Interest Rate Period, the Two-Day Interest Rate Period or the Weekly Interest Rate Period to the Daily Interest Rate Period, the Two-Day Interest Rate Period or the Weekly Interest Rate Period, the Series 2009 Bonds will not be subject to mandatory tender for purchase on the effective date of such conversion. Except for conversions among the Daily Interest Rate Period, the Two-Day Interest Rate Period and the Weekly Interest Rate Period, if the Interest Rate Period is to be converted, then the Series 2009 Bonds will be subject to mandatory tender for purchase on the effective date of the conversion to another Interest Rate Period, at a purchase price equal to the principal amount thereof, without premium, plus accrued interest (if any) to the effective date of the conversion. The Bond Indenture provides that the Bond Trustee is required to give notice of any conversion to another Interest Rate Period to the holders of the Series 2009 Bonds to be converted not less than 10 days (30 days in the case of a conversion to a Long-Term Interest Rate Period or Auction Rate Period) prior to the proposed effective date of such conversion. Certain Conditions to Conversion of Interest Rates on Series 2009 Bonds. In connection with any conversion of the Interest Rate Period from a Daily Interest Rate Period, a Two-Day Interest Rate Period or a Weekly Interest Rate Period, the Corporation will cause to be provided to the Bond Trustee, among other things, a Favorable Opinion of Bond Counsel dated the effective date of such conversion. In the event that Bond Counsel fails to deliver a Favorable Opinion of Bond Counsel on any such date, then the Interest Rate Period will not be converted from the Daily Interest Rate Period, the Two-Day Interest Rate Period or the Weekly Interest Rate Period, as applicable, and the Series 2009 Bonds will continue to bear interest at the Daily Interest Rate, the Two-Day Interest Rate or the Weekly Interest Rate as in effect immediately prior to such proposed conversion of the Interest Rate Period. In any event, if notice of such conversion has been mailed to the holders of the Series 2009 Bonds, and Bond Counsel fails to deliver a Favorable Opinion of Bond Counsel on the effective date of the proposed conversion or any other condition to the conversion of the Series 2009 Bonds has not been satisfied, the Series 2009 Bonds will continue to be subject to mandatory purchase, if applicable, on the date which would have been the effective date of such conversion as provided in the Bond Indenture and the Series 2009 Bonds will continue to bear interest at Daily Interest Rates, Two-Day Interest Rates or Weekly Interest Rates, as the case may be. Rescission of Election to Convert. The Corporation may rescind its election to convert the Interest Rate Period from a Daily Interest Rate Period, a Two-Day Interest Rate Period or a Weekly Interest Rate Period by delivering a rescission notice to the Bond Trustee, the Remarketing Agent, the Credit Facility Issuer and the Authority on or prior to 10:00 a.m. on the Business Day preceding the proposed effective date of the conversion. In the event the Corporation rescinds its election to convert the Interest Rate Period from a Daily Interest Rate Period, a Two-Day Interest Rate Period or a Weekly Interest Rate Period, then the Interest Rate Period will not be converted from the Daily Interest Rate Period, the Two-Day Interest Rate Period or the Weekly Interest Rate Period, as applicable, and the Series 2009 Bonds will bear interest, as applicable, at the Daily Interest Rate, Two-Day Interest Rate, or the Weekly Interest Rate as in effect immediately prior to such proposed conversion of the Interest Rate Period. However, if a notice of the proposed conversion has been given to the Holders of the Series 2009 Bonds, then the Series 2009 Bonds nevertheless which were subject to mandatory tender will still be subject to mandatory tender for purchase on the date which would have been the effective date of the conversion, regardless of the rescission. 11

19 Tender and Purchase of the Series 2009 Bonds The Bond Indenture provides that, so long as Cede & Co. is the sole registered owner of the Series 2009 Bonds, all tenders and deliveries of Series 2009 Bonds under the provisions of the Bond Indenture will be made pursuant to DTC s procedures as in effect from time to time, and none of the Authority, the Corporation, the Bond Trustee or the Remarketing Agent will have any responsibility for or liability with respect to the implementation of such procedures. Tender for Purchase upon Election of Holder During a Daily Interest Rate Period, a Two-Day Interest Rate Period or a Weekly Interest Rate Period. During any Daily Interest Rate Period, Two-Day Interest Rate Period or Weekly Interest Rate Period, any Series 2009 Bond (other than a Bank Bond) will be purchased in an Authorized Denomination (provided that the amount of any Series 2009 Bond not to be purchased will also be in an Authorized Denomination) from the Holder thereof at the option of such Holder on any Business Day (referred to as a Tender Date) at a purchase price equal to the principal amount thereof plus accrued interest from the immediately preceding Interest Payment Date (the Tender Price) (a) in the case of Series 2009 Bonds in a Daily Interest Rate Period, upon delivery to the Bond Trustee and the Remarketing Agent, by no later than 11:00 a.m., New York City time on the Tender Date, of an irrevocable written notice or an irrevocable telephonic notice, (b) in the case of Series 2009 Bonds in a Two-Day Interest Rate Period, upon delivery to the Bond Trustee and the Remarketing Agent, by no later than 4:00 p.m., New York City time on a Business Day not less than 2 Business Days before the Tender Date specified by the Holder in such notice, of an irrevocable written notice or an irrevocable telephonic notice, promptly confirmed by telecopy or other writing, stating the principal amount of Series 2009 Bonds to be purchased and the date on which such Series 2009 Bonds are to be purchased, promptly confirmed by telecopy or other writing, stating the principal amount of Series 2009 Bonds to be purchased and (c) in the case of Series 2009 Bonds in a Weekly Interest Rate Period, upon delivery to the Bond Trustee and the Remarketing Agent, by no later than 4:00 p.m., New York City time on a Business Day not less than 7 days before the Tender Date specified by the Holder in such notice, of an irrevocable written notice of tender stating the principal amount of Series 2009 Bonds to be purchased and the date on which such Series 2009 Bonds are to be purchased. A Holder must deliver the notice to the Bond Trustee at its Principal Office and to the Remarketing Agent. Any notice delivered to the Tender Agent with respect to Series 2009 Bonds in a Two-Day Interest Rate Period or a Weekly Interest Rate Period after 4:00 p.m., New York City time, will be deemed to have been received on the next succeeding Business Day. A Series 2009 Bond so tendered will be purchased at a purchase price equal to the principal amount thereof tendered for purchase, without premium, plus accrued interest to the Tender Date (if the Tender Date is not an Interest Accrual Date), payable in immediately available funds. Mandatory Tender for Purchase upon Conversion to a Different Interest Rate Period Except for Conversions Among Daily Interest Rate Periods, Two-Day Interest Rate Periods and Weekly Interest Rate Periods. The Series 2009 Bonds will not be subject to mandatory tender for purchase if the conversion is from a Daily Interest Rate Period, a Two-Day Interest Rate Period or a Weekly Interest Rate Period to a Daily Interest Rate Period, a Two-Day Interest Rate Period or a Weekly Interest Rate Period. Other than described in the preceding sentence, the Series 2009 Bonds will be subject to mandatory tender for purchase on the effective date of a conversion to a different Interest Rate Period, or on the day which would have been the effective date of such a conversion to a new Interest Rate Period had certain events described in the Bond Indenture not occurred which resulted in the interest rate on such Series 2009 Bonds not being converted, at a purchase price equal to the principal amount thereof tendered for purchase, without premium, plus accrued interest to the Tender Date (if the Tender Date is not an Interest Payment Date), payable in immediately available funds. Mandatory Tender for Purchase upon Termination, Replacement or Expiration of Credit Facility; Credit Facility Default Tender Date. If at any time the Bond Trustee gives notice that the Tender Price on the Series 2009 Bonds tendered for purchase will, on the date specified in such notice, cease to be payable from a then-existing Credit Facility as a result of (i) the termination, replacement or expiration of the term, as extended, of such Credit Facility, including but not limited to a termination at the option of the Corporation in accordance with the terms of such Credit Facility or the delivery of a Self Liquidity Agreement, or (ii) a Self Liquidity Agreement is replaced with a Credit Facility, then such Series 2009 Bonds will be purchased or deemed purchased at a purchase price equal to the principal amount thereof tendered for purchase, without premium, plus accrued interest to the Tender Date (if the Tender Date is not an Interest Payment Date), payable in immediately available funds. 12

20 Any purchase of a Bond under the circumstances described in the preceding paragraph will occur: (1) on the fifth Business Day preceding any expiration or termination of a Credit Facility without replacement by an Alternate Credit Facility or replacement with a Self Liquidity Agreement and (2) on the proposed date of the replacement of a Credit Facility with an Alternate Credit Facility or of a Self Liquidity Agreement with a Credit Facility. No such mandatory tender will be effected upon the replacement of a Credit Facility in the case where the Credit Facility is failing to honor conforming draws. Self Liquidity Agreement means any arrangement which results in the Corporation agreeing to provide its own funds for the purchase of Series 2009 Bonds tendered for purchase or subject to mandatory purchase. The Bond Trustee is required to give notice by mail to the Holders of the Series 2009 Bonds secured by a Credit Facility on or before the 30th day preceding the replacement, termination or expiration of such Credit Facility in accordance with its terms. The Bond Trustee is required to give notice by mail to the Holders of the Series 2009 Bonds secured by a Credit Facility in the case of any Credit Facility Default Tender Date, as soon as reasonably possible, but no later than the Business Day following the receipt by the Bond Trustee of notice from the Credit Facility Issuer that (i) an event of default has occurred under the Reimbursement Agreement which permits the Credit Facility Issuer to cause the Series 2009 Bonds to be tendered or (ii) the Credit Facility Issuer has determined that it will not reinstate the amount available under the Credit Facility following a drawing to pay interest on the Series 2009 Bonds. Irrevocable Notice Deemed to be Tender of Series 2009 Bonds. The giving of notice by a Holder of its election to have its Series 2009 Bond purchased during a Daily Interest Rate Period, a Two-Day Interest Rate Period or a Weekly Interest Rate Period will constitute the irrevocable tender for purchase of such Series 2009 Bond with respect to which such notice has been given, regardless of whether such Series 2009 Bond is delivered to the Tender Agent for purchase on the relevant Tender Date. If any Holder who has given notice of tender for purchase as described in the preceding sentence fails to deliver such Series 2009 Bond to the Tender Agent at the place and on the Tender Date and at the time specified, or fails to deliver such Series 2009 Bond properly endorsed, such Series 2009 Bond will constitute an Undelivered Bond. Undelivered Series 2009 Bonds. If funds in the amount of the Tender Price of the Undelivered Bond are available for payment to the Holder thereof on the Tender Date and at the time specified, from and after the Tender Date and time of that required delivery, (1) such Undelivered Bond will be deemed to be purchased and will no longer be deemed to be Outstanding under the Bond Indenture; (2) interest will no longer accrue thereon; and (3) funds in the amount of the Tender Price of such Undelivered Bond will be held uninvested by the Tender Agent for the benefit of the Holder thereof (provided that the Holder will have no right to any investment proceeds derived from such funds), to be paid on delivery (and proper endorsement) of such Undelivered Bond to the Tender Agent at its Principal Office for delivery of Series 2009 Bonds. The Tender Agent may refuse to accept delivery of any Bond for which a proper instrument of transfer has not been provided; however, such refusal will not affect the validity of the purchase of such Series 2009 Bond as described in the Bond Indenture. Payment of Tender Price. For payment of the Tender Price of any Series 2009 Bond required to be purchased as provided in the Bond Indenture on the Tender Date specified in the applicable notice, such Series 2009 Bond must be delivered on the date specified in such notice, to the Tender Agent at its Principal Office for delivery of the Series 2009 Bonds, accompanied by an instrument of transfer thereof, in form satisfactory to the Tender Agent, executed in blank by the Holder thereof or his duly authorized attorney, with such signature guaranteed by a commercial bank, trust company or member firm of the New York Stock Exchange. Inadequate Funds for Tenders. If sufficient funds are not available for the purchase of all Series 2009 Bonds tendered or deemed tendered and required to be purchased on any Tender Date, the failure to pay Tender Price of all Tendered Bonds shall constitute an Event of Default under the applicable Bond Indenture, all Tendered Bonds shall be returned to their respective holders and shall bear interest at the Maximum Rate from the date of such failed purchase until all such Series 2009 Bonds are purchased or otherwise paid; provided, however, that with respect to tenders of Series 2009 Bonds while the Series 2009 Bonds are held by the Securities Depository, if Tendered Bonds which are remarketed have not been purchased on the delivery versus payment basis as described under Book Entry Tenders below, no Event of Default shall be deemed to have occurred under the Bond Indenture or the Loan Agreement if the Tendered Bonds are purchased on the Business Day following the Tender Date. 13

21 Book-Entry Tenders. As described above, all tenders for purchase during any period in which the Series 2009 Bonds are registered in the name of the Securities Depository shall be subject to the terms and conditions set forth in the applicable DTC Letter of Representations and to the procedures and requirements of the Securities Depository then in effect. So long as the Series 2009 Bonds are maintained in book-entry form, there shall be no requirement of (A) physical delivery to or by the Tender Agent, the Remarketing Agent or the Bond Trustee of any Series 2009 Bonds subject to mandatory or optional purchase as a condition to the payment of the Purchase Price therefor or (B) any wire transfer of any remarketing proceeds of such Series 2009 Bonds to or from the Tender Agent, the Remarketing Agent or the Bond Trustee. The Remarketing Agent s sole responsibilities in connection with the purchase and remarketing of tendered Series 2009 Bonds shall be to remarket, pursuant to the terms of the Bond Indenture, the Series 2009 Bonds for which it has been timely notified in accordance with the Bond Indenture that have been tendered, or deemed tendered, to the Tender Agent by the Beneficial Owners thereof; notify the requisite parties required under the applicable Bond Indenture by the times required in the Bond Indenture of the portion of the tendered Series 2009 Bonds or Series 2009 Bonds that are deemed tendered that have not been remarketed on or before such time in respect of the related date of purchase therefor; and purchase, or cause to be purchased, on a delivery versus payment basis, the portion of the Series 2009 Bonds which have been tendered, or deemed tendered, by Beneficial Owners to the Tender Agent (or its participant account with the Securities Depository) that have been remarketed on or before the related date of purchase therefor from the Tender Agent on the applicable date of purchase in such manner as required or provided by the Securities Depository s procedures and requirements then in effect. The Tender Agent s sole responsibilities in connection with the purchase and remarketing of a Tendered Bond shall be to (A)(1) in the event the Remarketing Agent notifies the Tender Agent that there are any tendered Series 2009 Bonds that have not been remarketed, draw, or direct the Bond Trustee to draw, upon the Credit Facility or self-liquidity arrangement which draw or funded amount shall be in an amount equal to the Purchase Price of such Series 2009 Bonds plus accrued and unpaid interest thereon to but excluding such date of purchase, and (2) remit, or direct the Bond Trustee to remit, the amount so drawn or received upon receipt thereof together with the proceeds received from the sale of Series 2009 Bonds that have been remarketed in accordance with (B) below, for deposit in the Bond Purchase Fund in accordance with the Bond Indenture for payment to or upon the order of the Securities Depository for the benefit of the tendering Beneficial Owners against delivery of the tendered Series 2009 Bonds to the Tender Agent (or its participant account with the Securities Depository); and (B) purchase tendered Series 2009 Bonds from tendering bondholders and sell, on a delivery versus payment basis, the remarketed Series 2009 Bonds to the Remarketing Agent on the applicable date of purchase in such manner as required or provided by the Securities Depository s procedures and requirements then in effect. In the event that any Series 2009 Bond that has been remarketed on a particular Tender Date has not been purchased on the delivery versus payment basis as described above by 3:00 p.m. New York City time on the applicable Tender Date in the manner required or provided by the Securities Depository s procedures and requirements then in effect, (a) the Tendered Series 2009 Bonds shall be returned to their respective holders and shall bear interest at the Maximum Rate from the date of such failed purchase until all such returned Series 2009 Bonds are purchased or otherwise paid, and (b) the Bond Trustee shall draw on the Credit Facility in order to receive the payment of such amounts on the following Business Day. The failure to pay Tender Price of all Tendered Series 2009 Bonds under these circumstances shall not constitute an Event of Default under the Bond Indenture or Loan Agreement. See SUMMARY OF CERTAIN PROVISIONS OF THE BOND INDENTURES Book-Entry Tenders in APPENDIX D. Sources of Funds for Purchase of the Series 2009 Bonds If all or a portion of the Series 2009 Bonds tendered for purchase cannot be remarketed and the applicable Credit Facility Issuer fails to purchase all or any part of the unremarketed portion of such tendered Series 2009 Bonds in accordance with the Credit Facility on a Tender Date, the Corporation shall pay to the Tender Agent, as soon as practicable on a Tender Date, immediately available funds (together with any remarketing proceeds and any funds provided under the Credit Facility) sufficient to pay the Tender Price on the Series 2009 Bonds tendered for purchase. 14

22 Credit Facility; Self Liquidity Agreement Draws on Credit Facility. During such time as a Credit Facility is in effect for a Subseries of Series 2009 Bonds, the Bond Trustee shall draw upon the applicable Credit Facility in accordance with its terms in an amount which will be sufficient to pay, on any date on which due, principal of and interest on Series 2009 Bonds (other than Bank Bonds) bearing interest at a Daily Interest Rate, a Two-Day Interest Rate or a Weekly Interest Rate, whether upon redemption (unless other Eligible Moneys are to be used for such purpose), at maturity, upon acceleration or otherwise or to purchase such Series 2009 Bonds in lieu of redemption. In no event shall the Bond Trustee draw upon the Credit Facility to make any payment of principal of or interest on Bank Bonds or Series 2009 Bonds registered in the name of the Authority or any Member of the Obligated Group. If the Credit Facility Issuer fails to honor any draw on the Credit Facility to pay principal or interest on the Series 2009 Bonds, the Bond Trustee shall give Immediate Notice of such failure to the Corporation and shall demand payment from the Corporation to the extent the Corporation has not made payment pursuant to the Loan Agreement. Alternate Credit Facility. The Corporation may, subject to the provisions of the Credit Facility Agreement, at any time arrange for the deposit with the Bond Trustee of an Alternate Credit Facility in substitution for the existing Credit Facility. The Series 2009 Bonds will be subject to mandatory tender as described above prior to the delivery of any Alternate Credit Facility. Effectiveness of Self Liquidity Agreement. A Self Liquidity Agreement for a Subseries of Bonds shall become effective upon delivery thereof to the Bond Trustee and delivery to the Bond Trustee of letters from at least one of Moody s, S&P or Fitch and by all of them that are then rating the applicable Series 2009 Bonds of the shortterm rating which will apply to such Series 2009 Bonds. A Self Liquidity Agreement shall be deemed to be replaced by a Credit Facility on the date that such Credit Facility is delivered to the Bond Trustee and accepted. The Series 2009 Bonds will be subject to mandatory tender as described above prior to the delivery of any Self Liquidity Agreement or Credit Facility described in this subheading. Redemption Optional Redemption. If there is no continuing Event of Default under the terms of the Bond Indenture, Series 2009 Bonds bearing interest at the Daily Interest Rate, the Two-Day Interest Rate or the Weekly Interest Rate are subject to optional redemption by the Authority, at the written direction of the Corporation and with the consent of the Credit Facility Issuer if required pursuant to the Reimbursement Agreement, in whole or in part, at a redemption price of 100% of the principal amount thereof at any time on any Business Day. Mandatory Sinking Fund Redemption. The Series 2009D Bonds shall be redeemed in part on August 1 in each year listed below at a redemption price equal to 100% of the principal amount redeemed plus accrued interest thereon to the redemption date, in the principal amount set forth below next to such year: August 1 of the Year Series 2009D-1 Bonds Principal Amount August 1 of the Year Series 2009D-2 Bonds Principal Amount 2036 $ 500, $ 500, ,340, ,340, ,520, ,520, ,720, ,720, ,920, ,920, ,120, ,120, ,320, ,320, * 5,560, * 5,560,000 *Final maturity 15

23 The Series 2009E Bonds shall be redeemed in part on August 1 in each year listed below at a redemption price equal to 100% of the principal amount redeemed plus accrued interest thereon to the redemption date, in the principal amount set forth below next to such year: August 1 of the Year Series 2009E-1 Bonds Principal Amount August 1 of the Year Series 2009E-2 Bonds Principal Amount 2036 $ 860, $ 140, ,465, ,215, ,775, ,265, ,120, ,320, ,460, ,380, ,805, ,435, ,150, ,490, * 9,365, * 1,755,000 *Final maturity Purchase in Lieu of Redemption. In lieu of redeeming Series 2009 Bonds, the Bond Trustee may, at the request of the Corporation, use such funds otherwise available under the Bond Indenture for redemption of Series 2009 Bonds to purchase such Series 2009 Bonds in the open market for cancellation at a price not exceeding the redemption price then applicable under the Bond Indenture. In the case of any optional or extraordinary redemption or any purchase and cancellation of the Series 2009 Bonds, the Bond Trustee shall apply as a credit against the Corporation s required Bond Sinking Fund deposits the amount of such Series 2009 in such order as the Corporation elects in writing prior to such optional or extraordinary redemption or purchase and cancellation or, if no election is made, in the inverse order thereof. Extraordinary Redemption. The Series 2009 Bonds are callable for redemption prior to maturity in the event of damage to or destruction of the Property of any Member of the Obligated Group or any part thereof, or the condemnation of the Property of any Member of the Obligated Group or any part thereof or sale consummated under the threat of condemnation of the Property of any member of the Obligated Group or any part thereof, if the net proceeds of insurance, condemnation or sale received in connection therewith and applied to make payments on the Series 2009 Obligation exceeds $500,000. If called for redemption in the events referred to the preceding paragraph, the Series 2009 Bonds will be subject to redemption at any time by the Authority, in whole or in part at any time, and, if in part, by maturities or portions thereof selected by the Obligated Group Agent or, if not so selected, in inverse order of maturity (less than all Series 2009 Bonds with the same Maturity Date to be selected by the Bond Trustee by lot), at the principal amount thereof plus accrued interest to the redemption date and without premium. Mandatory Tender for Purchase of the Series 2009 Bonds. The Authority and, by their acceptance of the Series 2009 Bonds, the holders of the Series 2009 Bonds, irrevocably grant to the Corporation and any assigns of the Corporation with respect to this right, the option to purchase, at any time, and from time to time, when the Series 2009 Bonds are redeemable pursuant to the provisions of the Bond Indenture described above under the subcaption Optional Redemption, any Series 2009 Bonds at a purchase price equal to the redemption price then applicable thereto. To exercise such option with respect to the Series 2009 Bonds, the Corporation must give the Bond Trustee a written request exercising such option as though such written request were a written request of the Authority for redemption, and the Bond Trustee is thereupon required to give the owners of such Series 2009 Bonds notice of such mandatory tender in the manner specified under the subcaption Notice of Redemption; Effect of Redemption below as though such mandatory tender were a redemption (which notice may be conditional to the same extent as a notice of redemption). Any such purchase of Series 2009 Bonds will be mandatory and enforceable against the owners of the Series 2009 Bonds and the owners will not have the right to retain their Series 2009 Bonds. On the date fixed for purchase pursuant to any exercise of such option, the Corporation is required to pay the purchase price of the Series 2009 Bonds then being purchased to the Bond Trustee in immediately available funds, and the Bond Trustee is required to pay the same to the sellers of such Series 2009 Bonds against delivery thereof. Following 16

24 such purchase, the Bond Trustee is required to cause such Series 2009 Bonds to be registered in the name of the Corporation or its nominee and to deliver them to the Corporation or its nominee or as otherwise directed by the Corporation. Notice of Redemption; Effect of Redemption. In the event any of the Series 2009 Bonds are called for redemption, the Bond Trustee shall give notice, in the name of the Authority, of the redemption of such Series 2009 Bonds, which notice shall state the following: (a) the name of the Series 2009 Bonds, (b) the CUSIP number and bond certificate number of the Series 2009 Bonds to be redeemed, (c) the original dated date of the Series 2009 Bonds, (d) the interest rate and maturity date of the Series 2009 Bonds to be redeemed, (e) the date of the redemption notice, (f) the redemption date, (g) the redemption price and (h) the address and telephone number of the principal office of the Bond Trustee. The notice of redemption shall further state that on the redemption date for such Series 2009 Bonds, there shall become due and payable upon each Series 2009 Bond to be redeemed the redemption price thereof, or the redemption price of the specified portion of the principal amount thereof in the case of a Bond to be redeemed in part only, with interest accrued and unpaid to such date, and that from and after such date, interest thereon shall cease to accrue and be payable. Such redemption notice shall be given by first class mail, postage prepaid, to the registered owners of the Series 2009 Bonds to be redeemed at the address shown on the Bond Register not less than 15 days nor more than 60 days prior to the Redemption Date; provided, however, that failure to give such notice by mailing or a defect in the notice or the mailing as to any Bond will not affect the validity of any proceedings for redemption as to any other Series 2009 Bond with respect to which notice was properly given. Any Series 2009 Bonds and portions of Series 2009 Bonds which have been duly selected for redemption and which are paid in accordance with the Bond Indenture shall cease to bear interest on the specified redemption date. Exchange and Transfer Upon surrender for transfer of any Series 2009 Bond at the designated corporate trust office of the Bond Trustee, the Authority shall execute, and the Bond Trustee shall authenticate and deliver, in the name of the transferee or transferees, a new fully registered Series 2009 Bond or Series 2009 Bonds of the same maturity and Subseries and of authorized denominations for the aggregate principal amount which the registered owner is entitled to receive. Series 2009 Bonds may be exchanged at said office of the Bond Trustee for a like aggregate principal amount of registered Bonds of other authorized denominations of the same maturity and Subseries. All Series 2009 Bonds presented for transfer or exchange are required to be accompanied by a written instrument or instruments of transfer or authorization for exchange, in form and with guaranty of signature satisfactory to the Bond Trustee, duly executed by the registered owner or by such owner s duly authorized attorney. No service charge shall be imposed upon the owner of any Series 2009 Bond requesting an exchange or transfer of such Series 2009 Bond, but the Authority and the Bond Trustee may require the payment by the Bondholder requesting an exchange or transfer of a sum sufficient to cover any tax, fee or other governmental charge required to be paid with respect to such exchange or transfer, except in the case of the issuance of a Series 2009 Bond or Series 2009 Bonds for the unredeemed portion of a Bond surrendered for redemption. The Authority and the Bond Trustee shall not be required to register the transfer or exchange of any Series 2009 Bond after notice calling such Series 2009 Bonds or portion thereof for redemption has been mailed or during the 15-day period next preceding the mailing of a notice of redemption of the Series 2009 Bonds. As to any Series 2009 Bond, the person in whose name the same is registered will be deemed and regarded as the absolute owner thereof for all purposes, and payment of or on account of the principal of and interest and any premium on any such Series 2009 Bond, shall be made only to or upon the written order of the registered owner thereof or such owner s legal representative, but such registration may be changed only as described in the Bond Indentures. All such payments shall be valid and effectual to satisfy and discharge the liability upon such Series 2009 Bond to the extent of the sum or sums so paid. So long as the book-entry system remains in effect, the foregoing provisions apply only to the Securities Depository as the holder of the Series 2009 Bonds. Transfers of beneficial ownership interests in the Series

25 Bonds may be made as described under the caption BOOK-ENTRY ONLY SYSTEM below while the bookentry system remains in effect. THE REMARKETING AGENTS The Daily Interest Rate for each Subseries of the Series 2009 Bonds will be initially determined by J.P. Morgan Securities Inc. and thereafter will be determined for the Series 2009D-1 Bonds by Wells Fargo Brokerage Services, LLC, for the Series 2009D-2 Bonds by Barclays Capital Inc., for the Series 2009E-1 Bonds by J.P. Morgan Securities Inc. and, for the Series 2009E-2 Bonds by Loop Capital Markets, LLC in the manner described herein. The Remarketing Agents are Paid by the Corporation The Remarketing Agents responsibilities include determining the interest rate from time to time and remarketing their respective Subseries of Series 2009 Bonds that are optionally or mandatorily tendered by the owners thereof (subject, in each case to the terms of the Remarketing Agreement), all as further described in this Official Statement. The Remarketing Agents are appointed by the Corporation and are paid by the Corporation for their services. As a result, the interests of the Remarketing Agents may differ from those of existing holders and potential purchasers of the Series 2009 Bonds. The Remarketing Agents Routinely Purchases Bonds for their Own Accounts Each Remarketing Agent is permitted, but not obligated, to purchase tendered Series 2009 Bonds for its own account. Each Remarketing Agent, in its sole discretion, routinely acquires tendered bonds for its own inventory in order to achieve a successful remarketing of such bonds (i.e., because there otherwise are not enough buyers to purchase the bonds) or for other reasons. However, the Remarketing Agents are not obligated to purchase bonds including the Series 2009 Bonds, and may cease doing so at any time without notice. The Remarketing Agents may also make a market in the related Subseries of Series 2009 Bonds by routinely purchasing and selling Series 2009 Bonds other than in connection with an optional tender and remarketing. Such purchases and sales may be at or below par. However, the Remarketing Agents are not required to make a market in the Series 2009 Bonds. If a Remarketing Agent purchases Series 2009 Bonds for its own account, it may offer those Series 2009 Bonds at a discount to par to some investors. Such Remarketing Agent may also sell any Series 2009 Bonds it has purchased to one or more affiliated investment vehicles for collective ownership or enter into derivative arrangements with affiliates or others in order to reduce its exposure to the related Subseries of Series 2009 Bonds. The purchase of Series 2009 Bonds by the Remarketing Agents may create the appearance that there is greater third party demand for the Series 2009 Bonds in the market than is actually the case. The practices described above also may reduce the supply of Series 2009 Bonds that may be tendered in a remarketing. Series 2009 Bonds May be Offered at Different Prices on any Date Each Remarketing Agent is required to determine on each date the rate that the interest rate is required to be determined under the Bond Indentures (each date a Rate Determination Date) the applicable rate of interest that, in its judgment, is the lowest rate that would permit the sale of the related Subseries of Series 2009 Bonds at par plus accrued interest, if any, on the date the rate becomes effective (referred to as the Effective Date). The interest rate will reflect, among other factors, the level of market demand for the Series 2009 Bonds (including whether such Remarketing Agent is willing to purchase such Subseries of Series 2009 Bonds for its own account). Each Remarketing Agreement requires that the Remarketing Agent use its best efforts to sell tendered bonds at par, plus accrued interest. There may or may not be Series 2009 Bonds tendered and remarketed on a Rate Determination Date. As an owner of Series 2009 Bonds the Remarketing Agents may sell Series 2009 Bonds at varying prices, including at a discount to par, to different investors on a Rate Determination Date or any other date. The Remarketing Agents are not obligated to advise purchasers in a remarketing if it does not have third party buyers for all of the Series 2009 Bonds at the remarketing price. 18

26 The Ability to Sell the Series 2009 Bonds other than through Tender Process May Be Limited While the Remarketing Agents may buy and sell Series 2009 Bonds, neither is obligated to do so and may cease doing so at any time without notice. Thus, investors who purchase the Series 2009 Bonds, whether in a remarketing or otherwise, should not assume that they will be able to sell their Series 2009 Bonds other than by tendering through the Transfer Agent in accordance with the tender process. In addition, the related Credit Facility Provider and the Obligated Group may fail to purchase tendered Series 2009 Bonds even when they are obligated to do so. In both cases, tendered Series 2009 Bonds would be returned to the holders thereof and bear interest at an interest rate established by the related Remarketing Agent that will not exceed the Maximum Rate. It is not certain that following a failure to purchase Series 2009 Bonds a secondary market for the Series 2009 Bonds will develop. Under Certain Circumstances, a Remarketing Agent May Be Removed, Resign or Cease Remarketing the Bonds, Without a Successor Being Named Under certain circumstances a Remarketing Agent may be removed or have the ability to resign or cease its remarketing efforts, without a successor having been named, subject to the terms of the related Remarketing Agreement. Without a Remarketing Agent, it will not be possible to remarket tendered bonds though the Series 2009 Bonds will be purchased by the Tender Agent in accordance with the terms of the applicable Bond Indenture. THE LETTERS OF CREDIT AND REIMBURSEMENT AGREEMENTS The Series 2009D Letter of Credit will be issued pursuant to a Reimbursement Agreement dated as of August 1, 2009 (the Series 2009D Reimbursement Agreement ) between the Corporation and the Series 2009D Initial Credit Facility Issuer. The Series 2009E Letter of Credit will be issued pursuant to a Reimbursement Agreement dated as of August 1, 2009 (the Series 2009E Reimbursement Agreement and, together with the Series 2009D Reimbursement Agreement, the Reimbursement Agreements ) between the Corporation and the Series 2009E Initial Credit Facility Issuer. Each Reimbursement Agreement is substantially similar. This summary does not purport to be a complete description of the material provisions of the Letters of Credit and the Reimbursement Agreements, to which documents reference is made for the complete provisions thereof. The Corporation and the Initial Credit Facility Issuers may amend provisions of the Reimbursement Agreements at any time without the consent of bondholders. Furthermore, compliance by the Corporation with the provisions of each Reimbursement Agreement may be waived in the sole determination of the related Initial Credit Facility Issuer. The provisions of any substitute letter of credit and related reimbursement agreement may be different from those summarized below. The Letters of Credit Each Letter of Credit is an irrevocable obligation of the respective Initial Credit Facility Issuer issued in an amount equal to the aggregate principal amount of the applicable outstanding Series of Series 2009 Bonds secured by the respective Letter of Credit, plus 43 days of interest at a rate of 12% per annum (the Cap Interest Rate ). The related Bond Trustee, upon compliance with the terms of the related Letter of Credit, is authorized and directed to draw up to (a) an amount sufficient (i) to pay principal of the related Series 2009 Bonds secured by such related Letter of Credit (other than Bank Bonds (as defined in the related Reimbursement Agreement), Series 2009 Bonds bearing interest at a rate other than the Daily Interest Rate, the Two-Day Interest Rate or the Weekly Interest Rate ( Converted Bonds ) and Series 2009 Bonds held by or on behalf of the Corporation ( Corporation Bonds )) when due, whether at maturity or upon redemption or acceleration, and (ii) to pay the portion of the purchase price of the related Series 2009 Bonds (other than Bank Bonds, Converted Bonds and Corporation Bonds) delivered for purchase pursuant to a demand for purchase by the owner thereof or a mandatory tender for purchase and not remarketed (a Liquidity Drawing ) equal to the principal amount of such Series 2009 Bonds, plus (b) an amount not to exceed 43 days of accrued interest on such Series 2009 Bonds at the Cap Interest Rate (i) to pay interest on related Series 2009 Bonds (other than Bank Bonds, Converted Bonds and Corporation Bonds) when due, and (ii) to pay the portion of the purchase price of related Series 2009 Bonds (other than Bank Bonds, Converted Bonds and 19

27 Corporation Bonds) delivered for purchase pursuant to a demand for purchase by the owner thereof or a mandatory tender for purchase and in each case not remarketed, equal to the interest accrued, if any, on such Series 2009 Bonds. The amount available under the related Letter of Credit will be reduced to the extent of any drawing thereunder, subject to reinstatement as described below. With respect to a drawing by the Bond Trustee solely to pay interest on the related Series 2009 Bonds on an interest payment date, the amount available under the related Series 2009 Letter of Credit will be automatically reinstated effective at 9:00 a.m., New York City time, on the fifth (5th) calendar day from the date of such drawing unless the Bond Trustee shall have received from the related Initial Credit Facility Issuer by telecopy (or other electronic telecommunication) by 5:00 p.m., New York City time, on the fourth (4th) calendar day from the date of such drawing notice that the Initial Credit Facility Issuer has not been reimbursed in full for such drawing or any other Event of Default under the related Reimbursement Agreement has occurred and as a consequence thereof the amount of the reduction will not be so reinstated and the Initial Credit Facility Issuer has directed the Bond Trustee to accelerate or cause a mandatory tender of the applicable Series of Series 2009 Bonds pursuant to the related Reimbursement Agreement. With respect to a Liquidity Drawing, upon a remarketing of the applicable Series 2009 Bonds (or portions thereof) purchased with the proceeds of such Liquidity Drawing, the amount available under the related Letter of Credit will be reinstated in an amount equal to the principal amount of the related Series 2009 Bonds purchased with the proceeds of such Liquidity Drawing, plus the amount of accrued interest thereon paid with the proceeds of such Liquidity Drawing, upon receipt by the related Initial Credit Facility Issuer (or the Bond Trustee on behalf of the related Initial Credit Facility Issuer), of the amount of any Liquidity Drawing relating to the Series 2009 Bonds purchased with the proceeds of such Liquidity Drawing plus all accrued interest thereon (or portions thereof) and written notice from the Bond Trustee specifying such amounts. Each Letter of Credit will terminate on the earliest of the related Initial Credit Facility Issuer s close of business on (a) the stated expiration date (August 17, 2012, unless renewed or extended); (b) the earlier of (i) the date which is fifteen (15) days following the date (the Conversion Date ) on which all of the related Series 2009 Bonds convert to bear interest at a rate other than the Daily Interest Rate, the Two-Day Interest Rate or the Weekly Interest Rate as specified in a notice from the Bond Trustee to the related Initial Credit Facility Issuer, or (ii) the date on which the related Initial Credit Facility Issuer honors a drawing under the related Letter of Credit on or after such Conversion Date; (c) the date on which the related Initial Credit Facility Issuer receives written notice from the Bond Trustee that no related Series 2009 Bonds remain Outstanding within the meaning of the Bond Indenture, all Drawings (as defined in the related Reimbursement Agreement) required to be made under the Bond Indenture and available under the related Letter of Credit have been made and honored or that a letter of credit has been issued in substitution for the related Letter of Credit in accordance with the terms of the Bond Indenture; (d) the date on which an acceleration drawing or a stated maturity drawing is honored by the related Initial Credit Facility Issuer; and (e) the date which is fifteen (15) days following the date the Bond Trustee receives a written notice from the related Initial Credit Facility Issuer specifying the occurrence of an Event of Default under the related Reimbursement Agreement and directing the Bond Trustee to cause a mandatory tender or acceleration of the Series 2009 Bonds. Reimbursement Agreement Events of Default Pursuant to the Reimbursement Agreements, the occurrence of any of the following events, among others, shall constitute and Event of Default thereunder. Reference is made to each Reimbursement Agreement for a complete listing of all Events of Default: (a) the Corporation shall fail to pay (i) any principal of or interest on any Drawing, any Liquidity Advance (each as defined in the related Letter of Credit) or Bank Bond as and when due under the related Reimbursement Agreement, (ii) any principal of or interest on any related Series 2009 Bonds for any reason other than the failure of the related Initial Credit Facility Issuer to honor a properly presented and conforming Drawing under the related Letter of Credit as and when due or (iii) any other Obligations (other than Reimbursement Obligations), as each of those terms is defined in the related Reimbursement Agreement, within five (5) calendar days of when due under the related Reimbursement Agreement; or 20

28 (b) any material representation or warranty made by the Corporation in the related Reimbursement Agreement (or incorporated therein by reference) or in any of the other Related Documents (as defined in the related Reimbursement Agreement) or in any certificate, document, instrument, opinion or financial or other statement contemplated by or made or delivered pursuant to or in connection with the related Reimbursement Agreement or with any of the other Related Documents, shall prove to have been incorrect, incomplete or misleading in any material respect; (c) any event of default shall have occurred under any of the Related Documents (as defined respectively therein), including, without limitation the Master Indenture; (d) default in the due observance or performance of certain covenants set forth in the related Reimbursement Agreement; (e) default in the due observance or performance of any other term, covenant or agreement set forth in the related Reimbursement Agreement and the continuance of such default for 30 days after the earlier of (i) the date on which such default shall first become known to certain officers of the Corporation, or (ii) written notice thereof is given to the Corporation by the applicable Initial Credit Facility Issuer; (f) any material provision of the related Reimbursement Agreement or any Related Document or sections of leases for certain facilities operated by the Corporation which prohibit the lessor from terminating or refusing to renew such leases unless the lessor assumes and agrees to perform the obligations of the Corporation under the applicable Loan Agreements (as defined in the related leases) to the extent required by such Loan Agreements shall cease to be valid and binding, or the Corporation or any other Member shall contest any such provision, or the Corporation, any other Member or any agent or trustee on their behalf shall deny that it has any or further liability under the related Reimbursement Agreement, the related Series 2009 Obligation, the related Series 2009 Bank Obligation, or any of the Related Documents to which it is a party; (g) the Corporation or any other Member shall (i) have entered involuntarily against it an order for relief under the United States Bankruptcy Code, as amended, (ii) not pay, or admit in writing its inability to pay, its debts generally as they become due, (iii) make an assignment for the benefit of creditors, (iv) apply for, seek, consent to, or acquiesce in, the appointment of a receiver, custodian, trustee, examiner, liquidator or similar official for it or any substantial part of its property, (v) institute any proceeding seeking to have entered against it an order for relief under the United States Bankruptcy Code, as amended, to adjudicate it insolvent, or seeking dissolution, winding up, liquidation, reorganization, arrangement, marshalling of assets, adjustment or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors or fail to file an answer or other pleading denying the material allegations of any such proceeding filed against it, (vi) take any corporate action in furtherance of any matter described in parts (i) through (v) above, or (vii) fail to contest in good faith any appointment or proceeding described in paragraph (h) under this heading; (h) a custodian, receiver, trustee, examiner, liquidator or similar official shall be appointed for the Corporation or any other Member or any substantial part of any of their respective property, or a proceeding described in paragraph (g)(v) under this heading shall be instituted against the Corporation or any other Member and such appointment continues undischarged or any such proceeding continues undismissed or unstayed for a period of 30 or more days; (i) dissolution or termination of the existence of the Corporation or any other Member; provided, however, that the dissolution or termination of any Member other than the Corporation shall not result in an Event of Default to the extent such dissolution is in accordance with the terms of the Master Indenture and the other terms of the related Reimbursement Agreement; (j) (A) certain defaults under certain Indebtedness of the Corporation or with respect to any obligation under a Swap Contract (as defined in the related Reimbursement Agreement) secured by a Master Note pursuant to the Master Indenture or (B) certain defaults under certain other Indebtedness of the Corporation or any obligation under a Swap Contract in excess of the dollar amount specified in the related Reimbursement Agreement; 21

29 (k) any final non-appealable judgment or judgments, writ or writs or warrant or warrants of attachment, or any similar process or processes in an aggregate amount in excess of the dollar amount specified in the related Reimbursement Agreement shall be entered or filed against the Corporation, any other Member or the Obligated Group or against any of their respective property and remain unvacated, unbonded or unstayed for a period of 60 days; (l) the Corporation or any member of its Controlled Group (as defined in the related Reimbursement Agreement) shall fail to pay when due an amount or amounts aggregating in excess of the dollar amount specified in the related Reimbursement Agreement which it shall have become liable to pay to the PBGC (as defined in the related Reimbursement Agreement) or to a Plan (as defined in the related Reimbursement Agreement) under Title IV of ERISA (as defined in the related Reimbursement Agreement); or notice of intent to terminate a Plan or Plans having aggregate Unfunded Vested Liabilities (as defined in the related Reimbursement Agreement) in excess of the dollar amount specified in the related Reimbursement Agreement (collectively, a Material Plan ) shall be filed under Title IV of ERISA by the Corporation or any member of its Controlled Group, any plan administrator or any combination of the foregoing; or the PBGC shall institute proceedings under Title IV of ERISA to terminate or to cause a trustee to be appointed to administer any Material Plan or a proceeding shall be instituted by a fiduciary of any Material Plan against the Corporation or any member of its Controlled Group to enforce Section 515 or 4219(c)(5) of ERISA and such proceeding shall not have been dismissed within 60 days thereafter; or a condition shall exist by reason of which the PBGC would be entitled to obtain a decree adjudicating that any Material Plan must be terminated; (m) (i) any of Moody s or S&P shall downgrade their respective ratings of any long-term unenhanced Indebtedness issued pursuant to the Master Indenture of the Obligated Group to below Baa1 (solely in connection with the Series 2009D Reimbursement Agreement) and Baa3 (solely in connection with the Series 2009E Reimbursement Agreement) (or their respective equivalent) by Moody s, or BBB+ (solely in connection with the Series 2009D Reimbursement Agreement) and BBB- (solely in connection with the Series 2009E Reimbursement Agreement) (or their respective equivalent) by S&P or (ii) any of Moody s or S&P shall suspend or withdraw their respective ratings of any long-term unenhanced Indebtedness issued pursuant to the Master Indenture of the Obligated Group for credit-related reasons or (iii) the Corporation shall fail to have a rating on any of the long-term, unenhanced Indebtedness of the Obligated Group maintained by any of Moody s or S&P; (n) any pledge or security interest created by the Master Indenture, the Bond Indenture, the related Series 2009 Obligation, the related Series 2009 Bank Obligation, or the related Reimbursement Agreement to secure any amount due under any related Series 2009 Bonds or the related Reimbursement Agreement shall fail to be fully enforceable or fail to have the priority required under the Master Indenture, in either case, by reason of a final, non-appealable judgment of a court of competent jurisdiction; or (o) a Governmental Authority (as defined in the related Reimbursement Agreement) with appropriate jurisdiction shall declare a debt moratorium, debt restructuring, debt adjustment or comparable restriction on the repayment when due of any Indebtedness or any obligation under any Swap Contract of the Corporation secured by a Master Note. Remedies Upon the occurrence of any of the above-described Events of Default, the related Initial Credit Facility Issuer may exercise one or more of the following rights and remedies in addition to any other remedies available in the related Reimbursement Agreement: (a) by notice to the Corporation require that the Corporation immediately prepay to the related Initial Credit Facility Issuer in immediately available funds an amount equal to the Available Amount (such amounts to be held by the related Initial Credit Facility Issuer as collateral security for the Obligations), provided, however, that in the case of an Event of Default described in paragraph (g) or (h) under the heading Reimbursement Agreement Events of Default above, such prepayment obligation shall automatically become immediately due and payable without any notice; 22

30 (b) declare all Obligations to be, and such amounts shall thereupon become, immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are waived by the Corporation, provided that upon the occurrence of an Event of Default under paragraph (g) or (h) under the heading Reimbursement Agreement Events of Default above, such acceleration shall automatically occur without notice; (c) give notice of the occurrence of an Event of Default to the Bond Trustee, directing the Bond Trustee to accelerate or cause a mandatory tender of the related Series 2009 Bonds, thereby causing the related Letter of Credit to expire fifteen (15) days thereafter; (d) pursue any rights and remedies it may have under the Related Documents; or (e) pursue any other action available at law or in equity. General BOOK-ENTRY ONLY SYSTEM DTC, New York, New York, will act as securities depository for the Series 2009 Bonds. The Series 2009 Bonds will be issued as fully-registered securities registered in the name of Cede & Co., as DTC s partnership nominee, or such other name as may be requested by an authorized representative of DTC. One fully registered Bond certificate will be issued for each maturity of the Series 2009 Bonds, each in the aggregate principal amount of such maturity, and will be deposited with the Bond Trustee on behalf of DTC. For additional information regarding DTC and its book-entry only system and the meaning of defined terms used under this caption, see APPENDIX G hereto. Limitations For so long the Series 2009 Bonds are registered in the name of DTC or its nominee, Cede & Co., the Authority and the Bond Trustee will recognize only DTC or its nominee, Cede & Co., as the registered owner of the Series 2009 Bonds for all purposes, including payments, notices and voting. Because DTC is treated as the registered owner of the Series 2009 Bonds for substantially all purposes under the Bond Indentures, Beneficial Owners may have a restricted ability to influence in a timely fashion remedial actions or the giving or withholding of requested consents or other directions. In addition, because the identity of Beneficial Owners is unknown to the Issuer, DTC and the Bond Trustee, it may be difficult to transmit information of potential interest to Beneficial Owners in an effective and timely manner. Beneficial Owners should make appropriate arrangements with their brokers or dealers for the distribution of information regarding the Series 2009 Bonds that may be transmitted by or through DTC. Under the Bond Indentures, payments made by the Bond Trustee to DTC or its nominee shall satisfy each Issuer s obligations under the Bond Indentures, the Corporation s obligations under the Loan Agreements and the Obligated Group s obligations on the Series 2009 Obligations, to the extent of the payments so made. Neither the Authority, the Members of the Obligated Group nor the Bond Trustee shall have any responsibility or obligation with respect to: the accuracy of the records of DTC, its nominee or any DTC Participant or Indirect Participant with respect to any beneficial ownership interest in any Series 2009 Bond; the delivery to any DTC Participant or Indirect Participant or any other Person, other than a registered owner, as shown in the Bond Register, of any notice with respect to any Series 2009 Bond, including, without limitation, any notice of redemption or any event which would or could give rise to an option with respect to any Series 2009 Bond; 23

31 the payment to any of DTC s Direct Participants or Indirect Participants or any other Person, other than a registered owner of the Bonds, as shown in the Bond Register, of any amount with respect to the principal of, premium, if any, or interest on, or the Tender Price of, any Bond; any consent given by DTC as registered owner; or the selection of the Beneficial Owners to receive payment in the event of any partial redemption of the Series 2009 Bonds. Prior to any discontinuation of the book-entry system of the Series 2009 Bonds, the Authority and the Bond Trustee will treat DTC as, and deem DTC to be, the absolute owner of the Series 2009 Bonds for all purposes whatsoever, including, without limitation: the payment of the principal of, premium, if any, and interest on, and the Tender Price of, the Series 2009 Bonds; giving redemption and tender notices and notices of other matters with respect to the Series 2009 Bonds; registering transfers of the Series 2009 Bonds; the selection of Series 2009 Bonds for redemption; giving notices of purchase of Series 2009 Bonds; and all other purposes whatsoever. Discontinuation of Book-Entry Only System The Beneficial Owners of the Series 2009 Bonds have no right to a securities depository for the Series 2009 Bonds. DTC or any successor Securities Depository for the Series 2009 Bonds may resign as securities depository by giving notice to the Bond Trustee and discharging its responsibilities under applicable law. In addition, the Authority may remove DTC or a successor Securities Depository as securities depository for the Series 2009 Bonds for any reason at any time. In such event, the Authority or the Bond Trustee, if the Authority shall fail to do so, shall (i) appoint a successor Securities Depository, qualified to act as such under Section 17(a) of the Securities Exchange Act, notify the prior Securities Depository of the appointment of such successor securities depository and transfer one or more separate bond certificates to such successor Securities Depository or (ii) notify the Securities Depository of the availability through the Securities Depository of bond certificates and transfer one or more separate bond certificates to Depository Participants having Series 2009 Bonds credited to their Securities Depository accounts. In such event, the Series 2009 Bonds shall no longer be restricted to being registered in the Bond Register in the name of the Securities Depository or its nominee, but may be registered in the name of the successor Securities Depository or its nominee, or in whatever name or names the Depository Participants receiving Series 2009 Bonds shall designate in accordance with the provisions of the Bond Indentures. Limited Obligations SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2009 BONDS The Series 2009 Bonds are limited obligations of the Authority and are payable solely from (a) payments or prepayments to be made on the related Series 2009 Obligation, (b) payments or prepayments made under the related Loan Agreement, (c) moneys and investments held by the Bond Trustee in the Funds held under, and to the extent provided in, the related Bond Indenture, (d) proceeds from the sale of such related Series 2009 Bonds and the income from the temporary investment thereof and (e) in certain circumstances, proceeds from certain insurance and condemnation awards or sale consummated under threat of condemnation. Certain investment earnings on moneys held by the Bond Trustee under the related Bond Indenture may be transferred to the Rebate Fund established 24

32 pursuant to the Tax Exemption Agreement, to be entered into on the date of issuance of the Series 2009 Bonds, among the Corporation, the Authority and the Bond Trustee. Amounts held in the Rebate Fund for the related Series 2009 Bonds are not part of the trust estate pledged to secure such Bonds and consequently will not be available to make payments on such Bonds. The Letters of Credit; Substitute Letters of Credit The Corporation covenants and agrees that at all times while any Series 2009 Bonds of a Subseries bearing interest at a Daily Interest Rate, Two-Day Interest Rate or Weekly Interest Rate are Outstanding it will maintain a Letter of Credit for such Subseries of Series 2009 Bonds in full force and effect, provided, however, that under certain circumstances the Corporation may deliver a Self-Liquidity Agreement. Such Letter of Credit will be in an amount at least equal to the aggregate principal amount of the related Subseries of Series 2009 Bonds then Outstanding (other than Bank Bonds) together with 43 days interest at the maximum annual interest rate of 12%. See THE LETTERS OF CREDIT AND REIMBURSEMENT AGREEMENTS herein. The Series 2009 Obligations The Series 2009 Obligations and the Series 2009 Bank Obligations will be issued by the Corporation pursuant to the provisions of the Master Indenture and will be the joint and several obligation of the Corporation and each other organization that becomes a Member of the Obligated Group. All Obligations issued under the Master Indenture, including the Series 2009 Obligations, are secured by a security interest in the Unrestricted Receivables of the Obligated Group, but are not presently secured by a pledge, grant or mortgage of any of the other property of the Obligated Group. Notwithstanding the pledge of Unrestricted Receivables, the Members of the Obligated Group may sell or otherwise transfer Unrestricted Receivables in accordance with the provisions of the Master Indenture. For a more detailed discussion of these and other provisions, see the sub-caption The Master Indenture below and SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE The Obligations; Payment of the Obligations in APPENDIX C hereto. Pursuant to the Bond Indentures, the Authority will pledge and assign to the Bond Trustee, for the benefit of the Bondholders, the Series 2009 Obligations and all of its right, title and interest in and to the Loan Agreements, except for the Authority s Unassigned Rights. Payments of the principal of, premium, if any, and interest on the Series 2009 Obligations will be made directly to the Bond Trustee. The Series 2009 Obligations will entitle the Bond Trustee, as the holder thereof, to the protection of the covenants, restrictions and other obligations of the Obligated Group under the Master Indenture. Additional Obligations The Corporation or any future Member of the Obligated Group may incur Additional Indebtedness that may, but need not be, evidenced or secured by an Additional Obligation issued under the Master Indenture. Additional Obligations may be issued to the Authority and to parties other than the Authority. Additional Obligations need not be pledged under the Bond Indentures, but will be equally and ratably secured (except as described in this Official Statement) with all Obligations (including the Series 2009 Obligations). Under the terms of the Master Indenture, Additional Obligations may also be entitled to be secured by security (including, without limitation, letters or lines of credit or insurance) or Liens on property (including health care facilities of the Obligated Group) in addition to any security that extends to all Obligations (including the Series 2009 Obligations) which security need not be extended to any other Obligation (including the Series 2009 Obligations). See DEFINITIONS OF CERTAIN TERMS Permitted Encumbrances, SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE Liens on Property and - Other Covenants of the Members in APPENDIX C hereto. The Master Indenture does not limit the amount of Additional Indebtedness that the Obligated Group may incur and does not require the Obligated Group to satisfy any financial tests in order to incur such Additional Indebtedness; provided, however, the MBIA Covenants and Bank Covenants (each as defined below) contain certain restrictions on the Obligated Group s ability to incur Additional Indebtedness. 25

33 The Master Indenture For a summary of certain of the provisions of the Master Indenture, see SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE in APPENDIX C hereto. The Obligated Group Other Persons, in addition to the Corporation, may become Members of the Obligated Group, and Members of the Obligated Group may leave the Obligated Group without satisfying any financial tests. Except as described below, there can be no assurance that any other Person will become a Member of the Obligated Group or that any existing Member of the Obligated Group will not leave the Obligated Group. Payments on Obligations, including the Series 2009 Obligations, will be the joint and several obligation of the Members of the Obligated Group. The accounts of the Members of the Obligated Group will be combined despite any potential uncertainties regarding the enforceability of the covenant of each Member of the Obligated Group in the Master Indenture to be jointly and severally liable on each Obligation. Certain Covenants of the Obligated Group The Master Indenture requires that each Member of the Obligated Group operate all of its facilities on a revenue producing basis and exercise such skill and diligence as to provide income from its Property, together with other available funds, sufficient to pay promptly all payments of principal and interest on its Indebtedness, all expenses of operation, maintenance and repair of its Property and all other payments required to be made under the Master Indenture, to the extent permitted by law. The Master Indenture also requires the Obligated Group to demonstrate each fiscal year that the Obligated Group s Historical Debt Service Coverage Ratio is not less than 1.10 to 1. If the Obligated Group fails to maintain such ratio in any particular fiscal year, the Master Indenture requires the Obligated Group to retain a Consultant to make recommendations with respect to the operations of the Obligated Group in order to increase such ratio to at least 1.10 to 1. The recommendations of such Consultant must be followed by each Member of the Obligated Group to the extent feasible (as determined in the reasonable judgment of the Governing Body of such Member of the Obligated Group) and permitted by law. The Master Indenture does not restrict the ability of a Member of the Obligated Group to sell, lease or otherwise dispose of its Property (as hereinafter defined), including cash, marketable securities or receivables, to anyone, other than a transfer by a Member of the Obligated Group of substantially all of its Property. See SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE Merger, Consolidation, Sale or Conveyance in APPENDIX C hereto. The Master Indenture provides that, subject to the provisions of the Master Indenture summarized under the caption SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE Liens on Property in APPENDIX C hereto no Member of the Obligated Group shall create or incur or permit to be created or incurred or to exist any Lien on any Property of any Member of the Obligated Group to secure Indebtedness except Permitted Encumbrances. Under the definition of Permitted Encumbrances, the Members of the Obligated Group could place significant encumbrances on their Property. The Property subject to such Liens could consist in part or in whole of cash, marketable securities, accounts receivable or health care facilities. See the definition of Permitted Encumbrances under the heading DEFINITIONS OF CERTAIN TERMS Permitted Encumbrances in APPENDIX C hereto. In addition, Subsection (b) of the definition permits Liens on Property of Members of the Obligated Group, in addition to those permitted under the other Subsections of the definition, if (i) after giving effect to all such Liens, the lesser of (x) the Book Value of the Property which is Encumbered by any such Liens or (y) the principal amount of the Indebtedness to be secured by all such Liens, is not more than 15% of the Book Value of all of the Property of the Obligated Group, or (ii) after giving effect to all Liens constituting Permitted Encumbrances permitted by such Subsection (b) of the definition, the Unsecured Debt Ratio would be at least 1.25:1 or, if less than 1.25:1, not less than it was for the Obligated Group immediately prior to the incurrence or grant of such Lien. See DEFINITIONS OF CERTAIN TERMS Permitted Encumbrances, SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE Liens on Property in APPENDIX C hereto. 26

34 The Master Indenture does not require the Obligated Group to satisfy any financial test in order to incur Additional Indebtedness, provided, however, the MBIA Covenants and Bank Covenants (as defined below) contain certain restrictions on the Obligated Group s ability to incur Additional Indebtedness. Additional Indebtedness including Additional Obligations may be secured by collateral solely for the benefit of such Indebtedness or Obligations, which collateral would not secure the Series 2009 Obligations. The foregoing is a summary of only certain of the covenants and provisions of the Master Indenture which may affect the security afforded by the Master Indenture and the Series 2009 Obligations. Certain covenants and restrictions (referred to herein as the MBIA Covenants) for the benefit of MBIA Insurance Corporation (referred to as MBIA) which relate to the tax-exempt bonds issued for the benefit of the Corporation in 2001 and 2003 (referred to as the MBIA Insured Bonds) apply to the Obligated Group only for as long as the MBIA Insured Bonds remain outstanding and are in addition to, and not in substitution for, the provisions of the Master Indenture. The MBIA Covenants may only be enforced by MBIA or by the Master Trustee for the sole benefit of MBIA upon the written request of MBIA. Failure to comply with the MBIA Covenants could cause an event of default under the Master Indenture. The MBIA Covenants may be modified, amended or waived at any time with the prior written consent of MBIA and without the consent of the Bond Trustee or the holder of any Obligation, including the Series 2009 Obligations, and without the consent of the owners of any Series 2009 Bonds. See SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE in APPENDIX C. Certain amendments to the Master Indenture are being made pursuant to the Tenth Supplemental Master Trust Indenture that is executed and delivered in connection with the issuance of the Series 2009 Bonds. By purchasing a Series 2009 Bond, the holder thereof is deemed to have consented to the amendments contained in the Tenth Supplemental Master Trust Indenture and described under the caption SUMMARY OF CERTAIN PROVISIONS OF THE TENTH SUPPLEMENTAL MASTER INDENTURE in APPENDIX C. The Master Indenture provides that certain amendments may be made to the Master Indenture with the consent of the holders of not less than a majority in aggregate principal amount of the Obligations which are outstanding under the Master Indenture. It is possible that the Corporation could obtain the consent of the holders of not less than a majority in aggregate principal amount of the Obligations outstanding without the consent of the holders of the Series 2009 Bonds. Any amendments so approved could be material. See SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE Supplemental Master Indentures in APPENDIX C. Bank Agreements The Corporation has entered or will enter into reimbursement agreements or similar documents with certain banks (the Banks ) providing credit enhancement for the Series 2009 Bonds, the Series 2009A/B Bonds and the Commercial Paper Notes and may enter into other similar agreements in the future. Such agreements contain covenants and restrictions (the Bank Covenants ) which apply in addition to the covenants contained in the Master Indenture. The Corporation s obligations to the Banks under the existing reimbursement agreements are secured by the Series 2009 Bank Obligations, the Series 2009A/B Bank Obligations and the Commercial Paper Bank Obligation issued under the Master Indenture. Failure by the Corporation to comply with the Bank Covenants could cause an event of default under the Master Indenture. The Loan Agreements and Bond Indentures General The Loan Agreements impose certain restrictions on the actions of the Corporation for the benefit of the Authority and the owners of the Series 2009 Bonds. The Loan Agreements and the Series 2009 Obligations provide that the Corporation will make payments to the Bond Trustee for deposit into the Revenue Fund under the related Bond Indenture in amounts sufficient to pay when due the principal of and premium, if any, and the interest on the Series 2009 Bonds. 27

35 The rights of the Authority in and to the Series 2009 Obligations, the amounts payable thereon and the amounts payable to the Authority under the Loan Agreements have been assigned to the Bond Trustee to provide for and to secure the payment of principal of and premium, if any, and interest on the Series 2009 Bonds. Payments on the Series 2009 Obligations pledged under the Bond Indentures will be made directly to the Bond Trustee. Certain amendments to the Bond Indentures and the Loan Agreements may be made without the consent of the owners of the Series 2009 Bonds. Certain other amendments to the Bond Indentures and the Loan Agreements may be made with the consent of the owners of not less than a majority in aggregate principal amount of the Series 2009 Bonds outstanding or a majority in aggregate principal amount of the Series 2009 Bonds affected by the proposed amendment. Any such amendment may be material. See SUMMARY OF CERTAIN PROVISIONS OF THE BOND INDENTURES Supplemental Bond Indentures in APPENDIX D. Credit Facility Issuer s Right to Consent to Amendments on Behalf of Bondholders So long as a Credit Facility is in effect and the Credit Facility Issuer has not lost any of its rights pursuant to the provisions of the Bond Indentures described under the captions SUMMARY OF CERTAIN PROVISIONS OF THE BOND INDENTURES Consent of the Credit Facility Issuer in APPENDIX D hereto, the Credit Facility Issuer shall have the right without the consent of or notice to the Bondholders (i) to direct the Bond Trustee, as holder of a Series 2009 Obligation, to take any action or give any consent, approval, waiver or notice under the provisions of the Master Indenture and (ii) to consent to any supplements or amendments to the Loan Agreement or the Bond Indenture on behalf of the owners of the Series 2009 Bonds. Any such amendments may be material. Rights of the University to Assume Obligations Under Certain Circumstances Under certain circumstances set forth in each Loan Agreement, the University may be substituted for, and shall assume the obligations of, the Corporation under the Loan Agreements (except as otherwise provided therein) and shall issue its note (referred to as the University Note) in substitution for the Series 2009D Obligation or the Series 2009E Obligation pledged under the Bond Indentures, and the Corporation will be released and discharged from all obligations and liabilities under the respective Loan Agreement and the respective Series 2009 Obligation. In such event, unless the University shall have become a Member of the Obligated Group, the University will not be subject to the terms and provisions of the Master Indenture, and the obligations so assumed by the University will not be secured in any way by the Master Indenture. See SUMMARY OF CERTAIN PROVISIONS OF THE LOAN AGREEMENTS Termination of Lease; Assumption of Obligations Under Loan Agreements in APPENDIX D, for the conditions under which such substitution may occur. No financial tests are required to be met by the University prior to such substitution. Unless such substitution occurs, the University is not obligated under the Loan Agreements and is not liable for any payments with respect to the Series 2009 Bonds. State of Illinois Not Liable on the Series 2009 Bonds The Series 2009 Bonds, any premium thereon and the interest thereon do not constitute indebtedness or an obligation, general or moral, or a pledge of the full faith or a loan of credit of the Authority, the State of Illinois or any political subdivision thereof, within the purview of any constitutional or statutory limitation or provision. The Authority is obligated to pay the principal of, premium, if any, and interest on the Series 2009 Bonds and other costs incidental thereto only from the sources specified in the Bond Indentures. Neither the full faith and credit nor the taxing powers, if any, of the Authority, the State of Illinois or any political subdivision thereof is pledged to the payment of the principal of, premium, if any, and interest on the Series 2009 Bonds. No owner of any Series 2009 Bond shall have the right to compel the taxing power of the Authority, the State of Illinois or any political subdivision thereof to pay the principal of, premium, if any, or interest on the Series 2009 Bonds. The Authority does not have the power to levy taxes for any purpose whatsoever. 28

36 THE AUTHORITY Powers The Authority is a body politic and corporate of the State of Illinois (referred to as the State). The Authority was created under the Illinois Finance Authority Act (referred to as the Act), which consolidated seven of the State s previously existing financing authorities (referred to as the Predecessor Authorities). All bonds, notes or other evidences of indebtedness of the Predecessor Authorities were assumed by the Authority effective January 1, Under the Act, the Authority may not have outstanding at any one time bonds for any of its corporate purposes in an aggregate principal amount exceeding $28,150,000,000, excluding bonds issued to refund the bonds of the Authority or bonds of the Predecessor Authorities. Pursuant to the Act, the Authority is governed by a 15- member board appointed by the Governor of the State with the advice and consent of the State Senate. Presently, eleven members have been duly appointed, and four vacancies exist. The members receive no compensation for the performance of their duties but are entitled to reimbursement for all necessary expenses incurred in connection with the performance of such duties. Bonds of the Authority The Authority may from time to time issue bonds as provided in the Act for the purposes set forth in the Act. Any bonds issued by the Authority (and any interest thereon) shall not be or become an indebtedness or obligation, general or moral, of the State or any political subdivision thereof nor be or become a pledge of the full faith and credit of the State or any political subdivision thereof, other than the Authority. The Series 2009 Bonds of the Authority as described herein are limited obligations of the Authority payable solely from the specific sources and revenues of the Authority specified in the resolution and the Bond Indenture authorizing the issuance of such bonds. No Owner of any Series 2009 Bond shall have the right to compel any taxing power of the State or any political subdivision thereof to pay the principal of, premium, if any or interest on the Series 2009 Bonds. The Authority has no taxing power. The Authority makes no warranty or representation, whether express or implied, with respect to the Illinois Project or the use thereof. Further, the Authority has not prepared any material for inclusion in this Official Statement, except the material under the headings THE AUTHORITY and LITIGATION The Authority. The distribution of this Official Statement has been duly approved and authorized by the Authority. Such approval and authorization does not, however, constitute a representation or approval by the Authority of the accuracy or sufficiency of any information contained herein except to the extent of the material under the headings referenced in this paragraph. The offices of the Authority are located at Two Prudential Plaza, 180 North Stetson Avenue, Suite 2555, Chicago, Illinois, 60601, and its telephone number is (312) Potential Legislative Action On May 21, 2009, Senate Bill 1333 was passed, as amended by the Illinois House of Representatives by House Amendments No. 1 and No. 2. Under the bill, designated officials and designated employees of a State of Illinois executive board or commission appointed or nominated between January 11, 1999 and January 29, 2009 would be terminated upon the effective date of the bill, which is the date the bill would become law. Such terminated officials and employees could continue serving for up to 90 days after such effective date. The bill expressly allows the Governor and any employing or appointing authority to subsequently reappoint or reemploy a person terminated in this manner. The Authority believes that its 15 board members appointed by the Governor and approximately 27 employees, including its senior management, are now covered by this bill. As of May 31, 2009, the last day of the regular session of the 96th Session of the Illinois General Assembly, the Senate Executive Committee had sent House Amendments No, 1 and No. 2 to Senate Bill 1333 to the floor of the Senate for final action. As of August 13, 2009, the Illinois Senate had not taken action on House Amendments No. 1 and No. 2 to Senate Bill The Authority does not know if the bill will pass in its current form or what effect, if any, the bill might have on the operations of the Authority if enacted. The bill does not affect the Authority s legal obligation to make payments with respect to the Series 2009 Bonds. 29

37 Authority Advisors D.A. Davidson & Co. and Scott Balice Strategies, LLC serve as co-senior financial advisors to the Authority. Additionally, certain legal matters with respect to the Series 2009 Bonds will be passed upon for the Authority by its special counsel Charity & Associates, P.C., Chicago, Illinois. General BONDHOLDERS RISKS The purchase and ownership of the Series 2009 Bonds involve certain investment risks that are discussed throughout this Official Statement. Each prospective purchaser of the Series 2009 Bonds (or a beneficial ownership interest therein) should make an independent evaluation of the information presented in this Official Statement. Some of the risks that could affect the Series 2009 Bonds and the future financial condition of the Corporation are described below. This description of various risks is not, and is not intended to be, exhaustive. The operations of the health care industry and the ownership and organization of individual participants therein, including the Corporation, have been subject to increasing scrutiny by federal, state and local governmental agencies. In response to perceived abuses and actual violations of the terms of existing federal, state and local health care payment programs, these agencies have increased their audit and enforcement activities, and federal and state legislation has been considered or enacted providing for or expanding existing civil and criminal penalties against certain activities. In addition, federal, state and local agencies have increased their scrutiny of transactions involving not-for-profit, tax-exempt organizations and are focusing in particular upon limitations on the use of charitable assets and revenues. Any of the risk factors described herein may affect the Corporation s revenues and impair its ability to make required payments under the Loan Agreements and the Obligated Group s ability to make required payments on the Series 2009 Obligations when due. Any such impairment may adversely affect the Authority s ability to pay the principal of, premium, if any, and interest on the Series 2009 Bonds, when due. There can be no assurance that the financial condition of the Corporation and/or the utilization of the Corporation s facilities will not be adversely affected by any of these factors. The Initial Credit Facility Issuers The primary security for the Series 2009D Bonds is intended to be an irrevocable transferable direct pay letter of credit and the primary security for the Series 2009E Bonds is intended to be a separate irrevocable transferable direct pay letter of credit. It is possible however, in the event of the insolvency of either Initial Credit Facility Issuer or the occurrence of some other event precluding an Initial Credit Facility Issuer from honoring its obligation to make payment as stated in the related Letter of Credit, that the financial resources of the Corporation and any future Member of the Obligated Group will be the secondary sources of payment on the related series of Series 2009 Bonds. There can be no assurance that the financial resources of the Corporation and any future Member of the Obligated Group, even though obligated under the Loan Agreements to pay, would be sufficient to pay the principal, premium, if any, interest on and Tender Price of the Series 2009 Bonds. There can be no assurance that the credit rating of each Initial Credit Facility Issuer will continue at its current level. A decline in the credit rating of an Initial Credit Facility Issuer or the issuer of an Alternate Credit Facility could result in a decline in any rating that may be assigned to the related Series 2009 Bonds from time to time which could in turn affect the market price for, rates, or marketability of such Series 2009 Bonds. For information concerning the Initial Credit Facility Issuers, see INFORMATION REGARDING THE INITIAL CREDIT FACILITY ISSUERS in APPENDIX F hereto. 30

38 Impact of Market Turmoil Over the last year, the economies of the United States and other countries have experienced severe disruption, prompting a number of banks and other financial institutions to seek additional capital, including capital provided through the federal government, to merge, and, in some cases, to cease operations. These events collectively have led to significant reductions in lending capacity and the extension of credit, erosion of investor confidence in the financial sector, and historically aberrant fluctuations in interest rates. This disruption of the credit and financial markets has led to volatility in the securities markets, significant losses in investment portfolios, increased business failures and consumer and business bankruptcies, and is a major cause of the current economic recession. In 2008 and 2009, federal legislation was enacted and regulatory and other initiatives were implemented by agencies of the Federal government and the Federal Reserve Board with the objective of stabilizing the financial markets by enhancing liquidity, providing additional capital to the financial sector and improving the performance and efficiency of credit markets. Other legislation is pending or under active consideration by Congress, and additional regulatory action is being considered by various Federal agencies and the Federal Reserve Board and foreign governments are implementing actions, all of which are intended to continue and strengthen efforts to restore the domestic and global credit markets. It is unclear whether these legislative, regulatory and other governmental actions will have the positive effect that is intended. The health care sector has been materially adversely affected by these developments. The consequences of these developments have generally included realized and unrealized investment portfolio losses, reduced investment income, limitations on access to the credit markets, difficulties in extending existing or obtaining new liquidity facilities, difficulties in rolling maturing commercial paper and remarketing revenue bonds subject to tender, requiring the expenditure of internal liquidity to fund principal payments on commercial paper or tenders of revenue bonds, and increased borrowing costs. The economic recession may also adversely affect the operations of the Corporation as a result of, among other factors, increases in the number of uninsured patients or deferral of elective medical procedures. Economic conditions are adversely affecting revenue available to the State of Illinois and increasing State expenses under various State programs, including Medicaid. Stresses on the State of Illinois budget have resulted in delays of payments due under Medicaid and other State programs and may result in future delays, reductions in payments or changes in eligibility for Medicaid or other State programs. President Obama signed into law the American Recovery and Reinvestment Act of 2009 (referred to as ARRA). ARRA includes several provisions that are intended to provide financial relief to the health care sector, including an increase through December 31, 2010 in federal payments to states to fund the Medicaid program, a requirement that states promptly reimburse healthcare providers, and a subsidy to the recently unemployed for health insurance premium costs. ARRA also establishes a framework for the implementation of a nationally-based health information technology program, including incentive payments commencing in 2011 to healthcare providers to encourage implementation of certified health information technology and electronic medical records. The incentive payments will be payable through 2014 to hospitals and physicians that comply with federal requirements. The Corporation has not made an assessment of what is needed to meet these requirements, and is therefore unable to determine the cost, if any of complying with these requirements at this time. Failure to comply by 2015 may result in reduced Medicare and Medicaid revenues in future years. Health Care Reform Health care reform has been identified as a priority by business leaders, public advocates, political leaders and candidates for office at the federal, state and local levels. Proposals include: (1) establishing universal healthcare coverage or purchasing pools; (2) modifying how hospitals, physicians and other healthcare providers are paid; and (3) evaluating hospitals, physicians and other healthcare providers on a variety of quality and efficacy standards to support pay-for-performance systems. Congress and the current administration have indicated their intent to institute health reform in the coming year. 31

39 In order to pay for health reform initiatives, the current administration and legislators propose to make significant cuts in Medicare payments to health care providers. Specified proposed actions that could adversely impact health care providers revenues include: (1) significant cuts to Medicare Advantage health plans resulting in reduced payments by such plans to providers; (2) reductions or limitations in reimbursement for patient readmissions; (3) bundled reimbursement for all hospital inpatient, post-acute and professional services rendered in an episode of care; (4) restricted access to or payments for ancillary services (e.g. prior authorization requirements for medical imaging procedures); (5) expansion of quality incentive programs that pay providers based on specified performance parameters; (6) additional claims submission and auditing requirements; and (7) further restrictions on Medicare payments. In addition, many states, including Illinois, have enacted, or are considering enacting, measures designed to reduce their Medicaid expenditures and change private health care insurance. States have also adopted, or are considering, legislation designed to reduce coverage and program eligibility, enroll Medicaid recipients in managed care programs and/or impose additional taxes on hospitals to help finance or expand states Medicaid systems. This focus on health care reform may increase the likelihood of significant changes affecting the health care industry. Possible future changes in the Medicare, Medicaid, and other state programs, including Medicaid supplemental payments pursuant to upper payment limit programs, may reduce reimbursements to Members of the Obligated Group and may also increase their operating expenses. Interest Rate Swap Risk The Corporation has entered into an interest rate swap (referred to as the Swap) with JPMorgan Chase Bank, N.A. with a notional amount of approximately $325 million. The Swap will be subject to periodic mark-tomarket valuations and at any time may have negative value (which could be substantial) to the Corporation. Changes in the market value of such swap agreements could negatively or positively impact the Corporation s operating results and financial condition, and such impact could be material. The Swap counterparty may terminate the Swap upon the occurrence of certain termination events or events of default. The Corporation may terminate the Swap at any time. If either the Swap counterparty or the Corporation terminate the Swap during a negative value situation, the Corporation may be required to make a termination payment to the Swap counterparty, and such payment could be material. Pursuant to the Swap, the Swap counterparty will be obligated to make variable rate payments to the Corporation based on an index and the notional amount of the Swap indicated above, which payments may be more or less than the variable rates the Corporation is required to pay with respect to a comparable amount of principal of the obligations to which the Swap relates. No determination can be made at this time as to the potential exposure to the Corporation relating to the difference in variable rate payments, termination payments or any non-scheduled payments subordinate to payments with respect to debt-service. See the audited combined financial statements of the Corporation included in APPENDIX B hereto, including Note 2, for additional information on the Swap. The Corporation is not required to post any collateral or otherwise secure its obligations under the Swap. There is no guarantee that any floating amount payable by a swap provider under any swap agreement will match the amount payable by the Corporation to the owners of the indebtedness to which such swap agreement relates at all times or at any time. To the extent of a mismatch, the Corporation is exposed to basis risk in that the floating amount it receives from the swap provider pursuant to the swap agreement will not equal the variable amount it is required to pay on the indebtedness to which the swap agreement relates. Construction Risk Construction of the Project is subject to the usual risks associated with construction projects, including, but not limited to, delays in issuance of required building permits or other necessary approvals or permits, strikes, shortages of materials and adverse weather conditions. Such events could result in delaying completion of the Project. Management of the Corporation anticipates that all required permits will be obtained in due course. It is anticipated that the proceeds from the sale of the Series 2009 Bonds, the Series 2009C Bonds, together with certain funds of the Corporation and certain funds to be obtained by the Corporation through future borrowings, will be sufficient to complete the construction and equipping of the Project. However, cost overruns for projects of this magnitude may occur due to change orders and other factors. In addition, the date of substantial completion may be 32

40 extended by reason of changes authorized by the Corporation, delays due to acts or neglect of the Corporation or by independent contractors employed by the Corporation or by labor disputes, fire, unusual delay in transportation, adverse conditions not reasonably anticipated, unavoidable casualties or any causes beyond the control of the contractors. Cost overruns and delays in completion of construction of the Project could materially adversely affect the financial condition of the Corporation. Nonprofit Healthcare Environment The Corporation is a not for profit corporation, exempt from federal income taxation as an organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (referred to as the Code). As a not for profit tax-exempt organization, the Corporation is subject to federal, state and local laws, regulations, rulings and court decisions relating to its organization and operation, including its operation for charitable purposes. At the same time, the Corporation conducts large-scale complex business transactions and is a major employer in its 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 healthcare organization. Over the past several years, an increasing number of the operations or practices of healthcare providers have been challenged or questioned to determine if they are consistent with the regulatory requirements for nonprofit tax-exempt organizations. These challenges are broader than concerns about compliance with federal and state statutes and regulations, such as Medicare and Medicaid compliance, and in many cases are examinations of core business practices of the healthcare organizations. Areas which have come under examination have included pricing practices, billing and collection practices, charitable care, executive compensation, exemption 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 (referred to as the IRS), labor unions, Congress, state legislatures, and patients, and in a variety of forums, including hearings, audits and litigation. These challenges or examinations include the following, among others: Federal Congressional Hearings. Since 2004, three Congressional Committees have conducted hearings and other proceedings inquiring into various practices of nonprofit hospitals and health care providers. The House Committee on Energy and Commerce (referred to as the House Committee) launched a nationwide investigation of hospital billing and collection practices and prices charged to uninsured patients. Twenty large hospital and healthcare systems were requested by the House Committee to provide detailed historical charge and billing practice information for acute care services. The Senate Finance Committee also conducted hearings on required reforms to the nonprofit sector and released staff discussion drafts on proposals for reform in the area of tax-exempt organizations, including a proposal for a five-year review of tax-exempt status by the IRS. Senator Grassley, of the Senate Finance Committee, has from time to time sent letters to various hospitals and hospital systems, including the Corporation, requesting certain information about general operating issues, including levels of charitable care and community benefits, and patient billing and collection practices. The IRS has requested information from a number of nonprofit hospitals and healthcare organizations regarding their charitable activities, patient billing and joint venture activities. Such hearings have continued in It is uncertain if any of the staff proposals will be adopted by the entire Senate Finance Committee or if the Senate Finance Committee will recommend legislative changes as a result of the hearing. The Senate Finance Committee is also considering a number of policy options regarding health care reform, including a hospital s 501(c)(3) tax-exempt status. See Charity Care below. The House Committee on Ways and Means has held several hearings to examine the tax-exempt sector, hospital tax exemptions and the use of tax-preferred bond financings. It is uncertain if any of these Committees will pursue further investigations or will recommend legislative changes as a result of these inquiries. 33

41 IRS Examination of Compensation Practices. In August 2004, the IRS announced a new enforcement effort to identify and halt abuses by tax-exempt organizations that pay excessive compensation and benefits to their officers and other insiders. The IRS announced that it would contact nearly 2,000 charities and foundations to seek more information about their compensation practices and procedures. In February 2009, the IRS issued its Hospital Compliance Project Final Report (the IRS Final Report ) based on its examination of such tax-exempt organizations. The IRS Final Report indicates that the IRS (i) will continue to heavily scrutinize executive compensation arrangements, practices and procedures and (ii) in certain circumstances, may conduct further investigations or impose fines on tax-exempt organizations. Revision of IRS Form 990 for Tax-Exempt Organization. The IRS Form 990 is used by most 501(c)(3) not-for-profit organizations exempt from federal income taxation to submit information required by the federal government. On December 20, 2007, the IRS released a revised Form 990 that 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 information on community benefit 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 detailed information on compliance risk areas available to the IRS and other stakeholders. At this time it is difficult to predict the additional burden that completion of the revised Form 990 may place on Corporation and its operations. Litigation Relating to Billing and Collection Practices. Lawsuits have been filed against other health care providers alleging, among other things, that they have failed to fulfill their obligations to provide charity care to uninsured patients and have overcharged uninsured patients. Many of these cases have 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 to address these complaints and allegations. Challenges to Real Property Tax Exemptions. Recently, the real property tax exemptions afforded to certain nonprofit healthcare providers by state and local taxing authorities have been challenged on the grounds that the healthcare providers were not engaged in charitable activities. These challenges have been based on a variety of grounds, including allegations of aggressive billing and collection practices and excessive financial margins. While the Corporation is not aware of any current challenge to the tax exemption afforded to any material real property of the Corporation, there can be no assurance that these types of challenges will not occur in the future. In February 2004, the Illinois Department of Revenue denied the request for property tax exemption of Provena Covenant Medical Center, a 199-bed hospital located in Urbana, Illinois. This decision was based on the conclusion that the hospital had not proven with clear and convincing evidence that it was operating with a charitable purpose under the Illinois Property Tax Code. In July 2007, the Circuit Court of Sangamon County reversed the decision of the Department of Revenue and granted Provena s exemption from real estate taxes, however, in August 2008, the Illinois Appellate Court reversed the Circuit Court s judgment. The decision has been appealed, and the Illinois Supreme Court has agreed to hear the case. It cannot be determined what effect this decision may have on the Corporation as its operative facts are different from those of the Corporation. Current State Legislative Initiatives. In addition to the increased scrutiny that tax-exempt hospitals have faced in the past few years through federal and state charity care litigation, congressional hearings and internal revenue service examinations, the Office of the Illinois Attorney General (referred to as the Attorney General) has also directed its attention toward state legislative and regulatory initiatives relating to tax-exempt hospitals. Under current Illinois law, tax-exempt hospitals are required annually to submit audited financial statements and detailed community benefits reports to the Attorney General. The Attorney General has also issued subpoenas to a number of Illinois hospitals, including the Corporation, 34

42 requesting additional information on charity care policies, billing practices and other matters. Several pieces of significant legislation were introduced in Illinois 2006 legislative session to provide the Attorney General with increased oversight and responsibility over tax-exempt hospitals charity care policies, property tax exemption, billing and collection procedures, labor relations and access to capital markets. These recent initiatives are indicative of a greater scrutiny of the billing, collection and other business practices of tax-exempt hospitals, and may indicate an increasingly more difficult operating environment for healthcare organizations, including the Corporation. While the Fair Patient Billing Act (Illinois Public Act ), relating to Illinois hospitals billing and collection procedures, was signed into law by the Governor on June 20, 2006, the Attorney General withdrew the bill focused on charity care policies and property tax exemption from consideration in the 2006 legislative session, and the Attorney General has not introduced any such legislation in the current legislative session. The Attorney General has expressed her intent to discuss these issues further with Illinois hospitals, industry organizations and consumer groups. The Illinois Hospital Uninsured Patients Discount Act became law on September 23, The changes, which became effective April 1, 2009, require all hospitals to provide discounts to uninsured patients in Illinois meeting certain eligibility requirements and establish a maximum collectible amount of 25% of annual family income for eligible individuals. There can be no assurance what future legislative initiatives may contain or what the final form of any legislation passed may be. It is unclear whether any such challenges, examinations and/or legislation would have a material adverse effect on the Corporation. The foregoing are some examples of the challenges and examinations facing nonprofit healthcare organizations. They are indicative of a greater scrutiny of the billing, collection and other business practices of these organizations, and may indicate an increasingly more difficult operating environment for healthcare organizations, including the Corporation. The challenges and examinations, and any resulting legislation, regulations, judgments, or penalties, could have a material adverse effect on the Corporation. Charity Care Hospitals are permitted to acquire tax-exempt status under the Code because the provision of health care historically has been treated as a charitable enterprise. This treatment arose before most Americans had health insurance, when charitable donations were required to fund the health care provided to the sick and disabled. Some commentators and others have taken the position that, with the onset of employer health insurance and governmental reimbursement programs, there is no longer any justification for special tax treatment for the health care industry, and the availability for tax-exempt status should be eliminated. Management of the Corporation considers the likelihood of such a dramatic change in the law to be remote; nevertheless, federal and state tax authorities are beginning to demand that tax-exempt hospitals justify their tax-exempt status by documenting their charitable care and other community benefits. The Senate Finance Committee is also considering a policy option that would codify organizational and operational requirements for determining whether a hospital is a charitable organization under Section 501(c)(3) of the Code. Such requirements include, among other things, that Section 501(c)(3) hospitals regularly conduct a community needs analysis, provide a minimum annual level of charitable patient care, not refuse service based on a patient s inability to pay and follow certain procedures before instituting collection actions against patients. The proposal also provides for excise taxes or intermediate sanctions designed to encourage compliance with the operational requirements. These intermediate sanctions could be imposed in situations where revocation of taxexempt status is viewed as inappropriate. As further described above under the caption BONDHOLDERS RISKS Nonprofit Healthcare Environment Litigation Relating to Billing and Collection Practices, charity care issues also serve as the basis of certain claims against major hospital systems throughout the United States on behalf of uninsured patients. The more than 60 lawsuits filed against non-profit hospitals raise a number of claims against the hospital defendants, including claims that the defendants, by accepting tax-exempt status, entered into agreements with the federal, state and local governments promising to provide free or reduced care to all those who need it; the uninsured patients are beneficiaries of those agreements and can bring suit on them; the defendants engaged in illegal and oppressive tactics against the uninsured; the defendants engaged in illegal price discrimination by charging the uninsured rates far in excess of the rates charged to such third party payors as Medicare and certain insurers; the defendants violated state consumer fraud statutes; the defendants allowed a portion of their properties to be used by for-profit entities at 35

43 less than fair value and engaged in other inappropriate transactions with doctors and certain insiders; the defendants transferred monies illegally to their affiliates for other than charitable purposes; and the defendants and the American Hospital Association, another named defendant in many of the lawsuits, conspired with the defendants to charge illegal prices to the uninsured. Illinois Health Facilities Planning Act Certain projects of the Corporation, including the Project, require a certificate of need (referred to as a CON) pursuant to the Illinois Health Facilities Planning Act, as amended (referred to as the Planning Act). The Planning Act, has among its purposes the establishment of procedures designed to reverse the trends of increasing costs of health care resulting from unnecessary construction or modification of health care facilities, for the orderly and economical development of health care facilities in the State, the avoidance of unnecessary duplication of such facilities and the promotion of planning for development of such facilities. Pursuant to the Planning Act and the accompanying regulations, no health care facility (which, as defined in the Planning Act, includes hospitals, nursing homes and certain other facilities) may initiate a project which (i) requires a capital expenditure in excess of the capital expenditure minimum threshold; or (ii) substantially changes the scope or functional operation of a health care facility; or (iii) results in the establishment or discontinuation of a health care facility; or (iv) increases or decreases the number of beds or redistributes the bed capacity among various categories of service or physical facilities by more than twenty beds or by more than 10% of the facility s total bed capacity, whichever is less, over a two-year period; or (v) establishes or discontinues a regulated category of service; or (vi) involves the change of ownership of a health care facility unless an exemption has been granted by the Illinois Health Facilities and Services Review Board (referred to as the Review Board), the issuance of which is governed by the provisions of the Planning Act. The Review Board, in consultation with the Illinois Department of Public Health, drafts rules, regulations, standards and criteria required to carry out the provisions and purposes of the Planning Act, which are subject to approval by the Joint Committee on Administrative Rules. The Planning Act establishes capital expenditure minimum thresholds for projects applied for by (i) hospitals, (ii) skilled and intermediate care long-term care facilities under the Illinois Nursing Home Care Act, and (iii) all other applicants, to be adjusted annually for inflation. Projects exceeding these capital expenditure minimum thresholds require a CON issued by the Review Board. As of the date of this Official Statement, these thresholds are set at $11,500,000, $6,500,000 and $3,000,000 respectively. The Corporation has obtained a CON for the Project. However, unexpected events could result in cost overruns and delays in completion of construction of the Project that, in turn, could cause the Corporation to fail to meet the completion deadline and capital expenditure limit imposed by the CON. Security and Enforceability Enforceability of the Master Indenture and the Series 2009 Obligations The Corporation has made, and any future Member of the Obligated Group will make, a covenant in the Master Indenture to make payments when due on the Series 2009 Obligations. If other entities become Members of the Obligated Group, those future Members of the Obligated Group will be jointly and severally liable for the payments due on the Series 2009 Obligations and the other Obligations issued from time to time under the Master Indenture. The enforceability of these joint and several obligations is uncertain. As a consequence, the property of the Members of the Obligated Group that are not the beneficiaries of the proceeds of the Series 2009 Bonds may not be available to make such payments. Notwithstanding these uncertainties, the accounts of the Members of the Obligated Group are combined and will continue to be combined for financial reporting purposes and will be used in determining whether various covenants and tests included in the Master Indenture are met. Counsel to the Corporation will render an opinion concurrently with the delivery of the Series 2009 Bonds to the effect that the Master Indenture and the Series 2009 Obligations are enforceable against the Corporation in accordance with their terms. However, such opinion will be qualified as to the joint and several obligations of the Members of the Obligated Group to make payments of debt service on the Series 2009 Obligations. In the opinion of counsel to the Corporation, such joint and several obligations may not be enforceable against a Member of the 36

44 Obligated Group that did not receive Series 2009 Bond proceeds or directly benefit from the issuance of the Series 2009 Bonds under any of the following circumstances: To the extent payments on the Series 2009 Obligations are requested to be made from assets of such Member which are donor-restricted or which are subject to a direct, express or charitable trust which does not permit the use of such assets for such payments. If the purpose of the debt created and evidenced by the Series 2009 Obligations is not consistent with the charitable purposes of such Member, or if the debt was incurred or issued for the benefit of an entity other than a nonprofit corporation which is exempt from federal income taxes under Sections 501(a) and 501(c)(3) of the Internal Revenue Code and is not a private foundation as defined in Section 509(a) of the Internal Revenue Code. To the extent payments on the Series 2009 Obligations would result in the cessation or discontinuation of any material portion of the health care or related services previously provided by such Member. If and to the extent payments are requested to be made pursuant to any loan violating applicable usury laws. Counsel to the Corporation will opine that the Series 2009 Obligations were issued (i) for a purpose which is consistent with the charitable purposes of the Corporation, (ii) for the benefit of a nonprofit corporation which is exempt from federal income taxes under Sections 501(a) and 501(c)(3) of the Internal Revenue Code and which is not a private foundation as defined in Section 509(a) of the Internal Revenue Code, and (iii) to secure a loan which does not violate applicable usury laws. These limitations on the enforceability of a Member of the Obligated Group s joint and several obligations on the Series 2009 Obligations also apply to their obligations on all other Obligations. If the obligation of a particular Member of the Obligated Group to make payment on an Obligation is not enforceable, and payment is not made on such Obligation when due in full, an event of default will occur under the Master Indenture. A Member of the Obligated Group may not be required to make payments on or provide amounts for the payment of an Obligation, including the Series 2009 Obligations, issued by or for the benefit of another entity if and to the extent that any such payment or transfer would render such Member insolvent or would conflict with or not be permitted by or would be subject to recovery for the benefit of other creditors of such Member under applicable fraudulent conveyance, bankruptcy, insolvency, moratorium or other similar laws affecting the enforcement of creditors rights. There is no clear precedent in the law as to whether payments on Obligations (including the Series 2009 Obligations) by a Member of the Obligated Group may be voided by a trustee in bankruptcy in the event such Member filed for bankruptcy protection and a trustee was appointed, or by third party creditors in an action brought pursuant to state fraudulent conveyances statutes. Under the United States Bankruptcy Code, a trustee in bankruptcy and, under state fraudulent conveyance statutes, a creditor of a related guarantor, may avoid any obligation incurred by a related guarantor if, among other bases therefor, (1) the guarantor has not received fair consideration or reasonably equivalent value in exchange for the guaranty and (2) the guaranty renders the guarantor insolvent, as defined in the United States Bankruptcy Code or state fraudulent conveyances statutes, or the guarantor is undercapitalized or it intended or expected to incur debts that it could not pay as they became due. Under such principles, the obligor on an Obligation (including the Series 2009 Obligations) that secures Related Bonds (including the Series 2009 Bonds) not issued for the direct benefit of such obligor may be considered a guarantor. Application by courts of the tests of insolvency, reasonably equivalent value and fair consideration has resulted in a conflicting body of case law. If a judicial action were brought to compel a Member of the Obligated Group to make a payment on an Obligation (including the Series 2009 Obligations), a court might not enforce such payment in the event it is determined that sufficient consideration for the Member s obligation was not received, or that the incurrence of such obligation has rendered or will render the Member insolvent, or the Member is or will thereby become undercapitalized or it intended or expected to incur debts that it could not pay as they became due. 37

45 In addition, state courts have common law authority and authority under Illinois statutes to terminate the existence of a not-for-profit or nonprofit corporation or undertake supervision of its affairs on various grounds, including a finding that the not-for-profit or nonprofit corporation has insufficient assets to carry out its stated charitable purposes or has taken some action which renders it unable to carry out such purposes. Such action may arise on the court s own motion or pursuant to a petition of the Illinois Attorney General or other persons who have interests different from those of the general public, pursuant to the common law and statutory power to enforce charitable trusts and to see to the application of their funds to their intended charitable uses. Pledge of Unrestricted Receivables All Obligations issued under the Master Indenture, including the Series 2009 Obligations, will be secured by a security interest in the Unrestricted Receivables of the Obligated Group, but will not be secured by a pledge, grant or mortgage of any of the other property of the Obligated Group. Notwithstanding the pledge of Unrestricted Receivables, the Members of the Obligated Group may sell or otherwise transfer Unrestricted Receivables in accordance with the provisions of the Master Indenture. Certain Matters Relating to Enforceability of the Pledge of Unrestricted Receivables The enforceability of the security interest in Unrestricted Receivables may be limited by a number of factors, including: (i) provisions prohibiting the direct payment of amounts due to health care providers from Medicaid and Medicare programs to persons other than such providers; (ii) the absence of an express provision permitting assignment of receivables due under the contracts between the Members of the Obligated Group and third-party payors, and present or future legal prohibitions against such assignment; (iii) certain judicial decisions which cast doubt on the right of the Master Trustee, in the event of the bankruptcy of a Member of the Obligated Group, to collect and retain accounts receivable from Medicare, Medicaid and other governmental programs; (iv) commingling of proceeds of accounts receivable with other moneys of the Members of the Obligated Group not so pledged under the Master Indenture; (v) statutory liens; (vi) rights arising in favor of the United States of America or any agency thereof; (vii) constructive trusts or equitable or other rights impressed or conferred thereon by a federal or state court in the exercise of its equitable jurisdiction; (viii) federal bankruptcy laws which may affect the enforceability of the Master Indenture, the Loan Agreements or the security interest in the Unrestricted Receivables which are earned by a Member of the Obligated Group within 90 days preceding the commencement of bankruptcy proceedings by or against such Member of the Obligated Group and during the pendency of such proceedings; (ix) rights of third parties in Unrestricted Receivables converted to cash and not in the possession of the Master Trustee; and (x) claims that might arise if appropriate financing or continuation statements are not filed in accordance with the Uniform Commercial Code, as from time to time in effect. Facilities The health care facilities of the Corporation are not general purpose buildings and may not be suitable for industrial or commercial use. Consequently, if an event of default were to occur and the Bond Trustee or the Master Trustee were in a position to sell or lease the facilities as a result of the exercise of available remedies, it could be difficult to find a buyer or lessee. The sale or lease of facilities may also be limited by the provisions of the Leases described in APPENDIX A or by restrictive provisions affecting the use of the facilities for purposes other than medical purposes. As a result, the Bond Trustee or the Master Trustee may not obtain an amount sufficient to satisfy obligations on the Series 2009 Bonds or the Series 2009 Obligations, whether pursuant to a judgment against the Corporation or otherwise. Amendments to Master Indenture, Bond Indentures and Loan Agreements Each Bond Indenture designates the Bond Trustee as the holder of the related Series 2009 Obligation. See SUMMARY OF CERTAIN PROVISIONS OF THE BOND INDENTURES Bond Trustee as Holder of Series 2009 Obligations in APPENDIX D. Certain amendments to the Master Indenture may be made with the consent of the owners of not less than a majority of the aggregate principal amount of the outstanding Obligations, including the Series 2009 Obligations. 38

46 Such percentage may be composed wholly or partially of the owners of Obligations other than the Series 2009 Obligations. Such amendments may adversely affect the security of holders of the Series 2009 Obligations and the owners of the Series 2009 Bonds. Availability of Remedies The remedies available to the Bond Trustee, the Master Trustee and the owners of the Series 2009 Bonds upon an event of default under the Bond Indentures, the Master Indenture and the Loan Agreements are in many respects dependent upon judicial actions which are often subject to discretion and delay. Under existing constitutional and statutory law and judicial decisions, including, specifically, the Bankruptcy Code, and other similar laws and equitable principles affecting the enforcement of creditors rights such as insolvency, reorganization, moratorium or fraudulent conveyance, the remedies provided in the Bond Indentures, the Master Indenture and the Loan Agreements may not be readily available or may be limited. The various legal opinions to be delivered concurrently with the delivery of the Series 2009 Bonds will be qualified as to the enforceability of the various legal instruments by limitations imposed by general principles of equity and by bankruptcy, reorganization, insolvency or other similar laws affecting the rights of creditors generally and laws relating to fraudulent conveyances. Bankruptcy In the event a Member of the Obligated Group files for protection from creditors under the United States Bankruptcy Code, the rights and remedies of the owners of the Series 2009 Bonds would be subject to various provisions of the United States Bankruptcy Code. If a Member of the Obligated Group were to commence a proceeding in bankruptcy, payments made by that Member of the Obligated Group during the 90-day period immediately preceding such commencement (or, under certain circumstances, during the preceding one-year period) may be voided as preferential transfers to the extent such payments allow the recipients thereof to receive more than they would have received in the event of the liquidation of such Member of the Obligated Group. Security interests and other liens granted by such Member to the Bond Trustee or the Master Trustee and perfected during such preference period may also be voided as preferential transfers to the extent such security interest or other lien secures obligations that arose prior to the date of such grant or perfection. A bankruptcy filing would operate as an automatic stay of the commencement or continuation of any judicial or other proceeding against such Member of the Obligated Group and its property and as an automatic stay of any act or proceeding to enforce a lien upon or to otherwise exercise control over its property as well as various other actions to enforce, maintain or enhance the rights of the Bond Trustee and the Master Trustee. If the bankruptcy court so ordered, the property of such Member of the Obligated Group, including its accounts receivable and the proceeds thereof, could be used for the financial rehabilitation of such Member of the Obligated Group despite any security interest of the Bond Trustee therein. The rights of the Bond Trustee and the Master Trustee to enforce their respective interests and other liens could be delayed during the pendency of the rehabilitation proceeding. Such Member of the Obligated Group could also file a plan for the adjustment of its debts in any such proceeding which could include provisions modifying or altering the rights of creditors generally, or any class of them, secured or unsecured. The plan, when confirmed by a court, binds all creditors who had notice or knowledge of the plan and, with certain exceptions, discharges all claims against the debtor to the extent provided for in the plan. No plan may be confirmed unless certain conditions are met, among which are conditions that the plan be feasible and that it shall either have been accepted by each class of claims impaired thereunder or, if the plan is not so accepted, the court shall have determined that the plan is fair and equitable with respect to each class of nonaccepting creditors impaired thereunder and does not discriminate unfairly. A class of claims has accepted the plan if at least two-thirds in dollar amount and more than one-half in number of the class cast votes in its favor. In the event of bankruptcy of a Member of the Obligated Group, there is no assurance that certain covenants, including tax covenants, contained in the Bond Indentures, the Loan Agreements or the Master Indenture and certain other documents would survive. Accordingly, such Member of the Obligated Group, as debtor in possession, or a bankruptcy trustee could take action which might adversely affect the exclusion of interest on the Series 2009 Bonds from gross income for federal income tax purposes. 39

47 In addition, the bankruptcy of a health plan or physician group that is a party to a significant managed care arrangement with one or more Members of the Obligated Group, or that of any significant contract payor obligated to any one or more Members of the Obligated Group, could have material adverse effects on the Obligated Group. Additional Debt; Permitted Encumbrances The Master Indenture permits the issuance of additional Obligations on a parity with the Series 2009 Obligations and also permits incurrence of additional Indebtedness by the Members of the Obligated Group. The Master Indenture provides that, subject to the provisions of the Master Indenture summarized under the caption SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE Liens on Property in APPENDIX C hereto no Member of the Obligated Group shall create or incur or permit to be created or incurred or to exist any Lien on any Property of a Member of the Obligated Group to secure Indebtedness except Permitted Encumbrances. Under the definition of Permitted Encumbrances, the Members of the Obligated Group could place significant encumbrances on their Property. The Property subject to such Liens could consist in part or in whole of cash, marketable securities, accounts receivable or health care facilities. See the definition of Permitted Encumbrances under the heading DEFINITIONS OF CERTAIN TERMS Permitted Encumbrances and SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE Liens on Property in APPENDIX C hereto. Exchange of Bonds In the event the Act or the Authority is determined to be unconstitutional under the laws of the State or under the laws of the United States of America, and as a result thereof, the Series 2009 Bonds are declared to be invalid and unenforceable, and if as a result thereof the obligation of the Corporation to make payments on the Series 2009 Obligations and any Additional Obligations pledged under the Bond Indentures is determined to be unenforceable, then the Corporation agrees that it will issue its own bonds in exchange for the then outstanding Series 2009 Bonds, principal amount for principal amount, having the same rates of interest, maturities, redemption provisions and prepayment provisions as are then applicable to the Series 2009 Bonds being exchanged. The interest on such bonds may not be exempt from federal income taxation. See SUMMARY OF CERTAIN PROVISIONS OF THE LOAN AGREEMENTS - Exchange of Bonds in APPENDIX D hereto. Patient Service Revenues Net patient revenues realized by the Corporation are derived from a variety of sources and will vary among the individual facilities owned and operated by the Corporation and also among the various market areas and regions in which such facilities are located. Certain facilities and regions may realize substantially more revenues from private payment programs, such as managed care organizations, than do others. A substantial portion of the net patient service revenues of the Corporation is derived from third-party payors which pay for the services provided to patients covered by such third parties for such services. These thirdparty payors include the federal Medicare program, state Medicaid programs and private health plans and insurers, including health maintenance organizations and preferred provider organizations. Many of those programs make payments to the Corporation in amounts that may not reflect the direct and indirect costs of the Corporation of providing services to patients. The financial performance of the Corporation has been and could be in the future adversely affected by the financial position or the insolvency or bankruptcy of or other delay in receipt of payments from third-party payors that provide coverage for services to their patients. Medicare and Medicaid Programs A significant portion of the Corporation s patient service revenue is derived from government health care programs, principally Medicare and Medicaid which are highly regulated and subject to frequent and substantial changes. Approximately 34% and 24.7% of the gross patient revenue of the Corporation for the fiscal year ended June 30, 2008 were derived from the Medicare program and Medicaid programs, respectively. See the information 40

48 in APPENDIX A under the caption SOURCES OF REVENUE. Medicare and Medicaid are the commonly used names for reimbursement or payment programs governed by certain provisions of the federal Social Security Act. Medicare is an exclusively federal program, and Medicaid is a combined federal and state program. Medicare provides certain health care benefits to beneficiaries who are 65 years of age or older, blind, disabled or qualify for the End Stage Renal Disease Program. Medicaid is designed to pay providers for care given to the medically indigent and others who receive federal aid. Medicaid is funded by federal and state appropriations and administered by the various states. Medicare General. Medicare is a federal governmental health insurance system under which physicians, hospitals and other health care providers are reimbursed or paid directly for services provided to eligible elderly and disabled persons. Medicare is administered by the Centers for Medicare and Medicaid Services, or CMS, of the federal Department of Health and Human Services. In order to achieve and maintain Medicare certification, a health care provider must meet CMS s Conditions of Participation on an ongoing basis, as determined by the state in which the provider is located and/or The Joint Commission or the Healthcare Facilities Accreditation Program, or DNV Healthcare Inc. The Corporation has a significant dependence on Medicare as a source of revenue. Because of this dependence, changes in the Medicare program may have a material effect on the Corporation. For example, Medicare program changes resulting from the Balanced Budget Act of 1997 and Medicare Modernization Act of 2003, as subsequently amended and modified (referred to as MMA), have limited increases in Medicare payments that were otherwise provided by law, and/or reduced Medicare payment or reimbursement for certain health care services provided to Medicare beneficiaries. The Balanced Budget Act of 2003 has had and will continue to have a significant negative effect on acute care hospitals and other Medicare providers. The Deficit Reduction Act of 2005 (referred to as DRA) was expected to reduce net Medicare and Medicaid spending by approximately $11 billion over a ten year period and reduces spending by $39 billion through 2010, with the majority of these savings to be achieved from freezing or reducing payments to Medicare providers. The President s fiscal year 2010 budget proposal released earlier this year, if implemented by Congress, would reduce net Medicare and Medicaid spending by $309 billion over ten years. The purpose of much of the recent statutory and regulatory activity, including the MMA and the DRA, has been to reduce the rate of increase in health care costs, particularly costs paid under the Medicare and Medicaid programs. Future reductions in Medicare reimbursement, or increases in Medicare reimbursement in amounts less than increases in the costs of providing care, may have a material adverse financial effect on the Corporation and any future members of the Obligated Group. A portion of the Medicare revenues of the Corporation is derived from payments made for services rendered to Medicare beneficiaries under a prospective payment system, or PPS. Under a prospective payment system, the amount paid to the provider for an episode of care is established by federal regulation and is not related to the provider s charges or costs of providing that care. Presently, hospital inpatient and outpatient services, skilled nursing care, and home health care are paid on the basis of a prospective payment system. Under the hospital inpatient PPS, fixed payment amounts per inpatient discharge are established based on the patient s assigned diagnosis related group, or DRG. DRGs classify treatments for illnesses according to the estimated intensity of hospital resources necessary to furnish care for each principal diagnosis. All services paid under the PPS for hospital outpatient services are classified into groups called ambulatory payment classifications, or APCs. Services in each APC are similar clinically and in terms of the resources they require. A payment rate is established for each APC. The capital component of care is also paid on a fully prospective basis. The Secretary of HHS is required to review annually the DRG categories to take into account any new procedures, reclassify DRGs and recalibrate the DRG relative weights that reflect the relative resources used by hospitals with respect to discharges classified within a given DRG category. There is no assurance that the Corporation will be paid amounts that will reflect adequately changes in the cost of providing health care or in the cost of health care technology being made available to patients. CMS may only adjust DRG weights on a budget-neutral basis. PPS-exempt hospitals and units (inpatient psychiatric, rehabilitation and long-term hospital services) are currently reimbursed under prospective payment systems separate from the PPS/DRG system used for general acute 41

49 care hospitals and units. However, these exempt hospital/unit PPS payment methodologies are similar in that they utilize nationally determined payment rates (per discharge for rehabilitation and long-term care, per diem for psychiatric). These national rates are then generally subject to patient and/or facility specific adjustments for such factors as: case mix, regional wage or cost differences, medical education, disproportionate share, and outliers. The types of adjustments vary for each of the exempt PPS programs. From time to time, the factors used in calculating the prospective payments for units of service are modified by CMS, which may reduce revenues for particular services. Additionally, as part of the federal budgetary process, Congress has regularly amended the Medicare law to reduce increases in payments that are otherwise scheduled to occur, or to provide for reductions in payments for particular services. These actions could adversely affect the revenues of the Corporation. Additional payments may be made to individual providers. Hospitals that treat a disproportionately large number of low-income patients (Medicaid and Medicare patients eligible to receive supplemental Social Security income) currently receive additional payments in the form of disproportionate share payments. Additional payments are made to hospitals that treat patients who are costlier to treat than the average patient; these additional payments are referred to as outlier payments. Hospitals are paid for a portion of their direct and indirect medical education costs. These additional payments are also subject to reductions and modifications in otherwise scheduled increases as a result of amendments to relevant statutory provisions. The costs of providing a unit of care may exceed the revenues realized from Medicare for providing that service. Additionally, the aggregate costs to a provider of providing care to Medicare beneficiaries may exceed aggregate Medicare revenues received during the relevant fiscal period. The DRA required the Secretary of HHS to select conditions (referred to as hospital-acquired conditions ) that are: (1) high cost, high volume, or both; (2) identified as a complicating condition, when present as a secondary diagnosis at discharge, results in payment at a higher MS-DRG; and (3) reasonably preventable through application of evidence-based guidelines. The DRA further required hospitals to begin reporting on claims for discharges, beginning October 1, 2007, whether the selected conditions were present on admission. CMS identified certain conditions which will have payment implications when acquired during an inpatient stay for discharges after October 1, In addition, CMS has announced three national coverage determinations to establish that Medicare will no longer pay for wrongfully performed inpatient or outpatient procedures. The Office of Inspector General has issued two broad reports about adverse events in hospitals and the need to improve patient safety. The incidence of adverse events and whether health care providers should be compensated for services which result in such adverse events continues to be an area of focus for regulators. Medical Education Costs. Medicare pays for certain costs associated with both direct and indirect medical education (including portions of the salaries of residents and teachers and other overhead costs directly attributable to medical education programs for training residents, nurses and allied health professionals), termed graduate medical education (GME) payments and indirect medical education (IME) payments. CMS announced in a fiscal year 2008 rule that it would phase out the Capital IME payments beginning with fiscal year ARRA delayed the phase-out of Capital IME until October 1, 2010, after which there will be no further Capital IME payment unless Congress or CMS takes further action. On May 23, 2007, CMS published a proposed rule that would eliminate all federal matching funds for State GME payments to hospitals under the Medicaid program. Although Medicaid IME payments had been made for 40 years, CMS concluded that GME payments are not authorized under the Medicaid statute. A Congressionally imposed moratorium on the CMS proposal expired April 1, Congress included in ARRA a sense of the Congress statement that the rule to abolish Medicaid GME should not be finalized, but ARRA does not prevent CMS from eliminating Medicaid GME payments. The House of Representatives Committee on Oversight and Government Reform Majority Staff report issued in March 2008 estimated that Illinois would lose approximately $14 million in the first year and $74 million over five years if Medicaid GME payments were eliminated. There can be no assurance that payments to the Corporation for providing medical education will be adequate to cover the costs attributable to medical education programs for training residents, nurses and allied health professionals. Medicare Audits. Hospitals participating in Medicare are subject to audits and retroactive audit adjustments with respect to reimbursement claimed under the Medicare program. The Corporation receives 42

50 payments for various services provided to Medicare patients based upon charges or other reimbursement methodologies that are then reconciled annually based upon the preparation and submission of annual cost reports. Estimates for the annual cost reports are reflected as amounts due to/from third-party payors and represent several years of open cost reports due to time delays in the fiscal intermediaries audits and the basic complexity of billing and reimbursement regulations. These estimates are adjusted periodically based upon correspondence received from the fiscal intermediary. Medicare regulations also provide for withholding Medicare payment in certain circumstances if it is determined that an overpayment of Medicare funds has been made. In addition, under certain circumstances, payments may be determined to have been made as a consequence of improper claims subject to the Federal False Claims Act or other federal statutes, subjecting the Corporation to civil or criminal sanctions. Management of the Corporation is not aware of any situation whereby a material Medicare payment is being withheld from the Corporation. As part of the Tax Relief and Health Care Act of 2006, Congress directed the expansion of the Recovery Audit Contractor (referred to as RAC) program. The RAC program will most likely impact the Corporation beginning in The RAC program seeks to identify and recover overpayments made by Medicare to medical providers. Under the current RAC demonstration project, the contractors are compensated on a contingent fee basis, and are entitled to keep such fees if identified denials are upheld at the first level of Medicare appeal. The implementation of the RAC program could significantly impact the Corporation. Provider-Based Standards. CMS made significant changes to the provider-based regulations included in the final outpatient PPS rulemaking for federal fiscal year Generally, CMS eliminated a few requirements for on-site provider-based facilities and clarified some of the provisions of the prior provider-based rules. CMS clarified that prior approval of provider-based status by CMS is not required for an entity to bill as provider-based. Rather, a provider may provide an optional attestation of its status as a provider-based entity. Although such attestation is not required to bill as a provider-based entity, it may provide some overpayment protection in the event that CMS subsequently makes a determination that an entity is not provider-based, assuming accurate representation by the provider to CMS. Any reclassification by CMS may adversely affect the entity s reimbursement under the Medicare program. Based on current regulations, the Corporation believes all its facilities that bill for services as provider-based entities qualify as provider-based entities under the current regulations. Medicaid Medicaid is a health insurance program for certain low-income and needy individuals that is jointly funded by the federal government and the states. Pursuant to broad federal guidelines, each state establishes its own eligibility standards; determines the type, amount, duration, and scope of services; sets the payment rates for services; and administers its own programs. Under the Medicaid program, the federal government supplements funds provided by the various states for medical assistance to the medically indigent. Payment for medical and health services is made to providers in amounts determined in accordance with procedures and standards established by state law under federal guidelines. Fiscal considerations of both federal and state governments in establishing their budgets will directly affect the funds available to the providers for payment of services rendered to Medicaid beneficiaries. Payment for Medicaid patients is subject to appropriation by the respective state legislatures of sufficient funds to pay the incurred patient obligations. Delays in appropriations and state budget deficits which may occur from time to time create a risk that payment for services to Medicaid patients will be withheld or delayed. The federal and state governments, including that of Illinois, have considered, and are continuing to consider, changes to Medicaid funding, particularly in light of the budget crises facing many states, including Illinois. The United States Congress recently approved an increase in Medicaid funding to states; however, the federal government continues to explore options for a long-term solution to the funding difficulties with Medicaid. Certain additional proposals being examined may ultimately result in reduced federal Medicaid funding to the states, which could adversely impact the amount of revenue received by the Corporation. The State of Illinois has experienced adverse economic conditions, including erosion of general fund tax revenues, falling real estate values, slower economic growth and higher unemployment, which may continue or 43

51 worsen over the coming years, resulting in significant shortfalls between its general fund revenues, which are the primary source of moneys for Medicaid funding, and spending demands. These economic conditions and the resulting shortfalls are expected to continue in the current fiscal year and may continue in future fiscal years. Shortfalls between State revenues and spending demands, along with balanced budget requirements, have in the past and may in the future result in cutbacks to government health care programs. Failure by the Illinois legislature to approve budgets prior to the start of a new fiscal year can also result in a temporary hold on or delay of Medicaid reimbursement. Given the fact that, historically, federal payments and the amount appropriated by the Illinois legislature for the payment of Medicaid claims have not been sufficient to reimburse hospitals for their actual costs of providing services to Medicaid patients, the financial challenges facing the State may negatively affect the Corporation in a number of ways. They may lead to a greater number of indigent patients who are unable to pay for their care and a greater number of individuals who qualify for Medicaid. They may cause the State to seek to generate revenue or reduce expenses by changing eligibility requirements for Medicaid recipients, changing the method of or reducing the amount of payments to hospitals for Medicaid services, delaying actual payments due to hospitals for Medicaid services, increasing the frequency of regulatory investigations and resulting penalties, and/or changing the taxexempt treatment of charitable organizations income or real estate. Additionally, as revenues decline, the State may face pressure from various interest groups to restrict the use of State funds to such interest groups purposes. This could negatively affect the availability of the State s general funds for Medicaid services. In 2005, the Governor of Illinois signed legislation that provided for a hospital assessment program (referred to as the Hospital Assessment Program) intended to qualify for federal matching funds under the Illinois Medicaid program. In August, 2008, the Governor of Illinois signed legislation that extends the sunset date of the Hospital Assessment Program to June 30, 2013, which was approved by CMS in December, There can be no assurance that the State of Illinois will provide funds necessary for the Hospital Assessment Program s renewal. The Corporation expects to receive a positive net impact on operating income of approximately $30 million annually beginning in fiscal year 2009 through 2013 from the new Hospital Assessment Program upon its funding by the State of Illinois. This compares to approximately $18 million received in Should the Hospital Assessment Program not be funded, the Corporation would reduce capital expenditures, investments in academic programs and other ongoing costs to offset the reduced net revenues. Private Health Plans and Managed Care Health care, including hospital services, is increasingly paid for by various managed care plans which generally use discounts and other economic incentives to reduce or limit the cost and utilization of expensive health care services such as inpatient hospital care. Managed care plans generally use discounts and other economic incentives to reduce or limit the cost and utilization of health care services. Payments to the Corporation from managed care plans typically are lower than those received from traditional indemnity/commercial insurers. There is no assurance that the Corporation will maintain managed care contracts or obtain other similar contracts in the future. Failure to maintain contracts could have the effect of reducing the market share of the Corporation s net patient services revenues. Conversely, participation may maintain or increase the patient base but could result in lower net income or operating losses to the Corporation if the Corporation is unable to adequately contain its costs. Many preferred provider organizations, or PPOs, and health maintenance organizations, or HMOs, currently pay providers on a negotiated fee-for-service basis or on a fixed rate per day of care, which, in each case, usually is discounted from the typical charges for the care provided. The discounts offered to HMOs and PPOs may result in payment to a provider that is less than its actual cost. Additionally, the volume of patients directed to a hospital may vary significantly from projections, and/or changes in the utilization of certain services offered by the provider may be dramatic and unexpected, thus further jeopardizing the provider s ability to contain costs. Some HMOs employ a capitation payment method under which hospitals are paid a predetermined periodic rate for each enrollee in the HMO who is assigned or otherwise directed to receive care at a particular hospital. In a capitation payment system, the Corporation assumes a financial risk for the cost and scope of care given 44

52 to the HMO s enrollees. In some cases, the capitated payment covers total hospital patient care provided. However, if payment under an HMO or PPO contract is insufficient to meet the Corporation s costs of care or if utilization by enrollees materially exceeds projections, the financial condition of the Corporation could erode rapidly and significantly. As a consequence of the above factors, the effect of managed care on the Corporation s financial condition is difficult to predict and may be different in the future than the financial statements for the current periods reflect. States are increasingly regulating the delivery of health care services in response to the federal government s failure to adopt comprehensive health care reform measures. Much of this increased regulation has centered on the managed care industry. State legislatures have cited their right and obligation to regulate and oversee health care insurance and have enacted sweeping measures that aim to protect consumers and, in some cases, providers. For example, a number of states have enacted laws mandating a minimum of 48-hour hospital stays for women after delivery; laws prohibiting gag clauses (contract provisions that prohibit providers from discussing various issues with their patients); laws defining emergencies, which provide that a health care plan may not deny coverage for an emergency room visit if a layperson would perceive the situation as an emergency; and laws requiring direct access to obstetrician-gynecologists without the requirement of a referral from a primary care physician. Due to this increased state oversight, the Corporation could become subject to or impacted by a variety of state health care laws and regulations affecting health care providers. In addition, the Corporation could be subject to state laws and regulations prohibiting, restricting, or otherwise governing PPOs, third-party administrators, physicianhospital organizations, independent practice associations or other intermediaries, fee-splitting, the corporate practice of medicine, selective contracting, any willing provider and freedom of choice laws, coinsurance and deductible amounts, insurance agency and brokerage, quality assurance, utilization review, and credentialing activities, provider and patient grievances, mandated benefits, rate increases, and many other practices. Alternative or Integrated Delivery System Development Many hospitals and health systems are pursuing strategies with physicians in order to offer an integrated package of health care services, including physician and hospital services, to patients, health care insurers and managed care providers. These integration strategies may take many forms, including management service organizations, or MSOs, which may provide physicians or physician groups with a combination of financial and managed care contracting services, office and equipment, office personnel and management information systems. Integration objectives may also be achieved via physician-hospital organizations, or PHOs, organizations which are typically jointly owned or controlled by a hospital and physician group for the purpose of managed care contracting, implementation and monitoring. Other integration structures include hospital-based clinics or medical practice foundations, which may purchase and operate physician practices as well as provide all administrative services to physicians. Many of these integration strategies are capital intensive and may create certain business and legal liabilities for the related hospital or health system. Often the start-up capitalization for such developments, as well as operational deficits, are funded by the sponsoring hospital or health system. Depending on the size and organizational characteristics of a particular development, these capital requirements may be substantial. In some cases, the sponsoring hospital or health system may be asked to provide a financial guarantee for the debt of a related entity which is carrying out an integrated delivery strategy. In certain of these structures, the sponsoring hospital or health system may have an ongoing financial commitment to support operating deficits, which may be substantial on an annual or aggregate basis. These types of integrated delivery developments are generally designed to conform to existing trends in the delivery of medicine, to implement anticipated aspects of health care reform, to increase physician availability to the community and/or enhance the managed care capability of the affiliated hospital and physicians. However, these goals may not be achieved, and, if the development is not functionally successful, it may produce materially adverse results that are counterproductive to some or all of the above-stated goals. All such integrated delivery developments carry with them the potential for legal or regulatory risks in varying degrees. Such developments may call into question compliance with the Medicare fraud and abuse laws, relevant antitrust laws and federal or state tax exemption. Such risks will turn on the facts specific to the 45

53 implementation, operation or future modification of any integrated delivery system. MSOs which operate at a deficit over an extended period of time may raise significant risks of investigation or challenge regarding the taxstatus of health care providers participating in MSOs or compliance with the Medicare fraud and abuse laws. In addition, depending on the type of development, a wide range of governmental billing and other issues may arise, including questions of the authorization of the entity to bill for or on behalf of the physicians involved. Other related legal and regulatory risks may arise, including employment, pension and benefits, and corporate practice of medicine, particularly in the current atmosphere of frequent and often unpredictable changes in federal and state legal requirements regarding health care and medical practice. The potential impact of any such regulatory or legal risks on the Corporation cannot be predicted with certainty. There can be no assurance that such issues and risks will not lead to material adverse consequences in the future. Regulatory Environment Licensing, Surveys, Investigations and Audits Health facilities, including those of the Corporation, are subject to numerous legal, regulatory, licensing, professional certification and private accreditation requirements. These include, but are not limited to, requirements relating to Medicare Conditions of Participation, requirements for participation in Medicaid, state licensing agencies, private payors and the accreditation standards of The Joint Commission, Healthcare Facilities Accreditation Program and DNV Healthcare, Inc. 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 affirmative actions by the Corporation. Management of the Corporation currently anticipates no difficulty renewing or continuing currently held licenses, certifications and accreditations, nor does management anticipate a reduction in third-party payments from events that would materially adversely affect the operations or financial condition of the Corporation. Nevertheless, actions in any of these areas could result in the loss of utilization or revenues, or the ability of the Corporation to operate all or a portion of its health care facilities, and consequently, could have a material and adverse effect on the Corporation. Negative Rankings Based on Clinical Outcomes, Cost, Quality, Patient Satisfaction and Other Performance Measures. Health plans, Medicare, Medicaid, employers, trade groups and other purchasers of health services, private standard-setting organizations and accrediting agencies increasingly are using statistical and other measures in efforts to characterize, publicize, compare, rank and change the quality, safety and cost of health care services provided by hospitals and physicians. Published rankings (such as score cards ), pay for performance, never events and other financial and non-financial incentive programs are being introduced to affect the reputation and revenue of hospitals and the members of their medical staffs and to influence the behavior of consumers and providers such as the Corporation. Currently prevalent are measures of quality based on clinical outcomes of patient care, reduction in costs, patient satisfaction and investment in health information technology. Measures of performance set by others that characterize a hospital negatively may adversely affect its reputation and financial condition. Civil and Criminal Fraud and Abuse Laws and Enforcement Federal and state health care fraud and abuse laws regulate both the provision of services to government program beneficiaries (and sometimes to individuals insured by private payors) and the methods and requirements for submitting claims for services rendered to such beneficiaries. Under these laws, individuals and organizations can be penalized for submitting claims for services that are not provided, billed in a manner other than as actually provided, not medically necessary, provided by an improper person, accompanied by an illegal inducement to utilize or refrain from utilizing a service or product, or billed in a manner that does not otherwise comply with applicable legal requirements. 46

54 Federal and state governments have a range of criminal, civil and administrative sanctions available to penalize and remediate health care fraud and abuse, including exclusion of the provider from participation in the Medicare/Medicaid programs, criminal fines, civil monetary penalties, suspension of payments and, in the case of individuals, imprisonment. Fraud and abuse cases may be prosecuted by one or more government entities and/or private individuals, and more than one of the available penalties may be imposed for each violation. Laws governing fraud and abuse apply to all individuals and healthcare enterprises with which a hospital does business, including other hospitals, home health agencies, long term care entities, infusion and pharmaceutical providers, insurers, health maintenance organizations, preferred provider organizations, third party administrators, physicians, physician groups, and physician practice management companies. Fraud and abuse prosecutions can have a catastrophic effect on a provider and potentially a material adverse impact on the financial condition of other entities in the health care delivery system of which that entity is a part. Based upon the prohibited activity in which the provider has engaged, governmental agencies and officials may bring actions against providers under civil or criminal False Claims Acts, the anti-kickback statute and state statutes prohibiting referrals for compensation or fee-splitting, or the federal Stark law, which prohibits referrals by a physician for certain designated health services to certain organizations in which such physician, a physician s immediate family or a physician organization has a financial relationship, unless an exception applies. Many states, including Illinois, also have state self-referral prohibitions. The civil and criminal monetary assessments and penalties arising out of such investigations and prosecutions may be substantial. Additionally, the provider may be denied participation in the Medicare and/or Medicaid programs. If and to the extent the Corporation or its medical staff physicians engaged in a prohibited activity and final judicial or administrative proceedings were concluded adversely to the Corporation, such outcome could materially adversely affect the Corporation. The Corporation has internal policies and procedures and has developed and implemented a compliance program that management of the Corporation believes will effectively reduce exposure liability for violations of these laws. However, because these laws are complex, enforcement efforts presently are widespread and expanding within the industry, and because those efforts may vary from region to region, there can be no assurance that the compliance program will significantly reduce or eliminate the exposure of the Corporation to civil or criminal sanctions or adverse administrative determinations. False Claims Act The federal False Claims Act, or FCA, makes it illegal to knowingly or willfully submit or present a false, fictitious or fraudulent claim to the federal government. However, because of its broad scope, the statute may include claims that are simply erroneous. FCA investigations and cases have become common in the health care field and may cover a range of activity from intentionally inflated billings, to highly technical billing infractions, to allegations of inadequate care. Violation or alleged violation of the FCA most often results in settlements that require multi-million dollar payments and mandatory compliance agreements. The FCA also permits individuals to initiate civil actions on behalf of the government in lawsuits called qui tam actions. Qui tam plaintiffs, or whistleblowers, share in the damages recovered by the government or recovered independently if the government does not participate. The FCA has become one of the government s primary weapons against health care fraud. FCA violations or alleged violations could lead to settlements, fines, exclusion or reputation damage that could have a material adverse impact on the Corporation. Patient Records and Patient Confidentiality The Health Insurance Portability and Accountability Act of 1996, or HIPAA, addresses the confidentiality of individuals health information. Disclosure of certain broadly defined protected health information is prohibited unless expressly permitted under the provisions of the HIPAA statute and regulations or authorized by the patient. HIPAA s confidentiality and security provisions extend not only to patient medical records, but also to a wide variety of health care clinical and financial settings where patient privacy restrictions often impose new communication, operational, accounting and billing restrictions. ARRA also encourages encryption of protected health information or other methodologies that render protected health information unusable, unreadable, or indecipherable to unauthorized individuals by requiring notice if there is a breach of unencrypted electronic health 47

55 information. The encryption standards are extensive and could be expensive to meet, and failure to comply with the HIPAA requirements may create unanticipated sources of legal liability. HIPAA imposes civil monetary penalties for violations and criminal penalties for knowingly obtaining or using individually identifiable health information. The penalties are tiered and range from $100-$50,000 for each individual violation to a maximum of $50,000-$1,250,000 annually, and/or imprisonment if the information was obtained or used with the intent to sell, transfer or use the information for commercial advantage, personal gain or malicious harm. Penalties can also be assessed for willful neglect. In addition, the Attorney General is now authorized to sue for actual or threatened HIPAA violations on behalf of residents of the State and obtain injunctions, statutory damages, and attorneys fees. Patient Transfers A federal anti-dumping statute imposes certain requirements which must be met before discharging or transferring a patient to another facility. Failure to comply with the law can result in exclusion from the Medicare and/or Medicaid programs as well as civil and criminal penalties. Failure of the Corporation to meet its responsibilities under the law could adversely affect the financial condition of the Corporation. Environmental Laws and Regulations The Corporation s health care operations generate medical waste that must be disposed of in compliance with federal, state and local environmental laws, rules and regulations. The Corporation s operations, as well as the Corporation s purchases and sales of facilities, also are subject to compliance with various other environmental laws, rules and regulations. The Corporation anticipates that such compliance will not materially affect the Corporation s business, financial condition or results of operations. Management of the Corporation is not aware of any pending or threatened claim, investigation or enforcement action regarding such environmental issues or any instance of contamination that, if determined adversely to the Corporation, would have material adverse consequences to the Corporation. Illinois Hospital Report Card Act In August 2003, the Governor of Illinois signed into law the Illinois Hospital Report Card Act, which mandates public access to certain information regarding hospital staffing and patient outcomes, requires certain additional hospital data reports to the Illinois Department of Public Health, and provides whistleblower protection for hospital employees who make good faith disclosures under the Act. As of January 1, 2008, hospitals must share with consumers, upon request, nurse staff schedules, nurse assignment rosters, methods to determine and adjust nurse staff schedules, and staff training information. Additional nursing and nosocomial infection data must also be reported to Illinois Department of Public Health, for subsequent public release, as soon as corresponding rules governing same are adopted. Given the very recent implementation of only part of this Act, and the lack of current official rules addressing the Corporation data reports, it is difficult to anticipate what effect, if any, such state disclosures and public information may have on the future operations of the Corporation. Physician Relations 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, denied or revoked often file legal actions against hospitals. Such actions may include a wide variety of claims, some of which could result in potential liability 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. All hospitals, including those owned and operated by the Corporation, are subject to such risks. 48

56 Affiliations, Merger, Acquisition and Divestiture The Corporation is not currently considering or pursuing a potential acquisition, merger or affiliation with other health systems or related entities. The Corporation may do so in the future. The Corporation does, from time to time, consider affiliations with, and acquisitions of, physician practices. Antitrust Enforcement of antitrust laws against health care providers is becoming more common, and antitrust liability may arise in a wide variety of circumstances, including medical staff privilege disputes, third party contracting, physician relations, and joint venture, merger, affiliation and acquisition activities. While the application of federal and state antitrust laws to health care is still evolving, enforcement activities by federal and state agencies appear to be increasing. Violators of antitrust laws could be subject to criminal and civil liability by both federal and state agencies, as well as by private litigants. Tax Matters Tax Exemption for Not-For-Profit Corporations Loss of tax-exempt status by the Corporation or any future Member of the Obligated Group receiving or otherwise benefiting from the proceeds of the Series 2009 Bonds, referred to as a Benefiting Member, could result in loss of tax exemption of the Series 2009 Bonds and of other tax-exempt debt issued for the benefit of such Benefiting Members, and defaults in covenants regarding the Series 2009 Bonds and other related tax-exempt debt would likely be triggered. Loss of tax-exempt status by any Benefiting Member would have material adverse consequences on the financial condition of the Obligated Group. Management of the Corporation is not aware of any transactions or activities currently ongoing that are likely to result in the revocation of the tax-exempt status of the Corporation. The maintenance by each Benefiting Member of its status as an organization described in Section 501(c)(3) of the Code is contingent upon compliance with general rules promulgated in the Code and related regulations regarding the organization and operation of tax-exempt entities, including their operation for charitable and educational purposes and their avoidance of transactions that may cause their assets to inure to the benefit of private individuals. The IRS has announced that it intends to closely scrutinize transactions between not-for-profit corporations and for-profit entities, and has issued audit guidelines for tax-exempt hospitals. Although specific activities of hospitals, such as medical office building leases and compensation arrangements and other contracts with physicians, have been the subject of interpretations by the IRS in the form of Private Letter Rulings, many activities have not been addressed in any official opinion, interpretation or policy of the IRS. Because the Corporation conducts large-scale and diverse operations involving private parties, there can be no assurances that certain of its transactions would not be challenged by the IRS. The IRS has taken the position that hospitals which are in violation of the federal Anti-Kickback Law may also be subject to revocation of their tax-exempt status. See the information herein under the caption, BONDHOLDERS RISKS Regulatory Environment Civil and Criminal Fraud and Abuse Laws and Enforcement. As a result, tax-exempt hospitals, such as those of the Corporation, which have, and will continue to have, extensive transactions with physicians are subject to an increased degree of scrutiny and perhaps enforcement by the IRS. The Taxpayers Bill of Rights 2, referred to for purposes of this Official Statement as the Intermediate Sanctions Law, allows the IRS to impose intermediate sanctions against certain individuals in circumstances involving the violation by tax-exempt organizations of the prohibition against private inurement. Prior to the enactment of the Intermediate Sanctions Law, the only sanction available to the IRS was revocation of an organization s tax-exempt status. Intermediate sanctions may be imposed in situations in which a disqualified person (such as an insider ) (i) engages in a transaction with a tax-exempt organization on other than a fair market value basis, (ii) receives unreasonable compensation from a tax-exempt organization or (iii) receives payment in an arrangement that violates the prohibition against private inurement. These transactions are referred to as excess 49

57 benefit transactions. A disqualified person who benefits from an excess benefit transaction will be subject to an excise tax equal to 25% of the amount of the excess benefit. Organizational managers who participate in the excess benefit transaction knowing it to be improper are subject to an excise tax equal to 10% of the amount of the excess benefit, subject to a maximum penalty of $10,000. A second penalty, in the amount of 200% of the excess benefit, may be imposed on the disqualified person (but not upon the organizational manager) if the excess benefit is not corrected within a specified period of time. In certain cases, the IRS has imposed substantial monetary penalties and future charity care or public benefit obligations on tax-exempt hospitals in lieu of revoking their tax-exempt status, as well as requiring that certain transactions be altered, terminated or avoided in the future and/or requiring governance or management changes. These penalties and obligations are typically imposed on the tax-exempt hospital pursuant to a closing agreement with respect to the hospital s alleged violation of Section 501(c)(3) exemption requirements. Given the wide range of complex transactions entered into by the Corporation, and uncertainty regarding how tax-exemption requirements may be applied by the IRS, the Corporation is, and will be, at risk for incurring monetary and other liabilities imposed by the IRS through such a closing agreement or similar process. These liabilities are possible from time to time and could be substantial, in some cases involving millions of dollars, and in extreme cases could be materially adverse to the Corporation. Bills have been introduced in Congress that would require a tax-exempt hospital to provide a certain amount of charity care and care to Medicare and Medicaid patients in order to maintain its tax-exempt status and avoid the imposition of an excise tax. Other legislation would have conditioned a hospital s tax-exempt status on the delivery of adequate levels of charity care. Congress has not enacted such bills. However, there can be no assurance that similar legislative proposals or judicial actions will not be proposed or adopted in the future. In recent years, the IRS and state, county and local taxing authorities have been undertaking audits and reviews of the operations of tax-exempt hospitals with respect to their exempt activities and the generation of unrelated business taxable income. The Corporation participates in activities that may generate unrelated business taxable income. Management of the Corporation believes that it has properly accounted for and reported unrelated business taxable income; nevertheless, an investigation or audit could lead to a challenge which could result in taxes, interest and penalties with respect to unreported unrelated business taxable income and in some cases could ultimately affect the tax-exempt status of a Benefiting Member as well as the exclusion from gross income for federal income tax purposes of the interest payable on the Series 2009 Bonds and other tax-exempt debt of the Corporation. In addition, legislation, if any, which may be adopted at the federal, state and local levels with respect to unrelated business income cannot be predicted. Any legislation could have the effect of subjecting a portion of the income of the Corporation to federal or state income taxes. Management believes that it has properly complied with the tax laws. Nevertheless, because of the complexity of the tax laws and the presence of issues about which reasonable persons can differ, an IRS coordinated examination program (CEP) audit could result in additional taxes, interest and penalties. A CEP audit could ultimately affect the tax-exempt status of the Corporation as well as the exclusion from gross income for federal income tax purposes of the interest payable with respect to the Series 2009 Bonds and other tax-exempt debt of the Corporation. In addition to the foregoing proposals with respect to income by not-for-profit corporations, various state and local governmental bodies have challenged the tax-exempt status of not-for-profit institutions and have sought to remove the exemption from real estate taxes of part or all of the property of various not-for-profit institutions on the grounds that a portion of its property was not being used to further the charitable purposes of the institutions or that the institutions did not provide sufficient care to indigent persons so as to warrant exemption from taxation as a charitable institution. Several of these disputes have been determined in favor of the taxing authorities or have resulted in negotiated settlement agreements. It is not possible to predict the scope or effect of future legislative or regulatory actions with respect to taxation of not-for-profit corporations. There can be no assurance that future changes in the laws and regulations of federal, state or local governments will not materially adversely affect the operations and financial condition of the Corporation by requiring any of them to pay income or local property taxes. 50

58 Tax-Exempt Status of Series 2009 Bonds The Code imposes a number of requirements that must be satisfied for interest on state and local obligations, such as the Series 2009 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 Corporation has agreed that it will comply with such requirements. Failure to comply with the requirements stated in the Code and related regulations, rulings and policies may result in the treatment of the interest on the Series 2009 Bonds as taxable. Such adverse treatment may be retroactive to the date of issuance. See also TAX EXEMPTION. 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, the IRS has sent several 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 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. The IRS has also added a new schedule to IRS Form 990. This new schedule requests detailed information related to all outstanding bond issues of nonprofit Hospitals, including information regarding operating, management and research contracts as well as private use compliance. These specific reporting obligations apply for tax years beginning on or after January 1, Although management of the Corporation believes that its expenditure and investment of bond proceeds, use or property financed with tax-exempt debt and record retention practices have complied with all applicable laws and regulations, there can be no assurance that the issuance of surveys will not lead to an IRS review that could adversely affect the market value of the Series 2009 Bonds or of other outstanding tax-exempt indebtedness of the Corporation. Additionally, the Series 2009 Bonds or other tax-exempt obligations issued for the benefit of the Corporation, may be, from time to time, subject to examinations by the IRS. Management of the Corporation believes that the Series 2009 Bonds and other tax-exempt obligations issued for the benefit of the Corporation, properly comply with the tax laws. In addition, Bond Counsel will render an opinion with respect to the tax-exempt status of the Series 2009 Bonds, as described under the caption TAX EXEMPTION. Management of the Corporation has not sought to obtain a private letter ruling from the IRS with respect to the Series 2009 Bonds, however, and the opinions of Bond Counsel are not binding on the IRS or the courts. There is no assurance that any IRS examination of the Series 2009 Bonds will not adversely affect the market value of the Series 2009 Bonds. See TAX EXEMPTION below. Other Industry and Investment Risks Indigent Care Tax-exempt hospitals and other providers often treat large numbers of indigent, uninsured and underinsured patients who are unable to pay for their medical care. These hospitals and other providers may be susceptible to economic and political changes which could increase the number of such persons or their responsibility for caring for this population. General economic conditions which affect the number of employed individuals who have health coverage will similarly affect the ability of patients to pay for their care. Similarly, changes in governmental policy, which may result in coverage exclusions under local, state and federal health care programs (including Medicare and Medicaid), may increase the frequency of indigent care by such hospitals and other providers. In the State of Illinois, there has been a recent increase in the number of individuals who qualify for Medicaid. The recently enacted Illinois Hospital Uninsured Patient Discount Act requires all hospitals in Illinois to provide discounts to 51

59 uninsured patients meeting certain eligibility criteria. It is also possible that future legislation could require that taxexempt hospitals and other providers maintain minimum levels of indigent care as a condition to federal income tax exemption or local property tax exemption. In sum, indigent care commitments of the Corporation could have a material adverse effect on the financial condition of the Corporation, taken as a whole. Bond Ratings There is no assurance that the ratings assigned to the Series 2009 Bonds will not be lowered or withdrawn at any time, the effect of which could be to adversely affect the market price for and marketability of the Series 2009 Bonds. Investments The Corporation has significant holdings in a broad range of investments. Market fluctuations may affect the value of those investments and those fluctuations may be at times material. For a discussion of the Corporation s investments, see the information in APPENDIX A under the caption INVESTMENTS. Exposure to Liquidity Risks Commercial banks have issued letters of credit securing the certain variable rate bonds of the Corporation, including the Series 2009A/B Bonds and the Series 2009 Bonds. No assurance can be given that such commercial banks will provide funds to purchase tendered variable rate bonds issued for the benefit of the Corporation or honor draws on the letters of credit to fund such purchases. The Corporation is obligated to provide for the payment of the tender price of any such variable rate bonds tendered and not remarketed if the commercial banks providing liquidity support for such variable rate bonds fail to provide funds for such purchase. Any failure by the Corporation to purchase such variable rate bonds upon their tender under these circumstances would constitute an event of default under the related bond indenture and would therefore trigger a cross-default to the Master Indenture. The ratings assigned to such variable rate bonds of the Corporation are based jointly on the underlying credit of the Corporation and the liquidity support provided by certain commercial banks. No assurance can be given that the ratings assigned to such variable rate bonds will remain in effect for any given period of time or that they might not be lowered or withdrawn entirely. Any downward change in or withdrawal of any ratings could increase the debt service requirements of the Corporation. Additionally, if variable rate bonds are tendered for purchase and not remarketed, those bonds would be purchased through a draw on the related letter of credit. The Corporation would then be required to repay the letter of credit provider for such draw over time (typically pursuant to a more rapid amortization of principal than the amortization for the publicly held bonds), and the interest rate payable to such letter of credit provider for such draw would likely be significantly higher than the interest rate for bonds held by the bondholders. Compliance with Applicable Codes In February 2009, the Corporation received notice from CMS that it was not in compliance with certain Medicare Conditions of Participation due to deficiencies in the physical conditions of certain of the Corporation s facilities in relation to prescribed standards. The Corporation has prepared and submitted a draft plan of correction for review by CMS and the Illinois Department of Public Health. Management of the Corporation anticipates that all deficiencies identified by CMS will be corrected by the Corporation within the time period required by CMS and that Medicare and Medicaid reimbursement will not be materially adversely affected. Management of the Corporation does not expect that the cost of correcting the deficiencies and maintaining compliance will have a material adverse effect on the Corporation s financial condition. Many of the facilities of the Corporation may be subject to municipal building codes requiring that fire suppression systems be installed by Such codes necessitate the renovation of certain facilities of the Corporation. The Corporation has developed a plan for implementing such renovations and estimates that the cost to complete such renovations will be not more than $20 million over the next eight years. Management of the 52

60 Corporation does not expect that the cost of such compliance will have a material adverse effect on the Corporation s financial condition. Staffing Shortages In recent years, the health care industry has suffered from a scarcity of nursing and other qualified health care professionals, technicians and personnel. This trend could force the Corporation to pay higher salaries to nursing and other qualified health care professionals, technicians and personnel as competition for such employees intensifies and, in an extreme situation, could lead to difficulty in keeping the facilities licensed to provide nursing care and thus eligible for reimbursement under Medicare and Medicaid. Professional Liability Claims and Liability Insurance In recent years, the number of professional and general liability suits and the dollar amounts of damage recoveries have increased nationwide, resulting in substantial increases in malpractice insurance premiums. Professional liability and other actions alleging wrongful conduct and seeking punitive damages often are filed against health care providers. Litigation may also arise from the corporate and business activities of the Corporation and its affiliates, employee-related matters, medical staff and provider network matters and denials of medical staff and provider network membership and privileges. As with professional liability, many of these risks are covered by insurance, but some are not. For example, some antitrust claims, business disputes and workers compensation claims are not covered by insurance or other sources and, in whole or in part, may be a liability of the Corporation and its affiliates if determined or settled adversely. Although the Corporation currently maintains and carries excess malpractice and general liability insurance which management of the Corporation considers adequate, the Corporation is unable to predict the availability, cost or adequacy of such insurance in the future. Other Risk Factors In the future, the following factors, among others, may adversely affect the operations of the Corporation to an extent that cannot be determined at this time: Hospitals are major employers, combining a complex mix of professional, quasi-professional, technical, clerical, housekeeping, maintenance, dietary and other types of workers in a single operation. The Corporation bears a wide variety of risks in connection with their employees. These risks include strikes and other related work actions, contract disputes, discrimination claims, personal tort actions, work-related injuries, exposure to hazardous materials, interpersonal torts (such as between employees, between physicians or management and employees, or between employees and patients), and other risks that may flow from the relationships between employer and employee or between physicians, patients and employees. Many of these risks are not covered by insurance, and certain of them cannot be anticipated or prevented. The Corporation is subject to all of the risks listed above, and such risks, alone or in combination, could have material adverse consequences to the financial condition or operations of the Corporation. Competition from other hospitals and other competitive facilities now or hereafter located in the respective service areas of the facilities operated by the Corporation may adversely affect revenues of the Corporation. Development of health maintenance and other alternative health delivery programs could result in decreased usage of inpatient hospital facilities and other facilities operated by the Corporation. A significant portion of the net income and assets of the Corporation is derived from investments in securities. Any significant disruption of the securities markets or weakness in the investment climate may potentially materially adversely affect the Corporation s revenues. 53

61 Cost and availability of any insurance or self-insurance funding requirements, such as malpractice, fire, automobile, and general comprehensive liability, that hospitals and other health care facilities of similar size and type as the Corporation generally carry or fund, as the case may be, may adversely affect revenues. The occurrences of natural disasters may damage some or all of the facilities, interrupt utility service to some or all of the facilities or otherwise impair the operation of some or all of the facilities operated by the Corporation or the generation of revenues from some or all of such facilities. Scientific and technological advances, new procedures, drugs and appliances, preventive medicine, occupational health and safety and outpatient health care delivery may reduce utilization and revenues of the facilities. Technological advances in recent years have accelerated the trend toward the use by hospitals of sophisticated and costly equipment and services for diagnosis and treatment. The acquisition and operation of certain equipment or services may continue to be a significant factor in hospital utilization, but the ability of the Corporation to offer such equipment or services may be subject to the availability of equipment or specialists, governmental approval or the ability to finance such acquisitions or operations. Reduced demand for the services of the Corporation that might result from decreases in population in their respective service areas. Increased unemployment or other adverse economic conditions in the service areas of the Corporation which would increase the proportion of patients who are unable to pay fully for the cost of their care. Any increase in the quantity of indigent and charitable care provided which is mandated by law or required due to increased needs of the community in order to maintain the charitable status of the Corporation. Regulatory actions which might limit the ability of the Corporation to undertake capital improvements at their respective facilities or to develop new institutional health services. The occurrence of a large scale terrorist attack that increases the proportion of patients who are unable to pay fully for the cost of their care and that disrupts the operation of certain health care facilities by resulting in an abnormally high demand for health care services. Adoption of a so-called flat tax federal income tax, a reduction in the marginal rates of federal income taxation or replacement of the federal income tax with another form of taxation, any of which might adversely affect the market value of the Series 2009 Bonds. Limitations on the availability of, and increased compensation necessary to secure and retain, nursing, technical and other professional personnel. The Authority LITIGATION There is not now pending (as to which the Authority has received service of process) or, to the actual knowledge of the Authority, threatened, any litigation against the Authority restraining or enjoining the issuance or delivery of the Series 2009 Bonds or questioning or affecting the validity of the Series 2009 Bonds or the proceedings or authority under which the Series 2009 Bonds are to be issued. Neither the creation, organization or existence of the Authority nor the title of any of the present members or other officers of the Authority to their respective offices is being contested. There is no litigation against the Authority pending (as to which the Authority has received service of process) or, to the actual knowledge of the Authority, threatened, which in any manner questions the right of the Authority to enter into the Bond Indentures, the Loan Agreements or the Bond Purchase 54

62 Contracts or to secure the Series 2009 Bonds in the manner provided in the Bond Indentures, the resolution and the Act. The Corporation The Corporation has advised that no litigation, proceedings or investigations are pending or, to its knowledge, threatened against it except (i) litigation, proceedings or investigations involving claims for hospital professional or general patient liability for which the probable ultimate recoveries and the estimated costs and expenses of defense, in the opinion of counsel to the Corporation, will be entirely within the applicable insurance policy limits (subject to applicable deductibles) or (ii) litigation, proceedings or investigations involving other types of claims which, if adversely determined, will not, in the opinion of counsel to the Corporation, have a materially adverse effect on the operation or condition, financial or otherwise, of the Corporation. No litigation, proceedings or investigations are pending or, to the knowledge of the Corporation, threatened against the Corporation which in any manner question the right of the Corporation to enter into the transactions described herein. LEGAL MATTERS All legal matters incidental to the authorization and issuance of the Series 2009 Bonds by the Authority are subject to the approval of Jones Day, Bond Counsel, Chicago, Illinois, whose approving opinion will be delivered with the Series 2009 Bonds. Bond Counsel has been retained by the Corporation. Certain legal matters will be passed upon for the Authority by its special counsel, Charity & Associates, P.C., Chicago, Illinois. Certain legal matters will be passed upon for the Corporation by its Acting General Counsel, John Satalic, Esq., and by its special counsel, Katten Muchin Rosenman LLP, Chicago, Illinois. Certain legal matters will be passed upon for the Initial Credit Facility Issuers by their counsel, Chapman and Cutler LLP, Chicago, Illinois. Certain legal matters will be passed upon for the Underwriters by their counsel, Foley & Lardner LLP, Chicago, Illinois. The Authority EXEMPTION FROM CONTINUING DISCLOSURE No financial or operating data concerning the Authority is material to any decision to purchase, hold or sell the Series 2009 Bonds. Consequently, the Authority will not provide any such information. The Corporation The Series 2009 Bonds will initially bear interest at the Daily Interest Rate, will be issued in denominations of $100,000 and multiples of $5,000 in excess thereof, and may be tendered by the owners thereof for purchase at such times as more fully described herein. Accordingly, the Series 2009 Bonds are exempt from the continuing disclosure requirements of Rule 15c2-12 (the referred to as the Rule) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended (referred to as the Exchange Act), and neither the Authority nor the Corporation have undertaken to provide any continuing disclosure information required by such Rule. As long as the Series 2009 Bonds and the remarketing thereof satisfy the exemption provided in paragraph (d)(1) of the Rule, no future information or disclosure will be provided by the Authority or the Corporation; provided, however, the Corporation files periodic reports and other information with each nationally recognized municipal securities information repository and with Wells Fargo Bank, National Association pursuant to its continuing disclosure obligations relating to other outstanding tax-exempt indebtedness offered primarily on the basis of the credit of the Corporation and any other Members of the Obligated Group. TAX EXEMPTION Internal Revenue Code of 1986, as amended (referred to as the Code) contains a number of requirements and restrictions which apply to the Series 2009 Bonds, including investment restrictions, a requirement of periodic payments of arbitrage profits to the United States, requirements regarding the timely and proper use of bond proceeds and the facilities financed or refinanced therewith, and certain other matters. The Authority and the 55

63 Corporation have covenanted to comply with all requirements of the Code that must be satisfied in order for the interest on the Series 2009 Bonds to be excludible from gross income for federal income tax purposes. Failure to comply with certain of such covenants could cause interest on the Series 2009 Bonds to become includible in gross income for federal income tax purposes retroactively to the date of issuance of the Series 2009 Bonds. Subject to compliance by the Authority and the Corporation with the above-referenced covenants, in the opinion of Bond Counsel, under present law, interest on the Series 2009 Bonds will not be includible in the gross income of the owners thereof for federal income tax purposes and will not be treated as an item of tax preference in computing the alternative minimum tax for individuals and corporations. Interest on the Series 2009 Bonds will be taken into account in computing the branch profits tax imposed on certain foreign corporations, but as described below, will not be treated as an adjustment in computing a corporation s alternative minimum taxable income for purposes of the federal alternative minimum tax imposed on certain corporations. In rendering its opinions, Bond Counsel will rely upon certifications of the Corporation with respect to certain material facts solely within the knowledge of the Corporation relating to, among other things, the property financed or refinanced with the proceeds of the Series 2009 Bonds and the application of the proceeds from the Series 2009 Bonds. See APPENDIX E for the proposed form of Bond Counsel s Opinion for the Series 2009 Bonds. The Code includes provisions for an alternative minimum tax (referred to as AMT) for corporations. The AMT, if any, depends upon a corporation s alternative minimum taxable income (referred to as AMTI), which is the corporation s taxable income with certain adjustments. One of the adjustment items used in computing AMTI of a corporation (excluding S corporations, Regulated Investment Companies, Real Estate Investment Trusts and REMICS) is an amount equal to 75% of the excess of such corporation s adjusted current earnings over an amount equal to its AMTI (before such adjustment item and the alternative tax net operating loss deduction). Pursuant to the American Recovery and Reinvestment Tax Act of 2009 (the 2009 Tax Act ) interest on the Series 2009 Bonds will not be included in adjusted current earnings in computing a corporation s alternative minimum taxable income for purposes of the federal alternative minimum tax imposed on certain corporations. Pursuant to the American Recovery and Reinvestment Tax Act of 2009, interest on the Series 2009 Bonds will not be an adjustment item used in computing AMTI of a corporation. Under the provisions of Section 884 of the Code, a branch profits tax is levied on the effectively connected earnings and profits (referred to as ECEP) of certain foreign corporations. ECEP includes tax-exempt interest such as interest on the Series 2009 Bonds. Ownership of the Series 2009 Bonds may result in collateral federal income tax consequences to certain taxpayers, including, without limitation, financial institutions, certain insurance companies, certain S corporations, individual recipients of Social Security or Railroad Retirement benefits. Code section 265 denies a deduction for interest on indebtedness incurred or continued to purchase or carry tax exempt bonds. Indebtedness may be allocated to tax exempt bonds for this purpose even though not directly traceable to the purchase of those bonds. Pursuant to the 2009 Tax Act, in the case of a holder that is a financial institution, the Series 2009 Bonds are not taken into account for purposes of determining the financial institution s interest expense subject to the pro-rata interest disallowance rule of Code Section 265(b) so long as the tax exempt bonds issued during 2009 and 2010 and held by the financial institution do not exceed two percent of the adjusted basis of the financial institution s assets as provided in Code Section 265(b)(7), and as limited by Code Sections 265(a)(2) and 291. Prospective purchasers of the Series 2009 Bonds should consult their tax advisors as to applicability of any tax collateral consequences. The market value and marketability of the Series 2009 Bonds may be adversely affected by future changes in federal or Illinois tax treatment of interest on the Series 2009 Bonds or by future modifications of the Code or the regulations issued thereunder. 56

64 Interest on the Series 2009 Bonds is not exempt from present Illinois income taxes. Ownership of the Series 2009 Bonds may result in other state and local tax consequences to certain taxpayers. Bond Counsel expresses no opinion regarding any such collateral consequences arising with respect to the Series 2009 Bonds. Prospective purchasers of the Series 2009 Bonds should consult with their tax advisors regarding the applicability of any state and local taxes. FINANCIAL STATEMENTS The combined financial statements of the Corporation as of June 30, 2007 and 2008 and for the year ended June 30, 2008, included in APPENDIX B to this Official Statement have been audited by PricewaterhouseCoopers LLP, independent auditors, as indicated in their report thereon which also appears in APPENDIX B. The combined financial statements include information concerning QV, Inc. and other entities which are not Members of the Obligated Group. See SUMMARY FINANCIAL STATEMENTS OF OPERATIONS, AND RATIO ANALYSIS in APPENDIX A for information concerning the affiliates that are included in the combined financial statements included in APPENDIX B. Prior to fiscal 2007 when the Corporation assumed management of the unincorporated units of the University described in APPENDIX A, the combined financial statements of the Corporation only included the hospital and clinic services and QV, Inc. The 2008 combined financial statements include the assets, liabilities and operating results of the hospitals and clinics, as well as the University s units managed by the Corporation. The 2007 statements of operations, changes in net assets, and cash flows and related disclosures are prepared on a basis similar to 2008, and presented for comparative purposes only. While there was an audit of the Corporation which included only the hospitals and clinics in 2007 and an audit of the University in 2007, there was no audit of the Corporation on a basis comparable to Accordingly, the 2007 comparative results are unaudited. FINANCIAL ADVISOR Melio & Company, LLC, Northfield, Illinois, has been engaged by the Corporation to provide various financial advisory services. Melio & Company, LLC, serves as a financial advisor to not-for-profit healthcare systems focusing, in particular, on the debt capital markets, as well as mergers, acquisitions and joint ventures. UNDERWRITING J.P. Morgan Securities Inc., Barclays Capital Inc., Loop Capital Markets, LLC and Cabrera Capital Markets, LLC have agreed to purchase the Series 2009D Bonds at a purchase price of $69,789, (which amount reflects an underwriting discount of $210,499.44) pursuant to a purchase contract entered into for the Series 2009D Bonds by and among the Authority, the Corporation and J.P. Morgan Securities Inc., as representative of itself, Barclays Capital Inc., Loop Capital Markets, LLC and Cabrera Capital Markets, LLC. J.P. Morgan Securities Inc., Loop Capital Markets, LLC and Cabrera Capital Markets, LLC have agreed to purchase the Series 2009E Bonds at a purchase price of $69,789, (which amount reflects an underwriting discount of $210,499.44) pursuant to a purchase contract entered into for the Series 2009E Bonds by and among the Authority, the Corporation and J.P. Morgan Securities Inc., as representative of itself, Loop Capital Markets, LLC and Cabrera Capital Markets, LLC. Each of J.P. Morgan Securities Inc., Barclays Capital Inc., Loop Capital Markets, LLC and Cabrera Capital Markets, LLC is referred to herein as an Underwriter and collectively as the Underwriters. The Underwriters reserve the right to join with dealers and other underwriters in offering the Series 2009 Bonds to the public. The Corporation has agreed to indemnify the Underwriters and the Authority against certain liabilities. The obligation of the Underwriters to accept delivery of the Series 2009 Bonds is subject to various conditions of the purchase contract. RATINGS Moody s Investors Service (referred to as Moody s) and Standard and Poor s Ratings Services (referred to as S&P), a division of the McGraw-Hill Companies are expected to assign their municipal bond ratings of Aaa / 57

65 VMIG 1 and AAA / A-1, respectively, to the Series 2009D Bonds, each on the condition that, upon delivery of the Series 2009D Bonds, the Series 2009D Initial Credit Facility Issuer will issue the Series 2009D Letter of Credit. The ratings assigned by Moody s and S&P are based jointly on the underlying credit of the Corporation and the support of the Series 2009D Letter of Credit. Moody s and S&P are expected to assign their municipal bond ratings of Aaa / VMIG 1 and AAA / A- 1+, respectively, to the Series 2009E Bonds, each on the condition that, upon delivery of the Series 2009E Bonds, the Series 2009E Initial Credit Facility Issuer will issue the Series 2009E Letter of Credit. The ratings assigned by Moody s and S&P are based jointly on the underlying credit of the Corporation and the support of the Series 2009E Letter of Credit. Moody s, Fitch Ratings and S&P have also assigned their underlying ratings of Aa3 with a stable outlook, AA- with a stable outlook, and AA- with a negative outlook, respectively, to the Corporation. Any explanation of the significance of ratings may only be obtained from the rating agencies. Certain information and material not included in this Official Statement were furnished to such rating agencies concerning the Series 2009 Bonds. Generally, rating agencies base their ratings on this information and materials and on investigations, studies and assumptions made by the rating agencies themselves. There is no assurance that the ratings mentioned above will remain in effect for any given period of time or that they might not be lowered or withdrawn entirely by the rating agency, if in its judgment circumstances so warrant. The Underwriters have no responsibility to bring to the attention of the owners of the Series 2009 Bonds any proposed revision or withdrawal of the ratings on the Series 2009 Bonds. Any downward change in or withdrawal of any ratings might have an adverse effect on the market price or marketability of the Series 2009 Bonds. MISCELLANEOUS The references herein to the Act, the Master Indenture, the Series 2009 Obligations, the Bond Indentures and the Loan Agreements are brief summaries of certain provisions thereof. Such summaries do not purport to be complete and for full and complete statements of the provisions thereof reference is made to the Act, the Master Indenture, the Series 2009 Obligations, the Bond Indentures and the Loan Agreements. Prior to the issuance of the Series 2009 Bonds, copies of the Bond Indentures, the Loan Agreements and the Series 2009 Obligations securing the Series 2009 Bonds will be available for inspection at the offices of the Authority. Following delivery of the Series 2009 Bonds, copies of such documents will be available for inspection at the designated corporate trust office of the Bond Trustee. Copies of the Master Indenture are available for inspection at the designated office of the Master Trustee. The agreement of the Authority with the holders of the Series 2009 Bonds is fully set forth in the Bond Indentures, and neither any advertisement of the Series 2009 Bonds nor this Official Statement is to be construed as constituting an agreement with the purchasers of the Series 2009 Bonds. So far as any statements are made in this Official Statement involving estimates, projections or matters of opinion, whether or not expressly so stated, they are intended merely as such and not as representations of fact. CUSIP identification numbers will be printed on the Series 2009 Bonds, but neither the failure to print such numbers nor any error in the printing of such numbers shall constitute cause for a failure or refusal by the purchaser thereof to accept delivery of and pay for any Bonds. The attached Appendices are integral parts of this Official Statement and must be read together with all of the foregoing statements. The Corporation has reviewed the information contained herein which relates to it, its affiliated corporations and its respective properties and operations, including, without limitation, the information in Appendices A and B, and has approved all such information for use within this Official Statement. 58

66 The execution and delivery of this Official Statement has been approved by the Corporation. THE UNIVERSITY OF CHICAGO MEDICAL CENTER By: /s/ Lawrence J. Furnstahl Chief Financial and Strategy Officer

67 [THIS PAGE INTENTIONALLY LEFT BLANK]

68 APPENDIX A Information Concerning THE UNIVERSITY OF CHICAGO MEDICAL CENTER Chicago, Illinois The information contained herein as Appendix A to this Official Statement has been obtained from The University of Chicago Medical Center and other sources deemed to be reliable.

69 TABLE OF CONTENTS History and Background... 1 Facilities and Property... 1 Description of the New Hospital Pavilion... 3 The Design Team for the New Hospital Pavilion... 4 Affiliation, Operating and Lease Arrangements... 5 Governance... 6 Board of Trustees... 7 Relationship of Parties Executive Administration Medical Staff Health Care Services Clinical Teaching Program Licenses, Accreditations and Memberships Affiliated Entities Affiliation, Merger and Divestiture Employees Service Area Competing Hospitals Utilization Statistics Insurance Program Investments Summary Financial Statements of Operations, and Ratio Analysis Sources of Revenue Management s Discussion of Financial Performance Page i

70 THE UNIVERSITY OF CHICAGO MEDICAL CENTER History and Background The University of Chicago Medical Center (the Corporation ), formerly known as The University of Chicago Hospitals and Health System, an Illinois not for profit corporation, was incorporated in 1986 to assume the operations of the hospital and clinic facilities of The University of Chicago (the University ). These hospital and clinic facilities are located on the University s main campus and have been in continuous operation since The University, an Illinois not for profit corporation, is the sole member of the Corporation and, as such, has the sole power to appoint the trustees of the Corporation. In 2006, the Corporation adopted a new management structure that combined all patient care activities and adopted the new name of The University of Chicago Medical Center. As a result, the Corporation now manages the University s faculty physician practice, medical malpractice self-insurance program, and an employee health benefit plan, which are organized as unincorporated units of the University, as well as the hospitals and clinics. The Corporation operates three hospitals and an ambulatory care facility located on the main campus of the University as well as certain outlying facilities and activities. The three hospitals operated by the Corporation consist of the main adult patient care facility, a maternity and women s hospital and a children s hospital. The mission of the Corporation is to provide superior health care in a compassionate manner, ever mindful of each patient s dignity and individuality. To accomplish its mission, the Corporation relies upon the skills and expertise of all who work together to advance medical innovation, serve the health needs of the community, and further the knowledge of those dedicated to caring. The Corporation has established a market identity it calls At the Forefront of Medicine, and has consistently been able to attract a critical mass of talented clinicians and staff to focus on treating the most complex clinical problems. In 2009 in recognition of its excellence, the U.S. News & World Report ranked 13 of the Corporation s programs among the nation s best in its Best Hospitals and Best Children s Hospitals rankings: Digestive Disorders; Endocrine Disorders; Kidney Disorders; Cancer; Neurology and Neurosurgery; Pediatric Endocrine; Ear, Nose and Throat; Heart; Respiratory Disorders; Neonatology; Geriatrics; Gynecology and Urology. Seven of these programs are ranked by U.S. News & World Report as the top ranked in Illinois. In February 2007, the Corporation s nurses were awarded Magnet status by the American Nurses Credentialing Center, the highest recognition given by that organization for nursing excellence. The Corporation is the only present Member of the Obligated Group; the University is not a Member of the Obligated Group. The Series 2009 Obligation and other Obligations issued under the Master Indenture are obligations only of the Obligated Group and not obligations of the University, including any unincorporated division of the University, or any other entity not specifically identified as a Member of the Obligated Group. Under certain circumstances described in this Official Statement, the University may be substituted for and assume certain obligations of the Corporation under the Loan Agreements and in connection therewith issue the University Notes. The obligations so assumed by the University will not be secured in any way by the Master Indenture, unless the University has become a Member of the Obligated Group. See SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2009 BONDS The Loan Agreements and Bond Indentures Rights of the University to Assume Obligations Under Certain Circumstances. Facilities and Property A substantial portion of the facilities operated by the Corporation are leased from the University. For a description of the leased properties, some of which are described below, and the lease arrangements, see Affiliation, Operating and Lease Arrangements below. The Corporation is currently licensed to operate 568 beds, which are located in three hospitals designated as follows: Bernard A. Mitchell Hospital, the main adult patient care facility ( Mitchell Hospital ); A-1

71 Chicago Lying-in Hospital, the maternity and women s hospital, which is located on the second floor of Mitchell Hospital; and Comer Children s Hospital, which is devoted to the medical needs of children and is located north of Mitchell Hospital ( Comer Children s Hospital ). Mitchell Hospital is located in two connected six-story buildings completed in October, 1983, which are designated the Mitchell Building and the Arthur Rubloff Intensive Care Tower. Mitchell Hospital replaced Billings Hospital as the University s main patient care facility and includes adult medical, surgical and obstetrics beds, the medical intensive care unit, the adult emergency department and labor and delivery suites, and other patient care services including pharmacy, radiology and clinical laboratories. Billings Hospital, the University s first patient care facility, had been in operation since 1927, the year the University moved the clinical components of its medical school to its main campus. The Arthur Rubloff Intensive Care Tower links the Mitchell Hospital to the other health care facilities of the Corporation, including the Surgery-Brain Research Pavilion. The Tower houses a burn and electrical trauma unit as well as intensive care units for transplantation, neuroscience, cardiac and general surgery patients. The Corporation also operates a portion of the Surgery-Brain Research Pavilion containing 17 operating suites with adjacent recovery beds. The Chicago Lying-in Hospital, which is located on the second floor of Mitchell Hospital, and connects to Comer Children s Hospital, is a State-designated regional facility for the care of high-risk pregnancies and a leading program in reproductive endocrinology and infertility. Comer Children s Hospital, which replaced the Wyler Children s Hospital that was built in 1967, opened in 2005 on a site that is adjacent to the Duchossois Center for Advanced Medicine (the DCAM ) (outpatient diagnostic and therapeutic services) and Mitchell Hospital (adult inpatient services, including labor and delivery). This new six-story, 242,000 square foot children s hospital was designed to provide the most advanced care for children in a family-centered environment. Comer Children s Hospital was built with larger private patient rooms that were sized to accommodate the vast growth of technology (such as monitors and ventilators) in pediatric care over the past 35 years. The rooms, designed with the input of patients and their families as well as doctors and nurses, also include enough space for parents to stay overnight with their hospitalized children. Comer Children s Hospital, a major referral center, currently has 155 beds in operation, including a neonatal intensive care unit with 47 level-iii beds. In addition to inpatient units, Comer Children s Hospital has six pediatric operating rooms (including one for interventional cardiac procedures), radiology, a palliative care unit, child life and family support areas (such as playrooms, resource center and family kitchen and laundry), as well as conference rooms and Housestaff education space. For the second year in a row, U.S. News and World Report selected Comer Children s Hospital as one of the best children s hospitals in the United States, ranking it in the top 30 in the country for pediatric endocrine disorders and neonatal care. As the only pediatric Level 1 Trauma Center on the south side of Chicago, Comer Children s Hospital provides immediate, highly specialized pediatric emergency services. The newest pediatric emergency facility in Chicago was built adjacent to Comer Children s Hospital on the first floor of a new four-story building and opened in Part of the remaining three floors are being built out for pediatric services to be relocated from the DCAM, with other space shelled for future expansion. The Corporation s ambulatory care facility, DCAM, houses the Corporation s specialty outpatient clinics for medicine, surgery, obstetrics and gynecology, pediatric specialty care, neurology and ophthalmology, as well as adult primary care and executive health practices. Completed in 1996, this facility consolidated the Corporation s diagnostic and outpatient treatment capacity in one convenient location. The six-story 525,000 square-foot building has 315 exam rooms, 90 rooms for outpatient procedures, eight operating rooms for ambulatory surgery, as well as facilities for radiation therapy, ambulatory radiology, cardiac, gastrointestinal and neurological diagnostic services. A-2

72 The DCAM is designed to bring the latest medical technology and scientific knowledge to each patient in a convenient, efficient, and comforting environment. The Corporation operates a number of special area-wide treatment centers, including a pediatric trauma center, regional burn and perinatal units and an emergency care center with a specially equipped and staffed medical helicopter which utilizes a helipad on the roof of the Mitchell Building. The following summary reflects the general classification of beds in service at the Corporation s facilities as of July 15, The Corporation currently operates 386 beds in Mitchell and 155 beds in Comer for a total of 541 beds. Table I Beds in Service Clinical Service Beds in Service Adult Multi-Specialty 126 Adult Intensive Care 63 Cardiology 23 Hematology/Oncology 79 Adult General Medicine 35 Obstetrics 46 Pediatric Multi-Specialty 45 Pediatric Intensive Care 30 Pediatric General Medicine 15 Neonatology* 71 Clinical Research Center 8 Total 541 *5 NICU beds are in Mitchell. Total NICU includes 24 level-ii intermediate care nursery beds that are not required to be licensed. Description of the New Hospital Pavilion The facilities centerpiece of the Corporation s strategic plan is the New Hospital Pavilion ( NHP ) project. Bridging the DCAM and Comer Children s Hospital, the NHP will form the core of the Corporation s 21st century medical center. The NHP will house inpatient and procedural components of the Corporation s most distinguished programs, including cancer, gastrointestinal disease, neuroscience, advanced surgery and high-technology imaging. Management believes that the building s innovative and efficient design, based on a matrix of modular cubes, will maximize flexibility for accelerating changes in biomedical science and technology over the coming decades, while optimizing scarce resources of land and energy. This site, which spans the northern portion of the block that contains DCAM and Comer Children s Hospital, allows for programs for adult complex care services to be contained in one building. An above-ground pedestrian walkway will connect the NHP to the DCAM on the second floor. The NHP will also connect via underground tunnels to the DCAM, Comer Children s Hospital and an existing tunnel system that connects to various of the Corporation s facilities. A rendering of the NHP appears on the inside back cover of this Official Statement. The NHP project is budgeted to cost approximately $700 million and will provide almost 1.2 million gross square feet of space for 240 beds, 23 operating rooms, 7 interventional suites, state-of-the-art imaging scanners, and other advanced diagnostic and treatment services, with approximately 200,000 square feet of shelled space for future program expansion, and a second helipad on the roof. In the spring of 2008, the NHP project received State of Illinois certificate of need approval, followed by Board of Trustees approval from both the Corporation and the University. The Corporation is seeking Leadership in Energy and Environmental Design ( LEED ) certification A-3

73 from the United States Green Building Council, and expects to be successful in obtaining Silver status. Final design was completed at the end of 2008, full bidding to subcontractors occurred in early 2009, and after a rebid to capture cost savings from the economic downturn a Guaranteed Maximum Price ( GMP ) contract was secured. Direct construction costs are estimated to total $470 million, which includes construction contingency. The remaining $230 million of the estimated cost includes design, project management, equipment, utility, and other infrastructure, contingency, capitalized interest and financing costs. Approximately $60 million has been spent to date for architecture, design, and pre-construction costs. NHP construction began in May, 2009, and is scheduled to run through 2012, with an anticipated opening of the NHP in early The Corporation expects to borrow $500 million for the project (including the proceeds of the Series 2009C Bonds and the Series 2009 Bonds), with the remaining $200 million funded by gifts and equity from the Corporation. After the NHP opens, the Corporation expects to reduce the number of beds in the Mitchell Hospital building to approximately 160 beds, all in single patient rooms. Clinical services continuing in the Mitchell building will include adult emergency medicine, adult general medicine and cardiology, and the labor and delivery services and obstetrics beds comprising the Chicago Lying-In Hospital. After the NHP opens, the Corporation will have approximately 555 beds across the New Hospital Pavilion, Comer Children's Hospital, Mitchell Hospital and Chicago Lying-In Hospital. The NHP will also provide an initial complement of 23 operating suites, which are larger and much more flexible than existing facilities and are designed to accommodate rapid advances in surgical technology such as robotics, intraoperative imaging and computer-assisted visualization of the surgical field. These new suites will replace the current 17 general operating rooms in the Surgery Brain Research Pavilion. The NHP project budget also includes excavation of space underground between DCAM and NHP, which will allow for future expansion of radiation therapy in the DCAM basement. The Design Team for the New Hospital Pavilion Architect/Hospital Planner Rafael Viñoly Architects ( RVA ) and Cannon Design were selected as the architects and hospital planners for the NHP because of their national and international experience in current healthcare design and practice, and a long term commitment to healthcare design and planning. Both firms have significant project experience on the University campus. Rafael Viñoly is a world renowned architect responsible for many award winning projects in the United States, Europe, Latin America and East Asia. Significant healthcare projects include work at Memorial Sloan Kettering, Columbia University Medical Center and the University of Pennsylvania Center for Advanced Medicine. Cannon Design has been in business for 60 years, with offices worldwide, and is a national leader in healthcare planning and design. Cannon has worked on projects at over 130 healthcare facilities and has provided healthcare design services at Kaiser Permanente, University Hospitals Case Medical Center Cancer Hospital, Barnes-Jewish Center for Advanced Medicine, University of Kansas Medical Center, Washington University School of Medicine, and most recently Brigham and Women s Hospital. Program Managers U.S. Equities Realty, LLC and its partner PMA Consultants of Illinois LLC serve as Program Managers on the project. In this role, they are responsible for the oversight of the project schedule and budget with direct reporting to the Corporation s senior management. Both firms have extensive experience in working with large scale projects. U.S. Equities Realty, LLC is a Chicago-based full service real estate development firm that has been responsible for the development of projects totaling more than 12.7 million square feet. Completed projects include the 1.2 million square foot John H. Stroger, Jr. Hospital of Cook County ( Stroger Hospital ), the Harold A-4

74 Washington Library Center, the nation s largest municipal library, and the redevelopment of the John Hancock building. PMA Consultants of Illinois LLC is a national program management consulting firm with experience in hospital projects and other large projects such as the 1.7 million square foot Hyatt Center in Chicago. U.S. Equities and PMA Consultants have partnered on the Stroger Hospital project and on projects for The University of Chicago Medical Center such as the Comer Center for Children and Specialty Care. Construction Managers A joint venture between the Gilbane Building Company and the W.E. O Neil Construction Company ( Gilbane/O Neil ) serves as the General Contractor/Construction Manager on the NHP project. Gilbane/O Neil was responsible for helping the Corporation secure the GMP, and is responsible for managing the construction within the GMP. The Gilbane Building Company ( Gilbane ), headquartered in Providence, Rhode Island, is one of the leading university and hospital construction managers in the United States. Over the last 10 years, Gilbane has completed 52 academic medical center projects including large projects for the Cleveland Clinic Foundations, M D. Anderson at the University of Texas, University of Iowa Hospitals and Clinics and the University of Pennsylvania. Gilbane has been ranked as a top 10 construction manager by Modern Healthcare magazine. Currently, Gilbane has 83 projects underway involving approximately 23 million square feet with a construction value of $6.5 billion. The W.E. O Neil Construction Company is a large Chicago-based construction company. Local projects include the IIT State Street Dormitories, the Gary Comer Youth Center, the Crown Fountain in Millennium Park and projects for Evanston, Mount Sinai and Lutheran General Hospitals. Affiliation, Operating and Lease Arrangements In connection with the establishment of the Corporation in 1986, the University and the Corporation entered into an Affiliation Agreement dated as of October 1, 1986 (the Affiliation Agreement ), that sets forth the relationship between the two corporations and specifies the responsibilities of each in relation to the provision of patient care, teaching and research at the hospitals and clinics. The University and the Corporation also entered into an Operating Agreement dated as of October 1, 1986, as amended (the Operating Agreement ), that provides for the management and operation by the Corporation of the hospital and clinic facilities owned by the University and for the transfer of certain University property devoted to hospital use to the Corporation. The Affiliation Agreement has an initial term of 40 years ending October 1, 2026 unless sooner terminated by mutual consent or as a result of a continuing breach of a material obligation therein or in the Operating Agreement. The Affiliation Agreement automatically renews for additional successive 10-year terms following expiration of the initial term, unless either party provides the other with at least two years prior written notice of its election not to renew. The Operating Agreement is coterminous with the Affiliation Agreement. The Affiliation Agreement provides that, among other things: (1) the Corporation and its medical staff will operate a hospital which will provide patient care in a setting which promotes medical education and research, and the University will continue to have available to it a hospital for use in connection with its medical education, training and research activities; (2) all members of the medical staff must have academic appointments in the University; (3) each academic clinical department of the Division of Biological Sciences of the University must have a corresponding hospital clinical department, and each academic clinical department and the corresponding hospital clinical department must have the same faculty member as chair; (4) each party shall be responsible for and control its own financial affairs, which shall include the determination of the size and composition of its staff and the scope of activities to be supported by its budget; and each party agrees to keep the other fully informed regarding financial matters affecting the Corporation and the University; and (5) if the Affiliation Agreement is terminated in accordance with its terms either by mutual consent or upon a default, the Corporation is obligated to return all the hospital facilities and assets to the University, without payment of any kind by the University to the Corporation. A-5

75 The Operating Agreement provides that, among other things: (1) the University gives the Corporation the right to use and operate certain facilities; (2) the University contributed to the Corporation, for its use, the equipment, supplies, furniture and other personal property located in the hospitals and clinics; (3) the Corporation undertakes the operations of the hospitals and clinics; and (4) each party will furnish specified services to the other, including insurance, at agreed upon rates. Pursuant to a Lease Agreement dated as of June 30, 1987, as amended (the Original Lease ), the University agreed to grant to the Corporation a leasehold interest in certain of the health care facilities currently operated by the Corporation. The facilities include the Mitchell Hospital, the Arthur Rubloff Intensive Care Tower, the Goldblatt Pavilion, the materials management facility, the third floor of the magnetic resonance imaging facility and the fourth floor and a portion of the third floor of the Surgery-Brain Research Pavilion. The balance of the leased area, referred to as the Phase III premises, includes portions of the Wyler Pavilion and Billings Hospital. The Phase III premises are subject to adjustment by the University and the Corporation from time to time under certain circumstances. The rent under the Original Lease was paid in The University and the Corporation have also entered into a Lease Agreement dated as of June 21, 1993, as amended (the CAM Lease ) under which the University granted to the Corporation a leasehold interest in the land on which the DCAM is located. The University and the Corporation have also entered into a Lease Agreement dated as of June 29, 2001 (the CCH Lease ) under which the University granted to the Corporation a leasehold interest in the land on which Comer Children s Hospital is located. The CCH Lease was amended by the First Amendment to the CCH Lease effective as of November 1, This amendment added various properties along Drexel Avenue between 57th and 58th streets behind Comer Children s Hospital where the four-story building that contains the Comer Emergency Department was built. In connection with the financing of the NHP, the Corporation will enter into a new lease (the NHP Lease and together with the CCH Lease, the CAM Lease and the Original Lease, the Leases ) under which the University will grant to the Corporation a leasehold interest in the land on which the NHP will be located. The term of each Lease is coterminous with the Affiliation Agreement and will end if the Affiliation Agreement terminates or ends or if the University assumes the obligations of the Corporation under any of its loan agreements with the Authority. In addition, the University may terminate each Lease upon the occurrence of an event of default thereunder. An event of default under the Original Lease includes, among other things, an event of default on the part of the Corporation under the Master Indenture, the Operating Agreement or the Affiliation Agreement. The University may not terminate any Lease or exercise its option not to renew the Affiliation Agreement upon the completion of its initial term, however, unless prior to the end of the lease term the University assumes and agrees to perform the obligations of the Corporation under the Loan Agreements to the extent required by the Loan Agreements. See SUMMARY OF CERTAIN PROVISIONS OF THE LOAN AGREEMENTS Termination of Lease; Assumption of Obligations under Loan Agreements in Appendix D for a description of certain conditions precedent to the substitution of the University and the termination of the Lease. See SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2009 BONDS The Loan Agreements and Bond Indentures Rights of the University to Assume Obligations Under Certain Circumstances. Governance As the sole corporate member of the Corporation, the University has the sole power to appoint the trustees of the Corporation and may amend the Bylaws of the Corporation and has approval over any amendment made by the Corporation s Board of Trustees. The Corporation s Executive Committee is also a committee of the University s Board of Trustees. The CEO of the Corporation has reporting responsibility to the Corporation s Board and as the University Vice President for Medical Affairs also reports to the President of the University. The Board of the Corporation has the following committees that meet regularly, but at different intervals throughout the year: Executive Committee, Finance & Strategic Planning Committee, Patient Care & Operations Committee, Community & Government Affairs Committee, Development Committee, Audit Committee, Compensation Committee, Trusteeship Committee, and T-II Committee (information technology). A-6

76 The University s President, Chairman of the Board of Trustees, and Provost are all ex officio trustees of the Board of the Corporation, as are the Corporation s Chief Executive Officer, President, and Medical Staff President. Ex officio trustees have full voting rights. Life Trustees are those trustees who reach the age of 70 years old. Life Trustees do not have voting privileges. Except for ex officio trustees and Life Trustees, the members of the Board serve staggered three-year terms. Board of Trustees The current members of the Board of the Corporation and their occupations are listed below. Members Mr. James S. Crown* Chairman Ms. Trisha Rooney Alden Mr. Andrew M. Alper* (ex officio) Mr. Paul F. Anderson (Life Trustee) Ms. Diane Atwood Mr. Marshall Bennett (Life Trustee) Mrs. Lindy Bergman (Life Trustee) Occupation President Henry Crown and Company Chicago, Illinois President R4 Services, LLC Chicago, Illinois Chairman The University of Chicago Board of Trustees Chairman Alper Investments, Inc. New York, New York Senior Advisor Booz & Co. Chicago, Illinois Director Atwood Foundation Chicago, Illinois Partner Marshall Bennett Enterprises Chicago, Illinois Civic Leader Chicago, Illinois Mr. Robert H. Bergman Ms. Ellen H. Block President Bergman Design, Inc. Chicago, Illinois President Nonsense, Inc. Chicago, Illinois A-7

77 Members Mr. Kevin J. Brown Mr. John Bucksbaum Mr. Benjamin D. Chereskin Mr. Frank M. Clark Ms. Stephanie Comer Mr. Craig J. Duchossois* Mr. Sidney Epstein (Life Trustee) Mr. Robert Feitler* (Life Trustee) Ms. Stephanie Field-Harris Mr. James S. Frank* Mr. Stanford J. Goldblatt* (Life Trustee) Mr. Rodney L. Goldstein* Mr. William J. Hunckler III Mr. Jeffrey D. Jacobs Occupation President and Chief Executive Officer Lettuce Entertain You Enterprises, Inc. Chicago, Illinois Private Investor Chicago, Illinois Managing Partner Madison Dearborn Partners Chicago, Illinois Chairman and Chief Executive Officer ComEd Chicago, Illinois President The Comer Foundation Chicago, Illinois Chief Executive Officer The Duchossois Group, Inc. Elmhurst, Illinois Chairman Emeritus A. Epstein & Sons International, Inc. Chicago, Illinois Chairman of the Executive Committee Weyco Group, Inc. Milwaukee, Wisconsin Civic Leader Chicago, Illinois President and Chief Executive Officer Wheels, Inc. Des Plaines, Illinois Partner Winston & Strawn LLP Chicago, Illinois Chairman and Managing Partner Frontenac Company Chicago, Illinois Private Investor Aspen, Colorado Partner The Jacobs Endeavors Chicago, Illinois A-8

78 Members Mr. Kenneth M. Jacobs* Mr. Jules F. Knapp (Life Trustee) Mr. Howard G. Krane* (Life Trustee) Mr. Kenneth Lehman Ms. Carol Levy Mr. John D. Mabie* (Life Trustee) Mr. Barry L. MacLean (Life Trustee) James L. Madara, M.D. (ex officio) Ms. Cheryl Mayberry McKissack Dr. Dane A. Miller Mrs. Marjorie I. Mitchell (Life Trustee) Mr. Ralph G. Moore Occupation Deputy Chairman Lazard USA New York, New York Chairman Grisham Security Door Corporation Chicago, Illinois Partner (retired) Kirkland & Ellis LLP Chicago, Illinois Managing Partner KKP Group L.L.C. Evanston, Illinois Co-Owner Material Possessions Chicago, Illinois Chairman Mid-Continent Capital, L.L.C. Chicago, Illinois President and Chief Executive Officer MacLean-Fogg Company Mundelein, Illinois Chief Executive Officer The University of Chicago Medical Center Dean, Pritzker School of Medicine and University Vice President for Medical Affairs Chicago, Illinois President and Chief Executive Officer Nia Enterprises, LLC Chicago, Illinois Founder and Board Member Biomet, Inc. Winona Lake, Indiana President Mitchell & Company Chicago, Illinois President Ralph G. Moore & Associates, Inc. Chicago, Illinois A-9

79 Members Mr. Christopher J. Murphy III Ms. Emily Nicklin* Mr. Brien M. O Brien Mr. Timothy K. Ozark Mr. Nicholas K. Pontikes Mr. James Reynolds, Jr. Mr. Thomas A. Reynolds III* Mr. Thomas Rosenbaum (ex officio) Mr. Michael Rosenberg (Life Trustee) Mr. Robert G. Schloerb* (Life Trustee) Mr. Gordon Segal (Life Trustee) Mr. Benjamin Shapiro Mr. Jeffrey T. Sheffield Occupation Chairman, President and Chief Executive Officer 1st Source Corporation South Bend, Indiana Partner Kirkland & Ellis LLP Chicago, Illinois Chairman and Chief Executive Officer Advisory Research, Inc. Chicago, Illinois Chairman Aim Financial Corporation Chicago, Illinois President Kenny s Kids Chicago, Illinois Chairman and Chief Executive Officer Loop Capital Markets, LLC Chicago, Illinois Capital Partner Winston & Strawn LLP Chicago, Illinois Provost The University of Chicago Chicago, Illinois Senior Director Keywell Corporation Chicago, Illinois Of Counsel Peterson & Ross Chicago, Illinois Chairman Crate and Barrel Northbrook, Illinois Manager Mason Avenue Investments, LLC Chicago, Illinois Partner Kirkland & Ellis LLP Chicago, Illinois A-10

80 Members Mr. Jorge A. Solis Ms. Melody Spann-Cooper Mr. John A. Svoboda Mr. Michael Tang Ms. MarrGwen Townsend Mr. James C. Tyree Mr. Terry L. Van Der Aa Mr. Scott Wald Mr. Stephen G. Weber, M.D. (ex officio) Mr. Robert G. Weiss (Life Trustee) Mr. Kelly R. Welsh Mr. Bruce White Ms. Paula Wolff* Occupation Director, Division of Banking Illinois Department of Finance and Professional Regulation Chicago, Illinois Chairman Midway Broadcasting Corporation Chicago, Illinois Senior Managing Director Svoboda Capital Partners LLC Chicago, Illinois Vice Chairman National Material L.P. Elk Grove Village, Illinois Co-Founder Townsend Analytics Chicago, Illinois Chairman and Chief Executive Officer Mesirow Financial, Inc. Chicago, Illinois President TLV Holdings, Inc. Hinsdale, Illinois President Romar Services LLC Northfield, Illinois President The University of Chicago Medical Center Medical Staff Organization Chicago, Illinois Private Investor Chicago, Illinois Executive Vice President and General Counsel Northern Trust Company Chicago, Illinois Chairman and Chief Executive Officer White Lodging Services Corp. Merrillville, Indiana Senior Executive Chicago Metropolis 2020 Chicago, Illinois A-11

81 Members Mr. Robert Zimmer* (ex officio) Occupation President The University of Chicago Chicago, Illinois *Also a member of the Board of Trustees of the University. Relationship of Parties All Members of the Corporation s Board of Trustees are required to disclose any potential conflicts of interest arising from serving on the Board. Certain members of the Board are associated with organizations doing business with the Corporation. Mr. Crown is on the Board of Directors of JP Morgan Chase & Co. JP Morgan Chase Bank is providing liquidity for the Series 2009E Bonds, and J.P. Morgan Securities Inc., is one of the firms underwriting the Series 2009C Bonds and underwriting and remarketing the Series 2009 Bonds. Dr. Miller is a Director of Biomet, Inc., which does business with the Corporation. Mr. Thomas Reynolds is the vice chair of the Board of Directors of the Rehabilitation Institute of Chicago. The Corporation may refer patients to the Rehabilitation Institute. Mr. Welsh is Executive Vice President and general counsel of the Northern Trust Company, which provides custody services and a letter of credit for the Corporation. Mr. Clark is the chairman and Chief Executive Officer of Commonwealth Edison. ComEd provides electric energy distribution services to the Corporation. He is also on the Board of Directors of Aetna, Inc., which has payor contracts with the Corporation. Mr. James Reynolds Jr. is Chairman and Chief Executive Officer of Loop Capital Markets, LLC. Loop Capital Markets, LLC is one of the firms underwriting and remarketing certain of the Series 2009C Bonds and the Series 2009 Bonds. From time to time, the Corporation has retained certain of the law firms with which certain of the members of the Corporation s Board are affiliated. Executive Administration The Corporation s Board of Trustees selects, with the approval of the University, the chief executive officer of the Corporation. The Corporation s senior executive officers are listed below. James L. Madara, M.D., Chief Executive Officer of the Corporation since June Dr. Madara is also Dean of the Biological Sciences Division and Pritzker School of Medicine, University of Chicago Vice President for Medical Affairs, and the Sara and Harold Lincoln Thompson Distinguished Service Professor (since 2002). Dr. Madara is one of the nation s leading academic pathologists and an authority on epithelial cell biology and on gastrointestinal disease. He previously chaired the Department of Pathology and Laboratory Medicine at Emory University ( ). He was a Professor/Assistant Professor of Pathology at Harvard Medical School ( ), and was an Instructor of Pathology at Harvard ( ). During this time, he served as director of the Division of Gastrointestinal Pathology ( ) and as a pathologist ( ) at Brigham and Women s Hospital. Dr. Madara has a BS from Juniata College, his MD from Hahnemann Medical College, and a MA with honors from Harvard University. On August 14, 2009, Dr. Madara announced that as of October 1, 2009 he would step down from his position as Chief Executive Officer of the Corporation and Dean of the Biological Sciences Division and Pritzker School of Medicine and return to the faculty of The University of Chicago. Dr. Everett Vokes, the current chairman of the Department of Medicine and a nationally renowned oncologist, has agreed to serve as interim Chief Executive Officer of the Corporation and Dean beginning October 1, 2009 while a national search is conducted for a permanent replacement. Lawrence J. Furnstahl, Chief Financial and Strategy Officer of the Corporation since Mr. Furnstahl is also the Treasurer of the Corporation and since January 2009, University of Chicago Vice President for Financial Planning for Science. Previously Mr. Furnstahl served as Chief Financial Officer and Chief of Strategic Development of the Corporation ( ). Prior to returning to the Corporation in 2000, Mr. Furnstahl was A-12

82 Senior Vice President and Chief Financial Officer of UCSF Stanford Health Care in northern California ( ) and Vice President and Chief Financial Officer of The University of Chicago ( ). He previously served as Vice President and Treasurer ( ) and Treasurer ( ) of the Corporation, as well as Senior Executive for Patient Services ( ), and as Special Assistant to the President of the Corporation. Mr. Furnstahl holds an AB in Economics from The University of Chicago. Harvey M. Golomb, M.D., Chief Medical Officer of the Corporation since 2006 and Dean for Clinical Affairs of the BSD since Dr. Golomb previously served as the Chairman of the Department of Medicine ( ) as well as Chief of the Section of Hematology/Oncology at The University of Chicago ( ). Dr. Golomb began his medical career at The University of Chicago in 1973 as a Fellow, then an Assistant Professor ( ) and then as an Associate Professor ( ) in the Section of Hematology/Oncology before being made Section Chief of Hematology/Oncology in He was named Full Professor of Hematology/Oncology in Previously, Dr. Golomb completed his residency in Internal Medicine ( ) and was a NIH Special Fellow in Medical Genetics ( ) at John Hopkins University School of Medicine. Dr. Golomb received his BA from The University of Chicago and his MD from the University of Pittsburgh School of Medicine. His specialty is Hematology/Oncology and he is a noted expert in the treatment of hairy cell leukemia. Kenneth J. Sharigian, Associate Dean and Executive Vice President for Organizational Strategy and Planning since Mr. Sharigian previously held the position of Associate Dean and Chief Operating Officer for the Biological Sciences Division of The University of Chicago ( ). Mr. Sharigian was previously the Vice President for Physician Organization and Business Planning at Stanford Hospitals and Clinics ( ) and interim Chief Financial Officer ( ). He was also the Vice President for Financial Strategy at UCSF Stanford Healthcare ( ). Mr. Sharigian served as Chief Financial Officer and Vice President of Finance and Business Development at Lucile Packard Children s Health Services ( ) and as Executive Director of the Stanford Physician Group ( ). He was Director of Finance for the Faculty Practice Program ( ) and Administrator of the Department of Surgery ( ) at Stanford University School of Medicine. Mr. Sharigian also held the position of Assistant Administrator of Ambulatory Care at Kaiser Permanente South San Francisco Medical Center ( ). He served many years at the Nevada State Division of Mental Hygiene and Mental Retardation; first as a psychologist ( ) and finally as the Deputy Administrator of Mental Health ( ). Mr. Sharigian has a BA in Psychology from San Francisco State University, a Ph.D. in Clinical Psychology from the University of Nevada and an MBA from Stanford University Graduate School of Business. Eric E. Whitaker, M.D., M.P.H., Executive Vice President for Strategic Affiliations and Associate Dean for Community-Based Research since Previously he served as the Director of the Illinois Department of Public Health ( ). Prior to his appointment with the State of Illinois, Dr. Whitaker was a Senior Attending Physician in Internal Medicine at Cook County Hospital in Chicago and a member of its Collaborative Research Unit ( ). During this time, he also served as the Medical Director for Vision House in Chicago ( ) and was a Research Fellow with the Robert Wood Johnson Clinical Scholars Program at The University of Chicago ( ). Dr. Whitaker completed his internship and residency in Primary Care Internal Medicine at UCSF/San Francisco General Hospital ( ). Dr. Whitaker received a BA in Chemistry from Grinnell College, his MPH from the Harvard School of Public Health and his MD from The University of Chicago Pritzker School of Medicine. He also has completed coursework at the Northwestern Kellogg Graduate School of Management. Carolyn Wilson, Associate Dean and, since August 2008, the Chief Operating Officer of the Corporation. Prior to this appointment, Ms. Wilson was the Associate Dean and Vice President for Faculty Practice Administration & Ambulatory Care of the Corporation ( ). Ms. Wilson previously held the position of Associate Dean and Chief Operating Officer ( ) and Director of Managed Care Operations ( ) of The University of Chicago Practice Plan. Ms. Wilson was previously a Care Center Executive at Ingalls Memorial Hospital ( ) and was Director of Operations at Oak Park and Westlake Hospitals ( ). At Oak Park and Westlake Hospitals she also held the positions of Director Infection Control/Quality Management ( ), Nursing Supervisor ( ), Director of Nursing Education ( ) and Charge Nurse, Inpatient Oncology ( ). She was a nursing supervisor at Presbyterian Home in Evanston, Illinois ( ) and she worked as a staff nurse prior to this at the National Institute of Health-Bethesda ( ) and Blodgett Memorial Medical Center ( ). Ms. Wilson has her Nursing Diploma from Blodgett Memorial Medical Center, a BS in Nursing from Rush University and a MBA from Benedictine University. A-13

83 Medical Staff Membership on the Medical Staff is limited to those practitioners who have faculty or other academic appointments in the University s Pritzker School of Medicine. Terms of appointment or reappointment to the Medical Staff are for two years; however, the appointment of a member will terminate immediately if such member s faculty or other academic appointment in the Pritzker School of Medicine is terminated. There are two categories of membership regular staff and consulting/associate staff. Only regular staff has admitting and voting privileges. The Medical Staff is organized under the following clinical departments: Anesthesia and Critical Care Medicine Human Genetics Neurology Obstetrics and Gynecology Pathology Pediatrics Psychiatry Radiation and Cellular Oncology Radiology Surgery Each clinical department has a chair who is appointed in accordance with the procedures of the University concerning the appointment of department chairs. Each chair must be a member of the regular Medical Staff. Chairs are responsible for supervising all clinical activities within their department, including outpatient services, and for the supervision of Housestaff in their department. Housestaff are those physicians and scientists who are graduates of approved schools and who are appointed as interns, residents, trainees, fellows, subspecialty residents or similar title and/or function in training programs conducted by the clinical departments. As of July 1, 2009, there were 1,665 physicians using the Corporation s facilities, including 799 attending physicians on the Medical Staff and 866 residents and fellows on the Housestaff (including 112 at NorthShore University Health System ( NorthShore ), an academic affiliate described below under the caption Affiliated Entities ). The following chart illustrates the distribution of Medical Staff and Housestaff by department and section as of July 1, Table II Medical Staff and Housestaff by Department Department Attending Total Physicians Housestaff 3 Physicians Anesthesia Medicine Neurology Obstetrics & Gynecology Ophthalmology Pathology Pediatrics Psychiatry Radiation Oncology Radiology Surgery Medicine/Pediatrics Family Medicine Transitional Year Total ,665 1 Ophthalmology is now organized under the Department of Surgery, but is separate for purposes of this table. 2 NorthShore accredited programs residents are in programs at NorthShore. A-14

84 Health Care Services The Corporation provides a wide range of tertiary services and operates a number of special area-wide treatment centers, including regional burn and perinatal units, a regional emergency center, and a pediatric trauma center. Among the tertiary services are oncology, hematology, radiation oncology, endocrinology, transplantation, gastroenterology, geriatric medicine, vascular surgery, neurology, neurosurgery, plastic and reconstructive surgery, general surgery, including stomach, bowel and colon surgery, musculoskeletal services, including orthopedics and rheumatology, heart failure, repair of congenital heart defects, pediatric medicine and surgery, and perinatology. The Corporation is involved in clinical research in a number of specialties and has been designated a Comprehensive Cancer Center by the National Cancer Institute, a National Diabetes Research and Training Center, a National Clinical Research Center, a Special Center for Research in Ischemic Heart Disease, a Howard Hughes Medical Institute (for research in molecular biology and molecular genetics), a Joseph P. Kennedy, Jr. Mental Retardation Research Center, a Comprehensive Sickle Cell Center, a Digestive Diseases Research Center and a National Clinical Nutrition Research Unit. Clinical Teaching Program The Corporation forms the clinical teaching facility of the Division of Biological Sciences ( BSD ) and Pritzker School of Medicine ( Pritzker ) of the University. Each academic clinical department chair at the University s Division of Biological Sciences is chair of the comparable clinical department at the Corporation. All of the members of the Corporation s medical staff hold academic appointments at the University. Through its unified governance structure adopted in 2006, the Corporation and the BSD both report to the Chief Executive Officer of the Corporation. This structure further enhances the training program and the ability to recruit a clinically able and academically recognized medical staff. The Corporation currently maintains 63 specialty and sub-specialty training programs that are accredited by the Accreditation Council for Graduate Medical Education. The core residency programs are in anesthesiology, dermatology, emergency medicine, internal medicine, medical genetics, neurological surgery, neurology, obstetrics and gynecology, ophthalmology, orthopedic surgery, otolaryngology, pathology, pediatrics, plastic surgery, psychiatry, radiology (diagnostic), radiation oncology surgery, urology, and med/peds. NorthShore has two additional specialty programs that the Corporation does not offer in Family Medicine and Transitional Year. For physicians seeking further training upon completion of their residency, the Corporation, in conjunction with the University, currently offers fellowships in all of these programs. As of July 1, 2009, there were 866 residents and fellows in these programs. Licenses, Accreditations and Memberships The Corporation is fully licensed by the State of Illinois and the City of Chicago. The Corporation received a three-year accreditation from the Joint Commission on Accreditation of Healthcare Organizations effective March, The Corporation holds memberships in numerous organizations, including the Illinois Hospital and Health Systems Association, National Association of Children s Hospitals and Related Institutions, the University Healthsystem Consortium and the Council of Teaching Hospitals of the Association of American Medical Colleges. Affiliated Entities QV, Inc. ( QV ) was an affiliated Illinois not-for-profit corporation which previously operated four outpatient clinics in the Chicago area. QV was voluntarily dissolved on July 6, QV was never a member of the Obligated Group. As part of cost reduction and service restructuring efforts, the Corporation discontinued operations and closed two of the clinics. The other two clinics have been transferred to the University and are being run by the BSD. On July 16, 2008 the Corporation entered into a Master Affiliation Agreement with NorthShore to establish an academic medical center affiliation for teaching, research and community service. As of July 1, 2009, medical students and residents from Pritzker-sponsored training programs began to gain clinical experience at NorthShore, working closely with physicians who are part of the NorthShore-based faculty. A-15

85 Leaders at both organizations believe the fit is a natural one, bringing together Pritzker, one of the premier medical schools in the country, with NorthShore, one of the nation's leading teaching hospitals. Both share a commitment to the highest levels of patient care and medical research, yet they expose students and residents to different patient populations and operational systems. Together, they provide students experience in an urbanacademic-medical-center and a suburban-community-teaching-hospital patient care setting. None of the affiliated entities is a Member of the Obligated Group. Affiliation, Merger and Divestiture The Corporation evaluates and pursues potential acquisition, merger and affiliation candidates as part of the overall strategic planning and development process. As part of its ongoing planning and property management functions, the Corporation reviews the use, compatibility and business viability of many of the operations of its facilities, and from time to time the Corporation may pursue changes in the use of, or disposition of, the facilities. Likewise, the Corporation occasionally receives offers from, or conducts discussions with, third parties about the potential acquisition of operations or properties which may become subsidiaries or affiliates of the Corporation in the future, or about the potential sale of some of the operations and properties which are currently conducted, owned by or affiliated with the Corporation. Discussions with respect to affiliation, merger, acquisition, disposition or change of use of facilities are held from time to time with other parties. These may be conducted with acute care hospital facilities, other health care providers, and insurers, and may relate to potential affiliation with the Corporation. As a result, it is possible that the current organizations and assets of the Corporation and the Obligated Group may change from time to time. Employees In June, 2009, the Corporation employed approximately 5,450 full-time equivalent employees. The Corporation provides compensation and a range of fringe benefits that it believes are competitive with other hospitals. The Corporation considers employee relations to be satisfactory. Approximately 44 percent of the employees of the Corporation (calculated on the basis of full-time equivalent employees), including most of the professional registered nurses, are represented by unions. The registered nurses are represented by the Illinois Nurses Association under an agreement which expires on October 31, The Corporation s approximately 1,345 clerical, service and maintenance employees are covered under a collective bargaining agreement with Local 743 of the International Brotherhood of Teamsters (Local 743), which expired on July 10, This contract had been extended until July 31, On August 3, 2009, Local 743 informed the Corporation that its members voted not to accept the Corporation's offer for a new three-year contract. The clerical, service and maintenance staff continue to work under the terms of the prior contract. Although at this point no assurances of a successful outcome can be made, management of the Corporation anticipates operations will continue normally as it pursues further alternatives with Local 743. The Corporation s plant trades and material handling employees are represented by Local 73 of the Service Employees International Union. The contract with this union expires on August 31, The International Brotherhood of Electrical Workers, Local 134, represents the Corporation's electricians. The contract with this union expires on November Service Area The Corporation draws most of its patients from the southern metropolitan Chicago area, which includes the south side of the City of Chicago, the south and southwest suburbs of Chicago and northwest Indiana. The Corporation s primary service area covers much of the south side of the City of Chicago. The primary service area is bounded by 36th Street to the north, Lake Michigan and the Indiana border to the east, 130th Street to the south and Western Avenue to the west. The primary service area is eight miles long, four miles wide at the northern boundary and eight miles wide at the southern boundary. Travel time from the Corporation s facilities to the most distant parts of the primary service area is 25 to 30 minutes. A-16

86 According to the Corporation s market data, the population of the Corporation s primary service area was approximately 770,000 in 2005, and is expected to hold constant. The neighborhoods in the primary service area vary greatly in economic status. Competing Hospitals In addition to competition from community hospitals in its primary service area, the Corporation competes in an area-wide tertiary care market with the following teaching hospitals: Advocate Christ Medical Center, Northwestern Memorial Hospital, Rush University Medical Center, University of Illinois Medical Center and Loyola University Medical Center. The following Table III sets forth certain information regarding inpatient utilization for the fiscal year ended June 30, 2008, except for Northwestern Memorial Hospital whose information is as of August 31, Current information for Loyola University Medical Center is not available to the Corporation. Table III Area-Wide Teaching Hospitals Average Beds in Service Admissions Average Daily Census Percent Occupancy Average Length of Stay The University of Chicago Medical Center , % 6.0 Advocate Christ Medical Center , % 5.2 Northwestern Memorial Hospital , % 4.7 Rush University Medical Center , % 5.0 University of Illinois Medical Center , % 6.1 Source: Metropolitan Chicago Healthcare Council Utilization Statistics; except for data relating to The University of Chicago Medical Center, which was supplied by the Corporation, for Northwestern Memorial Hospital and Rush University Medical Center, which was publically disclosed. A-17

87 Utilization Statistics The following Table IV shows data regarding the utilization of patient care facilities at Mitchell Hospital, Chicago Lying-in Hospital and Comer Children s Hospital, on a consolidated basis, and the outpatient visits at the DCAM. Table IV Patient Utilization Fiscal Year Ended June 30, Nine Months Ended March 31, Average Beds in Service Average Daily Census Percent of Occupancy 80.5% 76.5% 74.3% 74.8% 77.0% Admissions 26,933 26,376 26,288 19,865 19,015 Average Length of Stay Patient Days 174, , , , ,565 Deliveries 2,773 2,586 2,116 1,699 1,322 Renal Dialysis Procedures 82,001 84,241 83,881 63,424 63,035 Emergency Visits 79,534 85,092 82,829 61,870 56,020 DCAM Clinic Visits 1 394, , , , ,250 Surgeries 25,190 24,859 23,473 17,762 16,298 Ambulatory Surgeries 11,686 12,168 11,312 8,593 7,530 1 DCAM clinic visits exclude emergency room visits and ambulatory surgeries, which are listed separately. Insurance Program The Corporation is included under the University s insurance programs. Since fiscal year 1977, the University has maintained a self-insurance program for its medical malpractice liability. This program is supplemented with commercial excess insurance. For fiscal years ending June 30, 2007 through June 30, 2009, the self-insurance program covers claims up to $10 million per claim with no annual aggregate. For claims in excess of $10 million, the insurance retention is limited to $15 million in the aggregate for all claims per year on top of the $10 million. The estimated liability for medical malpractice self-insurance is actuarially determined based upon University-estimated claim reserves and various assumptions and represents the estimated present value of selfinsurance claims that will be settled in the future. It considers anticipated payout patterns as well as interest to be earned on available assets prior to payment. The excess of the net assets available for claims equaled approximately $37.1 million as of June 30, Most of the medical malpractice self-insurance assets are invested in the University's Total Return Investment Pool (described below), which has experienced significant declines during fiscal year 2009, reflecting general trends in the financial markets. The current year s contribution is held in cash for liquidity. The University carries commercial insurance coverage for other major risks, which covers the Corporation. The University charges the Corporation an amount that represents the Corporation s portion of commercial insurance costs. Investments The Corporation maintains a self-insurance program for workers compensation liability claims. The Investment Committee of the Board of Trustees of the Corporation maintains oversight of the investment portfolio of the Corporation. The Chief Financial Officer is responsible for monitoring and reporting on the investment portfolio to the Investment Committee. The Board Designated investments are maintained in two A-18

88 different accounts, the Long-Term Investment Account ( LTA ) and the University managed Total Return Investment Pool ( TRIP ). Historically 60 percent of the Corporation s investments were held in the LTA managed by external investment managers chosen and overseen by the Investment Committee. The other 40 percent were invested as part of the University s $4.8 billion TRIP endowment pool, managed by the University s Investment Office. In mid-2007, the Corporation s Board approved the investment of up to 75 percent of investments in TRIP. Over the following eighteen months, funds totaling $350 million were transferred to TRIP (in installments of $50 - $75 million each quarter) with the last transfer occurring on September 30, Funds transferred came from excess operating earnings and the liquidation of investments in the LTA. The other 25 percent is invested in the LTA in a highly liquid and well-diversified portfolio. About 8 percent of the LTA is invested in private equities that are close to reaching their maturity; no new private equity investments will be made. The rest of the LTA has historically had a targeted allocation of 35 percent fixed income/65 percent equities. As a result of the decline in equity markets, the Corporation reviewed the asset allocation of the LTA in January and moved the targeted equity allocation from 65 percent to 50 percent, within a range of 40 percent to 60 percent equities, with the remainder in fixed income. Additions to the LTA from operations will be invested in fixed income assets, rebalancing at least annually and maintaining the equity allocation within the 40 percent to 60 percent corridor. The equity allocation includes domestic and international equities. The fixed income category includes traditional core bond investments. Each investment manager is reviewed on a quarterly basis and compared against a benchmark index. The Corporation also retains an independent investment advisor to work with management and the Investment Committee. In light of recent declines in the financial markets, the asset allocation within TRIP is also under review. In the meantime, the asset allocation is more conservative, specifically with a larger allocation to cash. At March 31, 2009, the asset allocation was 24 percent cash and fixed income, 10 percent equities, 18 percent real assets, including real estate and natural resources, 18 percent private equities and 30 percent alternative investments. The equity category includes domestic and international equities, including international developed and emerging markets. The fixed income category includes U.S. bonds. Alternative investments include absolute return hedge funds and distressed securities. These investments are reviewed quarterly against benchmark indices by the University s Investment Committee, with regular reporting to the Corporation s Investment Committee. Since fiscal year 2002, the Corporation has been regularly transferring excess funds from operations to investments and transferred a total of $115 million from fiscal year 2002 to fiscal year In fiscal year 2006, the Corporation instituted a policy whereby funds in the operating fund in excess of an established threshold are transferred to investments on a monthly basis. Since fiscal year 2006, an additional $204 million has been transferred for a total of $319 million added to investments over a seven year period. Spending from both accounts is restricted to a payout formula of 4.0 percent annually for the LTA and between 4.5 percent and 5.5 percent annually for TRIP. Pension Funds A majority of the Corporation s employees participate in the University s defined benefit and contribution pension plan. Consistent with accounting principles for multi-employer pension plans, the University records the pension asset or liability for this plan on its balance sheet. The Corporation and the University make annual contributions to the defined benefit portion of the plan at a rate necessary to maintain plan funding on an actuarially recommended basis. The Corporation recognizes its negotiated share of the annual contribution as expense. The Corporation s pension expense for this plan was $1.5 million, $12.2 million, and $9.9 million for fiscal years 2007, 2008 and 2009, respectively. The University reported projected benefits obligations of $408.4 million and a fair value of plan assets of $319.7 million at June 30, These assets were invested 85 percent in equities and 15 percent in fixed income at June 30, Since that time, pension fund investments have experienced significant declines. In response, a joint working group of trustees and senior management from the University and the Corporation recently reviewed this plan, assisted by an external actuary and consultant. As a result, the Investment Committees of the University and the Corporation, working together, have set a new asset allocation for the pension plan, targeting approximately 40 percent in equities and 60 percent in fixed income, including a larger allocation to A-19

89 high-quality bonds with longer duration. Largely due to declines in the stock market, the funding status of this plan has decreased, and the Corporation s contribution is budgeted to increase from $9.9 million in fiscal year 2009 to $34.1 million in fiscal year The Corporation also sponsors a curtailed and frozen defined benefit plan for past employees of a former affiliate. Pension expense for that plan has been $136,000, ($259,000) and $144,000 for fiscal years 2007, 2008 and 2009, respectively. The plan had assets of $39.0 million and the assets were invested 61 percent in equities and 39 percent in fixed income at June 30, Summary Financial Statements of Operations, and Ratio Analysis Appearing hereafter in Appendix B are the combined financial statements of the Corporation and its related organizations for the two fiscal years ended June 30, 2007 and June 30, 2008, together with the auditors report as rendered by PricewaterhouseCoopers LLP with respect to the June 30, 2008 financial statements. The combined financial statements include information concerning QV, Inc. and the unincorporated units of the University managed by the Corporation, which are the physician practice plan, the medical malpractice self-insurance program, and the employee health benefit plan, all of which are not members of the Obligated Group. At present, the Corporation is the sole Member of the Obligated Group. Certain loans and receivables from affiliated organizations have been reclassified to net asset transfers and identified on the following table as net asset transfers to affiliates Prior to 2007 when the Corporation assumed management of the unincorporated units of the University described above, the combined financial statements of the Corporation only included the hospital and clinic services and QV. The 2008 combined financial statements include the assets, liabilities and operating results of the hospitals and clinics, as well as the University s units managed by the Corporation. The fiscal year 2007 statements of operations, changes in net assets, and cash flows and related disclosures are prepared on a basis similar to fiscal year 2008, and presented for comparative purposes only. While there was an audit of the Corporation which included only the hospitals and clinics in 2007 and an audit of the University in 2007, there was no audit of the Corporation on a basis comparable to Accordingly, the 2007 comparative results are unaudited. The unaudited combined financial statements for the nine-month periods ended March 31, 2008 and 2009 are derived from unaudited combined financial statements of the Corporation, which reflect all adjustments, consisting of normal recurring accruals, which the Corporation considers necessary for a fair presentation of the Corporation s financial position and operating results for those periods. The unaudited financial statements for the nine-month period ended March 31, 2009 are not necessarily indicative of the results that may be expected for the entire fiscal year ending June 30, Table V-A and Table V-B include the financial information of the Obligated Group (the hospitals and clinics) only, which is the first column of the Combining Statement of Operations and the Combining Balance Sheet in Appendix B. A-20

90 Table V-A Selected Financial Information The University of Chicago Medical Center Statements of Operations (000) Fiscal Year Ended June 30, Nine Months Ended March 31, Operating Revenues Net patient service revenues $902,214 $1,070,638 $1,076,061 $810,460 $814,303 Other operating revenues and net assets released from restrictions 43,204 43,198 50,807 38,964 40,907 Total Operating Revenues 945,418 1,113,836 1,126, , ,210 Operating Expenses Salaries, wages, and benefits 445, , , , ,966 Supplies and other 263, , , , ,993 Premiums paid to Self-Insurance Operations 24,391 22,851 22,427 16,820 15,985 Provision for doubtful accounts 43,573 55,330 46,270 36,143 43,020 Interest 13,994 15,465 15,275 11,899 11,356 Medicaid Provider Tax 0 61,541 30,771 23,078 20,018 Depreciation 46,369 48,588 57,850 39,963 42,928 Clinic, supervision and support 93, , ,139 97, ,603 Total Operating Expenses 930,460 1,026,032 1,037, , ,869 Total Operating Income 14,958 87,804 89,395 81,569 30,341 Nonoperating Gains (Losses): Investment Income and Unrestricted Gifts, net 59,367 55, ,773 72,203 (191,645) Derivative Ineffectiveness (27,815) Other, net (89) 285 (1,933) (65) (1,473) Excess of revenues over expenses 74, , , ,707 (190,592) Other Changes in Net Assets Change in unrealized gains on investments 2,248 49,190 (105,610) (76,586) 0 Transfers to The University of Chicago (15,000) (15,000) (19,000) (14,250) (17,250) Net assets released for capital purchases 4,857 26,447 1, Cumulative effect of change in accounting principles (7,939) 52, Pension adjustment 7,607 2,210 (3,476) 0 0 Accumulated changes in valuation of derivative (20) 1,634 (19,206) (23,973) (37,688) Net asset transfer to UC Health System (2,336) (2,447) (2,745) (194) (139) Other, net Net change in unrestricted net assets $64,228 $258,095 $41,603 $40,052 ($245,278) A-21

91 Table V-B Selected Financial Information The University of Chicago Medical Center Balance Sheets (000) Fiscal Year Ended June 30, Nine Months Ended March 31, Assets Current assets Cash and cash equivalents $ 20,718 $ 86,698 $ 79,306 $ 77,262 $ 88,183 Accounts receivable, less allowance for doubtful accounts 109,339 93, , , ,066 Current portion of investments limited to use Current portion of pledges receivable 11,438 3,950 6,984 5,655 5,673 Other current assets 41,681 62,669 18,430 61,318 26,386 Total current assets 183, , , , ,574 Investments, limited as to use, less current portion 611, , , , ,146 Property, plant and equipment, net 496, , , , ,315 Pledges receivable, less current portion 15,708 14,480 15,011 12,926 13,447 Other assets, net 10,331 23,062 21,465 21,268 18,901 Total assets $1,317,853 $1,549,797 $1,598,328 $1,610,620 $1,432,383 Liabilities and net assets Current liabilities Accounts payable and accrued expenses $ 94,571 $123,745 $105,715 $120,923 $104,725 Current portion of long-term debt 7,390 8,535 8,845 8,845 15,615 Current portion of other long-term liabilities 1,306 1,402 1,522 1,496 1,203 Current portion of estimated third-party payor settlements 65,588 41,975 48,223 40,338 51,762 Due to The University of Chicago 18,241 18,508 30,160 37,920 56,896 Total current liabilities 187, , , , ,201 Other liabilities Self insurance liability, less current portion 6,934 6,557 6,215 5,411 5,272 Long-term debt, less current portion 364, , , , ,494 Other long-term liabilities, less current portion 85,212 44,657 59,020 60, ,189 Total liabilities 643, , , , ,156 Net assets Unrestricted 598, , , , ,570 Temporarily restricted 70,525 46,943 50,277 47,232 50,620 Permanently restricted 5,816 6,030 6,081 6,030 6,037 Total net assets 674, , , , ,227 Total liabilities and net assets $1,317,853 $1,549,797 $1,598,328 $1,610,620 $1,432,383 A-22

92 Table VI A sets forth pro forma coverage of estimated maximum annual debt service on the outstanding tax-exempt bonds issued for the benefit of the Corporation in 2001, 2003 and 2009, on commercial paper notes issued for the benefit of the Corporation (the Commercial Paper Notes ) and on the Series 2009C Bonds and Series 2009 Bonds. Table VI A, B, & C Ratio Analysis Table VI-A Estimated Pro Forma Maximum Annual Debt Service Coverage (000) Fiscal Year Ended June 30, Revenues in Excess of Expenses $74,236 $143,158 $189,235 Depreciation 46,369 48,588 57,850 Interest 13,994 15,465 15,275 Revenue Available for Debt Service 1 $134,599 $207,211 $262,360 Estimated Maximum Annual Debt Service 2 37,312 37,312 37,312 Pro Forma Maximum Annual Debt Service Coverage 3.6x 5.5x 7.0x 1 As noted in the footnote to Table V above, in July, 2008, the Corporation adopted an accounting standard that requires that all changes in the value of investments be reported within the revenue over expense total. Therefore, amounts that were previously reported as Unrealized Gains and Losses will be included in Investment Income for the Corporation s fiscal year ended June 30, The reclassification will not affect the Corporation s calculation of its Historical Debt Service Coverage Ratio for purposes of the Master Indenture, which permits the Corporation to disregard non-cash items when computing the Historical Debt Service Coverage Ratio. 2 The Commercial Paper Notes, the Series 2009A Bonds, the Series 2009B Bonds (each described below in Table VIII) and the Series 2009 Bonds bear interest at variable rates (the Variable Rate Indebtedness ). For purposes of these calculations, the debt service with respect to the Variable Rate Indebtedness has been determined by assuming that the interest rate thereon will be 3.10% per annum, except for the Series 2009 Bonds, which is assumed to bear interest at the swap rate of 3.89%. Actual interest rates may vary from assumed rates. Table VI-B Historical Liquidity (000) Fiscal Year Ended June 30, Cash and Short Term Investments $ 20,718 $ 86,698 $ 79,306 Unrestricted Investments 566, , ,970 Total Available Funds $587,143 $763,741 $837,276 Total Operating Expenses before Depreciation $884,091 $977,444 $979,623 Days Cash on Hand Equals total available funds divided by total operating expenses before depreciation and multiplied by 365, rounded to the nearest day. A-23

93 Subsequent to June 30, 2008, the market value of the Corporation s investments was negatively impacted by the general decline in the market value of equity investments. At March 31, 2009, cash and unrestricted investments totaled $629.6 million, and days cash on hand was 221 days. Due to the recent adoption by the State of Illinois of the Uniform Prudent Management of Institutional Funds Act, beginning June 30, 2009 the Corporation will be reclassifying certain unrestricted assets as temporarily restricted assets on its balance sheet. At March 31, 2009, those assets totaled approximately $50,370,000 and represented approximately 17 days cash on hand. Those assets will remain temporarily restricted until appropriated by the Corporation for expenditure, in which case those funds so appropriated will become unrestricted funds. Table VI-C below sets forth (i) the historical long-term capitalization ratios as of June 30, 2006, 2007 and 2008 and (ii) pro forma capitalization ratios for fiscal year 2008, assuming the issuance of the Series 2009C Bonds and the Series 2009 Bonds in an aggregate principal amount of $225,000,000. Table VI-C Historical and Pro Forma Long-Term Capitalization (000) Fiscal Year Ended June 30, Pro Forma 2008 Long-Term indebtedness (excluding current portion) $364,120 $395,200 $384,422 $ 609,422 Unrestricted net assets 598, , , ,848 Total capitalization $962,270 $1,251,44 $1,282,270 $1,507,270 Long-term indebtedness as a percentage of total capitalization 37.8% 31.6% 30.0% 40.4% Sources of Revenue Substantial portions of the Corporation s patient revenues are paid through third party payors. The following table lists the approximate percentage of gross patient revenues by payor category. Table VII Gross Revenue by Payor Fiscal Year Ended June 30, Nine Months Ended March 31, Blue Cross (non-hmo/ppo) 0.5% 0.4% 0.5% 0.5% 0.2% Commercial Contracted Care (HMO/PPO) Medicare Medicaid Self Pay Other Total 100.0% 100.0% 100.0% 100.0% 100.0% The Corporation has contracts with over 75 health maintenance organizations (HMOs) and preferred provider organizations (PPOs), including The University of Chicago Health Plan (for employees of the University and the Corporation), Blue Cross, United Healthcare, Aetna and Humana. A-24

94 Table VIII Outstanding Long-Term Debt (000) June 30, March 31, Series Credit Enhancement Expires Fixed Rate Debt 2003 MBIA n/a $ 55,840 $ 50,515 $ 45,380 $ 45,380 $ 39, MBIA n/a 87,770 86,605 84,605 84,605 82,605 Variable Rate Debt 2009A Wells Fargo Bank, N.A. February 10, , B The Bank of Montreal February 10, , , , , , C 1 55,400 55,400 55,400 55,400 - Commercial Paper Notes The Northern Trust Company November 30, ,866 97,004 95,488 97,004 95,488 3 Total Long-Term Debt 2 $368,776 $401,524 $391,473 $392,989 $382,628 1 Refunded with the proceeds of the Series 2009A Bonds and the Series 2009B Bonds. 2 Exclusive of any premium or discount. 3 The Corporation repaid a portion of the maturing Commercial Paper Notes on June 1, As of June 1, 2009, $88,488,000 of Commercial Paper Notes were outstanding. Management s Discussion of Financial Performance From June 30, 1987, the first fiscal year-end after formation of the Corporation, through March 31, 2009, the Corporation s net assets have increased by more than 8.5 times, from $81.7 million to $709.2 million. This represents an average annual growth rate in net assets of 10.4 percent per year compounded over nearly 22 years, despite an increasingly challenging health care environment over this time period and across a wide variety of conditions in the general economy, including the Balanced Budget Act of 1997, and its impact on teaching hospital reimbursement, along with a significant decrease in net assets during the current fiscal year, largely the result of recent large declines in the financial markets and their impact on the Corporation s investments and other financial assets. Management believes that this long-term financial performance resulted from several core characteristics of the Corporation: a close connection to, and location on the campus of, The University of Chicago, one of the nation s premier private research universities; a belief that academic and clinical distinction is more important than size; a focus on the bi-directional flow of ideas between fundamental biology and clinical practice; the application of a systems approach to complex problems; a history of developing leaders in biomedicine; and A-25

95 an active and engaged governance and management approach that identifies both changes in the environment and gaps in execution, in order to implement corrective actions as required. Taken together, management believes that these characteristics have contributed to operating earnings, investment returns, and major gifts that have generated the increase in the Corporation s net assets over the past two decades. In 2004, the Corporation s Board of Trustees adopted a strategic plan based on its comparative advantage in aggregating a critical mass of highly skilled and talented people who focus on the most complex and challenging clinical problems an advantage rooted in the Corporation s close affiliation with the University. The 2004 strategic plan called for investing in programs, technology and facilities at a nationally-competitive rate, supported by three central drivers: focused growth where academic medicine can secure competitive advantage, such as cancer and advanced surgical programs; delivering on the Forefront of Medicine brand by leveraging program differentiation to secure appropriate rates and by improving access and service; and cost reduction toward benchmark levels. The facilities centerpiece of the 2004 strategic plan is the NHP described in this Appendix A under the caption Description of the New Hospital Pavilion. In 2006, the University refined the Corporation s governance and management structure to integrate patient care activities across hospital, clinic and physician services. With this new structure, the Corporation began implementing a refined strategy that builds on the 2004 strategic plan, with an enhanced understanding that distinction is a better metric of success than size. The Corporation, working together with the University s Division of Biological Sciences (with which it shares a unified leadership team), is focused on achieving six major goals over a five to ten year time horizon: 1. Becoming a best performer in quality, safety, cost, service and satisfaction. 2. Strengthening its position as a leading provider of complex care in Illinois. 3. Partnering in a South Side health system that optimizes deployment of finite societal resources. 4. Investing in 21st century facilities and information technology. 5. Securing a unique research-rich environment. 6. Attracting the best students in biology and medicine. Table IX summarizes the Corporation s operating revenue and expense for hospital and clinic services, with several adjustments to facilitate analysis: expenses for the provision for doubtful accounts ( provision ) and Medicaid Provider Tax assessment ( assessment ) have been netted against operating revenues, and the $17.7 million net increase in operating income from the 2006 Provider Tax program has been reallocated to fiscal year 2006 from fiscal year 2007, where it was recorded due to a delay in federal approval of the program. Patient days in the hospitals and visits to the emergency rooms and DCAM clinics are also shown for comparison. A-26

96 Between fiscal year 2006 and fiscal year 2008, despite a reduction in on-site patient activity as measured by patient days and visits, adjusted net operating revenues increased by 14.2 percent, while costs were well-controlled. This combination drove adjusted operating income up from less than $33 million to more than $89 million. Table IX Summary of Operating Revenues and Expenses for Hospital & Clinic Services Net of Provision for Doubtful Accounts and Medicaid Provider Tax Assessment (millions) Fiscal Year Ended June 30, Revenues, net of provision and assessment $901.8 $997.0 $1,049.8 Adjustment for 2006 Provider Tax program 17.7 (17.7) Adjusted operating revenues, net ,049.8 Percent change 6.5% 7.2% Expenses, net of provision and assessment Percent change 2.5% 5.6% Adjusted operating income for hospital and clinic services $32.6 $70.1 $89.4 Patient days 174, , ,675 Percent change -5.2% -5.0% DCAM clinic and ER visits 474, , ,106 Percent change 2.8% -3.4% Between fiscal years 2006 and 2007, adjusted operating revenues for hospital and clinic services (net of provision for doubtful accounts and Medicaid Provider Tax assessment) increased by 6.5 percent, even after adjusting the net income from the 2006 Provider Tax program recognized in fiscal year 2007 from 2007 operating revenues back into the operating revenues for fiscal year Adjusted net revenues increased another 7.2 percent from fiscal year 2007 to fiscal year This strong year-to-year revenue growth occurred with a 9.9 percent reduction in on-site patient days over the same two years, and essentially flat clinic and emergency room visits. This revenue performance reflects the success of management s efforts to reposition the Corporation s on-site efforts toward treating the most seriously ill and securing appropriate payment rates for complex care, while working with the community to create a better-connected health care system on the South Side of Chicago, so that patient needs are matched with the most appropriate care givers. These efforts also resulted in a somewhat higher share of gross revenues covered by contracted care, Blue Cross or commercial insurance, from 37.1 percent in fiscal year 2006 to 38.4 percent in fiscal year Between fiscal years 2006 and 2007, management also launched a vigorous cost control and quality improvement effort, aided by the increased specialization on complex care at the Medical Center and the allocation of clinical resources in a more rigorous way by diagnosis. Net operating expenses for hospital and clinic services increased by only 2.5 percent in fiscal year 2007 and 5.6 percent in fiscal year 2008, both well below the corresponding increases in net revenues. This resulted from more efficient staffing and fewer full-time equivalent employees, a major initiative supported by external consulting to secure supply and service chain savings, and improved clinical efficiency reflected by reduced average length of stay (from 6.5 days in fiscal year 2006 to 6.0 days in fiscal year 2008). Based on national benchmarks, management believes that the Corporation s cost position has been reduced from approximately the 75th percentile on the high end, to near the median of other academic medical centers. Core costs for salaries, benefits, supplies and services increased by only 3.1 percent over two years, from $709 million in fiscal year 2006 to $731 million in fiscal year 2008, compared to the 14.2 percent increase in adjusted net revenues over the same period. This wider core margin supported the Corporation s increase in A-27

97 payments to the Division of Biological Sciences for the work of the faculty, from $93 million in fiscal year 2006 to $134 million in fiscal year 2008, while still generating significantly improved total operating income. Management believes that the closer alignment between improved patient care operations and resources to support clinical and academic programs that underpin the Forefront of Medicine brand, is one of the benefits from the Corporation s new governance and management structure. The Division of Biological Sciences is fourth in the nation in NIH grants per faculty member, while the Pritzker School of Medicine is in the top 10 schools for student selectivity measured by GPA, MCAT scores and acceptance rates, both as ranked by U.S. News and World Report in Among other expenses, aggregate spending for interest costs and insurance premiums remained essentially flat, while depreciation expense increased from $46 million in fiscal year 2006 to nearly $58 million in fiscal year 2008, including over $3 million to write down the un-depreciated value of a staff parking garage that will be demolished as part of the New Hospital Pavilion project. Absent this one-time item, the remaining increase in depreciation reflects continued investment in competitive technology and information systems. Over the three fiscal years from 2006 through 2008, unrestricted net assets have increased by $364 million, largely the result of operating earnings from hospital and clinic services plus the total return on investments. Correspondingly, the Corporation s cash and unrestricted investments increased from $588 million on June 30, 2006, to $837 million on June 30, 2008, and days cash on hand rose from 242 days to 312 days over the same period. During the nine months ended March 31, 2009, the Corporation s operating revenues, net of provision for doubtful accounts and Medicaid Provider Tax assessment, totaled approximately $792.2 million, a slight increase of 0.3 percent above the $790.2 million recorded during the same period in the prior year. Operating income totaled $30.3 million, a figure net of three non-recurring expense items: $6.1 million for previously-disputed FICA taxes on employee contributions to defined-contribution pension plans, $2.1 million to write off bond insurance premiums and other issuance costs on variable rate debt insured by MBIA that was refinanced in 2009, and $10.1 million for severance and other restructuring costs associated with a cost reduction plan implemented mid-year. Total return on investments (net of unrestricted gifts) through the first nine months of fiscal year 2009 was a loss of $191.6 million, of which approximately $152.5 million were unrealized losses. In addition, the Corporation recorded $65.1 million of increased liability for the mark-to-market valuation of its interest rate swap. The Corporation entered into this swap in August 2006, to hedge interest rate exposure on future debt issues for the New Hospital Pavilion. Cash flows, in which the Corporation pays 3.89% and receives 68% of LIBOR through August 2044, do not begin until August 2011, and the Corporation is not required to post collateral. Primarily as a result for these two factors, net assets decreased from $954.2 million on June 30, 2008 to $709.2 million on March 31, Total cash and investments decreased by $213.2 million during the first nine months of fiscal year 2009, from $877.8 million on June 30, 2008 to $664.6 million on March 31, 2009, largely due to negative return on investments noted above. Over the same period, property, plant and equipment, net of accumulated depreciation, increased by $23.7 million to $571.3 million, including final design and early construction work for the New Hospital Pavilion that will be reimbursed from bond proceeds. Management believes that the essentially flat revenue trend experienced to date in fiscal year 2009, compared to the growth in fiscal years 2007 and 2008, reflects the impact of the recession in the general economy. The pattern of patient volume and net revenues also reflects the Corporation s continued commitment to implementing its strategy of focus on complex care most appropriate to the high-technology platform of an academic medical center, while securing appropriate payment rates for that care. In particular, the 0.3 percent net revenue growth year-to-date was achieved with 4.3 percent fewer inpatient admissions, 5.2 percent fewer inpatient days, and 4.8 percent fewer emergency room and clinic visits. The share of gross revenues covered by contracted care, Blue Cross or commercial insurance increased from 38.4 percent to 39.6 percent. Management continues to reshape the composition of activities on-site, although now because of the recession, with a lower level of aggregate activity to be matched with rescaled operations and reduced costs. Consistent with this commitment to its long-term strategy, over the past two years the Corporation s leadership has been reviewing every part of the organization, assessing whether each of its programs, structures and expenditures A-28

98 contribute both to its core missions and its financial strength. The current national economic climate has caused management to accelerate this work. As March 2009 results indicate, patient volume and revenues were lower than in prior periods. The value of the Corporation s investments and other financial instruments declined with the steep drops in the financial markets. The costs of borrowing to support capital projects increased, and management does not expect fundraising to grow in the current recessionary climate. These trends are affecting most health care organizations. The Corporation has recognized this increasingly serious national economic challenge early and is responding as described below. In December 2008, a special meeting of the Finance & Strategy Planning Committee of the Corporation s Board of Trustees met to review the effect of the deteriorating economy on revenues, and to plan an approach in response. The consensus from that meeting was to anticipate a severe economic downturn and to take vigorous steps to reduce costs in a single step function, in a way that maintains and where possible accelerates the Corporation s long-term strategic goals: Focusing on-site resources on tertiary and quaternary care best suited to the high-technology platform of an academic medical center, leveraging the research strength of the University; Distributing primary and secondary care through a non-owned network of community-based providers; and Reducing costs in operating units by 10 percent (or $65 million now) to secure the Corporation s operating income given conservative revenue assumptions, so that when the economic recession ends, resumed revenue growth will fall to the bottom line. Management believes that vigorous and timely action will maintain the Corporation s financial strength and capital base for competitive facilities like the New Hospital Pavilion, as well as research and program development that underpins the Forefront of Medicine brand. The Corporation is implementing a cost reduction plan to cut approximately $65 million from the Corporation s expense base, plus another $25 million from the academic budgets of the Biological Sciences Division within the University. These reductions from the annual budgets are in place as of the beginning of fiscal year 2010, in order to match expenditures to revenues and ensure that the Corporation has the resources to invest in critical components of its core mission and strategic priorities. Approximately one-third of these savings were in place in fiscal year 2009; these current-year expense reductions will be offset in part by one-time severance and other restructuring costs. The Corporation began this process by reorganizing at the leadership level. During January 2009, a total of 15 positions at the senior management level, including four vice presidents of the Corporation, were eliminated through a reduction in force. As a result, responsibilities have been significantly redistributed across the leadership team. These changes will result in greater integration of administration across patient care, research, education and community outreach activities. The biomedical organization will become flatter and more decisions will be made by integrated teams. The changes also will streamline decision-making and reduce costs by eliminating duplication and inefficiencies. Management also instituted a process for identifying additional organizational changes and budget reductions, most of which were implemented beginning in February Eight budget groups developed plans for budget cuts and reorganization. These groups began work in December, consulting with key administrators, faculty and staff members across affected units, including a two day retreat with approximately 100 senior faculty and management leaders in early January. Their work has continued as plans have been refined and implemented. To achieve the $65 million cost savings target within the Corporation s budget, management has eliminated approximately 600 staff positions (a reduction of nearly 10 percent) through a balance of layoffs and attrition. A-29

99 Management believes that financial results in recent months demonstrate the success of the Corporation s strategy, tested through a difficult economic environment. The following analysis is intended to illustrate progress toward implementing the economic response plan, by dividing year-to-date operating results into two components. During the first four months of fiscal year 2009 (July October 2008), the Corporation recorded operating income of $7.4 million. Adding back two non-recurring costs ($2.1 million for the bond issuance cost write-off and $6.1 million for the FICA tax settlement), results in operating income before non-recurring costs of $15.6 million, or $3.9 million per month. In the subsequent five months (November 2008 March 2009), operating income was $22.9 million, net of $10.1 million of one-time severance and restructuring costs from the layoffs and other cost reduction efforts. Adding this back results in operating income before non-recurring costs of $33.0 million for five months, or $6.6 million per month an improvement of nearly 70 percent. This recent five-month performance is higher than the average adjusted monthly earnings of $5.8 million in 2007, and approaching the $7.5 million per month recorded in 2008, especially since most of the staff reductions occurred only part-way through the five-month period. Table X Analysis of Operating Income Adjusted for Non-Recurring Costs for Fiscal Year 2009 (millions) Four Months Ended October 31, 2008 Five Months Ended March 31, 2009 Nine Months Ended March 31, 2009 Revenues, net of provision and assessment $355.1 $437.0 $792.1 Expenses, net of provision and assessment Operating income for hospital and clinic services Adjustment for non-recurring costs: Issuance cost write-off FICA tax settlement Severance and restructuring Operating income before non-recurring costs $15.6 $33.0 $48.6 Months in period Monthly average of operating income before non-recurring costs $3.9 $6.6 $5.4 These budget decisions, including staffing levels, have been based on the Corporation s commitment to maintain the highest quality of patient care and safety, its outstanding educational environment, and academic excellence. Management s intent has been to reduce expenditures in a targeted and strategic way in order to protect and enhance the quality of the Corporation s programs. A-30

100 APPENDIX B COMBINED FINANCIAL STATEMENTS OF THE CORPORATION AND INDEPENDENT AUDITOR S REPORT

101 [THIS PAGE INTENTIONALLY LEFT BLANK]

102 The University of Chicago Medical Center Combined Financial Statements (With Combining Financial Information) June 30, 2008 and 2007

103 The University of Chicago Medical Center Index June 30, 2008 and 2007 Page(s) Report of Independent Auditors...1 Financial Statements Combined Balance Sheets...2 Combined Statements of Operations...3 Combined Statements of Changes in Net Assets...4 Combined Statements of Cash Flows...5 Notes to Combined Financial Statements Other Financial Information Report of Independent Auditors on Accompanying Combining Information Combining Balance Sheet Combining Statement of Operations... 27

104 PricewaterhouseCoopers LLP One North Wacker Chicago, IL Telephone (312) Facsimile (312) Report of Independent Auditors To the Board of Trustees of The University of Chicago Medical Center: In our opinion, the accompanying combined balance sheets at June 30, 2008 and 2007 and the related combined statements of operations, changes in net assets and cash flows for the year ended June 30, 2008 present fairly, in all material respects, the financial position of The University of Chicago Medical Center (UCMC) at June 30, 2008 and 2007, and the results of their operations, their changes in net assets and their cash flows for the year ended June 30, 2008 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of UCMC s management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these statements in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. The accompanying combined statements of operations, of changes in net assets, and of cash flows for the year ended June 30, 2007 were not audited by us and, accordingly, we do not express an opinion on them. September 26,

105 The University of Chicago Medical Center Combined Balance Sheets June 30, 2008 and 2007 (in thousands of dollars) Assets Current assets Cash and cash equivalents $ 83,953 $ 101,061 Accounts receivable, less allowance for doubtful accounts for $38,307 and $38, , ,948 Current portion of investments limited to use 56,991 37,971 Current portion of pledges receivable 6,984 3,950 Other current assets 23,937 66,457 Total current assets 302, ,387 Investments limited to use, less current portion 965, ,297 Property, plant and equipment, net 548, ,450 Pledges receivable, less current portion 15,011 14,480 Other assets, net 21,484 23,112 Total assets $ 1,853,270 $ 1,805,726 Liabilities and Net Assets Current liabilities Accounts payable and accrued expenses $ 164,906 $ 159,125 Current portion of long-term debt 8,845 8,535 Current portion of other long-term liabilities 1,556 1,436 Current portion of estimated third-party payor settlements 48,223 41,975 Due to University of Chicago 54,186 44,703 Total current liabilities 277, ,774 Other liabilities Self-insurance liabilities, less current portion 138, ,530 Long-term debt, less current portion 384, ,200 Other long-term liabilities, less current portion 59,051 44,723 Total liabilities 860, ,227 Net assets Unrestricted 936, ,526 Temporarily restricted 50,277 46,943 Permanently restricted 6,081 6,030 Total net assets 993, ,499 Total liabilities and net assets $ 1,853,270 $ 1,805,726 The accompanying notes are an integral part of the combined financial statements. 2

106 The University of Chicago Medical Center Combined Statements of Operations Years Ended June 30, 2008 and 2007 (unaudited) (in thousands of dollars) (Unaudited) Clinical Operations Operating revenues Net patient service revenue $ 1,220,144 $ 1,219,419 Other operating revenues and net assets released from restrictions 66,188 62,962 Total operating revenues 1,286,332 1,282,381 Operating expenses Salaries, wages and benefits 474, ,253 Supplies and other 290, ,386 Physician services from the University of Chicago 224, ,286 Premiums paid to self-insurance operations 49,838 51,102 Provision for doubtful accounts 56,013 69,126 Interest 15,275 15,465 Medicaid provider tax 30,771 61,541 Depreciation 58,089 48,835 Total operating expenses 1,199,256 1,196,994 Operating income from clinical operations 87,076 85,387 Self-Insurance Operations Self-insurance claims and expenses (65,861) (55,354) Investment income from self-insurance funds 29,952 35,416 Premiums received from clinical operations 49,838 51,102 Total operating income 101, ,551 Nonoperating gains (losses) Investment income and unrestricted gifts, net 101,812 55,122 Other, net (1,933) 285 Excess of revenues over expenses 200, ,958 Other changes in net assets Change in unrealized gains (losses) on investments (126,379) 51,874 Transfers to University of Chicago (19,000) (15,000) Net assets released for capital purchases 1,882 26,447 Cumulative effect of change in accounting principles - 52,683 Liability for pension benefits (3,476) 2,210 Accumulated changes in valuation of derivative (19,206) 1,634 Other, net Increase in unrestricted net assets $ 35,228 $ 292,026 The accompanying notes are an integral part of the combined financial statements. 3

107 The University of Chicago Medical Center Combined Statements of Changes in Net Assets Years Ended June 30, 2008 and 2007 (unaudited) (in thousands of dollars) (Unaudited) Unrestricted net assets Excess of revenues over expenses $ 200,884 $ 171,958 Change in unrealized gains (losses) on investments (126,379) 51,874 Transfers to University of Chicago (19,000) (15,000) Net assets released for capital purchases 1,882 26,447 Cumulative effect of change in accounting principles - 52,683 Pension adjustment (3,476) 2,210 Accumulated changes in valuation of derivative (19,206) 1,634 Other, net Increase in unrestricted net assets 35, ,026 Temporarily restricted net assets Contributions 6,532 5,188 Net assets released from restrictions used for operating purposes (1,316) (2,323) Net assets released for capital purchases (1,882) (26,447) Increase (decrease) in temporarily restricted net assets 3,334 (23,582) Permanently restricted net assets Contributions and other Increase in net assets 38, ,658 Net assets at beginning of year 954, ,841 Net assets at end of year $ 993,112 $ 954,499 The accompanying notes are an integral part of the combined financial statements. 4

108 The University of Chicago Medical Center Combined Statements of Cash Flows Years Ended June 30, 2008 and 2007 (unaudited) (in thousands of dollars) (Unaudited) Cash flows from operating activities Increase in net assets $ 38,613 $ 268,658 Adjustments to reconcile change in net assets to net cash and cash equivalents provided by operating activities Net change in unrealized (gains) losses on investments 126,379 (51,874) Transfers to University of Chicago 19,000 15,000 Restricted contributions (6,583) (5,402) Realized gains on investments (110,432) (52,182) Other changes in unrestricted net assets 27,379 (2,443) Cumulative effect of a change in accounting principle - (52,683) Loss on disposal of assets 1, Depreciation and amortization 58,210 48,881 Increase (decrease) in cash and cash equivalents resulting from a change in: Patient accounts receivable, net (16,953) 17,369 Other assets 24,841 (49,073) Accounts payable and accrued expenses 5,781 27,624 Due to the University of Chicago 9,483 1,378 Estimated settlements with third-party payors 4,388 (21,213) Self-insurance liabilities (16,561) 18,695 Other liabilities (4,781) (430) Net cash and cash equivalents provided from operating activities 160, ,455 Cash flows from investing activities Purchases of property, plant and equipment (74,274) (83,950) Deposits to construction and capitalized interest funds - (13,971) Uses of construction and capitalized interest funds 14,115 6,926 Purchases of investments (636,054) (134,827) Sales of investments 546, ,442 Net cash and cash equivalents used in investing activities (150,115) (109,380) Cash flows from financing activities Proceeds from issuance of long-term debt - 41,000 Payments on long-term obligations (11,588) (9,423) Transfers paid to the University of Chicago, net (18,522) (14,805) Restricted contributions 3,018 14,118 Net cash and cash equivalents (used in) provided by financing activities (27,092) 30,890 Net (decrease) increase in cash and cash equivalents (17,108) 83,965 Cash and cash equivalents Beginning of year 101,061 17,096 End of year $ 83,953 $ 101,061 The accompanying notes are an integral part of the combined financial statements. 5

109 The University of Chicago Medical Center Notes to Combined Financial Statements June 30, 2008 and 2007 (in thousands of dollars) 1. Organization and Basis of Presentation The University of Chicago Medical Center ( UCMC or the Medical Center ) is an integrated combination of an Illinois not-for-profit corporation and certain unincorporated units of the University of Chicago (the University ). UCMC operates the Bernard Mitchell Hospital, the Chicago Lying-In Hospital, the University of Chicago Comer Children s Hospital, the Duchossois Center for Advanced Medicine, and various other outpatient clinics and treatment areas, plus the faculty physician practice, medical malpractice self-insurance program, and an employee health benefit plan, all of which are organized as unincorporated units of the University and are controlled by UCMC. Prior to August 7, 2006, the Medical Center corporation was named The University of Chicago Hospitals. QV, Inc. ( QV ) is an affiliated not -for-profit corporation operating outpatient clinics in the Chicago area, and has certain Board members common to UCMC. The University, as the sole corporate member of UCMC, elects UCMC s Board of Trustees and approves its By-Laws. The Chief Executive Officer, who is the Vice President for Medical Affairs at the University, shall be appointed by the President of the University, subject to the consent of the Medical Center Executive Committee and final approval of the University s Board of Trustees. The relationship between UCMC and the University is defined in the Medical Center By-Laws, an Affiliation Agreement, an Operating Agreement, and several Leases. See Note 3 for agreements and transactions with the University. In 2007, the University transferred oversight of all of its clinical operations to UCMC, which prior to that time included only hospital and clinic services. The 2008 combined financial statements include the assets, liabilities and operating results of the hospitals and clinics, as well as the University-based clinical operations. The 2007 statements of operations, changes in net assets, and cash flows and related disclosures are prepared on a basis similar to 2008, and presented for comparative purposes only. While there was an audit of UCMC which included only the hospitals and clinics in 2007 and an audit of the University in 2007, there was no audit of clinical operations on a basis comparable to Accordingly, the 2007 comparative results are unaudited. UCMC, the University, and QV are tax-exempt organizations under Section 501(c)3 of the Internal Revenue Code. Accordingly, no provision for income taxes related to these entities has been made. Effective July 1, 2007, UCMC adopted FASB Interpretation No. 48 ( FIN 48 ), Accounting for Uncertainty in Income Taxes - an interpretation of SFAS No. 109, Accounting for Income Taxes. The adoption did not have a material effect on the combined financial statements. 2. Summary of Significant Accounting Policies Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The most significant estimates are made in the areas of patient accounts receivable, accruals for settlements with third-party payors, and accrued compensation and benefits. 6

110 The University of Chicago Medical Center Notes to Combined Financial Statements June 30, 2008 and 2007 (in thousands of dollars) Fair Value of Financial Instruments The fair value of financial instruments approximates the carrying amount reported in the combined balance sheets for cash and cash equivalents, investments, investments limited as to use, patient accounts receivable, accounts payable and long-term debt. Cash and Cash Equivalents Cash and cash equivalents represent money market and highly liquid debt instruments with a maturity at the date of purchase of three months or less. Inventory UCMC values inventories at the lower of cost or market. Investments Marketable investments are measured at fair value based on quoted market prices. Investment income or loss (including realized gains and losses on investments, impairment losses, interest and dividends) is included in the excess of revenues over expenses unless the income or loss is restricted by the donor or the law. The change in net unrealized gains and losses on investments is excluded from the excess of revenues over expenses. Private equity, real estate and absolute return investments are measured on the equity method. The value of these investments is based on valuations provided by external investment managers. These valuations necessarily involve estimates, appraisals, assumptions and methods which are reviewed by management. All changes in the value of these investments are included in the excess of revenues over expenses. A significant portion of UCMC s investments are part of the University s Total Return Investment Pool (TRIP). UCMC accounts for its investments in TRIP based on its share of the underlying securities and records the investment activity as if UCMC owned the investments directly. Investments Limited as to Use Investments limited as to use primarily include assets held by trustees under debt and other agreements and designated assets set aside by the Board of Trustees for future capital improvements and other specific purposes, over which the Board retains control and may at their discretion subsequently use for other purposes. Derivative Instruments UCMC has entered into a forward starting swap transaction against contemplated variable rate borrowing for a new hospital pavilion. The notional amount of this swap is $325,000 and the effective start date is August Management determined that the interest rate swap is effective as defined by Statement of Financial Accounting Standards (SFAS) No. 133, Accounting for Derivative Instruments and Certain Hedging Activities and accordingly has utilized hedge accounting. Therefore, the change in the fair value of the interest rate swap is excluded from excess of revenues over expenses and reported as a change in unrestricted net assets. Property, Plant and Equipment Property, plant and equipment are reported on the basis of cost less accumulated depreciation and amortization. Donated items are recorded at fair market value at the date of contribution. The carrying value of property, plant and equipment is reviewed if the facts and circumstances suggest that it may be impaired. Depreciation of property, plant and equipment is calculated by use of the straight-line method at rates intended to depreciate the cost of assets over their estimated useful 7

111 The University of Chicago Medical Center Notes to Combined Financial Statements June 30, 2008 and 2007 (in thousands of dollars) lives, which generally range from three to forty years. Interest costs incurred on borrowed funds during the period of construction of capital assets, net of any interest earned, are capitalized as a component of the cost of acquiring those assets. Asset Retirement Obligation On June 30, 2006, UCMC adopted Financial Accounting Standards Board Interpretation No. 47 (FIN 47), Accounting for Conditional Asset Retirement Obligations. FIN 47 requires that a liability be recognized for the fair value of a legal obligation to perform asset retirement activities that are conditional on a future event if the amount can be reasonably estimated. Upon recognition of a liability, the asset retirement cost is recorded as an increase in the carrying value of the related long-lived asset and then depreciated over the life of the asset. The UCMC asset retirement obligations arise primarily from regulations that specify how to dispose of asbestos if facilities are demolished or undergo major renovations or repairs. UCMC s obligation to remove asbestos was estimated using site-specific surveys where available and a per square foot estimate where surveys were unavailable. Pledges Receivable Pledges are recorded at the present value of their estimated future cash flow. Estimated future cash flows due after one year are discounted using interest rates commensurate with estimated collection risks. Other Assets Other assets include deferred financing costs, which are amortized over the term of the related obligations. Net Assets Permanently restricted net assets include the historical dollar amounts of gifts that are required by donors to be permanently retained. Temporarily restricted net assets include gifts, which can be expended but for which restrictions have not yet been met. Such restrictions include purpose restrictions where donors have specified the purpose for which the net assets are to be spent, or time restrictions imposed by donors or implied by the nature of the gift (such as pledges to be paid in the future) or by interpretations of law. Realized gains and losses are classified as unrestricted net assets unless they are restricted by the donor or law. Unrestricted net assets include all the remaining net assets of UCMC. See Note 12 for further information on the composition of restricted net assets. Gifts and Grants Unconditional promises to give cash and other assets to UCMC are reported at fair value at the date the promise is received. Conditional promises to give are recognized when the conditions are substantially met. The gifts are reported as either temporarily or permanently restricted support if they are received with donor stipulations that limit the use of the donated assets. Donor-restricted contributions whose restrictions are met within the same year received are reported as unrestricted gifts in the accompanying financial statements. Gifts of cash or other assets that must be used to acquire long-lived assets are reported as additions to temporarily restricted net assets if the gifts are not expended or placed in service during the year. 8

112 The University of Chicago Medical Center Notes to Combined Financial Statements June 30, 2008 and 2007 (in thousands of dollars) Statement of Operations All activities of UCMC deemed by management to be ongoing, major and central to the provision of healthcare services, are reported as operating revenues and expenses. Other activities deemed to be nonoperating include unrestricted gifts and certain investment income (including realized gains and losses). UCMC recognizes changes in accounting estimates related to third-party payor settlements as more experience is acquired. Adjustments to prior year estimates for these items resulted in an increase in net patient service revenues of $10,000 in 2008 and $6,000 (unaudited) in In addition, UCMC recognized $10,000 in 2008 and $11,000 (unaudited) in 2007 for settlements and various Medicare appeal issues for years from 1996 through During 2008, the Board approved plans to demolish a DCAM garage in UCMC recorded a $3,000 impairment for this asset which has been recorded as depreciation expense. In September 2006, the Securities and Exchange Commission staff issued Staff Accounting Bulletin ( SAB ) No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements. Although the SAB is directly applicable to public companies, UCMC has elected to follow the prescribed guidance. SAB 108 establishes a dual approach to the quantification and assessment of materiality of misstatements, requiring use of both the rollover method (focused primarily on the impact on the statement of operations) and the iron curtain method (focused primarily on the impact on the balance sheet). Prior to SAB 108, UCMC used the rollover method. Following the guidance of SAB 108, UCMC has elected to recognize the cumulative effect of its initial application of SAB 108 as an adjustment to the opening balance of unrestricted net assets. The adoption resulted in a decrease in non-current liabilities of $35,000 related to third party settlements, and an increase in non-current assets of $11,800 related to the valuation of a trust. Adjustments of other differences resulted in a decrease of $3,300 in current liabilities, an increase in investments of $1,400 and an increase of $1,200 in property, plant and equipment. The impact of these adjustments resulted in a $52,700 increase in other changes in net assets on the Statement of Operations for the year ended June 30, 2007 (unaudited). The statement of operations includes excess of revenues over expenses. Changes in unrestricted net assets that are excluded from excess of revenues over expenses include changes in unrealized gains and losses on investments, transfers to the University, contributions of long-lived assets released from restrictions (including assets acquired using contributions which by donor restriction were to be used for acquisition of UCMC assets) and additional minimum pension liabilities. Net Patient Service Revenue, Accounts Receivable and Allowance for Doubtful Accounts UCMC maintains agreements with the Social Security Administration under the Medicare Program, Blue Cross and Blue Shield of Illinois, Inc. (Blue Cross), and the State of Illinois under the Medicaid Program and various managed care payors that govern payment to UCMC for services rendered to patients covered by these agreements. The agreements generally provide for per case or per diem rates or payments based on allowable costs, subject to certain limitations, for inpatient care and discounted charges or fee schedules for outpatient care. 9

113 The University of Chicago Medical Center Notes to Combined Financial Statements June 30, 2008 and 2007 (in thousands of dollars) Net patient service revenue is reported at estimated net realizable amounts from patients, thirdparty payors, and others for services rendered and includes estimated retroactive revenue adjustments due to future audits, reviews, and investigations. Retroactive adjustments are considered in the recognition of revenue on an estimated basis in the period the related services are rendered, and UCMC estimates are adjusted in future periods as adjustments become known or as years are no longer subject to UCMC audits, reviews and investigations. Contracts, laws and regulations governing Medicare, Medicaid, and Blue Cross are complex and subject to interpretation. As a result, there is at least a reasonable possibility that recorded estimates will change by a material amount in the near term. A portion of the accrual for settlements with thirdparty payors has been classified as long-term because UCMC estimates they will not be paid within one year. The process for estimating the ultimate collectibility of receivables involves significant assumptions and judgment. UCMC has implemented a standardized approach to this estimation based on the payor classification and age of outstanding receivables. Account balances are written off against the allowance when management feels it is probable the receivable will not be recovered. The use of historical collection experience is an integral part of the estimation of the reserve for doubtful accounts. Revisions in the reserve for doubtful accounts are recorded as adjustments to the provision for doubtful accounts. Hospital Assessment Program/Medicaid Provider Tax In December 2004, the State of Illinois, after receiving approval by the federal government, implemented a hospital assessment program. The program assessed hospitals a provider tax based on occupied bed days and provided increases in hospitals Medicaid payments. The Centers for Medicare and Medicaid Services (CMS) had not yet approved the hospital assessment program at June 30, 2006 and, as a result, no amounts were recorded in CMS approved the program for 2006 and 2007 in Accordingly, amounts related to both 2006 and 2007 are included in The program results in a net increase of $35,400 (unaudited) in the 2007 income from operations, which represents $97,000 (unaudited) in additional Medicaid payments offset by $61,600 (unaudited) in Medicaid provider tax. For 2008, a net increase of $17,700 was included in income from operations, which represents $48,500 in additional Medicaid payments offset by $30,800 in Medicaid provider tax 3. Agreements and Transactions with the University The Affiliation Agreement with the University provides, among other things, that all members of the medical staff will have academic appointments in the University. The Affiliation Agreement has an initial term of 40 years ending October 1, 2026 unless sooner terminated by mutual consent or as a result of a continuing breach of a material obligation therein or in the Operating Agreement. The Affiliation Agreement automatically renews for additional successive 10-year terms following expiration of the initial term, unless either party provides the other with at least two years prior written notice of its election not to renew. The Operating Agreement, as amended, provides, among other things, that the University gives UCMC the right to use and operate certain facilities. The Operating Agreement is coterminous with the Affiliation Agreement. The Lease Agreements provide, among other things, that UCMC will lease from the University certain of the health care facilities and land that UCMC operates and occupies. The Lease Agreements are coterminous with the Affiliation Agreement. 10

114 The University of Chicago Medical Center Notes to Combined Financial Statements June 30, 2008 and 2007 (in thousands of dollars) UCMC purchases various services from the University, including certain employee benefits, utilities, security, telecommunications and insurance. In addition, certain UCMC accounting records are maintained by the University. During the years ended June 30, 2008 and 2007, the University charged UCMC approximately $74,300 and $73,000 (unaudited), respectively, for utilities, security, telecommunications, insurance and overhead. The University provides physician services to UCMC. In 2008 and 2007, UCMC recorded $224,500 and $200,300 (unaudited), respectively, in expense related to these services. UCMC s Board of Trustees adopted a plan of support under which it would provide annual net asset transfers to support academic programs in biology and medicine. All commitments under this plan are subject to the approval of UCMC s Board of Trustees and do not represent legally binding commitments until that approval. Unpaid portions of commitments approved by the UCMC Board of Trustees are reflected as current liabilities. In 2008 and 2007, UCMC recorded net asset transfers of $19,000 and $15,000 (unaudited), respectively, for this support. 4. Investments and Investments Limited as to Use The composition of investments and investments limited as to use is as follows at June 30: UCMC 2008 Board Designated Separately Malpractice Invested TRIP Trust Other Total 2007 Separately invested U.S. equities $ 121,073 $ 47,059 $ 20,826 $ 5,111 $ 194,069 $ 348,816 International equity 26,554 98,577 43, , ,448 Private equity 14,426 73,500 32, ,509 72,282 Real assets - 77,031 34, ,156 47,584 Absolute return - 167,463 74, , ,426 Domestic fixed income 95,941 37,810 16,734 28, , ,959 Cash and equivalents 173 4,265 2, ,625 8,753 $ 258,167 $ 505,705 $ 224,437 $ 34,653 $ 1,022,962 $ 949,268 The malpractice self-insurance trust consists primarily of funds held in TRIP. Other investments consist of construction and capitalized interest, donor restricted, worker s compensation selfinsurance, and trustee-held funds. The Board Designated investments in TRIP include $5,900 in permanently restricted funds. 11

115 The University of Chicago Medical Center Notes to Combined Financial Statements June 30, 2008 and 2007 (in thousands of dollars) The composition of net investment income and unrestricted gifts is as follows for the years ended June 30: (Unaudited) Interest and dividend income, net $ 25,363 $ 39,031 Realized gains (losses) on sales of securities and equity adjustment in private equities, net 110,432 52,182 Unrestricted gifts 1, Investment impairments (5,220) (1,621) $ 131,764 $ 90,538 Total clinical and self-insurance investment income is displayed in the financial statements as follows for the years ended June 30: (Unaudited) Total investment and unrestricted gifts, net $ 101,812 $ 55,122 Investment income from Self-Insurance funds 29,952 35,416 Total Clinical and Self-Insurance investment and unrestricted gifts, net $ 131,764 $ 90,538 UCMC also invests in private equity limited partnerships. As of June 30, 2008, UCMC has commitments of $35,900 to fund private equity limited partnerships, approximately $33,400 of which have been funded. 5. Property, Plant and Equipment The components of property, plant and equipment as of June 30 are as follows: Land and land rights $ 36,029 $ 33,093 Buildings and improvements 617, ,718 Equipment 361, ,667 Construction in progress 61,476 88,830 1,076,399 1,033,308 Less accumulated depreciation (528,361) (499,858) Total property, plant and equipment, net $ 548,038 $ 533,450 UCMC s net property, plant and equipment cost includes approximately $15,400 representing assets under capital leases with the University, which are stated at the University s historical cost. The cost of buildings that are jointly used by the University and UCMC is allocated based on the lease provisions. In addition, land and land rights includes approximately $26,400, which represents the unamortized portion of initial lease payments made to the University. Interest costs aggregating $0 and $300 were capitalized in 2008 and 2007, respectively. 12

116 The University of Chicago Medical Center Notes to Combined Financial Statements June 30, 2008 and 2007 (in thousands of dollars) 6. Long-Term Debt Long-term debt as of June 30 consists of the following: Illinois Health Facilities Authority Bonds Revenue bonds, Series 2003 Serial Bonds, 4.0% to 5.0%, maturing from August 15, 2004 to August 15, 2014 $ 45,380 $ 50,515 Revenue bonds, Series 2001 Serial Bonds, 5.05%, maturing from August 15, 2005 to August 15, ,440 34,440 Revenue bond, Series 2001 Term Bond, 5.0%, maturing August 15, ,100 28,100 Revenue bond, Series 2001 Term Bond, 5.1%, maturing August 15, ,065 24,065 Variable Rate Demand Revenue Bonds, Series 1998, maturing through August 1, , ,000 Adjustable Rate Revenue Bonds, Series 1994C, maturing through August 15, ,400 55,400 Illinois Educational Facilities Authority Bonds Commercial Paper Revenue Note, Series 2007 (pooled financing program), 3.7% at June 30, 2008, maturing July 1, ,000 41,000 Commercial Paper Revenue Note, Series 2005 (pooled financing program), 3.7% at June 30, 2008, maturing September 1, ,375 29,000 Commercial Paper Revenue Note, Series 1998 (pooled financing program), 3.7% at June 30, 2008, maturing November 1, ,113 27,004 Unamortized premium 1,794 2,211 Total obligations 393, ,735 Less current maturities (8,845) (8,535) Long-term portion $ 384,422 $ 395,200 The carrying value of long-term debt does not differ materially from its estimated fair value as of June 30, 2008 and 2007, based on the quoted market prices for the same or similar issues. 13

117 The University of Chicago Medical Center Notes to Combined Financial Statements June 30, 2008 and 2007 (in thousands of dollars) Scheduled annual repayments for the next five years and thereafter are as follows at June 30: Thereafter Revenue Bonds, Series 2003 $ 5,845 $ 5,615 $ 6,195 $ 6,490 $ 6,705 $ 14,530 Revenue Bonds, Series ,000 1,400 1,470 1,530 1,595 76,610 Revenue Bonds, Series ,000 1,600 1,300 1,400 1, ,700 Revenue Bonds, Series 1994C ,400 Pooled Financing ,004 Pooled Financing ,000 Pooled Financing ,000 $ 8,845 $ 8,615 $ 8,965 $ 9,420 $ 9,900 $ 347,244 In August 2003, the Illinois Health Facilities Authority ( IHFA ) issued $65,290 of fixed rate Revenue Refunding Bonds, Series 2003 on behalf of UCMC in order to redeem Revenue Refunding Bonds, Series 1993A, 1993B-1, and 1993B-2. The Series 2003 bonds are due between August 15, 2004 and August 15, 2014 and bear interest at rates between 4% and 6%. The Series 2003 bonds are subject to redemption after August 15, In September 2001 the IHFA issued $36,725 of Revenue Bonds Series 2001 (Serial Bond) and $28,100 of Revenue Bonds Series 2001 (Term Bond 2031) and $24,065 of Revenue Bonds Series 2001 (Term Bond 2036), (collectively, the Series 2001 Bonds ) on behalf of UCMC for the construction and equipping of the new University of Chicago Comer Children s Hospital. The Series 2001 Serial Bonds, due August 15, 2023, and the Term Bond 2031, due August 15, 2031, are subject to redemption after August 15, The Term Bond 2036, due August 15, 2036, is subject to redemption after August 15, In August 1998, the IHFA issued $119,500 of Variable Rate Demand Revenue Bonds, Series 1998 (the Series 1998 Bonds ) on behalf of UCMC to advance refund the Series 1994A and 1994B revenue notes. The variable rate of interest on the Series 1998 Bonds may be changed or converted to a fixed interest rate at any time subject to certain requirements set forth in the Bond Indenture. The Series 1998 Bonds may be redeemed at certain times prior to their maturity and at certain premiums, depending on the mode of interest that is in effect. In June, 1994, IHFA issued $55,400 of Adjustable Rate Revenue Bonds Series 1994C ( Series 1994C Bonds ) (collectively the Series 1994 Bonds ) on behalf of UCMC to redeem the outstanding adjustable rate Revenue Bonds, and to provide funding for the development of the Duchossois Center for Advanced Medicine (the DCAM ). Interest on the Series 1994C Bonds is payable in one of seven variable modes of interest determination, as defined in the Series 1994 Bond Indenture ( Bond Indenture ). The variable modes of interest may be changed at any time at the discretion of UCMC, subject to certain requirements set forth in the Bond Indenture. The Series 1994C Bonds may be subject to mandatory conversion to a fixed interest rate in certain circumstances, as defined in the Bond Indenture. The Series 1994C Bonds are subject to redemption under certain conditions as defined in the Bond Indenture. The Series 1994C Bonds may be redeemed with a descending premium beginning at 2%. 14

118 The University of Chicago Medical Center Notes to Combined Financial Statements June 30, 2008 and 2007 (in thousands of dollars) Each of the IHFA bond series is collateralized by unrestricted receivables and subject to certain restrictions. The Series 1994, Series 1998, Series 2001 and Series 2003 Bonds are guaranteed by a municipal bond insurance policy. The restrictions under the respective debt agreements include financial ratio requirements, the most restrictive of which is to maintain a minimum debt service coverage ratio of 1.1:1. UCMC was in compliance with all applicable debt covenants at June 30, In May, 2008, the rating of the municipal bond insurer was downgraded. As a result, it became necessary to access the separate liquidity facilities which support the series 1994C and 1998 variable debt. On June 30, 2008, $51.8 million and $91.5 million, respectively, of these series were tendered under these facilities. These bank bonds bear interest at 5.0%, and require repayment in 5 years. The remaining outstanding debt of $3.6 million and $19.1 million, respectively, bear interest rates of 9.0% and 7.75%, respectively. See Note 17, Subsequent Event. In April 2007, the Illinois Educational Facilities Authority (IEFA) issued $41,000 of variable rate demand revenue bonds on behalf of UCMC to finance a parking garage, office building renovation and renovation of the labor and delivery area. The bonds can be redeemed at any time without penalty. These bonds mature through July In September 2005, the IEFA issued $29,000 of variable rate demand revenue bonds on behalf of UCMC to finance an addition to the Comer Children s Hospital. The bonds can be redeemed at any time without penalty. These bonds mature through September In November 1998, the IEFA issued $27,866 of variable rate demand revenue bonds on behalf of UCMC to finance a parking garage and additional clinic space in the DCAM. The bonds can be redeemed at any time without penalty. These bonds mature through November Payment on each of the IEFA bonds is collateralized by a letter of credit maturing November The letter of credit is subject to certain restrictions, which include financial ratio requirements and consent to future indebtedness. The most restrictive financial ratio is to maintain a debt service coverage ratio of 1.1:1. UCMC was in compliance with all applicable debt covenants at June 30, The original issue discount related to the Series 2001 issue is $1,080 and the original premium related to the Series 2003 issue is $4,966, respectively. These amounts are amortized over the term of the bonds, and are included in interest expense in the accompanying statements of operations. UCMC paid interest of approximately $15,100 and $14,200 (unaudited) in 2008 and 2007, respectively. UCMC has a $15,000 line of credit from a commercial bank. As of June 30, 2008 and 2007, no amount was outstanding. 15

119 The University of Chicago Medical Center Notes to Combined Financial Statements June 30, 2008 and 2007 (in thousands of dollars) 7. Commitments Leases UCMC has capital and noncancelable operating leases for certain buildings and equipment. Future minimum payments required under noncancelable operating and capital leases as of June 30 are as follows: Operating Capital 2009 $ 2,159 $ 1, ,824 1, ,065 1, and thereafter 1,192 - Total minimum lease payments $ 6,903 4,084 Less - Amount representing interest 376 Present value of net minimum capital lease payments $ 3,708 The amount of total assets capitalized under these leases at June 30, 2008 and 2007, is $12,100 and $12,000, respectively, with related accumulated depreciation of $10,000 and $9,100, respectively. Rental expense was approximately $6,200 and $6,300 (unaudited) for the years ended June 30, 2008 and 2007, including a $500 annual rental of a parking garage from the University. 8. Charity Care UCMC s policy is to treat patients in immediate need of medical services without regard to their ability to pay for such services, including patients transferred from other hospitals under the provisions of the Emergency Medical Treatment and Active Labor Act (EMTALA). UCMC also accepts patients through the Perinatal and Pediatric Trauma Networks without regard to their ability to pay for services. UCMC maintains records to identify and monitor the level of charity care they provide. These records include the amount of charges forgone for services and supplies furnished under their charity-care policy as well as the estimated cost of services and supplies. The estimated difference between the cost of services provided to Medicaid patients and the reimbursement from the Medicaid programs for this patient care is also considered to be charity care. During the years ended June 30, the following levels of charity care were provided: (Unaudited) Estimated costs incurred for charity care $ 12,729 $ 14,195 Excess of cost over reimbursement for Medicaid patients before the effect of the provider tax 80,910 85,889 $ 93,639 $ 100,084 16

120 The University of Chicago Medical Center Notes to Combined Financial Statements June 30, 2008 and 2007 (in thousands of dollars) In 2008, UCMC recorded a net increase in operating income of $17,700 for 2008 for the State of Illinois Medicaid Provider Tax Program. In 2007, UCMC recorded a net increase of $17,700 (unaudited) for 2007 and $17,700 (unaudited) for See Note 2 for further information on the Medicaid Provider Tax. 9. Insurance Since 1977, UCMC has maintained a self-insurance program for its medical malpractice liability. This program is supplemented with commercial excess insurance. The University s self-insurance retention was $10,000 per claim and unlimited in annual aggregate for the years ended June 30, 2007 and Claims in excess of $10,000 are subject to an additional self-insurance retention limited to $15,000 per claim and $15,000 in annual aggregate. The estimated liability for medical malpractice self-insurance is actuarially determined based upon UCMC-estimated claim reserves and various assumptions, and represents the estimated present value of self-insurance claims that will be settled in the future. It considers anticipated payout patterns as well as interest to be earned on available assets prior to payment. Management believes that an adequate provision has been recorded in the combined financial statements for estimated liabilities. If the present-value method were not used, the ultimate liability for medical malpractice self-insurance claims would be approximately $45,300 higher at June 30, The interest rate assumed in determining the present value for was 6.0% and 6.25% for 2008 and 2007, respectively. UCMC Clinical Operations recognizes as malpractice expense the actuarially determined normal contribution, with gains and losses amortized over six years. This is displayed as Premiums paid to Self-Insurance in Clinical Operations and Premiums received from Clinical Operations in Self- Insurance Operations on the Statement of Operations. UCMC designated $10,900 and $11,900 as of June 30, 2008 and 2007, respectively, as a workers compensation self-insurance reserve trust fund. The self-insurance program investments consist of 60% bonds and 40% marketable equities. The specifically identified claim requirements and actuarially determined reserve requirements for unreported workers compensation claims were $6,200 and $6,600 as of June 30, 2008 and 2007, respectively. The University also charges UCMC for its portion of other commercial insurance and self-insurance costs. 10. Pension Plans Active Plans A majority of UCMC s personnel participate in the University s defined benefit and contribution pension plan. Under the defined benefit portion of this plan, benefits are based on years of service and the employee s compensation during the last five years of employment. UCMC and the University make annual contributions to this portion of the plan at a rate necessary to maintain plan funding on an actuarially recommended basis. UCMC recognizes its negotiated share of annual contributions as expense. Contributions of $12,200 and $1,500 (unaudited) were made in the fiscal years ended June 30, 2008 and 2007, respectively. UCMC expects to make contributions of $8,100 for the fiscal year ended June 30,

121 The University of Chicago Medical Center Notes to Combined Financial Statements June 30, 2008 and 2007 (in thousands of dollars) Under the defined contribution portion of the plan, UCMC and plan participants make contributions that accrue to the benefit of the participants at retirement. UCMC s contributions, which are based on a percentage of each covered employee s salary, totaled approximately $3,000 and $2,700 (unaudited) for the years ended June 30, 2008 and 2007, respectively. The benefit obligation, fair value of plan assets and funded status for the combined University and UCMC defined benefit and contribution pension plan as of June 30, are shown below: Projected benefit obligation $ 408,416 $ 423,208 Fair value of plan assets 319, ,093 Deficit of plan assets over benefit obligation $ (88,652) $ (60,115) The weighted-average assumptions used in the accounting for the plan are shown below: Discount rate 7.1 % 6.4 % Expected return on plan assets 8.0 % 8.0 % Rate of compensation increase 4.2 % 4.2 % The measurement date for the University plan is June 30. The weighted average asset allocation for the plan is as follows: Domestic equities 64 % 65 % International equity Fixed income % 100 % Total benefits and plan expenses paid by the plan are $29,500 and $27,900 (unaudited) for the fiscal years ended June 30, 2008 and 2007, respectively. Expected future benefit payments excluding plan expenses are as follows: Fiscal Year 2009 $ 22, , , , , ,940 18

122 The University of Chicago Medical Center Notes to Combined Financial Statements June 30, 2008 and 2007 (in thousands of dollars) Certain UCMC personnel participate in a contributory pension plan. Under this plan, UCMC and plan participants make annual contributions to purchase annuities equivalent to retirement benefits earned. UCMC s pension expense for this plan was $4,100 and $3,600 (unaudited) for the years ended June 30, 2008 and 2007, respectively. Curtailed and Frozen Plan In June 2002, UCMC assumed sponsorship of a plan which covers employees of a former affiliate. Participation and benefit accruals are frozen. All benefit accruals are fully vested. Components of net periodic pension cost and other amounts recognized in unrestricted net assets include the following: Years Ended June 30, (Unaudited) Net periodic pension cost Interest cost $ 2,969 $ 2,987 Expected return on plan assets (3,228) (2,926) Amortization of unrecognized net actuarial loss - 75 Net periodic pension cost (259) 136 Other changes in plan assets and benefit obligations recognized in unrestricted net assets Liability for pension benefits (3,476) 2,210 Net other changes in unrestricted net assets (3,476) 2,210 Total recognized in net periodic pension cost and unrestricted net assets $ (3,735) $ 2,346 On June 30, 2007, UCMC adopted Statement of Financial Accounting Standards Number 158, Employer s Accounting for Defined Benefit Pension and Other Postretirement Plans. There was no transition period benefit cost. 19

123 The University of Chicago Medical Center Notes to Combined Financial Statements June 30, 2008 and 2007 (in thousands of dollars) The following tables set forth additional required pension disclosure information for this plan: Years Ended June 30, (Unaudited) Change in projected benefit obligation Benefit obligation at beginning of year $ 49,523 $ 49,010 Interest cost 2,969 2,987 Net actuarial (gain) loss (2,605) 161 Benefits paid (2,760) (2,635) 47,127 49,523 Change in plan assets Fair value of plan assets at beginning of year 41,976 37,312 Actual return on plan assets (2,852) 5,222 Employer contribution 2,761 2,077 Benefits paid (2,760) (2,635) 39,125 41,976 Funded status at end of year $ (8,002) $ (7,547) Amounts recognized in the balance sheet are included in noncurrent liabilities. Accumulated plan benefits equal projected plan benefits. Assumptions used in the accounting for the net periodic pension cost were as follows: Discount rate 6.7 % 6.2 % Expected return on plan assets 8.0 % 8.0 % Rate of compensation increase N/A N/A Weighted average asset allocations for plan assets are as follows: Cash 2 % 2 % Fixed income Domestic equities International equities % 100 % The target asset allocation is 60% equities and 40% fixed income. The expected return on plan assets is based on historical investment returns for similar investment portfolios. 20

124 The University of Chicago Medical Center Notes to Combined Financial Statements June 30, 2008 and 2007 (in thousands of dollars) UCMC expects to make contributions of $1,900 to the plan in the fiscal year ending June 30, Expected future benefit payments are: Fiscal Year 2009 $ 3, , , , , , Concentration of Credit Risk As a hospital, UCMC is potentially subject to concentration of credit risk from patient accounts receivable and certain investments. Investments, which include government and agency securities, stocks, corporate bonds, real assets, absolute return, and private equities, are not concentrated in any corporation or industry or with any single counter-party. UCMC receives a significant portion of its payments for services rendered from a limited number of government and commercial third-party payors, including Medicare, Medicaid, and Blue Cross. UCMC has not historically incurred any significant credit losses outside the normal course of business. 12. Pledges Pledges receivable at June 30 are shown below: Years Ended June 30, Unconditional promises expected to be collected in: Less than one year $ 7,002 $ 3,968 One year to five years 13,294 11,022 More than five years 4,982 6,982 25,278 21,972 Less unamortized discount (discount rate 5.5%) (3,283) (3,542) Total $ 21,995 $ 18, Restricted Net Assets Temporarily restricted net assets are available for the following purposes as of June 30: Pediatric health care $ 2,555 $ 3,557 Adult health care Educational and scientific programs Capital and other purposes 46,023 41,782 Total $ 50,277 $ 46,943 21

125 The University of Chicago Medical Center Notes to Combined Financial Statements June 30, 2008 and 2007 (in thousands of dollars) Income from permanently restricted net assets is restricted for: Pediatric health care $ 1,857 $ 1,807 Adult health care 1,929 1,928 Educational and scientific programs 2,295 2,295 Total $ 6,081 $ 6, Functional Expenses Total operating expenses by function are as follows for the years ended June 30: (Unaudited) Health care services $ 1,086,645 $ 1,066,446 General and administrative 128, ,800 Total $ 1,215,279 $ 1,201,246 Total clinical and self insurance operating expenses are displayed on the financial statements as follows: (Unaudited) Total operating expense $ 1,199,256 $ 1,196,994 Self-Insurance claims and expenses 65,861 55,354 Premiums received from Clinical Operations (49,838) (51,102) Total Clinical and Self-Insurance operating expense $ 1,215,279 $ 1,201, Contingencies UCMC is subject to complaints, claims and litigation which have risen in the normal course of business. In addition, UCMC is subject to reviews by various federal and state government agencies to assure compliance with applicable laws, some of which are subject to different interpretations. While the outcome of these suits cannot be determined at this time, management, based on advice from legal counsel, believes that any loss which may arise from these actions will not have a material adverse effect on the financial position or results of operations of UCMC. 16. Friend Family Health Center (FFHC) FFHC was incorporated in June 1997 to provide primary care to economically challenged and medically high-risk populations on Chicago s South Side, and was designated a Federally Qualified Health Center in October FFHC is a separate not-for-profit Illinois corporation which is not controlled by UCMC. 22

126 The University of Chicago Medical Center Notes to Combined Financial Statements June 30, 2008 and 2007 (in thousands of dollars) UCMC subleases facilities to FFHC in the Friend Building located near its main facilities, and provides security and information services to FFHC at cost. Certain members of UCMC s medical staff provide physician services at FFHC. UCMC has provided $8,300 of cumulative support to offset FFHC operating losses, towards which $2,200 has been provided by the Emanuel Friend Trust, a charitable trust established in Chicago in the 1930s. Support from the Trust is provided under a 1994 agreement with UCMC. 17. Subsequent Event On September 3, 2008, UCMC obtained a total of $165 million in taxable lines of credit from three banks. These lines bear variable interest rates based on LIBOR and expire in 6 months. The lines were used to redeem series 1994C and 1998 bonds. UCMC plans to issue new fixed and variable rate debt to repay the lines before they expire. 23

127 PricewaterhouseCoopers LLP One North Wacker Chicago, IL Telephone (312) Facsimile (312) Report of Independent Auditors on Accompanying Combining Information To the Board of Trustees of University of Chicago Medical Center: The report on our audits of the combined financial statements of The University of Chicago Medical Center as of June 30, 2008 and 2007 and for the year ended June 30, 2008 appears on page one of this document. These audits were conducted for the purpose of forming an opinion on the combined financial statements taken as a whole. The combining information is presented for purposes of additional analysis of the combined financial statements rather than to present the financial position and results of operations of the individual entities. Accordingly, we do not express an opinion on the financial position and results of operations of the individual entities. However, the combining information has been subjected to the auditing procedures applied in the audits of the combined financial statements and, in our opinion, is fairly stated in all material respects in relation to the combined financial statements taken as a whole. The accompanying combined statement of operations for the year ended June 30, 2007 was not audited by us and, accordingly, we do not express an opinion on them. September 26,

128 The University of Chicago Medical Center Combining Balance Sheet June 30, 2008 (with comparative combined balances as of June 30, 2007) (in thousands of dollars) June 30, 2008 Hospitals Physician Self- UC Health June 30, & Clinics QV Services Insurance Plan Eliminations Combined 2007 Assets Current assets Cash and cash equivalents $ 79,306 $ 1,421 $ - $ 1,846 $ 1,380 $ - $ 83,953 $ 101,061 Accounts receivable, less allowance for doubtful accounts $38,307 and $38, , , , ,948 Current portion of investments limited to use , ,991 37,971 Current portion of pledges receivable 6, ,984 3,950 Other current assets 18, , ,937 66,457 Total current assets 216,304 2,052 24,752 58,278 1, , ,387 Investments limited to use, less current portion 797, , , ,297 Property, plant and equipment, net 547, , ,450 Pledges receivable, less current portion 15, ,011 14,480 Other assets, net 21, ,484 23,112 Total assets $ 1,598,328 $ 2,527 $ 24,752 $ 226,283 $ 1,380 $ - $ 1,853,270 $ 1,805,726 25

129 The University of Chicago Medical Center Combining Balance Sheet June 30, 2008 (with comparative combined balances as of June 30, 2007) (in thousands of dollars) June 30, 2008 Hospitals Physician Self- UC Health June 30, & Clinics QV Services Insurance Plan Eliminations Combined 2007 Liabilities and Net Assets Current liabilities Accounts payable and accrued expenses $ 105,715 $ 632 $ 749 $ 56,432 $ 1,378 $ - $ 164,906 $ 159,125 Current portion of long-term debt 8, ,845 8,535 Current portion of other long-term liabilities 1, ,556 1,436 Current portion of estimated third-party payor settlements 48, ,223 41,975 Due to University of Chicago 30, , ,186 44,703 Total current liabilities 194, ,752 56,432 1, , ,774 Other liabilities Self-insurance liability, less current portion 6, , , ,530 Long-term debt, less current portion 384, , ,200 Other long-term liabilities, less current portion 59, ,051 44,723 Total liabilities 644, , ,186 1, , ,227 Net assets Unrestricted 897,848 1,807-37, , ,526 Temporarily restricted 50, ,277 46,943 Permanently restricted 6, ,081 6,030 Total net assets 954,206 1,807-37, , ,499 Total liabilities and net assets $ 1,598,328 $ 2,527 $ 24,752 $ 226,283 $ 1,380 $ - $ 1,853,270 $ 1,805,726 26

130 The University of Chicago Medical Center Combining Statement of Operations Year Ended June 30, 2008 (with comparative combined balances for the year ended June 30, 2007) (unaudited) (in thousands of dollars) Clinical Operations: June 30, 2008 (Unaudited) Hospitals Physician Self- UC Health June 30, & Clinics QV Services Insurance Plan Eliminations Combined 2007 Operating revenues Net patient service revenue $ 1,076,061 $ 7,550 $ 140,387 $ - $ - $ (3,854) $ 1,220,144 $ 1,219,419 Other operating revenues and net assets released - from restrictions 50,807 1,263 13,103-44,177 (43,162) 66,188 62,962 Total operating revenues 1,126,868 8, ,490-44,177 (47,016) 1,286,332 1,282,381 Operating expenses Salaries, wages and benefits 470,684 3, , ,253 Supplies and other 260,057 2,476 30,603-44,175 (47,016) 290, ,386 Physician services from the University of Chicago , , ,286 Premiums paid to Self-Insurance Operations 22,427-27, ,838 51,102 Provision for doubtful accounts 46, , ,013 69,126 Interest 15, ,275 15,465 Medicaid provider tax 30, ,771 61,541 Depreciation 57, ,089 48,835 Clinic, supervision and support 134,139 3,929 (138,068) Total operating expenses 1,037,473 11, ,490-44,175 (47,016) 1,199,256 1,196,994 Operating income from Clinical Operations 89,395 (2,321) ,076 85,387 Self-Insurance Operations: Self-Insurance claims and expenses (65,861) - - (65,861) (55,354) Investment income from Self-Insurance funds , ,952 35,416 Premiums received from Clinical Operations , ,838 51,102 Total operating income 89,395 (2,321) - 13, , ,551 Nonoperating gains (losses) Investment income and unrestricted gifts, net 101, ,812 55,122 Other, net (1,933) (1,933) 285 Excess (deficit) of revenues over expenses 189,235 (2,282) - 13, , ,958 Other changes in net assets Change in unrealized gains on investments (105,610) - - (20,769) - - (126,379) 51,874 Transfers to University of Chicago (19,000) (19,000) (15,000) Net assets released for capital purchases 1, ,882 26,447 Cumulative effect of change in accounting principles ,683 Pension adjustment (3,476) (3,476) 2,210 Accumulated changes in valuation of derivative (19,206) (19,206) 1,634 Net asset transfer to UC Health System (2,745) 2, Other, net Net change in unrestricted net assets $ 41,603 $ 463 $ - $ (6,840) $ 2 $ - $ 35,228 $ 292,026 27

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132 APPENDIX C SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE

133 Table of Contents Page Definitions of Certain Terms... C-1 Summary of Certain Provisions of the Master Indenture... C-14 The Obligations; Payment of the Obligations... C-14 Entrance Into the Obligated Group... C-15 Cessation of Status as a Member of the Obligated Group... C-16 Insurance... C-17 Rates and Charges... C-17 Damage or Destruction... C-18 Condemnation... C-19 Merger, Consolidation, Sale or Conveyance... C-20 Financial Statements... C-21 Liens on Property... C-23 Other Covenants of the Members... C-23 Defaults and Remedies... C-23 Direction of Proceedings by Holders... C-25 Waiver of Events of Default... C-25 Removal of the Master Trustee... C-26 Supplemental Master Indentures... C-26 Summary of Certain Provisions of the Fourth Supplemental Master Indenture... C-27 Pledge of Unrestricted Receivables... C-27 Definitions... C-27 Entrance Into the Obligated Group... C-29 Cessation of Status as a Member of the Obligated Group... C-29 Insurance... C-30 Rates and Charges... C-30 Merger, Consolidation, Sale or Conveyance... C-31 Permitted Additional Indebtedness... C-31 Calculation of Debt Service and Debt Service Coverage... C-33 Sale, Lease or Other Disposition of Property... C-35 Liens on Property... C-36 Removal of the Master Trustee... C-36 Supplemental Master Indentures... C-36 Additional Provisions for the Benefit of the Bond Insurer... C-37 Summary of Certain Provisions of the Tenth Supplemental Master Indenture... C-37 Series 2009 Amendments to the Master Indenture... C-37 Amendment to the Master Indenture... C-38 -i-

134 Brief descriptions of the Master Indenture, the Fourth Supplemental Master Indenture and the Tenth Supplemental Master Indenture are included hereafter in this Official Statement. Such descriptions do not purport to be comprehensive or definitive. All references to the Master Indenture, the Fourth Supplemental Master Indenture and the Tenth Supplemental Master Indenture are qualified in their entirety by reference to each such document, copies of which are available for review prior to the issuance and delivery of the Series 2009 Bonds at the office of the Authority and thereafter at the office of the Master Trustee. DEFINITIONS OF CERTAIN TERMS The following are definitions of certain terms used in the Master Indenture. Certain additional definitions appear under the headings SUMMARY OF CERTAIN PROVISIONS OF THE FOURTH SUPPLEMENTAL MASTER INDENTURE and SUMMARY OF CERTAIN PROVISIONS OF THE TENTH SUPPLEMENTAL MASTER INDENTURE. Accelerable Instrument means any obligation or any mortgage, indenture, loan agreement or other instrument under which there has been issued or incurred, or by which there is secured, any Indebtedness evidenced by an Obligation, which Obligation or instrument provides that, upon the occurrence of an event of default under such Obligation or instrument, the holder of such Obligation or instrument may request that the Master Trustee declare the Indebtedness evidenced by such Obligation due and payable prior to the date on which it would otherwise become due and payable. Accreted Value means, with respect to any Capital Appreciation Indebtedness, (i) as of any Valuation Date, the amount set forth for such date in the Supplemental Master Indenture authorizing such Capital Appreciation Indebtedness and (ii) as of any date other than a Valuation Date, the sum of (a) the Accreted Value as of the next preceding Valuation Date and (b) the product of (1) a fraction, the numerator of which is the number of days having elapsed from the preceding Valuation Date and the denominator of which is the number of days from such preceding Valuation Date to the next succeeding Valuation Date, and (2) the difference between the Accreted Values for such Valuation Dates. Additional Indebtedness means Indebtedness incurred by any Member subsequent to the issuance of the Series 1987 Obligation. Additional Obligations means any evidence of Indebtedness issued after the issuance of the Series 1987 Obligation (including the Series 2009 Obligations), authorized to be issued by a Member pursuant to the Master Indenture which has been authenticated by the Master Trustee. Affiliate means a corporation, limited liability company, partnership, joint venture, association, business trust or similar entity (i) which controls, is controlled by or is under common control with, directly or indirectly, a Person; or (ii) a majority of the members of the governing body of which are members of the governing body of a Person. For the purposes of this definition, control means with respect to: (a) a corporation having stock, the ownership, directly or indirectly, of more than 50% of the securities (as defined in Section 2(1)of the Securities Act of 1933, as amended) of any class or classes, the holders of which are ordinarily, in the absence of contingencies, entitled to elect a majority of the governing body of such corporation; (b) a non-profit corporation not having stock, having the power to elect or appoint, directly or indirectly, a majority of the members of the governing body of such corporation; or (c) any other entity, the power to direct the management of such entity through the ownership of at least a majority of its voting securities or the right to designate or elect at least a majority of the members of its governing body, by contract or otherwise. For the purposes of this definition, governing body means with respect to: (a) a corporation having stock, such corporation s board of directors and the owners, directly or indirectly, of more than 50% of the securities (as defined in Section 2(1)of the Securities Act of 1933, as amended) of any class or classes, the holders of which are ordinarily, in the absence of contingencies, entitled to elect a majority of the corporation s directors (both of which groups shall be considered a governing body); (b) a non-profit corporation not having stock, such corporation s members if the members have complete discretion to elect the corporation s directors, or the corporation s directors if the corporation s members do not have such discretion or if such corporation has no members; and (c) any other entity, its governing board or body. For the purposes of this definition, all references to directors and members shall be deemed to include all entities performing the function of directors or members however denominated. C-1

135 Authority means the Illinois Finance Authority, a body politic and corporate created and existing under and by virtue of the Act, and its successors and assigns. Bond Insurer means MBIA Insurance Corporation, a stock insurance corporation organized under the laws of the State of New York, and its successors and assigns and any surviving, resulting or transferee corporation. Bond Insurance Policy means the financial guaranty insurance policy of the Bond Insurer which insures the payment of the principal of and interest on the Series 2003 Bonds or the Series 2001 Bonds, as applicable, when due. Bond. Bondholder, holder, owner or owner of the Bonds means the registered owner of any Related Book Value, when used with respect to Property of a Member, means the value of such Property, net of accumulated depreciation and amortization, as reflected in the most recent audited financial statements of such Member which have been prepared in accordance with generally accepted accounting principles, and when used with respect to Property of all Members, means the aggregate of the values of such Property, net of accumulated depreciation and amortization, as reflected in the most recent audited combined financial statements of the Obligated Group prepared in accordance with generally accepted accounting principles, provided that such aggregate shall be calculated in such a manner that no portion of the value of any Property of any Member is included more than once. Capital Appreciation Indebtedness means any Indebtedness issued as to which interest is payable only at the maturity of such Indebtedness, upon the prior redemption of such Indebtedness or upon the conversion of such Indebtedness to Indebtedness with interest payable prior to maturity or prior to redemption. In the case of Capital Appreciation Indebtedness that is convertible to Indebtedness with interest payable prior to maturity or prior to redemption of such Indebtedness, the term Capital Appreciation Indebtedness shall be limited to the period prior to such conversion, and after such conversion, such Indebtedness shall be treated for the purposes of the Master Indenture in the same fashion as other Indebtedness having the same terms. For the purpose of computing the principal amount of Indebtedness held by the Holder of Capital Appreciation Indebtedness in giving to the Obligated Group or the Master Trustee any notice, consent, request or demand pursuant to the Master Indenture for any purpose whatsoever, the principal amount of Capital Appreciation Indebtedness shall be deemed to be its Accreted Value. CAM Lease means the Center for Advanced Medicine and Pritzker Building Lease Agreement dated as of June 21, 1993 between the University, as lessor, and the Corporation, as lessee, as it may from time to time be amended or supplemented. Capitalized Interest means amounts irrevocably deposited in escrow to pay interest on Funded Indebtedness or Related Bonds and interest earned on amounts irrevocably deposited in escrow to the extent such interest earned is required to be applied to pay interest on Funded Indebtedness or Related Bonds. Capitalized Lease means any lease of real or personal property which, in accordance with generally accepted accounting principles, is required to be capitalized on the balance sheet of the lessee. Capitalized Rentals means, as of the date of determination, the amount at which the aggregate Net Rentals due and to become due under a Capitalized Lease under which a Person is a lessee would be reflected as a liability on a balance sheet of such Person. Code means the Internal Revenue Code of 1986, as amended from time to time. Commitment Indebtedness means the obligation of any Member to repay amounts disbursed pursuant to a commitment from a financial institution to refinance or purchase when due, when tendered or when required to be purchased (a) other Indebtedness of such Member, which other Indebtedness was incurred in accordance with the provisions of the Master Indenture or (b) Indebtedness of a Person who is not a Member, which Indebtedness is guaranteed by a Guaranty of such Member or secured by or payable from amounts paid on Indebtedness of such C-2

136 Member, in either case which Guaranty or Indebtedness of such Member was incurred pursuant to the Master Indenture, and the obligation of any Person to pay interest payable on amounts disbursed for such purposes, plus any fees payable to such financial institution for, under or in connection with such commitment or in the event of disbursement pursuant to such commitment or in connection with the enforcement thereof, including without limitation any penalties payable in the event of such enforcement. Construction Index means the construction index based on unit costs as reported in the Repair & Remodel Quarterly most recently published prior to the date in question by Marshall and Swift or its successor agency or, if such index is no longer published or is no longer acceptable to the Obligated Group Agent, such other index as is certified to be comparable and appropriate by the Obligated Group Agent in an Officer s Certificate delivered to the Master Trustee and which other index is acceptable to the Master Trustee. Consultant means a professional consulting or banking firm selected by the Obligated Group Agent and acceptable to the Master Trustee, having the skill and experience necessary to render the particular report required and having a favorable and nationally recognized reputation for such skill and experience, which firm shall have no interest, direct or indirect, in any Member and shall not have a partner, member, director, officer or employee who is a member, director, officer or employee of any Member, it being understood that an arm s length contract between such firm and any Member for the performance of consulting or banking services shall not in and of itself be regarded as creating an interest in or an employee relationship with such entity. Contributions means the aggregate amount of all contributions, grants, gifts, bequests and devises actually received by any Person in the applicable fiscal year of such Person. Corporation means The University of Chicago Medical Center (formerly The University of Chicago Hospitals), an Illinois not for profit corporation, and its successors and assigns and any surviving, resulting or transferee corporation; provided, however, as described in the Master Indenture, that for the purposes of a Related Loan Document and a Related Bond Indenture, Corporation shall mean the University if the University shall have assumed the obligation of the Corporation pursuant to the terms of the Related Loan Document. Counsel means an attorney duly admitted to practice law before the highest court of any state and, without limitation, may include independent or in-house legal counsel for any Related Issuer, any Member, the Master Trustee or any Related Bond Trustee. Cumulative Net Income Available for Dividends means for any Person the amount equal to the sum of the Income Available for Debt Service of such Person for each Fiscal Year subsequent to June 30, 1987, less, in each Fiscal Year, interest on Funded Indebtedness, depreciation and amortization. Current Value means (i) with respect to Property, Plant and Equipment: (a) the aggregate fair market value of such Property, Plant and Equipment as reflected in the most recent written report of an appraiser selected by the Obligated Group Agent and acceptable to the Master Trustee and who, in the case of real property, is a member of the American Institute of Real Estate Appraisers (MAI), delivered to the Master Trustee (which report shall be dated not more than three years prior to the date as of which Current Value is to be calculated) increased or decreased by a percentage equal to the aggregate percentage increase or decrease in the Construction Index from the date of such report to the date as of which Current Value is to be calculated; plus (b) the Book Value of any Property, Plant and Equipment acquired since the last such report increased or decreased by a percentage equal to the aggregate percentage increase or decrease in the Construction Index from the date of such acquisition to the date as of which Current Value is to be calculated; minus (c) the greater of the Book Value or the fair market value (as reflected in such most recent appraiser s report) of any Property, Plant and Equipment disposed of since the last such report increased or decreased by a percentage equal to the aggregate percentage increase or decrease in the Construction Index from the date of such report to the date as of which Current Value is to be calculated, and (ii) with respect to any other Property, the fair market value of such Property, which fair market value shall be evidenced in a manner satisfactory to the Master Trustee. Debt Service Requirements means with respect to the period of time for which calculated, the aggregate of the payments required to be made during, such period in respect of principal (whether at maturity, as a result of mandatory sinking fund redemption, mandatory prepayment or otherwise) and interest on outstanding Funded C-3

137 Indebtedness of each Person or a group of Persons with respect to which calculated; provided that: (a) the amount of such payments for a future period shall be calculated in accordance with the assumptions contained in the Master Indenture; (b) interest shall be excluded from the determination of the Debt Service Requirements to the extent that Capitalized Interest is available to pay such interest; and (c) principal on Indebtedness shall be excluded from the determination of Debt Service Requirements to the extent that amounts are on deposit in an irrevocable escrow and such amounts (including, where appropriate, the earnings or other increment to accrue thereon) are required to be applied to pay such principal and such amounts so required to be applied are sufficient to pay such principal. Eighth Supplemental Master Indenture means the Eighth Supplemental Master Trust Indenture dated as of September 3, 2008 between the Corporation and the Master Trustee, supplementing and amending the Master Indenture. Encumbered means, with respect to Property, subject to a Lien other than Liens which constitute Permitted Encumbrances described in the following subsections of the definition thereof: (a), (c), (d) (other than leases whereunder any Member of the Obligated Group is lessor entered into in accordance with the disposition of Property provisions of the Master Indenture), (e) through (u); provided that any amounts on deposit in a construction fund created in connection with the issuance of an Obligation which are held as security for the payment of such Obligation or any Indebtedness incurred to purchase such Obligation or the proceeds of which are advanced or otherwise made available in connection with the issuance of such Obligation, shall not be deemed to be Encumbered if the amounts are to be applied to construct or otherwise acquire Property which is not subject to a Lien. Escrow Obligations means (i) with respect to any series of Related Bonds, the obligations permitted to be used to refund or advance refund such series of Related Bonds under the Related Bond Indenture, and (ii) in all other cases (a) United States Government Obligations, or (b) obligations of any agency or instrumentality of the United States Government, or (c) certificates of deposit issued by a bank or trust company which are (i) fully insured by the Federal Deposit Insurance Corporation, Federal Savings and Loan Insurance Corporation or similar corporation chartered by the United States or (ii) secured by a pledge of any United States Government Obligations having an aggregate market value, exclusive of accrued interest, equal at least to the principal amount of the certificates so secured, which security is held in a custody account by a custodian satisfactory to the Master Trustee, or (d) (1) evidences of a direct ownership in future interest or principal payments on United States Government Obligations, which Obligations are held in a custody account by a custodian satisfactory to the Master Trustee pursuant to the terms of a custody agreement and (2) obligations issued by any state of the United States or any political subdivision, public instrumentality or public authority of any state, which obligations are fully secured by and payable solely from United States Government Obligations, which United States Government Obligations are held pursuant to an agreement in form and substance acceptable to the Master Trustee. Excluded Property means the real estate described in Exhibit C to the Master Indenture, as amended from time to time in accordance with the provisions of the Master Indenture, and all improvements, fixtures, tangible personal property and equipment located thereon and used in connection therewith. Expenses means, for any period, the aggregate of all expenses calculated under generally accepted accounting principles, including without limitation any taxes, incurred by the Person or Persons involved during such period, minus (i) interest on Funded Indebtedness, (ii) depreciation and amortization, (iii) unusual or extraordinary expenses, (iv) any expenses resulting from (a) the extinguishment of debt, (b) any disposition of assets not made in the ordinary course of business, (c) any discontinued operations or (d) noncash adjustments to the value of assets or liabilities resulting from changes in generally accepted accounting principles, (v) any expenses resulting from a forgiveness of or the establishment of reserves against Indebtedness of an Affiliate which does not constitute an extraordinary expense, (vi) losses resulting from any reappraisal, revaluation or write-down of assets (including without limitation intangibles), (vii) any noncash loss or change in the value of an Interest Rate Hedge (including any change in the value of the termination value thereof) which loss or change in value is not the result of the expiration or termination (including early termination) of such Interest Rate Hedge, (viii) any loss or change in value of investment securities and partnerships which is not the result of the sale, transfer or disposition of such investment securities, (ix) any nonrecurring items which do not involve the expenditure or transfer of assets, (x) asset retirement obligations (except in the year paid), (xi) any other non-cash expenses, including, but not limited to, pension adjustments related to market value fluctuations and discount rates, but excluding bad debt expense and (xii) C-4

138 any expenses attributable to transactions between any Member and another Member, provided, however, that the provisions of (i) through (xii) notwithstanding, no amount shall be subtracted from expenses more than once. Facilities means all land, leasehold interests and buildings and all fixtures and equipment (as defined in the Uniform Commercial Code or equivalent statute in effect in the state where such fixtures or equipment are located) of a Person. Facilities shall not include the land, leasehold interests, buildings, fixtures or equipment constituting Excluded Property. Fifth Supplemental Master Indenture means the Fifth Supplemental Master Trust Indenture dated as of September 1, 2005 between the Corporation and the Master Trustee, supplementing and amending the Master Indenture. First Supplemental Master Indenture means the Supplemental Master Trust Indenture dated as of November 29, 1999 between the Corporation and the Master Trustee, supplementing and amending the Master Indenture. Fiscal Year means the nine month period beginning October 1, 1986 and ending on June 30, 1987, and thereafter any twelve month period beginning on July 1 of any calendar year and ending on June 30 of the following year or such other twelve month period selected by the Obligated Group Agent as the fiscal year for the Members of the Obligated Group. Fourth Supplemental Master Indenture means the Fourth Supplemental Master Trust Indenture dated as of August 1, 2003 between the Corporation and the Master Trustee, supplementing and amending the Master Indenture. Funded Indebtedness means with respect to any Person (i) all Indebtedness of such Person for borrowed money which is not Short Term; (ii) all Indebtedness of the Person incurred or assumed in connection with the acquisition or construction of Property which is not Short Term; (iii) the Guaranties of such Person which are not Short Term; and (iv) Capitalized Rentals under Capitalized Leases entered into by the Person; provided, however, that Indebtedness that could be described by more than one of the foregoing categories shall not in any case be considered more than once for the purpose of any calculation made pursuant to the Master Indenture. Governing Body means, with respect to a Member, the board of directors, the board of trustees or similar group in which the right to exercise the powers of corporate directors or trustees is vested. Guaranty means all obligations of a Person guaranteeing, or in effect guaranteeing, any Indebtedness, dividend or other obligation of any Primary Obligor in any manner, whether directly or indirectly, including but not limited to obligations incurred through an agreement, contingent or otherwise, by such Person: (1) to purchase such Indebtedness or obligation or any Property constituting security therefor; (2) to advance or supply funds: (i) for the purchase or payment of such Indebtedness or obligation, or (ii) to maintain working capital or other balance sheet condition; (3) to purchase securities or other Property or services primarily for the purpose of assuring the owner of such Indebtedness or obligation of the ability of the Primary Obligor to make payment of the Indebtedness or obligation; or (4) otherwise to assure the owner of such Indebtedness or obligation against loss in respect thereof. Historical Debt Service Coverage Ratio means, for any period of time, the ratio consisting of (i) a numerator equal to the amount determined by dividing Income Available for Debt Service for that period by the Debt Service Requirements for such period and (ii) a denominator of one; provided, however, that in calculating the Debt Service Requirements for such period, the principal amount of any Indebtedness included in such calculation which is paid during such period shall be excluded to the extent such principal amount is paid from the proceeds of other Indebtedness incurred in accordance with the provisions of the Master Indenture. Income Available for Debt Service means, for any period, the excess of Revenues over Expenses of the Person or group of Persons involved. C-5

139 Indebtedness means, for any Person, (a) all Guaranties by such Person, (b) all liabilities (exclusive of reserves such as those established for deferred taxes) recorded or required to be recorded as such on the audited financial statements of such Person as of the end of the then most recent fiscal year for which financial statements reported upon by independent certified public accountants are available, and (c) all obligations for the payment of money incurred or assumed by such Person (i) due and payable in all events or (ii) if incurred or assumed primarily to assure the repayment of money borrowed or credit extended, due and payable upon the occurrence of a condition precedent or upon the performance of work, possession of Property as lessee, rendering of services by others or otherwise, and shall include, without limitation, Non Recourse Indebtedness; provided that Indebtedness shall not include Indebtedness of one Member to another Member, an Interest Rate Hedge, any Guaranty by any Member of Indebtedness of any other Member or the joint and several liability of any Member on Indebtedness issued by another Member. Independent Architect means an architect, engineer or firm of architects or engineers selected by a Member, acceptable to the Master Trustee and licensed by, or permitted to practice in, the state where the construction involved is located, which architect, engineer or firm of architects or engineers shall have no interest, direct or indirect, in any Member and, in the case of an individual, shall not be a member, director, officer or employee of any Member and, in the case of a firm, shall not have a partner, member, director, officer or employee who is a member, director, officer or employee of any Member; it being understood that an arm s length contract with any Member for performance of architectural or engineering services shall not in and of itself be regarded as creating an interest in or an employee relationship with such entity and that the term Independent Architect may include an architect or engineer or a firm of architects or engineers who otherwise meet the requirements of this definition and who also are under contract to construct the facility which they have designed. Insurance Consultant means a person or firm who, in the case of an individual, is not an employee or officer of any Member or any Related Issuer and which, in the case of a firm, shall not have a partner, member, director, officer or employee who is a member, director, officer or employee of any Member or any Related Issuer, appointed by the Obligated Group Agent and satisfactory to the Master Trustee, qualified to survey risks and to recommend insurance coverage for hospital or health care facilities and services of the type involved, and having a favorable reputation for skill and experience in such surveys and such recommendations, and which may include a broker or agent with whom any Member transacts business. Interest Rate Hedge shall mean an agreement, expressly identified pursuant to its terms as being entered into in connection with and in order to hedge the interest rate on all or a portion of any Indebtedness, which agreement may include, without limitation, an interest rate swap, cap, collar, floor, or forward and which agreement does not constitute an obligation to repay money borrowed, credit extended or the equivalent thereof. Land means the real Property owned or leased by the Obligated Group upon which the primary operations of the Members are conducted, as described in Exhibit A to the Master Indenture, as amended from time to time, together with all buildings, improvements and fixtures located thereon, but excluding therefrom the Excluded Property. Lease means both or either of (i) the Lease Agreement dated as of June 30, 1987, between the University, as lessor, and the Corporation, as lessee, as previously amended, and as amended by the Eighth Amendment to Lease Agreement dated as of February 1, 2009, and as it may from time to time hereafter be amended or supplemented and (ii) the Center for Advanced Medicine and Pritzker Building Lease Agreement dated as of June 21, 1993 between the University, as lessor, and the Corporation, as lessee, as previously amended, and as the same may be amended from time to time. Lien means any mortgage, pledge or lease of, security interest in or lien, charge, restriction or encumbrance on any Property of the Person involved in favor of, or which secures any obligation to, any Person other than any Member, and any Capitalized Lease under which any Member is lessee and the lessor is not another Member. Master Indenture means the Master Trust Indenture (Amended and Restated) dated as of November 1, 1998 between the Corporation and the Master Trustee, amending and restating that certain Master Trust Indenture dated as of August 1, 1987, as supplemented and amended by the First Supplemental Master Indenture, the Second C-6

140 Supplemental Master Indenture, the Third Supplemental Master Indenture, the Fourth Supplemental Master Indenture, the Fifth Supplemental Master Indenture, the Sixth Supplemental Master Indenture, the Seventh Supplemental Master Indenture, the Eighth Supplemental Master Indenture, the Ninth Supplemental Master Indenture and the Tenth Supplemental Master Indenture and as it may from time to time be further supplemented and amended in accordance with the terms thereof. Master Trustee means Wells Fargo Bank, N.A. or any successor trustee under the Master Indenture. Member or Member of the Obligated Group means any Person who is designated as a Member of the Obligated Group pursuant to the terms of the Master Indenture. Net Proceeds means, when used with respect to any insurance or condemnation award or sale consummated under threat of condemnation, the gross proceeds from the insurance or condemnation award or sale with respect to which that term is used less all expenses (including attorney s fees, adjuster s fees and any expenses of the Master Trustee) incurred in the collection of such gross proceeds. Ninth Supplemental Master Indenture means the Ninth Supplemental Master Trust Indenture dated as of February 1, 2009 between the Corporation and the Master Trustee, supplementing and amending the Master Indenture. Non Recourse Indebtedness means any Indebtedness secured by a Lien on Property, Plant and Equipment (other than the Land) of any Member, liability of which is effectively limited to the Property, Plant and Equipment subject to such Lien with no recourse, directly or indirectly, to any other Property of any Member. Obligated Group means the Corporation and any other Person which has fulfilled the requirements for entry into the Obligated Group set forth in the Master Indenture and which has not ceased such status pursuant to the Master Indenture. Obligated Group Agent means the Corporation or such other Member as may be designated from time to time pursuant to written notice to the Master Trustee and each Related Issuer executed by the President or Chairman of the Governing Body of each Member. Obligation holder, holder, owner of the Obligations means the registered owner of any fully registered or book entry Obligation unless alternative provision is made in the Supplemental Master Indenture pursuant to which such Obligation is issued for establishing ownership of such Obligation in which case such alternative provision shall control. Obligations means the Series 1987 Obligation and any Additional Obligations, and any Obligation or Obligations issued under the Master Indenture in exchange therefor. Original Master Indenture means the Master Trust Indenture dated as of August 1, 1987 between the Corporation and Continental Illinois National Bank and Trust Company of Chicago, as prior Master Trustee. Original Principal Amount or original principal amount means the amount originally loaned to the debtor, including underwriter s discount and expenses deducted from the proceeds of such Indebtedness prior to delivery thereof to the debtor. Outstanding means in the case of Indebtedness of a Person other than Related Bonds or Obligations, all such Indebtedness of such Person which has been issued except any such portion thereof cancelled after purchase on the open market or surrender for cancellation or because of payment at or redemption prior to maturity, any such Indebtedness in lieu of which other Indebtedness has been duly issued and any such Indebtedness which is no longer deemed outstanding under its terms and with respect to which such Person is no longer liable under the terms of such Indebtedness. C-7

141 Outstanding Obligations or Obligations outstanding means all Obligations which have been duly authenticated and delivered by the Master Trustee under the Master Indenture, except: (a) Obligations cancelled after purchase in the open market or because of payment at or prepayment or redemption prior to maturity; (b) (i) Obligations for the payment or redemption of which cash or Escrow Obligations shall have been theretofore deposited with the Master Trustee (whether upon or prior to the maturity or redemption date of any such Obligations); provided that if such Obligations are to be prepaid or redeemed prior to the maturity thereof, notice of such prepayment or redemption shall have been given or arrangements satisfactory to the Master Trustee shall have been made therefor, or waiver of such notice satisfactory in form to the Master Trustee shall have been filed with the Master Trustee; and (ii) Obligations securing Related Bonds the payment or redemption of which cash or Escrow Obligations shall have been theretofore deposited with the Related Bond Trustee (whether upon or prior to the maturity or redemption date of any such Obligations); provided that if such Obligations are to be redeemed prior to the maturity thereof, notice of such redemption shall have been given or arrangements satisfactory to the Related Bond Trustee shall have been made therefor, or waiver of such notice satisfactory in form to the Related Bond Trustee shall have been filed with the Related Bond Trustee; (c) (d) Obligations in lieu of which others have been authenticated under the Master Indenture; Obligations held by a Member; and (e) Obligations cancelled after the delivery of the University Note in exchange therefor pursuant to a Related Loan Document. Notwithstanding the foregoing, any Obligation securing Related Bonds shall be deemed outstanding if such Related Bonds are outstanding. Outstanding Related Bonds or Related Bonds outstanding means all Related Bonds which have been duly authenticated and delivered by the Related Bond Trustee under the Related Bond Indenture, except: (a) Related Bonds cancelled after purchase in the open market or because of payment at or redemption prior to maturity; (b) Related Bonds for the payment or redemption of which cash or Escrow Obligations of the type described in clause (i) of the definition thereof shall have been theretofore deposited with the Related Bond Trustee (whether upon or prior to the maturity or redemption date of any such Bonds) in accordance with the Related Bond Indenture; provided that if such Bonds are to be redeemed prior to the maturity thereof, notice of such redemption shall have been given or arrangements satisfactory to the Related Bond Trustee shall have been made therefor, or waiver of such notice satisfactory in form to the Related Bond Trustee shall have been filed with the Related Bond Trustee; (c) Indenture; and (d) Related Bonds in lieu of which others have been authenticated under the Related Bond Related Bonds held by a Member. Permitted Encumbrances means the Master Indenture, any Related Loan Document, any Related Bond Indenture and, as of any particular time: C-8

142 (a) Liens arising by reason of good faith deposits with a Member in connection with tenders, leases of real estate, bids or contracts (other than contracts for the payment of money), deposits by any Member 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; 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 to maintain self insurance or to participate in any funds established to cover any insurance risks (including without limitation, any fund established to cover health insurance risks) or in connection with workmen s compensation, unemployment insurance, pensions or profit sharing plans or other social security plans or programs, or to share in the privileges or benefits required for corporations participating in such arrangements; (b) any Lien on the Property of any Member permitted by the provisions of the Master Indenture summarized under the heading SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE Liens on Property ; (c) Obligations; any Lien on Property if such Lien equally and ratably secures all of the Obligations and only the (d) leases which relate to Property of the Obligated Group which is of a type that is customarily the subject of such leases, such as office space for physicians and educational institutions, food service facilities, gift shops and radiology or other hospital based specialty services, pharmacy and similar departments; leases entered into in accordance with the disposition of Property provisions of the Master Indenture; leases, licenses or similar rights existing as of August 1, 1987 to use Property owned on such date by any Person who was a Member on such date, and any renewals and extensions thereof; and any leases, licenses or similar rights to use Property whereunder a Member is lessee, licensee or the equivalent thereof upon fair and reasonable terms no less favorable to the lessee or licensee than would obtain in a comparable arm s length transaction; (e) Liens for taxes and special assessments which are not then delinquent, or if then delinquent are being contested in accordance with the provisions of the Master Indenture; (f) utility, access and other easements and rights of way, restrictions, encumbrances and exceptions which do not materially interfere with or materially impair the operation of the Property affected thereby (or, if such Property is not being then operated, the operation for which it was designed or last modified); (g) any mechanic s, laborer s, materialman s, supplier s or vendor s Lien or right in respect thereof if payment is not yet due under the contract in question or if such Lien is being contested in accordance with the provisions of the Master Indenture; (h) such Liens, irregularities of title and encroachments on adjoining property as normally exist with respect to property similar in character to the Property involved and which do not materially adversely affect the value of, or materially impair, the Property affected thereby for the purpose for which it was acquired or is held by the owner thereof, including without limitation statutory liens granted to banks or other financial institutions, which liens have not been specifically granted to secure Indebtedness and which do not apply to Property which has been deposited as part of a plan to secure Indebtedness; (i) zoning laws and similar restrictions which are not violated by the Property affected thereby; (j) statutory rights under Section 291, Title 42 of the United States Code, as a result of what are commonly known as Hill Burton grants, and similar rights under other federal statutes or statutes of the state in which the Property involved is located; (k) all right, title and interest of the state where the Property involved is located, municipalities and the public in and to tunnels, bridges and passageways over, under or upon a public way; C-9

143 (l) Liens of or resulting from any judgment or award, the time for the appeal or petition for rehearing of which shall not have expired, or in respect of which any Member shall at any time in good faith be prosecuting an appeal or proceeding for a review and in respect of which a stay of execution pending such appeal or proceeding for review shall be in existence; (m) Liens on moneys deposited by patients or others with a Member as security for or as prepayment of the cost of patient care or any rights of residents of life care or similar facilities to endowment or similar funds deposited by or on behalf of such residents; paid; (n) Liens on Property due to rights of third party payors for recoupment of excess reimbursement (o) any security interest in any depreciation reserve, debt service reserve, debt service or similar fund established pursuant to the terms of any Supplemental Master Indenture, Related Bond Indenture or Related Loan Document in favor of the Master Trustee, a Related Bond Trustee, a Related Issuer or the holder of the Indebtedness issued pursuant to such Supplemental Master Indenture, Related Bond Indenture or Related Loan Document or the holder of any related Commitment Indebtedness; (p) any Lien on any Related Bond or any evidence of Indebtedness of any Member acquired by or on behalf of any Member which secures Commitment Indebtedness and only Commitment Indebtedness; (q) Liens arising from court or administrative proceedings which are being contested by the Member affected thereby in accordance with the provisions of the Master Indenture; (r) such Liens, covenants, conditions and restrictions, if any, which do not secure Indebtedness and which are other than those of the type referred to above, as are set forth in Exhibit A to the Master Indenture, and which (i) in the case of Property owned by the Corporation on the date of execution of the Master Indenture, do not and will not, so far as can reasonably be foreseen, materially adversely affect the value of the Property currently affected thereby or materially impair the same and (ii) in the case of any other Property, do not materially adversely affect the value or materially impair or materially interfere with the operation or usefulness thereof for the purpose for which such Property was acquired by or is held by a Member; (s) Liens on or in Property given, bequeathed or devised to the owner thereof existing at the time of such gift, bequest or devise, provided that (i) such Liens consist solely of restrictions on the use thereof or the income therefrom, or (ii) such Liens secure Indebtedness which is not assumed by any Member and such Liens attach solely to the Property (including the income therefrom) which is the subject of such gift, grant, bequest or devise; (t) Liens on Excluded Property; and (u) Liens on accounts receivable arising as a result of the sale of such accounts receivable with recourse, provided that the principal amount of Indebtedness secured by any such Lien does not exceed the aggregate sales price of such accounts receivable received by the Member of the Obligated Group selling the same. Permitted Investments means investments in any of the following: (a) United States Government Obligations; (b) Bonds, debentures, notes or other evidences or indebtedness issued by any of the following: Bank for Cooperatives; Federal Home Loan Banks; Federal Home Loan Mortgage Corporation (including participation certificates); Federal Land Banks; Federal Financing Bank; or any other agency or instrumentality of the United States of America (created by an Act of Congress) substantially similar to the foregoing in its legal relationship to the United States of America; C-10

144 (c) Time or demand deposits, certificates of deposit, repurchase agreements or other similar banking arrangements with any bank, trust company, national banking association or other savings institution (including any Related Bond Trustee or the Master Trustee) or with any governmental securities dealer whose accounts are insured by Securities Investors Protection Corporation, provided that such deposits, certificates, repurchase agreements, and other arrangements are (i) fully insured by the Federal Deposit Insurance Corporation or the Federal Savings and Loan Insurance Corporation or (ii) fully collateralized by Permitted Investments of the type described in (a) or (b) above, or (iii) in or with a government securities dealer, bank, trust company, national banking association or other savings institution whose unsecured debt obligations are rated in either of the two highest rating categories by Moody s Investors Service and Standard & Poor s Corporation; provided that in the case of any Permitted Investments which are repurchase agreements, the investments which are the subject thereof shall be in the possession of the Master Trustee, a Related Bond Trustee or an agent thereof and be subject to no prior claims or liens; and (d) Such other investments as at the time of the acquisition thereof shall be listed as permissible investments for trustees funds in an indenture or resolution with respect to Indebtedness which is issued in accordance with, or secured by an Obligation which is issued under, the Master Indenture. Person means any natural person, firm, joint venture, association, partnership, business trust, corporation, public body, agency or political division thereof or any other similar entity. Primary Obligor means the Person who is primarily obligated on an obligation which is guaranteed by another Person. Proceeds means the current outstanding principal amount of any series of Bonds (excluding accrued interest). Property means any and all rights, titles and interests in and to any and all property, whether real or personal, tangible or intangible, wherever situated and whether now owned or hereafter acquired. Except as otherwise noted, Property shall not include Excluded Property. Property, Plant and Equipment means all Property of each Member which is classified as property, plant and equipment under generally accepted accounting principles. Qualifying Obligation Holder means any Related Issuer or the holder or holders of 10% or more in aggregate principal amount of the Obligations of any series. Related Bond Indenture means any indenture, bond resolution or similar instrument pursuant to which any series of Related Bonds is issued. Related Bond Trustee means the Bond Trustee and any other trustee under any Related Bond Indenture and any successor trustee thereunder or, if no trustee is appointed under a Related Bond Indenture, the Related Issuer. Related Bonds means the Bonds, and any other revenue bonds or similar obligations issued by any state of the United States of America or any municipal corporation or other political subdivision formed under the laws thereof or any constituted authority, agency or instrumentality of any of the foregoing empowered to issue obligations on behalf thereof, the proceeds of which are loaned or otherwise made available to any Member in consideration, whether in whole or in part, of the execution, authentication and delivery of an Obligation or Obligations to such governmental issuer. Related Issuer means the Authority and any other issuer of a series of Related Bonds. Related Loan Document means any document or documents (including without limitation any lease, sublease or installment sales contract) pursuant to which any proceeds of any Related Bonds are advanced to any Member (or any Property financed or refinanced with such proceeds is leased, subleased or sold to a Member). C-11

145 Revenues means, for any period, (i) in the case of any Person providing health care services, the sum of (a) net patient service revenues, plus (b) other operating revenues, plus (c) non-operating revenues (other than income derived from the sale of assets not in the ordinary course of business or any gain from the extinguishment of debt or any unusual or extraordinary item or earnings which constitute Capitalized Interest or earnings on amounts which are irrevocably deposited in escrow to pay the principal of or interest on Indebtedness), all as determined in accordance with generally accepted accounting principles; and (ii) in the case of any other Person, gross revenues less sale discounts and sale returns and allowances, as determined in accordance with generally accepted accounting principles; but excluding for purposes of both clause (i) and (ii) above (A) any gains on the sale or other disposition of investments or fixed or capital assets not in the ordinary course and any gains on the extinguishment of debt, (B) earnings resulting from any reappraisal, revaluation or write-up of assets, (C) noncash gains or changes in the valuation of Interest Rate Hedges which gain or change in value is not the result of the expiration or termination (including early termination) of such Interest Rate Hedge, (D) gains or changes in the valuation of investment securities other than as the result of the sale, transfer or other disposition of such investment security, (E) any nonrecurring items of an extraordinary nature which do not involve the receipt of assets, (F) the equity in the earnings from investments in affiliates and (G) insurance (other than business interruption) and condemnation proceeds; provided, however, that if such calculation is being made with respect to the Obligated Group, such calculation shall be made in such a manner so as to exclude any revenues attributable to transactions between any Member and any other Member; provided, further, that the provisions of (A) through (G) notwithstanding, no amount shall be added to revenues more than once. Second Supplemental Master Indenture means the Second Supplemental Master Trust Indenture dated as of August 1, 2001 between the Corporation and the Master Trustee, supplementing and amending the Master Indenture. Series 1987 Obligation means the $90,555,000 principal amount The University of Chicago Hospitals Direct Note Obligation, Series 1987 (Illinois Health Facilities Authority) issued by the Corporation pursuant to the Master Indenture, which has been paid and cancelled. Series 2001 Bond Indenture means the Bond Trust Indenture dated as of August 1, 2001 from the Authority to the Bond Trustee, as it may from time to time be amended or supplemented. Series 2001 Bonds means the $88,890,000 original aggregate principal amount of Illinois Health Facilities Authority Revenue Bonds Series 2001 (The University of Chicago Hospitals and Health System), initially authorized to be issued pursuant to terms and conditions of the Series 2001 Bond Indenture. Series 2003 Bond Indenture means the Bond Trust Indenture dated as of August 1, 2003 from the Authority to the Bond Trustee, as it may from time to time be amended or supplemented. Series 2003 Bonds means the $65,290,000 original aggregate principal amount of Illinois Health Facilities Authority Revenue Refunding Bonds, Series 2003 (The University of Chicago Hospitals and Health System), initially authorized to be issued pursuant to the terms and conditions of the Series 2003 Bond Indenture. Series 2009 Bonds means, collectively, the Series 2009C Bonds, the Series 2009D Bonds and the Series 2009E Bonds. Series 2009 Obligations means, collectively, the Series 2009C Obligation, the Series 2009D Obligation, the Series 2009D Bank Obligation, the Series 2009E Obligation and the Series 2009E Bank Obligation. Series 2009C Bonds means the $85,000,000 aggregate principal amount of Illinois Finance Authority Revenue Bonds, Series 2009C (The University of Chicago Medical Center). Series 2009C Obligation means the $85,000,000 principal amount The University of Chicago Medical Center Direct Note Obligation, Series 2009C (Illinois Finance Authority) in substantially the form contained in the Tenth Supplemental Master Indenture. C-12

146 Series 2009D Bonds means the $70,000,000 aggregate principal amount of Illinois Finance Authority Variable Rate Demand Revenue Bonds, Series 2009D (The University of Chicago Medical Center). Series 2009D Obligation means the $70,000,000 principal amount The University of Chicago Medical Center Direct Note Obligation, Series 2009D-1 (Illinois Finance Authority) in substantially the form contained in the Tenth Supplemental Master Indenture. Series 2009D Bank Obligation means The University of Chicago Medical Center Direct Note Obligation, Series 2009D-2 (Bank of America, N.A.) in substantially the form contained in the Tenth Supplemental Master Indenture. Series 2009E Bonds means the $70,000,000 aggregate principal amount of Illinois Finance Authority Variable Rate Demand Revenue Bonds, Series 2009E (The University of Chicago Medical Center). Series 2009E Obligation means the $70,000,000 principal amount The University of Chicago Medical Center Direct Note Obligation, Series 2009E-1 (Illinois Finance Authority) in substantially the form contained in the Tenth Supplemental Master Indenture. Series 2009E Bank Obligation means The University of Chicago Medical Center Direct Note Obligation, Series 2009E-2 (JPMorgan Chase Bank, National Association) in substantially the form contained in the Tenth Supplemental Master Indenture. Seventh Supplemental Master Indenture means the Seventh Supplemental Master Trust Indenture dated as of April 1, 2008 between the Corporation and the Master Trustee, supplementing and amending the Master Indenture. Short Term, when used in connection with Indebtedness, means having an original maturity less than or equal to one year and not renewable at the option of the debtor for a term greater than one year beyond the date of original issuance. Sixth Supplemental Master Indenture means the Sixth Supplemental Master Trust Indenture dated as of April 1, 2007 between the Corporation and the Master Trustee, supplementing and amending the Master Indenture. Supplemental Master Indenture means an indenture amending or supplementing the Master Indenture entered into pursuant to the Master Indenture. Tax-Exempt Organization means a Person organized under the laws of the United States of America or any state thereof which is an organization described in Section 501(c)(3) of the Code, which is exempt from federal income taxes under Section 501(a) of the Code, and which is not a private foundation within the meaning of Section 509(a) of the Code, or corresponding provisions of federal income tax laws from time to time in effect. Tenth Supplemental Master Indenture means the Tenth Supplemental Master Trust Indenture dated as of August 1, 2009 between the Corporation and the Master Trustee, supplementing and amending the Master Indenture. Third Supplemental Master Indenture means the Third Supplemental Master Trust Indenture dated as of May 1, 2002, between the Corporation and the Master Trustee, supplementing and amending the Master Indenture. United States Government Obligations means direct obligations of, or obligations the timely payment of the principal of and interest on which are fully guaranteed by, the United States of America. University means The University of Chicago, an Illinois not for profit corporation, and its successors and assigns and any surviving, resulting or transferee corporation. C-13

147 University Note means a Direct Obligation Note of the University payable to the order of the Related Issuer which may, under certain circumstances set forth in the Related Loan Document, be executed and delivered by the University to the Related Bond Trustee in exchange for an Obligation and any other note of the University issued in exchange for any Additional Obligations of the Corporation issued pursuant to a Related Loan Document. Unrestricted Fund Balance means, at the time of calculation, the unrestricted fund balance of the Obligated Group as determined in accordance with generally accepted accounting principles. Unsecured, when used in connection with Indebtedness, means not secured by a Lien; or, if secured by a Lien, that proportion of such Indebtedness, if any, by which, at the date the Lien was granted, the amount of such Indebtedness exceeded the fair market value of the Property securing such Indebtedness, as determined in good faith by the Obligated Group Agent. Unsecured Debt Ratio means, as of any date of calculation, the ratio consisting of (i) a numerator equal to the amount determined by dividing the Book Value or, at the option of the Obligated Group Agent, the Current Value of Property which is not Encumbered, by the aggregate principal amount (or in the case of Indebtedness issued or incurred at a discount, the amount thereof which is not classified as a direct deduction from the face amount of such Indebtedness determined in accordance with generally accepted accounting principles) of all Unsecured Indebtedness (excluding unfunded Commitment Indebtedness) then outstanding and (ii) a denominator of one. Valuation Date means, with respect to any Capital Appreciation Indebtedness, the date or dates set forth in the Supplemental Master Indenture relating to such Indebtedness on which specific Accreted Values are assigned to Capital Appreciation Indebtedness. Written Request means, with reference to a Related Issuer, a request in writing signed by the Chairman, Vice Chairman, Mayor, Clerk, President, Secretary or Assistant Secretary of the Related Issuer and with reference to any Member means a request in writing signed by the President or a Vice President of such Member, or any other officers designated in writing by the Related Issuer or the Member, as the case may be. SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE The Master Indenture contains various covenants, security provisions, terms and provisions, certain of which are summarized below. In addition, the Fourth Supplemental Master Indenture contains covenants and restrictions for the benefit of the Bond Insurer which apply in addition to, and not in substitution for, the provisions of the Master Indenture. See SUMMARY OF CERTAIN PROVISIONS OF THE FOURTH SUPPLEMENTAL MASTER INDENTURE below. In addition, the Tenth Supplemental Master Indenture contains certain amendments which apply in addition to, and not in substitution for, the provisions of the Master Indenture. Such amendments shall only be applicable during the period any Series 2009 Bonds are outstanding. See SUMMARY OF CERTAIN PROVISIONS OF THE TENTH SUPPLEMENTAL MASTER INDENTURE below. Copies of the Master Indenture, including the Fourth Supplemental Master Indenture and the Tenth Supplemental Master Indenture, are available upon request from the Master Trustee. THE OBLIGATIONS; PAYMENT OF THE OBLIGATIONS The number of the Obligations or series of Obligations and the total principal amount thereof that may be issued under the Master Indenture by Members of the Obligated Group is not limited. All of the Obligations issued under the Master Indenture will be full, unlimited, joint and several obligations of each Member of the Obligated Group but will not be secured by a pledge or mortgage of, or security interest in, assets of any Member. Subject to certain conditions set forth in the Master Indenture, a Member may issue Additional Obligations secured by security in addition to that securing all Obligations (including Liens on Property (including health care facilities) or letters or lines of credit or insurance), which additional security need not be extended to any other Obligation. See LIENS ON PROPERTY. The Master Indenture provides that Supplemental Master Indentures C-14

148 pursuant to which one or more series of Obligations entitled to additional security is issued may provide for such amendments to the provisions of the Master Indenture, including the provisions thereof relating to the exercise of remedies upon the occurrence of an event of default, as are necessary to provide such security and to permit realization upon such security solely for the benefit of the Obligations entitled thereto. Each Member unconditionally and irrevocably (subject to the right of such Member to cease its status as a Member of the Obligated Group pursuant to the terms and conditions of the Master Indenture described under CESSATION OF STATUS AS A MEMBER OF THE OBLIGATED GROUP ), jointly and severally covenants that it will promptly pay the principal of, premium, if any, and interest on every Obligation issued under the Master Indenture at the place, on the dates and in the manner provided in the Master Indenture and in said Obligations according to the true intent and meaning thereof. Notwithstanding any schedule of payments upon the Obligations set forth in the Master Indenture or in the Obligations, each Member unconditionally and irrevocably (subject to the right of such Member to cease its status as a Member of the Obligated Group pursuant to the terms and conditions of the Master Indenture summarized under CESSATION OF STATUS AS A MEMBER OF THE OBLIGATED GROUP ), jointly and severally agrees to make payments upon each Obligation and be liable therefor at the times and in the amounts (including principal, interest and premium, if any) equal to the amounts to be paid as interest, principal at maturity or by mandatory sinking fund redemption, or premium, if any, upon any Related Bonds from time to time outstanding. Under certain circumstances the University may be substituted for and assume the obligations of the Corporation under a Related Loan Document, and issue a note in exchange for an Obligation issued under the Master Indenture, whereupon (unless the University shall have become a Member of the Obligated Group) the University will not be subject to the provisions of the Master Indenture nor will the obligations of the University under the Related Loan Document and the University Note be entitled to the benefits and security of the Master Indenture. ENTRANCE INTO THE OBLIGATED GROUP Any Person may become a Member of the Obligated Group if: (a) Such Person is a corporation; (b) Such Person shall execute and deliver to the Master Trustee a Supplemental Master Indenture acceptable to the Master Trustee which shall be executed by the Master Trustee and each then current Member, containing (i) the agreement of such Person (A) to become a Member of the Obligated Group and thereby to become subject to compliance with all provisions of the Master Indenture and (B) unconditionally and irrevocably (subject to the right of such Person to cease its status as a Member of the Obligated Group pursuant to the terms and conditions of the Master Indenture summarized under CESSATION OF STATUS AS A MEMBER OF THE OBLIGATED GROUP below) to jointly and severally make payments upon each Obligation at the times and in the amounts provided in each such Obligation and (ii) representations and warranties by such Person substantially similar to those set forth in the Master Indenture (but with such deviations as are acceptable to the Master Trustee); (c) Each of the other Members shall, by appropriate action of its Governing Body, have approved the admission of such Person to the Obligated Group; (d) The Master Trustee shall have received (1) a certificate of the Obligated Group Agent which demonstrates that, immediately upon such Person becoming a Member of the Obligated Group, the Members would not, as a result of such transaction, be in default in the performance or observance of any covenant or condition to be performed or observed by them under the Master Indenture, (2) an opinion of Counsel to the effect that (x) the instrument described in paragraph (b) above has been duly authorized, executed and delivered and constitutes a legal, valid and binding agreement of such Person, enforceable in accordance with its terms, subject to customary exceptions for bankruptcy, insolvency and other laws generally affecting the enforcement of creditors rights and the application of general principles of equity and to the exceptions set forth in Exhibit D to the Master Indenture and (y) the addition of such Person to the Obligated Group will not adversely affect the status as a Tax-Exempt Organization of any Member C-15

149 which otherwise has such status and (3) if all amounts due or to become due on all Related Bonds have not been paid to the holders thereof and provision for such payment has not been made in such manner as to have resulted in the defeasance of all Related Bond Indentures, an opinion of nationally recognized municipal bond counsel (which counsel and opinion, including the scope, form, substance and other aspects thereof, are acceptable to the Master Trustee), to the effect that under then existing law the consummation of such transaction, whether or not contemplated on the date of delivery of any such Related Bond, would not adversely affect (i) the validity of any Related Bond or the exemption from federal or state income taxation of interest payable on any such Related Bond otherwise entitled to such exemption or (ii) the exemption from registration under the Securities Act of 1933 of any Related Bond otherwise entitled to such exemption; (e) (i) The description of the Land in Exhibit A to the Master Indenture is amended to include a description of the real property of the Person becoming a Member upon which the primary operations of such Person are conducted and a description of any Permitted Encumbrances of the type described in subparagraph (r) of the definition thereof, (ii) Exhibit C to the Master Indenture is amended to include a description of the Property of the Person becoming a Member which is to be considered Excluded Property (provided that such Property may be treated as Excluded Property only if such Property is real or tangible personal property and the primary operations of such Person are not conducted upon such real property), and (iii) Exhibit E to the Master Indenture is amended to add such Person as a Member; and Each successor, assignee, surviving, resulting or transferee corporation of a Member must agree to become, and satisfy the above-described conditions to becoming, a Member of the Obligated Group prior to any such succession, assignment or other change in such Member s corporate status. CESSATION OF STATUS AS A MEMBER OF THE OBLIGATED GROUP Each Member covenants that it will not take any action, corporate or otherwise, which would cause it to cease to be a Member of the Obligated Group unless: (a) if the Member proposing to withdraw from the Obligated Group is a party to any Related Loan Documents with respect to Related Bond which remain outstanding, another Member of the Obligated Group has issued an Obligation under the Master Indenture evidencing or assuming the obligation of the Obligated Group in respect of such Related Bonds; (b) prior to cessation of such status, there is delivered to the Master Trustee an opinion of nationally recognized municipal bond counsel (which counsel and opinion, including the scope, form, substance and other aspects thereof, are acceptable to the Master Trustee) to the effect that, under then existing law, the cessation by the Member of its status as a Member will not adversely affect the validity of any Related Bond or the exemption from federal or state income taxation of interest payable on any Related Bond otherwise entitled to such exemption; (c) the Obligated Group Agent delivers a certificate to the Master Trustee indicating that prior to and immediately after such cessation, no event of default exists under the Master Indenture and no event shall have occurred which with the passage of time or the giving of notice or both would become such an event of default; (d) prior to such cessation there is delivered to the Master Trustee an opinion of 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 cessation by such Member of its status as a Member will not adversely affect the status as a Tax-Exempt Organization of any Member which otherwise has such status; and (e) prior to cessation of such status, each Member of the Obligated Group consents in writing to the withdrawal by such Member. C-16

150 Upon such cessation in accordance with the foregoing provisions, (i) the description of Land contained in Exhibit A to the Master Indenture shall be amended to delete therefrom the description of any real property and of any Permitted Encumbrances of the type described in subparagraph (r) of the definition of Permitted Encumbrances of the Member which has ceased being a Member of the Obligated Group, (ii) Exhibit C to the Master Indenture shall be amended to delete therefrom any Property of the Member which has ceased being a Member and (iii) Exhibit E to the Master Indenture shall be amended to delete therefrom the name of such Person. INSURANCE Each Member shall maintain or cause to be maintained, at its sole cost and expense, insurance with respect to its Property, the operation thereof and its business against such casualties, contingencies and risks (including but not limited to public liability and employee dishonesty) and in amounts not less than are customary in the case of corporations engaged in the same or similar activities and similarly situated and as are adequate to protect its Property and operations. The Obligated Group or any Member may self-insure if the Obligated Group Agent determines that such self-insurance is prudent under the circumstances. RATES AND CHARGES Each Member covenants and agrees to operate all of its Facilities on a revenue producing basis and to charge such fees and rates for its Facilities and services and to exercise such skill and diligence as to provide income from its Property together with other available funds sufficient to pay promptly all payments of principal and interest on its Indebtedness, all expenses of operation, maintenance and repair of its Property and all other payments required to be made by it under the Master Indenture to the extent permitted by law. Each Member further covenants and agrees that it will from time to time as often as necessary and to the extent permitted by law, revise its rates, fees and charges in such manner as may be necessary or proper to comply with the provisions of the Master Indenture summarized under this heading. The Members covenant and agree that they will cause the accountants of the Obligated Group to calculate the Historical Debt Service Coverage Ratio of the Obligated Group for the Fiscal Year covered by such report and to deliver a copy of such calculation to the Persons to whom such report is required to be delivered under the Master Indenture. If in any Fiscal Year Historical Debt Service Coverage Ratio of the Obligated Group is less than 1.10:1, the Obligated Group shall, at its expense, retain a Consultant to make recommendations with respect to the rates, fees and charges of the Members and the Obligated Group s methods of operation and other factors affecting its financial condition in order to increase such Historical Debt Service Coverage Ratio to at least 1.10:1. Such Consultant shall be selected by the Obligated Group Agent from a list of Consultants which are acceptable to all Related Issuers. A copy of the Consultant s report and recommendations, if any, shall be filed with each Member, the Master Trustee, each Related Bond Trustee, each Related Issuer and each Qualifying Obligation holder. Each Member shall follow each recommendation of the Consultant applicable to it to the extent feasible (as determined by the Governing Body of such Member and each Related Issuer) and permitted by law. The provisions summarized under this heading shall not be construed to prohibit any Member from serving indigent patients to the extent required for such Member to continue its qualification as a Tax-Exempt Organization or from serving any other class or classes of patients without charge or at reduced rates so long as such service does not prevent the Obligated Group from satisfying the other requirements summarized under this heading. The foregoing provisions notwithstanding, if in any Fiscal Year the Historical Debt Service Coverage Ratio of the Obligated Group is less than 1.10:1, the Obligated Group shall not be required to retain a Consultant to make such recommendations if: (A) there is filed with each Member, the Master Trustee, each Qualifying Obligation holder, each Related Bond Trustee and each Related Issuer a written report addressed to them of a Consultant (which report, including without limitation, the scope, form, substance and other aspects thereof, is acceptable to the Master Trustee) which contains an opinion of such Consultant that applicable laws or regulations have prevented the Obligated Group from generating Income Available for Debt Service during such Fiscal Year in an amount sufficient to cause the Historical Debt Service Coverage Ratio of the Obligated Group for such Fiscal Year to equal or exceed 1.10:1 and, if requested by the Master Trustee, such report is accompanied by a concurring opinion of C-17

151 Counsel (which Counsel and opinion, including without limitation the scope, form, substance and other aspects thereof, are acceptable to the Master Trustee) as to any conclusions of law supporting the opinion of such Consultant; (B) the report of such Consultant indicates that the rates charged by the Obligated Group are such that, in the opinion of the Consultant, the Obligated Group has generated the maximum amount of Revenues given such laws or regulations; and (C) the Historical Debt Service Coverage Ratio of the Obligated Group for such Fiscal Year was at least 1:1. 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 the first of such two Fiscal Years the Obligated Group provides to the Master Trustee (who shall provide a copy to each Qualifying Obligation holder, Related Bond Trustee and Related Issuer) an opinion of 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. DAMAGE OR DESTRUCTION Each Member agrees to notify the Master Trustee immediately in the case of the destruction of its Facilities or any portion thereof as a result of fire or other casualty, or any damage to such Facilities or portion thereof as a result of fire or other casualty, the Net Proceeds of which are estimated to exceed the greater of (a) $20,000,000 or (b) 2-1/2% of the Net Assets of the Obligated Group as shown on the balance sheet contained in the most recent combined financial statements of the Obligated Group reported on by independent public accountants. Net Proceeds of any insurance relating to such damage or destruction not exceeding the greater of (a) or (b) above may be paid directly to the Member suffering such casualty loss. In the event such Net Proceeds exceed the greater of (a) or (b) above, the Member suffering such casualty or loss shall within twelve (12) months after the date on which the Net Proceeds are finally determined elect by written notice of such election to the Master Trustee one of the following three options, subject to the approval of the Master Trustee (which approval may not be unreasonably withheld): (a) Option A-Repair and Restoration. Such Member may elect to replace, repair, reconstruct, restore or improve any of the Facilities of the Obligated Group or acquire additional Facilities for the Obligated Group. In such event an amount equal to the Net Proceeds of any insurance relating thereto shall be deposited with the Master Trustee and such Member shall proceed forthwith to replace, repair, reconstruct, restore or improve Facilities of the Obligated Group or to acquire additional Facilities and will apply the Net Proceeds of any insurance relating to such damage or destruction received from the Master Trustee to the payment or reimbursement of the costs of such replacement, repair, reconstruction, restoration, improvement or acquisition. So long as the Members are not in default under the Master Indenture, any Net Proceeds of insurance relating to such damage or destruction received by the Master Trustee shall be released from time to time by the Master Trustee to such Member upon the receipt by the Master Trustee of: (1) the Written Request of such Member specifying the expenditures made or to be made or the Indebtedness incurred in connection with such repair, reconstruction, restoration, improvement or acquisition and stating that such Net Proceeds, together with any other moneys legally available for such purposes, will be sufficient to complete such replacement, repair, reconstruction, restoration, improvement or acquisition; and (2) if such expenditures were or are to be made for the construction or renovation of Facilities, the written approval of such Written Request by an Independent Architect. If such Member elects this Option A, the Master Indenture requires such Member to complete the replacement, repair, reconstruction, restoration, improvement and acquisition of the Facilities, whether or not the Net Proceeds of insurance received for such purposes are sufficient to pay for the same. (b) Option B-Prepayment of Obligations. Subject to the obligations of the Members to keep their facilities in good repair and working order, such Member may elect to have all or a portion of the Net Proceeds payable as a result of such damage or destruction applied to the prepayment of the Obligations. C-18

152 In such event such Member shall, in its notice of election to the Master Trustee, direct the Master Trustee to apply such Net Proceeds, when and as received, to the prepayment of the Obligations. (c) Option C-Partial Restoration and Partial Prepayment of Obligations. Such Member may elect to have a portion of such Net Proceeds applied to the replacement, repair, reconstruction, restoration and improvement of the Facilities of the Obligated Group or the acquisition of additional Facilities for the Obligated Group with the remainder of such Net Proceeds to be applied to prepay Obligations, in which event such Net Proceeds to be used for replacement, repair, reconstruction, restoration, improvement and acquisition shall be applied as set forth in subparagraph (a) above and such Net Proceeds to be used for prepayment of the Obligations shall be applied as set forth in subparagraph (b) above. The foregoing notwithstanding, no Member will be required to comply with the provisions of the Master Indenture summarized under this heading to the extent that the Facilities damaged or destroyed were pledged as security for Non-Recourse Indebtedness incurred under the Master Indenture or Indebtedness secured by Liens in accordance with the Master Indenture and the documents pursuant to which such Indebtedness was incurred require Net Proceeds to be applied in a manner inconsistent with the Master Indenture. CONDEMNATION The Master Trustee shall cooperate fully with the Members in the handling and conduct of any prospective or pending condemnation proceedings with respect to their Facilities or any part thereof. Pursuant to the Master Indenture, each Member has irrevocably assigned to the Master Trustee all right, title and interest of such Member in and to any Net Proceeds of any award, compensation or damages payable in connection with any such condemnation or taking, or any payment received in a sale consummated under threat of condemnation (any such award, compensation, damages or payment being hereinafter referred to as an award ), which exceeds the greater of (a) $20,000,000 or (b) 2-1/2% of the Net Assets of the Obligated Group as shown on the balance sheet contained in the most recent combined financial statements of the Obligated Group reported on by independent public accountants. Such Net Proceeds shall be initially paid to the Master Trustee for disbursement or use as hereinafter provided. In the event such Net Proceeds exceed the greater of (a) or (b) above, the Member in question shall within twelve (12) months after the date on which the Net Proceeds are finally determined elect by written notice of such election to the Master Trustee one of the following three options, subject to the approval of the Master Trustee (which approval may not be unreasonably withheld): (a) Option A-Repairs and Improvements. The Member may elect to use the Net Proceeds of the award for restoration or replacement of or repairs and improvements to the Facilities of the Obligated Group or the acquisition of additional Facilities for the Obligated Group. In such event, so long as the Obligated Group is not in default under the Master Indenture, such Member shall have the right to receive such Net Proceeds from the Master Trustee from time to time upon the receipt by the Master Trustee of: (1) the Written Request of such Member specifying the expenditures made or to be made or the Indebtedness incurred in connection with such restoration, replacement, repairs, improvements and acquisitions and stating that such Net Proceeds, together with any of the moneys legally available for such purposes, will be sufficient to complete such restoration, replacement, repairs, improvements and acquisition; and (2) if such expenditures were or are to be made for the construction or renovation of Facilities, the written approval of such Written Request by an Independent Architect. (b) Option B-Prepayment of Obligations. Subject to the obligation of such Member to keep its Facilities in good repair and working order, such Member may elect to have such Net Proceeds of the award applied to the prepayment of the Obligations. In such event such Member shall, in its notice of C-19

153 election to the Master Trustee, direct the Master Trustee to apply such Net Proceeds when and as received, to the prepayment of the Obligations. (c) Option C-Partial Restoration and Partial Prepayment of Obligations. Such Member may elect to have a portion of such Net Proceeds of the award applied to the repair, replacement, restoration and improvement of the Facilities of the Obligated Group or the acquisition of additional Facilities for the Obligated Group, with the remainder of such Net Proceeds to be applied to the prepayment of Obligations, in which event such Net Proceeds to be used for repair, replacement, restoration, improvement and acquisition shall be applied as set forth in subparagraph (a) of the Master Indenture summarized under this heading and such Net Proceeds to be used for prepayment of the Obligations shall be applied as set forth in subparagraph (b) of the Master Indenture summarized under this heading. The foregoing notwithstanding, no Member will be required to comply with the provisions of the Master Indenture summarized under this heading to the extent that the Facilities condemned were pledged as security for Non-Recourse Indebtedness incurred in accordance with the Master Indenture or Indebtedness secured by Liens in accordance with the Master Indenture and the documents pursuant to which such Indebtedness was issued require Net Proceeds to be applied in a manner inconsistent with the provisions of the Master Indenture summarized under this heading. MERGER, CONSOLIDATION, SALE OR CONVEYANCE (a) Each Member agrees that it will not merge into, or consolidate with, one or more corporations which are not Members, or allow one or more of such corporations to merge into it, or sell or convey all or substantially all of its Property to any Person who is not a Member, unless: (i) Any successor corporation to such Member (including, without limitation, any purchaser of all or substantially all the Property of such Member) is a corporation organized and existing under the laws of the United States of America or a state thereof and shall execute and deliver to the Master Trustee an appropriate instrument, satisfactory to the Master Trustee, containing the agreement of such successor corporation to assume, jointly and severally, the due and punctual payment of the principal of, premium, if any, and interest on all Obligations according to their tenor and the due and punctual performance and observance of all the covenants and conditions of the Master Indenture to be kept and performed by such Member; (ii) The Obligated Group Agent delivers a certificate to the Master Trustee indicating that immediately after such merger or consolidation, or such sale or conveyance, no Member would be in default in the performance or observance of any covenant or condition of any Related Loan Document or the Master Indenture; and (iii) If all amounts due or to become due on all Related Bonds have not been fully paid to the holders thereof or fully provided for, there shall be delivered to the Master Trustee an opinion of nationally recognized municipal bond counsel (which counsel and opinion, including the scope, form, substance and other aspects thereof, are acceptable 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 the original date of delivery of such Related Bonds, would not adversely affect the validity of such Related Bonds or the exemption otherwise available from federal or state income taxation of interest payable on such Related Bonds. (b) In case of any such consolidation, merger, sale or conveyance and upon any such assumption by the successor corporation, such successor corporation shall succeed to and be substituted for its predecessor, with the same effect as if it had been named in the Master Indenture as such Member. Any successor corporation to such Member thereupon may cause to be signed and may issue in its own name Obligations under the Master Indenture and the predecessor corporation shall be released from its obligations under the Master Indenture and under any Obligations, if such predecessor corporation shall have conveyed all Property owned by it (or all such Property shall be deemed conveyed by operation of C-20

154 law) to such successor corporation. All Obligations so issued by such successor corporation under the Master Indenture shall in all respects have the same legal rank and benefit under the Master Indenture as Obligations theretofore or thereafter issued in accordance with the terms of the Master Indenture as though all of such Obligations had been issued under the Master Indenture by such Member without any such consolidation, merger, sale or conveyance having occurred. (c) In case of any such consolidation, merger, sale or conveyance such changes in phraseology and form (but not in substance) may be made in Obligations thereafter to be issued as may be appropriate. (d) The Master Trustee may rely upon an opinion of Counsel as conclusive evidence that any such consolidation, merger, sale or conveyance, and any such assumption, complies with the provisions of the Master Indenture summarized under this heading and that it is proper for the Master Trustee under the provisions of the Master Indenture summarized under this heading to join in the execution of any instrument required to be executed and delivered pursuant to the provisions of the Master Indenture summarized under this heading. (e) The foregoing provisions of the Master Indenture summarized under this heading shall not be applicable to the termination of the Lease by the University or the Corporation under the circumstances, and upon satisfaction of the terms and conditions, set forth in a Related Loan Document Upon the consummation of the transactions described in a Related Loan Document, any Obligations then pledged under the Related Bond Indenture shall be returned by the Corporation to the Master Trustee, shall be cancelled by the Master Trustee pursuant to the Master Indenture and shall no longer be Outstanding under the Master Indenture. FINANCIAL STATEMENTS The Members covenant that they will keep or cause to be kept proper books of records and accounts in which full, true and correct entries will be made of all dealings or transactions of or in relation to the business and affairs of the Obligated Group in accordance with generally accepted principles of accounting consistently applied except as may be disclosed in the notes to the audited financial statements referred to in subparagraph (B) below. To the extent that generally accepted accounting principles would require consolidation of certain financial information of entities which are not Members of the Obligated Group with financial information of one or more Members, consolidated financial statements prepared in accordance with generally accepted accounting principles which include information with respect to entities which are not Members of the Obligated Group may be delivered in satisfaction of the requirements of the provisions of the Master Indenture summarized under this heading so long as: (a) supplemental information in sufficient detail to separately identify the information with respect to the Members of the Obligated Group is delivered to the Master Trustee with the audited financial statements; (b) such supplemental information has been subjected to the auditing procedures applied in the audit of the combined financial statements delivered to the Master Trustee and, in the opinion of the accountant, is fairly stated in all material respects in relation to the combined financial statements taken as a whole; and (c) such supplemental information is used for the purposes of the Master Indenture or for any agreement, document or certificate executed and delivered in connection or pursuant to the Master Indenture. The Members further covenant that they will furnish or cause to be furnished to the Master Trustee, any Related Issuers, any Related Bond Trustees and any requesting Qualified Obligation holder: (A) As soon as practicable after they are available but in no event more than 90 days after the expiration of each of the first three quarterly fiscal periods of each Fiscal Year of the Obligated Group, a combined statement of revenues and expenses and changes in fund balances of the Obligated Group during such period, and a combined balance sheet as of the end of each such quarterly fiscal period, all in reasonable detail and certified, subject to year-end adjustment, by the Treasurer or another authorized financial officer of the Obligated Group Agent. (B) As soon as practicable after they are available, but in no event more than 150 days after the last day of each Fiscal Year, a financial report for such Fiscal Year certified by a firm of nationally recognized independent certified public accountants selected by the Obligated Group Agent and C-21

155 satisfactory to the Master Trustee and each Related Issuer covering the operations of the Obligated Group for such Fiscal Year and containing a combined balance sheet as of the end of such Fiscal Year and a combined statement of changes in fund balances and changes in financial position for such Fiscal Year and a combined statement of revenues and expenses for such Fiscal Year, showing in each case in comparative form commencing with the Fiscal Year ending July 30, 1989 the financial figures for the preceding Fiscal Year, together with a separate written statement of the accountants preparing such report containing a calculation of the Obligated Group s Historical Debt Service Coverage Ratio for said Fiscal Year and a statement that such accountants have obtained no knowledge of any default insofar as it pertains to accounting matters by any Member in the fulfillment of any of the terms, covenants, provisions or conditions of the Master Indenture, or if such accountants shall have obtained knowledge of any such default or defaults, they shall disclose in such statement the default or defaults and the nature thereof (but such accountants shall not be liable directly or indirectly to anyone for failure to obtain knowledge of any default). (C) At the time of delivery of the financial report referred to in subsection (B) above, a certificate of the Obligated Group Agent signed by its President or any Vice President, stating that the Obligated Group Agent has made a review of the activities of each Member during the preceding Fiscal Year for the purpose of determining whether or not the Members have complied with all of the terms, provisions and conditions of the Master Indenture and that each Member has kept, observed, performed and fulfilled each and every covenant, provision and condition of the Master Indenture on its part to be performed and is not in default in the performance or observance of any of the terms, covenants, provisions or conditions of the Master Indenture, or if any Member shall be in default such certificate shall specify all such defaults and the nature thereof. (D) Such additional information as the Master Trustee, any requesting Qualifying Obligation holder, any Related Issuer or any Related Bond Trustee may reasonably request concerning any Member in order to enable the Master Trustee, such Qualifying Obligation holder, such Related Issuer or such Related Bond Trustee to determine whether the covenants, terms and provisions of the Master Indenture have been complied with by the Members and for that purpose all pertinent books, documents and vouchers relating to the business, affairs and Property (other than patient, donor and personnel records) of the Members shall at all times during regular business hours be open to the inspection of such accountant or other agent (who may make copies of all or any part thereof) as shall from time to time be designated and compensated by the Master Trustee, such Qualifying Obligation holder, such Related Issuer or such Related Bond Trustee. The Members also agree that the Obligated Group Agent will on behalf of the Members provide copies of the information referred to in subsections (A) and (B) above to each rating agency at the time maintaining a rating on any Related Bonds or any Indebtedness of any Member. The Members also agree that, within 10 days after their receipt thereof, the Obligated Group Agent will file with the Master Trustee on behalf of the Members a copy of each Consultant s report or counsel s opinion required to be prepared under the terms of the Master Indenture. Without limiting the foregoing each Member will permit the Master Trustee, any such Qualifying Obligation holder, any such Related Issuer or any such Related Bond Trustee (or such persons as they may designate) to visit and inspect, at the expense of such Person, its Property and to discuss the affairs, finances and accounts of the Obligated Group with its officers and independent accountants, all at such reasonable times and as often as the Master Trustee, such Qualifying Obligation holder, such Related Issuer or such Related Bond Trustee may reasonably desire. The Obligated Group Agent will give prompt written notice of a change of accountants by the Obligated Group to the Master Trustee and each such Related Issuer and Related Bond Trustee. The notice shall state: (i) the effective date of such change; (ii) whether there were any unresolved disagreements with the former accountants on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which the accountants claimed would have caused them to refer to the disagreement in a report on the disputed matter, if it was not resolved to their satisfaction; and (iii) such additional information relating thereto as such Related Issuer, Related Bond Trustee or the Master Trustee may reasonably request. C-22

156 Each Member agrees that, whenever requested by any Related Issuer, it will provide and certify, or cause to be provided and certified, in form satisfactory to such Related Issuer, such information concerning such Member and the other Members, their property, their operation and finances and other matters that such Related Issuer considers necessary to enable it to complete and publish an official statement relating to its Related Bonds when any of such Related Bonds are to be offered for sale or to enable it to make any reports required by law, governmental regulations or the Related Bond Indenture in connection with any such Related Bonds. LIENS ON PROPERTY (a) Each Member agrees that it will keep its Property free and clear of all Liens which are not Permitted Encumbrances. (b) A Lien on Property of any Member securing Indebtedness shall be classified as a Permitted Encumbrance (as provided in clause (b) of the definition thereof) and therefore be permitted if: (i) after giving effect to all such Liens, the lesser of (x) the Book Value of the Property of the Obligated Group which is Encumbered by any such Liens (excluding amounts on deposit in any fund maintained under a Related Bond Indenture for the purpose of matching periodic debt service payments by a Member with periodic debt service payments on Related Bonds or for the purpose of an interest or debt service reserve fund, in all cases in amounts which do not exceed amounts customarily deposited in such a fund) or (y) the principal amount of the Indebtedness to be secured by all such Liens, is not more than 15% of the Book Value of all of the Property of the Obligated Group (calculated on the basis of the Book Value of the Property of the Obligated Group at the time such Indebtedness is incurred); or (ii) after giving effect to all Liens constituting Permitted Encumbrances solely by reason of being described in subparagraph (b) of the definition thereof, the Unsecured Debt Ratio would be at least 1.25:1 or, if less than 1.25:1, not less than it was for the Obligated Group immediately prior to the incurrence or grant of such Lien. OTHER COVENANTS OF THE MEMBERS Each Member covenants to, among other things, (a) pay, or cause to be paid, all taxes, levies, assessments and charges on account of the use, occupancy or operation of its Property and to comply with all present and future laws, ordinances, orders, decrees, decisions, rules, regulations and requirement of every duly constituted governmental authority, commission and court and the officers thereof which may be applicable to it or any of its affairs, business, operations and Property; provided that such Member has the right to contest any of the foregoing provided that no such contest shall subject any Related Issuer, any Obligation holder or the Master Trustee to the risk of any liability, and that the Member will save all Related Issuers, all Related Bond Trustees, all Obligation holders and the Master Trustee harmless from and against all losses, judgments, decrees and costs as a result of such contest; (b) maintain, preserve and keeps its Property and each part thereof in good repair, working order and condition and make all necessary and proper repairs, renewals, and replacements thereto; (c) procure and maintain all necessary licenses and permits and maintain accreditation of its hospital Facilities (other than those not accredited as of the later of the date of the Master Indenture or the date a Person becomes a Member thereunder) by the Joint Commission on Accreditation of Hospitals and the status of its health care Facilities (other than those not currently having such status or not having such status on the date a Person becomes a Member) as providers of health care services eligible for payment under those third-party payment programs which its Governing Body determines are appropriate. DEFAULTS AND REMEDIES The following events are events of default under the Master Indenture : (a) failure of the Obligated Group to pay any installment of interest or principal, or any premium, on any Obligation when the same shall become due and payable, whether at maturity, upon any C-23

157 date fixed for prepayment or by acceleration or otherwise and the continuance of such failure for five days; or (b) failure of any Member to comply with, observe or perform any of the covenants, conditions, agreements or provisions of the Master Indenture and to remedy such default within 30 days after written notice thereof to such Member and the Obligated Group Agent from the Master Trustee or the holders of at least 25% in aggregate principal amount (for the purposes of the provisions of the Master Indenture summarized under this heading, the principal of Capital Appreciation Indebtedness shall be deemed to be the Accreted Value thereof at the time of determination) of the outstanding Obligations; or (c) any representation or warranty made by any Member in the Master Indenture or in any statement or certificate furnished to the Master Trustee or the purchaser of any Obligation in connection with the sale of any Obligation or furnished by any Member pursuant to the Master Indenture proves untrue in any material respect as of the date of the issuance or making thereof and shall not be corrected or brought into compliance within 30 days after written notice thereof to the Obligated Group Agent by the Master Trustee or the holders of at least 25% in aggregate principal amount of the Outstanding Obligations; or (d) default shall occur in the payment of the principal of, premium, if any, or interest on any Indebtedness for borrowed money (other than Non-Recourse Indebtedness) of any Member, including without limitation any Indebtedness created by any Related Loan Document, as and when the same shall become due, or an event of default as defined in any mortgage, indenture, loan agreement or other instrument under or pursuant to which there was issued or incurred, or by which there is secured, any such Indebtedness (including any Obligation) of any Member, and which default in payment or event of default entitles the holder thereof to declare or, in the case of any Obligation, to request that the Master Trustee declare, such Indebtedness due and payable prior to the date on which it would otherwise become due and payable; provided, however, that if such Indebtedness is not evidenced by an Obligation or issued, incurred or secured by or under a Related Loan Document, a default in payment thereunder shall not constitute an event of default under the Master Indenture unless the unpaid principal amount of such Indebtedness, together with the unpaid principal amount of all other Indebtedness so in default, exceeds 1% of the Unrestricted Fund Balance of the Obligated Group on the date of calculation; or (e) any judgment, writ or warrant of attachment or of any similar process shall be entered or filed against any Member or against any Property of any Member and remains unvacated, unpaid, unbonded, uninsured, unstayed or uncontested in good faith for a period of 30 days; provided, however, that none of the foregoing shall constitute an event of default unless the amount of such judgment, writ, warrant of attachment or similar process, together with the amount of all other such judgments, writs, warrants or similar processes so unvacated, unpaid, unbonded, unstayed or uncontested, exceeds 1% of the Unrestricted Fund Balance of the Obligated Group on the date of calculation; or (f) any Member admits insolvency or bankruptcy or its inability to pay its debts as they mature, or is generally not paying its debts as such debts become due, or makes an assignment for the benefit of creditors or applies for or consents to the appointment of a trustee, custodian or receiver for such Member, or for the major part of its Property; or (g) a trustee, custodian or receiver is appointed for any Member or for the major part of its Property and is not discharged within 30 days after such appointment; or (h) bankruptcy, dissolution, reorganization, arrangement, insolvency or liquidation proceedings, proceedings under Title 11 of the United States Code, as amended, or other proceedings for relief under any bankruptcy law or similar law for the relief of debtors are instituted against any Member and are allowed against such Member or are consented to or are not dismissed, stayed or otherwise nullified within 30 days after such institution; or C-24

158 (i) payment of any installment of interest or principal, or any premium, on any Related Bond shall not be made when the same shall become due and payable under the provisions of any Related Bond Indenture. If an event of default has occurred and is continuing, the Master Trustee may, and if requested by either the holders of not less than 25% in aggregate principal amount (for the purposes of the provisions of the Master Indenture summarized under this heading, the principal amount of Capital Appreciation Indebtedness shall be deemed to be the Accreted Value thereof at the time of determination) of Outstanding Obligations or the holder of any Accelerable Instrument under which Accelerable Instrument an event of default exists, shall, by notice in writing delivered to the Obligated Group Agent, declare the entire principal amount of all Obligations then outstanding under the Master Indenture and the interest accrued thereon immediately due and payable, and the entire principal and such interest shall thereupon become and be immediately due and payable, subject, however, to the provisions of the Master Indenture with respect to waivers of events of default. DIRECTION OF PROCEEDINGS BY HOLDERS The holders of a majority in aggregate principal amount of the Obligations then outstanding which have become due and payable in accordance with their terms or have been declared due and payable pursuant to the Master Indenture and have not been paid in full in the case of remedies exercised to enforce such payment or the holders of a majority in aggregate principal amount (for the purposes of the provisions of the Master Indenture summarized under this heading, the principal amount of Capital Appreciation Indebtedness shall be deemed to be the Accreted Value thereof at the time of determination) of the Obligations then outstanding in the case of any other remedy shall have the right, at any time, by an instrument or instruments in writing executed and delivered to the Master Trustee, to direct the method and place of conducting all proceedings to be taken in connection with the enforcement of the terms and conditions of the Master Indenture or for the appointment of a receiver or any other proceedings under the Master Indenture; provided, that such direction shall not be otherwise than in accordance with the provisions of law and of the Master Indenture and that the Master Trustee shall have the right to decline to comply with any such request if the Master Trustee shall be advised by counsel (who may be its own counsel) that the action so directed may not lawfully be taken or the Master Trustee in good faith shall determine that such action would be unjustly prejudicial to the holders of the Obligations not parties to such direction. Pending such direction from the holders of a majority in aggregate principal amount of the Obligations outstanding, such direction may be given in the same manner and with the same effect by the holder of an Accelerable Instrument upon whose request pursuant to the Master Indenture the Master Trustee has accelerated the Obligations. The foregoing notwithstanding, the holders of a majority in aggregate principal amount of the Obligations then outstanding which are entitled to the exclusive benefit of certain security in addition to that intended to secure all or other Obligations shall have the right, at any time, by an instrument or instruments in writing executed and delivered to the Master Trustee, to direct the method and place of conducting all proceedings to be taken in connection with the enforcement of the terms and conditions of the Master Indenture, the Supplemental Master Indenture or Indentures pursuant to which such Obligations were issued or so secured or any separate security document in order to realize on such security; provided, however, that such direction shall not be otherwise than in accordance with the provisions of law and of the Master Indenture. WAIVER OF EVENTS OF DEFAULT If, at any time after the principal of all Obligations shall have been so declared due and payable, and before any judgment or decree for the payment of the moneys due shall have been obtained or entered as hereinafter provided and before the acceleration of any Related Bond (unless such acceleration has been waived or rescinded and annulled by any Related Bond Trustee in accordance with the Related Bond Indenture), any Member shall pay or shall deposit with the Master Trustee a sum sufficient to pay all matured installments of interest upon all such Obligations and the principal and premium, if any, of all such Obligations that shall have become due otherwise than by acceleration (with interest on overdue installments of interest and on such principal and premium, if any, at the rate borne by such Obligations to the date of such payment or deposit to the extent permitted by law) and the expenses of the Master Trustee, and any and all events of default under the Master Indenture, other than the nonpayment of principal of and accrued interest on such Obligations that shall have become due by acceleration, shall have been remedied, then and in every such case the holders of a majority in aggregate principal amount (for C-25

159 the purposes of the provisions of the Master Indenture summarized under this heading, the principal amount of Capital Appreciation Indebtedness shall be deemed to be the Accreted Value thereof at the time of determination) of all Obligations then outstanding and the holder of each Accelerable Instrument who requested the giving of notice of acceleration, by written notice to the Obligated Group Agent and to the Master Trustee, may waive all events of default and rescind and annul such declaration and its consequences; but no such waiver or rescission and annulment shall extend to or affect any subsequent event of default, or shall impair any right consequent thereon. REMOVAL OF THE MASTER TRUSTEE The Master Trustee may be removed at any time, by an instrument or concurrent instruments in writing delivered to the Master Trustee and to the Obligated Group Agent, and signed by the owners of a majority in aggregate principal amount of Obligations then outstanding; provided that, if any Related Issuer so elects, it may elect to sign such an instrument as the owner of the Obligation or Obligations pledged to secure the Related Bonds issued by such Related Issuer. SUPPLEMENTAL MASTER INDENTURES The Members and the Master Trustee may, without the consent of, or notice to, any of the Obligation holders, amend or supplement the Master Indenture to: (a) cure any ambiguity or defective provision in or omission from the Master Indenture in such manner as is not inconsistent with and does not impair the security of the Master Indenture or adversely affect the holder of any Obligation; (b) grant to or confer upon the Master Trustee for the benefit of the Obligation holders any additional rights, remedies, powers or authority that may lawfully be granted to or conferred upon the Obligation holders and the Master Trustee, or either of them, to add to the covenants of the Members for the benefit of the Obligation holders or to surrender any right or power conferred under the Master Indenture upon any Member; (c) assign and pledge under the Master Indenture additional revenues, properties or collateral; (d) evidence the succession of another corporation to the agreements of a Member or the Master Trustee, or the successor of any thereof under the Master Indenture; (e) qualify the Master Indenture under the Trust Indenture Act of 1939, as then amended, or under any similar federal statute hereafter in effect or to permit the qualification of any Obligations for sale under the securities laws of any state of the United States; (f) provide for the refunding or advance refunding of any Obligation; (g) provide for the issuance of Additional Obligations; (h) reflect the addition to or withdrawal of a Member from the Obligated Group; (i) provide for the issuance of Obligations with original issue discount, provided such issuance would not materially adversely affect the holders of Outstanding Obligations; (k) permit an Obligation to be secured by security which security is not extended to all Obligation holders; and (l) permit the issuance of Obligations which are not in the form of a promissory note. In addition to the foregoing, the holders of not less than fifty-one percent (51%) in aggregate principal amount (for the purposes of the provisions of the Master Indenture summarized under this heading, the principal amount of Capital Appreciation Indebtedness shall be deemed to be the Accreted Value thereof at the time of determination) of the Obligations which are outstanding under the Master Indenture at the time of the execution of such Supplemental Master Indenture shall have the right, from time to time, anything contained in the Master Indenture to the contrary notwithstanding, to consent to and approve the execution by the Members and the Master Trustee of such other Supplemental Master Indentures as shall be deemed necessary and desirable by the Members for the purpose of modifying, altering, amending, adding to or rescinding, in any particular, any of the terms or provisions contained in the Master Indenture or any other Supplemental Master Indenture; provided, however, that nothing in the provisions of the Master Indenture summarized under this heading shall permit, or be construed as permitting (a) an extension of the stated maturity or reduction in the principal amount of or reduction in the rate or extension of the time of paying of interest on or reduction of any premium payable on the redemption of, any Obligation, without the consent of the holder of such Obligation, (b) a reduction in the aforesaid aggregate principal amount of Obligations the holders of which are required to consent to any such supplemental Master Indenture or any such amending or supplementing instruments, without the consent of the holders of all the Obligations at the time outstanding which would be affected by the action to be taken, or (c) modification of the rights, duties or immunities of the Master Trustee, without the written consent of the Master Trustee. For the purpose of the provisions of the Master Indenture summarized under this heading, the principal amount of an Obligation issued to secure Commitment Indebtedness shall be the principal amount owed and not yet repaid on such Obligation as of the date of such calculation (rather than the nominal amount thereof). C-26

160 SUMMARY OF CERTAIN PROVISIONS OF THE FOURTH SUPPLEMENTAL MASTER INDENTURE The provisions of the Fourth Supplemental Master Indenture summarized below (the Bond Insurer Covenants ) are in addition to and do not replace the covenants and restrictions contained in the Master Indenture. Further, these additional covenants and restrictions may only be enforced by the Bond Insurer and may be modified, amended or waived with the prior written consent of the Bond Insurer and without the consent of the Master Trustee, the Related Bond Trustee, the Authority, the holder of any Obligation or any owner of any Series 2001 Bond, Series 2003 Bond, Series 2009 Bond or any other Related Bond. The provisions of the Fourth Supplemental Master Indenture summarized below shall only be applicable during the period that any Series 2001 Bonds or any Series 2003 Bonds are Outstanding, the Bond Insurance Policy is still in full force and effect and the Bond Insurer has not lost its consent rights pursuant to the Series 2003 Bond Indenture or the Series 2001 Bond Indenture, as applicable. PLEDGE OF UNRESTRICTED RECEIVABLES The following language is added to the Granting Clauses of the Master Indenture by the Fourth Supplemental Master Indenture: All accounts and assignable general intangibles now owned or hereafter acquired (excluding software) by any Member of the Obligated Group regardless of how generated, and all proceeds therefrom, whether cash or non-cash, all as defined in Article 9 of the Uniform Commercial Code, as amended of the state in which such Member is a registered organization; excluding, however, gifts, grants, bequests, donations and contributions to any Member heretofore or hereafter made, and the income and gains derived therefrom, which are specifically restricted by the donor or grantor to a particular purpose which is inconsistent with its use for payments under the Master Indenture or on the Obligations, to the extent required by such restriction and not subsequently designated as unrestricted (defined in the Master Indenture as the Unrestricted Receivables ) DEFINITIONS The following definitions are added to the Master Indenture by the Fourth Supplemental Master Indenture: (a) Balloon Indebtedness means Long-Term Indebtedness, 20% more of the original principal amount of which matures during any consecutive twelve month period, if such maturing principal amount is not required to be amortized below such percentage by mandatory redemption or prepayment prior to such twelve month period. Balloon Indebtedness does not include Indebtedness which otherwise would be classified under the Master Indenture as Put Indebtedness. (b) Expenses. Days Cash on Hand means Unrestricted Cash and Investments divided by Days of Operating (c) Days of Operating Expenses means the quotient determined by dividing (a) (i) an amount equal to operating expenses, as set forth in the most recent financial statements delivered under the Master Indenture, minus (ii) depreciation and amortization set forth in the most recent financial statements delivered under the Master Indenture, by (b) the number of days for the applicable period. (d) Funded Indebtedness Ratio means the ratio consisting of (i) a numerator equal to the amount determined by dividing the Obligated Group s total Funded Indebtedness by the sum of (a) such Funded Indebtedness and (b) the Obligated Group s unrestricted net assets (as reflected in or derived from the most recent audited combined financial statements of the Obligated Group prepared in accordance with generally accepted accounting principles) and (ii) a denominator of one. (e) Historical Pro Forma Debt Service Coverage Ratio means, for any period of time, the ratio consisting of (i) a numerator equal to the amount determined by dividing Income Available for Debt Service for that period by the Maximum Annual Debt Service Requirement for the Funded Indebtedness then outstanding (other C-27

161 than any Funded Indebtedness being refunded with the Funded Indebtedness then proposed to be issued) and the Funded Indebtedness then proposed to be issued and (ii) a denominator of one. (f) Long-Term Indebtedness means Indebtedness (which also may constitute Balloon Indebtedness or Put Indebtedness) having an original stated maturity or term greater than one year or renewable at the option if the debtor for a period greater than one year from the date of initial issuance. (g) Maximum Annual Debt Service Coverage Ratio means (A) for any Fiscal Year, the ratio consisting of (i) a numerator equal to the amount determined by dividing Income Available for Debt Service of the Obligated Group for such Fiscal Year by the Maximum Annual Debt Service Requirement for the Funded Indebtedness of the Obligated Group then outstanding and (ii) a denominator of one, and (B) for any six month period, the ratio consisting of (i) a numerator equal to the amount determined by dividing Income Available for Debt Service of the Obligated Group for such six month period by 50% of the Maximum Annual Debt Service Requirement for the Funded Indebtedness of the Obligated Group then outstanding and (ii) a denominator of one. (h) Maximum Annual Debt Service Requirement means the largest total Debt Service Requirements for the current or any succeeding Fiscal Year. (i) Projected Debt Service Coverage Ratio means, for any future period, the ratio consisting of (i) a numerator equal to the amount determined by dividing the projected Income Available for Debt Service for that period by the Maximum Annual Debt Service Requirement for the Funded Indebtedness expected to be outstanding during such period and (ii) a denominator of one. (j) Put Indebtedness means Indebtedness which is (i) payable or required to be purchased or redeemed by or on behalf of the underlying obligor, at the option of the owner thereof, prior to its stated maturity date of (ii) payable or required to be purchased or repurchased from the owner by or on behalf of the underlying obligor (other than at the option of the owner) prior to its stated maturity date, other than pursuant to any mandatory sinking fund or due to acceleration upon the occurrence of an event of default. (k) Unrestricted Cash and Investments means (a) the sum of all cash, cash equivalents and unrestricted and unencumbered long term marketable or liquid investment balances, including without limitation, such amounts that are on deposit in a funded depreciation fund or account, whether classified as current or noncurrent assets, held by a Member for any of its corporate purposes, but excluding trustee-held funds, reserves, deposits or set-asides (including, without limitation, debt service funds, construction funds, malpractice funds, litigation reserves, self-insurance or captive insurer funds, and pension or retirement funds), less (b) the sum of (i) the principal amount of any Short-Term Indebtedness or Balloon Indebtedness (except to the extent funds are on deposit in a debt service fund to pay such Short-Term or Balloon Indebtedness) maturing within one year of the date Unrestricted Cash and Investments are calculated (including internal affiliate loans and draws on lines of credit regardless of the maturity date of such lines of credit), plus (ii) the proceeds of accounts receivable financings or factoring, plus (iii) the required collateral levels under a swap agreement if collateral is actually posted, all as set forth in the most recent financial statements delivered under the Master Indenture, plus (iv) the proceeds of Put Indebtedness if such Put Indebtedness is not supported by a liquidity facility with a term-out provision with level annual payments over a term of not less than five years; provided, however, that the principal amount of Short-Term Indebtedness, Put Indebtedness or Balloon Indebtedness are not required to be deducted pursuant to (b) (i) and (iv) above if there is in effect on the date of calculation a binding commitment (including without limitation letters or lines of credit or standby bond purchase agreements) which may be subject only to commercially reasonable contingencies from a financial institution to provide financing sufficient to pay the principal amount of such Balloon Indebtedness or Put Indebtedness so becoming due within one year of the date of calculation or to pay such Short- Term Indebtedness, except that any amounts payable pursuant to the binding commitment payable within one year shall nevertheless be deducted. (l) Unrestricted Receivables means all accounts and assignable general intangibles now owned or hereafter acquired (excluding software) by any Member of the Obligated Group regardless of how generated, and all proceeds therefrom, whether cash or non-cash, all as defined in Article 9 of the Uniform Commercial Code, as amended of the state in which such Member is a registered organization; excluding, however, gifts, grants, bequests, donations and contributions to any Member heretofore or hereafter made, and the income and gains derived C-28

162 therefrom, which are specifically restricted by the donor or grantor to a particular purpose which is inconsistent with its use for payments under the Master Indenture or on the Obligations, to the extent required by such restriction and not subsequently designated as unrestricted. Subparagraph (u) of the provisions of the Master Indenture summarized above under the heading DEFINITIONS OF CERTAIN TERMS; Permitted Encumbrances is amended to read as follows: (u) Liens on accounts receivable arising as a result of the sale of such accounts receivable with recourse, provided that the principal amount of Indebtedness secured by any such Lien (i) does not exceed the aggregate sales price of such accounts receivable received by the Member of the Obligated Group selling the same, and (ii) does not exceed 20% of the net accounts receivable of the Obligated Group at the time of incurrence. ENTRANCE INTO THE OBLIGATED GROUP Paragraphs (d) and (e) of the provisions of the Master Indenture summarized above under the heading SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE - ENTRANCE INTO THE OBLIGATED GROUP are amended to read as follows: (d) The Master Trustee shall have received (1) an Officer s Certificate of the Obligated Group Agent which demonstrates that, immediately upon such Person becoming a Member of the Obligated Group, (x) the Members would not, as a result of such transaction, be in default in the performance or observance of any covenant or condition to be performed or observed by them under the Master Indenture and (y) the Obligated Group could meet the conditions described in subsection (A) of the provisions of the Fourth Supplemental Master Indenture summarized below under the heading PERMITTED ADDITIONAL INDEBTEDNESS below for the incurrence of one dollar of additional Funded Indebtedness, (2) an opinion of Counsel to the effect that (x) the instrument described in paragraph (b) above has been duly authorized, executed and delivered and constitutes a legal, valid and binding agreement of such Person, enforceable in accordance with its terms, subject to customary exceptions for bankruptcy, insolvency and other laws generally affecting the enforcement of creditors rights and the application of general principles of equity and to the exceptions set forth in Exhibit D to the Master Indenture and (y) the addition of such Person to the Obligated Group will not adversely affect the status as a Tax-Exempt Organization of any Member which otherwise has such status, and (3) if all amounts due or to become due on all Related Bonds have not been paid to the holders thereof and provision for such payment has not been made in such a manner as to have resulted in the defeasance of all Related Bond Indentures, an opinion of nationally recognized municipal bond counsel (which counsel and opinion, including the scope, form, substance and other aspects thereof, are acceptable to the Master Trustee), to the effect that under then existing law the consummation of such transaction, whether or not contemplated on the date of delivery of any such Related Bond, would not adversely affect (x) the validity of any Related Bond or the exemption from federal or state income taxation of interest payable on any such Related Bond otherwise entitled to such exemption or (y) the exemption from registration under the Securities Act of 1933 of any Related Bond otherwise entitled to such exemption; (e) The Master Trustee shall have received an Officer s Certificate of the Obligated Group Agent demonstrating that the unrestricted net assets of the Obligated Group giving effect to such Member s entry into the Obligated Group is not less that 85% of the unrestricted net assets of the Obligated Group (excluding such new Member) at the end of the most recent Fiscal Year for which audited financial statements are available. CESSATION OF STATUS AS A MEMBER OF THE OBLIGATED GROUP The provisions of the Master Indenture summarized above under the heading SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE - CESSATION OF STATUS AS A MEMBER OF THE OBLIGATED GROUP are amended as follows: (a) by adding subsections (c) and (d) thereof to read as follows: C-29

163 (c) the Obligated Group Agent delivers to the Master Trustee a certificate that, immediately upon such Person ceasing to be a Member of the Obligated Group, the Obligated Group could meet the conditions described in (1) subsection (A) of the provisions of the Fourth Supplemental Master Indenture summarized under the heading PERMITTED ADDITIONAL INDEBTEDNESS below for the incurrence of one dollar of additional Funded Indebtedness, and (2) the provisions of the Master Indenture summarized under the heading LIQUIDITY, demonstrating Unrestricted Cash and Investments of the Obligated Group are not less than an amount equal to 75 Days of Operating Expenses; (d) the Master Trustee receives written notice from each Rating Agency (as defined in the Bond Indenture), if any, then maintaining a rating on the non-credit enhanced obligations of the Obligated Group that such rating will not be withdrawn or reduced from the rating prior to such Person ceasing to be a Member of the Obligated Group; (b) by adding the following sentence at the end thereof to read as follows: The foregoing provisions to the contrary notwithstanding, the Corporation covenants that it will not, at any time, take any action, corporate or otherwise, or permit any action to be taken, which would cause the Corporation, or any entity which includes the acute care hospital known as the University of Chicago Hospitals to cease to be a Member of the Obligated Group. INSURANCE The provisions of the Master Indenture summarized above under the heading SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE - INSURANCE are deleted in their entirety and replaced to read as follows: Each Member shall maintain, or cause to be maintained, at its sole cost and expense, insurance with respect to its Property, the operation thereof and its business against such casualties, contingencies and risks (including but not limited to public liability and employee dishonesty) and in amounts not less than are customary in the case of corporations engaged in the same or similar activities and similarly situated and as is adequate to protect its Property and operations. The Obligated Group may self-insure if the Obligated Group Agent determines that such self-insurance is prudent under the circumstances; provided, however, that no Member of the Obligated Group may self-insure its Property, Plant and Equipment in excess of $1,000,000. The Obligated Group Agent shall annually review the commercial insurance and self-insurance each Member maintains as to whether such insurance is customary and adequate. In addition, the Obligated Group Agent shall at least once every Fiscal Year cause an Officer s Certificate to be delivered to the Master Trustee, each Related Issuer and the Bond Insurer which indicates that the insurance then being maintained by the Members is customary in the case of corporations engaged in the same or similar activities and similarly situated and is adequate to protect the Obligated Group s Property and operations; provided however, that with respect to self-insurance, the Obligated Group Agent shall cause a certificate of an Insurance Consultant to be delivered to the Master Trustee, each Related Issuer and the Bond Insurer, stating that such self-insurance meets standards set forth in this paragraph. RATES AND CHARGES The provisions of the Master Indenture summarized above under the heading SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE - RATES AND CHARGES are amended as follows: (a) by amending the last sentence of the third paragraph thereof to read as follows: Such Consultant shall be selected by the Obligated Group Agent from a list of Consultants which are acceptable to all Related Issuers. In addition, such Consultant and the scope of the Consultant s report must be approved by the Bond Insurer. (b) by amending the first sentence of the fourth paragraph thereof to read as follows: C-30

164 A copy of the Consultant s report and recommendations, if any, shall be filed with each Member, the Master Trustee, each Related Bond Trustee, each Related Issuer and each Qualifying Obligation Holder, and must be approved by the Bond Insurer. (c) by adding the following sentence at the end thereof to read as follows: The foregoing provisions of the Master Indenture summarized under this heading to the contrary notwithstanding, the failure of the Obligated Group to maintain a Historical Debt Service Coverage Ratio in any Fiscal Year of at least 1.00:1 shall constitute an event of default under the Master Indenture. MERGER, CONSOLIDATION, SALE OR CONVEYANCE The provisions of the Master Indenture summarized above under the heading SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE - MERGER, CONSOLIDATION, SALE OR CONVEYANCE are amended as follows: (a) by adding subsections (a)(iii) and (iv) as follows: (iii) The Master Trustee shall have received an Officer s Certificate of the Obligated Group Agent demonstrating that immediately after such merger or consolidation, or such sale or conveyance, the conditions described in subsection (A) of the provisions of the Fourth Supplemental Master Indenture summarized under the heading PERMITTED ADDITIONAL INDEBTEDNESS below would be met for the incurrence of one dollar of additional Funded Indebtedness; (iv) The Master Trustee shall have received an Officer s Certificate of the Obligated Group Agent demonstrating that the unrestricted net assets of the Obligated Group giving effect to such merger or consolidation, or such sale or conveyance, is not less than 85% of the unrestricted net assets of the Obligated Group (without giving effect to such merger, consolidation, sale or conveyance) at the end of the most recent Fiscal Year for which audited financial statements are available; and (b) by adding the following sentence at the end thereof to read as follows: The foregoing provisions to the contrary notwithstanding, the Corporation covenants that it will not, at any time, take any action, corporate or otherwise, which would cause the Corporation or any entity which includes the acute care hospital known as the University of Chicago Hospitals to cease to be included in the Obligated Group. PERMITTED ADDITIONAL INDEBTEDNESS The provisions of the Master Indenture summarized above are amended to add a new section as follows: So long as any Obligations are outstanding, the Obligated Group will not incur any Long-Term Additional Indebtedness (whether or not incurred through the issuance of Additional Obligations) other than: (A) Funded Indebtedness, if prior to incurrence thereof or, if such Funded Indebtedness was incurred in accordance with another subsection of the Master Indenture summarized under this heading and any Member wishes to have such Indebtedness classified as having been issued under this subsection (A), prior to such classification, there is delivered to the Master Trustee: (i) An Officer s Certificate from the Obligated Group Agent (which Officer s Certificate, including without limitation the scope, form, substance and other aspects thereof, is acceptable to the Master Trustee) stating that the Funded Indebtedness Ratio of the Obligated Group, after giving effect to the incurrence of such Indebtedness and to the application of the proceeds thereof, does not exceed 0.60:1; and C-31

165 (ii) An Officer s Certificate from the Obligated Group Agent (which Officer s Certificate, including without limitation the scope, form, substance and other aspects thereof, is acceptable to the Master Trustee) stating that the Historical Pro Forma Debt Service Coverage Ratio of the Obligated Group for the most recent Fiscal Year preceding the date of delivery of the report for which combined financial statements reported upon by independent certified public accountants are available was not less than 1.20:1; or (b) (x) an Officer s Certificate from the Obligated Group Agent in a form acceptable to the Master Trustee stating that the Historical Pro Forma Debt Service Coverage Ratio of the Obligated Group for the Fiscal Year next preceding the incurrence of such Funded Indebtedness for which combined financial statements reported upon by independent certified public accountants are available was not less than 1.10:1; and (y) a written Consultant s report (which report, including without limitation the scope, form, substance and other aspects thereof, is acceptable to the Master Trustee) to the effect that the Projected Debt Service Coverage Ratio of the Obligated Group for each of the next two succeeding Fiscal Years or, if such Indebtedness is being incurred in connection with the financing of Facilities, the two Fiscal Years succeeding the projected completion date of such Facilities, is not less than 1.20:1, provided that such report shall include forecast balance sheets, statements of operations and statements of changes in net assets for each of such two Fiscal Years and a statement of the relevant assumptions upon which such forecasted statements are based, which financial statements shall indicate that sufficient revenues and cash flow could be generated to pay the operating expenses of the Obligated Group s proposed and existing Facilities and the debt service on the Obligated Group s other existing Indebtedness during such two Fiscal Years; or (c) An Officer s Certificate from the Obligated Group Agent in a form acceptable to the Master Trustee stating that the Historical Pro Forma Debt Service Coverage Ratio of the Obligated Group for the Fiscal Year next preceding the incurrence of such Funded Indebtedness for which combined financial statements reported upon by independent certified public accountants are available was not less than 1.10:1 and that the Projected Debt Service Coverage Ratio of the Obligated Group for each of the next two succeeding Fiscal Years or, if such Indebtedness is being incurred in connection with the financing of Facilities, the two Fiscal Years succeeding the projected completion date of such Facilities, is not less than 1.50:1; further provided that the requirements of the foregoing subsection (b)(x) or (y), as the case may be, shall be deemed satisfied if (1) there is delivered to the Master Trustee the report of a Consultant (which report, including without limitation the scope, form, substance and other aspects thereof, is acceptable to the Master Trustee and which contains the information required by the proviso to subsection (b)(y) in the case of projections) which contains an opinion of such Consultant that applicable laws or regulations have prevented or will prevent the Obligated Group from generating the amount of Income Available for Debt Service required to be generated by subsection (b)(x) or (y), as the case may be, as a prerequisite to the issuance of Funded Indebtedness, and, if requested by the Master Trustee, such report is accompanied by a concurring 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) as to any conclusions of law supporting the opinion of such Consultant, (2) the report of the Consultant indicates that the rates charged or to be charged by the Obligated Group are or will be such that, in the opinion of such Consultant, the Obligated Group has generated or will generate the maximum amount of Revenues reasonably practicable given such laws or regulations, and (3) the Historical Maximum Annual Debt Service Coverage Ratio of the Obligated Group and the Projected Debt Service Coverage Ratio of the Obligated Group referred to in the applicable subsection are at least 1.00:1. (B) Balloon Indebtedness, with the consent of the Bond Insurer, if the conditions set forth in subsection (A) are met with respect to such Balloon Indebtedness when the assumptions set forth in subsection (C) below are made with respect to the portion of such Balloon Indebtedness becoming due during each such 12 month period. (C) Put Indebtedness if the conditions set forth in subsection (A) above are met with respect to such Put Indebtedness when it is assumed that such Put Indebtedness bears interest at the Revenue Bond Index, as most recently published in The Bond Buyer, and is payable on a level annual debt service basis over a 30-year period commencing with the next succeeding Put Date. (D) Funded Indebtedness for the purpose of refunding (whether in advance or otherwise) any outstanding Funded Indebtedness so as to render it no longer outstanding if prior to the incurrence thereof: C-32

166 (i) An Officer s Certificate of the Obligated Group Agent is delivered to the Master Trustee stating that, taking the issuance of the proposed Funded Indebtedness and the refunding of the existing Funded Indebtedness into account, (a) the Maximum Annual Debt Service Requirement of the Obligated Group will not be increased by more than 10%, or (b) the conditions described in subsection (A) of the Fourth Supplemental Master Indenture summarized under this heading are met with respect to such proposed Funded Indebtedness; and (ii) There is delivered to the Master Trustee an opinion of Counsel stating that, upon the incurrence of such proposed Funded Indebtedness and application of the proceeds thereof and any other funds to be applied for such purpose, the outstanding Funded Indebtedness to be refunded thereby will no longer be outstanding within the meaning of the Master Indenture. (E) Liabilities for contributions to self-insurance or shared or pooled-risk insurance programs required or permitted to be maintained under the Master Indenture. (F) Commitment Indebtedness without limit. (G) Indebtedness incurred in connection with a sale of accounts receivable with or without recourse by any Member consisting of an obligation to repurchase all or a portion of such accounts receivable upon certain conditions, provided that the principal amount of such Indebtedness permitted by the Master Indenture shall not exceed the aggregate sale price of such accounts receivable received by such Member; provided, however, that if such sale of accounts receivable is with recourse, the aggregate principal amount of Indebtedness incurred pursuant to the provisions of the Master Indenture summarized under this subsection (G) shall not exceed 20% of the Book Value of accounts receivable of the Obligated Group as of the end of the most recent Fiscal Year for which audited financial statements are available, without the written consent of the Bond Insurer. (H) Indebtedness the principal amount of which at the time incurred, together with the aggregate principal amount of all other Indebtedness then outstanding which was issued pursuant to the provisions of the Fourth Supplemental Master Indenture summarized under this subsection (H) and which has not subsequently been reclassified as having been issued under Sections (A), (B) or (C) of the provisions of the Fourth Supplemental Master Indenture summarized under this heading, does not exceed 20% of the Revenues of the Obligated Group for the most recent Fiscal Year in which combined financial statements reported upon by independent certified public accountants are available. Each Member covenants that prior to, or as soon as reasonably practicable after, the incurrence of Indebtedness by such Member for money borrowed or credit extended, or the equivalent thereof, it will deliver to the Master Trustee an Officer s Certificate which identifies the Indebtedness incurred, identifies the subsection of the Fourth Supplemental Master Indenture summarized under this heading pursuant to which such Indebtedness was incurred, demonstrates compliance with the provisions of such subsection and attaches a copy of the instrument evidencing such Indebtedness. CALCULATION OF DEBT SERVICE AND DEBT SERVICE COVERAGE The provisions of the Master Indenture summarized above are amended to add a new section as follows: The various calculations of the amount of Indebtedness of a Person, the amortization schedule of such Indebtedness and the debt service payable with respect to such Indebtedness required under certain provisions of the Fourth Supplemental Master Indenture shall be made in a manner consistent with that adopted in the provisions of the Master Indenture summarized under the heading PERMITTED ADDITIONAL INDEBTEDNESS above and in the Fourth Supplemental Master Indenture summarized under this heading. In the case of Balloon or Put Indebtedness issued pursuant to the provisions of the Fourth Supplemental Master Indenture summarized under the heading PERMITTED ADDITIONAL INDEBTEDNESS, the amortization schedule of such Indebtedness and the debt service payable with respect to such Indebtedness for future periods shall be calculated on the assumption that such Indebtedness is being issued C-33

167 simultaneously with such calculation. With respect to Put Indebtedness, if the option of the holder to require that such Indebtedness be paid, purchased or redeemed prior to its stated maturity date, or if the requirement that such Indebtedness be paid, purchased or redeemed prior to its stated maturity date (other than at the option of such holder and other than pursuant to any mandatory sinking fund or any similar fund), has expired or lapsed as of the date of calculation, such Put Indebtedness shall be deemed payable in accordance with its terms. In determining the amount of debt service payable on Indebtedness in the course of the various calculations required under certain provisions of the Master Indenture, if the terms of the Indebtedness being considered are such that interest thereon for any future period of time is expressed to be calculated at a varying rate per annum, a formula rate or a fixed rate per annum based on a varying index, then for the purpose of making such determination of debt service, interest on such Indebtedness for such period (the Determination Period ) shall be computed by assuming that the rate of interest applicable to the Determination Period is equal to the average of the rate of interest (calculated in the manner in which the rate of interest for the Determination Period is expressed to be calculated) which was in effect on the last date of each of any six consecutive calendar months occurring in the nine full calendar months immediately preceding the month in which such calculation is made; provided that if the index or other basis for calculating such interest was not in existence for at least six full calendar months next preceding the date of calculation, the rate of interest for such portion of such period shall be deemed to be the rate of interest borne by such Indebtedness when issued. Obligations issued to secure Indebtedness permitted to be incurred under the provisions of the Fourth Supplemental Master Indenture summarized under the heading PERMITTED ADDITIONAL INDEBTEDNESS shall not be treated as Additional Indebtedness. No debt service shall be deemed payable with respect to Commitment Indebtedness until such time as funding occurs under the commitment which gave rise to such Commitment Indebtedness. From and after such funding, the amount of such debt service shall be calculated in accordance with the actual amount required to be repaid on such Commitment Indebtedness and the actual interest rate and amortization schedule applicable thereto. No Additional Indebtedness shall be deemed to arise when any funding occurs under any such commitment or any such commitment is renewed upon terms which provide for substantially the same terms of repayment of amounts disbursed pursuant to such commitment as obtained prior to such renewal. In addition, no Additional Indebtedness shall be deemed to arise when Indebtedness which bears interest at a variable rate of interest is converted to Indebtedness which bears interest at a fixed rate or the method of computing the variable rate on such Indebtedness is changed or the terms upon which Indebtedness, if Put Indebtedness, may be or is required to be tendered for purchase are changed, if such conversion or change is in accordance with the provisions applicable to such variable rate Indebtedness or Put Indebtedness in effect immediately prior to such conversion or change. Except for the purpose of determining whether any particular Guaranty may be incurred in which case it shall be assumed that 100% of the Indebtedness guaranteed is Funded Indebtedness of the guarantor under such Guaranty and except for the purpose of calculating any historical Debt Service Requirements in which case the guarantor s Debt Service Requirements under a Guaranty shall be deemed to be the actual amount paid on such Guaranty by the guarantor, a guarantor shall be considered liable only for 20% of the annual debt service requirement on the Indebtedness guaranteed; provided, however, if the guarantor has been required by reason of its guaranty to make a payment in respect of such Indebtedness within the immediately preceding 24 months, the guarantor shall be considered liable for 100% of the annual debt service requirement on the Indebtedness guaranteed. For the purposes of the various calculations required under the Master Indenture, the Capitalized Rentals under a Capitalized Lease at the time of such calculation shall be deemed to be the principal payable thereon. Anything in the Master Indenture to the contrary notwithstanding, any portion of any Indebtedness of any Member for which an Interest Rate Hedge has been obtained by such Member shall be deemed to bear interest for the period of time that such Interest Rate Hedge is in effect at a net rate which takes into account the interest payments made by such Member on such Indebtedness and the payments made or received by such Member on such Interest Rate Hedge; provided that the long-term credit rating of the C-34

168 provider of such Interest Rate Hedge (or any guarantor thereof) is in one of the three highest rating categories of any Rating Agency (without regard to any refinements of gradation of rating category by numerical modifier or otherwise) or is at least as high as that of the Obligated Group. In addition, so long as any Indebtedness is deemed to bear interest at a rate taking into account an Interest Rate Hedge, any payments made by a Member on such Interest Rate Hedge shall be excluded from Expenses and any payments received by a Member on such Interest Rate Hedge shall be excluded from Revenues, in each case, for all purposes of the Master Indenture. SALE, LEASE OR OTHER DISPOSITION OF PROPERTY The provisions of the Master Indenture summarized above are amended to add a new section as follows: Each Member agrees that it will not, in any consecutive 12-month period, sell, lease or otherwise dispose (including without limitation any involuntary disposition) of Property which, together with all other Property transferred by Members in transactions other than those described in subsections (A) through (F) of the provisions of the Master Indenture summarized under this heading, totals for such 12-month period in excess of 6% of the Book Value of the Property of the Obligated Group (calculated on the basis of the Book Value of the assets shown on the assets side of the balance sheet in the audited financial statements of the Obligated Group for the Fiscal Year next preceding the date of such sale, lease or other disposition for which combined financial statements of the Obligated Group reported on by independent certified public accountants are available), except for transfers or other dispositions in the ordinary course of business and except for transfers or other dispositions of Property: (A) In return for other Property of equal or greater value and usefulness; (B) To any Person, if prior to such sale, lease or other disposition there is delivered to the Master Trustee an Officer s Certificate of a Member stating that, in the judgment of the signer, such Property has, or within the next succeeding 24 calendar months is reasonably expected to, become inadequate, obsolete, worn out, unsuitable, unprofitable, undesirable or unnecessary and the sale, lease or other disposition thereof will not impair the structural soundness, efficiency or economic value of the remaining Property; (C) To another Member; (D) Upon fair and reasonable terms no less favorable to the Member than would obtain in a comparable arm s-length transaction; (E) To any Person, if such Property consists solely of assets which are specifically restricted by the donor or grantor to a particular purpose which is inconsistent with their use for payment on the Obligations; (F) To any Person upon delivery to the Master Trustee of an Officer s Certificate of the Obligated Group Agent (accompanied by the independent certified public accountant s reports mentioned below) certifying that during the Fiscal Year immediately preceding the proposed disposition for which financial statements have been reported upon by independent certified public accountants, taking into account such disposition as if it occurred in such Fiscal Year, (i) the conditions described in the provisions of subsection (A) of the Fourth Supplemental Master Indenture summarized under the heading PERMITTED ADDITIONAL INDEBTEDNESS would be met for the incurrence of one dollar of additional Funded Indebtedness, and (ii) the Historical Debt Service Coverage Ratio of the Obligated Group would not be reduced by more than 35%. The foregoing provisions of the Master Indenture summarized under this heading to the contrary notwithstanding, the Corporation covenants that it will not, at any time, take any action, corporate or otherwise, which would cause the acute care hospital known as the University of Chicago Hospitals to cease to be included in the Property of the Obligated Group. C-35

169 The foregoing provisions of the Master Indenture summarized under this heading to the contrary notwithstanding, each Member further agrees that it will not sell, lease, donate or otherwise dispose of Property (a) which could reasonably be expected at the time of such sale, lease, donation or disposition to result in a reduction of the Historical Debt Service Coverage Ratio for the Obligated Group such that the Master Trustee would be obligated to require the Obligated Group to retain a Consultant pursuant to the provisions of the Master Indenture summarized under the heading RATES AND CHARGES, or (b) if a Consultant has been retained in the circumstances described in the provisions of the Master Indenture summarized under the heading RATES AND CHARGES, such action, in the opinion of such Consultant, will have an adverse effect on the Income Available for Debt Service of the Obligated Group. The foregoing provisions of the Master Indenture summarized under this heading shall not be applicable to the termination of the Lease, the CAM Lease or the Children s Hospital Lease by the University or the Corporation under the circumstances, and upon satisfaction of the terms and conditions, set forth in any Related Loan Document. LIENS ON PROPERTY The provisions of the Master Indenture summarized above under the heading SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE - LIENS ON PROPERTY are deleted in their entirety and replaced to read as follows: (A) Each Member agrees that it will keep its Property free and clear from all Liens which are not Permitted Encumbrances. (B) A Lien on Property of any Member securing Indebtedness shall be classified as a Permitted Encumbrance (as provided in clause (b) of the definition thereof) and therefore be permitted if after giving effect to such Liens, the Book Value of the Property of the Obligated Group which is Encumbered by any such Liens (excluding amounts on deposit in any fund maintained under a Related Bond Indenture for the purpose of an interest or debt service reserve fund, in all cases in amounts which do not exceed amounts customarily deposited in such a fund) is not more than 6% of the Book Value of all of the Property of the Obligated Group (calculated on the basis of the Book Value of the Property of the Obligated Group as shown in the combined financial statements of the Obligated Group for the Fiscal Year next preceding the date of calculation for which combined financial statements of the Obligated Group reported on by independent certified public accountants are available). REMOVAL OF THE MASTER TRUSTEE The provisions of the Master Indenture summarized above under the heading SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE - REMOVAL OF THE MASTER TRUSTEE are deleted in their entirety and replaced to read as follows: The Master Trustee may be removed at any time, by an instrument or concurrent instruments in writing delivered to the Master Trustee, the Obligated Group Agent and the Bond Insurer, and signed by the owners of a majority in aggregate principal amount of Obligations then outstanding; provided that, if any Related Issuer so elects, it may elect to sign such an instrument as the owner of the Obligation or Obligations pledged to secure the Related Bonds issued by such Related Issuer. SUPPLEMENTAL MASTER INDENTURES The provisions of the Master Indenture summarized above under the heading SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE - SUPPLEMENTAL MASTER INDENTURES are amended as follows: (A) by amending clause (a) of the first paragraph to read as follows: C-36

170 (a) to cure any ambiguity or defective provision in or omission from the Master Indenture in such manner as is not inconsistent with and does not impair the security of the Master Indenture or adversely affect the holder of any Obligation, with the prior written consent of the Bond Insurer. (B) by amending the first clause of the Third paragraph to read as follows: In addition to Supplemental Master Indentures covered by the first paragraph summarized under this heading and subject to the terms and provisions contained in the Master Indenture summarized in the Third paragraph under this heading, and not otherwise, the holders of not less than a majority of the Obligations which are outstanding under the Master Indenture at the time of the execution of such Supplemental Master Indenture shall have the right, with the prior written consent of the Bond Insurer, from time to time, anything contained in the Master Indenture to the contrary notwithstanding, to consent to and approve the execution by the Members and the Master Trustee of such other Supplemental Master Indentures as shall be deemed necessary and desirable by the Members for the purpose of modifying, altering, amending, adding to or rescinding, in any particular, any of the terms or provisions contained in the Master Indenture or any other Supplemental Master Indenture. ADDITIONAL PROVISIONS FOR THE BENEFIT OF THE BOND INSURER LIQUIDITY The Master Indenture is amended by adding the following provisions thereto: The Obligated Group Agent covenants to deliver to the Bond Insurer and the Master Trustee (i) within 90 days of the end of the last day of the second quarter of each Fiscal Year and (ii) within 150 days of the last day of each Fiscal Year an Officer s Certificate demonstrating that Days Cash on Hand of the Obligated Group as of such date was not less than 75. If such Officer s Certificate is not delivered when required or if Days Cash on Hand as so calculated by such Officer s Certificate is less than 75 as of (i) the last day of the second quarter of each Fiscal Year or (ii) the last day of each Fiscal Year, an Event of Default shall exist under the Master Indenture. COPIES OF SUPPLEMENTS AND AMENDMENTS TO MASTER INDENTURE The Master Indenture is amended by adding the following provisions thereto: Copies of any supplements and amendments to the Master Indenture shall be delivered to Standard & Poor s. SUMMARY OF CERTAIN PROVISIONS OF THE TENTH SUPPLEMENTAL MASTER INDENTURE A brief description of certain amendments to the Master Indenture contained in the Tenth Supplemental Master Indenture is set forth below. Reference is made to the Tenth Supplemental Master Indenture for a full and complete statement of its provisions. SERIES 2009 AMENDMENTS TO THE MASTER INDENTURE This section contains amendments to the Master Indenture relating to the issuance of the Series 2009 Bonds (the Series 2009 Amendments ) which apply in addition to, and not in substitution for, the provisions of the Original Master Indenture. The Series 2009 Amendments shall only be applicable during the period any Series 2009 Bonds are outstanding. The provisions of the Master Indenture summarized in subparagraph (c) under the caption, the SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE SUPPLEMENTAL MASTER INDENTURES, permits amendments to the Master Indenture without the consent of, or notice to, any of the Obligation holders for the purpose of assigning and pledging under the Master Indenture additional revenues, properties and collateral. C-37

171 Pledge of Unrestricted Receivables The Granting Clauses of the Master Indenture are deemed to be amended by the Tenth Supplemental Master Indenture by adding the following language after the first paragraph of the Granting Clauses: All accounts and assignable general intangibles now owned or hereafter acquired (excluding software) by any Member of the Obligated Group regardless of how generated, and all proceeds therefrom, whether cash or noncash, all as defined in Article 9 of the Uniform Commercial Code, as amended of the state in which such Member is a registered organization; excluding, however, gifts, grants, bequests, donations and contributions to any Member heretofore or hereafter made, and the income and gains derived therefrom, which are specifically restricted by the donor or grantor to a particular purpose which is inconsistent with its use for payments under this Master Indenture or on the Obligations, to the extent required by such restriction and not subsequently designated as unrestricted (defined in this Master Indenture and referred to herein as the Unrestricted Receivables ). Provided, however, that at the written request of the Obligated Group Agent, the Master Trustee will execute and deliver, at the cost of the Obligated Group, such appropriate documents, including without limitation, releases and termination statements releasing and/or terminating the Lien created under the Master Indenture on those Unrestricted Receivables that are sold or factored to the extent permitted by the Master Indenture; and provided further that Unrestricted Receivables pledged under the Master Indenture may be made subject to a Lien to the extent permitted under the Master Indenture including, without limitation, liens on the Unrestricted Receivables which consist of accounts receivable that may be sold free and clear of the lien thereon despite this pledge if such sale is in accordance with the provisions of the Master Indenture. Additional Definition The following definition is added to the Master Indenture by the Tenth Supplemental Master Indenture to read as follows: Unrestricted Receivables shall have the meaning set forth in the Granting Clauses hereof. AMENDMENT TO THE MASTER INDENTURE The amendment to the Master Indenture contained in the Tenth Supplemental Master Indenture summarized below requires the consent of the holders of not less than fifty-one percent (51%) in aggregate principal amount of the Obligations which are Outstanding under the Master Indenture. The holders of the Series 2009 Obligations shall, by the acceptance thereof, be deemed to have consented to the amendments. The amendments, however, shall not become effective upon the issuance of the Series 2009 Bonds but shall become effective upon receipt by the Master Trustee of evidence that the holders of fifty-one percent (51%) in aggregate principal amount of the Obligations outstanding under the Master Indenture have consented to the amendments. The provisions of the Master Indenture summarized above in the second paragraph under the caption SUPPLEMENTAL MASTER INDENTURES are deleted in their entirety and replaced as follows: In addition to the foregoing, the holders of not less than a majority in aggregate principal amount (for the purposes of the provisions of the Master Indenture summarized under this heading, the principal amount of Capital Appreciation Indebtedness shall be deemed to be the Accreted Value thereof at the time of determination) of the Obligations which are outstanding under the Master Indenture at the time of the execution of such Supplemental Master Indenture shall have the right, from time to time, anything contained in the Master Indenture to the contrary notwithstanding, to consent to and approve the execution by the Members and the Master Trustee of such other Supplemental Master Indentures as shall be deemed necessary and desirable by the Members for the purpose of modifying, altering, amending, adding to or rescinding, in any particular, any of the terms or provisions contained in the Master Indenture or any other Supplemental Master Indenture; provided, however, that nothing in the provisions of the Master Indenture summarized under this heading shall permit, or be construed as permitting (a) an extension of the stated maturity or reduction in the principal amount of or reduction in the rate or extension of the time of paying of interest on or reduction of any premium payable on the redemption of, any Obligation, without the consent C-38

172 of the holder of such Obligation, (b) a reduction in the aforesaid aggregate principal amount of Obligations the holders of which are required to consent to any such supplemental Master Indenture or any such amending or supplementing instruments, without the consent of the holders of all the Obligations at the time outstanding which would be affected by the action to be taken, or (c) modification of the rights, duties or immunities of the Master Trustee, without the written consent of the Master Trustee. For the purpose of the provisions of the Master Indenture summarized under this heading, the principal amount of an Obligation issued to secure Commitment Indebtedness shall be the principal amount owed and not yet repaid on such Obligation as of the date of such calculation (rather than the nominal amount thereof). C-39

173 [THIS PAGE INTENTIONALLY LEFT BLANK]

174 APPENDIX D SUMMARY OF CERTAIN PROVISIONS OF THE BOND INDENTURES AND THE LOAN AGREEMENTS

175 Summary of Certain Provisions of the Bond Indentures and the Loan Agreements... D-1 Definitions of Certain Terms... D-1 Summary of Certain Provisions of the Bond Indentures... D-14 Funds... D-14 Transfer of Funds Between Project Fund and Funded Interest Account... D-18 Investment of Funds... D-18 Prohibited Activities... D-19 Supplemental Bond Indentures... D-19 Events of Default... D-21 Acceleration; Remedies... D-23 Direction of Proceedings by Bondholders... D-24 Waiver of Events of Default... D-24 Application of Moneys... D-25 Removal of the Bond Trustee... D-26 Bond Trustee as Holder of Series 2009 Obligation... D-27 Defeasance... D-27 Credit Facility... D-29 Consent of the Credit Facility Issuer... D-30 Termination of Lease; Assumption of Obligations Under Loan Agreements... D-30 Book Entry Tenders... D-31 Summary of Certain Provisions of the Loan Agreements... D-32 Loan of Series 2009 Bond Proceeds... D-33 Representations... D-33 Obligated Payments; Fund Deposits; Prepayments and Other Payments... D-33 Assignment and Pledge of Authority s Rights; Obligations of Corporation are Unconditional... D-33 Indemnification of the Authority... D-34 Maintenance of Corporate Existence and Status... D-35 Accreditation and Licensure... D-37 Financial Statements... D-37 Discharge of Orders... D-37 Use of Property... D-37 Rates and Charges... D-38 Transfer of Assets... D-38 Investment of Funds; Arbitrage; Tax Exemption Agreement... D-38 Credit Facility; Alternate Credit Facility... D-38 Supplements and Amendments to the Loan Agreements... D-39 Defaults and Remedies... D-40 Exchange of Bonds... D-42 Termination of Lease; Assumption of Obligations under Loan Agreements... D-42 i

176 SUMMARY OF CERTAIN PROVISIONS OF THE BOND INDENTURES AND THE LOAN AGREEMENTS Brief descriptions of the Bond Indentures and the Loan Agreements are included hereafter in this Official Statement. Such descriptions do not purport to be comprehensive or definitive. All references to the Bond Indentures and the Loan Agreements are qualified in their entirety by reference to each such document, copies of which are available for review prior to the issuance and delivery of the Series 2009 Bonds at the office of the Authority and thereafter at the office of the Bond Trustee. All references to the Series 2009 Bonds are qualified in their entirety by reference to the definitive form thereof and the information with respect thereto included in the Bond Indentures. The Bond Indentures and the Loan Agreements contain substantially similar provisions and are therefore summarized together under this Appendix. The Series 2009D Bonds are separately secured by the Series 2009D Loan Agreement, the Series 2009D Obligation and the Series 2009D Bond Indenture and the Series 2009E Bonds are separately secured by the Series 2009E Loan Agreement, the Series 2009E Obligation and the Series 2009E Bond Indenture. All references herein to the Series 2009 Bonds, the Loan Agreements, the Bond Indentures and the Series 2009 Obligations should be interpreted accordingly. Unless the context indicates otherwise, each reference to the Bond Indenture shall be deemed to refer to the Series 2009D Bond Indenture or the Series 2009E Bond Indenture, as applicable, each reference to the Series 2009 Bonds or the Bonds shall be deemed to refer to the Series 2009D Bonds or the Series 2009E Bonds, as applicable, each reference to the Loan Agreement shall be deemed to refer to the Series 2009D Loan Agreement or the Series 2009E Loan Agreement, as applicable, and each reference to the Series 2009 Obligation shall be deemed to refer to the Series 2009D Obligation or the Series 2009E Obligation, as applicable. DEFINITIONS OF CERTAIN TERMS The following are definitions of certain terms used in the Bond Indentures and the Loan Agreements. Act means the Illinois Finance Authority Act of the State of Illinois, as from time to time amended. Affiliation Agreement means the Affiliation Agreement dated as of October 1, 1986, as amended, between the Corporation and the University, as it may from time to time be amended or supplemented. Alternate Credit Facility means a credit facility provided in accordance with the Loan Agreement (other than (a) the Initial Credit Facility or (b) a Renewal Credit Facility), including, without limitation, a letter of credit or credit facility of a commercial bank or a financial institution, or a combination thereof, which provides security for payment of the principal of and interest on the Bonds when due (referred to in this definition as credit support ) and for payment of the purchase price of Tendered Bonds delivered or deemed delivered in accordance with the Bond Indenture (referred to in this definition as liquidity support ); provided that an Alternate Credit Facility may be issued to provide only credit support or liquidity support so long as a separate Alternate Credit Facility or Renewal Credit Facility provides at all times such Alternate Credit Facility is in effect complementary credit support or liquidity support, as the case may be, so that at all times while any of the Bonds bear interest at a Daily Interest Rate, Two-Day Interest Rate or Weekly Interest Rate such Bonds shall be entitled to credit support and liquidity support. Any amendment of a Credit Facility which is not a Renewal Credit Facility shall be an Alternate Credit Facility. Alternate Credit Facility Agreement means any Credit Facility Agreement substituted for an existing Credit Facility Agreement pursuant to the Bond Indenture. Applicable Percentage means (a) 100% if the Prevailing Rating is AAA/Aaa/AAA, (b) 110% if the Prevailing Rating is AA/Aa/AA, (c) 120% if the Prevailing Rating is A/A/A, (d) 130% if the Prevailing Rating is BBB/Baa/BBB and (e) 150% if the Prevailing Rating is Below BBB/Baa/BBB. ARS Conversion Date means the date on which the Bonds convert from an Interest Rate Period other than an ARS Rate Period and begin to bear interest at the Auction Period Rate. D-1

177 ARS Rate Period means any period of time commencing on the ARS Conversion Date and ending on the earlier of the Conversion Date or the day preceding the final maturity date of the Bonds. Auction Period Rate means the Auction Rate (as defined in the auction procedures attached as an exhibit to the Bond Indenture) or any other rate of interest to be borne by the Bonds during each Auction Period determined in accordance with the auction procedures attached as an exhibit to the Bond Indenture; provided, however, in no event may the Auction Period Rate exceed the Maximum Rate. Authority means the Illinois Finance Authority, a body politic and corporate created and existing under and by virtue of the Act, and its successors and assigns. Authorized Denominations means $100,000 or any integral multiple of $5,000 in excess of $100,000. Bank Bond Rate means the interest rate(s) applicable from time to time to Bank Bonds as determined in accordance with the applicable Credit Facility Agreement; provided that if no Credit Facility is in place as provided for in the provisions of the Loan Agreement summarized under the caption SUMMARY OF CERTAIN PROVISIONS OF THE LOAN AGREEMENTS - CREDIT FACILITY; ALTERNATE CREDIT FACILITY, the Bank Bond Rate shall be zero percent. Bank Bonds means Bonds purchased with moneys drawn under the Credit Facility pursuant to the Bond Indenture and owned by or pledged to or for the benefit of the Credit Facility Issuer or its permitted assignees in accordance with the Credit Facility Agreement until such Bonds are remarketed by the Remarketing Agent pursuant to the Remarketing Agreement and the Credit Facility Issuer has been paid all amounts due to it related to such Bank Bonds including any related Credit Facility Reimbursement Obligation or such Bonds lose their characterization as Bank Bonds pursuant to the Credit Facility Agreement. Bank Obligation(s) means individually, each of the Series 2009D Bank Obligation and the Series 2009E Bank Obligation and, collectively, both such obligations. Bond Counsel means any nationally recognized municipal bond counsel not objected to by the Bond Trustee. Bond Financed Property means all real and personal property of the Corporation to be financed or refinanced in whole or in part directly or indirectly out of the proceeds of the Series 2009 Bonds. Bond Indenture(s) means, individually, each of the Series 2009D Bond Indenture and the Series 2009E Bond Indenture and, collectively, both such Bond Indentures. Bond Interest Term means, with respect to any Bond, each period established in accordance with the Bond Indenture during which such Bond bears interest at a Bond Interest Term Rate. Bond Interest Term Rate means, with respect to each Bond, a non variable interest rate on such Bond established periodically in accordance with the Bond Indenture. Bond Purchase Fund means each such trust fund established with a Tender Agent pursuant to the Bond Indenture. Bond Register means the registration books of the Authority kept by the Bond Trustee (in its capacity as Registrar) to evidence the registration and transfer of the Series 2009 Bonds. Bond Sinking Fund means the fund by that name created under the Bond Indenture to which moneys are to be deposited in accordance with the Bond Indenture. Bond Trustee means Wells Fargo Bank, N.A., as bond trustee or any successor trustee under the Bond Indenture. D-2

178 Bond Year means any 12-month period beginning August 1 of a calendar year and ending July 31 of the next year. Bondholder, holder, owner or owner of the Bonds means the registered owner of any Bond and does not mean any beneficial owner of Bonds whether through the book-entry only system or otherwise. Bonds means the Series 2009 Bonds (including, without limitation, any Bank Bonds). Business Day means any day other than a Saturday, Sunday or other day on which the New York Stock Exchange is closed or on which banks are authorized or required to be closed in any of the City of Chicago, Illinois, the City of New York, New York, the city in which the office of the Credit Facility Issuer for drawings under the Credit Facility is located or any other municipalities in which the principal offices of the Bond Trustee or the Auction Agent, if any, are located. Closing Date means the date of the initial issuance and delivery of the Series 2009 Bonds. Code means the Internal Revenue Code of 1986, as amended from time to time. Each reference to a Section of the Code in the Bond Indenture shall be deemed to include the United States Treasury Regulations, including temporary and proposed regulations relating to such Section which are applicable to the Bonds or the use of the proceeds thereof. Conversion Date means the effective date of a Conversion of a Subseries of Bonds. Corporation means The University of Chicago Medical Center an Illinois not for profit corporation, and its successors and assigns and any surviving, resulting or transferee corporation, or any transferee corporation if all or substantially all of the assets of the Corporation have been transferred to such transferee corporation. Corporation Purchase Account means each account with that name established within the Bond Purchase Fund pursuant to the Bond Indenture. Counsel means an attorney duly admitted to practice law before the highest court of any state and, without limitation, may include independent or in-house legal counsel for the Corporation, any other Member, the Authority, the Master Trustee or the Bond Trustee. Credit Facility means one or more letters of credit (including confirming letters of credit or similar credit facility) then in effect and issued by a Credit Facility Issuer which, by its terms secures the payment of the principal of and interest on the Bonds when due and the Tender Price of Tendered Bonds, to the extent not paid from the proceeds of a remarketing of such Bonds. A Credit Facility may be applicable to only one Subseries of Bonds and there may be a separate Credit Facility and Credit Facility Issuer for each Subseries of Bonds. Credit Facility Agreement means, initially the Series 2009D Reimbursement Agreement and the Series 2009E Reimbursement Agreement, as applicable, and thereafter means any agreement pursuant to which a Credit Facility Issuer agrees to issue any Renewal Credit Facility or Alternate Credit Facility at the time in effect, as such agreement may from time to time be amended and supplemented. Credit Facility Issuer means a commercial bank, savings institution, insurer or other financial institution issuing a Credit Facility, including the Initial Credit Facility Issuers. Credit Facility Default Tender Date means the date on which the Bonds will be subject to mandatory tender (i) as a result of the receipt by the Bond Trustee of notice from the Credit Facility Issuer that an Event of Default has occurred and is continuing under the Credit Facility Agreement relating to such Credit Facility, which date must be a Business Day not greater than four days after the date of receipt of such notice by the Bond Trustee or (ii) as a result of receipt by the Bond Trustee of a notice from the Credit Facility Issuer that it has determined it will not reinstate the amount available under the Credit Facility for interest payments upon payment of an interest D-3

179 drawing, which date must be a Business Day not greater than four days after the date of receipt of such notice by the Bond Trustee. Credit Facility Purchase Account means each account with that name established within the Bond Purchase Fund pursuant to the Bond Indenture. Credit Facility Reimbursement Obligations means all amounts payable by the Corporation to the Credit Facility Issuer pursuant to the terms of the Credit Facility Agreement and relating to draws made under the Credit Facility. Daily Interest Rate means a variable interest rate for the Bonds established in accordance with the Bond Indenture. Daily Interest Rate Period means each period during which a Daily Interest Rate is in effect for a Subseries of Bonds. Defaulted Interest means interest on any Bond of a particular series which is payable but not duly paid on the date due. DTC means The Depository Trust Company. Electronic Means means facsimile transmission, transmission or other similar electronic means of communication providing evidence of transmission, including a telephone communication confirmed by any other method set forth in this definition. Eligible Accounts means an account that is either (a) maintained with a federal or state-chartered depository institution or trust company that has a S&P short-term debt rating of at least A-2 (or if no short-term debt rating, a long term rating of BBB+ ); or (b) maintained with the corporate trust department of a federal depository institution or state-chartered depository institution subject to regulations regarding fiduciary funds on deposit similar to Title 12 of the U.S. Code of Federal Regulation Section 9.10(b), which in either case has corporate trust powers and is acting in its fiduciary capacity. Eligible Moneys means (a) Bond proceeds deposited with the Bond Trustee contemporaneously with the issuance and sale of the Bonds and which were continuously thereafter held subject to the lien of the Bond Indenture in a separate and segregated fund, account or subaccount established under the Bond Indenture in which no moneys which were not Eligible Moneys were at any time held, together with investment earnings on such Bond proceeds; (b) moneys (i) paid or deposited by the Corporation or any other Member of the Obligated Group to or with the Bond Trustee, (ii) continuously held in any fund, account or subaccount established under the Bond Indenture which is subject to the lien of the Bond Indenture and in which no other moneys which are not Eligible Moneys are held and (iii) which have so been on deposit with the Bond Trustee for at least 367 days from their receipt by the Bond Trustee, during and prior to which period no petition by or against the Authority, the Corporation, any other Member of the Obligated Group or any affiliate thereof (as defined in Title 11 of the United States Code) to which such moneys are attributable under any bankruptcy or similar law now or hereafter in effect shall have been filed and no bankruptcy or similar proceeding otherwise initiated (unless such petition or proceeding shall have been dismissed and such dismissal be final and not subject to appeal), together with investment earnings on such moneys; (c) moneys received by the Bond Trustee pursuant to the Credit Facility which are held in any fund, account or subaccount established under the Bond Indenture in which no other moneys which are not Eligible Moneys are held, together with investment earnings on such moneys; (d) proceeds from the remarketing of any Bonds pursuant to the provisions of the Bond Indenture to any Person other than the Authority, the Corporation, any other Member of the Obligated Group or any affiliate thereof (as defined in Title 11 of the United States Code); (e) proceeds from the issuance and sale of refunding bonds, together with the investment earnings on such proceeds; and (f) moneys which are derived from any other source, together with the investment earnings on such moneys, if the Bond Trustee has received an unqualified opinion of nationally recognized bankruptcy counsel, which opinion is not objected to by the Bond Trustee, the Credit Facility Issuer and the Rating Agencies (which opinion may assume that no Bondholders are insiders within the meaning of Title 11 of the United States Code) to the effect that payment of such amounts D-4

180 to bondholders would not be voidable as preferential payments under Sections 362(a), 541 or 547 of the United States Bankruptcy Code recoverable under Section 550 of the United States Bankruptcy Code should the Authority, the Corporation, any other Member of the Obligated Group or any affiliate thereof (as defined in Title 11 of the United States Code) become a debtor in a proceeding commenced thereunder; provided that such proceeds, moneys or income shall not be deemed to be Eligible Moneys or available for payment of the Bonds if, among other things, an injunction, restraining order or stay is in effect preventing such proceeds, moneys or income from being applied to make such payment. For the purposes of this definition, the term moneys shall include cash and any investment securities including, without limitation, Government Obligations. Expiration Date means (i) the date upon which a Credit Facility is scheduled to expire (taking into account any extensions of such Expiration Date) in accordance with its terms without regard to any early termination thereof, and (ii) the date upon which a Credit Facility terminates following voluntary termination by the Corporation pursuant to the Loan Agreement and any pertinent provision of the related Credit Facility. Favorable Opinion of Bond Counsel means, with respect to any action the occurrence of which requires such an opinion, an unqualified Opinion of Counsel, which shall be Bond Counsel, to the effect that such action is permitted under the Bond Indenture and will not, in and of itself, adversely affect the validity or enforceability of the Series 2009 Bonds or result in the inclusion of interest on the Series 2009 Bonds in gross income for federal income tax purposes (subject to the inclusion of any exemptions contained in the opinion of Bond Counsel delivered upon original issuance of the Bonds), and containing any other opinion specifically required by the provisions of the Bond Indenture). Fitch means Fitch, Inc., its successors and assigns, and, if such corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, Fitch shall be deemed to refer to any other nationally recognized securities rating agency designated by the Bond Trustee, at the written direction of the Corporation with written notice to the Authority and the Bond Trustee. Fund means any of the funds established pursuant to the Bond Indenture. Government Obligations means (a) United States Government Obligations or (b) evidences of a direct ownership in future interest or principal payments on United States Government Obligations, which United States Government Obligations are held in a custodial account by a custodian satisfactory to the Bond Trustee pursuant to the terms of a custody agreement. Immediate Notice means notice by Electronic Means to such address as the addressee shall have provided in writing, promptly followed by written notice by first class mail, postage prepaid; provided, however, that if any Person required to give an Immediate Notice shall not have been provided with the necessary information to deliver such notice by Electronic Means, Immediate Notice shall mean written notice by first class mail, postage prepaid. Independent Counsel means an attorney duly admitted to practice law before the highest court of any state and, without limitation, may include independent legal counsel for the Corporation, the Bond Trustee, the Authority or the Master Trustee. Initial Credit Facility Issuer(s) means, individually, each of the Series 2009D Initial Credit Facility Issuer and the Series 2009E Credit Facility Issuer and, collectively both such Initial Credit Facility Issuers. Interest Accrual Date means (a) for any Weekly Interest Rate Period, the first day thereof and, thereafter, each Interest Payment Date, (b) for any Two-Day Interest Rate Period, the first day thereof and, thereafter, each Interest Payment Date and (c) for any Daily Interest Rate Period, the first day thereof and, thereafter, each Interest Payment Date. Interest Fund means the trust fund so designated which is created and established pursuant to the Bond Indenture. D-5

181 Interest Payment Date means (a) September 1, 2009 and thereafter each date set forth in (b), (c), (d), (e) and (f) below; (b) for any Weekly Interest Rate Period, the first Business Day of each succeeding calendar month; (c) for any Daily Interest Rate Period, the first Business Day of the each succeeding calendar month; (d) for any Two- Day Interest Rate Period, the first Business Day of each succeeding calendar month; (e) for each Interest Rate Period, the day next succeeding the last day thereof; and (f) for Bank Bonds, the dates set forth in the Credit Facility Agreement. Interest Rate Period means each Daily Interest Rate Period, Two-Day Interest Rate Period, Weekly Interest Rate Period, Short Term Interest Rate Period, Long-Term Interest Rate Period, LIBOR-Based Interest Rate Period or ARS Rate Period. Lease means both or either of (i) the Lease Agreement dated as of June 30, 1987, between the University, as lessor, and the Corporation, as lessee, as previously amended, and as it may from time to time hereafter be amended or supplemented, (ii) the Center for Advanced Medicine and Pritzker Building Lease Agreement dated as of June 21, 1993 between the University, as lessor, and the Corporation, as lessee, as previously amended, and as the same may be amended or supplemented from time to time and (iii) the New Hospital Pavilion Lease Agreement dated as of August 20, 2009 between the University, as lessor, and the Corporation, as lessee, as the same may be amended or supplemented from time to time. LIBOR-Based Interest Rate means a variable interest rate borne by the Bonds and established in accordance with the Bond Indenture. effect. LIBOR-Based Interest Rate Period means each period during which a LIBOR-Based Interest Rate is in LIBOR Index means the reported rate for deposits in U.S. dollars having an index maturity of one month for a period commencing on the second London Banking Day immediately following the date of determination, in amounts of not less than $1,000,000, that appears on Telerate Page 3750 (or such other page as may replace that page on that service, or such other service as may be nominated by the British Bankers Association, for the purpose of displaying London interbank offered rates for U.S. dollar deposits) at approximately 11:00 a.m., London time, on the date of determination. LIBOR Percentage means the minimum percentage of the LIBOR Index that would be necessary (as determined by the Remarketing Agent based on the examination of tax-exempt obligations comparable to the Bonds known by the Remarketing Agent to have been priced or traded under then-prevailing market conditions) to allow the Remarketing Agent to sell the Bonds on the date and at the time of such determination at their principal amount (without regard to accrued interest) if the Bonds were being sold on such date. Loan Agreement(s) means, individually, each of the Series 2009D Loan Agreement and the Series 2009E Loan Agreement and, collectively, both such Loan Agreements. Long-Term Interest Rate means a term, non variable interest rate established in accordance with the Bond Indenture. London Banking Day means any day on which commercial banks are open for general business (including dealings in foreign exchange and foreign currency) in the City of London, United Kingdom. Long-Term Interest Rate Period means each period during which a Long-Term Interest Rate is in effect. Master Indenture means the Master Trust Indenture (Amended and Restated) dated as of November 1, 1998 between the Corporation and the Master Trustee, amending and restating that certain Master Trust Indenture dated as of August 1, 1987, as theretofore supplemented and amended and as it may from time to time be further supplemented and amended in accordance with the terms thereof. Master Trustee means Wells Fargo Bank, N.A. or any successor trustee under the Master Indenture. D-6

182 Maturity Date means August 1, Maximum Lawful Rate means the maximum rate of interest on the Bonds permitted by applicable law. Maximum Rate means the lesser of (i) 12% per annum, (ii) the maximum rate from time to time permitted to be drawn on the Credit Facility to pay interest on the Bonds (initially, 12%) and (iii) the Maximum Lawful Rate, provided, however, that the Maximum Rate for Bank Bonds shall be the lesser of 25% per annum and the Maximum Lawful Rate. Member or Member of the Obligated Group means the Corporation and any Person designated as a Member of the Obligated Group pursuant to the terms of the Master Indenture. Moody s means Moody s Investors Service, Inc., a corporation organized and existing under the laws of the State of Delaware, its successors and their assigns, or, if such corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, any other nationally recognized securities rating agency designated by the Bond Trustee at the written direction of the Corporation with written notice to the Bond Trustee and the Authority. Obligated Group means collectively, those Persons designated as a Member of the Obligated Group pursuant to the terms of the Master Indenture, initially the Corporation. Obligated Group Agent means the Corporation or any other member of the Obligated Group designated as the Obligated Group Agent pursuant to the provisions of the Master Indenture. Officer s Certificate means a certificate signed, in the case of a certificate delivered by a Person which is a corporation, by the President, any Vice President, Treasurer or such other duly authorized officer of such corporation or, in the case of a certificate delivered by any Person which is not a corporation, the chief executive or chief financial officer of such other Person, in either case whose authority to execute such certificate shall be evidenced to the satisfaction of the Bond Trustee. Bonds. Official Statement means this Official Statement prepared in connection with the issuance and sale of the Opinion of Counsel means a written opinion of counsel who is acceptable to the Bond Trustee in form and substance acceptable to the Bond Trustee and the Credit Facility Issuer (but only of the Credit Facility Issuer is an addressee of such opinion). Outstanding, Bonds outstanding or outstanding Bonds means, as of any given date, all Bonds which have been duly authenticated and delivered under the Bond Indenture, except: (a) maturity; Bonds canceled after purchase in the open market or because of payment at or redemption prior to (b) Bonds for the payment or redemption of which cash or noncallable Government Obligations or both shall have been theretofore deposited with the Bond Trustee (whether upon or prior to the maturity or redemption date of any such Bonds) in accordance with the Bond Indenture; and (c) Bonds in lieu of which others have been authenticated under the Bond Indenture. Person means any natural person, firm, joint venture, association, partnership, business trust, corporation, limited liability company, public body, agency or political subdivision thereof or any other similar entity. Prevailing Rating means (a) AAA/Aaa/AAA if the Bonds shall have at least two (or, if the Bonds are rated by only one Rating Agency, any one) of the followings ratings: AAA or better by S&P, Aaa or better by Moody s or AAA or better by Fitch, (b) if not AAA/Aaa/AAA, AA/Aa/AA if the Bonds shall have at least two (or, D-7

183 if the Bonds are rated by only one Rating Agency, any one) of the following ratings: AA- or better by S&P, Aa3 or better by Moody s or AA- or better by Fitch, (c) if not AAA/Aaa/AAA or AA/Aa/AA, A/A/A if the Bonds shall have at least two (or, if the Bonds are rated by only one Rating Agency, any one) of the following ratings: A- or better by S&P, A3 or better by Moody s or A- or better by Fitch, (d) if not AAA/Aaa/AAA, AA/Aa/AA or A/A/A, then BBB/Baa if the Bonds shall have at least two (or, if the Bonds are rated by only one Rating Agency, any one) of the following ratings: BBB- or better by S&P, Baa3 or better by Moody s or BBB- or better by Fitch, and (e) if not AAA/Aaa/AAA, AA/Aa/AA, A/A/A or BBB/Baa/BBB, then Below BBB/Baa/BBB, whether or not the Bonds are rated by any Rating Agency. For purposes of this definition, S&P s rating categories of AAA, AA-, A- and BBB-, Moody s rating categories of Aaa, Aa3, A3 and Baa3 and Fitch s ratings categories of AAA, AA-, A- and BBB- shall be deemed to refer to and include the respective rating categories correlative thereto in the event that any such rating agencies shall have changed or modified their generic rating categories or if any successor thereto appointed in accordance with the definitions thereof shall use different rating categories. Principal Office means when used with respect to the Bond Trustee, the principal corporate trust office of the Bond Trustee located in Chicago, Illinois or such other office of the Bond Trustee as may be designated by the Bond Trustee. Project means all Property of the Corporation financed or refinanced with the proceeds of the Series 2009 Bonds. Project Certificate means the Certificate Regarding the Expenditure of Funds dated the Closing Date and delivered by the Corporation in connection with the issuance of the Series 2009 Bonds. Purchase Contract means the Series 2009D Purchase Contract and the Series 2009E Purchase Contract, as applicable. Qualified Investments means, with respect to the Bond Indentures, investments in any of the following: (a) Government Obligations; (b) Direct obligations of any agency or instrumentality of the United States of America and obligations on which the timely payment of principal and interest is fully guaranteed by any such agency or instrumentality; (c) Certificates of deposit, time deposits or other direct, unsecured debt obligations of any bank (including without limitation the Master Trustee or the Bond Trustee and their affiliates), trust company or savings and loan association if all of the direct, unsecured debt obligations of such institution at the time of purchase of such certificates of deposit, time deposits or obligations, which are rated by a Rating Agency are rated by such Rating Agency in one of the three highest Rating Categories assigned by such Rating Agency, or which certificates of deposit, time deposits or obligations are fully secured by a security interest in obligations described in clauses (a) or (b) of this definition; provided, however, that if such certificates of deposit, time deposits or obligations are so secured (1) the Bond Trustee shall have a perfected first security interest in the obligations securing such certificates of deposit, time deposits or other obligations, (2) the Bond Trustee shall hold or shall have the option to appoint an intermediary bank, trust company or savings and loan association as its agent to hold the obligations securing such certificates of deposit, time deposits or other obligations, and (3) the Bond Trustee or its appointed agent shall hold such obligations free and clear of the liens or claims of third parties; (d) Certificates of deposit or time deposits of any bank (including the Bond Trustee and the Master Trustee and their affiliates), trust company or savings and loan association which certificates of deposit or time deposits are fully insured by a federally sponsored deposit insurance program; (e) Securities of the type described in clauses (a) or (b) above purchased under agreements to resell such securities to any registered broker-dealer subject to the Securities Investors Protection Corporation jurisdiction or any commercial bank, if such broker-dealer s or bank s uninsured, unsecured and unguaranteed obligations which are rated by a Rating Agency are rated by such Rating Agency in one of the three highest rating categories assigned D-8

184 by such Agency (without regard to any refinement or gradation of rating category by numerical modifier or otherwise), provided: (i) a master repurchase agreement or specific written repurchase agreement governs the transaction; (ii) the repurchase agreement has a term of 30 days or less, or the Bond Trustee or a third party custodian as described below is required thereunder to value the collateral securities no less frequently than monthly and to liquidate or cause the custodian to liquidate the collateral securities if any deficiency in the required collateral percentage is not restored within two Business Days of such valuation; (iii) the fair market value of the securities in relation to the amount of the repurchase obligation, including principal and interest, is equal to at least 100%; and either (iv)(a) the securities are held by the Bond Trustee free and clear of any lien or claims of a third party, or (iv)(b)(w) the securities are held by an independent third party acting solely as agent for the Bond Trustee free and clear of any lien or claims of a third party (other than as agent hereinafter described), (x) such agent is a Federal Reserve Bank, or a bank which is a member of the Federal Deposit Insurance Corporation and which bank has combined capital, surplus and undivided profits of not less than $50,000,000, (y) the Bond Trustee shall have received written confirmation from such agent that it holds such securities, free and clear of any lien or claim, as agent for the Bond Trustee and (z) a perfected first security interest under the Uniform Commercial Code, or book entry procedures prescribed at 31 CFR et seq., 31 CFR et. seq., 31 CFR et. seq. or any other regulations analogous to the preceding regulations governing any other automated book entry system operated by the United States federal reserve banks in which securities issued by government sponsored enterprises are issued, recorded, transferred and maintained in book entry form (including without limitation the regulations set forth in 24 CFR Part 81, Subpart H) in such securities is created for the benefit of the Bond Trustee; (f) Investment agreements with banks which meet the rating criteria set forth in (c) above or investment agreements with non-bank financial institutions (i) all of the unsecured, direct long-term debt of such non-bank financial institution which is rated by a Rating Agency is rated by such Rating Agency in one of the three highest Rating Categories assigned by such Agency for obligations of that nature, (ii) if such non-bank financial institutions have no such outstanding long-term debt which is rated, all of the short-term debt of which is rated by a Rating Agency is rated by such Rating Agency in the highest Rating Category assigned to short-term indebtedness by such Rating Agency, or (iii) the obligations of such non-bank financial institutions are guaranteed by an entity whose claims paying ability is rated by a Rating Agency in one of the three highest rating categories (without regard to any refinement or gradation of rating category by numerical modifier or otherwise), all of which agreements referred to this subparagraph (f) provide that if such banks or non-bank financial institutions debt no longer satisfies such rating criteria such bank or institution will secure such agreements as soon as reasonably practicable to the extent and in the manner provided in subparagraph (c) above; (g) Shares of a fund registered under the Investment Company Act of 1940, as amended, whose shares are registered under the Securities Act of 1933, as amended, (including those funds for which the Bond Trustee or an affiliate performs services for a fee, whether as a custodian, transfer agent, investment advisor or otherwise) having assets of at least $100,000,000, whose investment assets are obligations which constitute Qualified Investments and which are rated AAAm or AAAm-G or better by S&P; (h) Commercial paper which, at the time of purchase, is rated by a Rating Agency in one of the two highest rating categories (incorporating refinements or gradation of rating category by numerical modifier or otherwise) assigned by such Rating Agency for obligations of that nature; (i) Obligations of, or obligations fully guaranteed by, any state of the United States of America or any political subdivision thereof which obligations, at the time of purchase, are rated by a Rating Agency in one of the three highest Rating Categories assigned by such Rating Agency to obligations of that nature; (j) Senior debt obligations of any corporation or trust organized under the laws of any state of the United States of America which securities, at the time of purchase, are rated by a Rating Agency in one of the three highest Rating Categories assigned by such Rating Agency for obligations of that nature; (k) Obligations which are rated in the highest rating category by a Rating Agency and are issued or incurred by any state, commonwealth or territory of the United States of America or any political subdivision, public instrumentality or public authority of any state, commonwealth or territory of the United States of America, which obligations are fully secured by and payable solely from an escrow fund consisting of cash or direct obligations of, D-9

185 or obligations the timely payment of principal and interest on which are fully guaranteed by, the United States of America, which fund is held by a corporate fiduciary pursuant to an escrow agreement; and (l) Bankers acceptances of any bank, including the Bond Trustee and the Master Trustee and their affiliates, if all of the direct, unsecured debt obligations of such institution at the time of purchase of such acceptances which are rated by a Rating Agency are rated by such Rating Agency in one of the three highest Rating Categories by such Rating Agency. Ratings of Qualified Investments referred to in the Bond Indenture shall be determined at the time of purchase of such Qualified Investments. The Bond Trustee shall have no responsibility to monitor the ratings of Qualified Investments after the initial purchase of such Qualified Investments. Rating Agency means any of Moody s, S&P or Fitch, or any other nationally recognized securities rating agency then maintaining a rating on the Bonds. Rating Category means one of the general rating categories of the Rating Agencies without regard to any refinement or gradation of such rating category by numerical modifier or otherwise. Rebate Fund means the Rebate Fund created pursuant to the Tax Exemption Agreement. Record Date means, with respect to any Interest Payment Date in respect to any Daily Interest Rate Period, Two-Day Interest Rate Period or any Weekly Interest Rate Period, the Business Day immediately preceding such Interest Payment Date. Remarketing Account means each account with that name established within the Bond Purchase Fund pursuant to the Bond Indenture. Remarketing Agent means any remarketing agent or agents with respect to a particular Subseries of Bonds appointed by the Corporation in accordance with the Bond Indenture and not objected to by the Authority or the Credit Facility Issuer and at the time serving as such under the Remarketing Agreement. The term related Remarketing Agent shall refer to the Remarketing Agent which has been designated Remarketing Agent for a particular Subseries of Bonds. Remarketing Agreements means those certain remarketing agreements between the Corporation and the Remarketing Agent, as such agreements may from time to time be amended and supplemented, to remarket the Bonds (or any Subseries thereof) delivered or deemed to be delivered for purchase by the holders thereof. Renewal Credit Facility means a Credit Facility provided in accordance with the Loan Agreement which has been issued with terms and conditions substantially similar to, and by the same provider of, the Credit Facility in substitution for which the Renewal Credit Facility is to be provided, except for: (a) an extension of the Expiration Date; (b) an increase or decrease in the Interest Coverage Rate or the Interest Coverage Period to the extent permitted by the provisions of the Bond Indenture; (c) Bond Indenture; an increase or decrease in the Interest Component to the extent permitted by the provisions of the (d) an increase or decrease in the portion of the Credit Facility designated to pay premium upon redemption or purchase of Bonds to the extent required or permitted by the provisions of the Bond Indenture; (e) changes in the business covenants contained in, the fees payable pursuant to and the interest rate on advances made under the Credit Facility Agreement; or D-10

186 (f) any combination of (a), (b), (c), (d) and (e). Renewal Credit Facility Agreement means, with respect to any Renewal Credit Facility, the agreement pursuant to which the Credit Facility Issuer agrees to issue such Renewal Credit Facility or allow the prior Credit Facility to be renewed; a Renewal Credit Facility Agreement may consist of a supplement or amendment to the existing Credit Facility Agreement. Self Liquidity Agreement means any arrangement which results in a Subseries of the Bonds being rated by at least one Rating Agency (and by all Rating Agencies then rating the Bonds) without the support of a Credit Facility. A Self Liquidity Agreement may be applicable to only one Subseries of the Bonds and there may be separate Self Liquidity Agreements for each Subseries of the Bonds. Series 2009 Obligation(s) means, collectively, the Series 2009D Obligation and the Series 2009E Obligation, or individually, each such series of obligation. Series 2009D Bank Obligation means The University of Chicago Medical Center Direct Note Obligation, Series 2009D-2 (Bank of America, N.A.). Series 2009D Bond Indenture means the Bond Trust Indenture dated as of August 1, 2009 from the Authority to the Bond Trustee relating to the Series 2009D Bonds, as it may from time to time be amended or supplemented. Series 2009D Bonds means the $70,000,000 aggregate principal amount of Illinois Finance Authority Variable Rate Demand Revenue Bonds, Series 2009D (The University of Chicago Medical Center), initially authorized to be issued by the Authority pursuant to the terms and conditions of the Bond Indenture. Series 2009D Initial Credit Facility Issuer means Bank of America, N.A., or any successor thereto or assignee thereof and any surviving, resulting or transferee corporation. Series 2009D Loan Agreement means the Loan Agreement relating to the Series 2009D Bonds dated as of August 1, 2009 between the Corporation and the Authority, as it may from time to time be amended or supplemented. Series 2009D Obligation means the $70,000,000 principal amount The University of Chicago Medical Center Direct Note Obligation, Series 2009D-1 (Illinois Finance Authority). Series 2009D Purchase Contract means Purchase Contract for the Series 2009D Bonds among the Authority, the Corporation and the purchasers named therein. Series 2009D Reimbursement Agreement means the Reimbursement Agreement dated as of August 1, 2009 by and between the Corporation and the Series 2009D Initial Credit Facility Issuer. Series 2009E Bank Obligation means The University of Chicago Medical Center Direct Note Obligation, Series 2009E-2 (JPMorgan Chase Bank, National Association). Series 2009E Bond Indenture means the Bond Trust Indenture dated as of August 1, 2009 from the Authority to the Bond Trustee relating to the Series 2009E Bonds, as it may from time to time be amended or supplemented. Series 2009E Bonds means the $70,000,000 aggregate principal amount of Illinois Finance Authority Variable Rate Demand Revenue Bonds, Series 2009E (The University of Chicago Medical Center), initially authorized to be issued by the Authority pursuant to the terms and conditions of the Series 2009E Bond Indenture. Series 2009E Initial Credit Facility Issuer means JPMorgan Chase Bank, National Association, or any successor thereto or assignee thereof and any surviving, resulting or transferee corporation. D-11

187 Series 2009E Loan Agreement means the Loan Agreement relating to the Series 2009E Bonds dated as of August 1, 2009 between the Corporation and the Authority, as it may from time to time be amended or supplemented. Series 2009E Obligation means the $70,000,000 principal amount The University of Chicago Medical Center Direct Note Obligation, Series 2009E-1 (Illinois Finance Authority) in substantially the form contained in the Tenth Supplemental Master Indenture. Series 2009E Purchase Contract means the Purchase Contract for the Series 2009E Bonds among the Authority, the Corporation and the purchasers named therein. Series 2009E Reimbursement Agreement means the Reimbursement Agreement dated as of August 1, 2009 by and between the Corporation and the Series 2009E Initial Credit Facility Issuer. Short-Term Interest Rate Period means, for any Subseries of Bonds, each period, consisting of Bond Interest Terms, during which such Subseries bear interest at one or more Bond Interest Term Rates. SIFMA Percentage means the minimum percentage of the SIFMA Swap Index that would be necessary (as determined by the Remarketing Agent based on the examination of tax-exempt obligations comparable to the Bonds known by the Remarketing Agent to have been priced or traded under then-prevailing market conditions) to allow the Remarketing Agent to sell the Bonds on the date and at the time of such determination at their principal amount (without regard to accrued interest) if the Bonds were being sold on such date. SIFMA Swap Index means, on any date, a rate determined on the basis of the seven-day high grade market index of tax-exempt variable rate demand obligations, as produced by Municipal Market Data and published or made available by the Securities Industry & Financial Markets Association (formerly the Bond Market Association) ( SIFMA ) or any Person acting in cooperation with or under the sponsorship of SIFMA and acceptable to the Bond Trustee and effective from such date. Special Record Date means the date fixed by the Bond Trustee pursuant to the Bond Indenture for the payment of Defaulted Interest. Standard & Poor s or S&P means Standard & Poor s Rating Services, a division of The McGraw Hill Companies, Inc., a corporation organized and existing under the laws of the State of New York, its successors and assigns, and, if such corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, Standard & Poor s shall be deemed to refer to any other nationally recognized securities rating agency designated by the Bond Trustee at the written direction of the Corporation with written notice to the Bond Trustee and the Authority. State means the State of Illinois. Subseries means the Subseries 2009D-1 Bonds, the Subseries 2009D-2 Bonds, the Subseries 2009E-1 Bonds and the Series 2009E-2 Bonds, as the case may be. Subseries 2009D-1 Bonds means $35,000,000 of Series 2009D Bonds bearing CUSIP No F ZR3. Subseries 2009D-2 Bonds means $35,000,000 of Series 2009D Bonds bearing CUSIP No F ZT9. Subseries 2009E-1 Bonds means $60,000,000 of Series 2009E Bonds bearing CUSIP No F ZV4. Subseries 2009E-2 Bonds means $10,000,000 of Series 2009D Bonds bearing CUSIP No F ZX0. Tax Exemption Agreement means the Tax Exemption Agreement dated the Closing Date among the Corporation, the Authority and the Bond Trustee. D-12

188 Tax-Exempt Organization means a Person organized under the laws of the United States of America or any state thereof which is an organization described in Section 501(c)(3) of the Code, which is exempt from federal income taxes under Section 501(a) of the Code, and which is not a private foundation within the meaning of Section 509(a) of the Code, or corresponding federal income tax laws from time to time in effect. Tender Agent means each Person qualified under Section 505 to act as Tender Agent and so appointed by the Corporation and so acting from time to time, and its successors. Initially, the Bond Trustee will act as Tender Agent. Tender Date means the date on which Bonds are required to be purchased pursuant to the provisions of the Bond Indenture. Tenth Supplemental Master Indenture means the Tenth Supplemental Master Trust Indenture dated as of August 1, 2009 between the Corporation and the Master Trustee. Two-Day Interest Rate means a variable interest rate on the Bonds established in accordance with the Bond Indenture. Two-Day Interest Rate Period means each period during which a Two-Day Interest Rate is in effect for a Subseries of Bonds. Unassigned Rights means the fees and expenses payable to the Authority, the Authority s right to indemnification under the Loan Agreement, the Authority s right to execute and deliver supplements and amendments to the Loan Agreement, the Authority s rights to receive notices under the Bond Indenture and under the Loan Agreement and the Authority s rights to give consents and make certain appointments under the Bond Indenture. United States Government Obligations means noncallable direct obligations of, or noncallable obligations (which shall not include shares of or investments in unit investment trusts or mutual funds) the timely payment of the principal of and interest on which is fully and unconditionally guaranteed by, the United States of America. University means The University of Chicago, an Illinois not for profit corporation, and its successors and assigns and any surviving, resulting or transferee corporation. University Note means the Direct Obligation Note, Series 2009 (Illinois Finance Authority) of the University payable to the order of the Authority which may, under certain circumstances set forth in the Loan Agreement, be executed and delivered by the University to the Bond Trustee in exchange for the Series 2009 Obligation issued pursuant to the Loan Agreement. Unrelated Trade or Business means an activity which constitutes an unrelated trade or business within the meaning of Section 513(a) of the Code without regard to whether such activity results in unrelated trade or business income subject to taxation under Section 512(a) of the Code. Weekly Interest Rate means a variable interest rate for the Bonds established pursuant to the Bond Indenture. Weekly Interest Rate Period means each period during which a Weekly Interest Rate is in effect for a Subseries of Bonds. Written Request means with reference to the Authority, a request in writing signed by the Chairperson, Vice Chairperson, Executive Director, Secretary or Treasurer of the Authority and with reference to the Corporation means a request in writing signed by the President, Chief Financial Officer, any Vice President or Treasurer of the Corporation, or any other officers designated in writing by the Authority or the Corporation, as the case may be. D-13

189 SUMMARY OF CERTAIN PROVISIONS OF THE BOND INDENTURES The Bond Indentures contains various covenants, security provisions, terms and conditions, certain of which are summarized below. Reference is made to the Bond Indentures for full and complete statements of its provisions. The following summary is limited to those provisions applicable to the Bonds while they bear interest at the Daily Interest Rate, the Two-Day Interest Rate or the Weekly Interest Rate. The Bond Indentures contain substantially similar provisions and are therefore summarized together under this Appendix. The Series 2009D Bonds are separately secured by the Series 2009D Loan Agreement, the Series 2009D Obligation and the Series 2009D Bond Indenture, and the Series 2009E Bonds are separately secured by the Series 2009E Loan Agreement, the Series 2009E Obligation and the Series 2009E Bond Indenture. All references herein to the Series 2009 Bonds, the Loan Agreements, the Bond Indentures and the Series 2009 Obligations should be interpreted accordingly. Unless the context indicates otherwise, each reference to the Bond Indenture shall be deemed to refer to the Series 2009D Bond Indenture or the Series 2009E Bond Indenture, as applicable, each reference to the Series 2009 Bonds or the Bonds shall be deemed to refer to the Series 2009D Bonds or the Series 2009E Bonds, as applicable, issued under the applicable Bond Indenture, each reference to the Loan Agreement shall be deemed to refer to the Series 2009D Loan Agreement or the Series 2009E Loan Agreement, as applicable, each reference to the Series 2009 Obligation shall be deemed to refer to the Series 2009D Obligation or the Series 2009E Obligation, as applicable, each reference to the Bond Trustee shall be deemed to refer to the Series 2009D Bond Trustee or the Series 2009E Bond Trustee, as applicable, and each reference to the Credit Facility Issuer shall be deemed to refer to the Series 2009D Credit Facility Issuer or the Series 2009E Credit Facility Issuer, as applicable. FUNDS (i) Revenue Fund. The Authority shall establish with the Bond Trustee and maintain so long as any of the Bonds are outstanding a separate account to be known as the Revenue Fund The University of Chicago Medical Center (the Revenue Fund ). All payments upon the Series 2009 Obligation, as and when received by the Bond Trustee, shall be deposited in the Revenue Fund and be held therein until disbursed as provided in the Bond Indenture. Pursuant to the assignment and pledge of payments upon the Series 2009 Obligation, the Authority will direct the Corporation to make payments upon such Series 2009 Obligation directly to the Bond Trustee when and as the same become due and payable under the terms of the Series 2009 Obligation and the Loan Agreement. (ii) Interest Fund. The Authority shall establish with the Bond Trustee and maintain so long as any of the Bonds are outstanding a separate account to be known as the Interest Fund The University of Chicago Medical Center (the Interest Fund ). The Bond Trustee shall establish separate accounts within the Interest Fund to be known as the Funded Interest Account, LOC Interest Account and the Regular Interest Account. The LOC Interest Account shall be an Eligible Account. At any time during which two Subseries of the Bonds bear interest at different Rate Periods the Bond Trustee shall establish separate subaccounts within the Interest Fund for moneys received with respect to each Subseries of Bonds. A deposit to the credit of the Interest Fund and Funded Interest Account will be made upon the issuance of the Bonds. On each Interest Payment Date the Bond Trustee shall deposit in the Regular Interest Account of the Interest Fund from the Revenue Fund moneys in an amount which, together with any moneys already on deposit in the Regular Interest Account of the Interest Fund (including amounts transferred from the Funded Interest Account) and available to make such payment, is not less than the amount of interest to become due on the Bonds on such Interest Payment Date. While a Credit Facility is in effect, payments of interest on Bonds (other than Bank Bonds) shall be made from Eligible Moneys on deposit in the LOC Interest Account. On each Interest Payment Date for a Bond (other D-14

190 than Bank Bonds), the Bond Trustee shall take such actions as are necessary to draw funds under the Credit Facility in accordance with its terms in an amount equal to the amount of interest due and payable on the Bonds on such Interest Payment Date. All proceeds of drawings under the Credit Facility to pay interest on the Bonds on an Interest Payment Date and any earnings thereon shall be deposited in the LOC Interest Account and shall not be commingled with any other moneys, but shall be held by the Bond Trustee as agent and bailee for the sole benefit and security of the owners of the Bonds (other than Bank Bonds) until applied as provided in the Bond Indenture. On each Interest Payment Date, after payment in full of all interest due on the Bonds (other than Bank Bonds), funds remaining on deposit in the Interest Fund (other than the LOC Interest Account) shall be transferred by the Bond Trustee to the Credit Facility Issuer in the amount necessary to reimburse the Credit Facility Issuer for the interest portion of the draw on the Credit Facility made on such date and to pay interest due with respect to any Bank Bond. Amounts on deposit in the Funded Interest Account shall be used to pay the interest on the Bonds on each Interest Payment Date (or to reimburse the Credit Facility Issuer for not in excess of the amount of each draw on the Credit Facility used to pay interest on the Bonds). On the later of August 1, 2012 or a date one year after the date that the Project is placed in service, any funds remaining on deposit in the Funded Interest Account and not reasonably expected to be used to pay interest on the Bonds on or before such date will be transferred to the Project Fund unless the Corporation delivers a Favorable Opinion of Bond Counsel to the Bond Trustee permitting such funds to be retained in the Funded Interest Account. In addition to the foregoing, amounts or deposit in the Funded Interest Account may be used to pay fees for the Credit Facility. Except as provided in the Bond Indenture and in the Tax Exemption Agreement, moneys in the Interest Fund shall be used solely to pay interest on the Bonds when due. The Bond Trustee shall at all times maintain accurate records of deposits into the Interest Fund and the sources and dates of such deposit. On or before the fourth Business Day next preceding each Interest Payment Date, the Bond Trustee shall notify the Corporation of the amount of interest coming due on such Bond on such Interest Payment Date, after giving effect to amounts to be transferred from the Funded Interest Account. At the time of such notice, if the interest rate has not yet been determined, the Bond Trustee shall use the Maximum Rate for the number of days during such period that such interest rate is not yet available. The foregoing provisions of the Bond Indenture summarized under this caption notwithstanding upon the Written Request of the Corporation (which request may refer to multiple payment dates) the Bond Trustee may use funds on deposit in the Interest Fund (including the Funded Interest Account) to make interest payments to the provider of a qualified hedge as defined in Section (h)(3), United States Treasury Regulations. The Bond Trustee shall be entitled to rely upon, and shall not be obligated to seek independent verification of, the representations of the Corporation in any Written Request submitted pursuant to this paragraph; provided, however, that the Bond Trustee shall be entitled to request verification from the Corporation of the amounts to be paid to the provider of any qualified hedge. In addition, the Corporation or a counterparty under such qualified hedge or other interest rate agreement may pay to the Bond Trustee for deposit in the Interest Fund any amounts due under such a qualified hedge or other interest rate agreement. The Bond Trustee may pay any funds so deposited to the Corporation or to the counterparty, as the case may be, pursuant to the provisions of the interest rate hedge agreement. (iii) Bond Sinking Fund. The Authority shall establish with the Bond Trustee and maintain so long as any of the Bonds are outstanding a separate account to be known as the Bond Sinking Fund The University of Chicago Medical Center (the Bond Sinking Fund ). The Bond Trustee shall also establish separate accounts within the Bond Sinking Fund to be known as the LOC Principal Account and the Regular Principal Account. The LOC Principal Account shall be an Eligible Account. At any time during which two Subseries of the Bonds bear interest at different Rate Periods the Bond Trustee shall establish separate subaccounts within the Bond Sinking Fund for moneys received with respect to each Subseries of Bonds On August 1, 2036 and each August 1 through and including August 1, 2043, after making the deposits required by the provisions of the Bond Indenture summarized under the prior caption, the Bond Trustee shall deposit in the Regular Principal Account of the Bond Sinking Fund from the Revenue Fund moneys in an amount which, D-15

191 together with any moneys already on deposit in the Regular Principal Account of the Bond Sinking Fund and available to make such payment is not less than the amount of principal to become due on the Bonds on such date by maturity or by mandatory Bond Sinking Fund redemption. While a Credit Facility is in effect, on or prior to each date on which principal is to become due on the Bonds (other than Bank Bonds), the Bond Trustee shall draw funds under the Credit Facility in accordance with its terms in an amount equal to the amount of principal due and payable on such date on each Bond secured by the Credit Facility. All proceeds of drawings under the Credit Facility to pay the principal of the Bonds upon maturity and any earnings thereon shall be deposited in the LOC Principal Account and shall not be commingled with any other moneys, but shall be held by the Bond Trustee as agent and bailee for the sole benefit and security of the owners of Bonds (other than Bank Bonds) until applied as provided in the Bond Indenture. While a Credit Facility is in effect, payments of principal on Bonds (other than Bank Bonds) shall be made from Eligible Moneys on deposit in the LOC Principal Account. Thereafter, payments of principal on the Bonds shall be made from any moneys on deposit in the Bond Sinking Fund. Payments of principal on Bank Bonds shall be made from any moneys on deposit in the Bond Sinking Fund other than the LOC Principal Account. On each date on which principal becomes due on the Bonds by maturity or mandatory bond sinking fund requirement, after payment in full of all principal due on the Bonds (other than Bank Bonds), funds remaining on deposit in the Bond Sinking Fund (other than the LOC Principal Account) shall be transferred by the Bond Trustee to the Credit Facility Issuer in the amount necessary to reimburse the Credit Facility Issuer for the principal portion of the draw on the Credit Facility made on such date and to pay principal due with respect to any Bank Bond. In lieu of such mandatory Bond Sinking Fund redemption the Bond Trustee may, at the Written Request of the Corporation, purchase an equal principal amount of Bonds of the same Subseries with the same Maturity Date in the open market at prices not exceeding the principal amount of the Bonds being purchased plus accrued interest (but only with Eligible Moneys if prior to the Fixed Rate Conversion Date except with regard to Bank Bonds). In addition, the amount of Bonds to be redeemed on any date pursuant to the mandatory Bond Sinking Fund redemption schedule shall be reduced by the principal amount of Bonds of the same Subseries with the same Maturity Date which are acquired by the Corporation and delivered to the Bond Trustee for cancellation. Purchases pursuant to this paragraph shall be made first from Bank Bonds and thereafter from Bonds selected by the Corporation. (iv) Redemption Fund. The Authority shall establish with the Bond Trustee and maintain so long as any of the Bonds are outstanding a separate account to be known as the Redemption Fund The University of Chicago Medical Center (the Redemption Fund ). The Bond Trustee shall also establish two separate accounts within the Redemption Fund to be known as the LOC Redemption Account (the LOC Redemption Account ) and the Regular Redemption Account (the Regular Redemption Account ). At any time during which two Subseries of the Bonds bear interest at different Rate Periods the Bond Trustee shall establish separate subaccounts within the Redemption Fund for moneys received with respect to each Subseries of Bonds. The LOC Redemption Account shall be an Eligible Account. In the event of (a) prepayment by or on behalf of the Corporation or any Member of amounts payable on the Series 2009 Obligation, (b) receipt by the Bond Trustee of condemnation awards or insurance proceeds for purposes of redeeming Bonds or (c) deposit with the Bond Trustee by or on behalf of the Corporation or the Authority of moneys from any other source for redeeming Bonds, except as otherwise provided in the provisions of the Bond Indenture summarized under the heading SUMMARY OF CERTAIN PROVISIONS OF THE BOND INDENTURES - CREDIT FACILITY, such moneys shall be deposited in the LOC Redemption Account of the Redemption Fund. Moneys drawn under the Credit Facility for payment of the principal of, premium, if any, and interest on the Bonds upon redemption and any earnings thereon shall be deposited into the LOC Redemption Account of the Redemption Fund and shall not be commingled with any other moneys held by the Bond Trustee. All proceeds of drawings under the Credit Facility to make timely redemption payments shall be deposited in the LOC Redemption Account and shall be held by the Bond Trustee as agent and bailee for the sole benefit and security of the Bondholders for Bonds (other than the owners of Bank Bonds) until applied as provided in the Bond Indenture. While a Credit Facility is in effect, payments of the redemption price of the Bonds (other than Bank Bonds) to be redeemed pursuant to the Bond Indenture shall be made, to the extent available, from Eligible Moneys D-16

192 on deposit in the LOC Redemption Account. The redemption price of Bank Bonds shall be paid from amounts deposited in the Redemption Fund (other than the LOC Redemption Account or the Regular Redemption Account). Moneys on deposit in the Redemption Fund shall be used first to make up any deficiencies existing in the Interest Fund and the Bond Sinking Fund (in the order listed) and second for the purchase or redemption of Bonds in accordance with the provisions of the Bond Indenture; provided, however, that moneys on deposit in the LOC Redemption Account shall not be used to make up deficiencies in the Interest Fund and the Bond Sinking Fund other than in the LOC Interest Account and the LOC Principal Account. On any date on which Bonds are redeemed from amounts on deposit in the Redemption Fund, funds on deposit in the Redemption Fund (exclusive of the LOC Redemption Account) shall be transferred by the Bond Trustee to the Credit Facility Issuer in the amount necessary to reimburse the Credit Facility Issuer for the draw made on the Credit Facility to pay such redemption price. (v) Bond Purchase Fund. There shall be established with and maintained by the Tender Agent a separate trust fund to be designated Bond Purchase Fund The University of Chicago Medical Center (the Bond Purchase Fund ). At any time during which two Subseries of Bonds bear interest at different Rate Periods, the Bond Trustee shall establish separate subaccounts within the Bond Purchase Fund for moneys received with respect to each Subseries of Bonds. The Tender Agent shall further establish within the Bond Purchase Fund a separate trust account to be referred to as a Remarketing Account, a separate trust account to be referred to as a Credit Facility Purchase Account and a separate trust account to be referred to as a Corporation Purchase Account. The moneys held in such accounts shall not be commingled with any other funds held under the Bond Indenture or with any other funds of the Bond Trustee. Upon receipt of the proceeds of a remarketing of Bonds on a Tender Date pursuant to the Bond Indenture, the Tender Agent shall deposit such proceeds in the Remarketing Account, which account shall be an Eligible Account, of the Bond Purchase Fund for application to the Tender Price of such Bonds in accordance with the Bond Indenture and, if the Tender Agent is not a paying agent with respect to such Bonds, shall transmit such proceeds to the Bond Trustee for such application. Notwithstanding the foregoing, upon receipt of the proceeds of a remarketing of Bank Bonds, the Tender Agent shall immediately pay such proceeds to the Credit Facility Issuer. Upon receipt from the Credit Facility Issuer of the immediately available funds transferred to the Tender Agent pursuant to the provisions of the Bond Indenture, the Tender Agent shall deposit such money in the Credit Facility Purchase Account of the Bond Purchase Fund for application to the Tender Price of the Bonds required to be purchased on a Tender Date in accordance with the Bond Indenture to the extent that the money on deposit in the Remarketing Account of the Bond Purchase Fund shall not be sufficient. Any amounts deposited in the Credit Facility Purchase Account and not needed with respect to any Tender Date for the payment of the Tender Price for any Bonds shall be immediately returned to the Credit Facility Issuer. Upon receipt from the Corporation under the Bond Indenture of any funds for the purchase of Tendered Bonds, the Tender Agent shall deposit such money, if any, in the Corporation Purchase Account of the Bond Purchase Fund for application to the Tender Price of the Bonds required to be purchased on a Tender Date in accordance with the Bond Indenture to the extent that the money on deposit in the Remarketing Account and the Credit Facility Purchase Account of the Bond Purchase Fund shall not be sufficient. Any amounts deposited in the Corporation Purchase Account and not needed with respect to any Tender Date for the payment of the Tender Price for any Bonds shall be immediately returned to the Corporation. (vi) Expense Fund. The Authority shall establish with the Bond Trustee a separate account to be known as the Expense Fund The University of Chicago Medical Center (the Expense Fund ). An initial deposit to the credit of the Expense Fund is to be made in accordance with the provisions of the Bond Indenture. Amounts on deposit in the Expense Fund shall be disbursed upon the Written Request of the Corporation for the payment of expenses for any recording, trustee s and depository s fees and expenses, accounting and legal fees, financing costs (including costs of acquiring investments for the funds and escrows), remarketing fees and expenses and expenses and other fees and expenses incurred or to be incurred by or on behalf of the Authority or the Corporation in connection with or incident to the D-17

193 issuance and sale of the Bonds. At such time as the Bond Trustee is furnished with a Written Request of the Corporation stating that all such fees and expenses have been paid, and in no event later than August 1, 2010, the Bond Trustee shall transfer any moneys remaining in the Expense Fund to the Interest Fund. (vii) Project Fund. The Authority shall establish with the Bond Trustee a separate account to be known as the Project Fund The University of Chicago Medical Center (the Project Fund ), to the credit of which deposits shall be made in accordance with the provisions of the Bond Indenture. A deposit to the credit of the Project Fund will be made upon the issuance of the Bonds. Any moneys received by the Bond Trustee from any other source for the Project shall be deposited in the Project Fund unless otherwise specifically excepted under the Bond Indenture or unless contrary provision is made in the Loan Agreement. The moneys in the Project Fund shall be held in trust by the Bond Trustee, shall be applied to the payment of the costs of the Project except to the extent required to be transferred to the Rebate Fund in accordance with the Tax Exemption Agreement and, pending such application, shall be held as trust funds under the Bond Indenture in favor of the holders of the outstanding Bonds and for the further security of such holders until paid out or transferred as summarized under this subcaption. After payment by the Bond Trustee of all orders theretofore tendered to the Bond Trustee under the provisions of the Bond Indenture and after receipt by the Bond Trustee of the certificates and other documents mentioned in the Bond Indenture with respect to the Project there shall remain any moneys in the Project Fund, the Corporation may (i) elect to retain all or a portion of such moneys in the Project Fund until August 1, 2012 or until a later date if the Authority and the Bond Trustee have received an Opinion of Bond Counsel to the effect that a disbursement after such date will not adversely affect any exemption from federal income taxation to which such interest on the Bonds would otherwise be entitled, and withdraw such moneys in accordance with the provisions of the Bond Indenture to pay or reimburse the Corporation for payment of the cost of an additional project or projects (as such terms are defined in the Act) if the Corporation complies with the provisions of the Loan Agreement relating to changes in or amendments to the Project Documents, (ii) deposit such moneys in the Bond Sinking Fund to the extent necessary to make the next payment therefrom so long as the next principal payment therefrom is required to be made within 13 months from the date of deposit therein, then in the Interest Fund to the extent necessary to make interest payments therefrom so long as such interest is required to be made within 13 months from the date of deposit; or (iii) use such moneys in such other manner as the Corporation may elect if the Corporation delivers a Favorable Opinion of Bond Counsel to the Bond Trustee with respect to such use; and then to the Redemption Fund. TRANSFER OF FUNDS BETWEEN PROJECT FUND AND FUNDED INTEREST ACCOUNT Notwithstanding the provisions of the Bond Indenture summarized in the second paragraph under the caption Summary OF CERTAIN PROVISIONS OF THE BOND INDENTURES FUNDS (vii) Project Fund above, the Corporation may direct the Bond Trustee to transfer funds on deposit in the Project Fund or the Funded Interest Account of the Interest Fund to the Funded Interest Account of the Interest Fund or the Project Fund, respectively, if (i) the Corporation delivers a Favorable Opinion of Bond Counsel to the Bond Trustee and (ii) complies with the provisions of the Loan Agreement with respect to any changes in the Project Documents (as defined therein) necessary to reflect such transfer and any change to the Project as a result of such transfer. INVESTMENT OF FUNDS Upon oral direction promptly followed by a Written Request of the Corporation filed with the Bond Trustee, moneys on deposit in the Revenue Fund, the Interest Fund (other than the LOC Interest Account), the Bond Sinking Fund (other than the LOC Principal Account), the Expense Fund, the Project Fund and the Redemption Fund (other than the LOC Redemption Account) shall be invested in Qualified Investments. Moneys in the LOC Interest Account, the LOC Principal Account, the LOC Redemption Account and the Bond Purchase Fund shall remain uninvested. Investments shall be made so as to mature on or prior to the date or dates that moneys therefrom are reasonably anticipated to be required. If the Corporation fails to give such direction to the Bond Trustee, moneys in such funds shall be invested only in Government Obligations maturing not later than 30 days after the date such investments are made. As and when any amounts invested pursuant to the Bond Indenture may be needed for disbursements from any such Fund, the Bond Trustee shall cause a sufficient amount of such investments to be sold D-18

194 or otherwise converted into cash to the credit of such Fund. The Bond Trustee, as authorized in the Loan Agreement, may trade with itself in the purchase and sale of securities for such investment; provided, however, that in no case shall any investment be otherwise than in accordance with the investment limitations contained in the Bond Indenture and in the Tax Exemption Agreement. The Bond Trustee shall not be liable or responsible for any loss resulting from any such investments. Gains from investments shall be credited to and held in and losses shall be charged to the fund or account from which the investment is made. Investment earnings on funds on deposit in the Project Fund and in the Funded Interest Account of the Interest Fund shall be retained therein; provided, however that the Corporation may elect to direct the Bond Trustee to deposit the investment earnings on such Funds to another Fund created under the Bond Indenture if the Corporation delivers a Favorable Opinion of Bond Counsel to the Bond Trustee. Except as provided in the Tax Exemption Agreement and in the provisions of the Bond Indenture summarized in the paragraph above, all income in excess of the requirements of the Funds derived from the investment of moneys on deposit in any such Funds shall be deposited in the following Funds, in the order listed: (i) the Bond Sinking Fund to the extent of the amount required to be deposited therein on the next scheduled maturity or mandatory sinking fund redemption date occurring within thirteen months of the date of deposit; (ii) the Interest Fund up to the amount which the Bond Trustee estimates will be required to be deposited therein on any Interest Payment Date occurring within thirteen months of the date of deposit; and (iii) the balance, if any, in the Redemption Fund. PROHIBITED ACTIVITIES Subject to the limitations on its liability as stated in the Bond Indenture and to the extent permitted by law, the Authority covenants and agrees in the Bond Indenture that it has not knowingly engaged and will not knowingly engage in any activities and that it has not knowingly taken and will not knowingly take any action which might result in any interest on the Series 2009 Bonds becoming includable in the gross income of the owners thereof for purposes of federal income taxation. The Authority further covenants and agrees in the Bond Indenture that it will comply with and take all actions required by the Tax Exemption Agreement. SUPPLEMENTAL BOND INDENTURES Subject to the limitations set forth in the provisions of the Bond Indenture summarized in the next paragraph, the Authority and the Bond Trustee may without the consent of, or notice to, any of the Bondholders, but with the consent of the Credit Facility Issuer, enter into a bond indenture or bond indentures supplemental to the Bond Indenture, as shall not be inconsistent with the terms and provisions of the Bond Indenture, for any one or more of the following purposes: (i) to cure any ambiguity or formal defect or omission in the Bond Indenture; (ii) to grant to or confer upon the Bond Trustee for the benefit of the Bondholders any additional rights, remedies, powers or authority that may lawfully be granted to or conferred upon the Bondholders and the Bond Trustee, or either of them; (iii) to assign and pledge under or subject to the Bond Indenture additional revenues, properties or collateral; (iv) to evidence the appointment of a separate co-bond Trustee or the succession of a new Bond Trustee under the Bond Indenture; (v) to modify, amend or supplement the Bond Indenture or any bond indenture supplemental thereto in such manner as to permit the qualification of the Bond Indenture under the Trust Indenture Act of 1939, as then amended, or any similar federal statute hereafter in effect or to permit the qualification of the Bonds for sale under the securities laws of any state of the United States; (vi) to modify, amend or supplement the Bond Indenture or any bond indenture supplemental thereto in such manner as to permit continued compliance with the Tax Exemption Agreement; (vii) to modify, amend or supplement the Bond Indenture or any bond indenture supplemental thereto in such manner as to permit the issuance of coupon Bonds and to permit the exchange of Bonds from registered form to coupon form and vice versa; (viii) to provide for the refunding or advance refunding of any Bonds, including the right to establish and administer an escrow fund and to take related action in connection therewith; (ix) to make any revisions thereto that shall be necessary in connection with the Corporation or the Authority furnishing a Self Liquidity Agreement, a Credit Facility or a bond insurance policy, including but not limited to revisions of the Interest Payment Dates for Bank Bonds, and additional Obligations to a Credit Facility Issuer; (x) to make any change that, in the judgment of the Bond Trustee, does not materially adversely affect the rights of any Bondholders. D-19

195 The Authority and the Bond Trustee may not enter into an indenture or indentures supplemental to the Bond Indenture pursuant to subsection (vii) above unless they shall have received a Favorable Opinion of Bond Counsel, with respect to the issuance of coupon Bonds. In addition to supplemental indentures permitted by the provisions summarized in the first paragraph under this caption and subject to the terms and provisions of the Bond Indenture hereinafter summarized, and not otherwise, the owners of not less than a majority in aggregate principal amount of the Bonds which are Outstanding under the Bond Indenture at the time of the execution of such bond indenture or supplemental bond indenture, with the written consent of the Credit Facility Issuer, shall have the right, from time to time, anything contained in the Bond Indenture to the contrary notwithstanding, to consent to and approve the execution by the Authority and the Bond Trustee of such other bond indenture or bond indentures supplemental thereto as shall be deemed necessary and desirable by the Authority for the purpose of modifying, altering, amending, adding to or rescinding, in any particular manner, any of the terms or provisions contained in the Bond Indenture or in any supplemental indenture; provided, however, that, except as set forth in the next proviso, the Credit Facility Issuer may consent to such amendment on behalf of the owners of the Bonds so long as the Credit Facility Issuer has not lost any of its rights pursuant to the provisions of the Bond Indenture summarized under the caption SUMMARY OF CERTAIN PROVISIONS OF THE BOND INDENTURES CONSENT OF THE CREDIT FACILITY ISSUER below; provided further, however, that nothing in the provisions of the Bond Indenture summarized under this heading shall permit, or be construed as permitting, a supplemental indenture to effect: (i) an extension of the maturity or reduction in the principal amount of, or reduction in the rate or extension of the time of paying interest on, or reduction of any premium payable on the redemption of, any Bonds, without the consent of the owners of such Bonds; (ii) a reduction in the amount or extension of the time of any payment required to be made to or from the Interest Fund or the Bond Sinking Fund; (iii) the creation of any lien prior to or on a parity with the lien of the Bond Indenture on the property described in the granting clauses of the Bond Indenture or the deprivation of any Bondholders of the lien created by the Bond Indenture on such property, without the consent of the owners of all the Bonds at the time outstanding; (iv) a reduction in the aforesaid aggregate principal amount of Bonds the owners of which are required to consent to any such supplemental indenture, without the consent of the owners of all the Bonds at the time outstanding which would be affected by the action to be taken; or (v) a modification of the rights, duties or immunities of the Bond Trustee or the Authority, without the written consent of the Bond Trustee or the Authority, as applicable; and provided further that no such amendment affecting the Bonds shall become effective until approved in writing by the Credit Facility Issuer. If a supplemental indenture would affect only one Subseries of the Bonds or less than all of the owners of a Subseries of Bonds, the owners of not less than a majority in aggregate principal amount of the Subseries of Bonds or the Bonds so affected which are outstanding at the time of the execution of the supplemental indenture shall have the right to consent to and approve, with the consent of the applicable Credit Facility Issuer, the execution by the Authority and the Bond Trustee of the supplemental indenture. The consent of the owners of the Bonds or a Subseries of Bonds may be obtained through the tender and subsequent remarketing of such Bonds. In order to obtain consent in such manner the Bonds or a Subseries of Bonds must be subject to tender pursuant to the provisions of the Bond Indenture. The purchasers of any such tendered Bonds that are remarketed in accordance with the provisions of the Bond Indenture may, by virtue of their purchase of Bonds, be deemed to have consented to the execution of a supplemental indenture if such purchasers have received notice of the supplemental indenture and the nature of the amendments contained therein in the manner set forth in the Bond Indenture or in any other manner acceptable to the Bond Trustee which provides the purchasers of the remarketed Bonds actual notice of the nature of the supplemental indenture to which the deemed consent will be obtained. If at any time the Authority and the Corporation shall request the Bond Trustee to enter into any such supplemental indenture for any of the purposes summarized in the preceding paragraph, the Bond Trustee shall, upon being satisfactorily indemnified with respect to expenses, cause notice of the proposed execution of such supplemental indenture to be mailed by registered or certified mail to the Credit Facility Issuer and to the registered owner of the Bonds as shown at their addresses as the same shall appear on the Bond Register. Such notice shall briefly set forth the nature of the proposed supplemental indenture and shall state that copies thereof are on file at the Principal Office of the Bond Trustee for inspection by all Bondholders. The Bond Trustee shall not, however, be subject to any liability to any Bondholder by reason of its failure to mail such notice, and any such failure shall not affect the validity of such supplemental indenture when consented to and approved as provided in the provisions of the Bond Indenture summarized under this caption. If the owners of the requisite principal amount of Bonds which D-20

196 are outstanding under the Bond Indenture at the time of the execution of any such supplemental indenture shall have consented to and approved the execution thereof as provided in the Bond Indenture, no owner of any Bond shall have any right to object to any of the terms and provisions contained therein, or the operation thereof, or in any manner to question the propriety of the execution thereof, or to enjoin or restrain the Bond Trustee or the Authority from executing the same or from taking any action pursuant to the provisions thereof. Upon the execution of any such supplemental indenture in accordance with the provisions summarized under this caption, the Bond Indenture shall be and be deemed to be modified and amended in accordance therewith. Anything in the Bond Indenture to the contrary notwithstanding, so long as no Member is not in default under the Master Indenture and the Corporation is not in default under the Loan Agreement, a supplemental indenture which adversely affects the rights of any Member under the Master Indenture or the Corporation under the Loan Agreement shall not become effective unless and until the Corporation shall have consented in writing to the execution and delivery of such supplemental indenture. EVENTS OF DEFAULT Each of the following events is an event of default under the Bond Indenture: (a) payment of any installment of interest payable on any of the Bonds shall not be made by the Authority when the same shall become due and payable; or (b) payment of the principal of or the premium, if any, payable on any of the Bonds shall not be made by the Authority when the same shall become due and payable, either at stated maturity, by proceedings for redemption, upon acceleration, through failure to make any payment to any Fund under the Bond Indenture or otherwise; or (c) except as provided in the provisions of the Bond Indenture summarized under the caption SUMMARY OF CERTAIN PROVISIONS OF THE BOND INDENTURES Book Entry Tenders below and under the heading THE SERIES 2009 BONDS Tender and Purchase of the Series 2009 Bonds - Inadequate Funds for Tenders in the forepart of this Official Statement, payment of Tender Price of any Bonds shall not be made when due and payable; or (d) a Subseries of Bonds are not purchased as required by the Bond Indenture within four days after receipt of notice from the applicable Credit Facility Issuer, in accordance with the Bond Indenture, that an event of default has occurred and is continuing under the Reimbursement Agreement relating to such Credit Facility or (ii) two days after receipt from the Credit Facility Issuer of a notice, in accordance with the Bond Indenture, that it has determined it will not reinstate the amount available under the Credit Facility for interest payments upon payment of an interest drawing; or (e) the Authority shall for any reason be rendered incapable of fulfilling its obligations under the Bond Indenture; or (f) an order or decree shall be entered, appointing a receiver, receivers, custodian or custodians for any of the revenues of the Authority, or approving a petition filed against the Authority seeking reorganization of the Authority under the federal bankruptcy laws or any other similar law or statute of the United States of America or any state thereof, or if any such order or decree, having been entered without the consent or acquiescence of the Authority, shall not be vacated or discharged or stayed on appeal within 60 days after the entry thereof; or (g) any proceeding shall be instituted, with the consent or acquiescence of the Authority, or any plan shall be entered into by the Authority, for the purpose of effecting a composition between the Authority and its creditors or for the purpose of adjusting the claims of such creditors pursuant to any federal statute or statute of the State now or hereafter enacted, if the claims of such creditors are under any circumstances payable from any part or all of the trust estate, including the revenues and other moneys D-21

197 derived by the Authority under the Series 2009 Obligation pledged under the Bond Indenture or the Loan Agreement; or (h) the Authority (1) files a petition in bankruptcy or under Title 11 of the United States Code, as amended, (2) makes an assignment for the benefit of its creditors, (3) consents to the appointment of a receiver, custodian or trustee for itself or for the whole or any part of the trust estate, including the revenues and other moneys derived by the Authority under the Series 2009 Obligation pledged under the Bond Indenture or the Loan Agreement, or (4) is generally not paying its debts as such debts become due; or (i) (1) the Authority is adjudged insolvent by a court of competent jurisdiction, (2) on a petition in bankruptcy filed against the Authority it is adjudged as bankrupt, or (3) an order, judgment or decree is entered by any court of competent jurisdiction appointing, without the consent of the Authority, a receiver, custodian or trustee of the Authority or of the whole or any part of its property and any of the aforesaid adjudications, orders, judgments or decrees shall not be vacated or set aside or stayed within 60 days from the date of entry thereof; or (j) the Authority shall file a petition or answer seeking reorganization or any arrangement under the federal bankruptcy laws or any other applicable law or statute of the United States of America or any state thereof; or (k) under the provisions of any other law for the relief or aid of debtors, any court of competent jurisdiction shall assume custody or control of the Authority or of the whole or any substantial part of its property, and such custody or control shall not be terminated within 30 days from the date of assumption of such custody or control; or (l) any event of default as defined in the Loan Agreement shall occur and be continuing as a result of which the Authority or the Bond Trustee is, at that time, entitled under the Loan Agreement to declare the Series 2009 Obligation immediately due and payable or to request the Master Trustee to declare the Series 2009 Obligation immediately due and payable; or (m) the Authority shall default in the due and punctual performance of any other of the covenants, conditions, agreements and provisions contained in the Bonds or in the Bond Indenture or in any bond indenture supplemental thereto to be performed on the part of the Authority, and such default shall continue for 60 days after written notice specifying such default and requiring the same to be remedied shall have been given to the Authority and the Corporation by the Bond Trustee; provided that the Bond Trustee may give such notice in its discretion and shall give such notice at the written request of the owners of not less than 10% in aggregate principal amount of the Bonds then outstanding under the Bond Indenture; provided further that if such default cannot with due diligence and dispatch be wholly cured within 60 days but can be wholly cured, the failure of the Authority to remedy such default within such 60-day period shall not constitute a default under the Bond Indenture if the Authority shall immediately upon receipt of such notice commence with due diligence and dispatch the curing of such default and, having so commenced the curing of such default, shall thereafter prosecute and complete the same with due diligence and dispatch; or (n) any event of default as summarized under the caption SUMMARY OF CERTAIN PROVISIONS OF THE MASTER INDENTURE DEFAULTS AND REMEDIES in Appendix C to this Official Statement shall occur and (i) be continuing from and after the date the Authority is entitled under the Loan Agreement to requires that the Master Indenture declare the Series 2009 Obligation to be immediately due and payable or for a period of 15 days from and after the date on which the Master Trustee is entitled under the Master Indenture to declare the Obligations issued thereunder immediately due and payable or (ii) the Master Trustee shall declare any Obligation immediately due and payable; or (o) the Authority, the Corporation or the Bond Trustee shall default in the performance of any covenant, condition, agreement or provision of the Tax Exemption Agreement, and such default shall continue for a period of 60 days after written notice specifying such default and requiring the same to be remedied shall have been given to the party in default and the Corporation by the other party; provided that D-22

198 if such default cannot with due diligence and dispatch be wholly cured within 60 days but can be wholly cured, the failure of the Authority, the Corporation or the Bond Trustee to remedy such default within such 60-day period shall not constitute a default under the Bond Indenture if any of the foregoing shall immediately upon receipt of such notice commence with due diligence and dispatch the curing of such default and, having so commenced the curing of such default, shall thereafter prosecute and complete the same with due diligence and dispatch; or (p) the Bond Trustee has received notice from a Credit Facility Issuer that an event of default has occurred under the Credit Facility Agreement or that a Credit Facility Issuer is not reinstating a Credit Facility following a draw thereon and directing the Bond Trustee to cause an acceleration of the Bonds. ACCELERATION; REMEDIES Upon the occurrence of any event of default specified in paragraphs (e) through (p) above (of which the Bond Trustee shall be deemed to have notice pursuant to the provisions of the Bond Indenture) the Bond Trustee may, with the consent of the Credit Facility Issuer, and shall upon the request of the Credit Facility Issuer, but without any action on the part of the Bondholders, or upon the occurrence of any event of default specified in paragraphs (e) through (p) above (of which the Bond Trustee shall be deemed to have notice pursuant to the provisions of the Bond Indenture) and the written request of either the Credit Facility Issuer or the owners of not less than 25% in aggregate principal amount of the Bonds then outstanding under the Bond Indenture (exclusive of any Bonds the registered owner of which is the Authority or any Member), with the written consent of the Credit Facility Issuer, and upon being indemnified to its satisfaction, the Bond Trustee shall, or upon the occurrence and continuance of an event of default specified in paragraphs (a) through (d) above, the Bond Trustee shall declare the entire principal amount of the Bonds then outstanding under the Bond Indenture and the interest accrued thereon immediately due and payable, and the entire principal and interest shall thereupon become and be immediately due and payable, subject, however, to the provisions of the Bond Indenture summarized below under the caption SUMMARY OF CERTAIN PROVISIONS OF THE BOND INDENTURES WAIVER OF EVENTS OF DEFAULT. In the case of an Event of Default specified in paragraph (p) above and receipt of a notice directing an acceleration of the Bonds from the Credit Facility Issuer, the Bond Trustee shall declare that the entire principal amount of the Bonds then outstanding under the Bond Indenture and the interest accrued thereon immediately due and payable on the second Business Day following the receipt of such direction from the Credit Facility Issuer. The Bond Trustee shall submit a draw on the Credit Facility on the day prior to the acceleration date in order to provide for the payment of the principal amount of the Bonds and the interest thereon that will become due and payable on the date of acceleration. Interest on the Bonds shall cease to accrue on the date of acceleration. Upon the occurrence and continuance of any Event of Default, the Bond Trustee may, without any action on the part of the Bondholders, or upon the occurrence and continuance of any Event of Default and the written request of the owners of not less than 25% in principal amount of the Bonds then outstanding under the Bond Indenture (exclusive of any Bonds the registered owner of which is the Authority or any Member), with the written consent of the Credit Facility Issuer, and upon being indemnified to its reasonable satisfaction as provided in the Bond Indenture, the Bond Trustee shall: (a) by mandamus, or other suit, action or proceeding at law or in equity, enforce all rights of the owners under, and require the Authority or the Corporation to carry out any agreements with or for the benefit of the owners of Bonds and to perform its or their duties under, the Act, the Series 2009 Obligation, the Loan Agreement and the Bond Indenture, provided that any such remedy may be taken only to the extent permitted under the applicable provisions of the Loan Agreement or the Bond Indenture, as the case may be; (b) bring suit upon the Bonds; or (c) by action or suit in equity enjoin any acts or things which may be unlawful or in violation of the rights of the owners of Bonds; provided, however, that the Bond Trustee shall have the right to decline to comply with any such request or direction if the Bond Trustee shall be advised by counsel (who may be its own counsel) that the action so requested may not lawfully be taken or the Bond Trustee in good faith shall determine that such action would be unjustly prejudicial to the owners of Bonds not parties to such request. If an event of default shall have occurred, and if it shall have been requested so to do by the owners of not less than 25% in aggregate principal amount of Bonds then outstanding, with the written consent of the Credit Facility Issuer, and the Bond Trustee shall have been indemnified as provided in the Bond Indenture, the Bond Trustee shall be obligated to exercise such one or more of the rights and powers conferred by the provisions of the D-23

199 Bond Indenture summarized under this caption as the Bond Trustee shall deem most expedient in the interests of the holders of Bonds; provided, however, that the Bond Trustee shall have the right to decline to comply with any such request if the Bond Trustee shall be advised by counsel (who may be its own counsel) that the action so requested may not lawfully be taken or the Bond Trustee in good faith shall determine that such action would be unjustly prejudicial to the holders of Bonds not parties to such request. No remedy by the terms of the Bond Indenture conferred upon or reserved to the Bond Trustee (or to the holders of Bonds) is intended to be exclusive of any other remedy, but each and every such remedy shall be cumulative and shall be in addition to any other remedy given to the Bond Trustee or to the holders of Bonds under the Bond Indenture now or hereafter existing at law or in equity or by statute. No delay or omission of the Bond Trustee or any owner of Bonds to exercise any right or power accruing upon any default or event of default shall impair any such right or power or shall be construed to be a waiver of any such default or event of default, or acquiescence therein; and every such right and power given by the Bond Indenture to the Bond Trustee and the owners of Bonds, respectively, may be exercised from time to time and as often as may be deemed expedient. No waiver of any default or event of default under the Bond Indenture, whether by the Bond Trustee or by the owners of Bonds, shall extend to or shall affect any subsequent default or event of default or shall impair any rights or remedies consequent thereon. DIRECTION OF PROCEEDINGS BY BONDHOLDERS The owners a majority in aggregate principal amount of Bonds then outstanding, with the written consent of the Credit Facility Issuer, shall have the right, at any time, by an instrument or instruments in writing executed and delivered to the Bond Trustee, to direct the method and place of conducting all proceedings to be taken in connection with the enforcement of the terms and conditions of the Bond Indenture, including enforcement of the rights of the Authority under the Loan Agreement (except Unassigned Rights) or the appointment of a receiver or any other proceedings under the Bond Indenture; provided, that such direction shall not be otherwise than in accordance with the provisions of law and of the Bond Indenture. WAIVER OF EVENTS OF DEFAULT The Bond Trustee may, with the consent of the Credit Facility Issuer, in its discretion without any action on the part of the Bondholders, and shall, upon the direction of the Credit Facility Issuer, waive any Event of Default under the Bond Indenture and its consequences and rescind any declaration of acceleration of principal, or shall do so, with the consent of the Credit Facility Issuer, upon written request of the owners of (a) at least a majority in aggregate principal amount of all the Bonds Outstanding in respect of which default in the payment of principal and/or interest exists, or (b) at least a majority in aggregate principal amount of all the Bonds outstanding, in the case of any other event of default; provided, however that there shall not be waived (i) any Event of Default in the payment of the principal of any outstanding Bonds when due whether by mandatory redemption through the Bond Sinking Fund, at the stated maturity specified therein or otherwise, other than principal due upon an acceleration of the Bonds, (ii) any default in the payment, when due of the interest on any such Bonds, other than accrued interest due solely as a result of the acceleration of the Bonds, unless prior to such waiver or rescission all arrears of interest, with interest thereon (to the extent permitted by law) at the rate borne by the Bonds in respect of which such default shall have occurred on overdue installments of interest or all arrears of payments of principal when due, as the case may be, and all reasonable expenses of the Bond Trustee, the Authority and any Paying Agent in connection with such default shall have been paid or provided for, or (iii) while the Bonds bear interest at a Daily Interest Rate, Two- Day Interest Rate or Weekly Interest Rate, any failure to have Eligible Moneys on deposit in the LOC Interest Account or the LOC Principal Account in an amount sufficient to pay interest or principal on the Bonds when due, unless prior to such waiver or rescission, the Credit Facility, if applicable, shall be reinstated to an amount equal to the aggregate principal amount of outstanding Bonds of the applicable Subseries, plus interest on such outstanding Bonds and any notice by the Credit Facility Issuer to the Bond Trustee requesting an acceleration of the Bonds delivered pursuant to the Event of Default summarized in paragraph (p) under the caption SUMMARY OF CERTAIN PROVISIONS OF THE BOND INDENTURES EVENTS OF DEFAULT has been rescinded or revoked. D-24

200 APPLICATION OF MONEYS All moneys received by the Bond Trustee or by any receiver pursuant to any right given or action taken under the provisions of the Bond Indenture summarized under this caption shall, after payment of the reasonable costs and expenses of the proceedings resulting in the collection of such moneys and of the reasonable fees of, and the reasonable expenses, liabilities and advances incurred or made by the Bond Trustee or the Master Trustee (except that such expenses of the Bond Trustee and the Master Trustee shall not be paid from the proceeds of a draw on a Credit Facility or from the proceeds of the remarketing of the Bonds) at the request or with the concurrence of the Bond Trustee, be deposited in the Revenue Fund and all moneys so deposited during the continuance of an Event of Default (other than moneys for the payment of Bonds which have previously matured or otherwise become payable prior to such Event of Default or for the payment of interest due prior to such Event of Default), together with all moneys in the Funds maintained by the Bond Trustee under the Bond Indenture, shall be applied as follows: (a) Unless the principal of all the Bonds shall have become or shall have been declared due and payable, all such moneys shall be applied: FIRST: To the payment to the Persons entitled thereto of all installments of interest then due on the Bonds (including without limitation, Bank Bonds), with interest on overdue installments, if lawful, at the rates per annum borne by the Bonds, in the order of the stated maturity of the installments of such interest, and, if the amount available shall not be sufficient to pay in full any particular installment, then to the payment ratably, according to the amounts due on such installment, to the Persons entitled thereto without any discrimination or privilege; SECOND: To the payment to the Persons entitled thereto of the unpaid principal (including unpaid premium, if any) of any of the Bonds (including without limitation, Bank Bonds) which shall have become due (other than Bonds called for redemption for the payment of which moneys are held pursuant to the provisions of the Bond Indenture), with interest on such Bonds at their rate from the respective dates upon which they became due, in the order of their due dates, and, if the amount available shall not be sufficient to pay in full Bonds due on any particular date, together with such interest, then to the payment ratably, according to the amount of principal and interest due on such date, to the Persons entitled thereto without any discrimination or privilege; THIRD: To the payment to the Persons entitled thereto of unpaid principal and interest due and owing on any Bonds, the payment of principal and interest of which has been extended in the manner described in the Bond Indenture; FOURTH: To the payment of amounts, if any, payable to the United States Treasury pursuant to the Tax Exemption Agreement; FIFTH: To the payment of any other sums required to be paid by the Corporation pursuant to any provision of the Loan Agreement, the Bond Indenture, the Series 2009 Obligation or the Credit Facility Agreement (including all Credit Facility Reimbursement Obligations); SIXTH: To the payment of any other sums required to be paid by the Corporation pursuant to any provision of the Master Indenture; and SEVENTH: To the payment of the surplus, if any, to the Corporation, its successors or assigns upon the written request of the Corporation or to whomsoever may be lawfully entitled to receive the same upon its written request, or as any court of competent jurisdiction may direct. (b) If the principal of all the Bonds shall have become due or shall have been declared due and payable, all such moneys shall be applied: D-25

201 FIRST: To the payment of the principal (including unpaid premium, if any) and interest then due and unpaid upon the Bonds, with interest on overdue interest and principal (including unpaid premium, if any), as aforesaid, without preference or priority of principal (including unpaid premium, if any) over interest or of interest over principal or of any installment of interest over any other installment of interest, or of any Bond over any other Bond, ratably, according to the amounts due respectively for principal (including unpaid premium, if any) and interest, to the Persons entitled thereto without any discrimination or privilege; SECOND: To the payment of the principal (including unpaid premium, if any) and interest then due and unpaid upon Bonds with respect to which the payment of principal and interest has been extended as described in the Bond Indenture; THIRD: To the payment of amounts, if any, payable pursuant to the Tax Exemption Agreement; and FOURTH: To the payment of amounts (other than principal and interest on Bank Bonds which shall be paid pursuant to paragraphs FIRST and SECOND above), if any, due and owing to the Credit Facility Issuer including all Credit Facility Reimbursement Obligations. (c) If the principal of all the Bonds shall have been declared due and payable, and if such declaration shall thereafter have been rescinded and annulled under the provisions of the Bond Indenture, then, subject to the provisions of the Bond Indenture summarized in paragraph (b) above in the event that the principal of all the Bonds shall later become due or be declared due and payable, the moneys shall be applied in accordance with the provisions of the Bond Indenture summarized in paragraph (a) above. Whenever moneys are to be applied by the Bond Trustee pursuant to the provisions of the Bond Indenture summarized under this caption, such moneys shall be applied at such times, and from time to time, as the Bond Trustee shall determine, having due regard for the amount of such moneys (which shall not include the application of moneys upon the occurrence of an acceleration pursuant to the provisions of the Bond Indenture summarized under the caption SUMMARY OF CERTAIN PROVISIONS OF THE BOND INDENTURES ACCELERATION; REMEDIES above) available for application and the likelihood of additional moneys becoming available for such application in the future. Whenever the Bond Trustee shall apply such moneys, it shall fix the date (which shall be an Interest Payment Date unless it shall deem another date more suitable, or, with respect to payments of Defaulted Interest, shall be such date as is required by the Bond Indenture) upon which such application is to commence and upon such date interest on the amounts of principal and interest to be paid on such date shall cease to accrue. The Bond Trustee shall give such notice as it may deem appropriate of the deposit with it of any such moneys and of the fixing of any such date and of the Special Record Date by mailing a copy of such notice by first class mail to the registered owners of the Bonds, at least 10 days prior to the Special Record Date. The Bond Trustee shall not be required to make payment to the holder of any unpaid Bond until such Bond shall be presented to the Bond Trustee for appropriate endorsement or for cancellation if fully paid. Whenever all Bonds and interest thereon have been paid under the provisions of the Bond Indenture summarized under this caption and all expenses and charges of the Bond Trustee have been paid, any balance remaining shall be paid to the Persons entitled to receive the same if no other Person shall be entitled thereto, then the balance shall be paid to the Corporation. REMOVAL OF THE BOND TRUSTEE If an event of default has occurred and is continuing under the Master Indenture, the Bond Indenture or the Loan Agreement, the Bond Trustee may be removed at any time by filing with the Bond Trustee so removed, and with the Authority, the Credit Facility Issuer and the Corporation an instrument in writing appointing a successor signed by the owners of a majority in aggregate principal amount of Bonds then Outstanding. So long as no event of default has occurred and is continuing under the Master Indenture, the Bond Indenture or the Loan Agreement, the Bond Trustee may be removed with or without cause at any time by an instrument or concurrent instruments in writing appointing a successor signed by Authority at the direction of the Corporation, and delivered to the Bond Trustee The foregoing notwithstanding, the Bond Trustee may not be so removed unless written notice of the D-26

202 delivery of such instrument or instruments signed by the Authority is mailed to the owners of all Bonds outstanding under the Bond Indenture, which notice indicates the Bond Trustee will be removed and replaced by the successor Bond Trustee named in such notice, such removal and replacement to become effective on the 90th day next succeeding the date of such notice, unless the owners of not less than ten percent (10%) in aggregate principal amount of such Bonds then outstanding under the Bond Indenture shall object in writing to such removal and replacement. Such notice shall be mailed by first class mail postage prepaid to the owners of all such Bonds then outstanding at the address of such owners then shown on the Bond Register. BOND TRUSTEE AS HOLDER OF SERIES 2009 OBLIGATION The Bond Trustee shall be considered the holder of the Series 2009 Obligation subject to the rights of the Credit Facility Issuer. So long as a Credit Facility is in effect and the Credit Facility Issuer has not lost any of its rights pursuant to the Bond Indenture, the Credit Facility Issuer shall have the right without the consent of or notice to the Bondholders (i) to direct the Bond Trustee, as holder of the Series 2009 Obligation, to take any action or give any consent, approval, waiver or notice under the provisions of the Master Indenture and (ii) to consent to any supplements or amendments to the Loan Agreement or the Bond Indenture on behalf of the owners of the Series 2009 Bonds. The Bond Trustee hereby acknowledges its obligation to act as directed by the Credit Facility Issuer. DEFEASANCE If the Authority or the Corporation shall pay or provide for the payment of the entire indebtedness on all Bonds outstanding (including, for the purpose of the provisions of the Bond Indenture summarized under this caption, any Bonds held by any Member) in any one or more of the following ways: (a) by paying or causing to be paid the principal of (including redemption premium, if any) and interest on all Bonds outstanding, as and when the same become due and payable; (b) by depositing with the Bond Trustee, in trust and subject to the lien of the Bond Indenture, at or before the stated maturity, moneys (which shall be Eligible Moneys) in an amount sufficient to pay or redeem (when redeemable) all Bonds outstanding (including the payment of premium, if any, and interest payable on such Bonds to the stated maturity or redemption date thereof), provided that such moneys, if invested, shall be invested in Government Obligations which are not prepayable or callable prior to, but mature on a date on or prior to, the date the moneys therefrom are anticipated to be required in an amount, without consideration of any income or increment to accrue thereon, sufficient to pay or redeem (when redeemable) and discharge the indebtedness on all Bonds outstanding at or before their respective stated maturity dates; it being understood that the investment income on such Government Obligations may be used for any other purpose under the Act; (c) by delivering to the Bond Trustee, for cancellation by it, all Bonds outstanding; or (d) by depositing with the Bond Trustee, in trust and subject to the lien of the Bond Indenture, Government Obligations which are not prepayable or callable prior to, but mature on or prior to, the date the moneys therefrom are anticipated to be required in such amount as will, together with the income or increment to accrue thereon, without consideration of any reinvestment thereof, and with any uninvested cash, be fully sufficient to pay or redeem (when redeemable) and discharge the indebtedness on all Bonds at or before their respective stated maturity dates; and if the Authority or the Corporation shall pay or cause to be paid all other sums payable under the Bond Indenture, the Bond Indenture and the estate and rights granted under the Bond Indenture shall cease, determine, and become null and void, and thereupon the Bond Trustee shall, upon Written Request of the Authority or the Corporation, and upon receipt by the Bond Trustee of an Officer s Certificate of the Corporation and an opinion of Independent Counsel (addressed to the Authority, the Bond Trustee and the Credit Facility Issuer), each stating that in the opinion of the signers all conditions precedent to the satisfaction and discharge of the Bond Indenture have been complied with, forthwith execute proper instruments acknowledging satisfaction of and discharging the Bond Indenture and the lien thereof and cancel the Series 2009 Obligation pledged under the Bond Indenture and return the same to the Master Trustee. The satisfaction and discharge of the Bond Indenture shall be without prejudice to the rights of the Bond Trustee to charge and be reimbursed by the Authority and the Corporation for any expenditures which it may thereafter incur in connection therewith. Any moneys, funds, securities, or other property remaining on deposit in the Revenue Fund, the Interest Fund, the Bond Sinking Fund, the Expense Fund, the Project Fund, the Redemption Fund, the Bond Purchase Fund or any other fund or investment under the Bond Indenture (other than said Government Obligations or other moneys deposited in trust as above provided and other than amounts on deposit in the Rebate Fund) shall, upon the full satisfaction of the Bond Indenture, forthwith be transferred, paid over and distributed to the Authority and the Corporation, as their respective interests may appear. D-27

203 If the Authority shall pay or provide for the payment of a portion of the Bonds (including for the purpose of the provisions of the Bond Indenture summarized under this caption, any such Bonds held by a Member of the Obligated Group), in one or more of the following ways: (a) by paying or causing to be paid the principal of (including premium, if any) and interest on such portion of the Bonds, as and when the same shall become due and payable; (b) by depositing with the Bond Trustee, in trust and subject to the lien of the Bond Indenture, at or before maturity, moneys (which shall be Eligible Moneys) in an amount sufficient to pay or redeem (when redeemable) such portion of the Bonds (including the payment of premium, if any, and interest payable on such Bonds to the Maturity or redemption date thereof), provided that such moneys, if invested, shall be invested in Government Obligations, which are not prepayable or callable prior to, but mature on a date on or prior to, the date the moneys therefrom are anticipated to be required in an amount, without consideration of any income or increment to accrue thereon, sufficient to pay or redeem (when redeemable) and discharge the indebtedness on such portion of the Bonds at or before their respective stated maturity dates; it being understood that the investment income on such Government Obligations may be used for any other purpose under the Act; (c) by delivering to the Bond Trustee, for cancellation by it, such portion of the Bonds; or (d) by depositing with the Bond Trustee, in trust and subject to the lien of the Bond Indenture, Government Obligations which are not prepayable or callable prior to, but mature on a date on or prior to, the date the monies therefrom are anticipated to be required, in such amount as will, together with the income or increment to accrue thereon, without consideration of any reinvestment thereof, and any uninvested cash, be fully sufficient to pay or redeem (when redeemable) and discharge the indebtedness on such portion of the Bonds at or before their respective stated maturity dates; and if the Authority or the Corporation shall also pay or cause to be paid all other sums payable under the Bond Indenture by the Authority with respect to such Bonds, and, if such portion of the Bonds is to be redeemed prior to the maturity thereof, notice of such redemption shall have been given as provided in the Bond Indenture or provisions satisfactory to the Bond Trustee shall have been made for the giving of such notice, such Bonds shall cease to be entitled to any lien, benefit or security under the Bond Indenture. The provisions of subparagraphs (b) and (d) of this paragraph shall only apply if (x) (A) such Bond matures or is called for redemption prior to the next date upon which such Bond is subject to purchase pursuant to the Bond Indenture or (B) the Bond Trustee, the Credit Facility Issuer and the Authority receive evidence satisfactory to them that the moneys on deposit in the escrow established to refund such Bonds are in an amount sufficient to pay the principal of and interest on such Bonds at the Maximum Rate on any date such Bonds may be tendered during the period prior to payment in full of principal, premium, if any, and interest payable on such Bonds, in which case the tendered Bonds shall be purchased with moneys on deposit in the escrow and shall be canceled, which evidence shall be accompanied by a written notice from each Rating Agency then maintaining a rating on the Bonds to be refunded that the rating on such Bonds will not be withdrawn, suspended or reduced from the rating borne by such Bonds immediately prior to such refunding, and (y) the Corporation waives, to the satisfaction of the Bond Trustee, its right to convert the method for determining the interest rate borne by such Bond. The liability of the Authority in respect of such Bonds, if any, shall continue but the holders thereof shall thereafter be entitled to payment (to the exclusion of all other Bondholders) only out of the moneys or Government Obligations deposited with the Bond Trustee as aforesaid. Notwithstanding anything to the contrary in the Bond Indenture, the provision for payment of the Bonds or a portion thereof as specified in clauses (b) or (d) of the first and fourth paragraphs above shall only apply if (x) (A) such Bond matures or is called for redemption prior to the next date upon which such Bond is subject to purchase pursuant to the Bond Indenture or (B) if such Bonds bear interest at a Daily Interest Rate, a Two-Day Interest Rate or Weekly Interest Rate, the Bond Trustee, the Credit Facility Issuer and the Authority receive evidence satisfactory to them that the moneys on deposit in the escrow established to refund such Bonds are in an amount sufficient to pay the principal of and interest on such Bonds at the Maximum Rate on any date such Bonds may be tendered during the period prior to payment in full of principal, premium, if any, and interest payable on such Bonds, in which case the tendered Bonds shall be purchased with moneys on deposit in the escrow and shall be canceled, which evidence shall be accompanied by a written notice from each Rating Agency then maintaining a rating on the Bonds to be refunded that the rating on such Bonds will not be withdrawn, suspended or reduced from the rating borne by such Bonds immediately prior to such refunding, and (y) the Corporation waives, to the satisfaction of the Bond Trustee, its right to convert the method for determining the interest rate borne by such Bond. The satisfaction and discharge of the Bond Indenture shall be without prejudice to the rights of the Bond Trustee to charge and be reimbursed by the Corporation for any expenditures which it may thereafter incur in connection with the Bond Indenture. D-28

204 CREDIT FACILITY During such time as a Credit Facility is in effect for a Subseries of Bonds, the Bond Trustee shall draw upon the Credit Facility in accordance with its terms in an amount which will be sufficient to pay, on any date on which due, principal of and interest on Bonds (other than Bank Bonds) bearing interest at a Daily Interest Rate, Two-Day Interest Rate or a Weekly Interest Rate, whether upon redemption (unless other Eligible Moneys are to be used for such purpose), at maturity, upon acceleration or otherwise or to purchase such Bonds in lieu of redemption. In no event shall the Bond Trustee draw upon the Credit Facility to make any payment of principal of Bank Bonds or Bonds registered in the name of the Authority or any Member of the Obligated Group or any payment of interest on any Interest Payment Date on Bonds which as of the Record Date for such Interest Payment Date were Bank Bonds or Bonds registered in the name of the Authority or any Member of the Obligated Group. If a Credit Facility Issuer fails to honor any draw on the Credit Facility to pay principal or interest on the Bonds, the Bond Trustee shall give Immediate Notice of such failure to the Corporation and shall demand payment from the Corporation to the extent the Corporation has not made payment pursuant to the provisions of the Loan Agreement. The Bond Trustee shall draw moneys under the applicable Credit Facility in accordance with its terms and in accordance with the Bond Indenture to the extent necessary to pay to the Bondholders the purchase price of Tendered Bonds. Immediately following each drawing under the Credit Facility, other than one to pay principal of or interest on the Bonds on an Interest Payment Date, and not as a condition to such drawing, the Bond Trustee shall use its best efforts to give telephonic notice to the Corporation that such a drawing under the Credit Facility was made. The Bond Trustee and the Bond Trustee s Agent shall return any moneys drawn under the Credit Facility to the Credit Facility Issuer as soon as reasonably practicable on or after the applicable purchase date to the extent such moneys exceed the amount necessary to pay the purchase price of Bonds tendered for purchase. If the Credit Facility Issuer fails to honor any draw on the Credit Facility to pay the Tender Price, the Bond Trustee shall give Immediate Notice of such failure to the Corporation and shall demand payment from the Corporation of the purchase price of Tendered Bonds pursuant to the Loan Agreement. The Corporation may, subject to the provisions of a Credit Facility Agreement, at any time arrange for the deposit with the Bond Trustee of a Renewal Credit Facility in substitution for the existing Credit Facility. Each Renewal Credit Facility shall be satisfactory in form and substance to the Bond Trustee; provided that no such Renewal Credit Facility shall be satisfactory to the Bond Trustee unless, in addition to all other requirements to be met therefore, a draft of such Renewal Credit Facility, a draft of the related Renewal Credit Facility Agreement, if any, and appropriate information concerning the Credit Facility Issuer which will issue such Renewal Credit Facility have been submitted to the Bond Trustee at least 20 days prior to the date such Renewal Credit Facility is to become effective. In connection with such renewal, the Bond Trustee shall also receive an opinion of counsel for the Credit Facility Issuer issuing the Renewal Credit Facility in substantially the form of opinion of counsel for the Initial Credit Facility Issuer delivered to the Bond Trustee upon the issuance of the Initial Credit Facility as to the enforceability of the Credit Facility. Upon the delivery of a Renewal Credit Facility, the Bond Trustee shall promptly give written notice by first class mail, postage prepaid, to each owner of a Bond bearing interest at a Daily Interest Rate, a Two-Day Interest Rate or a Weekly Interest Rate that a Renewal Credit Facility and Renewal Credit Facility Agreement will enhance such Bond. The Corporation may, subject to the provisions of the Credit Facility Agreement, at any time arrange for the deposit with the Bond Trustee of an Alternate Credit Facility in substitution for an existing Credit Facility. The Alternate Credit Facility shall expire no earlier than 360 days from the date of its deposit with the Bond Trustee. Each Alternate Credit Facility shall be satisfactory in form and substance to the Bond Trustee; provided that any such Alternate Credit Facility shall not be satisfactory to the Bond Trustee unless, in addition to all other requirements to be met therefore, a draft of such Alternate Credit Facility, a draft of the Alternate Credit Facility Agreement and a draft of any supplemental bond indenture required to be executed in connection with the delivery of the Alternate Credit Facility, and appropriate information concerning the entity which will issue such Alternate Credit Facility have been submitted to each Rating Agency then maintaining a rating on the Bonds entitled to the benefit of the then effective Credit Facility, and each such Rating Agency has given notice, promptly confirmed in writing, to the Bond Trustee at least 20 days prior to the date such Alternate Credit Facility is to become effective as to what rating the Bonds entitled to the benefit of the Alternate Credit Facility will bear after such substitution. D-29

205 The Credit Facility then in effect may be replaced by an Alternate Credit Facility only if (i) the provisions for mandatory tender for purchase of the Bonds described under the caption THE SERIES 2009 BONDS Tender and Purchase of the Series 2009 Bonds Mandatory Tender for Purchase upon Termination, Replacement or Expiration of Credit Facility; Credit Facility Default Tender Date in the Official Statement are complied with, (ii) prior to such replacement the Corporation shall have delivered to the Bond Trustee and the Authority a Favorable Opinion of Bond Counsel, (iii) the Bond Trustee shall receive an opinion of counsel for the Credit Facility Issuer issuing the Alternate Credit Facility in substantially the form of opinion of counsel for the Initial Credit Facility Issuer delivered to the Bond Trustee upon the issuance of the Initial Credit Facility, and (iv) all obligations under the existing Credit Facility Agreement have been paid in full. So long as any Bonds bear interest at a Daily Interest Rate, a Two-Day Interest Rate or a Weekly Interest Rate, the Corporation is required to cause to have on deposit with the Bond Trustee a Credit Facility or a Self Liquidity Agreement in accordance with the Loan Agreement. CONSENT OF THE CREDIT FACILITY ISSUER Notwithstanding any other provision of the Bond Indenture or the Loan Agreement to the contrary, no consent of or notice to the Credit Facility Issuer shall be required under any provision of the Bond Indenture or the Loan Agreement nor shall the Credit Facility Issuer have any right to receive notice of, consent to, direct or control any actions, restrictions, rights, remedies, waivers or accelerations pursuant to any provision of the Bond Indenture or the Loan Agreement during any time which: (a) the Credit Facility Issuer has failed to honor a properly presented draw made under and in strict compliance with the terms of the Credit Facility; (b) the Credit Facility for any reason ceases to be valid and binding on the Credit Facility Issuer or is declared by a court of competent jurisdiction to be null and void, or the validity or enforceability of any provision of the Credit Facility is denied by the Credit Facility Issuer or any governmental agency or authority, or the Credit Facility Issuer is denying in writing further liability or obligation under the Credit Facility, in all of the above cases contrary to the terms of the Credit Facility; (c) a petition has been filed and is pending against the Credit Facility Issuer under any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution or liquidation law of any jurisdiction, whether now or hereafter in effect, and has not been dismissed within 60 days after such filing; (d) the Credit Facility Issuer has filed a petition, which is pending, under any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution or liquidation law, of any jurisdiction, whether now or hereafter in effect, or has consented to in writing the filing of any petition against it under such law; or (e) the Credit Facility Issuer is dissolved or confiscated by action of government due to war or peace time emergency or the U.S. government declares a moratorium on the Credit Facility Issuer s activities. TERMINATION OF LEASE; ASSUMPTION OF OBLIGATIONS UNDER LOAN AGREEMENTS In the event that the Corporation or the University determines to terminate the Lease in accordance with its terms or the Lease is terminated as a result of the termination of the Affiliation Agreement, the Lease requires that, as a condition precedent thereto, the University shall assume and agree to perform the obligations of the Corporation under the Loan Agreement. In furtherance thereof, the Corporation and the Authority have agreed, in the Loan Agreement, that upon not less than 60 days prior written notice to the Authority, the Bond Trustee and the Credit Facility Issuer, the University may be substituted for, and shall assume the obligations of, the Corporation under the Loan Agreement in all respects (except to the extent that the covenants and agreements of the Corporation under the Loan Agreement are modified in connection therewith as set forth in the Loan Agreement) and the Corporation shall D-30

206 be released and discharged from all obligations and liabilities under the Loan Agreement and on the Obligations pledged under the Bond Indenture upon the satisfaction of certain conditions precedent set forth in the Loan Agreement, including the execution and delivery by the University of the University Note, in a principal amount equal to the then unpaid principal amount of the Series 2009 Obligation, with principal and interest installments thereon to correspond in all respects with the principal and interest installments then due and to become due on the Series 2009 Obligation. In connection with such assumption by the University of the obligations of the Corporation under the Loan Agreement, as described above, the following changes to the provisions of the Bond Indenture shall occur effective with the execution and delivery by the University of the Assumption Instruments (as defined in the Loan Agreement), unless the University shall have become a Member of the Obligated Group and therefore subject to the terms and provisions of the Master Indenture: (i) All references to the Master Indenture, the Tenth Supplemental Master Indenture, the Master Trustee, the Members or Members of the Obligated Group and the Obligated Group shall be deleted. (ii) All references to the Series 2009 Obligation shall be deemed changed to the University Note, and all references in the Bond Indenture to the Corporation or the Obligated Group Agent shall be deemed to refer to the University. (iii) Upon the satisfaction of all conditions precedent to such assumption set forth in the Loan Agreement and upon delivery of the University Note to the Bond Trustee, the Bond Trustee shall cancel and return to the Corporation the Series 2009 Obligation pledged under the Bond Indenture, and the University Note shall replace and be substituted for such Series 2009 Obligation for all purposes of the Bond Indenture; provided, however, that the Bond Trustee shall be satisfied the payments of principal, premium, if any, and interest on the University Note correspond in all respects to such payments on such Series 2009 Obligation. BOOK ENTRY TENDERS (a) Notwithstanding any other provision of the Bond Indenture to the contrary, all tenders for purchase during any period in which the Bonds are registered in the name of the Securities Depository shall be subject to the terms and conditions set forth in the Letter of Representations and to the procedures and requirements of the Securities Depository then in effect. For so long as the Bonds are registered in the name of a Securities Depository or its nominee, the tender option rights of holders of Bonds with respect to optional tenders may be exercised only by the Securities Depository by giving notice of its election to tender Bonds or portions thereof at the times and in the manner described herein. Beneficial Owners will not have any right to tender Bonds directly to the Tender Agent other than through the Securities Depository. Procedures under which a Beneficial Owner may direct a Direct Participant or the Securities Depository, or an Indirect Participant of the Securities Depository acting through a Direct Participant of the Securities Depository, to exercise a tender option right in respect of Bonds or portions thereof in an amount equal to all or a portion of such Beneficial Owner s beneficial ownership interest therein shall be governed by standing instructions and customary practices determined by such Direct Participant or Indirect Participant. For so long as the Bonds are registered in the name of a Securities Depository or its nominee, delivery of Bonds required to be tendered for purchase shall be effected by the transfer on the applicable date of purchase of a book entry credit to the account of the Tender Agent of a beneficial interest in such Bonds and payment for such Bonds shall be in accordance with the procedures and requirements of the Securities Depository. None of the provisions of the Bond Indenture summarized under this heading will require the Bond Trustee to expend, advance or risk its own overnight or intra-day funds or otherwise incur individual financial liability in the exercise of any of its rights or powers under the Bond Indenture. (b) Notwithstanding anything expressed or implied herein to the contrary, so long as the Bonds are maintained in book-entry form: (i) there shall be no requirement of (A) physical delivery to or by the Tender Agent, the Remarketing Agent or the Bond Trustee of any Bonds subject to mandatory or optional purchase as a condition to the payment of the Purchase Price therefor or (B) any wire transfer of any remarketing proceeds of such Bonds to or from the Tender Agent, the Remarketing Agent or the Trustee; (ii) the Remarketing Agent s sole responsibilities D-31

207 in connection with the purchase and remarketing of a Tendered Bond shall be, in accordance with its obligations under the Bond Indenture and the procedures and requirements of the Securities Depository then in effect, to: (A) remarket, pursuant to the terms of the Bond Indenture, the Bonds for which it has been timely notified in accordance with the Bond Indenture that have been tendered, or deemed tendered, to the Tender Agent by the Beneficial Owners thereof; (B) notify the requisite parties required under the Bond Indenture by the times required herein of the portion of the Tendered Bonds or Bonds that are deemed tendered that have not been remarketed on or before such time in respect of the related date of purchase therefor; and (C) purchase, or cause to be purchased, on a delivery versus payment basis, the portion of the Bonds which have been tendered, or deemed tendered, by Beneficial Owners to the Tender Agent (or its participant account with the Securities Depository) that have been remarketed on or before the related date of purchase therefor from the Tender Agent on the applicable date of purchase in such manner as required or provided by the Securities Depository s procedures and requirements then in effect; (iii) the Tender Agent s sole responsibilities in connection with the purchase and remarketing of a Tendered Bond shall be, in accordance with its obligations under the Bond Indenture and the procedures and requirements of the Securities Depository then in effect, to: (A)(1) in the event the Remarketing Agent notifies the Tender Agent that there are any Tendered Bonds that have not been remarketed, draw, or direct the Bond Trustee to draw, upon the Credit Facility or self-liquidity arrangement which draw or funded amount shall be in an amount equal to the Purchase Price of such Bonds plus accrued and unpaid interest thereon to but excluding such date of purchase, and (2) remit, or direct the Bond Trustee to remit, the amount so drawn or received upon receipt thereof together with the proceeds received from the sale of Bonds that have been remarketed in accordance with (B) below, for deposit in the Bond Purchase Fund in accordance with the Bond Indenture for application in accordance with the Bond Indenture for payment to or upon the order of the Securities Depository for the benefit of the tendering Beneficial Owners against delivery of the Tendered Bonds to the Tender Agent (or its participant account with the Securities Depository); and (B) purchase Tendered Bonds from tendering bondholders and sell, on a delivery versus payment basis, the remarketed Bonds to the Remarketing Agent on the applicable date of purchase in such manner as required or provided by the Securities Depository s procedures and requirements then in effect. (c) In the event that any Series 2009 Bond that has been remarketed on a particular Tender Date has not been purchased on the delivery versus payment basis as described in the provisions of the Bond Indenture summarized under this caption by 3:00 p.m. New York City time on the applicable Tender Date in the manner required or provided by DTC s procedures and requirements then in effect, (a) the Tendered Bonds shall be returned to their respective holders and shall bear interest at the Maximum Rate from the date of such failed purchase until all such returned Bonds are purchased or otherwise paid (as provided in the provisions of the Bond Indenture summarized under the heading THE SERIES 2009 BONDS Tender and Purchase of the Series 2009 Bonds - Inadequate Funds for Tenders in the forepart of this Official Statement), and (b) the Bond Trustee shall draw on the Credit Facility in order to receive the payment of such amounts on the following Business Day. The failure to pay Tender Price of all Tendered Bonds under these circumstances shall not constitute an Event of Default under the Bond Indenture or the Loan Agreement. SUMMARY OF CERTAIN PROVISIONS OF THE LOAN AGREEMENTS The Loan Agreements contain various terms and conditions, certain of which are summarized below. Reference is made to the Loan Agreements for a full and complete statement of the provisions thereof. The Loan Agreements contain substantially similar provisions and are therefore summarized together under this Appendix. The Series 2009D Bonds are separately secured by the Series 2009D Loan Agreement, the Series 2009D Obligation and the Series 2009D Bond Indenture, and the Series 2009E Bonds are separately secured by the Series 2009E Loan Agreement, the Series 2009E Obligation and the Series 2009E Bond Indenture. All references herein to the Series 2009 Bonds, the Loan Agreements, the Bond Indentures and the Series 2009 Obligations should be interpreted accordingly. Unless the context indicates otherwise, each reference to the Bond Indenture shall be deemed to refer to the Series 2009D Bond Indenture or the Series 2009E Bond Indenture, as applicable, each reference to the Series 2009 Bonds or Bonds shall be deemed to refer to the Series 2009D Bonds or the Series 2009E Bonds, as applicable, issued under the applicable Bond Indenture each reference to the Loan Agreement shall be deemed to refer to the Series 2009D Loan Agreement or the Series 2009E Loan Agreement, as applicable, each reference to the Series 2009 Obligation shall be deemed to refer to the Series 2009D Obligation or the Series 2009E Obligation, as applicable, and each reference to the Bank Obligation shall mean the Series 2009D Bank Obligation or the Series 2009E Bank Obligation, as applicable. D-32

208 LOAN OF SERIES 2009 BOND PROCEEDS The Corporation will enter into the Loan Agreement with the Authority, pursuant to which the Authority will loan the proceeds from the sale of the Series 2009 Bonds to the Corporation. The Series 2009 Obligation will be delivered to the Authority to evidence such loan and the obligation of the Corporation to repay the same. The Series 2009 Obligation will be issued in a principal amount equal to the aggregate principal amount of the Series 2009 Bonds, and will provide for payment of principal, premium, if any, and interest thereon sufficient to permit the Authority to make payments of principal, premium, if any, and interest on the Series 2009 Bonds. REPRESENTATIONS The Corporation represents in the Loan Agreement that it is a not for profit corporation duly incorporated under the laws of the State, in good standing and duly authorized to conduct its business in the State, the Corporation is duly authorized and has full power under all applicable laws and its articles of incorporation and Bylaws to create, issue, enter into, execute and deliver the Loan Agreement, the Master Indenture, including the Tenth Supplemental Master Indenture and the other documents related to the issuance of the Series 2009 Bonds and all action on its part necessary for the valid execution and delivery of such documents has been duly and effectively taken; and the Series 2009 Obligation and the Bank Obligation in the hands of the holder thereof will be the legal and valid obligations of the Corporation. OBLIGATED PAYMENTS; FUND DEPOSITS; PREPAYMENTS AND OTHER PAYMENTS Under the terms of the Loan Agreement, the Corporation agrees to pay the Bond Trustee such amounts at such times as shall provide for payment of interest, premium, if any, and principal, whether upon a scheduled interest payment date, at maturity, mandatory redemption, upon acceleration or otherwise, on the Bonds outstanding under the Bond Indenture. The Loan Agreement also requires that the Corporation pay certain other charges which may be incurred for such items as the Bond Trustee s fees, the Master Trustee s fees, the Authority s fees and expenses, and other reasonable fees and expenses incurred in connection with the issuance of the Series 2009 Bonds. All payments due on the Series 2009 Obligation and under the Loan Agreement, except for certain enumerated payments described in the Loan Agreement, shall be paid directly to the Bond Trustee and applied in the manner provided in the Bond Indenture. ASSIGNMENT AND PLEDGE OF AUTHORITY S RIGHTS; OBLIGATIONS OF CORPORATION ARE UNCONDITIONAL As security for the payment of the Series 2009 Bonds, the Authority will assign and pledge to the Bond Trustee all right, title and interest of the Authority in and to the Loan Agreement, the Series 2009 Obligation, including the right to receive payments under the Loan Agreement and under the Series 2009 Obligation (except its Unassigned Rights, including without limitation the right to receive payment of expenses, fees, indemnification and the rights to make determinations and receive notices as provided in the Loan Agreement), and will direct the Corporation to make said payments directly to the Bond Trustee. The Corporation assents in the Loan Agreement to such assignment and pledge and will make payments directly to the Bond Trustee without defense or set-off by reason of any dispute between the Corporation and the Authority or Bond Trustee, and agrees that its obligation to make payments under the Loan Agreement and to perform its other agreements contained in the Loan Agreement are absolute and unconditional. The Corporation will bear all risk of damage, destruction or loss of title in whole or in part to its Property, or any part thereof, including without limitation any loss, complete or partial, or interruption in the use, occupancy or operation of such Property, or any manner or thing which for any reason interferes with, prevents or renders burdensome, the use or occupancy of its Property or the compliance by the Corporation with any of the terms of the Loan Agreement. In furtherance of the foregoing, but without limiting any of the other provisions of the Loan Agreement, the Corporation agrees that its obligations to pay the principal, premium, if any, and interest owing under the Loan Agreement, to pay the other sums provided for in the Loan Agreement and to perform and observe its other agreements contained in the Loan Agreement shall be absolute and unconditional and that the Corporation shall not be entitled to any suspension, discontinuation, abatement or diminution thereof nor to any termination of the Loan Agreement for any reason whatsoever (including any acts or circumstances that may constitute failure of consideration, destruction of or damage to the Bond Financed Property, commercial frustration of purpose, any D-33

209 change in the laws of the United States or of the State or any political subdivision of either or any failure of the Authority to perform any of its agreements, whether express or implied, or any duty, liability or obligation arising from or connected with the Loan Agreement). INDEMNIFICATION OF THE AUTHORITY The Corporation will pay, and will protect, indemnify and save the Authority and the Bond Trustee (the Indemnified Persons ) harmless from and against, any and all liabilities, losses, damages, tax penalties, costs and expenses (including attorneys fees and expenses of the Corporation, the Authority and the Bond Trustee), causes of action, suits, proceedings, claims, demands, tax reviews, investigations and judgments of whatsoever kind and nature (including, but not limited to, those arising or resulting from any injury to or death of any person or damage to property) arising from or in any manner directly or indirectly growing out of or connected with the following: (a) the use, financing, non-use, condition or occupancy of any of the Bond Financed Property, any repairs, construction, alterations, renovation, relocation, remodeling and equipping thereof or thereto or the condition of any of such Bond Financed Property including adjoining sidewalks, streets or alleys and any equipment or facilities at any time located on such Bond Financed Property or used in connection therewith but which are not the result of the gross negligence or willful misconduct of the Authority or the Bond Trustee; (b) violation of any agreement, warranty, covenant or condition of the Loan Agreement or any other agreement executed in connection with the Loan Agreement; (c) Property; violation of any contract, agreement or restriction by the Corporation relating to its Bond Financed (d) violation of any law, ordinance, regulation or court order affecting any of the Bond Financed Property or the ownership, occupancy or use thereof or the Series 2009 Bonds or the use of the proceeds thereof; (e) any statement or information concerning the Corporation or any other Member of the Obligated Group, any of its or their officers and members or its or their Property, relating to their operations or financial condition generally or the Bond Financed Property specifically, contained in any official statement or supplement or amendment thereto furnished to the Authority or the purchasers of any Bonds, that is untrue or incorrect in any material respect, and any omission from such official statement of any statement or information which should be contained therein for the purpose for which the same is to be used or which is necessary to make the statements therein concerning the Corporation or any other Obligated Group Member, any of its or their officers and members and the Bond Financed Property not misleading in any material respect, provided that such official statement has been approved by the Corporation and the Indemnified Persons did not have actual knowledge of the omission or misstatement; (f) any loss, liability or expense incurred arising out of or in connection with the acceptance or administration of the Bond Indenture or the Loan Agreement, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties thereunder, unless caused solely by the negligence or bad faith on the part of the Bond Trustee; and (g) as to the Authority only, any other loss, liability or expense arising out of or in connection with the issuance of the Series 2009 Bonds and entering into of the transaction related thereto, including without limitation the enforcement of any remedies under the Bond Indenture or related documents. Such indemnity shall extend to each Indemnified Person s respective past, present and future members, officers, directors, employees, agents, successors and assigns, as well as each person, if any, who controls the Authority or the Bond Trustee, as the case may be, as that term is defined in Section 15 of the Securities Act of 1933, as amended. In case any claim shall be made or any action shall be brought against one or more of the Indemnified Persons in respect of which indemnity can be sought against the Corporation pursuant to any of the preceding D-34

210 paragraphs under this caption, the Indemnified Person seeking indemnity shall promptly notify the Corporation, in writing, and the Corporation shall promptly assume the defense thereof, including the employment of counsel chosen by the Corporation and approved by the Authority or Bond Trustee, or both (provided, that such approval by the Authority or Bond Trustee shall not be unreasonably withheld), the payment of all expenses and the right to negotiate and consent to settlement. If any Indemnified Person is advised in a written opinion of counsel that there may be legal defenses available to such Indemnified Person which are adverse to or in conflict with those available to the Corporation or that the defense of such Indemnified Person should be handled by separate counsel, the Corporation shall not have the right to assume the defense of such Indemnified Person, but the Corporation shall be responsible for the reasonable fees and expenses of counsel retained by such Indemnified Person in assuming its own defense, and provided also that, if the Corporation shall have failed to assume the defense of such action or to retain counsel reasonably satisfactory to the Authority or Bond Trustee within a reasonable time after notice of the commencement of such action, the reasonable fees and expenses of counsel retained by the Indemnified Person shall be paid by the Corporation. Notwithstanding the foregoing, any one or more of the Indemnified Persons shall have the right to employ separate counsel with respect to any such claim or in any such action and to participate in the defense thereof, but the fees and expenses of such counsel shall be paid by such Indemnified Person unless the employment of such counsel has been specifically authorized by the Corporation or unless the provisions of the immediately preceding sentence are applicable. The Corporation shall not be liable for any settlement of any such action affected without the consent of the Corporation, but if settled with the consent of the Corporation or if there be a final judgment for the plaintiff in any such action with or without consent, the Corporation agrees to indemnify and hold harmless the Indemnified Person from and against any loss, liability or expense by reason of such settlement or judgment. The Corporation shall also indemnify the Authority, Bond Trustee and such Indemnified Persons for all reasonable costs and expenses, including reasonable counsel fees, incurred in: (i) enforcing any obligation of the Corporation under the Loan Agreement or any related agreement, (ii) taking any action requested by the Corporation, (iii) taking any action required by the Loan Agreement or any related agreement, or (iv) taking any action considered necessary by the Authority and which is authorized by the Loan Agreement or any related agreement. If the Authority is to take any action under the Loan Agreement or any other instrument executed in connection with the Loan Agreement for the benefit of the Corporation, it will do so if and only if (i) the Authority is a necessary party to any such action or proceeding, and (ii) the Authority has received specific written direction from the Corporation, as required under the Loan Agreement or under any other instrument executed in connection therewith, as to the action to be taken by the Authority. All amounts payable to the Authority under the provisions of the Loan Agreement summarized under this caption shall be deemed to be fees and expenses payable to the Authority for the purposes of the provisions of the Loan Agreement and of the Bond Indenture dealing with assignment of the Authority s rights under the Loan Agreement. The Authority and its members, officers, agents, employees and their successors and assigns shall not be liable to the Corporation for any reason. Any provision of the Loan Agreement or any other instrument or document executed and delivered in connection therewith to the contrary notwithstanding, the Authority retains the right to (i) enforce any applicable Federal or State law or regulation or resolution of the Authority, and (ii) enforce any rights accorded to the Authority by Federal or State law or regulation of the Authority, and nothing in the Loan Agreement shall be construed as an express or implied waiver thereof. The provisions summarized under this caption shall survive the termination of the Loan Agreement. MAINTENANCE OF CORPORATE EXISTENCE AND STATUS Unless the Corporation complies with the following provisions of the Loan Agreement summarized under this caption, the Corporation agrees that as long as any Bonds are Outstanding it will maintain its existence, will not dissolve, liquidate or otherwise dispose of all or substantially all of its assets, and will not consolidate with or merge into another corporation or permit one or more other corporations to consolidate with or merge into it. Any dissolution, liquidation, disposition, consolidation or merger shall be subject to the following conditions: D-35

211 (a) the Corporation provides a certificate to the Authority and the Bond Trustee in form and substance satisfactory to such parties, to the effect that no event of default exists under the Loan Agreement or under the Bond Indenture and that no event of default will be caused by the dissolution, liquidation, disposition, consolidation or merger; (b) the entity surviving the dissolution, liquidation, disposition, consolidation or merger assumes in writing and without condition or qualification the obligations of the Corporation under the Loan Agreement, the Tax Exemption Agreement and the Master Indenture (the Corporation Documents ); (c) the Corporation or the entity surviving the dissolution, liquidation, disposition, consolidation or merger, within ten days after execution thereof, furnishes to the Authority and the Bond Trustee a true and complete copy of the instrument of dissolution, liquidation, disposition, consolidation or merger; (d) neither the validity nor the enforceability of the Bonds, the Bond Indenture or any agreements to which the Corporation is a party is adversely affected by the dissolution, liquidation, disposition, consolidation or merger; (e) the dissolution, liquidation, disposition, consolidation or merger will not adversely affect any exemption from federal income taxation to which interest on the Bonds would otherwise be entitled; (f) if then required by the Authority, evidence that no rating on the Bonds, if the Bonds are then rated, is reduced or withdrawn as a result of the dissolution, liquidation, disposition, consolidation or merger; (g) any successor to the Corporation shall be qualified to do business in the State and shall continue to be qualified to do business in the State throughout the term of the Loan Agreement; (h) (1) neither the validity nor enforceability of the Corporation Documents are adversely affected by the dissolution, liquidation, disposition, consolidation or merger and (2) the provisions of the Act, the Bond Indenture, the Loan Agreement and the Master Indenture are complied with concerning the dissolution, liquidation, disposition, consolidation or merger; (i) the Authority has executed a certificate acknowledging receipt of all documents, information and materials required by the provisions of the Loan Agreement summarized under this caption; and (j) the Project continues to be as described in the Loan Agreement. As of the effective date of the dissolution, liquidation, disposition, consolidation or merger, the Corporation (at its cost) shall furnish to the Authority and the Bond Trustee (i) an opinion of Bond Counsel, in form and substance satisfactory to such parties, as to items (d) and (e) above, and (ii) an opinion of Independent Counsel, in form and substance satisfactory such parties, as to the legal, valid and binding nature of items (b) and (h) above. The Corporation further covenants that none of its money, property or other assets will be distributed to any of its directors or officers or to any other private person or individual; provided, however, that the Corporation may pay compensation or provide payment in kind in a reasonable amount for services rendered, including for service as a director only, or otherwise distribute its money, property or other assets to its directors, officers or any other private person or individual if such distribution is permitted by the Illinois General Not for Profit Corporation Act of 1986, as amended, and is otherwise permitted under the terms of the Loan Agreement. The Corporation further agrees that it will not act or fail to act in any other manner which could adversely affect any exemption from federal income taxation to which the interest on the Series 2009 Bonds would otherwise be entitled. Notwithstanding any other provision of the Loan Agreement summarized under this caption, the Authority may, at the request of the Corporation, waive any of the conditions summarized under this caption at its sole discretion without the consent of Bondholders. D-36

212 ACCREDITATION AND LICENSURE The Corporation warrants that its existing hospital is now accredited by The Joint Commission and its facilities have all material state and local licenses required for the operation thereof. The Corporation will obtain and maintain, or cause to be obtained and maintained, all such material licenses required for its operations and the operation of its health care facilities. The Corporation will use its best efforts to establish and maintain the status of its existing hospital as a provider of health care services, eligible for reimbursement under Medicare and equivalent insurance programs, and Medicaid and other similar contractual programs, including future federal and state programs, so long as it is in the best interest of the Obligated Group and the Bondholders, as determined by the Board of Trustees of the Corporation. FINANCIAL STATEMENTS The Corporation covenants that it will keep or cause to be kept proper books of records and accounts in which full, true and correct entries will be made of all dealings or transactions of, or in relation to, the business and affairs of the Obligated Group in accordance with generally accepted principles of accounting consistently applied, except as reflected in the notes thereto, and will furnish the materials and notices required to be delivered to the Master Trustee pursuant to the provisions of the Master Indenture to the Authority and the Bond Trustee. DISCHARGE OF ORDERS The Corporation covenants to cause any order, writ or warrant of attachment, garnishment, execution, replevin or similar process filed against any part of the funds or accounts held by the Bond Trustee under the Bond Indenture to be discharged, vacated, bonded or stayed within 90 days after such filing (which 90-day period shall be extended for so long as the Corporation is contesting such process in good faith), but, notwithstanding the foregoing, in any event not later than five days prior to any proposed execution or enforcement with respect to such filing or any transfer of moneys or investments pursuant to such filing. USE OF PROPERTY The Corporation agrees to use its health care facilities primarily as a revenue producing health facility (as such term is defined in the Act) and for related activities and only in furtherance of its lawful corporate purposes. The Corporation further covenants and agrees to operate its facilities so as not to discriminate on a legally impermissible basis. The Corporation agrees that it will not use or permit to be used any of the Bond Financed Property (i) by any Person in an Unrelated Trade or Business of the Corporation, or (ii) by any Person who is not a Tax-Exempt Organization, in either case in such manner or to such extent as would result in the loss of any exemption for purposes of federal income taxation to which the interest on the Series 2009 Bonds would otherwise be entitled. The Corporation further agrees that it will not use or permit to be used any of its Bond Financed Property: (i) primarily for sectarian instruction or study or as a place of devotional activities or religious worship or as a facility used primarily in connection with any part of the program of a school or department of divinity for any religious denomination or the training of ministers, priests, nuns, rabbis or other similar persons in the field of religion, or (ii) in a manner which is prohibited by the Establishment of Religion Clause of the First Amendment to the Constitution of the United States of America and the decisions of the United States Supreme Court interpreting the same or by any comparable provisions of the Constitution of the State and the decisions in the Supreme Court of the State interpreting the same. The Corporation agrees to permit the Authority or the Bond Trustee, but neither the Authority nor the Bond Trustee shall be obligated, to make inspections of any of its Property to determine compliance with the two preceding paragraphs. The provisions of this paragraph and the immediately preceding paragraph shall remain in full force and effect notwithstanding the payment of the Series 2009 Bonds and all amounts due and owing under the Loan Agreement and the Series 2009 Obligation and the termination of the Bond Indenture and the Loan Agreement. D-37

213 The covenants and agreements summarized under this caption need not be observed or may be changed if the Bond Trustee and the Corporation receive a Favorable Opinion of Bond Counsel with respect to such nonobservance or change. RATES AND CHARGES The Corporation covenants and agrees to charge such fees and rates for its Facilities and services and to exercise such skill and diligence so as to provide income from its Property together with other available funds sufficient to pay promptly all expenses of operation, maintenance and repair of such Property, all amounts owing under the Loan Agreement or on the Series 2009 Obligation pledged under the Bond Indenture and all other payments required to be made by it under the Loan Agreement to the extent permitted by law. The Corporation further covenants and agrees that it will, from time to time as often as necessary, to the extent permitted by law, revise its rates, fees and charges and cause the Obligated Group Members to operate their Facilities and to revise their rates, fees and charges in such manner as may be necessary or proper to comply with the provisions of the Loan Agreement summarized under this caption. The provisions of the Loan Agreement summarized under this caption shall not be construed to prohibit the Corporation or the Obligated Group Members from serving indigent patients to the extent required for the Corporation or any such Obligated Group Member to continue its qualification as a Tax-Exempt Organization or from serving any other class or classes of patients without charge or at reduced rates so long as such service does not prevent the Corporation from satisfying the other requirements of the provisions of the Loan Agreement summarized under this caption. TRANSFER OF ASSETS The Corporation covenants and agrees that it will not sell, lease or otherwise dispose (including without limitation any involuntary disposition resulting from an act or failure to act by the Corporation), directly or indirectly, in whole or in part, of Bond Financed Property unless the conditions set forth in the Tax Exemption Agreement are satisfied. INVESTMENT OF FUNDS; ARBITRAGE; TAX EXEMPTION AGREEMENT The Corporation covenants and agrees that moneys on deposit in any Fund under the Bond Indenture shall at all times be invested by the Bond Trustee in Qualified Investments and that the Corporation will take all actions necessary, including without limitation providing the Bond Trustee with, or causing the Bond Trustee to receive, all necessary directions, in writing to assure that such moneys are continuously invested in accordance with the provisions of the Bond Indenture and the Tax Exemption Agreement. The Bond Trustee is authorized to trade with itself in the purchase and sale of securities as provided in the provisions of the Bond Indenture summarized under the caption SUMMARY OF CERTAIN PROVISIONS OF THE BOND INDENTURES INVESTMENT OF FUNDS until otherwise directed by the Corporation in an Officer s Certificate. The Corporation further covenants and agrees that it will not take or permit to be taken any action or fail to take any action, including without limitation any action with respect to the investment of the proceeds of any Bonds (whether or not held under the Bond Indenture), or with respect to any other moneys or securities deposited with the Bond Trustee pursuant to the Bond Indenture, or with respect to the payments derived from the Series 2009 Obligation, or from the Master Indenture or the Loan Agreement, or with respect to the purchase of other obligations of the Authority, or with respect to any actions or payments required under the Tax Exemption Agreement, or with respect to any other moneys or properties, regardless of the source or where held, which may, notwithstanding compliance with the other provisions of the Bond Indenture, the Loan Agreement or the Tax Exemption Agreement, result in constituting the Series 2009 Bonds arbitrage bonds within the meaning of such term as used in Section 148 of the Code. The Corporation covenants that neither it nor any related person as defined in Section 144(a)(3) and 147(a) of the Code, pursuant to an arrangement, formal or informal, will purchase obligations of the Authority in an amount related to the amount of the Series 2009 Obligation or delivered in connection with the transaction contemplated by the Loan Agreement. CREDIT FACILITY; ALTERNATE CREDIT FACILITY Except as hereinafter described, the Corporation covenants and agrees that it shall maintain the Credit Facility, an Alternate Credit Facility or a Self Liquidity Agreement, in an amount equal to the required stated amount for the Series 2009 Bonds during the Daily Interest Rate Period, Two-Day Interest Rate Period or Weekly D-38

214 Interest Rate Period. If a Credit Facility has been delivered to the Bond Trustee with respect to the Series 2009 Bonds, the Corporation (1) shall maintain the Credit Facility or an Alternate Credit Facility, in an amount equal to the required stated amount for the Series 2009 Bonds prior to its termination, and (2) shall not voluntarily terminate the Credit Facility or any Alternate Credit Facility without at least 60 days written notice to the Bond Trustee, the Remarketing Agent and the then Credit Facility Issuer. The Corporation covenants and agrees that it shall give at least 60 days advance written notice to the Bond Trustee, the Credit Facility Issuer and the Remarketing Agent of (1) its intent to furnish an Alternate Credit Facility or Self Liquidity Agreement to the Bond Trustee, which notice shall specify the nature of such Alternate Credit Facility, the identity of the Alternate Credit Facility provider and the proposed effective date of the Alternate Credit Facility or such Self Liquidity Agreement and (2) its intent to terminate the Credit Facility then in effect, which notice shall specify the proposed termination date for such Credit Facility. SUPPLEMENTS AND AMENDMENTS TO THE LOAN AGREEMENTS The Authority, the Corporation and the Bond Trustee may, without the consent of or notice to the owners of the bonds, but with the consent of the Credit Facility Issuer, consent to any amendment, change or modification of the Loan Agreement as shall not be inconsistent with the terms and provisions of the Bond Indenture, for one or more of the following purposes: (i) to cure any ambiguity or formal defect or omission in the Loan Agreement, (ii) for the purpose of complying with the provisions of the Tax Exemption Agreement, (iii) to grant to or confer upon the Authority or Bond Trustee, for the benefit of the Bondholders, any additional rights, remedies, powers or authorities that lawfully may be granted to or conferred upon the Authority or the Bond Trustee, (iv) to amend or modify the Loan Agreement, or any part thereof, in any manner specifically required or permitted by the terms thereof, including, without limitation, as may be necessary to maintain the exclusion from gross income for purposes of federal income taxation of the interest on the Bonds, (v) to provide that Bonds may be secured by a credit facility or other additional security not otherwise provided for in the Bond Indenture or the Loan Agreement, (vi) to modify, amend or supplement the Loan Agreement, or any part thereof, or any supplement thereto, in such manner as the Bond Trustee or Corporation deem necessary in order to comply with any statute, regulation, judicial decision or other law relating to secondary market disclosure requirements with respect to tax-exempt obligations of the type that includes the Bonds, (vii) to provide for the appointment of a successor securities depository, (viii) to provide for the availability of certificated Bonds, (ix) to provide for the addition of any interest rate mode, including, without limitation, an auction rate mode, or to provide for the modification or deletion of any interest rate mode so long as no Bonds will be operating in the interest rate mode when it is to be so modified or deleted, or to amend, modify or alter the interest rate setting provisions, tender provision or conversion provisions for any then existing interest rate mode so long as no Bonds will be operating in the interest mode when such provisions are to be so amended, modified or altered; provided that, in each case, there is delivered to the Bond Trustee a Favorable Opinion of Bond Counsel (x) to provide for changes in the components of the Bond Financed Property, to the extent permitted by the Bond Indenture and Loan Agreement or (xi) in connection with any other change in the Loan Agreement which, in the judgment of the Bond Trustee, does not materially adversely affect the rights of the Bond Trustee, any Bondholder or the Authority; provided, however, that nothing in the provisions of the Bond Indenture summarized under this caption shall permit, or be construed as permitting, any amendment, change or modification of the Loan Agreement that may result in anything summarized in the lettered clauses in the third paragraph under the caption SUMMARY OF CERTAIN PROVISIONS OF THE BOND INDENTURES SUPPLEMENTAL BOND INDENTURES, without the consent of each Bondholder affected. Except for the amendments, changes or modifications as provided in the preceding paragraph, neither the Authority nor the Bond Trustee shall consent to any other amendment, change or modification of the Loan Agreement without the prior written consent, given and procured as in this paragraph provided, of the Credit Facility Issuer and the owners of not less than a majority in aggregate principal amount of the Bonds which are outstanding under the Bond Indenture at the time of execution of any such amendment, change or modification. If an amendment, change or modification would affect only one Subseries of the Bonds or less than all of the owners of a Subseries of Bonds, the owners of not less than a majority in aggregate principal amount of the Subseries of Bonds or the Bonds so affected which are outstanding at the time of the execution of the amendment or modification shall have the right to consent to and approve, with the consent of the applicable Credit Facility Issuer, the execution of any such amendment or modification. If at any time the Authority and the Corporation shall request the consent of the Bond Trustee to any such proposed amendment, change or modification of the Loan Agreement, the Bond D-39

215 Trustee shall, upon being satisfactorily indemnified with respect to expenses, cause notice of such proposed amendment, change or modification to be mailed in the same manner as summarized in the fourth paragraph under the caption SUMMARY OF CERTAIN PROVISIONS OF THE BOND INDENTURES SUPPLEMENTAL BOND INDENTURES with respect to supplemental indentures. Such notice shall briefly set forth the nature of such proposed amendment, change or modification and shall state that copies of the instrument embodying the same are on file at the Principal Office of the Bond Trustee for inspection by all Bondholders. The Bond Trustee shall not, however, be subject to any liability to any Bondholder by reason of its failure to mail such notice, and any such failure shall not affect the validity of such amendment, change or modification when consented to and approved as summarized in this paragraph. If the owners of the requisite principal amount of Bonds which are outstanding under the Bond Indenture at the time of the execution of any such amendment, change or modification shall have consented to and approved the execution thereof as provided in the Bond Indenture, no owner of any Bond shall have any right to object to any of the terms and provisions contained therein, or the operation thereof, or in any manner to question the propriety of the execution thereof, or to enjoin or restrain the Bond Trustee or the Authority from executing the same or from taking any action pursuant to the provisions thereof. The foregoing notwithstanding, the Credit Facility Issuer may consent to such amendments on behalf of the owners of the Bonds so long as the Credit Facility Issuer has not lost any of its rights pursuant to the provisions of the Bond Indenture summarized under the caption SUMMARY OF CERTAIN PROVISIONS OF THE BOND INDENTURES CONSENT OF THE CREDIT FACILITY ISSUER above. Under no circumstances shall any amendment to the Loan Agreement alter the Obligations pledged under the Bond Indenture or the payments of principal, premium, if any, and interest thereon, without the consent of the owners of all the Bonds outstanding. DEFAULTS AND REMEDIES The occurrence and continuance of any of the following events shall constitute an event of default under the Loan Agreement: (a) failure of the Corporation to pay any installment of interest, principal or premium under the Loan Agreement or on the Series 2009 Obligation pledged under the Bond Indenture or any other payment required by the Loan Agreement when the same shall become due and payable, with respect to a scheduled Interest Payment Date, or a maturity date, upon any date fixed for prepayment, upon acceleration or otherwise and the continuance of such failure for five days; or (b) failure by the Corporation to cause to be made any payment of principal or interest on any Bonds in the Daily Rate Interest Period, Two-Day Interest Rate Period or Weekly Rate Interest Period (other than Bank Bonds) or any amounts due and payable upon delivery of such Bonds (other than Bank Bonds) for purchase or redemption when the same shall become due and payable with Eligible Moneys; or (c) except as provided in the provisions of the Bond Indenture summarized under the caption SUMMARY OF CERTAIN PROVISIONS OF THE BOND INDENTURES Book Entry Tenders below and under the heading THE SERIES 2009 BONDS Tender and Purchase of the Series 2009 Bonds - Inadequate Funds for Tenders in the forepart of this Official Statement, payment of any amount due in respect of the Tender Price of Tendered Bonds shall not be made from any source (including the Corporation) when the same shall become due and payable; or (d) failure of the Corporation to comply with or perform any of the covenants, conditions, or provisions of the Loan Agreement, or failure of the Corporation to comply with or perform any of the covenants, conditions or provisions of the Tax Exemption Agreement and to remedy such default within 30 days after written notice thereof from the Authority or the Bond Trustee to the Corporation; provided that, if such default cannot with due diligence and dispatch be wholly cured within 30 days but can be wholly cured, the failure of the Authority, the Corporation or the Bond Trustee to remedy such default within such 30-day period shall not constitute a default under the Loan Agreement if any of the foregoing shall immediately upon receipt of such notice commence with due diligence and dispatch the curing of such D-40

216 default and, having so commenced the curing of such default, shall thereafter prosecute and complete the same with due diligence and dispatch; or (e) any representation or warranty made by the Corporation in the Loan Agreement or in any statement or certificate furnished to the Authority or the Bond Trustee or the purchaser of any Bonds in connection with the sale of the Bonds or furnished by the Corporation pursuant to the Loan Agreement proves untrue in any material respect as of the date of the issuance or making thereof and shall not be corrected or brought into compliance within 30 days after notice thereof to the Corporation by the Authority or the Bond Trustee; or (f) the Master Trustee gives notice to the Bond Trustee that an Event of Default (as defined in the Master Indenture) has occurred under the Master Indenture which would permit the acceleration of any Obligation (as defined therein); or (g) the Corporation admits insolvency or bankruptcy or its inability to pay its debts as they mature, or is generally not paying its debts as such debts become due, or makes an assignment for the benefit of creditors or applies for or consents to the appointment of a trustee, custodian or receiver for the Corporation, or for the major part, of its Property; or (h) a trustee, custodian or receiver is appointed for the Corporation or for the major part of its Property and is not discharged within 60 days after such appointment; or (i) bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings, proceedings under Title 11 of the United States Code, as amended, or other proceedings for relief under any bankruptcy law or similar law for the relief of debtors are instituted by or against the Corporation (other than bankruptcy proceedings instituted by the Corporation against third parties), and if instituted against the Corporation are allowed against the Corporation or are consented to or are not dismissed, stayed or otherwise nullified within 60 days after such institution; or (j) payment of any installment of interest, principal, or premium, on any Bond shall not be made when the same shall become due and payable under the provisions of the Bond Indenture; or (k) failure of the Corporation to comply with or perform its obligations summarized under the caption SUMMARY OF CERTAIN PROVISIONS OF THE LOAN AGREEMENTS DISCHARGE OF ORDERS above. Upon the occurrence and during the continuance of any Event of Default under the Loan Agreement, the Bond Trustee, as assignee of the rights of the Authority, shall have the following rights and remedies, in addition to any other remedies in the Loan Agreement or by law provided: (a) Acceleration of Payments on the Obligations Pledged Under the Bond Indenture and Payments Under the Loan Agreement. The Bond Trustee, as assignee of the Authority, may, with the written consent of the Credit Facility Issuer, by written notice to the Master Trustee, request that it declare the Series 2009 Obligation pledged under the Bond Indenture (if not then due and payable) to be due and payable immediately, subject to the provisions of the Master Indenture regarding waiver of Events of Default (as defined in the Master Indenture), anything in such Series 2009 Obligation or the Loan Agreement contained to the contrary notwithstanding. In addition, upon the occurrence and continuance of an event of default under the Loan Agreement, the Bond Trustee, as assignee of the Authority, may, with the written consent of the Credit Facility Issuer, by written notice to the Corporation, declare all amounts payable pursuant to the Loan Agreement immediately due and payable. (b) Right to Bring Suit, Etc. The Bond Trustee, as assignee of the Authority, may in its discretion, with or without entry, personally or by attorney, proceed to protect and enforce its rights by pursuing any available remedy including a suit or suits in equity or at law, whether for damages or for the specific performance of any obligation, covenant or agreement contained in the Series 2009 Obligation D-41

217 pledged under the Bond Indenture, in the Loan Agreement or in the Master Indenture, or in aid of the execution of any power granted in the Loan Agreement, or for the enforcement of any other appropriate legal or equitable remedy, as the Bond Trustee shall deem most effectual to collect the payments then due and thereafter to become due on the Series 2009 Obligation or to enforce performance and observance of any obligation, agreement or covenant of the Corporation under the Loan Agreement, under such Series 2009 Obligation or under the Master Indenture or to protect and enforce any of the Authority s rights or duties under the Loan Agreement or thereunder. EXCHANGE OF BONDS In the event the Act or the Authority created thereunder is determined to be unconstitutional under the laws of the State or under the laws of the United States of America, and as a result thereof, the Bonds issued by the Authority are declared to be invalid and unenforceable, and if as a result thereof the obligation of the Corporation to make payments on the Series 2009 Obligation pledged under the Bond Indenture is determined to be unenforceable, then the Corporation agrees that it will issue its own bonds (the interest on which may not be exempt from federal income tax) in exchange for an amount of Bonds equal to the then outstanding Bonds, principal amount for principal amount, having the same rates of interest, maturity, redemption provisions and prepayment provisions as are then applicable to the Bonds being exchanged. The bonds to be issued by the Corporation will be issued under an indenture having substantially the same terms and provisions as the Bond Indenture and the Loan Agreement and such bonds of the Corporation will be issued thereunder in exchange for an amount of Bonds equal to the Bonds surrendered by the registered owners thereof. Notice of any such exchange shall be given as provided for redemption of the Bonds under the Bond Indenture and the expenses of such exchange, including the printing of the bonds and other reasonable expenses in connection therewith, shall be borne by the Corporation. TERMINATION OF LEASE; ASSUMPTION OF OBLIGATIONS UNDER LOAN AGREEMENTS In the event that the Corporation or the University determines to terminate the Lease or the Lease is terminated as result of the termination of the Affiliation Agreement, the Lease requires that, as a condition precedent thereto, the University shall assume and agree to perform the obligations of the Corporation under the Loan Agreement. In furtherance thereof, the Corporation and the Authority agree that, upon not less than 60 days prior written notice to the Authority, the Bond Trustee and the Credit Facility Issuer, the University may be substituted for, and shall assume the obligations of the Corporation under the Loan Agreement in all respects (except to the extent that the covenants and agreements of the Corporation under the Loan Agreement are modified in connection therewith as set forth in the Loan Agreement), and the Corporation shall be released and discharged from all obligations and liabilities under the Loan Agreement and on the Series 2009 Obligation pledged under the Bond Indenture, upon the satisfaction of the following conditions precedent: (a) the execution and delivery by the University of the University Note in a principal amount equal to the then unpaid principal amount of the Series 2009 Obligation pledged under the Bond Indenture, with principal and interest installments thereon to correspond in all respects with the principal and interest installments then due and to become due on Series 2009 Obligation; (b) the execution and delivery of an appropriate instrument or instruments (the Assumption Instruments ), satisfactory to the Authority, the Bond Trustee and the Credit Facility Issuer, containing the agreement of the University to assume the due and punctual payment of the principal of, premium, if any, and interest on the Series 2009 Obligation pledged under the Bond Indenture according to its tenor and the due and punctual performance and observance of all the covenants and conditions of the Corporation contained in the Loan Agreement, as modified to the extent set forth in the Loan Agreement; (c) the delivery of a certificate of the University to the Authority, the Bond Trustee and the Credit Facility Issuer indicating that immediately after such assumption by the University and release of the Corporation, the University would not be in default in the performance or observance of any covenant or condition of the Loan Agreement, as modified to the extent set forth in the Loan Agreement; (d) the delivery of an opinion of Counsel for the University addressed to the Authority, the Bond Trustee and the Credit Facility Issuer to the effect that the University Note is a full and unlimited obligation of the University, and that the University Note and the Assumption Instruments have been duly authorized, executed and delivered by the University and constitute the legal, valid and binding instruments of the University enforceable in accordance with their terms, subject to customary exceptions for laws relating to bankruptcy, insolvency and creditors rights generally and to the availability of equitable remedies; and (e) the delivery of an Opinion of Bond Counsel (which counsel and opinion, including the scope, form, substance and other aspects thereof, are acceptable to the Authority, the Bond Trustee and the Credit Facility Issuer) to the effect that under then existing law the consummation of such assumption by the D-42

218 University and release of the Corporation would not adversely affect the validity of the Series 2009 Bonds or the exemption otherwise available from federal or state income taxation of interest payable thereon. In connection with the assumption by the University of the obligations of the Corporation under the Loan Agreement, the following changes to the provisions of the Loan Agreement shall occur effective with the execution and delivery by the University of the Assumption Instruments, unless the University shall have become a Member of the Obligated Group and therefore subject to the terms and provisions of the Master Indenture: (a) All references in the Loan Agreement to the Master Indenture, the Tenth Supplemental Master Indenture, the Master Trustee, the Members or Members of the Obligated Group and the Obligated Group shall be deleted; (b) all references in the Loan Agreement to the Series 2009 Obligation, shall be deemed combined and changed to the University Note, and all references to the Corporation and the Obligated Group Agent shall be deemed to refer to the University; (c) the provisions of the Loan Agreement summarized under the heading Financial Statements are amended and summarized as follows: The Corporation covenants that it will keep proper books of record and account in which full, true and correct entries will be made of all dealings or transactions of or in relation to the business and affairs of the Corporation, in accordance with generally accepted principles of accounting consistently applied, except for changes disclosed in the notes thereto, and will furnish in duplicate to the Authority and the Bond Trustee: (a) within 150 days after the last day of each fiscal year of the Corporation, the financial statements, certified by independent public accountants of national standing selected by the Corporation, containing those financial statements customarily prescribed for similar educational institutions, including a balance sheet as at the end of such fiscal year, together with a separate written statement of the accountants certifying such financial statements that such accountants have obtained no knowledge of any default by the Corporation in the fulfillment of any of the terms, covenants, provisions or conditions applicable to it in the Loan Agreement relating to financial matters or, if such accountants shall have obtained knowledge of any such default or defaults and the nature thereof, they shall disclose the same; but such accountants shall not be liable directly or indirectly to anyone for failure to obtain knowledge of any default; (b) within 150 days after the last day of each fiscal year of the Corporation, an Officer s Certificate of the Corporation, stating that the signer of the certificate has made a review of the activities of the Corporation during the preceding fiscal year for the purpose of determining whether or not the Corporation has complied with all the terms, provisions and conditions applicable to it in the Loan Agreement and that to the best knowledge of such signer the Corporation has kept, observed, performed and fulfilled each and every covenant, provision and condition applicable to it in the Loan Agreement on its part to be performed and is not in default in the performance or observance of any of the terms, covenants, provisions or conditions of the Loan Agreement, or if the Corporation shall be in default, such certificate shall specify all such defaults and the nature thereof of which the signer of the certificate shall have knowledge; (c) such additional information as the Authority or the Bond Trustee may reasonably request in writing concerning the Corporation in order to enable such person to determine whether the covenants, terms and provisions of the Loan Agreement have been complied with by the Corporation, and for that purpose all pertinent financial books, documents and vouchers (other than personnel records and such other records which the Corporation is not permitted by law to disclose) relating to its business, affairs and properties shall at all times upon reasonable prior written notice during regular business hours be open to the inspection of such person or other agent as shall from time to time be designated and compensated by the Authority or the Bond Trustee. The foregoing notwithstanding, the Corporation is not obligated to keep its books of records and accounts in accordance with generally accepted principles of accounting, and the financial report of the Corporation certified by independent certified public accountants required to be delivered pursuant to subparagraph (a) above may be qualified, if and to the extent that (a) a significant number of educational institutions similar to the Corporation, as determined by the Corporation and agreed upon by the Authority and the Bond Trustee, prepare their financial statements with the same variance from generally accepted D-43

219 principles of accounting as that of the Corporation, (b) the Corporation provides a report to the Authority and the Bond Trustee prepared by a nationally recognized firm of independent certified public accountants in detail satisfactory to the Authority and the Bond Trustee, demonstrating the variance from generally accepted principles of accounting by such other educational institutions, and (c) the Corporation does not furnish to any entity and does not keep financial statements prepared in a manner consistent with generally accepted principles of accounting. Without limiting the foregoing, the Corporation will permit the Authority and the Bond Trustee (or such persons as the Authority or the Bond Trustee may designate) to visit and inspect, at the expense of the Authority or the Bond Trustee, any of the properties of the Corporation and to discuss the affairs, finances and accounts of the Corporation with its and their officers and independent accountants, all upon reasonable prior written notice at such reasonable times and as often as the Authority or the Bond Trustee may reasonably desire. (d) as follows: There shall be added to the Loan Agreement new provisions, including those summarized MERGER The Corporation will not transfer, sell, lease or otherwise dispose of all or a substantial part of its assets in any fiscal year (other than sales of securities and other assets held for investment purposes), or be a party to any merger or consolidation, unless after giving effect thereto: (a) the corporation surviving such merger, resulting from such consolidation or acquiring such assets (the Surviving Corporation ): (i) expressly assumes in writing all of the obligations of the Corporation contained in the Loan Agreement; (ii) has a net worth, exclusive of restricted fund balances, equal to or greater than that of the Corporation immediately prior to such merger, consolidation or transfer of assets; and (iii) is an organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended, and is exempt from Federal income taxation under Section 501(a) of such Code (or any successor sections of a subsequently enacted Federal income statute or code); (b) no event of default as summarized under the heading DEFAULTS AND REMEDIES shall have occurred and be continuing and no event shall have occurred and be continuing which with the lapse of time or giving of notice, or both, would constitute such an event of default; (c) no litigation is pending against the other party to such merger, consolidation or transfer of assets except litigation the probable recovery in which, in the opinion of counsel for the Corporation, either (i) will be within the coverage of existing insurance policies or (ii) will not be material to the operations or financial position of the Corporation; and (d) such merger, consolidation or transfer of assets will not adversely affect the exemption of the interest on the Bonds from Federal income taxes. Prior to such merger, consolidation or transfer of assets, the Corporation shall deliver to the Authority and the Bond Trustee a certificate signed by its President and its chief financial officer stating that all of the foregoing conditions have been satisfied, which certificate shall be supported: as to paragraph (a)(ii) above, by a report or opinion signed by its independent public accountants; and as to paragraphs (a)(iii) and (c) above, by an opinion of its Counsel; and as to paragraph (d) above, by an opinion of nationally recognized municipal bond attorneys. Notwithstanding the foregoing, but subject to the provision of the Loan Agreement summarized under the heading TRANSFER OF ASSETS, the Corporation may sell a substantial part of its assets if and to the extent that (a) such sale is for fair value, as determined by the Board of Trustees of the Corporation, (b) the proceeds of such sale are invested by the Corporation within six months thereafter in other assets which will be used in connection with the operations of the Corporation and (c) such sale does not have a materially adverse effect on the ability of the Corporation to meet its obligations under the Loan Agreement. As used in the Loan Agreement, a substantial part of the assets of the Corporation shall mean assets with an aggregate fair market value of 10% or more of the aggregate fair market value of all assets of the Corporation, whether or not shown as assets on the balance sheets of the Corporation. D-44

220 TAXES, CHARGES AND ASSESSMENTS Subject to the provisions of the Loan Agreement summarized below under the heading TERMINATION OF LEASE; ASSUMPTION OF OBLIGATIONS UNDER LOAN AGREEMENTS - PERMITTED CONTESTS, to the extent that the Corporation or its Property is or becomes liable to taxation, the Corporation covenants and agrees to pay or cause to be paid (when the same shall become due and payable) all lawful taxes, charges, assessments and other governmental levies against the Corporation or its Property. If under applicable law any such tax, charge, fee, rate, imposition or assessment may at the option of the taxpayer be paid in installments, the Corporation may exercise such option. Nothing contained in the Loan Agreement shall be deemed to constitute an admission by either the Authority or the Corporation that either the Authority or the Corporation is liable for any tax, charge, fee, rate, imposition or assessment. COMPLIANCE WITH ORDERS AND ORDINANCES Subject to the provisions of the Loan Agreement summarized below under the heading TERMINATION OF LEASE; ASSUMPTION OF OBLIGATIONS UNDER LOAN AGREEMENTS -PERMITTED CONTESTS, the Corporation will, at its sole cost and expense, comply with all present and future laws, ordinances, orders, decrees, rules, regulations and requirements of every duly constituted governmental authority, commission and court and the officers thereof of which it has notice, and the failure to comply with which would materially and adversely affect the use, occupancy or condition of any of its Facilities. PERMITTED CONTESTS The Corporation shall not be required to pay any tax, charge, assessment or imposition required to be paid under the provisions of the Loan Agreement summarized under the heading TERMINATION OF LEASE; ASSUMPTION OF OBLIGATIONS UNDER LOAN AGREEMENTS - TAXES, CHARGES AND ASSESSMENTS, or to comply with any law, ordinance, rule, order, regulation or requirement referred to in the provisions of the Loan Agreement summarized under the heading TERMINATION OF LEASE; ASSUMPTION OF OBLIGATIONS UNDER LOAN AGREEMENTS - COMPLIANCE WITH ORDERS AND ORDINANCES, so long as the Corporation or its Property is exempt from taxation or so long as the Corporation shall contest or take other appropriate action in good faith and at its cost and expense with respect to the amount or validity thereof, in an appropriate manner or by appropriate proceedings which shall operate during the pendency thereof to prevent (i) the collection of or other realization upon the tax, assessment, imposition, charge, lien or encumbrance so contested or (ii) any materially adverse effect on the use, occupancy or condition of any of the Corporation s Facilities; provided, that no such contest or action shall subject the Authority or the Bond Trustee to any liability unless the Corporation properly indemnifies the Authority or the Bond Trustee, as the case may be. While any such matters are pending, the Corporation shall have the right to pay, remove or cause to be discharged or marked exempt the tax, assessment, imposition, charge, lien or encumbrance being contested. Each such contest shall be promptly prosecuted to final conclusion or settlement, and the Corporation will pay, and save the Authority and the Bond Trustee harmless against, all losses, judgments, decrees and costs (including attorneys fees and expenses in connection therewith) and will, promptly after the final determination or settlement of such contest or action, pay and discharge the amounts which shall be levied, assessed or imposed or determined to be payable therein, together with all penalties, fines, interests, costs and expenses thereon or in connection therewith. MAINTENANCE OF PROPERTY The Corporation will at its own cost and expense keep its Property in good repair and order, reasonable wear and tear excepted, and from time to time will make all repairs, replacements, renewals and additions necessary for the efficient functioning thereof. D-45

221 INSURANCE The Corporation agrees to maintain insurance coverage by reputable insurance companies or associations, if commercially available at reasonable costs, and/or to maintain self-insurance programs, in such forms and amounts and against such hazards as are customary for institutions of similar size and scope of activity. BOND TRUSTEE S RIGHT TO PERFORM CORPORATION S COVENANTS; ADVANCES In the event that the Corporation shall fail to (i) perform any covenant contained in the Loan Agreement and summarized under the headings TERMINATION OF LEASE; ASSUMPTION OF OBLIGATIONS UNDER LOAN AGREEMENTS - TAXES, CHARGES AND ASSESSMENTS OR COMPLIANCE WITH ORDERS AND ORDINANCES, (ii) maintain its Property in repair pursuant to the Loan Agreement summarized under the heading TERMINATION OF LEASE; ASSUMPTION OF OBLIGATIONS UNDER LOAN AGREEMENTS - MAINTENANCE OF PROPERTY, (iii) procure the insurance required by the provisions of the Loan Agreement summarized under the heading TERMINATION OF LEASE; ASSUMPTION OF OBLIGATIONS UNDER LOAN AGREEMENTS - INSURANCE, or (iv) fail to make any other payment or perform any other act required to be performed under the Loan Agreement, then and in each such case (unless the same is being contested or other appropriate action is being taken with respect thereto pursuant to the Loan Agreements) the Bond Trustee, upon not less than 5 days prior written notice to the Corporation, may (but shall not be obligated to) remedy such default for the account of the Corporation and make advances for that purpose. No such performance or advance shall operate to release the Corporation from any such default, and any sums so advanced by the Bond Trustee shall be repayable by the Corporation on demand and shall bear interest at the prime rate of the Bond Trustee from the date of the advance until repaid. ISSUANCE OF SUBSTITUTE NOTES Upon the surrender of the University Note, the Corporation will execute and deliver to the holder thereof a new University Note dated the date of the University Note being surrendered but with appropriate notations thereon to reflect payments of principal and interest thereon; provided, however, that there shall never be outstanding at any one time more than one University Note. DAMAGE OR DESTRUCTION The Corporation agrees to notify the Bond Trustee immediately in the case of the destruction of its Facilities or any portion thereof as a result of fire or other casualty, or any damage to such Facilities or portion thereof as a result of fire or other casualty, the Net Proceeds of which are estimated to exceed the greater of (a) $20,000,000 or (b) 2 1/2% of the Net Assets of the Corporation as shown on the balance sheet contained in the most recent financial statements of the Corporation reported on by independent public accountants. Net Proceeds of any insurance relating to such damage or destruction not exceeding the greater of (a) or (b) above may be paid directly to the Corporation. In the event such Net Proceeds exceed the greater of (a) or (b) above, the Corporation shall within twelve (12) months after the date on which the Net Proceeds are finally determined elect by written notice of such election to the Bond Trustee one of the following three options, subject to the approval of the Bond Trustee (which approval may not be unreasonably withheld): (a) Option A-Repair and Restoration. The Corporation may elect to replace, repair, reconstruct, restore or improve any of its Facilities or acquire additional Facilities. In such event an amount equal to the Net Proceeds of any insurance relating thereto shall be deposited with the Bond Trustee, and the Corporation shall proceed forthwith to replace, repair, reconstruct, restore or improve its Facilities or to acquire additional Facilities and will apply the Net Proceeds of any insurance relating to such damage or destruction received from the Bond Trustee to the payment or reimbursement of the costs of such replacement, repair, reconstruction, restoration, improvement or acquisition. So long as the Corporation is not in default under the Loan Agreement, any Net Proceeds of insurance relating to such damage or D-46

222 CONDEMNATION destruction received by the Bond Trustee shall be released from time to time by the Bond Trustee to the Corporation upon the receipt by the Bond Trustee of: (1) the Written Request of the Corporation specifying the expenditures made or to be made or the indebtedness incurred in connection with such repair, reconstruction, restoration, improvement or acquisition and stating that such Net Proceeds, together with any other moneys legally available for such purposes, will be sufficient to complete such replacement, repair, reconstruction, restoration, improvement or acquisition; and (2) if such expenditures were or are to be made for the construction or renovation of Facilities, the written approval of such Written Request by an Independent Architect. It is further understood and agreed that in the event the Corporation shall elect this Option A, the Corporation shall complete the replacement, repair, reconstruction, restoration, improvement and acquisition of the Facilities, whether or not the Net Proceeds of insurance received for such purposes are sufficient to pay for the same. (b) Option B-Prepayment of University Note. The Corporation may elect to have all or a portion of the Net Proceeds payable as a result of such damage or destruction applied to the prepayment of the University Note. In such event the Corporation shall, in its notice of election to the Bond Trustee, direct the Bond Trustee to apply such Net Proceeds, when and as received, to the prepayment of the University Note and the Series 2009 Bonds. (c) Option C-Partial Restoration and Partial Prepayment of University Note. The Corporation may elect to have a portion of such Net Proceeds applied to the replacement, repair, reconstruction, restoration and improvement of its Facilities or the acquisition of additional Facilities, with the remainder of such Net Proceeds to be applied to prepay the University Note, in which event such Net Proceeds to be used for replacement, repair, reconstruction, restoration, improvement and acquisition shall be applied as set forth in subparagraph (a) of this subheading and such Net Proceeds to be used for prepayment of the University Note shall be applied as set forth in subparagraph (b) of this subheading. The Authority and the Bond Trustee shall cooperate fully with the Corporation in the handling and conduct of any prospective or pending condemnation proceedings with respect to its Facilities or any part thereof. The Corporation irrevocably assigns to the Authority and the Bond Trustee, as their respective interests may appear, all right, title and interest of the Corporation in and to any Net Proceeds of any award, compensation or damages (hereinafter referred to as an award ), payable in connection with any such condemnation or taking, which exceeds the greater of (a) $20,000,000 or (b) 2 1/2% of the Net Assets of the Corporation as shown on the balance sheet contained in the most recent financial statements of the Corporation reported on by independent public accountants. Such Net Proceeds shall be initially paid to the Bond Trustee for disbursement or use. In the event such Net Proceeds exceed the greater of (a) or (b) above, the Corporation shall within twelve (12) months after the date on which the Net Proceeds are finally determined elect by written notice of such election to the Bond Trustee one of the following three options, subject to the approval of the Bond Trustee (which approval may not be unreasonably withheld): (a) Option A-Repairs and Improvements. The Corporation may elect to use the Net Proceeds of the award made in connection with such condemnation or taking for restoration or replacement of or repairs and improvements to its Facilities or the acquisition of additional Facilities. In such event, so long as the Corporation is not in default under the Loan Agreement, the Corporation shall have the right to receive such Net Proceeds from the Bond Trustee from time to time upon the receipt by the Bond Trustee of: (1) the Written Request of the Corporation specifying the expenditures made or to be made or the indebtedness incurred in connection with such restoration, replacement, repairs, improvements and acquisition and stating that such Net Proceeds, together with any of the moneys legally available for such purposes, will be sufficient to complete such restoration, replacement, repairs, improvements and acquisitions; and (2) if such expenditures were or are to be made for the construction or renovation of Facilities, the written approval of such Written Request by an Independent Architect. D-47

223 (b) Option B-Prepayment of University Note. The Corporation may elect to have such Net Proceeds payable as a result of such condemnation or taking applied to the prepayment of the University Note. In such event the Corporation shall, in its notice of election to the Bond Trustee, direct the Bond Trustee to apply such Net Proceeds when and as received, to the prepayment of the University Note and the Series 2009 Bonds. (c) Option C-Partial Restoration and Partial Prepayment of University Note. The Corporation may elect to have a portion of such Net Proceeds applied to the repair, replacement, restoration and improvement of its Facilities or the acquisition of additional Facilities, with the remainder of such proceeds to be applied to the prepayment of the University Note, in which event such Net Proceeds to be used for repair, replacement, restoration, improvement and acquisition shall be applied as set forth in subparagraph (a) of this subheading and such Net Proceeds to be used for prepayment of the University Note shall be applied as set forth in subparagraph (b) of this subheading. OTHER PROVISIONS WITH RESPECT TO NET PROCEEDS Amounts received by the Bond Trustee in respect of any insurance or condemnation awards shall, at the Written Request of the Corporation, be deposited with the Bond Trustee in a special trust account and be invested or reinvested by the Bond Trustee in Qualified Investments subject to the Corporation s right to receive the same pursuant to certain provisions of the Loan Agreement. If the Corporation elects to proceed under the provisions of the Loan Agreement, any amounts in respect of such Net Proceeds not so paid to the Corporation shall be used to prepay the University Note. (i) section (d) of the provisions of the Loan Agreement summarized under the heading DEFAULTS AND REMEDIES shall be deleted; (ii) sub-section (I) of the last paragraph of the provisions of the Loan Agreement summarized under the heading DEFAULTS AND REMEDIES shall be replaced in its entirety as follows: The Authority may, by written notice to the Corporation, declare the principal of the University Note (if not then due and payable) to be due and payable immediately, and upon any such declaration, the principal of the University Note shall become and be immediately due and payable, anything in the University Note or in the Loan Agreement contained to the contrary notwithstanding. The Authority shall declare the principal of the University Note due and payable immediately upon the occurrence of any of the defaults described in paragraphs (a), (g), (h), (i) or (j) above or upon the occurrence of any of the defaults described in paragraph (d) summarized under the heading DEFAULTS AND REMEDIES above which immediately constitutes an event of default. This provision, however, is subject to the condition that if, at any time after the principal of the University Note shall have been so declared and become due and payable, all arrears of interest, if any, upon the University Note and the expenses of the Authority shall be paid by the Corporation, and every other default in the observance or performance of any covenant, condition or agreement in the University Note or in the Loan Agreement contained shall be made good, or be secured, to the satisfaction of the Authority, or provision deemed by the Authority to be adequate shall be made therefor, then and in every such case the Authority may waive the event of default by reason of which the principal of the University Note shall have been so declared and become due and payable and may rescind and annul such declaration and its consequences; provided, however, that no such waiver, rescission or annulment shall extend to or affect any subsequent event of default or impair any right consequent thereon. D-48

224 APPENDIX E FORM OF PROPOSED OPINION OF BOND COUNSEL

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226 APPENDIX E FORM OF OPINION OF BOND COUNSEL August 20, 2009 Illinois Finance Authority Chicago, Illinois J.P. Morgan Securities Inc. New York, New York Loop Capital Markets, LLC Chicago, Illinois Barclays Capital New York, New York Cabrera Capital Markets, LLC Chicago, Illinois Wells Fargo Bank, N.A., as bond trustee Chicago, Illinois The University of Chicago Medical Center Chicago, Illinois Wells Fargo Brokerage Services, LLC Chicago, Illinois Ladies and Gentlemen: Re: $70,000,000 Illinois Finance Authority Variable Rate Demand Revenue Bonds, Series 2009D (The University of Chicago Medical Center) Consisting of $35,000,000 Subseries 2009D-1 Bonds and $35,000,000 Subseries 2009D-2 Bonds We have acted as bond counsel in connection with the issuance by the Illinois Finance Authority (the Authority ) of $70,000,000 in aggregate principal amount of its Variable Rate Demand Revenue Bonds, Series 2009D (The University of Chicago Medical Center) (the Bonds ), initially dated the date hereof. The Bonds are issued under the provisions of the Illinois Finance Authority Act, as amended (the Act ), and under and pursuant to that certain Bond Trust Indenture dated as of August 1, 2009 (the Bond Indenture ) between the Authority and Wells Fargo Bank, N.A., as bond trustee (the Bond Trustee ). The proceeds from the sale of the Bonds will be loaned by the Authority to The University of Chicago Medical Center, an Illinois not for profit corporation (the Borrower ), under that certain Loan Agreement dated as of August 1, 2009 (the Loan Agreement ) between the Authority and the Borrower. The loan of the Bond proceeds will be evidenced by the Borrower s Direct Note Obligation, Series 2009D (Illinois Finance Authority) (the Series 2009D Obligation ) in the principal amount of $70,000,000, dated the date hereof and issued pursuant to the Master Trust Indenture (Amended and Restated) dated as of November 1, 1998, as previously supplemented and amended and as supplemented and amended by the Tenth E-1

227 Supplemental Master Trust Indenture dated as of August 1, 2009 (collectively, the Master Indenture ), between the Borrower and Wells Fargo Bank, N.A., as successor master trustee (the Master Trustee ). Pursuant to the terms of the Loan Agreement and the Series 2009D Obligation, the Borrower is obligated to make payments sufficient to pay the principal of, premium, if any, and interest on the Bonds. Pursuant to the terms of the Master Indenture, the Borrower and each other Person (as defined in the Master Indenture) which hereafter executes the Master Indenture (individually, a Member and collectively, the Obligated Group ) agree to be jointly and severally liable (subject to the Master Indenture s provisions permitting a Member to leave the Obligated Group) on all Obligations issued under the Master Indenture, including the Series 2009D Obligation. The proceeds from the sale of the Bonds will be used, together with certain other moneys, to (i) finance the cost of the acquisition, construction, renovation and equipping of certain health facilities of the Borrower; (ii) pay a portion of the interest on the Bonds; and (iii) pay certain expenses incurred in connection with the issuance of the Bonds, all as permitted by the Act. Simultaneously with the issuance of the Bonds, the Authority will issue its $70,000,000 Variable Rate Demand Revenue Bonds, Series 2009E (The University of Chicago Medical Center) (the Series 2009E Bonds ). The proceeds of the Series 2009E Bonds will be used, together with certain other moneys, to (i) finance the cost of the acquisition, construction, renovation and equipping of certain health facilities of the Borrower; (ii) pay a portion of the interest on the Series 2009E Bonds; and (iii) pay certain expenses incurred in connection with the issuance of the Series 2009E Bonds, all as permitted by the Act. The Bonds and the Series 2009E Bonds will be considered a single issue of bonds for purposes of federal income taxation. The Borrower has informed us that it is an organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (the Code ), that it is exempt from federal income taxes under Sections 501(a) and 501(c)(3) of the Code, and that it is not a private foundation as defined in Section 509(a) of the Code. We note that the tax-exempt status of the Borrower is addressed in the opinions of John Satalic, Esq., Acting General Counsel to the Borrower, and of Katten Muchin Rosenman LLP, special counsel to the Borrower, dated this date and provided to the addressees hereof and we express no opinion with respect to such status. In our capacity as bond counsel, we have examined, among other things, certified proceedings of the members of the Authority authorizing, among other things, the execution and delivery of the Bond Indenture, the Loan Agreement and the Tax Exemption Agreement dated the date hereof among the Authority, the Borrower and the Bond Trustee and the issuance of the Bonds; a specimen Bond; a certificate of the Bond Trustee regarding the authentication of the Bonds; a certificate of the Authority; executed counterparts of the above-referenced documents; executed opinions of Charity & Associates, P.C., special counsel to the Authority, John Satalic, Esq., Acting General Counsel to the Borrower, Katten Muchin Rosenman LLP, special counsel to the Borrower, and Foley & Lardner LLP, special counsel to the initial purchasers of the Bonds, each dated this date; and such other documents, showings and related matters as we have deemed necessary in order to render this opinion. E-2

228 Based upon the foregoing and in reliance upon certain documents and showings hereinafter referred to, we are of the opinion that: 1. The Bond Indenture has been duly authorized by the Authority, has been duly executed and delivered by authorized officers of the Authority and, assuming due authorization, execution and delivery thereof by the Bond Trustee, constitutes a valid and binding instrument of the Authority, enforceable against the Authority in accordance with its terms, subject to the qualification that the enforcement thereof may be limited by laws relating to bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors rights and by the availability of equitable remedies. 2. The Bonds and the loan by the Authority to the Borrower of the proceeds from the sale thereof as evidenced by the Series 2009D Obligation and secured by the Loan Agreement have been duly authorized by the Authority, the Bonds have been duly executed by authorized officers of the Authority and have been validly issued by the Authority and, assuming due authentication thereof by the Bond Trustee, constitute the valid and binding limited obligations of the Authority payable solely from payments and prepayments received by the Authority upon the Series 2009D Obligation and from other amounts payable under the Loan Agreement and pledged under the Bond Indenture and the Bonds are enforceable in accordance with their terms and are entitled to the benefit and security of the Bond Indenture, subject to the qualification that the enforcement thereof may be limited by laws relating to bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors rights and by the availability of equitable remedies. 3. The Loan Agreement has been duly authorized by the Authority, has been duly executed and delivered by authorized officers of the Authority and, assuming due authorization, execution and delivery thereof by the Borrower, constitutes a valid and binding instrument of the Authority enforceable against the Authority in accordance with its terms, subject to the qualification that the enforcement thereof may be limited by laws relating to bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors rights and by the availability of equitable remedies. In rendering the foregoing opinion, we have not attempted to verify the correctness of the assumptions made therein regarding the due authorization, execution and delivery of the Loan Agreement by the Borrower, including, without limitation, whether the Borrower has the power or authority to take such actions or whether such actions violate existing corporate articles of incorporation or bylaws, agreements or court decisions or are the subject of or may be affected by any litigation. 4. Interest on the Bonds is not, under present law, includible in gross income of the owners thereof for federal income tax purposes and will not be treated as an item of tax preference in computing the alternative minimum tax for individuals and corporations nor as an adjustment in computing a corporation s alternative minimum taxable income for purposes of the federal alternative minimum tax imposed on certain corporations. Interest on the Bonds will be taken into account, however, in computing the branch profits tax imposed on certain foreign corporations. The foregoing opinions assume compliance with certain covenants made by the Authority and the Borrower to satisfy pertinent requirements of the Code with respect to the Bonds and the Series 2009E Bonds. Failure to comply with certain of these covenants could E-3

229 cause the interest on the Bonds to be included in gross income and be subject to federal income taxation retroactive to the date of issuance of the Bonds. Ownership of the Bonds may result in other federal tax consequences to certain taxpayers, including, without limitation, financial institutions, certain insurance companies, certain S corporations, individual recipients of Social Security or Railroad Retirement benefits and taxpayers who may be deemed to have incurred (or continued) indebtedness to purchase or carry tax-exempt obligations. We express no opinion regarding any such collateral consequences arising with respect to the Bonds. Interest on the Bonds is not exempt from present Illinois income taxes. In rendering this opinion, we have relied upon the certificates of even date herewith of the Borrower with respect to certain material facts solely within the knowledge of the Borrower relating to the property financed or refinanced with the proceeds of the Bonds and the Series 2009E Bonds and the application of the proceeds of the Bonds and the Series 2009E Bonds. Respectfully submitted, E-4

230 August 20, 2009 Illinois Finance Authority Chicago, Illinois J.P. Morgan Securities Inc. New York, New York Loop Capital Markets, LLC Chicago, Illinois Cabrera Capital Markets, LLC Chicago, Illinois Wells Fargo Bank, N.A., as bond trustee Chicago, Illinois The University of Chicago Medical Center Chicago, Illinois Ladies and Gentlemen: Re: $70,000,000 Illinois Finance Authority Variable Rate Demand Revenue Bonds, Series 2009E (The University of Chicago Medical Center) Consisting of $60,000,000 Subseries 2009E-1 Bonds and $10,000,000 Subseries 2009E-2 Bonds We have acted as bond counsel in connection with the issuance by the Illinois Finance Authority (the Authority ) of $70,000,000 in aggregate principal amount of its Variable Rate Demand Revenue Bonds, Series 2009E (The University of Chicago Medical Center) (the Bonds ), initially dated the date hereof. The Bonds are issued under the provisions of the Illinois Finance Authority Act, as amended (the Act ), and under and pursuant to that certain Bond Trust Indenture dated as of August 1, 2009 (the Bond Indenture ) between the Authority and Wells Fargo Bank, N.A., as bond trustee (the Bond Trustee ). The proceeds from the sale of the Bonds will be loaned by the Authority to The University of Chicago Medical Center, an Illinois not for profit corporation (the Borrower ), under that certain Loan Agreement dated as of August 1, 2009 (the Loan Agreement ) between the Authority and the Borrower. The loan of the Bond proceeds will be evidenced by the Borrower s Direct Note Obligation, Series 2009E (Illinois Finance Authority) (the Series 2009E Obligation ) in the principal amount of $70,000,000, dated the date hereof and issued pursuant to the Master Trust Indenture (Amended and Restated) dated as of November 1, 1998, as previously supplemented and amended and as supplemented and amended by the Tenth Supplemental Master Trust Indenture dated as of August 1, 2009 (collectively, the Master Indenture ), between the Borrower and Wells Fargo Bank, N.A., as successor master trustee (the Master Trustee ). Pursuant to the terms of the Loan Agreement and the Series 2009E Obligation, the Borrower is obligated to make payments sufficient to pay the principal of, premium, if any, and interest on the Bonds. Pursuant to the terms of the Master Indenture, the Borrower and each other Person (as defined in the Master Indenture) which hereafter executes E-5

231 the Master Indenture (individually, a Member and collectively, the Obligated Group ) agree to be jointly and severally liable (subject to the Master Indenture s provisions permitting a Member to leave the Obligated Group) on all Obligations issued under the Master Indenture, including the Series 2009E Obligation. The proceeds from the sale of the Bonds will be used, together with certain other moneys, to (i) finance the cost of the acquisition, construction, renovation and equipping of certain health facilities of the Borrower; (ii) pay a portion of the interest on the Bonds; and (iii) pay certain expenses incurred in connection with the issuance of the Bonds, all as permitted by the Act. Simultaneously with the issuance of the Bonds, the Authority will issue its $70,000,000 Variable Rate Demand Revenue Bonds, Series 2009D (The University of Chicago Medical Center) (the Series 2009D Bonds ). The proceeds of the Series 2009D Bonds will be used, together with certain other moneys, to (i) finance the cost of the acquisition, construction, renovation and equipping of certain health facilities of the Borrower; (ii) pay a portion of the interest on the Series 2009D Bonds; and (iii) pay certain expenses incurred in connection with the issuance of the Series 2009D Bonds, all as permitted by the Act. The Bonds and the Series 2009D Bonds will be considered a single issue of bonds for purposes of federal income taxation. The Borrower has informed us that it is an organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (the Code ), that it is exempt from federal income taxes under Sections 501(a) and 501(c)(3) of the Code, and that it is not a private foundation as defined in Section 509(a) of the Code. We note that the tax-exempt status of the Borrower is addressed in the opinions of John Satalic, Esq., Acting General Counsel to the Borrower, and of Katten Muchin Rosenman LLP, special counsel to the Borrower, dated this date and provided to the addressees hereof and we express no opinion with respect to such status. In our capacity as bond counsel, we have examined, among other things, certified proceedings of the members of the Authority authorizing, among other things, the execution and delivery of the Bond Indenture, the Loan Agreement and the Tax Exemption Agreement dated the date hereof among the Authority, the Borrower and the Bond Trustee and the issuance of the Bonds; a specimen Bond; a certificate of the Bond Trustee regarding the authentication of the Bonds; a certificate of the Authority; executed counterparts of the above-referenced documents; executed opinions of Charity & Associates, P.C., special counsel to the Authority, John Satalic, Esq., Acting General Counsel to the Borrower, Katten Muchin Rosenman LLP, special counsel to the Borrower, and Foley & Lardner LLP, special counsel to the initial purchasers of the Bonds, each dated this date; and such other documents, showings and related matters as we have deemed necessary in order to render this opinion. Based upon the foregoing and in reliance upon certain documents and showings hereinafter referred to, we are of the opinion that: 1. The Bond Indenture has been duly authorized by the Authority, has been duly executed and delivered by authorized officers of the Authority and, assuming due authorization, execution and delivery thereof by the Bond Trustee, constitutes a valid and binding instrument of the Authority, enforceable against the Authority in accordance with its terms, subject to the E-6

232 qualification that the enforcement thereof may be limited by laws relating to bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors rights and by the availability of equitable remedies. 2. The Bonds and the loan by the Authority to the Borrower of the proceeds from the sale thereof as evidenced by the Series 2009E Obligation and secured by the Loan Agreement have been duly authorized by the Authority, the Bonds have been duly executed by authorized officers of the Authority and have been validly issued by the Authority and, assuming due authentication thereof by the Bond Trustee, constitute the valid and binding limited obligations of the Authority payable solely from payments and prepayments received by the Authority upon the Series 2009E Obligation and from other amounts payable under the Loan Agreement and pledged under the Bond Indenture and the Bonds are enforceable in accordance with their terms and are entitled to the benefit and security of the Bond Indenture, subject to the qualification that the enforcement thereof may be limited by laws relating to bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors rights and by the availability of equitable remedies. 3. The Loan Agreement has been duly authorized by the Authority, has been duly executed and delivered by authorized officers of the Authority and, assuming due authorization, execution and delivery thereof by the Borrower, constitutes a valid and binding instrument of the Authority enforceable against the Authority in accordance with its terms, subject to the qualification that the enforcement thereof may be limited by laws relating to bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors rights and by the availability of equitable remedies. In rendering the foregoing opinion, we have not attempted to verify the correctness of the assumptions made therein regarding the due authorization, execution and delivery of the Loan Agreement by the Borrower, including, without limitation, whether the Borrower has the power or authority to take such actions or whether such actions violate existing corporate articles of incorporation or bylaws, agreements or court decisions or are the subject of or may be affected by any litigation. 4. Interest on the Bonds is not, under present law, includible in gross income of the owners thereof for federal income tax purposes and will not be treated as an item of tax preference in computing the alternative minimum tax for individuals and corporations nor as an adjustment in computing a corporation s alternative minimum taxable income for purposes of the federal alternative minimum tax imposed on certain corporations. Interest on the Bonds will be taken into account, however, in computing the branch profits tax imposed on certain foreign corporations. The foregoing opinions assume compliance with certain covenants made by the Authority and the Borrower to satisfy pertinent requirements of the Code with respect to the Bonds and the Series 2009D Bonds. Failure to comply with certain of these covenants could cause the interest on the Bonds to be included in gross income and be subject to federal income taxation retroactive to the date of issuance of the Bonds. Ownership of the Bonds may result in other federal tax consequences to certain taxpayers, including, without limitation, financial institutions, certain insurance companies, certain S corporations, individual recipients of Social Security or Railroad Retirement benefits and taxpayers who may be deemed to have incurred (or continued) indebtedness to purchase or carry tax-exempt obligations. We express no opinion regarding any such collateral consequences arising with respect to the Bonds. E-7

233 Interest on the Bonds is not exempt from present Illinois income taxes. In rendering this opinion, we have relied upon the certificates of even date herewith of the Borrower with respect to certain material facts solely within the knowledge of the Borrower relating to the property financed or refinanced with the proceeds of the Bonds and the Series 2009D Bonds and the application of the proceeds of the Bonds and the Series 2009D Bonds. Respectfully submitted, E-8

234 APPENDIX F INFORMATION REGARDING THE INITIAL CREDIT FACILITY ISSUERS

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236 THE SERIES 2009D INITIAL CREDIT FACILITY ISSUER The information under this heading has been provided solely by the Series 2009D Initial Credit Facility Issuer and is believed to be reliable. This information has not been verified independently by the Authority, the Corporation or the Underwriters. The Authority, the Corporation and the Underwriters make no representation whatsoever as to the accuracy, adequacy or completeness of such information. Bank of America, N.A. (the Bank ) is a national banking association organized under the laws of the United States, with its principal executive offices located in Charlotte, North Carolina. The Bank is a wholly-owned indirect subsidiary of Bank of America Corporation (the Corporation ) and is engaged in a general consumer banking, commercial banking and trust business, offering a wide range of commercial, corporate, international, financial market, retail and fiduciary banking services. As of June 30, 2009, the Bank had consolidated assets of $1.45 trillion, consolidated deposits of $1 trillion and stockholder s equity of $150 billion based on regulatory accounting principles. The Corporation is a bank holding company and a financial holding company, with its principal executive offices located in Charlotte, North Carolina. Additional information regarding the Corporation is set forth in its Annual Report on Form 10-K for the fiscal year ended December 31, 2008, together with its subsequent periodic and current reports filed with the Securities and Exchange Commission (the SEC ). Filings can be inspected and copied at the public reference facilities maintained by the SEC at 100 F Street, N.E., Washington, D.C , United States, at prescribed rates. In addition, the SEC maintains a website at which contains reports, proxy statements and other information regarding registrants that file such information electronically with the SEC. The information concerning the Corporation and the Bank is furnished solely to provide limited introductory information and does not purport to be comprehensive. Such information is qualified in its entirety by the detailed information appearing in the documents and financial statements referenced herein. The Letter of Credit has been issued by the Bank. Moody s Investors Service, Inc. ( Moody s ) currently rates the Bank s long-term debt as Aa3 and short-term debt as P-1. The outlook is stable. Standard & Poor s currently rates the Bank s long-term debt as A+ and its short-term debt as A-1. The outlook is stable. Fitch Ratings, Inc. ( Fitch ) currently rates long-term debt of the Bank as A+ and short-term debt as F1+. The outlook is stable. Further information with respect to such ratings may be obtained from Moody s, Standard & Poor s and Fitch, respectively. No assurances can be given that the current ratings of the Bank s instruments will be maintained. The Bank will provide copies of the most recent Bank of America Corporation Annual Report on Form 10- K, any subsequent reports on Form 10-Q, and any required reports on Form 8-K (in each case as filed with the SEC pursuant to the Exchange Act), and the publicly available portions of the most recent quarterly Call Report of the Bank delivered to the Comptroller of the Currency, without charge, to each person to whom this document is delivered, on the written request of such person. Written requests should be directed to: Bank of America Corporate Communications 100 North Tryon Street, 18th Floor Charlotte, North Carolina Attention: Corporate Communication PAYMENTS OF PRINCIPAL AND INTEREST ON THE SERIES 2009D BONDS WILL BE MADE FROM DRAWINGS UNDER THE LETTER OF CREDIT. PAYMENTS OF THE PURCHASE PRICE OF THE BONDS WILL BE MADE FROM DRAWINGS UNDER THE LETTER OF CREDIT IF REMARKETING PROCEEDS ARE NOT AVAILABLE. ALTHOUGH THE LETTER OF CREDIT IS A BINDING OBLIGATION OF THE BANK, THE SERIES 2009D BONDS ARE NOT DEPOSITS OR OBLIGATIONS OF THE CORPORATION OR ANY OF ITS AFFILIATED BANKS AND ARE NOT GUARANTEED BY ANY OF THESE ENTITIES. THE SERIES 2009D BONDS ARE NOT INSURED BY THE FEDERAL DEPOSIT F-1

237 INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY AND ARE SUBJECT TO CERTAIN INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED. The information contained in this Appendix F, including financial information, relates to and has been obtained from the Series 2009D Initial Credit Facility Issuer, and is furnished solely to provide limited introductory information regarding the Series 2009D Initial Credit Facility Issuer and does not purport to be comprehensive. Any financial information provided in this Appendix F is qualified in its entirety by the detailed information appearing in the Call Reports referenced above. The delivery hereof shall not create any implication that there has been no change in the affairs of the Series 2009D Initial Credit Facility Issuer since the date hereof. F-2

238 THE SERIES 2009E INITIAL CREDIT FACILITY ISSUER JPMorgan Chase Bank, National Association ( the Bank ) is a wholly owned bank subsidiary of JPMorgan Chase & Co., a Delaware corporation whose principal office is located in New York, New York. The Bank offers a wide range of banking services to its customers, both domestically and internationally. It is chartered and its business is subject to examination and regulation by the Office of the Comptroller of the Currency. As of March 31st, 2009, JPMorgan Chase Bank, National Association, had total assets of $1,688.2 billion, total net loans of $595.9 billion, total deposits of $978.8 billion, and total stockholder s equity of $131.6 billion. These figures are extracted from the Bank s unaudited Consolidated Reports of Condition and Income (the Call Report ) as at March 31, 2009, prepared in accordance with regulatory instructions that do not in all cases follow U.S. generally accepted accounting principles, which are filed with the Federal Deposit Insurance Corporation. The Call Report, including any update to the above quarterly figures, can be found at Additional information, including the most recent annual report on Form 10-K for the year ended December 31, 2008, of JPMorgan Chase & Co., the 2008 Annual Report of JPMorgan Chase & Co., and additional annual, quarterly and current reports filed with or furnished to the Securities and Exchange Commission (the SEC ) by JPMorgan Chase & Co., as they become available, may be obtained without charge by each person to whom this Official Statement is delivered upon the written request of any such person to the Office of the Secretary, JPMorgan Chase & Co., 270 Park Avenue, New York, New York or at the SEC s website at The information contained in this Appendix F, including financial information, relates to and has been obtained from the Series 2009E Initial Credit Facility Issuer, and is furnished solely to provide limited introductory information regarding the Series 2009E Initial Credit Facility Issuer and does not purport to be comprehensive. Any financial information provided in this Appendix F is qualified in its entirety by the detailed information appearing in the Call Reports referenced above. The delivery hereof shall not create any implication that there has been no change in the affairs of the Series 2009E Initial Credit Facility Issuer since the date hereof. F-3

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240 APPENDIX G INFORMATION REGARDING BOOK-ENTRY ONLY SYSTEM

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242 INFORMATION REGARDING BOOK-ENTRY ONLY SYSTEM Information concerning DTC and the Book-Entry Only System has been obtained from DTC and is not guaranteed as to accuracy or completeness by, and is not to be construed as a representation by, the Authority, the Underwriters, the Bond Trustee or the Obligated Group. Bonds in Book-Entry Form The DTC, New York, New York, will act as securities depository for the Series 2009 Bonds. The Series 2009 Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered certificate will be issued for each subseries of the Series 2009 Bonds, in the aggregate principal amount of such issue, and will be deposited with DTC. DTC and its Participants 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 DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-u.s. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC s participants (referred to as 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 (referred to as 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 (referred to as 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 and Purchases of Securities under the DTC system must be made by or through Direct Participants, which will receive a credit for the Securities on DTC s records. The ownership interest of each actual purchaser of each Security ( 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 Securities 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 Securities, except in the event that use of the book-entry system for the Securities is discontinued. To facilitate subsequent transfers, all Series 2009 Bonds deposited by Direct Participants with DTC are registered in the name of DTC s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Series 2009 Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Series 2009 Bonds; DTC s records reflect only the identity of the Direct Participants to whose accounts such Series 2009 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. G-1

243 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. Redemption notices shall be sent to DTC. If less than all of the Series 2009 Bonds within a maturity are being redeemed, DTC s practice is to determine by lot the amount of the interest of each Direct Participant in such maturity to be redeemed. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to the Series 2009 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 Authority as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co. s consenting or voting rights to those Direct Participants to whose accounts the Series 2009 Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). Redemption proceeds, distributions, and dividend payments on the Series 2009 Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC s practice is to credit Direct Participants accounts upon DTC s receipt of funds and corresponding detail information from the Authority or the Bond Trustee, on payable date in accordance with their respective holdings shown on DTC s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in street name, and will be the responsibility of such Participant and not of DTC, the Bond Trustee, or Authority, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the Bond Trustee, or Authority, 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. DTC may discontinue providing its services as depository with respect to the Securities at any time by giving reasonable notice to Issuer or Agent. Under such circumstances, in the event that a successor depository is not obtained, Security certificates are required to be printed and delivered. G-2

244 New Hospital Pavilion shown from northwest with Knapp Center for Biomedical Discovery and Gordon Center for Integrative Science on left and the Duchossois Center for Advanced Medicine on the right.