Wells Fargo Securities as Remarketing Agent

Transcription

1 Third Supplement to Official Statement dated December 12, 2007, as previously supplemented by a Supplement to Official Statement dated December 17, 2007 and a Second Supplement to Official Statement dated July 3, 2012, relating in part to $52,375,000 outstanding principal amount Illinois Finance Authority Variable Rate Demand Revenue Bonds, Subseries 2007A-2 (Northwestern Memorial Hospital) CUSIP No F BY4 $52,375,000 outstanding principal amount Illinois Finance Authority Variable Rate Demand Revenue Bonds, Subseries 2007A-4 (Northwestern Memorial Hospital) CUSIP No F BZ1 This Third Supplement supplements the Official Statement dated December 12, 2007, as previously supplemented pursuant to a Supplement to Official Statement dated December 17, 2007 and a Second Supplement to Official Statement dated July 3, 2012* (collectively, the Original Official Statement and, together with this Third Supplement, the Official Statement ), relating, in part, to the (i) $52,375,000 outstanding principal amount of the Variable Rate Demand Revenue Bonds, Subseries 2007A-2 (Northwestern Memorial Hospital) (the Subseries 2007A-2 Bonds ) and (ii) $52,375,000 outstanding principal amount of the Variable Rate Demand Revenue Bonds, Subseries 2007A-4 (Northwestern Memorial Hospital) (the Subseries 2007A-4 Bonds and, together with the Series 2007A-2 Bonds, the Subseries 2007A-2/A-4 Bonds ), issued by the Illinois Finance Authority (the Authority ). The Original Official Statement is available on the Municipal Securities Rulemaking Board s Electronic Municipal Market Access system accessible at emma.msrb.org ( EMMA ). The Subseries 2007A-2/A-4 Bonds originally were issued on December 19, 2007 pursuant to a Bond Trust Indenture dated as of December 1, 2007 between the Authority and Wells Fargo Bank, N.A., as bond trustee (the Bond Trustee ). The proceeds of the sale of the Subseries 2007A-2/A-4 Bonds were loaned to Northwestern Memorial Hospital, an Illinois not for profit corporation (the Hospital or NMH ), for the purposes described in the Official Statement. The Hospital, the Bond Trustee and Wells Fargo Bank, National Association (the Substitute Liquidity Bank ) will enter into two separate but substantially similar Standby Bond Purchase Agreements, each dated as of December 1, 2013, relating to the Subseries 2007A-2 Bonds and the Subseries 2007A-4 Bonds, respectively (the Substitute Liquidity Facilities ), which Substitute Liquidity Facilities will become effective on December 17, 2013 (the Liquidity Substitution Date ). On and after the Liquidity Substitution Date, the Subseries 2007A-2/A-4 Bonds that are subject to optional or mandatory tender pursuant to the terms of the Bond Indenture, and are not remarketed, will be purchased (except in certain circumstances described herein) from moneys provided by the Substitute Liquidity Bank under the related Substitute Liquidity Facility. Wells Fargo Bank, National Association The Subseries 2007A-2/A-4 Bonds are not subject to mandatory tender on the Liquidity Substitution Date in connection with the delivery of the Substitute Liquidity Facilities. Each Substitute Liquidity Facility expires as of December 17, 2018, unless extended or terminated earlier pursuant to the terms thereof. Northwestern Memorial HealthCare, an Illinois not for profit corporation (the Corporation or NMHC ), as Obligated Group Agent on behalf of itself and each of the other Members of the Obligated Group (in its capacity as Obligated Group Agent, the Obligated Group Agent ), provides on a quarterly and annual basis to nationally recognized municipal securities information repositories certain financial information and operating data relating to the Obligated Group, which is available on EMMA. The obligation of the Substitute Liquidity Bank to purchase Subseries 2007A-2/A-4 Bonds under the related Substitute Liquidity Facility will be subject to certain conditions, and such obligation may be terminated or suspended immediately and automatically without prior notice under certain circumstances upon the occurrence of certain Events of Default under and as defined in the related Substitute Liquidity Facility. The Subseries 2007A-2/A-4 Bonds currently bear interest, and will continue to bear interest, in a Weekly Rate Period, and are subject to conversion as described in the Original Official Statement. Effective as of December 17, 2013, Wells Fargo Bank, National Association has been appointed by the Corporation as successor Remarketing Agent (the Successor Remarketing Agent ) for the Subseries 2007A-2/A-4 Bonds pursuant to a Remarketing Agreement dated as of December 17, 2013 (the Remarketing Agreement ) between the Corporation and the Successor Remarketing Agent. This Third Supplement has been prepared for the sole purpose of describing the Substitute Liquidity Facilities and does not purport to be definitive or complete. It should only be read in conjunction with the Original Official Statement, the summary of certain investment risks and the information in Appendix A in the most recent offering memoranda relating to the Obligated Group s long-term indebtedness, and the Financial and Other Information (as defined herein). See Documents Incorporated by Reference herein. Other than as provided herein, the Original Official Statement has not been updated since its date. The Authority has not participated in the preparation of this Third Supplement, makes no representation with respect hereto and is not in any manner responsible for any of the information contained herein. This Third Supplement has been prepared for use by the Successor Remarketing Agent for the sole purpose of providing information relating to the matters set forth herein. Dated: December 11, 2013 Wells Fargo Securities as Remarketing Agent * The Second Supplement to Official Statement related to a substitution of liquidity facilities for two separate subseries of bonds covered by the Original Official Statement. CUSIP numbers appearing on the cover of this Third Supplement have been provided by the CUSIP Service Bureau, which is managed on behalf of the American Bankers Association by Standard & Poor s, a division of The McGraw-Hill Companies, Inc. Neither the Authority, the Successor Remarketing Agent nor the Obligated Group is responsible for the selection of CUSIP numbers and makes no representation as to their correctness on the Subseries 2007A-2/A-4 Bonds or as set forth on the cover of this Third Supplement.

2 TABLE OF CONTENTS PAGE Introduction... 1 Purpose of this Third Supplement to Official Statement... 1 Description of the Subseries 2007A-2/A-4 Bonds... 2 The Obligated Group... 2 Certain Updates to 2013 Appendix A... 3 The Substitute Liquidity Facilities... 5 General... 5 Substitute Liquidity Facilities... 5 Description of the Substitute Liquidity Bank Bondholders' Risks Affordable Care Act Budget Control Act of Government Debt Ceiling Nonprofit Healthcare Environment Payment for Health Care Services Commercial Insurance and Other Third-Party Plans Liquidity Facilities Tax Matters Continuing Disclosure Documents Incorporated by Reference Relationship of Certain Parties Ratings Successor Remarketing Agent APPENDIX A INFORMATION CONCERNING THE SUBSTITUTE LIQUIDITY BANK APPENDIX B FORM OF DISCLOSURE DISSEMINATION AGREEMENT i

3 THIRD SUPPLEMENT TO OFFICIAL STATEMENT DATED DECEMBER 12, 2007, AS PREVIOUSLY SUPPLEMENTED BY A SUPPLEMENT TO OFFICIAL STATEMENT DATED DECEMBER 17, 2007 AND A SECOND SUPPLEMENT TO OFFICIAL STATEMENT DATED JULY 3, 2012, RELATING IN PART TO $52,375,000 outstanding principal amount Illinois Finance Authority Variable Rate Demand Revenue Bonds, Subseries 2007A-2 (Northwestern Memorial Hospital) $52,375,000 outstanding principal amount Illinois Finance Authority Variable Rate Demand Revenue Bonds, Subseries 2007A-4 (Northwestern Memorial Hospital) INTRODUCTION Purpose of this Third Supplement to Official Statement This Third Supplement supplements the Official Statement dated December 12, 2007, as previously supplemented pursuant to a Supplement to Official Statement dated December 17, 2007 and a Second Supplement to Official Statement dated July 3, 2012 (collectively, the "Original Official Statement" and, together with this Third Supplement, the "Official Statement"), relating in part to the (i) $52,375,000 outstanding principal amount of the Variable Rate Demand Revenue Bonds, Subseries 2007A-2 (Northwestern Memorial Hospital) (the "Subseries 2007A-2 Bonds") and (ii) $52,375,000 outstanding principal amount of the Variable Rate Demand Revenue Bonds, Subseries 2007A-4 (Northwestern Memorial Hospital) (the "Subseries 2007A-4 Bonds" and, together with the Series 2007A- 2 Bonds, the "Subseries 2007A-2/A-4 Bonds"), issued by the Illinois Finance Authority (the "Authority"). This Third Supplement should be read in conjunction with the Original Official Statement, the summary of certain investment risks and the information in Appendix A in the 2013 Official Statement (as hereinafter defined), and the Financial and Other Information (as hereinafter defined). The Original Official Statement and the 2013 Official Statement are available on the Municipal Securities Rulemaking Board's Electronic Municipal Market Access system ("EMMA"), accessible at The foregoing notwithstanding, potential purchasers of the Subseries 2007A-2/A- 4 Bonds are cautioned against relying on any information contained in the Original Official Statement without reviewing the more up-to-date information provided herein or incorporated herein by reference. See "DOCUMENTS INCORPORATED BY REFERENCE" herein. Capitalized terms not otherwise defined in this Third Supplement have the meanings given to them in the Original Official Statement. The Subseries 2007A-2/A-4 Bonds originally were issued on December 19, 2007 pursuant to a Bond Trust Indenture dated as of December 1, 2007 between the Authority and Wells Fargo Bank, N.A., as bond trustee (the "Bond Trustee"). The proceeds of the sale of the Subseries 2007A-2/A-4 Bonds were loaned to Northwestern Memorial Hospital, an Illinois not for profit corporation (the "Hospital" or "NMH"), pursuant to a Loan Agreement dated as of December 1, 2007 (the "Loan Agreement") for the purposes described in the Original Official Statement. The Subseries 2007A-2 Bonds and the Subseries 2007A-4 Bonds, respectively, currently are supported by two separate but substantially similar Standby Bond Purchase Agreements, each dated as of December 1, 2007, as supplemented and amended (the "Existing Liquidity Facilities"), among the Hospital, the Bond Trustee and JPMorgan Chase Bank, National Association (the "Existing Liquidity Bank"). On December 17, 2013, the Hospital, the Bond Trustee and Wells Fargo, National Association (the "Substitute Liquidity Bank") will enter into two separate but substantially similar Standby Bond Purchase Agreements, each dated as of December 1, 2013, relating to the Subseries 2007A-2 Bonds and 1

4 the Subseries 2007A-4 Bonds, respectively (each a "Substitute Liquidity Facility" and, collectively, the "Substitute Liquidity Facilities"). Each Substitute Liquidity Facility will become effective on December 17, 2013 (the "Liquidity Substitution Date"). From and after the Liquidity Substitution Date, the Subseries 2007A-2/A-4 Bonds that are subject to optional or mandatory tender pursuant to the terms of the Bond Indenture and are not remarketed will be purchased (except in certain circumstances described herein) from moneys provided under the related Substitute Liquidity Facility. Each Substitute Liquidity Facility expires as of December 17, 2018, unless extended or terminated earlier pursuant to the terms thereof. In certain circumstances, either or both of the Substitute Liquidity Facilities may be replaced by one or more other Substitute Liquidity Facilities. The Subseries 2007A-2/A-4 Bonds are not subject to mandatory tender on the Liquidity Substitution Date in connection with the delivery of the Substitute Liquidity Facilities. See the information herein under the captions "THE SUBSTITUTE LIQUIDITY FACILITIES" and "DESCRIPTION OF THE SUBSTITUTE LIQUIDITY BANK." Description of the Subseries 2007A-2/A-4 Bonds Reference is made to the Original Official Statement and to the sections therein entitled "THE SERIES 2007 BONDS," "SECURITY FOR THE SERIES 2007 BONDS" and Appendix C "Summary of Principal Documents" for a summary description of the terms of the Subseries 2007A-2/A-4 Bonds while bearing interest in a Daily Rate Period or a Weekly Rate Period, including a summary of the terms of payment, security, interest rates, interest rate periods, conversion to different interest rate periods, redemption, mandatory tenders and optional tenders by the holders of the Subseries 2007A-2/A-4 Bonds, as well as a summary of the Bond Indenture. The Obligated Group General. Northwestern Memorial HealthCare (the "Corporation" or "NMHC"), the Hospital, Northwestern Lake Forest Hospital ("NLFH"), Northwestern Memorial Foundation ("NMF"), Northwestern Memorial Physicians Group ("NMPG"), Lake Forest Health and Fitness Institute ("HFI"), Northwestern Medical Faculty Foundation (d/b/a Northwestern Medical Group) ("NMG") and Northwestern Foundation for Research and Education (d/b/a Northwestern Management Services) ("NMS"), each an Illinois not for profit corporation, are the current Members of the Obligated Group. NMG and NMS became Members of the Obligated Group on September 13, Other persons may become Members of the Obligated Group, and Members may withdraw from the Obligated Group, all in accordance with the procedures set forth in the Master Indenture. Management does not intend to alter the composition of the Obligated Group in the immediately foreseeable future. The Corporation is the parent corporation of an integrated healthcare delivery system which includes, among other entities, the Hospital, NLFH, NMF, NMPG, HFI, NMG and NMS. NMH owns and operates an academic medical center hospital with its main campus located in downtown Chicago, Illinois that provides a complete range of adult inpatient and outpatient services in an educational and research environment. NMH's hospital facility contains 894 licensed beds and serves as the primary teaching hospital for the Feinberg School of Medicine of Northwestern University. NLFH owns and operates multiple facilities on a 160-acre campus in Lake Forest, Illinois, approximately 30 miles north of downtown Chicago, including a 117-licensed bed acute care hospital facility and a nursing facility which is licensed for 40 extended care and 44 long-term care beds. A more detailed description of the Obligated Group, its history, organization and financial performance is set forth in Appendix A to the Official Statement dated February 14, 2013 (the "2013 2

5 Official Statement") relating to the Illinois Finance Authority Revenue Bonds, Series 2013 (Northwestern Memorial HealthCare), a copy of which is available on EMMA at Financial and Other Information. The Corporation provides on a quarterly and annual basis to EMMA certain financial information and operating data relating to the Obligated Group. The most recent financial information and operating data provided by the Corporation includes (i) the audited consolidated financial statements of Northwestern Memorial HealthCare and Subsidiaries ("NMHC and Subsidiaries") as of and for the fiscal years ended August 31, 2013 and 2012 and (ii) the Annual Report and Certification for the fiscal year ended August 31, 2013 (collectively, the "Financial and Other Information"). The Financial and Other Information is available on EMMA and is incorporated herein by reference. See "DOCUMENTS INCORPORATED BY REFERENCE" herein. The audited consolidated financial statements of NMHC and Subsidiaries referred to in (i) above include certain affiliates of the Corporation, which are not Members of the Obligated Group, and do not include NMG or NMS, which joined the Obligated Group on September 13, For the fiscal year ended August 31, 2013, the Obligated Group, as adjusted on a pro forma basis to include NMG and NMS as if NMG and NMS joined the Obligated Group on September 1, 2012, comprised approximately 97% and 99%, respectively, of the total unrestricted net assets and total revenue of the consolidated financial results of NMHC and Subsidiaries. See Footnotes 14 and 15 to the audited consolidated financial statements of NMHC and Subsidiaries as of and for the fiscal year ended August 31, 2013, a copy of which is available on EMMA at for additional information regarding the clinical affiliation agreement between NMHC and NMG. Certain Updates to 2013 Appendix A Appendix A to the 2013 Official Statement (the "2013 Appendix A") contains a more detailed description of the Obligated Group, its history, organization and financial performance and is incorporated herein by reference. The following information is supplemental to the information contained in the 2013 Appendix A. The organizational chart appearing in the section captioned "ORGANIZATIONAL STRUCTURE" in the 2013 Appendix A is deleted in its entirety and replaced with the following: The members of the Obligated Group are the entities inside the blue box in the organizational chart below. 3

6 The section captioned "ORGANIZATIONAL STRUCTURE" in the 2013 Appendix A is supplemented to include the following: Effective September 13, 2013, Northwestern Medical Faculty Foundation (d/b/a Northwestern Medical Group) ("NMG") and Northwestern Foundation for Research and Education (d/b/a Northwestern Management Services) ("NMS"), each an Illinois not for profit corporation, became Members of the Obligated Group. NMG is a not-for-profit, multispecialty group practice with approximately 900 members and 1,500 additional health professionals and other staff, which serves as the clinical faculty practice plan arm of the Medical School and is one of the faculty components of the academic medical center. The majority of the NMG physicians serve as full-time faculty members of the Medical School and as members of the medical staff of NMH and NLFH. NMG's primary location is on the Medical Campus and it shares interrelated missions with the Hospital and the Medical School. Pursuant to a clinical affiliation agreement, as described in the audited consolidated financial statements of NMHC and Subsidiaries as of and for the fiscal years ended August 31, 2013 and 2012, NMHC, NMPG and NMG are aligning their clinical operations. Northwestern Medicine is a trademark of NMHC and is also used by the Medical School. Going forward, the clinical, medical education and research functions of NMHC, NMPG and NMG will be known as Northwestern Medicine. Northwestern Management Services was formed to foster and promote the educational, charitable, research, scientific and literary activities of NMG and the Medical School. NMS also provides administrative management services for NMG. The section captioned "EXECUTIVE MANAGEMENT STAFF" in the 2013 Appendix A is supplemented to include the following: 4

7 Effective July 1, 2013, Peter J. McCanna became Executive Vice President and Chief Operating Officer of NMHC. Mr. McCanna previously served as Executive Vice President, Administration and Chief Financial Officer of NMHC. The position of Chief Financial Officer of the Corporation currently is open. The Corporation presently is undertaking a nationwide search in order to identify a candidate for this position. An interim chief financial officer has been appointed and is expected to continue to serve in that capacity until a permanent replacement is found. General THE SUBSTITUTE LIQUIDITY FACILITIES The Substitute Liquidity Facilities will become effective on the Liquidity Substitution Date. From and after the Liquidity Substitution Date, the Subseries 2007A-2/A-4 Bonds that are subject to optional or mandatory tender pursuant to the terms of the Bond Indenture, and are not remarketed, will be purchased by the Substitute Liquidity Bank (except in certain circumstances described herein), in accordance with the related Substitute Liquidity Facility. The Subseries 2007A-2/A-4 Bonds are not subject to mandatory tender on the Liquidity Substitution Date in connection with the delivery of the Substitute Liquidity Facilities. Substitute Liquidity Facilities The terms and provisions of each Substitute Liquidity Facility are substantially identical. Accordingly, the majority of the discussion below is generic and applies equally to each subseries of the Subseries 2007A-2/A-4 Bonds. Where the specific terms of the Substitute Liquidity Facilities differ, those differences are explicitly identified in the following discussion. Each Substitute Liquidity Facility provides liquidity support only for the related subseries of the Subseries 2007A-2/A-4 Bonds identified therein and does not provide security for any other subseries of the Series 2007 Bonds. The following summary of the Substitute Liquidity Facilities does not purport to be comprehensive or definitive and is subject to all of the terms and provisions of each Substitute Liquidity Facility to which reference is made hereby. Investors are urged to obtain and review a copy of the related Substitute Liquidity Facility in order to understand all of the terms of that document. Copies of the Substitute Liquidity Facilities may be obtained from the Bond Trustee upon request. See "THE SUBSTITUTE LIQUIDITY BANK" and APPENDIX A attached hereto for certain information regarding the Substitute Liquidity Bank. Each Substitute Liquidity Facility contains various provisions, covenants and conditions, certain of which are summarized below. Various words or terms used in the following summary are defined in the related Substitute Liquidity Facility or the Bond Indenture, and reference thereto is made for full understanding of their import. Upon compliance with the terms and conditions of the related Substitute Liquidity Facility, and subject to the terms and conditions set forth therein, the Substitute Liquidity Bank will purchase the related Subseries 2007A-2/A-4 Bonds that are tendered for purchase, whether at the option of the owner of the related Subseries 2007A-2/A-4 Bonds or upon mandatory tender for purchase, and which such Subseries 2007A-2/A-4 Bonds have not been remarketed. The Subseries 2007A-2/A-4 Bonds so purchased by the Substitute Liquidity Bank are "Purchased Bonds" under the terms of the Substitute Liquidity Facilities and the Bond Indenture. Under each Substitute Liquidity Facility, the Substitute 5

8 Liquidity Bank is initially committed to purchase the related Subseries 2007A-2/A-4 Bonds in an amount equal to the then outstanding aggregate principal amount of the related Subseries 2007A-2/A-4 Bonds plus 35 days interest thereon at an assumed rate of 10% per annum (together, the "Available Commitment"). Unless terminated earlier, or extended, in each case, in accordance with their respective terms, each of the Substitute Liquidity Facilities will expire on December 17, If the Bond Trustee has not received sufficient funds on any Purchase Date to purchase all of the Subseries 2007A-2/A-4 Bonds to be purchased, the Bond Trustee shall so notify the Substitute Liquidity Bank no later than 12:00 p.m., New York time, on that day. If the Substitute Liquidity Bank receives such notice, subject to the satisfaction of certain conditions precedent set forth in the Substitute Liquidity Facilities, the Substitute Liquidity Bank shall transfer to the Bond Trustee by 2:30 p.m., New York time, on such date, the amount requested by the Bond Trustee, in immediately available funds, for the purchase of all of the related tendered related Subseries 2007A-2/A-4 Bonds bearing interest at a Variable Rate for the Daily Rate Period or the Weekly Rate Period (which are not Purchased Bonds or Subseries 2007A- 2/A-4 Bonds held by or on behalf of the Corporation or any other Member of the Obligated Group) to be purchased. UNDER CERTAIN CIRCUMSTANCES DESCRIBED BELOW, THE OBLIGATION OF THE SUBSTITUTE LIQUIDITY BANK TO PURCHASE THE RELATED SUBSERIES 2007A-2/A-4 BONDS TENDERED BY THE OWNERS THEREOF OR SUBJECT TO MANDATORY TENDER MAY BE TERMINATED OR SUSPENDED IMMEDIATELY AND AUTOMATICALLY WITHOUT A PURCHASE BY THE SUBSTITUTE LIQUIDITY BANK. IN SUCH EVENT, SUFFICIENT FUNDS MAY NOT BE AVAILABLE TO PURCHASE THE RELATED SUBSERIES 2007A-2/A-4 BONDS TENDERED BY THE OWNERS THEREOF OR SUBJECT TO MANDATORY TENDER. IN ADDITION, THE SUBSTITUTE LIQUIDITY FACILITIES DO NOT SUPPORT THE PAYMENT OF THE PRINCIPAL OF OR INTEREST OR PREMIUM, IF ANY, ON THE RELATED SUBSERIES 2007A-2/A-4 BONDS. Under the terms of each of the Substitute Liquidity Facilities, the Corporation is obligated to redeem Purchased Bonds and to pay to the Substitute Liquidity Bank any fees and other obligations due and owing to the Substitute Liquidity Bank in accordance with the terms of the related Substitute Liquidity Facility. The representations and warranties, covenants and events of default set forth in each of the Substitute Liquidity Facilities are solely for the benefit of the Substitute Liquidity Bank, and the Bondholders shall have no rights or obligations with respect to such provisions. The Substitute Liquidity Bank may in its discretion waive compliance with any representation, warranty, covenant or event of default and any other provisions of the related Substitute Liquidity Facility and may agree with the Members of the Obligated Group to amend such provisions without notice. To evidence the Obligated Group's obligations under the Substitute Liquidity Facilities, the Obligated Group will issue and deliver to the Substitute Liquidity Bank its Direct Note Obligation, Series 2013E (Wells Fargo Bank, National Association) and its Direct Note Obligation, Series 2013F (Wells Fargo Bank, National Association) collectively (the "Substitute Bank Obligations") pursuant to the Master Indenture. Events of Default. The following events constitute events of default under the Substitute Liquidity Facilities. Reference is made to each Substitute Liquidity Facility for a complete listing of all events of default. 6

9 (a) any representation or warranty made by the Obligated Group in the related Substitute Liquidity Facility (or incorporated therein by reference) or in the Loan Agreement, the Bond Indenture, the Purchase Contract, the Remarketing Agreement, the Official Statement, the Master Indenture, the Custody Agreement entered into between the Bond Trustee, as Custodian, and the Substitute Liquidity Bank, the fee letter between the Corporation and the Substitute Liquidity Bank, the related Subseries 2007A-2/A-4 Bonds and the tax agreement of the Corporation relating to the Subseries 2007A-2/A-4 Bonds or in any other agreement or instrument relating thereto (collectively with such related Substitute Liquidity Facility, the "Related Documents") shall prove to have been incorrect, incomplete or misleading in any material respect when made (and for purposes of this clause (a), "material" as it relates solely to the representations and warranties set forth in Sections 4.4, 4.7, 4.9, 4.10, 4.13 and 4.21 of each Substitute Liquidity Facility shall be defined as any event which results in a reduction of 7% or more of the combined/consolidated assets of the Obligated Group from the value of the assets shown on the financial statements for the most recently completed Fiscal Year of the Obligated Group for which audited financial statements are available); (b) any "event of default" shall have occurred and be continuing under any of the Related Documents, and the applicable cure period related thereto shall have elapsed; (c) the principal of or interest on any of the related Subseries 2007A-2/A-4 Bonds (including Purchased Bonds) shall not be paid when due, whether on any regularly scheduled interest payment date, at maturity, upon redemption, acceleration or otherwise (other than as a result of an acceleration of Purchased Bonds following an Event of Default as described below under the subcaption "Remedies"); (d) any default in payment by the Hospital to the Substitute Liquidity Bank of any obligations (other than as described in subsection (c) above) when and as due under the related Substitute Liquidity Facility; (e) default in the due observance or performance by the Hospital of any term, covenant or agreement set forth (or incorporated by reference) in the related Substitute Liquidity Facility and the continuance of such default for thirty days after the occurrence thereof; provided, however, that there is no 30-day cure period for a failure to observe or perform certain covenants or agreements set forth in the related Substitute Liquidity Facility; (f) (A) any court of competent jurisdiction or Governmental Authority having competent jurisdiction shall find or rule that the related Substitute Liquidity Facility, the related Subseries 2007A-2/A-4 Bonds, the Bond Indenture, the Loan Agreement, the related Bank Note or the Master Indenture or any provision thereof relating to the obligation of the Hospital to make principal or interest payments with respect to the related Subseries 2007A-2/A-4 Bonds (including the Purchased Bonds) or the security therefor shall cease to be valid and binding on the Hospital or any other Significant Member of the Obligated Group (defined in the Substitute Liquidity Facilities as a Member of the Obligated Group, or an aggregation or combination of Members of the Obligated Group, which accounted for fifty percent (50%) or more of the total cash flows of the consolidated Obligated Group, determined on the basis of the audited financial statements for the most recently completed Fiscal Year) to the extent a party thereto; or (B) an executive officer of the Hospital or any other Significant Member of the Obligated Group shall in writing contest the related Substitute Liquidity Facility, the related Subseries 2007A-2/A-4 Bonds, the Bond Indenture, the Loan Agreement, the related Bank Note or the Master Indenture or any provision thereof relating to the obligation of the Corporation to make principal or interest payments with respect to the related Subseries 2007A-2/A-4 Bonds (including the Purchased 7

10 Bonds) or the security therefor, or an executive officer of the Corporation or any other Significant Member of the Obligated Group, shall deny in writing that the Hospital or such other Significant Member of the Obligated Group, as applicable, has any or further liability under the related Substitute Liquidity Facility, the related Subseries 2007A-2/A-4 Bonds, the Bond Indenture, the Loan Agreement, the related Bank Note or the Master Indenture; (g) the Hospital shall (i) have commenced against it any case, proceeding or other action of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its debts which (x) results in an order for such relief or in the appointment of a receiver or similar official or (y) remains undismissed, undischarged or unbonded for a period of sixty (60) days, (ii) admit in writing its inability to pay its debts generally as they become due or become insolvent within the meaning of Section 101(32) of the United States Bankruptcy Code, (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, conservator, 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, or any other bankruptcy or similar law, 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, (vi) fail to contest during a period of sixty (60) or more days any appointment or proceeding described in Section 6.1(h) hereof, or (vii) take any corporate action to authorize or consent to any of the actions set forth above in this subsection (g); (h) a custodian, receiver, trustee, conservator, liquidator or similar official shall be appointed for the Corporation or any substantial part of the Property of the Corporation, or a proceeding described in Section 6.1(g)(v) shall be instituted against the Corporation and such appointment continues undischarged or any such proceeding continues undismissed or unstayed for a period of sixty (60) or more days; (i) any Significant Member of the Obligated Group (other than the Hospital) shall (i) have commenced against it any case, proceeding or other action of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its debts which (x) results in an order for such relief or in the appointment of a receiver or similar official or (y) remains undismissed, undischarged or unbonded for a period of sixty (60) days, (ii) admit in writing its inability to pay its debts generally as they become due or become insolvent within the meaning of Section 101(32) of the United States Bankruptcy Code, (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, conservator, 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, or any other bankruptcy or similar law, 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, (vi) fail to contest for a period of sixty (60) or more days any appointment or proceeding described in Section 6.1(j) 8

11 hereof, or (vii) take any corporate action to authorize or to consent to any of the actions set forth above in this subsection (i); (j) a custodian, receiver, trustee, conservator, liquidator or similar official shall be appointed for any Significant Member of the Obligated Group (other than the Hospital) or any substantial part of the Property of any such Person, or a proceeding described in Section 6.1(i)(v) shall be instituted against any such Person and such appointment continues undischarged or any such proceeding continues undismissed or unstayed for a period of sixty (60) or more days; (k) (A) the Hospital or any other Significant Member of the Obligated Group shall default in any payment of principal of or interest on any Indebtedness which is secured by (or directly authenticated as) a Master Obligation issued pursuant to the Master Indenture on a parity basis with, or is senior to, the Subseries 2007A-2/A-4 Bonds (the "Parity Debt"), but expressly excluding, for purposes of this subsection (k)(a), defaults in the payment of accelerated principal of or premium, if any, or interest on any bank bonds or pledged bonds arising from liquidity draws on letters of credit, standby bond purchase agreements or other similar evidences of indebtedness, or (B) (I) the Hospital or any other Member of the Obligated Group shall fail to perform any agreement, term or condition (other than as described in subsection (k)(a) above) contained in any agreement, mortgage or other instrument under which any Parity Debt is created or secured, which results in Parity Debt becoming due and payable prior to its maturity, or a moratorium shall have been declared or announced (whether or not in writing) by an Authorized Officer of the Hospital or any Member of the Obligated Group with respect to any Parity Debt, or (II) the Hospital or any other Member of the Obligated Group shall default in the performance of any agreement secured by Parity Debt or under which such Parity Debt is created if the effect of such default is to permit the holder or holders of such Parity Debt to cause such Parity Debt to become due prior to its maturity; (l) one or more final, non-appealable judgments for the payment of money in excess of an aggregate of an amount equal to $5,000,000 shall be rendered against the Hospital and/or a Significant Member of the Obligated Group, and such judgment or order shall continue unsatisfied and unstayed for a period of sixty (60) days; (m) the occurrence of any "reportable event," as defined in ERISA, which is determined to constitute grounds for termination by the PBGC (as defined in each of Substitute Liquidity Facilities) of any Plan (as defined in the related Substitute Liquidity Facility) maintained by or on behalf of the Hospital or any Member of the Obligated Group or any ERISA Affiliates (as defined in each of the Substitute Liquidity Facilities) thereof or for the appointment by the appropriate United States District Court of a trustee to administer such Plan and such reportable event is not corrected and such determination is not revoked within thirty days after notice thereof has been given to the plan administrator or the Hospital or such Member of the Obligated Group or any ERISA Affiliates thereof, or the institution of proceedings by the PBGC to terminate any such Plan or to appoint a trustee to administer such Plan; or the appointment of a trustee by the appropriate United States District Court to administer any such Plan; or the Hospital, any Member of the Obligated Group or any ERISA Affiliates thereof as employer under a Multi-employer Plan shall have made a complete or partial withdrawal from such Multiemployer Plan and the plan sponsor of such Multi-employer Plan shall have notified such withdrawing employer that such employer has incurred a withdrawal liability in an annual amount exceeding $1,000,000; (n) a default shall occur and be continuing under any other agreement between the Hospital or any other Member of the Obligated Group and the Substitute Liquidity Bank or under 9

12 any other obligation owed by the Hospital or any other Member of the Obligated Group to the Substitute Liquidity Bank; (o) each of Moody's, S&P and Fitch (to the extent Fitch then provides a rating described below at the request or direction of the Hospital or any other Member) (i) shall reduce the long-term unenhanced credit rating of the Obligated Group below "Baa3" (or its equivalent), "BBB-" (or its equivalent) and "BBB-" (or its equivalent), respectively, or shall suspend or withdraw such rating, in each case, due to credit-related events; or (p) the long-term unenhanced credit rating of the Obligated Group shall be reduced below "A1" (or its equivalent) by Moody's, below "A+" (or its equivalent) by S&P or below "A+" (or its equivalent) by Fitch (to the extent Fitch then provides a rating described below at the request or direction of the Hospital or any other Member). Remedies. The following are remedies available to the Substitute Liquidity Bank under the related Substitute Liquidity Facility upon the occurrence of certain events of default thereunder: (i) Upon the occurrence of any event of default described in clauses (c), (f)(a), (g), (h), (i), (j), (k)(a), (l) or (o) hereof, (A) the Substitute Liquidity Bank's obligation to purchase Subseries 2007A-2/A-4 Bonds under the related Substitute Liquidity Facility shall immediately and automatically terminate without notice or other action on the part of the Substitute Liquidity Bank and its Available Commitment (as defined in the related Substitute Liquidity Facility) shall immediately terminate and be permanently reduced to zero under the related Substitute Liquidity Facility, and (B) all accrued fees and other obligations outstanding owed by the Hospital to the Substitute Liquidity Bank shall be forthwith due and payable without demand, presentment, protest or other notice whatsoever, all of which are expressly waived by the Hospital. (ii) Upon the occurrence of any event of default other than as set forth in the immediately preceding clause (i) above, the Substitute Liquidity Bank may, in its sole and absolute discretion, (A) terminate its obligations under the related Substitute Liquidity Facility and its Available Commitment and permanently reduce such Available Commitment to zero by written notice to the Bond Trustee (such termination and reduction to be effective thirty days after such notice is received by the Bond Trustee), and (B) without terminating its Available Commitment other than as described in clause (i) above, declare all accrued fees and other obligations outstanding owed by the Hospital to the Substitute Liquidity Bank to be immediately due and payable without further demand, presentment, protest or other notice whatsoever, all of which are expressly waived by the Hospital. (iii) Upon the occurrence of an event of default specified in clause (f)(b) above, the obligation of the Substitute Liquidity Bank under the related Substitute Liquidity Facility to purchase Subseries 2007A-2/A-4 Bonds shall be immediately and automatically suspended, without notice, and the Substitute Liquidity Bank shall be under no further obligation to purchase Subseries 2007A-2/A-4 Bonds unless and until the obligation of the Substitute Liquidity Bank to purchase Subseries 2007A-2/A-4 Bonds is reinstated as provided in the related Substitute Liquidity Facility. (iv) Upon the occurrence and during the continuance of an event that would upon the passage of time or giving of notice, or both, become an Event of Default as described in clauses (g), (h), (i) or (j) above, the obligation of the Substitute Liquidity Bank to purchase Subseries 2007A-2/A-4 Bonds under the related Substitute Liquidity Facility shall be immediately and automatically suspended, without notice, and the Substitute Liquidity Bank shall be under no 10

13 further obligation under the related Substitute Liquidity Facility to purchase Subseries 2007A- 2/A-4 Bonds, until the bankruptcy, insolvency or similar proceeding referred to therein is terminated prior to the court entering an order granting the relief sought in such proceeding. In the event such proceeding is terminated, then the obligations of the Substitute Liquidity Bank under the related Substitute Liquidity Facility shall be automatically reinstated and the terms of the related Substitute Liquidity Facility shall continue in full force and effect (unless the obligation of the Substitute Liquidity Bank to purchase Subseries 2007A-2/A-4 Bonds under the related Substitute Liquidity Facility shall otherwise have terminated as provided in the related Substitute Liquidity Facility) as if there had been no such suspension. (v) In addition to the rights and remedies set forth in clauses (i), (ii), (iii) and (iv) above, in the case of any event of default specified in the related Substitute Liquidity Facility, the Substitute Liquidity Bank may exercise all of its rights and remedies under or in respect of the related Substitute Liquidity Facility or the Related Documents or all other rights and remedies available at law or in equity, including, without limitation, specific performance; provided, however, that the Substitute Liquidity Bank will not have the right to terminate its obligations to purchase Subseries 2007A-2/A-4 Bonds, to declare any amount due hereunder due and payable, or to accelerate the maturity date of Subseries 2007A-2/A-4 Bonds except as provided in the related Substitute Liquidity Facility and in the Bond Indenture. DESCRIPTION OF THE SUBSTITUTE LIQUIDITY BANK A description of the Substitute Liquidity Bank is included in APPENDIX A hereto. The information contained in APPENDIX A has been provided by the Substitute Liquidity Bank and is believed to be reliable. This information has not been verified independently by the Authority, the Bond Trustee or the Corporation. The Authority, the Bond Trustee and the Corporation make no representation whatsoever as to the accuracy, adequacy or completeness of such information. BONDHOLDERS' RISKS There are risks associated with the purchase of the Subseries 2007A-2/A-4 Bonds. The information under the caption "BONDHOLDERS' RISKS" in the Original Official Statement is hereby deleted in its entirety and replaced with the information under the caption "BONDHOLDERS' RISKS" in the 2013 Official Statement, as supplemented by the information herein, which is hereby incorporated by reference. Affordable Care Act The Affordable Care Act also imposes a 2.3% excise tax on qualified medical devices (the "Medical Device Tax"), which became effective on January 1, Attempts to repeal provisions the Medical Device Tax have been introduced in both houses of Congress. The ultimate outcomes of any legislative attempts to repeal or amend the Medical Device Tax are unknown. In the event the Medical Device Tax is not repealed, the cost of medical devices could increase, which may have an adverse effect on the financial condition of the Obligated Group. The Affordable Care Act will also create state "health insurance exchanges" that will provide consumers with improved access to health insurance. The exchanges may have a positive impact on providers by increasing the availability of health insurance for individuals who were previously uninsured. Conversely, employers or individuals may shift their purchase of health insurance to new 11

14 plans offered through the exchanges, which may or may not reimburse providers at rates equivalent to rates the providers currently receive. The exchanges could alter the health insurance market in ways that cannot be predicted, and the exchanges might, directly or indirectly, take on a rate-setting function that could negatively impact providers. Budget Control Act of 2011 On August 2, 2011, President Obama signed the Budget Control Act of 2011 (the "Budget Control Act"). The Budget Control Act limits the federal government's discretionary spending caps at levels necessary to reduce expenditures by $917 billion from the current federal budget baseline over the course of 10 years, from federal fiscal years 2012 through Medicare, Social Security, Medicaid and other entitlement programs will not be affected by the limit on discretionary spending caps. The Budget Control Act also created a Joint Select Committee on Deficit Reduction (the "Committee"), which was tasked with making recommendations to further reduce the federal deficit by $1.5 trillion on or before November 23, After several months of negotiations, the Committee was unable to reach agreement on spending reductions. As a result of this failure, and in exchange for raising the debt ceiling, the Budget Control Act also set in place a protocol for mandatory spending cuts known as sequestration, including a 2% reduction in Medicare spending, beginning in January Medicaid is one of a number of programs exempted from sequestration. The Taxpayer Relief Act extended the date on which the 2% reduction in Medicare spending would become effective by 60 days to March 1, On March 26, 2013, the President signed into law the Consolidated and Further Continuing Appropriations Act of 2013, providing funds for the operation of the federal government through September 30, 2013 and off-setting some of the sequestration mandated reductions for federal fiscal year On October 16, 2013, following a 16-day partial shutdown of the federal government, Congress passed and the President signed the Continuing Appropriations Act, 2014, which funded the federal government until January 15, 2014 and temporarily suspended the United States' debt ceiling limits. Because Congress may make changes to the budget in the future, it is impossible to predict the impact any spending cuts that are approved may have on the Obligated Group. Similarly, it is impossible to predict whether any automatic reductions to Medicare may be triggered in lieu of other spending cuts that may be proposed by Congress. These reductions could be implemented disproportionately for hospitals and could have an adverse effect on the financial condition of the Obligated Group. Government Debt Ceiling The federal government has estimated that it will reach its congressional approved federal debt limit on or about February 7, A failure by Congress to increase the federal debt limit may impact the federal government's ability to incur additional debt to satisfy its obligations. Management of the Obligated Group is unable to determine at this time what impact the failure to increase the federal debt limit may have on its operations, although it may be material. Nonprofit Healthcare Environment Recent Property and Sales Tax Legislation. An amendment to the Tax Act was proposed in the Illinois General Assembly ("HB 3634") on May 24, HB 3634 would provide that the property tax exemption for hospitals described in the Tax Act does not apply if (i) the subject property is located in a municipality that would be disproportionately impacted by the exemption and (ii) the hospital's net income for the hospital year is 8% or more of its revenue for the hospital year if the exemption is not applied to the property. HB 3634 would also find that a municipality would be disproportionately impacted by the exemption if (1) the municipality in which the property is located has a population of 12

15 10% or less of the total population of all municipalities served by the hospital and (2) the municipality provides services to 50% of more of the hospital's properties in the county in which the municipality is located. Due to the uncertainty as to whether HB 3634 will be enacted, and what form it might take as enacted, the Obligated Group has not undertaken an analysis of the effect HB 3634 might have on its exempt properties. Current State Legislative Initiatives. On March 8, 2013, a proposed rule was released by the Attorney General regarding hospital financial assistance applications, the use of presumptive eligibility methods in the financial assistance process and related reporting requirements. The final rule was issued on August 7, Management of the Obligated Group is analyzing the final rule to determine if any change to the Obligated Group's current policies and procedures will need to be made. Payment for Health Care Services Inpatient Operating Costs. On August 19, 2013, CMS issued the 2014 Final Inpatient Prospective Payment Rule for hospitals, which adopts a "2-midnight" benchmark to be used to determine the medical necessity of an inpatient admission. Under this rule, Medicare Part A payment is presumed to be appropriate only if the physician certifies that a patient will require a stay in the hospital lasting at least two midnights, and clearly documents in the medical record that he or she is admitting the patient to the hospital on that expectation. Management of the Obligated Group is unable to predict whether or not physicians will timely complete the required certifications, or what effect, if any, the new requirement will have on hospital revenues. Illinois Medicaid Expansion. On July 22, 2013, Illinois enacted P.A , which, among other things, expands Medicaid health coverage to adults under the age of 65 with incomes under 138% of the federal poverty level. Approximately 350,000 adults are expected to obtain health coverage under the Medicaid expansion, beginning January 1, The federal government will pay 100% of the cost of the newly eligible Medicaid recipients in 2014, 2015 and 2016, with the matching level phasing down (by about 2% a year starting in 2017) to 90% by 2020 and subsequent years. Management of the Obligated Group is analyzing this new law to determine the effect it will have on the Obligated Group's operations. Medicaid Disproportionate Share Payments. CMS recently issued a final rule on Medicaid DSH payments, cutting roughly $1.1 billion from the program over the next two fiscal years. In the federal government's 2014 fiscal year, which starts October 1, CMS estimates that hospitals will lose $500 million in Medicaid DSH payments. Those cuts will increase to $600 million in Management of the Obligated Group are unable to predict what effect, if any, the cut in disproportionate share hospital payments will have on hospital operations. Commercial Insurance and Other Third-Party Plans Health Care Exchanges. The Affordable Care Act imposed the use and availability of state-based exchanges in which health insurance can be purchased by certain groups and segments of the population, the extension of subsidies and tax credits for premium payments by some consumers and employers, and the imposition upon commercial insurers of certain terms and conditions that must be included in contracts with providers. In addition, the Affordable Care Act imposes many new obligations on states related to health insurance. It is unclear how the increased federal oversight of state health care may affect future state oversight or affect the Obligated Group. The effects of these changes upon the financial condition of any third party payor that offers health insurance, rates paid by third-party payors to providers and, thus, the revenues of the Obligated Group, and upon the operations, results of operations and financial condition of the Obligated Group cannot be predicted. 13

16 Liquidity Facilities Each subseries of the Subseries 2007A-2/A-4 Bonds will initially be supported by a Substitute Liquidity Facility, pursuant to which the Substitute Liquidity Bank will agree, under certain circumstances, to provide funds for the purchase of the related subseries of the Subseries 2007A-2/A-4 Bonds supported by the related Substitute Liquidity Facility that are tendered for purchase in the event such Subseries 2007A-2/A-4 Bonds are not remarketed or remarketing proceeds are not made available. In the event that the Substitute Liquidity Bank becomes insolvent or bankrupt, no assurance can be given that funds of the Substitute Liquidity Bank would be available to pay the purchase price of any tendered Subseries 2007A-2/A-4 Bonds. TAX MATTERS In connection with the delivery of the Substitute Liquidity Facilities, Jones Day, Chicago, Illinois, Bond Counsel, will render an opinion that the delivery of the Substitute Liquidity Facilities in substitution for the Existing Liquidity Facilities issued by the Existing Liquidity Bank will not have an adverse impact on any exemption from federal income taxation to which interest on the Subseries 2007A-2/A-4 Bonds would otherwise be entitled and will not, in and of itself, adversely affect the validity of the Subseries 2007A-2/A-4 Bonds. CONTINUING DISCLOSURE So long as the Subseries 2007A-2/A-4 Bonds bear interest in a Daily Rate Period or a Weekly Rate Period, the Subseries 2007A-2/A-4 Bonds are exempt from the continuing disclosure provisions of Rule 15c2-12 under the Securities and Exchange Act of 1934, as amended. In order to provide certain continuing disclosure with respect to the Subseries 2007A-2/A-4 Bonds, the Obligated Group Agent, on behalf of the Obligated Group, has voluntarily entered into a Disclosure Dissemination Agreement ("Disclosure Dissemination Agreement") for the benefit of the Holders of the Subseries 2007A-2/A-4 Bonds with Digital Assurance Certification, L.L.C. ("DAC"), pursuant to which the Obligated Group has designated DAC as Disclosure Dissemination Agent. The Disclosure Dissemination Agreement will be substantially in the form attached as APPENDIX B hereto and may also refer to other continuing disclosure undertakings entered into by Members of the Obligated Group in connection with the issuance of various other series of tax-exempt bonds. The Authority has not made and will not make any provision to provide any annual financial statements or other credit information relating to the Corporation or any other Member of the Obligated Group to investors on a periodic basis and has determined that no financial or operating data concerning the Authority is material to any decision to purchase, hold or sell the Subseries 2007A-2/A-4 Bonds, and the Authority will not provide any such information. DOCUMENTS INCORPORATED BY REFERENCE The Corporation files periodic reports and other information with the MSRB. The Corporation's filings with the MSRB are available to the public on EMMA at This Third Supplement incorporates by reference certain information the Corporation has filed with the MSRB on EMMA, which means that important information is disclosed to purchasers and potential purchasers of the Subseries 2007A-2/A-4 Bonds by reference to those documents. The following information available on EMMA is incorporated by reference herein: (i) the Financial and 14

17 Other Information, (ii) the information under the caption "BONDHOLDERS' RISKS" in the 2013 Official Statement and (iii) the 2013 Appendix A. Such documents contain information concerning the Obligated Group as of a specific date, and other than as specifically set forth herein, such documents and information have not been updated, revised or supplemented since their respective dates. Any statement incorporated or deemed to be incorporated by reference in this Third Supplement will be deemed to be modified or superseded for purposes of this Third Supplement to the extent that a statement contained in this Third Supplement modifies or supersedes that statement. References to web site addresses presented herein are for informational purposes only and may be in the form of a hyperlink solely for the reader's convenience. Unless specified otherwise, such web sites and the information or links contained therein are not incorporated into, and are not part of, this Third Supplement. RELATIONSHIP OF CERTAIN PARTIES Dentons US LLP, special counsel to the Obligated Group, also represents the Successor Remarketing Agent and the Substitute Liquidity Bank from time to time in unrelated matters. Jones Day, Bond Counsel, also represents the Successor Remarketing Agent and the Authority from time to time in unrelated matters. Ungaretti & Harris LLP, special counsel to the Successor Remarketing Agent, also represents the Authority and the Substitute Liquidity Bank from time to time in unrelated matters. Wells Fargo Bank, National Association is serving as Successor Remarketing Agent, the Bond Trustee and the Substitute Liquidity Bank for the Subseries 2007A-2/A-4 Bonds. RATINGS Moody's Investors Service, Inc. ("Moody's") has ratings for the Subseries 2007A-2/A-4 Bonds of "Aa2/VMIG1" and Standard & Poor's Ratings Services, a Division of The McGraw-Hill Companies, Inc. ("Standard & Poor's"), has ratings for the Subseries 2007A-2/A-4 Bonds of "AA+/A-1". The short-term ratings are contingent upon the execution and delivery of the Substitute Liquidity Facility and will only apply to Subseries 2007A-2/A-4 Bonds bearing interest in a Daily Rate Period or a Weekly Rate Period. The ratings assigned to the Subseries 2007A-2/A-4 Bonds reflect only the views of Moody's and Standard & Poor's. Any further explanation of the significance of such ratings may only be obtained from Standard & Poor's and Moody's. Certain information and materials concerning the Obligated Group and the Subseries 2007A-2/A- 4 Bonds not included in this Official Statement were furnished to Standard & Poor's and Moody's. Generally, rating agencies base their ratings on such information and materials and on investigations, studies and assumptions by the rating agencies. There is no assurance that the ratings mentioned above will remain for any given period of time or that such ratings might not be lowered or withdrawn entirely by Standard & Poor's or Moody's, if in their judgment circumstances so warrant. Wells Fargo Bank, National Association, as Successor Remarketing Agent, has undertaken no responsibility either to bring to the attention of the owners of the Subseries 2007A-2/A-4 Bonds any proposed revision or withdrawal of the ratings on the Subseries 2007A-2/A-4 Bonds or to oppose any such proposed revision or withdrawal. Any downward revision or withdrawal of such rating could have 15

18 an adverse effect on the market price or marketability of the Subseries 2007A-2/A-4 Bonds. Such ratings should not be taken as a recommendation to buy or hold the Subseries 2007A-2/A-4 Bonds. SUCCESSOR REMARKETING AGENT Effective as of December 17, 2013, Wells Fargo Bank, National Association has been appointed by the Corporation as successor remarketing agent (the "Successor Remarketing Agent") for the Subseries 2007A-2/A-4 Bonds pursuant to a Remarketing Agreement dated as of December 17, 2013 (the "Remarketing Agreement") between the Corporation and the Successor Remarketing Agent. Wells Fargo Securities is the trade name for certain securities-related capital markets and investment banking services of Wells Fargo & Company and its subsidiaries, including Wells Fargo Bank, National Association. The Successor Remarketing Agent has entered into an agreement (the "Distribution Agreement") with its affiliate, Wells Fargo Advisors, LLC ("WFA"), for the distribution of certain municipal securities offerings, including the Subseries 2007A-2/A-4 Bonds. Pursuant to the Distribution Agreement, the Successor Remarketing Agent will share a portion of its underwriting or remarketing agent compensation, as applicable, with respect to the Subseries 2007A-2/A-4 Bonds with WFA. The Successor Remarketing Agent also utilizes the distribution capabilities of its affiliates, Wells Fargo Securities, LLC ("WFSLLC") and Wells Fargo Institutional Securities, LLC ("WFIS"), for the distribution of municipal securities offerings, including the Subseries 2007A-2/A-4 Bonds. In connection with utilizing the distribution capabilities of WFSLLC, the Successor Remarketing Agent pays a portion of WFSLLC's expenses based on its municipal securities transactions. The Successor Remarketing Agent, WFSLLC, WFIS and WFA are each wholly-owned subsidiaries of Wells Fargo & Company. The Successor Remarketing Agent has provided the following sentence for inclusion in this Third Supplement. The Successor Remarketing Agent has reviewed the information in this Third Supplement and the Original Official Statement in accordance with, and as part of, its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Successor Remarketing Agent does not guarantee the accuracy or completeness of such information, except for the description of the Substitute Liquidity Bank contained in APPENDIX A hereto. The Successor Remarketing Agent is Paid by the Corporation The Successor Remarketing Agent's responsibilities include determining the interest rate from time to time and remarketing the Subseries 2007A-2/A-4 Bonds that are optionally or mandatorily tendered by the owners thereof (subject, in each case, to the terms of the Bond Indenture and the Remarketing Agreement), all as further described in this Third Supplement and the Original Official Statement. The Successor Remarketing Agent is appointed by the Corporation, with the prior written consent of the Substitute Liquidity Bank, and is paid by the Corporation for its services. As a result, the interests of the Successor Remarketing Agent may differ from those of existing Holders and potential purchasers of the Subseries 2007A-2/A-4 Bonds. The Successor Remarketing Agent Routinely Purchases Subseries 2007A-2/A-4 Bonds for its Own Account The Successor Remarketing Agent acts as remarketing agent for a variety of variable rate demand obligations and, in its sole discretion, routinely purchases such obligations for its own account. The Successor Remarketing Agent is permitted, but not obligated, to purchase tendered Subseries 2007A-2/A- 16

19 4 Bonds for its own account and, in its sole discretion, may routinely acquire such tendered Subseries 2007A-2/A-4 Bonds in order to achieve a successful remarketing of the Subseries 2007A-2/A-4 Bonds (i.e., because there otherwise are not enough buyers to purchase the Subseries 2007A-2/A-4 Bonds) or for other reasons. However, the Successor Remarketing Agent is not obligated to purchase Subseries 2007A- 2/A-4 Bonds, and may cease doing so at any time without notice. The Successor Remarketing Agent may also make a market in the Subseries 2007A-2/A-4 Bonds by routinely purchasing and selling Subseries 2007A-2/A-4 Bonds other than in connection with an optional or mandatory tender and remarketing. Such purchases and sales may be at or below par. However, the Successor Remarketing Agent is not required to make a market in the Subseries 2007A-2/A-4 Bonds. The Successor Remarketing Agent may also sell any Subseries 2007A-2/A-4 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 Subseries 2007A-2/A-4 Bonds. The purchase of Subseries 2007A-2/A-4 Bonds by the Successor Remarketing Agent may create the appearance that there is greater third party demand for the Subseries 2007A-2/A-4 Bonds in the market than is actually the case. The practices described above also may result in fewer Subseries 2007A-2/A-4 Bonds being tendered in a remarketing. Subseries 2007A-2/A-4 Bonds May be Offered at Different Prices on Any Date Including an Interest Rate Determination Date Pursuant to the Bond Indenture and the Remarketing Agreement, the Successor Remarketing Agent is required to determine the applicable rate of interest that, in its judgment, is the lowest rate that would permit the sale of the Subseries 2007A-2/A-4 Bonds bearing interest at the applicable interest rate at par plus accrued interest, if any, on and as of the applicable interest rate determination date. The interest rate will reflect, among other factors, the level of market demand for the Subseries 2007A-2/A-4 Bonds (including whether the Successor Remarketing Agent is willing to purchase Subseries 2007A-2/A- 4 Bonds for its own account). There may or may not be Subseries 2007A-2/A-4 Bonds tendered and remarketed on an interest rate determination date, the Successor Remarketing Agent may or may not be able to remarket any Subseries 2007A-2/A-4 Bonds tendered for purchase on such date at par and the Successor Remarketing Agent may sell Subseries 2007A-2/A-4 Bonds at varying prices to different investors on such date or any other date. The Successor Remarketing Agent is not obligated to advise purchasers in a remarketing if it does not have third party buyers for all of the Subseries 2007A-2/A-4 Bonds at the remarketing price. In the event the Successor Remarketing Agent owns any Subseries 2007A-2/A-4 Bonds for its own account, it may, in its sole discretion in a secondary market transaction outside the tender process, offer such Subseries 2007A-2/A-4 Bonds on any date, including the interest rate determination date, at a discount to par to some investors. The Ability to Sell the Subseries 2007A-2/A-4 Bonds other than through the Tender Process May Be Limited The Successor Remarketing Agent may buy and sell Subseries 2007A-2/A-4 Bonds other than through the tender process. However, it is not obligated to do so and may cease doing so at any time without notice and may require Holders that wish to tender their Subseries 2007A-2/A-4 Bonds to do so through the Tender Agent with appropriate notice. Thus, investors who purchase the Subseries 2007A- 2/A-4 Bonds, whether in a remarketing or otherwise, should not assume that they will be able to sell their Subseries 2007A-2/A-4 Bonds other than by tendering the Subseries 2007A-2/A-4 Bonds in accordance with the tender process. 17

20 Under certain circumstances, the Successor Remarketing Agent May be Removed, Resign or Cease Remarketing the Subseries 2007A-2/A-4 Bonds Under certain circumstances, the Successor Remarketing Agent may be removed or have the ability to resign or cease its remarketing efforts, subject to the terms of the Bond Indenture and the Remarketing Agreement. 18

21 APPENDIX A INFORMATION CONCERNING THE SUBSTITUTE LIQUIDITY BANK WELLS FARGO BANK, NATIONAL ASSOCIATION The information under this heading has been provided solely by the Substitute Liquidity Bank and is believed to be reliable. This information has not been verified independently by the Authority or the Successor Remarketing Agent. The Authority and the Successor Remarketing Agent make no representation whatsoever as to the accuracy, adequacy or completeness of such information. Wells Fargo Bank, National Association The Substitute Liquidity Bank is a national banking association organized under the laws of the United States of America with its main office at 101 North Phillips Avenue, Sioux Falls, South Dakota 57104, and engages in retail, commercial and corporate banking, real estate lending and trust and investment services. The Substitute Liquidity Bank is an indirect, wholly-owned subsidiary of Wells Fargo & Company ("Wells Fargo"), a diversified financial services company, a financial holding company and a bank holding company registered under the Bank Holding Company Act of 1956, as amended, with its principal executive offices located in San Francisco, California. The Substitute Liquidity Bank prepares and files Call Reports on a quarterly basis. Each Call Report consists of a balance sheet as of the report date, an income statement for the year-to-date period to which the report relates and supporting schedules. The Call Reports are prepared in accordance with regulatory instructions issued by the Federal Financial Institutions Examination Council. While the Call Reports are supervisory and regulatory documents, not primarily accounting documents, and do not provide a complete range of financial disclosure about the Substitute Liquidity Bank, the reports nevertheless provide important information concerning the Substitute Liquidity Bank's financial condition and results of operations. The Substitute Liquidity Bank's Call Reports are on file with, and are publicly available upon written request to the FDIC, th Street, N.W., Washington, D.C , Attention: Division of Insurance and Research. The FDIC also maintains an internet website that contains the Call Reports. The address of the FDIC's website is The Substitute Liquidity Bank's Call Reports are also available upon written request to the Wells Fargo Corporate Secretary's Office, Wells Fargo Center, MAC N , 90 South 7 th Street, Minneapolis, MN The Substitute Liquidity Facilities will be solely an obligation of the Substitute Liquidity Bank and will not be an obligation of, or otherwise guaranteed by, Wells Fargo & Company, and no assets of Wells Fargo & Company or any affiliate of the Substitute Liquidity Bank or Wells Fargo & Company will be pledged to the payment thereof. Payment of the Letter of Credit will not be insured by the FDIC. The information contained in this section, including financial information, relates to and has been obtained from the Substitute Liquidity Bank, and is furnished solely to provide limited introductory information regarding the Substitute Liquidity Bank and does not purport to be comprehensive. Any financial information provided in this section 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 Substitute Liquidity Bank since the date hereof. A-1

22 [THIS PAGE INTENTIONALLY LEFT BLANK]

23 APPENDIX B DISCLOSURE DISSEMINATION AGREEMENT This Disclosure Dissemination Agreement (the "Disclosure Agreement"), dated December 17, 2013, is executed and delivered by Northwestern Memorial HealthCare, an Illinois not for profit corporation (the "Corporation"), as Obligated Group Agent on behalf of itself and the other Members of the Obligated Group established under the Master Indenture (as hereinafter defined), and Digital Assurance Certification, L.L.C., as exclusive Disclosure Dissemination Agent (the "Disclosure Dissemination Agent" or "DAC") for the benefit of the Holders (hereinafter defined) of the Bonds (hereinafter defined) and in order to provide certain continuing disclosure with respect to the Bonds. The services provided under this Disclosure Agreement solely relate to the execution of instructions received from the Corporation through use of the DAC system and do not constitute "advice" within the meaning of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Act"). DAC will not provide any advice or recommendation to the Authority (hereinafter defined), the Corporation, or anyone on behalf of the Authority or the Corporation, regarding the "issuance of municipal securities" or any "municipal financial product" as defined in the Act and nothing in this Disclosure Agreement shall be interpreted to the contrary. SECTION 1. Definitions. Capitalized terms not otherwise defined in this Disclosure Agreement shall have the meaning assigned in Rule 15c2-12 of the United States Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time (the "Rule") or, to the extent not in conflict with the Rule, in the Official Statement (hereinafter defined). The capitalized terms shall have the following meanings: "Annual Report" means an Annual Report described in and consistent with Section 3 of this Disclosure Agreement. "Annual Filing Date" means the date, set in Sections 2(a) and 2(f), by which the Annual Report is to be filed with the MSRB. "Annual Financial Information" means annual financial information as such term is used in paragraph (b)(5)(i) of the Rule and specified in Section 3(a) of this Disclosure Agreement. "Audited Financial Statements" means the financial statements of Northwestern Memorial HealthCare and Subsidiaries (or such other financial statements which include all "obligated persons" (as defined by the Rule)), for the prior fiscal year, certified by an independent auditor as prepared in accordance with accounting principles generally accepted in the United States of America or otherwise, as such term is used in paragraph (b)(5)(i) of the Rule and specified in Section 3(b) of this Disclosure Agreement. "Authority" means the Illinois Finance Authority, as issuer of the Bonds. "Bonds" means the bonds as listed on the attached Exhibit A, with the 9-digit CUSIP numbers relating thereto.

24 "Certification" means a written certification of compliance signed by the Disclosure Representative stating that the Annual Report, Audited Financial Statements, Notice Event notice, Failure to File Event notice, Voluntary Event Disclosure or Voluntary Financial Disclosure delivered to the Disclosure Dissemination Agent is the Annual Report, Audited Financial Statements, Notice Event notice, Failure to File Event notice, Voluntary Event Disclosure or Voluntary Financial Disclosure required to be (or voluntarily) submitted to the MSRB under this Disclosure Agreement. A Certification shall accompany each such document submitted to the Disclosure Dissemination Agent by the Corporation and include the full name of the Bonds and the 9-digit CUSIP numbers for all Bonds to which the document applies. "Disclosure Representative" means the chief financial officer of the Corporation or his or her designee, or such other person as the Corporation shall designate in writing to the Disclosure Dissemination Agent from time to time as the person responsible for providing Information to the Disclosure Dissemination Agent. "Disclosure Dissemination Agent" means Digital Assurance Certification, L.L.C, acting in its capacity as Disclosure Dissemination Agent hereunder, or any successor Disclosure Dissemination Agent designated in writing by the Corporation pursuant to Section 9 hereof. "Failure to File Event" means the Corporation's failure to file an Annual Report on or before the Annual Filing Date or a failure to file a Quarterly Report on or before the Quarterly Filing Date. "Force Majeure Event" means: (i) acts of God, war, or terrorist action; (ii) failure or shutdown of the Electronic Municipal Market Access system maintained by the MSRB; or (iii) to the extent beyond the Disclosure Dissemination Agent's reasonable control, interruptions in telecommunications or utilities services, failure, malfunction or error of any telecommunications, computer or other electrical, mechanical or technological application, service or system, computer virus, interruptions in Internet service or telephone service (including due to a virus, electrical delivery problem or similar occurrence) that affect Internet users generally, or in the local area in which the Disclosure Dissemination Agent or the MSRB is located, or acts of any government, regulatory or any other competent authority the effect of which is to prohibit the Disclosure Dissemination Agent from performance of its obligations under this Disclosure Agreement. "Holder" means any person (a) having the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Bonds (including persons holding Bonds through nominees, depositories or other intermediaries) or (b) treated as the owner of any Bonds for federal income tax purposes. "Information" means, collectively, the Annual Reports, the Quarterly Reports, the Audited Financial Statements (if any), the Notice Event notices, the Failure to File Event notices, the Voluntary Event Disclosures and the Voluntary Financial Disclosures. B-2

25 "Master Indenture" means the Amended and Restated Master Trust Indenture dated as of May 1, 2004, as supplemented and amended from time to time, among the Corporation, Northwestern Memorial Hospital, Northwestern Lake Forest Hospital, Northwestern Memorial Foundation, Northwestern Memorial Physicians Group, Lake Forest Health and Fitness Institute, Northwestern Medical Faculty Foundation (d/b/a Northwestern Medical Group) and Northwestern Foundation for Research and Education (d/b/a Northwestern Management Services), as the current members of an obligated group established thereunder, and Wells Fargo Bank, N.A., as successor master trustee. "MSRB" means the Municipal Securities Rulemaking Board established pursuant to Section 15B(b)(1) of the Securities Exchange Act of "Notice Event" means any of the events enumerated in paragraph (b)(5)(i)(c) of the Rule and listed in Section 4(a) of this Disclosure Agreement. "Official Statement" means that Official Statement prepared by the Corporation in connection with the Bonds, as listed on Exhibit A. "Quarterly Report" means a Quarterly Report described in and consistent with Section 3Q of this Disclosure Agreement. "Quarterly Filing Date" means the date, set in Section 2Q(a), by which the Quarterly Report is to be filed with the MSRB. "Trustee" means the institution identified as such in the document under which the Bonds were issued. "2013 Official Statement" means the Official Statement dated February 14, 2013 relating to the Illinois Finance Authority Revenue Bonds, Series 2013 (Northwestern Memorial HealthCare). "Voluntary Event Disclosure" means information of the category specified in any of subsections (e)(vi)(1) through (e)(vi)(11) of Section 2 of this Disclosure Agreement that is accompanied by a Certification of the Disclosure Representative containing the information prescribed by Section 7(a) of this Disclosure Agreement. "Voluntary Financial Disclosure" means information of the category specified in any of subsections (e)(vii)(1) through (e)(vii)(9) of Section 2 of this Disclosure Agreement that is accompanied by a Certification of the Disclosure Representative containing the information prescribed by Section 7(b) of this Disclosure Agreement. SECTION 2. Provision of Annual Reports. (a) The Corporation shall provide, annually, an electronic copy of the Annual Report and Certification to the Disclosure Dissemination Agent, together with a copy for the Bond Trustee, not later than four (4) days prior to the Annual Filing Date. Promptly upon receipt of an electronic copy of the Annual Report and the Certification, the Disclosure Dissemination Agent shall provide an Annual Report to each National Repository and the State Depository (if any) not B-3

26 later than 150 days after the end of each fiscal year of the Corporation, commencing with the fiscal year ending August 31, Such date and each anniversary thereof is the "Annual Filing Date." The Annual Report may be submitted as a single document or as separate documents comprising a package, and may cross-reference other information as provided in Section 3 of this Disclosure Agreement. (b) If on the tenth (10th) day prior to the Annual Filing Date, the Disclosure Dissemination Agent has not received a copy of the Annual Report and Certification, the Disclosure Dissemination Agent shall contact the Disclosure Representative by telephone and in writing (which may be by ), with a copy to the Authority, to remind the Corporation of its undertaking to provide the Annual Report pursuant to Section 2(a). Upon such reminder, the Disclosure Representative shall either (i) provide the Disclosure Dissemination Agent with an electronic copy of the Annual Report and the Certification no later than four (4) days prior to the Annual Filing Date, or (ii) instruct the Disclosure Dissemination Agent in writing, with a copy to the Authority, that the Corporation will not be able to file the Annual Report within the time required under this Disclosure Agreement, state the date by which the Annual Report for such year will be provided and instruct the Disclosure Dissemination Agent that a Failure to File Event has occurred and to immediately send a notice to the MSRB in substantially the form attached as Exhibit B, accompanied by a cover sheet completed by the Disclosure Dissemination Agent in the form set forth in Exhibit C-1. (c) If the Disclosure Dissemination Agent has not received an Annual Report and Certification by 6:00 p.m. Eastern time on the Annual Filing Date (or, if such Annual Filing Date falls on a Saturday, Sunday or holiday, then the first business day thereafter) for the Annual Report, a Failure to File Event shall have occurred and the Corporation irrevocably directs the Disclosure Dissemination Agent to immediately send a notice to the MSRB in substantially the form attached as Exhibit B without reference to the anticipated filing date for the Annual Report, accompanied by a cover sheet completed by the Disclosure Dissemination Agent in the form set forth in Exhibit C-1. (d) If Audited Financial Statements of the Corporation are prepared but not available prior to the Annual Filing Date, the Corporation shall, when the Audited Financial Statements are available, provide in a timely manner an electronic copy to the Disclosure Dissemination Agent, accompanied by a Certification, together with a copy each for the Authority and the Trustee, for filing with the MSRB. (e) The Disclosure Dissemination Agent shall: (i) (ii) (iii) verify the filing specifications of the MSRB each year prior to the Annual Filing Date; upon receipt, promptly file each Annual Report received under Sections 2(a) and 2(b) with the MSRB; upon receipt, promptly file each Audited Financial Statement received under Section 2(d) with the MSRB; B-4

27 (iv) upon receipt, promptly file the text of each Notice Event received under Sections 4(a) and 4(b)(ii) with the MSRB, identifying the Notice Event as instructed by the Corporation pursuant to Section 4(a) or 4(b)(ii) (being any of the categories set forth below) when filing pursuant to Section 4(c) of this Disclosure Agreement: 1. "Principal and interest payment delinquencies;" 2. "Non-Payment related defaults, if material;" 3. "Unscheduled draws on debt service reserves reflecting financial difficulties;" 4. "Unscheduled draws on credit enhancements reflecting financial difficulties;" 5. "Substitution of credit or liquidity providers, or their failure to perform;" 6. "Adverse tax opinions, IRS notices or events affecting the tax status of the security;" 7. "Modifications to rights of securities holders, if material;" 8. "Bond calls, if material;" 9. "Defeasances;" 10. "Release, substitution, or sale of property securing repayment of the securities, if material;" 11. "Rating changes;" 12. "Tender offers;" 13. "Bankruptcy, insolvency, receivership or similar event of an obligated person;" 14. "Merger, consolidation, or acquisition of an obligated person, if material;" and 15. "Appointment of a successor or additional trustee, or the change of name of a trustee, if material;" (v) upon receipt (or irrevocable direction pursuant to Section 2(c) of this Disclosure Agreement, as applicable), promptly file a completed copy of Exhibit B to this Disclosure Agreement with the MSRB, identifying the filing as "Failure to provide annual financial information as required" B-5

28 when filing pursuant to Section 2(b)(ii) or Section 2(c) of this Disclosure Agreement; (vi) upon receipt, promptly file the text of each Voluntary Event Disclosure received under Section 7(a) with the MSRB, identifying the Voluntary Event Disclosure as instructed by the Corporation pursuant to Section 7(a) (being any of the categories set forth below) when filing pursuant to Section 7(a) of this Disclosure Agreement: 1. "amendment to continuing disclosure undertaking;" 2. "change in obligated person;" 3. "notice to investors pursuant to bond documents;" 4. "certain communications from the Internal Revenue Service;" 5. "secondary market purchases;" 6. "bid for auction rate or other securities;" 7. "capital or other financing plan;" 8. "litigation/enforcement action;" 9. "change of tender agent, remarketing agent, or other on-going party;" 10. "derivative or other similar transaction;" and 11. "other event-based disclosures;" (vii) upon receipt, promptly file the text of each Voluntary Financial Disclosure received under Section 7(b) with the MSRB, identifying the Voluntary Financial Disclosure as instructed by the Corporation pursuant to Section 7(b) (being any of the categories set forth below) when filing pursuant to Section 7(b) of this Disclosure Agreement: 1. "quarterly/monthly financial information;" 2. "change in fiscal year/timing of annual disclosure;" 3. "change in accounting standard;" 4. "interim/additional financial information/operating data;" 5. "budget;" 6. "investment/debt/financial policy;" B-6

29 7. "information provided to rating agency, credit/liquidity provider or other third party;" 8. "consultant reports;" and 9. "other financial/operating data." (viii) upon receipt (or irrevocable direction pursuant to Section 2Q(c) of this Disclosure Agreement, as applicable), promptly file a completed copy of Exhibit D to this Disclosure Agreement with the MSRB, identifying the filing as "Failure to provide quarterly report as required" when filing pursuant to Section 2(b)(ii) or Section 2(c) of this Disclosure Agreement; (ix) provide the Corporation and the Authority evidence of the filings of each of the above when made, which shall be by means of the DAC system, for so long as DAC is the Disclosure Dissemination Agent under this Disclosure Agreement. (f) The Corporation may adjust the Annual Filing Date upon change of its fiscal year by providing written notice of such change and the new Annual Filing Date to the Disclosure Dissemination Agent, the Authority, the Trustee and the MSRB, provided that the period between the existing Annual Filing Date and new Annual Filing Date shall not exceed one year. (g) Any Information received by the Disclosure Dissemination Agent before 6:00 p.m. Eastern time on any business day that it is required to file with the MSRB pursuant to the terms of this Disclosure Agreement and that is accompanied by a Certification and all other information required by the terms of this Disclosure Agreement will be filed by the Disclosure Dissemination Agent with the MSRB no later than 11:59 p.m. Eastern time on the same business day; provided, however, the Disclosure Dissemination Agent shall have no liability for any delay in filing with the MSRB if such delay is caused by a Force Majeure Event provided that the Disclosure Dissemination Agent uses reasonable efforts to make any such filing as soon as possible. SECTION 2Q. Provision of Quarterly Reports. (a) The Corporation shall provide, quarterly, an electronic copy of each Quarterly Report and Certification to the Disclosure Dissemination Agent, together with a copy each for the Authority and the Trustee, not later than the Quarterly Filing Date. Promptly upon receipt of an electronic copy of the Quarterly Report and the Certification, the Disclosure Dissemination Agent shall provide a Quarterly Report to the MSRB not later than (i) 60 days after the end of each of the first three fiscal quarters of the Corporation, commencing with the fiscal quarter ending February 28, 2014 and (ii) 75 days after the end of the fourth fiscal quarter of the Corporation. Each January 31, April 30, July 31 and November 15 is a Quarterly Filing Date. The Quarterly Report may be submitted as a single document or as separate documents comprising a package, and may cross-reference other information as provided in Section 3Q of this Disclosure Agreement. B-7

30 (b) If on the fourth (4 th ) day prior to the Quarterly Filing Date, the Disclosure Dissemination Agent has not received a copy of the Quarterly Report and Certification, the Disclosure Dissemination Agent shall contact the Disclosure Representative by telephone and in writing (which may be by ), with a copy to the Authority, to remind the Corporation of its undertaking to provide the Quarterly Report pursuant to Section 2Q(a). Upon such reminder, the Disclosure Representative shall either (i) provide the Disclosure Dissemination Agent with an electronic copy of the Quarterly Report and the Certification no later than two (2) business days prior to the Quarterly Filing Date, or (ii) instruct the Disclosure Dissemination Agent in writing, with a copy to the Authority, that the Corporation will not be able to file the Quarterly Report within the time required under this Disclosure Agreement, state the date by which the Quarterly Report for such quarter will be provided and instruct the Disclosure Dissemination Agent that a Failure to File Event has occurred and to immediately send a notice to the MSRB in substantially the form attached as Exhibit B, accompanied by a cover sheet completed by the Disclosure Dissemination Agent in the form set forth in Exhibit C-1. (c) If the Disclosure Dissemination Agent has not received a Quarterly Report and Certification by 6:00 p.m. Eastern time on the Quarterly Filing Date (or, if such Quarterly Filing Date falls on a Saturday, Sunday or holiday, then the first business day thereafter) for the Quarterly Report, a Failure to File Event shall have occurred and the Corporation irrevocably directs the Disclosure Dissemination Agent to immediately send a notice to the MSRB in substantially the form attached as Exhibit D without reference to the anticipated filing date for the Quarterly Report, accompanied by a cover sheet completed by the Disclosure Dissemination Agent in the form set forth in Exhibit C-1. SECTION 3. Content of Annual Reports. (a) Each Annual Report shall contain Annual Financial Information with respect to Northwestern Memorial HealthCare and Subsidiaries, including the information provided in APPENDIX A to the 2013 Official Statement under the captions "HISTORICAL UTILIZATION OF SERVICES," "SUMMARY OF FINANCIAL RESULTS Debt Service Coverage;" " Capitalization;" and " Sources of Revenue." Such information shall not include any interim or pro forma data. (b) Audited Financial Statements prepared in accordance with generally accepted accounting principles ("GAAP") as described in the Official Statement will be included in the Annual Report. If audited financial statements are not available, then, unaudited financial statements, prepared in accordance with GAAP as described in the Official Statement will be included in the Annual Report. Audited Financial Statements (if any) will be provided pursuant to Section 2(d). Any or all of the items listed above may be included by specific reference from other documents, including official statements of debt issues with respect to which the Corporation is an "obligated person" (as defined by the Rule), which have been previously filed with the Securities and Exchange Commission or available on the MSRB Internet Website. If the document incorporated by reference is a final official statement, it must be available from the MSRB. The Corporation will clearly identify each such document so incorporated by reference. B-8

31 Any annual financial information containing modified operating data or financial information is required to explain, in narrative form, the reasons for the modification and the impact of the change in the type of operating data or financial information being provided. SECTION 3Q. Content of Quarterly Reports. (a) Each Quarterly Report shall contain unaudited financial statements of Northwestern Memorial HealthCare and Subsidiaries (or such other financial statements which include all "obligated persons" (as defined by the Rule)) for the prior fiscal quarter, including an unaudited consolidated or combined balance sheet and related unaudited consolidated or combined statements of operations and changes in net assets, all of which have been prepared on a basis substantially consistent with the Audited Financial Statements prepared for the prior fiscal year. Any or all of the items listed above may be included by specific reference from other documents, including official statements of debt issues with respect to which the Corporation is an "obligated person" (as defined by the Rule), which have been previously filed with the Securities and Exchange Commission or available on the MSRB Internet Website. If the document incorporated by reference is a final official statement, it must be available from the MSRB. The Corporation will clearly identify each such document so incorporated by reference. Any Quarterly Report containing modified financial information is required to explain, in narrative form, the reasons for the modification and the impact of the change in the type of financial information being provided. SECTION 4. Reporting of Notice Events. (a) The occurrence of any of the following events with respect to the Bonds constitutes a Notice Event: 1. Principal and interest payment delinquencies; 2. Non-payment related defaults, if material; 3. Unscheduled draws on debt service reserves reflecting financial difficulties; 4. Unscheduled draws on credit enhancements reflecting financial difficulties; 5. Substitution of credit or liquidity providers, or their failure to perform; 6. Adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the Bonds, or other material events affecting the tax status of the Bonds; B-9

32 7. Modifications to rights of Holders, if material; 8. Bond calls, if material, and tender offers; 9. Defeasances; 10. Release, substitution, or sale of property securing repayment of the Bonds, if material; 11. Rating changes; 12. Bankruptcy, insolvency, receivership or similar event of an obligated person; For the purposes of the event described in subsection (a)(12) of this Section 4, the event is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent or similar officer for an obligated person in a proceeding under the U.S. Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of such obligated person, or if such jurisdiction has been assumed by leaving the existing governing body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of such obligated person. 13. The consummation of a merger, consolidation, or acquisition involving an obligated person or the sale of all or substantially all of the assets of an obligated person, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material; and 14. Appointment of a successor or additional trustee or the change of name of a trustee, if material. The Corporation shall, in a timely manner not in excess of ten business days after its occurrence, notify the Disclosure Dissemination Agent in writing of the occurrence of a Notice Event. Such notice shall instruct the Disclosure Dissemination Agent to report the occurrence pursuant to subsection (c) and shall be accompanied by a Certification. Such notice or Certification shall identify the Notice Event that has occurred (which shall be any of the categories set forth in Section 2(e)(iv) of this Disclosure Agreement), include the text of the disclosure that the Corporation desires to make, contain the written authorization of the Corporation for the Disclosure Dissemination Agent to disseminate such information, and identify the date the Corporation desires for the Disclosure Dissemination Agent to disseminate B-10

33 the information (provided that such date is not later than the tenth business day after the occurrence of the Notice Event). (b) The Disclosure Dissemination Agent is under no obligation to notify the Authority, the Corporation or the Disclosure Representative of an event that may constitute a Notice Event. In the event the Disclosure Dissemination Agent so notifies the Disclosure Representative, the Disclosure Representative will within two business days of receipt of such notice (but in any event not later than the tenth business day after the occurrence of the Notice Event, if the Corporation determines that a Notice Event has occurred), instruct the Disclosure Dissemination Agent that (i) a Notice Event has not occurred and no filing is to be made or (ii) a Notice Event has occurred and the Disclosure Dissemination Agent is to report the occurrence pursuant to subsection (c) of this Section 4, together with a Certification. Such Certification shall identify the Notice Event that has occurred (which shall be any of the categories set forth in Section 2(e)(iv) of this Disclosure Agreement), include the text of the disclosure that the Corporation desires to make, contain the written authorization of the Corporation for the Disclosure Dissemination Agent to disseminate such information, and identify the date the Corporation desires for the Disclosure Dissemination Agent to disseminate the information (provided that such date is not later than the tenth business day after the occurrence of the Notice Event). (c) If the Disclosure Dissemination Agent has been instructed by the Corporation as prescribed in subsection (a) or (b)(ii) of this Section 4 to report the occurrence of a Notice Event, the Disclosure Dissemination Agent shall promptly file a notice of such occurrence with MSRB in accordance with Section 2 (e)(iv) hereof. This notice will be filed with a cover sheet completed by the Disclosure Dissemination Agent in the form set forth in Exhibit C-1. SECTION 5. CUSIP Numbers. Whenever providing information to the Disclosure Dissemination Agent, including but not limited to Annual Reports, documents incorporated by reference to the Annual Reports, Audited Financial Statements, Notice Event notices, Failure to File Event notices, Voluntary Event Disclosures and Voluntary Financial Disclosures, the Corporation shall indicate the full name of the Bonds and the 9-digit CUSIP numbers for the Bonds as to which the provided information relates. SECTION 6. Additional Disclosure Obligations. The Corporation acknowledges and understands that other state and federal laws, including but not limited to the Securities Act of 1933 and Rule 10b-5 promulgated under the Securities Exchange Act of 1934, may apply to the Corporation, and that the duties and responsibilities of the Disclosure Dissemination Agent under this Disclosure Agreement do not extend to providing legal advice regarding such laws. The Corporation acknowledges and understands that the duties of the Disclosure Dissemination Agent relate exclusively to execution of the mechanical tasks of disseminating information as described in this Disclosure Agreement. SECTION 7. Voluntary Filing. (a) The Corporation may instruct the Disclosure Dissemination Agent to file a Voluntary Event Disclosure with the MSRB from time to time pursuant to a Certification of the Disclosure Representative. Such Certification shall identify the Voluntary Event Disclosure B-11

34 (which shall be any of the categories set forth in Section 2(e)(vi) of this Disclosure Agreement), include the text of the disclosure that the Corporation desires to make, contain the written authorization of the Corporation for the Disclosure Dissemination Agent to disseminate such information, and identify the date the Corporation desires for the Disclosure Dissemination Agent to disseminate the information. If the Disclosure Dissemination Agent has been instructed by the Corporation as prescribed in this Section 7(a) to file a Voluntary Event Disclosure, the Disclosure Dissemination Agent shall promptly file such Voluntary Event Disclosure with the MSRB in accordance with Section 2(e)(vi) hereof. This notice will be filed with a cover sheet completed by the Disclosure Dissemination Agent in the form set forth in Exhibit C-2. (b) The Corporation may instruct the Disclosure Dissemination Agent to file a Voluntary Financial Disclosure with the MSRB from time to time pursuant to a Certification of the Disclosure Representative. Such Certification shall identify the Voluntary Financial Disclosure (which shall be any of the categories set forth in Section 2(e)(vii) of this Disclosure Agreement), include the text of the disclosure that the Corporation desires to make, contain the written authorization of the Corporation for the Disclosure Dissemination Agent to disseminate such information, and identify the date the Corporation desires for the Disclosure Dissemination Agent to disseminate the information. If the Disclosure Dissemination Agent has been instructed by the Corporation as prescribed in this Section 7(b) to file a Voluntary Financial Disclosure, the Disclosure Dissemination Agent shall promptly file such Voluntary Financial Disclosure with the MSRB in accordance with Section 2(e)(vii) hereof. This notice will be filed with a cover sheet completed by the Disclosure Dissemination Agent in the form set forth in Exhibit C-2. (c) The parties hereto acknowledge that the Corporation is not obligated pursuant to the terms of this Disclosure Agreement to file any Voluntary Event Disclosure pursuant to Section 7(a) hereof or any Voluntary Financial Disclosure pursuant to Section 7(b) hereof. (d) Nothing in this Disclosure Agreement shall be deemed to prevent the Corporation from disseminating any other information through the Disclosure Dissemination Agent using the means of dissemination set forth in this Disclosure Agreement or including any other information in any Annual Report, Audited Financial Statements, Notice Event notice, Failure to File Event notice, Voluntary Event Disclosure or Voluntary Financial Disclosure, in addition to that required by this Disclosure Agreement. If the Corporation chooses to include any information in any Annual Report, Audited Financial Statements, Notice Event notice, Failure to File Event notice, Voluntary Event Disclosure or Voluntary Financial Disclosure in addition to that which is specifically required by this Disclosure Agreement, the Corporation shall have no obligation under this Disclosure Agreement to update such information or include it in any future Annual Report, Audited Financial Statements, Notice Event notice, Failure to File Event notice, Voluntary Event Disclosure or Voluntary Financial Disclosure. SECTION 8. Termination of Reporting Obligation. The obligations of the Corporation and the Disclosure Dissemination Agent under this Disclosure Agreement shall terminate with respect to the Bonds upon the legal defeasance, prior redemption or payment in full of all of the Bonds, or upon delivery by the Disclosure Representative to the Disclosure Dissemination Agent of an opinion of nationally recognized bond counsel to the effect that continuing disclosure is no longer required. B-12

35 SECTION 9. Disclosure Dissemination Agent. The Corporation has appointed Digital Assurance Certification, L.L.C. as exclusive Disclosure Dissemination Agent under this Disclosure Agreement. The Corporation may, upon thirty days written notice to the Disclosure Dissemination Agent and the Trustee, if any, replace or appoint a successor to the Disclosure Dissemination Agent. Upon termination of DAC's services as Disclosure Dissemination Agent, whether by notice of the Corporation or DAC, the Corporation agrees to appoint a successor Disclosure Dissemination Agent or, alternately, agrees to assume all responsibilities of Disclosure Dissemination Agent under this Disclosure Agreement for the benefit of the Holders of the Bonds. Notwithstanding any replacement or appointment of a successor, the Corporation shall remain liable until payment in full for any and all sums owed and payable to the Disclosure Dissemination Agent. The Disclosure Dissemination Agent may resign at any time by providing thirty days' prior written notice to the Authority and the Corporation. SECTION 10. Remedies in Event of Default. In the event of a failure of the Corporation or the Disclosure Dissemination Agent to comply with any provision of this Disclosure Agreement, the Holders' rights to enforce the provisions of this Agreement shall be limited solely to a right, by action in mandamus or for specific performance, to compel performance of the parties' obligation under this Disclosure Agreement. Any failure by a party to perform in accordance with this Disclosure Agreement shall not constitute a default on the Bonds or under any other document relating to the Bonds, and all rights and remedies shall be limited to those expressly stated herein. SECTION 11. Duties, Immunities and Liabilities of Disclosure Dissemination Agent. (a) The Disclosure Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Agreement. The Disclosure Dissemination Agent's obligation to deliver the information at the times and with the contents described herein shall be limited to the extent the Corporation has provided such information to the Disclosure Dissemination Agent as required by this Disclosure Agreement. The Disclosure Dissemination Agent shall have no duty with respect to the content of any disclosures or notice made pursuant to the terms hereof. The Disclosure Dissemination Agent shall have no duty or obligation to review or verify any Information, or any other information, disclosures or notices provided to it by the Corporation and shall not be deemed to be acting in any fiduciary capacity for the Authority, the Corporation, the Holders of the Bonds or any other party. The Disclosure Dissemination Agent shall have no responsibility for the Corporation's failure to report to the Disclosure Dissemination Agent a Notice Event or a duty to determine the materiality thereof. The Disclosure Dissemination Agent shall have no duty to determine or liability for failing to determine whether the Corporation has complied with this Disclosure Agreement. The Disclosure Dissemination Agent may conclusively rely upon Certifications of the Corporation at all times. THE CORPORATION AGREES TO INDEMNIFY AND SAVE THE DISCLOSURE DISSEMINATION AGENT AND ITS RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS, HARMLESS AGAINST ANY LOSS, EXPENSE AND LIABILITIES WHICH THEY MAY INCUR ARISING OUT OF OR IN THE EXERCISE OR PERFORMANCE OF THEIR POWERS AND DUTIES HEREUNDER, INCLUDING THE COSTS AND EXPENSES (INCLUDING ATTORNEYS FEES) OF DEFENDING AGAINST B-13

36 ANY CLAIM OF LIABILITY, BUT EXCLUDING LIABILITIES DUE TO THE DISCLOSURE DISSEMINATION AGENT'S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. The obligations of the Corporation under this Section shall survive resignation or removal of the Disclosure Dissemination Agent and defeasance, redemption or payment of the Bonds. (b) The Disclosure Dissemination Agent may, from time to time, consult with legal counsel (either in-house or external) of its own choosing in the event of any disagreement or controversy, or question or doubt as to the construction of any of the provisions hereof or its respective duties hereunder, and shall not incur any liability and shall be fully protected in acting in good faith upon the advice of such legal counsel. The reasonable fees and expenses of such counsel shall be payable by the Corporation. (c) All documents, reports, notices, statements, information and other materials provided to the MSRB under this Agreement shall be provided in an electronic format and accompanied by identifying information as prescribed by the MSRB. SECTION 12. No Authority Responsibility. The Corporation and the Disclosure Dissemination Agent acknowledge that the Authority has undertaken no responsibility, and shall not be required to undertake any responsibility, with respect to any reports, notices or disclosures required by or provided pursuant to this Disclosure Agreement, and shall have no liability to any person, including any Holder of the Bonds, with respect to any such reports, notices or disclosures. SECTION 13. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Agreement, the Corporation and the Disclosure Dissemination Agent may amend this Disclosure Agreement and any provision of this Disclosure Agreement may be waived, if such amendment or waiver is made to conform with such provisions of any outstanding disclosure agreement by and between the Obligated Group Agent or any other Member of the Obligated Group and the Disclosure Dissemination Agent for the benefit of holders of any outstanding bonds issued for the benefit of the Obligated Group, and such amendment or waiver would not, in and of itself, cause the undertakings herein to violate the Rule if such amendment or waiver had been effective on the date hereof but taking into account any subsequent change in or official interpretation of the Rule; provided neither the Corporation nor the Disclosure Dissemination Agent shall be obligated to agree to any amendment modifying their respective duties or obligations without their consent thereto. Notwithstanding the preceding paragraph, the Disclosure Dissemination Agent shall have the right to adopt amendments to this Disclosure Agreement necessary to comply with modifications to and interpretations of the provisions of the Rule as announced by the Securities and Exchange Commission from time to time by giving not less than 20 days written notice of the intent to do so together with a copy of the proposed amendment to the Authority and the Corporation. No such amendment shall become effective if the Corporation shall, within 10 days following the giving of such notice, send a notice to the Disclosure Dissemination Agent in writing that it objects to such amendment. B-14

37 SECTION 14. Beneficiaries. This Disclosure Agreement shall inure solely to the benefit of the Corporation, the Authority, the Trustee (if any), the Disclosure Dissemination Agent, the underwriters, and the Holders from time to time of the Bonds, and shall create no rights in any other person or entity. SECTION 15. Governing Law. This Disclosure Agreement shall be governed by the laws of the State of Illinois (other than with respect to conflicts of laws). SECTION 16. Counterparts. This Disclosure Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. [Remainder of page intentionally left blank.] B-15

38 The Disclosure Dissemination Agent and the Corporation have caused this Disclosure Dissemination Agreement to be executed, on the date first written above, by their respective officers duly authorized. DIGITAL ASSURANCE CERTIFICATION, L.L.C., as Disclosure Dissemination Agent By: Name: Title: NORTHWESTERN MEMORIAL HEALTHCARE, an Illinois not for profit corporation By: Name: Douglas M. Young Title: Interim Chief Financial Officer and Treasurer B-16

39 EXHIBIT A NAME AND CUSIP NUMBERS OF BONDS Issuer: Obligated Person: Name of Bond Issue: Illinois Finance Authority Northwestern Memorial HealthCare, as Obligated Group Agent on behalf of itself and the other Members of the Obligated Group Illinois Finance Authority Variable Rate Demand Revenue Bonds, Series 2007A-2 and Series 2007A-4 (Northwestern Memorial Hospital) Date of Issuance: December 19, 2007 Date of Disclosure Agreement: CUSIP Numbers: December 12, 2007, as supplemented pursuant to a Supplement to Official Statement dated December 17, 2007, a Second Supplement to Official Statement dated July 3, 2012 and a Third Supplement to Official Statement dated December 11, FBY4, 45200FBZ1 B-17

40 EXHIBIT B NOTICE TO MSRB OF FAILURE TO FILE ANNUAL REPORT Issuer: Obligated Person: Name of Bond Issue: Illinois Finance Authority Northwestern Memorial HealthCare, as Obligated Group Agent on behalf of itself and the other Members of the Obligated Group Illinois Finance Authority Variable Rate Demand Revenue Bonds, Series 2007A-2 and Series 2007A-4 (Northwestern Memorial Hospital) Date of Issuance: December 19, 2007 Date of Disclosure Agreement: December 12, 2007, as supplemented pursuant to a Supplement to Official Statement dated December 17, 2007, a Second Supplement to Official Statement dated July 3, 2012 and a Third Supplement to Official Statement dated December 11, 2013 CUSIP Numbers: NOTICE IS HEREBY GIVEN that the Obligated Person has not provided an Annual Report with respect to the above-named Bonds as required by the Disclosure Agreement between the Obligated Person and Digital Assurance Certification, L.L.C., as Disclosure Dissemination Agent. The Obligated Person has notified the Disclosure Dissemination Agent that it anticipates that the Annual Report will be filed by [ ]. Dated: [ ]. Digital Assurance Certification, L.L.C., as Disclosure Dissemination Agent, on behalf of the Obligated Person cc: Northwestern Memorial HealthCare B-18

41 EXHIBIT C-1 EVENT NOTICE COVER SHEET This cover sheet and accompanying "event notice" will be sent to the MSRB pursuant to Securities and Exchange Commission Rule 15c2-12(b)(5)(i)(C) and (D). Issuer's and Obligated Person's Names: Illinois Finance Authority Northwestern Memorial HealthCare, as Obligated Group Agent on behalf of itself and the other Members of the Obligated Group Issuer's Six-Digit CUSIP Number: Issuer's Nine-Digit CUSIP Number(s) of the bonds to which this material event notice relates: Number of pages of attached: Description of Notice Event (Check One): 1. "Principal and interest payment delinquencies;" 2. "Non-Payment related defaults, if material;" 3. "Unscheduled draws on debt service reserves reflecting financial difficulties;" 4. "Unscheduled draws on credit enhancements reflecting financial difficulties;" 5. "Substitution of credit or liquidity providers, or their failure to perform;" 6. "Adverse tax opinions, IRS notices or events affecting the tax status of the security;" 7. "Modifications to rights of securities holders, if material;" 8. "Bond calls, if material;" 9. "Defeasances;" 10. "Release, substitution, or sale of property securing repayment of the securities, if material;" 11. "Rating changes;" 12. "Tender offers;" 13. "Bankruptcy, insolvency, receivership or similar event of an obligated person;" 14. "Merger, consolidation, or acquisition of an obligated person, if material;" and 15. "Appointment of a successor or additional trustee, or the change of name of a trustee, if material." Failure to provide annual financial information as required Failure to provide quarterly report as required I hereby represent that I am authorized by the Obligated Person or its agent to distribute this information publicly: Signature: Name: Title: Digital Assurance Certification, L.L.C. 390 N. Orange Avenue Suite 1750 Orlando, FL Date: [ ]. B-19

42 EXHIBIT C-2 VOLUNTARY EVENT DISCLOSURE COVER SHEET This cover sheet and accompanying "voluntary event disclosure" will be sent to the MSRB, pursuant to the Disclosure Dissemination Agent Agreement dated December 17, 2013 between Northwestern Memorial HealthCare and DAC. Issuer's and Obligated Person's Names: Illinois Finance Authority Northwestern Memorial HealthCare, as Obligated Group Agent on behalf of itself and the other Members of the Obligated Group Issuer's Six-Digit CUSIP Number: Issuer's Nine-Digit CUSIP Number(s) of the bonds to which this material event notice relates: Number of pages of attached: Description of Voluntary Event Disclosure (Check One): [C11] 1. "amendment to continuing disclosure undertaking;" 2. "change in obligated person;" 3. "notice to investors pursuant to bond documents;" 4. "certain communications from the Internal Revenue Service;" 5. "secondary market purchases;" 6. "bid for auction rate or other securities;" 7. "capital or other financing plan;" 8. "litigation/enforcement action;" 9. "change of tender agent, remarketing agent, or other on-going party;" 10. "derivative or other similar transaction;" and 11. "other event-based disclosures." I hereby represent that I am authorized by the Obligated Person or its agent to distribute this information publicly: Signature: Name: Title: Digital Assurance Certification, L.L.C. 390 N. Orange Avenue Suite 1750 Orlando, FL Date: [ ]. B-20

43 EXHIBIT C-3 VOLUNTARY FINANCIAL DISCLOSURE COVER SHEET This cover sheet and accompanying "voluntary financial disclosure" will be sent to the MSRB, pursuant to the Disclosure Dissemination Agent Agreement dated December 17, 2013 between Northwestern Memorial HealthCare and DAC. Issuer's and Obligated Person's Names: Illinois Finance Authority Northwestern Memorial HealthCare, as Obligated Group Agent on behalf of itself and the other Members of the Obligated Group Issuer's Six-Digit CUSIP Number: Issuer's Nine-Digit CUSIP Number(s) of the bonds to which this material event notice relates: Number of pages of attached: Description of Voluntary Event Disclosure (Check One): [C11] 1. "quarterly/monthly financial information;" 2. "change in fiscal year/timing of annual disclosure;" 3. "change in accounting standard;" 4. "interim/additional financial information/operating data;" 5. "budget;" 6. "investment/debt/financial policy;" 7. "information provided to rating agency, credit/liquidity provider or other third party;" 8. "consultant reports;" and 9. "other financial/operating data." I hereby represent that I am authorized by the Obligated Person or its agent to distribute this information publicly: Signature: Name: Title: Digital Assurance Certification, L.L.C. 390 N. Orange Avenue Suite 1750 Orlando, FL Date: [ ]. B-21

44 EXHIBIT D NOTICE TO MSRB OF FAILURE TO FILE QUARTERLY REPORT Issuer: Obligated Person: Name of Bond Issue: Illinois Finance Authority Northwestern Memorial HealthCare, as Obligated Group Agent on behalf of itself and the other Members of the Obligated Group Illinois Finance Authority Variable Rate Demand Revenue Bonds, Series 2007A-2 and Series 2007A-4 (Northwestern Memorial Hospital) Date of Issuance: December 19, 2007 Date of Disclosure Agreement: December 12, 2007, as supplemented pursuant to a Supplement to Official Statement dated December 17, 2007, a Second Supplement to Official Statement dated July 3, 2012 and a Third Supplement to Official Statement dated December 11, 2013 CUSIP Numbers: NOTICE IS HEREBY GIVEN that the Obligated Person has not provided an Annual Report with respect to the above-named Bonds as required by the Disclosure Agreement between the Obligated Person and Digital Assurance Certification, L.L.C., as Disclosure Dissemination Agent. The Obligated Person has notified the Disclosure Dissemination Agent that it anticipates that the Annual Report will be filed by [ ]. Dated: [ ]. Digital Assurance Certification, L.L.C., as Disclosure Dissemination Agent, on behalf of the Obligated Person cc: Northwestern Memorial HealthCare B-22

45 SUPPLEMENT TO OFFICIAL STATEMENT DATED DECEMBER 12, 2007 $364,500,000 ILLINOIS FINANCE AUTHORITY VARIABLE RATE DEMAND REVENUE BONDS, SERIES 2007 (NORTHWESTERN MEMORIAL HOSPITAL) CONSISTING OF $214,500,000 Illinois Finance Authority Variable Rate Demand Revenue Bonds, Series 2007A (Northwestern Memorial Hospital) Initial Rate Period: Weekly Rate Period $150,000,000 Illinois Finance Authority Variable Rate Demand Revenue Bonds, Series 2007B (Northwestern Memorial Hospital) Initial Rate Period: Daily Rate Period The Official Statement referenced above is supplemented and amended by this Supplement to Official Statement dated December 17, 2007 in order to provide additional information relating to correspondence received by Northwestern Memorial Hospital from the U.S. Department of Health and Human Services, Centers for Medicare & Medicaid Services on December 13, The information under the caption "BONDHOLDERS' RISKS Federal and State Policies Affecting Health Care Providers Compliance and Reimbursement" on page 43 of the Official Statement is hereby amended to include the following additional information: "Hospitals, including NMH, must comply with standards called "Conditions of Participation" ("COPs") to participate in the Medicare program. The U.S. Department of Health and Human Services, Centers for Medicare & Medicaid Services ("CMS") may request that the Illinois Department of Public Health ("IDPH"), on behalf of CMS, conduct a survey of any Illinois hospital to determine compliance with the COPs. In November of 2007, IDPH conducted a survey at NMH. Based on this survey, CMS informed NMH on December 13, 2007 that it was not in compliance with the COPs for Patients' Rights due to a deficiency in documentation. NMH was also informed that CMS could terminate NMH's Medicare provider agreement unless NMH comes into compliance with the COPs no later than February 13, Under current regulations, if a hospital is terminated from the Medicare program, its participation in the Medicaid program would also be terminated. NMH has taken immediate steps to prevent the recurrence of the identified documentation deficiency and to address the items identified in the survey. The Hospital will submit a plan of correction to CMS and IDPH no later than December 27, 2007 outlining the resolution of the identified deficiency. NMH is confident that the deficiency identified by CMS will be corrected by NMH within the time period required and that CMS will not seek to terminate NMH's participation in the Medicare program. There can be no assurance, however, that CMS will not terminate NMH from the Medicare and Medicaid programs, in which case NMH's reimbursement would be materially and adversely affected." 2. The consolidated financial statements of Northwestern Memorial HealthCare (NMHC) and Subsidiaries as of August 31, 2007 and 2006 and for the years then ended, included in APPENDIX B to the Official Statement, have been revised and reissued solely to include the information provided above as an unaudited subsequent event in Note 15 to the consolidated financial statements. The opinion of Ernst & Young LLP with respect to such revised and reissued consolidated financial statements of NMHC and Subsidiaries is dated November 8, The revised and reissued consolidated financial statements of NMHC and Subsidiaries will be available at on the date hereof. 3. The information regarding UBS AG included as page E-1 in APPENDIX E to the Official Statement entitled "INFORMATION CONCERNING THE BANKS" is deleted in its entirety and replaced with the page E-1 attached hereto. This Supplement should be affixed to and made a part of the Official Statement dated December 12, Dated: December 17, 2007

46 UBS AG UBS AG ("UBS"), is a financial services firm incorporated and domiciled in Switzerland and operating under Swiss Company law and Swiss Federal Banking Law. Its two registered offices are located in Zurich and Basel, Switzerland. UBS will provide its credit and/or liquidity facilities through its Stamford branch, which is licensed as a branch by the Connecticut Banking Department and is subject to examination and regulation by Federal and Connecticut state banking authorities. Moody's currently rates UBS's long-term senior unsecured debt as "Aaa" and short-term commercial paper as "P-1". S&P rates UBS's long-term local issuer credit as "AA" and its short-term local issuer credits as "A-1+". Fitch rates UBS's long-term senior unsecured debt as "AA" and short-term debt as "F-1+". Further information with respect to such ratings may be obtained from Moody's, S&P and Fitch, respectively. No assurances can be given that the current ratings of the bank's instruments will be maintained. UBS had total assets of 2,396,511 million Swiss francs and shareholder equity of 49,686 million Swiss francs as of December 31, UBS files periodic reports with the Securities Exchange Commission (SEC). Additional information, including recent reports on Form 6-K and the most recent Annual report on Form 20-F for the year ended December 31, 2006, can be easily obtained from the SEC website ( E-1

47 NEW ISSUES BOOK-ENTRY ONLY Ratings S&P: Moody s: Subseries 2007A-1/A-3 AA+/A-1+ Aa2/VMIG1 Subseries 2007A-2/A-4 AA+/A-1+ Aa2/VMIG1 Subseries 2007B-1/B-2 AA+/A-1+ Aa2/VMIG1 In the opinion of Jones Day, Bond Counsel, assuming compliance with certain covenants, under present law, interest on the Series 2007 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. Interest on the Series 2007 Bonds will be taken into account, however, in computing an adjustment used in determining the corporate alternative minimum tax and the branch profits tax. See Tax Exemption herein for a more detailed discussion of some of the federal income tax consequences of owning the Series 2007 Bonds. Interest on the Series 2007 Bonds is not exempt from present Illinois income taxes. $364,500,000 ILLINOIS FINANCE AUTHORITY Variable Rate Demand Revenue Bonds, Series 2007 (Northwestern Memorial Hospital) consisting of $214,500,000 Illinois Finance Authority Variable Rate Demand Revenue Bonds, Series 2007A (Northwestern Memorial Hospital) Initial Rate Period: Weekly Rate Period $150,000,000 Illinois Finance Authority Variable Rate Demand Revenue Bonds, Series 2007B (Northwestern Memorial Hospital) Initial Rate Period: Daily Rate Period Dated: Date of Original Issuance Price: 100% Due: As shown on the inside cover The Series 2007A Bonds will be issued in four Subseries (as set forth on the inside cover), each initially bearing interest at a Weekly Rate for a Weekly Rate Period. The Series 2007B Bonds will be issued in two Subseries (as set forth on the inside cover), each initially bearing interest at a Daily Rate for a Daily Rate Period. Each Subseries is subject to conversion to other interest periods, as described herein. So long as the Series 2007 Bonds bear interest during a Weekly Rate Period or a Daily Rate Period, such Series 2007 Bonds are issuable in authorized denominations of $100,000 and multiples of $5,000 in excess thereof. Interest on the Series 2007 Bonds of each Subseries will be paid on each Interest Payment Date as described herein, commencing January 2, The initial Weekly Rate for the Subseries 2007A-1/A-3 Bonds will be established by UBS Securities LLC and the initial Weekly Rate for the Subseries 2007A-2/A-4 Bonds will be established by J.P. Morgan Securities Inc., in each case on or about December 18, The initial Daily Rate for the Subseries 2007B-1 Bonds will be established by UBS Securities LLC and the initial Daily Rate for the Subseries 2007B-2 Bonds will be established by J.P. Morgan Securities Inc., in each case on or about December 19, All of the Series 2007 Bonds are expected to be issued and delivered on or about December 19, Weekly Rates and Daily Rates, as applicable, for the Subseries 2007A-1/A-3 Bonds and the Subseries 2007B-1 Bonds will be determined by UBS Securities LLC, as remarketing agent for such Subseries of Series 2007 Bonds, and Weekly Rates and Daily Rates, as applicable, for the Subseries 2007A-2/A- 4 Bonds and the Subseries 2007B-2 Bonds will be determined by J.P. Morgan Securities Inc., as remarketing agent for such Subseries of Series 2007 Bonds. The Series 2007 Bonds will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York ( DTC ), and DTC will act as securities depository for the Series 2007 Bonds. Purchases will be made only in book-entry form through Participants (as herein defined), and no physical delivery of Series 2007 Bonds will be made to Beneficial Owners (as herein defined) except as described herein. The principal of, premium, if any, and interest on each Subseries of the Series 2007 Bonds will be paid by Wells Fargo Bank, N.A., as Bond Trustee (the Bond Trustee ), to Cede & Co., so long as Cede & Co. is the registered owner of each Subseries of the Series 2007 Bonds. Payment of principal, premium, if any, and interest will be made to Beneficial Owners by DTC through its Participants. See BOOK-ENTRY ONLY SYSTEM herein. The Series 2007 Bonds are subject to optional and extraordinary optional redemption prior to maturity as described herein. The Series 2007 Bonds are subject to mandatory sinking fund redemption prior to maturity as described herein. The Series 2007 Bonds are subject to optional and mandatory tender for purchase prior to maturity under the circumstances described herein. See THE SERIES 2007 BONDS Purchases of tendered Series 2007 Bonds, except in certain circumstances described herein, will be made from proceeds of the remarketing of such Series 2007 Bonds, or if not remarketed or, if remarketing proceeds are not available, from monies provided under separate but substantially identical identified on the inside cover page. THE LIQUIDITY FACILITIES THE SERIES 2007 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 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 2007 BONDS AND OTHER COSTS INCIDENTAL THERETO ONLY FROM THE SOURCES SPECIFIED IN THE RELATED BOND INDENTURE. NEITHER THE FULL FAITH AND CREDIT NOR THE TAXING POWERS, IF ANY, OF THE AUTHORITY OR 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 2007 BONDS OR OTHER COSTS INCIDENTAL THERETO, EXCEPT AS OTHERWISE PROVIDED IN THE RELATED BOND INDENTURE. NO OWNER OF ANY SERIES 2007 BOND SHALL HAVE THE RIGHT TO COMPEL THE TAXING POWER, IF ANY, OF THE AUTHORITY, THE STATE OF ILLINOIS OR ANY POLITICAL SUBDIVISION THEREOF TO PAY THE PRINCIPAL OF, PREMIUM, IF ANY, OR INTEREST ON THE SERIES 2007 BONDS. THE AUTHORITY DOES NOT HAVE THE POWER TO LEVY TAXES FOR ANY PURPOSES WHATSOEVER. The Series 2007 Bonds are being offered when, as and if issued and received by the related Underwriters, in each case subject to prior sale, to withdrawal or modification of the offer without notice, and to the approval of their legality 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 internal General Counsel and its special counsel, Sonnenschein Nath & Rosenthal LLP, Chicago, Illinois, for JPMorgan Chase Bank, National Association, UBS AG and The Bank of Nova Scotia by their special counsel, Winston & Strawn LLP, Chicago, Illinois, for UBS AG by its internal Swiss counsel and for The Bank of Nova Scotia by its Canadian counsel, Fasken Martineau Dumoulin LLP, and for the Underwriters by their special counsel, Ungaretti & Harris LLP, Chicago, Illinois. It is expected that the Series 2007 Bonds will be available for delivery in New York, New York through the facilities of DTC on or about December 19, UBS INVESTMENT BANK (FOR THE SUBSERIES 2007A-1, 2007A-3 AND 2007B-1 BONDS) LOOP CAPITAL MARKETS, LLC (FOR THE SERIES 2007B BONDS) Official Statement dated December 12, JPMORGAN (FOR THE SUBSERIES 2007A-2, 2007A-4 AND 2007B-2 BONDS)

48 PRINCIPAL AMOUNTS, SUBSERIES DESIGNATIONS, CUSIPS, MATURITIES, REMARKETING AGENTS, INITIAL LIQUIDITY FACILITY PROVIDERS AND EXPIRATION DATES OF INITIAL LIQUIDITY FACILITY AGREEMENTS $214,500,000 Illinois Finance Authority Variable Rate Demand Revenue Bonds, Series 2007A (Northwestern Memorial Hospital) consisting of $53,625,000 Subseries 2007A-1 Bonds CUSIP: 45200F CB3 Due: August 15, 2042 Remarketing Agent: UBS Securities LLC Initial Liquidity Facility Provider: UBS AG Expiration Date: December 19, 2014 $53,625,000 Subseries 2007A-2 Bonds CUSIP: 45200F BY4 Due: August 15, 2042 Remarketing Agent: J.P. Morgan Securities Inc. Initial Liquidity Facility Provider: JPMorgan Chase Bank, National Association Expiration Date: December 19, 2014 $53,625,000 Subseries 2007A-3 Bonds CUSIP: 45200F CC1 Due: August 15, 2042 Remarketing Agent: UBS Securities LLC Initial Liquidity Facility Provider: UBS AG Expiration Date: December 19, 2014 $53,625,000 Subseries 2007A-4 Bonds CUSIP: 45200F BZ1 Due: August 15, 2042 Remarketing Agent: J.P. Morgan Securities Inc. Initial Liquidity Facility Provider: JPMorgan Chase Bank, National Association Expiration Date: December 19, 2014 $150,000,000 Illinois Finance Authority Variable Rate Demand Revenue Bonds, Series 2007B (Northwestern Memorial Hospital) consisting of $75,000,000 Subseries 2007B-1 Bonds CUSIP: 45200F CD9 Due: August 15, 2042 Remarketing Agent: UBS Securities LLC Initial Liquidity Facility Provider: The Bank of Nova Scotia Expiration Date: December 17, 2008 $75,000,000 Subseries 2007B-2 Bonds CUSIP: 45200F CA5 Due: August 15, 2042 Remarketing Agent: J.P. Morgan Securities Inc. Initial Liquidity Facility Provider: The Bank of Nova Scotia Expiration Date: December 17, 2008

49 REGARDING USE OF THIS OFFICIAL STATEMENT No dealer, broker, salesman or other person has been authorized by the Authority, the Corporation, JPMorgan Chase Bank, National Association, UBS AG or The Bank of Nova Scotia (collectively, the "Banks"), UBS Securities LLC ("UBS Securities"), J.P. Morgan Securities Inc. ("JPMorgan Securities") and Loop Capital Markets LLC ("Loop Capital" and, together with UBS Securities and JPMorgan Securities, the "Underwriters") to give any information or to make any representations, other than those contained in this Official Statement, and if given or made, such other information or representations must not be relied upon as having been authorized by any of the foregoing. The information and expressions of opinion herein are subject to change without notice, and neither the delivery of this Official Statement nor any sale hereunder implies that there has been no change in the matters described herein since the date hereof. This Official Statement does not constitute an offer to sell or the solicitation of any offer to buy, nor shall there be any sale of the Series 2007 Bonds by any person in any jurisdiction in which it is unlawful for such person to make such offer, solicitation or sale. The information set forth herein has been obtained from the Authority, the Corporation, the Banks and DTC and other sources, which are believed to be reliable. The Underwriters have reviewed the information in this Official Statement in accordance with, and as part of, their responsibilities to investors under federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriters do not guarantee the accuracy or completeness of such information. Neither the Authority, its counsel nor any of its members, 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 AUTHORITY," "LITIGATION The Authority" and "INTRODUCTION The Authority." Except with respect to the information contained under such captions, neither the Authority, its counsel nor any of its members, agents, employees or representatives make any representation as to the completeness, sufficiency and truthfulness of the statements set forth in this Official Statement. Members of the Authority and any other person executing the Series 2007 Bonds are not subject to personal liability by reason of the issuance of the Series 2007 Bonds. Other than with respect to the information concerning the Banks contained under "THE LIQUIDITY FACILITIES" and "THE BANKS" and in APPENDIX E - "Information Concerning the Banks" attached hereto, none of the information in this Official Statement has been supplied or verified by the Banks, and the Banks make no representation or warranty, express or implied, as to (i) the accuracy or completeness of such information, (ii) the validity of the Series 2007 Bonds or (iii) the tax-exempt status of interest on the Series 2007 Bonds. The Series 2007 Bonds have not been registered under the Securities Act of 1933, as amended, and neither the Master Indenture (as hereinafter defined) nor the Bond Indentures (as hereinafter defined) have been qualified under the Trust Indenture Act of 1939, as amended, in reliance upon exemptions contained in such Acts. The registration or qualification of the Series 2007 Bonds in accordance with applicable provisions of securities laws of the states in which the Series 2007 Bonds have been registered or qualified and the exemption from registration or qualification in other states cannot be regarded as a recommendation thereof. Neither these states nor any of their agencies have passed upon the merits of the Series 2007 Bonds or the accuracy or completeness of this Official Statement. Any representation to the contrary may be a criminal offense. CUSIP numbers are included in this Official Statement for the convenience of the holders and potential holders of the Series 2007 Bonds. No assurance can be given that the CUSIP numbers for the Series 2007 Bonds, or a particular Subseries of the Series 2007 Bonds, will remain the same after the date of issuance and delivery of the Series 2007 Bonds. In connection with the offering of the related Subseries of the Series 2007 Bonds, the related Underwriter may over allot or effect transactions which stabilize or maintain the market price of such Series 2007 Bonds at a level above that which might otherwise prevail in the open market. Such stabilizing, if commenced, may be discontinued at any time. The Series 2007 Bonds may be offered and sold to certain dealers (including dealers depositing the Series 2007 Bonds into investment accounts) and to others at prices lower than the public offering prices set forth on the cover page of this Official Statement. After the Series 2007 Bonds of each Subseries are released for sale to the public, the public offering prices and other selling terms may from time to time be varied by the related Underwriter. Certain statements included or incorporated by reference in this Official Statement constitute "forward-looking statements." Such statements generally are identifiable by the terminology used, such as "plan," "expect," "estimate," "budget" or other similar words. The achievement of certain results or other expectations contained in such forward-looking statements involves known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The Corporation does not plan to issue any updates or revisions to those forward-looking statements if or when changes to its expectations or events, conditions or circumstances in which such statements are based occur.

50 [THIS PAGE INTENTIONALLY LEFT BLANK]

51 Heading TABLE OF CONTENTS OFFICIAL STATEMENT... 1 INTRODUCTION... 1 Purpose of this Official Statement; Definitions... 1 Northwestern Memorial Hospital... 1 Purpose of the Series 2007 Bonds... 2 Security for the Series 2007 Bonds... 2 Existing and Additional Indebtedness... 4 Separate Series and Subseries... 5 Book-Entry Only System... 6 Summaries... 6 Bondholders' Risks... 6 PLAN OF FINANCE... 6 The Project... 6 Refunding of the Series 2004A Bonds... 7 ESTIMATED SOURCES AND USES OF SERIES 2007 PROCEEDS... 8 THE SERIES 2007 BONDS... 8 General... 8 Interest Rates and Rate Periods... 9 Conversion of Interest Rate Tenders Redemption Provisions Retained Call Rights BOOK-ENTRY ONLY SYSTEM Bonds in Book-Entry Form DTC and Its Participants Tenders Discontinuance of DTC Services Use of Certain Terms in Other Sections of the Official Statement SECURITY FOR THE SERIES 2007 BONDS Limited Obligations State Not Liable for Payments on the Series 2007 Bonds Loan Agreements Series 2007 Obligations, Series 2007 Bank Obligations and the Master Indenture THE LIQUIDITY FACILITIES General Substitute Liquidity Facilities Liquidity Facility Not Required in Certain Circumstances Immediate Termination of Initial or Substitute Liquidity Facility Agreement Upon Default in Certain Circumstances The Initial Liquidity Facility Agreements THE BANKS THE AUTHORITY Description of the Authority Bonds of the Authority Authority Advisors ESTIMATED ANNUAL DEBT SERVICE REQUIREMENTS Page i

52 BONDHOLDERS'RISKS...37 General Nonprofit Healthcare Environment Interest Rate Swap Risk Federal and State Policies Affecting Health Care Providers Commercial Insurance and Other Third Party Plans Regulation of the Health Care Industry Corporate Practice of Medicine Physician Credentialing Malpractice Lawsuits and Insurance Nursing Shortages Labor Relations Charity Care Other Risk Factors Generally Affecting Health Care Facilities Special Considerations Relating to the Series 2007 Bonds Security for the Series 2007 Bonds Additional Indebtedness Enforceability of the Master Indenture Potential Effects of Bankruptcy Corporate Compliance Program Antitrust Environmental Laws and Regulations...57 Internal Revenue Code Compliance Tax-Exempt Status; Continuing Legal Requirements Cost and Availability of Insurance Bond Ratings Market for Series 2007 Bonds Initial Liquidity Facility Agreements LITIGATION The Authority The Corporation LEGAL MATTERS TAX EXEMPTION RATINGS INDEPENDENT AUDITORS UNDERWRITING Series 2007A Bonds Series 2007B Bonds VERIFICATION OF MATHEMATICAL COMPUTATIONS EXEMPTION FROM CONTINUING DISCLOSURE REQUIREMENTS MISCELLANEOUS APPENDIX A: APPENDIX B: APPENDIX C: APPENDIX D: APPENDIX E: Northwestern Memorial Hospital Audited Consolidated Financial Statements and Details of Consolidation of Northwestern Memorial HealthCare and Subsidiaries Summary of Principal Documents Forms of Opinions of Bond Counsel Information Concerning the Banks ii

53 OFFICIAL STATEMENT $364,500,000 Illinois Finance Authority Variable Rate Demand Revenue Bonds, Series 2007 (Northwestern Memorial Hospital) INTRODUCTION The information contained in this Introduction is a summary statement and is subject in all respects to the more complete information set forth in this Official Statement, particularly APPENDIX C attached hereto. The purchase of the Series 2007 Bonds involves certain investment risks that are discussed throughout this Official Statement, including under the caption "Bondholders' Risks." Investors must read the entire Official Statement to obtain information essential to making an informed investment decision. Purpose of this Official Statement; Definitions This Official Statement, including the cover page and the Appendices, sets forth certain information concerning (i) Northwestern Memorial Hospital, an Illinois not for profit corporation ("NMH," the "Hospital" or the "Corporation"), (ii) the Illinois Finance Authority (the "Authority"), (iii) the Authority's $214,500,000 in aggregate principal amount of Variable Rate Demand Revenue Bonds, Series 2007A (Northwestern Memorial Hospital) (the "Series 2007A Bonds") and (iv) the Authority's $150,000,000 in aggregate principal amount of Variable Rate Demand Revenue Bonds, Series 2007B (Northwestern Memorial Hospital) (the "Series 2007B Bonds"). The Series 2007A Bonds and the Series 2007B Bonds are referred to herein collectively as the "Series 2007 Bonds." This Official Statement is intended to be used only for Series 2007 Bonds that (i) bear interest for a Daily Rate Period, a Weekly Rate Period or a Flexible Rate Period, (ii) are supported by one or more liquidity facilities and (iii) are registered in the name of a nominee of The Depository Trust Company. This Official Statement should not be relied upon in determining whether to purchase Series 2007 Bonds that do not bear interest for a Daily Rate Period, a Weekly Rate Period or a Flexible Rate Period and are not supported by one or more liquidity facilities. Certain capitalized terms used in the forepart of this Official Statement and not otherwise defined herein are defined in APPENDIX C hereto. Northwestern Memorial Hospital The Corporation owns and operates an academic medical center with its main campus located in downtown Chicago, Illinois. The Corporation serves as the primary teaching hospital for the Feinberg School of Medicine of Northwestern University and provides a complete range of adult inpatient and outpatient services in an educational and research environment. More detailed information concerning the Corporation, its relationship with the Feinberg School of Medicine of Northwestern University and other affiliates and its financial condition is set forth in APPENDIX A attached hereto. The audited consolidated financial statements and details of consolidation of Northwestern Memorial HealthCare and Subsidiaries ("NMHC and Subsidiaries") for the fiscal years

54 ended August 31, 2007 and 2006 are set forth in APPENDIX B attached hereto. As of and for the fiscal year ended August 31, 2007, the Corporation comprised 97% and 93%, respectively, of the total unrestricted net assets and total revenue of the consolidated financial results of NMHC and Subsidiaries. Purpose of the Series 2007 Bonds The proceeds from the sale of the Series 2007A Bonds, together with certain other moneys, will be used to: (i) refund or refinance the outstanding principal amount of the Illinois Finance Authority Revenue Bonds, Series 2004A (Northwestern Memorial Hospital) (the "Series 2004A Bonds"), and (ii) pay certain expenses incurred in connection with the issuance of the Series 2007A Bonds and the refunding of the Series 2004A Bonds, including but not limited to fees for liquidity enhancement with respect to the Series 2007A Bonds. The proceeds from the sale of the Series 2007B Bonds, together with certain other moneys, will be used to: (i) pay, reimburse the Corporation for the payment of, or refinance outstanding indebtedness the proceeds of which were used for, the costs of acquiring, constructing, renovating, remodeling and/or equipping certain health care facilities owned by the Corporation, including but not limited to, the acquisition, construction and/or equipping of its new Prentice Women's Hospital and certain other capital expenditures (collectively, the "Project"), and (ii) pay certain expenses incurred in connection with the issuance of the Series 2007B Bonds, including but not limited to fees for liquidity enhancement with respect to the Series 2007B Bonds. herein. See "PLAN OF FINANCE" and "ESTIMATED SOURCES AND USES OF SERIES 2007 PROCEEDS" Security for the Series 2007 Bonds Each series of the Series 2007 Bonds will be issued under and be secured by a separate, but substantially similar, Bond Trust Indenture, each dated as of December 1, 2007 (collectively, the "Bond Indentures"), each between the Authority and Wells Fargo Bank, N.A., as bond trustee (the "Bond Trustee"). The Authority will loan the proceeds from the sale of each series of the Series 2007 Bonds to the Corporation pursuant to a separate, but substantially similar, Loan Agreement, each dated as of December 1, 2007 (collectively, the "Loan Agreements"), each between the Corporation and the Authority. Upon issuance of the Series 2007 Bonds, the Corporation, as the sole Member of the Obligated Group, will enter into a Seventh Supplemental Master Trust Indenture dated as of December 1, 2007 (the "Seventh Supplemental Master Indenture"), supplementing and amending the Amended and Restated Master Trust Indenture dated as of May 1, 2004, as previously supplemented and amended through the date hereof (the "Original Master Indenture," as amended by the Seventh Supplemental Master Indenture and as it may be further supplemented and amended from time to time, the "Master Indenture") with Wells Fargo Bank, N.A., as successor master trustee (the "Master Trustee"). To evidence the loan of the proceeds from the sale of the Series 2007 Bonds, the Corporation will issue and deliver to the Authority (i) its Direct Note Obligation, Series 2007A (Illinois Finance Authority) (the "Series 2007A Obligation") in a principal amount equal to the aggregate principal amount of the Series 2007A Bonds and (ii) its Direct Note Obligation, Series 2007B (Illinois Finance Authority) (the "Series 2007B Obligation" and, together with the Series 2007A Obligation, the "Series 2007 Obligations") in a principal amount equal to the aggregate principal amount of the Series 2007B Bonds, all pursuant to the Master Indenture. The Corporation also will issue and deliver the Series 2007 Bank Obligations (as defined herein) to the related Banks providing liquidity support for the related Subseries of the Series 2007 Bonds. 2

55 The Authority will pledge and assign the related Series 2007 Obligation and certain of its rights under the related Loan Agreement to the Bond Trustee as security for the related series of Series 2007 Bonds. The terms of each Series 2007 Obligation will require payments by the Corporation which, together with other moneys available therefor (and interest earned thereon), will be sufficient to provide for the payment of the principal of and interest on the related series of the Series 2007 Bonds, as well as the purchase price payable on such Series 2007 Bonds on any optional or mandatory tender date. The Series 2007 Obligations 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 obligation of the Corporation and any future Members of the Obligated Group to make payments on the Series 2007 Obligations is not secured by any pledge or mortgage of, or security interest in, any assets of the Obligated Group. See the information set forth under the caption "BONDHOLDERS' RISKS - Security for the Series 2007 Bonds." Concurrently with the issuance of the Series 2007 Bonds, (i) the Corporation, UBS AG (the "Subseries 2007A-1/A-3 Bank") and the Bond Trustee will enter into a Standby Bond Purchase Agreement dated as of December 1, 2007 (the "Subseries 2007A-1 Initial Liquidity Facility Agreement") relating to the Subseries 2007A-1 Bonds, (ii) the Corporation, the Subseries 2007A-1/A-3 Bank and the Bond Trustee will enter into a Standby Bond Purchase Agreement dated as of December 1, 2007 (the "Subseries 2007A-3 Initial Liquidity Facility Agreement" and, together with the Subseries 2007A-1 Initial Liquidity Facility Agreement, the "Subseries 2007A-1/A-3 Initial Liquidity Facility Agreements") relating to the Subseries 2007A-3 Bonds, (iii) the Corporation, JPMorgan Chase Bank, National Association (the "Subseries 2007A-2/A-4 Bank"), and the Bond Trustee will enter into a Standby Bond Purchase Agreement dated as of December 1, 2007 (the "Subseries 2007A-2 Initial Liquidity Facility Agreement") relating to the Subseries 2007A-2 Bonds, (iv) the Corporation, the Subseries 2007A-2/A-4 Bank and the Bond Trustee will enter into a Standby Bond Purchase Agreement dated as of December 1, 2007 (the "Subseries 2007A-4 Initial Liquidity Facility Agreement" and, together with the Subseries 2007A-2 Initial Liquidity Facility Agreement, the "Subseries 2007A-2/A-4 Initial Liquidity Facility Agreements"), (v) the Corporation, The Bank of Nova Scotia (the "Subseries 2007B Bank" and, together with the Subseries 2007A-1/A-3 Bank and the Subseries 2007A-2/A-4 Bank, the "Banks"), and the Bond Trustee will enter into a Standby Bond Purchase Agreement dated as of December 1, 2007 (the "Subseries 2007B-1 Initial Liquidity Facility Agreement") relating to the Subseries 2007B-1 Bonds, and (vi) the Corporation, the Subseries 2007B Bank and the Bond Trustee will enter into a Standby Bond Purchase Agreement dated as of December 1, 2007 (the "Subseries 2007B-2 Initial Liquidity Facility Agreement" and, together with the Subseries 2007B-1 Initial Liquidity Facility Agreement, the "Subseries 2007B Initial Liquidity Facility Agreements") relating to the Series 2007B-2 Bonds, which agreements will be substantially identical. The Subseries 2007A-1/A-3 Initial Liquidity Facility Agreements, the Subseries 2007A-2/A-4 Initial Liquidity Facility Agreements and the Subseries 2007B Initial Liquidity Facility Agreements are sometimes referred to herein collectively as the "Initial Liquidity Facility Agreements." Under the terms of the related Initial Liquidity Facility Agreement, the related Bank will agree, under certain circumstances, to provide funds for the purchase of the related Subseries of Series 2007 Bonds that are tendered for purchase ("Tendered Bonds") in the event such Tendered Bonds (i) are not remarketed by UBS Securities LLC, as remarketing agent for the Subseries 2007A-1/A-3 Bonds and the Subseries 2007B-1 Bonds (the "Subseries 2007A-1/A-3/B-1 Remarketing Agent"), or (ii) are not remarketed by J.P. Morgan Securities Inc., as remarketing agent for the Subseries 2007A-2/A-4 Bonds and the Subseries 2007B-2 Bonds (the "Subseries 2007A-2/A-4/B-2 Remarketing Agent" and, together with the Subseries 2007A-1/A-3/B-1 Remarketing Agent, the "Remarketing Agents"), in each case for which remarketing proceeds are not available. 3

56 Each of the Subseries 2007A-1/A-3 Initial Liquidity Facility Agreements and the Subseries 2007A-2/A-4 Initial Liquidity Facility Agreements will expire on December 19, 2014, unless extended or terminated at an earlier date in accordance with their respective terms. The Subseries 2007B Initial Liquidity Facility Agreements will expire on December 17, 2008, unless extended or terminated at an earlier date in accordance with their respective terms. Under certain circumstances, each of the Initial Liquidity Facility Agreements may be replaced or terminated. See "THE LIQUIDITY FACILITIES" and "THE BANKS" herein and APPENDIX E "Information Concerning the Banks" attached hereto. Under certain circumstances described under "THE LIQUIDITY FACILITIES The Initial Liquidity Facility Agreements Events of Default" and " Remedies," purchases of Tendered Bonds will not be made under the related Initial Liquidity Facility Agreement and, therefore, funds may not be available to purchase such Tendered Bonds. Under certain circumstances, an event of default under an Initial Liquidity Facility Agreement may permit the related Bank to automatically terminate or suspend its obligations to purchase Tendered Bonds under such related Initial Liquidity Facility Agreement. See "THE LIQUIDITY FACILITIES The Initial Liquidity Facility Agreements Events of Default" and " Remedies." To evidence the Corporation's obligations under each of the Initial Liquidity Facility Agreements, the Corporation will issue and deliver (i) to the Subseries 2007A-1/A-3 Bank, its Direct Note Obligation, Series 2007A-1 (UBS AG) and its Direct Note Obligation, Series 2007A-3 (UBS AG) (collectively, the "Subseries 2007A-1/A-3 Bank Obligations"), (ii) to the Subseries 2007A-2/A-4 Bank, its Direct Note Obligation, Series 2007A-2 (JPMorgan Chase Bank, National Association) and its Direct Note Obligation, Series 2007A-4 (JPMorgan Chase Bank, National Association) (collectively, the "Subseries 2007A-2/A-4 Bank Obligations") and (iii) to the Subseries 2007B Bank, its Direct Note Obligation, Series 2007B-1 (The Bank of Nova Scotia) and its Direct Note Obligation, Series 2007B-2 (The Bank of Nova Scotia) (collectively, the "Subseries 2007B Bank Obligations" and, together with the Subseries 2007A-1/A-3 Bank Obligations and the Series 2007A-2/A-4 Bank Obligations, the "Series 2007 Bank Obligations"). For further information concerning the security for the Series 2007 Bonds, see "SECURITY FOR THE SERIES 2007 BONDS." Existing and Additional Indebtedness Prior to the issuance of the Series 2007 Bonds, the Corporation has issued multiple Obligations under the Master Indenture. As a result of the refunding of the Series 2004A Bonds, the Obligations that will remain outstanding and will be secured on a parity basis with the Series 2007 Obligations and the Series 2007 Bank Obligations under the Master Indenture will be (i) the $100,000,000 Direct Note Obligation, Series 1995A (Illinois Health Facilities Authority) (the "Series 1995 Obligation"), issued in connection with the issuance by the Illinois Health Facilities Authority (a predecessor entity to the Authority) (the "Prior Issuer") of its Variable Rate Demand Revenue Bonds, Series 1995 (Northwestern Memorial Hospital) (the "Series 1995 Bonds"), which remains outstanding in the principal amount of $100,000,000; (ii) the $33,000,000 Direct Note Obligation, Series 2002C-1 (Illinois Health Facilities Authority) (the "Series 2002C Obligation"), issued in connection with the issuance by the Prior Issuer of its Variable Rate Demand Revenue Bonds, Series 2002C (Northwestern Memorial Hospital) (the "Series 2002C Bonds"), which remains outstanding in the principal amount of $33,000,000; (iii) the $86,400,000 Direct Note Obligation, Series 2004B (Illinois Finance Authority) (the "Series 2004B Obligation"), issued in connection with the issuance by the Authority of its Variable Rate Demand Revenue Bonds, Series 2004B (Northwestern Memorial Hospital) (the "Series 2004B Bonds"), which remains outstanding in the principal amount of $86,400,000; and (iv) the $219,400,000 Direct Note Obligation, Series 2004C (Illinois Finance Authority) (the "Series 2004C Obligation"), issued in connection with the issuance by 4

57 the Authority of its Variable Rate Demand Revenue Bonds, Series 2004C (Northwestern Memorial Hospital) Auction Rate Securities (the "Series 2004C Bonds"), which remains outstanding in the principal amount of $207,900,000. In addition, the Corporation has issued and delivered its Direct Note Obligations to the respective banks providing liquidity support for the Subseries 2004B-1 Bonds, the Subseries 2004B-2 Bonds, the Series 1995 Bonds and the Series 2002C Bonds (collectively, the "Prior Bank Obligations"). In addition, the Corporation has issued and delivered, and intends to issue and deliver concurrently with the issuance of the Series 2007 Bonds, various of its Direct Note Obligations to counterparties to interest rate swap agreements (collectively, the "Swap Obligations"). Additional Obligations may be issued in the future under the Master Indenture on a parity with the Series 2007 Obligations, the Series 2007 Bank Obligations, the Series 1995 Obligation, the Series 2002C Obligation, the Series 2004B Obligation, the Series 2004C Obligation, the Prior Bank Obligations and the Swap Obligations. The Series 2007 Obligations, the Series 2007 Bank Obligations, the Series 1995 Obligation, the Series 2002C Obligation, the Series 2004B Obligation, the Series 2004C Obligation, the Prior Bank Obligations and the Swap Obligations and any additional Obligations issued by the Corporation and any future Member of the Obligated Group under the Master Indenture are collectively referred to herein as the "Obligations." No additional bonds may be issued under either of the Bond Indentures. The Corporation may issue Additional Obligations under the Master Indenture to the Authority or to parties other than the Authority that will not be pledged under the Bond Indentures, but will be equally and ratably secured with the Series 2007 Obligations and the Series 2007 Bank Obligations (except as described herein). See "SUMMARY OF PRINCIPAL DOCUMENTS SUMMARY OF CERTAIN PROVISIONS OF THE RESTATED MASTER INDENTURE Additional Indebtedness" in APPENDIX C attached hereto. Under the terms of the Master Indenture, such Additional Obligations may be entitled to the benefit of security in addition to the unsecured general obligation to pay pursuant to the Master Indenture. See "SECURITY FOR THE SERIES 2007 BONDS" and "BONDHOLDERS'RISKS Security for the Series 2007 Bonds." Separate Series and Subseries Each series of the Series 2007 Bonds is an entirely separate series and the sale of one series is not dependent upon the issuance of the other series of Series 2007 Bonds. All references in this Official Statement to a related or applicable Series 2007 Bond, the maturity or maturity dates of the Series 2007 Bonds, Bond Trustee, Loan Agreement, Bond Indenture, Liquidity Facility, Liquidity Facility Agreement, Initial Liquidity Facility Agreement, Series 2007 Obligation, Bank Obligation or Remarketing Agent, will refer to (i) in the case of the Series 2007A Bonds, the maturity and maturity dates for the Series 2007A Bonds, the Bond Trustee for the Series 2007A Bonds, the Series 2007A Bond Indenture, the Series 2007A Obligation, the Subseries 2007A-1/A-3 Bank and the Subseries 2007A-1/A-3 Bank Obligation for the Subseries 2007A-1 Bonds and the Subseries 2007A-3 Bonds, the Subseries 2007A-2/A-4 Bank and the Subseries 2007A-2/A-4 Bank Obligation for the Subseries 2007A-2 Bonds and the Subseries 2007A-4 Bonds, the Subseries 2007A-1 Initial Liquidity Facility for the Subseries 2007A-1 Bonds, the Subseries 2007A-2 Initial Liquidity Facility for the Subseries 2007A-2 Bonds, the Subseries 2007A-3 Initial Liquidity Facility for the Subseries 2007A-3 Bonds, the Subseries 2007A-4 Initial Liquidity Facility for the Subseries 2007A-4 Bonds, the Subseries 2007A-1/A-3 Remarketing Agent for the Subseries 2007A-1 Bonds and the Subseries 2007A-3 Bonds and the Subseries 2007A-2/A-4 Remarketing Agent for the Subseries 2007A-2 Bonds and the Subseries 2007A-4 Bonds and (ii) in the case of the Series 2007B Bonds, the maturity and maturity dates for the Series 2007B Bonds, the Bond Trustee for the Series 2007B Bonds, the Series 2007B Bond Indenture, the Series 2007B Obligation, the Subseries 2007B Bank and the Subseries 2007B Bank Obligations, the Subseries 2007B-1 Initial Liquidity Facility for the Subseries 2007B-1 Bonds, the Subseries 2007B-2 Initial Liquidity Facility for the Subseries 2007B-2 5

58 Bonds, the Subseries 2007B-1 Remarketing Agent for the Subseries 2007B-1 Bonds and the Subseries 2007B-2 Remarketing Agent for the Subseries 2007B-2 Bonds. Book-Entry Only System The Series 2007 Bonds will be initially issued through a Book-Entry Only System maintained by The Depository Trust Company ("DTC"). The Series 2007 Bonds will be initially registered in the name of Cede & Co., as DTC's nominee. See "BOOK-ENTRY ONLY SYSTEM." Summaries Descriptions of the Corporation, the Authority, the Banks and the Series 2007 Bonds, and summaries of the Bond Indentures, the Loan Agreements, the Master Indenture, the Remarketing Agreements, the Series 2007 Obligations, the Initial Liquidity Facility Agreements and the Series 2007 Bank Obligations are included in this Official Statement, including the Appendices attached hereto. Such information, summaries and descriptions do not purport to be comprehensive or definitive. All references in this Official Statement to the specified documents are qualified in their entirety by reference to each such document, copies of which are available from the Bond Trustee, and all references to the Series 2007 Bonds are qualified in their entirety by reference to the definitive forms thereof and the information with respect thereto included in the aforesaid documents. Bondholders' Risks There are certain risks involved in the purchase of any Series 2007 Bonds. See the information herein under the caption, "BONDHOLDERS'RISKS." PLAN OF FINANCE The proceeds from the sale of the Series 2007A Bonds, together with certain other moneys, will be used to refund the Series 2004A Bonds and pay certain expenses incurred in connection with the issuance of the Series 2007A Bonds and the refunding of the Series 2004A Bonds, including but not limited to fees for liquidity enhancement. The proceeds from the sale of the Series 2007B Bonds, together with certain other moneys will be used to pay, reimburse the Corporation for the payment of, or refinance outstanding indebtedness the proceeds of which were used for, the costs of acquiring, constructing, renovating, remodeling and/or equipping the Project and pay certain expenses incurred in connection with the issuance of the Series 2007B Bonds, including but not limited to fees for liquidity enhancement. The issuance of either series of the Series 2007 Bonds is not contingent upon the issuance of the other series of the Series 2007 Bonds and the Corporation may determine not to issue any series or subseries of bonds in connection with its overall plan of finance. For more detailed information regarding the use of proceeds of the Series 2007 Bonds, see the information under the caption "ESTIMATED SOURCES AND USES OF SERIES 2007 PROCEEDS" herein. The Project The proceeds of the Series 2007B Bonds will be used to pay or reimburse the Corporation for, or refinance outstanding indebtedness the proceeds of which were used for, the payment of the costs of acquiring, constructing, renovating, remodeling and equipping certain health facilities owned by the 6

59 Corporation, including but not limited to the acquisition, construction and/or equipping of its new Prentice Women's Hospital. For additional information regarding the Project, see the information in APPENDIX A hereto under the caption "CURRENT HOSPITAL OPERATIONS, LOCATION AND DESCRIPTION OF EXISTING FACILITIES Prentice Women's Hospital." Refunding of the Series 2004A Bonds The Authority previously issued its Series 2004A Bonds in the aggregate principal amount of $194,130,000, all of which currently remain outstanding. In order to refund the Series 2004A Bonds, a portion of the proceeds of the Series 2007A Bonds will be delivered to Wells Fargo Bank, N.A., as successor trustee for the Series 2004A Bonds (the "Series 2004A Bond Trustee"). The funds on deposit with the Series 2004A Bond Trustee will be invested in Government Obligations that, together with any investment earnings thereon, and any cash on deposit will produce sufficient amounts to pay principal of and interest on all of the Series 2004A Bonds due on and prior to August 15, 2014 and redeem on August 15, 2014 all of the outstanding Series 2004A Bonds maturing after August 15, 2014 at a redemption price equal to 100% of the principal amount thereof. All such Government Obligations and cash held by the Series 2004A Bond Trustee will be pledged solely for the benefit of the Series 2004A Bonds and the holders thereof. 7

60 ESTIMATED SOURCES AND USES OF SERIES 2007 PROCEEDS The estimated proceeds of the sale of the Series 2007 Bonds, together with certain other available funds and exclusive of investment earnings, and the estimated uses of such funds are shown below: Series 2007A Bonds Series 2007B Bonds Total Sources of Funds: Principal Amount of Series 2007 Bonds Other Available Funds $214,500,000 5,934,444 $150,000,000 0 $364,500,000 5,934,444 Total Sources of Funds $220,434,444 $150,000,000 $370,434,444 Uses of Funds: Deposit to Series 2007B Project Fund Refunding of Series 2004A Bonds Costs of Issuance (1) $ 0 218,563,449 1,870,995 $148,950, ,050,000 $148,950, ,563,449 2,920,995 Total Uses of Funds $220,434,444 $150,000,000 $370,434,444 (1) Includes, without limitation, the estimated fees and expenses, as applicable, of the Underwriters, Underwriters' Counsel, Bond Counsel, Corporation's Counsel, the Initial Liquidity Facility Providers, the Initial Liquidity Facility Providers' Counsel, the Authority, the Authority's Counsel, the auditors, the Bond Trustee, the Master Trustee, the Rating Agencies, and other miscellaneous costs incurred in connection with the issuance of the Series 2007 Bonds. THE SERIES 2007 BONDS The following is a summary of certain provisions applicable to the Series 2007 Bonds while such Series 2007 Bonds bear interest in a Daily Rate Period, a Weekly Rate Period or a Flexible Rate Period only. Reference is made to the Bond Indentures and to the summary of certain provisions of the Bond Indentures included in APPENDIX C for a more complete description of the Series 2007 Bonds. The discussion herein is qualified by such reference. So long as DTC acts as a security depository for the Series 2007 Bonds, as described under "BOOK-ENTRY ONLY SYSTEM" herein, all references to "Owner of the Series 2007 Bonds" or "Bondholder" are deemed to be Cede & Co., as nominee for DTC, and not to participants of DTC or Beneficial Owners. General The Bond Indentures provide that each Subseries of the Series 2007 Bonds may bear interest during one of six Rate Periods: (i) a Daily Rate Period, (ii) a Weekly Rate Period, (iii) a Flexible Rate Period, (iv) a Term Rate Period, (v) an ARS Rate Period or (vi) a Fixed Rate Period. The Daily Rate Period, Weekly Rate Period and Term Rate Period are referred to herein, collectively, as the "Variable Rate Periods." Each series of the Series 2007 Bonds need not bear interest in the same Rate Period 8

61 simultaneously; however, all Series 2007 Bonds of a Subseries must be in the same Rate Period and an individual Series 2007 Bond may have only one applicable Rate Period at any one time. Initially, the Series 2007A Bonds of each Subseries will bear interest at a Variable Rate for Weekly Rate Periods and the Series 2007B Bonds of each Subseries will bear interest at a Variable Rate for Daily Rate Periods, but each Subseries may be converted at the option of the Corporation, subject to certain restrictions, to a different interest Rate Period. Each Subseries of the Series 2007 Bonds will be initially dated its date of issuance and thereafter will be dated as of the most recent Interest Payment Date to which interest has been duly paid or provided for next preceding its date of issue, unless issued on an Interest Payment Date on which interest has been paid or provided for, in which event it will be dated as of such Interest Payment Date. The Series 2007A Bonds and the Series 2007B Bonds will each mature, subject to prior redemption and purchase, on August 15, 2042 (a related "Maturity Date"). The Series 2007 Bonds will be issued and available only in fully registered form in Authorized Denominations. "Authorized Denominations" means (i) for any Series 2007 Bond in a Daily Rate Period or a Weekly Rate Period, $100,000 and $5,000 multiples in excess thereof and (ii) for any Series 2007 Bond in a Flexible Rate Period, $100,000 and $1,000 multiples in excess thereof. Payment of principal, premium, if any, and interest on the Series 2007 Bonds will be made to beneficial owners of the Series 2007 Bonds by DTC as described under "BOOK-ENTRY ONLY SYSTEM" below. Interest on Series 2007 Bonds during a Daily Rate Period, a Weekly Rate Period or a Flexible Rate Period will be paid on each Interest Payment Date, will be calculated on the basis of a 365/366 day year for actual number of days elapsed and will accrue during each such Rate Period from and including each Interest Payment Date to but not including the next Interest Payment Date. While the Series 2007 Bonds are in a Daily, Weekly or Flexible Rate Period, "Interest Payment Date" means (i) when used with respect to a Daily Rate Period or a Weekly Rate Period, the first Business Day of each calendar month, (ii) when used with respect to a Flexible Rate Period, each Repurchase Date, (iii) each Mandatory Tender Date and (iv) the Maturity Date for any such Series 2007 Bonds. The first Interest Payment Date for each Subseries of the Series 2007 Bonds will be January 2, Each Subseries of the Series 2007 Bonds will bear interest at the lesser of (i) the applicable Variable Rate or Flexible Rate for such Rate Period or (ii) the Interest Coverage Rate set forth in the related Liquidity Facility supporting such Subseries (initially, the Interest Coverage Rate set forth in each of the Initial Liquidity Facility Agreements is 10% per annum). Notwithstanding the preceding sentence, at no time will any Series 2007 Bond bear interest at a rate above the lesser of 12% or the maximum rate permitted by law (the "Maximum Interest Rate"). Each Bond Indenture provides that no Daily Rate Period, Weekly Rate Period or Flexible Rate Period for a Subseries will be established which would cause the Interest Coverage Rate of the Liquidity Facility for such Subseries to be less than the requirements set forth in the related Bond Indenture and summarized under the caption "SUMMARY OF PRINCIPAL DOCUMENTS - SUMMARY OF CERTAIN PROVISIONS OF THE BOND INDENTURES Liquidity Facility" in APPENDIX C. Interest Rates and Rate Periods Daily Rate Period. A Daily Rate Period is a period from and commencing on a Business Day and including and ending on the first day preceding the first Business Day thereafter. During a Daily Rate Period, the related Remarketing Agent will set the interest rate for the related Subseries of the Series 2007 Bonds at the lowest interest rate which, in the judgment of such Remarketing Agent, would enable such 9

62 Series 2007 Bonds to be remarketed at the principal amount thereof, plus accrued interest thereon, if any, for each Daily Rate Period (hereinafter referred to as the "Daily Rate"). The related Remarketing Agent shall determine each Daily Rate no later than 10:30 a.m., New York City time, on the commencement date of the Daily Rate Period to which it relates; provided, however, that the initial Daily Rates applicable to each Subseries of the Series 2007B Bonds on their date of issuance will be determined by the related Remarketing Agent on or prior to the date of issuance. If the related Remarketing Agent fails for any reason to determine or notify the Bond Trustee of the Daily Rate for a Daily Rate Period when required under the related Bond Indenture, the Daily Rate for such Daily Rate Period shall be equal to the lesser of (i) the SIFMA Municipal Index and (ii) the Maximum Interest Rate until the related Remarketing Agent next determines the Daily Rate as required under the related Bond Indenture. All determinations of Daily Rates pursuant to the related Bond Indenture shall be conclusive and binding upon the Authority, the Corporation, the Bond Trustee, the related Bank and the holders of the Series 2007 Bonds to which such rates are applicable. The Daily Rate will be available on any Business Day between 1:00 p.m. and 5:00 p.m., New York City time, by telephone from the Bond Trustee upon request of any owner of a Series 2007 Bond or the related Bank. Weekly Rate Period. A Weekly Rate Period is a period from and commencing on Thursday of any calendar week and including and ending on the Wednesday of the next calendar week; provided, however, that (i) any Weekly Rate Period which does not follow another Weekly Rate Period will commence on the Variable Rate Conversion Date with respect thereto and end on the first or second Wednesday thereafter, at the discretion of the related Remarketing Agent, in order to most efficiently effect the conversion, and (ii) any Weekly Rate Period which is not followed by another Weekly Rate Period will commence on the last or second to last Thursday of a calendar month, at the discretion of the related Remarketing Agent, in order to most efficiently effect the conversion, and end on the day preceding the first Business Day of the next calendar month. During a Weekly Rate Period, the related Remarketing Agent will set the interest rate for the related Subseries of Series 2007 Bonds at the lowest interest rate which, in the judgment of such Remarketing Agent, would enable such Series 2007 Bonds to be remarketed at the principal amount thereof, plus accrued interest thereon, if any, on the first day of such Weekly Rate Period with respect thereto (hereinafter referred to as the "Weekly Rate"). The related Remarketing Agent shall determine each Weekly Rate not later than 10:00 a.m., New York City time, on the commencement date of the Weekly Rate Period to which it relates (or the preceding Business Day if such day is not a Business Day); provided, however, that the initial Weekly Rates applicable to each Subseries of the Series 2007A Bonds on their date of issuance will be determined by the related Remarketing Agent on or prior to the date of issuance. If the related Remarketing Agent fails for any reason to determine or notify the Bond Trustee of the Weekly Rate for a Weekly Rate Period when required under the related Bond Indenture, the Weekly Rate for such Weekly Rate Period shall be equal to the lesser of (i) the SIFMA Municipal Index and (ii) the Maximum Interest Rate until the related Remarketing Agent next determines the Weekly Rate as required under the related Bond Indenture. All determinations of Weekly Rates pursuant to the related Bond Indenture shall be conclusive and binding upon the Authority, the Corporation, the Bond Trustee, the related Bank and the holders of the Series 2007 Bonds to which such rates are applicable. The Weekly Rate will be available on any Business Day between 1:00 p.m. and 5:00 p.m., New York City time, by telephone from the Bond Trustee upon request of any owner of a Series 2007 Bond or the related Bank. If the related Remarketing Agent for any Subseries shall determine that due to a change in the market for bonds similar to such Subseries of Series 2007 Bonds it is desirable to change the day on which a Variable Rate for a Weekly Rate Period is determined, the related Remarketing Agent shall deliver a certificate to that effect to the Corporation, the Authority, the Bond Trustee and the Bank, if any, and such change shall take effect 21 days following receipt of such certificate. As a condition to any 10

63 change in determination date for a Weekly Rate, an Opinion of Bond Counsel to the effect that such change will not adversely affect any exemption from federal income taxation to which the related series of the Series 2007 Bonds are entitled must also be delivered. Flexible Rate Period. A Flexible Rate Period is a period commencing on a date on which a Series 2007 Bond of any Subseries is converted to bear interest at a Flexible Rate and ends on a date on which such Subseries is converted to bear interest at a rate other than a Flexible Rate or on the Maturity Date for such Series 2007 Bond. Each Flexible Rate Period is composed of Interest Periods of a duration determined by the related Remarketing Agent which is not less than one day and which cannot exceed the shortest of (i) 270 days, (ii) the Interest Coverage Period of the Liquidity Facility relating to such Subseries, (iii) the remaining number of days prior to any Mandatory Tender Date or (iv) the remaining number of days prior to each date on which the related Subseries of Series 2007 Bonds are subject to optional or extraordinary redemption. For each Interest Period, the Flexible Rate for each Series 2007 Bond in such Interest Period will be determined by the Remarketing Agent for such Series 2007 Bond in connection with the sale of such Series 2007 Bond. During a Flexible Rate Period, the Series 2007 Bonds of each Subseries may operate in different Interest Periods and bear interest at different Flexible Rates. During a Flexible Rate Period, the related Remarketing Agent will set the interest rate for the related Series 2007 Bonds at the lowest annual rate of interest which would, in the judgment of such Remarketing Agent, enable a particular Series 2007 Bond to be remarketed at the principal amount thereof on the first day of each Interest Period. If the Remarketing Agent fails for any reason to determine or notify the Bond Trustee of the Interest Period or Flexible Rate when required under the related Bond Indenture, the Interest Period shall be of the shortest permitted duration and the Flexible Rate shall be equal to the lesser of (i) the SIFMA Municipal Index and (ii) the Maximum Interest Rate. All determinations of Flexible Rates and Interest Periods pursuant to the Bond Indentures shall be conclusive and binding upon the Authority, the Corporation, the Bond Trustee, the related Bank and the holders of the Series 2007 Bonds to which such rates and periods are applicable. Failure to Give Notices. Failure by the Bond Trustee to give any notice as provided in the related Bond Indenture, any defect therein, and any failure by any holder of a Series 2007 Bond to receive any such notice (including without limitation any Immediate Notice) shall not extend the period for making elections, in any way change the rights of the owners of Series 2007 Bonds to elect to have such Series 2007 Bonds purchased, in any way change the conditions which must be satisfied in order for such election to be effective or for payment of the purchase price to be made after an effective election or in any way change such owner's obligation to tender the Series 2007 Bonds for purchase. Conversion of Interest Rate Conversion to another Rate Period during Daily and Weekly Rate Periods. At the option of the Corporation, any Subseries of the Series 2007 Bonds may be converted to any other Rate Period provided for in the related Bond Indenture during a Daily or Weekly Rate Period on any Business Day; provided, however, that any conversion to the ARS Rate Period may occur only on an Interest Payment Date. To exercise such option, the Corporation must give written notice of the conversion it intends to effect and the date on which such conversion will occur to the related Remarketing Agent, the Authority, the Bond Trustee and the related Bank not less than seven Business Days prior to the date on which the Bond Trustee is required to notify Bondholders of the conversion. Together with such notice, the Corporation shall give the Authority, the related Bank and the Bond Trustee a proposed form of an Opinion of Bond Counsel to the effect that the conversion of the related Subseries of the Series 2007 Bonds to a different Rate Period will not adversely affect the validity of the related Subseries of the Series 2007 Bonds or any exemption from federal income taxation to which interest on the related Subseries of the Series 2007 Bonds would otherwise be entitled. No such change to a different Rate Period shall become effective 11

64 unless the Corporation files with the Authority, the related Bank and the Bond Trustee, the final executed Opinion of Bond Counsel of the type referred to in the preceding sentence dated the Conversion Date. Notwithstanding the provisions of the preceding two sentences, such opinion shall not be required to be delivered with respect to a conversion to a Daily Rate Period, Weekly Rate Period or Flexible Rate Period if the immediately preceding Rate Period was a Daily Rate Period or Weekly Rate Period. The Bond Trustee is required to mail a written notice of such conversion to the holders of such Series 2007 Bonds to be converted not less than 15 days prior to the Conversion Date in the case of conversions between Daily and Weekly Rate Periods or from a Daily Rate Period or a Weekly Rate Period to any other Rate Period. Any such notice will state, among other things, (i) the Conversion Date, (ii) that the Series 2007 Bonds to be converted will be subject to mandatory tender for purchase on such Conversion Date, at a purchase price of 100% of the principal amount thereof, plus accrued interest thereon, if any, and (iii) the time at which such Series 2007 Bonds are to be tendered for purchase. See "THE SERIES 2007 BONDS Tenders Mandatory Tenders." The Corporation may revoke its election to effect such conversion by giving written notice of such revocation to the Authority, the Bond Trustee, the related Remarketing Agent and the related Bank at any time prior to the setting of the interest rate for the new Rate Period. Such revocation will have the same effect as a failed conversion as described below under the caption "THE SERIES 2007 BONDS Conversion of Interest Rate Failed Conversions." Conversion to another Rate Period during a Flexible Rate Period. At the option of the Corporation, any Subseries of the Series 2007 Bonds may be converted from a Flexible Rate Period to any other Rate Period provided for in the related Bond Indenture. The Conversion Date will be the last regularly scheduled Interest Payment Date on which interest is payable for any Interest Periods theretofore established for the Series 2007 Bonds to be converted. The Corporation must give written notice of any such conversion to the related Remarketing Agent, the Authority, the Bond Trustee and the related Bank not less than seven Business Days prior to the date on which the Bond Trustee is required to notify the Bondholders of the conversion. Together with such notice, the Corporation must give the Authority, the related Bank and the Bond Trustee a proposed form of an Opinion of Bond Counsel to the effect that the conversion of the related Subseries of the Series 2007 Bonds to another Rate Period will not adversely affect the validity of the related Subseries of the Series 2007 Bonds or any exemption from federal income taxation to which interest on the related Subseries of the Series 2007 Bonds would otherwise be entitled. No change to a different Rate Period shall become effective unless the Corporation files with the Authority, the related Bank and the Bond Trustee, the final executed Opinion of Bond Counsel of the type referred to in the preceding sentence dated the Conversion Date. Notwithstanding the provisions of the preceding two sentences, such opinion shall not be required to be delivered with respect to a conversion to a Daily Rate Period or Weekly Rate Period if the immediately preceding Rate Period was a Flexible Rate Period. The Bond Trustee is required to mail a written notice of such conversion to all holders of such Series 2007 Bonds to be converted (i) not less than 15 days prior to the Conversion Date if converting to a Daily Rate Period, a Weekly Rate Period, a Fixed Rate Period or an ARS Rate Period and (ii) not less than 20 days prior to the Conversion Date in the case of conversions from a Flexible Rate Period to a Term Rate Period; provided, however, that the Bond Trustee will not mail such written notice until it has received a written confirmation from the related Remarketing Agent that no Interest Period for such Series 2007 Bonds in the Flexible Rate Period of the Subseries to be converted extends beyond the Conversion Date. Such notice will state, among other things, that the Series 2007 Bonds to be converted will be subject to mandatory tender for purchase on the Conversion Date at a purchase price of 100% of the principal amount thereof and will specify the time at which such Series 2007 Bonds are to be tendered for purchase. See "THE SERIES 2007 BONDS Tenders Mandatory Tenders." 12

65 The Corporation may revoke its election to effect such conversion by giving written notice of such revocation to the Authority, the Bond Trustee, the related Remarketing Agent and the related Bank at any time prior to the setting of the interest rate for the new Rate Period. Such revocation will have the same effect as a failed conversion as described below under the caption "THE SERIES 2007 BONDS Conversion of Interest Rate Failed Conversions." Failed Conversions. If on any Conversion Date from a Daily Rate Period, Weekly Rate Period or Flexible Rate Period, any condition precedent to such conversion required by the related Bond Indenture is not satisfied, such conversion will not occur, the mandatory tender will remain effective and (i) if the Corporation has filed with the Authority and the Bond Trustee an Opinion of Bond Counsel to the effect that the conversion of such Series 2007 Bonds to a Weekly Rate Period will not adversely affect the validity of the related series of the Series 2007 Bonds or any exemption from federal income taxation to which interest on the related series of the Series 2007 Bonds would otherwise be entitled, such Series 2007 Bonds shall bear interest at the Variable Rate determined by the Remarketing Agent on the failed Conversion Date for a Weekly Rate Period, and thereafter shall bear interest at Variable Rates for Weekly Rate Periods until a Conversion Date or (ii) if the Opinion of Bond Counsel referred to in clause (i) above has not been delivered, such Series 2007 Bonds shall bear interest at the rates determined by the Remarketing Agent on the failed Conversion Date for a Rate Period or Interest Periods, as the case may be, of the same length as the immediately preceding Rate Period or Interest Periods. Tenders Optional Tenders Daily Rate Period. Holders of the Series 2007 Bonds of any Subseries during a Daily Rate Period may tender their Series 2007 Bonds for purchase in an Authorized Denomination at a purchase price equal to 100% of the principal amount thereof plus accrued interest thereon if not tendered on an Interest Payment Date (the "Tender Price") on any Business Day upon oral notice (promptly confirmed in writing) or written notice of tender given to the Bond Trustee for such Series 2007 Bonds not later than 11:00 a.m., New York City time, on any Business Day (during a Daily Rate Period, an "Optional Tender Date"). Weekly Rate Period. Holders of the Series 2007 Bonds of any Subseries during a Weekly Rate Period may tender their Series 2007 Bonds for purchase in an Authorized Denomination at the Tender Price on any Business Day upon oral notice (promptly confirmed in writing) or written notice of tender given to the Bond Trustee for such Series 2007 Bonds not later than 5:00 p.m., New York City time, on a Business Day not less than seven (7) days prior to the date such Series 2007 Bonds are to purchased (during a Weekly Rate Period, an "Optional Tender Date"). Flexible Rate Period. Holders of Series 2007 Bonds of any Subseries in a Flexible Rate Period have no right to optionally tender their Series 2007 Bonds. Notice of Tenders. Each notice of tender ("Optional Tender Notice") referred to above must state the following: (1) the name and address of the Bondholder and the principal amount and CUSIP of the Series 2007 Bonds to which the notice relates, (2) that the Bondholder irrevocably demands purchase of such Series 2007 Bond or a specified portion thereof in an Authorized Denomination, (3) the Optional Tender Date on which such Series 2007 Bond or portion is to be purchased and (4) the payment instructions with respect to the Tender Price and, in the case of a written notice, must be delivered to the Bond Trustee for such Series 2007 Bonds at its designated corporate trust offices and must be in form satisfactory to the Bond Trustee. The determination of the Bond Trustee as to whether an Optional Tender Notice has been properly delivered is conclusive and binding upon the owner of such Series

66 Bond delivering such notice. Delivery of an Optional Tender Notice, whether oral or written, to the Bond Trustee for such Series 2007 Bonds automatically constitutes (1) an irrevocable offer to sell such Series 2007 Bond (or portion thereof) to which the notice relates on the Optional Tender Date to any purchaser selected by the related Remarketing Agent for such Series 2007 Bonds, at the Tender Price of such Series 2007 Bond (or portion thereof), (2) an irrevocable authorization and instruction to the Bond Trustee to effect a transfer of such Series 2007 Bond (or portion thereof) upon payment of the Tender Price to the Bond Trustee on the Optional Tender Date, (3) an irrevocable authorization and instruction to the Bond Trustee to effect the exchange of the Series 2007 Bond to be purchased in whole or in part for other Series 2007 Bonds in an equal aggregate principal amount so as to facilitate the sale of such Series 2007 Bonds (or portion thereof to be purchased), and (4) an acknowledgment that such Bondholder will have no further rights with respect to such Series 2007 Bond (or portion thereof) upon payment of the Tender Price thereof to the Bond Trustee on the Optional Tender Date, except for the right of such Bondholder to receive such Tender Price upon surrender of such Series 2007 Bond to the Bond Trustee. Mandatory Tenders Mandatory Tender Events. The Series 2007 Bonds of each Subseries (other than Pledged Bonds or Obligated Group Bonds) in a Daily, Weekly or Flexible Rate Period are subject to mandatory tender for purchase upon the occurrence of any of the following events: 1. Conversion Date. The Series 2007 Bonds are subject to mandatory tender for purchase on any Conversion Date or Proposed Fixed Rate Conversion Date at the applicable Tender Price, with respect to Series 2007 Bonds during a Daily Rate Period or Weekly Rate Period, or 100% of the principal amount thereof (the "Repurchase Price"), with respect to Series 2007 Bonds during a Flexible Rate Period. 2. Liquidity Facility Stated Expiration Date. During the period that a Liquidity Facility is required for a Subseries of the Series 2007 Bonds, such Series 2007 Bonds (other than Obligated Group Bonds or Pledged Bonds ) are subject to mandatory tender at a purchase price equal to the applicable Tender Price or Repurchase Price on the Business Day prior to the Stated Expiration Date of the related Liquidity Facility if, by the 15th day preceding such Stated Expiration Date, the Corporation fails to furnish the Bond Trustee notice of an extension of such Liquidity Facility or a Substitute Liquidity Agreement that will be effective on the Business Day prior to the Stated Expiration Date. 3. Liquidity Substitution Date. During the period that a Liquidity Facility is required for a Subseries of the Series 2007 Bonds, such Series 2007 Bonds are subject to mandatory tender on the Business Day preceding a Liquidity Substitution Date at a purchase price equal to the applicable Tender Price or Repurchase Price if a Rating Agency which currently rates such Series 2007 Bonds will withdraw or downgrade its rating as described under the caption "THE LIQUIDITY FACILITIES Substitute Liquidity Facilities" as a result of the delivery of a Substitute Liquidity Facility. 4. Liquidity Agreement Default. During the period that a Liquidity Facility is required for a Subseries of the Series 2007 Bonds, such Series 2007 Bonds are subject to mandatory tender on a date designated by the Bond Trustee (as described below under "Notice of Mandatory Tender") at a purchase price equal to the applicable Tender Price or Repurchase Price when the Bond Trustee receives written notice from the related Bank that a Liquidity Agreement Default (events of default under the related Liquidity Facility Agreement which would allow a Bank to terminate such Liquidity Facility Agreement with prior notice) has occurred and is 14

67 continuing under the related Liquidity Facility Agreement. Certain Liquidity Agreement Defaults may constitute "Special Defaults" (events of default under the related Liquidity Facility Agreement which would allow a Bank to immediately terminate or suspend its obligations to make payments under such Liquidity Facility Agreement without prior notice). If there is a Special Default, no mandatory tender of the Series 2007 Bonds will occur as a result of such Special Default. See "THE LIQUIDITY FACILITIES Immediate Termination of Initial or Substitute Liquidity Facility Agreement Upon Default in Certain Circumstances" and " The Initial Liquidity Facility Agreements" below for a discussion of events of defaults under the initial Liquidity Facility Agreements which may be Liquidity Agreement Defaults or Special Defaults and the impact of a Special Default on tenders of Series 2007 Bonds. 5. Termination of Liquidity Facility. In the event that the requirements of the related Bond Indenture which would allow a Subseries of Series 2007 Bonds to remain in a Daily Rate Period, Weekly Rate Period or Flexible Rate Period without the benefit of a Liquidity Facility are met, such Series 2007 Bonds are subject to mandatory tender on the Business Day preceding the date on which the Liquidity Facility that supports such Series 2007 Bonds is terminated as described under the caption "THE LIQUIDITY FACILITIES Liquidity Facility Not Required In Certain Circumstances," at a purchase price equal to the applicable Tender Price or Repurchase Price. 6. Repurchase Date. Each Series 2007 Bond bearing interest at a Flexible Rate is subject to mandatory tender for purchase on each Repurchase Date at the Repurchase Price. The owners of any of the Series 2007 Bonds subject to such mandatory tender for purchase as described in the preceding paragraphs may not elect to retain such Series 2007 Bonds. Notice of Mandatory Tender. Notices to holders of any Series 2007 Bonds that are subject to mandatory tender on a Conversion Date or a Proposed Fixed Rate Conversion Date as described in subparagraph (1) of the immediately preceding subcaption will be provided as described under the caption "THE SERIES 2007 BONDS Conversion of Interest Rate" above. With respect to any Series 2007 Bonds subject to mandatory tender upon the occurrence of an event relating to the Liquidity Facility that supports such Series 2007 Bonds as described in subparagraphs (2), (3) or (5) of the immediately preceding subcaption, the Bond Trustee for such Series 2007 Bonds will mail a written notice of such mandatory tender to the holders of such Series 2007 Bonds not less than 15 days prior to the date such Series 2007 Bonds are required to be tendered for purchase. In each case, such notice of mandatory tender will state, among other things, (i) the date upon which such Series 2007 Bonds are subject to mandatory tender for purchase and (ii) that the owners thereof have no right to retain such Series 2007 Bonds. No notice of mandatory tender will be given to owners of Series 2007 Bonds in a Flexible Rate Period that are subject to mandatory tender for purchase on a Repurchase Date as described in subparagraph (6) of the immediately preceding subcaption. Upon the receipt of a notice of a Liquidity Agreement Default described in subparagraph (4) under the preceding subcaption, the Bond Trustee shall give Immediate Notice of such event to the owners of Series 2007 Bonds of the related Subseries and such Series 2007 Bonds shall be purchased with proceeds of a draw on the related Liquidity Facility on a date designated by the Bond Trustee which is no more than 15 days after the date of the Immediate Notice to the Bondholders and in no event later than the Business Day prior to the last day on which funds will be available under the related Liquidity Facility, at a purchase price equal to the Tender Price or the Repurchase Price, as the case may be. The owner of any such Series 2007 Bond required to be purchased may not elect to retain its Series 2007 Bond. Upon receipt by the Bond Trustee of a written notice from a Bank of the occurrence of a Special Default under the related Liquidity Facility Agreement, the Bond Trustee shall give Immediate Notice thereof to the 15

68 owners of all the Series 2007 Bonds of the Subseries to which such Liquidity Facility relates and the related Remarketing Agent which notice shall state that there will be no mandatory purchase of the Series 2007 Bonds of such Subseries as a result of such Special Default and that the Series 2007 Bonds of such Subseries will no longer be entitled to the benefits of a Liquidity Facility. If Immediate Notice of a mandatory tender has been given due to receipt by the Bond Trustee of written notice from the Bank of the occurrence of a Liquidity Agreement Default but a Special Default occurs prior to the Mandatory Tender Date, the Series 2007 Bonds of such Subseries (other than Pledged Bonds and Obligated Group Bonds) shall remain subject to mandatory tender on such date, although the purchase price thereof will not be payable from amounts drawn under the related Liquidity Facility or with remarketing proceeds and such purchase price will be payable only from funds provided by the Corporation pursuant to the related Loan Agreement. Remarketing and Purchase Remarketing. Each Remarketing Agent agrees to use its best efforts to solicit offers to purchase Series 2007 Bonds of the related Subseries which are subject to optional or mandatory tender in accordance with the terms of the related Bond Indenture and the related Remarketing Agreement. Payment of Purchase Price. On each Optional Tender Date or Mandatory Tender Date, upon receipt by the Bond Trustee for the Tendered Bonds of 100% of the aggregate Tender Price or Repurchase Price of Series 2007 Bonds tendered or required to be tendered for purchase, the Bond Trustee will pay the applicable Tender Price or Repurchase Price of such Series 2007 Bonds to the holders thereof but only from the following sources and in the following order: (a) moneys paid to the Bond Trustee by the related Remarketing Agent or by the new purchaser of such Series 2007 Bonds as proceeds of the remarketing of such Series 2007 Bonds, (b) moneys paid to the Bond Trustee by the related Bank for the purchase of such Series 2007 Bonds pursuant to the Liquidity Facility that supports such Series 2007 Bonds and (c) any other moneys provided by the Corporation. UNDER CERTAIN CIRCUMSTANCES DESCRIBED UNDER "THE LIQUIDITY FACILITIES THE INITIAL LIQUIDITY FACILITY AGREEMENTS EVENTS OF DEFAULT" AND " REMEDIES," PURCHASES WILL NOT BE MADE UNDER THE RELATED INITIAL LIQUIDITY FACILITY AGREEMENT AND, THEREFORE, FUNDS MAY NOT BE AVAILABLE TO PURCHASE A SUBSERIES OF SERIES 2007 BONDS TENDERED OR REQUIRED TO BE TENDERED FOR PURCHASE. Insufficient Funds to Pay Purchase Price. If sufficient funds are not available to purchase all Series 2007 Bonds of a series that have been optionally or mandatorily tendered for purchase, as applicable, no purchase of Series 2007 Bonds of such series so tendered will be made. In such event, such Series 2007 Bonds will bear interest from such date at a rate equal to the sum of the SIFMA Municipal Index plus 1% but in no event higher than the Maximum Interest Rate until such default is cured or such Series 2007 Bonds are paid in full. Also, the Bond Trustee for the Series 2007 Bonds will immediately (i) return all such tendered Series 2007 Bonds to the holders thereof, (ii) return all moneys received for the purchase of such Series 2007 Bonds to the persons providing such moneys and (iii) notify all owners of such Series 2007 Bonds in writing that an Event of Default under the related Bond Indenture has occurred and of the interest rate to be effective pursuant to the immediately preceding sentence. THE FAILURE TO PAY THE PURCHASE PRICE OF ANY SERIES 2007 BONDS OF ANY SUBSERIES WILL NOT CONSTITUTE A DEFAULT UNDER THE RELATED BOND INDENTURE, THE RELATED LOAN AGREEMENT OR THE MASTER INDENTURE IF FUNDS ARE DEPOSITED WITH THE BOND TRUSTEE NOT LATER THAN 11:30 A.M., NEW YORK CITY TIME, ON THE NEXT SUCCEEDING BUSINESS DAY AFTER WHICH PAYMENT WAS OTHERWISE REQUIRED TO HAVE BEEN MADE WITH RESPECT TO SUCH SERIES 2007 BONDS IN AN AMOUNT EQUAL TO THE PRINCIPAL AMOUNT OF TENDERED BONDS PLUS ACCRUED INTEREST TO BUT NOT 16

69 INCLUDING SUCH NEXT SUCCEEDING BUSINESS DAY. IN SUCH CASE, THE BOND TRUSTEE IS NOT REQUIRED TO PAY THE PURCHASE PRICE OF SUCH TENDERED BONDS UNTIL 1:00 P.M., NEW YORK CITY TIME, ON SUCH NEXT SUCCEEDING BUSINESS DAY. Failure to Deliver Tendered Bonds. If any Series 2007 Bond is not delivered on an Optional Tender Date, a Mandatory Tender Date or a Repurchase Date, as applicable, but there has been irrevocably deposited with the Bond Trustee for such Series 2007 Bond an amount sufficient to pay the purchase price thereof, interest thereon will cease to accrue on such date and the owner of such Series 2007 Bond will have no further rights thereunder or under the related Bond Indenture except to receive payment of the purchase price for such Series 2007 Bond from the funds so deposited upon presentation and surrender of said Series 2007 Bond to the Bond Trustee. On the Optional Tender Date, Mandatory Tender Date or Repurchase Date, as applicable, a new Series 2007 Bond in lieu of and in substitution for such undelivered Series 2007 Bonds will be issued and registered in the names of the purchasers thereof. 17

70 Redemption Provisions Mandatory Redemption Series 2007A Bonds. The Series 2007A Bonds of each Subseries are subject to mandatory sinking fund redemption in part at the principal amount thereof plus accrued interest to the date of redemption thereof, from mandatory Bond Sinking Fund payments which are required to be made by the Corporation in amounts sufficient to redeem on August 15 of each of the years set forth below, the principal amount specified for each of the dates shown below: SUBSERIES 2007A-1 BONDS SUBSERIES 2007A-2 BONDS AUGUST 15 OF THE YEAR PRINCIPAL AMOUNT AUGUST 15 OF THE YEAR PRINCIPAL AMOUNT 2009 $ 225, $ 225, , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,575, ,575, ,625, ,625, ,675, ,675, ,750, ,750, ,825, ,825, ,875, ,875, ,950, ,950, ,025, ,025, ,125, ,125, ,325, ,325, ,350, ,350, ,425, ,425, ,475, ,475, ,175, ,175, ,425, ,425, ,650, ,650, ,925, ,925,000 Maturity 18

71 SUBSERIES 2007A-3 BONDS SUBSERIES 2007A-4 BONDS Maturity AUGUST 15 OF THE YEAR PRINCIPAL AMOUNT AUGUST 15 OF THE YEAR PRINCIPAL AMOUNT 2009 $ 225, $ 225, , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,575, ,575, ,625, ,625, ,675, ,675, ,750, ,750, ,825, ,825, ,875, ,875, ,950, ,950, ,025, ,025, ,125, ,125, ,325, ,325, ,350, ,350, ,425, ,425, ,475, ,475, ,175, ,175, ,425, ,425, ,650, ,650, ,925, ,925,000 19

72 Series 2007B Bonds. The Series 2007B Bonds of each Subseries are subject to mandatory sinking fund redemption in part at the principal amount thereof plus accrued interest to the date of redemption thereof, from mandatory Bond Sinking Fund payments which are required to be made by the Corporation in amounts sufficient to redeem on August 15 of each of the years set forth below, the principal amount specified for each of the dates shown below: SUBSERIES 2007B-1 BONDS SUBSERIES 2007B-2 BONDS Maturity AUGUST 15 OF THE YEAR PRINCIPAL AMOUNT AUGUST 15 OF THE YEAR PRINCIPAL AMOUNT 2012 $ $300, , , , , , , , , , , , ,600, ,600, ,700, ,700, ,850, ,850, ,850, ,850, ,950, ,950, ,100, ,100, ,150, ,150, ,250, ,250, ,300, ,300, ,250, ,250, ,400, ,400, ,550, ,550, ,750, ,750, ,050, ,050, ,200, ,200, ,500, ,500, ,650, ,650,000 Moneys on deposit in the Bond Sinking Fund shall be applied by the Bond Trustee to the redemption of the Series 2007 Bonds of each Subseries on August 15 of each year set forth above (i) with respect to such Series 2007 Bonds of a Subseries bearing interest at a Daily Rate or a Weekly Rate, by lot in such manner as shall be determined by the Bond Trustee and (ii) with respect to such Series 2007 Bonds of a Subseries bearing interest at a Flexible Rate, in order of Repurchase Dates occurring on or after each such August 15 such that Series 2007 Bonds with the shortest period of time remaining to the Repurchase Date are selected first (and by lot in such manner as shall be determined by the Bond Trustee within the last required Repurchase Date) until the principal amount of Series 2007 Bonds to be redeemed in such year has been redeemed; provided, however, that Series 2007 Bonds with Repurchase Dates established subsequent to the date on which Series 2007 Bonds to be redeemed are selected shall be treated as having a Repurchase Date as of the redemption date. 20

73 Optional Redemption The Series 2007 Bonds of each Subseries in a Daily, Weekly or Flexible Rate Period may be redeemed by the Authority upon direction of the Corporation, in whole or in part from time to time, and, in the case of any particular Series 2007 Bond, on any Repurchase Date applicable thereto during a Flexible Rate Period or at any time during a Daily Rate Period or a Weekly Rate Period and, if in part, by the redemption of any Pledged Bonds first and thereafter by Rate Period, Subseries and Maturity Date selected by the Corporation (less than all of any Series 2007 Bonds in the same Rate Period, in the same Subseries and with the same Maturity Date to be selected randomly utilizing such method as may be designated by the Bond Trustee), at the principal amount of the Series 2007 Bonds to be redeemed, plus accrued interest thereon, if any, and without premium. Extraordinary Optional Redemption The Series 2007 Bonds of each Subseries 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 condemnation 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 the insurance, condemnation or sale received in connection therewith exceeds the greater of (a) $1,000,000 or (b) the sum of $1,000,000 plus an amount equal to $1,000,000 multiplied by a percentage equal to the aggregate percentage increase or decrease in the Construction Index from its level as of May 1, If called for redemption in such event, the Series 2007 Bonds of each Subseries will be subject to redemption by the Authority at any time, in whole or in part, and, if in part, by the redemption of Pledged Bonds first and thereafter by Rate Period, Subseries and Maturity Date selected by the Corporation (less than all of any Series 2007 Bonds in the same Rate Period, in the same Subseries and with the same Maturity Date to be selected randomly utilizing such method as may be designated by the Bond Trustee), at the principal amount thereof plus accrued interest to the redemption date, if any, and without premium. Partial Redemption No redemption of less than all of a Subseries of the Series 2007 Bonds at the time outstanding will be made unless the aggregate principal amount of such Subseries of the Series 2007 Bonds to be redeemed is at least $100,000 and the aggregate principal amount of such Subseries of the Series 2007 Bonds not to be redeemed are each in an Authorized Denomination for such Series 2007 Bonds. In the event of any partial redemption of any Subseries of the Series 2007 Bonds, as described above, the mandatory Bond Sinking Fund redemption payments for such Subseries will be reduced in such order as the Corporation shall elect prior to such redemption or, if no such election is made, in the inverse order thereof. The Bond Trustee shall (in such manner as it in its sole discretion shall choose) adjust the amount of each such reduction in required Bond Sinking Fund redemption payment for such Subseries, so that each such required Bond Sinking Fund redemption payment is made in integral amounts of $25,000. Purchase in Lieu of Redemption Purchase and Cancellation. In lieu of optionally redeeming the Series 2007 Bonds of any Subseries as described above, the Bond Trustee may, at the request of the Corporation, use such funds otherwise available under the related Bond Indenture for redemption of Series 2007 Bonds to purchase Series 2007 Bonds of such Subseries in the open market at a price not exceeding the redemption price then applicable under the related Bond Indenture, such Series 2007 Bonds to be delivered to the Bond 21

74 Trustee for the purpose of cancellation. In the case of any such redemption or purchase of Series 2007 Bonds, the Authority shall receive credit against its required Bond Sinking Fund deposits for such Subseries in the same manner as would be applicable if such Series 2007 Bonds were optionally redeemed. Purchases shall be made first from Pledged Bonds and thereafter from Series 2007 Bonds of such Subseries with Rate Periods and Maturity Dates selected by the Corporation. Purchase and No Cancellation. The Authority and, by their acceptance of the Series 2007 Bonds, the owners of the Series 2007 Bonds, irrevocably grant to the Corporation the option to purchase, at any time when the Series 2007 Bonds are optionally redeemable pursuant to the provisions of the related Bond Indenture described above, any Series 2007 Bonds at a purchase price equal to the redemption price applicable thereto. To exercise such option with respect to the Series 2007 Bonds, the Corporation must give the Bond Trustee a written request 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 2007 Bonds notice of such purchase in the manner specified under the subcaption, "Notice of Redemption; Effect of Redemption" below as though such purchase were a redemption. The purchase of such Series 2007 Bonds will be mandatory and enforceable against the owners of the Series 2007 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 2007 Bonds then being purchased to the Bond Trustee in immediately available funds, and the Bond Trustee will pay the same to the owners of such Series 2007 Bonds against delivery thereof. Following such purchase, the Bond Trustee will cause such Series 2007 Bonds to be registered in the name of the Corporation or its nominee and shall deliver them to the Corporation or its nominee. In the case of the purchase of less than all of the Series 2007 Bonds, the particular Series 2007 Bonds to be purchased will be selected in accordance with the provisions of the related Bond Indenture. Notice of Redemption; Effect of Redemption A copy of the notice of the call for any redemption identifying the Series 2007 Bonds of each Subseries in a Daily, Weekly or Flexible Rate Period to be redeemed will be given by first class mail, postage prepaid, to the registered owners of Series 2007 Bonds to be redeemed at their addresses as shown on the Bond Register no less than 15 days prior to the redemption date with respect to such Series 2007 Bonds. Except for mandatory Bond Sinking Fund redemptions with respect to the Series 2007 Bonds, prior to the date that the redemption notice is first mailed as aforesaid, funds will be placed with the Bond Trustee for such Series 2007 Bonds to be redeemed to pay such Series 2007 Bonds and any premium thereon and accrued interest thereon to the redemption date, or such notice will state that any redemption is conditional on such funds being deposited with the Bond Trustee on the redemption date and that a failure to make such deposit shall not constitute an event of default under the related Bond Indenture. Failure to give notice in the manner prescribed above with respect to any such Series 2007 Bond, or any defect in such notice, will not affect the validity of the proceedings for redemption for any Series 2007 Bond with respect to which notice was properly given. If any Series 2007 Bond of any Subseries is transferred or exchanged on the Bond Register by the Bond Registrar after notice has been given of an optional or mandatory tender or calling such Bond for redemption, the Bond Registrar will attach a copy of such notice to the Bond issued in connection with such transfer. While the Series 2007 Bonds are subject to the Book-Entry System, redemption notices will be sent to Cede & Co. 22

75 Upon the happening of the above conditions and if sufficient moneys are on deposit with the Bond Trustee on the applicable redemption date to redeem the Series 2007 Bonds to be redeemed and to pay interest due thereon and premium, if any, the Series 2007 Bonds thus called will not after the applicable redemption date bear interest, be protected by the related Bond Indenture or be deemed to be outstanding under the provisions of the related Bond Indenture. Retained Call Rights All or a portion of the Series 2007 Bonds may, in the future, be refunded or defeased to any redemption date or maturity for the Series 2007 Bonds. In connection with the issuance of the Series 2007 Bonds, the Authority, the Bond Trustee and the Corporation have reserved all of the call rights pertaining thereto. Therefore, subject to certain requirements in the related Bond Indenture, subsequent to the date that cash and/or government securities are deposited with the Bond Trustee to provide for the payment of all or any portion of the Series 2007 Bonds at the respective maturity dates therefor or any redemption date therefor, the Authority may, if directed by the Corporation, elect to call such Series 2007 Bonds (or any portions thereof) on any earlier redemption date applicable to such Series 2007 Bonds. Subsequent to the date that cash and/or government securities are deposited with the Bond Trustee to provide for the payment of all or any portion of the Series 2007 Bonds at any redemption date or dates applicable to such Series 2007 Bonds (but prior to the giving of any notice of redemption with respect to such Series 2007 Bonds pursuant to the related Bond Indenture), the Authority may, if directed by the Corporation, elect to pay such Series 2007 Bonds (or any portion thereof) at the respective maturity dates therefor. See "THE SERIES 2007 BONDS Redemption Provisions Optional Redemption" and "SUMMARY OF PRINCIPAL DOCUMENTS SUMMARY OF CERTAIN PROVISIONS OF THE BOND INDENTURES Defeasance" in APPENDIX C. BOOK-ENTRY ONLY SYSTEM The information in this section concerning DTC and the Book-Entry System has been obtained from DTC and is not guaranteed as to accuracy or completeness by, and is not to be construed as a representation by, the Authority, the Underwriters, the Remarketing Agents, the Banks, the Bond Trustee, the Corporation or the other Members of the Obligated Group, if any. Bonds in Book-Entry Form Beneficial ownership in the Series 2007 Bonds will be available to Beneficial Owners (as described below) only by or through DTC Participants via a book-entry system (the "Book-Entry System") maintained by DTC. DTC and Its Participants DTC will act as securities depository for the Series 2007 Bonds. The Series 2007 Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC's partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully registered bond certificate will be issued for each Subseries of the Series 2007 Bonds, in the aggregate principal amount of such Series 2007 Bonds, and will be deposited with DTC. DTC, the world's largest 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 23

76 of the Securities Exchange Act of DTC holds and provides asset servicing for over 2 million issues of U.S. and non-u.s. equity, corporate and municipal debt issues, and money market instruments from over 85 countries that DTC's participants ("Direct Participants") deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities through electronic computerized book-entry transfers and pledges between Direct Participants' accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-u.s. securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ("DTCC"). DTCC, in turn, is owned by a number of Direct Participants of DTC and Members of the National Securities Clearing Corporation, Government Securities Clearing Corporation, MBS Clearing Corporation, and Emerging Markets Clearing Corporation (NSCC, GSCC, MBSCC, and EMCC, also subsidiaries of DTCC), as well as by the New York Stock Exchange, Inc., the American Stock Exchange LLC, and the National Association of Securities Dealers, Inc. 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, ether directly or indirectly ("Indirect Participants"). DTC has Standard & Poor's highest rating: AAA. The DTC rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at Purchases of Series 2007 Bonds under the Book-Entry System must be made by or through Direct Participants, which will receive a credit for the Series 2007 Bonds on DTC's records. The ownership interest of each actual purchaser of each Series 2007 Bond ("Beneficial Owner") is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Series 2007 Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the Series 2007 Bonds, except in the event that use of the Book-Entry System for the Series 2007 Bonds is discontinued. To facilitate subsequent transfers, all Series 2007 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 2007 Bonds with DTC and their registration in the name of Cede & Co. or such other nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Series 2007 Bonds; DTC's records reflect only the identity of the Direct Participants to whose accounts such Series 2007 Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of the Series 2007 Bonds may wish to take certain steps to augment transmission to them of notices of significant events with respect to the Series 2007 Bonds, such as redemptions, tenders, defaults, and proposed amendments to security documents. For example, Beneficial Owners of the Series 2007 Bonds may wish to ascertain that the nominee holding the Series 2007 Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners, or in the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of the notices be provided directly to them. 24

77 Redemption notices shall be sent to DTC. If less than all of the Series 2007 Bonds are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in the Series 2007 Bonds to be redeemed. Neither DTC nor Cede & Co. (nor such other DTC nominee) will consent or vote with respect to the Series 2007 Bonds unless authorized by a Direct Participant in accordance with DTC's procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the Bond Trustee 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 2007 Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). Principal and interest payments on the Series 2007 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 the payable date in accordance with their respective holdings shown on DTC's records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such Participant and not of DTC, the Bond Trustee, the Authority or the Corporation or any other Member of the Obligated Group, subject to any statutory or regulatory requirements as may be in effect from time to time. Payments of principal and interest to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) are the responsibility of the Bond Trustee, disbursement of such payments to Direct Participants is the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. Tenders A Beneficial Owner shall give notice to elect to have its Series 2007 Bonds purchased or tendered, through its Participant, to the applicable Remarketing Agent, and shall effect delivery of such Series 2007 Bonds by causing the Direct Participant to transfer the Participant's interest in the Series 2007 Bonds, on DTC's records, to the applicable Remarketing Agent. The requirement for physical delivery of Series 2007 Bonds in connection with an optional tender or a mandatory purchase will be deemed satisfied when the ownership rights in the Series 2007 Bonds are transferred by Direct Participants on DTC's records and followed by a book-entry credit of tendered Series 2007 Bonds to the applicable Remarketing Agent's DTC account. Discontinuance of DTC Services DTC may discontinue providing its services as securities depository with respect to Series 2007 Bonds at any time by giving notice to the Authority and the Bond Trustee. Under such circumstances, in the event that a successor securities depository is not obtained, bond certificates are required to be printed and delivered. The Authority may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event, bond certificates will be printed and delivered to DTC. Use of Certain Terms in Other Sections of the Official Statement While the Series 2007 Bonds are in the Book-Entry System, reference in other sections of this Official Statement to owners of such Series 2007 Bonds should be read to include any person for whom a 25

78 Participant acquires an interest in the Series 2007 Bonds, but (i) all rights of ownership, as described herein, must be exercised through DTC and the Book-Entry System and (ii) notices that are to be given to registered owners by the Bond Trustee will be given only to DTC. DTC is required to forward (or cause to be forwarded) the notices to the Participants by its usual procedures so that such Participants may forward (or cause to be forwarded) such notices to the Beneficial Owners. Limited Obligations SECURITY FOR THE SERIES 2007 BONDS The Series 2007 Bonds of each series will be limited obligations of the Authority and will be payable solely from: (i) revenues received by the Authority from the Corporation as payments of principal of and premium, if any, and interest on the related Series 2007 Obligation, (ii) payments or prepayments by the Corporation made under the related Loan Agreement (except for certain Unassigned Rights of the Authority for indemnification and administrative expenses), (iii) certain monies and investments held by the Bond Trustee under the related Bond Indenture and (iv) in certain circumstances, insurance proceeds and condemnation awards or sale consummated under threat of condemnation. Certain investment earnings on moneys held by the Bond Trustee under each Bond Indenture may be transferred to the related Rebate Fund established pursuant to the related Tax Exemption Agreement among the Authority, the Bond Trustee and the Corporation. Amounts held in the related Rebate Fund and the related Bond Purchase Fund are not part of the "trust estate" created by the related Bond Indenture and pledged to secure the related series of Series 2007 Bonds and, consequently, will not be available to make payments on the related series of Series 2007 Bonds. State Not Liable for Payments on the Series 2007 Bonds Under no circumstances shall the Series 2007 Bonds and the interest thereon be or become an indebtedness or obligation of the State of Illinois (the "State"), within the purview of any constitutional limitation or provision, or a charge against the credit of, or a pledge of the taxing power of, the State or any political subdivision thereof. The principal of, premium (if any) and interest on the related series of the Series 2007 Bonds are payable solely from the revenues or income pledged therefor in accordance with the related Bond Indenture. The Authority does not have the power to levy taxes for any purpose, including, but not limited to, payment of the principal of, premium (if any) and interest on the Series 2007 Bonds. Loan Agreements The Authority will lend the proceeds of the Series 2007 Bonds to the Corporation pursuant to the Loan Agreements. The Corporation will agree in the Loan Agreements to repay such loans and to pay interest thereon. Pursuant to the related Loan Agreement, such payments are required to be made at such times and in such amounts so as to provide funds which are sufficient to make full and timely payment of principal of and interest on the Series 2007 Bonds of the related series. The Corporation also agrees in the related Loan Agreement to make or cause to be made payments of the purchase price of the Tendered Bonds of each series. Pursuant to the related Bond Indenture, the Authority will pledge and assign the related Loan Agreement and its right, title and interest therein (excluding Unassigned Rights) to the Bond Trustee as security for the related Series 2007 Bonds. 26

79 Series 2007 Obligations, Series 2007 Bank Obligations and the Master Indenture Series 2007 Obligations; Series 2007 Bank Obligations. As evidence of the obligation to make payments under the related Loan Agreement, the Corporation will issue and deliver the related Series 2007 Obligation to the Authority, and the Authority will pledge and assign the related Series 2007 Obligation to the Bond Trustee pursuant to the related Bond Indenture. The related Series 2007 Obligation will be in the same aggregate principal amount, will bear interest at the same rates, will be payable at times and in amounts and will have redemption and purchase requirements that correspond to the related Series 2007 Bonds. Pursuant to the provisions of the Master Indenture, the Corporation will also issue and deliver the related Series 2007 Bank Obligation to the related Bank to secure its obligations under the related Initial Liquidity Facility Agreement. The Series 2007 Obligations and the Series 2007 Bank Obligations are unsecured general obligations of the Members of the Obligated Group. No mortgage on, or similar security interest in, the Facilities or revenues of the Obligated Group has been granted to the Bond Trustee, the Master Trustee, the Banks or any other party by any Member of the Obligated Group for the benefit of the holders of the Series 2007 Bonds. See "BONDHOLDERS'RISKS Security for the Series 2007 Bonds." Master Indenture. The Series 2007 Obligations 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 Master Indenture provides that payments on the Series 2007 Obligations, the Series 2007 Bank Obligations, the Series 1995 Obligation, the Series 2002C Obligation, the Series 2004B Obligation and the Series 2004C Obligation and on any Additional Obligations issued under the Master Indenture are the joint and several obligation of each Member of the Obligated Group. CURRENTLY, THE CORPORATION IS THE SOLE MEMBER OF THE OBLIGATED GROUP. See the information herein under the caption, "BONDHOLDERS' RISKS Enforceability of the Master Indenture." See APPENDIX C "SUMMARY OF PRINCIPAL DOCUMENTS SUMMARY OF CERTAIN PROVISIONS OF THE RESTATED MASTER INDENTURE" for a summary of certain terms of the Master Indenture. The Master Indenture does not limit the ability of the Members of the Obligated Group to (i) issue Additional Obligations, (ii) incur other Indebtedness or (iii) enter into guarantees. Additional Indebtedness incurred by a Member of the Obligated Group 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 or to parties other than the Authority. No Additional Obligations are required to be pledged under the Bond Indentures. Except as described below, all Obligations will be equally and ratably secured under the Master Indenture with the Series 2007 Obligations pledged under the Bond Indentures. Subject to certain conditions set forth in the Master Indenture, Additional Indebtedness, including Additional Obligations, may be secured by security in addition to that provided for the Series 2007 Obligations and the other Obligations, including Liens on the Property (including health care Facilities) of the Obligated Group, Liens to secure Indebtedness incurred for the purpose of financing all or any part of the purchase price or the cost of constructing, improving or acquiring Property subject to such Liens, letters or lines of credit, insurance or security interest in reserve or other funds, which additional security or Liens need not be extended to any other Indebtedness (including, without limitation, the Series 2007 Obligations and the other Obligations). See the information herein under the caption, "BONDHOLDERS' RISKS Additional Indebtedness." See also the information set forth under "SUMMARY OF PRINCIPAL DOCUMENTS SUMMARY OF CERTAIN PROVISIONS OF THE RESTATED MASTER INDENTURE Liens on Property" and "DEFINITION OF CERTAIN TERMS Permitted Encumbrances" contained in APPENDIX C hereto. 27

80 The Master Indenture contains certain covenants that are for the sole benefit of Financial Security Assurance Inc., as bond insurer for the Series 2004C Bonds (the "Series 2004C Bond Insurer"). See APPENDIX C "SUMMARY OF PRINCIPAL DOCUMENTS SUMMARY OF CERTAIN PROVISIONS OF THE FIRST SUPPLEMENTAL MASTER INDENTURE" for a summary of those covenants. The Series 2004C Bond Insurer may modify, amend or waive its covenants at its sole discretion at any time without the consent of or any notice to the holders of any of the Related Bonds. The Master Indenture provides that a supplemental master indenture pursuant to which one or more series of Obligations entitled to additional security is issued may provide for 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 thereof. See APPENDIX C "SUMMARY OF PRINCIPAL DOCUMENTS SUMMARY OF CERTAIN PROVISIONS OF THE RESTATED MASTER INDENTURE Supplemental Master Indentures" for a summary of certain terms of the Master Indenture. General THE LIQUIDITY FACILITIES Pursuant to the related Loan Agreement, the Corporation covenants and agrees that at all times while any Series 2007 Bonds of any related Subseries bearing interest in other than a Fixed Rate Period or an ARS Rate Period are Outstanding it will maintain a Liquidity Facility for such Series 2007 Bonds of any Subseries in full force and effect, except as described below under "THE LIQUIDITY FACILITIES Liquidity Facility Agreement Not Required in Certain Circumstances." Each Liquidity Facility will be in an amount at least equal to the aggregate principal amount of the Subseries of Series 2007 Bonds supported by such Liquidity Facility plus an amount equal to the interest on such Series 2007 Bonds calculated at the applicable Interest Coverage Rate for the maximum number of days between the applicable Interest Payment Dates in the applicable Rate Period plus the number of days then required in writing by any Rating Agency then rating such Series 2007 Bonds. Substitute Liquidity Facilities A Substitute Liquidity Facility for Series 2007 Bonds of any Subseries may become effective on any Business Day (a "Liquidity Substitution Date"). Not less than 15 days prior to the proposed Liquidity Substitution Date, the Corporation must have delivered to the Bond Trustee and the Authority (a) a Substitute Liquidity Facility and (b) written evidence from each Rating Agency then maintaining a rating on such Series 2007 Bonds of the rating on such Series 2007 Bonds after the Liquidity Substitution Date. If written evidence from any such Rating Agency provides that the current ratings assigned to such Series 2007 Bonds will be withdrawn or reduced, such Series 2007 Bonds will be subject to mandatory tender and purchase as described under "THE SERIES 2007 BONDS Tenders Mandatory Tenders." If such Series 2007 Bonds are not subject to mandatory tender, 15 days prior to the proposed Liquidity Substitution Date the Bond Trustee for such Series 2007 Bonds will give notice to the Bondholders of such Series 2007 Bonds of the name of the provider of the Substitute Liquidity Facility (the "Substitute Bank") and the ratings to be assigned to the Series 2007 Bonds after the Liquidity Substitution Date. On such Liquidity Substitution Date, the Authority and the Bond Trustee must also receive (i) an opinion of counsel for the Substitute Bank regarding the enforceability of the Substitute Liquidity Facility in substantially the form delivered to the Bond Trustee upon execution and delivery of the then-current Liquidity Facility and (ii) an Opinion of Bond Counsel to the effect that the substitution of the thencurrent Liquidity Facility will not adversely affect the validity of such Series 2007 Bonds or any 28

81 exemption from federal income taxation to which the interest on such Series 2007 Bonds would otherwise be entitled. Liquidity Facility Not Required in Certain Circumstances The Corporation is not required to provide a Liquidity Facility for Series 2007 Bonds of any Subseries if, prior to the expiration or termination of the Liquidity Facility then in effect for such Subseries, there is delivered to the Authority and the Bond Trustee (i) an Opinion of Bond Counsel to the effect that the expiration or termination of such Liquidity Facility then in effect will not adversely affect the validity of the Series 2007 Bonds of such Subseries or any exemption from federal income taxation to which the interest on the Series 2007 Bonds of such Subseries would otherwise be entitled and (ii) either (A) written evidence from each Rating Agency then maintaining a rating on such Series 2007 Bonds that the rating on such Series 2007 Bonds (other than Series 2007 Bonds bearing interest at an Auction Period Rate or a Fixed Rate) following the expiration or termination of such Liquidity Facility will not be reduced (without giving effect to numeric or other qualifiers) or withdrawn from the rating on such Series 2007 Bonds immediately prior to such expiration or termination or (B) an opinion of Independent Counsel addressed to the Authority or addressed to the Remarketing Agent for such Series 2007 Bonds with a reliance letter to the Authority (which counsel and opinion, including the scope, form and other aspects thereof are acceptable to the Authority) to the effect that nothing has come to the attention of such Independent Counsel, after review of the offering materials to be used to remarket such Series 2007 Bonds without the benefit of a Liquidity Facility, to cause such Independent Counsel to believe that such materials contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances under which they were made, not misleading. On the Business Day prior to each Liquidity Facility Cancellation Date, the affected Series 2007 Bonds will be subject to mandatory purchase as described under "THE SERIES 2007 BONDS Tenders Mandatory Tenders." Immediate Termination of Initial or Substitute Liquidity Facility Agreement Upon Default in Certain Circumstances Upon receipt by the Bond Trustee for the Series 2007 Bonds of any Subseries of a written notice from either the related Bank or Substitute Bank of the occurrence of an event of default under the related Liquidity Facility Agreement (a "Liquidity Agreement Default") which permits such Bank or Substitute Bank to immediately terminate (or, in certain circumstances, suspend) its obligation to purchase the Tendered Bonds of such Subseries (a "Special Default"), the Bond Trustee will give notice of the Special Default to the owners of such Series 2007 Bonds and the Remarketing Agent for such Series 2007 Bonds stating that due to the Special Default there will be no mandatory purchase of such Series 2007 Bonds and that such Series 2007 Bonds will no longer be entitled to the benefits of such Liquidity Facility (subject to possible reinstatement in the event of a suspension). If notice of a mandatory tender has been given due to receipt by the Bond Trustee of written notice from the related Bank of the occurrence of a Liquidity Agreement Default but a Special Default occurs prior to the Mandatory Tender Date, such Series 2007 Bonds (other than Pledged Bonds) will remain subject to mandatory tender on such Mandatory Tender Date, although the purchase price thereof will not be payable from amounts drawn under the Liquidity Facility or remarketing proceeds. See "THE LIQUIDITY FACILITIES The Initial Liquidity Facility Agreements Events of Default," and " Remedies" below for a description of the conditions under which funds will not be available under the Initial Liquidity Facility Agreements to purchase Tendered Bonds. 29

82 The Initial Liquidity Facility Agreements The terms and provisions of each Initial Liquidity Facility Agreement are substantially identical. Accordingly, the majority of the discussion below is generic and applies equally to each Subseries of Series 2007 Bonds. Where the specific terms of the Initial Liquidity Facility Agreements differ, those differences are explicitly identified in the following discussion. Each Initial Liquidity Facility Agreement provides liquidity support only for the Subseries of the Series 2007 Bonds identified therein (as described on the cover page hereof) and does not provide security for the other Subseries of the Series 2007 Bonds. The following summary of the Initial Liquidity Facility Agreements does not purport to be comprehensive or definitive and is subject to all of the terms and provisions of each of the Initial Liquidity Facility Agreements to which reference is made hereby. Investors are urged to obtain and review a copy of the related Initial Liquidity Facility Agreement in order to understand all of the terms of that document. Copies of the Initial Liquidity Facility Agreements may be obtained from the Bond Trustee upon request. See "THE BANKS" and APPENDIX E attached hereto for certain information regarding the Banks. Each of the Initial Liquidity Facility Agreements contains various provisions, covenants and conditions, certain of which are summarized below. Various words or terms used in the following summary are defined in this Official Statement, the related Initial Liquidity Facility Agreement or the related Bond Indenture, and reference thereto is made for full understanding of their import. Upon compliance with the terms and conditions of the related Initial Liquidity Facility Agreement, and subject to the terms and conditions set forth therein, the related Bank is obligated to provide funds for the purchase of Series 2007 Bonds of the related Subseries that are tendered for purchase, whether at the option of the owner of the Series 2007 Bonds or upon mandatory tender for purchase, and which such Series 2007 Bonds have not been remarketed. Under each of the Initial Liquidity Facility Agreements, the related Bank is initially obligated to make available an amount equal to the then outstanding aggregate principal amount of the Series 2007 Bonds of the related Subseries plus 35 days interest thereon at the rate of 10% per annum (together, the "Available Commitment"). To the extent that the related Bank advances funds under the related Initial Liquidity Facility Agreement to purchase Series 2007 Bonds of the related Subseries, the Available Commitment will be reduced by the principal amount of and accrued interest on the Series 2007 Bonds so purchased, subject to reinstatement upon remarketing of such purchased Series 2007 Bonds in accordance with the provisions of the related Initial Liquidity Facility Agreement. Unless terminated earlier, or extended, each of the Subseries 2007A-1/A-3 Initial Liquidity Facility Agreements and the Subseries 2007A-2/A-4 Initial Liquidity Facility Agreements will expire on December 19, 2014, and the Subseries 2007B Initial Liquidity Facility Agreements will expire on December 17, Under the terms of each of the Initial Liquidity Facility Agreements, the Corporation is obligated to reimburse the related Bank for any amounts paid by such Bank pursuant to the related Initial Liquidity Facility Agreement and to pay to the related Bank any fees and other obligations due and owing to such Bank under the related Initial Liquidity Facility Agreement. Events of Default. The following events constitute events of default under the Initial Liquidity Facility Agreements. Reference is made to each Initial Liquidity Facility Agreement for a complete listing of all events of default. (a) any material representation or warranty made by the Corporation in the related Initial Liquidity Facility Agreement (or incorporated therein by reference) or in the related Loan Agreement, the related Bond Indenture, the related Purchase Contract, the related Remarketing 30

83 Agreement, this Official Statement, the Master Indenture, the Custody Agreement entered into between the Bond Trustee, as Custodian, and the related Bank, the related Subseries of Series 2007 Bonds and the tax agreement of the Corporation relating to the related series of Series 2007 Bonds or in any other agreement or instrument relating thereto (collectively with such related Initial Liquidity Facility Agreement, the "Related Documents") shall prove to have been incorrect, incomplete or misleading in any material respect when made; (b) any "event of default" shall have occurred and be continuing under any of the Related Documents, and the applicable cure period related thereto shall have elapsed; (c) the principal of or interest on the related Subseries of Series 2007 Bonds (including the related Subseries of Series 2007 Bonds purchased by the related Bank pursuant to the related Initial Liquidity Facility Agreement that have not been remarketed, i.e. "Pledged Bonds") shall not be paid when due, whether on any regularly scheduled interest payment date, at maturity, upon redemption or acceleration (other than as a result of an acceleration as described below under the subcaption "Remedies"; (d) any default in payment by the Corporation to the related Bank of any obligations (other than as described in subsection (c) above) when and as due under the related Initial Liquidity Facility Agreement; (e) default in the due observance or performance by the Corporation of any term, covenant or agreement set forth (or incorporated by reference) in the related Initial Liquidity Facility Agreement and the continuance of such default for thirty days after the occurrence thereof; provided, however, that there is no 30-day cure period for a failure to observe or perform certain covenants or agreements set forth in the related Initial Liquidity Facility Agreement; (f) (A) the related Initial Liquidity Facility Agreement or certain of the Related Documents or any provision thereof relating to the obligation of the Corporation to make principal or interest payments with respect to the related Subseries of Series 2007 Bonds (including Pledged Bonds) or the security therefore shall cease to be valid and binding, or (B) the Corporation or any other Significant Member of the Obligated Group (as defined herein) shall contest the related Initial Liquidity Facility Agreement or certain of the Related Documents or any provision thereof relating to the obligation of the Corporation to make principal or interest payments with respect to the related Subseries of Series 2007 Bonds (including Pledged Bonds) or the security therefore, or the Corporation or any other Member of the Obligated Group which accounted for fifty percent (50%) or more of the total cash flows of the consolidated Obligated Group (a "Significant Member of the Obligated Group"), or any agent or trustee on behalf of the Corporation or such Significant Member, if applicable, shall deny that it has any or further liability under the related Initial Liquidity Facility Agreement or certain of the Related Documents; (g) the occurrence of certain events of bankruptcy, insolvency, reorganization or liquidation of the Corporation or the Corporation shall generally not, or shall be unable to, or so admit in writing its inability to pay its debts, or a custodian, receiver or similar official shall be appointed for the Corporation; (h) the occurrence of certain events of bankruptcy, insolvency, reorganization or liquidation of any Significant Member of the Obligated Group or any Significant Member of the 31

84 Obligated Group shall generally not, or shall be unable to, or so admit in writing its inability to, pay its debts; (i) (A) a default by the Corporation or any other Member of the Obligated Group in any payment of principal of or premium, if any, or interest on any indebtedness which is secured by (or directly authenticated as) a Master Obligation issued pursuant to the Master Indenture on a parity basis with, or is senior to, the Bonds (the "Parity Debt") or (B)(1) the Corporation or any other Member of the Obligated Group fail to perform any agreement, term or condition other than as described in subsection (i)(a) above) contained in any agreement, mortgage or other instrument under which any Parity Debt is created or secured, which results in Parity Debt becoming due and payable prior to its maturity, or a moratorium shall have been declared or announced (whether or not in writing) by an Authorized Officer (as defined in the Substitute Liquidity Facility Agreement) of the Corporation or any Member of the Obligated Group with respect to any Parity Debt, or (2) a default by the Corporation or any other Member of the Obligated Group in the performance of any agreement secured by Parity Debt or under which such Parity Debt is created if the effect of such default is to permit the holder or holders of such Parity Debt to cause such Parity Debt to become due prior to its maturity; or (j) a final, non-appealable judgment for the payment of money in excess of an aggregate of an amount equal to $5,000,000 shall be rendered against the Corporation and/or a Significant Member of the Obligated Group, with respect to which, in the opinion of the related Bank, adequate cash reserves have not been established, and such judgment or order shall continue unsatisfied and unstayed for period of sixty (60) days; (k) the occurrence of any "reportable event," as defined in ERISA, which is determined to constitute grounds for termination by the PBGC (as defined in each of Initial Liquidity Facility Agreements) of any Plan (as defined in the related Initial Liquidity Facility Agreement) maintained by or on behalf of the Corporation, any Member of the Obligated Group or any ERISA Affiliates (as defined in each of the Initial Liquidity Facility Agreements) thereof or for the appointment by the appropriate United States District Court of a trustee to administer such Plan and such reportable event is not corrected and such determination is not revoked within thirty days after notice thereof has been given to the plan administrator or the Corporation, such Member of the Obligated Group or any ERISA Affiliates thereof, or the institution of proceedings by the PBGC to terminate any such Plan or to appoint a trustee to administer such Plan; or the appointment of a trustee by the appropriate United States District Court to administer any such Plan; or the Corporation, any Member of the Obligated Group or any ERISA Affiliates thereof as employer under a Multi-employer Plan shall have made a complete or partial withdrawal from such Multi-employer Plan and the plan sponsor of such Multi-employer Plan shall have notified such withdrawing employer that such employer has incurred a withdrawal liability in an annual amount exceeding $1,000,000; (l) a default shall occur and be continuing under any other agreement between the Corporation and the related Bank or under any other obligation owed by the Corporation to the related Bank; (m) each of Moody's and S&P shall reduce the long-term unenhanced credit rating of the Corporation below "Baa3" (or its equivalent) and "BBB-" (or its equivalent), respectively, or shall suspend or withdraw such rating due to credit-related events; or (n) the long-term unenhanced credit rating of the Obligated Group shall be reduced below "A1" (or its equivalent) by Moody's or below "A+" (or its equivalent) by S&P. 32

85 Remedies. The following are remedies available to the related Bank under the related Initial Liquidity Facility Agreement upon the occurrence of certain events of default thereunder: (i) Upon the occurrence of any event of default described in clauses (c), (f)(a), (g), (h), (i)(a), (j) or (m) hereof, (A) the related Bank's obligation to purchase Series 2007 Bonds of the related Subseries under the related Initial Liquidity Facility Agreement shall immediately terminate without notice or other action on the part of the related Bank and its Available Commitment (as defined in the related Initial Liquidity Facility Agreement), shall immediately terminate and be permanently reduced to zero under the related Initial Liquidity Facility Agreement, and (B) all accrued fees and other obligations outstanding owed by the Corporation to the related Bank shall be forthwith due and payable without demand, presentment, protest or other notice whatsoever, all of which are expressly waived by the Corporation. (ii) Upon the occurrence of any event of default other than as set forth in the immediately preceding clause (i) above, the related Bank may, in its sole and absolute discretion, (A) terminate its obligations under the related Initial Liquidity Facility Agreement and its Available Commitment and permanently reduce such Commitment to zero by written notice to the Trustee (such termination and reduction to be effective thirty days after such notice is received by the Trustee), and (B) declare all accrued fees and other obligations outstanding owed by the Corporation to the related Bank to be immediately due and payable without further demand, presentment, protest or other notice whatsoever, all of which are expressly waived by the Corporation. (iii) Upon the occurrence of an event of default specified in clause (f)(b) above, the obligation of the related Bank under the related Initial Liquidity Facility Agreement to purchase Bonds shall be immediately and automatically suspended, without notice, and the related Bank shall be under no further obligation to purchase Series 2007 Bonds of the related Subseries unless and until the obligation of the related Bank to purchase Series 2007 Bonds of the related Subseries is reinstated as provided in the related Initial Liquidity Facility Agreement. (iv) Upon the occurrence and during the continuance of an event that would upon the passage of time or giving of notice, or both, become an event of default as described in clause (g) or (h) above, the obligation of the related Bank to purchase Series 2007 Bonds of the related Subseries under the related Initial Liquidity Facility Agreement shall be immediately and automatically suspended, without notice, and the related Bank shall be under no further obligation under the related Initial Liquidity Facility Agreement to purchase Series 2007 Bonds of the related Subseries, until the bankruptcy, insolvency or similar proceeding referred to therein is terminated prior to the court entering an order granting the relief sought in such proceeding. In the event such proceeding is terminated, then the obligations of the related Bank under the related Initial Liquidity Facility Agreement shall be automatically reinstated and the terms of the related Initial Liquidity Facility Agreement shall continue in full force and effect (unless the obligation of the related Bank to purchase Series 2007 Bonds of the related Subseries under the related Initial Liquidity Facility Agreement shall otherwise have terminated as provided in the related Initial Liquidity Facility Agreement) as if there had been no such suspension. (v) In addition to the rights and remedies set forth in clauses (i), (ii), (iii) and (iv) above, in the case of any event of default specified in the related Initial Liquidity Facility Agreement, the related Bank may exercise all of its rights and remedies under or in respect of the related Initial Liquidity Facility Agreement or the Related Documents or all other rights and remedies available at law or in equity, including, without limitation, specific performance; provided, however, that the related Bank will not have the right to terminate its obligations to 33

86 purchase Series 2007 Bonds of the related Subseries, to declare any amount due hereunder due and payable, or to accelerate the maturity date of Series 2007 Bonds of the related Subseries except as provided in the related Initial Liquidity Facility and in the related Bond Indenture. The representations and warranties, covenants and events of default set forth in each of the Initial Liquidity Facility Agreements are solely for the benefit of the related Bank, and the Bondholders shall have no rights or obligations with respect to such provisions. Each of the Banks may in its discretion waive compliance with any representation, warranty, covenant or event of default and any other provisions of the related Initial Liquidity Facility Agreement and may agree with the Corporation to amend such provisions without notice. THE BANKS For more information concerning the Banks, see "INFORMATION CONCERNING THE BANKS" in APPENDIX E attached hereto. Description of the Authority THE AUTHORITY The Authority is a body politic and corporate of the State of Illinois. The Authority was created under the Illinois Finance Authority Act (the "Act"), which consolidated seven of the State's previously existing financing authorities (the "Predecessor Authorities"), including the Illinois Health Facilities Authority. 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 $26,650,000,000, 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 of Illinois with the advice and consent of the State Senate. Presently, all fifteen members have been duly appointed. 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. The offices of the Authority are located at Two Prudential Plaza, 180 North Stetson, Suite 2555, Chicago, Illinois and its telephone number is (312) 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 of Illinois or any political subdivision thereof nor be or become a pledge of the full faith and credit of the State of Illinois or any political subdivision thereof, other than the Authority. The Series 2007 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 resolutions and the related Bond Indenture authorizing the issuance of such Series 2007 Bonds. No Owner of any Series 2007 Bond shall have the right to compel any taxing power of the State of Illinois or any political subdivision thereof to pay the principal of, premium, if any or interest on the Series 2007 Bonds, and the Authority has no taxing power. 34

87 The Authority makes no warranty or representation, whether express or implied, with respect to any of the Facilities or the use thereof. Further, the Authority has not prepared any material for inclusion in this Official Statement, except that material under the headings "INTRODUCTION The Authority," "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. 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 2007 Bonds will be passed upon the Authority by its special counsel, Charity & Associates, P.C., Chicago, Illinois. 35

88 ESTIMATED ANNUAL DEBT SERVICE REQUIREMENTS The following table sets forth, for each Fiscal Year ending August 31, the amounts required for the payment of interest on and principal of the Series 2007 Bonds. In addition, the table sets forth total debt service on the Series 1995 Bonds, the Series 2002C Bonds, the Series 2004B Bonds and the Series 2004C Bonds, which represents the only other indebtedness for borrowed money of the Corporation expected to be outstanding after the issuance of the Series 2007 Bonds and the application of the proceeds thereof. See the information in APPENDIX A hereto under the caption "SUMMARY OF FINANCIAL RESULTS Debt Service Coverage" for certain calculations of coverage of debt service on the Series 2007 Bonds, the Series 1995 Bonds, the Series 2002C Bonds, the Series 2004B Bonds and the Series 2004C Bonds. Fiscal Year Series 2007A Bonds (1) Series 2007B Bonds (1) Ending Other Long- Total Debt August 31 Principal Interest (2) Principal Interest (3) Debt (1)(4) Service 2008 $0 $6,016,987 $0 $3,500,667 $19,500,617 $29,018, ,000 9,178, ,340,000 19,486,513 34,904, ,000,000 9,139, ,340,000 22,136,444 37,616, ,000,000 9,097, ,340,000 21,976,659 37,413, ,000,000 9,054, ,000 5,340,000 28,274,350 43,968, ,100,000 9,011, ,000 5,329,320 27,986,566 43,627, ,100,000 8,964, ,000 5,322,200 28,159,409 43,646, ,200,000 8,917, ,000 5,318,640 28,174,696 43,710, ,200,000 8,866, ,000 5,315,080 28,171,725 43,652, ,300,000 8,814, ,000 5,311,520 28,129,377 43,655, ,300,000 8,759, ,000 5,307,960 28,153,890 43,720, ,400,000 8,703, ,000 5,300,840 28,203,850 43,808, ,400,000 8,643, ,293,720 28,024,828 43,362, ,500,000 8,583, ,000 5,293,720 28,207,472 43,784, ,500,000 8,519, ,000 5,286,600 28,251,232 43,657, ,600,000 8,455, ,000 5,283,040 28,256,682 43,695, ,600,000 8,386, ,000 5,279,480 28,293,677 43,659, ,700,000 8,318, ,275,920 29,253,498 44,547, ,300,000 8,245,633 5,200,000 5,275,920 18,594,349 43,615, ,500,000 7,976,056 5,400,000 5,090,800 18,507,724 43,474, ,700,000 7,697,921 5,700,000 4,898,560 18,640,256 43,636, ,000,000 7,411,228 5,700,000 4,695,640 18,671,381 43,478, ,300,000 7,111,698 5,900,000 4,492,720 18,699,093 43,503, ,500,000 6,799,331 6,200,000 4,282,680 18,653,423 43,435, ,800,000 6,478,406 6,300,000 4,061,960 18,745,484 43,385, ,100,000 6,144,644 6,500,000 3,837,680 18,754,732 43,337, ,500,000 5,798,045 6,600,000 3,606,280 18,750,195 43,254, ,300,000 5,434,330 10,500,000 3,371,320 18,755,830 43,361, ,400,000 5,207,543 10,800,000 2,997,520 18,735,613 43,140, ,700,000 4,976,477 11,100,000 2,613,040 18,739,823 43,129, ,900,000 4,732,574 11,500,000 2,217,880 18,740,877 43,091, ,700,000 4,480,113 12,100,000 1,808, ,088, ,700,000 3,423,200 12,400,000 1,377, ,900, ,600,000 2,323,497 13,000, , ,859, ,700,000 1,185,283 13,300, , ,658,763 TOTALS $214,500,000 $250,857,088 $150,000,000 $149,816,667 $721,630,266 $1,486,804,021 36

89 (1) (2) (3) (4) The calculations of estimated annual debt service requirements set forth in this table are calculated based upon the assumptions set forth herein and are not calculated in accordance with the Master Indenture. In anticipation of the issuance of the Series 2007A Bonds, in July of 2007, the Corporation entered into two forward-starting interest rate exchange agreements (the "Forward Swaps") with JPMorgan Chase Bank, National Association (an affiliate of J.P. Morgan Securities Inc.) and UBS AG (an affiliate of UBS Securities LLC) (collectively, the "Counterparties") in order to manage its variable rate debt exposure and the interest rate risks associated therewith. The Forward Swaps provide that, on December 19, 2007, the Corporation will begin paying a fixed interest rate of 3.889% per annum and receiving a floating rate determined pursuant to a formula based on one-month LIBOR plus a fixed constant, based on an aggregate notional amount equal to $214,500,000. As a result, for purposes of these calculations, the Series 2007A Bonds bear interest at 3.889% per annum plus related annual fees (assumed to be 39 basis points per annum). The Series 2007B Bonds bear interest at variable rates. For purposes of these calculations, the assumed variable rate is 3.17% per annum, based on the average of the Securities Industry and Financial Markets Association (SIFMA) Index since its inception in July 1989, plus related annual fees (assumed to be 39 basis points per annum). Actual interest rates may vary from the assumed rates. The Corporation previously has entered into various interest rate exchange agreements with the Counterparties with respect to a portion of the Series 1995 Bonds, the Series 2004B Bonds and a majority of the Series 2004C Bonds in order to manage its variable rate debt exposure and the interest rate risks associated therewith. As a result, these calculations take into account the amounts payable by the Corporation pursuant to such interest rate exchange agreements. For purposes of these calculations, (i) $86,400,000 of the Series 2004B Bonds bear interest at fixed rate of 3.31% per annum plus related annual fees, (ii) $137,100,000 of the Series 2004C Bonds bear interest at a fixed rate of 3.62% per annum plus related annual fees, (iii) $70,500,000 of the Series 2004C Bonds bear interest at a fixed rate of 3.31% per annum plus related annual fees, and (iv) $50,000,000 of the Series 1995 Bonds bear interest at a fixed rate of 4.86% per annum plus related annual fees. The remainder of the Series 1995 Bonds, the Series 2002C Bonds and the Series 2004C Bonds bear interest at variable rates. For purposes of these calculations, the assumed variable rate is 3.17% per annum, based on the SIFMA Index since its inception in July 1989, plus related annual fees. Actual interest rates may vary from the assumed rates. For purposes of these calculations, related annual fees are assumed in all cases to be 39 basis points per annum. BONDHOLDERS'RISKS The purchase of any of the Series 2007 Bonds involves certain investment risks that are discussed throughout this Official Statement. Accordingly, each prospective purchaser of any of the Series 2007 Bonds should make an independent evaluation of all of the information presented in this Official Statement in order to make an informed investment decision. Certain of these risks are described below. The discussion of risk factors is not meant to be exhaustive. General The Series 2007 Bonds are limited obligations of the Authority and, except to the extent payable from proceeds of the Series 2007 Bonds and certain other amounts on deposit with the Bond Trustee under the related Bond Indenture, are payable solely from the payments to be made by the Corporation under the related Loan Agreement or by the Corporation and any future Members of the Obligated Group on the Series 2007 Obligations and under the Master Indenture. No representation or assurance is given or can be made that revenues will be realized by the Corporation in amounts sufficient to make payments on the Series 2007 Obligations or under the Loan Agreements when due and other payments necessary to meet the obligations of the Corporation. The receipt of future revenues is subject to, among other factors, the capabilities of the management of the Corporation, government regulation and future economic and other conditions that are unpredictable and that may affect revenues and payment of principal of and interest on the Series 2007 Bonds. The realization of revenue and the level of expenses are affected by, and subject to, conditions that are 37

90 impossible to predict and, therefore, may change to an extent and with effects that cannot be determined at this time. Nonprofit Healthcare Environment The Corporation is a not-for-profit entity, exempt from federal income taxation as an organization described in Section 501(c)(3) of the Code. As a not-for-profit tax-exempt organization it is subject to federal, state and local laws, regulations, rulings and court decisions relating to its organizations and operations, including its operation for charitable purposes. At the same time, the Corporation conducts complex business transactions and is a significant employer in its community. 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. Recently, 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 instead 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 of property from real property taxation, and others. These challenges and questions have come from a variety of sources, including state attorneys general, the Internal Revenue Service (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: Congressional Hearings. Beginning in 2003, a number of House and Senate Committees, including, the House Committee on Energy and Commerce, the House Committee on Ways and Means and the Senate Finance Committee, conducted hearings and/or investigations into issues related to nonprofit tax-exempt healthcare organizations. These hearings and investigations have included a nationwide investigation of hospital billing and collection practices and prices charged to uninsured patients and possible reforms to the nonprofit sector. These hearings and investigations may result in new legislation. The effect on the nonprofit health care sector or the Corporation of any such legislation, if enacted, cannot be determined at this time. Internal Revenue Service Examination of Compensation Practices. In August 2004, the IRS announced an 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. Litigation Relating to Billing and Collection Practices. Lawsuits have been filed in both federal and state courts alleging, among other things, that the defendant hospitals have failed to fulfill their obligations to provide charity care to uninsured patients and have overcharged uninsured patients. See "BONDHOLDERS' RISKS - Charity Care" below. The Corporation currently is a party to such litigation, and no assurance can be made with respect to the outcome of such litigation. Challenges to Real Property Tax Exemptions. Recently, the real property tax exemptions afforded to certain nonprofit healthcare providers by state and local taxing authorities in Illinois 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 38

91 challenge to the tax exemption afforded to any of its material Properties, there can be no assurance that these types of challenges will not occur in the future. The Corporation currently pays property taxes on a portion of its Property. On November 6, 2007, Cook County Assessor James M. Houlihan issued a report, requested by the Cook County Board of Commissioners, titled "Exempt Hospitals: Valuation Estimates and Appraisal Methodology." The report concluded that, if deemed entirely taxable, the estimated aggregate property value of Cook County's fifty-four (54) non-governmental not for profit licensed general hospitals is between 4.3 and 4.5 billion dollars. The report did not include estimated valuations for each individual hospital, nor did it opine on whether the real property owned by these hospitals should be taxable or taxexempt. To estimate the value of the property, the Assessor used three commonly accepted appraisal practices: the cost approach, the sales comparison approach, and the income capitalization (or income) approach. There can be no assurance that the Cook County Assessor, the Cook County Board of Commissioners, the Illinois Department of Revenue or any other party will not seek to challenge the tax exemption afforded to real property owned by hospitals in Cook County, Illinois. It is unclear whether a challenge to the tax exemption afforded to such hospitals, including certain of the Corporation's material Properties, would have a material adverse effect on such hospitals. 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 (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) 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 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 (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 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. 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 the 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 difficult operating environment for healthcare organizations, including the Corporation. The challenges, examinations and resulting legislation, regulations, judgments, and/or penalties, could have a material adverse effect on the Corporation. 39

92 Interest Rate Swap Risk The Corporation has and may in the future periodically enter into interest rate swap agreements to manage interest rate risk. See the information in footnote 6 to the "Audited Consolidated Financial Statements and Details of Consolidation of Northwestern Memorial HealthCare and Subsidiaries" in APPENDIX B hereto. In anticipation of the issuance of the Series 2007A Bonds, the Corporation entered into two swap agreements with respect to the Series 2007A Bonds. The Corporation has also entered into other swap agreements with respect to other outstanding Indebtedness. Each swap agreement is subject to periodic "mark-to-market" valuations and may, at any time, have a negative value (which could be substantial) to the Corporation. Changes in the market value of such agreements could negatively or positively impact the Corporation's financial condition, and such impact could be material. Any of the Corporation's swap agreements may be subject to early termination upon the occurrence of certain specified events. If either the Corporation or the counterparty terminates such an agreement when the agreement has a negative value to the Corporation, the Corporation could be obligated to make a termination payment to the counterparty in the amount of such negative value, and such payment could be substantial and potentially materially adverse to the Corporation's financial condition. In the event of an early termination of a swap agreement, there can be no assurance that (i) the Corporation will receive any termination payment payable to it by the respective swap provider, (ii) the Corporation will not be obligated to or will have sufficient monies to make a termination payment payable by it to the applicable swap provider, and (iii) the Corporation will be able to obtain a replacement swap agreement with comparable terms. The swap agreements entered into by the Corporation may require the Corporation to secure its obligations in certain circumstances. The Corporation's ability to place a lien on its collateral is limited by the Master Indenture. See "SUMMARY OF PRINCIPAL DOCUMENTS DEFINITIONS OF CERTAIN TERMS Permitted Encumbrances" in APPENDIX C. If the Corporation is unable to secure its obligations under a swap agreement with sufficient collateral, the related swap provider will have the right to terminate such swap agreement and the Corporation could be required to make a termination payment to the swap provider, the amount of which could be substantial. Under the terms of the Corporation's existing swap agreements, no collateral is currently required to be posted. Pursuant to swap agreements related to the Series 1995 Bonds, the Series 2004B Bonds, the Series 2004C Bonds and the Series 2007A Bonds of the Corporation, the swap provider is obligated to make floating rate payments to the Corporation determined pursuant to a formula based on a percentage of the applicable floating rate (i.e. LIBOR or the SIFMA Index) plus a fixed constant based on the applicable notional amount, which floating rate payments may be more or less than the amount the Corporation is required to pay, on such Bonds. There is no guarantee that any floating amount payable by the swap provider under any swap agreement will match the amount payable by the Corporation to the owners of such Bonds 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 each swap agreement will not equal the variable amount it is required to pay on the applicable Bonds. The agreement by the swap provider to pay certain amounts to the Corporation pursuant to the swap agreements does not alter or affect the Corporation's obligation to pay the principal of, interest on, and redemption price of, any of the Series 1995 Bonds, the Series 2004B Bonds, the Series 2004C Bonds or the Series 2007A Bonds. The swap provider has no obligation to make any payments with respect to the principal of, interest on, or redemption price of, the Series 1995 Bonds, the Series 2004B Bonds, the Series 2004C Bonds or the Series 2007A Bonds. Neither the holders of the Series 1995 Bonds, the Series 2004B Bonds, the Series 2004C Bonds or the Series 2007A Bonds nor any other person (other than the Corporation) shall have any rights under the swap agreement or against the swap provider. 40

93 Federal and State Policies Affecting Health Care Providers General. Health care providers are subject to laws and regulations administered by federal, state and local authorities. Changes in such laws or regulations in the future, particularly in laws and regulations relating to reimbursement under the Medicare and Medicaid programs, could adversely affect the operations or financial results of the Corporation. The Balanced Budget Act of 1997 (the "BBA") reduced reimbursement for various health care services provided to beneficiaries. Subsequent legislation has restored, in part, reimbursement to providers affected by BBA cuts. However, future action by the federal government or by the State of Illinois limiting, reducing or restricting participation in the total amount of funds available for the Medicare and Medicaid programs could lower the amount of reimbursement available to the Corporation. For the fiscal year ended August 31, 2007, approximately 21.8% of the net revenues of the Corporation were derived from the Medicare program, and an additional 6.1% were derived from the Medicaid program. If the Corporation incurs costs in treating Medicare or Medicaid patients which exceed the level of reimbursement, the Corporation will experience a loss from such services which will have to be made up from other revenue sources. Other third-party payors have begun implementing their own limitations on reimbursement payable to hospitals to avoid such "cost-shifting." Medicare Program. Medicare is a federal program that provides for the payment of hospital and certain other health care services, for persons who are 65 years of age and older, disabled or qualify for the End Stage Renal Disease Program. The following discussion outlines certain legislative and regulatory risk factors that have influenced, and are expected to influence, the revenues of the Corporation from Medicare reimbursement. Medicare Part A covers inpatient services and certain other services, and Medicare Part B covers certain physician services, medical supplies and durable medical equipment. Medicare pays most acute care hospitals for most services provided to inpatients under a payment system known as the "Prospective Payment System" or "PPS." Separate PPS payments are made for inpatient operating costs and inpatient capital-related costs. Some costs are also paid on the basis of "reasonable costs," which are known as "pass-through" costs. Health care providers have been and will be affected significantly by changes in federal and state health care laws and regulations, particularly those pertaining to Medicare and Medicaid. The Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the "MMA"), which contains a number of significant changes to the Medicare program, was signed into law on December 8, The Deficit Reduction Act of 2005 (the "DRA"), contained, among other things, a number of provisions to slow the pace of spending growth in the Medicare program while increasing health care providers' focus on quality and efficient delivery of health care services. Diverse and complex statutory and regulatory mechanisms, the effect of which is to limit the amount of money paid to health care providers under both the Medicare and Medicaid programs, have been enacted and approved in recent years. Management of the Corporation is unable to predict what effect, if any current and future legislative initiatives related to Medicare and Medicaid may have on the operations of the Corporation. Approximately 21.8% of the net patient service revenues of the Corporation were derived from the Medicare program for the fiscal year ended August 31, As a consequence, adverse development or change in Medicare reimbursement could have a material adverse effect on the financial condition and result of operations of the Corporation. Inpatient Operating Costs. Acute care hospitals such as that owned by the Corporation are paid a specified amount towards their operating costs based on the Diagnosis Related Group ("DRG") to which each Medicare inpatient service is assigned, which is determined by the diagnosis, procedure and other 41

94 factors assigned to each Medicare inpatient. The amount to be paid for each DRG is established prospectively by the Centers for Medicare and Medicaid Services ("CMS"), an agency of the United States Department of Health and Human Services ("HHS"), and is not, with certain exceptions, related to a hospital's actual costs. For certain Medicare beneficiaries who have unusually costly hospital stays ("outliers"), CMS will provide additional payments above those specified for the DRG. Outlier payments cease to be available upon the exhaustion of such patient's Medicare benefits or a determination that acute care is no longer necessary, whichever occurs first. There is no assurance that any of these payments will cover the actual costs incurred by a hospital. In addition, recent revisions to the outlier regulations, implemented in order to curb outlier payment abuse, may adversely affect hospitals' ability to receive such subsidies. DRG payments are adjusted annually based on the hospital "market basket" index, which purports to measure the cost of providing health care services. For every year since 1983, Congress has modified the increases and given substantially less than the increase in the market basket index. Under the MMA, hospitals will continue to receive the full increase in the "market basket" index in fiscal years so long as they participate in CMS's Hospital Quality Initiative. Pursuant to the DRA, for federal fiscal year 2007 and thereafter, there will be a 2% reduction from the market basket update (3.4%) for nonparticipating hospitals. CMS has proposed a market basket update of 3.3% for federal fiscal year The Corporation participates in the Hospital Quality Initiative. There is no assurance that future updates in DRG payments will keep pace with the increases in the cost of providing inpatient hospital services. The Secretary of HHS is required to review annually the DRG categories to take into account any new procedures and reclassify DRGs and recalibrate the DRG relative weights that reflect the relative hospital resources used by hospitals with respect to discharges classified within a given DRG category. For federal fiscal year 2007, CMS has created new DRGs and revised or deleted others in order to better recognize the severity of illness. Further reforms and revisions to the DRG system are planned for federal fiscal year There is no assurance that the Corporation or any future Member of the Obligated Group 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. Capital Costs. Hospitals are reimbursed on a fully prospective basis for capital costs (including depreciation and interest) related to the provision of inpatient services to Medicare beneficiaries. Thus, capital costs are reimbursed exclusively on the basis of a standard federal rate (based on average national costs), subject to certain adjustments (such as for disproportionate share, indirect medical education and outlier cases) specific to the hospital. Hospitals are reimbursed at 100% of the standard federal rate for all capital costs. This applies to the standard federal rate before the application of the adjustment factors for outliers, exceptions and budget neutrality. There can be no assurance that the prospective payments for capital costs will be sufficient to cover the actual capital-related costs of the Corporation allocable to Medicare patient stays or to provide adequate flexibility in meeting the Corporation's future capital needs. 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). Payment for direct graduate medical education ("DGME") reimburses hospitals for the direct costs of their medical education programs, including faculty and resident salaries and other costs incurred directly and in support of the teaching programs. The amount of payment for DGME costs for a cost reporting period is based on the hospital's number of residents in that period and the hospital's costs per resident in a base year ("PRA"). For costs reporting periods beginning on or after October 1, 2000, 42

95 and on or before September 30, 2005, Section 311 of Public Law establishes a "floor" and a "ceiling" based on a locality-adjusted, updated weighted average PRA. Payment for the operating and capital-related costs of indirect medical education is made as an adjustment to the federal rate and is based on the ratio of a hospital's number of full-time equivalent residents to its average number of staffed beds. 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. Section 1886(d)(5)(B) of the Federal Social Security Act provides that prospective payment hospitals that have residents in an approved DGME program receive an additional payment to reflect the higher indirect operating costs associated with DGME. Physician Payments. Certain physician services are reimbursed on the basis of a national fee schedule called the "resource-based-relative-value scale" ("RB-RVS"). The RB-RVS fee schedule establishes payment amounts for all physician services, including services of provider-based physicians, and is subject to annual updates. The Sustainable Growth Rate ("SGR"), which is a limit on the growth of Medicare payments for physician services, is linked to changes in the U.S. Gross Domestic Product over a ten-year period. SGR targets are compared to actual expenditures in order to determine subsequent physician fee schedule updates. Although the underlying conversion factor used to calculate payment amounts to physicians under the RB-RVS fee schedule decreased by 4.4% from 2005 to 2006, the DRA restored payments to physician at 2005 levels, which restoration was effective as of January 1, For 2007, the final rule issued by CMS provided for a 5.0% reduction to such underlying conversation factor, but such reduction was eliminated by Congress pursuant to the Tax Relief and Health Care Act of 2006, instead freezing payments at their current levels. Beginning in July 2007, physicians may receive 1.5% bonus payments in exchange for voluntary submission of data on quality measures. For 2008, CMS has estimated a 9.9% decrease in the physician fee schedule. Costs of Outpatient Services. Under Section 1833(t) of the Social Security Act ("SSA"), hospital outpatient services, including hospital operating and capital costs, are reimbursed on a PPS basis. Several Medicare Part B services are specifically excluded from this rule, including certain physician and nonphysician practitioner services, ambulance, physical and occupational therapy, and speech pathology services. Under hospital outpatient PPS, predetermined amounts are paid for designated services furnished to Medicare beneficiaries. CMS classifies outpatient services and procedures that are comparable clinically and in terms of resource use into ambulatory payment classification ("APC") groups. Using hospital outpatient claims data from the most recent available hospital cost reports, CMS determines the median costs for the services and procedures in each APC group. Outpatient PPS ("OPPS") are adjusted annually based on the hospital inpatient market basket percentage increase. For fiscal year 2007, the APC adjustment will be the full market basket increase of 3.4%, and CMS has proposed a 3.3% increase for There can be no assurance that the hospital OPPS rate, which bases payment on APC groups rather than on individual services, will be sufficient to cover the actual costs of the Corporation allocable to Medicare patient care. Beginning in calendar year 2007, hospitals that fail to report certain required quality data will have their market basket percentage increase reduced by two percentage points. In addition to the APC rate, there is a predetermined beneficiary coinsurance amount for each APC group. There can be no assurance that the beneficiary will pay this amount. Compliance and Reimbursement. Hospitals must comply with standards called "Conditions of Participation" in order to be eligible for Medicare and Medicaid reimbursement. CMS is responsible for ensuring that hospitals meet these regulatory Conditions of Participation. Under applicable Medicare rules, hospitals accredited by The Joint Commission are deemed to meet the Conditions of Participation. Failure to maintain Joint Commission accreditation or to otherwise comply with the Conditions of 43

96 Participation or applicable state licensing requirements could have a material adverse effect on the revenues of the Corporation. On March 10, 2007, the Hospital received a full three-year reaccreditation from The Joint Commission following its triennial accreditation survey. 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 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. Medicare Advantage. Medicare beneficiaries may obtain Medicare coverage through a managed care Medicare Advantage plan (formerly known as a "Medicare+Choice" plan). A Medicare Advantage plan may be offered by a coordinated care plan (such as a health maintenance organization or "HMO" or a preferred provider organization or "PPO"), a provider sponsored organization ("PSO") (a network operated by health care providers rather than an insurance company), a private fee-for-service plan, or a combination of a medical savings account ("MSA") and contributions to a Medicare Advantage plan. Each Medicare Advantage plan, except an MSA plan, is required to provide benefits approved by the Secretary of HHS. A Medicare Advantage plan will receive a monthly capitated payment from HHS for each Medicare beneficiary who has elected coverage under the plan. Health care providers, such as the Corporation, must contract with Medicare Advantage plans to treat Medicare Advantage enrollees at agreed upon rates or they may form a PSO to contract directly with HHS as a Medicare Advantage plan. Covered inpatient emergency services rendered to a Medicare Advantage beneficiary by a hospital that is an out-of-plan provider (i.e., that has not entered into a contract with a Medicare Advantage plan) will be paid at Medicare fee-for-service payment rates as payment in full. The MMA made several substantive changes to Medicare Advantage in addition to renaming the program. These changes are designed to improve Medicare Advantage by providing increased payments to providers and by offering more health plan choices, including expanded rural coverage through the inclusion of regional plans, beginning in Increased payments to Medicare Advantage providers were effective as of March There can be no assurance, however, that rates negotiated for the treatment of Medicare Advantage enrollees will be sufficient to cover the cost of providing services to such patients at the facilities of the Corporation. Medicaid. Medicaid represented approximately 6.1% of the Corporation's net patient service revenues for the fiscal year ended August 31, Medicaid is a combined federal and state program. Medicaid is designed to pay providers for care given to the medically indigent and others who receive federal aid. 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. The federal government supplements funds provided by the various states. 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 44

97 providers for payment of services rendered to Medicaid beneficiaries. Significant changes have been and may continue to be made in the Medicaid program which could have a material adverse impact on the financial condition of the Corporation. The following paragraphs discuss certain Medicaid reimbursement rules for the State of Illinois to which the Corporation is subject. Fiscal considerations of both the 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. Historically, federal payments and the amount appropriated by the Illinois General Assembly for payment of Medicaid claims have not been sufficient to reimburse hospitals for their actual costs in providing services to Medicaid patients. In certain prior years, the State of Illinois ceased making payments and hospitals were paid on a delayed basis through either emergency appropriations or additional appropriations made during the ensuing fiscal year. Failure of the State of Illinois to pay Medicaid claims on a timely basis may have an adverse effect on the cash flow and financial condition of the Corporation. On July 17, 2005, the Governor of Illinois signed legislation that provides for a hospital assessment program (the "Hospital Assessment Program") intended to qualify for federal matching funds under the Illinois Medicaid program, with a sunset provision that would become effective on July 1, The Hospital Assessment Program builds upon 2004 legislation that established a one-year hospital assessment program, which sunset on July 1, Under the Hospital Assessment Program, each hospital is assessed an amount based on that hospital's adjusted gross hospital revenue. Such assessments are to be used to provide additional reimbursement for Medicaid inpatient and outpatient services. The Hospital Assessment Program in part responds to federal government comments made in regard to Illinois' 2004 hospital assessment program. On November 21, 2006, HHS approved the Hospital Assessment Program for the period July 1, 2005 through June 30, 2008 (i.e. State of Illinois fiscal years 2006, 2007 and 2008). The impact on the Corporation due to the implementation of the Hospital Assessment Program is an estimated aggregate net receipt of approximately $51.2 million for the Corporation's fiscal years There can be no assurance, however, that the Hospital Assessment Program will be renewed by the State of Illinois or whether HHS will approve the Hospital Assessment Program after June 30, The Medicaid managed care program is a voluntary program that operates predominantly in Cook County. In Cook County, the Illinois Department of Public Heath contracts with Health Maintenance Organizations ("HMOs") and Managed Care Community Networks ("MCCNs") to provide health services to managed care enrollees. Four HMOs and one MCCN provide services for Medicaid clients. Expansion of the "Voluntary Enrollment Period" program will depend on legislative initiatives. On July 1, 2006, Illinois implemented a statewide Primary Care Case Management ("PCCM") Program for certain Illinois Medicaid program participants. People who are enrolled in the PCCM program will have a primary care provider, who will provide continuity of care by coordinating and managing participants' care. This will allow participants to receive primary and preventive health care services at a physician's office or a clinic rather than at an emergency room or through hospitalization. Management of the Corporation believes that this new program will have no material impact on the Corporation's operations or financial condition. Commercial Insurance and Other Third Party Plans Many commercial insurance plans, including group plans, reimburse their customers or make direct payments to the Corporation for charges at established rates. Generally, these plans pay semi- 45

98 private room rates plus ancillary service charges, which are subject to various limitations and deductibles depending on the plan. To the extent allowed by law, patients carrying such coverage are responsible to the hospital for any deficiency between the commercial insurance proceeds and total billed charges. Managed Care and Integrated Delivery Systems. 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 take many forms, several of which are discussed below. Further, many of these integration strategies are capital intensive and may create certain business and legal liabilities for the Corporation and any future Member of the Obligated Group. The Corporation has entered into contractual arrangements with PPOs, HMOs, and other similar managed care organizations ("MCOs"), pursuant to which it agrees to provide or arrange to provide certain health care services for these organizations' eligible enrollees. There can be no assurance that revenues received under such contracts will be sufficient to cover all costs of services provided. Failure of the revenues received under such contracts to cover all costs of services provided may have a material adverse effect on the future operations or financial condition of the Corporation. Medicare law states that MCO and provider contracts may include a physician incentive plan only if (1) no specific payment is made directly or indirectly under the plan to a physician or physician group as an inducement to reduce or limit medically necessary services furnished to an individual enrollee; and (2) the stop-loss protection, enrollee survey and disclosure requirements of this section are met. If an MCO and provider enter into an agreement that does not meet these requirements, CMS may apply intermediate sanction or the Office of Inspector General ("OIG") may apply civil monetary penalties. State Laws. 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 and any future Members of the Obligated Group could be subject to a variety of state health care laws and regulations, affecting both MCOs and health care providers. In addition, the Corporation and any future Members of the Obligated Group could be subject to state laws and regulations prohibiting, restricting, or otherwise governing PPOs, third-party administrators, physician-hospital organizations, independent practice associations or other intermediaries; fee-splitting; the "corporate practice of medicine"; selective contracting ("any willing provider" laws 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. Dependence Upon Third-Party Payors. The Corporation's and any future Member of the Obligated Group's ability to develop and expand their services and, therefore, profitability, is dependent upon their ability to enter into contracts with third-party payors at competitive rates. There can be no assurance that they will be able to attract third-party payors, and where they do, no assurance that they 46

99 will be able to contract with such payors on advantageous terms. The ability of the Corporation to contract with third-party payors on advantageous terms may be adversely affected by the increasing consolidation of such third-party payors. The inability of the Corporation or any future Member of the Obligated Group to contract with a sufficient number of such payors on advantageous terms would have a material adverse effect on the Obligated Group's future operations and financial results. Further, while the Corporation expects to control health care service utilization and increase quality, the Corporation cannot predict changes in utilization patterns or on health care providers. Physician Contracting and Relations. The Corporation and future Members of the Obligated Group may wish to contract with physician organizations ("POs") (e.g., independent physician practices or associations, physician-hospital organizations, faculty practice plans, etc.) to arrange for the provision of physician and ancillary services. Because POs are separate legal entities with their own goals, obligations to shareholders, financial status, and personnel, there are risks involved in contracting with the POs. The success of the Corporation and any future Members of the Obligated Group will be partially dependent upon their ability to contract with POs to participate in their network, and upon the POs', including their employed physicians', abilities to perform their obligations and deliver high quality patient care in a cost-effective manner. There can be no assurance that the Obligated Group will be able to contract with and retain the requisite number of POs, or that such POs will deliver high quality health care services. Without contracting with a sufficient number and type of POs, the Corporation could fail to be competitive, could fail to keep or attract payor contracts, or could be prohibited from operating until it has arranged for physician services necessary to provide adequate access for patients. Such occurrences could have a material adverse affect on the business or operations of the Corporation and any future Members of the Obligated Group. Regulation of the Health Care Industry Anti-Fraud and Abuse Laws. The Medicare and Medicaid Anti-Fraud and Abuse Amendments (the "Anti-Fraud and Abuse Law") provide for civil and criminal penalties and exclusion from the Medicare/Medicaid programs for knowing and willful solicitation, receipt, offer or payment of remuneration directly or indirectly in return for or to induce the referral of Medicare or Medicaid business. These penalties may be applied to cases where hospitals and physicians conduct joint business activities, physician recruiting and retention programs, various forms of hospital assistance to medical practices or the physician contracting entities, physician referral services, hospital-physician services or management contracts, and space or equipment rentals between hospitals and physicians. HHS has issued regulations from time to time setting forth so-called "safe harbors" that protect from prosecution under the statute certain limited types of arrangements. The Balanced Budget Act of 1997 provides for civil monetary penalties in the case of violations of the Anti-Fraud and Abuse Law in which a person contracts with an excluded provider for the provision of health care items or services where the person knows or should know that the provider has been excluded from participation in a federal health care program. Violation will result in damages three times the remuneration involved as well as penalty of $50,000 per violation. Similarly, the Illinois Insurance Claims Fraud Prevention Act (the "ICFPA") prohibits remuneration (in cash or kind) for patient referrals where ultimately an insurance company will pay claims. The penalty for violations of ICFPA include a civil penalty of $5,000 to $10,000 per violation, plus an assessment of not more than three times the amount of each claim for compensation under a contract of insurance. 47

100 Management believes the Corporation's arrangements are in material compliance with the Anti- Fraud and Abuse Law and the ICFPA; however, no assurance can be given that regulatory authorities will not take a contrary position. However, in light of the scarcity of case law interpreting the Anti-Fraud and Abuse Law and the ICFPA provisions, there can be no assurance that the Corporation or any future Member of the Obligated Group will not be found to have violated the Anti-Fraud and Abuse Law or the ICFPA provisions, and if so, whether any sanction imposed would have a material adverse effect on the operations of the Corporation or the financial condition of the Corporation. Health Insurance Portability and Accountability Act. The Health Insurance Portability and Accountability Act of 1996 ("HIPAA") prohibits the following practices, the commission of which may lead to civil monetary penalties: (1) the practice or pattern of presenting a claim for an item or service on a reimbursement code that the person knows or should know will result in greater payment than appropriate (i.e., upcoding); and (2) engaging in a practice of submitting claims for payment for medically unnecessary services. Violation of such prohibited practices could amount to civil monetary penalties of up to $10,000 for each item or service involved. Management of the Corporation does not expect that the prohibited practices provisions of HIPAA will affect the Obligated Group in a material respect. HIPAA also includes administrative simplification provisions intended to facilitate the processing of health care payments by encouraging the electronic exchange of information and the use of standardized formats for health care information. Congress recognized, however, that standardization of information formats and greater use of electronic technology present additional privacy and security risks due to the increased likelihood that databases of personally identifiable health care information will be created and the ease with which vast amounts of such data can be transmitted. Therefore, HIPAA requires the establishment of distinct privacy and security protections for individually identifiable health information. HHS issued privacy regulations that protect patient medical records and other personal health information maintained by health care providers, hospitals, health plans, health insurers, and health care clearinghouses. Under the privacy regulations, there are specific federal penalties if a patient's right to privacy is violated. For non-criminal violations of the privacy standards by the persons subject to the standards, including disclosures made in error, there are civil monetary penalties of $100 per violation up to $25,000 per year, per standard. In addition, criminal penalties are provided in HIPAA for certain types of violations of the statute that are done knowingly: up to $50,000 and one year in prison for obtaining or disclosing protected health information; up to $100,000 and up to five years in prison for obtaining or disclosing protected health information under "false pretenses"; and up to $250,000 and up to 10 years in prison for obtaining protected health information with the intent to sell, transfer or use it for commercial advantage, personal gain or malicious harm. HIPAA also mandates the establishment of security regulations. Under the security regulations, health care providers are required to implement administrative, physical and technical safeguards to protect the confidentiality, integrity and availability of the electronic protected health information, which they receive or create. The Corporation believes that operations and information systems comply with the HIPAA and privacy and security regulations, although there can be no assurance that the Corporation will not be found to have violated the regulations in any one instance. Finally, HHS promulgated regulations to standardize the electronic transfer of information pursuant to certain enumerated transactions, with a compliance deadline of October 16, Management of the Corporation believes that its healthcare facilities are in material compliance with the regulations to standardize the electronic transfer of information. 48

101 Self-Referral Laws. A federal law, commonly referred to as the Stark Law, prohibits a physician who has a financial relationship, or whose immediate family member has a financial relationship, with an entity (including a hospital), from referring a Medicare or Medicaid patient to the entity for certain designated health services, with limited exceptions. The Stark Law also prohibits the entity receiving the referral from filing a claim or billing for the services arising out of the prohibited referral. The prohibition applies regardless of the reasons for the financial relationship and the referral; that is, unlike the federal Anti-Fraud and Abuse Law, no finding of intent to violate the Stark Law is required. The Stark Law also requires an entity providing designated health services to report to HHS information concerning the entity's ownership, investment and compensation arrangements, including the covered services and items provided by the entity and the names and physician identification numbers of physicians (and immediate relatives) having a financial relationship with the entity. In addition to the Stark Law, many states, including Illinois, have also adopted self-referral laws. The Illinois statutory prohibition on self-referrals imposes broad prohibitions on the ability of a physician or other health care worker to refer patients to entities outside his or her group or office practice in which the physician or health care worker is an investor, subject to certain exceptions. Management believes that the Corporation's arrangements with physicians are in material compliance with the Stark Law and the Illinois prohibition on self-referrals; however, no assurances can be given that the federal or state regulatory authorities will not take a contrary position. On March 26, 2004, CMS published the Phase II Interim Final Stark II regulations. Those Phase II regulations had an effective date of July 26, The Phase II regulations cover those parts of the Stark Law that were not covered by Phase I, namely the ownership and investment exceptions to the general prohibition, the compensation arrangement exceptions to the general prohibition and the Stark Law's reporting provisions. Phase II also includes additional regulatory exceptions, definitions and CMS's response to public comments on the Phase I regulations. Such comments relate to certain revisions to rules covered by the Phase I regulations, which are incorporated into the Phase II materials as well. The final Phase III of the Stark Rule was published in the Federal Register on September 5, The rule finalizes the Phase II interim final rule that was published March 26, 2004, and responds to public comments on Phase II. Phase III provides interpretations of statutory exceptions and modifications under the Stark Law. The application of the "stand in the shoes" provision in the Phase III final rule, whereby referring physicians will be treated as "standing in the shoes" of their physician organizations for the purposes of applying the Stark rules describing direct and indirect compensation arrangements, will take effect on December 4, 2008 for compensation arrangements between: (i) faculty practice plans and another component within the same academic medical center; and (ii) integrated health care systems in which each affiliated organization is exempt from federal income taxation under Internal Revenue Code Section 501(c)(3) where the arrangement is between an affiliated designated health services entity and an affiliated physician practice within the same integrated health system, as CMS is reviewing the impact of this portion of the final rule on such entities. All other provisions of the Phase III final rule take effect on December 4, CMS issued the final 2008 Medicare physician fee schedule rule on November 1, 2007, and the rule is scheduled to be published in the Federal Register on November 27, In this final rule, CMS finalized its proposed Stark law revision that addresses revisions to the anti-markup rule. This provision, effective January 1, 2008, expands the prohibition on a physician practice marking up the cost of a purchased diagnostic test ordered by the physician practice when Medicare is billed for the service. Management of the Corporation believes that the Corporation is currently in material compliance with the Stark provisions. However, in light of the scarcity of case law interpreting the Stark provisions there can be no assurance that the Corporation or any future Member of the Obligated Group will not be 49

102 found to have violated the Stark provisions, and if so, whether any sanction imposed would have a material adverse effect on the operations of the Corporation or the financial condition of the Corporation. Physician Recruitment. The Internal Revenue Service ("IRS") and HHS have issued various pronouncements that could limit physician recruiting and retention arrangements. The IRS has stated that hospitals that provide financial incentives to physicians to recruit them or to retain them in the community risk loss of tax exempt status unless the incentives are necessary to serve a charitable purpose and, further, that improvement of a charitable hospital's financial condition does not necessarily constitute such a purpose. Management of the Corporation believes that the Corporation is in material compliance with the legal standards applicable to recruitment and retention arrangements and does not anticipate any adverse impact on the ability of the Corporation to recruit and retain physicians. Anti-Dumping. In response to concerns regarding inappropriate hospital transfers of emergency patients based on the patient's inability to pay for the services provided, Congress enacted, in 1986, the Emergency Medical Treatment and Active Labor Act. This so-called "anti-dumping" law imposes certain requirements on hospitals prior to 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 results of future operations or the financial condition of the Corporation. Illinois Hospital Report Card Act. In August of 2003, the Governor of Illinois signed into law the 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. In addition, hospitals must share with consumers, upon request, nurse staff schedules, nurse assignment rosters, methods to determine and adjust nurse staff schedules, and staff training information. 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 hospital data reports, it is difficult to anticipate what effect, if any, such state disclosures and public information may have on the operations of the Corporation. The foregoing description of policies affecting health care is not meant to be an all-inclusive discussion of aspects of federal law and regulation which may affect the level of reimbursement of the Corporation. Hospitals and affiliated providers operate in a complicated regulatory environment. These or other statutory or regulatory initiatives may affect the future revenues or results of operations of the Corporation. Corporate Practice of Medicine Many states prohibit general business corporations from practicing medicine, employing physicians, or even providing professional services under the supervision of a licensed practitioner. These laws are commonly referred to as "corporate practice of medicine" laws. Hospitals and certain hospital affiliates are excepted from the operation of the corporate practice of medicine doctrine under Illinois law. The Corporation believes it is in material compliance with current Illinois law on this subject. Physician Credentialing 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 50

103 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 and medical staffs. Such actions may include a wide variety of claims, some of which could result in substantial uninsured damages to a hospital. In addition, failure of the Corporation to adequately oversee the conduct of its medical staff may result in hospital liability to third parties. Malpractice Lawsuits and Insurance As with most academic medical center hospitals, there may be, at any point in time, a number of medical malpractice actions filed or pending against the Corporation. Generally, these will be paid or settled from insurance and/or self-insurance or captive insurance retention, and some will not be pursued by plaintiffs. However, certain actions may seek punitive or other damages, which may not be covered by insurance. The ability of the Corporation to insure or otherwise protect itself against malpractice claims and the cost of malpractice insurance or other protection may affect its operations or overall financial condition as the dollar amounts involved in patient damage recoveries are potentially significant. Nursing Shortages In recent years, the health care industry has suffered from a scarcity of nursing and other qualified health care technicians and personnel. Factors underlying this trend include a decrease in the number of persons entering the nursing profession and a shortage of faculty available to meet the demands of students seeking to enter the nursing profession. Any of these factors may be expected to intensify in the future, aggravating the shortage of nursing personnel or other qualified health care technicians and personnel. This trend could force the Corporation to pay higher salaries to nursing and other qualified health care technicians and personnel as competition for such employees intensifies. Labor Relations Not-for-profit health care providers and their employees are under the jurisdiction of the National Labor Relations Board. Unionization of additional employees of the Corporation or a shortage of qualified professional personnel could cause an increase in payroll costs beyond those projected. Moreover, a September 9, 2003 National Labor Relations Board decision (Advocate Health and Hospital Corp. and Physicians for Responsible Negotiation, N.L.R.B., No. 13-REC-20426, 9/9/03), which gave medical residents and fellows at Advocate Lutheran General Hospital the right to organize as a collective bargaining unit, may increase the likelihood that residents at other teaching hospitals will organize and collectively bargain on issues such as pay, benefits, and working conditions. The Corporation cannot control the prevailing wage rates in its service area and any increase in such rates will directly affect the costs of its operations. See the information in APPENDIX A under the heading "EMPLOYEES." 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 government reimbursement programs, there is no longer any justification for special tax treatment for the not for profit health care sector, and the availability for taxexempt status should be eliminated. Management of the Corporation cannot predict the likelihood for such a dramatic change in the law. Federal and state tax authorities are beginning to demand that taxexempt hospitals justify their tax-exempt status by documenting their charitable care and other 51

104 community benefits. For example, a July, 2007 discussion draft document prepared by the staff of Senate Finance Committee ranking Republican Charles Grassley (R-Iowa), proposed a five percent minimum charity care requirement for hospitals to maintain their tax exemption under Section 501(c)(3) of the Code. The document has been the topic of industry and Senate Finance Committee roundtable discussion but has not otherwise moved forward in the legislative process. 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 50 lawsuits filed against nonprofit 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 the state consumer fraud statutes; the defendants allowed a portion of their properties to be used by for-profit 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. Other Risk Factors Generally Affecting Health Care Facilities In the future, the following factors, among others, may adversely affect the operation of health care facilities, including those of the Corporation, to an extent that cannot be determined at this time: Adverse labor actions that could result in a substantial reduction in revenues without corresponding decreases in costs. The reduced need for hospitalization or other services arising from scientific advances, changes in demographics or a decline in the economic condition of the service area of the Corporation. Efforts by insurers, private employers and governmental agencies to limit the cost of hospital services by reducing the utilization of hospital facilities by such means as preventive medicine, improved occupational health and safety, outpatient care and rate negotiation. The cost and availability of any insurance, such as malpractice, fire, automobile, and general comprehensive liability, that health care organizations of a similar size and type generally carry. See the information in APPENDIX A under the heading "INSURANCE." Increases in expenses without corresponding increases in revenue could result from, among other factors, increases in the salaries, wages and fringe benefits of employees, increases in self-insurance charges, increases in costs associated with advances in medical technology or with inflation and future legislation which prevents or limits the ability of the Corporation to increase operating revenues. Regulatory actions, including, but not limited to, certificate of need laws which might limit the ability of health care providers to undertake capital improvements to their facilities or to develop new institutional health services. 52

105 Proposals to eliminate the tax-exempt status of bonds issued to finance health care facilities, or to limit the use of such tax-exempt bonds. The status of revenue rulings governing the tax-exempt status of charitable corporations may be changed by either the courts, the Internal Revenue Service or Congress, thereby requiring tax-exempt health care organizations, as a condition of maintaining their tax-exempt status, to provide increased indigent care at reduced rates or without charge. Instability in the stock market which may adversely affect both the principal value of, and income from, the Corporation's investment portfolio. Special Considerations Relating to the Series 2007 Bonds The Remarketing Agents are Paid by the Corporation. The Remarketing Agents' responsibilities include determining the interest rate from time to time and remarketing the related Series 2007 Bonds that are optionally or mandatorily tendered by the owners thereof (subject, in each case, to the terms of the related Remarketing Agreement), all as further described in this Official Statement. Each Remarketing Agent is appointed by the Corporation and is paid by the Corporation for its services. As a result, the interests of the Remarketing Agents may differ from those of existing holders and potential purchasers of the related Series 2007 Bonds. The Remarketing Agents Routinely Purchase Bonds for their Own Accounts. Each Remarketing Agent acts as remarketing agent for a variety of variable rate demand obligations and, in its sole discretion, routinely purchases such obligations for its own account in order to achieve a successful remarketing of the obligations (i.e., because there are otherwise not enough buyers to purchase the obligations) or for other reasons. Each Remarketing Agent is permitted, but not obligated, to purchase tendered related Series 2007 Bonds for its own account and, if it does so, it may cease doing so at any time without notice. Each Remarketing Agent may also make a market in the related Series 2007 Bonds by routinely purchasing and selling such related Series 2007 Bonds other than in connection with an optional or mandatory tender and remarketing. Such purchases and sales may be at or below par. However, each Remarketing Agent is not required to make a market in the related Series 2007 Bonds. Each Remarketing Agent may also sell any related Series 2007 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 Series 2007 Bonds. The purchase of related Series 2007 Bonds by a Remarketing Agent may create the appearance that there is greater third party demand for the Series 2007 Bonds in the market than is actually the case. The practices described above also may result in fewer Series 2007 Bonds being tendered in a remarketing. Bonds May be Offered at Different Prices on any Date Including an Interest Rate Determination Date. Pursuant to the related Remarketing Agreement, each Remarketing Agent is required to determine the applicable rate of interest that, in its judgment, is the lowest rate that would permit the sale of the related Series 2007 Bonds bearing interest at the applicable interest rate at par plus accrued interest, if any, on and as of the applicable determination date. The interest rate will reflect, among other factors, the level of market demand for the Series 2007 Bonds (including whether a Remarketing Agent is willing to purchase related Series 2007 Bonds for its own account). There may or may not be Series 2007 Bonds tendered and remarketed on an interest rate determination date, each Remarketing Agent may or may not be able to remarket any related Series 2007 Bonds tendered for purchase on such date at par and each Remarketing Agent may sell related Series 2007 Bonds at varying prices to different investors on such date or any other date. Each Remarketing Agent is not obligated to advise purchasers in a remarketing if it does not have third party buyers for all of the related Series 2007 Bonds at the remarketing price. In the event a Remarketing Agent owns any related Series 2007 Bonds for its own account, it may, in its sole 53

106 discretion in a secondary market transaction outside the tender process, offer such related Series 2007 Bonds on any date, including an interest rate determination date, at a discount to par to some investors. The Ability to Sell Series 2007 Bonds other than through Tender Process may be Limited. Each Remarketing Agent may buy and sell related Series 2007 Bonds other than through the tender process. However, it is not obligated to do so and may cease doing so at any time without notice and may require holders that wish to tender their Series 2007 Bonds to do so through the Tender Agent with appropriate notice. Thus, investors who purchase the Series 2007 Bonds, whether in a remarketing or otherwise, should not assume that they will be able to sell their Series 2007 Bonds other than by tendering the Series 2007 Bonds in accordance with the tender process. Under Certain Circumstances, the Remarketing Agents May be Removed, Resign or Cease Remarketing the Series 2007 Bonds, Without a Successor being Named. Under certain circumstances, each 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 Remarketing Agreement. Security for the Series 2007 Bonds Neither the Series 2007 Bonds nor the Series 2007 Obligations are secured by a pledge or mortgage of, or by a security interest in, or by a lien upon, any Property (including revenues) of the Corporation. Accordingly, should an event of default and acceleration of the Series 2007 Bonds or the Series 2007 Obligations occur, the Bond Trustee or the Master Trustee, as applicable, will be an unsecured creditor of the Corporation. As an unsecured creditor, the Bond Trustee or Master Trustee, as applicable, would have no right to proceed directly against any Property of the Corporation by foreclosure or otherwise as a method of recovery. Further, in the event the Bond Trustee or the Master Trustee were to obtain a judgment and place a judgment lien against the Corporation's land and facilities and seek foreclosure of that lien as a source of repayment of the Series 2007 Bonds and the Series 2007 Obligations, it could be difficult to find a buyer or lessee for such facilities because those facilities are not comprised of general-purpose buildings and generally would not be suitable for industrial or commercial use. Consequently, the Bond Trustee and the Master Trustee may not realize an amount sufficient to pay in full the Series 2007 Bonds and the Series 2007 Obligations from the sale or lease of those facilities. Further, the Corporation's title to the real property upon which the Feinberg and Galter pavilions are located, and upon which the new Prentice Women's Hospital is located, is subject to a right of reverter in favor of Northwestern University in the event such facilities are not used primarily for health care and related purposes. In the event of a default and acceleration of the Series 2007 Bonds or the Series 2007 Obligations, the existence of such reversionary interest may adversely impact the ability of the Bond Trustee and the Master Trustee to proceed against such facilities and may have a materially adverse effect upon the value of that property. Certain amendments to the Bond Indentures and the Loan Agreements may be made with the consent of the holders of not less than a majority of the principal amount of the outstanding related Series 2007 Bonds and certain amendments to the Master Indenture may be made with the consent of the holders of not less than a majority of the principal amount of outstanding Obligations. Such amendments may adversely affect the security of the Bondholders of the Series 2007 Bonds and, with respect to amendments to the Master Indenture, the holders of the requisite percentage of outstanding Obligations may be composed wholly or partially of the holders of Additional Obligations. Upon issuance of the Series 2007 Bonds, the Series 2007 Obligations will not constitute a majority in aggregate principal amount of Obligations outstanding under the Master Indenture. 54

107 Additional Indebtedness The Master Indenture does not limit the ability of the Corporation or the other Members of the Obligated Group to incur Additional Indebtedness. In addition, the Master Indenture permits the addition of Members of the Obligated Group notwithstanding the existence, when such Members enter the Obligated Group, of Liens on accounts receivable, assignable general intangibles or the proceeds thereof by such additional Members. The Master Indenture requires the Members of the Obligated Group to maintain a Debt Service Coverage Ratio of 1.0 to 1.0. Failure to maintain such coverage for one Fiscal Year may and for two successive Fiscal Years will constitute an Event of Default. The absence of limitations on the incurrence of Additional Indebtedness and the ability to expand the Obligated Group to include Members with unlimited, pre-existing Liens or the items described above could have a material adverse effect on the holders of the Series 2007 Bonds. See APPENDIX C "SUMMARY OF PRINCIPAL DOCUMENTS SUMMARY OF CERTAIN PROVISIONS OF THE FIRST SUPPLEMENTAL MASTER INDENTURE" for a summary of certain covenants related to Additional Indebtedness which are solely for the benefit of the Series 2004C Bond Insurer. Enforceability of the Master Indenture The liability of the Corporation under the Series 2007 Obligations will be limited as the liability of debtors typically is affected by bankruptcy or insolvency, by the application of general principles relating to creditors' rights and additionally as described below. The joint and several obligations described herein of the Members of the Obligated Group to make payments of debt service on Obligations issued pursuant to the Master Indenture, the proceeds of which Obligations were not loaned or otherwise distributed to such Member, may not be enforceable to the extent such payments (i) are requested on any Obligations which are issued for a purpose which is not consistent with the charitable purposes of the Member from which such payment, loan or transfer is requested, or which are issued for the benefit of any entity that is a not-for-profit corporation which is exempt from federal income taxes as the organization described in Section 501(c)(3) of the Code, and not a "private foundation," as defined in Section 509(a) of the Code; (ii) are requested to be made from any monies or assets which are donor restricted or which are subject to a direct or express trust which does not permit the use of such monies or assets for such a payment, loan or transfer; (iii) would result in the cessation or discontinuation of any material portion of the health care or related services previously provided by the Member from which such payment, loan or transfer is requested; or (iv) are requested to be made pursuant to any loan violating applicable usury laws. The extent to which the assets of any present or future Member falls within the category referred to in clause (ii) above cannot now be determined. A Member of the Obligated Group may not be required to make payments on Obligations issued by or for the benefit of another Member to the extent such transfer would render such Member insolvent, would conflict with or not be permitted by applicable laws or would be subject to recovery for the benefit of other creditors of such Member under applicable laws. There is no clear precedent in the law as to whether payments by a Member in order to pay debt service on the Obligations issued by or for the benefit of another Member may be voided by a trustee in bankruptcy in the event of a bankruptcy of such Member or by third-party creditors in an action brought pursuant to Illinois fraudulent conveyance statutes. Under the United States Bankruptcy Code a trustee in bankruptcy and, under Illinois fraudulent conveyance statutes, a creditor of a related guarantor may avoid any obligation incurred by a related guarantor if, among other bases therefor, (i) the guarantor has not received fair consideration or reasonably equivalent value in exchange for the guaranty, or (ii) the guaranty renders the guarantor insolvent, as defined in the United States Bankruptcy Code or Illinois fraudulent conveyance statutes, or (iii) the guarantor is undercapitalized. 55

108 Application by courts of the tests of "insolvency," "reasonably equivalent value" and "fair consideration" has resulted in a conflicting body of case law. It is possible that, in an action to force a Member to pay debt service on the Obligations issued by or for the benefit of another Member, a court might not enforce such a transfer in the event it is determined that such Member is analogous to a guarantor and that fair consideration or reasonably equivalent value for such guaranty was not received and that the incurrence of such obligation has rendered and will render the Member of the Obligated Group insolvent or the Member is or will thereby become undercapitalized There exists, in addition to the foregoing, common law authority and authority under Illinois statutes for the ability of the Illinois courts to terminate the existence of a not-for-profit corporation or undertake supervision of its affairs on various grounds, including a finding that such corporation has insufficient assets to carry out its stated charitable purposes or has taken some action which renders it unable to carry out such purposes. Such court action may arise on the court's own motion or pursuant to a petition of the Illinois Attorney General or such other persons who have interests different from those of the general public pursuant to the common law and statutory power to enforce charitable trusts and to see to the application of their funds to their intended charitable uses. Potential Effects of Bankruptcy If the Corporation were to file a petition for relief or if a petition were filed against the Corporation under the United States Bankruptcy Code, the filing would operate, among other things, as an automatic stay of the commencement or continuation of any judicial or other proceeding against the Corporation, and its property. In various circumstances, such property, including its accounts receivable and proceeds thereof, could be used for the benefit of the Corporation despite the claims of its creditors. In a proceeding under Chapter 11 of the United States Bankruptcy Code, the Corporation could file a plan of reorganization which modifies the rights of creditors generally or the rights of any class of creditors, secured or unsecured. The plan, when confirmed by the court, would bind all creditors except, under very limited circumstances, creditors without notice or knowledge of the plan and would discharge all claims against the debtor. No plan may be confirmed unless, among other conditions, the plan is in the best interests of creditors, is feasible and has been accepted by each class of claims impaired thereunder. 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 allowed claims of the class that are voted with respect to the plan are cast in its favor. Even if the plan is not so accepted (but if all other conditions to confirmation under the Bankruptcy Code have been satisfied), it may be confirmed if the court finds that the plan is fair and equitable with respect to each class of non-accepting claims or interests impaired thereunder and does not discriminate unfairly. Corporate Compliance Program The Corporation has implemented a compliance program which includes a compliance plan to assist all employees in understanding and adhering to the legal and ethical standards that govern hospital operations and the provision of patient care (the "Compliance Plan"). The Compliance Plan has been designed to (i) comply with the standards set forth in the Federal Sentencing Guidelines for Organizational Defendants and (ii) help assure that the Corporation and its affiliates act in accordance with their mission, values and known legal duties. Antitrust Enforcement of antitrust laws against health care providers has increased in recent years. 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. 56

109 Violators of the antitrust laws could be subject to criminal and civil enforcement by federal and state agencies, as well as by private litigants. At various times, the Corporation may be subject to an investigation by a governmental agency charged with the enforcement of the antitrust laws, or may be subject to administrative or judicial action by a federal or state agency or a private party. The most common areas of potential liability are joint activities among providers with respect to payor contracting, medical staff credentialing, and use of a hospital's local market power for entry into related health care businesses. Hospitals also regularly have disputes regarding credentialing and peer review and, therefore, may be subject to liability in this area. Environmental Laws and Regulations Health care providers are subject to a wide variety of federal, state and local environmental and occupational health and safety laws and regulations which address, among other things, the operations, facilities and properties owned or operated by health care organizations. Among the type of regulatory requirements faced by health care organizations are air and water quality control requirements, waste management requirements, specific regulatory requirements applicable to asbestos, polychlorinated biphenyls and radioactive substances, requirements for providing notice to employees and members of the public about hazardous materials handled by or located at the health care institution, requirements for training employees in the proper handling and management of hazardous materials and wastes, and other requirements. In its role as an owner and operator of properties or facilities, the Corporation may be subject to liability for investigating and remedying any hazardous substances that may have migrated off of its property. Typical health care operations include, but are not limited to, in various combinations, the handling, use, storage, transportation, disposal and discharge of hazardous, infectious, toxic, radioactive, flammable and other hazardous materials, wastes, pollutants or contaminants. As such, health care operations are particularly susceptible to the practical, financial and legal risks associated with compliance with such laws and regulations. Such risks may result in damage to individuals, property or the environment, interrupt operations and increase their cost, result in legal liability, damages, injunctions or fines and result in investigations, administrative proceedings, penalties or other governmental agency actions. There is no assurance that the Corporation will not encounter such risks in the future, and such risks may result in material adverse consequences to the operations or financial condition of the Corporation. At the present time, management of the Corporation is not aware of any pending or threatened claim, investigation or enforcement action regarding such environmental issues which, if determined adversely to the Corporation, would have a material adverse effect on the financial condition of the Corporation. Internal Revenue Code Compliance The Internal Revenue Service has determined that the Corporation is a tax-exempt organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (the "Code"), and exempt from taxation under Section 501(a) of the Code. As a tax-exempt, charitable organization, the Corporation and its operations are subject to various requirements specified by the Code and the regulations promulgated thereunder. Compliance with those requirements is necessary to maintain the tax-exempt status of the Corporation. Loss of tax-exempt status by the Corporation could result in loss of tax exemption of the Series 2007 Bonds and of other tax-exempt debt issued for the benefit of the Corporation, and defaults in covenants regarding the Series 2007 Bonds and other related tax-exempt debt would likely be triggered. Such an event would have material adverse consequences on the financial condition of the Corporation. The Internal Revenue Service (the "IRS") has announced that it intends to 57

110 closely scrutinize transactions between nonprofit corporations and for-profit entities, including transactions relating to the Anti-Fraud and Abuse Law, and in particular has issued revised audit guidelines for tax-exempt health care entities. Taxing authorities in certain jurisdictions have sought to impose or increase taxes related to the property and operations of non-profit organizations, including hospitals, particularly where such authorities are dissatisfied with the amount of service provided to indigents. At the federal level, however, the IRS has ruled that the tax-exempt status of nonprofit hospitals is not dependent upon their acceptance of patients who cannot pay. It is possible that future administrative or judicial proceedings could have the effect of requiring nonprofit institutions to increase their services to indigent patients to retain their tax-exempt status. In recent years, the Internal Revenue Service has issued a number of formal and informal statements or interpretations, which have increased uncertainty of the Internal Revenue Service's position on a wide variety of activities commonly undertaken by health care organizations, including the arrangements of such organizations with physicians and physician groups. As a result, tax-exempt hospitals and other providers are currently subject to an increased degree of scrutiny and possibly enforcement by the Internal Revenue Service with respect to such activities. Legislation adopted by Congress in 1996 provides the IRS with an "intermediate" sanctions system of federal excise taxes to combat violations by tax-exempt organizations of the private inurement prohibition of the Code. Previous to the "intermediate sanctions law," the IRS could punish such violations only through revocation of an entity's tax-exempt status. Intermediate sanctions may be imposed where there is an "excess benefit transaction," defined to include a disqualified person (i.e., an insider) (1) engaging in a non-fair market value transaction with the tax-exempt organization; (2) receiving unreasonable compensation from the tax-exempt organization; or (3) receiving payment in an arrangement that violates the private inurement proscription. Intermediate sanctions may be imposed by the IRS either in lieu of or in addition to revocation of exemption. The legislation is potentially favorable to taxpayers since it provides the IRS with a punitive option short of exemption revocation to deal with incidents of private inurement. However, the standards for tax exemption have not been changed and the IRS still has authority for revoking tax-exempt status in appropriate circumstances. In 1990 the former Employee Plans and Exempt Organizations Division of the IRS expanded the Coordinated Examination Program (or CEP) of the IRS to tax-exempt health care organizations. CEP audits are conducted by teams of revenue agents. The CEP audit teams consider a wide range of possible issues, including the community benefit standard, private inurement and private benefit, partnerships and joint ventures, retirement plans and employee benefits, employment taxes, tax-exempt bond financing, political contributions and unrelated business income. To date, the Corporation has not been the subject of a CEP audit. However, no assurance can be given as to whether the Corporation will be subject to a CEP audit in the future or, if any, what effect such an audit would have on the Corporation. Tax-Exempt Status; Continuing Legal Requirements The tax-exempt status of interest on the Series 2007 Bonds presently depends upon maintenance by the Corporation of its status as an organization described in Section 501(c)(3) of the Code. The maintenance of such status is contingent on compliance with general rules promulgated in the Code and related regulations regarding the organization and operation of tax-exempt hospitals and health systems. See "Tax Exemption" herein. Neither of the Bond Indentures nor the Master Indenture provides for the payment of any additional interest or penalty in the event the interest on the Series 2007 Bonds of any Subseries becomes included in gross income for federal income tax purposes. 58

111 Although the IRS has only infrequently taxed the interest received by holders of bonds that were represented to be tax-exempt, the IRS has examined a number of bond issues and concluded that such bond issues did not comply with applicable provisions of the Code and related regulations. No assurance can be given that the IRS will not examine a Bondholder, the Corporation or the Series 2007 Bonds of any Subseries. If the Series 2007 Bonds of any Subseries are examined, it may have an adverse impact on their marketability and price. Cost and Availability of Insurance In the past few years, the insurance market for casualty and professional liability insurance has tightened significantly with respect to both cost and availability of coverage, resulting in escalating fees and premiums and in some cases a lack of adequate coverage. See "INSURANCE" in APPENDIX A hereto for additional information regarding insurance coverage of the Corporation. Bond Ratings There is no assurance that the ratings assigned to the Series 2007 Bonds of each Subseries at the time of issuance will not be lowered or withdrawn at any time, the effect of which could adversely affect the market price for, and marketability of, such Series 2007 Bonds. See "RATINGS" herein. Market for Series 2007 Bonds Subject to prevailing market conditions, each related Underwriter intends, but is not obligated, to make a market in the related Series 2007 Bonds. There is presently no secondary market for the Series 2007 Bonds and no assurance that a secondary market will develop. Consequently, investors may not be able to resell Series 2007 Bonds purchased by them should they need or wish to do so for emergency or other purposes. Initial Liquidity Facility Agreements Each Subseries of the Series 2007 Bonds will initially be supported by an Initial Liquidity Facility Agreement, pursuant to which the related Bank will agree, under certain circumstances, to provide funds for the purchase of the Series 2007 Bonds of the Subseries supported by the related Initial Liquidity Facility Agreement that are tendered for purchase in the event such Series 2007 Bonds are not remarketed or remarketing proceeds are not made available. In the event that the related Bank becomes insolvent or bankrupt, no assurance can be given that funds of the related Bank would be available to pay the purchase price of any tendered Series 2007 Bonds of the related Subseries. 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 2007 Bonds of any Subseries or questioning or affecting the validity of the Series 2007 Bonds of any Subseries or the proceedings or authority under which they are to be issued. Neither the creation, organization or existence 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 pending (as to which the Authority has received service of process) or, to the actual knowledge of the Authority, threatened against the Authority that in any manner questions the right of the Authority to enter into the 59

112 Loan Agreements with the Corporation or to secure the Series 2007 Bonds in the manner provided in the Bond Indentures and the Act. The Corporation The Corporation has determined that except as described herein (i) no litigation, proceedings or investigations are pending for which it has received service of process or written notice or, to its knowledge, threatened against it or its officers except litigation, proceedings or investigations in which the probable ultimate recoveries and the estimated costs and expenses of defense (a) will be entirely within applicable insurance policy limits (including, commercial insurance and self-insurance or captive insurance retentions), subject to applicable deductibles, or (b) will not have a materially adverse effect on the Corporation's operations or condition, financial or otherwise; and (ii) no litigation, proceedings or investigations are pending for which it has received service of process or written notice or, to its knowledge, threatened which in any manner questions the validity of, or the right of the Corporation to effect, the plan of finance described herein or use the proceeds of the Series 2007 Bonds for the purposes described herein. LEGAL MATTERS Certain legal matters incident to the authorization, issuance and sale by the Authority of the Series 2007 Bonds will be subject to the approving opinion of Jones Day, Chicago, Illinois, Bond Counsel to 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 internal General Counsel and by its special counsel, Sonnenschein Nath & Rosenthal LLP, Chicago, Illinois. Certain legal matters will be passed upon for the Banks by its special counsel, Winston & Strawn LLP, Chicago, Illinois, and for UBS AG by its internal Swiss counsel and for The Bank of Nova Scotia by its Canadian counsel, Fasken Martineau Dumoulin LLP. Certain legal matters will be passed upon for the Underwriters by their special counsel, Ungaretti & Harris LLP, Chicago, Illinois. TAX EXEMPTION The Code contains a number of requirements and restrictions which apply to each series of the Series 2007 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 Corporation have covenanted to comply with all requirements of the Code that must be satisfied in order for the interest on each series of the Series 2007 Bonds to be excludible from gross income for federal income tax purposes. Failure to comply with certain of such covenants could cause interest on such Series 2007 Bonds to become includible in gross income for federal income tax purposes retroactively to the date of issuance of such Series 2007 Bonds. Each series of Series 2007 Bonds will be treated as a separate issue of tax-exempt bonds for purposes of the Code. Subject to compliance by the Authority and the Corporation with the above-referenced covenants, under present law, in the opinion of Bond Counsel, interest on the Series 2007 Bonds of each series 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 2007 Bonds of each series will be taken into account, however, in 60

113 computing an adjustment used in determining the alternative minimum tax for certain corporations, and in computing the "branch profits tax" imposed on certain foreign corporations. In rendering its opinions, Bond Counsel will rely upon (i) 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 2007 Bonds and the Series 2004A Bonds and the application of the proceeds of the Series 2007 Bonds and (ii) the verification report of Causey Demgen & Moore Inc., Denver, Colorado, described herein under the caption "VERIFICATION OF MATHEMATICAL COMPUTATIONS." See APPENDIX D to this Official Statement for the proposed forms of Bond Counsel's opinions for the Series 2007 Bonds. The Code includes provisions for an alternative minimum tax ("AMT") for corporations. The AMT, if any, depends upon a corporation's alternative minimum taxable income ("AMTI"), which is a 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). "Adjusted current earnings" would include all tax-exempt interest, including interest on the Series 2007 Bonds. Under the provisions of Section 884 of the Code, a branch profits tax is levied on the "effectively connected earnings and profits" ("ECEP") of certain foreign corporations. ECEP includes tax-exempt interest such as interest on the Series 2007 Bonds. Ownership of the Series 2007 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 and taxpayers who may be deemed to have incurred (or continued) indebtedness to purchase or carry the Series 2007 Bonds. Prospective purchasers of the Series 2007 Bonds should consult their tax advisors as to applicability of any such collateral consequences. The market value and marketability of the Series 2007 Bonds may be adversely affected by future changes in federal or State of Illinois tax treatment of interest on the Series 2007 Bonds or by future modifications of the Code or the regulations issued thereunder. Interest on the Series 2007 Bonds is not exempt from present Illinois income taxes. RATINGS Moody's Investors Service ("Moody's") and Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies ("S&P"), are expected to assign the ratings set forth on the cover page of this Official Statement to the Series 2007 Bonds. The short-term ratings assigned to the Series 2007 Bonds of each Subseries are contingent upon the execution and delivery of the related Initial Liquidity Facility Agreement. The long-term ratings assigned to the Series 2007 Bonds of each Subseries reflect the underlying rating of the Corporation. The ratings and an explanation of their significance may be obtained from the rating agency furnishing such rating. Such ratings reflect only the respective views of the rating agencies. The ratings are not recommendations to buy, sell or hold the Series 2007 Bonds of any Subseries. The ratings are subject to revision or withdrawal at any time, and any such revision or withdrawal may affect the market price or marketability of the Series 2007 Bonds of Subseries. 61

114 Generally, rating agencies base their ratings on the information and materials so furnished and on investigations, studies, and assumptions by the ratings agencies. There is no assurance that a particular rating will be maintained for any given period of time or that it will not be lowered or withdrawn entirely if, in the judgment of the agency originally establishing the rating, circumstances so warrant. The Authority, the Underwriters and the Corporation have undertaken no responsibility to bring to the attention of the holders of the Series 2007 Bonds any proposed revision or withdrawal of any rating of the Series 2007 Bonds of any Subseries or to oppose any such proposed revision or withdrawal. Any such change in or withdrawal of such rating could have an adverse effect on the market price or marketability of such Series 2007 Bonds. INDEPENDENT AUDITORS The consolidated financial statements of Northwestern Memorial HealthCare and Subsidiaries ("NMHC and Subsidiaries") as of August 31, 2007 and 2006 and for the years then ended, included in APPENDIX B to this Official Statement have been audited by Ernst & Young LLP, independent auditors, as stated in their report appearing in APPENDIX B. The audited consolidated financial statements of NMHC and Subsidiaries included in APPENDIX B hereto include Northwestern Memorial HealthCare and other affiliates of the Corporation which are not Members of the Obligated Group. For the fiscal year ended August 31, 2007, the Corporation comprised 97% and 93%, respectively, of the total unrestricted net assets and total revenue of the consolidated financial results of NMHC and Subsidiaries. Series 2007A Bonds UNDERWRITING Pursuant to a purchase contract by and among the Authority, the Corporation and UBS Securities LLC ("UBS Securities"), UBS Securities will purchase the Subseries 2007A-1/A-3 Bonds at an aggregate purchase price of $107,012,977, which represents the par amount of the Subseries 2007A-1/A-3 Bonds, less an underwriting discount of $237,023. The purchase contract will provide that UBS Securities will purchase all the Subseries 2007A-1/A-3 Bonds, if any are purchased, and require the Corporation to indemnify UBS Securities and the Authority under certain circumstances. The initial public offering price for the Subseries 2007A-1/A-3 Bonds may be changed, from time to time, by UBS Securities. Pursuant to a purchase contract among the Authority, the Corporation and J.P. Morgan Securities Inc. ("JPMorgan Securities"), JPMorgan Securities will purchase the Subseries 2007A-2/A-4 Bonds at an aggregate purchase price of $107,019,412, which represents the par amount of the Subseries 2007A-2/A-4 Bonds, less an underwriting discount of $230,588. The purchase contract will provide that JPMorgan Securities will purchase all the Subseries 2007A-2/A-4 Bonds, if any are purchased, and require the Corporation to indemnify JPMorgan Securities and the Authority under certain circumstances. The initial public offering price for the Subseries 2007A-2/A-4 Bonds may be changed, from time to time, by JPMorgan Securities. Series 2007B Bonds Pursuant to a purchase contract by and among the Authority, the Corporation and UBS Securities, on its own behalf and as representative of Loop Capital Markets LLC (the "Subseries 2007B-1 Underwriters"), the Subseries 2007B-1 Underwriters will purchase the Subseries 2007B-1 Bonds at an 62

115 aggregate purchase price of $74,834,250, which represents the par amount of the Subseries 2007B-1 Bonds, less an underwriting discount of $165,750. The purchase contract will provide that the Subseries 2007B-1 Underwriters will purchase all the Subseries 2007B-1 Bonds, if any are purchased, and require the Corporation to indemnify the Subseries 2007B-1 Underwriters and the Authority under certain circumstances. The initial public offering price for the Subseries 2007B-1 Bonds may be changed, from time to time, by the Subseries 2007B-1 Underwriters. Pursuant to a purchase contract by and among the Authority, the Corporation and JPMorgan Securities, on its own behalf and as representative of Loop Capital Markets LLC (the "Subseries 2007B-2 Underwriters"), the Subseries 2007B-2 Underwriters will purchase the Subseries 2007B-2 Bonds at an aggregate purchase price of $74,838,750, which represents the par amount of the Subseries 2007B-2 Bonds, less an underwriting discount of $161,250. The purchase contract will provide that the Subseries 2007B-2 Underwriters will purchase all the Subseries 2007B-2 Bonds, if any are purchased, and require the Corporation to indemnify the Subseries 2007B-2 Underwriters and the Authority under certain circumstances. The initial public offering price for the Subseries 2007B-2 Bonds may be changed, from time to time, by the Subseries 2007B-2 Underwriters. VERIFICATION OF MATHEMATICAL COMPUTATIONS A portion of the proceeds of the Series 2007 Bonds will be used to purchase eligible securities (the "Escrowed Obligations") to be held in trust to provide for payment of principal of and interest on the Series 2004A Bonds through their call date for redemption prior to maturity. The arithmetical accuracy of certain computations included in the schedules provided by or on behalf of the Corporation relating to computation of anticipated receipts of principal and interest on the Escrowed Obligations to pay the regularly scheduled debt service on the Series 2004A Bonds through their call date and to redeem the Series 2004A Bonds on that call date will be examined by Causey Demgen & Moore Inc., Denver, Colorado, a firm of independent certified public accountants. Such computations are based solely upon assumptions and information supplied by or on behalf of the Corporation. Causey Demgen & Moore Inc. has restricted its procedures to verifying the arithmetical accuracy of certain computations and has not made any study or evaluation of the assumptions and information upon which the computations are based and, accordingly, has not expressed an opinion on the data used, the reasonableness of the assumptions, or the achievability of future events. EXEMPTION FROM CONTINUING DISCLOSURE REQUIREMENTS The continuing disclosure provisions of Rule 15c2-12 under the Securities and Exchange Act of 1934, as amended (the "Rule"), are not applicable to the Series 2007 Bonds, and the Corporation will not initially be obligated to provide ongoing information to Bondholders. In the event that Series 2007 Bonds of any Subseries are converted to a Term Rate, a Fixed Rate or an Auction Rate, the Corporation agrees in the related Loan Agreement to comply with any continuing disclosure requirements that comply with the Rule as then in effect. The Corporation files information with the Nationally Recognized Municipal Securities Information Repositories on an quarterly basis pursuant to a continuing disclosure agreement entered into connection with the Series 2004C Bonds. The Corporation makes no representation or warranty that such filings will continue. 63

116 MISCELLANEOUS The summaries or descriptions of provisions of the Act, the Series 2007 Bonds, the Series 2007 Obligations, the Loan Agreements, the Bond Indentures, the Master Indenture, the Initial Liquidity Facility Agreements and the Series 2007 Bank Obligations, and all references to other materials not purporting to be quoted in full, are only brief outlines of some of the provisions thereof and do not purport to summarize or describe all of the provisions thereof. Reference is made to the Act, the Series 2007 Bonds, the Series 2007 Obligations, the Loan Agreements, the Bond Indentures, the Master Indenture, the Initial Liquidity Facility Agreements and the Series 2007 Bank Obligations, and such other materials for a full and complete statement of the provisions thereof. Such documents are on file at the offices of the Authority and following delivery of the Series 2007 Bonds will be on file at the offices of the Bond Trustee. So far as any statements made in this Official Statement involve matters of opinion or estimates, whether or not expressly stated, they are set forth as such and not as representations of fact, and no representation is made that any of such statements will be realized. Neither this Official Statement nor any statement which may have been made orally or in writing is to be construed as a contract with the owners of the Series 2007 Bonds. It is anticipated that the CUSIP identification numbers will be printed on the Series 2007 Bonds, but neither the failure to print such numbers nor any error in the printing of such numbers shall constitute a failure or refusal by any purchaser thereof to accept delivery of and pay for any Series 2007 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 that relates to the Corporation, the Obligated Group and its property, has approved all such information for use within this Official Statement and has duly authorized, executed and delivered this Official Statement. 64

117 This Official Statement is approved: NORTHWESTERN MEMORIAL HOSPITAL By: /s/ Peter J. McCanna Executive Vice President, Administration and Chief Financial Officer 65

118 [THIS PAGE INTENTIONALLY LEFT BLANK]

119 APPENDIX A NORTHWESTERN MEMORIAL HOSPITAL The information contained in this Appendix A has been obtained from Northwestern Memorial Hospital and from other sources as shown herein

120 TABLE OF CONTENTS Page INTRODUCTION...A-1 HISTORY AND BACKGROUND...A-1 CORPORATE STRUCTURE AND AFFILIATED CORPORATIONS...A-2 GOVERNANCE...A-4 EXECUTIVE MANAGEMENT STAFF...A-7 NMHC MISSION AND STRATEGY...A-9 CURRENT HOSPITAL OPERATIONS, LOCATION AND DESCRIPTION OF EXISTING FACILITIES...A-10 SERVICE AREA...A-15 MEDICAL STAFF...A-17 LICENSES, ACCREDITATIONS AND MEMBERSHIPS...A-19 HISTORICAL UTILIZATION OF SERVICES...A-20 SUMMARY OF FINANCIAL RESULTS...A-21 MANAGEMENT S DISCUSSION OF FINANCIAL PERFORMANCE...A-24 RESEARCH...A-25 MEDICAL SCHOOL AFFILIATION AND MEDICAL EDUCATION...A-27 SHARED SERVICES...A-29 EMPLOYEES...A-29 INSURANCE...A-29 AFFILIATIONS AND GROWTH...A-30

121 NORTHWESTERN MEMORIAL HOSPITAL INTRODUCTION Northwestern Memorial Hospital (the Hospital or NMH ) is an academic medical center in downtown Chicago, Illinois that provides a complete range of adult inpatient and outpatient services in an educational and research environment. The Hospital has 897 licensed beds 1 and is the primary teaching hospital for the Feinberg School of Medicine ( FSM or the Medical School ) of Northwestern University (the University or NU ). The Feinberg and Galter Pavilions, which were opened in May 1999, house the Hospital s primary inpatient care units and medical office building. The approximately 2.1 million square-foot facility includes 490 licensed beds (consisting of 398 medical/surgical beds and 92 intensive care unit ( ICU ) beds) and houses 25 physician practices. The new Prentice Women s Hospital 2 ( new Prentice ), located one block north, opened on October 20, New Prentice houses obstetrics, neonatology, gynecology, and gynecology/oncology services as well as inpatient medical oncology. The approximately 947,500 square-foot facility includes 328 licensed beds (134 obstetrics inpatient beds, 86 Level III neonatal ICU bays, 36 women s care inpatient beds, and 72 adult medical/surgical inpatient beds). Births at Prentice have grown over 11% from 9,464 in 2003 to 10,534 in Based on number of births, Prentice is the tenth largest hospital obstetrics program in the country, and the largest in Illinois 3. The Stone Institute of Psychiatry ( Stone Institute ) houses the remaining 79 licensed beds for inpatient psychiatry. The Hospital has several other buildings on its medical campus in downtown Chicago that provide additional health care and administrative services. Capitalized terms used, but not defined in this Appendix A have the meanings given in the front part of this Official Statement. The Hospital is a not-for-profit corporation organized and existing under the laws of the State of Illinois and is exempt from federal income taxation pursuant to Section 501(a) of the Internal Revenue Code of 1986, as amended ( the Code ), as an organization described in Section 501(c)(3) of the Code and which is not a private foundation within the meaning of Section 509(a) of the Code. Northwestern Memorial HealthCare, an Illinois not-for-profit corporation ( NMHC ), serves as the sole corporate member of the Hospital and Northwestern Memorial Foundation, an Illinois not-for-profit corporation (the Foundation or NMF ). The Hospital is the sole corporate member or shareholder of four subsidiary corporations. NMHC, the Foundation, NMH and the four subsidiary corporations are collectively referred to herein as Northwestern Memorial. The Hospital is the only Member of the Obligated Group and therefore the only entity in Northwestern Memorial obligated to make payments on the Obligations or the Series 2007 Bonds. HISTORY AND BACKGROUND Northwestern Memorial Hospital is founded on a long tradition of leadership in patient care, education, and research. NMH was formed by the consolidation of Chicago Wesley Memorial Hospital ( Wesley ) and Passavant Memorial Hospital ( Passavant ) on September 1, Passavant was founded in 1865, and Wesley was founded in In the mid-1920s, the predecessors of Wesley Not all licensed beds are staffed. Refer to Historical Utilization of Services herein for a definition of licensed and staffed beds. The new Prentice Women s Hospital, which opened on October 20, 2007, now houses all of the services previously operated under the same name Prentice Women s Hospital in the Prentice/Stone Pavilion located two blocks east of the new location. For clarity in this Appendix A, the Prentice Women s Hospital located at its new location is referred to as the new Prentice. The new Prentice building also contains two floors used for adult inpatient medical/surgical care. Based on American Hospital Association Survey 2007 database. A-1

122 affiliated with the Chicago Medical College, which later became the Feinberg School of Medicine. See the information under the caption heading, MEDICAL SCHOOL AFFILIATION AND MEDICAL EDUCATION herein. The Prentice Women s Hospital and Maternity Center was formed though a merger in 1975 of NMH and the Women s Hospital and Chicago Maternity Center. The Stone Institute, which was initially operated by the University, was subsequently merged into the operations of the Hospital in CORPORATE STRUCTURE AND AFFILIATED CORPORATIONS Northwestern Memorial is comprised of NMHC, NMH, the Foundation and four subsidiaries under the Hospital. The following is a brief description of each Northwestern Memorial entity, other than the Hospital, which is described in further detail herein. Financial information on each Northwestern Memorial entity is shown on the consolidating schedules included in the NMHC consolidated audited financial statements in Appendix B hereto. Northwestern Memorial HealthCare NMHC serves as the sole corporate member of NMH and NMF. NMHC has significant reserved powers and must approve certain actions of its subsidiaries as described below in GOVERNANCE. A-2

123 Northwestern Memorial Foundation The Foundation is a not-for-profit corporation organized and existing under the laws of the State of Illinois and is exempt from federal income taxation pursuant to Section 501(a) of the Code as an organization described in Section 501(c)(3) of the Code and which is not a private foundation within the meaning of Section 509(a) of the Code. The Foundation conducts fundraising and other related development activities in support of the Hospital and its mission, including providing funding for research, education and community service. The Foundation raises philanthropic funds from individuals, corporations and foundations and through community fundraising organizations. As of August 31, 2007, the Foundation had total assets of $575 million and net assets of $539 million. In addition, the Foundation raised funds of $24 million in the fiscal year ending August 31, The Foundation granted $43 million and $29 million to the Hospital in the fiscal years ended August 31, 2006 and 2007, respectively. Included in the grants to the Hospital in the fiscal years ended August 31, 2006 and 2007, respectively, were $19 million and $9 million for construction of new Prentice. There is no assurance as to the level of contribution, if any, that the Foundation will make to the Hospital in any future fiscal year. Northwestern Memorial Physicians Group The Hospital is the sole corporate member of Northwestern Memorial Physicians Group ( NMPG ), a not-for-profit corporation organized and existing under the laws of the State of Illinois that is exempt from federal income taxation pursuant to Section 501(c)(3) of the Code. NMPG is an 80- provider (60 physicians and 20 other clinical practitioners) primary care practice of the Hospital. NMPG provides a wide range of primary care services, including internal medicine, obstetrics, gynecology, pediatrics, dermatology, occupational medicine, travel medicine, integrative medicine and executive health and operates 13 offices located throughout metropolitan Chicago. Northwestern HealthCare Corporation The Hospital is the sole shareholder of Northwestern HealthCare Corporation ( NHC ), an Illinois corporation. NHC is a clinically integrated physicians organization that coordinates managed care contracting on behalf of the participating medical staff of the Hospital. Additionally, NHC supports physician practices by providing credentialing, expected reimbursement reports, payer notices, and quality improvement and utilization management. Northwestern Memorial Insurance Company The Hospital is the sole shareholder of Northwestern Memorial Insurance Company ( NMIC ). NMIC was incorporated in the Cayman Islands in September 2002 to serve as a risk financing vehicle for NMH and certain other affiliated indemnified parties. NMIC currently provides coverage to a defined group of indemnities including NMHC and its subsidiaries and Northwestern Medical Faculty Foundation ( NMFF ). NMFF is an unconsolidated, not-for-profit, multispecialty group practice which serves as the clinical faculty practice plan arm of FSM and is one of the faculty components of the academic medical center. For additional information, see INSURANCE herein. Northwestern Memorial Home Health Care The Hospital is the sole corporate member of Northwestern Memorial Home Health Care ( NMHHC ), a not-for-profit corporation organized and existing under the laws of the State of Illinois that is exempt from federal income taxation pursuant to Section 501(c)(3) of the Code. On July 15, 2005, the NMHHC Board of Directors adopted a plan to dispose of substantially all of its assets. The sale of assets was completed in fiscal year 2006 with a realized gain of $10.2 million. Results of NMHHC s operations have been classified as discontinued operations. A-3

124 GOVERNANCE NMHC Board of Directors The sole corporate member of the Hospital is NMHC, which, pursuant to the articles of incorporation and bylaws of NMHC and the Hospital, has certain reserved powers over the Hospital. These NMHC reserved powers over the Hospital include, but are not limited to, the right to: elect and remove members of the Board of Directors of the Hospital; nominate officers for approval by the Hospital s Board of Directors; approve contracting policy; approve or require asset transfers outside the Hospital and any organization controlled by the Hospital; approve the incurrence of indebtedness by the Hospital and any organization controlled by the Hospital; approve the strategic plans of the Hospital and any organization controlled by the Hospital; approve the annual budget of the Hospital and any organization controlled by the Hospital; consult with the Hospital regarding the Hospital s annual budgets; approve capital acquisitions; require participation in capital acquisition strategies; require the maintenance of adequate insurance programs; and approve participation in networks, affiliations, joint ventures, mergers and acquisitions. In addition, NMHC has certain reserved powers over the subsidiaries of the Hospital. NMHC is not obligated to make any payments on the Series 2007 Bonds or the Obligations. The Board of Directors of NMHC is authorized to consist of members (there are currently 16 members) and includes ex-officio the President and Chief Executive Officer of NMHC, the Chair Emeritus of the NMHC Board of Directors, the chairs of the Board s standing committees, the Chair of the Foundation Board, at least one member of the NMH medical staff, and at least two concurrently serving NMH directors. Ex-officio members are voting members of the Board. Directors, other than ex-officio directors, are elected to three-year terms with a maximum of twelve consecutive years. Directors serve without remuneration except for expenses actually incurred. The Board meets at least quarterly, and holds an annual meeting during the first quarter of the calendar year. The standing committees and subcommittees assisting the Board include the Executive, Finance, Audit, and Nominating and Corporate Governance Committees. The Board also has two subcommittees, the Executive Compensation Subcommittee and the Investment Subcommittee, which are subcommittees of the Executive and Finance Committees, respectively. The Audit Committee provides oversight to NMHC s corporate compliance, integrity and internal audit services. The Audit Committee is also responsible for engaging a qualified independent public accounting firm and meets with the auditor after completion of the audit to receive, review and accept the independent auditor s report. All members of the Audit Committee are independent directors. The Executive Committee of the NMHC Board currently consists of 8 members, and includes the President and Chief Executive Officer of NMHC as a voting member. Subject to any limitations imposed by the NMHC Board of Directors and except where prohibited by law, the Executive Committee has the power to act for the NMHC Board between board meetings. A-4

125 The following is a list of individuals who currently serve on the NMHC Board of Directors, their business affiliations and their total years of service on the NMHC Board (which may not be consecutive). Directors Business Affiliations Years of Service 4 Edward M. Liddy* Chairman Chairman Allstate Insurance Company John A. Canning, Jr.* Chairman Vice Chairman Madison Dearborn Partners LLC William A. Osborn* Chairman and CEO Vice Chairman Northern Trust Corporation Dean M. Harrison* President and CEO Northwestern Memorial HealthCare and Northwestern Memorial Hospital Thomas A. Cole* Chairman, Executive Committee Sidley Austin LLP Peter D. Crist Chairman Crist Associates, LLC William M. Daley Chairman, Midwest Region JP Morgan Chase & Co. James M. Denny* Chairman Gilead Sciences Sandra L. Helton Former Executive VP & CFO Telephone and Data Systems, Inc James A. Hill, M.D. Chief of Staff Northwestern Memorial Hospital W. James McNerney, Jr. Chairman, President and CEO The Boeing Company Robert L. Parkinson, Jr.* Chairman and CEO Baxter International Inc. Philip J. Purcell, III Former Chairman & CEO Morgan Stanley J. Christopher Reyes Chairman Reyes Holdings LLC Larry D. Richman President and Chief Executive Officer PrivateBancorp, Inc. Scott C. Smith* President Tribune Publishing Company * Member of the Executive Committee NMH Board of Directors The Hospital is the sole shareholder of NMIC and NHC and sole corporate member of NMPG and NMHHC and has certain reserved powers over its subsidiary corporations. These powers include, but are not limited to, the right to: elect and remove members of the boards of directors of the subsidiaries; approve asset transfers outside Northwestern Memorial; approve the incurrence of indebtedness; and approve annual budgets. Certain of these actions must also be approved by NMHC. The Board of Directors of the Hospital is authorized to consist of members (there are currently 16) including the following ex-officio members: the President and Chief Executive Officer of NMHC, the President and Chief Executive Officer of NMH, the chairs of the standing committees of the Hospital, the chief of staff of the NMH Medical Staff (as hereinafter defined), and the Dean of the Years of service are determined through January A-5

126 Medical School. Ex-officio directors are voting members of the Board. Directors, other than ex-officio directors, are elected to three-year terms with a maximum service of 12 consecutive years. Directors serve without remuneration except for expenses actually incurred. The Board meets at least quarterly. The Professional Standards Committee is the sole standing committee of the Hospital Board. The following is a list of individuals who currently serve on the NMH Board of Directors, their business affiliations and their total years of service on the NMH Board (which may not be consecutive). Directors Business Affiliations Years of Service 5 Edward M. Liddy Chairman 6 Chairman Allstate Insurance Company John A. Canning, Jr. Chairman 10 Vice Chairman Madison Dearborn Partners LLC Maria C. Bechily President 1 Maria Bechily Public Relations Carol L. Bernick Executive Chairman 2 Alberto Culver Company William J. Brodsky Chairman and CEO 2 Chicago Board Options Exchange Gregory Q. Brown Executive Vice President 1 Motorola Inc. Thomas A. Cole Chairman, Executive Committee 8 Sidley Austin LLP Thomas P. Flanagan Vice Chairman 3 Deloitte & Touche LLP Sharon Gist Gilliam Former Chief Executive Officer 6 The Chicago Housing Authority Dean M. Harrison President and CEO 7 Northwestern Memorial HealthCare and Northwestern Memorial Hospital James A. Hill, M.D. Chief of Staff 2 Northwestern Memorial Hospital J. Larry Jameson, M.D., Dean, Feinberg School of Medicine 6 PhD Northwestern University Lee M. Mitchell Managing Partner 6 Thoma Cressey Bravo Homi B. Patel Chairman and CEO 1 Hartmarx Corporation Abra Prentice Wilkin Civic Leader 6 Richard L. Wixson, M.D. Attending Physician Northwestern Memorial Hospital 7 Potential Conflicts of Interest The Hospital does business with certain firms and businesses with which various members of its Board of Directors are affiliated. NMHC has a conflict of interest policy applicable to the Hospital which requires, in connection with any actual or possible conflict of interest, that any Board member with a financial interest in a transaction or arrangement discloses such interest to the Board and follows an appropriate conflict management plan. The plan may include abstaining from voting on any such matter. The Hospital believes that any such transactions are on terms and conditions no less favorable to the Hospital than those with unrelated third parties. 5 Years of service are determined through January A-6

127 EXECUTIVE MANAGEMENT STAFF The day-to-day operations and long-term management planning for the Hospital are handled by the key officers listed below. Dean M. Harrison, BS, MBA President and Chief Executive Officer Dean M. Harrison is President and Chief Executive Officer of NMHC and the Hospital, a position he was appointed to in September 2006 after serving as the President of the Hospital since Before joining Northwestern Memorial in July of 1998 as Senior Vice President, Corporate Operations, he was President and Chief Operating Officer of the University of Chicago Health System. Mr. Harrison earned a Bachelor of Science Degree in 1977 from Indiana University and a Master of Business Administration from St. Francis College, Ft. Wayne, Indiana, in He is immediate past chair of the Metropolitan Chicago Healthcare Council Board of Directors, a member of the Board of Directors for the University HealthSystem Consortium (UHC), a member of the Board of Directors of United Way Metropolitan Chicago, a member of the Board of Directors of the Illinois Hospital Association, and he serves on the Administrative Board of the Council of Teaching Hospitals. Mr. Harrison is a member of The Economic Club of Chicago, The Commercial Club of Chicago, World President s Organization, The Institute of Medicine of Chicago and the Business Leadership Group for Workforce Chicago 2.0. Peter J. McCanna, BA, MA Executive Vice President, Administration and Chief Financial Officer Mr. McCanna was appointed Chief Financial Officer of NMHC and the Hospital in August 2002 and was promoted to Executive Vice President, Administration and Chief Financial Officer in September He is responsible for finance, audit, insurance, quality, planning, community relations, information technology, facilities, real estate, and strategic planning. Prior to joining Northwestern Memorial, Mr. McCanna was the Senior Vice President and Chief Financial Officer at Presbyterian Healthcare Services in Albuquerque, New Mexico, since He directed all finance functions for the integrated health care organization that includes seven hospitals, a physician group, home care agency and HMO. Prior to joining Presbyterian Healthcare Services, Mr. McCanna spent six years at the University of Colorado Hospital, Denver, where he also served as Chief Financial Officer. Mr. McCanna graduated from the University of Michigan in He earned his Master s in Public Affairs from the University of Texas at Austin s LBJ School of Public Affairs. He is a member of the Healthcare Financial Management Association and the Health Management Academy. Dennis M. Murphy, BA, MHA Executive Vice President and Chief Operating Officer Dennis Murphy was appointed Executive Vice President and Chief Operating Officer of NMHC and the Hospital in September He is responsible for Hospital operations and the development of the new Prentice, which opened on October 20, Prior to this role, Mr. Murphy served as Vice President, Operations. A-7

128 Before joining Northwestern Memorial in 2000, Mr. Murphy was the Vice President of Ambulatory Services and Business Development at the University of Chicago Hospitals. Prior to this experience, he spent ten years at Johns Hopkins Hospital in a variety of roles from Administrative Fellow to Medicine Department Administrator. Mr. Murphy earned a Bachelor of Arts Degree in 1986 from the University of Notre Dame and a Master of Healthcare Administration from Duke University in Julie L. Creamer, RN, MS Senior Vice President of Quality and Planning Ms. Creamer was promoted in September 2006 to Senior Vice President of Quality and Planning of the Hospital with responsibility for Quality and Business Development. Ms. Creamer led the organizational Quality and Patient Safety initiatives as Vice President since 2001, and prior to this served for six years as Vice President, Operations and Chief Nurse Executive. Ms. Creamer received her Bachelor of Science in Nursing in 1980 from Marquette University and received her Masters of Science from the University of Illinois, Chicago in In addition to her work at NMH, Ms. Creamer has made a number of national presentations on a variety of topics to such organizations as the American Organization of Nurse Executives, the American Hospital Association, the Institute for Healthcare Improvement and the Scottsdale Institute. Michelle A. Janney, RN, BSN, MSN, PhD, CNAA-BC Senior Vice President and Chief Nurse Executive Ms. Janney was appointed Vice President, Operations and Chief Nurse Executive at Northwestern Memorial Hospital in August 2002 and promoted to Senior Vice President and Chief Nurse Executive in Prior to joining NMH, she was Vice President and Chief Nurse Executive at West Virginia University Hospitals, concurrently serving as the Associate Dean of Clinical Services for West Virginia University s School of Nursing. Ms. Janney received a Bachelor of Science Degree in Nursing from the University of Toledo in 1980, a Master of Science Degree in Nursing from the Medical College of Ohio in 1987, and a PhD in Administration and Leadership from the University of Toledo in She is a graduate of the Wharton Fellows Program in Management for Nurse Executives at the University of Pennsylvania and the Leadership at the Peak Program at the Center for Creative Leadership. Ms. Janney holds membership in Sigma Theta Tau, the international honor society for nursing. In 2007, Ms. Janney won the national election to the Board of Directors for the American Organization of Nurse Executives representing Illinois, Indiana, Michigan, Ohio, and Wisconsin. She also sits on the American Hospital Association Regional Policy Board, the Board of Directors for the Commission on Accreditation of Healthcare Management Education and The Joint Commission s Hospital Advisory Council. Carol M. Lind, BA, JD Senior Vice President and General Counsel Ms. Lind was appointed Senior Vice President and General Counsel of NMHC and the Hospital in June Prior to becoming General Counsel, Ms. Lind served as Senior Vice President, Governance and Strategy. In addition, Ms. Lind currently serves as NMHC s Chief Integrity Executive. A-8

129 Prior to joining Northwestern Memorial in 2006, Ms. Lind was a Partner in the Corporate and Securities Group in the law firm of Sidley Austin LLP, focusing on corporate counseling and governance, mergers and acquisitions and securities offerings. She received her Juris Doctor with honors from The University of Chicago in 1994 and her Bachelor of Arts from Williams College in Dean L. Manheimer, BA, MA Senior Vice President Human Resources Mr. Manheimer was appointed Senior Vice President of Human Resources in June He joined NMH as a Vice President in May Prior to joining Northwestern Memorial, Mr. Manheimer served as Vice President of Human Resources for CareGroup, a six hospital, 11,500-employee health system in Boston, Massachusetts. Prior to the merger into CareGroup, he also served as Senior Vice President of Human Resources at Pathway Health Network and Deaconess Hospital. Mr. Manheimer received his Bachelor of Arts degree from the University of Wisconsin, Madison in 1973 and his Master of Arts from Boston College in He has also completed Harvard Business School s Executive Management Program. Mr. Manheimer currently serves on the Business Leadership Group for Workforce Chicago 2.0, the faculty of the Institute for Healthcare Improvement and the Medical and Health Careers Academy Advisory Board of the Chicago Public Schools. Charles M. Watts, BS, MD Senior Vice President and Chief Medical Officer Dr. Watts joined the Hospital as the Senior Vice President and Chief Medical Officer in November Dr. Watts was previously at the University of Michigan, where for eight years he served as Chief of Clinical Affairs (Chief Medical Officer), as well as Medical Director, Medical Intensive Care Unit and Clinical Associate Dean in the Medical School. Dr. Watts received his medical degree in 1967 from the University of Michigan, where he also received his residency training in internal medicine and pulmonology, specializing in critical care. His research interests have included severity adjustment in the intensive care unit, quality improvement measurement, and acute respiratory distress syndrome. He is an active member of the American College of Chest Physicians, The American College of Physicians, The American Thoracic Society, Health Management Academy and The Society of Critical Care Medicine. NMHC MISSION AND STRATEGY NMHC and its subsidiaries are committed to providing the highest quality of care in an academic environment. To fulfill this commitment, NMHC is guided by a fundamental mission statement. NMHC Mission Statement Northwestern Memorial HealthCare is an academic medical center where the patient comes first. We are an organization of caregivers who aspire to consistently high standards of quality and costeffectiveness. We seek to improve the health of the communities we serve by delivering a broad range of services with sensitivity to the individual needs of our patients and their families. NMHC is bonded in an essential academic and service relationship with the Feinberg School of Medicine of Northwestern A-9

130 University. The quality of our services is enhanced through their integration with education and research in an environment that encourages excellence of practice, critical inquiry, and learning. NMHC Strategic Plan The NMHC strategic plan has three goals for Northwestern Memorial: 1) to provide the Best Patient Experience from the patient s perspective, 2) to recruit, develop and retain the Best People who share the organization s values and achieve results, and 3) to develop the resources to achieve our mission and vision through Exceptional Financial Performance. Each goal has specific objectives, strategies and tactics that are achieved through the long range financial plan, annual implementation plans, and annual budget and capital plans. In 2004, a joint planning group comprised of representatives from the Hospital, NU, NMFF and the Medical Staff developed a Statement of Opportunity describing the interdependent relationships of NU, NMH and the Medical Staff: We will capitalize on the collaborative partnership among the medical school, faculty and hospital to: foster clinical care innovation and provide the best patient experience; create and disseminate new knowledge; cultivate future leaders; and apply our combined resources and expertise to accelerate Northwestern s recognition as a great academic medical center. Building upon this statement, this group has worked together in a number of different areas ranging from clinical program planning to quality of care initiatives and related stabilization of the professional liability coverage expense. In 2007, eight planning teams comprised of over 100 participants from NU, NMH and the Medical Staff were launched. These teams include the traditional elements of an academic medical center Research, Education, and Patient Care and five additional elements the joint planning group defined as essential to the vision. These include: Community Engagement, Exceptional Financial Performance, Faculty Development & Best People, Ideal/Best Patient Experience, and National Leader in Quality & Patient Safety. Each team is charged with developing the visionary plan for their element. These plans will be integrated over the next twelve to eighteen months. Hospital Operations CURRENT HOSPITAL OPERATIONS, LOCATION AND DESCRIPTION OF EXISTING FACILITIES The Hospital is one of the major referral hospitals in the Midwest and provides a full range of medical and surgical specialty services. The Hospital has 897 licensed beds and in the fiscal year ended August 31, 2007, had more than 43,000 admissions. The Hospital has 33 units dedicated to the special care of patients recovering from a wide range of clinical disorders and surgeries that include such procedures as laser brain surgery, total hip-joint replacements, heart, kidney and liver transplants, and treatments for high-risk mothers and infants. Technologically advanced equipment at the Hospital includes full field digital mammography, multi-slice spiral Computed Tomography (CT), single photon emission CT, stereotactic radiosurgery, robotic surgery, linear accelerators that treat cancer, positron emission tomography (PET) scanners, and a minimally invasive surgery training laboratory. In January 2008, a central telemetry monitoring station will be opened, allowing for a 65% increase in telemetry monitoring capability from a central site. The Hospital has been designated as an Adult Level I Trauma Center. The Emergency Room is staffed 24 hours a day, 7 days a week by physicians who specialize in emergency medicine, with a wide array of medical specialists available for consultation. It also serves as a resource hospital for the Emergency Medical Services system operated in conjunction with the Chicago Fire Department. In addition, the Hospital has a 23-bed Emergency Department Observation Unit ( EDOU ). A-10

131 The Hospital provides care for the infants born at or transferred to NMH, including care in its Level III special care nursery staffed by neonatologists. The Hospital does not provide inpatient pediatrics services, but utilizes the pediatric faculty of NU based at Children s Memorial Hospital ( CMH ) to provide post partum physicals and specialty consultations, neonatology physician coverage and developmental evaluation services. The Hospital also does not provide inpatient rehabilitation services, but works closely with the Rehabilitation Institute of Chicago ( RIC ) located on the Medical Campus. See SHARED SERVICES herein. A more detailed description of the Hospital s location and the services provided in each of the Hospital s primary buildings, including the new Prentice, is provided in the following section. Hospital Location The primary clinical facilities of the Hospital consist of the Galter and Feinberg Pavilions, new Prentice, the Stone Institute, and Olson Pavilion. These facilities are all located in the Streeterville neighborhood of Chicago. Streeterville is located immediately to the northeast of the Loop, Chicago s main business district, and is bounded on the east by Lake Michigan. The neighborhood is also surrounded by the Gold Coast residential area to the north and the Michigan Avenue Magnificent Mile retail and hotel district one block to the west. The Streeterville area is located within Chicago s approximately 6 square mile Central Area 6. The Central Area has seen dramatic residential and office growth during the past decade, with strong growth projected for the next ten years. The residential population grew at a compound annual growth rate of 10.2% - from 83,200 in 2000 to 135,061 in The Central Area is forecasted to grow by an additional 60,000 from 2005 to The population of this area is forecasted to be 208,719 by The Hospital is the only acute care hospital located in this dynamic community, a significant source of increasing patient volume. The Hospital s pavilions and other support and auxiliary buildings are part of a 25-acre medical campus (the Medical Campus ). This Medical Campus covers an area comprising approximately seven city blocks in Streeterville and also includes FSM, NU s School of Law, the Robert H. Lurie Medical Research Center, and RIC. CMH plans to build the Ann and Robert H. Lurie Children s Hospital of Chicago on the Medical Campus with an anticipated opening in This facility will replace the current Children s Memorial Hospital located in the Lincoln Park neighborhood of Chicago. The Medical Campus also includes the Veterans Administration ( VA ) Lakeside Medical Center (the VA Lakeside ) and research facility which were purchased by the hospital in 2005 and leased back to the VA through January 17, The VA s only remaining operations in this facility are outpatient related and the facility is expected to close in December See AFFILIATIONS AND GROWTH herein. Also located near the Medical Campus are the headquarters of several health care organizations the American College of Surgeons, the American Medical Association, the American Dental Association, the American College of Healthcare Executives and the American Hospital Association. The following is a map of the Medical Campus. 6 The Central Area approximate boundaries are Division Street to the north, Halsted Street to the west, 18 th Street to the south and Lake Michigan to the east. A-11

132 A-12

133 Feinberg and Galter Pavilions The Feinberg and Galter Pavilions opened on time and on budget in May The approximately 2.1 million square-foot facility houses a total of 490 licensed beds, including 398 medical/surgical beds and 92 ICU beds. The facility also includes 22 general outpatient observation beds, 28 emergency department bays, 23 beds in the EDOU, 32 operating rooms and 25 physician practices. The inpatient tower, which is in the Feinberg Pavilion, and medical office tower, which is in the Galter Pavilion, are supported by a common base, containing the operating suite, radiology, laboratory, cardiac catheterization laboratory and other ancillary and supporting services. The inpatient tower provides private rooms for all patients. Having all major services in one building improves patient care quality, efficiency, and convenience. The positioning of diagnostic and treatment functions in the common base promotes flexibility and efficiency through the easy availability of advanced technology to both Hospital and physician office patients. The medical office tower was developed jointly with NMFF. NMFF is an unconsolidated, notfor-profit, multi-specialty group practice with over 700 members which serves as the clinical faculty practice plan arm of FSM and is one of the faculty components of the academic medical center. NMFF is an independent corporation determined to be an organization exempt from federal income taxation pursuant to Section 501(c)(3) of the Code and which is not a private foundation within the meaning of Section 509(a) of the Code. NMFF owns and occupies 425,000 square feet on seven floors in the Galter Pavilion. NMH constructed and sold to NMFF the external components of the seven floors while NMFF constructed the internal build-out of the floors. NMH and NMFF also entered into other arrangements concerning the use and management of the Galter Pavilion related to the joint ownership. The Hospital is exploring adding 56 licensed beds and additional observation beds to the Galter Pavilion to help meet the needs of the community. Any increase in licensed beds will require a certificate of need ( CON ) from the Illinois Health Facilities Planning Board (the Planning Board ). There is no assurance that the Hospital will submit the application, that a CON will be granted by the Planning Board or if the CON is granted, that it will be for 56 beds. Prentice Women s Hospital NMH opened new Prentice on October 20, 2007, on time and on budget, providing an expanded state of the art facility to house its large and growing obstetrics and gynecology program. The new approximately 947,500 square-foot facility cost approximately $507 million. The new Prentice enables NMH to provide comprehensive care to women and serves as an entry point to Northwestern Memorial for women and their families. The new Prentice houses a wide range of women s services, including 256 licensed beds consisting of 134 obstetric beds, 8 breast and plastic surgery beds, 28 gynecology / gynecology-oncology beds and 86 neonatal intensive care unit beds. The new Prentice also contains 32 labor, delivery and recovery rooms, 4 caesarean section rooms, 12 labor and delivery observation rooms, 10 operating rooms and 144 normal nursery bassinets. New Prentice has capacity for 13,500 deliveries annually. Surgery capacity was expanded from six operating rooms to ten, with a corresponding increase in recovery areas from 18 to 30. The first three floors include a women s health center offering a variety of women s health information, classes, educational sessions, health programs, and screening for diseases specific to women s health along with retail, dining and conference facilities. The new Prentice also includes a comprehensive breast center and complete diagnostic and therapeutic services. In addition, in response to growing demand for medical/surgical inpatient services, two floors of the new Prentice were built to accommodate an addition of 72 adult medical oncology inpatient beds A-13

134 licensed by a CON granted on April 25, Radiation oncology was also added to new Prentice to ensure continuity of care and expanded services for the oncology patient population. A portion of the Series 2007 Bond proceeds will finance or reimburse the Hospital for certain costs of the approximately $35.5 million 72 bed expansion. Stone Institute of Psychiatry The third major NMH inpatient facility on the Medical Campus is the Stone Institute of Psychiatry. Located at 320 East Huron Street and opened in 1975, the Stone Institute houses the Hospital s inpatient psychiatry program consisting of 79 licensed (55 staffed) acute mental illness beds. Administrative services supporting the inpatient program are also located in Stone. NMH leases the land under the Stone Institute from NU. According to the agreement between NMH and NU, the lease will terminate three years after the Hospital has received all required certificates of occupancy for new Prentice. A plan to relocate the inpatient psychiatry program is currently in development. Olson Pavilion The Olson Pavilion/Health Sciences Center opened in NMH and the University built Olson Pavilion as a joint venture. The land is leased from a land trust formed by the University, and NMH and the University each use approximately half of the building. The University space is used for research and other programs. The Hospital space in the Olson Pavilion currently contains pathology, human resources, and a 44-chair renal dialysis program operated by the Renal Care Group on the fourth floor. Renal Care Group is an unaffiliated entity leasing space to provide these services. In addition, the Hospital expanded its surgery capacity in 2004 by opening an Ambulatory Surgery Center (the Center ) on the 6 th floor of the Olson Pavilion. The nearly 43,000 square-foot Center is comprised of 10 operating rooms and 30 preparation/recovery stations. It is licensed under the Hospital as an extension of the Hospital s main surgery program located in the Feinberg Pavilion. Outpatient services currently include general surgery and specialty surgery such as ophthalmology, hand, otolaryngology (ENT), oral, plastic, orthopaedic, and vascular surgery. 676 North St. Clair The 676 North St. Clair building is a 26-story commercial office building owned by NMH and located directly west of the Feinberg and Galter Pavilions. The building was built in 1980 and has approximately 598,000 rentable square feet. To date, the building has primarily been 32% direct patient care and 68% administrative use. In 2007, NMH began executing a plan to transition 676 North St. Clair to a medical/clinical building. In March 2007, the Hospital entered into a 10-year lease for approximately 150,000 square feet in an office building at 541 North Fairbanks, located three blocks south of the Feinberg Pavilion. The Hospital took possession of approximately 100,000 square feet in 2007 and will take possession of the remaining 50,000 square feet in late Several administrative functions will move to the new location from 676 North St. Clair. The Hospital expects that the building use for 676 North St. Clair will be comprised of approximately 65% direct patient care and 35% administrative use once this transition is fully executed. In addition, NMH received CON approval in 2007 for an Outpatient Imaging Center to be located in 676 North St. Clair. The Imaging Center will expand services and convenience for outpatients, while freeing up capacity within the Feinberg/Galter imaging departments to accommodate the growth in inpatient demand for imaging services. The Imaging Center is planned to open in fiscal year A-14

135 Other Facilities Other facilities owned by the Hospital include administrative buildings at 240 East Ontario (5 floors) and 259 East Erie Street (7 floors); an outpatient imaging center at 441 East Ontario containing three of the Hospital s MRIs; and a 1,093-space parking facility at Erie Street and McClurg Court for employee parking. The Hospital leases space for administrative and clinical functions in several buildings adjacent to the Medical Campus for wellness, the Developmental Evaluation Clinic, Prentice Ambulatory Care Clinic and a resale shop at 46 East Chicago Avenue. The Hospital also leases space for records management and archiving on 18 th Street south of the Loop. As the Medical Campus continues to evolve, the physical connections between the facilities have been an important aspect of ensuring efficient patient, visitor and staff flow. The Feinberg and Galter Pavilions are connected by bridges spanning Huron Street to NU s parking garage and to the Olson Pavilion. A bridge connects Feinberg to the Robert H. Lurie Medical Research Center and the Stone Institute, providing an enclosed patient travel corridor. In addition, tunnel connections through the Olson Pavilion tie new Prentice to services at the Feinberg and Galter Pavilions. The Hospital is currently planning construction of a bridge connecting the 676 North St. Clair building to the Galter Pavilion scheduled to begin in 2008 after receipt of final permits. It is also expected that the new Prentice will be connected by bridge to NU s parking garage upon the completion of the construction of the Ann and Robert H. Lurie Children s Hospital of Chicago. The Hospital may consider opportunities for acquisition of land on or outside of the Medical Campus for future growth. See AFFILIATIONS AND GROWTH herein. SERVICE AREA 7 The Hospital divides its total service area into three markets: the seven-county area; the City of Chicago; and the primary service area ( PSA ). The seven counties surrounding and including the City of Chicago are responsible for approximately 91.5% of the Hospital s total admissions. The seven-county market had a calendar year 2005 population of 8,698,621. The Hospital competes with community and teaching hospitals throughout the seven-county market. This market is very competitive and includes 82 acute care hospitals. Despite the competitive nature of the seven-county market, the Hospital is the current single hospital market leader with a 4.2% market share. The City of Chicago (including the PSA) is responsible for approximately 64% of the Hospital s total admissions. In calendar year 2005, the City of Chicago had a population of 3,213,632. The Hospital is one of five academic medical centers located in the greater Chicago Metropolitan area, four of which are located within the City of Chicago, including Rush University Medical Center (Rush) and the University of Illinois at Chicago Medical Center (UIC) on the west side of the City, The University of Chicago Hospitals & Health System (U of C) on the south side of the City, and NMH. The fifth academic medical center, Loyola University Medical Center, is located to the west of the city. NMH is the market share leader in the City of Chicago with a 7.9% market share. St. Elizabeth/St. Mary of Nazareth Hospital Center is second with a 6.6% market share. 7 The market share information in this section was obtained from the Illinois Hospital Association s COMPdata system covering fiscal year 1997 fiscal year 2007 YTD (Sept 06-June 07). The system is based on discharge data that hospitals are required to file with the State of Illinois. Population projections are based on the 2005 Census, Appraisal Research Corporation (for Central Service Area), Third Wave Analysis and NMH Business Development Analysis. The information on the number of hospitals and staffed bed counts are from the 2006 Illinois Department of Public Health Annual Hospital Profiles. A-15

136 The following map shows the PSA and the City of Chicago as well as the location of NMH and the other academic medical centers in the greater Chicago metropolitan area. NMH PRIMARY SERVICE AREA Primary Service Area The PSA consists of the 21 ZIP codes 8 contiguous to the Hospital and is responsible for approximately 38% of the Hospital s total admissions. The boundaries of the Hospital s PSA extend north of the Hospital to Devon Avenue and Ridge Road, west to Pulaski Road, south to 16th Street, and east to Lake Michigan. The PSA had a population in calendar year 2005 of 880,191. Within the Hospital s PSA, there are twelve acute care hospitals, a pediatric hospital, a long-term acute care facility, a rehabilitation hospital, a neurologic and orthopedic hospital, and a psychiatric hospital. The twelve acute care hospitals operate 2,684 staffed beds. The five specialty facilities operate an additional 691 staffed beds. 8 PSA zip codes include 60601, 60602, 60603, 60604, 60605, 60606, 60607, 60610, 60611, 60613, 60614, 60616, 60618, 60622, 60625, 60640, 60647, 60654, 60657, and A-16