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n.PRELIMINARY OFFICIAL STATEMENT DATED JUNE 16, 2016

NEW ISSUE Ratings: Moody’s: Baa3S&P: BBB

See “RATINGS” herein

In the opinion of Hawkins Delafield & Wood LLP, Bond Counsel to the Authority, under existing statutes and court decisions and assuming continuing compliance with certain tax covenants described herein, (i) interest on the Series 2016A Bonds is excluded from gross income for Federal income tax purposes pursuant to Section 103 of the Internal Revenue Code of 1986, as amended (the “Code”), and (ii) interest on the Series 2016A Bonds is not treated as a preference item in calculating the alternative minimum tax imposed on individuals and corporations under the Code; such interest, however, is included in the adjusted current earnings of certain corporations for purposes of calculating the alternative minimum tax imposed on such corporations. In addition, in the opinion of Bond Counsel to the Authority, under existing statutes, interest on the Series 2016A Bonds is exempt from the State of Maine income tax imposed on individuals. See “TAX MATTERS” herein.

$174,035,000*Maine Health and Higher Educational Facilities Authority

Revenue Bonds, Eastern Maine Healthcare Systems Obligated Group Issue, Series 2016A

Dated: Date of Delivery Due: July 1, as shown on the inside cover

The above-referenced bonds (the “Series 2016A Bonds”) are issuable only as fully registered bonds and, when issued, will be registered in the name of Cede & Co., as nominee for The Depository Trust Company (“DTC”), New York, New York. DTC will act as securities depository for the Series 2016A Bonds. Purchases of the Series 2016A Bonds will be made in book-entry form, in the denomination of $5,000 or any integral multiple thereof. Purchasers will not receive certificates representing their interest in Series 2016A Bonds purchased. So long as Cede & Co. is the Bondholder, as nominee for DTC, references herein to the Bondholders or registered owners shall mean Cede & Co., as aforesaid, and shall not mean the Beneficial Owners of the Series 2016A Bonds.

Principal and semiannual interest on the Series 2016A Bonds will be paid by U.S. Bank National Association, Boston, Massachusetts, as Paying Agent. So long as DTC or its nominee, Cede & Co., is the Bondholder, such payments will be made directly to such Bondholder. Interest will be payable on January 1, 2017 and semiannually thereafter on January 1 and July 1. The Series 2016A Bonds are subject to redemption prior to maturity, including redemption at par under certain circumstances, as described herein under “THE SERIES 2016A BONDS - REDEMPTION.”

The Series 2016A Bonds are special, limited obligations of the Maine Health and Higher Educational Facilities Authority (the “Authority”) payable solely out of the revenues or other receipts, funds or moneys of the Authority pledged therefor or otherwise available to U.S. Bank National Association (the “Bond Trustee”) under the Bond Indenture, dated as of July 1, 2016, between the Authority and the Bond Trustee (the “Bond Indenture”), consisting solely of payments made by the Institutions (as hereinafter defined) pursuant to the Loan Agreement, dated as of July 1, 2016 (the “Agreement”), among the Authority, Eastern Maine Medical Center (“EMMC”), Charles A. Dean Memorial Hospital (“CA Dean”), Inland Hospital (“Inland”), Maine Coast Regional Health Facilities (“Maine Coast”), The Aroostook Medical Center (“TAMC”), and The Blue Hill Memorial Hospital (“Blue Hill” and, together with EMMC, CA Dean, Maine Coast, Inland and TAMC, the “Institutions”), all as more fully described herein. To secure the payments under the Agreement, EMMC, Acadia Hospital, Corp. (“Acadia”), Eastern Maine Healthcare Systems (“EMHS” or the “Obligated Group Agent”), Mercy Health System of Maine (“MHSM”), Mercy Hospital (“Mercy”), VNA Home Health & Hospice (“VNA”), Blue Hill, Inland, Lakewood (“Lakewood”), Sebasticook Valley Health (“SVH”), TAMC, Maine Coast and, prior to or concurrently with the issuance of the Series 2016A Bonds, CA Dean (collectively, the “Obligated Group”) will issue a note (the “Series 2016A Note”) to the Authority, which will be assigned to the Bond Trustee, secured by a pledge of Gross Receipts (as defined herein) of the Obligated Group pursuant to a Master Trust Indenture, dated as of April 1, 2010, as amended and supplemented, among the members of the Obligated Group and U.S. Bank National Association, as Master Trustee (the “Master Trustee”). The Series 2016A Bonds will also be secured by mortgages granted to the Master Trustee on certain real and personal property of EMMC, Mercy, SVH and Maine Coast.

THE SERIES 2016A BONDS ARE NOT AND SHALL NOT BE DEEMED TO CONSTITUTE A DEBT OR LIABILITY OR A PLEDGE OF THE FAITH AND CREDIT OF THE STATE OF MAINE OR ANY POLITICAL SUBDIVISION THEREOF BUT SHALL BE PAYABLE SOLELY FROM PLEDGED REVENUES UNDER THE BOND INDENTURE. NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE STATE OF MAINE OR OF ANY POLITICAL SUBDIVISION THEREOF IS PLEDGED TO THE PAYMENT OF THE PRINCIPAL OF OR INTEREST ON THE SERIES 2016A BONDS. THE AUTHORITY HAS NO TAXING POWER.

The Series 2016A Bonds are being offered when, as and if issued by the Authority and accepted by the Underwriters, subject to prior sale or to withdrawal or modification of the offer without notice and subject to the approval of legality by Hawkins Delafield & Wood LLP, New York, New York, Bond Counsel to the Authority. Certain legal matters will be passed upon for the Obligated Group by Eaton Peabody, PA, Bangor, Maine, and for the Underwriters by McCarter & English, LLP, Newark, New Jersey. Certain legal matters will be passed upon for the Authority by Verrill Dana, LLP, Portland, Maine. It is expected that the Series 2016A Bonds will be available for delivery to DTC in New York, New York, on or about July __, 2016.

Raymond James BofA Merrill Lynch

Goldman, Sachs & Co. Morgan Stanley Wells Fargo Securities

Dated: July __, 2016

* Preliminary, subject to change.

$174,035,000* MAINE HEALTH AND HIGHER EDUCATIONAL FACILITIES AUTHORITY

Revenue Bonds, Eastern Maine Healthcare Systems Obligated Group Issue, Series 2016A

MATURITIES, AMOUNTS, INTEREST RATES, YIELDS AND CUSIPS

$57,500,000* ____% Term Bonds Due July 1, 2041, Yield ____%, CUSIP Number 560427_____∗∗

$116,535,000* ____% Term Bonds Due July 1, 2046, Yield ____%, CUSIP Number 560427_____∗∗


∗∗ “CUSIP” is a copyright of American Bankers Association. The CUSIP numbers listed above are being provided solely for the convenience of Bondholders only at the time of issuance of the Series 2016A Bonds and none of the Authority, the Obligated Group or the Underwriters makes any representation with respect to such numbers or undertakes any responsibility for their accuracy now or at any time in the future.

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IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS LISTED ON THE COVER PAGE HERETO (“THE UNDERWRITERS”) MAY OVERALLOT OR EFFECT TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SERIES 2016A BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

No dealer, broker, salesman or other person has been authorized by the Maine Health and Higher Educational Facilities Authority, the Obligated Group or the Underwriters to give any information or to make any representations with respect to the Series 2016A Bonds, other than those contained in this Official Statement, and, if given or made, such other information or representations must not be relied upon as having been authorized by any of the foregoing. The information contained herein under the heading “The Authority” has been furnished by the Maine Health and Higher Educational Facilities Authority. All other information contained herein has been obtained from other sources which are believed to be reliable, but it is not guaranteed as to accuracy or completeness by, and is not to be construed to be the representation of, the Maine Health and Higher Educational Facilities Authority or the Underwriters. Neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the parties referred to above since the date hereof. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy, and there shall not be any sale of, the Series 2016A Bonds in any state in which it is unlawful to make such offer, solicitation or sale.

THE SERIES 2016A BONDS HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, NOR HAS THE INDENTURE 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 2016A BONDS IN ACCORDANCE WITH APPLICABLE PROVISIONS OF THE SECURITIES LAWS OF THE STATES, IF ANY, IN WHICH THE SERIES 2016A BONDS HAVE BEEN REGISTERED OR QUALIFIED AND THE EXEMPTION FROM REGISTRATION OR QUALIFICATION IN CERTAIN 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 2016A BONDS OR THE ACCURACY OR COMPLETENESS OF THIS OFFICIAL STATEMENT. ANY REPRESENTATION TO THE CONTRARY MAY BE A CRIMINAL OFFENSE.

The order and placement of materials in this Official Statement, including the Appendices, are not to be deemed to be a determination of relevance, materiality or importance, and this Official Statement, including the Appendices, must be considered in its entirety.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Official Statement contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 that are not limited to historical facts, but reflect current beliefs, expectations or intentions regarding future events. These statements include in general forward-looking statements.

Statements that are not historical facts, including statements that use terms such as “anticipates,” “believes,” “expects,” “intends,” “plans,” “projects,” “seeks” and “will” and that relate to plans and objectives of the Obligated Group for future operations, are forward-looking statements. In light of the risks and uncertainties inherent in all forward-looking statements, the inclusion of such statements in this Official Statement should not be considered as a representation by any person that the objectives or plans of the Obligated Group will be achieved. These forward-looking statements include, without limitation, expectations with respect to the synergies, future financial and operating results of the Obligated Group, and the Obligated Group’s plans, objectives, expectations and intentions with respect to future operations and services.

All forward-looking statements involve significant risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements, many of which are generally outside the control of the Obligated Group and are difficult to predict. These risks and uncertainties also include those set forth under “BONDHOLDERS’ RISKS” herein.

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TABLE OF CONTENTS Page

INTRODUCTORY STATEMENT ............................................................................................................................................. 1 THE AUTHORITY ..................................................................................................................................................................... 6 THE SERIES 2016A BONDS ..................................................................................................................................................... 9 SECURITY FOR THE SERIES 2016A BONDS ...................................................................................................................... 15 CERTAIN FINANCIAL COVENANTS .................................................................................................................................. 19 EASTERN MAINE HEALTHCARE SYSTEMS ..................................................................................................................... 19 PLAN OF FINANCE ................................................................................................................................................................ 20 ESTIMATED SOURCES AND USES OF FUNDS ................................................................................................................. 21 DEBT SERVICE REQUIREMENTS ........................................................................................................................................ 22 BONDHOLDERS’ RISKS ........................................................................................................................................................ 23 UNDERWRITING .................................................................................................................................................................... 48 RATINGS .................................................................................................................................................................................. 49 FINANCIAL ADVISOR ........................................................................................................................................................... 49 LITIGATION ............................................................................................................................................................................ 49 LEGALITY OF SERIES 2016A BONDS FOR INVESTMENT AND DEPOSIT ................................................................... 50 SERIES 2016A BONDS NOT LIABILITY OF THE STATE OF MAINE .............................................................................. 50 AGREEMENT OF THE STATE............................................................................................................................................... 50 LEGAL MATTERS ................................................................................................................................................................... 50 TAX MATTERS ....................................................................................................................................................................... 51 INDEPENDENT ACCOUNTANTS ......................................................................................................................................... 53 CONTINUING DISCLOSURE ................................................................................................................................................. 54 MISCELLANEOUS .................................................................................................................................................................. 55 Appendix A – Information Concerning Eastern Maine Healthcare Systems and the Obligated Group .................................. A-1 Appendix B – Consolidated Financial Statements of Eastern Maine Healthcare Systems ...................................................... B-1 Appendix C – Certain Provisions of Principal Documents ...................................................................................................... C-1 Appendix D – Form of Opinion of Bond Counsel ................................................................................................................... D-1 Appendix E – Form of Continuing Disclosure Agreement ...................................................................................................... E-1

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MAINE HEALTH AND HIGHER EDUCATIONAL FACILITIES AUTHORITY

_________________________

OFFICIAL STATEMENT

Relating to

$174,035,000*

Maine Health and Higher Educational Facilities Authority Revenue Bonds, Eastern Maine Healthcare Systems Obligated Group Issue, Series 2016A

INTRODUCTORY STATEMENT

The descriptions and summaries of various documents set forth herein do not purport to be comprehensive or definitive, and reference is made to each document for the complete details of all terms and conditions. All statements herein are qualified in their entirety by reference to each document. See Appendix C for certain provisions of the principal documents and for definitions of certain capitalized words and terms used but not defined elsewhere in this Official Statement.

Purpose

The purpose of this Official Statement, including the cover page, inside cover and appendices hereto, is to set forth certain information concerning the Maine Health and Higher Educational Facilities Authority (the “Authority”) and its $174,035,000* Revenue Bonds, Eastern Maine Healthcare Systems Obligated Group Issue, Series 2016A (the “Series 2016A Bonds”), issued pursuant to a Bond Indenture, dated as of July 1, 2016 (the “Bond Indenture”), between the Authority and U.S. Bank National Association, Boston, Massachusetts, as Bond Trustee (the “Bond Trustee”), and authorized by the Authority’s Bond Resolution adopted June 15, 2016 (the “Bond Resolution”). The Series 2016A Bonds are issued and secured under the Bond Indenture and the Bond Resolution in accordance with the Maine Health and Higher Educational Facilities Authority Act, being Chapter 413 of Title 22, Sections 2051 to 2077, inclusive, of the Maine Revised Statutes Annotated, as it may be amended from time to time (the “Act”). The Series 2016A Bonds and any additional bonds that may be issued pursuant to the Bond Indenture are referred to collectively as the “Bonds.”

Use of Proceeds

The proceeds of the Series 2016A Bonds will be loaned by the Authority to EMMC, CA Dean, Inland, Maine Coast, TAMC and Blue Hill (collectively, the “Institutions”) pursuant to a Loan Agreement (the “Agreement”), dated as of July 1, 2016, by and among the Institutions and the Authority. The Institutions will agree to make payments sufficient to repay the Authority’s loan and make certain other payments pursuant to the terms of the Loan Agreement. See Appendix C – “CERTAIN PROVISIONS OF PRINCIPAL DOCUMENTS – CERTAIN PROVISIONS OF THE AGREEMENT.”


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The proceeds of the Series 2016A Bonds, together with other available funds, will be used by the Institutions to (a) finance or refinance capital improvements and acquisition costs of the Institutions; (b) reimburse prior expenditures and refinance bank debt of certain of the Institutions; (c) fund capitalized interest, if any, on a portion of the Series 2016A Bonds; and (d) fund costs of issuing the Series 2016A Bonds. See “PLAN OF FINANCE” and “ESTIMATED SOURCES AND USES OF FUNDS” herein and Appendix A hereto.

Security

The Series 2016A Bonds are special obligations of the Authority, equally and ratably secured by and payable from amounts received by the Bond Trustee from the Institutions pursuant to the Agreement. Simultaneously with the issuance of the Series 2016A Bonds and in consideration of the Authority’s loan to the Institutions of proceeds of the Series 2016A Bonds under the Agreement, the Obligated Group will issue a note dated as of July 1, 2016 (the “the Series 2016A Note”) to the Authority, which will be assigned to the Bond Trustee. The Series 2016A Note will be issued under and pursuant to the Master Trust Indenture, dated as of April 1, 2010, as amended and supplemented (the “Master Indenture”), by and among the Obligated Group (as defined below) and U.S. Bank National Association, as Master Trustee (the “Master Trustee”). The Series 2016A Note will be pledged and assigned by the Authority to the Bond Trustee under the Bond Indenture for the sole benefit of the Holders of the Series 2016A Bonds and the holders of any Additional Bonds issued pursuant to the Bond Indenture. The Series 2016A Note will have terms and conditions to provide payments thereon sufficient to pay all amounts to become due on the Series 2016A Bonds. To further secure the Obligated Group’s obligations under the Series 2016A Note, the members of the Obligated Group have granted a security interest in all of their Gross Receipts under the Master Indenture. See Appendix C – “CERTAIN PROVISIONS OF PRINCIPAL DOCUMENTS.”

As further security for its obligations under the Agreement, certain members of the Obligated Group have granted security interests and/or mortgage liens in favor of the Master Trustee as follows: (a) a mortgage lien on the main campus of EMMC; (b) a mortgage lien on both hospitals of Mercy and its Westbrook campus and gastroenterology clinic; (c) a security interest in certain equipment of SVH and a mortgage lien on the hospital of SVH; and (d) a mortgage lien on the hospital and a medical office building and housing facility of Maine Coast (collectively, the “Mortgages”). See “SECURITY FOR THE SERIES 2016A BONDS – MORTGAGED PROPERTY” herein.

The Series 2016A Bonds will be secured by the Mortgages and the Series 2016A Note on a parity basis with all outstanding Notes and obligations issued and to be issued under the Master Indenture. See “SECURITY FOR THE SERIES 2016A BONDS – MASTER INDENTURE” herein.

Eastern Maine Healthcare Systems

Eastern Maine Healthcare Systems (“EMHS” or the “Obligated Group Agent”) is a Maine nonprofit corporation, which controls a group of affiliated health care organizations constituting an integrated health delivery system serving the state of Maine. EMHS, through its affiliates, offers a broad range of health delivery services and providers, including acute care, medical-surgical hospitals, a free-standing acute psychiatric hospital, primary care and specialty physician practices, long-term care and home health agencies, and ground and air emergency transport services. EMHS is a member of the Obligated Group and is the sole member of, or controls the sole member of, each other member of the Obligated Group. EMHS provides management and support services to its subsidiaries. For the six-

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month period ended March 26, 2016, the Obligated Group1 comprised 97.3%, 96.2% and 96.3% of total consolidated assets, revenue and expenses, respectively, for the EMHS system.

The Obligated Group

In addition to EMHS, the members of the Obligated Group, each of which is a Maine nonprofit corporation and an organization described in Section 501(c)(3) of the Code, currently consist of the following:

Acadia Hospital, Corp. (“Acadia”). Acadia owns and operates an acute care, regional, psychiatric hospital located in Bangor, Maine, with 100-licensed beds. Acadia provides both hospital-based and community-based mental health and substance abuse treatment services to the people of Maine.

The Aroostook Medical Center (“TAMC”). TAMC owns and operates a community hospital located in Presque Isle in northern Maine with 89-licensed beds. TAMC also owns and operates Aroostook Health Center (“AHC”), a long term care and rehabilitation facility with 72-licensed beds. TAMC provides a full range of hospital, primary and specialty services.

The Blue Hill Memorial Hospital (“Blue Hill”). Blue Hill owns and operates a critical access hospital located in Blue Hill, Maine with 25-licensed beds. Blue Hill offers primary and selected specialty healthcare services.

Eastern Maine Medical Center (“EMMC”). EMMC owns and operates a regional acute care medical center located in Bangor, Maine with 411-licensed beds. EMMC is the largest EMHS hospital, serving communities throughout central, eastern, and northern Maine.

Inland Hospital (“Inland”). Inland owns and operates a community hospital in Waterville, Maine with 48-licensed beds.

Lakewood (“Lakewood”). Lakewood owns and operates a long term care facility with 105-licensed beds. Inland is also the sole corporate member of Lakewood, which is also located on the Inland campus. Lakewood provides a continuum of skilled nursing and rehabilitation services, secure dementia care and long term care services.

Maine Coast Regional Health Facilities d/b/a Maine Coast Memorial Hospital (“Maine Coast”). Maine Coast is a community hospital located in Ellsworth, Maine with 64-licensed beds. Maine Coast provides emergency, primary and specialty inpatient, surgical and diagnostic services.

Mercy Health System of Maine (“MHSM”). MHSM is a community health care system sponsored by the Sisters of Mercy of the Americas. MHSM is the Class A corporate member of Mercy and VNA. EMHS is the sole corporate member of MHSM, and the Class B corporate member of Mercy and VNA.

Mercy Hospital (“Mercy”). Mercy owns and operates an acute care hospital with two campuses located in Portland, Maine with a total of 230-licensed beds. Mercy provides inpatient and outpatient medical and surgical care as well as obstetrics and gynecological services.

1 CA Dean is not included in the Obligated Group for purposes of the percentages of assets, revenues and expenses listed above.

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Sebasticook Valley Health (“SVH”). SVH owns and operates a critical access hospital located in Pittsfield, Maine with a total of 25-licensed beds.

VNA Home Health & Hospice (“VNA”). VNA is a provider of home health and hospice services to clients in Cumberland County, Maine and York County, Maine.

Prior to or concurrently with the issuance of the Series 2016A Bonds, Charles A. Dean Memorial Hospital (“CA Dean”), also a Maine nonprofit corporation and an organization described in Section 501(c)(3) of the Code, will become a member of the Obligated Group pursuant to the terms of the Master Indenture. CA Dean is a critical access hospital located in the Moosehead Lake region of Maine with 25-licensed beds, that provides acute, skilled, and nursing facility beds, as well as 24-hour emergency medical services and a ground ambulance program.

In the future, other entities may become members of the Obligated Group in accordance with the provisions of the Master Indenture and members of the Obligated Group may withdraw from the Obligated Group and be released from their respective obligations under the Master Indenture upon compliance with conditions prescribed therein. For more information related to additions to and withdrawals from the Obligated Group, see “CERTAIN PROVISIONS OF PRINCIPAL DOCUMENTS – CERTAIN PROVISIONS OF THE MASTER INDENTURE” in Appendix C hereto.

See Appendix A – “INFORMATION CONCERNING EASTERN MAINE HEALTHCARE SYSTEMS AND THE OBLIGATED GROUP” and Appendix B – “CONSOLIDATED FINANCIAL STATEMENTS OF EASTERN MAINE HEALTHCARE SYSTEMS” for more information on EMHS and the other members of the Obligated Group.

Special Obligations

The Series 2016A Bonds are special obligations of the Authority. Neither the State nor any political subdivision thereof shall be obligated to pay the principal of or interest on the Series 2016A Bonds, except from the Pledged Revenues, and neither the faith and credit nor the taxing power of the State or of any political subdivision thereof is pledged to the payment of the principal of or interest on the Series 2016A Bonds. The Authority does not have taxing power.

Other Financing Plans

Concurrently with the issuance of the Series 2016A Bonds, EMHS is expected to issue its Taxable Bonds, Series 2016B in the aggregate principal amount of $79,895,000* (the “Series 2016B Bonds”). The Series 2016B Bonds are being offered pursuant to a separate offering document and will be secured by the Series 2016B Note issued under the Master Indenture, which note will be secured by the lien on Gross Receipts, and by the Mortgages (as defined herein), in each case on a parity with the lien securing the Series 2016A Note.

Bondholders’ Risks

For information concerning certain risks relating to future revenues and expenses of the members of the Obligated Group, health care legislation which might affect the operations of the members of the Obligated Group, and other considerations, see the information included under the caption


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“BONDHOLDERS’ RISKS” herein and in Appendix A hereto, which information should be read in its entirety.

HOLDERS OF SERIES 2016A BONDS ARE ADVISED TO READ CAREFULLY THE SECTIONS ENTITLED “SECURITY FOR THE SERIES 2016A BONDS” AND “BONDHOLDERS’ RISKS” HEREIN AND APPENDIX A HERETO FOR A DISCUSSION OF CERTAIN RISK FACTORS WHICH SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE SERIES 2016A BONDS. Careful consideration should be given to these risks and other risks described elsewhere in this Official Statement.

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THE AUTHORITY

General

The Authority was created and established by the Act as a public body corporate and politic and an instrumentality of the State of Maine (the “State”). The purpose of the Authority, among others, is to assist health care institutions, social service institutions and institutions for higher education in the undertaking of projects involving the acquisition, construction, improvement, reconstruction and equipping of health care, social service and educational facilities and the refinancing of existing indebtedness.

The Act provides that the Authority members shall be the State Superintendent of Financial Institutions, ex-officio, the Commissioner of the Department of Human Services, ex-officio, the Commissioner of the Department of Education, ex-officio, the Treasurer of the State, ex-officio, and eight other members appointed by the Governor of the State who are required to be residents of the State and not more than four of whom shall be members of the same political party. Three of the appointed members shall be trustees, directors, officers or employees of health care facilities, two shall be trustees, members of a corporation or board of governors, officers or employees of institutions for higher education and one shall be a person having a favorable reputation for skill, knowledge and experience in state and municipal finance, either as a partner, officer or employee of an investment banking firm which originates and purchases state and municipal securities or as an officer or employee of an insurance company or bank whose duties relate to the purchase of state and municipal securities as an investment and to the management and control of a state and municipal securities portfolio. The members of the Authority are entitled to be paid necessary expenses incurred while engaged in the performance of their duties. The Authority elects from its members a Chairman and a Vice Chairman and appoints an Executive Director who is not a member.

[Remainder of page intentionally left blank.]

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Authority Membership and Organization

The present members of the Authority and the dates their terms expire are set forth below:

Name Term Expires† Affiliation

Neal Meltzer, Chairman

11/03/13 Executive Director, Waban Projects, Sanford, Maine

David Champoux Vice Chairman

11/03/15 Partner - Business Group, Pierce Atwood, LLP, Portland, Maine

James Clair 02/27/15 Chief Executive Officer, Goold Health Systems, Augusta, Maine

Robert R. Cooper 01/29/15 President, Bisson Transportation, Inc., West Bath, Maine

Glen Cyr 11/03/14 Chief Financial Officer, North Country Associates, Lewiston, Maine

Evan B. Livada 11/03/13 Former President, Livada Securities, Portland, Maine

George Spann 11/03/15 Retired President, Thomas College, Waterville, Maine

Kenneth Stafford 11/03/16 Certified Public Accountant, Stafford Advisors, Falmouth, Maine

Vacant Ex-Officio Commissioner, Department of Education, State of Maine, Augusta, Maine

Mary C. Mayhew Ex-Officio Commissioner, Department of Health and Human Services, State of Maine,

Augusta, Maine

Lloyd P. LaFountain III Ex-Officio Superintendent of Financial Institutions, Bureau of Financial Institutions, State of Maine, Augusta, Maine

Theresa M. Hayes Ex-Officio Treasurer of State, State of Maine, Augusta, Maine

________________________________

†All members serve until the appointment and qualification of a successor. The State Treasurer, if not reelected, serves for a period of not less than 30 days after the end of his or her term and until qualification of a successor.

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Michael R. Goodwin is Executive Director of the Authority and is responsible for the general management of the Authority’s affairs. Mr. Goodwin also serves as Executive Director of the Maine Municipal Bond Bank, the Maine Governmental Facilities Authority and the Maine Public Utility Financing Bank.

Verrill Dana, LLP, Portland, Maine, is serving as counsel to the Authority. Hawkins Delafield & Wood LLP, New York, New York, is serving as Bond Counsel to the Authority and will submit its approving opinion with regard to the legality of the Series 2016A Bonds substantially in the form attached hereto as Appendix D.

The Act provides that the Authority may employ such other consulting engineers, architects, attorneys, accountants, construction and financial experts, superintendents, managers and such other employees and agents as are necessary in its judgment.

Powers of the Authority

Under the Act, the Authority is authorized and empowered, among other things: to issue bonds and notes and to refund the same; to make loans to participating hospitals, nursing homes, licensed residential care facilities, licensed continuing care retirement communities, assisted living facilities, community mental health facilities, a licensed scene response air ambulance, community health centers and community health or social services facilities (“participating health care facilities”) or institutions for higher education or eligible institutions providing an educational program to its members or the general public for the cost of projects; to refinance existing indebtedness incurred by participating health care facilities or institutions for higher education to finance facilities; to charge and collect rates, rents, fees and charges for the use of and for the services furnished by a project; to acquire, construct, reconstruct, renovate, improve, replace, maintain, repair, extend, enlarge, operate, lease as lessee or lessor and regulate any project financed under the Act; to enter into contracts for any and all such purposes, including contracts for the management and operation of a project, and to designate a participating health care facility or a participating institution for higher education as its agent in connection with a project; to mortgage any project and the site thereof; to acquire directly or through a participating health care facility or a participating institution for higher education, as its agent, by purchase or by gift or devise such lands, structures, property, real or personal, rights, rights of way, franchises and easements as the Authority deems necessary; to sue and be sued; to receive and accept grants from the federal government, the State, or any other public agency; and to do all things necessary or convenient to carry out the purposes of the Act.

Financing Programs of the Authority

Pursuant to its powers under the Act, the Authority has adopted five resolutions establishing separate financing programs with respect to which the Authority issues bonds and makes loans to participating institutions. The five resolutions are (1) the General Bond Resolution adopted June 5, 1973 (which for presentation purposes in the Authority’s financial statements includes all transactions completed under separate bond indentures not secured by a common reserve fund, such as the Series 2016A Bonds), (2) the Reserve Fund Resolution adopted December 6, 1991, (3) the Medium Term Financing Reserve Fund Resolution adopted March 5, 1992, (4) the Taxable Finance Reserve Fund Resolution adopted December 15, 1992 (the “First Taxable Resolution”) and (5) the Taxable Finance Reserve Fund Resolution adopted July 11, 2003 (the “Second Taxable Resolution”). None of the common reserve funds or the funds and accounts established under the Authority’s various programs are pledged to the security of the Series 2016A Bonds.

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Outstanding Indebtedness of the Authority

Pursuant to the preceding bond resolutions of the Authority, the following principal amounts of bonds, other than the Series 2016A Bonds, were outstanding as of June 13, 2016:

(1) General Resolution: $984,922,702;

(2) Reserve Fund Resolution: $750,010,000;

(3) Medium Term Financing Reserve Fund Resolution: $0;

(4) First Taxable Resolution: $0; and

(5) Second Taxable Resolution: $0.

The Authority may issue other series of bonds or notes for the purpose of financing projects for participating health care institutions and institutions of higher education and financing student loan programs. Each such series of bonds or notes will be issued pursuant to a resolution or bond indenture separate and apart from the Bond Resolution and the Bond Indenture authorizing the Series 2016A Bonds and will be secured by instruments separate and apart from the instruments securing the Series 2016A Bonds; provided, however, that any such series of bonds issued by the Authority on behalf of the members of the Obligated Group could be issued as Additional Bonds pursuant to and secured by the Bond Indenture. See “SECURITY FOR THE SERIES 2016A BONDS – ADDITIONAL BONDS AND ADDITIONAL INDEBTEDNESS.”

Certain Legislation Affecting the Authority

In 1995, the Legislature of the State passed the State Government Evaluation Act (the “Evaluation Act”), Maine Revised Statutes Annotated, Title 3, Chapter 35, Sections 951 through 963. The stated purpose of the Evaluation Act is to establish a system for periodic review of agencies and independent agencies of state government and requires the Legislature to evaluate their efficacy and performance. The Evaluation Act provides that the legislative committee with jurisdiction may conduct an analysis and evaluation of the Authority either in accordance with the scheduling guidelines or as necessary. Based on such review and analysis, such committee may recommend termination of an agency to the Legislature. The Authority was reviewed favorably by the Legislature’s Joint Standing Committee on Education and Cultural Affairs in its report submitted March 13, 2012. The Evaluation Act currently provides that the next review of the Authority will take place in 2019.

THE SERIES 2016A BONDS

General Description

The Series 2016A Bonds will bear interest from their dated date at the stated rates, and will mature, subject to the right of redemption described below, in the amounts and on the dates set forth on the inside cover page of this Official Statement. The Series 2016A Bonds shall be dated their date of delivery. The Series 2016A Bonds are issuable only as fully registered bonds in the denominations of $5,000 or any multiple thereof, as provided in the Bond Indenture. Interest will be computed on the basis of a 360-day year of twelve thirty-day months and is payable commencing on January 1, 2017, and semiannually thereafter on each January 1 and July 1, until maturity or prior redemption.

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Redemption

Optional Redemption. The Series 2016A Bonds maturing after July 1, 20__ are subject to redemption prior to maturity, at the option of the Obligated Group, on and after July 1, 20__, in whole or in part at any time at a Redemption Price of par plus accrued interest to the redemption date.

Mandatory Sinking Fund Redemption.* The Series 2016A Bonds maturing July 1, 2041 and July 1, 2046 are subject to mandatory sinking fund redemption prior to maturity at a Redemption Price equal to the principal amount of such Series 2016A Bonds to be redeemed plus accrued interest, if any, thereon to the Redemption Date, without premium, on each July 1 of the years listed below and in the following amounts:

Series 2016A Term Bonds due July 1, 2041*

Year* Principal Amount* Year* Principal Amount* 2037 $ 10,100,000 2040 $ 12,070,000 2038 11,165,000 2041† 12,555,000 2039 11,610,000

___________________

† Final Maturity

Series 2016A Term Bonds due July 1, 2046*

Year* Principal Amount* Year* Principal Amount* 2042 $ 13,055,000 2045 $ 29,900,000 2043 13,710,000 2046† 31,395,000 2044 28,475,000

___________________

† Final Maturity

Extraordinary Optional Redemption. The Series 2016A Bonds are also subject to redemption prior to maturity at the option of the Obligated Group Agent, in whole or in part at any time, at a Redemption Price equal to the principal amount of such Series 2016A Bonds to be redeemed plus accrued interest thereon to the date of redemption, without premium, from insurance proceeds received with respect to casualty losses, or condemnation awards, relating to any facility of the Obligated Group, where the amount of such proceeds or awards exceeds 10% of the value of such property, plant or equipment, under certain circumstances provided under the Bond Indenture.

Selection of Series 2016A Bonds to be Redeemed. In the event of any redemption of less than all Outstanding Series 2016A Bonds, any maturity or maturities and amounts within maturities of Series 2016A Bonds to be redeemed shall be selected by the Bond Trustee at the direction of the Obligated Group Agent. If less than all of the Series 2016A Bonds of a maturity are to be redeemed, at the election of the Authority, the Authority shall select the Series 2016A Bonds to be redeemed or the Bond Trustee shall select the Series 2016A Bonds to be redeemed in such manner as the respective party may determine, provided that, for so long as the book-entry only system is in effect, the particular Series 2016A Bonds or portions thereof to be redeemed shall be selected by DTC in such a manner as DTC and the participants may determine. In making such selection, the Bond Trustee (or DTC) shall treat each Series 2016A Bond as representing that number of Series 2016A Bonds of the lowest authorized denomination ($5,000) as is obtained by dividing the principal amount of such Series 2016A Bond by such denomination.


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Partial Redemption of Series 2016A Bonds. Upon the selection and call for redemption of, and the surrender of, any Series 2016A Bond for redemption in part only, the Authority shall cause to be executed and the Bond Trustee shall authenticate and deliver to or upon the written order of the Holder thereof, at the expense of the Institutions, a new Series 2016A Bond or Series 2016A Bonds of authorized denominations in an aggregate face amount equal to the unredeemed portion of the Series 2016A Bond surrendered, which new Series 2016A Bond or Series 2016A Bonds shall be a fully registered Series 2016A Bond or Series 2016A Bonds without coupons, in authorized denominations.

The Authority and the Bond Trustee may agree with any Holder of any Series 2016A Bond that such Holder may, in lieu of surrendering the same for a new Series 2016A Bond, endorse on such Series 2016A Bond a notice of such partial redemption, which notice shall set forth, over the signature of such Holder, the redemption date, the principal amount redeemed and the principal amount remaining unpaid. Such partial redemption shall be valid upon payment of the amount thereof to the registered owner of any such Series 2016A Bond and the Authority and the Bond Trustee shall be fully released and discharged from all liability to the extent of such payment irrespective of whether such endorsement shall or shall not have been made upon the reverse of such Series 2016A Bond by the owner thereof and irrespective of any error or omission in such endorsement.

Effect of Call for Redemption. On the date designated for redemption by notice given as provided in the Bond Indenture, the Series 2016A Bonds so called for redemption shall become and be due and payable at the Redemption Price provided for redemption of such Series 2016A Bonds on such date. If on the date fixed for redemption moneys for payment of the Redemption Price and accrued interest are held by the Bond Trustee or paying agents as provided in the Bond Indenture, interest on such Series 2016A Bonds so called for redemption shall cease to accrue, such Series 2016A Bonds shall cease to be entitled to any benefit or security under the Bond Indenture except the right to receive payment from the moneys held by the Bond Trustee or the paying agents and the amount of such Series 2016A Bonds so called for redemption shall be deemed paid and no longer Outstanding.

Any optional redemption of the Series 2016A Bonds shall be credited against mandatory sinking fund redemption requirements, if applicable, in such manner and order as may be directed by the Obligated Group Agent.

Notice of Redemption. If less than all the Series 2016A Bonds are to be redeemed, the Series 2016A Bonds to be redeemed shall be identified by reference to the issue and series designation, date of issue, serial numbers and maturity date. Notice of redemption of any Series 2016A Bonds shall be mailed by the Bond Trustee, provided the Bond Trustee has received seven (7) days prior written instructions from the Authority or the Obligated Group Agent (unless a shorter period is agreed to by the Bond Trustee), and the Holders will receive the notice not less than thirty (30) nor more than forty-five (45) days prior to the date set for redemption, to each registered Holder of a Series 2016A Bond to be so redeemed at the address shown on the books of the Registrar but failure to so mail or any defect in any such notice with respect to any Bond shall not affect the validity of the proceedings for the redemption of any other Series 2016A Bond with respect to which notice was so mailed or with respect to which no such defect occurred, respectively. Such notice shall state that any optional redemption or extraordinary optional redemption is conditional and shall be made only from and to the extent that funds shall be on deposit with the Bond Trustee and available for such purpose on the redemption date.

Purchase in Lieu of Redemption. Any Series 2016A Bonds called for optional redemption pursuant to the Bond Indenture, at the option of the Obligated Group Agent may, in lieu of redemption, be purchased by the Obligated Group Agent or by a Person designated by the Obligated Group Agent on the redemption date at a price equal to the principal amount thereof plus interest accrued to the redemption date, and if so purchased and not submitted for cancellation, shall continue to be Outstanding under the

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Bond Indenture for all purposes and shall continue to be subject to optional redemption as provided in the Bond Indenture.

Acceleration

If a Bond Indenture Event of Default occurs, including a Bond Indenture Event of Default resulting from a payment default on the part of the Institutions under the Agreement, the principal of the Series 2016A Bonds may be accelerated and become immediately due and payable, at par, with interest payable thereon to the accelerated payment date. For a description of the Bond Indenture Events of Default, see Appendix C – “CERTAIN PROVISIONS OF PRINCIPAL DOCUMENTS – CERTAIN PROVISIONS OF THE AGREEMENT – DEFAULTS AND REMEDIES” and “CERTAIN PROVISIONS OF THE INDENTURE – DEFAULTS AND REMEDIES” and “SUMMARY OF THE SUPPLEMENTAL INDENTURE – DEFAULTS AND REMEDIES.”

Transfer and Exchange

Except while the book-entry only system is in effect as described above, Series 2016A Bonds may be exchanged upon presentation and surrender thereof to the Registrar for an equal aggregate principal amount of Series 2016A Bonds with the same interest rate and maturity. See “THE SERIES 2016A BONDS – BOOK-ENTRY ONLY SYSTEM.”

Book-Entry Only System

The Depository Trust Company (“DTC”), New York, New York, will act as securities depository for the Series 2016A Bonds. The Series 2016A 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 Series 2016A Bond certificate will be issued for each maturity of the Series 2016A Bonds in the aggregate principal amount of such maturity, and will be deposited with DTC.

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

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Purchases of the Series 2016A Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Series 2016A Bonds on DTC’s records. The ownership interest of each actual purchaser of each Series 2016A 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 2016A Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Series 2016A Bonds, except in the event that use of the book-entry system for the Series 2016A Bonds is discontinued.

To facilitate subsequent transfers, all Series 2016A 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 2016A Bonds with DTC and their registration in the name of Cede & Co., or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Series 2016A Bonds. DTC’s records reflect only the identity of the Direct Participants to whose accounts such Series 2016A 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 2016A Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Series 2016A Bonds, such as redemptions, tenders, defaults, and proposed amendments to the security documents. For example, Beneficial Owners of the Series 2016A Bonds may wish to ascertain that the nominee holding the Series 2016A Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of the notices be provided directly to them.

Redemption notices shall be sent to DTC. If less than all of the Series 2016A Bonds within a single maturity are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such maturity to be redeemed.

Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to the Series 2016A Bonds unless authorized by a Direct Participant in accordance with DTC’s MMI procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the Authority as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts the Series 2016A Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).

Principal (including sinking fund installments, if any), redemption premium, if any, and interest payments on the Series 2016A 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 Paying Agent 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 Paying Agent, the

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Obligated Group, the Bond Trustee, or the Authority, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal and interest to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the Authority or the Paying Agent, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants.

DTC may discontinue providing its services as depository with respect to the Series 2016A Bonds at any time by giving reasonable notice to the Authority or the Bond Trustee. Under such circumstances, in the event that a successor depository is not obtained, Series 2016A Bond certificates are required to be printed and delivered.

The Authority may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository). In that event, Series 2016A Bond certificates will be printed and delivered to DTC.

The information in this section concerning DTC and DTC’s book-entry system has been obtained from sources that the Authority believes to be reliable, but none of the Authority, the Obligated Group or the Underwriters takes any responsibility for the accuracy thereof.

NEITHER THE BOND TRUSTEE NOR THE AUTHORITY SHALL HAVE ANY RESPONSIBILITY OR OBLIGATION TO ANY PARTICIPANT, ANY PERSON CLAIMING A BENEFICIAL OWNERSHIP INTEREST IN THE SERIES 2016A BONDS UNDER OR THROUGH DTC OR ANY PARTICIPANT, OR ANY OTHER PERSON WHO IS NOT SHOWN IN THE REGISTRATION BOOKS OF THE BOND TRUSTEE AS BEING A BONDHOLDER, WITH RESPECT TO: THE ACCURACY OF ANY RECORDS MAINTAINED BY DTC OR ANY PARTICIPANT; THE PAYMENT BY DTC OR ANY PARTICIPANT OF ANY AMOUNT IN RESPECT OF THE PRINCIPAL OF OR REDEMPTION PRICE, IF ANY, OR INTEREST ON THE SERIES 2016A BONDS; ANY NOTICE WHICH IS PERMITTED OR REQUIRED TO BE GIVEN TO BONDHOLDERS UNDER THE BOND INDENTURE; THE SELECTION BY DTC OR ANY PARTICIPANT OF ANY PERSON TO RECEIVE PAYMENT IN THE EVENT OF A PARTIAL REDEMPTION OF THE SERIES 2016A BONDS; OR ANY CONSENT GIVEN OR OTHER ACTION TAKEN BY DTC OR ITS NOMINEE, CEDE & CO., AS BONDHOLDER.

In the event that the book-entry only system is discontinued, principal and redemption price will be payable upon surrender of the Series 2016A Bonds at the corporate trust office of the Paying Agent and interest will be payable on each Interest Payment Date, by check or draft mailed or, at the option of the Holder of at least $500,000 aggregate principal amount of Series 2016A Bonds, by wire transfer, to the Bondholders as of the close of business on the Record Date.

If the book-entry only system is discontinued and Series 2016A Bond certificates have been delivered as described in the Bond Indenture, the Beneficial Owner, upon registration of certificates held in the Beneficial Owner’s name, will become the Bondholder. Thereafter, Series 2016A Bonds may be exchanged for an equal aggregate principal amount of Series 2016A Bonds in other authorized denominations and of the same maturity, upon surrender thereof at the principal corporate trust office of the Bond Trustee, as Registrar. The transfer of any Series 2016A Bond may be registered on the books maintained by the Bond Trustee, as Registrar, for such purpose only upon the surrender thereof to the Bond Trustee with a duly executed assignment in form satisfactory to the Bond Trustee. For every exchange or registration of transfer of Series 2016A Bonds, the Bond Trustee, as Registrar, may make a charge sufficient to reimburse it for any tax or other governmental charge required to be paid with respect to such exchange or registration of transfer, but no other charge may be made to the Bondholder for any exchange or registration of transfer of the Series 2016A Bonds. The Bond Trustee will not be required to

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register the transfer of or exchange any Series 2016A Bond during the period from the Record Date to the Bond Payment Date or if such Series 2016A Bond (or any part thereof) has been or is being called for redemption.

SECURITY FOR THE SERIES 2016A BONDS

General

The Series 2016A Bonds constitute special obligations of the Authority payable solely from, and secured by a pledge of, the revenues of the Authority received from or on account of the Institutions and amounts on deposit from time to time in the funds and accounts established under the Bond Indenture (except the Rebate Fund), including the earnings thereon, subject to the application thereof for the purposes and on the terms and conditions set forth in the Bond Indenture. The Series 2016A Bonds will be secured on a parity with any Additional Bonds that may be issued under the Bond Indenture.

Bond Indenture

The Series 2016A Bonds will be issued by the Authority pursuant to the Bond Indenture. The Bond Indenture constitutes a contract among the Authority, the Bond Trustee and the Holders of the Series 2016A Bonds and the pledges and covenants made therein are for the equal and ratable benefit and security of the Holders of the Series 2016A Bonds. The Bond Indenture provides that the Series 2016A Bonds shall be special obligations of the Authority, payable solely from and secured solely by the payments made by the Institutions under the Agreement, and the funds available in the Bond Fund established under the Bond Indenture. As security for its obligations under the Bond Indenture with respect to the Series 2016A Bonds, the Authority has pledged to the Bond Trustee the payments of the Institutions received or receivable by the Authority pursuant to the Agreement, all funds held by the Bond Trustee under the Bond Indenture (except the Rebate Fund) and all income derived from the investment of such funds, and will assign to the Bond Trustee all such pledged funds, all of the Authority’s right, title and interest in the Agreement (except the right of the Authority to grant approvals, consents or waivers, to receive notices, or for indemnification or reimbursement of costs and expenses) and the Series 2016A Note.

The Bond Indenture provides that the security interest granted by the Authority to the Bond Trustee therein is for the equal and proportionate benefit and security of the Holders from time to time of the Series 2016A Bonds issued, authenticated, delivered and outstanding under the Bond Indenture, without preference, priority or distinction as to lien or otherwise of any Bonds over any other Bonds to the end that each Holder of any Bonds has the same rights, privileges and lien under and by virtue of the Bond Indenture.

Agreement

The Agreement is the full faith and credit general obligation of each of the Institutions, by which each is required, on a joint and several basis, to make payments to the Authority which will meet all debt service payment requirements on the Series 2016A Bonds. The Agreement is to remain in full force and effect until all Series 2016A Bonds have been fully paid, defeased or otherwise discharged.

Master Indenture

The obligations of the Institutions to make repayments of the loan to the Institutions by the Authority of the proceeds of the Series 2016A Bonds under the Agreement are evidenced by the Series 2016A Note issued by EMHS, as Obligated Group Agent, on behalf of itself and all other members of the Obligated Group. The Series 2016A Note will be issued under and pursuant to the Master Indenture and

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Supplemental Master Trust Indenture No. 16, dated as of July 1, 2016 (the “Supplemental Master Trust Indenture No. 16”), by and among EMHS (on behalf of itself and the other members of the Obligated Group) and the Master Trustee.

As of the date of issuance of the Series 2016A Note, the Obligated Group has outstanding notes (the “Notes”) under the Master Indenture as follows:

1. The Series 2010 Notes securing loans by the Authority to each of EMMC and Acadia of the proceeds of the Authority’s Revenue Bonds, Series 2010A, outstanding in the aggregate principal amount of $57,947,325.00.

2. The Series 2013 Note securing a loan by the Authority to EMMC of the proceeds of the Authority’s Revenue Bonds, Eastern Maine Medical Center Obligated Group Issue, Series 2013, outstanding in the aggregate principal amount of $142,595,000.00.

3. The Series 2015 Taxable Note (Bangor Savings Bank Loan) securing loans by Bangor Savings Bank to MHSM, Mercy and VNA, outstanding in the aggregate principal amount of $7,008,521.00.

4. The Series 2015 Note (Mercy Hospital – Authority Series 2014 Bonds) securing loans by the Authority to MHSM, Mercy and VNA of the proceeds of the Authority’s Revenue Bonds, Mercy Hospital Issue, Series 2014, outstanding in the aggregate principal amount of $56,610,000.00.

5. The Series 2015 Note (Inland Series 2007B Loan Agreement Amendment) and the Series 2015 Note (Lakewood Series 2007B Loan Agreement Amendment) securing loans by the Authority to Inland and Lakewood of the proceeds of the Authority’s Revenue Bonds, Series 2007B, outstanding in the aggregate principal amount of $7,761,901.00.

6. The Series 2015 Note (Inland Series 2015A Loan Agreement Amendment) securing a loan by the Authority to Inland of the proceeds of the Authority’s Revenue Bonds, Series 2015A, outstanding in the aggregate principal amount of $837,580.00.

7. The Series 2015 Note (SVH Series 2013 (FAME) Loan Agreement Amendment) securing a loan by the Finance Authority of Maine (“FAME”) to SVH of the proceeds of FAME’s Revenue Obligation Securities Sebasticook Valley Health - Series 2013, currently outstanding in the aggregate principal amount of $8,563,282.00.

8. The Series 2015 Note securing a $140,000,000 non-revolving line of credit arrangement of EMHS, with borrowings outstanding in the aggregate principal amount of $80,115,673.62. Proceeds of the Series 2016A Bonds are expected to be used, among other uses, to partially pay down outstanding borrowings under this line of credit facility.

Concurrently with the issuance of the Series 2016A Bonds, EMHS, on behalf of the Obligated Group, is expected to issue the Series 2016B Note under the Master Indenture in the aggregate principal amount of $79,895,000* in order to secure the Series 2016B Bonds. Proceeds of the Series 2016B Bonds are expected to be used, among other uses, to partially pay down outstanding borrowings under the EMHS line of credit arrangement described above. Thereafter, EMHS may also terminate the existing


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line of credit facilities described above with the existing lenders and/or pursue a new line of credit facility, which may or may not be secured by Notes issued under the Master Indenture.

The Mortgages secure on a parity basis all Notes issued under the Master Indenture, including the Series 2016A Note and the Series 2016B Note. The Master Indenture provides that members of the Obligated Group, in addition to indebtedness secured by a Note, may incur additional indebtedness whether or not secured by a Note. See “CERTAIN FINANCIAL COVENANTS” and Appendix C – “CERTAIN PROVISIONS OF PRINCIPAL DOCUMENTS – CERTAIN PROVISIONS OF THE MASTER INDENTURE.”

Pledge of Gross Receipts

Under the Master Indenture, the members of the Obligated Group have granted, for the equal and ratable benefit of the holders of all Notes (including the Series 2016A Note and the Series 2016B Note) and other obligations previously issued and to be issued under the Master Indenture, a first lien on and security interest in their Gross Receipts.

Mortgaged Property

To secure all Notes and other obligations under the Master Indenture, the following members of the Obligated Group have granted to the Master Trustee a first mortgage lien on and security interest in certain real and/or personal property for the equal and ratable benefit of the holders of the Notes and any other obligations issued from time to time under the Master Indenture:

1. EMMC has granted to the Master Trustee a first mortgage lien on and security interest in the real property comprising EMMC’s main medical center campus consisting of approximately 25 acres in Bangor, Maine pursuant to a Mortgage and Security Agreement dated April 1, 2010.

2. Mercy has granted to the Master Trustee (as assignee of the master trustee for the Mercy obligated group pursuant to an Assignment of Mortgage dated September 25, 2015) a mortgage lien on the real property comprising its acute care hospital on State Street in Portland, Maine, its acute care hospital on Fore River Parkway in Portland, Maine, its gastroenterology clinic on Long Creek Drive in South Portland, Maine, and its radiology clinic in Westbrook, Maine pursuant to a Mortgage dated March 28, 2014, as amended on April 4, 2014.

3. SVH has granted to the Master Trustee (as assignee of Bangor Savings Bank pursuant to an Assignment of Mortgage dated as of November 2, 2015) a first mortgage lien on and security interest in the real and personal property comprising its hospital consisting of approximately 9.32 acres in Pittsfield, Maine pursuant to a Commercial Mortgage and Security Agreement with Financing Statement dated January 17, 2013.

4. Maine Coast has granted to the Master Trustee a mortgage lien on the real property comprising its main hospital, medical office building and housing facility on Union Street in Ellsworth, Maine pursuant to a Mortgage dated March 24, 2016.

The foregoing Mortgages are collectively referred to herein as the “Mortgages” and all real and personal property subject to the grant of the first Mortgage lien and security interest created by the Mortgages are collectively referred to as the “Mortgaged Property.”

In addition to the above, Inland and Lakewood have granted to the Authority a mortgage lien on and security interest in certain of their real and personal in order to secure their obligations related to the following tax-exempt bonds issued by the Authority as follows:

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1. Inland has granted to the Authority a mortgage lien on and security interest in the real and personal property comprising Inland’s hospital facility located in Waterville, Maine pursuant to (a) a Loan Agreement and Mortgage, dated as of July 1, 2015, as amended and supplemented, securing Inland’s obligations related to the Authority’s Revenue Bonds, Series 2015A; and (b) a Loan Agreement and Mortgage, dated as of October 1, 2007, as amended and supplemented by a First Amendment to Loan Agreement and Mortgage, dated November 2, 2015, securing Inland’s obligations related to the Authority’s Revenue Bonds, Series 2007B.

2. Lakewood has granted to the Authority a leasehold mortgage lien on and security interest in the real and personal property comprising Lakewood’s long term care facility located in Waterville, Maine pursuant to a Loan Agreement and Mortgage, dated as of October 1, 2007, as amended and supplemented, securing Lakewood’s obligations related to the Authority’s Revenue Bonds, Series 2007B.

In addition, CA Dean has granted to an existing lender a mortgage lien on and security interest in the real and personal property comprising CA Dean’s hospital facility located in Greenville, Maine securing a $775,000 line of credit facility.

Note that the Inland, Lakewood and CA Dean mortgages described above are not part of the Mortgaged Property and, as such, do not secure on a parity basis the Notes issued under the Master Indenture.

Other properties of the Obligated Group, including but not limited to other property of EMMC, Mercy Hospital and Maine Coast, the hospital campus of Acadia in Bangor, Maine, the property of EMHS, the property of TAMC in Presque Isle, Maine and the property of Blue Hill in Blue Hill, Maine, are not mortgaged or encumbered, and thus are not included in the Mortgaged Property and are not subject to a Mortgage.

Each member of the Obligated Group covenants in the Master Indenture that it will not create or permit to be created or to exist any Lien (as defined in the Master Indenture) on any Property (as defined in the Master Indenture) of such member now owned or hereafter acquired, other than Permitted Encumbrances. The Property restricted by this covenant includes all Property of the members of the Obligated Group. The Permitted Encumbrances include certain encumbrances heretofore and hereafter granted to secure indebtedness of the members of the Obligated Group. See Appendix C – “CERTAIN PROVISIONS OF PRINCIPAL DOCUMENTS – CERTAIN PROVISIONS OF THE MASTER INDENTURE” under the section heading “PERMITTED ENCUMBRANCES” for a listing of such Permitted Encumbrances.

Additional Bonds and Additional Indebtedness

The Authority may issue Additional Bonds on a parity with the Series 2016A Bonds under certain conditions provided in the Bond Indenture. The Agreement does not restrict the incurrence of additional indebtedness by the Institutions; however, the Master Indenture governs the ability of the Institutions and the other members of the Obligated Group to incur Additional Indebtedness. See Appendix C – “CERTAIN PROVISIONS OF PRINCIPAL DOCUMENTS – CERTAIN PROVISIONS OF THE AGREEMENT” and “– CERTAIN PROVISIONS OF THE MASTER INDENTURE.”

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CERTAIN FINANCIAL COVENANTS

Pursuant to the Master Indenture, the Obligated Group has agreed to certain financial covenants, including but not limited to the rate covenant described below. (For defined terms, see Appendix C – “CERTAIN PROVISIONS OF PRINCIPAL DOCUMENTS.”)

Rate Covenant

Except as permitted under certain circumstances described in the Master Indenture, the members of the Obligated Group shall maintain for each Fiscal Year the ratio of Aggregate Income Available for Debt Service to Annual Debt Service at least at 1.20. If such ratio, as calculated at the end of any Fiscal Year, is below 1.20, the members of the Obligated Group covenant to retain a Consultant, within 60 days after the date the audited financial statements of the members of the Obligated Group are delivered to the Governing Body of the Obligated Group Agent, to make recommendations to increase such ratio for subsequent Fiscal Years at least to the required level of 1.20. So long as the Obligated Group should follow the Consultant’s recommendations to the extent permitted by law, charter, by-laws or contract, the rate covenant shall be deemed to be complied with even if such ratio for any subsequent Fiscal Year is below 1.20, provided that the ratio is at least 1.00.

See Appendix C – “CERTAIN PROVISIONS OF PRINCIPAL DOCUMENTS – CERTAIN PROVISIONS OF THE MASTER INDENTURE,” for a more complete description of the foregoing covenant and other covenants contained in the Master Indenture.

EASTERN MAINE HEALTHCARE SYSTEMS

EMHS (Eastern Maine Healthcare Systems) is an integrated health delivery system serving the state of Maine. Based on revenues, EMHS is the second largest healthcare system in the state of Maine. EMHS offers a broad range of health delivery services and providers, including: acute care, medical-surgical hospitals, a free-standing acute psychiatric hospital, primary care and specialty physician practices, long-term care and home health agencies, and ground and air emergency transport services. For the six-month period ended March 26, 2016, the Obligated Group1 comprised 97.3%, 96.2% and 96.3% of total consolidated assets, revenue and expenses, respectively, for the EMHS system. See Appendix A – “INFORMATION CONCERNING EASTERN MAINE HEALTHCARE SYSTEMS AND THE OBLIGATED GROUP” for more information on EMHS and the other members of the Obligated Group.



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PLAN OF FINANCE

The proceeds of the Series 2016A Bonds will be used to: (A) finance new money projects consisting of (1) for EMMC in the approximate amount of $150,000,000 for the purpose of: (a) Phase II of the Modernization Project including, but not limited to, new non-invasive and invasive cardiology units, operating rooms, support space, post-anesthesia, and labor and delivery rooms, (b) renovations to the emergency department, and (c) relocation of the cafeteria and kitchen; (2) for CA Dean in the approximate amount of $3,000,000 for the purpose of expansion and modernization of 2,800 square feet ambulatory care facility, including expanded primary care, imaging, laboratory, rehabilitation, and occupational health services; (3) for Inland in the approximate amount of $4,600,000 for the purpose of renovation of patient care areas; (4) for TAMC in the approximate amount of $11,200,000 for the purpose of (a) relocation of a linear accelerator, (b) relocation of the orthopedic department, (c) renovation and construction of additions to the operating room, eye care center, dialysis center, cafeteria and other miscellaneous capital improvements, and (d) for structural improvements, including but not limited to installation of windows, roofing, insulation, flooring and related improvements at Aroostook Health Center (“AHC”), a 72 patient, approximately 35,000 square foot long term care and rehabilitation facility owned and operated by TAMC; and (5) for certain of the foregoing new money projects, to pay capitalized interest on a portion of the Series 2016A Bonds; (B) refinance certain third-party indebtedness in the approximate amount of $5,705,000, the proceeds of which (1) defeased a portion of the Authority’s Revenue Bonds, Series 2010B allocable to Blue Hill; and (2) defeased a portion of the Authority’s Revenue Bonds, Series 2012A allocable to TAMC; (C) finance in the approximate amount of $11,840,000 for the acquisition of the assets of Maine Coast, namely, a 64-bed approximately 122,500 square foot hospital facility, including a 25,000 square foot hospital addition to house the emergency department and administrative office spaces, a 2,500 square foot sterile processing department, hospital lobby and registration area renovations; 22,362 square feet of hospital renovations, a 5,610 square foot hospital expansion, including an emergency room area, laboratory, a physical therapy, cardiopulmonary and ambulatory surgery recovery room, radiology/ultrasound suite, obstetrics/nursery unit; operating room suite, intensive care unit, cafeteria and dining facilities, and other miscellaneous capital improvements; and (D) pay costs of issuing the Series 2016A Bonds. See “ESTIMATED SOURCES AND USES OF FUNDS” herein and Appendix A hereto. Proceeds of the Series 2016A Bonds in an amount anticipated to equal $36,000,000 (as of the date of issuance of the Series 2016A Bonds) will be used to reimburse certain of the Institutions for costs of the Project that have already been paid by such Institutions.

The Institutions expect the proceeds of the Series 2016A Bonds to be sufficient, together with other funds of the Institutions, including proceeds of ongoing fundraising, to fully finance the cost of construction of the Project. In the Agreement, the Institutions have covenanted to complete the Project.

Concurrently with the issuance of the Series 2016A Bonds, EMHS is expected to issue its Series 2016B Bonds in the aggregate principal amount of $79,895,000*. The Series 2016B Bonds are being offered pursuant to a separate offering document and will be secured by the Series 2016B Note issued under the Master Indenture, which Series 2016B Note will be secured by the lien on Gross Receipts on a parity with the lien securing the Series 2016A Note and by the Mortgages. The proceeds of the Series 2016B Bonds are expected to be used to (i) refinance certain line of credit borrowings and term loan indebtedness of EMHS and the other members of the Obligated Group; (ii) pay certain swap termination fees; (iii) finance various transition costs related to recently added members of the Obligated Group; and (iv) pay the costs of issuance of the Series 2016B Bonds.


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Concurrently with or after the issuance of the Series 2016A Bonds and the Series 2016B Bonds, and the application of the proceeds thereof, EMHS and other members of the Obligated Group may also terminate their existing line of credit facilities with their existing lenders and/or pursue a new line of credit facility or facilities, which may or may not be secured by Notes issued under the Master Indenture.

ESTIMATED SOURCES AND USES OF FUNDS*

The proceeds to be received from the sale of the Series 2016A Bonds and the Series 2016B Bonds, together with other available funds, are expected to be applied as follows:

Series 2016A

(Tax-Exempt)Series 2016B1

(Taxable) TotalSources of Funds Par Amount $ 174,035,000 $ 79,895,000 $ 253,930,000 Net Original Issue Premium 17,009,000 - 17,009,000 EMHS Fundraising/Equity Contribution 6,274,000 - 6,274,000 Total Sources of Funds 197,318,000 79,895,000 277,213,000 Uses of Funds Deposit to Construction Fund2 155,396,000 - 155,396,000 Payoff of Lines of Credit 30,434,000 54,510,000 84,944,000 Payoff of EMHS Term Loans - 23,384,000 23,384,000 Swap Termination Fee - 800,000 800,000 Capitalized Interest Fund 8,872,000 - 8,872,000 Costs of Issuance 2,616,000 1,201,000 3,817,000 Total Uses of Funds 197,318,000 79,895,000 277,213,000

1 The Estimated Sources and Uses of the Series 2016B Bonds are provided for reference only. The Series 2016B Bonds are not subject to the terms hereof and are being offered pursuant to a separate offering document. 2 See “PLAN OF FINANCE.” For a more complete description of the plan of finance, see Appendix A – “INFORMATION CONCERNING EASTERN MAINE HEALTHCARE SYSTEMS AND THE OBLIGATED GROUP.”



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DEBT SERVICE REQUIREMENTS

Principal, interest and mandatory sinking fund redemption requirements on the Series 2016A Bonds, on the Series 2016B Bonds, on all other outstanding Notes of the Obligated Group under the Master Indenture and on all other outstanding debt of the Obligated Group are shown below:

Series 2016A Bonds

Period Ending

with each fiscal year

end in September Principal* Interest

Total Debt Service on

Series 2016A Bonds


Series 2016B Bonds


other Master Indenture Notes(1)

Total Debt Service on all other Long-Term Debt(2)

Total Debt Service on Series 2016A

Bonds, Series 2016B Bonds,

other Notes and other Long- Term Debt

2017 $ 0 $ 17,067,059 $ 1,729,039 2018 0 19,415,138 1,708,039 2019 0 20,583,187 1,578,712 2020 0 20,580,532 1,388,174 2021 0 20,645,174 914,181 2022 0 20,512,920 18,515 2023 0 20,589,512 0 2024 0 20,119,283 0 2025 0 19,507,287 0 2026 0 19,512,098 0 2027 0 19,512,988 0 2028 0 19,507,378 0 2029 0 19,011,954 0 2030 0 18,672,439 0 2031 0 18,577,917 0 2032 0 18,569,809 0 2033 0 18,575,201 0 2034 0 18,572,821 0 2035 0 18,575,423 0 2036 0 18,576,920 0 2037 10,100,000 14,734,500 0 2038 11,165,000 14,078,000 0 2039 11,610,000 14,077,750 0 2040 12,070,000 14,081,250 0 2041 12,555,000 14,077,000 0 2042 13,055,000 14,079,000 0 2043 13,710,000 14,080,500 0 2044 28,475,000 0 0 2045 29,900,000 0 0 2046 31,395,000 0 0 Total 174,035,000 485,893,040 7,336,661

______________________ (1) Note that the EMHS 2013 bonds include capitalized interest. (2) Note that an EMHS loan, several non-Obligated Group loans, and the SVH 2013 Bonds have been amortized in accordance with the Master Indenture for balloon indebtedness. Also, CA Dean is expected to join the Obligated Group and its debt is included in this column. The unhedged variable rate debt associated with the EMHS loans has an assumed rate of 3.5%. All other debt bears interest at its actual rate or swap rate. *Preliminary, subject to change.

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BONDHOLDERS’ RISKS

The discussion herein of risks that could affect payments to be made by the members of the Obligated Group with respect to the Series 2016A Bonds is not intended to be comprehensive or definitive, but rather is intended to summarize certain matters that could affect the ability of the members of the Obligated Group to make such payments.

General

The Series 2016A Bonds are payable solely from and secured by funds available therefor under the Bond Indenture, including payments made pursuant to the Agreement and the Series 2016A Note. Future revenues and expenses of the members of the Obligated Group will be affected by events and conditions relating generally to, among other things, demand for the services of the members of the Obligated Group; the ability of the members of the Obligated Group to provide the services required by patients; physicians’ relationships with the hospitals of the members of the Obligated Group; management capabilities; the correctness of the design and success of the strategic plans of the members of the Obligated Group; economic developments in the service areas of the members of the Obligated Group; ability of members of the Obligated Group to control expenses and maintain relationships with HMOs and other MCOs and third-party payers; the level of investment returns; competition; rates; costs; third-party reimbursement; legislation; and government regulation. While the members of the Obligated Group reasonably expect in the future to generate sufficient revenues to cover its expenses, third-party payments, statutes and regulations governing research grants, and contractual terms and provisions may change, and unanticipated events and circumstances may occur that cause variations from this expectation, and the variations may be material. Accordingly, there is no assurance that the members of the Obligated Group will realize sufficient income from operations in future years to meet its obligations, including payments with respect to the Series 2016A Bonds. The following general factors, among others, could affect the level of revenues to the members of the Obligated Group or its financial condition or otherwise result in risks for Bondowners.

Enforceability of Master Indenture and Other Risks Related to Master Indenture Financings

The state of insolvency, fraudulent conveyance and bankruptcy laws relating to the enforceability of guaranties or obligations issued by a corporation in favor of the creditors of another, or the obligation of a member of an Obligated Group to make debt service payments on behalf of another member of such Obligated Group, is unsettled. The ability to enforce a master indenture or any obligations, including the Series 2016A Note, against any member of the Obligated Group that would be rendered insolvent thereby could be subject to challenge. A member of the Obligated Group may not be required to make any payment or to provide for the payment of any obligations, or portion thereof, the proceeds of which were not loaned or otherwise disbursed to such member of the obligated group, to the extent that such transfer would render the member of the Obligated Group insolvent or which would conflict with, not be permitted by or is subject to recovery for the benefit of other creditors of such member of the Obligated Group under applicable laws. In particular, such obligations may be voidable under the United States Bankruptcy Code and the Maine fraudulent conveyance statute if the obligation is incurred without “fair”, “valuable” or “fairly equivalent” consideration to the obligor and if the incurrence of the obligation thereby renders a member of the Obligated Group insolvent. The standards for determining the fairness or value of consideration and the manner of determining insolvency may vary under the United States Bankruptcy Code, state fraudulent conveyance statutes and applicable judicial decisions. There is no clear precedent in the law as to whether such payments from a member of the obligated group in order to pay debt service on an obligation may be voided by a trustee in bankruptcy in the event of bankruptcy of the member of the Obligated Group, or by third-party creditors in an action brought pursuant to state fraudulent conveyance statutes.

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Although the Master Indenture permits other persons to become members of the Obligated Group, the current members might remain the only members of the Obligated Group throughout the term of the Series 2016A Bonds. Also, because it is not known which entities, if any, may become additional members of the Obligated Group, it is unknown what risks the addition of such entities to the Obligated Group, in light of their financial condition and the nature of their businesses, may present to the Holders of the Series 2016A Bonds. In addition, members may be permitted to withdraw from the Obligated Group, and be released from all obligations previously incurred by the Obligated Group, if certain conditions are met. See “CERTAIN PROVISIONS OF PRINCIPAL DOCUMENTS – CERTAIN PROVISIONS OF THE MASTER INDENTURE” in Appendix C hereto.

The obligations of the members of the Obligated Group will be limited to the same extent as the obligations of debtors typically are affected by bankruptcy, insolvency, fraudulent conveyance and other laws affecting creditors’ rights generally and the application of general principles of creditors’ rights and other debtor relief laws.

Enforceability of Lien on Gross Receipts in the Event of Bankruptcy

The Agreement provides that the Institutions will make payments to the Authority sufficient to pay the principal of the Series 2016A Bonds and the interest thereon as the same become due. The obligation of the Institutions to make such payments is secured in part by liens on all Gross Receipts of the Obligated Group granted to the Master Trustee pursuant to the Master Indenture. In the event of bankruptcy of a member of the Obligated Group, the Bankruptcy Code of 1978, Title 11 of the United States Code, as amended, currently provides that certain Gross Receipts received by a member of the Obligated Group within ninety days before the commencement of a case in bankruptcy and, thereafter, may not be subject to the lien of the Master Trustee. In such event the Master Trustee would occupy the position of an unsecured creditor with respect to such Gross Receipts. In addition, the enforcement of the lien on Gross Receipts would be subject to the exercise of equitable jurisdiction by a court which, under certain circumstances, may have power to direct the use of such receipts to meet expenses of members of the Obligated Group before payment of debt service.

Realization of Value on the Mortgaged Property

The facilities mortgaged by the Obligated Group (the Mortgaged Property) are not comprised of general purpose buildings and would not generally be suitable for industrial or commercial use. Consequently, it would be difficult to find a buyer or lessee for any of the Obligated Group’s Mortgaged Property if it were necessary to foreclose. Thus, upon any default by the Obligated Group it may not be possible to realize the amount of the Series 2016A Bonds from a sale or lease of the Obligated Group’s Mortgaged Property.

Patient Protection and Affordable Care Act and Healthcare Reform Initiatives

In order to control the cost of health care paid for by the federal and state governments and to maintain or improve the quality of health care, there have been frequent changes to federal and state statutes, regulations and policies governing the operation and financing of hospitals, nursing facilities, assisted living facilities and various community-based providers of health care and related social services, including mental health and behavioral services. These frequent changes are often motivated by an interest in limiting or controlling the cost of health care services paid for by the government and protecting or improving the quality of health care related services and the extent to which the entire population has access to those services. Further changes addressing these issues are likely to occur frequently for the foreseeable future, and it is not possible to predict the particular effects that new statutes, regulations and policies will have on health care institutions such as the members of the

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Obligated Group. Certain significant statutes, regulations and policies affecting the health care institutions are described below.

On March 23, 2010, the Patient Protection and Affordable Care Act was signed into law and on March 30, 2010, the Health Care and Education Reconciliation Act was signed into law and amended the Patient Protection and Affordable Care Act. Together, these laws (hereinafter referred to as the “Affordable Care Act”) made significant changes to the health care system in the United States. Implementation of the Affordable Care Act is affecting health care organizations in countless ways through insurance reforms, changes in Medicare and Medicaid provider payments, quality and transparency initiatives, and delivery system reforms. The Affordable Care Act includes such provisions as prohibiting health insurers from denying coverage or refusing claims based on pre-existing conditions, expanding Medicaid eligibility, subsidizing insurance premiums, providing incentives for businesses to provide health care benefits, and establishing health insurance exchanges. On June 28, 2012, the Supreme Court of the United States upheld a constitutional challenge to the Affordable Care Act. The Court held that the insurance mandate was constitutional under Congress’s taxing power. However, the Court ruled that Congress’s expansion of the Medicaid program was unconstitutional because it would have withdrawn all federal funding to states that did not abide by the expansion. Accordingly, states have the option of expanding Medicaid under the Affordable Care Act. As of the date hereof, Maine is not participating in the Medicaid expansion.

Efforts to repeal or substantially modify provisions of the Affordable Care Act continue. In July 2014, two federal appeals courts issued conflicting rulings with respect to the Affordable Care Act on whether the federal government could subsidize health insurance premiums in states that use the federal health insurance exchange. On June 25, 2015, the Supreme Court of the United States issued its opinion in King v. Burwell holding that the tax credit subsidies provided in the Affordable Care Act apply equally to state-run exchanges and the federal exchange, obviating the potential disparate treatment of program participants nationally. Efforts to repeal or delay the implementation of the Affordable Care Act continue in Congress. On May 12, 2016, the United States District Court for the District of Columbia in U.S. House of Representatives v. Burwell ruled in favor of the House of Representatives concerning a challenge to actions taken by the Department of Health and Human Services in implementing the Affordable Care Act. The Court held that the law does not permit the appropriation of billions of dollars of public money to tax credits that make insurance premiums more affordable, and to reductions in deductibles and other “cost sharing” methods used by insurers. This holding is stayed pending an appeal. The ultimate outcomes of legislative attempts to repeal or amend the Affordable Care Act and other legal challenges to the Affordable Care Act are unknown and their impact on the operations of the members of the Obligated Group cannot be determined at this time.

The primary purpose of the Affordable Care Act is to extend health insurance coverage to approximately thirty-two (32) million Americans who were uninsured at the time of enactment of such Act. States that elect to participate may expand Medicaid to cover all adults earning less than 133% of the federal poverty level, and private health insurance will be made available to individuals and small companies through exchanges that will be run by the federal government, or at the option of a state by states that elect to do so. Individuals who do not buy health care insurance, and certain employers that do not offer health insurance to workers, will be subject to monetary penalties. The expectation is that the reforms will provide coverage to most Americans, with approximately half of those currently uninsured covered through possible expansions of Medicaid and more or less the other half through private insurance.

The Affordable Care Act will also impact health care provider payment and care delivery models. The current fee-for-service models, including the hospital PPS, have been criticized for contributing to higher costs and systematic fragmentation. Programs in the Affordable Care Act will promote emerging

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payment and care delivery models and the development of alternative payment systems designed to reward providers for improving care coordination, demonstrating quality improvement and providing greater transparency about care processes and outcomes. These systems include bundled payment, value-based purchasing, accountable care organizations and patient-centered medical homes.

Although the Affordable Care Act affects many aspects of hospital operations, it is not possible to predict the effects that these and other federal statutes will have on hospital revenues or whether additional changes will be made to the Medicare payment system in light of Federal budgetary pressures. Further, because there has been ongoing opposition to the Affordable Care Act, it is not possible to predict whether and to what extent there may be changes made to the Affordable Care Act, through legislation or as a result of legal challenges, and whether and to what extent any such changes may impact hospital revenues.

Government Reimbursement Environment for Hospitals

Hospitals, like certain of the members of the Obligated Group, rely for a significant portion of their patient service revenues on reimbursement programs administered by the Federal government under Title XVIII of the United States Social Security Act (the “Medicare” program), providing hospital insurance benefits for most individuals over the age of 65 and for those entitled to social security disability benefits. A lesser but also significant portion of the revenues of hospitals are paid by the State Department of Health and Human Services (“DHHS”) in accordance with federal and state regulations adopted under Titles V and XIX of the Social Security Act pursuant to which the federal government reimburses the State for a majority of the costs (the “Medicaid” program). Although legislation in Maine has changed the name of the State’s Federal Medicaid program to “MaineCare,” it will continue to be referred to herein as “Medicaid.”

Medicare. Historically, hospitals were reimbursed pursuant to a “reasonable cost” based system of reimbursement, under which increases in a hospital’s operating costs were passed on to the federal government. Concerns over dramatically increasing health care costs led to the creation and rolling implementation of the “Prospective Payment System” or “PPS.” Today, the reasonable cost based system of hospital reimbursement has been phased out in favor of inpatient and outpatient PPS, or “IPPS” and “OPPS” respectively.

Under the IPPS, inpatient services at general, short term, acute care hospitals (except any hospital which has been designated as a limited service critical access hospital (a “Critical Access Hospital”) by certain state and federal authorities) are paid by Medicare on the basis of prospectively determined payment amounts per discharge, rather than on the basis of allowable reasonable costs reported retrospectively. Each inpatient is categorized into a “Medicare severity diagnosis related group” or “MS-DRG” based on the patient’s diagnosis and any complications or co-morbidities, and each MS-DRG is assigned a payment weight based on the average resources used to treat Medicare patients in that MS-DRG. The MS-DRG payments are subject to annual adjustments for a variety of factors, some of which are related to changing costs of providing the service but others of which may be related to such extrinsic factors as federal budget constraints. It is not possible to predict the effects of the IPPS on hospital revenues or whether additional changes will be made to the IPPS system.

The Balanced Budget Act of 1997 required the Centers for Medicare and Medicaid Services (“CMS”) to develop a PPS for outpatient department hospital services. CMS established an outpatient prospective payment system based on the classification of services delivered in an outpatient setting into “Ambulatory Payment Classification” (“APC”) groups. The OPPS was first implemented for services furnished on or after August 1, 2000. Since that time CMS has frequently changed, corrected, delayed and revised the OPPS rules, promulgated payment suspension provisions for un-filed cost reports and

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established Payment Rates for each calendar year. It is not possible to predict the effects of the OPPS on hospital revenues or whether additional changes will be made to the OPPS system.

Inpatient psychiatric facilities are also paid under a PPS system. Likewise, both long term care hospitals and inpatient rehabilitation facilities are paid under a PPS, as opposed to a reasonable cost system. It is not possible to predict the effects of the evolution from reasonable cost to PPS on hospital revenues or to predict whether additional changes will be made to PPS.

Hospitals designated as Critical Access Hospitals continue to be reimbursed on a reasonable cost basis for services rendered after such designation is approved. Medicare legislation increased the number of allowable beds from 15 to 25, and increased reimbursement to 101 percent of reasonable cost, thereby increasing the number of hospitals in the State that may be designated as Critical Access Hospitals. Hospitals that qualify as Sole Community Hospitals or Medicare Dependent Hospitals may be entitled to receive enhanced Medicare inpatient payments.

With the implementation of the Affordable Care Act, CMS is currently testing several models of care delivery re-design that aim to improve the efficiency of healthcare systems, improve quality, and contain costs. These models are designed to make health care providers accountable for the care that they provide to Medicare beneficiaries, and include such initiatives as the Advance Payment Accountable Care Organization model, Pioneer Accountable Care Organization demonstrations, and Medicare Shared Savings Accountable Care Organization program. It is not possible to predict the effects that these new value-based care delivery models may have on hospital revenues or to predict whether additional changes will be made to the Medicare PPS and fee-for-service payment systems.

Recent Legislation. On January 2, 2013, the American Taxpayer Relief Act of 2012 (the “Taxpayer Relief Act”) was signed into law to address the federal deficit and the budget sequestration provisions of the Budget Control Act of 2011. The Taxpayer Relief Act postponed the budget sequestration provisions of the Budget Control Act of 2011 for two months to allow Congress to attempt to reach a budget compromise. With no budget compromise forthcoming, on March 1, 2013, the President issued a sequestration order, requiring across-the-board reductions in Federal spending. Accordingly, on March 8, 2013, CMS announced that Medicare claims for payment with a date of service or date of discharge on or after April 1, 2013, incurred a two percent (2%) reduction in Medicare payment. In late December 2013 a budget agreement was signed into law that raised the sequestration caps for fiscal years 2014 and 2015 in exchange for extending the sequestration through 2023. On November 2, 2015, President Obama signed into law the “Bipartisan Budget Act of 2015,” which extended sequestration for an additional year, through fiscal year 2025. The law also provides a uniform 2% reduction for 2024 instead of applying different rates during the first and second halves of the fiscal year, but the FY 2025 sequestration will be “front loaded” (that is, a 4% reduction will apply during the first 6 months of the fiscal year and no reduction will be imposed during the second half of the fiscal year). In the future, Congress and the Administration may or may not reach budget deals to lessen the impact or end sequestration. It is impossible to predict, however, whether any such further budget deals will be made and whether such budget deals or the failure to do so would impact federal spending on the Medicare and Medicaid programs. Likewise, it is not possible to predict whether additional budget control measures will be made to the Medicare payment system in light of Federal budgetary pressures.

The American Recovery and Reinvestment Act of 2009 (“ARRA”), also known as the “Stimulus Bill,” contained a number of provisions that may impact hospitals. For example, the ARRA provided approximately $19 billion for Medicare and Medicaid health information technology incentives. The incentives are provided through the Medicare program and encourage physicians and hospitals to adopt and use certified electronic health records in a meaningful way (as defined by the Secretary and may include reporting quality measures) before 2015. Providers who had not already adopted and used

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certified electronic health records in a meaningful way were subject to financial penalties. Additional financial penalties and incentives will be imposed on physicians and hospitals who fail to satisfy heightened standards for meaningful use of electronic health records during a 2015 through 2017 reporting period under the Modified Stage 2 Electronic Health Record Incentive Program.

Medicaid. As is the case with Medicare, the payment methodologies in the Medicaid program continue to change and evolve. Beginning in 2004, for hospital inpatient services DHHS implemented a payment system based on a prospectively determined rate per-discharge. For hospital outpatient services, Medicaid reimbursement generally followed the methodology established by CMS for Medicare-covered services prior to the implementation of PPS methodologies. Medicaid outpatient services were reimbursed at the lower of outpatient costs or charges in accordance with pre-PPS Medicare Principles of Reimbursement. DHHS paid hospitals a weekly interim payment for inpatient and outpatient services, called prospective interim payments (“PIP”), based in part on cost report data from previous years. After close of the fiscal year, a retrospective reconciliation is determined for each hospital (“Interim and Final Cost Settlements”), which compares the total PIP payments made to the amount due based upon actual costs and utilization in accordance with state and federal regulations, plus a “disproportionate share hospital” allowance for those hospitals that qualify on the basis of the quantity of service provided to Medicaid-eligible patients and to low-income patients not eligible for Medicaid. The disproportionate share hospital payment is subject to a federally mandated aggregate cap and state budgetary constraints.

In recent years, the annual amount of PIP paid to hospitals has been lower than their costs and DHHS has owed the hospitals the difference between the annual PIP and the Interim and Final Cost Settlement. DHHS has not received sufficient annual budget appropriations to pay the cost settlements, which has caused some delay in the issuance of Interim and Final Cost Settlements to hospitals.

In State fiscal year 2013, DHHS phased out the PIP and Interim and Final Cost Settlement process for hospitals that are not designated as Critical Access Hospitals and transitioned to a payment system based on the Medicare IPPS and OPPS. As a result, DHHS currently reimburses hospital inpatient services based on diagnosis related grouping (“MaineCare DRG”), similar to the MS-DRG methodology. For outpatient services, DHHS currently reimburses hospitals based on ambulatory payment classifications (“MaineCare APC”), similar to the Medicare APC methodology, and pays hospitals 93% of the Medicare rate. This change in the Medicaid payment system for hospitals that are not designated as Critical Access Hospitals will largely eliminate the need for PIP and Interim and Final Cost Settlements because payments for services are made on a current basis. Medicaid will continue to reimburse Critical Access Hospitals based on the reasonable costs of both inpatient and outpatient services and a small adjustment will be made to payments for inpatient services relating to relative share of Medicaid patients. It is not possible to predict the effects that delayed payments and changes to the reimbursement system may have on individual hospitals or whether State budgetary pressure will cause delays in hospital Interim and Final Cost Settlements owed in 2013 and beyond. The extent to which these multiple components of Medicaid reimbursement have resulted in payments sufficient to cover actual costs of caring for Medicaid patients has varied from hospital to hospital in recent years. It is not possible to predict the effects that changes to the Medicaid reimbursement system will have on hospital revenues or whether additional changes will be made to the Medicaid payment system in light of recent and continuing State budgetary pressures. There can be no assurance that Medicaid payments will be sufficient to reimburse the members of the Obligated Group for the costs of the services provided to eligible beneficiaries.

Free Care Obligation. As discussed above, although states have the option of expanding Medicaid under the Affordable Care Act, as of the date hereof, Maine is not participating in the Medicaid expansion. Nevertheless, hospitals are required by State law to provide care to individuals unable to pay for hospital services due to low income. Hospitals, like certain of the members of the Obligated Group,

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are prohibited from denying service to any State resident “solely because of the inability of the individual to pay for those services.” At a minimum, each hospital must conclude that a person is unable to pay when their family income falls below current federal poverty guidelines. Each hospital is required to adopt and follow a “free care policy” that defines how inability to pay will be determined and the services that will be provided. Certain affiliates of hospitals are required to follow similar policies.

Hospitals are also required under the Emergency Medical Treatment and Active Labor Act (“EMTALA”) to provide screening and stabilization or an appropriate transfer to all patients seeking emergency care, without regard to their ability to pay. Hospitals may be excluded from reimbursement under Medicare for unremedied violations of EMTALA.

It is not possible to predict the effects that changes to the health insurance market and Medicaid reimbursement system will have on hospital revenues or whether additional changes will be made to the Medicaid payment system in light of recent and continuing State budgetary pressures. There can be no assurance that Medicaid payments will be sufficient to reimburse the members of the Obligated Group for the costs of the services provided to eligible beneficiaries. It is possible that the Legislature will consider further changes to Medicaid reimbursement, including reductions in reimbursement to the members of the Obligated Group as well as tax measures or enrollment caps to address any future budgetary shortfall in the future legislative session and that some of those cuts and taxes may affect the members of the Obligated Group.

It is possible that these recent developments may impact the members of the Obligated Group, both as employers with insured employees and as health care providers.

Reimbursement Environment for Nursing Facilities and Assisted Living Facilities

Successful operation of nursing facilities and assisted living facilities is highly dependent on the Medicaid program administered by DHHS. The federal government has on occasion threatened to cut off Medicaid funds to states which it found were not in compliance with its regulations. Any such Federal action taken with respect to the State Medicaid program would likely have a material adverse effect upon the nursing facilities or assisted living facilities of a member of the Obligated Group.

State administrators of the Medicaid program periodically audit the reimbursable costs on which Medicaid reimbursements are based. No assurance can be given that certain costs will not be disallowed with an attendant reduction in rates of reimbursement. Such an audit could result in the nursing facilities and assisted living facilities being required to refund Medicaid reimbursements previously received.

To obtain the necessary Medicaid reimbursement, the nursing facilities and assisted living facilities must be able to attract an adequate number of patients. Demographic changes, competition from other nursing facilities or assisted living facilities, and efforts by DHHS to encourage home and community-based alternatives to care in these facilities could hamper the ability of the nursing facilities or assisted living facilities of a member of the Obligated Group to obtain or maintain satisfactory occupancy ratios.

In recent years, nursing facility bed occupancy has fluctuated in different regions of the State. This trend has not affected all nursing facilities equally. A few have experienced little change in their occupancy rates, while most have experienced declines in occupancy as a percentage of available beds, the magnitude and impact of which have varied greatly from facility to facility. Occupancy rates and financial performance are highly correlated in the nursing facility industry. The impact, if any, of the regulatory changes pertaining to nursing facilities on the financial condition of the members of the Obligated Group is not known at this time. Policies designed to achieve reductions in the total number of nursing facility beds may have negative effects on occupancy.

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There have been numerous statutory and regulatory changes that may have a material adverse effect on occupancy and financial viability of nursing facilities and assisted living facilities. For example, since 1994, DHHS has required a “Medical Eligibility Determination” (“MED”), using prescribed forms and assessment tools, as a prerequisite to Medicaid coverage of nursing facility services. Unless these medical criteria, as amended from time to time, are met, Medicaid reimbursement for care provided in a nursing facility is unavailable. Accompanying statutory requirements deny all reimbursement for services delivered to any privately-paying resident who does not qualify for nursing facility services under the MED assessment at the time of admission, if that resident later exhausts the private funds and applies for Medicaid benefits but still does not qualify under the MED criteria.

In addition, when individuals apply for Medicaid, they must report financial transactions they have made over a “look back” period. If there have been transfers of assets for less than value, Medicaid imposes a “penalty period” for eligibility, during which an applicant is ineligible for Medicaid. The Deficit Reduction Act of 2005 made two significant changes in the “look back” and “penalty period” calculations that may adversely impact nursing facilities. First, the “look back” period was extended from thirty-six (36) months to sixty (60) months. Second, the “penalty period” now begins on the date of the prospective resident’s application for Medicaid as opposed to the date of the transfer for less than value. Thus, DHHS is looking farther back for problematic transfers and the penalty period does not begin until the resident applies for Medicaid.

Federal nursing home quality standards have also increased Federal oversight, which is burdensome and expensive to nursing facilities. The regulations provide for fines of up to $10,000 per day for violations of the standards. Increased scrutiny from the United States Department of Health and Human Services’ Office of Inspector General has been reported in fraud alerts with respect to the long-term care industry, and the industry can expect increased scrutiny of nursing facilities in the future.

Monthly room charges made to patients of nursing facilities and assisted living facilities are generally paid from one or more of the following sources:

a. Payment from the patient’s personal funds (private pay patients);

b. Medicare payments (Federal program for the aged), solely for certain subcategories of care in nursing facilities;

c. Medicaid payments (State program for the medically indigent, funded by State and Federal funds);

d. Veterans Administration payments; or

e. Private long-term care insurance.

Private insurance carriers reimburse their subscribers or make direct payments to health care facilities for expenses of care at established rates. The patient remains responsible for any difference between the insurance proceeds and the total charges. Many private insurance policies do not presently provide benefits for long-term care and treatment in nursing homes.

Under the Medicaid and Medicare programs, nursing facilities and, under the Medicaid program, assisted living facilities, are reimbursed on the basis of prospectively determined payment rates for services to qualified patients. These rates are based on a combination of facility-specific and industry-wide determination of reasonable costs. Under both programs, the amount of reimbursement is subject to certain ceilings. In addition, there are guidelines applied for determining the reasonableness of various allowable costs. During the year, rates for services to Medicare and Medicaid patients are based upon

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estimates of costs to be incurred. With respect to Medicare and Medicaid, allowable costs include interest, depreciation, amortized financing expenses and certain operating expenses. Each program will reimburse its share of the interest portion of the nursing facility’s allowable debt service payments. The allowability of debt service is subject to tests for reasonableness and relationship to the reimbursable services provided, among others. Allowable debt service, like other fixed costs, will not be fully reimbursed if a nursing facility’s occupancy falls below certain levels on an annualized basis. Although the principal portion of such debt service payments is not considered to be a reimbursable cost, a depreciation charge on the portion of the buildings and financing expenses allocable to each program is allowed as a reimbursable cost. All costs are subject to an overall ceiling for reimbursement. In determining and allocating costs, the Medicare and Medicaid programs follow generally accepted accounting principles unless their applicable rules specify otherwise.

Medicaid reimbursement for nursing facilities and assisted living facilities is based on the Maine Principles of Reimbursement for Nursing Facilities and Principles of Reimbursement for Residential Care Facilities, respectively. These rules establish a prospective reimbursement system for most facilities by which the payment rate for services is set in advance of the actual provision of the services. For nursing facilities, these rates are adjusted for “case mix,” i.e., the intensity of the resources required for treatment of a given population. The Medicaid rate is established in a two-step process. In the first step, a facility’s base year cost report is reviewed to extract those costs which are allowable costs. A facility’s costs may fall into an allowable cost category, but be determined unallowable because they exceed certain limitations. Allowable base year costs are determined and separated into components: direct, indirect, routine, and fixed costs for nursing facilities, or routine and fixed/capital costs (with allocations of indirect costs) for assisted living facilities. The second step is to apply various aggregate limits, standards, and exclusions to costs incurred in allowable categories, in order to calculate the rate at which the facility’s services will be reimbursed. This step is generally described in DHHS’s Rules as accomplishing the objective of determining those costs that “must be incurred by an efficiently and economically operated facility,” a reference to now-repealed federal statutory standards for reimbursement of nursing facility services, which were echoed in Maine statutory language that currently remains in effect. This step includes the “case mix” adjustment, which depends on classification of each resident into one of 45 “case mix classification groups” based on “minimum data sets” (“MDS”) reflecting periodic assessment of each resident’s “functional capacity.” Errors in these MDS data may subject a nursing facility to substantial reimbursement penalties. The rules applicable to nursing facilities and most assisted living facilities currently provide that DHHS will establish a prospective per diem rate to be paid to each facility until the end of its fiscal year.

Each nursing facility’s cost components for the fiscal year defined by the rule from time to time as the base year will be the basis for the rate computations (subject to upper limits). The base year direct, indirect and routine patient care cost components will be trended forward using inflationary factors described in the reimbursement rule.

Upon determination of the final rate, reconciliation must be made between DHHS and the institutional provider. If DHHS determines that a facility was overpaid, the facility must repay the overpayment within sixty (60) days of notice or request that DHHS reduce facility payments during the balance of the fiscal year by the amount of the overpayment.

The Maine Principles of Reimbursement for Nursing Facilities are frequently amended, often on an emergency basis to comply with State budget initiatives to balance the State budget. According to DHHS, this rule change and others were necessary changes related to budget calculations. It is not possible to predict the effects that changes to the Medicaid reimbursement system will have on nursing facility revenues or whether additional changes will be made to the Medicaid payment system in light of recent and continuing State budgetary pressures. There can be no assurance that Medicaid payments will

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be sufficient to reimburse the nursing facility of a member of the Obligated Group for the costs of the services provided to eligible beneficiaries.

The methodology prescribed in the Principles for Reimbursement for Assisted Living Services, while similar to that described above for nursing homes, is somewhat less complicated. DHHS will reimburse Assisted Living Facilities a daily rate for covered services provided to eligible residents based on the resident’s level of resource needs. Residents are assessed for level of need by reference to an assessment tool, and from the results of the assessment, DHHS assigns the resident to one of eight different resource groups organized by level of need. DHHS then reimburses assisted living providers for services provided to each eligible resident based on their individual resource grouping. As with other types of health care providers, CMS has shifted its retrospective reasonable-cost based payment system to a prospective payment system for Medicare-covered services in skilled nursing facilities (“SNF-PPS”). The SNF-PPS payment rates include the costs of all covered skilled nursing services exclusive of certain costs associated with operating approved educational activities. According to CMS, SNF-PPS will substantially reduce average payments to skilled nursing facilities.

The SNF-PPS payments apply to Medicare beneficiaries during a skilled nursing facility stay covered by the Medicare program. When Medicare beneficiaries are receiving nursing facility services not covered in their entirety by Medicare, certain therapeutic and other services received by those residents are covered under “Part B” of Medicare. Under the consolidated billing requirements adopted in conjunction with the establishment of the SNF-PPS, Medicare Part B covered services provided to a nursing facility resident will no longer be billed separately by each provider of these services. Instead, the nursing facility will be required to bill Medicare on a consolidated basis for most such services delivered to a Medicare-eligible resident, and the nursing facility will be responsible for paying the providers of those services. Physician services and certain other categories are excluded from the consolidated billing requirement. These billing requirements will increase the administrative costs of nursing facilities participating in the Medicare program.

Under the Medicare program, nursing facilities will receive value-based performance incentives under a Value-Based Purchasing Program commencing in 2018. Also beginning in 2018, compliance with the reporting of measures under the Skilled Nursing Facility Quality Reporting Program will be necessary for a nursing facility to avoid a two-percent reduction in its market basket percentage increase.

Maine Hospital, Nursing Facility and Assisted Living Facility Licensing and Operational Regulations

Maine statutes and implementing rules require hospitals, nursing facilities (including nursing homes formerly classified as “intermediate care facilities” or “skilled nursing facilities”), and assisted living facilities (including those formerly classified as ‘‘boarding homes” or ‘‘residential care facilities,” and, to a lesser degree, those formerly regulated as “adult foster homes” or “congregate housing services”) to obtain and annually renew licenses and to operate pursuant to detailed rules governing the functioning of such facilities. These facilities are subject to periodic and detailed surveys of their operations for the purpose of ensuring compliance with these detailed licensing requirements. For hospital and nursing facilities, these requirements are interrelated with certification and participation rules established at the federal level with respect to the Medicare and Medicaid programs. There are a wide variety of “remedies,” ranging from monetary penalties to various controls or limitations on operation, which can be imposed by licensing and certification authorities, in response to operational deficiencies found during these surveys. For hospitals and nursing facilities, these enforcement measures can affect both State licensure and the right to participate in federal health care programs. Compliance with these State and, where applicable, federal regulations requires significant effort and expense on behalf of the facilities and there can be no assurance that hospitals, nursing facilities and assisted living facilities will be able to maintain the necessary licenses in the future or will not be required to spend significant sums in order to maintain their licenses.

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In addition to this primary licensure and regulatory framework, numerous health and safety regulations and statutes apply variously to the hospitals, nursing facilities, and assisted living facilities and are enforced by various State agencies. Violation of licensure or health and safety standards could result in closure or requirements that compliance with such standards are to be immediately achieved. Such standards are subject to change and there can be no assurance that in the future these health care, facilities will meet those changed standards or will not be required to spend significant sums in order to comply with those changed standards.

Regulatory and Reimbursement Environment for Community Health and Social Services Facilities

Community health and social services facilities include a variety of organizations that provide various types of outpatient services including preventive care, primary care services, home health services, mental health, mental retardation services, and behavioral health and substance abuse treatment and prevention services. The facilities are subject to regulation by DHHS. Certain facilities providing preventive and primary care may not be licensed by the State, but may be certified and regulated under federal law as rural health clinics if they are located in a qualifying rural shortage area and meet other criteria set forth in federal regulations. Thus, depending on the services provided, a community health or social services facility may be subject to licensure and regulatory control by one or more state or federal agencies. In general, the operation of community health and social services facilities is extensively governed by various regulatory requirements of DHHS. Licensure and certification rules and requirements are generally designed to establish quality care standards for the facilities and to establish standards for recipients of services from the facilities. Compliance with state regulations requires significant effort and expense on behalf of the community health or social services facilities. In light of this significant effort and expense, there can be no assurance that the community health and social services facilities will be able to maintain the necessary licenses or certifications in the future. Also, there can be no assurance that in the future rules will not change, requiring these facilities to spend significant sums in order to comply with the changes.

The State regulations governing community health and social services facilities that are either boarding care facilities or intermediate care facilities are similar to those for nursing homes, and, as with nursing homes, compliance with such State regulations requires significant effort and expense on behalf of the members of the Obligated Group providing such facilities. There can be no assurance that a boarding care facility or intermediate care facility of a member of the Obligated Group will be able to maintain the necessary DHHS licenses in the future, or will not be required to spend significant sums in order to maintain their licenses.

Successful operation of all of these various kinds of facilities is substantially dependent upon Medicaid funding. No assurance can be given that certain costs will not be disallowed with an attendant reduction in reimbursement. An audit could result in the members of the Obligated Group being required to refund Medicaid reimbursements previously received or could result in the members of the Obligated Group receiving additional revenues. The members of the Obligated Group must continue to be able to attract an adequate number of patients to obtain the necessary Medicaid reimbursement. Demographic changes and competition from other kinds of facilities could hamper the ability of the members of the Obligated Group to obtain or maintain satisfactory occupancy ratios.

In addition, as is the case with other health care providers, the State must administer its programs in accordance with federal regulations in order to receive partial reimbursement from the federal government for the cost of its Medicaid program, and the State depends heavily on the availability of federal funding at the current percentage of total costs. Any federal action reducing funding for the State Medicaid program would probably have a material adverse effect upon participating members of the Institution.

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The community health and social services facilities of a member of the Obligated Group which receive a substantial portion of their funding from Medicaid are reimbursed for services on a wide variety of bases often including allowable costs subject to various limitations, constraints and annual audits. Certain services may be limited to fee schedules that do not reflect the full costs of operation. Medicaid reimbursement is based on various program-specific rules establishing principles of reimbursement for each of the services rendered or kinds of facilities involved.

Another significant source of funding for some of the community health and social service facilities of the members of the Obligated Group are contracts with DHHS. The contracts specify the extent and nature of services to be provided, the financial terms of the agreement, and legal and regulatory requirements. Funds from the contracts are paid to members of the Obligated Group in installments throughout the year and the members of the Obligated Group receiving such funds are required to submit quarterly reports covering program performances and financial statements. Contracts must be renegotiated and are put out to bid intermittently. Some services are provided by private non-medical institutions (PNMIs) under contract with DHHS but paid for by Medicaid under various reimbursement mechanisms.

PNMIs are defined as an agency or facility that is not, as a matter of regular business, a health insuring organization, hospital, nursing home, or a community health care center, that provides food, shelter, and treatment services to residents in single or multiple facilities. PNMIs must be licensed by DHHS, or must meet comparable licensure standards and requirements and staffing patterns as determined by DHHS. The future viability of PNMIs is in question due to ongoing concerns of CMS about Maine’s PNMI program. In August 2011, CMS expressed concern that some PNMI programs met the definition of an institute for mental disease (“IMD”). IMDs are not reimbursed through the Medicaid program. In response to CMS concerns, DHHS made changes to the program and ceased requesting federal reimbursement for services provided in certain facilities. DHHS stated that it was exploring with providers and consumers all options related to the restructure of the PNMI model in light of ongoing concerns expressed by CMS. On January 9, 2013, DHHS issued a memorandum notifying PNMIs that, as a result of working with CMS, significant changes to reimbursement must be made for over 6,000 Medicaid members in more than 400 PNMI locations.

Reimbursement for all Medicaid funded programs is under pressure, and many programs are experiencing funding cuts or caps on annual, daily or hourly rates or other limits that will cap or reduce reimbursement. Reimbursement has also been reduced or proposed to be eliminated or reduced for a wide range of services or providers that may affect the members of the Obligated Group, including pharmacy providers, providers of services to the developmentally disabled and certain rehabilitation, community support, and early intervention services.

Maine continues to experience budgetary shortfalls. Predictions about the existence and amount of any budgetary shortfalls in the future vary widely and will be affected by revenue projections, current Medicaid funding and budget decisions. Such events will place continuing and increasing pressure on governmental programs, including Medicaid reimbursement for community health and social services facilities.

As with all health care institutions, there are a number of other health and safety regulations and statutes applying to the community health and social services facilities which are enforced by various State agencies. Violation of licensure or health and safety standards could result in closure or an order requiring immediate compliance with the standards. Such standards are subject to change, and there can be no assurance that in the future the community health and social services facilities institutions will meet the changed standards or that the members of the Obligated Group will not be required to spend significant sums in order to comply with the changed standards.

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Demographic changes and competition from other community health and social services facilities or other health care providers could hamper the ability of the members of the Obligated Group to obtain or maintain satisfactory patient bases.

Another significant source of funding for certain community health and social services facilities may be grants and contracts with various state and federal agencies. The contracts specify the extent and nature of services to be provided, the financial terms of the agreement, and legal and regulatory requirements. Funds from the contracts are paid to such facilities in installments throughout the year and the members of the Obligated Group receiving such funds are generally required to submit reports covering program performances and financial statements. Contracts must be renegotiated and are put out to bid intermittently. Grants also have to be obtained and renewed intermittently.

Insurers and third party payors may be other sources of funding for certain community health and social service facilities. As managed care contracting, whereby payors for health care services contract with health care providers including community health and social services facilities for the purpose of reducing costs, becomes more prevalent in the State, the members of the Obligated Group providing community health and social services facilities may be exposed to further reductions in revenues as well as increased financial risks.

Covenant to Maintain Tax-Exempt Status of the Series 2016A Bonds

The tax-exempt status of the Series 2016A Bonds is based on the continued compliance by the Authority and the Institutions with certain covenants contained in the Agreement. These covenants relate generally to the maintenance of the Institutions’ tax-exempt status, arbitrage limitations, rebate of certain investment earnings to the federal government, and restrictions on the amount of costs of issuance financed the proceeds of the Series 2016A Bonds. Failure to comply with any of these covenants may result in the treatment of interest on the Series 2016A Bonds as taxable retroactive to the date of issuance. See “TAX MATTERS” herein.

Tax-Exempt Status

Each of the members of the Obligated Group is tax-exempt under section 501(c)(3) of the Internal Revenue Code of 1986, as amended (the “Code”). The Code contains restrictions on the issuance of tax-exempt bonds for the purpose of financing and refinancing different types of health care facilities for not-for-profit organizations. Consequently, the Code and changes thereto could adversely affect the members of the Obligated Group’ ability to finance its future capital needs and could have other adverse effects on the members of the Obligated Group that cannot be predicted at this time. The Code also continues to subject unrelated business income of not-for-profit organizations to taxation.

As tax-exempt organizations, no part of the net earnings of the members of the Obligated Group may inure to the benefit of any private individual. Accordingly, there are certain restrictions on the types of business arrangements that a member of the Obligated Group may enter into without jeopardizing its tax-exempt status. The IRS has issued guidance in informal private letter rulings and general counsel memoranda on some situations that give rise to private inurement, but there is no definitive body of law and no regulations or public advisory rulings that address many common arrangements between exempt health care providers and nonexempt individuals or entities. While management believes that the members of the Obligated Group’ arrangements with private persons and entities are generally consistent with guidance by the IRS, there can be no assurance concerning the outcome of an audit or other investigation given the lack of clear authority interpreting the range of activities undertaken by the members of the Obligated Group.

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The IRS has intensified its scrutiny of a broad variety of contractual relationships commonly entered into by tax-exempt hospitals with physicians and for-profit entities, such as income guarantees and joint ventures, and has issued detailed hospital audit guidelines suggesting that field agents scrutinize numerous activities of hospitals in an effort to determine whether any action should be taken with respect to limitations on, or revocation of, their tax-exempt status or assessment of additional tax. The IRS has also commenced intensive audits of select health care providers to determine whether the activities of these providers are consistent with their continued tax-exempt status. The IRS has indicated that, in certain circumstances, violation of the fraud and abuse statutes could constitute grounds for revocation of a hospital’s tax-exempt status. Any suspension, limitation, or revocation of the tax-exempt status of the members of the Obligated Group or assessment of significant tax liability could have a material adverse effect on the members of the Obligated Group.

In certain instances, pursuant to the intermediate sanctions regulations, penalty excise taxes may be imposed in lieu of (and in certain situations, in addition to) revocation of tax-exempt status where an exempt organization is found to have engaged in an “excess benefit transaction” with a “disqualified person,” meaning that organization insiders have received some type of unreasonable compensation or excessive economic benefit from the organization. The tax is imposed both on the disqualified person receiving such excess benefit and on any officer, director, trustee or other person having similar powers or responsibilities who participates in the transaction willfully or without reasonable cause, knowing it will involve “excess benefit.”

From time to time, Congress has introduced legislation affecting the tax-exempt status of not-for-profit organizations. Taxing authorities in certain jurisdictions have sought to impose or increase taxes related to the property and operations of such organizations, particularly where such authorities have been dissatisfied with the amount of service provided to indigents. Any legislation affecting the tax-exempt status of the members of the Obligated Group or imposing increasing taxes related to its property and operations could have a material adverse effect on its future operations or financial condition.

Various state and local governmental bodies in certain parts of the country have also challenged the tax-exempt status of health care organizations and have sought to remove the exemption of property from real estate taxes of part or all of the property of various not-for-profit institutions on the grounds that a portion of such property was not being used to further the charitable purposes of such organizations or that the organizations did not provide sufficient care to indigent persons so as to warrant exemption from taxation as a charitable institution. Several of these disputes have been determined in favor of the taxing authorities or have resulted in settlements that are not favorable to the organization.

There have also been numerous Congressional hearings in the past several years held by the House Ways and Means Committee, the Senate Finance Committee and other committees investigating various activities and practices of tax-exempt and other health care organizations, including hospital pricing systems, hospital billing and collection practices, unaudited business income and prices charged to uninsured patients. It cannot be determined at this time whether any legislation will be enacted in response to congressional hearings and investigations and, if so, what form any such legislation would take and what its impact would be on the Obligated Group. Other legislative changes or judicial actions with respect to matters relating to the tax-exempt status of not-for-profit corporations, including the provision of free care to the indigent and the exemption from property taxes of such corporations, could be enacted.

While management of the members of the Obligated Group is not aware of any challenge or investigation concerning the members of the Obligated Group and their tax-exempt status, there can be no assurance that none will occur in the future. Such a challenge could have adverse consequences for the members of the Obligated Group.

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Community Benefit Initiatives

The IRS has also undertaken a community benefit initiative directed at hospitals. The IRS Hospital Compliance Project Final Report issued in 2009 determined that the reporting of community benefit by not-for-profit hospitals varied widely, both as to types of programs and expenditures classified as community benefit and the measurement of community benefits. As a result, the IRS issued revised Form 990 that includes Schedule H, effective for tax years beginning after March 23, 2010, which is designed to provide uniformity regarding types of programs and expenditures reported as community benefits by not-for-profit hospitals. As the IRS collects and reviews information from hospitals about the levels and types of community benefit provided, the IRS may issue a more stringent interpretation of community benefit. Findings from Schedule H reports may also revive proposals in Congressional committees which, from time to time, have been made to codify the requirements for hospitals’ tax-exempt status, including requirements to conduct a regular community needs analysis and to provide minimum levels of charity care. Additionally, the Affordable Care Act contains new requirements for not-for-profit hospitals in order to maintain their tax-exempt status, which includes a requirement to conduct a community health needs assessment (CHNA), among other requirements.

Construction Risks

Construction projects are subject to a variety of risks, including but not limited to delays in issuance of required building permits or other necessary approvals or permits, strikes, shortages of materials and adverse weather conditions. Such events could delay occupancy and thus delay receipt of revenue from the Project. Cost overruns may occur due to change orders, delays in the construction schedule, scarcity of building materials and other factors. Cost overruns could cause the costs to exceed available funds, the availability of which funds may be dependent on the success of future fundraising by the members of the Obligated Group.

Factors That Could Affect the Future Financial Condition of the Obligated Group

The future financial condition of the members of the Obligated Group and other members of the Obligated Group could be adversely affected by legislation, regulatory actions, increased competition from other health care providers, third party reimbursement, especially Medicaid in light of recent and predicted State budgetary shortfalls, demand for health care services, demographic changes, malpractice claims and other litigation and other factors, including the following:

Federal Legislation. The increasing cost of health care and concerns about the quality of and access to the health care system are issues which continue to receive a great deal of attention at the federal level. In light of these concerns, legislation may be enacted which could result in limitations on hospital or sub-acute facility revenues, third-party payments and costs or charges or which could require an increase in the quantity of indigent care required to maintain the tax-exempt status of the Obligated Group members or could eliminate such status altogether regardless of the level of indigent care. It is impossible to predict the content or impact of any future legislation, regulations and government policies on hospitals or subacute facilities, but it is possible that fundamental changes in the health care delivery and financing system could result from legislative enactments. Government revenue sources are subject to statutory and regulatory changes, administrative rulings, interpretations of policy, determinations by fiscal intermediaries and government funding restrictions, all of which may materially increase or decrease the rates of payment and cash flow to health care institutions such as the Obligated Group members. There is no assurance that payments made under such programs will remain at levels comparable to the present levels or be sufficient to cover all operating and fixed costs. Legislative proposals to reduce or contain Medicare and Medicaid spending are frequently made in Congress, often as part of larger federal spending or cost containment proposals. Similar proposals are likely in the future.

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Maine Legislation and Rules. In recent years, proposals to control or reduce Medicaid spending, or to reallocate Medicaid spending from services provided by hospitals to less expensive health care providers, have been studied by or been introduced in, and in some cases enacted by, the Maine Legislature. In addition, the financial operations of hospitals were closely regulated by the State in the past and may, sometime in the future, again be closely regulated by the State. As a result of significant budgetary pressure, there continue to be legislative and rulemaking proposals to control and reduce benefits and Medicaid reimbursement to health care institutions. The Obligated Group is unable to predict the negative effects, if any, on operations that may be caused by changes in legislation, rules or both.

Regulatory and Contractual Actions that Could Affect Health Care Institutions. Health care institutions are subject to regulatory actions and policy or contractual changes by those governmental and private agencies that administer the Medicare and Medicaid programs and actions by, among others, the National Labor Relations Board, applicable professional review organizations, the Joint Commission, and the various federal, state and local health planning agencies.

Policy or contractual changes may also be imposed by various private insurers and health benefit programs, including Blue Cross, HMO’s, PPO’s, Medicare Advantage and others, especially in the light of the Affordable Care Act. Managed care contracting between health care institutions and third-party payors, whereby payors for health services contract with health care institutions or become involved with the provision of health care services for the purpose of reducing costs, is becoming more prevalent in Maine and may result in decreased revenues and increased financial risks for health care institutions. Additionally, it is not possible to predict the effects that the Affordable Care Act or some other future change in the health care regulatory environment may have on non-governmental payors and any private contracts that exist between non-governmental payors and the members of the Obligated Group.

So-called “consumer directed health plans” are a fairly new development in the insurance market. Typically these plans involve a high deductible health plan, coupled with a health reimbursement arrangement (“HRA”) or, most recently, a health savings account (“HSA”). Enrollees are responsible for the deductibles, and the HRA or HSA provides a source of funding that can be used to pay the deductibles in the event the enrollee incurs medical expenses. Although the potential for increased bad debt and charity care exists with any high deductible insurance product, because this product is fairly new to the marketplace, its impact on the Obligated Group, if any, is currently unknown.

Competition

Many hospitals in Maine have consolidated into a few systems, increasing competition among these systems as well as between individual hospitals. Hospitals are expanding or reconfiguring their service lines to capture incremental market share, entering potentially lucrative services lines, or reducing or limiting unprofitable services. This may further increase competitive pressures on acute care hospitals.

The members of the Obligated Group face, and will continue to face, competition from other hospitals, integrated delivery systems, and ambulatory care providers that offer similar health care services. In addition, alternative modes of health care delivery offering lower priced services to the same population, such as ambulatory surgery centers, private laboratories, private radiology services, skilled nursing facilities, and home care, compete with the hospitals.

Management believes that insurers will continue to encourage competition among hospitals and other providers on the basis of price and payment terms. To some degree, payers have used the threat of patient steerage, carve outs of certain services, and network exclusion to drive provider prices lower. Insurers are also introducing network products that segregate hospitals and other providers into tiers that are based in part on the relative costs and quality of the providers and that provide financial incentives to

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subscribers who use the services of providers in the less costly and higher quality tiers. This may lead to increased competition among hospitals based on price.

Management believes that sustained growth in patient volume, together with firm cost controls, have been and will remain fundamental to the financial stability of the members of the Obligated Group. There are many limitations on the ability of the members of the Obligated Group to increase volume and control costs, and there can be no assurance that volume increases or expense reductions needed to maintain the financial stability of the members of the Obligated Group will occur.

A number of third-party payors, including Medicare, are currently formulating reimbursement mechanisms whereby a hospital and its associated physicians and other providers (collectively, an “Accountable Care Organization” or “ACO”) will assume some degree of financial risk for the cost-effective delivery of health care services to a defined population. The members of the Obligated Group currently use ACO contracting and may pursue additional ACO contracting in the future but no assurance can be given that such ACO contracting will result in positive financial performance.

Legislative, Regulatory and Contractual Matters Affecting Revenues

The health care industry is heavily regulated by federal and state governments and is dependent on governmental sources for a substantial portion of revenues. Governmental revenue sources are subject to statutory and regulatory changes, administrative rulings, interpretations of policy, determinations by Medicare Administrative Contractors (i.e., the non-governmental organizations or agencies that contract with the federal government to process Medicare claims) and government funding restrictions, all of which may materially increase or decrease the rates of payment and cash flow to providers of health care services. In the past, there have been frequent and significant changes in the methods and standards used by government agencies to reimburse and regulate the operations of providers. Many of these changes are implemented retroactively, resulting in significant prior year adjustments. There is reason to believe that substantial additional changes will occur in the future.

Legislation is periodically introduced in Congress and in the Maine Legislature that could result in reductions in provider revenues, third-party payments, and costs or charges, or that could result in increased competition or an increase in the level of indigent care required to maintain tax-exempt status. No assurance can be given that payments made under such programs will remain at levels comparable to the present levels or be sufficient to cover all existing costs. While changes are anticipated, the impact of such changes on the members of the Obligated Group cannot be predicted.

From time to time, legislative proposals are made at the federal and state level to engage in broader reform of the health care industry, including proposals to promote competition in the health care industry, to contain health care costs, to provide national health insurance, to impose additional requirements for hospitals to qualify for tax exempt status, and to impose additional requirements and restrictions on health care insurers, providers, and other health care entities. The effects of future reform efforts on the members of the Obligated Group cannot be predicted.

The members of the Obligated Group are also subject to regulatory and administrative actions by CMS and Maine Department of Health and Human Services (the administrators of the Medicare and Medicaid programs, respectively) and other federal, state, and local government agencies. In addition, the members of the Obligated Group and certain of the services and educational programs which they offers, are subject to accreditation by the Joint Commission and other entities. While management believes that the members of the Obligated Group are in substantial compliance with the standards of the aforementioned regulatory and accrediting bodies, there can be no assurance that a challenge or investigation will not occur in the future. An adverse finding by one or more of the said organizations could materially adversely affect future operations or revenue of the members of the Obligated Group.

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Renewal and continuation of the operating licenses, certifications, and accreditations of the members of the Obligated Group are based on inspections, surveys, investigations and other reviews, some of which may require or include affirmative action or response by the members of the Obligated Group. These activities are conducted in the normal course of business of health care facilities, both in connection with periodic renewals and in response to specific complaints, which may be made to governmental agencies, private agencies, or the media by patients, ombudsmen, or employees, among others.

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

Certificate of Need Restrictions

The State of Maine has implemented a Certificate of Need (“CON”) program pursuant to which health care facilities, including acute care hospitals, ambulatory surgical facilities, nursing facilities and others, are required to obtain State approval before expending funds in excess of a specified dollar amount on capital projects or offering certain innovative services or new technologies. The existence of the CON program has two different implications for the hospital. First, the program may limit a provider’s ability to respond on a timely basis to competitive programs offered by other providers. Second, while the existence of the CON program may limit a provider’s ability to expand or add services needed to compete, the program has also, in certain instances, served as a barrier to entry that prevents would-be competitors from entering or expanding operations in a particular field of service. Maine officials have recently expressed interest in abolishing the State’s CON program. Enactment of such a law could impact the members of the Obligated Group by making it easier for competitors to compete with the members of the Obligated Group.

Federal and State “Fraud and Abuse” Laws and Regulations

There is an expanding and complex body of laws, regulations and policies relating to federal and state health programs that are not directly related to payment. These include reporting and other technical rules, as well as broadly stated prohibitions regarding inducements for referrals, all of which carry potentially significant penalties for noncompliance. The prohibitions on inducements for referrals are so broadly drafted (and so broadly interpreted by several applicable federal cases and in statements by Office of the Inspector General (“OIG”) officials) that they may create liability in connection with a wide variety of business transactions. These laws apply to a variety of cases where hospitals and physicians conduct joint business activities, such as practice purchases, physician recruiting and retention programs, various forms of hospital assistance to individual physicians, medical practices or physician contracting entities, physician referral services, hospital-physician service or management contracts, and space or equipment rentals between hospitals and physicians.

Civil penalties range from monetary fines that may be levied on a per-violation basis to temporary or permanent exclusion from the federal health programs (which account for a significant portion of revenue and cash flow of most providers, including the members of the Obligated Group). Criminal penalties may also be imposed. Much of this risk cannot be assessed accurately due to the lack of case law or material guidance by the OIG. While management of the members of the Obligated Group

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is not aware of any challenge or investigation with respect to such matters, there can be no assurance that one or more will not occur in the future.

One of the broadest prohibitions is the Federal Medicare/Medicaid Anti-Fraud and Abuse Amendments to the Social Security Act (the “Anti-Kickback Law”), which makes it a criminal felony offense to knowingly and willfully offer, pay, solicit or receive remuneration in return for or to induce, business that may be paid for, in whole or in part, under a federal health care program including, but not limited to, the Medicare or Medicaid programs. Under the Affordable Care Act, a violation of the Anti-Kickback Law is deemed to be a violation of the federal False Claims Act. The May 12, 2014 proposed rule from the OIG provides that for violations of the Anti-Kickback Law, penalties may be imposed for “each offer, payment, solicitation, or receipt of remuneration and that each action constitutes a separate violation.” “Safe harbor” regulations, published by the OIG, provide defenses from prosecution or administrative enforcement action for a limited scope of arrangements. The safe harbors described in the regulations are narrow and do not cover a wide range of economic relations that many hospitals, physician and other health care providers consider to be legitimate business arrangements. However, failure to satisfy the conditions of a safe harbor does not necessarily indicate a violation of the applicable statute.

The members of the Obligated Group may have certain relationships with physicians and other referral sources that do not necessarily meet all of the requirements of applicable safe harbors. Nonetheless, management believes that the members of the Obligated Group are presently in material compliance with the Anti-Kickback Law. However, in light of the narrowness of the safe harbor regulations and the scarcity of case law interpreting the Anti-Kickback Law, there can be no assurance that the members of the Obligated Group will not be found to have violated the Anti-Kickback Law, and if so, that any sanction imposed would not have a material adverse effect on the operations or the financial condition of the members of the Obligated Group.

In addition, Maine has a Medicaid anti-kickback statute. Unlike the federal statute, the Maine anti-kickback statutes lack an intent requirement and do not incorporate safe harbor provisions. Violations of the Maine anti-kickback statutes may result in criminal and/or civil penalties. Management believes that the business arrangements of the members of the Obligated Group are in material compliance with the Maine anti-kickback statutes, but considering the lack of available defenses and general applicability, there can be no assurance that a third party reviewing such arrangements would not find a violation, and such a finding could have a material and adverse effect on the members of the Obligated Group.

Federal and State False Claims Acts

The federal False Claims Act is another broad statute that the government often utilizes in fighting fraud and abuse. In a health care context, the most commonly used provisions under the False Claims Act prohibit a person from “knowingly” presenting or causing to be presented a false or fraudulent claim for payment or approval to the federal government and from “knowingly” making, using, or causing to be made a false record or statement to get a false or fraudulent claim paid or approved by the federal government. These prohibitions extend to claims submitted to federal health care programs, including, but not limited to, Medicare or Medicaid.

The False Claims Act broadly defines the terms “knowing” and “knowingly.” Specifically, knowledge will have been proven for purposes of the False Claims Act if the person: (1) has actual knowledge of the information; (2) acts in deliberate ignorance of the truth or falsity of the information; or (3) acts in reckless disregard of the truth or falsity of the information. Moreover, the statute specifically provides that a specific intent to defraud is not required in order to prove that the law has been violated.

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The Affordable Care Act and regulations promulgated thereunder obligate healthcare entities receiving payment from governmental health programs to identify and return overpayments made in error or as a result of improper claim submissions by the later of 60 days after the date on which the overpayment was identified, or the date any corresponding cost report is due, if applicable. Overpayments can result from, among other circumstances, errors attributable to Medicare contractors or providers and from receipt of payment for claims arising from violations of other health law fraud and abuse laws. Providers are required to exercise “reasonable diligence” by undertaking proactive compliance activities to monitor claims and by performing reactive investigations after receiving “credible information about a potential overpayment.” If an overpayment is identified, a provider is required to “look back” six years to identify and return similar overpayments that may have been received during that extended time period. Failure to adhere to the foregoing requirements represents a “knowing” failure to report and return an overpayment and constitutes a violation of the False Claims Act.

A person found to have violated this statute is liable for a per claim civil penalty of not less than $5,500 and not more than $11,000, plus three times the amount of damages sustained by the federal government. The Bipartisan Budget Act of 2015 requires federal agencies, including the Department of Justice (“DOJ”), to update levels of civil monetary penalties based on inflation and a cost-of-living adjustment derived from the amount by which the CPI in October 2015 exceeds the CPI in October of the year in which the penalty amount was established or adjusted. The initial adjustment must take effect no later than August 1, 2016 and will be followed by automatic annual adjustments. Although DOJ has not yet released its adjusted False Claims Act penalty calculations, one federal agency that generates False Claims Act cases released an interim final rule in which application of the inflation adjustment formula increased minimum per-claim penalties under the False Claims Act from $5,500 to $10,781 and maximum per-claim penalties from $11,000 to $21,563. In certain limited cases involving prompt disclosure of False Claims Act violations, the statute provides for double, rather than treble, damages. Private individuals may also bring suit under the qui tam provisions of the False Claims Act and may be eligible for incentive payments for providing information that leads to recoveries or sanctions that arise in a variety of contexts in which hospitals and health care providers operate.

Additionally, Maine has a Medicaid False Claims Act that makes it a criminal violation for any person to “knowingly and willfully make or cause to be made any false statement or representation of a material fact in any application” for a Medicaid benefit. The Maine Attorney General may also seek civil remedies for violations of this law.

The members of the Obligated Group conduct a variety of activities that pose varying degrees of risk under the federal and state False Claims Acts, and other fraud and abuse laws, rules and regulations. While management believes that the members of the Obligated Group comply with these laws, there can be no assurance that a reviewing third party would not find some violation of the fraud and abuse laws that would justify the bringing of a federal or state False Claims Act suit. Such actions, if they result in an adverse outcome, could have a materially adverse effect on the members of the Obligated Group.

Limitations on Certain Arrangements Imposed by Federal Ethics in Patient Referrals Act

The Federal Ethics in Patient Referrals Act (commonly known as the “Stark Law”) prohibits a physician (or an immediate family member of such physician) with a financial relationship with an entity from referring a Medicare or Medicaid patient to such entity for the furnishing of certain designated health services and prohibits such entity from presenting or causing to be presented a claim for payment under the Medicare or Medicaid program for designated health services furnished pursuant to a prohibited referral. The designated health services subject to these prohibitions are clinical laboratory services, physical and occupational therapy services, radiology services (including magnetic resonance imaging, computerized tomography, and ultrasound), radiation therapy services, durable medical equipment,

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parenteral and enteral nutrients (including equipment and supplies), orthotic and prosthetic devices, speech language pathology, home health services, outpatient prescription drugs and inpatient and outpatient hospital services.

A financial relationship for purposes of the Stark Law is defined as either an ownership or investment interest in the entity or a compensation arrangement with the entity. An ownership or investment interest may be through equity, debt, or other means and includes an interest in an entity that holds an ownership or investment interest in an entity providing the designated health services.

The Stark Law and regulations provide certain exceptions to these restrictions. Unlike the Anti-Kickback Law’s safe harbors discussed above (where the failure to meet a safe harbor does not necessarily mean the referral is prohibited), failure to satisfy an exception to the Stark provisions means that the referral itself is prohibited, and that the entity receiving the referral is prohibited from seeking payment for such service.

Violations of the Stark Law can result in denial of payment, substantial civil monetary penalties, and exclusion from the Medicare and Medicaid programs. In certain circumstances, knowing violations may also create liability under the False Claims Act.

The Stark Law is a strict liability statute. Intent behind violations does not matter and even technical violations can result in harsh penalties. Sanctions for violations of the Stark Law include refunds of the amounts collected for services rendered pursuant to a prohibited referral, civil money penalties of up to $15,000 for each claim arising out of such referral, plus up to three times the reimbursement claimed, and exclusion from the Medicare program. The Stark Law also provides for a civil penalty of up to $100,000 for entering into an arrangement with the intent of circumventing its provisions. In addition, knowing violation of the Stark Law may also serve as the basis for liability under the federal False Claims Act. As required under the Affordable Care Act, CMS released a protocol under which health care providers can make self-disclosures of actual and potential Stark violations, with reduced penalties for self-disclosure violations. CMS released this protocol on September 23, 2010.

Management believes that the members of the Obligated Group are in compliance with Stark Law, but there can be no assurance that a third party reviewing the financial relationships between any Institution and referring physicians would find full compliance. The failure of arrangements between the members of the Obligated Group and a referring physician to fall within one or more of the exceptions could have a materially adverse effect on the members of the Obligated Group.

OIG Compliance Guidelines

The OIG has encouraged all health care providers to adopt and implement programs to promote compliance with federal and state laws, including the False Claims Act, the Anti-Kickback Law and the Stark Law. In 1998, the OIG published Compliance Program Guidance (“CPG”) for the hospital industry. In recognition of the significant changes in the delivery and reimbursement for hospital services that have occurred since the CPG’s publication, the OIG published Supplemental Compliance Program Guidance on January 31, 2005. These Publications (collectively, the “Guidances”) provide recommendations to hospitals for adopting and implementing effective programs to promote compliance with applicable federal and state law and the program requirements of federal, state, and private health plans, and they include a discussion of significant risk areas for hospitals. Compliance with the Guidances is voluntary but is nevertheless an important factor in controlling risk because an effective compliance program promotes compliance so that future issues can be prevented or identified, reported, and corrected. However, the presence of a compliance program is not an assurance that a health care provider will not be investigated by one or more federal or state agencies that enforce health care fraud and abuse laws or that it will not be required to make repayments to various health care insurers (including the Medicare and/or

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Medicaid programs). Management believes that the members of the Obligated Group have implemented effective compliance programs.

Regulation of Patient Transfers

Federal law requires hospitals that have emergency rooms to provide emergency treatment to all persons presenting themselves with emergency medical conditions. Congress enacted EMTALA in response to concerns regarding inappropriate hospital transfers of emergency patients based on the patient’s inability to pay for the services provided. This law mandates that certain medical screening and stabilizing treatment requirements be met before a patient who is medically unstable or in labor may be transferred to another facility, unless the patient asks to be transferred or a physician certifies that the benefits of the transfer outweigh the risks. The law further prohibits hospitals from delaying such screening or treatment in order to inquire about an individual’s method of payment. Failure to comply with EMTALA can result in exclusion from the Medicare and/or Medicaid programs as well as civil and criminal penalties, of up to $50,000 per violation. In addition, the hospital is liable for claims brought by any individual who has suffered harm as a result of such violation. Accordingly, failure of acute care hospitals to meet their responsibilities under the law could adversely affect their financial condition. Management believes that the members of the Obligated Group are in compliance with these requirements.

Health Insurance Portability and Accountability Act

Congress enacted The Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) to mandate portability of health insurance and protect the use and disclosure of personal health information. Congress also included in HIPAA certain “administrative simplification” provisions intended to reduce the administrative costs of processing health care payments by encouraging the electronic exchange of health information and the use of standardized formats for health care claims and other transactions. The Health Information Technology for Economic and Clinical Health (“HITECH”) Act of 2009 and associated regulations amended HIPAA, expanding the accountability and responsibilities of Business Associates with respect to the safeguarding of Protected Health Information (“PHI”).

HIPAA and its regulations apply to “Covered Entities,” including health plans, health care clearinghouses, and those health care providers who electronically conduct certain financial and administrative transactions (e.g., electronic health care claim submissions) and “Business Associates,” which is defined broadly as any party that creates, receives, maintains, or transmits PHI, (e.g., consultants, clearinghouses, vendors, financial services firms, billing firms, accountants, attorneys, auditors, accreditation organizations, health information organizations, E-prescribing gateways, and management firms), including subcontractors that create, receive, maintain, or transmit information on behalf of a Business Associate. The final privacy regulations now in effect address five basic privacy principles: (1) consumer control over health information, (2) boundaries on patient record use and release, (3) safeguards for personal health information, (4) accountability for patient record use and release, and (5) a balance between public responsibility and privacy protections. The final transaction standards regulations require covered entities to conduct certain electronic transactions in compliance with the applicable transactions and code sets standards published by the U.S. Department of Health and Human Services (“USDHHS”), although individual payers are permitted temporarily to accept non-compliant claims. The final security regulations require covered entities to safeguard access to PHI by the use of encryption, passwords and other similar measures.

Federal penalties are imposed under HIPAA if a patient’s right to privacy is violated. Civil violations, including disclosures made in error, carry monetary penalties which are imposed pursuant to the following tiered structure based on culpability:

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• For a person or entity who did not know (and by exercising reasonable diligence would not have known) that he or she violated a HIPAA provision—$100 to $50,000 for each violation; maximum $1,500,000 total penalty in one year;

• For a violation in which it is established that the violation was due to reasonable cause and not to willful neglect—$1,000 to $50,000 for each such violation; maximum $1,500,000 total penalty in one year;

• For a violation in which it is established that the violation was due to willful neglect and was timely corrected—$10,000 to $50,000 for each such violation; maximum $1,500,000 total penalty in one year;

• For a violation in which it is established that the violation was due to willful neglect and was not timely corrected—$50,000 for each such violation; maximum $1,500,000 total penalty in one year.

Criminal penalties for intentional violations carry fines of up to $250,000 and 10 years in prison.

Compliance with HIPAA has required changes in information technology platforms, major operational and procedural changes in the handling of data, and vigilance in monitoring of ongoing compliance with the various regulations. Each of member of the Obligated Group is actively engaged in monitoring compliance with the HIPAA regulations and has a HIPAA Implementation Compliance Plan in place, which it believes addresses these regulatory requirements.

Federal and State Laws Relating to the Privacy and Security of Personal Health Information

Under HIPAA, USDHHS has issued regulations to standardize and facilitate the electronic transfer of health care information for purposes that include the processing of health care payments, privacy regulations that protect patient medical records and other personal health information maintained by health care providers, health plans and health care clearinghouses, and security regulations that require health care providers to implement administrative, physical and technical safeguards to protect the confidentiality, integrity and availability of the electronic health information that they receive or create. HIPAA also requires that health care providers enter into business associate agreements to assure that contractors and other entities performing activities on their behalf related to treatment, payment, or health care operations protect the privacy and security of patient information.

The HIPAA privacy and security regulations were strengthened under HITECH. HITECH expanded certain privacy and security provisions of HIPAA and created new avenues of enforcement, including the ability of state attorneys general to bring HIPAA enforcement actions. HITECH also made Business Associates directly liable for HIPAA security compliance and established breach notification obligations for providers in the event of a breach of unsecured protected health information that creates a risk of harm to individuals. Violations of the privacy and security standards can result in civil monetary penalties that can reach up to $1.5 million per year and criminal penalties that include fines and imprisonment. Each of member of the Obligated Group believes that its operations and information systems comply with the HIPAA standardized electronic transfer, privacy and security regulations, although there can be no assurance that a member of the Obligated Group will not be found to have violated these regulations in any one instance.

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Affiliation, Merger, Acquisition and Divestiture

As part of its ongoing planning and property management functions, the members of the Obligated Group review the use, compatibility and financial viability of many of its operations and from time to time may pursue changes in the use, or disposition, of any of their facilities. Likewise, the members of the Obligated Group may receive offers from, or conduct discussions with, third parties about the potential acquisition of operations or properties that may become part of the Obligated Group in the future or about the potential sale of some of the operations and properties of the Obligated Group. Discussions with respect to affiliation, merger, acquisition, disposition, or change of use, including those that may affect the members of the Obligated Group, are held on an intermittent, and usually confidential, basis. As a result, it is possible that the assets currently owned by the members of the Obligated Group may change, subject to the provisions in the financing documents that apply to merger, sale, disposition or purchase of assets.

Antitrust

Enforcement of the antitrust laws against health care providers may arise in a wide variety of circumstances including medical staff privilege disputes, payer contracting, physician relations, joint ventures, merger, affiliation and acquisition activities and certain pricing and salary setting activities. From time to time, the members of the Obligated Group may be involved with all of these types of activities. Actions can be brought by federal and state enforcement agencies seeking criminal and civil penalties and, in some instances, by private litigants seeking damages for harm from allegedly anti-competitive behavior. Liability may be substantial, depending on the facts and circumstances of each case. In addition, if any provider with whom any member of the Obligated Group is (or becomes) affiliated is determined to have violated the antitrust laws, such member of the Obligated Group may be subject to liability as a joint actor.

While management believes that the members of the Obligated Group are currently in compliance with relevant antitrust laws, there can be no assurance that a third party reviewing the activities of the members of the Obligated Group would find such activities to be in full compliance with such laws.

Environmental Matters

Health care providers are subject to a wide variety of federal, state and local environmental and occupational health and safety laws and regulations. These requirements govern medical and toxic or hazardous waste management, air and water quality control, notices to employees and the public and training requirements for employees. Health care organizations such as the members of the Obligated Group are subject to potentially material liability for costs of investigating and remedying the release of any such substances either on, or that have migrated from, their properties or for the improper off-site disposal of such substances and the harm to persons or property that such release or disposal may cause. At the present time, management of the members of the Obligated Group is not aware of any pending or threatened environmental claim, investigation or enforcement action, which, if determined adversely to the members of the Obligated Group, could have material adverse consequences.

Malpractice Lawsuits

Although the number of malpractice lawsuits filed against physicians and hospitals has stabilized in recent years, the dollar amounts of patient damage recoveries remain potentially significant. A number of insurance carriers have withdrawn from this segment of the insurance market citing underwriting losses, and premiums have increased sharply in the last several years. The effect of these developments has been to significantly increase the operating costs of hospitals and physicians, including the members of the Obligated Group.

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Professional and General Liability Claims

General-liability, professional-liability (including claims that may arise from medical staff peer review activities), directors’ and officers’ liability and employment-practices liability insurance are provided for the members of the Obligated Group. Claims against health care providers alleging wrongful acts or omissions such as negligence may seek punitive damages in addition to compensatory damages, but insurance usually does not cover judgments for punitive damages. As is the case with most forms of directors’ and officers’ liability insurance, certain risks and losses of the members of the Obligated Group in connection with allegations of mismanagement may not be covered by the insurance provided to the members of the Obligated Group. While management considers the current types and amounts of liability insurance coverage maintained by the members of the Obligated Group to be adequate, no assurance can be given that the members of the Obligated Group will continue to maintain in the future the types and coverage amounts currently in place, that the coverage will be sufficient to cover all insurable liability judgments rendered against or settlements entered into by the members of the Obligated Group or that adequate coverage will continue to be available at reasonable cost. Any such uninsured losses would be incurred directly by the members of the Obligated Group, and such losses, if material, could adversely affect the results of operations and financial condition of the members of the Obligated Group.

Investment and Gift Matters

The members of the Obligated Group derive a substantial portion of their excess of revenues over expenses from income from investments and gifts. Any significant deterioration in the securities markets generally or adverse results in the specific investments which the members of the Obligated Group have made, or in their ability to generate investment gains or receive gifts, would reduce their income and cash flow and, therefore, could impair their ability to finance its operating and capital needs and future growth.

Other Risk Factors

The following additional factors, among others, may adversely affect the operations of health care providers, including the members of the Obligated Group, to an extent that cannot be determined at this time:

• Increased unemployment or other adverse economic conditions in the service areas of the members of the Obligated Group, which might increase the proportion of patients without health insurance benefits or who are unable to pay fully for the costs of their care;

• Employee strikes and other adverse labor actions that could result in a substantial reduction in revenues without corresponding decreases in costs, or shortages of nurses or other qualified personnel that limit the availability of needed services;

• Declines in financial position or fund balance due to poor investment returns;

• Efforts by employers to reduce the costs of health insurance by having employees bear a greater portion of their health care costs, causing employees to be more selective and cost-conscious in choosing health care services;

• Reduced need for hospitalization or other health care services arising from medical and scientific advances;

• Increases in cost and limitations in the availability of any insurance, such as fire, terrorism and/or business interruption, automobile and comprehensive general liability, that the members of the Obligated Group generally carry; and

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• Acts of war or acts of so-called terrorists, including the use of weapons capable of mass destruction.

UNDERWRITING

The Series 2016A Bonds are being purchased by Raymond James & Associates, Inc., Merrill Lynch, Pierce Fenner & Smith Incorporated, Goldman, Sachs & Co., Morgan Stanley & Co. LLC and Wells Fargo Bank, National Association (collectively, the “Underwriters”), for whom Raymond James & Associates, Inc. is acting as representative. The Underwriters have agreed to purchase the Series 2016A Bonds at an aggregate purchase price of $_____________ (consisting of the principal amount of the Series 2016A Bonds of $_________, less underwriters’ discount of $__________, [plus/less] aggregate net original issue [premium/discount] of $____________). The Contract of Purchase for the Series 2016A Bonds provides that the Underwriters will purchase all of the Series 2016A Bonds if any are purchased. The initial public offering prices or yields on the Series 2016A Bonds may be changed by the Underwriters.

The Underwriters have provided the following five sentences for inclusion in this Official Statement. The Underwriters have reviewed the information in this Official Statement in accordance with, and as part of, their respective responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriters do not guarantee the accuracy or completeness of such information. The Underwriters and their respective affiliates are full service financial institutions engaged in various activities, which may include securities trading, commercial and investment banking, financial advisory, investment management, principal investment, hedging, financing and brokerage activities. Certain of the Underwriters and their respective affiliates have, from time to time, performed and may in the future perform, various investment banking services for the Authority. In the ordinary course of their various business activities, the Underwriters and their respective affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities, which may include default swaps) and financial instruments (including bank loans) for their own account and for the accounts of their customers and may at any time hold long and short positions in such securities and instruments. Such investment and securities activities may involve securities and instruments of the Authority. The Underwriters and their respective affiliates may also communicate independent investment recommendations, market color or trading ideas and/or publish or express independent research views in respect of such assets, securities or instruments and may at any time hold, or recommend to clients that they should acquire, long and/or short positions in such assets, securities and instruments.

Morgan Stanley, parent company of Morgan Stanley & Co. LLC, one of the Underwriters of the Series 2016A Bonds, has entered into a retail distribution arrangement with its affiliate Morgan Stanley Smith Barney LLC. As part of the distribution arrangement, Morgan Stanley & Co. LLC may distribute municipal securities to retail investors through the financial advisor network of Morgan Stanley Smith Barney LLC. As part of this arrangement, Morgan Stanley & Co. LLC may compensate Morgan Stanley Smith Barney LLC for its selling efforts with respect to the Series 2016A Bonds.

Wells Fargo Bank, National Association, acting through its Municipal Products Group ("WFBNA"), one of the underwriters of the Series 2016A Bonds, has entered into an agreement (the "Distribution Agreement") with its affiliate, Wells Fargo Advisors, LLC ("WFA"), for the distribution of certain municipal securities offerings, including the Series 2016A Bonds. Pursuant to the Distribution Agreement, WFBNA will share a portion of its underwriting or remarketing agent compensation, as applicable, with respect to the Series 2016A Bonds with WFA. WFBNA also utilizes the distribution capabilities of its affiliate Wells Fargo Securities, LLC (“WFSLLC”), for the distribution of municipal securities offerings, including the Series 2016A Bonds. In connection with utilizing the distribution

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capabilities of WFSLLC, WFBNA pays a portion of WFSLLC’s expenses based on its municipal securities transactions. WFBNA, WFSLLC, and WFA are each wholly-owned subsidiaries of Wells Fargo & Company.

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 WFBNA, which conducts its municipal securities sales, trading and underwriting operations through the Wells Fargo Bank, NA Municipal Products Group, a separately identifiable department of WFBNA, registered with the Securities and Exchange Commission as a municipal securities dealer pursuant to Section 15B(a) of the Securities Exchange Act of 1934.

RATINGS

Moody’s Investors Service, Inc. (“Moody’s”) has assigned a rating of “Baa3” with a negative outlook to the Series 2016A Bonds, and Standard & Poor’s Ratings Services (“S&P”) has assigned a rating of “BBB” with a stable outlook to the Series 2016A Bonds. Any explanation of the significance of such ratings may only be obtained from the rating agency furnishing the same. A credit rating is not a recommendation to buy, sell or hold securities. There is no assurance that the ratings will continue for any given period of time or that they might not be revised downward or withdrawn entirely by the rating agencies, if in their judgment circumstances so warrant. None of the Authority, the members of the Obligated Group or the Underwriters has undertaken any responsibility to bring to the attention of the Holders of the Series 2016A Bonds any proposed revision or withdrawal or to oppose any such revision or withdrawal. Any such downward revision or withdrawal of the ratings might have an adverse effect on the market price of the Series 2016A Bonds.

FINANCIAL ADVISOR

EMHS has retained Kaufman, Hall & Associates, LLC, Skokie, Illinois, as financial advisor in connection with the issuance of the Series 2016A Bonds. Although Kaufman, Hall & Associates, LLC has assisted in the preparation of this Official Statement, Kaufman, Hall & Associates, LLC was not and is not obligated to undertake, and has not undertaken to make, an independent verification and assumes no responsibility for the accuracy, completeness or fairness of the information contained in this Official Statement.

LITIGATION

There is not now pending or to the knowledge of the Authority threatened any litigation restraining or enjoining the issuance or delivery of the Series 2016A Bonds or questioning or affecting the validity of the Series 2016A Bonds or the proceedings and authority under which they are to be issued. Neither the creation, organization or existence of the Authority, nor the title of the present members or other officers of the Authority to their respective offices, is being contested. There is no litigation pending or threatened which in any manner questions the right of the Authority to issue the Series 2016A Bonds to finance and refinance the Project in accordance with the provisions of the Act, the Bond Resolution, the Master Indenture, the Bond Indenture, the Mortgages and the Agreement. See Appendix A with respect to any material litigation affecting EMHS and the other members of the Obligated Group.

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LEGALITY OF SERIES 2016A BONDS FOR INVESTMENT AND DEPOSIT

Under the Act, bonds of the Authority (including the Series 2016A Bonds) are securities in which all public officers and public bodies of the State and its political subdivisions, all insurance companies and associations and other persons carrying on an insurance business, trust companies, banks, bankers, banking associations, savings banks and savings associations, including savings and loan associations, credit unions, building and loan associations, investment companies, executors, administrators, trustees and other fiduciaries, pension, profit-sharing, retirement funds and other persons carrying on a banking business and all other persons whatsoever, who are now or may hereafter be authorized to invest in bonds or other obligations of the State, may properly and legally invest funds, including capital in their control or belonging to them. Under the Act, the bonds of the Authority (including the Series 2016A Bonds) are securities that may properly and legally be deposited with and received by any State or municipal public officer or any agency or political subdivision of the State for any purpose for which the deposit of bonds or other obligations of the State is now or may hereafter be authorized by law.

SERIES 2016A BONDS NOT LIABILITY OF THE STATE OF MAINE

The Series 2016A Bonds are special obligations of the Authority, payable solely from payments made pursuant to the Agreement and from certain funds held by the Bond Trustee under the Bond Indenture. The Series 2016A Bonds do not constitute or create any debt or liability of or on behalf of the State or any political subdivision thereof or a pledge of the faith and credit of the State or of any political subdivision thereof, but will be payable solely from the funds provided under the Bond Indenture. The issuance of the Series 2016A Bonds will not directly or indirectly or contingently obligate the State or any political subdivision thereof to levy or to pledge any form of taxation whatever therefor.

AGREEMENT OF THE STATE

Under the Act, the State pledges and agrees with the holders of the bonds issued under the Act, and those parties entering into contracts with the Authority, that the State will not limit, alter, restrict or impair the rights vested in the Authority to acquire, construct, reconstruct, maintain and operate any project under the Act or to establish, revise, charge and collect rates, rents, fees and other charges as may be convenient or necessary to produce sufficient revenues to meet the expenses of maintenance and operations thereof and to fulfill the terms of any agreements with holders of bonds or in any way impair the rights and remedies of such holders, until the bonds and interest thereon and all costs and expenses in connection with any action or proceeding by or on behalf of bondholders are fully met and discharged. The Act provides that the foregoing does not preclude such limitation or alteration if and when adequate provision is made by law for the protection of bondholders.

LEGAL MATTERS

All legal matters incidental to the issuance of the Series 2016A Bonds by the Authority are subject to the approval of Hawkins Delafield & Wood LLP, New York, New York, Bond Counsel to the Authority, whose approving opinion, in substantially the form set forth in Appendix D hereto, will be delivered concurrently with the Series 2016A Bonds. Certain legal matters are subject to the approval of Verrill Dana, LLP, Portland, Maine, counsel to the Authority. Certain legal matters will be passed upon for EMHS and the Obligated Group by Eaton Peabody, PA, Bangor, Maine, and for the Underwriters by McCarter & English, LLP, Newark, New Jersey.

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TAX MATTERS

Opinion of Bond Counsel

In the opinion of Hawkins Delafield & Wood LLP, Bond Counsel to the Authority, under existing statutes and court decisions and assuming continuing compliance with certain tax covenants described herein, (i) interest on the Series 2016A Bonds is excluded from gross income for Federal income tax purposes pursuant to Section 103 of the Internal Revenue Code of 1986, as amended (the “Code”), and (ii) interest on the Series 2016A Bonds is not treated as a preference item in calculating the alternative minimum tax imposed on individuals and corporations under the Code; such interest, however, is included in the adjusted current earnings of certain corporations for purposes of calculating the alternative minimum tax imposed on such corporations. In rendering its opinion, Bond Counsel has relied on certain representations, certifications of fact, and statements of reasonable expectations made by the Authority and the Institutions and others in connection with the Series 2016A Bonds, and Bond Counsel has assumed compliance by the Authority and the Institutions with certain ongoing covenants to comply with applicable requirements of the Code to assure the exclusion of interest on the Series 2016A Bonds from gross income under Section 103 of the Code. In addition, in rendering its opinion, Bond Counsel has relied on the opinion of counsel to the Institutions regarding, among other matters, the current qualification of the Institutions as organizations described in Section 501(c)(3) of the Code.

In addition, in the opinion of Bond Counsel to the Authority, under existing statutes, interest on the Series 2016A Bonds is exempt from the State of Maine income tax imposed on individuals.

Bond Counsel expresses no opinion regarding any other Federal or state tax consequences with respect to the Series 2016A Bonds. Bond Counsel renders its opinion under existing statutes and court decisions as of the issue date, and assumes no obligation to update, revise or supplement its opinion to reflect any action hereafter taken or not taken, or any facts or circumstances that may hereafter come to its attention, or changes in law, or in interpretations thereof, that may hereafter occur, or for any other reason. Bond Counsel expresses no opinion on the effect of any action hereafter taken or not taken in reliance upon an opinion of other counsel on the exclusion from gross income for Federal income tax purposes of interest on the Series 2016A Bonds, or under state and local tax law.

Certain Ongoing Federal Tax Requirements and Covenants

The Code establishes certain ongoing requirements that must be met subsequent to the issuance and delivery of the Series 2016A Bonds in order that interest on the Series 2016A Bonds be and remain excluded from gross income under Section 103 of the Code. These requirements include, but are not limited to, requirements relating to use and expenditure of gross proceeds of the Series 2016A Bonds, yield and other restrictions on investments of gross proceeds, and the arbitrage rebate requirement that certain excess earnings on gross proceeds be rebated to the Federal government. Noncompliance with such requirements may cause interest on the Series 2016A Bonds to become included in gross income for Federal income tax purposes retroactive to their issue date, irrespective of the date on which such noncompliance occurs or is discovered. The Authority and the Institutions have covenanted to comply with certain applicable requirements of the Code to assure the exclusion of interest on the Series 2016A Bonds from gross income under Section 103 of the Code.

Certain Collateral Federal Tax Consequences

The following is a brief discussion of certain collateral Federal income tax matters with respect to the Series 2016A Bonds. It does not purport to address all aspects of Federal taxation that may be relevant to a particular owner of a Series 2016A Bond. Prospective investors, particularly those who may

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be subject to special rules, are advised to consult their own tax advisors regarding the Federal tax consequences of owning and disposing of the Series 2016A Bonds.

Prospective owners of the Series 2016A Bonds should be aware that the ownership of such obligations may result in collateral Federal income tax consequences to various categories of persons, such as corporations (including S corporations and foreign corporations), financial institutions, property and casualty and life insurance companies, individual recipients of Social Security and railroad retirement benefits, individuals otherwise eligible for the earned income tax credit, and taxpayers deemed to have incurred or continued indebtedness to purchase or carry obligations the interest on which is excluded from gross income for Federal income tax purposes. Interest on the Series 2016A Bonds may be taken into account in determining the tax liability of foreign corporations subject to the branch profits tax imposed by Section 884 of the Code.

Original Issue Discount

“Original issue discount” (“OID”) is the excess of the sum of all amounts payable at the stated maturity of a Series 2016A Bond (excluding certain “qualified stated interest” that is unconditionally payable at least annually at prescribed rates) over the issue price of that maturity. In general, the “issue price” of a maturity means the first price at which a substantial amount of the Series 2016A Bonds of that maturity was sold (excluding sales to bond houses, brokers, or similar persons acting in the capacity as underwriters, placement agents, or wholesalers). In general, the issue price for each maturity of Series 2016A Bonds is expected to be the initial public offering price set forth on the cover page of this Official Statement. Bond Counsel further is of the opinion that, for any Series 2016A Bonds having OID (a “Discount Bond”), OID that has accrued and is properly allocable to the owners of the Discount Bonds under Section 1288 of the Code is excludable from gross income for Federal income tax purposes to the same extent as other interest on the Series 2016A Bonds.

In general, under Section 1288 of the Code, OID on a Discount Bond accrues under a constant yield method, based on periodic compounding of interest over prescribed accrual periods using a compounding rate determined by reference to the yield on that Discount Bond. An owner’s adjusted basis in a Discount Bond is increased by accrued OID for purposes of determining gain or loss on sale, exchange, or other disposition of such Series 2016A Bond. Accrued OID may be taken into account as an increase in the amount of tax-exempt income received or deemed to have been received for purposes of determining various other tax consequences of owning a Discount Bond even though there will not be a corresponding cash payment.

Owners of Discount Bonds should consult their own tax advisors with respect to the treatment of original issue discount for Federal income tax purposes, including various special rules relating thereto, and the state and local tax consequences of acquiring, holding, and disposing of Discount Bonds.

Bond Premium

In general, if an owner acquires a Series 2016A Bond for a purchase price (excluding accrued interest) or otherwise at a tax basis that reflects a premium over the sum of all amounts payable on the Series 2016A Bond after the acquisition date (excluding certain “qualified stated interest” that is unconditionally payable at least annually at prescribed rates), that premium constitutes “bond premium” on that Series 2016A Bond (a “Premium Bond”). In general, under Section 171 of the Code, an owner of a Premium Bond must amortize the bond premium over the remaining term of the Premium Bond, based on the owner’s yield over the remaining term of the Premium Bond, determined based on constant yield principles (in certain cases involving a Premium Bond callable prior to its stated maturity date, the amortization period and yield may be required to be determined on the basis of an earlier call date that results in the lowest yield on such bond). An owner of a Premium Bond must amortize the bond premium

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by offsetting the qualified stated interest allocable to each interest accrual period under the owner’s regular method of accounting against the bond premium allocable to that period. In the case of a tax-exempt Premium Bond, if the bond premium allocable to an accrual period exceeds the qualified stated interest allocable to that accrual period, the excess is a nondeductible loss. Under certain circumstances, the owner of a Premium Bond may realize a taxable gain upon disposition of the Premium Bond even though it is sold or redeemed for an amount less than or equal to the owner’s original acquisition cost. Owners of any Premium Bonds should consult their own tax advisors regarding the treatment of bond premium for Federal income tax purposes, including various special rules relating thereto, and state and local tax consequences, in connection with the acquisition, ownership, amortization of bond premium on, sale, exchange, or other disposition of Premium Bonds.

Information Reporting and Backup Withholding

Information reporting requirements apply to interest paid on tax-exempt obligations, including the Series 2016A Bonds. In general, such requirements are satisfied if the interest recipient completes, and provides the payor with a Form W-9, “Request for Taxpayer Identification Number and Certification,” or if the recipient is one of a limited class of exempt recipients. A recipient not otherwise exempt from information reporting who fails to satisfy the information reporting requirements will be subject to “backup withholding,” which means that the payor is required to deduct and withhold a tax from the interest payment, calculated in the manner set forth in the Code. For the foregoing purpose, a “payor” generally refers to the person or entity from whom a recipient receives its payments of interest or who collects such payments on behalf of the recipient.

If an owner purchasing a Series 2016A Bond through a brokerage account has executed a Form W-9 in connection with the establishment of such account, as generally can be expected, no backup withholding should occur. In any event, backup withholding does not affect the excludability of the interest on the Series 2016A Bonds from gross income for Federal income tax purposes. Any amounts withheld pursuant to backup withholding would be allowed as a refund or a credit against the owner’s Federal income tax once the required information is furnished to the Internal Revenue Service.

Miscellaneous

Tax legislation, administrative actions taken by tax authorities, or court decisions, whether at the federal or state level, may adversely affect the tax-exempt status of interest on the Series 2016A Bonds under Federal or state law or otherwise prevent beneficial owners of the Series 2016A Bonds from realizing the full current benefit of the tax status of such interest. In addition, such legislation or actions (whether currently proposed, proposed in the future, or enacted) and such decisions could affect the market price or marketability of the Series 2016A Bonds. For example, budgets proposed by the Obama Administration from time to time have recommended a 28% limitation on certain itemized deductions and other tax benefits, including tax-exempt interest. The net effect of such a proposal, if enacted into law, would be that an owner of a tax-exempt bond with a marginal tax rate in excess of 28% would pay some amount of Federal income tax with respect to the interest on such tax-exempt bond, regardless of issue date.

Prospective purchasers of the Series 2016A Bonds should consult their own tax advisors regarding the foregoing matters.

INDEPENDENT ACCOUNTANTS

The consolidated financial statements as of and for the fiscal years ended September 26, 2015 and September 27, 2014 of Eastern Maine Healthcare Systems, included in Appendix B to this Official

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Statement, have been audited by BerryDunn, independent accountants, as stated in their report appearing in Appendix B to this Official Statement.

CONTINUING DISCLOSURE

The Authority has determined that no financial or operating data concerning the Authority is material to any decision to purchase, hold or sell the Series 2016A Bonds and the Authority will not provide any such information. EMHS, on behalf of itself and the other members of the Obligated Group, has undertaken all responsibilities for any continuing disclosure to Bondowners as described below, and the Authority shall have no liability to the Bondowners or any other person with respect to such disclosures.

EMHS, on behalf of itself and the other members of the Obligated Group, has covenanted for the benefit of Bondowners to comply with and carry out all of the provisions of a Continuing Disclosure Agreement (the “Disclosure Agreement”) dated the date of delivery of the Series 2016A Bonds, by and between EMHS, as the Obligated Group Agent, and the Bond Trustee. Under the Disclosure Agreement, EMHS has agreed to provide certain financial information and operating data relating to the EMHS system by not later than 45 days following the end of each fiscal quarter and consolidated audited financial statements of the EMHS system by no later than 120 days following the end of EMHS’ Fiscal Year beginning with the Fiscal Year ending September 24, 2016, and to provide notices of the occurrence of certain enumerated significant events. The quarterly and annual reports and notices of significant events will be filed on behalf of EMHS with the Municipal Securities Rulemaking Board through its Electronic Municipal Market Access system. The specific nature of the information to be contained in the quarterly and annual reports and the notices of significant events is summarized in Appendix E - “Form of Continuing Disclosure Agreement.” These covenants have been made in order to assist the Underwriters in complying with Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time.

During the past five years, each of the members of the Obligated Group has complied in all material respects with its existing continuing disclosure obligations, except that: the annual financial information and operating data for fiscal year 2014 for the Obligated Group was not timely filed with respect to the Authority’s Revenue Bonds, Eastern Maine Medical Center Obligated Group Issue, Series 2013 (the “Series 2013 Bonds”); and quarterly reports for the Obligated Group for the first and fourth quarters of fiscal year 2014 were not timely filed with respect to the Series 2013 Bonds.

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MISCELLANEOUS

The references herein and in the appendices hereto to the Series 2016A Bonds, the Act, the Bond Resolution, the Agreement, the Bond Indenture, the Master Indenture, the Mortgages and the Tax Regulatory Agreement are brief summaries of certain provisions thereof. Such summaries do not purport to be complete and reference is made to such statute and documents for full and complete statements therein. The agreements of the Authority with the Holders of the Series 2016A Bonds are fully set forth in the Bond Indenture, and neither any advertisement of the Series 2016A Bonds nor this Official Statement is to be construed as constituting an agreement with the purchasers of the Series 2016A Bonds. So far as any statements are made in this Official Statement involving matters of opinion, whether or not expressly so stated, they are intended merely as such and not as representations of fact. Copies of the documents mentioned in this paragraph are on file at the offices of the Authority and the Bond Trustee.

The information relating to DTC and the book-entry only system described under the heading “THE SERIES 2016A BONDS – BOOK-ENTRY ONLY SYSTEM” has been furnished by DTC. Such information is believed to be reliable, but none of the Authority, EMHS, the Obligated Group or the Underwriters makes any representations or warranties whatsoever with respect to such information.

The members of the Obligated Group have reviewed the information contained herein which relates to EMHS and the other members of the Obligated Group and has approved all such information for use in this Official Statement. The execution and delivery of this Official Statement by its Executive Director has been duly authorized by the Authority.

MAINE HEALTH AND HIGHER EDUCATIONAL FACILITIES AUTHORITY By: Michael R. Goodwin Executive Director

Dated: ______________, 2016

[THIS PAGE INTENTIONALLY LEFT BLANK]

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TABLE OF CONTENTS

Appendix A

Information Concerning Eastern Maine Healthcare Systems

(Series 2016A Bonds)


Introduction ....................................................................................................................................... A-3

Service Area & Locations ................................................................................................................. A-4

Long Term Strategic Vision .............................................................................................................. A-5

System Transformation ..................................................................................................................... A-7

Information Technology ................................................................................................................... A-8

Strategic Acquisitions ....................................................................................................................... A-8

Governance ....................................................................................................................................... A-9

Obligated Group .............................................................................................................................. A-13

Operating Companies / Subsidiaries ............................................................................................... A-13

EMMC Medical Education Programs ............................................................................................. A-16

Employees ....................................................................................................................................... A-17

SOCIOECONOMIC AND MARKET SHARE INFORMATION FOR THE EMHS SERVICE AREA

Service Area .................................................................................................................................... A-20

Population and Age Characteristics ................................................................................................ A-21

Median Household Income ............................................................................................................. A-21

Unemployment Rates ...................................................................................................................... A-22

Industry Concentration .................................................................................................................... A-22

Top Employers ................................................................................................................................ A-23

Competitor and Market Share Information ..................................................................................... A-23

HISTORICAL UTILIZATION & OTHER STATISTICS.................................................................... A-25

Obligated Group Medical Staff Profile ........................................................................................... A-26

Top Ten Admitting Physicians by Specialty ................................................................................... A-30

Top Ten Surgeons by Specialty ...................................................................................................... A-30

THE PROJECT ..................................................................................................................................... A-31

CONSOLIDATED FINANCIAL RESULTS ....................................................................................... A-34

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MANAGEMENT’S DISCUSSION OF FISCAL YEARS ENDING 2014, 2015 AND SIX-MONTH FISCAL 2016

Financial Results – Six-Months Ended March 26, 2016 ................................................................. A-37

Financial Results – Fiscal Year 2015 .............................................................................................. A-37

Financial Results – Fiscal Year 2014 .............................................................................................. A-37

SELECTED FINANCIAL INFORMATION

Outstanding Indebtedness ............................................................................................................... A-38

Maximum Annual Debt Service Coverage ..................................................................................... A-39

Debt to Capitalization Ratio ............................................................................................................ A-40

Days Cash on Hand ......................................................................................................................... A-41

Payor Mix ....................................................................................................................................... A-42

Medicare ......................................................................................................................................... A-42

Medicaid (MaineCare) .................................................................................................................... A-43

Anthem Blue Cross and Blue Shield of Maine ............................................................................... A-44

Other Payer Arrangements .............................................................................................................. A-44

Investment Policy ............................................................................................................................ A-44

RETIREMENT PLANS

Cash Balance Plan ........................................................................................................................... A-44

Defined Contribution Plan .............................................................................................................. A-44

Deferred Compensation Plan .......................................................................................................... A-44

INSURANCE

Professional and General Liability .................................................................................................. A-45

Worker’s Compensation ................................................................................................................. A-45

Employee Health Benefits .............................................................................................................. A-45

Postretirement Medical Benefits ..................................................................................................... A-45

LEGAL MATTERS

Professional Liability Litigation ..................................................................................................... A-46

Other Litigation ............................................................................................................................... A-46

COMMUNITY OUTREACH AND COMMUNITY BENEFIT .......................................................... A-46

COMPLIANCE PROGRAM ................................................................................................................ A-47

FUTURE PLANS .................................................................................................................................. A-47

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Introduction

Eastern Maine Healthcare Systems (“EMHS”) is a Maine nonprofit corporation that controls an integrated delivery system providing a comprehensive continuum of healthcare services to communities throughout Maine. Based on revenues, EMHS is the second largest healthcare system in the state of Maine. EMHS’ core services include acute care medical-surgical hospitals, an acute psychiatric hospital, physician practices, ambulatory care centers, nursing homes, home care agencies, and ground and air emergency transport services. Through its subsidiaries, EMHS also provides medical laboratory services throughout New England, operates a multistate distributor of medical and surgical supplies to various healthcare organizations, operates four retail pharmacies, and holds significant ownership interests in several non-subsidiary companies providing services, such as skilled and long-term nursing care.

EMHS is comprised of more than 30 organizations, which include nine prominent hospitals in Maine: Acadia Hospital, Corp. (“Acadia”), The Aroostook Medical Center (“TAMC”), The Blue Hill Memorial Hospital (“Blue Hill”), Charles A. Dean Memorial Hospital (“CA Dean”), Eastern Maine Medical Center (“EMMC”), Inland Hospital (“Inland”), Maine Coast Regional Health Facilities d/b/a Maine Coast Memorial Hospital (“Maine Coast”), Mercy Hospital (“Mercy”), and Sebasticook Valley Health (“SVH”). EMMC is the EMHS flagship hospital, providing a full complement of sub-specialty care, trauma services, and the latest in advanced technologies and imaging capabilities. Other EMHS hospitals refer patients to EMMC for major operations and consultations with sub-specialists, and when sophisticated intensive care facilities are required. Other non-hospital EMHS members include Affiliated Healthcare Systems (“AHS”), Beacon Health, LLC (“Beacon”), Rosscare, VNA Home Health & Hospice (“VNA”), and EMHS Foundation (the “Foundation”).

EMHS offers the following services:

Allergy/Immunology Anesthesia Services Anatomical Laboratory Services Anticoagulation Clinic Audiology Services Behavioral Health Services Blood Bank Blood Product Management Services Cardiology Services

• Angioplasty • Cardiac Catheterization Lab • Cardiology/Non-Invasive • Coronary Interventions • Electrophysiology • Pediatric

Care Management Clinical Laboratory Services Diabetes, Endocrine, and Nutrition Center Dietary Services Emergency Services ESWL (Kidney Stone Treatment) Gastroenterology

• Advanced endoscopy Hemodialysis – Acute Hospitalist Inpatient Care

• Adult • Pediatric

Infectious Disease Services Infusion Therapy Intensive Care

• Adult • Cardiac • Pediatric • Neonatal

Mental Health Services – Acute Occupational Therapy Services Ophthalmologic Services Organ Bank Orthopedic Services

• Adult • Pediatric

Oncology Services – Adult • Medical/Chemotherapy • Radiation Therapy

Oncology Services – Pediatric • Medical/Chemotherapy • Radiation Therapy

Palliative Care Pediatric Specialty Services Prosthetics Pharmacy Services Physical Therapy Primary Care Services

• Adult Medicine • Family Medicine • Pediatric Medicine

Post-Op Recovery Room Services Radiology

• CT Scan • Diagnostic Radioisotope • Diagnostic Radiology Services • MRI (Magnetic Res Imaging) • Nuclear Medicine • PET Scan (Position Emission Tomo) • Ultrasound

Rehab Services • Inpatient • Outpatient

Respiratory/Pulmonary Services Sleep Center Social Services Speech Pathology Services Stroke Center

• Surgical Services Specialties: o Bariatric o Cardiac o General o Gynecology o Neurology o Oral/Maxillofacial o Orthopedic o Otolaryngology o Pediatric o Reconstructive/Plastic o Spine o Urology o Vascular

• Minimally Invasive Center: o Advanced Laparoscopic

procedures o Robotics Procedures o Epicenter for Bariatric Robotic

Surgery Trauma Center Vascular Services Walk-in-Care Wellness Services Women’s and Children’s Care

• Gynecology Services • Maternal Fetal Medicine Services • Neonatal Nursery Services • Obstetrical Services

Wound Care-Inpatient

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Service Area & Locations

The following map shows the location of EMHS hospitals, physician outpatient care sites, long-term care facilities, and related facilities.

Source: EMHS Planning Department

Key annual statistics (approximate):

11,500 employees

600 employed physicians

45 primary care locations

9 hospitals

4 retail pharmacies

5 air and ground emergency transport companies

8 nursing homes

5 home health locations

Integrated EMR

Freestanding cancer center

1.3 million outpatient visits annually

83,900 covered lives

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Long Term Strategic Vision

Strategic Plan and the Triple Aim

EMHS’ Vision 2020 is to be a nationally-recognized model of excellence in healthcare. The recently approved three-year strategic plan has six strategic pillars (quality, service, people, growth, finance and community) to assure a balanced and focused plan. The strategic plan references the Institute for Medical Improvement’s developed “Triple Aim” and adds another goal related to the need for engaged employees, providers, and patients. These four goals are: 1) better care for individuals; 2) better population health; 3) lower per capita costs; and 4) improved employee experience and engaged staff, patients, and providers.

1) Better Care for Individuals: EMHS is building a system-wide quality, patient safety and patient experience structure. It is working to foster a culture of care while reconfiguring its clinical services to optimize care across its regional delivery sites.

2) Better Population Health: EMHS is advancing its accountable care enterprise by recognizing the need to succeed under multiple payment models. Specifically, EMHS is building on its strong information technologies to identify and evaluate innovations to support high value care. EMHS is also partnering with others to address high priority population health issues.

3) Lower Per Capita Costs: EMHS is streamlining processes to enable scale effectiveness when possible.

4) Improved Employee Experience: EMHS is actively recruiting and retaining a workforce with the skills needed for current and future models of healthcare service delivery.

Nationally Recognized Accountable Care Organization

As a statewide health system, EMHS recognizes the importance of care delivered in local and regional markets. EMHS has established itself as a leader in value-based care and has invested considerable energy and resources in creating an advanced accountable care infrastructure. EMHS’ Beacon is a full service accountable care organization which operates one of the few National Committee for Quality Assurance accredited care management programs outside of insurance payers. Beacon has care managers embedded in primary care practices throughout Maine.

EMHS’ accountable care experience began in 2009 when it was one of 17 grantees awarded a Beacon Community Grant by the Office of the National Coordinator for Health Care Technology. This program created a culture of data sharing among providers to improve patient care and gave EMHS important experience in improving outcomes for chronically ill patients through the use of information technology and the organization of community medical and behavioral health specialists around care management strategies. EMHS has since continued its commitment to value-based care and reimbursement models, and is now one of 32 initial health systems in the country selected to participate in the federal Center for Medicare and Medicaid Innovation (“CMMI”) Pioneer Model Accountable Care Organization Demonstration Program. EMHS recently applied for and was named to participate in the CMMI Next Generation payment program. As a Pioneer site, Beacon implemented a successful effort to be granted a waiver for the normal requirement for three-day inpatient stay prior to admission to a skilled facility. Through its development of the infrastructure needed for the Medicare Pioneer and Next Generation demonstration programs, Beacon received the requisite experience needed to expand its services to employers, third party administrators and commercial payers. Beacon now manages and/or has risk contracts covering approximately 83,900 lives in Maine.

Expanding Access through Technology

EMHS is growing its virtual health and telemedicine services through the use of its imaging, electronic health record and telemedicine programs. Most of Maine’s rural hospitals are connected to the EMHS Picture Archiving and Communication System (“PACS”). PACS is a radiology imaging system supporting state-of-the-art consultations. This allows for ease in accessing and sharing images and radiologists reports. Likewise, nearly all of Maine’s rural hospitals and Federally Qualified Health Centers have remote access to EMHS’ inpatient electronic health records enabling them to review the status of patients transferred to an EMHS hospital. In the area of telemedicine, specialists providing virtual consultations for neonatology, pediatric intensive care and

A-6

trauma surgery are available to rural hospitals’ emergency departments. Acadia has developed a strong tele-psych service that provides consultations to regional emergency departments, correctional facilities, nursing homes and other healthcare programs.

The following map demonstrates the extent of the overall EMHS telemedicine network and the Acadia psychiatric telemedicine network, respectively, as relates to both EMHS hospitals (listed in orange) and non-EMHS hospitals (listed in blue).

Key Telemedicine Services: • PICU – EMMC pediatric intensivists provide audio and visual consults to 17 outlying emergency

departments requiring sub-specialized expertise. • Cardio Clinic – EMMC cardiologists provide EKG over-reads to primary care physicians at

outlying hospitals. • Stroke ED – EMMC neurologists provide online consultations to 5 outlying emergency

departments. • Trauma – EMMC trauma surgeons provide online consultations to 17 outlying emergency

departments. • Acadia Psych – Acadia provides crisis coverage for connected emergency departments, along

with hub appointments, and telemedicine home appointments for patients who are uncomfortable using a hub.

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System Partnerships in New England

EMHS has established a partnership with the Dana Farber Cancer Institute in Boston, Massachusetts (“Dana Farber”). EMHS enrolls its patients in some of Dana Farber’s latest, groundbreaking breast cancer and multiple myeloma clinical trials.

EMHS has also established a partnership with the Dartmouth-Hitchcock Healthcare System in New Hampshire (“Dartmouth-Hitchcock”). In 2013, EMHS became one of four new members of the Dartmouth-Hitchcock’s High Value Healthcare Collaborative (“HVHC”). The HVHC, a federally funded consortium of health care delivery systems, was co-founded by Dartmouth-Hitchcock in 2010 to share data to improve the clinical outcomes of targeted conditions with lowered costs. At present, the HVHC consists of 19 health systems representing 200 hospitals and 70 million patients across the country.

In 2012, EMHS partnered with Dartmouth-Hitchcock, Fletcher Allen Health Care, Maine Health and Dartmouth College to fund the start-up of the Northern New England Accountable Care Collaborative (“NNEACC”), a value-based care collaborative providing leading solutions that enable health providers to manage population health. As NNEACC partners developed their own internal expertise, there was no further need to outsource this service.

System Transformation

In order for EMHS to meet its long-term strategic objectives, it must continue to transform itself into a statewide integrated delivery system. This transformation will allow EMHS to position itself to provide healthcare services to a geographically dispersed population within a variety of reimbursement structures. This process has been ongoing for several years and much progress has been made. The remaining steps are expected to be accomplished in the next one to two years. Transformation efforts are grouped into three categories and discussed separately below.

Governance Model Restructure

In order to manage EMHS as a system, two changes related to governance have been accomplished. First, the EMHS Board of Directors (the “Board”) now has effective legal control over all of its subsidiaries. As part of this process, all of EMHS’ hospitals have been moved or will be moved into the EMHS Obligated Group. Second, new Chief Operating Officer and Chief Strategy Officer positions have been established that have responsibility for the EMHS system as a whole. Finally, the EMHS Chief Financial Officer role has evolved to effectively oversee all financial affairs of subsidiaries. To reflect this system management philosophy, subsidiary company Chief Executive Officers will be retitled to Senior Vice President/Presidents, while subsidiary Chief Financial Officers will become Vice Presidents of Finance.

Operating Platform Restructure

Many of the services and responsibilities of an integrated system had been widely duplicated throughout EMHS’ subsidiaries. This duplication has resulted in various levels of competence and lack of standardization, which was inefficient from a cost perspective, but also hindered system management from making the best decisions on a timely basis. In order to address this challenge, the accounting, human resources, information systems, legal and managed care contracting teams have been consolidated and are now under system management at the EMHS Corporate Office. Presently, the EMHS banking/cash management, capital budgeting, investment, revenue cycle management, supply chain management and quality functions are in the process of being centralized. These efforts are expected to be completed in fiscal year 2017.

Care Delivery Initiatives / Provider Initiatives

The rural setting of many of Maine’s residents can present challenges to ensuring that patients receive the proper level of hospital care in a timely basis. This occurs because many of the rural areas are served by hospitals with minimal secondary care platforms, requiring many patients to be transferred for more advanced care. As a result of this, EMMC has historically received a high number of low acuity referrals and transfers from other EMHS

A-8

hospitals. This has constrained EMMC’s capacity to accept all of the higher acuity cases that it otherwise could, which results in outmigration from the EMHS system – a significant financial opportunity cost. In order to address this, EMHS is currently undertaking a “network optimization” effort to keep as many patients as possible in local EMHS hospitals. This will be done by selectively augmenting several hospitals’ secondary care capabilities, hiring hospitalists and other key physician specialists, and placing them in needed locations.

EMHS’ service area now comprises the entire state of Maine. EMHS is undertaking two types of strategies to support its geographic coverage of the state of Maine. The first is the emphasis it has placed on its ACO organization, Beacon. One of the primary goals of Beacon is to become a comprehensive statewide network so that it can become a viable option for insurers/employers wanting a single contact for statewide coverage. The second strategy is to increase healthcare coverage in areas where EMHS has no hospital. Because the majority of high acuity cases from the northern region of Maine will be eventually be referred to EMMC, this effort is highly interrelated to the provider initiatives efforts discussed above. In order to accomplish both of these strategies, EMHS has continued to selectively acquire and affiliate with hospitals throughout Maine. These efforts are described separately in the “STRATEGIC ACQUISITIONS” section of this Appendix A.

Information Technology

In fiscal year 2014, the EMHS IT function became centralized at the EMHS Corporate Office. This has resulted in better cost control and more efficient allocation of IT resources among EMHS’ subsidiary organizations. During this centralization, the number of IT employees was reduced from 380 to 300. A system-wide Chief Information Officer was hired in 2014 and five regional Chief Information Officers provide day-to-day service and communication within each EMHS geographic area. Major initiatives during recent years, and continuing into the present, include the installation, standardization or improvement of the following:

- Business Intelligence/Analytics - Modernization and co-location of data centers - Data Warehousing (enterprise data warehouse for use with ACO subsidiary and other functions) - Full Redundancy/Disaster Recovery - Business Continuity - Full Encryption - Timely and Routine Patch Management

In 2014, IT leadership, with the assistance of an outside consulting firm, developed a three-year strategic plan to integrate into the EMHS overall strategic plan. The major finding of this process was that EMHS needed to replace and upgrade its electronic health records (“EHR”) / revenue cycle systems. Because the EHR system receives and feeds data to almost every IT system within EMHS, this will necessarily require many other related spinoff projects to be completed to ensure compatibility. From the Fall of 2015 through the present, EMHS has gone through an RFP process to select a new EHR/revenue cycle system. At present, EMHS has narrowed its decision to two products or vendors. Since this will be a capital intensive project, additional options are being evaluated for each vendor on ways to smooth related capital expenditures over a five- to- ten- year period as opposed to making large cash expenditures in the first few years of the project. At present, EMHS’ Information Technology function expects to make a recommendation in the Fall of 2016.

As a result of its existing EHR technology utilization, EMHS received meaningful use incentive payments in the amount of $9,774,182 for fiscal year 2014 and $6,049,932 for fiscal year 2015.

Strategic Acquisitions

As discussed in the “SYSTEM TRANSFORMATION” section of this Appendix A, EMHS has grown in size through selected acquisitions and affiliations. In the future, EMHS plans to continue this process. This strategy is integral to EMHS’ goals of being able to offer a statewide provider network for contracting purposes and to refer high acuity cases to EMMC. However, another reason to pursue this strategy is to assist in maintaining a viable provider infrastructure in the rural parts of Maine. Specifically, the pressures of healthcare reform and the

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impending medical workforce shortfall have continued to threaten the viability of small, stand-alone hospitals. EMHS’ affiliation models include a menu of clinical relationships, opportunities in accountable care, medical transport, purchasing, and comprehensive population health.

Recent EMHS acquisitions and affiliations include:

On October 4, 2013, EMHS became the sole corporate member of MHSM, which consists of Mercy and VNA. Mercy operates a 230-bed acute care hospital with two campuses located in Portland, Maine.

Effective October 1, 2015, EMHS became the sole corporate member of Maine Coast Healthcare Corporation (MCHC) of Ellsworth, Maine. MCHC includes Maine Coast, a Maine nonprofit, tax-exempt corporation that operates a 64-bed acute care hospital, Maine Coast Healthcare Foundation, Maine Coast Medical Realty, and Maine Coast Foundation.

EMHS recently signed two Strategic Network Participant agreements, the first with Down East Community Hospital, a 25-bed acute care hospital located in Machias, Maine, in April 2016, and the second with Northern Maine Medical Center, a 25-bed acute care hospital located in Fort Kent, Maine, in December 2015.

EMHS continuously evaluates potential acquisitions, mergers, and affiliations as part of the overall strategic development process, as well as decisions to divest and/or sell existing entities, services or products that currently comprise the EMHS system. As a result, it is anticipated that the group of affiliated healthcare entities currently comprising the EMHS system, and their respective owned or operated properties and facilities, may change over time. Governance

In early 2014, EMHS successfully implemented an integrated governance model. The model provides EMHS, as the corporate parent, with ultimate control and sovereignty over its subsidiaries. Prior to this, EMHS exercised control through its reserved powers, which required EMHS’ consent and approval for specified types of action proposed or initiated by a subsidiary, such as budgets, mergers/consolidations, transfer of significant assets, acquisitions, organizational document amendments and dissolutions.

The Board meets on a quarterly basis. Board member terms are three years with a twelve-year term limit. The Board currently operates with a structure comprised of the following eight standing committees:

- Audit & Compliance

- Council of Chairs (comprised of the Board Chairpersons of EMHS subsidiary boards)

- Executive Performance Management

- Finance*

- Governance

- Nominating

- Quality

- Strategic Planning

*Currently, the Finance Committee works with a sub-committee, the Investment Function Team, to oversee EMHS investment portfolios. In Fall 2016, EMHS expects to create a new Investment Committee to replace this structure. At that point, the Board will operate with nine committees.

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EMHS Board of Directors

Board Member Principal Occupation Term

Serving

Years of Service

Evelyn S. Silver, PhD, Chair

Higher education consultant. Retired administrator, University of Maine.

4th 10

Barry D. McCrum Vice Chair

Owner of McCrum & Company. Former Senior Vice President, Time Warner New England Division. Former TAMC trustee and Chair.

3rd 8

Kathy Corey Owner and Chair of the Board, Day’s Jewelers. Inland Trustee and past chair.

1st 1

James O. Donnelly Senior VP and Director of Retail Delivery, Bangor Savings Bank. Former Maine State Legislator.

1st 2

Carl W. Flora, Esq. Attorney. President, Loring Development Authority. Former chair, TAMC.

4th 12

Nichi S. Farnham Former Maine State Senator. Retired captain, US Air Force. Former City Councilor and Mayor of Bangor.

4th 11

Charles E. Hewett, PhD Executive Vice President and Chief Operating Officer, The Jackson Laboratory.

2nd 4

M. Michelle Hood President and Chief Executive Officer, EMHS. Ex Officio 8

Joyce Hedlund, EdD Interim President, University of Maine at Machias. 2nd 8

J. Daniel Lafayette III President and owner of Lafayette Hotels. 3rd 9

Marianne Lynch, Esq. Attorney; consultant and advocate for improved access to legal, social and health services for rural populations.

1st 4

Michael McInnis Retired insurance executive and consultant. Former Trustee and Board Chair, EMMC.

1st 3

Kathleen Ober, MD Obstetrician and gynecologist, Blue Hill. 1st 3

Michael S. Pancoe, MD, FACR

Practicing physician, EMMC (1981-present). Former President and Divisional Director Spectrum Medical Group. Campaign Co-Chair (with wife, Ellie) for EMMC Children's Cancer Center.

3rd 12

Anne Perry Family nurse practitioner at Calais Regional Medical Services. Former Maine state legislator.

1st 2

Stephen B. Rich, AIA Retired President and Chief Executive Officer, WBRC Architects and Engineers.

2nd 5

Danielle N. Ripich, PhD President, University of New England. 1st 2

John I. Simpson Retired President, H.E. Sargent Corp. Owner and President Innovative Solutions Now, LLC.

3rd 9

David L. Small Chief Operating Officer and Treasurer, Nelson & Small, Inc. Mercy trustee

1st 1

Potential Conflicts of Interest

EMHS does not generally, other than with respect to professional medical practices, do business with firms with which EMHS members of the Board or past members of the Board may be affiliated. The Bylaws of EMHS provide that no such transaction shall be entered into without full disclosure by the interested Director and the approval of the Board. The interested Director may not have a vote in such approval or be counted as part of a quorum in which such voted is taken. The transactions described in this Appendix A have been undertaken in full

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compliance with these provisions of the Bylaws. Moreover, Directors are required to submit annual conflict disclosure statements.

Executive Management of EMHS

M. Michelle Hood, FACHE (age 59) President and Chief Executive Officer

Ms. Hood received a Bachelor of Science degree in 1978 from Purdue University and a Master of Health Care Administration from Georgia State University in 1981. She joined EMHS in April 2006 from Billings, Montana where she was President and Chief Executive Officer of the Sisters of Charity of Leavenworth Health Systems Montana Region, as well as President and Chief Executive Officer of its flagship hospital, St. Vincent Healthcare. In her more than ten years as President and Chief Executive Officer of EMHS, Ms. Hood has provided leadership and vision that anticipate both advances and obstacles. In addition to overseeing a health care system, she focuses on healthcare policy developments at the state and national levels, positioning EMHS to innovatively address the very specific needs and challenges of improving the health status of the people of Maine. Ms. Hood works at making connections and building creative partnerships that work for Maine communities, strengthening the economic and educational climate of the state of Maine, and ensuring that EMHS is a desirable place to work for more than 8,000 dedicated professionals. She is active with both the American Hospital Association and the Maine Hospital Association, and serves as Chair of the University of Maine System Board of Trustees and on a number of other healthcare and community boards.

Jay Eckersley, MHA (66) Interim Chief Administrative Officer

Mr. Eckersley is a senior executive healthcare professional with more than 30 years of leadership experience in acute care settings and experienced in mergers, acquisitions and turnarounds. He is also serving as Chief Administrative Officer at the EMHS Corporate Office and as President of Mercy. Mr. Eckersley joined EMHS from B.E. Smith, a company that specializes in healthcare leadership. A former Chief Executive Officer in large healthcare systems, he is skilled in health systems and service line integration. Mr. Eckersley has a Bachelor of Science degree in Systems Engineering from the University of Utah and a Master of Healthcare Administration degree from Xavier University.

James Puffenberger, Esq., FACHE, MBA, CPA (67) Interim Senior Vice President, Treasurer and Chief Financial Officer

Mr. Puffenberger is a senior-level financial executive with more than 35 years of leadership and management experience, with broad organizational expertise in highly complex healthcare environments. After serving as Chief Financial Officer for hospitals and systems in Ohio, Indiana, and Arizona, and then as President and Chief Executive Officer of Northern Arizona Healthcare in Flagstaff, Arizona, he formed his own consulting firm to perform Chief Financial Officer duties at hospitals and health systems in Michigan and Ohio, and most recently joined B.E. Smith for its engagement with EMHS. Mr. Puffenberger has Bachelor of Science and Master of Business Administration degrees from Bowling Green State University and a Juris Doctorate from University of Toledo School of Law.

Robert A Thompson, MD, MBA (56) Senior Vice President, Chief Medical Officer

EMHS’ Chief Medical Officer serves as a key member of senior management participating in thought leadership, high-level policy formation, and direction setting to establish and achieve the strategic and operational goals of EMHS, as well as leading the formation of a system-wide medical group. Dr. Thompson serves as the executive sponsor of the Quality Committee of the Board and as President of Affiliated Healthcare Systems (AHS).

Prior to joining EMHS, Dr. Thompson was Chief Quality and Medical Officer at Asante, an integrated healthcare system headquartered in southern Oregon. During his tenure, Asante was recognized as a “Top 15 Health System” by Truven Health Analytics for three years in a row. He was also appointed to the Oregon Patient Safety

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Commission by Governor Kitzhaber. Other highlights of Dr. Thompson’s career include senior physician leadership positions at Altru Health System, a regional integrated healthcare system serving northeast North Dakota and northwest Minnesota. In 2007, he was elected as President of the North Dakota Medical Association. In 2007, he was elected as President of the North Dakota Medical Association. Dr. Thompson graduated from the University of North Dakota as a Medical Doctor and went on to a residency in Internal Medicine and a fellowship in Allergy/Immunology at the University of Iowa. He is board certified in Internal Medicine and Allergy/Immunology. He also received a Master of Business Administration from the University of St. Thomas.

Richard W. Freeman, MD, MPH, ScD, FACP (69) Senior Vice President and Chief Transformation Officer

Richard Freeman, MD, a General Internist, is Senior Vice President and Chief Transformation Officer of EMHS. He is responsible for guiding the transformation of EMHS from volume-based reimbursement and care delivery models to value-based models. Prior to joining EMHS in 2011, Dr. Freeman served concurrently as Chief Medical Officer for two subsidiary multi-specialty group practices of Spectrum Health System in western Michigan. Dr. Freeman holds an undergraduate degree from Cornell University, graduate degrees in public health and epidemiology from the Johns Hopkins Bloomberg School of Public Health, and holds a Doctor of Medicine degree from University of Maryland School of Medicine. His early career included service as Vice President for Medical Affairs at Johns Hopkins Bayview Medical Center; as President and Chief Operations Officer of CareAdvantage, Inc., a medical management firm serving BlueCross BlueShield plans; as Director in the Health Care Division of Navigant Consulting, Inc.; and as Senior Vice President and affiliate leader, Rochester General Medical Group, Rochester, NY. He has been a member of the full-time faculties at the Johns Hopkins School of Medicine, where he was the founding director of the first-year student preceptorship, Introduction to Clinical Medicine. He is also a member of the full-time faculties at the New York University School of Medicine, where he directed the Specialty Center for Public Health Preparedness, funded by the United States Centers for Disease Control and Prevention in the wake of 9/11 events.

Matthew Weed, MBA (58) Senior Vice President and Chief Strategy Officer

Matthew Weed joined EMHS in January 2016 after a 30-year tenure at Intermountain Healthcare in Utah. Intermountain is nationally recognized as one of the best healthcare systems in the U.S. While with Intermountain, Matt held a variety of leadership positions in operations, strategy, planning and business development, most recently as the Strategy Director of the urban region. At EMHS, Matt is responsible for planning and strategy, government relations, marketing and communications, community health and grants, and philanthropy. Matt is the senior strategist at EMHS overseeing strategic plan development and alignment with organizational plans. He has an undergraduate degree from the University of Utah and an Master of Business Administration from Brigham Young University.


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Obligated Group

* CA Dean will be added to the Obligated Group at the time of issuance of the Series 2016A Bonds and the Series 2016B Bonds.

History

In 1985, Eastern Maine Healthcare, the parent of EMMC prior to its merger into EMHS, created an Obligated Group consisting of EMHS, EMMC and Acadia. In June 2015 an initiative to expand the Obligated Group was undertaken so that EMHS could centralize its processes for consolidating and managing its capital structure, operating cash, investments and capital expenditures. The new Obligated Group was completed in April 2016 (other than with respect to CA Dean) wherein the following additional member organizations were brought into the Obligated Group, after having their associated bond indebtedness, if any, either defeased or transferred to the Obligated Group:

1. Mercy 2. MHSM 3. VNA 4. Inland 5. Lakewood 6. SVH 7. Blue Hill 8. TAMC 9. Maine Coast 10. CA Dean (will be added to the Obligated Group at the time of issuance of the Series 2016A Bonds and

the Series 2016B Bonds)

As of the date of issuance of the Series 2016A Bonds and the Series 2016B Bonds, the Obligated Group is comprised of the companies shown in the graph above. For the six-month period ended March 26, 2016, the Obligated Group1 accounted for 97.3%, 96.2% and 96.3% of total assets, revenue and expenses, respectively of the EMHS system.

Operating Companies / Subsidiaries

Obligated Group Members

Acadia Hospital, Corp. (Acadia) Acadia is a 100-licensed bed nonprofit, acute care hospital and community mental health agency, located in Bangor, Maine. It provides both hospital-based and community-based mental health and substance abuse treatment services to the people of Maine. Acadia was the first psychiatric hospital in the United States to


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receive Magnet recognition from the American Nurses Association. Acadia currently is contracted to provide tele-psychiatry consultation services to many hospitals throughout Maine. Acadia has been recognized for the following:

Maine Tobacco-Free Hospital Network Gold Star Award for a tobacco-free environment. (2014) “Most Improved” in the most wired study by the American Hospital Association. (July 2015)

The Aroostook Medical Center (TAMC) TAMC is an 89-licensed bed hospital and the leading provider of healthcare services in northern Maine. TAMC provides a full range of hospital, primary and specialty services and is affiliated with Mars Hill nursing home. TAMC has been recognized for the following:

“Most Improved” in the most wired study by the American Hospital Association. (July 2015) TAMC’s lab practice was identified as a national model by the College of American Pathologists.

(2014)

The Blue Hill Memorial Hospital (Blue Hill) Blue Hill is a 25-licensed bed critical access hospital, located in Blue Hill, Maine. Blue Hill offers primary and selected specialty healthcare services. Primary care practices are located in Blue Hill, Castine, and Stonington. Blue Hill collaborates with Maine Coast on obstetrics care. Blue Hill has been recognized for the following:

Maine Tobacco-Free Hospital Network Gold Star Award for a tobacco-free environment. (2014) “A” in patient safety measures from the Hospital Safety Score by The Leapfrog Group. (November

2015) “Most Wired” by the American Hospital Association. (July 2015)

Charles A. Dean Memorial Hospital (CA Dean) CA Dean is a 25-licensed bed critical access hospital located near Moosehead Lake in Greenville, Maine. CA Dean is also the home to Northwood Healthcare, a primary care practice with offices in Greenville, Monson and Sangerville. CA Dean provides acute, skilled, and nursing facility beds, as well as 24-hour emergency medical services and a ground ambulance program. CA Dean will become a member of the Obligated Group at the time of issuance of the Series 2016A Bonds and the Series 2016B Bonds. CA Dean has been recognized for the following:



Eastern Maine Healthcare Systems (EMHS) EMHS is the parent company of the EMHS system and provides management and support services to its subsidiaries. EMHS has been recognized for the following:

EMHS’ Move and Improve program was recognized by the Wellness Council of Maine for empowering employees to reach their full potential through wellness. (October 2014)

Best Places to work in Maine by Society for Human Resource Management six times since 2007.

Eastern Maine Medical Center (EMMC) EMMC, located in Bangor, Maine, is a 411-licensed bed regional referral hospital. EMMC and its medical staff provide three-quarters of the primary-care hospital services offered in the Bangor area, as well as specialty and intensive services to the northern two-thirds of the state of Maine.

In the past few years, EMMC has reorganized its employed medical group, comprised of 400+ employed physicians to develop a physician led, professionally managed medical group. The medical group is supporting hub-and-spoke growth of needed specialties to other hospitals within the region, with a current focus on

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hospitalist and emergency department providers. These regional specialties support care closer to home and free up EMMC capacity to treat patients with higher acuity needs.

Recent recognitions for EMMC are:

Maine Tobacco-Free Hospital Network Gold Star Award for a tobacco-free environment. (2014)

“A” in patient safety measures from the Hospital Safety Score by The Leapfrog Group. (November 2014)

“Most Wired” by the American Hospital Association. (July 2015)

CancerCare receives Outstanding Achievement Award from the American College of Surgeons Commission on Cancer (2014) and The Innovator Award from the Association of Community Cancer Centers.

Stroke Care receives Get With The Guidelines®—Stroke Gold-Plus Quality Achievement Award from the American Heart Association/American Stroke Association. (April 2015)

Inland Hospital (Inland) and Lakewood (Lakewood) Inland is a 48-licensed bed hospital in Waterville, Maine. Inland’s affiliates include Lakewood, a 105-licensed bed continuing care center on the hospital campus; and 18 primary and specialty care physician offices in Waterville and surrounding communities. Lakewood provides a continuum of skilled nursing and rehabilitation services, secure dementia care and long term care services. Lakewood is also a member of the Obligated Group. Inland has been recognized for the following:


“Most Improved” in the most wired study by the American Hospital Association. (July 2015) Women’s Choice Award from “America’s Best Hospitals for Obstetrics.” (2016)

Maine Coast Regional Health Facilities d/b/a Maine Coast Memorial Hospital (Maine Coast) In October 2015, EMHS acquired Maine Coast, a 64-licensed bed nonprofit acute care hospital located in Ellsworth, Maine. Maine Coast provides emergency, primary and specialty inpatient, surgical and diagnostic services. Maine Coast has been recognized for the following:


Mercy Health System of Maine (MHSM) and Mercy Hospital (Mercy) In October 2013, EMHS acquired MHSM and Mercy, a 230-licensed bed, nonprofit acute care hospital located in Portland, Maine. Mercy provides inpatient and outpatient medical and surgical care as well as obstetrics and gynecological services. Mercy has been recognized for the following:



Sebasticook Valley Health (SVH) SVH is a 25-licensed bed critical access hospital in Pittsfield, Maine, with a wide range of outpatient services and three primary care locations throughout central Maine. SVH has been recognized for the following:


Maine Tobacco-Free Hospital Network Gold Star Award for a tobacco-free environment. (2014) “Most Wired” by the American Hospital Association. (July 2015)

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VNA Home Health & Hospice (VNA) VNA provides a continuum of care from companionship and skilled homecare through hospice. VNA includes VNA (Portland), Bangor Area Visiting Nurses, Hospice of Eastern Maine, Hancock County HomeCare and Hospice, Visiting Nurses of Aroostook, and Hospice of Aroostook.

In 2015, VNA made 124,847 home health visits, 40,275 hospice visits and served more than 8,500 clients. VNA had an average census of more than 1,500 monthly clients and its care providers traveled more than 3,145,500 miles. VNA received the Fazzi Association Award for Top 25% Patient Satisfaction 2015.

Non-Obligated Group Members

Affiliated Healthcare Systems (AHS) AHS is a Maine-based company that has built one of the largest healthcare support networks in all of New England. AHS provides regional referral lab, material management, transcription, and collection services and offers ground ambulance transportation. AHS has several retail pharmacy locations.

Beacon Health, LLC (Beacon) Beacon is a limited liability corporation with accountable care functions, including risk contracting, provider network development, population health management and related data analytics. EMHS has a 98% ownership interest in Beacon. Beacon is contracted to provide care managers based in EMHS member hospital’s primary care practices.

EMHS Foundation (The Foundation) The Foundation holds and manages unrestricted and donor-restricted funds for the benefit of various EMHS companies and other exempt organizations in Maine. The amount of assets held for the benefit of unrelated organizations is not material.

Rosscare Rosscare provides resources, education, housing, and support services for older adults, their families, and caregivers throughout the EMHS service area. Rosscare provides these services through its six nursing homes (owned in a joint venture with First Atlantic Corp).

On a combined basis, these nursing homes offer 384 long-term care beds, 14 independent living units, 40 assisted living units, 26 specialized care beds, and a 48-bed Alzheimer unit.

In February 2016, Dirigo Pines, a subsidiary of Rosscare, was sold. Dirigo Pines is an apartment-style retirement community in Orono, Maine, which includes 23 specialized care beds, a 27-bed Alzheimer unit, 56 independent living units, and 17 assisted living units.

EMMC Medical Education Programs

EMMC serves as a teaching hospital and has affiliations with a number of teaching institutions in New England. EMMC provides third-year clinical clerkships (medical school) for twelve students in Internal Medicine, Pediatrics, OB-GYN, Surgery, Psychiatry, Family Medicine, Outpatient Internal Medicine and Neurology from the University of Vermont School of Medicine. It also provides third-year clerkships for 36 students in Internal Medicine, Pediatrics, OB-GYN, Surgery, Psychiatry, and Family Medicine from the University of New England College of Osteopathic Medicine. In addition, four to eight fourth-year medical students usually are on campus at EMMC at any given time.

Family Practice Residency Program

The Family Medicine Residency Program at EMMC offers a well-rounded education with an emphasis on preventative care in a rural setting. EMMC’s tertiary care facility expands that focus by providing resident physicians the opportunity to work with primary care and specialty physicians caring for a large patient population. The diversity of EMMC’s faculty keeps resident physicians up to date on all areas of family medicine, from obstetrics to child care, from chronic disease management to palliative care. EMMC integrated patient

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centered medical home has been recognized nationally and provides patients with on-site services, such as behavioral medicine, gynecology, developmental pediatrics and care management. This program has 27 residents, graduating nine physicians per year. In addition, EMMC offers a fellowship programs in Neuromuscular and Osteopathic Manipulative Medicine, and Hospice and Palliative Care. In the past five years, EMMC has recruited twelve graduates to practice primary care or hospitalist medicine.

EMMC Pharmacy Residency Program

EMMC’s Pharmacy Residency Program affords newly graduated pharmacists an in-depth exposure to clinical pharmacy practice. While providing individual attention and professional development, the pharmacy residency experience includes comprehensive hospital-pharmacist led training, with emphasis on evidence-based medicine, advance pharmacy practice and clinical research. The EMMC Pharmacy Residency Program has been accredited by the American Society of Hospital Pharmacy since 2006. The EMMC Pharmacy Residency Program has graduated 17 pharmacy residents and, in 2016, the program will be expanding to graduate four pharmacist residents each year.

Employees

As of the six-month period ended March 26, 2016, the EMHS system employed approximately 11,560 full time and part time employees in the following categories.

6 Month 6 Month

FY 2013 FY 2014 FY 2015 FY 2015 FY 2016

Professional Physicians (including physician management) 528 667 680 685 754

Advanced Practice Nurses 208 309 323 311 334

RNs 1,697 2,245 2,285 2,203 2,403

Other (PT, OT, ST, Clinicians) 395 612 687 631 730

Total Professional 2,828 3,833 3,975 3,830 4,221 Technical 703 991 991 961 1,048

Service 1,777 2,243 2,270 2,240 2,427

Clerical 2,072 2,390 2,512 2,501 2,731 Managerial (including RN management) 616 775 840 809 891

Craftsmen/Laborers/Operators 147 165 150 129 137

EMHC and M Drug1 349 348 256 312 105

Subtotal 5,664 6,912 7,019 6,952 7,339

Total 8,492 10,745 10,994 10,782 11,560

Source: EMHS Human Resources Lawson system. 1Certain EMHS companies, such as EMMC Hospitality Condominium Association and M Drug, LLC, were not utilizing the Lawson system for all periods listed above and, as such, are shown separately.

The 11,560 employees represent approximately 9,642 full time equivalent employees (“FTE”) as of the six-month period ended March 26, 2016. The figure represents an approximate 6.4% increase in FTEs over fiscal year 2015, which is largely a result of the acquisition of Maine Coast in the early part of fiscal year 2016. The chart below shows FTEs for the EMHS system for the periods indicated.

FY 2013 FY 2014 FY 2015 (6 mos.)

FY 2015 (6 mos.)

FY 2016 7,214 9,016 9,059 9,540 9,642

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Union Employees

EMMC has a collective bargaining agreement with the Maine State Nurses Association/National Nurses Organizing Committee/National Nurses United (“MSNA”), which covers its regular full-time and part-time general duty nurses (staff RN’s), representing approximately 20% of the current workforce at EMMC. The current term of the contract ends on May 30, 2018.

Maine Coast has a collective bargaining agreement with the MSNA, which covers its regular full-time and part-time general duty nurses, lab technologists and social workers, representing approximately one fifth of the current workforce at Maine Coast. The current term of the contract ends on May 20, 2019.

TAMC has a collective bargaining agreement with the MSNA, which covers its regular full-time and part-time general duty nurses (staff RN’s), representing approximately 14% of the current workforce at TAMC. The current term of the contract ended June 7, 2016. TAMC is currently engaged in contract negotiations related to a renewal of this arrangement.

TAMC has a collective bargaining agreement with the Teamsters/Tech Union (“Tech”), which covers regular full time, regular part time and casual part time employees working as licensed practical nurses (LPNs), technicians, technologists and paramedics, representing approximately 12% of the workforce at TAMC. The current term of the contract ends on September 1, 2017.

Bangor Area Visiting Nurses (“BAVN”) has a collective bargaining agreement with the MSNA, which covers its regular full-time and part-time general duty nurses, representing approximately 4% of the current workforce at BVNA. The current term of the contract ends June 18, 2017.

Total Employee Count

Union Employee

Count %

EMMC 4,150 834 20.10%

Maine Coast 640 105 16.41%

TAMC – MSNA 1,052 151 14.35%

TAMC – Tech 1,052 124 11.79%

BVNA 459 20 4.36%

Source: EMHS Human Resources.

Other than as listed above, EMHS is not aware of any other current organizing effort of its employees by any other labor unions.

Employee Retention Rates

EMHS has a high employee retention rate for its employees, especially RNs at EMMC. The following table shows the retention rates for EMHS employees and EMMC registered nurses for fiscal years 2014, 2015 and the six-month period ended March 26, 2016.

FY 2014

FY 2015

6 Month FY 2016

All EMHS Employees 85.00% 79.30% 92.03% EMMC RNs 93.00% 88.53% 95.30%

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Employee Benefits

Employee benefits and wages paid by EMHS are considered by management to be competitive with those of competing facilities. Benefits include: two medical plan options, three dental plan options, flexible spending accounts for healthcare and dependent care, life insurance, long term disability, paid time off, and education assistance. Pension plans include a cash balance defined benefit plan, a deferred compensation plan, and a 403(b) tax deferred plan described under “RETIREMENT PLANS.”


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SOCIOECONOMIC AND MARKET SHARE INFORMATION FOR THE EMHS SERVICE AREA

Service Area

EMHS operates in two service areas: Service Area A and Service Area B. EMHS defines separate service areas due to the demographic nature of the Maine market and the large geographic reach of EMHS. Since these are two distinct markets, the data has been separated for the more urban, Portland area and the hospitals in the eastern, central and northern parts of the state of Maine. Together, Service Areas A and B encompass the entire state of Maine.

The two service areas are defined by counties as:

Service Area A – northern Maine counties including: Penobscot, Aroostook, Piscataquis, Hancock, Washington, Somerset, Kennebec, Waldo and Knox

Service Area B – southern Maine counties including: Oxford, Androscoggin, Lincoln, Knox, Sagadahoc, Cumberland and York

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Population and Age Characteristics

As the graph below shows, the population of Service Areas A and B is becoming increasingly concentrated in the over 65 age cohort.

2010 Census 2015

Estimated Census

% Change

Service Area A

Age 65 and over 94,706 113,805 20.2%

Age 45-64 178,555 163,383 -8.5%

Age 18-44 185,497 198,069 6.8%

Age 0-17 115,232 103,006 -10.6%

Total 573,990 578,263 0.7%

Service Area B

Age 65 and over 116,399 147,586 26.8%

Age 45-64 232,105 216,531 -6.7%

Age 18-44 246,556 259,725 5.3%

Age 0-17 159,308 146,425 -8.1%

Total 754,368 770,267 2.1%

Maine

Age 65 and over 211,105 261,391 23.8%

Age 45-64 410,660 379,914 -7.5%

Age 18-44 432,053 457,794 6.0%

Age 0-17 274,540 249,431 -9.1%

Total 1,328,358 1,348,530 1.5%

Source: EMHS Planning: 2010 data from Nielsen Demographic Data Set, 2015 from GeoLytics.

Median Household Income

The median household (“HH”) income in the Service Areas A and B for 2015 is presented in the following table:

Avg HH

Size Per Capita

HH Income Median HH

Income Total HH

% of HH with income

<$15,000

2015

Service Area A

Aroostook 2.26 $ 20,023 $ 37,440 29,502 18.9%

Franklin 2.28 21,031 41,281 12,956 16.0%

Hancock 2.20 26,459 49,222 23,993 12.8%

Kennebec 2.32 24,145 48,197 52,645 12.4%

Penobscot 2.33 22,152 45,801 65,045 15.5%

Piscataquis 2.22 18,926 34,152

7,383 21.0%

Somerset 2.35 20,116 39,289 22,334 18.8%

Waldo 2.33 21,611 42,118 16,057 14.3%

Washington 2.24 19,403 37,221 13,748 20.0% Service Area B

Androscoggin 2.38 22,310 47,176 46,335 14.6%

Cumberland 2.33 29,449 60,625 121,067 11.5%

Knox 2.22 24,955 48,022 17,391 12.8%

Lincoln 2.24 26,020 48,101 14,823 11.2%

Oxford 2.35 20,930 40,781 24,685 16.0%

Sagadahoc 2.32 26,708 55,953 14,987 10.9%

York 2.40 26,785 57,380 81,000 9.6% MAINE 2.33 $ 24,693 $ 48,030 563,951 13.5%

Source: EMHS Planning: 2010 US Census, American Fact Finder; 2015 GeoLytics

A-22

Unemployment Rates

The average unemployment rates in each of the counties in Service Areas A and B for the 2014-2016 time period are presented in the following table:

2014 2015 2016

County

Total Labor Force

Unemployment Total Labor Force

Unemployment Total Labor Force

Unemployment

Number Rate Number Rate Number Rate EMHS Service Area A

Aroostook 33,210 2,990 9.0% 31,840 2,310 7.3% 30,640 1,820 5.9%

Franklin 15,430 1,140 7.4% 15,010 840 5.6% 14,320 690 4.8%

Hancock 28,000 2,960 10.6% 26,910 2,420 9.0% 26,240 1,790 6.8%

Kennebec 63,550 4,170 6.6% 61,620 3,360 5.5% 60,450 2,550 4.2%

Penobscot 80,290 5,930 7.4% 77,350 4,550 5.9% 75,470 3,690 4.9%

Piscataquis 7,740 660 8.5% 7,450 520 7.0% 7,220 410 5.7%

Somerset 24,460 2,370 9.7% 23,370 1,970 8.4% 22,750 1,500 6.6%

Waldo 20,640 1,610 7.8% 20,040 1,280 6.4% 19,670 1,030 5.2%

Washington 14,230 1,550 10.9% 13,600 1,300 9.6% 13,200 1,030 7.8%

EMHS Service Area B

Androscoggin 56,260 3,710 6.6% 54,870 2,970 5.4% 54,500 2,220 4.1%

Cumberland 157,660 8,410 5.3% 154,640 6,670 4.3% 153,310 4,880 3.2%

Knox 19,820 1,420 7.2% 19,440 1,190 6.1% 19,010 900 4.7% Lincoln 16,530 1,340 8.1% 15,820 1,030 6.5% 15,560 770 4.9%

Oxford 27,990 2,260 8.1% 27,030 1,830 6.8% 26,450 1,380 5.2%

Sagadahoc 18,930 1,120 5.9% 18,590 860 4.6% 18,420 660 3.7%

York 109,120 7,480 6.9% 106,800 5,800 5.4% 106,290 4,350 4.1%

Source: Maine Department of Labor, Center for Workforce Research & Information in cooperation with the U.S. Bureau of Labor Statistics.

Industry Concentration

Industry concentration for Service Areas A and B, as well as the state of Maine, in 2015 is presented in the following table.

Characteristic Service Area

A Service Area

B Maine

Education and health services 28.6% 25.1% 26.5% Retail trade 13.6% 13.6% 13.6% Manufacturing 9.0% 10.8% 10.1% Construction 7.8% 7.2% 7.5% Leisure and hospitality 7.3% 8.5% 8.0% Professional and business services 6.9% 9.3% 8.3% Other services 6.3% 6.4% 6.4% Public administration 5.2% 3.5% 4.2% Transportation and utilities 4.3% 3.4% 3.8% Agriculture, forestry, fishing, and hunting 3.4% 1.6% 2.3% Financial activities 3.4% 5.5% 4.6% Wholesale trade 2.3% 2.9% 2.7% Information 1.9% 2.1% 2.0% Mining 0.1% 0.1% 0.1%

Source: EMHS Planning, GeoLytics 2015

A-23

Top Employers

The top employers of the state of Maine are presented in the following table:

Employer Industry Specialization Number of Employees

Eastern Maine Healthcare Systems General medical and surgical hospitals 9,000 to 11,500

Hannaford Bros Co Supermarkets and other grocery stores 7,501 to 8,000

Wal-Mart / Sam’s Club Discount department stores 7,001 to 7,500

MaineHealth General medical and surgical hospitals 7,001 to 7,500

Bath Iron Works Corporation Ship building and repairing 5,501 to 6,000

L.L.Bean, Inc Retail 4,501 to 5,000

MaineGeneral Medical Center General medical and surgical hospitals 3,001 to 3,500

Central Maine Healthcare Corp General medical and surgical hospitals 3,001 to 3,500

Unum Provident Direct life insurance carriers 3,001 to 3,500

TD Bank NA Commercial banking 3,001 to 3,500

Source: Maine Department of Labor and Statistics as of 3rd Quarter 2015

Competitor and Market Share Information

The following charts show EMHS total and service line market share percentages for the 2011 through 2013 periods (latest available). Service Areas A and B are presented separately. For purposes of market share calculations, all EMHS hospitals owned in June 2016 were included in historical trends regardless of when they were acquired. For example, Mercy inpatient volume was included in Service Area B calculations before it was acquired in October 2013.

Service Area A EMHS Inpatient Market Share 2011 2012 2013 EMHS 43.5% 44.3% 45.2% MaineHealth 12.5% 12.4% 12.0% MaineGeneral 16.4% 16.3% 16.3% CMMC 2.2% 2.2% 1.9% Covenant 7.0% 6.8% 6.5% Mid-Coast 0.4% 0.4% 0.3% Other 18.0% 17.6% 17.8%

Total 100% 100% 100%

Service Area B EMHS Inpatient Market Share 2011 2012 2013 EMHS 10.7% 10.5% 10.5% MaineHealth 52.7% 52.8% 54.4% MaineGeneral 0.9% 1.1% 1.0% CMMC 13.8% 14.0% 12.4% Covenant 7.9% 7.8% 7.9% Mid-Coast 7.4% 7.4% 7.4% Other 6.6% 6.4% 6.4%

Total 100% 100% 100%

Source: Maine Health Data Organization Discharge Data (excludes newborns)

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The table below demonstrates EMHS’ market share in certain service lines in Service Areas A and B.

Service Area A EMHS Inpatient Market Share by

Service Line 2011 2012 2013 Cardiac Services 49.2% 49.9% 50.9% ENT 45.9% 50.0% 47.9% General Medicine 37.7% 38.2% 38.7% General Surgery 44.7% 46.3% 47.8% Gynecology 24.1% 25.9% 21.4% Neonatology 47.5% 48.0% 48.7% Neurology 41.7% 43.4% 44.6%

Neurosurgery 46.6% 45.2% 41.6% Obstetrics 46.4% 47.1% 48.0% Oncology/Hematology (Medical) 45.9% 49.6% 50.6% Ophthalmology 40.3% 50.8% 55.0% Orthopedics 43.2% 45.4% 46.5% Other Trauma 45.3% 49.4% 50.1% Rehabilitation 67.3% 60.8% 59.3% Spine 43.2% 45.6% 50.4% Thoracic Surgery 60.5% 57.1% 62.4% Urology 52.5% 50.8% 55.9% Vascular Services 59.1% 55.5% 59.1% Aggregate 43.5% 44.3% 45.2%

Service Area B EMHS Inpatient Market Share by

Service Line 2011 2012 2013 Cardiac Services 5.2% 4.8% 4.4% ENT 11.6% 7.3% 6.8% General Medicine 13.2% 12.5% 11.9% General Surgery 8.5% 9.0% 8.8% Gynecology 11.3% 8.1% 6.3% Neonatology 11.0% 12.1% 11.7% Neurology 5.4% 4.7% 4.3%

Neurosurgery 2.4% 3.1% 1.2% Obstetrics 11.1% 12.1% 11.4% Oncology/Hematology (Medical) 7.4% 6.3% 6.4% Ophthalmology 9.3% 8.5% 3.7% Orthopedics 15.2% 14.9% 19.4% Other Trauma 4.7% 3.5% 3.9% Rehabilitation 0.7% 0.4% 0.4% Spine 15.1% 16.5% 19.0% Thoracic Surgery 7.4% 9.4% 21.8% Urology 11.6% 12.2% 10.2% Vascular Services 7.1% 5.5% 4.1% Aggregate 10.7% 10.5% 10.5%

2011 2012 2013 Service Area A 43.5% 44.3% 45.2% Service Area B 10.7% 10.5% 10.5%

Source: Maine Health Data Organization Discharge Data (excludes newborns)

A-25

HISTORICAL UTILIZATION AND OTHER STATISTICS The following chart demonstrates the utilization statistics for EMHS and its subsidiaries for the years and periods indicated.

EMHS Consolidated FY 2013 FY 2014* FY 2015 (6 mos.)

FY 2015 (6 mos.)

FY 2016* Inpatient Routine Services Utilization

Available Beds (Adult and Pediatric) 588 744 720 726 744

Adult & Pediatric Days 151,453 177,400 175,787 89,730 88,439

Adult & Pediatric Admissions 26,341 32,663 31,896 16,115 16,005

Average Length of Stay 5.75 5.43 5.51 5.57 5.53

Births 2,200 3,061 3,084 1,491 1,606

Medicare Case Mix Index (Average) 1.77 1.781 1.783 1.740 1.844

Visits

Total Outpatient visits 1,014,065 1,271,973 1,369,923 655,387 759,521

Emergency Department Visits 117,666 137,275 141,543 68,536 78,127

Physician Practices 553,493 730,963 775,386 376,254 416,448

Rehab Therapies 317,046 345,592 353,232 170,919 215,275

Procedures and Tests

Endoscopy 10,225 12,998 13,743 6,399 8,650

Surgery 24,970 33,502 31,942 16,085 17,617

Laboratory 1,915,296 2,383,851 2,251,863 1,116,920 1,256,018

Imaging

Diagnostic 132,966 173,833 176,660 86,425 97,593

Interventional 1,868 4,954 5,065 2,438 2,307

Nuclear 6,285 7,593 7,169 3,514 4,176

Ultrasound 24,550 38,482 38,915 18,665 23,196

MRI 12,710 15,969 16,702 8,149 9,521

CT Scan 38,270 48,374 48,889 23,946 26,736

Vascular Testing 9,787 10,229 10,158 4,940 4,877

PET Scan 1,546 1,589 1,716 805 870

Radiation Oncology (Linear Accelerator) 20,481 21,559 22,477 11,546 11,475

Medical Oncology 58,896 62,386 64,780 31,161 32,306

Cardiac Catheterization Lab 5,910 6,668 6,540 3,093 3,373

Echocardiography 15,066 18,332 19,171 9,226 8,762

Neurodiagnostics 1,862 1,932 2,195 1,032 1,137

Home Health Visits 71,128 156,338 157,646 76,243 82,006

ACO Covered Lives (Managed) 25,965 56,259 95,080 96,471 83,905

FTE’s 7,214 9,016 9,059 9,540 9,642

Source: EMHS Accounting Department

*Mercy, MHSM and VNA are reflected in the utilization statistics above as of fiscal year 2014 after joining EMHS in October 2013. Maine Coast is reflected in the utilization statistics above as of the six-month period ended March 26, 2016 after joining EMHS in October 2015.


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Obligated Group Medical Staff Profile

Hospital Name

Physicians on Active

Staff

Courtesy/ Consultant

Staff

Employed Physicians on Active

Staff

% Active Staff

Employed

Employed Primary

Care Physicians

Employed Primary

Care NPs/PAs

Average Age of

Medical Staff

Acadia Hospital1 20 1 18 90% 0 0 53

Blue Hill Memorial Hospital1 22 72 18 82% 11 6 51

Charles A. Dean Memorial Hospital3 8 117 8 100% 5 2 50

Eastern Maine Medical Center2 444 49 299 67% 41 24 48

Inland Hospital1 53 191 32 60% 16 10 51

Maine Coast Memorial Hospital2 51 55 36 71% 17 3 52

Mercy Hospital2 320 237 122 38% 33 12 50

Sebasticook Valley Health1 22 55 19 86% 9 6 51

The Aroostook Medical Center1 69 41 54 78% 14 9 52

Totals 1,009 818 606 59% 146 72

1

Source: EMHS’ credentialing database. 2 Source: EMHS’ medical staff/credentialing office. 3 CA Dean will be added to the Obligated Group at the time of issuance of the Series 2016A Bonds and the Series 2016B Bonds.

EMMC and Mercy together comprise 764 or 76% of total EMHS medical staff. Because of their materiality, more detailed information on each of these hospitals' medical staffs is posted below.


A-27

EMMC Medical Staff by Practice Type

The following table identifies EMMC medical staff by practice type and whether employed or in private practice as of January 2016.

Department

Number of

Practices

Number of Employed Physicians

Number of Private Practice Physicians

Total Physicians

% of Total Physicians Employed

Allergy Immunology 2 1 0 1 100%

Anesthesiology 4 24 3 27 89%

Cardiothoracic Surgery 1 5 0 5 100%

Cardiology 1 22 3 25 88%

Critical Care Medicine 0 0 0 0 NA

Dentistry 7 0 7 7 0%

Pediatric Dermatology 1 1 0 1 100%

Developmental Pediatrics 1 1 0 1 100%

Emergency Medicine 1 19 0 19 100%

Endocrinology 2 3 0 3 100%

Family Practice 21 40 12 52 77%

Gastroenterology 1 9 0 9 100%

General Surgery 9 16 5 21 76%

Genetics 1 1 0 1 100%

Hematology/Oncology 1 12 0 12 100%

Hospitalists 1 51 0 51 100%

Infectious Disease 2 4 0 4 100%

Internal Medicine 11 6 0 6 100% Internal Medicine/Nephrology 0 0 0 0 NA

Maternal Fetal Medicine 0 0 0 0 NA

Neonatology 1 5 0 5 100%

Nephrology 1 0 6 6 0%

Neurology 2 10 0 10 100%

Neurosurgery 2 3 2 5 60%

OB/GYN 9 9 4 13 69%

Occupational Medicine 0 0 0 0 NA

Ophthalmology 6 2 6 8 25%

Oral Surgery 2 1 2 3 33%

Orthopedic Surgery 5 13 7 20 65%

Otolaryngology 1 4 0 4 100%

Pain Medicine 0 0 0 0 NA

Palliative Care 1 7 0 7 100%

Pathology 1 0 13 13 0%

Pediatric Cardiology 0 2 0 2 100%

Pediatric Endocrine 1 1 0 1 100%

Pediatric Gastroenterology 1 1 0 1 100%

Pediatric Hospitalist 1 9 0 9 100%

Pediatric Intensive Care 0 1 0 1 100%

Pediatric Oncology 1 3 0 3 100%

Pediatric Surgery 1 1 0 1 100%

Pediatrics 10 7 4 11 64%

Plastic Surgery 3 2 2 4 50%

Podiatry 4 0 5 5 0%

Psychiatry 1 0 11 11 0%

Pulmonology 2 0 12 12 0%

Radiation Oncology 0 0 4 4 0%

Radiology 2 0 17 17 0%

Rehabilitation Medicine 2 6 1 7 86%

Rheumatology 1 2 0 2 100%

Sports Medicine 0 0 0 0 NA

Urgent Care Medicine 0 0 0 0 NA

Urology 1 6 1 7 86%

Vascular Medicine 1 1 0 1 100%

Vascular Surgery 1 6 0 6 100% Totals 131 317 127 444 71%

Source: EMMC Medical Staff Office

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Change in EMMC Medical Staff from Fiscal Years 2013 to 2016

The medical staff has grown in recent years as a result of active recruitment efforts by EMMC, including the addition of new specialty services. Resignations from the medical staff have been principally due to retirements and physicians leaving the service area for personal reasons.

The following table sets forth the net increase/(decrease) in the medical staff (including employed physicians) at EMMC for each of the fiscal years ending September 2013, 2014, 2015 and 2016 (6 months).

Specialty 2013 New Resigned 2014 New Resigned 2015 New Resigned (6 mo.)

2016 Anesthesia Service 20 3 1 22 4 3 23 4 1 26 Pain Medicine 5 5 5 5 Cardiovascular Service 18 2 20 1 21 2 19 Emergency Med. Service 20 20 4 1 23 3 3 23 Family Medicine Service 39 3 36 4 32 1 31 Inpatient 0 2 2 2 2 4 Maternal Health 0 0 1 1 2 3 Outpatient 0 4 4 1 5 2 1 6 Residency 0 0 2 2 3 3 2 Urgent Care 3 3 3 3 Medicine Service 7 1 6 6 6 Endo/metabolism 4 4 4 4 Gastroenterology 5 5 2 7 2 9 Hem/Onc 11 11 5 16 1 17 Hospital Medicine 41 7 3 45 3 2 46 3 5 44 Infectious Disease 3 3 3 1 4 Nephrology 5 5 5 2 1 6 Neurology 9 9 2 7 2 2 7 Palliative Care 3 3 1 4 4 Pulmonary Medicine 13 1 14 1 15 1 14 Rheumatology 1 1 1 1 Vascular 1 1 1 1 Ob/Gyn Service 13 1 14 1 15 1 14 Maternal Fetal medicine 1 1 1 1 Orthopedic Service 20 3 23 1 22 22 Pathology 13 1 2 12 1 13 1 12 Allergy 1 1 1 1 Adolescent 1 1 1 1 Cardiology 1 1 1 1 Endo 1 1 1 1 Gastroenterology 0 0 0 1 1 0 General 14 3 11 2 13 2 11 Genetics 1 1 1 1 Hem/Onc 2 1 3 3 1 2 Infectious Disease 3 3 3 1 4 Inpatient 9 9 9 9 Neonatology 4 2 2 2 2 Neurology 1 1 1 1 Podiatry 6 6 6 6 Psychiatry Service 13 2 2 13 3 3 13 4 2 15 Radiology Service 19 1 18 2 20 2 2 20 Rad. Oncology 4 1 5 5 1 4 Rehabilitation Service 6 6 1 7 1 8 Occupational Medicine 2 2 2 2 Dentistry 6 1 1 6 1 7 1 8 General Surgery & Trauma 20 4 24 1 3 22 3 25 Neurosurgery 5 1 4 1 5 5 Ophthalmology 8 1 9 9 9 Otolaryngology 3 1 2 2 2 Oral Surgery 2 2 2 2 Pediatric 1 1 1 1 Plastic Surgery 4 4 4 1 5 Urology 5 5 5 5 Vascular Surgery 5 5 1 1 5 1 6 Totals 402 34 21 415 39 20 434 41 31 444

Source: EMMC Medical Staff Office

A-29

Mercy Medical Staff by Practice Type

The following table identifies Mercy medical staff by practice type and whether employed or in private practice as of January 2016.

Department Number

of Practices

Number of Employed Physicians

Number of Private Practice

Physicians

Total Physicians

% of Total Physicians Employed

Allergy Immunology 1 0 1 1 0%

Anesthesiology 2 2 32 34 6%

Cardiothoracic Surgery 1 0 1 1 0%

Cardiology 3 5 20 25 20%

Critical Care Medicine 1 4 0 1 100%

Dentistry 2 0 4 4 0%

Dermatology 1 0 1 1 0%

Developmental Pediatrics 0 0 0 0 NA

Emergency Medicine 2 20 4 24 83%

Endocrinology 1 1 0 1 100%

Family Practice 13 16 8 24 67%

Gastroenterology 2 3 1 4 75%

General Surgery 4 6 3 9 67%

Genetics 0 0 0 0 NA

Hematology/Oncology 3 3 9 12 25%

Infectious Disease 1 0 4 4 0%

Internal Medicine 6 17 2 19 89%

Internal Medicine/Nephrology 1 0 1 1 0%

Maternal Fetal Medicine 0 0 0 0 NA

Neonatology 0 0 0 0 NA

Nephrology 1 0 1 1 0%

Neurology 1 0 1 1 0%

Neurosurgery 1 3 0 3 100%

OB/GYN 3 8 2 10 80%

Occupational Medicine 0 0 0 0 NA

Ophthalmology 1 0 7 7 0%

Oral Surgery 2 0 4 4 0%

Orthopedic Surgery 8 2 32 34 6%

Otolaryngology 5 3 5 8 38%

Pain Medicine 1 2 0 2 100%

Palliative Care 1 1 0 1 100%

Pathology 1 0 3 3 0%

Pediatric Cardiology 0 0 0 0 NA

Pediatric Hospitalist 0 0 0 0 NA

Pediatric Intensive Care 0 0 0 0 NA

Pediatric Oncology 0 0 0 0 NA

Pediatric Surgery 0 0 0 0 NA

Pediatrics 5 4 6 10 40%

Plastic Surgery 2 0 11 11 0%

Podiatry 7 0 11 11 0%

Psychiatry 6 6 3 9 67%

Pulmonology 2 4 6 10 40%

Radiation Oncology 0 0 0 0 NA

Radiology 2 0 5 5 0%

Rehabilitation Medicine 0 0 0 0 NA

Rheumatology 0 0 0 0 NA

Sports Medicine 0 0 0 0 NA

Urgent Care Medicine 4 12 0 12 100%

Urology 2 0 4 4 0%

Vascular Medicine 0 0 0 0 NA

Vascular Surgery 1 0 6 6 0%

Totals 100 122 198 320

Source: Mercy Medical Staff Office

A-30

Top Ten Admitting Physicians by Specialty

The specialty and ages of EMMC’s and Mercy’s top admitting physicians (other than surgeons) are presented below.

EMMC 6 months FY 2016

Mercy

6 months FY 2016

Specialty Admissions Age (as of 4/15/16)

Specialty Admissions

Age (as of 4/15/16)

Medicine 575 40 Orthopedics 247 52

Medicine 533 48 Orthopedics 198 41

Medicine 294 46 Medicine 120 60

Orthopedics 199 43 Medicine 117 38




Rehabilitation 144 53 Medicine 96 43

Medical Family Practice 138 43 Medicine 91 54

Medical Family Practice 124 43 Pediatrics 90 33

Source: EMMC Medical Group Finance

Top Ten Surgeons by Specialty

The specialty and ages of EMMC’s and Mercy’s top surgeons are presented below.

EMMC 6 months FY 2016

Mercy

6 months FY 2016

Specialty Admissions Age (as of 4/15/16)

Specialty Admissions

Age (as of 4/15/16)

Surgery 257 51 Orthopedics 286 52

Orthopedics 195 43 Orthopedics 226 57

Surgery 188 57 Neurosurgery 221 48


Orthopedics 171 66 Neurosurgery 153 64

Orthopedics 168 42 Urology 152 46


Cardiology 161 56 General 146 38

Surgery 147 41 General 134 61


Source: EMMC Medical Group Finance

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THE PROJECT

EMMC Modernization Project

EMMC’s long-term strategy to meet the needs of its market is predicated upon its main hospital campus continuing to be utilized primarily for inpatient and specialty care services while certain outpatient services are relocated to convenient locations off the main campus. In order to ensure that these objectives are accomplished, a modernization project (the “Project”) was initiated in 2011 to include an expansion in inpatient capacity, an allocation of this expanded inpatient capacity to result in an overall higher percentage of private beds to update surgical suites, and to reorganize or expand selected hospital ancillary service space to improve patients’ overall care while increasing operational efficiency. The Project was divided into an initial and completion phases, or “Phase 1” and “Phase 2”, respectively.

Phase 1: Completed June 2016

EMMC began the Project in April 2011 with smaller components being funded through internal funds. In 2013, Phase 1 was started after issuance of the Maine Health and Higher Educational Authority Revenue Bonds, Eastern Maine Obligated Group, Series 2013. Phase 1 was completed in June 2016 and consists of the following:

- The addition of a new, approximately 327,425 square-foot, seven-story, steel frame patient tower with an eighth-story mechanical penthouse. Three of the seven floors have been completely built out and furnished including new NICU and telemetry areas.

- 32 bed increase in total hospital bed capacity.

- New hospital entrance and main lobby (partially complete).

- New dining area (partially complete).

- Expanded central sterile processing department.

During the three-year construction period of Phase 1, several modifications to Phase 1 of the Project were made, including:

- Postponement, and possible removal from the Project, of a Medical Office Building Component.

- Postponement, and possible removal from the Project, of free standing central utility plant. As a result, utility systems are now housed in the tower.

Phase 2: Projected Completion Date September 2017

Phase 2 of the Project consists of:

- Construction of 12 operating rooms (two are hybrid rooms) to replace existing rooms (over 35 years old) including a new pre- and post-operative care unit. Upon Phase 2 completion, EMMC will have a total of 24 operating rooms, a net increase of three.

- Completion of the building out, equipping and operationalizing of the new patient tower’s remaining 4 new floors.

- Addition of an 8-bed observation unit in the emergency room.

- Expanded non-invasive and invasive cardiac diagnostic and treatment areas on the first two patient floors. This will include an expanded imaging unit consisting of interventional radiology and cardiac catheterization.


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Phase 2 Cost

Phase 2 estimated costs are: Phase 2

Architect, engineering and other fees $14,810,022

Proposed construction costs 70,469,292*

Moveable equipment 48,648,910

Subtotal $133,928,224 *Includes $52,501,305 for most recent guaranteed maximum price construction contract.

At the completion of Phase 2, EMMC’s change in total and private bed capacity is detailed in the following table.

2013 June 2016 Project Completion Available

Inpatient Beds Total Beds

Private Rooms

Total Beds

Private Rooms

Total Beds

Private Rooms

Adult/Med Surg 220 64 252 96 254 102 Critical Care 44 44 44 44 48 48 Pediatric ICU 6 6 6 6 6 6 Rehab 34 14 34 14 34 14 Peds 15 7 15 7 15 7 OB 22 14 22 14 25 25 NICU 23 9 23 9 29 29 Total 364 158 396 190 411 231

Other components to be financed with the proceeds of the Series 2016A Bonds

EMMC Approximately $10,000,000 is expected to be applied to the relocation of the cafeteria and kitchen at EMMC. In addition, approximately $10,000,000 is expected to be applied to the expansion and renovation of the emergency department at EMMC. CA Dean Approximately $3,000,000 is expected to be applied to the expansion and modernization of an approximately 2,800 square-foot ambulatory care facility, including expanded primary care, imaging, laboratory, rehabilitation and occupational health services at CA Dean. TAMC TAMC has spent (with related reimbursements from the proceeds of the Series 2016A Bonds) approximately $11,200,000 on the following items: (a) relocation of a linear accelerator; (b) relocation of the orthopedic department; (c) renovation and construction of additions to the operating room, eye care center, dialysis center, cafeteria and other miscellaneous capital improvements; and (d) structural improvements, including but not limited to installation of windows, roofing, insulation, flooring and related improvements at Aroostook Health Center (“AHC”), a 72 patient, approximately 35,000 square-foot long term care and rehabilitation facility owned and operated by TAMC.

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Inland

Inland spent approximately $4,600,000 on the renovation of patient care areas through the use of line of credit borrowings, for which proceeds of the Series 2016A Bonds will be used to pay back those line of credit borrowings. Other uses of the proceeds of the Series 2016A Bonds Upon the issuance of the Series 2016A Bonds, in connection with prior expenditures made in connection with the Phase 2 costs and TAMC project expenditures, EMMC and its affiliates, including TAMC, are expected to be reimbursed for certain Project costs. The amount of such reimbursement was equal to approximately $14,700,000 as of March 26, 2016 and is anticipated to equal approximately $36,000,000 as of the date of issuance of the Series 2016A Bonds. In addition, EMHS will pay down lines of credit in the amount of $32,000,000 that were used to fund prior projects and refund indebtedness in connection with the Obligated Group, inclusive of the TAMC and Inland projects described above.

Other Financing Plans

Concurrently with the issuance of the Series 2016A Bonds, EMHS is expected to issue its Taxable Bonds, Series 2016B in the aggregate principal amount of $79,895,000* (the “Series 2016B Bonds”). The proceeds of the Series 2016B Bonds are expected to be used to (i) refinance certain indebtedness of EMHS and other members of the Obligated Group, including outstanding line of credit borrowings in the amount of approximately $54,000,000 and outstanding term loans in the amount of approximately $23,000,000; (ii) pay certain swap termination fees; (iii) finance various transition costs related to recently added members of the Obligated Group; and (iv) pay the costs of issuance of the Series 2016B Bonds. EMHS may also terminate its existing line of credit facility with its existing lender and/or pursue a new line of credit facility, which may or may not be secured by a Note issued under the Master Indenture.

Project Certificate of Need Requirements

EMMC received a Certificate of Need (CON) award for the Project on October 1, 2008. Total CON related project costs, exclusive of the debt service reserve fund and replacement equipment amounts of $16,519,482 and $30,400,000, respectively, are below the approved CON limit of $262,000,000. The Project was deemed to have commenced on April 15, 2011. EMMC has no time limit as long as the Project continues to progress. EMMC will continue to file required implementation reports to the state of Maine’s CON Unit every six months until Project completion.

Cianbro/Brasfield & Gorrie has served as construction manager for the Project. EMMC and the construction manager entered into a guaranteed maximum price construction contract relating to the Project in the amount of $52,501,305 for Phase 2 in August, 2015. EMHS is utilizing the American Institute of Architects (AIA) contract document A201-207 “General Conditions of the Contract for Construction” and AIA contract document A133-2009 “Standard form of Agreement Between Owner and Construction Manager as Constructor where the basis of payment is the Cost of the Work Plus a Fee with a Guaranteed Maximum Price.”

EMMC has designed the facility in order to maximize efficiency of care. Leadership in Energy and Environmental Design (LEED) building standards guided all aspects of the design ensuring that the facility will incorporate essential “green” building principles.

EMMC Modernization Project Team

The Project will be overseen by members of the EMMC executive leadership team, facility directors, and planning and philanthropy staff from the EMHS Corporate Office. The architectural team is from MorrisSwitzer Environments for Health. Civil engineering will be provided by Wright-Pierce, and mechanical/


A-34

electrical/plumbing and structural services will be provided by BVH Integrated Services. Equipment planning will be performed by KJWW Associates. EMMC has hired Colliers International to serve as the owner’s representative on the Project. There is one EMMC project manager dedicated to the Project.

Project Fundraising Campaign

The Foundation centralizes all fundraising, funds management and planned giving activity for all members of EMHS. As part of EMMC’s Hospital Modernization Project, a five-year $20 million fund raising campaign commenced in 2013. The first phase, or Leadership Phase, of the capital campaign plan was designed to be implemented over a 36-month period of active solicitations, followed by a three- to five-year redemption period for those pledges to be paid. The preliminary financial objective for the first phase was $8 million in gifts and pledges by the end of 2015 with 80% of the goal realized by early 2017 and campaign completion by the end of 2017. As of April 30, 2016, the Foundation had collected $6.3 million in cash and has $4.2 million in pledged receivables, for a total of $10.5 million, which will be used as an equity contribution in connection with the plan of finance for the Series 2016A Bonds.

CONSOLIDATED FINANCIAL RESULTS

Appendix B of the Official Statement sets forth the audited consolidated financial statements of the entire EMHS system for the years ended September 28, 2013, September 27, 2014, and September 26, 2015 together with the report of BerryDunn, independent auditors. The EMHS system utilizes a fiscal year ending on the last Saturday of each September. For the six-month period ending March 26, 2016, the Obligated Group1 accounted for 97.3%, 96.2% and 96.3% of total assets, revenue and expenses, respectively, for the EMHS system.



A-35

Consolidated Statement of Operations

(in thousands) Period Ended

FY 2013 FY 2014 FY 2015 6 months FY 2015

6 months FY 2016

REVENUE: Patient service revenue (net of contractual allowances and discounts) $1,006,662 $1,312,505 $1,383,061

$685,919

$752,995

Less Provision of bad debts 46,029 73,822 74,172 37,693 35,969

Net patient service revenue 960,633 1,238,683 1,308,889 648,226 717,026

Sales and contract revenue 25,023 23,278 18,925 8,765 7,889 Other revenue 38,758 37,099 44,563 21,727 25,830 Net assets released from restrictions – operations 2,104 2,825 2,590 1,184 1,600

Total revenue 1,026,518 1,301,885 1,374,967 679,902 752,345

EXPENSES: Compensation and employee benefits 609,505 785,064 820,197 405,243 449,553 Supplies and other 329,213 451,467 494,824 233,884 273,655

Total expenses 938,718 1,236,531 1,315,021 639,127 723,208

INCOME FROM OPERATIONS BEFORE INTEREST, DEPRECIATION AND AMORTIZATION 87,800 65,354 59,946 40,775 29,137

Depreciation and amortization 42,500 51,128 56,555 27,164 30,899 Interest 7,027 8,628 9,077 4,575 4,723

(LOSS) INCOME FROM OPERATIONS BEFORE GAINS AND LOSSES 38,273 5,598 (5,686) 9,036 (6,485)

OTHER GAINS (LOSSES): Income tax expense 414 (547) (341) (300) (313) Joint venture income 38 701 (543) 490 605 Investment income and other – net 9,615 4,896 4,757 1,241 2,576 Loss on extinguishment of debt 0 0 0 0 (2,709) Gain on sale of Dirigo Pines – net 0 0 0 0 3,253 Contribution received in the acquisition of Mercy, Maine Coast, net 0 73,076 0 0 39,282

Total other gains (losses) – net 10,067 78,126 3,873 1,431 42,694

EXCESS (DEFICIENCY) OF REVENUE AND GAINS OVER EXPENSES AND LOSSES BEFORE NONCONTROLLING INTEREST 48,340 83,724 (1,813) 10,467 36,209

DISCONTINUED OPERATIONS 15,264 0 0 0 0

NONCONTROLLING INTEREST (23) 277 (213) (117) (118)

EXCESS (DEFICIENCY) OF REVENUE AND GAINS OVER EXPENSES AND LOSSES 63,581 84,001 (2,026) 10,350 36,091

NET ASSETS RELEASED FROM RESTRICTIONS – capital acquisitions 4,394 1,784 3,860 2,339 994

CHANGE IN NET UNREALIZED GAINS AND LOSSES ON INVESTMENTS (5,480) 9,499 (2,071) 6,553 2,569

ADJUSTMENTS TO POSTRETIREMENT BENEFITS ASSETS AND LIABILITIES 16,711 (1,092) (23,419) (5,955) (2,085)

DIVIDENDS TO MEMBERS 0 0 (128) 0 (143)

CONTRIBUTION OF LONG-LIVED ASSETS – NET 0 36 0 0 0

INCREASE IN UNRESTRICTED NET ASSETS $79,206 $94,228 $(23,784) $13,287 $37,426

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Consolidated Balance Sheet

(in thousands) Period Ended

FY 2013 FY 2014 FY 2015 6 months FY 2015

6 months FY 2016

Cash and cash equivalents $57,903 $91,043 $96,900 $82,565 $95,759 Short-term investments 14,599 14,783 14,983 14,880 15,038 Assets whose use is limited or restricted 46,781 62,028 49,207 53,982 41,396 Patient and trade accounts receivable 147,403 218,069 238,343 234,608 258,254 Less allowance for uncollectable accounts (43,295) (68,960) (77,909) (72,759) (84,240) Net patient and trade accounts receivable 104,108 149,109 160,434 161,849 174,014 Estimated third-party payor settlements 10,896 9,120 24,523 17,364 19,366 Other receivables 12,047 15,299 19,044 14,112 17,528 Inventory 11,289 14,648 14,694 14,841 15,756 Prepaid expenses and other current assets 17,636 14,599 13,598 20,268 22,089

Total current assets 275,259 370,629 393,383 379,861 400,946

Property and equipment – net 374,852 545,109 615,489 565,396 655,473

Internally designated by the Board of Directors: Funded depreciation 201,706 191,835 191,910 194,480 183,177 Other designated funds 105,519 99,456 95,272 95,632 110,700 Other funds held by trustees 206,536 178,999 116,502 159,720 103,315 Temporarily donor-restricted 36,530 44,596 44,212 47,592 45,549 Permanently donor-restricted 13,066 16,098 16,197 16,159 17,111 Beneficial interest in perpetual trusts 10,852 12,288 12,868 12,413 14,856

Total noncurrent assets whose use is limited or restricted 574,209 543,272 476,961 525,996 474,708

Estimated settlements receivable from the state of Maine 21,604 21,306 16,603 19,898 21,168 Deferred financing costs 2,755 3,109 2,907 3,022 2,731 Intangibles and other assets 20,922 22,757 23,014 23,589 21,373

Total other assets 45,281 47,172 42,524 46,509 45,272

TOTAL ASSETS 1,269,601 1,506,182 1,528,357 1,517,762 1,576,399

Accounts payable 51,691 73,813 75,401 57,603 63,994 Accrued expenses and other current liabilities 76,041 101,217 109,820 101,454 114,680 Estimated third-party payor settlements 30,158 35,833 33,252 33,854 29,359 Line-of-credit borrowings 58 22,307 42,779 30,299 85,164 Current portion of long-term debt 12,246 13,155 14,271 13,408 11,465 Current portion of accrual for self-insurance 10,442 10,837 9,613 10,519 9,151

Total current liabilities 180,636 257,162 285,136 247,137 313,813

Long-term debt – net of current portion 311,308 361,902 348,862 359,159 323,001 Accrual for self-insurance and postretirement benefits 137,949 148,686 179,153 155,713 181,461 Estimated third-party payor settlements 38,948 21,823 21,811 22,967 24,220 Other liabilities 4,557 13,764 14,050 13,467 13,049

Total noncurrent liabilities 492,762 546,175 563,876 551,306 541,731

Total liabilities 673,398 803,337 849,012 798,443 855,544

Unrestricted 535,276 629,504 605,720 642,791 643,146 Temporarily restricted 36,530 44,596 44,212 47,592 45,549 Permanently restricted 23,918 28,386 29,065 28,572 31,967

Total controlled net assets 595,724 702,486 678,997 718,955 720,662

Unrestricted-noncontrolling interest 479 359 348 364 193

Total net assets 596,203 702,845 679,345 719,319 720,855

TOTAL LIABILITIES AND NET ASSETS $1,269,601 $1,506,182 $1,528,357 $1,517,762 $1,576,399

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MANAGEMENT’S DISCUSSION OF FISCAL YEARS ENDING 2014, 2015, AND SIX MONTH FISCAL 2016

Financial Results – Six Months Ended March 26, 2016

For the six-month period ended March 26, 2016, EMHS had an operating loss of $6.5 million compared to a profit of $9 million for the same period in fiscal year 2015. EMHS’ gross inpatient revenue grew by 6.2% and gross outpatient revenue grew by 20.6% compared to the same period in fiscal year 2015, and total net revenue grew by 10.7%. Total expenses rose by 13.2% from the previous year, with approximately 3% of the expense increase due to increases in pharmaceutical costs, contract labor, and employee health insurance expense. Revenue increased as the result of strong outpatient volume growth of 7.4% that more than offset declines in inpatient admissions and patient days of 7.6% and 5.6%, respectively.

On a hospital specific basis, EMMC, the system’s flagship facility, had operating income of $20.1 million for the 6-month period compared to budgeted operating income of $8.7 million and operating income of $14.9 million for the same period in fiscal year 2015. EMMC’s income offset $16.6 million in losses incurred at Maine Coast, Mercy, and TAMC. The Mercy losses were due mainly to declines in admissions and patient days of 22% and 18%, respectively. The Maine Coast was not part of the EMHS system during the comparative period as this hospital was acquired in October 2015. TAMC lost $7.9 million compared to a profit of $1.8 million a year earlier. TAMC’s change from the prior period is primarily the result of a one-time $3.4 million patient receivable write-off found when TAMC’s revenue cycle transitioned to the EMHS Corporate Office as a result of service integration activities.

Financial Results – Fiscal Year 2015

In fiscal year 2015, EMHS generated a $5.7 million operating loss, a decline of $11.3 million from fiscal year 2014. This loss was due mainly to increases in employee health insurance expense, pharmaceutical costs, and in IT software support and licensing fees. EMHS total revenue increased by 5.6% to $1.375 billion as higher outpatient revenue from increased outpatient volumes more than offset decreases in inpatient revenue from lower admissions, patient days and surgeries. Specifically, EMHS total admissions and patient days fell by 2% and 1%, respectively, while surgical volume fell by 5%.

During the year, EMMC enjoyed a significant rebound in operating profit from 2014 levels while Inland and TAMC returned to profitability. However, these improvements were largely offset by a $22 million loss at Mercy.

Financial Results – Fiscal Year 2014

EMHS’ operating profitability declined from fiscal year 2013 levels to $5.6 million. Due to the acquisition of the Mercy hospital facility in October 2013, EMHS’ revenue rose to $1.302 billion, an increase of $275 million or 27% over fiscal year 2013 levels. Also because of the Mercy acquisition, EMHS admissions and patient days rose by 24% and 17%, respectively. On a hospital specific level, EMMC was the primary driver of the decline in EMHS profitability primarily due to admissions falling by 2.4% during the year while inpatient surgical volume fell 6%. In addition, Medicare reimbursement rule changes required many of its short term admissions to be reclassified as outpatients, there was a significant increase in bad debt expense, and there was a significant decline in physician referrals from its physician group due to the departure of several key physicians. Simultaneously, Inland and TAMC both generated losses for the year compared to profits in fiscal year 2013.


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SELECTED FINANCIAL INFORMATION

Outstanding Indebtedness

The following table shows the proforma outstanding indebtedness of the Obligated Group, unless noted below, giving effect to the issuance of the Series 2016A Bonds and the Series 2016B Bonds as of July 13, 2016.

OUTSTANDING LONG-TERM INDEBTEDNESS UNDER MASTER INDENTURE

Debt Original

Par Par

Outstanding Final

Maturity Debt Type

2015 Mercy (Bangor Savings Bank) $7,501,935 $6,953,935 2024 Taxable 10-year fixed rate loan

2015 Mercy (Authority Series 2014 Bonds) 61,055,000 56,610,000 2036 Tax-Exempt 10-year fixed rate put

2013 EMMC 143,900,000 142,595,000 2043 Fixed

2013 SVH (FAME) 10,500,000 8,563,282 2029 Tax-Exempt 15-year fixed rate loan

2010A Acadia 12,765,000 6,620,000 2021 Fixed

2010A EMMC 70,875,000 58,195,000 2040 Fixed

2007B Inland 3,185,000 2,630,000 2037 Fixed

2007B Lakewood 7,010,000 5,790,000 2037 Fixed

2015A Inland 995,000 940,000 2030 Fixed

2016A Bonds (Tax-Exempt) 174,035,000* 174,035,000* 2046 Fixed

2016B Bonds (Taxable) 79,895,000* 79,895,000* 2036 Fixed

Total $571,716,935 $542,827,217 OTHER OUTSTANDING LONG-TERM INDEBTEDNESS1

Par Outstanding Debt Type

Installment Loans (Obligated Group) $ 216,965 Fixed

Installment Loans (Non Obligated Group) 4,622,484 Various

Capital Leases (Obligated Group)2 2,415,736 Various

Capital Leases (Non Obligated Group)2 190,359 Various

Other Outstanding Long-Term Indebtedness - $7,445,544

SHORT TERM INDEBTEDNESS

Commitment Par Outstanding3 EMHS Line of Credit (Obligated Group/Master Indenture Note)4 $140,000,000 $0 Inland Line of Credit (Obligated Group/ No Note under Master Indenture) 7,000,000 0

Total Short Term Indebtedness $147,000,000 $0

Total Indebtedness Outstanding $550,272,761 1Note that balances reflect CA Dean entering the Obligated Group at the time of the issuance of the Series 2016A Bonds and the Series 2016B Bonds. 2 Certain capital leases are as of September 2015. 3As of July 13, 2016 after the issuance of the Series 2016A Bonds and the Series 2016B Bonds. 4 The EMHS line of credit is currently available up to $140,000,000 and is secured by a Note under the Master Indenture. The EMHS line of credit was outstanding in the amount of $80,115,674 as of May 2, 2016 and is expected to entirely reimbursed with the proceeds of the Series 2016A Bonds and the Series 2016B Bonds. * Preliminary, subject to change.

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Maximum Annual Debt Service Coverage

The following tables show the maximum annual debt service coverage of the EMHS system and the Obligated Group for fiscal years 2013, 2014 and 2015 and the 6 months ended 2016 (annualized).

SYSTEM (in 000’s) 6 months

ended

FY 2013 FY 2014 FY 2015 March 2016 (annualized)

Operating Revenue 1,026,518 1,301,885 1,374,967 1,504,690

Operating Expenses 988,245 1,296,287 1,380,653 1,517,660

Non-Operating Gains/Losses 10,067 78,126 3,873 45,018

Depreciation and Interest Expense 49,527 59,756 65,632 71,244

Net Income Available for Debt Service 97,867 143,480 63,819 103,292

Maximum Debt Service* 29,671 29,116 30,588 31,398

Historical Maximum Annual Debt Service 3.30x 4.93x 2.09x 3.29x

Proforma Maximum Annual Debt Service 34,783

Historical Proforma Maximum Annual Debt Service Coverage

2.97x

OBLIGATED GROUP* 6 months

ended

FY 2013 FY 2014 FY 2015 March 2016 (annualized)

Operating Revenue 742,910 778,401 1,066,321 1,447,752

Operating Expenses 705,183 775,381 1,077,407 1,461,669

Non-Operating Gains/Losses 2,841 5,261 2,158 36,520

Depreciation and Interest Expense 34,458 33,377 49,902 68,137

Net Income Available for Debt Service 75,026 41,658 40,974 90,740

Maximum Debt Service 18,051 18,061 23,341 30,294

Historical Maximum Annual Debt Service 4.16x 2.31x 1.76x 3.00x

Proforma Maximum Annual Debt Service 34,783 Historical Proforma Maximum Annual Debt Service Coverage 2.61x

*Members of the Obligated Group are reflected for the entirety of the 6 or 12 month period in which they entered the Obligated Group. Mercy entered the Obligated Group on September 25, 2015. Blue Hill, Inland (and its subsidiary Lakewood), TAMC, and SVH entered the Obligated Group on November 2, 2015. Maine Coast entered the Obligated Group on March 24, 2016.

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Debt to Capitalization Ratio

The following table shows the Long Term Debt-to-Capitalization of EMHS and the Obligated Group for fiscal years 2013, 2014 and 2015 and six months ended March 26, 2016.


ended

FY 2013 FY 2014 FY 2015 March 2016

Total Long Term Debt 323,554 375,057 363,133 334,466

Unrestricted Net Assets 535,276 629,504 605,720 643,146

Debt to Capitalization Ratio 37.67% 37.34% 37.48% 34.21%

2016 Bonds 253,930

Proforma Long-term Debt 565,301

Proforma Debt to Capitalization Ratio 46.78%

OBLIGATED GROUP * 6 months

ended

FY 2013 FY 2014 FY 2015 March 2016

Total Long Term Debt 253,888 247,523 305,520 329,563

Unrestricted Net Assets 421,611 449,458 499,247 637,396

Debt to Capitalization Ratio 37.59% 35.51% 37.96% 34.08%

2016 Bonds 253,930

Proforma Long-term Debt 560,398

Proforma Debt to Capitalization Ratio 46.79%



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Days Cash on Hand

The following table shows Days Cash on Hand of EMHS and the Obligated Group for fiscal years 2013, 2014 and 2015 and six-months ended March 26, 2016.


ended

FY 2013 FY 2014 FY 2015 March 2016

Unrestricted Cash 57,903 91,043 96,900 95,759

ST Investments 14,599 14,783 14,983 15,038

Funded Depreciation 201,706 191,835 191,910 183,117

Other Discretionary Funds 105,519 99,456 95,272 110,700

Unrestricted Cash and Investments $379,727 $397,117 $399,065 $404,674

Total Expenses $988,245 $1,296,287 $1,380,653 1,517,660

Less Depreciation & Amortization (42,500) (51,128) (56,555) (61,798)

Net Cash Expenses $945,745 $1,245,159 $1,324,098 $1,455,862

Per Day $2,591 $3,411 $3,628 $3,978

Days Cash on Hand 146.55 116.41 110.01 101.73

Cash Reimbursed from 2016 Bonds $14,740

Proforma Days Cash on Hand 105.44

OBLIGATED GROUP*

6 months

ended

FY 2013 FY 2014 FY 2015 March 2016

Unrestricted Cash 32,602 43,429 71,076 85,152

Short Term Investments 14,206 14,385 14,575 15,039

Funded Depreciation 173,994 172,763 173,756 183,009

Other Discretionary Funds 82,205 73,103 68,325 106,550

Unrestricted Cash and Investments $303,007 $303,680 $327,732 $389,750

Total Expenses $705,183 $775,381 $1,077,407 1,461,669

Less Depreciation & Amortization (30,025) (28,478) (43,284) (59,559)

Net Cash Expenses $675,158 $746,903 $1,034,123 $1,402,110

Per Day $1,850 $2,046 $2,833 $3,831

Days Cash on Hand* 163.81 148.40 115.68 101.74

Cash Reimbursed from 2016 Bonds $14,740

Proforma Days Cash on Hand 105.59


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Payor Mix

EMHS maintains agreements with the Federal Medicare program (“Medicare”) administered by the Centers for Medicare and Medicaid Services (“CMS”) of the United States Department of Health and Human Services, Anthem Blue Cross and Blue Shield of Maine (“Anthem”), and various other commercial carriers and managed care organizations for the provision of services to patients covered by those carriers. Additionally, EMHS maintains an agreement with the state of Maine under the Medicaid (“MaineCare”) program.

The following provides information for EMHS regarding the percentage of gross inpatient and outpatient service revenue by payor for fiscal years 2013, 2014, 2015 and the 6 months ended 2016.

Payor FY 2013 FY 2014 FY 2015 6 months FY 2015

6 months FY 2016

Medicare (incl. Med Adv.) 44.1% 44.2% 45.6% 45.6% 45.6%

Medicaid 19.2% 16.4% 15.3% 15.6% 14.3%

Anthem 9.3% 9.6% 9.2% 9.3% 8.9%

Commercial 18.6% 20.6% 20.9% 20.5% 22.5%

Self-Pay 7.0% 7.1% 6.4% 6.4% 5.7%

Other 1.8% 2.1% 2.6% 2.6% 3.0%

Total 100.0% 100.0% 100.0% 100.0% 100.0%

Medicare

Acute care hospitals are subject to the federal Prospective Payment System (“PPS”) for Medicare inpatient hospital services, inpatient skilled nursing facilities, inpatient rehabilitation services, and for certain outpatient services. Under these prospective payment methodologies, Medicare pays a prospectively determined per discharge, per day, or per visit rate for non-physician services. These rates vary according to the applicable Diagnostic Related Group (“DRG”), Case-Mix Group, or Resource Utilization Group. Capital costs related to Medicare inpatient PPS services are paid based upon a standardized amount per discharge weighted by DRG. For most outpatient services, Medicare makes payments based upon the Ambulatory Payment Classification of each patient. Certain other outpatient services are reimbursed according to fee screens.

TAMC is designated as a Medicare-dependent hospital and accordingly receives an additional payment amount representing a portion of the difference between the federal operating rate and a hospital-specific rate.

Inland and Maine Coast were selected to participate in a Medicare Rural Community Hospital Demonstration Project and are therefore no longer subject to PPS payments for inpatient hospital services and associated capital costs for the duration of this five-year program. During the first fiscal year of the program which began September 25, 2011, Medicare paid for the full reasonable costs incurred for inpatient services provided. The payment for subsequent years is the lesser of reasonable costs or a target amount determined by increasing the first year program costs by the inpatient prospective payment factor update for each succeeding year.

Blue Hill, CA Dean and SVH have been granted Critical Access Hospital (“CAH”) status, which continues as long as certain utilization criteria are met. Each CAH is reimbursed 101% of allowable costs for its inpatient and substantially all of its outpatient services provided to Medicare patients.

As a specialty psychiatric hospital, Acadia is reimbursed for Medicare inpatient services on a PPS basis. The prospective payment methodology for psychiatric facilities is based on a variable acuity and age based per diem rate. This rate is adjusted upwards to reflect higher costs on the earlier days of the stay and downwards towards the end of the stay. The per diem rate varies based on the diagnosis, co-morbidity condition, age, wage index, rural setting, as well as the presence of full-service emergency services and the extent of teaching activity in the facility.

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EMHS began participating in the CMS Pioneer Accountable Care Organization (“Pioneer”) on January 1, 2012. EMHS hospitals participating include EMMC, Blue Hill, CA Dean, Inland, Mercy, SVH and TAMC. Additional organizations participated in Pioneer through contractual arrangements or through ownerships in Beacon. Through this agreement, EMHS provides care coordination and health care management to Medicare enrollees identified as patients of Pioneer participants. Under the program, EMHS is eligible to share in the resulting savings in year one, and in shared savings and losses in subsequent years, based on calendar year final settlements. EMHS withdrew from participation in Pioneer in 2015 in order to transition to CMMI Next Generation payment program.

Medicaid (MaineCare)

MaineCare inpatient reimbursement for acute care hospitals is based upon prospectively determined rates that vary according to the applicable DRG. Capital and physician service costs related to MaineCare inpatient services are paid based on a percentage of allowable costs. For most outpatient services, MaineCare makes payment based upon Ambulatory Payment Classifications of the patient. Outpatient physician services are paid on a percentage of allowable costs and certain other outpatient services are reimbursed according to fee screens. Acute care hospitals receive interim payments for capital costs and physician services at a tentative rate with final settlement determined after completion of annual cost reports by the state of Maine. Nursing facilities are reimbursed partially on a prospectively determined per diem rate for direct and routine services together with a fixed cost component that is subject to final settlement determined after completion of an annual cost report by the state of Maine.

The MaineCare program reimburses hospitals granted Medicare status as a CAH on a percentage of allowable costs for inpatient and outpatient services provided to MaineCare patients.

Acadia is reimbursed for MaineCare inpatient services based on a negotiated rate related to established charges. Outpatient services are reimbursed based on a percentage of cost.

Maine hospitals have not received final settlement on cost reports filed under the MaineCare program since 2004. For the open cost report years from 2005 to 2015, the Obligated Group has established reserves against changes in the total obligation arising from final settlement of the cost reports. Estimated settlements receivable are also classified as current or non-current based on expected timing of final settlement.

The state of Maine currently assesses an annual health care provider tax on the realizable revenues of hospitals at a rate of 2.23%. This amount is reported as an operating expense in the consolidated statements of operations.

(in thousands) FY 2013 FY 2014 FY 2015 6 months

FY 2016 Amounts due from MaineCare – current 520 2,744 13,339 4,099 Amounts due from MaineCare– long-term 21,604 21,306 16,603 21,168 Total amounts due from MaineCare 22,123 24,050 29,941 25,267 Amounts due to MaineCare – current (1,662) (11,685) (14,197) (7,459) Amounts due to MaineCare – long-term (5,079) (7,248) (6,925) (7,188) Total amounts due to MaineCare (6,741) (18,933) (21,122) (14,647) Net amounts due from MaineCare 15,382 5,117 8,819 10,620

The state of Maine’s current budget does not fully provide for payment of outstanding amounts due to the hospitals. Accordingly, certain amounts receivable from the MaineCare program have been reported as noncurrent assets because management has determined that such amounts are not reasonably expected to be realized in cash within one year of the date of the consolidated balance sheet.

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Anthem Blue Cross and Blue Shield of Maine

Anthem represents approximately 9% of the gross revenues of EMHS, and is the largest non-governmental payer. EMMC and other EMHS hospitals are reimbursed by Anthem on a percentage of charges for inpatient and outpatient services, and for some physician services. Other physician services are paid on a fee schedule. The current contract with Anthem expires on December 31, 2016.

Other Payer Arrangements

Members of the Obligated Group have entered into other payment arrangements with commercial insurance carriers, health maintenance organizations, and preferred provider organizations. The basis for payment under these arrangements varies; in individual cases, these may include prospectively determined rates per discharge and per day, discounts from established charges, fee screens, and capitation fees on a per member, per month basis.

Investment Policy

The EMHS Finance Committee has adopted a Statement of Investment Objectives and Policy Guidelines. These include balancing conservation, growth and use of assets of its pension (both tax qualified and non-qualified plans), endowment and self-insurance trust funds. These guidelines have a target asset allocation of 65% equities and of 35% fixed income. The statement of Investment Objectives is reviewed annually to ensure that it continues to reflect the objectives of the Board.

RETIREMENT PLANS

Cash Balance Plan

The EMHS Retirement Partnership Plan is a cash balance plan which covers employees of certain members of the EMHS controlled group of corporations. It was originally adopted as of August 1, 1966 and was amended and restated most recently on October 1, 2015. Plan participants have a cash balance account to which the participant’s employer makes a contribution based on age and years of vesting service. Contributions range from 3% to 8% of compensation and the cash balance accounts earn interest credits.

Defined Contribution Plans

The EMHS Retirement Partnership 403(b) Plan is a defined contribution plan that was established on March 1, 1994. The plan covers employees of certain tax-exempt members of the EMHS controlled group of corporations. Employer match contributions vary based on the employee’s member organization and length of service, and range from 50% to 100% of employee elective deferrals, up to a maximum of between 4% and 7% of compensation. Employer non-elective core and transition contributions cover certain members of EMHS and vary based on the employee’s member organization and length of service. Core contributions are between 1% to 2% of compensation. Transition contributions are between 0.5% to 0.75% of compensation.

The Affiliated Healthcare Systems Retirement Partnership 401(k) Plan is a defined contribution plan that was established on January 1, 1999. The plan covers employees of certain for-profit members of the EMHS-controlled group of corporations. Employer match contributions vary based on the employee’s length of service, and range from 50% to 100% of employee elective deferrals, up to a maximum of 4% of compensation.

Deferred Compensation Plan

The EMHS 457(b) Plan was established effective August 1, 2003, and covers key employees of certain members of the EMHS controlled group of corporations. Participants can elect to defer a portion of their compensation via elective deferrals to the plan. The plan is intended to constitute an unfunded, eligible deferred compensation plan as described in Section 457(b) of the Internal Revenue Code, which is maintained by a tax-exempt organization primarily for the purpose of providing deferred compensation for a select group of management or highly

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compensated employees. This Plan is intended to be exempt from the participation, vesting, funding and fiduciary requirements of Title I, Part 1 of ERISA.

INSURANCE

Professional and General Liability

EMHS member organizations participate in a large deductible commercial insurance program which provides coverage for professional liability and general liability. In order to protect against large claims, various layers of insurance have been obtained through the commercial market. Each layer is positioned to provide coverage in the event that the limits of the underlying layer have been exhausted. Under the program’s current structure, EMHS is responsible for the first $1 million of each professional liability claim subject to a $5 million aggregate for all claims. EMHS is also responsible for the first $1 million of each general liability claim subject to a $5 million aggregate for all claims. These amounts are paid in the form of a deductible which applies to the underlying professional and general liability coverage. The first layer of coverage in EMHS’ program is provided through a hospital liability policy with limits of $2 million for each claim subject to a $15 million aggregate for all claims (the deductible noted above applies). The next layer of coverage is provided through a hospital umbrella policy which sits above EMHS’ hospital liability policy, as well as other coverages such as auto liability and employer’s liability. The umbrella policy provides $8 million in additional limits. EMHS purchases two excess policies which sit above the umbrella policy; the lead excess providing $15 million in additional coverage and a second excess layer providing $10 million in additional coverage. Trust funding and accrued self-insurance reserves are determined by independent actuarial projections. The actuarially determined premium for the program is allocated to the member organizations based on their unique exposures as well as their claim experience.

Worker’s Compensation

EMHS maintains a common trust fund for a group worker’s compensation program, in accordance with the Maine Worker’s Compensation Act. Because the common trust fund is regulated by the Maine Bureau of Insurance, neither the assets nor the liabilities of the trust are reflected in the consolidated financial statements. The worker’s trust fund is part owner of a captive insurance company which provides excess workers compensation coverage. The trust fund is responsible for the first $500,000 of every claim. In the event that a claim exceeds $500,000, the trust fund and captive split the next $200,000 equally. Claims exceeding $700,000 are then handled by the captive program up to the statutory requirement. Trust funding and accrued self-insurance reserves are determined by independent actuarial projections. The actuarially determined premium for the program is allocated to the member organizations based on their unique exposures as well as their claim experience.

Employee Health Benefits

Employee health and dental benefits are provided through self-insured plans or commercially acquired programs. The self-insured medical plan had internal stop loss coverage that provided reimbursement for domestic claims (e.g., with-in EMHS provider network) in excess of $500,000. For non-domestic claims the internal stop loss provides reimbursement for claims in excess of $500,000 and less than $1,000,000 per individual claim. External stop loss provides full reimbursement for non-domestic claims in excess of $1,000,000 per individual claim.

Postretirement Medical Benefits

Certain members of the EMHS controlled group of corporations provide certain medical benefits for retired employees. Employees of these participating organizations may become eligible for these benefits if they reach normal retirement age while working for such organizations. Early retirement benefits are available to retirees with at least 15 years of vested service. Employees at participating organizations hired after January 1, 2005 and the employees of a nonparticipating company are not eligible for retiree medical benefits. The postretirement medical plan is not funded.

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LEGAL MATTERS

Professional Liability Litigation

At any time, members of the Obligated Group have lawsuits pending against them alleging professional liability. EMHS employs and retains legal counsel to defend its interests in these suits. Given EMHS’ professional liability self-insurance trust and its excess coverage, it is the opinion of management, based on consultation with legal counsel, that if these pending suits were decided unfavorably to EMHS, there would be no material adverse effect on the Obligated Group’s financial condition, results of operations, or consolidated financial statements.

Other Litigation

EMHS, Mercy and MHSM are involved in a pending legal matter related to a former Mercy employee alleging a constructive discharge as a result of complaints made about Mercy’s billing practices in violation of the Maine Whistleblowers Protection Act. In addition, the former Mercy employee alleges qui tam claims as a relator and a claim of unlawful retaliation as a whistleblower, in each case, under the federal False Claims Act. Although resolution of this matter is pending and insurance coverage may be available, an unfavorable resolution could have an adverse effect on the financial condition or results of operation of EMHS, Mercy and/or MHSM, which may or may not be material.

As of the date of the Official Statement, in addition to the above, there are several suits pending against the Obligated Group, which do not involve claims based on alleged professional liability. Some of these suits are covered, and being defended in connection with commercial insurance policies or applicable trust bylaws. Based upon the nature of the other claims and the availability of insurance coverage, management believes that if these other pending suits were decided unfavorably to EMHS, there would be no material adverse effect on the Obligated Group’s financial condition, results of operations or consolidated financial statements. Other than those disclosed separately, management is not aware of any other suits being threatened against EMHS which could have a material adverse effect on the financial condition, results of operations or consolidated financial statements of the Obligated Group. In addition, there are no suits pending or, to the knowledge of management, threatened which challenge any member of the Obligated Group’s status as an organization described in Section 501(c)(3) of the Code.

COMMUNITY OUTREACH AND COMMUNITY BENEFIT

EMHS has enjoyed a long history of working in partnership with healthcare, public health, and community partners to identify issues and opportunities for collaborative community health improvement. Through community health screenings, professional and community education, initiatives addressing areas of significant need identified through the Community Health Needs Assessment, and charity care, EMHS and its member organizations are working to make a difference in its communities. Every day, EMHS invests in these resources so that the people of Maine can benefit from the best medical practices, healthcare services, and community improvement efforts available.

EMHS and its member organizations provide extensive and valuable services to their communities either free or at a reduced level of reimbursement. In fiscal year 2015, the total community benefit provided by EMHS totaled $176,679,558. These community benefits reflect the nonprofit mission of EMHS member organizations and include a focus on the clinical, social and environmental factors which influence the ability of populations to lead healthier lives.

Community Health Priorities of Focus include, but not limited to:

Access to Care.

Preventive Care and Self-Management.

Population Health Management.

Measurement and improvement of priority health status issues, such as obesity, physical activity and nutrition, substance abuse, behavioral and mental health, etc.

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Measurement and improvement of priority health factors, such as poverty, transportation, employment, and health care insurance.

In 2016, the Maine Shared Community Health Needs Assessment (CHNA), a comprehensive review of health data and community stakeholder input on a broad set of health issues in Maine, was conducted through a collaborative effort among Maine’s four largest healthcare systems – EMHS, Central Maine HealthCare, MaineGeneral Health, and MaineHealth – as well as the Maine Center for Disease Control and Prevention, an office of the Maine Department of Health and Human Services. These reports are foundational and imperative to achieving EMHS’ mission of improving the health and well-being of the communities we serve.

COMPLIANCE PROGRAM

EMHS has a corporate compliance program designed to prevent, detect and resolve violations of applicable state and federal laws and regulations, as well as violations of internal policies and procedures. The department staffs the compliance function at the EMHS Corporate Office, while acting as a resource for member organizations through the provision of either direct or indirect compliance support.

Each EMHS subsidiary has its own designated compliance officer, maintains an active compliance program, including all of the elements outlined in the OIG Guidance to Hospitals, and has adopted the EMHS Code of Conduct and significant EMHS compliance policies. Each subsidiary has a compliance committee led by its compliance officer whose work is addressed through an annual work plan that reflects all elements outlined by the OIG. In turn, the EMHS Vice President and Chief Compliance Officer leads a system-wide compliance committee comprised of all subsidiary compliance officers and other relevant subject matter experts.

Each EMHS subsidiary’s Compliance Officer reports administratively to the subsidiary’s President and CEO (or other Senior Executive Officer), and substantively to the subsidiary’s Board or designated Board Committee and to the EMHS Vice President and Chief Compliance Officer.

FUTURE PLANS

EMHS evaluates potential acquisitions, mergers and affiliations as part of their overall strategic development process, this also includes decisions to divest and/or sell existing entities, services or products of EMHS. These potential actions may involve the need for additional capital or may involve debt prepayment in certain cases. EMHS may have additional capital needs in connection with the consolidation of the campuses at Mercy, plus routine annual capital and major moveable equipment replacements of the EMHS system. Other than these, EMHS does not have any material future debt plans.


APPENDIX B


Consolidated Financial Statements

September 26, 2015 and September 27, 2014

TABLE OF CONTENTS Page(s) Independent Auditor’s Report 1 - 2 Consolidated Financial Statements as of and for the Years Ended September 26, 2015 and September 27, 2014: Balance Sheets 3 Statements of Operations 4 Statements of Changes in Net Assets 5 Statements of Cash Flows 6 Notes to Consolidated Financial Statements 7 - 57 Supplementary Consolidating Information as of and for the Year Ended September 26, 2015, With Comparative Totals as of and for the Year Ended September 27, 2014 58 - 63

INDEPENDENT AUDITOR'S REPORT Board of Directors Eastern Maine Healthcare Systems Brewer, Maine We have audited the accompanying consolidated financial statements of Eastern Maine Healthcare Systems, which comprise the consolidated balance sheets as of September 26, 2015 and September 27, 2014, and the related consolidated statements of operations, changes in net assets and cash flows for the years then ended, and the related notes to the financial statements. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with U.S. generally accepted accounting principles; this includes the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with U.S. generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Eastern Maine Healthcare Systems as of September 26, 2015 and September 27, 2014, and the consolidated results of its operations, changes in net assets and cash flows for the years then ended in accordance with U.S. generally accepted accounting principles.

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Board of Directors Eastern Maine Healthcare Systems Brewer, Maine

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Other Matter Our audits were conducted for the purpose of forming an opinion on the consolidated financial statements as a whole. The supplementary consolidating information, as identified in the table of contents, is presented for purposes of additional analysis rather than to present the financial position, results of operations, changes in net assets and cash flows of the individual entities. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audits of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with U.S. generally accepted auditing standards. In our opinion, the information is fairly stated in all material respects in relation to the consolidated financial statements as a whole.

Portland, Maine December 18, 2015


Consolidated Balance Sheets


ASSETS (Dollars in thousands)

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

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2015 2014

CURRENT ASSETS: Cash and cash equivalents 96,900$ 91,043$ Short-term investments 14,983 14,783 Assets whose use is limited or restricted 49,207 62,028 Patient and trade accounts receivable - less allowance for uncollectible accounts of $77,909 in 2015 and $68,961 in 2014 160,434 149,109 Estimated third-party payor settlements 24,523 9,120 Other receivables 19,044 15,299 Inventory 14,694 14,648 Prepaid expenses and other current assets 13,598 14,599

Total current assets 393,383 370,629

PROPERTY AND EQUIPMENT — Net 615,489 545,109

NONCURRENT ASSETS WHOSE USE IS LIMITED OR RESTRICTED: Internally designated by the Board of Directors: Funded depreciation 191,910 191,835 Other designated funds 95,272 99,456 Self-insurance and other funds held by trustees 116,502 178,999 Temporarily donor-restricted 44,212 44,596 Permanently donor-restricted 16,197 16,098 Beneficial interest in perpetual trusts 12,868 12,288

Total noncurrent assets whose use is limited or restricted 476,961 543,272

OTHER ASSETS: Estimated settlements receivable from the State of Maine 16,603 21,306 Deferred financing costs 2,907 3,109 Intangibles and other assets 23,014 22,757

Total other assets 42,524 47,172

TOTAL ASSETS 1,528,357$ 1,506,182$

LIABILITIES AND NET ASSETS (Dollars in thousands)

2015 2014

CURRENT LIABILITIES: Accounts payable 75,401$ 73,813$ Accrued expenses and other current liabilities 109,820 101,217 Estimated third-party payor settlements 33,252 35,833 Line-of-credit borrowings 42,779 22,307 Current portion of long-term debt 14,271 13,155 Current portion of accrual for self-insurance 9,613 10,837

Total current liabilities 285,136 257,162

NONCURRENT LIABILITIES: Long-term debt — net of current portion 348,862 361,902 Accrual for self-insurance and postretirement benefits 179,153 148,686 Estimated third-party payor settlements 21,811 21,823 Other liabilities 14,050 13,764

Total noncurrent liabilities 563,876 546,175

Total liabilities 849,012 803,337

NET ASSETS: Unrestricted 605,720 629,504 Temporarily restricted 44,212 44,596 Permanently restricted 29,065 28,386

Total controlled net assets 678,997 702,486

Unrestricted-noncontrolling interest 348 359

Total net assets 679,345 702,845

TOTAL LIABILITIES AND NET ASSETS 1,528,357$ 1,506,182$


Consolidated Statements of Operations

Years Ended September 26, 2015 and September 27, 2014

(Dollars in thousands)

The accompanying notes are an integral part of these consolidated financial statements. - 4 -

REVENUE: Patient service revenue (net of contractual allowances and discounts) 1,383,061$ 1,312,505$ Less provision for bad debts 74,172 73,822

Net patient service revenue 1,308,889 1,238,683

Sales and contract revenue 18,925 23,278 Other revenue 44,563 37,099 Net assets released from restrictions — operations 2,590 2,825

Total revenue 1,374,967 1,301,885

EXPENSES: Compensation and employee benefits 820,197 785,064 Supplies and other 494,824 451,467 Depreciation and amortization 56,555 51,128 Interest 9,077 8,628

Total expenses 1,380,653 1,296,287

INCOME (LOSS) FROM OPERATIONS BEFORE GAINS AND LOSSES (5,686) 5,598

OTHER GAINS (LOSSES): Income tax expense (341) (547) Joint venture income (loss) (543) 701 Investment income and other — net 4,757 4,896 Contribution received in the acquisition of Mercy, net - 73,076

Total other gains — net 3,873 78,126

EXCESS (DEFICIENCY) OF REVENUE AND GAINS OVER EXPENSES AND LOSSES (1,813) 83,724

NONCONTROLLING INTEREST (213) 277

EXCESS (DEFICIENCY) OF REVENUE AND GAINS OVER EXPENSES AND LOSSES - CONTROLLING INTEREST (2,026) 84,001

OTHER CHANGES IN UNRESTRICTED NET ASSETS: Net assets released from restrictions — capital acquisitions 3,860 1,784 Change in net unrealized gains (losses) on investments (2,071) 9,499 Contribution of long-lived assets, net - 36 Dividends to member (128) - Pension and postretirement plan-related adjustments (23,419) (1,092)

INCREASE (DECREASE) IN UNRESTRICTED NET ASSETS — CONTROLLING INTEREST (23,784)$ 94,228$


Consolidated Statements of Changes in Net Assets



The accompanying notes are an integral part of these consolidated financial statements. - 5 -

Controlled Temporarily Permanently Total TotalUnrestricted Restricted Restricted Controlled NoncontrollingNet Assets Net Assets Net Assets Net Assets Interest

NET ASSETS — September 28, 2013 535,276$ 36,530$ 23,918$ 595,724$ 479$

Excess of revenue and gains over expenses and losses 83,724 - - 83,724 - Noncontrolling interest 277 - - 277 (277) Noncontrolling paid-in capital - - - - 157 Contribution received in the acquisition of Mercy - 1,696 1,846 3,542 - Restricted contributions - 8,728 1,862 10,590 - Net assets released from restrictions: Capital acquisitions 1,784 (1,784) - - - Operations - (2,825) - (2,825) - Restricted investment income and realized net gains - 181 - 181 - Change in net unrealized gains on investments 9,499 2,083 747 12,329 - Other 36 (13) 13 36 - Pension and postretirement plan-related adjustments (1,092) - - (1,092) -

Increase in net assets 94,228 8,066 4,468 106,762 (120)

NET ASSETS — September 27, 2014 629,504 44,596 28,386 702,486 359

Deficiency of revenue and gains over expenses and losses (1,813) - - (1,813) - Noncontrolling interest (213) - - (213) 213 Noncontrolling dividends to member - - - - (224) Restricted contributions - 7,424 1,494 8,918 - Net assets released from restrictions: Capital acquisitions 3,860 (3,860) - - - Operations - (2,590) - (2,590) - Restricted investment income and realized net gains - (383) - (383) - Change in net unrealized gains on investments (2,071) (957) (833) (3,861) - Other (128) (18) 18 (128) - Pension and postretirement plan-related adjustments (23,419) - - (23,419) -

Increase (decrease) in net assets (23,784) (384) 679 (23,489) (11)

NET ASSETS — September 26, 2015 605,720$ 44,212$ 29,065$ 678,997$ 348$


Consolidated Statements of Cash Flows



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

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2015 2014

CASH FLOWS FROM OPERATING ACTIVITIES: Increase (decrease) in net assets (23,500)$ 106,642$ Adjustments to reconcile change in net assets to net cash provided by operating activities: Depreciation and amortization 56,555 51,128 Provision for bad debts 74,172 73,433 Dividends to member 128 - Gain on sale of property and equipment (135) (98) Loss on sale of joint venture - 242 Net realized and unrealized (gains) losses on investments 2,447 (13,636) Equity in (earnings) losses of joint ventures 543 (701) Adjustment to fair value of equity in net assets of acquired affiliates - (76,619) Pension and postretirement plan-related adjustments 23,419 1,092 Restricted contributions (8,918) (10,590) Contribution of long-lived assets - (36) Changes in operating assets and liabilities: Patient and trade accounts receivable (85,497) (88,156) Other current assets (2,789) 6,665 Other assets (1,055) 686 Estimated third-party payor settlements (13,292) (11,096) Accounts payable, accrued expenses, and other liabilities 4,267 11,433 Accrual for self-insurance and postretirement benefits 5,823 840 Net cash provided by operating activities 32,168 51,229 CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment (119,609) (97,113) Proceeds from sales of property and equipment 1,008 338 Proceeds from distributions of equity of joint ventures 94 1,821 Proceeds from sale of joint venture - 66 Cash received in the acquisition of Mercy - 9,314 Investment in joint ventures (568) (471) Purchases of investments (75,838) (95,632) Proceeds from sales of investments 76,677 84,018 Net changes in money market investments 75,690 72,155 Net cash used by investing activities (42,546) (25,504) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of long-term debt - 69,958 Repayment of long-term debt (13,019) (87,017) Proceeds from lines-of-credit 33,221 97,597 Repayment of lines-of-credit (12,750) (80,407) Payment of bond issuance costs 95 (463) Dividends to member (128) - Restricted contributions and investment income 8,535 10,771 Decrease (increase) in pledges receivable restricted for long-term purposes 281 (3,024) Net cash provided by financing activities 16,235 7,415

NET INCREASE IN CASH AND CASH EQUIVALENTS 5,857 33,140

CASH AND CASH EQUIVALENTS — Beginning of year 91,043 57,903

CASH AND CASH EQUIVALENTS — End of year 96,900$ 91,043$

and September 27, 2014, respectively. NONCASH TRANSACTIONS:

September 26, 2015 and September 27, 2014, respectively, related to the acquisitions of equipment. The System refinanced $988 of tax-exempt bonds during the year ended September 26, 2015. See Note 7 for disclosure of purchases of property and equipment included in accounts payable.

Cash paid for interest approximated $15,197 and $14,564 for the years ended September 26, 2015

The System entered into capital leases in the amount of approximately $1,667 and $127 during the years ended


Notes to Consolidated Financial Statements


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1. Organization and Business Eastern Maine Healthcare Systems (EMHS) is the parent company in an integrated health care delivery system (the System). EMHS controls its subsidiaries by means of stock ownership, corporate membership or membership interests. The System provides a broad range of health care and related services in Northern, Eastern and Southern Maine through subsidiary and affiliated entities. The primary function of EMHS is to provide overall coordination and direction for the activities of the following corporations. Each affiliated organization is a tax-exempt charitable organization, unless otherwise noted. Acadia Hospital, Corp. (Acadia) — Acadia operates a 100-bed acute care, psychiatric hospital located in Bangor, Maine. Acadia is the sole corporate member of Acadia Healthcare, Inc. (AHI). AHI provides an alcohol and drug treatment program, adult and children’s case management services, school-based services, and other mental health community services. Restorative Health, LLC, is a wholly-owned subsidiary of AHI that provides outpatient mental health services. Affiliated Healthcare Systems (AHS) — AHS, a taxable holding company, is a wholly-owned subsidiary of EMHS. AHS has several subsidiaries and is a member in several joint venture limited liability companies. The following are subsidiaries of AHS:

Affiliated Laboratory, Inc. (ALI) — ALI provides medical laboratory services to various System companies, physicians, and other health care providers throughout Northern New England. ALI operates medical laboratories in Bangor and Portland, Maine. Affiliated Materiel Services (AMS) — AMS provides warehousing and distribution solutions to EMHS’ Supply Chain Network. AMS also provides consulting services to supply chain management. Affiliated Healthcare Management (AHM) — AHM provides various services to businesses throughout Northern New England. These services include workforce training, employee assistance programs, web design solutions, and other services to hospitals and other health care organizations, including System companies. Alliance Health Documentation, LLC (AHD) — AHD provides transcription services in which AHS is 51% owner. Dirigo Pines Retirement Community, LLC (DPRC) — The purpose of DPRC is to construct a cooperative retirement housing community in Orono, Maine.




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M Drug, LLC (M Drug) – Doing business as Miller Drug, M Drug operates four retail pharmacies in Bangor and Brewer, Maine. Meridian Mobile Health, LLC (Meridian) — Meridian is a limited liability company providing ground medical transportation services.

Beacon Health, LLC (Beacon) — Beacon contracts with payors to provide population health management service and care coordination. EMHS owns a 95% membership interest in Beacon. Blue Hill Memorial Hospital (BHMH) — BHMH operates a 25-bed, critical access hospital located in Blue Hill, Maine. Charles A. Dean Memorial Hospital (C.A. Dean) — C.A. Dean operates a 25-bed critical access hospital and skilled care facility in Greenville, Maine and has family and specialty practices in Greenville, Monson, and Sangerville. Eastern Maine HomeCare (EMHC) — EMHC provides home health, hospice, telehealth, and community health services to residents in Central, Northern, and Eastern Maine. Effective October 1, 2015, EMHC merged into VNA Home Health & Hospice, a member of Mercy Health Systems of Maine (MHSM or Mercy). Eastern Maine Medical Center (EMMC) — EMMC operates a regional 411-bed acute care medical center located in Bangor, Maine, which provides a variety of inpatient and ambulatory health care services. EMMC is the sole corporate member of the following subsidiaries:

Eastern Maine Medical Center Auxiliary (EMMCA) — EMMCA raises funds to benefit EMMC. Norumbega Medical Specialists, Ltd. (Norumbega) — Norumbega operates a physician practice in Orono, Maine. During FY2015, the assets and liabilities of Norumbega were transferred to EMMC.

EMHS Foundation (The Foundation) — The Foundation holds and manages unrestricted and donor-restricted funds for the benefit of various System companies and other exempt organizations in Maine. The amount of assets held for the benefit of unrelated organizations is not material. Inland Hospital (Inland) — Inland operates a 48-bed hospital located in Waterville, Maine. Inland is the sole member of Lakewood Continuing Care Center (Lakewood). Lakewood operates a 105-bed long-term care facility. Maine Network for Health (MNH) — MNH is a provider-owned service organization that offers administrative, clinical, and quality support services to physician practices and hospitals. Several System hospitals collectively own the majority of MNH and, accordingly, MNH has been included in the System's consolidated financial statements. MNH is a taxable corporation. In fiscal year 2016, Maine Network for Health will be dissolved.




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Mercy Health System of Maine (MHSM or Mercy) — On October 4, 2013, EMHS became the sole corporate member of MHSM which consists of Mercy Hospital and VNA Home Health and Hospice (VNA). Mercy operates a 230-bed acute care hospital with two campuses located in Portland, Maine. The Hospital provides inpatient and outpatient medical, surgical, and obstetrical/ gynecological care as well as treatment for alcoholism and drug addiction. VNA is a provider of home health and hospice services to clients in Cumberland and York counties. EMHS believes it will benefit from MHSM’s extensive work on the development of an ambulatory network and VNA’s extensive home-based care systems, which are considered central to improving the health of the communities. The transaction was accounted for as an acquisition in accordance with Accounting Standards Update No. 2010-07 (ASU), Not-for-Profit Entities: Mergers and Acquisitions, which requires the assets and liabilities of MHSM to be accounted for at fair value as of the date of the acquisition. The fair value of the net assets at the date of acquisition were recognized as a contribution received in the acquisition of Mercy as part of other gains, temporarily restricted net assets, and permanently restricted net assets based on the donor restrictions, if any, on such net assets. There was no consideration transferred in connection with the transaction. As of October 1, 2013, the effective date of the transaction, the fair value of each major class of assets and liabilities was as follows (dollars in thousands): Assets Current assets $ 57,845 Property and equipment 116,513 Intangible assets 3,237 Other assets 28,966 Total assets 206,561 Liabilities Current liabilities (42,724) Contingent consideration (1,000) Long-term liabilities (86,219) Contribution $ 76,618 The contribution received was recorded as follows: Unrestricted: Contribution received in the acquisition of Mercy $ 73,076 Temporarily restricted net assets 1,696 Permanently restricted net assets 1,846 Total $ 76,618




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The contribution received was recorded net of $5,136,000 of transition service agreement fees to be paid to Catholic Health East (CHE), the previous parent company of MHSM. The fair value of property and equipment is based on the cost approach and market (comparable sales) approach. Intangible assets consist of the Medicare license and a Certificate of Need application, both of which are based on replacement cost. The contingent consideration relates to the maximum indemnification MHSM must provide to CHE because the outcomes cannot be reasonably estimated under the terms of the affiliation agreement. The consolidated statement of operations for fiscal year 2014 includes the results of Mercy for the entire year. Rosscare — Rosscare provides or supports a continuum of nonacute health care services, including a personal emergency response program, a telephone reassurance program, and a continuing care information center. Rosscare is the sole shareholder of Rosscare Nursing Homes, Inc. (RNHI) and is the sole member of Dirigo Pines Inn, LLC (DPI):

RNHI — RNHI is a 50% partner in six separate partnerships, each of which owns and operates a nursing home. On a combined basis, the nursing homes offer 384 long-term care beds, 54 assisted living units, 26 specialized care beds, and a 48-bed Alzheimer unit to the residents of Central Maine. DPI — DPI is a limited liability company formed for the construction and operation of an apartment-style retirement community in Orono, Maine. DPI offers 23 specialized care beds, a 27-bed Alzheimer unit, 56 independent living units, and 17 assisted living units.

Sebasticook Valley Health (SVH) — SVH operates a 25-bed critical access hospital located in Pittsfield, Maine. The Aroostook Medical Center (TAMC) and Subsidiaries — TAMC operates a community hospital with 89 beds and a nursing home with 72 beds. TAMC has the following subsidiaries:

TAMC Title Corporation — TAMC Title Corporation is a real estate holding company that owns buildings that are leased to various health care-related organizations. As of September 2015 remaining assets were transferred to TAMC. TAMC Endowments — TAMC Endowments is responsible for raising, holding, and managing contributions received from donors for the benefit of TAMC and its subsidiaries. As of November 2014 was dissolved and assets transferred to TAMC.

2. Summary of Significant Accounting Policies Reporting Entity The accompanying consolidated financial statements include the accounts of EMHS and its controlled affiliates. The consolidated financial statements include 100% of the assets and liabilities of majority-owned subsidiaries. Significant intercompany accounts and transactions among the




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affiliated organizations have been eliminated in preparing the consolidated financial statements. The assets of any member of the consolidated group may not be available to meet the obligations of other members in the group, except as disclosed in Note 9. Fiscal Year The fiscal year for the majority of the System organizations ends on the last Saturday in September. Basis of Presentation The accompanying consolidated financial statements have been presented in conformity with accounting principles generally accepted in the United States of America (U.S. generally accepted accounting principles) in accordance with the American Institute of Certified Public Accountants' Audit and Accounting Guide, Health Care Organizations, and other pronouncements applicable to health care organizations. For purposes of display, transactions deemed by management to be ongoing and central to the provision of health care services are reported as revenue and expenses. Peripheral or incidental transactions are reported as other gains and losses. Use of Estimates The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the period. Actual results could differ from those estimates. Significant management estimates include net patient service revenue and related patient accounts receivable, the valuation of investments and acquisitions, the determination of impairment of long-lived assets, self-insurance reserves, accrued retirement benefits, estimated third-party payor settlements and gains or losses from risk based contracts. Cash and Cash Equivalents Cash and cash equivalents include highly liquid investments with a maturity of three months or less at the date of purchase, excluding amounts classified as assets whose use is limited or restricted. Patient and Trade Accounts Receivable Patient and trade accounts receivable are stated at the amount management expects to collect from outstanding balances. Management provides for probable uncollectible amounts through a charge to earnings and a valuation allowance based on its assessment of the current status of individual accounts. Balances that are still outstanding after management has used reasonable collection efforts are written off through a charge to the valuation allowance and the applicable patient accounts receivable. Credit is extended without collateral.




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In evaluating the collectability of accounts receivable, the System analyzes past results and identifies trends for each major payor source of revenue for the purposes of estimating the appropriate amounts for the allowance for doubtful accounts and the provision for bad debts. Data in each major payor source is regularly reviewed to evaluate the adequacy of the allowance for doubtful accounts. Specifically, for receivables relating to services provided to patients having third-party coverage, an allowance for doubtful accounts and a corresponding provision for bad debts are established at varying levels based on the age of the receivables and payor source. For receivables relating to self-pay patients, a provision for doubtful accounts and corresponding allowance for doubtful accounts is made in the period services are rendered based on experience indicating the inability or unwillingness of patients to pay amounts for which they are financially responsible. Actual write-offs are charged against the allowance for doubtful accounts. Investments and Investment Income Investments in equity securities with readily determinable fair values and all investments in debt securities are recorded at fair value. Realized gains or losses on the sale of investments are determined by use of average cost. Unrealized gains and losses on investments are excluded from excess of revenue and gains over expenses and losses and reported as an increase or decrease in net assets, except that declines in fair value that are judged to be other than temporary are reported as realized losses. The System periodically reviews its investments to identify those individual investments for which fair value is below cost. The System then makes a determination as to whether the investment should be considered other than temporarily impaired. There were no significant impairments at September 26, 2015 or September 27, 2014. Investments, in general, are exposed to various risks, such as interest rate, credit, and overall market volatility. Consequently, it is reasonably possible that changes in the values of investments will occur in the near term and that such changes could materially affect the amounts reported in the consolidated balance sheets and statements of operations and changes in net assets. Several System organizations own interests in joint venture entities. Ownership interests between 20% and 50% in a joint venture are accounted for by using the equity method of accounting. Using the equity method, the investment is increased by the System organization's share of the entity's income and additional investments. The investment is decreased by the System organization's share of the entity's losses and distributions. Derivative Instruments The System recognizes derivative instruments as either assets or liabilities and measures those instruments at fair value. The accounting for changes in the fair value of a derivative depends on the intended use of the derivative and the resulting designation. For a derivative instrument designated as a fair value hedge, the gain or loss is recognized in earnings in the period of change together with the offsetting loss or gain on the hedged item attributed to the risk being hedged. For a derivative instrument designated as a cash flow hedge, the effective portion of the derivative's gain or loss is initially reported as an unrealized gain or loss on investments and subsequently reclassified into earnings when the hedged exposure affects earnings. The ineffective portion of the gain or loss is reported in earnings immediately. For derivative instruments that are not designated as accounting hedges, changes in fair value are recognized in earnings in the period of change.




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The System records derivative instruments in the statements of cash flows to operating, investing, or financing activities consistent with the cash flows of the hedged item. Inventory System organizations record inventory at the lower of cost or market using the first-in, first-out, or average cost methods. Assets Whose Use is Limited or Restricted Assets whose use is limited or restricted include Board of Directors (the "Board") designated assets, assets held in trust under debt agreements, self-insurance trust arrangements, and assets that are donor-restricted. Permanently restricted trusts held by unrelated entities for the benefit of various System organizations are reported as beneficial interest in perpetual trusts. Board-designated assets may be used at the Board's discretion. Property and Equipment Property and equipment are recorded at cost or, in the case of gifts, at fair market value at the date of the gift, less accumulated depreciation. Depreciation of property and equipment is computed using the straight-line method over the estimated useful lives of the related assets. Buildings and equipment under capital lease obligations are amortized using the straight-line method over the shorter period of the lease term or estimated useful life of the building or equipment. Such amortization is included in depreciation and amortization in the consolidated statements of operations. Gifts of long-lived assets, such as land, buildings, or equipment, are reported as an increase in unrestricted net assets (excluded from the excess (deficiency) of revenue and gains over expenses and losses), unless explicit donor stipulations specify how the donated assets must be used. Gifts of long-lived assets with explicit restrictions that specify how the assets are to be used, and gifts of cash or other assets that must be used to acquire long-lived assets, are reported as an increase in restricted net assets. Absent explicit donor stipulations about how long those long-lived assets must be maintained, expirations of donor restrictions are reported when the donated or acquired long-lived assets are placed in service. Impairment of Long-Lived Assets Long-lived assets to be held and used are reviewed for impairment whenever circumstances indicate that the carrying amount of an asset may not be recoverable. Long-lived assets to be disposed of are reported at the lower of the carrying amount or fair value, less cost to sell.




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Asset Retirement Obligations The System recognizes the liability for conditional asset retirement obligations when the System has a legal obligation to perform asset retirement activities. The fair value of the liability for the legal obligation associated with an asset retirement is recorded in the period in which the obligation is incurred. When the liability is initially recorded, the cost of the asset retirement is capitalized. Substantially all of the asset retirement obligations recorded relate to estimated costs to remove asbestos that is contained within the System's facilities. The adjustments to the carrying amount of the asset retirement obligation were approximately $188,000 and $1,843,000 in 2015 and 2014, respectively, and were primarily attributable to revised estimates, accretion expense and removal of asbestos. Costs of Borrowing Interest costs incurred on borrowed funds during the period of construction of capital assets, net of investment income on borrowed assets held by trustees, are capitalized as a component of the cost of acquiring those assets. The amount of interest that was capitalized totaled approximately $5,684,000 and $6,252,000 in 2015 and 2014, respectively. Deferred financing costs and original issue premiums and discounts are amortized over the period the related obligation is outstanding on an effective interest rate method. Temporarily and Permanently Restricted Net Assets Temporarily restricted net assets are those whose use has been limited by donors to a specific time period or purpose. Permanently restricted net assets have been restricted by donors to be maintained in perpetuity. Endowment The System has interpreted state law as requiring realized and unrealized gains of permanently restricted net assets to be retained in a temporarily restricted net asset classification until appropriated by the Board and expended. As a result of this interpretation, the System classifies as permanently restricted net assets (a) the original value of the gifts donated to the permanent endowment when explicit donor stipulations requiring permanent maintenance of the historical fair value are present, and (b) the original value of the subsequent gifts to the permanent endowment when explicit donor stipulations requiring permanent maintenance of the historical fair value are present. The remaining portion of the donor-restricted endowment fund composed of accumulated gains not required to be maintained in perpetuity is classified as temporarily restricted net assets until those amounts are appropriated for expenditure in a manner consistent with the donor's stipulations.




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The System administers a formal spending policy consistent with state law to appropriate the net appreciation of permanently restricted net assets as is deemed prudent by the Board considering the System's long-term and short-term needs, price-level trends, and general economic conditions. Under this policy, the System maintains an annual spending level generally in the range of 3%-6%, with a target of 5%, of each endowment fund's moving five-year average market value. Endowment assets are invested in a manner to generate returns at least equal to and preferably greater than the consumer price index, plus 5%. To satisfy its long-term rate-of-return objectives, the System targets a diversified asset allocation that places a greater emphasis on equity-based investments within prudent risk constraints. Realized and unrealized gains on permanently restricted net assets, which are not specifically restricted by donors, are reported in a temporarily restricted net asset classification until appropriated by the Board and expended. Revenue Recognition Net patient service revenue is reported at the estimated net realizable amounts from patients, third-party payors, and others for services rendered, including estimated retroactive adjustments under reimbursement agreements with third-party payors. Under the terms of various agreements, regulations, and statutes, certain elements of third-party reimbursement to System organizations are subject to negotiation, audit, and/or final determination by the third-party payors. As a result, there is at least a reasonable possibility that recorded estimates will change by a material amount in the near term. Variances between preliminary estimates of net patient service revenue and final third-party settlements are included in net patient service revenue in the year in which the settlement or change in estimate occurs. In 2015 and 2014, changes in prior-year estimates increased net patient service revenue by $6,520,000 and $19,746,000, respectively. Gifts Unconditional promises to give cash and other assets to System organizations are reported at fair value at the date the promise is received. Unconditional promises to give that are expected to be collected in future years are recorded at the present value of estimated future cash flows. The discounts on those amounts are computed using a risk-free rate applicable to the year in which the promise is received. Amortization of the discount is included in contribution revenue. Conditional promises to give and indications of intentions to give are reported at fair value at the date the gift is received. Gifts are reported as an increase in either temporarily or permanently restricted net assets if they are received with donor stipulations that limit the use of the donated assets. When a donor restriction expires, that is, when a stipulated time restriction ends or purpose restriction is accomplished, temporarily restricted net assets are reclassified as unrestricted net assets and reported in the consolidated statements of operations as net assets released from restrictions. Donor-restricted contributions whose restrictions are met within the same year as received are reported as additions to unrestricted net assets in the accompanying consolidated financial statements.




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Excess (Deficiency) of Revenue and Gains Over Expenses and Losses The consolidated statements of operations include excess (deficiency) of revenue and gains over expenses and losses. Changes in unrestricted net assets which are excluded from excess (deficiency) of revenue and gains over expenses and losses, consistent with industry practice, include transfers of assets to and from affiliates for other than goods and services, the change in unrealized gains and losses on investments, pension and postretirement plan adjustments, and contributions of long-lived assets (including assets acquired using contributions which, by donor restriction, were to be used for the purposes of acquiring such assets). Other Revenue Unrestricted investment income on operating assets is included in other revenue in the year earned. Grant revenue, meaningful use incentives (see below), cafeteria sales, and gift shop revenue are also included as other revenue. Meaningful Use Revenues The Medicare and Medicaid electronic health record (EHR) incentive programs provide a financial incentive for achieving "meaningful use" of certified EHR technology. The criteria for meaningful use will be staged in three steps with stage three beginning in 2018. During 2015 and 2014, the System attested to Stage 1 and Stage 2 meaningful use certification from the Centers of Medicare and Medicaid Services (CMS) and recorded meaningful use revenues of $1,974,000 and $5,114,000, respectively, in the consolidated statements of operations. The meaningful use attestation is subject to audit by CMS in future years. As part of this process, a final settlement amount for the incentive payments could be established that differs from the initial calculation, and could result in return of a portion or all of the incentive payments received by the System. The Medicaid program provides incentive payments to hospitals and eligible professionals as they adopt, implement, upgrade or demonstrate meaningful use in the first year of participation and demonstrate meaningful use for up to five remaining participation years. During 2015 and 2014, the System recorded meaningful use revenues of $4,076,000 and $4,660,000, respectively, after attesting to Stage 1 and Stage 2 meaningful use. The System recognizes revenue ratably over the reporting period starting at the point when management is reasonably assured it will meet all of the meaningful use objectives and any other specific requirements applicable for the reporting period. Income Taxes EMHS, its hospitals, and certain other affiliates have been determined by the Internal Revenue Service to be tax-exempt charitable organizations as described in Section 501(c)(3) or 501(c)(2) of the Internal Revenue Code (the Code) and, accordingly, are exempt from federal income taxes on related income pursuant to Section 501(a) of the Code. Accordingly, no provision for federal income taxes has been recorded in the accompanying consolidated financial statements for these organizations.




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Tax-exempt charitable organizations could be required to record an obligation for income taxes as the result of a tax position they have historically taken on various tax exposure items including unrelated business income or tax status. Under guidance issued by the Financial Accounting Standards Board (FASB), assets and liabilities are established for uncertain tax positions taken or positions expected to be taken in income tax returns when such positions are judged to not meet the “more-likely-than-not” threshold, based upon the technical merits of the position. Estimated interest and penalties, if applicable, related to uncertain tax positions are included as a component of income tax expense. The System has evaluated its tax position taken or expected to be taken on income tax returns and concluded the impact to be not material. Certain of the System's affiliates are taxable entities. Deferred taxes related to these entities are based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect in the years the differences are expected to reverse. The deferred tax assets and liabilities for these entities are not material. Accrual for Self-Insurance Liabilities The liabilities for outstanding losses and loss-related expenses include estimates for malpractice losses incurred but not reported, as well as losses pending settlement. Insurance recoveries are included in other assets and are not netted against the liability. Such liabilities are necessarily based on estimates, and while management believes that the amounts provided are adequate, the ultimate liability may be in excess of or less than the amounts provided. As a result, there is at least a reasonable possibility that recorded estimates will change by a material amount in the near term. The methods for making such estimates and the resulting liability are actuarially reviewed on an annual basis and any adjustments are reflected in operations currently. The System also estimates and records a liability for claims incurred but not reported for employee health and dental benefits provided through self-insured plans. The liability is estimated based on prior claims experience and the expected time period from the date such claims are incurred to the date the related claims are submitted and paid. Accounting for Defined Benefit Pension and Other Postretirement Plans The System recognizes the overfunded or underfunded status of its defined benefit and postretirement plans as an asset or liability in its consolidated balance sheets. Certain changes in the funded status of the plans are reported as a change in unrestricted net assets presented below the excess (deficiency) of revenue and gains over expenses and losses in the consolidated statements of operations and changes in net assets in the year in which the changes occur.

Recently Issued Accounting Pronouncement In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers. The standard is designed to replace all existing guidance on revenue recognition, including industry-specific rules with an overarching, principles-based general standard. The core principle is to recognize revenue in an amount that reflects the consideration the entity expects to receive in




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exchange for services provided. The ASU will be effective for the System in its fiscal year ending in 2019. The System has not determined the impact of the ASU on its financial statements.

Newly Adopted Accounting Pronouncement Effective in the year ended September 26, 2015, the System adopted the provisions of FASB ASU No. 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. The ASU changes the requirements for reporting discontinued operations. A disposal of a component of an entity or a group of components of an entity is required to be reported as discontinued operations only if the strategic shift has or will have a major effect on an entity’s operations and financial results when specified events occur. Reclassifications Certain amounts in the prior year financial statements have been reclassified to conform with the current year presentation. Subsequent Events For purposes of the preparation of these financial statements, the System has considered transactions or events occurring through December 18, 2015, which was the date that the financial statements were issued. Effective October 1, 2015, EMHS became the sole corporate member of Maine Coast Healthcare Corporation (MCHC) of Ellsworth, Maine. MCHC includes Maine Coast Memorial Hospital, a Maine nonprofit, tax-exempt corporation that operates a 64-bed acute care hospital, Maine Coast Healthcare Foundation, Maine Coast Medical Realty, and Maine Coast Foundation. Serving as a continuum of care provider for Hancock and western Washington Counties, MCHC provides emergency, primary and specialty acute inpatient, diagnostic, and surgical services. The accounting for the transaction will be completed in the second quarter of fiscal year 2016 and, therefore, its effect on the consolidated financial statements of the System for the year ending September 24, 2016 has not yet been determined. There was no consideration transferred in connection with the Maine Coast transaction. The unaudited book value of MCHC assets and liabilities at September 30, 2015 was $65,078,000 and $24,082,000, respectively. DPI, DPRC, DPDC, DPF, and AHM entered into a Purchase and Sale Agreement, dated October 7, 2015, to sell the assets of Dirigo Pines Inn and the real estate underlying the Dirigo Pines cottage community to CPF SENIOR LIVING – DIRIGO PINES, LLC. The transaction is expected to close in late 2015 or early 2016.




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3. Net Patient Service Revenue Net patient service revenue for the years ended September 26, 2015 and September 27, 2014 consisted of the following (dollars in thousands):

2015 2014

Full charges for services to patients: Daily patient services 335,253$ 330,006$ Ancillary services 802,367 735,778 Outpatient services 1,616,675 1,475,312

Gross patient service revenue 2,754,295 2,541,096

Less contractual allowances (1,312,802) (1,162,071)

Less charity care (58,432) (66,520)

(1,371,234) (1,228,591)

Patient service revenue (net of contractual allowances and discounts) 1,383,061 1,312,505 Less provision for bad debts (74,172) (73,822)

Net patient service revenue 1,308,889$ 1,238,683$

The allowance for doubtful accounts related to patient service revenue was $77,838,000 and $68,816,000 at September 26, 2015 and September 27, 2014, respectively, and relates primarily to self-pay accounts. Gross self-pay accounts receivable were $81,236,000 and $75,374,000 at September 26, 2015 and September 27, 2014, respectively. During the years ended September 26, 2015 and September 27, 2014, self-pay write-offs were $72,577,000 and $69,646,000, respectively. Gross revenue related to self-pay patients was $187,964,000 and $176,350,000 for the years ended September 26, 2015 and September 27, 2014, respectively.




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4. Charity Care and Community Service When patients meet certain criteria under the System's charity care policies, System organizations provide them with care without charge or at amounts less than established rates. System organizations do not pursue collection of amounts determined to qualify as charity care and, accordingly, these amounts are not included in net patient service revenue. The System estimates the costs associated with providing charity care by calculating a ratio of total cost to total gross charges, and then multiplying that ratio by the gross uncompensated charges associated with providing care to patients eligible for free care. The estimated cost of caring for charity care patients was $22,978,210 and $30,727,517 for the years ended September 26, 2015 and September 27, 2014, respectively. Funds received from gifts and grants to subsidize charity services provided were $548,082 and $538,598 for the years ended September 26, 2015 and September 27, 2014, respectively. In furtherance of their charitable purposes, System organizations provide many services and programs at reduced or no cost to the public, schools, and civic groups. Some of these services include health screenings, clinics, coordination of blood drives, educational materials and presentations, radio and television information programs on health topics, hosting support groups and programs, and offering a speakers bureau of professionals to discuss health issues.

5. Third-Party Reimbursement The System's affiliates have contractual agreements with third-party payors that provide for payments to the respective organizations at amounts that differ from their established charge rates. A summary of the payment arrangements with major third-party payors is as follows: Medicare Net revenue from the Medicare program accounted for approximately 34% and 32% of the System's net patient service revenue for 2015 and 2014, respectively. The acute care hospitals are subject to the federal Prospective Payment System (PPS) for Medicare inpatient hospital services, inpatient skilled nursing facility services, inpatient rehabilitation services, and for certain outpatient services. Under these prospective payment methodologies, Medicare pays a prospectively determined per discharge, per day, or per visit rate for non-physician services. These rates vary according to the applicable Diagnosis Related Group (DRG), Case-Mix Group, or Resource Utilization Group. Capital costs related to Medicare inpatient PPS services are paid based upon a standardized amount per discharge weighted by DRG. TAMC is designated as a Medicare-dependent hospital for reimbursement purposes. Accordingly, TAMC receives an additional payment amount, which is a portion of the difference between the federal operating rate and a hospital-specific rate. Inland was selected to participate in a Medicare Rural Community Hospital Demonstration Project and is therefore no longer subject to PPS payments for inpatient hospital services and associated capital costs for the duration of this five-year program. During the first fiscal year of the program which began September 25, 2011, Medicare paid for the full reasonable costs incurred for inpatient services provided. The payment for subsequent years is the lesser of reasonable costs or a target amount determined by increasing the first year program costs by the inpatient prospective payment factor update for each succeeding year. For most outpatient




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services, Medicare makes payment based upon the Ambulatory Payment Classification (APC) of each patient. Certain other outpatient services are reimbursed according to fee screens. The hospitals are reimbursed for cost-reimbursable items at an interim tentative rate with final settlement determined after submission of annual cost reports and audits thereof by the Medicare audit contractor. Outpatient services provided at the System's rural health centers are reimbursed on the basis of reasonable costs per visit. As a specialty psychiatric hospital facility, Acadia is reimbursed for Medicare inpatient services on a PPS basis. The prospective payment methodology for psychiatric facilities is based on a variable acuity and age based per diem rate. This rate is adjusted upwards to reflect higher costs on the earlier days of the stay and downwards towards the end of the stay. The per diem will vary based on diagnosis, comorbidity condition, age, wage index, rural setting, the presence of a full-service emergency room, and the extent of teaching activity in the facility. BHMH, C.A. Dean, and SVH have been granted Critical Access Hospital (CAH) status, which continues as long as certain utilization criteria are met. Each CAH is reimbursed 101% of allowable costs for its inpatient and substantially all of its outpatient services provided to Medicare patients. The System began participating in the CMS Pioneer Accountable Care Organization (ACO) on January 1, 2012. System hospitals participating include EMMC, BHMH, CA Dean, Inland, Mercy, SVH and TAMC. Additional organizations participated in the ACO through contractual arrangements or through ownerships in Beacon Health, LLC. Through this agreement, the System provides care coordination and health care management to Medicare enrollees identified as patients of the ACO participants. Under the program, the System was eligible to share in the resulting savings in year one, and in shared savings and losses in subsequent years, based on calendar year final settlements. The System withdrew from participation in the Pioneer ACO for 2015. The System recorded losses of $2,900,000 related to plan year 2013 and $2,900,000 for plan year 2014. MaineCare Net revenue from the MaineCare program accounted for approximately 14% and 15% of the System's net patient service revenue for 2015 and 2014, respectively. MaineCare inpatient reimbursement for acute care hospitals is based upon prospectively determined rates that vary according to the applicable DRG. Capital and physician service costs related to MaineCare inpatient services are paid based on a percentage of allowable costs. For most outpatient services, MaineCare makes payment based upon the APC of the patient. Outpatient physician services are paid on a percentage of allowable costs and certain other outpatient services are reimbursed according to fee screens. Acute hospitals receive interim payments for capital costs and physician services at a tentative rate with final settlement determined after completion of annual cost reports by the State. Nursing facilities are reimbursed partially on a prospectively determined per diem rate for direct and routine services together with a fixed cost component that is subject to final settlement determined after completion of an annual cost report by the State.




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BHMH, C. A. Dean, and SVH are also recognized as CAHs by the MaineCare program and, as such, are reimbursed on a percentage of allowable costs for inpatient and outpatient services provided to MaineCare patients. Acadia is reimbursed for MaineCare inpatient services based on a negotiated rate related to established charges. Outpatient services are reimbursed based on a percentage of cost.

The System’s hospitals have not received final settlement on cost reports filed under the MaineCare program since 2004. For the open cost report years from 2005 to 2015, the System has established reserves against changes in the total obligation arising from final settlement of the cost reports. At September 26, 2015 and September 27, 2014, the System had $14,886,000 and $14,575,000, respectively, of MaineCare reserves included in non-current estimated third party-payor settlements. Estimated settlements receivable are also classified as current or non-current based on expected timing of final settlement. The State assesses a health care provider tax on the revenues of hospitals. The amount of tax assessed to System organizations was approximately $25,454,000 and $25,443,000 in 2015 and 2014, respectively. This amount has been reported as supplies and other expenses in the accompanying consolidated statements of operations. Other Payor Arrangements The System's affiliates have entered into other payment agreements with commercial insurance carriers, health maintenance organizations, and preferred provider organizations. The basis for payment under these agreements include prospectively determined rates per discharge and per day, discounts from established charges, fee screens, and capitation fees earned on a per member, per month basis. The System entered into a population health management contract with a large employer. The contract provides shared gains and losses based on performance against cost benchmarks with adjustments for quality goals. The performance periods are from March 2014 through February 2015 and March 2015 through February 2016. The contract covers approximately 5,500 lives and includes a provider network that includes System members and strategic contractors. The System recorded a $717,000 gain in 2015 for the performance period ended February 2015. Preliminary results for the performance period ended February 2016 are inconclusive and accordingly, the System has recorded no gains or losses for this period as of September 26, 2015. Shared gains are limited to 10% of the cost target and shared losses are limited to 10% of the cost target and not to exceed $2,500,000. The System entered into a one-year population health agreement with Anthem Blue Cross Blue Shield of Maine. The performance period begins January 1, 2015 and includes shared savings and losses based on performance against cost benchmarks with adjustments for quality goals. The contract covers approximately 36,000 lives and includes a provider network that includes System members and strategic contractors. Shared gains and losses are subject to a 10% cap. The System recorded estimated shared losses of $2,500,000 as of September 26, 2015.




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6. Investments and Assets Whose Use is Limited or Restricted At September 26, 2015 and September 27, 2014, investments and assets whose use is limited or restricted consisted of the following (dollars in thousands):

2015 2014

Short-term investments: Temporary cash investments 21$ 34$ Mutual funds, institutional funds and common/collective trusts 14,553 14,362 Fixed-income securities 409 387

Total short-term investments 14,983$ 14,783$

Assets whose use is limited or restricted — current: Temporary cash investments 46,666$ 46,210$ Fixed-income securities 2,401 15,677 Interest in trusts and charitable gift annuities 140 141

Total assets whose use is limited or restricted — current 49,207$ 62,028$

Assets whose use is limited or restricted — noncurrent: Temporary cash investments 75,896$ 70,111$ Marketable equity securities 4,567 3,938 Other equity investments 815 4,659 Mutual funds, institutional funds and common/collective trusts 247,851 245,138 Guarantee investment contracts 7,522 29,969 Fixed-income securities 117,113 166,630 Pledges and other receivables 8,625 8,715 Interest in trusts and charitable gift annuities 1,704 1,824 Beneficial interest in perpetual trusts 12,868 12,288

Total assets whose use is limited or restricted — noncurrent 476,961$ 543,272$ Assets of self-insured programs for employee health benefits, certain assets held in trust under bond indentures, and portions of charitable gift annuities are classified as current assets.




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For the years ended September 26, 2015 and September 27, 2014, investment income consisted of the following (dollars in thousands):

2015 2014

Interest and dividend income 4,692$ 4,865$ Realized gains and losses on sale of securities — net 1,414 1,307 Change in net unrealized gains (losses) on investments (3,861) 12,329

Total 2,245$ 18,501$

For the years ended September 26, 2015 and September 27, 2014, investment income was reported as follows (dollars in thousands):

2015 2014

Consolidated statements of operations: Other revenue 1,741$ 1,745$ Investment income and other — net 4,748 4,246 Change in net unrealized gains (losses) on investments (2,071) 9,499

Consolidated statements of changes in net assets: Temporarily restricted net assets — restricted investment income and realized and unrealized investment gains (losses) (1,340) 2,264 Permanently restricted net assets — unrealized investment gains (losses) (833) 747

Total 2,245$ 18,501$




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Derivative Financial Instruments AHS and EMHS are parties in several fixed-payor swap contracts related to underlying, variable rate debt obligations (which are disclosed in Note 9). The purpose of these contracts is to protect AHS and EMHS against rising interest rates related to the variable rate debt. These contracts qualify for hedge accounting as a cash flow hedge. The combined increase in the fair value of the contracts amounted to $60,000 during 2015 and $531,000 during 2014, and is included in change in net unrealized gains (losses) on investments in the accompanying consolidated statements of operations. The net settlement related to the contracts is included in interest expense. AHS and EMHS expect to hold the swap contracts until their respective maturities, at which point unrealized gains or losses will be zero. The fair value of the interest rate swaps was a liability of $1,821,000 and $1,881,000 at September 26, 2015 and September 27, 2014, respectively, and is included in other liabilities in the accompanying consolidated balance sheets. The interest swap contract disclosures are summarized as follows (dollars in thousands):

Fair Value Fair ValueLiability Liability

Fixed Variable as of as of Rate Rate Notional September 26, September 27, TerminationPaid Received Amount 2015 2014 Date Counterparty

AHS 7.10% 1.70% 2,905$ 579$ 577$ September 2021 TD BankAHS 7.09% 1.69% 1,682 300 309 November 2020 TD BankEMHS 5.57% 1.56% 9,627 942 995 November 2018 TD Bank

Total unrealized loss 1,821$ 1,881$

Pledges Receivable Pledges receivable includes the net present value of future unconditional promises to give from donors. At September 26, 2015 and September 27, 2014, the future amounts receivable for unconditional promises to give are as follows (dollars in thousands):

2015 2014

Due within one year 3,207$ 5,216$ Due within two to five years 5,206 3,970 Thereafter 73 28

Total receivable 8,486 9,214

Less allowance for uncollectible pledges and discounts (383) (830)

Total net receivable 8,103$ 8,384$




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Annuity Agreements The System has entered into various charitable gift annuity agreements with donors with the assets held in trust and administered by the System. These assets are included in assets whose use is limited or restricted in the accompanying consolidated balance sheets and totaled approximately $1,486,000 and $1,570,000 at September 26, 2015 and September 27, 2014, respectively. A contribution is recognized at the date the agreement is established. Liabilities associated with the agreements are recorded at the present value of estimated future payments to be made to the donors. The liabilities are included in noncurrent liabilities and accrued expenses in the accompanying consolidated balance sheets and totaled approximately $892,000 and $182,000 at September 26, 2015 and September 27, 2014, respectively.

7. Property and Equipment At September 26, 2015 and September 27, 2014, property and equipment consisted of the following (dollars in thousands):

2015 2014

Land 20,951$ 20,994$ Buildings and land improvements 443,065 434,316 Equipment, furniture, and fixtures 569,564 521,502 Leasehold improvements 20,901 20,601

1,054,481 997,413

Less accumulated depreciation and amortization (599,447) (550,185)

455,034 447,228

Construction in progress 160,455 97,881

Net property and equipment 615,489$ 545,109$

EMHS and its affiliates have commitments for facility expansions totaling approximately $78,739,000 and $117,876,000 at September 26, 2015 and September 27, 2014, respectively. Construction in progress relates primarily to the construction of a new tower to add inpatient, surgical and diagnostic services and renovation of existing patient care areas at EMMC. Approval of the certificate of need for $262 million was received from the State of Maine, which does not include replacement equipment or debt service reserve funds. Phase 1 of the project is being funded through a 2013 bond issuance of $143.9 million including $11 million bond premium, and net assets of approximately $44 million and is expected to be completed in 2016. Phase 2 is expected to cost $102 million and is expected to be completed in 2017. Upon completion, capacity will increase from 346 total beds to 411, operating rooms will increase from 21 to 24, and the majority of patient rooms will be converted to private.




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At September 26, 2015 and September 27, 2014, $21,508,000 and $15,240,000, respectively, of property and equipment purchases and costs related to construction projects were included in accounts payable. Property and equipment includes a building and equipment recorded under capital leases totaling $9,829,000 and $10,261,000 with related accumulated depreciation of $8,641,000 and $9,428,000 at September 26, 2015 and September 27, 2014, respectively.

8. Intangibles and Other Assets At September 26, 2015 and September 27, 2014, intangibles and other assets consisted of the following (dollars in thousands):

2015 2014

Investments in joint ventures: Rosscare Nursing Homes, Inc. interests 5,854$ 5,204$ Advanced Collections Services, LLC 678 362 County Physical Therapy, LLC 485 465 LifeFlight of Maine, LLC 1,666 2,366 MedComm, LLC (287) (334) Uniship Courier Services, LLC 183 85 New Century Healthcare, LLC 1 1 Northern New England Accountable Care Collaborative, LLC - 507 Penobscot Logistics Solutions, LLC 209 203

Total 8,789 8,859

Intangibles resulting from acquisition of Mercy 3,127 3,127 Other receivables 3,248 2,422 Retirement community development costs 624 645 Deferred tax assets 1,398 1,777 Customer lists 2,618 2,824 Other 3,210 3,103

Total 23,014$ 22,757$




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The System's share of earnings (losses) in its joint ventures totaled $(543,000) and $701,000 for the years ended September 26, 2015 and September 27, 2014, respectively. Distributions from these joint ventures totaled $94,000 and $1,821,000 for the years ended September 26, 2015 and September 27, 2014, respectively. In 2015 and 2014, the System increased its investment in joint ventures by $568,000 and $471,000, respectively. During the ordinary course of business, the System may provide services to various joint ventures. This income is included in sales and contract revenue and was not material in 2015 or 2014. The System entities own 50% interests in several joint venture entities (except for a 33.3% interest in Penobscot Logistics Solutions, LLC and 25% interest in Northern New England Accountable Care Collaborative, LLC, which terminated in 2015). Selected financial information derived from the unaudited financial statements of each joint venture entity at September 26, 2015 and September 27, 2014 is as follows (dollars in thousands):

Total Long-Term NetName of Joint Venture Owner Assets Debt Equity

Colonial Acres RNHI 2,975$ 275$ 1,926$ Dexter Health Care RNHI 1,625 8 1,121 Katahdin Health Care RNHI 1,088 445 344 Ross Manor Associates RNHI 16,910 10,216 4,357 Stillwater Health Care RNHI 3,669 526 2,588 Hibbards Health Care RNHI 6,756 4,188 1,374

Rosscare Nursing Homes, Inc. 33,023 15,658 11,710

Advanced Collections Services, LLC AHS 2,124 - 1,356 Uniship Courier Services, LLC AHS 558 - 367 County Physical Therapy, LLC TAMC 1,334 111 969 LifeFlight of Maine, LLC EMHS 16,149 6,533 3,332 MedComm, LLC AHS 301 598 (575) New Century Healthcare, LLC EMHS 1 - 1 Penobscot Logistics Solutions, LLC AHS 5,976 4,931 628

Total 59,466$ 27,831$ 17,788$

2015




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Total Long-Term NetName of Joint Venture Owner Assets Debt Equity

Colonial Acres RNHI 2,738$ 400$ 1,810$ Dexter Health Care RNHI 1,219 42 872 Katahdin Health Care RNHI 960 476 188 Ross Manor Associates RNHI 13,728 6,950 4,920 Stillwater Health Care RNHI 3,046 571 2,040 Hibbards Health Care RNHI 5,499 4,196 578

Rosscare Nursing Homes, Inc. 27,190 12,635 10,408

Advanced Collections Services, LLC AHS 1,629 - 724 Uniship Courier Services, LLC AHS 517 - 170 County Physical Therapy, LLC TAMC 1,215 99 930 LifeFlight of Maine, LLC EMHS 9,941 4,574 2,913 MedComm, LLC AHS 210 645 (668) New Century Healthcare, LLC EMHS 1 - 1 Northern New England Accountable Care Collaborative, LLC EMHS 4,281 - 2,540 Penobscot Logistics Solutions, LLC AHS 6,165 5,195 610

Total 51,149$ 23,148$ 17,628$

2014




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9. Debt Long-term debt at September 26, 2015 and September 27, 2014 consisted of the following (dollars in thousands): Bonds payable: 2015 2014 Inland Series 2015A Bonds (due in varying amounts each July through the year 2030 with fixed-interest rates ranging from 2.00% to 5.00% per annum) 902$ 988$ Mercy Series 2015 Bonds - Series 2015 Note (due in varying amounts each July through the year 2036 with fixed-interest rates of 3.07% per annum) 58,625 60,585 Mercy Series 2015 Bonds - Series 2015 Taxable Note (due in varying amounts monthly through the year 2024 with fixed-interest rates of 4.53% per annum) 7,502 8,115 EMMC Series 2013 Bonds (due in varying amounts each July through the year 2043 with fixed-interest rates ranging from 3.00% to 5.00% per annum) 143,215 143,710 SVH Finance Authority of Maine 2013 Revenue Obligation Bonds (due in varying amounts each January through the year 2029 with fixed interest rates ranging from 2.87% to 3.41% per annum) 9,065 9,714 TAMC Series 2012A Bonds (due in varying amounts each July through the year 2022 with fixed-interest rates ranging from 2.50% to 5.00% per annum) 3,601 4,131 BHMH/TAMC Series 2010B Bonds (due in varying amounts each July through the year 2028 with fixed-interest rates ranging from 3.125% to 5.25% per annum) 4,247 5,146 Acadia/EMMC Series 2010A Bonds (due in varying amounts each July through the year 2040 with fixed-interest rates ranging from 3.25% to 5.25% per annum) 61,167 64,367 Inland/Lakewood Series 2007B Bonds (due in varying amounts each July through the year 2037 with fixed-interest rates ranging from 4.00% to 5.00% per annum) 7,997 8,222

SVH Series 2004B Bonds repaid in — 2015 - 38

296,321 305,016

Net unamortized original issue premium 12,555 13,253

Bonds payable — net 308,876 318,269

Other long-term debt: Installment loans and other 51,951 55,541 Capital lease obligations 2,306 1,247

Total long-term debt 363,133 375,057

Less current portion (14,271) (13,155)

Long-term debt — net of current portion 348,862$ 361,902$




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Eastern Maine Healthcare Systems Obligated Group In 1985, Eastern Maine Healthcare (EMH), the parent of EMMC prior to its merger into EMHS, created an obligated group consisting of EMH, EMMC and Acadia. The EMH Obligated Group is now named the Eastern Maine Healthcare Systems Obligated Group (the EMHS Obligated Group). During fiscal year 2015 MHSM, Mercy Hospital and VNA also became members of the EMHS Obligated Group. The purpose of the obligated group is to simplify the debt structure of the System and to allow the System to make capital available to members with lower costs of capital and less restrictive debt covenants. The members of the obligated group are jointly liable for the debt service on the obligations issued under the Master Trust Indenture for the EMHS Obligated Group. On September 30, 2015 and 2014, the EMHS Obligated Group had obligations totaling approximately $305,325,000 and $292,797,000, respectively, that are covered under the Master Trust Indenture. Subsequent to September 26, 2015, BHMH, Inland, SVH and TAMC also became members of the EMHS Obligated Group. Debt obligations issued under the EMHS Master Trust Indenture require that the EMHS Obligated Group on a consolidated basis satisfy certain measures of financial performance (including a minimum debt service coverage ratio) as long as the obligations are outstanding. Management is not aware of any noncompliance with such covenants at September 26, 2015. Bonds Payable Series 2015A Bonds — In 2015, Inland issued $902,000 in notes payable to secure tax-exempt revenue bonds issued by the Maine Health and Higher Educational Facilities Authority (the Authority or MHHEFA) for the purpose of refunding the Series 2006A Bond. The Series 2015A Bonds are collateralized by substantially all of the property of Inland and a security interest in its gross receipts. Series 2015 Note — In 2014 the Mercy Health System of Maine Obligated Group, comprised of MHSM, Mercy and VNA, issued a Series 2014 Note to the Authority for the purpose of refunding 2006 Mercy revenue bonds. In 2015 the note was replaced with the Series 2015 Note by the EMHS Obligated Group for the purpose of evidencing the refinanced 2014 Note upon the consolidation of the Mercy Health System of Maine Obligated Group into the EMHS Obligated Group. The Series 2015 Note is collateralized under the 2015 EMHS Obligated Group Supplemental Master Trust Indenture by a first priority security interest in gross revenues and accounts receivable and a mortgage of certain EMHS Obligated Group facilities. Series 2015 Taxable Note — In 2014 the Mercy Health System of Maine Obligated Group, comprised of MHSM, Mercy Hospital and VNA, issued a Series 2014 Taxable Note in the amount of $8,450,000 to Bangor Savings Bank for the purpose of refunding the 2010C fixed rate bonds. In 2015 the Series 2014 Taxable Note was replaced with the Series 2015 Taxable Note by the EMHS Obligated Group for the purpose of evidencing the refinanced 2014 Taxable Note upon the consolidation of the Mercy Health System of Maine Obligated Group into the EMHS Obligated Group. The Series 2015 Taxable Note is payable based on a ten year amortization with a final maturity date of March 28, 2024. The Series 2015 Taxable Note is collateralized under the 2015 EMHS Obligated Group Supplemental Master Trust Indenture by a first priority security interest in




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gross revenues and accounts receivable and a mortgage of certain EMHS Obligated Group facilities. Series 2013 Bonds — In 2013, EMMC issued $143,900,000 in notes payable to secure tax-exempt revenue bonds issued by the Authority for the purpose of financing a portion of the first phase of the expansion and modernization project. The Series 2013 Bonds are collateralized by a security interest in its gross receipts, equipment and a mortgage lien on its main campus. Finance Authority of Maine 2013 Bonds — In 2013, SVH issued $10,500,000 in notes payable to secure tax-exempt revenue bonds issued by the Finance Authority of Maine for the purpose of financing construction costs and refunding existing debt. The Series 2013 Bonds are collateralized by a security interest in the pledged receipts. Series 2012A Bonds — In 2012, TAMC issued $5,156,350 in notes payable to secure tax-exempt revenue bonds issued by the Authority for the purpose of refunding existing debt. The Series 2012A Bonds are collateralized by substantially all of the property and equipment of TAMC and a security interest in the gross receipts of the entity. Series 2010B Bonds — In 2010, BHMH and TAMC issued $2,223,000 and $6,243,000, respectively, in notes payable to secure tax-exempt revenue bonds issued by the Authority for the purpose of refunding existing debt. The Series 2010B Bonds are collateralized by substantially all of the property and equipment of BHMH and TAMC and a security interest in the gross receipts of each entity. Series 2010A Bonds — In 2010, Acadia and EMMC issued $76,772,000 in notes payable to secure tax-exempt revenue bonds issued by the Authority for the purpose of refunding existing debt and financing new construction at EMMC. EMHS, EMMC, and Acadia are jointly and severally obligated to pay principal and interest on the notes when due. The notes are collateralized by the pledged and assigned revenue of EMHS, EMMC, and Acadia. The Series 2010A Bonds are collateralized by a security interest in their gross receipts. Series 2007B Bonds — In 2008, Inland and Lakewood issued $9,537,000 in notes payable to secure tax-exempt revenue bonds issued by the Authority for the purpose of hospital and nursing home renovation and expansion. The Series 2007B Bonds are collateralized by substantially all of the property of Inland and Lakewood and a security interest in their gross receipts. Installment Loans In 1999, EMHS borrowed $25,000,000 from a commercial bank. The loan requires a monthly fixed-principal repayment sufficient to repay the debt in full at or before June 2019. The note requires interest at the rate of 1% above the one month London InterBank Offered Rate (LIBOR) resulting in an interest rate of1.20% at September 26, 2015 and 1.15% at September 27, 2014. The outstanding balance was $4,455,000 and $5,705,000 at September 26, 2015 and September 27, 2014, respectively.




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In 2009, EMHS purchased an office building in Brewer, Maine. The building and related acquisition costs were financed through proceeds of two mortgage notes payable in a combined amount of $23,700,000, collateralized by the building. The notes are amortized over a 25-year period, but are structured in five-year and ten-year terms. The five-year loan of $6,504,500 bears a fixed-interest rate of 4.95%. This five-year loan required a balloon payment of $5,804,731 due in November 2013. The note was refinanced in November 2013 and, as a result, is reflected as long-term debt. The amended loan bears interest at a fixed rate of 3.23%. The ten-year loan of $17,195,500 includes $11,270,500 that bears interest at a fixed rate of 5.57%. The remaining $5,925,000 bears interest equal to one-month LIBOR, plus 1.35% resulting in an interest rate of 1.54% and 1.50% at September 26, 2015 and September 27, 2014, respectively. The outstanding balance was $19,926,000 and $20,670,000 at September 26, 2015 and September 27, 2014, respectively. The notes require certain financial covenants to be met on both a quarterly and annual basis. The acquisition of DPRC and DPI in 2006 included the assumption of a mortgage and various notes payable. DPI has a mortgage collateralized by real estate and personal property and guaranteed by the U.S. Department of Housing and Urban Development (HUD). In March 2012, the mortgage was refinanced at a lower interest rate and previously unpaid interest payments were rolled into a second mortgage with repayment terms based on available cash flow. The first mortgage had an outstanding balance of $12,901,000 and $13,159,000 at September 26, 2015 and September 27, 2014, respectively. The second mortgage had an outstanding balance of $3,024,000 and $3,173,000 at September 26, 2015 and September 27, 2014, respectively. Beginning March 2012, the first note bears interest at 3.55% per annum and requires monthly principal and interest payments of $108,000 through February 2044. The second note bears interest at 2.65% per annum. The note requires interest and principal payments when there is surplus cash as defined by HUD regulations. DPI has a revolving working capital line-of-credit with total amounts outstanding of $1,999,000 at September 26, 2015 and September 27, 2014. The note matures in April 2016 and requires monthly interest payments. The note requires interest at the prime rate for domestic banks, resulting in interest rates of 4.25% at September 26, 2015 and September 27, 2014, respectively. During 2011, DPRC replaced an existing revolving line-of-credit with a note payable. The outstanding balance was $2,200,000 at September 26, 2015 and September 27, 2014. The note bears interest of 4.69%. The note requires an $800,000 principal payment in April 2016 and the balance of $1,400,000 due in April 2017. In addition, DPRC holds a tax increment financing note with an outstanding balance of $554,000 and $638,000 at September 26, 2015 and September 27, 2014, respectively. The note bears interest at the prime rate for domestic banks, resulting in interest rates of 3.25% at both September 26, 2015 and September 27, 2014. The note requires semiannual payments of principal and interest with a final payment due in April 2016. Several other System affiliates have mortgages, notes payable, and installment loans outstanding totaling $6,892,000 and $7,997,000 at September 26, 2015 and September 27, 2014, respectively. The notes bear interest at rates ranging between 1.23% and 7.10% per annum and are payable through 2033.




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Lines-of-Credit On August 21, 2015, EMHS obtained a new $140,000,000 non-revolving line-of-credit arrangement, which expires in August 2016 and replaces the previous $35,000,000 line-of-credit. The purpose of the line-of-credit is to provide (i) working capital funds; (ii) refinancing required to transition the system to a single obligated group; and (iii) bridge financing for certain capital projects in anticipation of permanent taxable and tax-exempt financing. The line of credit is secured pursuant to the terms of the Master Trust Indenture for the EMHS obligated group. Outstanding borrowings under the line-of-credit were $34,817,000 and $16,020,000 at September 26, 2015 and September 27, 2014, respectively. Borrowings under the agreement bear interest at the rate of 1.12% above LIBOR as of September 26, 2015 and .91% above LIBOR as of September 27, 2014. Subsequent to September 26, 2015, the EMHS line-of-credit provided bridge financing to TAMC and BHMH for the defeasance and redemption of the TAMC 2010B and 2012A MHHEFA Bonds and the BHMH 2010B MHHEFA Bonds for $6,264,000 and $1,947,000, respectively. Certain of the System's other affiliates have line-of-credit agreements with interest ranging from 1.14% to 3.25% at September 26, 2015 and September 27, 2014. Maximum available borrowings under the agreements aggregated $13,700,000 at September 26, 2015 and September 27, 2014. The lines expire at various dates in fiscal year 2016, and are collateralized by accounts receivable and certain fixed assets. The outstanding balance was $7,962,000 and $6,287,000 at September 26, 2015 and September 27, 2014, respectively. Principal Payments Principal payments required on long-term debt, excluding capital lease obligations, for the next five years and thereafter at September 26, 2015, are as follows (dollars in thousands):

Years Bonds Other Debt Total

2016 9,054$ 4,688$ 13,742$ 2017 9,379 3,873 13,252 2018 9,734 3,739 13,473 2019 9,223 19,261 28,484 2020 9,514 995 10,509 Thereafter 249,417 19,395 268,812

Total 296,321$ 51,951$ 348,272$




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Loan Covenants Several of the loan agreements contain covenants, which impose restrictions on, among other things, additional indebtedness, transfers between affiliates, and dispositions of property and require that certain financial ratios be met.

Capital Leases EMHS and System affiliates have capital lease obligations outstanding totaling $2,306,000 and $1,247,000 at September 26, 2015 and September 27, 2014, respectively. The obligations bear interest at rates ranging between 3.25% and 7.0% per annum and are payable through 2018. The System's future obligations under capital leases at September 26, 2015 are as follows (dollars in thousands):

Years Amount

2016 662$ 2017 597 2018 580 2019 481 2020 262 Thereafter 109

Total minimum lease payments 2,691

Less amounts representing interest (385)

Present value of minimum lease payments 2,306$




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10. Temporarily and Permanently Restricted Net Assets Temporarily Restricted Net Assets At September 26, 2015 and September 27, 2014, temporarily restricted net assets are available for the following purposes (dollars in thousands):

2015 2014

Cancer Care 7,302$ 7,214$ Capital projects 14,950 11,956 Charity care 5,136 5,746 Education and research 1,507 1,385 Women’s and children’s care 2,523 2,960 Other health care services 12,794 15,335

Total 44,212$ 44,596$

Permanently Restricted Net Assets At September 26, 2015 and September 27, 2014, the investment returns on permanently restricted net assets are restricted to the following purposes (dollars in thousands):

2015 2014

Cancer Care 1,963$ 952$ Capital projects 4,142 4,336 Charity care 2,660 3,616 Education and research 494 536 Women’s and children’s care 582 558 Other health care services 19,224 18,388

Total 29,065$ 28,386$




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Endowment Funds The System's endowment consists of approximately 292 funds established for a variety of purposes. For the purposes of this disclosure, endowment funds include both donor-restricted endowment funds and funds designated by the Board to function as endowment. As required by U.S. generally accepted accounting principles, net assets associated with endowment funds are classified and reported based on the existence or absence of donor-imposed restrictions.

Endowment Net Asset Composition and Changes in Endowment Net Assets A summary of the endowment net asset composition by type of fund at September 26, 2015 and September 27, 2014, and the changes therein for the years then ended is as follows (dollars in thousands):

Temporarily PermanentlyUnrestricted Restricted Restricted Total

Donor-restricted endowment funds - $ 16,308$ 29,065$ 45,373$ Board-designated endowment funds 2,472 - - 2,472

Total funds 2,472$ 16,308$ 29,065$ 47,845$

September 26, 2015

Temporarily PermanentlyUnrestricted Restricted Restricted Total

Donor-restricted endowment funds - $ 17,934$ 28,386$ 46,320$ Board-designated endowment funds 2,588 - - 2,588

Total funds 2,588$ 17,934$ 28,386$ 48,908$

September 27, 2014




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Temporarily Permanently Unrestricted Restricted Restricted Total Endowment net assets – September 28, 2013 $ 2,504 $ 17,401 $ 23,918 $ 43,823 Investment return: Net appreciation 171 2,074 - 2,245 Change in beneficial interest in perpetual trusts - - 747 747 Total investment return 171 2,074 747 2,992 Contribution received in the acquisition of Mercy - - 1,846 1,846 Contributions - - 1,862 1,862 Additions to Board-designated funds 31 - - 31 Appropriations of endowment assets for expenditure (106) (1,145) - (1,251) Other (12) (396) 13 (395) Endowment net assets – September 27, 2014 2,588 17,934 28,386 48,908 Investment loss: Net appreciation 5 6 - 11 Change in beneficial interest in perpetual trusts - - (833) (833) Total investment loss 5 6 (833) (822) Contributions - - 1,494 1,494 Appropriations of endowment assets for expenditure (108) (1,222) - (1,330) Other (13) (410) 18 (405) Endowment net assets – September 26, 2015 $ 2,472 $ 16,308 $ 29,065 $ 47,845




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Funds with Deficiencies From time to time, the fair value of assets associated with individual donor-restricted endowment funds may fall below the level that the donor requires the System to retain as a fund in perpetuity. There were no deficiencies at September 26, 2015 or September 27, 2014.

11. Professional Liability, Self-Insurance, and Other Contingencies

Professional and General Liability Prior to October 1, 2015, System organizations participate in self-insurance plans for professional and patient general liability, and nonpatient general liability coverage. Trust funding and accrued self-insurance reserves are determined by independent actuarial projections. Excess insurance (or stop-loss) coverage has been obtained through various commercial insurance companies for the self-insurance programs. For professional liability, the excess coverage provided reimbursement for individual claims in excess of $5 million and aggregate claims in excess of $15 million in 2015, and for individual claims in excess of $12 million and aggregate claims in excess of $25 million in 2014. For general liability, the excess coverage provided for reimbursement for individual claims in excess of $1 million and for aggregate claims in excess of $3 million. The investment assets and accrued self-insurance reserves of the professional and general liability trust were $54,670,000 and $36,296,000, respectively, as of September 26, 2015 and $54,515,000 and $30,484,000, respectively, as of September 27, 2014. Effective October 1, 2015, the former self-insurance plans transitioned into a deductible program with underlying coverage provided by Medical Mutual Insurance Company of Maine and excess insurance coverage provided by various commercial insurance companies. The Trust now serves as a mechanism to fund deductibles and funding continues to be determined by independent actuarial projections. For both professional and general liability, the program provides total limits of $35 million per claim and $48 million in the aggregate, subject to a deductible of $1 million per claim and $5 million in the aggregate. Workers' Compensation The System maintains a common trust fund for a group workers' compensation program in accordance with the Maine Workers' Compensation Act. Because the common trust fund is regulated by the Maine Bureau of Insurance, neither the assets nor the liabilities of the trust are reflected in the accompanying consolidated financial statements. The assets of the trust were approximately $14,273,000 and $13,984,000 and the liabilities were approximately $12,363,000 and $12,865,000 at September 26, 2015 and September 27, 2014, respectively.




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Employee Health Benefits Employee health and dental benefits are provided through partially self-insured plans or commercially acquired programs. The self-insured medical plan had stop loss coverage that provides reimbursement for claims other than those paid to System organizations in excess of $825,000 per individual as of September 26, 2015 and September 27, 2014. Other Contingencies Affiliates of the System are parties in various legal proceedings and potential claims arising in the ordinary course of their business. In addition, the health care industry as a whole is subject to numerous laws and regulations of federal, state, and local governments. Compliance with these laws and regulations is subject to government review and interpretation, as well as regulatory actions, which could result in the imposition of significant fines and penalties, as well as significant repayments of previously billed and collected revenue, from patient services and exclusion from the Medicare and Medicaid programs. Such compliance in the health care industry has recently come under increased governmental scrutiny. Management does not believe that these matters will have a material adverse effect on the System's consolidated financial position or results of operations.

12. Pension and Postretirement Health Care Plans Cash Balance Plan Employees of certain System affiliates participate in a Defined Benefit, Cash Balance Plan (the Plan). At the close of every calendar year, participating employers credit the employee's core account with a contribution based on eligible pay, age, and years of credited service. The employee must be at least 21 years of age and have worked 1,000 hours in the current calendar year to receive the contribution for that year. The funding policy of the Plan is to make contributions at least equal to the minimum amount required under the law.




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The following table sets forth the Plan's funded status and amounts recognized in the consolidated balance sheets at September 26, 2015 and September 27, 2014 (dollars in thousands):

2015 2014Change in benefit obligation: Benefit obligation — beginning of year 274,780$ 246,532$ Service cost 14,140 12,694 Interest cost 11,177 10,972 Benefits paid (17,756) (12,867) Actuarial loss 13,777 16,945 Net change in individual accounts (25) 504

Benefit obligation — end of year 296,093$ 274,780$

Change in Plan assets: Fair value of Plan assets — beginning of year 221,436$ 202,686$ Actual return on Plan assets 962 17,793 Employer contribution 15,260 13,320 Benefits paid (17,756) (12,867) Net change in individual accounts (25) 504

Fair value of Plan assets — end of year 219,877$ 221,436$

Net amount recognized — accrued liability (76,216)$ (53,344)$

Amounts recognized in other changes in unrestricted net assets: Prior-service costs 499$ 729$ Actuarial loss 101,304 78,166

Total recognized in other changes in unrestricted net assets 101,803$ 78,895$

Accumulated benefit obligation 270,891$ 254,137$




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The System's contribution to the Plan for 2015 and 2014 exceeded amounts required by the Employee Retirement Income Security Act of 1974 (ERISA). The Plan's Adjusted Funding Target Attainment Percentage under ERISA was 109% and 107% at September 26, 2015 and September 27, 2014, respectively. As a result, the Plan is not subject to ERISA benefit restrictions. For the years ended September 26, 2015 and September 27, 2014, net pension cost for the Plan included the following components (dollars in thousands):

2015 2014

Service cost for benefits earned during the year 14,140$ 12,694$ Interest cost on projected benefit obligation 11,177 10,972 Expected return on Plan assets (16,060) (14,972) Amortization of prior service cost 231 270 Amortization of net loss 5,737 4,576

Net periodic pension benefit cost 15,225$ 13,540$ The prior service costs and net loss for the Plan that are expected to be amortized from other changes in unrestricted net assets into net periodic pension benefit cost over the next fiscal year are $180,637 and $6,764,627, respectively. The following table sets forth the assumptions used in determining the benefit obligations at September 26, 2015 and September 27, 2014:

Weighted-average discount rate 4.20 % 4.25 % Rate of increase in future compensation 3.00 2.50

The following sets forth the assumptions used to determine net periodic benefit cost for the years ended September 26, 2015 and September 27, 2014:

Weighted-average discount rate 4.25 % 4.65 % Rate of increase in future compensation 2.50 2.50 Expected long-term rate of return on Plan assets 7.50 7.50




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The discount rate represents an estimate of the rate at which the pension benefits could be "effectively" settled. The rate of compensation increase represents a best estimate of long-term pay increases and reflects an inflation expectation consistent with the discount rate. The long-term rate of return on Plan assets represents an estimate of the rate of return on current assets, taking into account the Plan's asset allocation, and also reflects an inflation expectation consistent with the discount rate. The System expects to make $13,600,000 in contributions to the Plan during 2016. In addition, the following benefit payments, which reflect expected future services, as appropriate, are expected to be paid during the years ending (dollars in thousands):

2016 25,273$ 2017 16,552 2018 18,321 2019 19,380 2020 20,599 2021-2025 118,277

The System has adopted a moderately growth-oriented investment policy for the Plan. It is anticipated that as the Plan matures, the policy should move toward a more conservative posture. The System's overall strategy is to invest in high-grade securities and other assets with a minimum risk of market value fluctuation. In general, the System's goal is to maintain the following allocation ranges:

Asset Class Minimum Target Maximum

Return Seeking (with 4% liquidity) 50 % 55 % 60 % Liability Hedging 40 45 50

Allocation %

Defined Contribution Plans Certain of the System's affiliates sponsor defined contribution plans, which cover substantially all of their employees, and certain hospital-based physicians meeting the plans' participation requirements. Expense for the years ended September 26, 2015 and September 27, 2014 was approximately $11,624,000 and $10,920,000, respectively. The affiliates fund the amount of the expense annually.




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Deferred Compensation Plans Several of the System's affiliates sponsor deferred compensation plans for eligible employees and supplemental executive retirement plans (SERP) for certain executives. Assets held by the System to provide for the payments of contractual liabilities are subject to the claims of the System's general creditors. The assets are invested in temporary cash investments, institutional mutual funds and common collective trusts. The investment assets and related liabilities of the deferred compensation and SERPs were $32,660,000 and $29,355,000, respectively, as of September 26, 2015 and $30,890,000 and $27,895,000, respectively, as of September 27, 2014. Postretirement Medical Benefits Various System organizations provide certain medical benefits for retired employees. Employees of these various participating organizations may become eligible for these benefits if they reach normal retirement age while working for such organizations. Early retirement benefits are available to retirees with at least 15 years of vested service. Employees at participating organizations hired after January 1, 2005 and the employees of a nonparticipating company are not eligible for retiree medical benefits. The postretirement medical plan is not funded. For the years ended September 26, 2015 and September 27, 2014, net periodic postretirement medical benefit cost consists of the components listed below (dollars in thousands):

2015 2014

Service cost for benefits attributed to service during the year 40$ 537$ Interest cost on accumulated postretirement benefit obligation 1,349 1,878 Amortization of prior service credit (553) (553) Amortization of net loss (302) -

Net periodic postretirement medical benefit cost 534$ 1,862$

Amounts recognized in other changes in unrestricted net assets: Prior-service credit (1,172)$ (1,725)$ Actuarial gain (6,281) (6,239)

Total recognized in other changes in unrestricted net assets (7,453)$ (7,964)$




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Prior-service credits of $553,497 for the postretirement medical plan are expected to be amortized from unrestricted net assets into net periodic postretirement medical benefit cost in the next fiscal year. The following table sets forth the components of the accumulated postretirement benefit obligation shown in the System's consolidated financial statements at September 26, 2015 and September 27, 2014 (dollars in thousands):

2015 2014

Change in postretirement benefit obligation: Benefit obligation — beginning of year 31,649$ 39,862$ Service cost 40 537 Interest cost 1,349 1,878 Benefits paid (1,628) (1,888) Actuarial gain (344) (8,740)

Accrued postretirement medical benefit obligation 31,066$ 31,649$ Approximately $1,256,000 and $1,276,000 of the accrued postretirement cost is included in current liabilities at September 26, 2015 and September 27, 2014, respectively. In determining the accumulated postretirement medical benefit obligation, the System used discount rates of 4.35% in 2015 and 2014. The Plan assumed annual rates of inflation in the per capita cost of covered health care benefits. The rates are assumed to decrease gradually down from 7.50% to 4.25% on a graded scale, becoming fixed in 2021. A 1% increase in the healthcare cost trend would increase the accumulated postretirement medical benefit obligation by $4,067,000, whereas a 1% reduction would cause a $3,312,000 reduction in the benefit obligation. The System expects to contribute $1,283,000 to the postretirement benefit plan during 2016.




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The following benefit payments, which reflect expected future services, as appropriate, are expected to be paid during the years ending (dollars in thousands):

September

2016 1,283$ 2017 1,385 2018 1,490 2019 1,604 2020 1,695 2021-2025 9,203

Pension and Postretirement Plan-Related Adjustments The components of pension and postretirement plan-related adjustments included in other changes in unrestricted net assets are as follows (dollars in thousands):

Cash Balance Plan

Postretirement Medical Benefits Total

For the year ended September 26, 2015Prior service costs 231$ (553)$ (322)$ Net actuarial gain (loss) (23,139) 42 (23,097)

(22,908)$ (511)$ (23,419)$

For the year ended September 27, 2014Prior service costs 270$ (553)$ (283)$ Net actuarial gain (loss) (9,549) 8,740 (809)

(9,279)$ 8,187$ (1,092)$




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13. Concentration of Credit Risk Various System organizations grant credit without collateral to their patients, many of whom are insured under third-party payor agreements. At September 26, 2015 and September 27, 2014, the accounts receivable from patients and third-party payors, net of contractual allowances, were as follows:

2015 2014

Medicare and MaineCare 26 % 22 % Commercial and other insurance 39 43 Patients 35 35

100 % 100 % System entities routinely invest in short-term repurchase agreements. These repurchase agreements are collateralized by highly liquid U.S. government securities with a market value typically exceeding the amount of funds invested in the agreements. Investments in repurchase agreements are not insured or guaranteed by the U.S. government; however, management believes the credit risk related to these investments is minimal.

14. Fair Value Measurements Generally accepted accounting principles establish a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entity's own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy). Level 1 — Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date. Level 2 — Significant other observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, and other inputs that are observable or can be corroborated by observable market data. Level 3 — Significant unobservable inputs that reflect an entity's own assumptions about the assumptions that market participants would use in pricing an asset or liability.




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The following tables present the carrying amounts and estimated fair value for the System's financial assets and liabilities as of September 26, 2015 and September 27, 2014 (dollars in thousands):

Quoted Prices Significantin Active Other Significant

Markets for Observable UnobservableIdentical Assets Inputs Inputs

(Level 1) (Level 2) (Level 3) Total

Assets:Temporary cash investments 122,583$ -$ -$ 122,583$ Pledges and other receivables - 8,625 - 8,625 Marketable equity securities 4,567 - - 4,567 Guarantee investment contracts - 7,522 - 7,522 Other equity investments - - 815 815 Mutual funds

Participant driven (deferred compensation) 28,845 - - 28,845 Balanced portfolio 16,776 - - 16,776

Common/collective trustsLarge cap U.S. equities - 985 - 985 Short-term bonds - 37,446 - 37,446

Institutional fundsFixed income funds - 79,874 - 79,874 Multi-asset funds - 98,478 - 98,478

Fixed-income securities — U.S.government Treasury and agencyobligations 56,502 - - 56,502

Fixed-income securities — Corporateobligations - 63,421 - 63,421

Interest in trusts and charitable gift annuities - - 1,844 1,844 Beneficial interest in

perpetual trusts - - 12,868 12,868

Total 229,273$ 296,351$ 15,527$ 541,151$

Liabilities:Deferred compensation -$ 29,355$ -$ 29,355$ Interest rate sw aps - 1,821 - 1,821

Total -$ 31,176$ -$ 31,176$

Cash Balance Pension Plan Assets (Note 12):Institutional mutual funds

Participant driven (deferred compensation) 5,175$ -$ -$ 5,175$ Common/collective trusts

Long-term bonds - 15,102 - 15,102 Liability-driven investments - 84,984 - 84,984

Institutional limited fundsEquity securities - 107,612 - 107,612

Hedge fund - - 7,004 7,004

Total 5,175$ 207,698$ 7,004$ 219,877$

Fair Value Measurements at September 26, 2015




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Quoted Prices Significantin Active Other Signif icant

Markets for Observable UnobservableIdentical Assets Inputs Inputs

(Level 1) (Level 2) (Level 3) Total

Assets:Temporary cash investments 116,355$ -$ -$ 116,355$ Pledges and other receivables - 8,715 - 8,715 Marketable equity securities 3,938 - - 3,938 Guarantee investment contracts - 29,969 - 29,969 Foreign issues - 4,093 - 4,093 Other equity investments - - 566 566 Mutual funds

Participant driven (deferred compensation) 18,772 - - 18,772 Balanced portfolio 25,220 - - 25,220

Common/collective trustsLarge cap U.S. equities - 944 - 944 Short-term bonds - 35,357 - 35,357

Institutional fundsFixed income funds - 77,037 - 77,037 Multi-asset funds - 102,170 - 102,170

Fixed-income securities — U.S.government Treasury and agencyobligations 121,909 - - 121,909

Fixed-income securities — Corporateobligations - 60,785 - 60,785

Interest in trusts and charitable gift annuities - 1,965 1,965 Beneficial interest in

perpetual trusts - - 12,288 12,288

Total 286,194$ 319,070$ 14,819$ 620,083$

Liabilities:Deferred compensation -$ 27,895$ -$ 27,895$ Interest rate sw aps - 1,881 - 1,881

Total -$ 29,776$ -$ 29,776$

Cash Balance Pension Plan Assets (Note 12):Institutional mutual funds

Participant driven (deferred compensation) 5,636$ -$ -$ 5,636$ Common/collective trusts

Long-term bonds - 43,916 - 43,916 Liability-driven investments - 55,003 - 55,003

Institutional limited fundsEquity securities - 109,873 - 109,873

Hedge fund - - 7,008 7,008

Total 5,636$ 208,792$ 7,008$ 221,436$





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The following is a reconciliation of assets in which significant unobservable inputs (Level 3) were used in determining fair value (dollars in thousands):

Beneficial Interest in Trusts Interest in and Charitable Other Equity Hedge

Perpetual Trusts Gift Annuities Investments Total Fund

Balance at September 28, 2013 10,852$ 1,731$ 555$ 13,138$ 6,592$

Contributions 715 153 - 868 - Distributions - (100) - (100) - Dividends, net of fees - 54 - 54 - Unrealized gains 721 127 11 859 416

Balance at September 27, 2014 12,288 1,965 566 14,819 7,008

Contributions 1,399 - 250 1,649 - Distributions - (93) - (93) - Dividends, net of fees - 108 - 108 - Unrealized losses (819) (136) (1) (956) (4)

Balance at September 26, 2015 12,868$ 1,844$ 815$ 15,527$ 7,004$

Unrealized gains or losses on beneficial interest in perpetual trusts in Level 3 are included in the change in net unrealized gains or losses on investments in permanently restricted net assets. Unrealized gains or losses on interest in trusts and charitable gift annuities in Level 3 are included in net unrealized gains or losses on investments in temporarily restricted net assets. Unrealized gains or losses on other equity investments in Level 3 are included in change in net unrealized gains or losses on investments in unrestricted net assets.




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Fair values of investments are provided by investment custodians, trustees, managers or advisors. The following is a description of the valuation methodologies used for assets and liabilities measured at fair value: Cash Investments — The carrying value of cash investments approximates fair value as maturities are less than three months and/or include money market funds that are based on quoted prices and actively traded.

Pledges Receivable — The present value of cash expected to be collected in future years, discounted using a risk-free rate applicable to the year in which the pledge is received. Discount rates ranged from .67% to 1.42% at September 26, 2015 and .58% to 1.77% at September 27, 2014. Marketable Equity Securities — The fair values of marketable securities are based on quoted market prices.

Guarantee Investment Contracts (GICs) — The estimated fair values of GICs approximate historical costs, as ratio of return approximate current market rates. Fixed-Income Securities — The estimated fair values of debt securities are based on quoted market prices and/or other market data for the same or comparable instruments and transactions in establishing the prices. Interest in trusts and charitable gift annuities – The fair values of the interest in trusts and charitable gift annuities are based on the underlying assets of the trusts and charitable gift annuities reported by the trustees, which all have readily determinable fair values based on quoted market prices of identical or comparable securities. The underlying investments are not readily available to the System and therefore this is considered to be a Level 3 investment. Other Equity Investments — The fair values of other equity investments are based on the investment manager’s estimate of the net realized value or the value of underlying assets which include significant Level 3 assets. Mutual Funds — The fair values of mutual funds and institutional funds are based on quoted market prices. Common/Collective Trusts and Institutional Funds — The fair values of the common/collective trusts are based on the net asset value (NAV) of the fund provided by the fund manager, representing the fair value of the underlying investments which are generally securities which are traded on an active market. Hedge Fund – The fair values of the hedge fund are based on the NAV of the fund that is based on the investment manager estimate of the net realized value or the value of underlying assets.




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Beneficial Interest in Perpetual Trusts — The fair values of the beneficial interest in perpetual trusts are based on the underlying assets of the trusts reported by the trustee, which all have readily determinable fair values based on quoted market prices of identical or comparable securities. The underlying investments are not readily available to the System and therefore this is considered to be a Level 3 investment. Deferred Compensation Liability — The fair values of the deferred compensation liabilities are based on the related assets. Interest Rate Swaps — The System uses inputs other than quoted prices that are observable to value the interest rate swaps. The System considers these inputs to be Level 2 inputs in the context of the fair value hierarchy. These values represent the estimated amounts the System would receive or pay to terminate agreements, taking into consideration current interest rates and the current creditworthiness of the counterparty.

The following methods and assumptions were used by the System in estimating the fair value of the System's financial instruments that are not measured at fair value on a recurring basis for disclosures in the consolidated financial statements: Cash and Cash Equivalents — The carrying value of the System's cash and cash equivalents approximates fair value, as maturities are very short-term. Long-Term Debt and Lines-of-Credit Borrowings — The estimated fair values of the System's long-term debt and lines-of-credit borrowings are based on current market prices for identical or similar instruments held as assets, or a discounted cash flows analysis based on the System's current incremental borrowing rates for similar types of borrowing arrangements.




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Fair value disclosures pursuant to FASB Accounting Standards Codification Topic 825, Financial Instruments, are presented in the following table (dollars in thousands):

Quote d Price s S ignific a ntin Ac tive Othe r S ignific a nt

Marke ts for Obse rva ble Unobse rva bleCa rrying Fa ir Ide ntic a l Asse ts Inputs InputsAmount Va lue (Le ve l 1) (Le ve l 2 ) (Leve l 3 )

Assets:Cash and cash equivalents 9 6 ,9 0 0$ 9 6 ,9 00$ 9 6 ,90 0$ -$ -$ Short- term investments 14 ,9 8 3 14 ,9 83 25 9 14 ,7 2 4 - Curret assets whose use is limited or restricted 4 9 ,2 0 7 4 9 ,2 07 4 8 ,17 5 8 9 2 14 0 Noncurrent assets whose use is limited or restric ted 4 7 6 ,9 6 1 4 7 5 ,5 6 2 18 0 ,83 9 28 0 ,7 3 5 13 ,9 8 8

Liabilities:Line- of- credit borrowings 4 2 ,7 7 9 4 2 ,7 79 - 4 2 ,7 7 9 - Long- term debt 3 6 3 ,13 3 3 6 3 ,5 2 5 - 36 3 ,5 2 5 - Deferred compensation 2 9 ,3 5 5 2 9 ,3 55 - 2 9 ,3 5 5 - Interest rate swaps 1,8 2 1 1,8 21 - 1,8 2 1 -

Fa ir Va lue Me a sure me nts a t Se pte mbe r 26 , 2 0 15

Quoted Prices Significantin Active Other Significant

Markets for Observable UnobservableCarrying Fair Identical Assets Inputs InputsAmount Value (Level 1) (Level 2) (Level 3)

Assets:Cash and cash equivalents 91,043$ 91,043$ 91,043$ -$ -$ Short- term investments 14,783 14,783 398 14,385 - Current assets whose use is limited or restricted 62,028 62,028 61,172 856 - Noncurrent assets whose use is limited or restricted 543,272 543,272 220,325 303,829 14,819

Liabilities:Line- of- credit borrowings 22,307 22,307 - 22,307 - Long- term debt 375,057 377,641 - 377,641 - Deferred compensation 27,895 27,895 - 27,895 - Interest rate swaps 1,881 1,881 - 1,881 -





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Investments at Net Asset Values In accordance with ASU No. 2009-12, Investments in Certain Entities that Calculate Net Asset Value per Share, the System expanded its disclosures for assets whose fair value is estimated using the NAV per share as of September 26, 2015 and September 27, 2014. The following tables set forth a summary of the System's investments with a reported NAV as of September 26, 2015 and September 27, 2014 (dollars in thousands):

Other RedemptionUnfunded Redemption Redemption Notice

Fair Value Commitment Frequency Restrictions PeriodInvestments Large Cap U.S. Equity 985$ None Daily None 1 business day Core Bond Funds 79,874 None Daily None 1 business day Multi-Asset Funds 98,478 None Daily None 1 business day Short-Term Bonds 37,446 None Monthly Redemption on first

day of the month5 business days

Total 216,783$

Pension Plan Investments Long-Term Bonds 15,102$ None Daily None 1 business day Liability-Driven Investments 84,984 None Daily None 1 business day Multi-Asset Funds 107,612 None Daily None 1 business day Hedge Fund 7,004 None Quarterly Full redemption pays

95% with remaining 5% after completion of the fund's annual audit. Redemption fee for redemption with 12 months of subscription date. Redemptions limited to 20% of NAV on dealing day.

65 days with a 30 day settlement period

Total 214,702$

Fair Value Estimated Using Net Asset Value per ShareSeptember 26, 2015




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Other RedemptionUnfunded Redemption Redemption Notice

Fair Value Commitment Frequency Restrictions PeriodInvestments Large Cap U.S. Equity 944$ None Daily None 1 business day Core Bond Funds 77,037 None Daily None 1 business day Multi-Asset Funds 102,170 None Daily None 1 business day Short-Term Bonds 35,357 None Monthly Redemption on 1st

day of the month5 business days

Total 215,508$

Pension Plan Investments Long-Term Bonds 43,916$ None Daily None 1 business day Liability-Driven Investments 55,003 None Daily None 1 business day Multi-Asset Funds 109,873 None Daily None 1 business day Hedge Fund 7,008 None Quarterly Full redemption pays

95% with remaining 5% after completion of the fund's annual audit. Redemption fee for redemption with 12 months of subscription date. Redemptions limited to 20% of NAV on dealing day.

65 days with a 30 day settlement period

Total 215,800$

Fair Value Estimated Using Net Asset Value per ShareSeptember 27, 2014




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Large cap U.S. equity — Seeks to provide long-term growth of capital by investing primarily in large cap equity securities and to achieve above average results over a market cycle. Large cap (large capitalization) investments involve stocks of companies generally having a market capitalization between $10 billion and $200 billion. Core bond funds — Seeks to provide excess return over the benchmark through a variety of diversified strategies including sector rotation, modest interest rate timing, security selection and tactical use of high yield and emerging market bonds. Multi-asset funds — Seeks favorable returns and offers a convenient way to diversify a portfolio by combining funds and separate accounts investing in U.S. and non-U.S. stocks, bonds, global commodities, listed real estate and infrastructure into one fund. Short-term bonds — Employs a disciplined value-oriented approach, fully invested at all times in the most attractive sectors to produce high risk-adjusted returns. Long-term bonds — Seeks favorable returns comparable to its index by combining diversified advisor styles and strategies over a full market cycle. The fund seeks to outperform the Barclays U.S. Long Government/Credit Bond Index. Liability-driven investments — Seeks favorable returns comparable to its index by combining diversified advisor styles and strategies over a full market cycle. Hedge fund – Seeks to achieve long-term capital appreciation with low to moderate volatility and low correlation to global equity markets.

15. Functional Expenses The System is a community-based health system dedicated to improving the health of the residents of its region. In 2015 and 2014, approximately 89% and 87%, respectively, of total expenses were related to direct health care program services, with the balance of expenses for management and general support services.




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16. Operating Leases and Other Commitments Operating Leases The System leases certain equipment, warehouse and office space subject to various agreements. Lease expense charged to operations amounted to approximately $13,526,000 in 2015 and $12,680,000 in 2014. The following is a schedule by year of future minimum lease payments under operating leases existing at September 26, 2015 (dollars in thousands):

Years EndingSeptember

2016 9,709$ 2017 7,029 2018 5,971 2019 5,134 2020 4,487 Thereafter 13,971

46,301$

The System leases warehouse and office space from Penobscot Logistics Solutions, LLC, a related party. The lease requires annual payments of $435,000 through 2023. Other Commitments In 2006, EMMC entered into a long-term agreement with its clinical systems vendor for remote hosting services. This agreement was revised and extended in 2009 for ten years. The agreement requires payments of $4,386,000 in 2015 through 2018 and a partial year payment of $2,193,000 in 2019. The amount of the payment is subject to performance standards and could be decreased in certain circumstances. In addition, EMMC has a perpetual license agreement with its clinical systems vendors. The agreement requires annual payments of $2,934,000 through 2019. The payments provide for the maintenance and support for the existing licensed software.


SUPPLEMENTARY CONSOLIDATING INFORMATION TO THE CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATING BALANCE SHEET INFORMATION — SEPTEMBER 26, 2015 AND CONSOLIDATED BALANCE SHEET INFORMATION — SEPTEMBER 27, 2014

Affiliated Eastern MaineAcadia Healthcare Blue Hill Charles A. Dean Healthcare Eastern Eastern Maine Inland Maine Mercy The Aroostook Eliminations 2015 2014

Hospital Systems Memorial Memorial Systems Maine Medical Center EMHS Hospital Network for Hospital Rosscare Sebasticook Medical Center and EMHS EMHSASSETS (Consolidated) (Consolidated) Hospital, Inc. Hospital (Consolidated) HomeCare (Consolidated) Foundation (Consolidated) Health (Consolidated) (Consolidated) Valley Health (Consolidated) Reclassifications Consolidated Consolidated

CURRENT ASSETS: Cash and cash equivalents 7,160,316$ 6,699,733$ 5,336,940$ 365,677$ 2,695,590$ 627,117$ 47,787,415$ 546,884$ 1,683,630$ 348,291$ 13,432,653$ 1,941,206$ 5,650,158$ 2,624,292$ -$ 96,899,902$ 91,042,593$ Short-term investments 14,575,225 - - - - - - - - - - - 407,338 - - 14,982,563 14,783,094 Assets whose use is limited or restricted 344,933 370,256 48,657 - 35,371,057 - 11,986,674 366,144 180,830 - 19,917 110,688 2 407,440 - 49,206,598 62,028,310 Patient and trade accounts receivable 6,456,903 5,093,224 6,369,969 2,463,353 367,141 2,351,522 121,626,618 - 11,809,373 - 52,943,907 45,605 5,385,142 23,634,354 (203,938) 238,343,173 218,069,668 Less allowance for uncollectible accounts (2,912,495) (1,019,123) (1,562,869) (567,360) - (178,023) (39,688,884) - (3,835,485) - (20,014,663) (4,722) (2,158,596) (5,967,100) - (77,909,320) (68,960,685) Net patient and trade accounts receivable 3,544,408 4,074,101 4,807,100 1,895,993 367,141 2,173,499 81,937,734 - 7,973,888 - 32,929,244 40,883 3,226,546 17,667,254 (203,938) 160,433,853 149,108,983 Estimated third-party payor settlements 2,641,922 - 9,000 572,000 - - 11,989,099 - 2,624,894 - 473,299 - 1,632,277 4,581,037 - 24,523,528 9,120,078 Interentity receivables 240,788 2,364,806 173,144 23,208 35,550,339 36 2,776,717 777,602 188,784 - 2,521,712 9,967 141,073 83,501 (44,851,677) - - Other receivables 121,836 1,049,767 783,632 532,774 22,989,847 - 4,887,477 5,786 907,743 - 4,487,072 74,052 127,798 1,883,745 (18,807,605) 19,043,924 15,299,041 Inventory 155,730 3,827,962 128,974 262,167 31,029 - 2,699,182 1,025 683,164 - 4,496,776 - 249,683 2,158,307 - 14,693,999 14,648,307 Prepaid expenses and other current assets 121,653 988,003 200,089 45,257 3,776,765 58,920 5,486,517 5,566 439,154 12,825 993,849 194,826 164,642 1,110,027 - 13,598,093 14,599,065

Total current assets 28,906,811 19,374,628 11,487,536 3,697,076 100,781,768 2,859,572 169,550,815 1,703,007 14,682,087 361,116 59,354,522 2,371,622 11,599,517 30,515,603 (63,863,220) 393,382,460 370,629,471

PROPERTY AND EQUIPMENT 35,548,314 18,176,061 29,247,465 10,701,713 101,817,144 3,259,358 657,583,428 320,315 57,623,391 - 139,866,555 22,481,241 43,114,403 95,196,967 - 1,214,936,355 1,095,293,891

Less accumulated depreciation and amortization (24,542,973) (8,670,554) (21,241,446) (7,356,542) (59,020,268) (3,093,904) (329,119,179) (208,991) (34,007,251) - (23,808,661) (8,105,429) (21,740,544) (58,531,678) - (599,447,420) (550,184,647)

Property and equipment - net 11,005,341 9,505,507 8,006,019 3,345,171 42,796,876 165,454 328,464,249 111,324 23,616,140 - 116,057,894 14,375,812 21,373,859 36,665,289 - 615,488,935 545,109,244

NONCURRENT ASSETS WHOSE USE IS LIMITED OR RESTRICTED: Internally designated by the Board of Directors: Funded depreciation 11,791,761 113,235 9,007,863 624,586 23,100,349 209,597 138,864,291 - 7,008,056 - - - 1,030,708 159,899 - 191,910,345 191,834,633 Other designated funds 22,059 300,000 9,255,548 548,246 20,826 2,893,125 67,981,725 7,151,974 3,594,699 - 300,000 - 7,097,143 7,500 (3,901,181) 95,271,664 99,455,864 Self-insurance and other funds held by trustees 35,388 20,163 74,982 12,465 60,323,610 8,718 41,474,869 - 2,570,795 - 5,061,075 1,063,456 408,725 5,447,925 - 116,502,171 178,999,185 Temporarily donor-restricted 149,093 - 474,150 380,048 23,660 285,758 33,029,229 38,966,388 704,148 - 1,732,292 20,646 527,320 4,331,167 (36,412,009) 44,211,890 44,596,270 Permanently donor-restricted 152,202 - 609,880 360,483 23,200 151,957 9,728,391 12,284,310 204,609 - 1,131,267 5,350 108,496 2,724,173 (11,287,209) 16,197,109 16,097,872 Beneficial interest in perpetual trusts - - 1,124,400 - - - 2,016,978 - 1,896,254 - 736,183 6,844,285 250,051 - - 12,868,151 12,287,886

Total noncurrent assets whose use is limited or restricted 12,150,503 433,398 20,546,823 1,925,828 83,491,645 3,549,155 293,095,483 58,402,672 15,978,561 - 8,960,817 7,933,737 9,422,443 12,670,664 (51,600,399) 476,961,330 543,271,710

OTHER ASSETS: Investments in subsidiaries - - - - 6,504,916 - - - - - - - - - (6,504,916) - - Note receivable from affiliate - 553,522 - - 4,321,149 - - - - - - - - - (4,874,671) - - Estimated settlements receivable from the state of Maine 590,070 - 132,850 7,380 - - 7,611,653 - 5,060,695 - 373,000 - 777,674 2,049,093 - 16,602,415 21,305,859 Deferred financing costs 63,271 - 27,641 - - - 2,000,658 - 122,012 - 538,514 - 82,160 73,164 - 2,907,420 3,108,881 Intangibles and other assets 475,184 6,509,893 864,503 316,713 1,866,258 286,991 23,828,583 - 3,572,018 18,160 8,897,606 5,905,756 1,287,386 4,873,274 (35,688,207) 23,014,118 22,757,194

Total other assets 1,128,525 7,063,415 1,024,994 324,093 12,692,323 286,991 33,440,894 - 8,754,725 18,160 9,809,120 5,905,756 2,147,220 6,995,531 (47,067,794) 42,523,953 47,171,934

TOTAL ASSETS 53,191,180$ 36,376,948$ 41,065,372$ 9,292,168$ 239,762,612$ 6,861,172$ 824,551,441$ 60,217,003$ 63,031,513$ 379,276$ 194,182,353$ 30,586,927$ 44,543,039$ 86,847,087$ (162,531,413)$ 1,528,356,678$ 1,506,182,359$

The above supplementary consolidating information is presented only for purposes of additional analysis and not as a presentation of the financial position of each component of the consolidating group.

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SUPPLEMENTARY CONSOLIDATING INFORMATION TO THE CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATING BALANCE SHEET INFORMATION — SEPTEMBER 26, 2015AND CONSOLIDATED BALANCE SHEET INFORMATION — SEPTEMBER 27, 2014


Hospital Systems Memorial Memorial Systems Maine Medical Center EMHS Hospital Network for Hospital Rosscare Sebasticook Medical Center and EMHS EMHSLIABILITIES AND NET ASSETS (Consolidated) (Consolidated) Hospital, Inc. Hospital (Consolidated) HomeCare (Consolidated) Foundation (Consolidated) Health (Consolidated) (Consolidated) Valley Health (Consolidated) Reclassifications Consolidated Consolidated

CURRENT LIABILITIES: Accounts payable 850,186$ 5,017,894$ 1,110,745$ 271,965$ 12,895,243$ 82,885$ 31,362,506$ 226,472$ 2,075,214$ 107,864$ 13,993,644$ 125,645$ 330,359$ 6,950,883$ -$ 75,401,505$ 73,813,158$ Interentity payables 314,309 932,281 283,033 218,051 4,870,555 1,589,830 5,561,939 240,407 1,401,567 30 19,084,974 155,372 483,462 9,919,807 (45,055,617) - - Accrued expenses and other current liabilities 3,376,265 2,963,331 2,717,836 1,008,752 17,796,366 992,290 43,995,296 126,567 4,649,328 - 20,434,838 448,198 2,930,723 8,380,081 - 109,819,871 101,216,628 Estimated third-party payor settlements 10,181,181 - 5,471,461 1,438,788 - - 8,433,361 - 1,179,740 - 1,756,873 - 2,805,221 1,985,256 - 33,251,881 35,833,251 Line-of-credit borrowings - - - 450,000 34,816,424 - - - 7,962,083 - 3,000,000 7,898,104 - 7,362,000 (18,710,104) 42,778,507 22,307,081 Current portion of long-term debt 1,078,368 1,973,628 115,214 47,049 2,027,487 - 3,191,672 - 723,773 - 2,804,458 435,415 673,472 1,385,000 (184,891) 14,270,645 13,154,673 Current portion of accrual for self-insurance - - - - 8,305,056 - 1,307,868 - - - - - - - - 9,612,924 10,837,343

Total current liabilities 15,800,309 10,887,134 9,698,289 3,434,605 80,711,131 2,665,005 93,852,642 593,446 17,991,705 107,894 61,074,787 9,062,734 7,223,237 35,983,027 (63,950,612) 285,135,333 257,162,134

NONCURRENT LIABILITIES: Long-term debt - net of current portion 5,631,071 9,928,539 1,675,190 251,596 22,353,258 - 208,079,450 - 10,459,911 - 63,720,444 18,041,715 8,391,374 5,117,077 (4,787,279) 348,862,346 361,902,329 Accrual for self-insurance and postretirement benefits 10,385,414 7,927,257 2,125,922 1,966,494 54,781,624 285,418 110,440,483 - 5,592,084 - 10,093,348 55,805 1,675,942 9,511,203 (35,688,207) 179,152,787 148,685,403 Estimated third-party payor settlements 5,179,119 - 760,930 441,521 - - 9,345,516 - 2,549,284 - 351,000 - 1,997,961 1,186,190 - 21,811,521 21,822,506 Other liabilities - 879,055 - - 942,041 - 2,653,701 772,368 224,527 - 8,322,352 - - 255,572 - 14,049,616 13,764,190

Total noncurrent liabilities 21,195,604 18,734,851 4,562,042 2,659,611 78,076,923 285,418 330,519,150 772,368 18,825,806 - 82,487,144 18,097,520 12,065,277 16,070,042 (40,475,486) 563,876,270 546,174,428

Total liabilities 36,995,913 29,621,985 14,260,331 6,094,216 158,788,054 2,950,423 424,371,792 1,365,814 36,817,511 107,894 143,561,931 27,160,254 19,288,514 52,053,069 (104,426,098) 849,011,603 803,336,562

NET ASSETS (DEFICIT): Common stock - 100,000 - - - - - - - 951,856 - - - - (1,051,856) - - Additional paid-in capital - 10,991,392 - - - - - - - 776,667 - - - - (11,768,059) - - Accumulated deficit - (4,586,476) - - - - - - - (1,554,839) - - - - 6,141,315 - - Unrestricted (deficit) 15,893,972 - 24,596,611 2,457,421 80,927,698 3,473,034 355,405,051 7,600,491 23,408,991 - 47,020,680 (3,443,608) 24,368,658 27,738,678 (3,727,497) 605,720,180 629,504,292 Temporarily restricted 149,093 - 474,150 380,048 23,660 285,758 33,029,229 38,966,388 704,148 - 1,732,292 20,646 527,320 4,331,167 (36,412,009) 44,211,890 44,596,270 Permanently restricted 152,202 - 1,734,280 360,483 23,200 151,957 11,745,369 12,284,310 2,100,863 - 1,867,450 6,849,635 358,547 2,724,173 (11,287,209) 29,065,260 28,385,758

Total controlled net assets 16,195,267 6,504,916 26,805,041 3,197,952 80,974,558 3,910,749 400,179,649 58,851,189 26,214,002 173,684 50,620,422 3,426,673 25,254,525 34,794,018 (58,105,315) 678,997,330 702,486,320

Retained earnings-noncontrolling interest - 250,047 - - - - - - - 97,698 - - - - (347,745) - - Unrestricted-noncontrolling interest - - - - - - - - - - - - - - 347,745 347,745 359,477

Total net assets 16,195,267 6,754,963 26,805,041 3,197,952 80,974,558 3,910,749 400,179,649 58,851,189 26,214,002 271,382 50,620,422 3,426,673 25,254,525 34,794,018 (58,105,315) 679,345,075 702,845,797

TOTAL LIABILITIES AND NET ASSETS 53,191,180$ 36,376,948$ 41,065,372$ 9,292,168$ 239,762,612$ 6,861,172$ 824,551,441$ 60,217,003$ 63,031,513$ 379,276$ 194,182,353$ 30,586,927$ 44,543,039$ 86,847,087$ (162,531,413)$ 1,528,356,678$ 1,506,182,359$

The above supplementary consolidating information is presented only for purposes of additional analysis and not as a presentation of the financial position of each component of the consolidating group.

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SUPPLEMENTARY CONSOLIDATING INFORMATION TO THE CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATING STATEMENT OF OPERATIONS INFORMATION — YEAR ENDED SEPTEMBER 26, 2015AND CONSOLIDATED STATEMENT OF OPERATIONS INFORMATION — YEAR ENDED SEPTEMBER 27, 2014


Hospital Systems Memorial Memorial Systems Maine Medical Center EMHS Hospital Network for Hospital Rosscare Sebasticook Medical Center and EMHS EMHS(Consolidated) (Consolidated) Hospital, Inc. Hospital (Consolidated) HomeCare (Consolidated) Foundation (Consolidated) Health (Consolidated) (Consolidated) Valley Health (Consolidated) Reclassifications Consolidated Consolidated

REVENUE: Patient service revenue (net of contractual allowances and discounts) 55,138,628$ 46,328,576$ 38,344,510$ 15,300,623$ -$ 13,433,941$ 723,889,996$ -$ 83,384,293$ -$ 250,074,980$ 519$ 38,856,913$ 118,420,386$ (112,502)$ 1,383,060,863$ 1,312,504,814$

Less provision for bad debts 3,109,408 1,346,400 1,606,311 417,982 - 87,490 32,586,624 - 5,613,294 - 19,176,025 - 3,202,919 7,025,504 - 74,171,957 73,821,457

Net patient service revenue 52,029,220 44,982,176 36,738,199 14,882,641 - 13,346,451 691,303,372 - 77,770,999 - 230,898,955 519 35,653,994 111,394,882 (112,502) 1,308,888,906 1,238,683,357

Sales and contract revenue 1,531,116 61,727,581 88,276 73,552 113,352,602 350 6,436,786 3,823,740 246,998 545,680 1,138,724 6,012,398 - 230,077 (176,282,871) 18,925,009 23,278,159 Other revenue 880,757 1,836,820 2,728,063 1,126,593 103,302,782 99,944 21,368,363 3,552 3,339,110 (9,980) 3,205,022 384,482 1,908,356 4,590,521 (100,201,017) 44,563,368 37,098,694 Net assets released from restrictions - operations 77,076 - 32,907 24,795 1,585 185,283 1,168,662 152,055 75,153 - 779,329 8,246 44,094 40,823 - 2,590,008 2,824,696

Total revenue 54,518,169 108,546,577 39,587,445 16,107,581 216,656,969 13,632,028 720,277,183 3,979,347 81,432,260 535,700 236,022,030 6,405,645 37,606,444 116,256,303 (276,596,390) 1,374,967,291 1,301,884,906

EXPENSES: Compensation and employee benefits 37,081,797 29,466,307 20,821,730 10,323,584 85,838,022 7,808,997 355,113,126 - 41,994,387 168,888 139,307,302 2,652,289 20,836,694 71,641,003 (2,857,011) 820,197,115 785,063,782 Supplies and other 13,916,165 76,441,876 14,841,290 5,361,839 156,053,645 5,075,561 299,292,987 3,692,379 35,330,872 246,517 102,021,138 2,667,568 13,348,004 40,051,700 (273,517,252) 494,824,289 451,467,230 Depreciation and amortization 1,087,272 1,288,179 1,282,086 597,116 4,299,628 299,508 23,796,159 18,242 3,200,140 4,832 14,100,660 617,208 1,869,714 4,093,804 - 56,554,548 51,128,207 Interest 312,605 498,233 84,428 18,509 1,114,002 5,623 2,930,842 - 747,110 150 2,294,689 722,230 306,207 264,848 (222,127) 9,077,349 8,628,105

Total expenses 52,397,839 107,694,595 37,029,534 16,301,048 247,305,297 13,189,689 681,133,114 3,710,621 81,272,509 420,387 257,723,789 6,659,295 36,360,619 116,051,355 (276,596,390) 1,380,653,301 1,296,287,324

INCOME (LOSS) FROM OPERATIONS BEFORE GAINS AND LOSSES 2,120,330 851,982 2,557,911 (193,467) (30,648,328) 442,339 39,144,069 268,726 159,751 115,313 (21,701,759) (253,650) 1,245,825 204,948 - (5,686,010) 5,597,582

OTHER GAINS (LOSSES): Income tax expense - (173,385) - - - - - - - (167,509) - - - - - (340,894) (546,856) Joint venture income (loss) - 366,954 - - (1,656,747) - - - - - - 707,287 - 39,579 - (542,927) 700,857 Investment income and other - net 495,978 (50,110) 540,479 15,702 1,153,360 820 2,283,452 152,661 276,794 - (117,930) 3,720 684,367 81,343 (763,883) 4,756,753 4,895,938 Contribution received in the acquisition of Mercy, net - - - - - - - - - - - - - - - - 73,076,220

Total other gains (losses) - net 495,978 143,459 540,479 15,702 (503,387) 820 2,283,452 152,661 276,794 (167,509) (117,930) 711,007 684,367 120,922 (763,883) 3,872,932 78,126,159

EXCESS (DEFICIENCY) OF REVENUE AND GAINS OVER EXPENSES AND LOSSES 2,616,308 995,441 3,098,390 (177,765) (31,151,715) 443,159 41,427,521 421,387 436,545 (52,196) (21,819,689) 457,357 1,930,192 325,870 (763,883) (1,813,078) 83,723,741

NONCONTROLLING INTEREST - (231,558) - - - - - - - 18,790 - - - - - (212,768) 277,461

EXCESS (DEFICIENCY) OF REVENUE AND GAINS OVER EXPENSES AND LOSSES - CONTROLLING INTEREST 2,616,308 763,883 3,098,390 (177,765) (31,151,715) 443,159 41,427,521 421,387 436,545 (33,406) (21,819,689) 457,357 1,930,192 325,870 (763,883) (2,025,846) 84,001,202

NET ASSETS RELEASED FROM RESTRICTIONS - CAPITAL ACQUISITIONS 56,475 - 4,110 - - - 1,870,484 - 277,610 - 678,417 - 221,389 751,685 - 3,860,170 1,783,665

CHANGE IN NET UNREALIZED GAINS AND LOSSES ON INVESTMENTS (145,261) 6,427 (695,043) (19,879) (562,951) - (3,055) (77,053) (122,550) - - - (445,144) - (6,427) (2,070,936) 9,498,690

CONTRIBUTION OF LONG-LIVED ASSETS - - - - - - - - - - - - - - - - 36,000

PAID-IN CAPITAL - 418,828 - - - - - - - - - - - - (418,828) - -

DIVIDENDS TO MEMBER - (425,638) - - - - - - - (128,000) - - - - 425,638 (128,000) -

NET CHANGE IN FUNDS HELD AT AFFILIATES (1,220) - 2 14 14 1,771 51,368 - 65,879 - - - (247) - (117,581) - -

INTERENTITY EQUITY TRANSFERS (1,021,646) - (1,177,328) (412,659) 28,132,603 (100,211) (15,731,045) (271,673) (1,918,551) - (4,354,383) (312,286) (711,006) (2,121,815) - - -

PENSION AND POSTRETIREMENT PLAN RELATED ADJUSTMENTS (1,426,924) (535,247) (371,984) (247,734) (5,591,703) - (15,750,733) - - - - (30,422) - - 535,247 (23,419,500) (1,091,794)

INCREASE (DECREASE) IN UNRESTRICTED NET ASSETS — CONTROLLING INTEREST 77,732$ 228,253$ 858,147$ (858,023)$ (9,173,752)$ 344,719$ 11,864,540$ 72,661$ (1,261,067)$ (161,406)$ (25,495,655)$ 114,649$ 995,184$ (1,044,260)$ (345,834)$ (23,784,112)$ 94,227,763$

The above supplementary consolidating information is presented only for purposes of additional analysis and not as a presentation of the results of operations of each component of the consolidating group.

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SUPPLEMENTARY CONSOLIDATING INFORMATION TO THE CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATING STATEMENT OF CHANGES IN CONTROLLED NET ASSETS INFORMATION - YEAR ENDED SEPTEMBER 26, 2015AND CONSOLIDATED STATEMENT OF CHANGES IN CONTROLLED NET ASSETS INFORMATION - YEAR ENDED SEPTEMBER 27, 2014

Affiliated Eastern MaineAcadia Healthcare Blue Hill Charles A. Dean Healthcare Eastern Eastern Maine Inland Maine Mercy Sebasticook The Aroostook Eliminations 2015 2014

Hospital Systems Memorial Memorial Systems Maine Medical Center EMHS Hospital Network Hospital Rosscare Valley Health Medical Center and EMHS EMHSUNRESTRICTED CONTROLLED NET ASSETS: (Consolidated) (Consolidated) Hospital, Inc. Hospital (Consolidated) HomeCare (Consolidated) Foundation (Consolidated) for Health (Consolidated) (Consolidated) (Consolidated) (Consolidated) Reclassifications Consolidated Consolidated

BEGINNING BALANCES 15,816,240$ 6,276,663$ 23,738,464$ 3,315,444$ 90,101,450$ 3,128,315$ 343,540,511$ 7,527,830$ 24,670,058$ 335,090$ 72,516,335$ (3,558,257)$ 23,373,474$ 28,782,938$ (10,060,263)$ 629,504,292$ 535,276,529$

Excess (deficiency) of revenue and gains over expenses and losses 2,616,308 995,441 3,098,390 (177,765) (31,151,715) 443,159 41,427,521 421,387 436,545 (52,196) (21,819,689) 457,357 1,930,192 325,870 (763,883) (1,813,078) 83,723,741 Noncontrolling interest - (231,558) - - - - - - - 18,790 - - - - - (212,768) 277,461 Net assets released from restrictions- Capital acquisition 56,475 - 4,110 - - - 1,870,484 - 277,610 - 678,417 - 221,389 751,685 - 3,860,170 1,783,665 Change in net unrealized gains and losses on investments (145,261) 6,427 (695,043) (19,879) (562,951) - (3,055) (77,053) (122,550) - - - (445,144) - (6,427) (2,070,936) 9,498,690

Contribution of long-lived assets, net - - - - - - - - - - - - - - - - 36,000 Pension and postretirement plan-related adjustments (1,426,924) (535,247) (371,984) (247,734) (5,591,703) - (15,750,733) - - - - (30,422) - - 535,247 (23,419,500) (1,091,794) Paid-in capital - 418,828 - - - - - - - - - - - - (418,828) - - Dividends to member - (425,638) - - - - - - - (128,000) - - - - 425,638 (128,000) - Net change in funds held at affiliates (1,220) - 2 14 14 1,771 51,368 - 65,879 - - - (247) - (117,581) - - Interentity equity transfers (1,021,646) - (1,177,328) (412,659) 28,132,603 (100,211) (15,731,045) (271,673) (1,918,551) - (4,354,383) (312,286) (711,006) (2,121,815) - - -

ENDING BALANCES 15,893,972$ 6,504,916$ 24,596,611$ 2,457,421$ 80,927,698$ 3,473,034$ 355,405,051$ 7,600,491$ 23,408,991$ 173,684$ 47,020,680$ (3,443,608)$ 24,368,658$ 27,738,678$ (10,406,097)$ 605,720,180$ 629,504,292$

TEMPORARILY RESTRICTED NET ASSETS:

BEGINNING BALANCES 318,766$ -$ 484,177$ 389,055$ 51,238$ 260,134$ 27,514,261$ 38,637,572$ 1,094,235$ -$ 2,068,150$ 24,575$ 688,598$ 4,892,146$ (31,826,637)$ 44,596,270$ 36,530,467$

Contribution received in the acquisition of Mercy - - - - - - - - - - - - - - - - 1,696,358 Restricted contributions 10,438 - - 16,396 300 - 520,285 6,681,845 36,476 - 42,939 2,872 111,137 870 - 7,423,558 8,727,785 Net assets released from restrictions- Capital acquisitions (56,475) - (4,110) - - - (1,870,484) - (277,610) - (678,417) - (221,389) (751,685) - (3,860,170) (1,783,665) Operations (77,076) - (32,907) (24,795) (1,585) (185,283) (1,168,662) (152,055) (75,153) - (779,329) (8,246) (44,094) (40,823) - (2,590,008) (2,824,696) Restricted investment income and realized net gains (losses - - 4,316 1 - - - (630,725) - - - - - 243,322 - (383,086) 180,927 Change in net unrealized gains and losses on investments - - (7,881) (567) - - - (587,389) (20,924) - (15,279) - (6,860) (317,528) - (956,428) 2,082,013

Other - - - - - - - (18,246) - - - - - - - (18,246) (12,919) Net change in funds held at affiliates (169,673) - (6,462) (2,411) (27,578) 25,624 5,286,809 - (364,106) - 181,045 (3,930) (343) (333,603) (4,585,372) - - Interentity equity transfers 123,113 - 37,017 2,369 1,285 185,283 2,747,020 (4,964,614) 311,230 - 913,183 5,375 271 638,468 - - -

ENDING BALANCES 149,093$ -$ 474,150$ 380,048$ 23,660$ 285,758$ 33,029,229$ 38,966,388$ 704,148$ -$ 1,732,292$ 20,646$ 527,320$ 4,331,167$ (36,412,009)$ 44,211,890$ 44,596,270$

PERMANENTLY RESTRICTED NET ASSETS:

BEGINNING BALANCES 113,002$ -$ 1,774,079$ 360,203$ 22,800$ 147,407$ 11,915,477$ 12,170,353$ 756,427$ -$ 1,899,799$ 7,332,978$ 373,698$ 2,719,173$ (11,199,638)$ 28,385,758$ 23,917,944$

Contribution received in the acquisition of Mercy - - - - - - - - - - - - - - - - 1,845,964 Restricted contributions - - - - - - - 95,711 1,398,969 - - - - - - 1,494,680 1,861,521 Change in net unrealized gains and losses on investments - - (39,799) - - - (208,249) - (54,533) - (32,349) (483,343) (15,151) - - (833,424) 747,410

Other - - - - - - - 18,246 - - - - - - - 18,246 12,919 Net change in funds held at affiliates 39,200 - - 280 400 4,550 38,141 - - - - - - 5,000 (87,571) - -

ENDING BALANCES 152,202$ -$ 1,734,280$ 360,483$ 23,200$ 151,957$ 11,745,369$ 12,284,310$ 2,100,863$ -$ 1,867,450$ 6,849,635$ 358,547$ 2,724,173$ (11,287,209)$ 29,065,260$ 28,385,758$

The above supplementary consolidating information is presented only for purposes of additional analysis and not as a presentation of the changes in equity and net assets of each component of the consolidating group.

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SUPPLEMENTARY CONSOLIDATING INFORMATION TO THE CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATING STATEMENT OF CASH FLOWS INFORMATION — YEAR ENDED SEPTEMBER 26, 2015AND CONSOLIDATED STATEMENT OF CASH FLOWS INFORMATION — YEAR ENDED SEPTEMBER 27, 2014


Hospital Systems Memorial Memorial Systems Maine Medical Center EMHS Hospital Network for Hospital Rosscare Sebasticook Medical Center and EMHS EMHS(Consolidated) (Consolidated) Hospital, Inc. Hospital (Consolidated) HomeCare (Consolidated) Foundation (Consolidated) Health (Consolidated) (Consolidated) Valley Health (Consolidated) Reclassifications Consolidated Consolidated

CASH FLOWS FROM OPERATING ACTIVITIES: Increase (decrease) in net assets (52,741)$ 307,311$ 808,321$ (866,750)$ (9,200,930)$ 374,893$ 17,209,400$ 515,434$ (306,718)$ (252,196)$ (25,863,862)$ (372,623)$ 818,755$ (1,600,239)$ (5,018,777)$ (23,500,722)$ ########### Adjustments to reconcile increase (decrease) in net assets to net cash provided (used) by operating activities: Depreciation and amortization 1,087,272 1,288,179 1,282,086 597,116 4,299,628 299,508 23,796,159 18,242 3,200,140 4,832 14,100,660 617,208 1,869,714 4,093,804 - 56,554,548 51,128,207 Provision for bad debts 3,109,408 1,346,400 1,606,311 417,982 - 87,490 32,586,624 - 5,613,294 - 19,176,025 - 3,202,919 7,025,504 - 74,171,957 73,433,482 (Gain) loss on sale of property and equipment (8,737) (20,923) 5,874 (17,360) (175,896) - 59,719 - - 11,003 (15,615) 1,187 59,922 (34,234) - (135,060) (98,139) Loss on sale of joint venture - - - - - - - - - - - - - - - - 241,620 Net realized and unrealized losses (gains) on investments 138,893 (6,427) 714,904 20,788 (138,337) - (451,837) 1,186,159 125,474 - 47,628 484,392 244,445 74,206 6,427 2,446,715 (13,635,811) Gain in subsidiaries - - - - (763,883) - - - - - - - - - 763,883 - - Dividends to member - 6,810 - - 6,810 - - - - 128,000 - - - - (13,620) 128,000 - Equity in (earnings) losses of joint ventures - (366,954) - - 1,656,747 - - - - - - (707,287) - (39,579) - 542,927 (700,858) Adjustment to fair value of equity in net assets of acquired affiliates - - - - - - - - - - - - - - - - (76,618,542) Net change in funds held at affiliates 131,693 - 6,460 2,117 27,164 (31,945) (5,376,318) - 298,227 - (181,045) 3,930 590 328,603 4,790,524 - - Interentity equity transfers 898,533 - 1,140,311 410,290 (28,133,888) (85,072) 12,984,025 5,236,287 1,607,321 - 3,441,200 306,911 710,735 1,483,347 - - - Contribution of long-lived assets - - - - - - - - - - - - - - - - (36,000) Pension and postretirement plan-related adjustments 1,426,924 535,247 371,984 247,734 5,591,703 - 15,750,733 - - - - 30,422 - - (535,247) 23,419,500 1,091,794 Restricted contributions (10,438) - - (16,396) (300) - (520,285) (6,777,556) (1,435,445) - (42,939) (2,872) (111,137) (870) - (8,918,238) (10,589,306) Changes in operating assets and liabilities: Patient and trade accounts receivable (3,480,127) (897,966) (2,630,687) 523,257 (134,436) (797,836) (44,765,821) - (4,613,777) - (15,083,134) (38,597) (3,344,691) (10,270,584) 37,572 (85,496,827) (88,155,546) Other current assets 19,166 833,327 (140,528) 127,108 (26,463,140) 378,434 5,904,658 (566,919) 644,560 46,649 (2,773,631) 57,494 52,835 374,986 18,715,398 (2,789,603) 6,664,311 Other assets 11,645 252,480 (98,330) (12,552) 97,500 (11,545) (301,714) - 12,616 172,490 (636,033) (2,973) (25,244) (331,246) (181,846) (1,054,752) 686,664 Estimated third-party payor settlements 2,465,668 - 1,346,678 (921,571) - (190,280) (7,489,723) - (1,923,970) - (2,432,148) - (1,305,156) (2,841,859) - (13,292,361) (11,095,997) Accounts payable, accrued expenses, and other liabilities 53,207 (2,539,582) 230,348 (67,494) 156,207 486,108 (96,416) 933,796 (638,157) (1,760) 11,123,884 187,051 35,862 7,246,594 (12,840,971) 4,268,677 11,432,230 Accrual for self-insurance and postretirement benefits (94,248) 50,290 81,204 5,678 4,964,955 347 470,220 - 36,480 - (73,781) (8,158) 402,850 (12,372) - 5,823,465 839,464

Net cash provided (used) by operating activities 5,696,118 788,192 4,724,936 449,947 (48,210,096) 510,102 49,759,424 545,443 2,620,045 109,018 787,209 556,085 2,612,399 5,496,061 5,723,343 32,168,226 51,229,007

CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment (1,151,418) (566,824) (675,437) (205,118) (6,127,252) 5,591 (93,419,630) - (1,142,513) - (6,941,183) (130,799) (1,238,412) (8,016,466) - (119,609,461) (97,113,112) Proceeds from sales of property and equipment 17,500 4,750 250 88,700 374,124 7,718 98,200 - - 1,214 101,664 - 54,000 259,896 - 1,008,016 338,095 Proceeds from distributions of equity in joint ventures - - - - - - - - - - - 74,072 - 20,000 - 94,072 1,821,000 Proceeds from sale of joint venture - - - - - - - - - - - - - - - - 65,563 Cash received in the acquisition of Mercy - - - - - - - - - - - - - - - - 9,313,841 Investment in joint ventures - (100,000) - - (450,000) - - - - - - (17,492) - - - (567,492) (471,000) Purchases of investments (3,577,234) (11,000) (250,000) (271,017) (8,014,638) - (50,301,138) (4,291,125) 294,083 - - - (7,794,817) (1,620,886) - (75,837,772) (95,631,788) Proceeds from sales of investments 3,557,144 16,000 24,927 112,202 11,027,938 - 48,906,851 4,464,831 (255,402) - - (1,049) 7,610,744 1,212,315 - 76,676,501 84,018,121 Net changes in money market investments 57,635 1,805,484 (923,360) (12,235) 5,026,121 (1,140) 73,828,821 (2,420,638) (1,606,980) - (1,444,770) (253,422) (398,096) 2,232,359 (200,000) 75,689,779 72,154,529

Net cash (used) provided by investing activities (1,096,373) 1,148,410 (1,823,620) (287,468) 1,836,293 12,169 (20,886,896) (2,246,932) (2,710,812) 1,214 (8,284,289) (328,690) (1,766,581) (5,912,782) (200,000) (42,546,357) (25,504,751)

CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from long-term debt - - - - - - - - - - - - - - - - 69,957,909 Repayment of long-term debt (1,230,087) (951,580) (116,195) (49,827) (1,994,185) - (2,995,256) - (713,573) (10,962) (2,610,989) (492,176) (687,273) (1,413,601) 246,847 (13,018,857) (87,016,609) Proceeds from lines-of-credit - - - 750,000 23,696,320 - - - 9,525,000 - 3,000,000 - - 2,962,000 (6,712,000) 33,221,320 97,596,763 Repayment of lines-of-credit - (42,394) - (300,000) (4,900,000) (500,000) - - (7,807,500) - - - - - 800,000 (12,749,894) (80,406,314) Payment of bond issuance costs - - - - - - 120,230 - (25,336) - - - - - - 94,894 (462,697) Interentity equity transfers (898,533) - (1,140,311) (410,290) 28,133,888 85,072 (13,119,025) (5,236,287) (1,607,321) - (3,441,200) (306,911) (710,735) (1,483,347) 135,000 - - Dividends to member - (6,810) - - - - - - - (128,000) - - - - 6,810 (128,000) - Restricted contributions and investment income 10,438 - 4,316 16,397 300 - 520,285 6,146,831 1,435,445 - 42,939 2,872 111,137 244,192 - 8,535,152 10,770,233 Decrease (increase) in pledges receivable restricted for long-term purposes - - - 28,006 - - (228,158) 323,700 - - - - 157,277 - - 280,825 (3,023,575)

Net cash (used) provided by financing activities (2,118,182) (1,000,784) (1,252,190) 34,286 44,936,323 (414,928) (15,701,924) 1,234,244 806,715 (138,962) (3,009,250) (796,215) (1,129,594) 309,244 (5,523,343) 16,235,440 7,415,710

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 2,481,563 935,818 1,649,126 196,765 (1,437,480) 107,343 13,170,604 (467,245) 715,948 (28,730) (10,506,330) (568,820) (283,776) (107,477) - 5,857,309 33,139,966

CASH AND CASH EQUIVALENTS — BEGINNING OF YEAR 4,678,753 5,763,915 3,687,814 168,912 4,133,070 519,774 34,616,811 1,014,129 967,682 377,021 23,938,983 2,510,026 5,933,934 2,731,769 - 91,042,593 57,902,627

CASH AND CASH EQUIVALENTS — END OF YEAR 7,160,316$ 6,699,733$ 5,336,940$ 365,677$ 2,695,590$ 627,117$ 47,787,415$ 546,884$ 1,683,630$ 348,291$ 13,432,653$ 1,941,206$ 5,650,158$ 2,624,292$ -$ 96,899,902$ 91,042,593$

The above supplementary consolidating information is presented only for purposes of additional analysis and not as a presentation of the cash flows of each component of the consolidating group.

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SUPPLEMENTARY CONSOLIDATING INFORMATION TO THE CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATING SCHEDULE OF NET PATIENT SERVICE REVENUE — YEAR ENDED SEPTEMBER 26, 2015 AND CONSOLIDATED SCHEDULE OF NET PATIENT SERVICE REVENUE — YEAR ENDED SEPTEMBER 27, 2014

AffiliatedAcadia Healthcare Blue Hill Charles A. Dean Eastern Eastern Maine Inland Mercy The Aroostook Eliminations 2015 2014

Hospital Systems Memorial Memorial Maine Medical Center Hospital Hospital Rosscare Sebasticook Medical Center and EMHS EMHS(Consolidated) (Consolidated) Hospital, Inc. Hospital HomeCare (Consolidated) (Consolidated) (Consolidated) (Consolidated) Valley Health (Consolidated) Reclassifications Consolidated Consolidated

FULL CHARGES FOR SERVICES TO PATIENTS: Daily patient services 39,787,814$ -$ 3,269,849$ 2,172,561$ -$ 200,362,942$ 16,305,406$ 44,714,177$ -$ 2,881,204$ 25,778,574$ (19,025)$ 335,253,502$ 330,005,661$ Ancillary services 17,658,382 - 8,203,091 2,228,237 - 567,987,434 20,944,792 131,794,444 - 6,914,006 46,636,182 - 802,366,568 735,777,843 Outpatient services 38,004,609 66,629,274 45,577,644 14,470,710 14,193,699 737,883,917 101,914,371 372,112,462 570 52,054,314 173,926,766 (93,477) 1,616,674,859 1,475,312,303 Gross patient service revenue 95,450,805 66,629,274 57,050,584 18,871,508 14,193,699 1,506,234,293 139,164,569 548,621,083 570 61,849,524 246,341,522 (112,502) 2,754,294,929 2,541,095,807 DEDUCTIONS FROM REVENUE: Contractual adjustments (27,348,866) (20,271,102) (17,304,246) (3,287,124) (759,758) (761,877,430) (52,801,021) (284,721,681) (51) (21,027,034) (123,403,469) - (1,312,801,782) (1,162,071,372) Charity care (12,963,311) (29,596) (1,401,828) (283,761) - (20,466,867) (2,979,255) (13,824,422) - (1,965,577) (4,517,667) - (58,432,284) (66,519,621) Provision for bad debts (3,109,408) (1,346,400) (1,606,311) (417,982) (87,490) (32,586,624) (5,613,294) (19,176,025) - (3,202,919) (7,025,504) - (74,171,957) (73,821,457) Total deductions (43,421,585) (21,647,098) (20,312,385) (3,988,867) (847,248) (814,930,921) (61,393,570) (317,722,128) (51) (26,195,530) (134,946,640) - (1,445,406,023) (1,302,412,450)Net patient service revenue 52,029,220$ 44,982,176$ 36,738,199$ 14,882,641$ 13,346,451$ 691,303,372$ 77,770,999$ 230,898,955$ 519$ 35,653,994$ 111,394,882$ (112,502)$ 1,308,888,906$ 1,238,683,357$

The above supplementary consolidating information is presented only for purposes of additional analysis and not as a presentation of the net patient service revenue of each component of the consolidating group.

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APPENDIX C

CERTAIN PROVISIONS OF PRINCIPAL DOCUMENTS

The following excerpts of certain provisions of the Bond Indenture, the Loan Agreement, the Master Trust Indenture and the Supplemental Master Trust Indenture, together with certain definitions set forth therein. The following excerpts of certain provisions do not purport to set forth all of the provisions of said documents, to which reference is made for the complete and actual terms thereof.

DEFINITIONS –BOND INDENTURE AND LOAN AGREEMENT

“Accountant” shall mean any firm of recognized independent certified public accountants appointed by the Obligated Group Agent to whom the Master Trustee makes no reasonable objection.

“Act” shall mean the Maine Health and Higher Educational Facilities Authority Act, Chapter 413 of Title 22, Sections 2051 to 2077, inclusive, of the Maine Revised Statutes Annotated, as it may be amended from time to time.

“Additional Bonds” shall mean the bonds or notes issued by the Authority pursuant to Section 2.14 of the Bond Indenture.

“Additional Indebtedness” shall mean any Indebtedness incurred by the Institutions subsequent to the issuance of the Series 2016 Note.

“Advance-Refunded Municipal Bonds” shall mean obligations that are exempt from Federal income taxation, that have been advance-refunded prior to their maturity, that are fully and irrevocably secured as to principal and interest by Government Obligations held in trust solely for the payment thereof, and that are serial bonds or term bonds not callable prior to maturity except at the option of the holder thereof.

“Agreement” shall mean the Loan Agreement, dated as of July 1, 2016, by and among the Authority and the Institutions, and when amended or supplemented, the Agreement, as amended or supplemented.

“Agreement Event of Default” shall mean any one or more of those events set forth in Section 6.1 of the Agreement.

“Annual Administrative Fee” shall mean the annual fee for the general administrative services of the Authority which for each Bond Year shall be an amount equal to that shown on the prevailing fee schedule of the Authority.

“Architect” shall mean any firm of recognized independent architects appointed by the Institutions to whom the Bond Trustee and the Authority make no reasonable objection.

“Authenticating Agent” shall mean the Bond Trustee, and any successor to its duties under the Bond Indenture.

“Authority” shall mean the Maine Health and Higher Educational Facilities Authority, a public body corporate and politic of the State of Maine.

“Authority Representative” shall mean the Chairman, Vice Chairman, Executive Director or Secretary of the Authority or such other Person as the Authority may designate to act on its behalf by written certificate furnished to the Institutions and the Bond Trustee containing the specimen signature of such Person and signed on behalf of the Authority by the Chairman, Vice Chairman, Executive Director or Secretary.

“Beneficial Owner” shall mean the Person in whose name a Bond is recorded as the beneficial owner of such Bond by a participant on the records of such participant or such Person’s subrogee.

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“Board” shall mean the directors of the Authority.

“Bond Counsel” shall mean an attorney or firm of attorneys of national recognition experienced in the field of municipal bonds whose opinions are generally accepted by purchasers of municipal bonds selected or employed by the Authority and reasonably acceptable to the Bond Trustee.

“Bonds” shall mean the Series 2016 Bonds and any Additional Bonds issued under the Bond Indenture.

“Bond Fund” shall mean the fund created pursuant to Section 5.1(a) of the Bond Indenture.

“Bond Indenture” shall mean the Bond Indenture, dated as of July 1, 2016, by and between the Authority and the Bond Trustee, and when amended or supplemented, such Bond Indenture, as amended or supplemented.

“Bond Indenture Event of Default” shall mean any one or more of those events set forth in Section 7.1 of the Bond Indenture.

“Bond Payment Date” shall mean each date on which principal or interest or both shall be payable on any of the Bonds according to their respective terms so long as any Bonds are Outstanding.

“Bond Purchase Contract” shall mean the Contract of Purchase between the Authority and the Original Purchaser pertaining to the sale of the Bonds.

“Bond Resolution” shall mean the Bond Resolution relating to the financing and refinancing of the Project which is the subject of the Agreement, adopted by the Authority on June 15, 2016.

“Bond Trustee” shall mean U.S. Bank National Association, of Boston, Massachusetts, and any successor to its duties under the Bond Indenture.

“Bond Year” shall mean the period commencing July second of each year and ending July first of the next year.

“Book–Entry Bonds” shall mean the Bonds held by DTC as the registered owner thereof pursuant to the terms and provisions of Section 2.13 of the Bond Indenture.

“Buildings” shall mean the buildings, structures, fixtures and improvements now or hereafter located on the Land.

“Business Day” shall mean any day of the year other than (i) a Saturday or Sunday, (ii) any day on which banks located in the city in which the Corporate Trust Office of the Bond Trustee is located are required or authorized to remain closed, (iii) any day on which banks located in Maine are required or authorized to remain closed, or (iv) any day on which the New York Stock Exchange or DTC is closed.

“Clean–Up” shall mean the removal, remediation of, monitoring of and all other response to, any Contamination to the satisfaction of all applicable governmental agencies, in compliance with Environmental Laws and otherwise in compliance with good commercial practice.

“Code” shall mean the Internal Revenue Code of 1986, as amended.

“Construction Fund” shall mean the fund created pursuant to Section 4.1 and Section 5.1(b) of the Bond Indenture.

“Contamination” shall mean the presence of any Hazardous Materials or the Release of any Hazardous Materials.

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“Corporate Trust Office” shall mean the office of the Bond Trustee and the Paying Agent at which its corporate trust business is conducted, which at the date hereof is located at One Federal Street, Boston, Massachusetts 02110, Attention: Corporate Trust Services.

“Disclosure Agreement” shall mean the Continuing Disclosure Agreement, dated the date of delivery of the Bonds, by and between the Obligated Group Agent and the Bond Trustee.

“DTC” shall mean The Depository Trust Company, a limited purpose trust company organized under the laws of the State of New York, and its successors and assigns.

“Environmental Law” shall mean any and all federal, State and local laws, ordinances, rules, regulations and administrative orders relating to Hazardous Materials.

“Equipment” shall mean the equipment, machinery, furnishings, fixtures (to the extent not a part of the Buildings), and other similar items of tangible personal property necessary or convenient for the operation of the Facility, whether now owned or held or hereafter acquired, less any equipment, machinery, furnishings, fixtures to the extent not a part of the Buildings, and other similar items which may actually be disposed of or removed pursuant to the Agreement and the Master Indenture.

“Facility” shall mean the Land, the Buildings and the Equipment.

“Fitch” shall mean Fitch, Inc., a corporation organized and existing under the laws of the State of New York, its successors and assigns, and, if such corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, any other nationally recognized securities rating agency designated by the Institutions by notice to the Authority and the Bond Trustee.

“Governing Body” shall mean the board of trustees of the respective Institutions.

“Government Obligations” shall mean direct general obligations of the United States of America.

“Gross Receipts” shall have the meaning ascribed thereto in the Master Indenture.

“Hazardous Materials” shall mean, without limitation, asbestos, gasoline, petroleum products, explosives, radioactive materials, polychlorinated biphenyls, chemical liquids, or any other solid, liquid or gaseous materials, or related or similar materials, or any other substance or material defined as a hazardous or toxic substance, material or waste by any applicable federal, State or local law, ordinance, rule, regulation or administrative order.

“Holder” or “Bondholder” shall mean the registered owner of any Bond, including DTC as the sole registered owner of Book-Entry Bonds.

“Initial Administrative Fee” shall mean the fee, payable from the Construction Fund to the Authority, for its initial services in regard to the financing and refinancing of the Project in an amount specified in the Authority’s prevailing fee schedule.

“Institutions” shall mean The Blue Hill Memorial Hospital, Charles A. Dean Memorial Hospital, Eastern Maine Medical Center, Inland Hospital, Maine Coast Regional Health Facilities and The Aroostook Medical Center, each a private, not for profit and charitable corporations organized and existing under the laws of the State of Maine.

“Institution Representative” shall mean the Person or Persons at the time designated to act on behalf of an Institution by written certificate furnished to the Authority and the Bond Trustee, containing the specimen signature of such Person and signed on behalf of an Institution by its chairman, its president or chief executive officer, or its chief financial officer. Such certificate may designate an alternate or alternates who shall have the same authority, duties and powers as such Institution Representative.

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“Interest Account” shall mean the account of the Bond Fund created pursuant to Section 5.1(a)(i) of the Bond Indenture.

“Land” shall mean the real property, interests in real property, rights-of-way, easements, licenses, and other rights in real property described in Schedule A to the Agreement.

“Master Indenture” shall mean the Master Trust Indenture, dated as of April 1, 2010, by and among the current members of the Obligated Group, any other future Members of the Obligated Group, and the Master Trustee, and when amended or supplemented, such Master Indenture, as amended or supplemented.

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

“Master Trustee” shall mean U.S. Bank National Association, of Boston, Massachusetts, and any successor to its duties under the Master Indenture.

“Member” shall mean a Member of the Obligated Group as defined in the Master Indenture.

“Moody’s” shall mean Moody’s Investors Service, a corporation organized and existing under the laws of the State of Delaware, its successors and their assigns, or, if such corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, any other nationally recognized securities rating agency designated by the Institutions by notice to the Authority and the Bond Trustee.

“Mortgage” shall mean the individual mortgages from each of Eastern Maine Medical Center, Mercy Hospital, Sebasticook Valley Health and Maine Coast Regional Health Facilities to the Master Trustee.

“Notes” shall mean the Series 2016 Note and any Additional Notes or other obligations issued under the Master Indenture.

“Note Payments” shall mean all payments to be made by the Institution under the Note issued to or for the account of the Authority.

“Obligated Group” shall mean the Obligated Group as defined in the Master Indenture.

“Obligated Group Agent” shall mean Eastern Maine HealthCare Systems, a Maine nonprofit corporation.

“Opinion of Bond Counsel” shall mean an opinion in writing signed by Bond Counsel.

“Opinion of Counsel” shall mean a written opinion of an attorney or firm of attorneys acceptable to the Bond Trustee and the Institutions and, to the extent the Authority is asked to take action in reliance thereon, the Authority, and who (except as otherwise expressly provided herein or in the Bond Indenture) may be either counsel for the Institution or for the Bond Trustee.

“Original Purchaser” shall mean the Person designated in the Bond Purchase Contract as the initial purchaser or purchasers of the Bonds or, if so designated in such Bond Purchase Contract, the representatives or lead or managing underwriters of such initial purchasers.

“Outstanding,” when used with reference to the Bonds, shall mean, as of any date of determination, all Bonds theretofore authenticated and delivered except: (i) Bonds theretofore cancelled by the Bond Trustee or delivered to the Bond Trustee for cancellation; (ii) Bonds which are deemed paid and no longer Outstanding as provided in the Bond Indenture; (iii) Bonds in lieu of which other Bonds have been issued pursuant to the provisions of the Bond Indenture relating to Bonds destroyed, stolen or lost, unless evidence satisfactory to the Bond Trustee has been received that any such Bond is held by a bona fide purchaser; and (iv) for purposes of any consent or other action to be taken under the Agreement or under the Bond Indenture by the Holders of a

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specified percentage of principal amount of Bonds, Bonds held by or for the account of the Authority, the Institutions, or any Person controlling, controlled by, or under common control with, either of them.

“Paying Agent” shall mean the Bond Trustee and any other banks or trust companies and their successors designated as the paying agencies or places of payment for the Bonds.

“Permitted Investments” shall mean and include any of the following, if and to the extent the same are at the time legal investments of the Issuer’s money:

(a) Government Obligations;

(b) bonds, debentures, notes or other evidence of indebtedness issued or guaranteed by any of the following federal agencies, instrumentalities or other entities, established by an Act of Congress or otherwise, including but not limited to the entities listed below, provided such obligations are backed by the full faith and credit of the United States of America:

(i) U.S. Export-Import Bank,

(ii) Farmers Home Administration,

(iii) Federal Financing Bank,

(iv) Federal Housing Administration Debentures,

(v) General Services Administration,

(vi) Aid for International Development,

(vii) Government National Mortgage Association,

(viii) U.S. Maritime Administration,

(ix) U.S. Department of Housing and Urban Development,

(x) Resolution Funding Corporation, and

(xi) Small Business Administration;

(c) bonds, debentures, notes or other evidence of indebtedness issued or guaranteed by any of the following non-full faith and credit U.S. government agencies, instrumentalities, corporations or other entities, established by an Act of Congress or otherwise:

(i) Federal Home Loan Bank System,

(ii) Federal Home Loan Mortgage Corporation,

(iii) Federal National Mortgage Association,

(iv) Student Loan Marketing Association,

(v) Financing Corporation,

(vi) Federal Farm Credit Banks,

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(vii) Private Export Funding Corp,

(viii) Resolution Funding Corporation,

(ix) Tennessee Valley Authority, and

(x) Inter-American Development Bank.

(d) money market funds registered under the Federal Investment Company Act of 1940, whose shares are registered under the Federal Securities Act of 1933, and having a rating by S&P of AAAm-G, AAAm, or AAm or ratings by Moody’s of Aaa, Aa1 or Aa2;

(e) certificates of deposit issued by commercial banks, savings and loan associations or mutual savings banks that are secured at all times by collateral described in (a), (b), or (c) above, provided that the Master Trustee has a perfected security interest in the collateral;

(f) certificates of deposit, savings accounts, deposit accounts or money market deposits which are fully insured by the FDIC, including the DIF (Deposit Insurance Fund);

(g) commercial paper issued under Section 3(a)(3) of the Securities Act of 1933 that have original maturities no longer than 270 days, rated, at the time of purchase, “Prime - 1” by Moody’s or “A-1” or better by S&P;

(h) Direct general obligations of any state of the United States or any subdivision or agency thereof to which is pledged the full faith and credit of a state the unsecured general obligation debt of which is rated in one of the three highest rating categories by at least one Rating Agency, or any obligation fully and unconditionally guaranteed by any state, subdivision or agency whose unsecured general obligation debt is so rated, or revenue bonds of any state of the United States, state agency or political subdivision or entity thereof rated in one of the two highest rating categories by at least one Rating Agency (any such securities are without regard to exemption of interest from federal taxation);

(i) Advance-Refunded Municipal Bonds;

(j) federal funds or bankers acceptances with a maximum term of one year of any bank which has an unsecured, uninsured and unguaranteed obligation rating of “Prime - 1” or “A3” or better by Moody’s and “A-1” or “A” or better by S&P;

(k) repurchase agreements that provide for the transfer of securities from a dealer or bank or financial institution (seller/borrower) to the Bond Trustee, or the Master Trustee on its behalf (buyer/lender), and the transfer of cash from the Bond Trustee, or the Master Trustee on its behalf, to the dealer, bank or financial institution with an agreement that the dealer or bank will repay the cash plus the yield to the Bond Trustee, or the Master Trustee on its behalf, in exchange for the securities at a specified date provided that such repurchase agreements satisfy the following criteria:

(i) the repurchase agreement must be between the Bond Trustee, or the Master Trustee on its behalf, and a primary dealer listed on the Federal Reserve reporting dealer list that falls under the jurisdiction of the SIPC, a bank, or financial institution and that is rated “A” or better (without regard to any refinement or gradation of rating category by numerical modifier or otherwise) by at least one of S&P, Moody’s, or Fitch;

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(ii) the repurchase agreement must be in writing and include the following (1) the securities that are acceptable for transfer are of the type listed in (a), (b) or (c) above, (2) the term of the repurchase agreement may not exceed the term of the bonds, (3) the collateral must be delivered to the Bond Trustee, the Master Trustee (if the Master Trustee is not supplying the collateral) or a third party acting as agent for the Master Trustee (if the Master Trustee is supplying the collateral) before/simultaneous with payment (perfection by possession of securities), and (4) the securities must be valued no less than weekly, marked to market at current market price, of the amount of cash transferred by the Bond Trustee, or the Master Trustee on its behalf, to the dealer, bank or financial institution under the repurchase agreement plus accrued interest. If the value of the collateral drops below the minimum defined percentage of the value of the cash transferred by the Bond Trustee, or the Master Trustee on its behalf, then additional cash and/or acceptable securities must be transferred to adjust the minimum requirement. The value of the collateral, in the case securities of the type described in section (a) above are pledged, must be equal to 102%, and in the case where securities of the type described in sections (b) and (c) above are pledged, collateral must be equal to 103%; and

(l) Forward purchase agreements by a financial institution rated at the time of execution by any Rating Agency in one of three highest rating categories assigned by such Rating Agency. Securities eligible for delivery under the agreement will include those described in sections (a), (b) or (c) above. Any forward purchase agreement must be accompanied by a bankruptcy opinion that the securities delivered will not be considered part of the bankruptcy estate in the event of a declaration of bankruptcy or insolvency by the provider;

(m) investment agreements with (i) banks or non-bank financial institutions or vehicles whose unsecured, direct long-term debt is rated, or if such investment agreement is guaranteed, by an entity rated by any Rating Agency at the time such agreement is executed in one of the three highest rating categories or (ii) such non-bank financial institution, vehicle, or the related guarantor has a claims paying ability rated by any Rating Agency in one of the three highest rating categories assigned by such Rating Agency, provided that if at any time after purchase the provider of the investment agreement drops below the three highest rating categories assigned by such Rating Agency, the investment agreement must, within 30 days, either (1) be assigned to a provider rated in one of the three highest rating categories, or (2) be secured by the provider with collateral securities described in clause (a), (b) and (c) above, the fair market value of which, in relation to the amount of the investment agreement including principal and interest, is equal to at least 102%; or

(n) time deposits of any bank domiciled in the United States or of a foreign bank with a branch in the United States which has combined capital, surplus and undivided profits of at least $500 million, so long as the long-term un-secured debt rating of the issuing bank is within one of the three highest rating categories by a Rating Agency;

For the purpose of this definition, references to rating categories refers to such categories without regard to numerical or symbol modifiers (i.e. “AA+”, “AA” and “AA-” constitute a single category).

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

“Pledged Revenues” shall mean all revenues, proceeds and receipts of the Authority derived from the Note Payments, and the proceeds of the Bonds pending their application in accordance with the Bond Indenture.

“Principal Account” shall mean the account of the Bond Fund created pursuant to Section 5.1(a)(ii) of the Bond Indenture.

“Project” shall mean the improvements of the Facility described in Schedule B to the Agreement, to be financed and refinanced with the proceeds of the Bonds.

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“Rating Agency” shall mean Fitch, Moody’s, S&P or any other nationally recognized securities rating agency.

“Rating Category” shall mean a generic securities rating category, without regard to any refinement or gradation of such rating category by a numerical modifier or otherwise.

“Record Date” shall mean, as the case may be, the applicable Regular or Special Record Date.

“Redemption Account” shall mean the account of the Bond Fund created pursuant to Section 5.1(a)(iv) of the Bond Indenture.

“Redemption Price” shall mean, when used with respect to a Bond or portion thereof to be redeemed, the principal amount of such Bond or portion thereof plus the applicable premium, if any, payable upon redemption thereof.

“Registrar” shall mean the Bond Trustee, and any successor to its duties under the Bond Indenture.

“Regular Record Date” shall mean the 15th day (whether or not a Business Day) of the calendar month next preceding each Bond Payment Date.

“Release” shall mean the intentional or unintentional presence, seepage, spilling, leaking, disposing, discharging, emitting, depositing, injecting, leaching, escaping or any other release or threatened release, however defined, of any Hazardous Materials.

“Representation Letter” shall mean the Representation Letter from the Authority and the Bond Trustee to DTC with respect to the Bonds.

“S&P” shall mean Standard & Poor’s, a division of The McGraw-Hill Companies, Inc., a corporation organized and existing under the laws of the State of New York, its successors and their assigns, or, if such corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, any other nationally recognized securities rating agency designated by the Obligated Group Agent by notice to the Authority and the Bond Trustee.

“Serial Bonds” shall mean the Bonds which are so designated in the Bond Indenture and are stated to mature in annual installments.

“Series 2016 Bonds” shall mean the Authority’s aggregate principal amount of Revenue Bonds, Eastern Maine Healthcare Systems Obligated Group Issue, Series 2016, dated their date of issuance.

“Series 2016 Note” shall mean the Note created and issued pursuant to the Agreement, the Master Indenture and the Supplemental Master Indenture in substantially the form set forth in the Supplemental Master Indenture.

“Sinking Fund Account” shall mean the account of the Bond Fund created pursuant to Section 5.1(a)(iii) of the Bond Indenture.

“Sinking Fund Account Requirement” shall mean the aggregate principal amount of the Bonds required to be retired on or before the corresponding Sinking Fund Account Retirement Date.

“Sinking Fund Account Retirement Date” shall mean the date on or before which the Bonds are required to be retired in an amount equal to the Sinking Fund Account Requirement for such date.

“Special Record Date” shall mean the date established by the Bond Trustee pursuant to Section 2.3(c) of the Bond Indenture as the record date for the payment of defaulted interest on the Bonds.

“State” shall mean the State of Maine.

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“Supplement” shall mean an indenture supplementing or modifying the provisions of the Bond Indenture entered into by the Authority and the Bond Trustee in accordance with Article X of the Bond Indenture.

“Supplemental Master Indenture” shall mean the Supplemental Master Trust Indenture No. 3 to the Master Indenture, dated as of July 1, 2016, by and among the members of the Obligated Group and the Master Trustee, and when amended or supplemented, such Supplemental Master Indenture, as amended or supplemented.

“Tax-Exempt Organization” shall mean a Person organized under the laws of the United States of America or any state thereof which is an organization described in Section 501(c)(3) and exempt from federal income taxes under Section 501(a) of the Code, or corresponding provisions of federal income tax laws from time to time in effect.

“Tax Regulatory Agreement” shall mean the Tax Regulatory Agreement, dated the date of delivery of the Bonds, by and among the Authority, the Institutions and the Bond Trustee.

“Term Bonds” shall mean the Bonds designated as Term Bonds in the Bond Indenture.

CERTAIN PROVISIONS OF THE INDENTURE

GRANTING CLAUSES

NOW, THEREFORE, THIS BOND INDENTURE FURTHER WITNESSETH: That the Authority in consideration of the premises, of the acceptance by the Bond Trustee of the trusts hereby created, and of the purchase and acceptance of the Bonds by the holders thereof, and for the purpose of fixing and declaring the terms and conditions upon which the Bonds are to be issued, authenticated, delivered, secured and accepted by all Persons who shall from time to time be or become holders thereof, and in order to secure the payment of all of the Bonds at any time issued and outstanding hereunder and the interest and premium, if any, thereon according to their tenor, purport and effect, and in order to secure the performance and observance of all of the covenants and conditions therein and herein contained, the Authority has executed this Bond Indenture and does hereby grant a security interest in, release, assign, transfer, pledge and grant and convey unto the Bond Trustee and its successors and assigns forever with the following described property:

A. All rights and interests of the Authority in, under and pursuant to the Agreement, including, but not limited to, the Note (defined herein) and the present and continuing right (i) to make claim for, collect or cause to be collected, receive or cause to be received all revenues, receipts and other sums of money payable or receivable thereunder, (ii) to bring acts and proceedings thereunder or for the enforcement thereof and (iii) to do any and all things which the Authority is or may become entitled to do under the Agreement; provided that the assignment made by this clause shall not include any assignment of any obligation of the Authority under the Agreement or any right of the Authority thereunder to grant approvals, consents or waivers, to receive notices, or for indemnification or reimbursement of costs and expenses.

B. Pledged Revenues and amounts on deposit from time to time in the Funds and Accounts created pursuant hereto, including the earnings thereon, including any of the foregoing that are “deposit accounts” and “investment property” as such terms are defined in 11 M.R.S.A. §1102, subject to the provisions of this Bond Indenture permitting the application therefor for the purpose and on the terms and conditions set forth herein; provided, however, that there is expressly excluded from any pledge, assignment, lien or security interest credited by this Bond Indenture any amount set apart and transferred to the Rebate Fund.

C. Any and all other real or personal property of any kind from time to time hereafter by delivery or by writing of any kind specifically conveyed, pledged, assigned or transferred, as and for additional security hereunder for the Bonds, by the Authority or by

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anyone in its behalf or with its written consent, or by the Institutions, in favor of the Bond Trustee, which is hereby authorized to receive any and all such property at any and all times and to hold and apply the same subject to the terms hereof.

TO HAVE AND TO HOLD all said properties pledged, assigned and conveyed by the Authority hereunder, including all additional property which by the terms hereof has or may become subject to the encumbrance hereof, unto the Bond Trustee and its successors in trust and its assigns forever, subject, however, to permitted encumbrances and to the rights reserved hereunder.

IN TRUST NEVERTHELESS, for the equal and proportionate benefit and security of the holders from time to time of the Bonds issued, authenticated, delivered and outstanding hereunder, without preference, priority or distinction as to lien or otherwise of any of said Bonds over any other or others of said Bonds to the end that each holder of such Bonds has the same rights, privileges and lien under and by virtue hereof; and conditioned, however, that if the Authority shall well and truly pay or cause to be paid fully and promptly when due all liabilities, obligations and sums at any time secured hereby, and shall promptly, faithfully and strictly keep, perform or observe or cause to be kept, performed and observed all of its covenants, warranties and agreements contained herein, then and in such event, this Bond Indenture shall be and become void and of no further force and effect; otherwise, the same shall remain in full force and effect, and upon the trusts and subject to the covenants and conditions hereafter set forth.

DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION

Section 1.3. All Bonds Equally and Ratably Secured; Bonds Not General Obligations of the Authority. All Bonds issued hereunder and at any time Outstanding shall in all respects be equally and ratably secured hereby, without preference, priority, or distinction on account of the date or dates or the actual time or times of the issuance or maturity of the Bonds, so that all Bonds at any time issued and Outstanding hereunder shall have the same right, lien, preference hereunder, and shall all be equally and ratably secured hereby. The Bonds are special obligations of the Authority payable solely from and secured by a pledge of Pledged Revenues and funds provided therefor under this Bond Indenture. Neither the State nor any political subdivision thereof shall be obligated to pay the principal of or interest on the Bonds, other than from Pledged Revenues, and neither the faith and credit nor the taxing power of the State or of any political subdivision thereof is pledged to the payment of the principal of or interest on the Bonds.

AUTHORIZATION AND TERMS OF BONDS

Section 2.13. Book-Entry Bonds. (a) Except as provided in paragraph (c) of this Section 2.13, the registered owner of all of the Bonds shall be DTC and the Bonds shall be registered in the name of Cede & Co., as nominee for DTC. Payment of interest for any Bond registered as of each Record Date in the name of Cede & Co. shall be made by wire transfer of New York clearing house or equivalent next day funds to the account of Cede & Co. on the Bond Payment Date for the Bonds at the address indicated on the regular Record Date or Special Record Date for Cede & Co. in the registry books of the Authority kept by the Registrar.

(b) The Bonds shall be initially issued in the form of a single fully registered Bond, authenticated by the Authenticating Agent, in the amount of the stated maturity of the Bonds. Upon initial issuance, the ownership of such Bonds shall be registered in the registry books of the Authority kept by the Registrar in the name of Cede & Co., as nominee of DTC. The Bond Trustee, the Registrar, the Paying Agent and the Authority may treat DTC (or its nominee) as the sole and exclusive owner of the Bonds registered in its name for the purposes of payment of the principal or redemption price of or interest on the Bonds, selecting the Bonds or portions thereof to be redeemed, giving any notice permitted or required to be given to Bondholders under the Bond Indenture, registering the transfer of Bonds, obtaining any consent or other action to be taken by Bondholders and for all other purposes whatsoever, and neither the Bond Trustee, the Registrar, the Paying Agent nor the Authority shall be affected by any notice to the contrary. Neither the Bond Trustee, the Registrar, the Paying Agent nor the Authority shall have any responsibility or obligation to any DTC participant, any Person claiming a beneficial ownership interest in the Bonds under or through DTC or any DTC participant, or any other Person which is not shown on the registration books of the Registrar as being a Bondholder, with respect to the accuracy of any records maintained by DTC or any DTC participant; the payment of DTC or any DTC participant of any amount in respect of the principal or redemption price of or interest on the Bonds; any

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notice which is permitted or required to be given to Bondholders under the Bond Indenture; the selection by DTC or any DTC participant of any Person to receive payment in the event of a partial redemption of the Bonds; or any consent given or other action taken by DTC as Bondholder. The Paying Agent shall pay all principal of and premium, if any, and interest on the Bonds only to or “upon the order of” DTC (as that term is used in the Uniform Commercial Code as adopted in the State of Maine), and all such payments shall be valid and effective to fully satisfy and discharge the Authority’s obligations with respect to the principal of and premium, if any, and interest on the Bonds to the extent of the sum or sums so paid. No Person other than DTC shall receive an authenticated Bond for each separate stated maturity evidencing the obligation of the Authority to make payments of principal of and premium, if any, and interest pursuant to the Bond Indenture. Upon delivery by DTC to the Bond Trustee of written notice to the effect that DTC has determined to substitute a new nominee in place of Cede & Co., and subject to the provisions herein with respect to Record Dates, the word “Cede & Co.” in this Bond Indenture shall refer to such new nominee of DTC.

(c) In the event the Authority determines that it is in the best interest of the Beneficial Owners that they be able to obtain Bond certificates, the Authority may notify DTC and the Bond Trustee, whereupon DTC will notify the DTC participants, of the availability through DTC of Bond certificates. In such event, the Bond Trustee shall issue, transfer and exchange Bond certificates as requested by DTC and any other Bondholders in appropriate amounts. DTC may determine to discontinue providing its services with respect to the Bonds at any time by giving notice to the Authority and the Bond Trustee and discharging its responsibilities with respect thereto under applicable law. Under such circumstances (if there is no successor securities depository), the Authority and the Bond Trustee shall be obligated to deliver Bond certificates as described in the Bond Indenture. In the event Bond certificates are issued, the provisions of the Bond Indenture shall apply to, among other things, the transfer and exchange of such certificates and the method of payment of principal of and interest on such certificates. Whenever DTC requests the Authority and the Bond Trustee to do so, the Bond Trustee and the Authority will cooperate with DTC in taking appropriate action after reasonable notice (i) to make available one or more separate certificates evidencing the Bonds to any DTC participant having Bonds credited to its DTC account or (ii) to arrange for another securities depository to maintain custody of certificates evidencing the Bonds.

(d) Notwithstanding any other provision of this Bond Indenture to the contrary, so long as any Bond is registered in the name of Cede & Co., as nominee of DTC, all payments with respect to the principal of and premium, if any, and interest on such Bond and all notices with respect to such Bond shall be made and given, respectively, to DTC as provided in the Representation Letter.

(e) In connection with any notice or other communication to be provided to Bondholders pursuant to the Bond Indenture by the Authority or the Bond Trustee with respect to any consent or other action to be taken by Bondholders, the Authority or the Bond Trustee, as the case may be, shall establish a record date for such consent or other action and give DTC notice of such record date not less than fifteen (15) calendar days in advance of such record date to the extent possible. Notice to DTC shall be given only when DTC is the sole Bondholder.

Section 2.14. Additional Bonds. (a) One or more series of Additional Bonds may be authenticated and delivered by the Authenticating Agent upon original issuance from time to time pursuant to this Section for any purpose permitted by the Act. The proceeds of any Additional Bonds shall be applied as provided in the Supplement authorizing such Additional Bonds and such Supplement shall set forth the terms and conditions for such Additional Bonds.

(b) The Authority shall not issue any Additional Bonds hereunder unless at or prior to the delivery to the Authenticating Agent of an order from the Authority to authenticate and deliver such Additional Bonds there shall be filed with the Bond Trustee (in addition to all other documents required by the Bond Indenture or any Supplement thereto):

(i) a certificate of an Authority Representative, stating that the Authority is not then in default on any Bonds Outstanding or in the performance of any of the covenants, conditions, agreements or provisions contained in the Bond Indenture or the Agreement; and

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(ii) a certificate of the Obligated Group Agent, stating that the Institutions are not then in default in the performance of any of the covenants, conditions, agreements or provisions contained in the Agreement.

(c) Prior to the issuance of any Additional Bonds hereunder, the Authority and the Institutions shall enter into an amendment to the Agreement or a supplemental agreement which shall provide, among other things, that the payments under the Agreement shall be increased and computed so as to amortize in full the principal of and interest on such Additional Bonds and any other costs in connection therewith. An executed counterpart of such amendment to the Agreement or supplemental agreement shall be delivered to the Bond Trustee prior to the authentication and delivery of such Additional Bonds by the Authenticating Agent.

REVENUES AND FUNDS

Section 5.3. Flow of Funds. So long as any Bonds are Outstanding, in each Bond Year, Note Payments received by the Bond Trustee shall be applied in the following manner and order of priority:

(a) Interest Account. The Bond Trustee shall deposit to the Interest Account on or before each Bond Payment Date, the amount, if any, necessary to cause the amount then being credited to the Interest Account, together with investment earnings on investments then on deposit in the Interest Account, if such earnings will be received before the next Bond Payment Date (but only to the extent that such amount or investment earnings have not previously been credited for purposes of such calculation), to be not less than the full amount of interest to be paid on Outstanding Bonds on such Bond Payment Date. Moneys in the Interest Account shall be used to pay interest on Bonds as it becomes due.

(b) Principal Account. The Bond Trustee shall deposit to the Principal Account on or before the last day of each Bond Year, commencing on the last day of each Bond Year ending on a date on which Bonds mature, the amount necessary to cause the amount then being credited to the Principal Account, together with the investment earnings on investments then on deposit in the Principal Account, if such earnings will be received before the last day of the Bond Year (but only to the extent that such amount or investment earnings have not previously been credited for purposes of such calculation), to be not less than the principal amount of Bonds Outstanding which will mature on the last day of such Bond Year, subject to appropriate adjustment for the initial Bond maturity if the period prior to such date is other than twelve full months. Moneys in the Principal Account shall be used to retire Bonds by payment at their scheduled maturity.

(c) Sinking Fund Account. The Bond Trustee shall deposit to the Sinking Fund Account on or before the last day of each Bond Year, commencing on the last day of each Bond Year ending on a date which is a Sinking Fund Account Retirement Date, the amount necessary to cause the amount credited to the Sinking Fund Account, together with investment earnings on investments then on deposit in the Sinking Fund Account, if such earnings will be received before the last day of the Bond Year (but only to the extent that such amount or investment earnings have not previously been credited for purposes of such calculation), to be not less than the unsatisfied Sinking Fund Account Requirements to be satisfied on or before the last day of such Bond Year, subject to appropriate adjustment for the initial Sinking Fund Account Retirement Date if the period prior to such date is other than twelve full months. Moneys in the Sinking Fund Account shall be used to retire Bonds by purchase, by mandatory redemption or by payment at their scheduled maturity.

The Bond Trustee may, and upon written direction of the Obligated Group Agent shall use its best efforts to, apply moneys credited to the Sinking Fund Account to purchase Bonds in satisfaction of Sinking Fund Account Requirements for such Bonds for a Sinking Fund Account Retirement Date. The Obligated Group Agent shall not direct and the Bond Trustee shall not so purchase any Bond at a price or cost (including any brokerage fees or commissions or other charges) which exceeds the principal amount thereof plus interest accrued to the date of purchase. Such accrued interest shall be paid from the Interest Account. The principal amount of Bonds of each maturity so purchased shall be credited against the unsatisfied balance of Sinking Fund Account Requirements for such maturity in order of Sinking Fund Account Retirement Dates as the Obligated Group Agent may direct. Except as provided in Section 3.9 hereof, all Bonds so purchased shall be cancelled.

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(d) Redemption Account. If the Institutions make an optional prepayment of any installment on the Note, the amount so paid shall be credited to the Redemption Account and applied promptly by the Bond Trustee, first, to cause the amounts credited to the Interest Account, the Principal Account or the Sinking Fund Account of the Bond Fund, in that order, to be not less than the amounts then required to be credited thereto and, then to retire Bonds by purchase, redemption or both purchase and redemption in accordance with the Obligated Group Agent’s directions. Any such purchase shall be made at the best price obtainable with reasonable diligence and no Bond shall be so purchased at a cost or price (including brokerage fees or commissions or other charges) which exceeds the Redemption Price at which such Bond could be redeemed on the date of purchase or on the next succeeding date upon which such Bond is subject to optional redemption plus accrued interest to the date of purchase. Any such redemption shall be of Bonds then subject to optional redemption at the Redemption Price then applicable for optional redemption of such Bonds.

The principal amount of any Bonds so purchased or redeemed shall be credited against the unsatisfied balance of Sinking Fund Account Requirements for such maturity in order of Sinking Fund Account Retirement Dates.

Upon receipt by the Bond Trustee of moneys accompanied by a certificate of the Obligated Group Agent stating that such moneys are insurance proceeds with respect to casualty losses or condemnation awards, that the amount of such proceeds or awards with respect to such casualty loss or taking exceeds 10% of the Value of the Property, Plant and Equipment and that such moneys are to be applied to redeem Bonds in accordance with Section 3.4 hereof and specifying the amount and maturities of Bonds to be redeemed, the Bond Trustee shall credit such moneys to the Redemption Account and shall apply such moneys to redeem Bonds in accordance with Section 3.4 hereof.

Any balance remaining in the Redemption Account after the purchase or redemption of Bonds in accordance with the Obligated Group Agent’s directions, or in any event on the day following the Bond Payment Date next succeeding the prepayment by the Institutions, shall be transferred to the Interest Account.

Section 5.4. Application of Funds and Accounts to Redeem all Bonds Outstanding. Notwithstanding the provisions of Section 5.3 hereof, if on any date the Series 2016 Bonds are subject to optional redemption pursuant to Section 3.2 hereof, the aggregate of moneys and Permitted Investments (valued at their market value, taking into account straight line amortizations and accretions of premiums and discounts, for purposes of this Section) held by the Bond Trustee (other than in the Rebate Fund) hereunder are sufficient to redeem all Bonds Outstanding, and to pay or discharge all other obligations, if any, of the Authority hereunder, then the Bond Trustee shall, at the direction of the Obligated Group Agent, sell all Permitted Investments held by it (other than in the Rebate Fund) and the proceeds and all other moneys held by the Bond Trustee hereunder shall be applied to redeem all Bonds Outstanding in accordance with the terms of Section 3.2 hereof and to pay or discharge such other obligations.

Section 5.5. Investment of Moneys Held by the Bond Trustee. (a) (i) Moneys in all Funds and Accounts held by the Bond Trustee shall be invested by the Bond Trustee, as soon as possible upon receipt in Permitted Investments as directed by the Obligated Group Agent, in writing signed by the Obligated Group Agent, or, in the absence of specific written direction by the Obligated Group Agent, consistent with the directions as set forth in Exhibit B attached hereto.

(ii) For purposes of and subject to paragraph (a)(i) above, moneys in the Funds or Accounts held by the Bond Trustee shall be invested as directed by the Obligated Group Agent in Permitted Investments maturing or redeemable not later or no less frequently than the respective following dates or periods of time: (A) Principal Account and Sinking Fund Account, the day preceding the last day of each Bond Year; (B) Interest Account, the day preceding the next Bond Payment Date; and (C) Redemption Account, the day preceding the next date on which Bonds are to be redeemed or are expected to be purchased.

(b) Amounts credited to a Fund or Account may be invested by the Bond Trustee, at the direction of the Obligated Group Agent, together with amounts credited to one or more other Funds or Accounts, in the same Permitted Investment, provided that (i) each such investment complies in all respects with the provisions of paragraph (a) of this Section as they apply to each Fund or Account for which the joint investment is made

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and (ii) the Bond Trustee maintains separate records for each Fund and Account and such investments are accurately reflected therein.

(c) The Bond Trustee may make any investment permitted by this Section, through or with its own commercial banking or investment departments unless otherwise directed by the Obligated Group Agent.

(d) Except as otherwise specifically provided herein, in computing the amount in any Fund or Account, Permitted Investments purchased as an investment of moneys therein (taking into account straight line amortizations and accretions of premiums and discounts) shall be valued at the face value or the current market value thereof, whichever is the lower, or at the redemption price thereof, if then redeemable at the option of the holder, in either event inclusive of accrued interest.

(e) The Bond Trustee shall sell at the best price reasonably obtainable, or present for redemption, any Permitted Investment purchased by it as an investment whenever it shall be necessary in order to provide moneys to meet any payment or transfer from the Fund or Account for which such investment was made.

(f) Neither the Bond Trustee nor the Authority shall knowingly use or direct or permit the use of any moneys of the Authority in its possession or control in any manner which would cause any Bond to be an “arbitrage bond” within the meaning ascribed to such term in Section 148 of the Code, or any successor section of the Code. Nothing herein shall obligate the Authority or the Bond Trustee to monitor or evaluate any investment made in accordance with the provisions of this Section or compliance with such requirement, and such parties shall be entitled to rely on the investment directions of the Obligated Group Agent as to suitability and legality.

(g) Notwithstanding any provision of this Bond Indenture and recognizing that the Obligated Group Agent is providing investment directions hereunder, the Authority and the Bond Trustee shall observe their covenants and agreements contained in the Tax Regulatory Agreement, to the extent that and for so long as such covenants and agreements are required by law.

DEFAULT AND REMEDIES

Section 7.1. Bond Indenture Events of Default. Each of the following is hereby declared a “Bond Indenture Event of Default” hereunder:

(a) If payment by the Authority in respect of any installment of interest on any Bond shall not be made in full when the same becomes due and payable;

(b) If payment by the Authority in respect of the principal of or redemption premium, if any, on any Bond shall not be made in full when the same becomes due and payable, whether at maturity or by proceedings for redemption or by declaration of acceleration or otherwise;

(c) The Authority shall fail duly to observe or perform any covenant or agreement on its part under this Bond Indenture for a period of thirty (30) days after the date on which written notice of such failure, requiring the same to be remedied, shall have been given to the Authority and the Institutions by the Bond Trustee, or to the Authority, the Institutions, and the Bond Trustee by the holders of at least twenty-five percent (25%) in aggregate principal amount of Bonds then Outstanding. If the breach of covenant or agreement is one which is capable of cure but cannot be completely remedied within the thirty (30) days after written notice has been given, it shall not be a Bond Indenture Event of Default as long as the Authority has taken active steps within the thirty (30) days after written notice has been given to remedy the failure and is diligently pursuing such remedy provided it shall be cured within sixty (60) days after such written notice;

(d) The entry of a decree or order by a court having jurisdiction in the premises adjudging the Authority a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of the Authority under the Federal Bankruptcy Code or any other applicable Federal or state law, or appointing a receiver, liquidator, assignee, or sequestrator (or other similar official) of the Authority or of any substantial part of its property, or ordering the winding up or liquidation of

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its affairs, and the continuance of any such decree or order unstayed and in effect for a period of sixty (60) consecutive days;

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

(f) Receipt by the Bond Trustee of written notice from the Authority that an Agreement Event of Default has occurred and is continuing and has not been waived by the Authority, accompanied by written request by the Authority to accelerate the payment of all Bonds Outstanding.

Section 7.2. Acceleration; Annulment of Acceleration. (a) Upon the occurrence of a Bond Indenture Event of Default, and if the Note has been declared by the Authority to be immediately due and payable, then, without any further action, all Bonds Outstanding shall become and be immediately due and payable, anything in the Bonds or herein to the contrary notwithstanding. In such event, there shall be due and payable on the Bonds an amount equal to the total principal amount of all such Bonds, plus all interest accrued thereon and which accrues to the earlier of the date of payment or five days following the date of the declaration of acceleration. The Bond Trustee shall give written notice of such acceleration to the Authority, the Registrar, the Master Trustee, and the Institutions, and the Registrar shall give notice to the Bondholders in the same manner as for a notice of redemption under Article III hereof stating the accelerated date on which the Note and the Bonds shall be due and payable.

(b) At any time after the principal of the Note and the Bonds shall have been so declared to be due and payable, if the declaration that the Note is immediately due and payable is annulled in accordance with the provisions of the Master Indenture, the declaration that the Bonds are immediately due and payable shall also, without further action, be annulled and the Registrar shall promptly give notice of such annulment in the same manner as provided in paragraph (a) of this Section for giving notice of acceleration. No such annulment shall extend to or affect any subsequent Bond Indenture Event of Default or impair any right consequent thereon.

Section 7.3. Rights of Bond Trustee Concerning the Note. The Bond Trustee, as pledgee and assignee for security purposes of all the right, title and interest of the Authority in and to the Agreement, the Master Indenture, the Supplemental Master Indenture and the Note delivered thereunder, shall, upon compliance with applicable requirements of law and except as otherwise set forth in this Article, be the sole real party in interest in respect of, and shall have standing to enforce each and every right granted to the Authority under the Agreement, the Master Indenture, the Supplemental Master Indenture and under the Note delivered thereunder. The Authority and the Bond Trustee hereby agree without in any way limiting the effect and scope thereof, that the pledge and assignment hereunder to the Bond Trustee of any and all rights of the Authority in and to the Note, the Master Indenture, the Supplemental Master Indenture and the Agreement shall constitute an agency appointment coupled with an interest on the part of the Bond Trustee which, for all purposes of this Bond Indenture, shall be irrevocable and shall survive and continue in full force and effect notwithstanding the bankruptcy or insolvency of the Authority or its default hereunder or on the Bonds. In exercising such rights and the rights given the Bond Trustee under this Article, the Bond Trustee shall take such action as, in the judgment of the Bond Trustee, would best serve the interests of the Bondholders, taking into account the provisions of the Agreement, the Master Indenture, the Supplemental Master Indenture and the Note, together with the security and remedies afforded to all holders of Notes thereunder.

Section 7.4. Additional Remedies and Enforcement of Remedies. (a) Upon the occurrence and continuance of any Bond Indenture Event of Default, the Bond Trustee may or upon the written request of the Holders of not less than twenty-five percent (25%) in an aggregate principal amount of the Bonds Outstanding, together with indemnification of the Bond Trustee to its satisfaction therefor, shall proceed forthwith to protect and enforce its rights and the rights of the Bondholders hereunder and under the Master Indenture and the Note

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and under the Act and the Bonds by such suits, actions or proceedings as the Bond Trustee, being advised by counsel, shall deem expedient, including but not limited to:

(i) Civil action to recover money or damages due and owing;

(ii) Civil action to enjoin any acts or things, which may be unlawful or in violation of the rights of the Holders of Bonds;

(iii) Enforcement of any other right of the Bondholders conferred by law or hereby and under the Master Indenture and the Note; and

(iv) Enforcement of any other right conferred by the Agreement, the Note or the Master Indenture.

(b) Regardless of the happening of a Bond Indenture Event of Default, the Bond Trustee, if requested in writing by the Holders of not less than twenty-five percent (25%) in aggregate principal amount of the Bonds then Outstanding, shall upon being indemnified to its satisfaction therefor, institute and maintain such suits and proceedings as it may be advised shall be necessary or expedient (i) to prevent any impairment of the security hereunder by any acts which may be unlawful or in violation hereof, or (ii) to preserve or protect the interests of the Holders, provided that such request is in accordance with law and the provisions hereof and, in the sole judgment of the Bond Trustee, is not unduly prejudicial to the interest of the Holders of Bonds not making such request.

Section 7.5. Application of Revenues and Other Moneys After Default. During the continuance of a Bond Indenture Event of Default all moneys received by the Bond Trustee pursuant to any right given or action taken under the provisions of this Article shall, after payment of the costs and expenses of the proceedings which result in the collection of such moneys and of the fees, expenses and advances incurred or made by the Bond Trustee and the Authority with respect thereto, be deposited in the Bond Fund, and all amounts held by the Bond Trustee hereunder shall be applied as follows:

(a) Unless the principal of all Outstanding Bonds shall have become or have been declared due and payable:

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

Second: To the payment to the Persons entitled thereto of the unpaid principal amounts or Redemption Price of any Bonds which shall have become due (other than Bonds previously called for redemption for the payment of which moneys are held pursuant to the provisions hereof), whether at maturity or by call for redemption, in the order of their due dates, and if the amounts available shall not be sufficient to pay in full all the Bonds due on any date, then to the payment thereof ratably, according to the principal amounts or Redemption Price due on such date, to the Persons entitled thereto, without any discrimination or preference.

(b) If the principal amounts of all Outstanding Bonds shall have become or have been declared due and payable, to the payment of the principal amounts and interest then due and unpaid upon the Bonds without preference or priority of principal over interest or of interest over principal, or of any installment of interest over any other installment of interest, or of any Bond over any other Bond, ratably, according to the amounts due respectively for principal amounts and interest, to the Persons entitled thereto without any discrimination or preference.

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(c) If the principal amounts of all Outstanding Bonds shall have been declared due and payable, and if such declaration shall thereafter have been rescinded and annulled under the provisions of this Article, then, subject to the provisions of paragraph (b) of this Section in the event that the principal amounts of all Outstanding Bonds shall later become due or be declared due and payable, the moneys shall be applied in accordance with the provisions of paragraph (a) of this Section.

Whenever moneys are to be applied by the Bond Trustee pursuant to the provisions of this Section, such moneys shall be applied by it at such times, and from time to time, as the Bond Trustee shall determine, having due regard for the amount of such moneys available for application and the likelihood of additional moneys becoming available for such application in the future. Whenever the Bond Trustee shall apply such moneys, it shall fix the date (which shall be a Bond Payment Date unless it shall deem another date more suitable) upon which such application is to be made and upon such date interest on the principal amounts to be paid on such dates shall cease to accrue. The Bond Trustee shall give such notice as it may deem appropriate of the deposit with it of any such moneys and of the fixing of any such date, and shall not be required to make payment to the Holder of any Bond until such Bond shall be presented to the Bond Trustee for appropriate endorsement of any partial payment or for cancellation if fully paid.

Whenever all Bonds and interest thereon have been paid under the provisions of this Section and all expenses and charges of the Bond Trustee have been paid, any balance remaining shall be paid to the Person entitled to receive the same; if no other Person shall be entitled thereto, then the balance shall be paid to the Institutions or as a court of competent jurisdiction may direct.

Section 7.8. Bondholders’ Control of Proceedings. If a Bond Indenture Event of Default shall have occurred and be continuing, notwithstanding anything herein to the contrary, the Holders of a majority in aggregate principal amount of Bonds then Outstanding shall have the right, at any time, by any instrument in writing executed and delivered to the Bond Trustee to direct the method and place of conducting any proceeding to be taken in connection with the enforcement of the terms and conditions hereof, provided that such direction is in accordance with law and the provisions hereof (including indemnity to the Bond Trustee as provided herein) and, in the sole judgment of the Bond Trustee, is not unduly prejudicial to the interest of Bondholders not joining in such direction and provided further that nothing in this Section shall impair the right of the Bond Trustee in its discretion to take any other action hereunder which it may deem proper and which is not inconsistent with such direction by Bondholders.

Section 7.9. Individual Bondholder Action Restricted. (a) No Holder of any Bond shall have any right to institute any suit, action or proceeding in equity or at law for the enforcement hereof or for the execution of any trust hereunder or for any remedy hereunder unless:

(i) a Bond Indenture Event of Default has occurred (A) under paragraph (a) or (b) of Section 7.1 hereof of which the Bond Trustee is deemed to have notice, or (B) under paragraph (c), (d), (e) or (f) of Section 7.1 hereof as to which the Bond Trustee has actual knowledge or as to which the Bond Trustee has been notified in writing;

(ii) the Holders of at least twenty-five percent (25%) in aggregate principal amount of Bonds Outstanding shall have made written request to the Bond Trustee to proceed to exercise the powers granted herein or to institute such action, suit or proceeding in its own name;

(iii) such Bondholders shall have offered the Bond Trustee indemnity as provided in Section 8.2 hereof;

(iv) the Bond Trustee shall have failed or refused to exercise the powers herein granted or to institute such action, suit or proceedings in its own name for a period of sixty (60) days after receipt by it of such request and offer of indemnity; and

(v) during such sixty (60) day period no direction inconsistent with such written request has been delivered to the Bond Trustee by the Holders of a majority in

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aggregate principal amount of Bonds then Outstanding in accordance with Section 7.8 hereof.

(b) No one or more Holders of Bonds shall have any right in any manner whatsoever to affect, disturb or prejudice the security hereof or to enforce any right hereunder except in the manner herein provided and for the equal benefit of the Holders of all Bonds Outstanding.

(c) Nothing contained herein shall affect or impair, or be construed to affect or impair, the right of the Holder of any Bond (i) to receive payment of the principal of or interest on such Bond on or after the due date thereof or (ii) to institute suit for the enforcement of any such payment on or after such due date; provided, however, no Holder of any Bond may institute or prosecute any such suit or enter judgment therein if, and to the extent that, the institution or prosecution of such suit or the entry of judgment therein would, under applicable law, result in the surrender, impairment, waiver or loss of the lien hereof on the moneys, funds and properties pledged hereunder for the equal and ratable benefit of all Holders of Bonds.

Section 7.11. Waiver of Bond Indenture Event of Default. (a) No delay or omission of the Bond Trustee or of any Holder of the Bonds to exercise any right or power accruing upon any Bond Indenture Event of Default shall impair any such right or power or shall be construed to be a waiver of any such Bond Indenture Event of Default or an acquiescence therein. Every power and remedy given by this Article to the Bond Trustee and the Holders of the Bonds, respectively, may be exercised from time to time and as often as may be deemed expedient by them.

(b) The Bond Trustee may waive, upon the written request of the Holders of a majority in aggregate principal amount of Bonds then Outstanding, any Bond Indenture Event of Default which in its opinion shall have been remedied before the entry of final judgment or decree in any suit, action or proceeding instituted by it under the provisions hereof, or before the completion of the enforcement of any other remedy hereunder.

(c) Notwithstanding anything contained herein to the contrary, the Bond Trustee, upon the written request of the Holders of at least a majority of the aggregate principal amount of Bonds then Outstanding, shall waive any Bond Indenture Event of Default hereunder and its consequences; provided, however, that, except under the circumstances set forth in paragraph (b) of Section 7.2 hereof, a default in the payment of the principal amount of, premium, if any, or interest on any Bond, when the same shall become due and payable by the terms thereof or upon call for redemption, may not be waived without the written consent of the Holders of all the Bonds at the time Outstanding; and provided, further, that the default in payment of any amount owing to the Bond Trustee or the Authority may not be waived without such Person’s consent.

(d) In case of any waiver by the Bond Trustee of a Bond Indenture Event of Default hereunder, the Authority, the Bond Trustee and the Bondholders shall be restored to their former positions and rights hereunder, respectively, but no such waiver shall extend to any subsequent or other Bond Indenture Event of Default or impair any right consequent thereon. The Bond Trustee shall not be responsible to any one for waiving or refraining from waiving any Bond Indenture Event of Default in accordance with this Section.

Section 7.12. Notice of Default. (a) Promptly, but in any event within thirty (30) days of (i) the occurrence of a Bond Indenture Event of Default under Section 7.1(a) or (b) hereof, or (ii) when the Bond Trustee has received actual notice, in writing, of a Bond Indenture Event of Default under Section 7.1 (c), (d), (e) or (f) hereof, the Bond Trustee shall, unless such Bond Indenture Event of Default shall have theretofore been cured, give written notice thereof by first class mail to each Holder of a Bond then Outstanding, provided that, except in the case of a default in the payment of principal amounts, Sinking Fund Installments, or the Redemption Price of or interest on any of the Bonds, the Bond Trustee may withhold such notice to such Holders if, in its sole judgment, it determines that the withholding of such notice is in the best interests of the Bondholders.

(b) The Bond Trustee shall promptly within one Business Day notify the Master Trustee and the Authority of (i) the occurrence of a Bond Indenture Event of Default under Section 7.1(a) or (b) hereof and (ii) when the Bond Trustee has received actual notice, in writing, of a Bond Indenture Event of Default under Section 7.1(c), (d), (e) or (f) hereof.

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Section 7.13. Limitation of the Authority’s Liability. No agreements or provisions contained herein nor any agreement, covenant or undertaking by the Authority contained in any document executed by the Authority in connection with the Project or the issuance, sale and delivery of the Bonds shall give rise to any pecuniary liability of the Authority or a charge against its general credit, or shall obligate the Authority financially in any way, except with respect to the Pledged Revenues and their application as provided herein. No failure of the Authority to comply with any term, covenant or agreement herein or in any document executed by the Authority in connection with the Project, shall subject the Authority to liability for any claim for damages, costs or other financial or pecuniary charge except to the extent that the same can be paid or recovered from the Pledged Revenues. Nothing herein shall preclude a proper party in interest from seeking and obtaining, to the extent permitted by law, specific performance against the Authority for any failure to comply with any term, condition, covenant or agreement herein; provided, that no costs, expenses or other monetary relief shall be recoverable from the Authority except as may be payable from the Pledged Revenues.

Section 7.14. Limitations on Remedies. It is the purpose and intention of this Article to provide rights and remedies to the Bond Trustee and Bondholders which may be lawfully granted under the provisions of the Act, but should any right or remedy herein granted be held to be unlawful, the Bond Trustee and the Bondholders shall be entitled as above set forth, to every other right and remedy provided in this Bond Indenture and by law.

THE BOND TRUSTEE

Section 8.6. Removal and Resignation of the Bond Trustee. The Bond Trustee may resign or may be removed at any time by an instrument or instruments in writing signed by the Holders of not less than a majority of the principal amount of Bonds then Outstanding. Written notice of such resignation or removal shall be given to the Authority and the Institutions and such resignation or removal shall take effect upon the appointment and qualification of a successor Bond Trustee. In the event a successor Bond Trustee has not been appointed and qualified within thirty (30) days of the date notice of resignation is given, the Bond Trustee, the Authority or the Institutions in all cases at the Institutions’ expense may apply to any court of competent jurisdiction for the appointment of a successor Bond Trustee to act until such time as a successor is appointed as provided in this Section.

In addition, the Bond Trustee may be removed at any time with or without cause, by Supplement hereto signed by the Authority so long as (i) no Agreement Event of Default or Indenture Event of Default shall have occurred and be continuing and (ii) the Authority determines, in such Supplement, that the removal of the Bond Trustee shall not have an adverse effect upon the rights or interests of the Bondholders. In the event a successor Bond Trustee has not been appointed and qualified within thirty (30) days after the removal, the Bond Trustee, the Authority or the Institutions in all cases at the Institutions’ expense may apply to any court of competent jurisdiction for the appointment of a successor Bond Trustee to act until such time as a successor is appointed as provided in this Section.

In the event of the resignation or removal of the Bond Trustee or in the event the Bond Trustee is dissolved or otherwise becomes incapable to act as the Bond Trustee, the Authority shall be entitled to appoint a successor Bond Trustee. In such event, the successor Bond Trustee shall cause notice to be mailed to the Holders of all Bonds then Outstanding in such manner deemed appropriate by the Authority. If the Bond Trustee resigns, the resigning Bond Trustee shall pay for such notice. If the Bond Trustee is removed, is dissolved, or otherwise becomes incapable of acting as Bond Trustee, the Institutions shall pay for such notice.

If the Holders of a majority of the principal amount of Bonds then Outstanding object to the successor Bond Trustee so appointed by the Authority and if such Holders designate another Person qualified to act as the Bond Trustee, the Authority shall then appoint as the Bond Trustee the Person so designated by the Holders.

Unless otherwise ordered by a court or regulatory body having competent jurisdiction, or unless required by law, any successor Bond Trustee shall be a trust company or bank having the powers of a trust company as to trusts, qualified to do trust business in the State and having an officially reported combined capital, surplus, undivided profits and reserves aggregating at least $25,000,000, if there is such an institution willing, qualified and able to accept the trust upon reasonable or customary terms.

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Every successor Bond Trustee howsoever appointed hereunder shall execute, acknowledge and deliver to its predecessor and also to the Authority and the Institutions an instrument in writing, accepting such appointment hereunder, and thereupon such successor Bond Trustee, without further action, shall become fully vested with all the rights, immunities, powers, trusts, duties and obligations of its predecessor, and such predecessor shall execute and deliver an instrument transferring to such successor Bond Trustee all the rights, powers and trusts of such predecessor. The predecessor Bond Trustee shall execute any and all documents necessary or appropriate to convey all interest it may have to the successor Bond Trustee. The predecessor Bond Trustee shall promptly deliver all records relating to the trust or copies thereof and communicate all material information it may have obtained concerning the trust to the successor Bond Trustee.

Each successor Bond Trustee, not later than ten (10) days after its assumption of the duties hereunder, shall mail a notice of such assumption to each Holder of a registered Bond.

Notwithstanding the provisions of Section 8.6 above, any corporation or association into which the Bond Trustee may be converted or merged, or with which it may be consolidated, or to which it may sell or transfer its corporate trust business and assets as a whole or substantially as a whole, or any corporation or association resulting from any such conversion, sale, merger, consolidation or transfer to which it is a party, shall be and become successor Bond Trustee hereunder and vested with all of the title to the whole property or trust estate and all the trusts, powers, discretions, immunities, privileges and all other matters as was its predecessor, without the execution or filing of any instrument or any further act, deed or conveyance on the part of any of the parties hereto.

SUPPLEMENTS

Section 9.1. Supplements Not Requiring Consent of Bondholders. The Authority and the Bond Trustee may, without the consent of or notice to any of the Holders, enter into one or more Supplements for one or more of the following purposes:

(a) to cure any ambiguity or formal defect or omission herein;

(b) to correct or supplement any provision herein which may be inconsistent with any other provision herein, or to make any other provisions with respect to matters or questions arising hereunder which shall not materially adversely affect the interests of the Holders;

(c) To grant or confer upon the Holders any additional rights, remedies, powers or authority that may lawfully be granted or conferred upon them;

(d) To secure additional revenues or provide additional security or reserves for payment of the Bonds;

(e) To preserve the exemption of the interest income borne on the Bonds from federal income taxes;

(f) To authorize the issuance of Additional Bonds hereunder; and

(g) To remove the Bond Trustee in accordance with the second paragraph of Section 8.6 hereof.

Section 9.2. Supplements Requiring Consent of Bondholders. (a) Other than Supplements referred to in Section 9.1 hereof and subject to the terms and provisions and limitations contained in this Article and not otherwise, the Holders of not less than a majority in aggregate principal amount of the Bonds then Outstanding shall have the right, from time to time, anything contained herein to the contrary notwithstanding, to consent to and approve the execution by the Authority and the Bond Trustee of such Supplements as shall be deemed necessary and desirable by the Authority for the purpose of modifying, altering, amending, adding to or rescinding, in any particular, any of the terms or provisions contained herein;

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provided, however, nothing in this Section shall permit or be construed as permitting a Supplement which would:

(i) extend the stated maturity of or time for paying interest on any Bond or reduce the principal amount of or the redemption premium or rate of interest payable on any Bond without the consent of the Holder of such Bond;

(ii) prefer or give a priority to any Bond over any other Bond without the consent of the Holder of each Bond then Outstanding not receiving such preference or priority; or

(iii) reduce the aggregate principal amount of Bonds then Outstanding the consent of the Holders of which is required to authorize such Supplement without the consent of the Holders of all Bonds then Outstanding.

(b) If at any time the Authority shall request the Bond Trustee to enter into a Supplement pursuant to this Section, the Bond Trustee shall, upon being satisfactorily indemnified with respect to expenses, cause notice of the proposed execution of such Supplement to be mailed by first class mail, postage prepaid, to all Holders of Bonds then Outstanding at their addresses as they appear on the registration books herein provided for. The Bond Trustee shall not, however, be subject to any liability to any Bondholder by reason of its failure to mail, or the failure of such Bondholder to receive, the notice required by this Section, and any such failure shall not affect the validity of such Supplement when consented to and approved as provided in this Section. Such notice shall be prepared by or on behalf of the Authority briefly set forth the nature of the proposed Supplement and shall state that copies thereof are on file at the office of the Bond Trustee for inspection by all Bondholders.

(c) If within such period, not exceeding three years, as shall be prescribed by the Institution, following the first publication of such notice, the Bond Trustee shall receive an instrument or instruments purporting to be executed by the Holders of not less than the aggregate principal amount or number of Bonds specified in Section 9.2(a) for the Supplement in question which instrument or instruments shall refer to the proposed Supplement described in such notice and shall specifically consent to and approve the execution thereof in substantially the form of the copy thereof referred to in such notice as on file with the Bond Trustee, thereupon, but not otherwise, the Bond Trustee may execute such Supplement in substantially such form, without liability or responsibility to any Holder of any Bond, whether or not such Holder shall have consented thereto.

(d) Any such consent shall be binding upon the Holder of the Bond giving such consent and upon any subsequent Holder of such Bond and of any Bond issued in exchange therefor (whether or not such subsequent Holder thereof has notice thereof), unless such consent is revoked in writing by the Holder of such Bond giving such consent or by a subsequent Holder thereof by filing with the Bond Trustee, prior to the execution by the Bond Trustee of such Supplement, such revocation. At any time after the Holders of the required principal amount or number of Bonds shall have filed their consents to the Supplement, the Bond Trustee shall make and file with the Authority a written statement to that effect. Such written statement shall be conclusive that such consents have been so filed.

(e) If the Holders of the required principal amount or number of the Bonds Outstanding shall have consented to and approved the execution of such Supplement as herein provided, no Holder of any Bond shall have any right to object to the execution thereof, or to object to any of the terms and provisions contained therein or the operation thereof, or in any manner to question the propriety of the execution thereof, or to enjoin or restrain the Bond Trustee or the Authority from executing the same or from taking any action pursuant to the provisions thereof.

Section 9.3. Execution and Effect of Supplements. (a) In executing any Supplement permitted by this Article, the Bond Trustee shall receive and may conclusively rely upon an Opinion of Counsel stating that the execution of such Supplement is authorized or permitted hereby and that all conditions precedent to the execution and delivery of such Supplement set forth herein have been satisfied. The Bond Trustee may but

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shall not be obligated to enter into any such Supplement which adversely affects the Bond Trustee’s own rights, duties or immunities.

(b) So long as no Bond Indenture Event of Default exists and the Institutions are not in default under the Agreement, the Master Indenture, the Supplemental Master Indenture or the Note, any Supplement under this Article which adversely affects the rights of the Institutions under the Agreement shall not become effective unless and until the Institutions shall have consented in writing to the execution and delivery of such Supplement. In this regard the Bond Trustee shall cause notice of the proposed execution and delivery of any such Supplement together with a copy of the proposed Supplement to be delivered to the Institutions at least ten (10) days prior to the date of its proposed execution and delivery in the case of a Supplement referred to in Section 9.1 hereof and not later than the date of first publication of the notice of the proposed execution and delivery in the case of a Supplement referred to in Section 9.2.

(c) Upon the execution and delivery of any Supplement in accordance with this Article, the provisions hereof shall be modified in accordance therewith and such Supplement shall form a part hereof for all purposes and every Holder of a Bond theretofore or thereafter authenticated and delivered hereunder shall be bound thereby.

(d) Any Bond authenticated and delivered after the execution and delivery of any Supplement in accordance with this Article may, and if required by the Authority or the Bond Trustee shall, bear a notation in form approved by the Authority and Bond Trustee as to any matter provided for in such Supplement. If the Authority shall so determine, new bonds so modified as to conform in the opinion of the Bond Trustee and the Authority to any such Supplement may be prepared and executed by the Authority and authenticated and delivered by the Authenticating Agent in exchange for and upon surrender of Bonds then Outstanding.

Section 9.4. Amendments to Agreement not Requiring Consent of Bondholders. The Authority and the Bond Trustee may without the consent of or notice to any of the Holders, consent to and join in the execution and delivery of any amendment, change or modification of the Agreement as may be required (a) by the provisions hereof or of the Agreement; (b) to cure any ambiguity or formal defect or omission therein; (c) to preserve the exemption of the interest borne on the Bonds from federal income taxes; (d) in the event there is a change to generally accepted accounting principles which has the effect of changing accounting related definitions and covenants contained in the Agreement, provided there is delivered to the Authority and the Bond Trustee an opinion of an Accountant which provides that after giving effect to such changes in generally accepted accounting principles, the definitions and covenants, as modified, are substantially similar to intent of application as the definitions and covenants which have been superseded were on the date of the Agreement or (e) in connection with any other change therein as to which there is filed with the Bond Trustee and the Authority an Opinion of Counsel stating that the proposed change will not adversely affect the interests of the Holders, and which in the opinion of the Bond Trustee will not adversely affect the interests of the Holders or the Bond Trustee.

Section 9.5. Amendments to Agreement Requiring Consent of Bondholders. (a) Except for amendments, changes or modifications to the Agreement referred to in Section 9.4 hereof, the Authority and the Bond Trustee may consent to and join in the execution and delivery of any amendment, change or modification to the Agreement only upon the consent of not less than a majority in aggregate principal amount of Bonds then Outstanding given as provided in this Section, provided, however, no such amendment, change or modification may affect the obligation of the Institutions to make payments under the Note or reduce the amount of or extend the time for making such payments without the consent of the Holders of all Bonds affected thereby.

(b) If at any time the Authority and the Institutions shall request the consent of the Bond Trustee to any such amendment, change or modification to the Agreement the Bond Trustee shall, upon being satisfactorily indemnified with respect to expenses, cause notice of the proposed amendment, change or modification to be given in the same manner as provided in Section 9.2 hereof with respect to Supplements hereto. Such notice shall be prepared by or on behalf of the Authority and briefly set forth the nature of the proposed amendment, change or modification and shall state that copies thereof are on file at the office of the Bond Trustee for inspection by all Bondholders.

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(c) If the consent to and approval of the execution of such amendment, change or modification is given by the Holders of not less than the aggregate principal amount or number of Bonds specified in paragraph (a) within the time and in the manner as provided by Section 9.2 hereof with respect to Supplements hereto, but not otherwise, such amendment, change or modification may be consented to, executed and delivered upon the terms and conditions and with like binding effect upon the Holders as provided in Sections 9.2 and 9.3 hereof with respect to Supplements hereto.

Section 9.6. Amendments to Master Indenture and Supplemental Master Indenture. The Institutions may enter into amendments to the Master Indenture or the Supplemental Master Indenture or both in accordance with the terms and provisions of such documents, with prior written notice to, but without the consent of, the Authority and the Bond Trustee, other than any consent as may be required of a Noteholder under the Master Indenture, in which case the Bond Trustee shall be deemed such Noteholder, unless otherwise provided in the Master Indenture or in a Supplemental Master Indenture.

SATISFACTION AND DISCHARGE

Section 10.1. Discharge. If payment of all principal of, premium, if any, and interest on the Bonds in accordance with their terms and as provided herein is made, or is provided for in accordance with this Article, and if all other sums payable by the Authority hereunder shall be paid or provided for, then the liens, estates and security interests granted hereby shall cease. Thereupon, upon the request of the Authority, and upon receipt by the Bond Trustee of an Opinion of Counsel stating that all conditions precedent to the satisfaction and discharge of the lien hereof have been satisfied, the Bond Trustee shall execute and deliver proper instruments acknowledging such satisfaction and discharging the lien hereof and the Bond Trustee shall transfer all property held by it hereunder, other than moneys or obligations held by the Bond Trustee for payment of amounts due or to become due on the Bonds, to the Authority, the Institutions or such other Person as may be entitled thereto as their respective interests may appear. Such satisfaction and discharge shall be without prejudice to the rights of the Bond Trustee thereafter to charge and be compensated or reimbursed for services rendered and expenditures incurred in connection herewith.

The Authority or the Institutions may at any time surrender to the Bond Trustee for cancellation any Bonds previously authenticated and delivered which the Authority or the Institutions may have acquired in any manner whatsoever and such Bond upon such surrender and cancellation shall be deemed to be paid and retired.

Section 10.2. Providing for Payment of Bonds. Payment of all or any portion of the Bonds may be provided for by the deposit with the Bond Trustee of moneys or non-callable Government Obligations or Advance-Refunded Municipal Bonds, or any combination thereof. The moneys and the maturing principal and interest income on such non-callable Government Obligations or Advance-Refunded Municipal Bonds, if any, shall be sufficient to pay when due the principal or Redemption Price of and interest on such Bonds. The moneys, non-callable Government Obligations and Advance-Refunded Municipal Bonds shall be held by the Bond Trustee irrevocably in trust for the Holders of such Bonds solely for the purpose of paying the principal or Redemption Price of and interest on such Bonds as the same shall mature, come due or become payable upon prior redemption, and, if applicable, upon simultaneous direction, expressed to be irrevocable, to the Bond Trustee as to the dates upon which any such Bonds are to be redeemed prior to their respective maturities.

If payment of the Bonds is so provided for, the Bond Trustee shall mail a notice so stating to each Holder of a Bond.

Bonds the payment of which has been provided for in accordance with this Section shall no longer be deemed Outstanding hereunder or secured hereby. The obligation of the Authority in respect of such Bonds shall nevertheless continue but the Holders thereof shall thereafter be entitled to payment only from the moneys, Government Obligations or Advance-Refunded Municipal Bonds deposited with the Bond Trustee to provide for the payment of such Bonds.

No Bond may be so provided for if, as a result thereof or of any other action in connection with which the provision for payment of such Bond is made, the interest payable on any Bond is made subject to federal income taxes. The Bond Trustee shall receive and may rely upon an Opinion of Bond Counsel (which opinion

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may be based upon a ruling or rulings of the Internal Revenue Service) to the effect that the provisions of this paragraph will not be breached by so providing for the payment of any Bonds.

Section 10.3. Payment of Bonds After Discharge. Notwithstanding the discharge of the lien hereof as in this Article provided, the Bond Trustee shall nevertheless retain such rights, powers and duties hereunder as may be necessary and convenient for the payment of amounts due or to become due on the Bonds and the registration, transfer, exchange and replacement of Bonds as provided herein. Nevertheless, any moneys held by the Bond Trustee or any Paying Agent for the payment of the principal of, premium, if any, or interest on any Bond remaining unclaimed for five years after the principal of all Bonds has become due and payable, whether at maturity or upon proceedings for redemption or by declaration as provided herein, shall then be paid to the Institutions and the Holders of any Bonds not theretofore presented for payment shall thereafter be entitled to look only to the Institutions for payment thereof as unsecured creditors and all liability of the Bond Trustee or any Paying Agent with respect to such moneys shall thereupon cease.

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CERTAIN PROVISIONS OF THE LOAN AGREEMENT

LOAN AGREEMENT; ISSUANCE OF SERIES 2016 BONDS AND SERIES 2016 NOTE

Section 3.1. Loan Agreement; Issuance of Series 2016 Bonds and Application of Proceeds. The Authority hereby agrees to loan, and hereby loans, to the Institutions, the amount set forth in the Agreement to provide funds to finance and refinance the Project, upon the terms and conditions set forth or referred to in this Agreement. The Institutions agree to borrow and hereby borrow, and agree to repay, jointly and severally, the amount set forth in the Agreement, upon the terms and conditions set forth or referred to in this Agreement. This Agreement shall constitute a general obligation of the Institutions. To provide funds to finance and refinance the Project, the Authority agrees to use its best efforts to issue the Bonds in accordance with the Bond Indenture and to cause the proceeds thereof to be paid to the Bond Trustee as provided in the Bond Indenture. The Institutions agree that the proceeds of the Bonds being loaned to the Institutions, to be made available to finance and refinance the Project, shall be deposited with the Bond Trustee and applied as provided in the Bond Indenture. The Institutions acknowledge and agree that they shall have no interest in the proceeds of the Bonds equal to or greater than that of the Holders who shall have a first and prior beneficial interest in such money until applied in accordance herewith and with the Bond Indenture.

Section 3.5. Security for Bonds. (a) The Institutions agree that the principal and Redemption Price of and the interest on the Bonds shall be payable in accordance with the Bond Indenture and the right, title and interest of the Authority hereunder and in and to the Note, the Note Payments and other amounts paid or payable by the Institutions hereunder, other than fees and expenses payable or reimbursable to the Authority, shall be assigned and pledged by the Authority to the Bond Trustee pursuant to the Bond Indenture to secure the payment of the Bonds. The Institutions agree that all of the rights accruing to or vested in the Authority with respect to the Note or hereunder may be exercised, protected and enforced by the Bond Trustee for or on behalf of the Holders in accordance with the provisions hereof and of the Bond Indenture.

(b) This Agreement is executed in part to induce the purchase by others of the Bonds, and, accordingly, all covenants and agreements on the part of each Institution (on its own behalf and on behalf of the Members of the Obligated Group) and the Authority, as set forth in this Agreement, are hereby declared to be for the benefit of the holders and owners from time to time of the Bonds.

(c) Each Institution agrees to do all things within its power in order to comply with and to enable the Authority to comply with all requirements, and to fulfill and to enable the Authority to fulfill all covenants, of the Bond Resolution, the Tax Regulatory Agreement and the Bond Indenture.

(d) As security for its obligation to make the Note Payments required under this Agreement and as provided in the Master Indenture (including as amended and supplemented through the Supplemental Master Indenture), each Institution and the other members of the Obligated Group pursuant to the Master Indenture have granted to the Master Trustee a security interest in Gross Receipts upon the conditions set forth in the Master Indenture. With respect to the Series 2016 Bonds, this pledge of Gross Receipts shall be for the benefit of the Authority and the Bond Trustee. The Institution hereby represents that as of the date of delivery of this Agreement it has granted no security interest in its Gross Receipts prior to or equal to the security interest referred to in this Section 3.06(d) but for any applicable security interest listed as a pre-existing encumbrance in Schedule D attached hereto and incorporated herein.

(e) As security for its obligation to make Note Payments required under the Agreement and provided in the Master Indenture (including as amended and supplemented through the Supplemental Master Indenture), certain members of the Obligated Group have granted to the Master Trustee the security interests set forth in the Mortgage. With respect to the Series 2016 Bonds, the Mortgage shall be for the benefit of the Authority and the Bond Trustee. The Bond Trustee shall not be required to foreclose on any Mortgage unless indemnified to its satisfaction by the applicable Institutions, and in no event, shall the Bond Trustee be required to foreclose on any Mortgage if doing so would subject it to environmental liability or will require the approval of a governmental regulator that cannot be obtained.

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PAYMENTS

Section 4.1. Payments of Principal, Premium and Interest. The Institutions, jointly and severally, covenant to duly and punctually pay the principal of and interest and any premium on the Note at the dates and in the places and manner mentioned therein and herein. Notwithstanding any schedule of payments to be made on the Note set forth therein or herein, the Institutions agree to make payments upon the Note and be liable therefor at the times and in the amounts equal to the amounts to be paid as the principal or Redemption Price of or interest on the Bonds from time to time Outstanding under the Bond Indenture as the same shall become due whether at maturity, upon redemption, by declaration of acceleration or otherwise. This provision shall not be read or interpreted to abrogate the joint and several liability of the Institutions for all Notes issued under the Master Indenture.

All amounts payable with respect to the Note or hereunder by the Institutions to the Authority, except as otherwise expressly provided herein, shall be paid to the Bond Trustee for the account of the Authority so long as any Bonds remain Outstanding.

Each Institution agrees and represents that it has received fair consideration in return for the obligations undertaken and to be undertaken by the Institution resulting from the Note issued on behalf of the Obligated Group.

Section 4.2. Note Payments. (a) The Note Payments shall be made not later than the 20th day of each month. Any scheduled payment which shall not be paid when due shall bear interest at the highest rate of interest borne on any Bond from the date the Note Payment is due until the same shall be paid.

(b) The Note Payments with respect to interest due on the Bonds shall include the amount, if any, necessary to cause the amount credited to the Interest Account together with available moneys and investment earnings on investments then on deposit in the Interest Account, if such earnings will be received before the next Bond Payment Date as determined by the Bond Trustee (but only to the extent that such moneys or investment earnings have not previously been credited for purposes of such calculation), to be not less than the full amount of interest to be paid on the Outstanding Bonds on the next Bond Payment Date. The Note Payments to be made pursuant to this paragraph (b) shall be appropriately adjusted to reflect the date of issuance of the Bonds and accrued or capitalized interest, if any, deposited in the Interest Account.

(c) The Note Payments with respect to principal of the Bonds shall include (after credit for any investment earnings in such Account that have not previously been credited), during each Bond Year ending on a date on which Bonds mature, the amount necessary to cause the amount credited to the Principal Account, together with the available moneys and investment earnings on investments then on deposit in the Principal Account, if such earnings will be received before the last day of the Bond Year as determined by the Bond Trustee (but only to the extent that such moneys or investment earnings have not previously been credited for purposes of such calculation), to be not less than the principal amount of the Bonds Outstanding which will mature on the last day of the Bond Year, and shall be appropriately adjusted to reflect the date of issuance of the Bonds.

(d) The Note Payments with respect to Sinking Fund Account Requirements of the Bonds shall include (after credit for any investment earnings in such Account that have not previously been credited), during each Bond Year ending on a date which is a Sinking Fund Account Retirement Date, the amount necessary to cause the amount credited to the Sinking Fund Account, together with available moneys and investment earnings on investments then on deposit in the Sinking Fund Account, if such earnings will be received before the last day of the Bond Year as determined by the Bond Trustee (but only to the extent that such moneys or investment earnings have not previously been credited for purposes of such calculation), to be not less than the unsatisfied Sinking Fund Account Requirements to be satisfied on or before the last day of the Bond Year.

(e) The Note Payments shall include all amounts due with respect to any rebate due to the United States pursuant to the Code and the Tax Regulatory Agreement.

Section 4.6. Obligations Unconditional. This Agreement is a general obligation of each Institution and the obligations of the Institutions and the other Members of the Obligated Group to make

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payments pursuant hereto and pursuant to the Note and to perform and observe all agreements on its part contained herein shall be absolute and unconditional. Until this Agreement is terminated or payment in full of all Bonds is made or is provided for in accordance with the Bond Indenture, the Institutions (i) will not suspend or discontinue any payments hereunder or neglect to perform any of its duties required hereunder or under the Tax Regulatory Agreement; (ii) will perform and observe all of its obligations set forth in this Agreement and in the Tax Regulatory Agreement; and (iii) except as provided herein, will not terminate this Agreement for any cause including, without limiting the generality of the foregoing, any acts or circumstances that may constitute failure of consideration; commercial frustration of purpose; any change in the tax or other laws or administrative rulings of, or administrative actions by or under authority of, the United States of America or of the State; or any failure of the Authority to perform and observe any obligation set forth in this Agreement, whether express or implied, or any duty, liability or obligation arising out of or connected with this Agreement, the Tax Regulatory Agreement or the Bond Indenture.

Nothing contained in this Section shall be construed to release the Authority from the performance of any of its obligations contained herein. In the event the Authority fails to perform any such obligation, the Institutions may institute such action against the Authority as the Institutions may deem necessary and to the extent permitted by law to compel performance so long as such action shall not violate the terms or conditions of this Agreement, and provided that no costs, expenses or other monetary relief shall be recovered from the Authority except as may be payable from the Pledged Revenues. The Institutions may, however, at their own respective cost and expense and in their own name or, to the extent lawful and upon written notice to, and prior receipt of written consent of the Authority, in the name of the Authority, prosecute or defend any action or proceeding or take any other action involving third Persons which the Institutions deem reasonably necessary in order to secure or protect its rights hereunder. In such event the Authority hereby agrees, to the extent reasonable, to cooperate fully with the Institutions, but at the Institution’s expense, and to take all action necessary to effect the substitution of the Institution for the Authority in any such action or proceeding if the Institution shall so request.

Notwithstanding any other provisions contained in this Agreement, the rights of the Bond Trustee or any party or parties on behalf of whom the Bond Trustee is acting (including, specifically, but without limitation, the right to receive the Note Payments) shall not be subject to any defense, set off, counterclaim or recoupment whatsoever, whether arising out of any breach of any duty or obligation of the Authority or the Bond Trustee owing to the Institutions, or by reason of any other indebtedness or liability at any time owing by the Authority or the Bond Trustee to the Institutions.

PARTICULAR COVENANTS

Section 5.1. Covenants as to Corporate Existence, Maintenance of Property, Etc. Each Institution hereby covenants:

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

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

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(c) To do all things reasonably necessary to conduct its affairs and carry on its business and operations in such manner as to comply in all material respects with any and all applicable laws of the United States and the several states thereof and to duly observe and conform to all valid orders, regulations or requirements of any governmental authority relative to the conduct of its business and the ownership of its Property; provided, nevertheless, that nothing herein contained shall require it to comply with, observe and conform to any such law, order, regulation or requirement of any governmental authority so long as the validity thereof or the applicability thereof to it shall be contested in good faith; provided, however, that no such contest shall subject the Bond Trustee or the Authority to the risk of any liability, and, in any event, that the Institutions shall, jointly and severally, indemnify the Bond Trustee and the Authority to their satisfaction against any liability resulting from such contest.

(d) Promptly to pay all lawful taxes, governmental charges and assessments at any time levied or assessed upon or against it or its Property; provided, however, that it shall have the right to contest in good faith any such taxes, charges or assessments or the collection of any such sums and pending such contest may delay or defer payment thereof; provided, however, that no such contest shall subject the Bond Trustee or the Authority to the risk of any liability, and, in any event, that the Institutions shall, jointly and severally, indemnify the Bond Trustee and the Authority against any liability resulting from such contest.

(e) Promptly to pay or otherwise satisfy and discharge all of its obligations and Indebtedness and all demands and claims against it as and when the same become due and payable, other than any thereof (exclusive of the Note issued and Outstanding hereunder and under the Master Indenture) whose validity, amount or collectability is being contested in good faith; provided, however, that no such contest shall subject any of its Property to risk of forfeiture or foreclosure or the Bond Trustee or the Authority to the risk of any liability, and, in any event, that the Institutions shall, jointly and severally, indemnify the Bond Trustee and the Authority against any liability resulting from such contest.

(f) At all times to comply with all terms, covenants and provisions of any Liens at such time existing upon its Property or any part thereof or securing any of its Indebtedness; provided, however, that it shall have the right to contest in good faith any such terms, covenants or provisions and pending such contest may delay or defer compliance therewith; provided, however, that no such contest shall subject any of its Property to risk of forfeiture or foreclosure or the Bond Trustee or the Authority to the risk of any liability, and, in any event, that the Institutions shall, jointly and severally, indemnify the Bond Trustee and the Authority against any liability resulting from such contest.

(g) To procure and maintain all necessary licenses and permits and maintain accreditation of its hospital facilities (other than those of a type for which accreditation is not then available) by the Joint Commission and the status of its hospital facilities (other than those not currently having such status) as a provider of health care services eligible for reimbursement under any appropriate third party payor programs and comparable programs, including future governmental programs as long as, in the opinion of the Institutions, such eligibility or accreditation is in the best interests of the Institutions.

(h) To maintain its status as a Tax Exempt Organization and to take no action or suffer any action to be taken by others under their control which would result in the interest on any Bond becoming subject to federal income taxes.

(i) To consent to the jurisdiction of the courts of the State for causes of action arising solely under the terms of this Agreement.

(j) That all action heretofore and hereafter taken by the Institutions to operate and maintain the Property, Plant and Equipment of the Obligated Group and to maintain the Project, and all actions hereafter taken by the Authority to maintain the Project upon the recommendation or request of any officer, employee or agent of the Institutions have been and will be in full compliance with the Bond Resolution, the Bond Indenture, the Tax Regulatory Agreement, the Agreement and will comply in all material respects with all pertinent laws, ordinances, rules, regulations and orders applicable to the Institutions, the other Members of the Obligated Group, or the Authority; and in connection with the operation, maintenance, repair and replacement of the Property, Plant and Equipment of the Obligated Group, that the Obligated Group shall comply in all material

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respects with all applicable ordinances, laws, rules, regulations and orders of the United States of America, the State, or the municipality or municipalities in which the Project is located.

(k) That the Institutions’ Property, Plant and Equipment have been and will be in compliance in all material respects with all applicable zoning, subdivision, building, land use and similar laws and ordinances and in compliance with all Environmental Laws; and that it shall not take any action or request the Authority to take any action which would cause such property or any part thereof to be in violation of such laws, ordinances or Environmental Laws. The Institution acknowledges that any review by the staff or counsel of the Authority of any such actions heretofore or hereafter taken has been or will be solely for the protection of the Authority.

(l) To hold and use the Facility for hospital purposes so long as the principal of and interest on the Bonds have not been fully paid and retired and all other conditions of the Bond Indenture, the Tax Regulatory Agreement and this Agreement have not been satisfied and the lien and security interests created under the Bond Indenture and this Agreement have not been released in accordance with the provisions hereof.

(m) The Project shall be used only for the purposes described in the Act and no part of the Project shall be used for any purpose which would cause the Authority’s financing and refinancing of the Project to constitute a violation of the First Amendment of the United States Constitution; and, in particular, that no part of the Project, so long as it is owned or controlled by the Institutions, shall be used for any sectarian instruction or as a place of religious worship or in connection with any part of a program of a school or department of divinity for any religious denomination; and any proceeds of any sale, lease, taking by eminent domain of the Project or other disposition thereof shall not be used for, or to provide a place for, such instruction, worship or program. The provisions of the foregoing sentence shall, to the extent permitted and required by law, survive termination of this Agreement.

(n) To provide parking for the Facility at a site or sites convenient for its operation in compliance with applicable zoning requirements.

(o) To obtain the approval of the Authority, which approval shall not be unreasonably withheld, prior to entering into any derivative financial product, interest rate swap or other similar transactions.

(p) To comply with all covenants on its part set forth in the Master Indenture and the Supplemental Master Indenture, and to concurrently provide the Authority and the Bond Trustee with copies of all certificates, opinions or reports required to be submitted to the Master Trustee.

(q) To make no change in the Master Trustee without the prior written consent of the Authority.

Section 5.2. Preservation of Exempt Status. (a) Each Institution represents and warrants that as of the date of the Agreement: (i) it is a Tax Exempt Organization described in Section 501(c)(3) of the Code; (ii) it has received a letter or determination from the Internal Revenue Service to that effect; (iii) such letter or determination has not been modified, limited or revoked; (iv) it is in compliance with all terms, conditions and limitations, if any, contained in or forming the basis of such letter or determination; (v) the facts and circumstances which form the basis of such letter or determination continue substantially to exist as represented to the Internal Revenue Service; (vi) it is not a “private foundation” as defined in Section 509 of the Code; (vii) it is exempt from Federal income taxes under Section 501(a) of the Code and it is in compliance with the provisions of said Code and any applicable regulations thereunder necessary to maintain such status; and (viii) it is a “participating healthcare institution” within the meaning of the Act, being a not for profit hospital located within and incorporated under the laws of the State and licensed as a hospital by the State.

(b) The Institutions agree that (i) no Member of the Obligated Group shall perform any acts, enter into any agreements, carry on or permit to be carried on at its facilities, or permit its facilities to be used in or for any trade or business, which shall adversely affect the basis for the exemption under Section 501 of such Code; (ii) it shall not use more than three percent (3%) of the net proceeds of the Series 2016 Bonds or permit the same to be used, directly or indirectly, in any trade or business that constitutes an unrelated trade or business as defined in Section 513(a) of the Code or in any trade or business carried on by any Person or Persons who are not governmental units or Tax Exempt Organizations; (iii) it shall not directly or indirectly use the proceeds of the Series 2016 Bonds to make or finance loans to Persons other than governmental units or Tax Exempt

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Organizations; (iv) it shall not take any action or permit any action to be taken on its behalf, or cause or permit any circumstances within its control to arise or continue, if such action or circumstances, or its expectation on the date of issuance of the Series 2016 Bonds, would cause the Series 2016 Bonds to be “arbitrage bonds” under the Code or cause the interest paid by the Authority on the Series 2016 Bonds to be subject to Federal income tax in the hands of the holders thereof; and (v) it shall use its best efforts to maintain the tax exempt status of the Series 2016 Bonds.

(c) The Institutions (or any related person, as defined in Section 147(a)(2) of the Code) shall not, pursuant to an arrangement existing at the time of the issuance of the Bonds, formal or informal, purchase the Series 2016 Bonds in an amount related to the amount of the payments due from the Institutions under the Agreement.

(d) For each Computation Date (as defined in the Tax Regulatory Agreement) the Institutions shall furnish the Authority and the Bond Trustee with a computation of the Rebate Amount (as defined in the Tax Regulatory Agreement) and hereby covenants to pay such Rebate Amount when due. The Institutions covenant to become expert in the computation of rebate and their liabilities with respect thereto, or to engage an entity that is expert in such computations.

Section 5.3. Institutions to Provide Project. The Institutions agree that it will provide or cause to be provided the Project in accordance with Schedule B hereto and that it shall, promptly upon delivery of the Bonds, deliver to the Authority a written estimated draw schedule indicating the times, amounts and purposes of draw requests from the Construction Fund, and it shall requisition moneys from the Construction Fund for purposes of completing the Project. The Institutions agree that it shall provide the Project with such additional structures, furnishings and equipment as may be required or necessary to keep the Project in operation. The Institutions agree that it shall, within fifteen (15) days of receipt of written notice from the Authority, pay to the Bond Trustee for deposit in the Construction Fund any money required to complete the financing and refinancing of the Project or any part thereof in the event that sufficient money therefor is not on deposit in the Construction Fund or the Institutions has not otherwise provided funds for such costs. The Institutions shall apply moneys from all available sources including, but not limited to, unrestricted funds, bond restricted funds, third-party borrowing and philanthropy to satisfy the requirements of the preceding sentence.

Section 5.5. Securities Law Status. Each Institution affirmatively represents, warrants and covenants that, as of the date of the Agreement, it is an organization organized and operated: (A) exclusively for charitable purposes; (B) not for pecuniary profit; and (C) no part of the net earnings of which inure to the benefit of any Person (other than a Tax-Exempt Organization), private stockholder or individual, all within the meaning, respectively, of the Securities Act of 1933, as amended, and of the Securities Exchange Act of 1934, as amended. Each Institution agrees that it shall not perform any act nor enter into any agreement which shall change such status as set forth in this Section.

Section 5.6. Immunity and Indemnity. (a) In the exercise of the powers of the Authority and its members, directors, officers, employees, agents and consultants under the Bond Resolution, the Bond Indenture, the Tax Regulatory Agreement and the Agreement including, without limiting the foregoing, the application of moneys and the investment of funds, the Authority shall not be accountable to the Institutions for any action taken or omitted by it or its members, directors, officers, employees, agents and consultants in good faith and believed by it or them to be authorized or within the discretion or rights or powers conferred. The Authority and its members, directors, officers, employees, agents and consultants shall be protected in its or their acting upon any paper or documents believed by it or them to be genuine, and it or they may conclusively rely upon the advice of counsel and may (but need not) require further evidence of any fact or matter before taking any action. No recourse shall be had by the Institutions for any claims based on the Bond Resolution, the Tax Regulatory Agreement, the Bond Indenture or the Agreement or any instruments or documents related thereto against any member, director, officer, employee, agent or consultant of the Authority alleging personal liability on the part of such Person unless such claims are based upon the willful misconduct of such Person.

(b) The Institutions, jointly and severally, agree to pay and indemnify, defend and hold the Authority (including any Person at any time serving as a member, director, officer, employee, agent or consultant of the Authority in their capacity as such) harmless from and against all claims, liabilities, losses, damages, costs, expenses (including attorneys’ fees), suits and judgments of any kind brought, claimed or

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rendered against the Authority, as a direct or indirect result of the Authority’s relationship with the Institutions or the financing or refinancing of the Project and arising out of (i) injury to or death of any Person or damage to property in or upon any property of the Institutions financed or refinanced, directly or indirectly, out of Bond proceeds or the occupation, use, possession or condition of such property or any part thereof or relating to the foregoing, (ii) any violation of any law, ordinance or regulation affecting such property or any part thereof or the ownership, occupation, use, possession or condition thereof, (iii) the issuance and sale of the Bonds or any of them, (iv) the execution and delivery hereof or of the Bond Indenture or of any document required hereby or thereby or in furtherance of the transactions contemplated hereby or thereby, (v) the performance of any act required of any indemnitee under this Section under any provision hereof or of the Bond Indenture or in furtherance of the transactions contemplated hereby or thereby or (vi) the presence, disposal, escape, seepage, leakage, spillage, discharge, emission, release, or threatened release of any Hazardous Materials on, from, or affecting the Property or any other property, or any personal injury (including wrongful death) or property damage (real or personal) arising out of or related to such Hazardous Materials, or any lawsuit brought or threatened, settlement reached, or government order relating to such Hazardous Materials in connection with the Property, or any violation of laws, orders, regulations, requirements, or demands of government authorities, which are based upon or in any way related to such Hazardous Materials including, without limitation, the costs and expenses of any remedial action, attorney and consultant fees, investigation and laboratory fees, court costs, and litigation expenses. The Institutions also agree, jointly and severally, to indemnify, defend and hold harmless the Bond Trustee, any Paying Agent, the Authenticating Agent and the Registrar and any Person serving as a director, officer, employee, agent or consultant of any of them in such Person’s capacity as such from and against all claims, liabilities, losses, damages, costs, expenses (including attorneys’ fees), suits and judgments arising out of events described in the foregoing clauses (i),(ii), (iv), (v), (vi) and clause (iii) with respect to the initial issuance and sale of the Series 2016 Bonds by the Authority to the Original Purchaser and arising out of actions taken by the Bond Trustee, any Paying Agent, the Authenticating Agent and the Registrar pursuant to its duties and responsibilities under the Bond Indenture. Notwithstanding the foregoing, the Institutions shall not be obligated to indemnify any Person with respect to any claims based upon the bad faith, fraud or deceit of such Person.

(c) The Authority shall promptly, upon receipt of notice of the existence of a claim or the commencement of a proceeding regarding which indemnity under this Section may be sought, notify the Institutions in writing thereof. If such a proceeding is commenced against the Authority, the Institutions may participate in the proceeding and, to the extent it elects to do so, may assume the defense thereof with counsel satisfactory to the Authority. If, however, the Authority is advised in an Opinion of Counsel that there may be legal defenses available to it which are different from or in addition to those available to the Institutions, or if the Institutions fail to assume the defense of such proceeding or to employ such counsel for that purpose within a reasonable time after notice of commencement of the proceeding, the Institutions shall not be entitled to assume the defense of the proceeding on behalf of the Authority, but shall be responsible for the reasonable fees, costs and expenses of the Authority in conducting its defense.

Section 5.7. Limitation of Authority’s Liability. No obligation of the Authority under or arising out of this Agreement, or any document executed by the Authority in connection with any Property of the Institutions financed or refinanced, directly or indirectly, out of Bond proceeds or the issuance, sale or delivery of any Bonds shall impose, give rise to or be construed to authorize or permit a debt or pecuniary liability of, or a charge against the general credit of, the Authority, the State or any political subdivision of the State, but each such obligation shall be a limited obligation of the Authority payable solely from the Pledged Revenues.

Section 5.11. Financial Statements. The Institutions agree that they will submit, to the Authority and the Bond Trustee, all financial and other information to be provided to the Master Trustee under Section 5.3 of the Master Indenture concurrently with providing such documentation to the Master Trustee.

The Institutions covenant that it will provide the Authority with documents it provides under the Disclosure Agreement in accordance with the timing provided in the Disclosure Agreement.

Section 5.14. Continuing Disclosure. The Institutions hereby covenants and agrees that it will comply with and carry out all of the provisions of the Disclosure Agreement. Except as provided in the Disclosure Agreement, neither the Authority nor the Bond Trustee shall have any liability to the Holders of the Series 2016 Bonds or any other person with respect to such disclosure matters. Notwithstanding any other

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provision of this Agreement, failure of the Institutions to comply with the Disclosure Agreement shall not be considered an Agreement Event of Default; however the following parties may seek specific performance of the Institutions’ obligations to comply with the Disclosure Agreement or this Section 5.14 and not money damages in any amount: (i) the Bond Trustee (and, at the request of the Holders of at least 25% aggregate principal amount of Outstanding Bonds, shall seek such specific performance), (ii) any Holder (including a beneficial owner) of Series 2016 Bonds, or (iii) the Authority. In addition to the rights to such specific performance and the rights of the Bond Trustee under of the Disclosure Agreement, the Authority shall have the right to file notice of a material event if, in its sole judgment, the Institutions have failed to do so.

EVENTS OF DEFAULT AND REMEDIES

Section 6.1. Agreement Events of Default. Each of the following events shall constitute and be referred to herein as an “Agreement Event of Default”:

(a) Any Member of the Obligated Group shall fail to make any payment of the principal of, the premium, if any, and interest on any Note Payment when and as the same shall become due and payable, whether at maturity, by proceedings for redemption, by acceleration or otherwise, in accordance with the terms thereof.

(b) The Obligated Group shall fail duly to observe or perform any other covenant or agreement on its part under this Agreement or under the Tax Regulatory Agreement for a period of thirty (30) days after the date on which written notice of such failure, requiring the same to be remedied, shall have been given to the Institutions by the Authority or the Bond Trustee, or to the Institutions, the Authority and the Bond Trustee by the holders of at least twenty-five percent (25%) in aggregate principal amount of the Note then Outstanding. If the breach of covenant or agreement is one which is capable of cure but cannot be completely remedied within the thirty (30) days after written notice has been given to the Institutions, it shall not be an Agreement Event of Default as long as (i) the Institutions have taken active steps within the thirty (30) days after written notice has been given to remedy the failure and is diligently pursuing such remedy and (ii) such failure is remedied within sixty (60) days after written notice has been given or, if such failure cannot reasonably be remedied within such sixty (60) days, the Institutions continue thereafter to diligently pursue and obtain such remedy.

(c) The Obligated Group shall default in the payment of any Indebtedness for borrowed moneys (other than any Indebtedness which is Non Recourse Indebtedness), which Indebtedness is in a principal amount in excess of one percent (1%) of Operating Revenues of the Obligated Group for the Historic Test Period, whether such Indebtedness now exists or shall hereafter be created, and any period of grace with respect thereto shall have expired, where the effect of such default is to accelerate the maturity of such Indebtedness or to permit the holders thereof (or a trustee on behalf of such holders) to cause such Indebtedness to become due prior to its stated maturity, or an event of default as defined in any mortgage, indenture or instrument, under which there may be issued or by which there may be secured or evidenced, any Indebtedness, in a principal amount in excess of one percent (1%) of Operating Revenues of the Obligated Group for the Historic Test Period, whether such Indebtedness now exists or shall hereafter be created, shall occur, provided, however, that such default shall not constitute an Agreement Event of Default within the meaning of this Section if within thirty (30) days, or within the time allowed for service of a responsive pleading if any proceeding to enforce payment of the Indebtedness is commenced, whichever is longer, (i) the Institutions in good faith commence proceedings to contest the existence or payment of such Indebtedness, and (ii) sufficient moneys or other adequate security are escrowed with a bank or trust company for the payment of such Indebtedness.

(d) The entry of a decree or order by a court having jurisdiction in the premises adjudging any Member of the Obligated Group a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of the Institutions under the Federal Bankruptcy Code or any other applicable federal or State law, or appointing a receiver, liquidator, assignee, or sequestrator (or other similar official) of the Institutions or of any substantial part of its Property, or ordering the winding up or liquidation of its affairs, and the continuance of any such decree or order unstayed and in effect for a period of sixty (60) consecutive days.

(e) The institution by any Member of the Obligated Group of proceedings to be adjudicated a bankrupt or insolvent, or the consent by it to the institution of bankruptcy or insolvency proceedings against it,

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

(f) If there occurs any Bond Indenture Event of Default.

(g) If there occurs any Master Indenture Event of Default.

An Agreement Event of Default shall be deemed to be in effect upon the actual occurrence of such event, whether or not notice thereof has been given or received. Upon having actual notice of the existence of an Agreement Event of Default, the Authority shall serve written notice thereof upon the Institutions unless the Institutions have expressly acknowledged the existence of such Agreement Event of Default in a writing delivered by the Institutions to the Authority and the Bond Trustee or filed by the Institutions in any court, with a copy to the Authority and the Bond Trustee.

Section 6.2. Remedies in General. Upon the occurrence and during the continuance of any Agreement Event of Default, the Bond Trustee on behalf of the Authority, at its option, may take such action as it deems necessary or appropriate to collect amounts due hereunder, to enforce performance and observance of any obligation or agreement of the Institutions hereunder or to protect the interests securing the same, and may, without limiting the generality of the foregoing:

(a) Exercise any or all rights and remedies given hereby or available hereunder or given by or available under any other instrument of any kind securing the Institutions’ performance hereunder.

(b) Take any action at law or in equity to collect the Note Payments then due, whether on the stated due date or by declaration of acceleration or otherwise, for damages or for specific performance or otherwise to enforce performance and observance of any obligation, agreement or covenant of the Institutions hereunder.

(c) Apply to a court of competent jurisdiction for the appointment of a receiver (but only in the case of an Agreement Event of Default not described in Section 6.1(d) or (e) hereof) of any or all of the property of the Institutions, such receiver to have such powers as the court making such appointment may confer. The Institutions hereby consent and agree, and will if requested by the Bond Trustee consent and agree at the time of application by the Bond Trustee for appointment of a receiver, to the appointment of such receiver and that such receiver may be given the right, power and authority, to the extent the same may lawfully be given, to take possession of and operate and deal with such property and the revenues, profits and proceeds therefrom, with like effect as the Institutions could do so, and to borrow money and issue evidences of indebtedness as such receiver.

In the event of any Agreement Event of Default, the Authority, in addition to any other right or remedies it may have at law or in equity, shall have the right to and may enter into the Facility without being liable for any prosecution or damages therefor and may dispossess the Institutions and may lease the Facility or any part thereof to another party for a term which may extend beyond the term hereof, and receive the rent therefor, upon such terms as shall be satisfactory to the Authority. Such entry by the Authority shall not operate to release the Institutions from any sums to be paid or covenants to be performed under the Agreement during the full term hereof. In addition, the Institutions hereby agree that the receipt of rents, awards, and any other moneys or evidences thereof, and any disposition of the same by the Authority shall not constitute a waiver of the right of foreclosure and sale of the Facility by the Authority or the Bond Trustee in the case of an Agreement Event of Default.

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For the purpose of leasing the Facility to another party, the Authority or the Bond Trustee shall be authorized to make such repairs or alterations in or to the Facility as the Authority may deem necessary to place the same in good order and condition. The Institutions shall be liable to the Authority for the cost of such repairs or alterations and all expenses of such leasing. If the sum realized or to be realized from the leasing is insufficient to satisfy the sum payable by the Institutions under the Agreement, the Authority or Bond Trustee, at its option, may require the Institutions to pay such deficiency month by month, or may hold the Institutions liable in advance for the entire deficiency to be realized during the term of the leasing of the Facility. Notwithstanding such entry by the Authority, the Institutions agree that any utility service (including heat) furnished to the Facility by the Institutions prior to such entry shall continue to be furnished by the Institutions to the Facility at the expense of the Institutions.

All rights and remedies herein given or granted to the Authority are cumulative, non-exclusive and in addition to any and all rights and remedies that the Authority may have or be given by reason of any law, statute, ordinance or otherwise. Notice in accordance with Section 7.10 hereof, mailed to the Institutions at least fifteen (15) days before any proposed realization upon such collateral shall constitute reasonable notification of such event under said Uniform Commercial Code.

MISCELLANEOUS

Section 7.1. Amendments and Supplements. This Agreement may be amended, changed or modified only as provided in Article IX of the Bond Indenture.

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CERTAIN PROVISIONS OF THE MASTER INDENTURE

The following are certain provisions of the Master Trust Indenture dated as of April 1, 2010, as amended and supplemented, including the Supplemental Master Trust Indenture No. 17, dated as of July 1, 2016. As described in the forepart of this Official Statement, upon issuance of the Series 2016 Bonds, the Obligated Group under such Master Indenture will consist of Eastern Maine HealthCare Systems, Eastern Maine Medical Center, Acadia Hospital, Corp., Mercy Health System of Maine, Mercy Hospital, VNA Home Health & Hospice, The Blue Hill Memorial Hospital, Inland Hospital, Lakewood, Sebasticook Valley Health, The Aroostook Medical Center, Maine Coast Regional Health Facilities and Charles A. Dean Memorial Hospital.

DEFINITIONS

“Accountant” shall mean any firm of recognized independent certified public accountants appointed by the Obligated Group Agent to whom the Master Trustee makes no reasonable objection.

“Accounts Receivable” shall mean any and all rights of the Obligated Group or any members thereof to payment for services rendered or for goods sold or leased which is not evidenced by an instrument or chattel paper, whether or not it has been earned by performance, including but without limiting the generality of the foregoing, all “accounts” as defined in 11 M.R.S.A. § 9-1102(2).

“Affiliate” shall mean a corporation, partnership, joint venture, association, foundation, business trust or similar entity organized under the laws of the United States of America or a state thereof which (i) directly or indirectly controls a member of the Obligated Group, (ii) is directly or indirectly controlled by a member of the Obligated Group or (iii) is directly or indirectly controlled by or under common control by the same Person as a member of the Obligated Group. For purposes of this definition, control means the power to direct the management policies of a Person through the ownership of a majority of its voting securities, the right to designate or elect a majority of the members of its board of directors or other governing board or body.

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

“Agreement” shall mean any loan agreement by and between any or all members of the Obligated Group and a Related Bond Issuer.

“Annual Debt Service” shall mean the Long-Term Debt Service Requirement for the Fiscal Year in question.

“Balloon Indebtedness” shall mean (1) Long-Term Indebtedness, or Short-Term Indebtedness which is intended to be refinanced upon or prior to its maturity by Long-Term Indebtedness so that such Short-Term Indebtedness will be Outstanding, in the aggregate, for more than one year as certified in an Officer’s Certificate, twenty-five percent (25%) or more of the initial principal amount of which matures (or is payable at the option of the holder) in any twelve month period, if such twenty-five percent (25%) or more is not to be amortized to below twenty-five percent (25%) by mandatory redemption prior to such twelve month period, or (2) any portion of an issue of Long-Term Indebtedness which, if treated as a separate issue of Indebtedness, would meet the test set forth in clause (i) of this definition and which Indebtedness is designated as Balloon Indebtedness in an Officer’s Certificate stating that such portion shall be deemed to constitute a separate issue of Balloon Indebtedness.

“Bond Index” shall mean, at the option of the Obligated Group Agent either (i) but only in the case of tax-exempt obligations, the 30-year Revenue Bond Index published most recently by The Bond Buyer, or a comparable index if such Revenue Bond Index is not so published, or (ii) in the case of tax-exempt obligations or other cases, the interest rate or interest index as may be certified to the Master Trustee as appropriate to the situation by a firm of nationally recognized investment bankers or a financial advisory firm experienced in such field.

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“Buildings” shall mean the buildings, structures, fixtures and improvements now or hereafter located on the Land.

“Capitalization” shall mean the sum of (i) the aggregate principal amount of all outstanding Long-Term Indebtedness of the Obligated Group (less any Debt Reserves) plus (ii) the Fund Balance of the Obligated Group.

“Capitalized Interest” shall mean that portion of the proceeds of any Indebtedness or any other funds (other than Debt Reserves) that are held in trust and are restricted to be used to pay interest due or to become due on Indebtedness.

“Completion Indebtedness” shall mean any Indebtedness incurred by the Obligated Group for the purpose of financing the completion of constructing or equipping facilities for the construction or equipping of which some Indebtedness has theretofore been incurred in accordance with the provisions of the Master Indenture, to the extent necessary to provide a completed and equipped facility of the type and scope contemplated at the time, and in accordance with the general plans and specifications for such facility as originally prepared with only such changes as have been made in conformity with the documents pursuant to which such Indebtedness was originally incurred, including funding Debt Reserves.

“Consultant” shall mean a Person selected by the Obligated Group Agent which is not, and no member, stockholder, director, officer or employee of which is, an officer or employee of any member of the Obligated Group, and which is either a nationally recognized professional management consultant in the area of healthcare finance or an Accountant (which may be a member of the Obligated Group’s external auditing firm) in the area of hospital finance having the skill and experience necessary to render the particular opinion, certificate or report required by the provisions hereof in which such requirement appears.

“Corporate Trust Office” shall mean the office of the Master Trustee at which its principal corporate trust business in the State of Maine is conducted, which at the date hereof is located at One Federal Street, Boston, Massachusetts, Attention: Corporate Trust Department.

“Current Assets” shall mean cash and cash equivalent deposits, marketable securities, interests in mutual funds of marketable securities, Accounts Receivable, accrued interest receivable, any funds designated by a Governing Body for any specific purpose and any other assets of the Obligated Group ordinarily considered current assets under generally accepted accounting principles.

“Debt Reserves” shall mean that portion of the proceeds of any Indebtedness or any other funds (other than Capitalized Interest) that are held in trust and are restricted to be used to pay principal or principal and interest due or to become due on Indebtedness (including moneys held in a reserve fund as security for Related Bonds).

“Discount Indebtedness” shall mean Indebtedness sold to the original purchaser thereof (other than any underwriter or other similar intermediary) at a discount from the par amount of such Indebtedness.

“Equipment” shall mean the equipment, machinery, furnishings, fixtures (to the extent not a part of the Buildings), and other similar items of tangible personal property, necessary or convenient for the operation of the Facility, whether now owned or held or hereafter acquired, less any equipment, machinery, furnishings, fixtures to the extent not a part of the Buildings, and other similar items which may actually be disposed of or removed pursuant to Section 5.5 of the Master Indenture.

“Facility” shall mean the Land, Buildings and Equipment.

“Fiscal Year” shall mean the fiscal year of the Obligated Group, which shall be the fiscal year designated from time to time in writing by the Obligated Group Agent to the Master Trustee. Whenever the Master Indenture refers to a Fiscal Year of a specific member of the Obligated Group, such reference shall be to the actual fiscal year adopted by such member of the Obligated Group.

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“Fund Balance” shall mean (i) for a Person that is a Tax-Exempt Organization, the aggregate fund balance of such Person, and (ii) for a Person that is not a Tax-Exempt Organization, the excess of assets over liabilities of such Person.

“Future Test Period” shall mean the two full Fiscal Years immediately following the computation then being made, or, if such computation is then being made in connection with the provision of funds for capital improvements, following completion of the capital improvements then being financed.

“Governing Body” shall mean, when used with respect to a member of the Obligated Group, its board of trustees, board of directors, or other board or group of individuals in which the power to direct the management and policies of the member of the Obligated Group are vested.

“Gross Receipts” shall mean all receipts, revenues, income and other moneys received by or on behalf of any one or more members of the Obligated Group, including, but without limiting the generality of the foregoing, revenues derived from the ownership or operation of the Property, including insurance and condemnation proceeds with respect to the Property or any portion thereof, and all rights to receive the same, whether in the form of Accounts Receivable, contract rights or other rights, and the proceeds of such rights, and whether now owned or held or hereafter coming into existence; provided, however, that gifts, grants, bequests, donations and contributions heretofore or hereafter made and designated or specified by the granting authority, donor or maker thereof as being for specified purposes (other than payment of debt service on Indebtedness) and the income derived therefrom to the extent required by such designation or specification shall be excluded from Gross Receipts.

“Gross Receipts Account” shall mean the account established pursuant to Section 2.8 hereof.

“Guaranty” shall mean all obligations of any member of the Obligated Group guaranteeing in any manner, whether directly or indirectly, any obligation of any other Person which would, if such other Person were a member of the Obligated Group, constitute Indebtedness under the Master Indenture, unless the obligation of such other Person is other than for the payment of a sum certain or reasonably ascertainable.

“Hedging Obligation” shall mean a Note, expressly identified as such in a Supplemental Master Indenture or in an Officer’s Certificate delivered to the Master Trustee as being entered into in order to hedge the interest payable on all or a portion of any Indebtedness, which agreement may include, without limitation, an interest rate swap, a forward or futures contract or an option (e.g., a call, put, cap, floor or collar) and which arrangement does not constitute an obligation to repay money borrowed, credit extended or the equivalent thereof.

“Historic Test Period” shall mean, at the option of the Obligated Group Agent, either (i) any twelve (12) consecutive calendar months out of the most recent period of eighteen (18) full calendar months, or (ii) the most recent period of twelve (12) full consecutive calendar months for which the financial statements of the Obligated Group have been reported upon by an Accountant, or (iii) the most recent Fiscal Year of the Obligated Group.

“Income Available for Debt Service” shall mean, with respect to the Obligated Group, as to any period of time, net income, or excess of revenue over expenses (including investment income, gifts and bequests, but excluding donor restricted funds and the income thereon to the extent restricted by the donor thereof to other than debt service or Operating Expenses) before depreciation, amortization and interest, as determined in accordance with generally accepted accounting principles consistently applied; provided, that no determination thereof shall take into account (i) any revenue or expense of any Person which is not a member of the Obligated Group, (ii) any extraordinary or nonrecurring gains or losses (including without limitation any gain or loss resulting from either the extinguishment of Indebtedness or the sale, exchange or other disposition of capital assets not in the ordinary course of business), (iii) the net proceeds of insurance (other than business interruption insurance) and condemnation awards, (iv) any non-reoccurring accounting changes, (v) unrealized gains or losses from investments including impairment losses on investments deemed to be other than temporary (notwithstanding generally accepted accounting principles), (vi) any unrealized gain or loss on or related to Hedging Obligations or other hedges or derivatives, and (vii) any item that is considered by the Obligated Group Agent to be a non-cash item of the Person involved.

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“Indebtedness” shall mean all obligations for payments of principal and interest with respect to money borrowed, incurred or assumed by one or more members of the Obligated Group, including Guaranties (other than any Guaranty by any member of the Obligated Group of Indebtedness of any other member of the Obligated Group), purchase money mortgages, financing or capital leases, installment purchase contracts or other similar instruments in the nature of a borrowing by which one or more members of the Obligated Group will be unconditionally obligated to pay; provided that Indebtedness shall not include Indebtedness of one Obligated Group member to another Obligated Group member, any Guaranty by any Obligated Group member of Indebtedness of any other Obligated Group member, the joint and several liability of any Obligated Group member on Indebtedness issued by another Obligated Group member or any obligation to repay moneys deposited by patients or others with an Obligated Group member as security for or as prepayment of the cost of patient care or any rights of residents of life care, elderly housing, nursing, or similar facilities to endowment or similar funds deposited by or on behalf of such residents. Nothing in this definition or otherwise shall be construed to count Indebtedness more than once.

“Insurance Consultant” shall mean a Person appointed by the Obligated Group Agent, qualified to survey risks and to recommend insurance coverage for hospital facilities and organizations engaged in like operations, who may be a broker or agent with whom a member of the Obligated Group transacts business, but who shall have no interest, direct or indirect, in any member of the Obligated Group and shall not be a member, director or employee of any member of the Obligated Group.

“Land” shall mean the real property, interests in real property, rights-of-way, easements, licenses, and other rights in real property described in Exhibit A hereto.

“Law or Regulation Circumstances” shall mean the occurrence of the following: (i) applicable laws, governmental regulations, third-party reimbursement methods or governmental insurance programs shall prevent or substantially impair, have prevented or substantially impaired or will prevent or substantially impair the Obligated Group from generating sufficient Aggregate Income Available for Debt Service to comply with the particular requirement of the Master Indenture in question, (ii) the effect upon the Obligated Group of the circumstances set forth in clause (i) above shall have been confirmed by a signed Consultant’s opinion (or in the discretion of the Related Bond Issuer, an Officer’s Certificate) delivered to the Master Trustee, (iii) an Officer’s Certificate shall have been delivered to the Master Trustee stating that the Obligated Group has generated the maximum Aggregate Income Available for Debt Service which, in the opinion of such officer, could reasonably be generated given the circumstances set forth in clause (i) above, and (iv), but only at the request of the Master Trustee, there shall have been delivered to the Master Trustee an Opinion of Counsel as to any conclusions of law supporting the opinion of the Consultant. Law or Regulation Circumstances shall not been deemed to include, or to have occurred as a result of the implementation of the State Funding Intercept as described in the Agreement.

“Lien” shall mean any mortgage, pledge, leasehold interest, security interest, choate or inchoate lien, judgment lien, easement, or other encumbrance on title, including, but not limited to, any mortgage or pledge of, security interest in or lien or encumbrance on any Property of any member of the Obligated Group which secures any Indebtedness or any other obligation of any member of the Obligated Group.

“Long-Term Debt Service Coverage Ratio” shall mean the ratio for the period in question of Aggregate Income Available for Debt Service to Maximum Annual Debt Service. In the event that any provision of the Master Indenture requires the computation of the Long-Term Debt Service Coverage Ratio, whether for the Historic Test Period or for the Future Test Period, and such computation does not produce the coverage ratio otherwise required by the provision of the Master Indenture in question, the coverage ratio requirement of such provision shall nevertheless be deemed satisfied if Law or Regulation Circumstances exist, and if there is delivered to the Master Trustee a Consultant’s opinion, report or certificate to the effect that the Long-Term Debt Service Coverage Ratio for the Future Test Period is projected to be not less than the highest practicable level, but in no event less than 1.00. Notwithstanding anything in the Master Indenture to the contrary requiring a Consultant’s opinion, report or certificate, projections of the Long-Term Debt Service Coverage Ratio may be made by an Officer’s Certificate if (i) the Long-Term Debt Service Coverage Ratio for the Historic Test Period as shown by an Officer’s Certificate exceeded 1.50, and (ii) the Long-Term Debt Service Coverage Ratio for the Future Test Period is projected by an Officer’s Certificate to exceed 1.50 unless

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the Related Bond Issuer, in its sole discretion, requires that such Long-Term Debt Service Coverage Ratio calculations be made by a Consultant’s opinion or report.

“Long-Term Debt Service Requirement” shall mean, for any period of time, the aggregate of the scheduled payments to be made (other than from amounts irrevocably deposited with a Related Bond Trustee or a lender for purposes of such payments) in respect of principal and interest on Outstanding Long-Term Indebtedness of members of the Obligated Group during such period, also taking into account (i) with respect to Balloon Indebtedness, the provisions of Section 5.16 of the Master Indenture, (ii) with respect to Variable Rate Indebtedness, the provisions of Section 5.17 of the Master Indenture, (iii) with respect to Discount Indebtedness, the provisions of Section 5.18 of the Master Indenture, (iv) with respect to Debt Reserves, the provisions of Section 5.19 of the Master Indenture, (v) with respect to Capitalized Interest, the provisions of Section 5.20 of the Master Indenture, and (vi) with respect to Indebtedness represented by a Guaranty, the provisions of Section 5.9(b)(1) of the Master Indenture.

“Long-Term Indebtedness” shall mean all Indebtedness, other than Short-Term Indebtedness, for any of the following:

(a) Payments of principal and interest with respect to money borrowed for an original term, or renewable at the option of the borrower for a period from the date originally incurred, of longer than one year;

(b) Payments under leases which are capitalized in accordance with generally accepted accounting principles having an original term, or renewable at the option of the lessee for a period from the date originally incurred, longer than one year; and

(c) Payments under installment purchase contracts having an original term in excess of one year.

“Master Indenture” shall mean the Master Trust Indenture, dated as of April 1, 2010, by and between the Obligated Group and the Master Trustee, and when amended or supplemented, such Master Indenture, as amended or supplemented.

“Master Indenture Event of Default” shall mean any one or more of those events set forth in Section 6.1 of the Master Indenture.

“Master Trustee” shall mean U.S. Bank National Association, of Boston, Massachusetts, and its successor to its duties under the Master Indenture.

“Maximum Annual Debt Service” shall mean, at the time of computation, the greatest Long-Term Debt Service Requirement for the then current or any future Fiscal Year.

“Non-Recourse Indebtedness” shall mean any Indebtedness secured by a Lien, which Indebtedness is not a general obligation of the Obligated Group or any member thereof, and the liability for which Indebtedness is effectively limited to the Property subject to such Lien with no recourse, directly or indirectly, to any other Property of the Obligated Group or any member thereof.

“Note” shall mean any Note issued, authenticated and delivered under the Master Indenture.

“Noteholder” or “Holder” shall mean the registered owner of any Note in registered form or the bearer of any Note in coupon form which is not registered or is registered to bearer.

“Obligated Group” shall mean Eastern Maine Healthcare Systems, Eastern Maine Medical Center, Acadia Hospital Corp., and any Person admitted to the obligated group under the Master Indenture in accordance with the provisions of Section 5.21 thereof.

“Obligated Group Agent” shall mean Eastern Maine Healthcare Systems, or such other member of the Obligated Group as the then incumbent Obligated Group Agent shall designate as a successor by an Officer’s Certificate delivered to the Master Trustee.

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“Officer’s Certificate” shall mean a certificate signed by the chairman of the Governing Body, or the president, chief executive officer or chief financial officer of the Obligated Group Agent.

“Operating Expenses” shall mean the total operating expenses of the Obligated Group, as determined in accordance with generally accepted accounting principles consistently applied.

“Operating Revenues” shall mean the total operating revenues of the Obligated Group less applicable deductions from operating revenues, as determined in accordance with generally accepted accounting principles consistently applied.

“Opinion of Bond Counsel” shall mean an opinion in writing signed by Bond Counsel.

“Opinion of Counsel” shall mean a written opinion of an attorney or firm of attorneys acceptable to the Master Trustee and the Obligated Group Agent and, to the extent a related Bond Issuer is asked to take action in reliance thereon, the Related Bond Issuer, and who may be either counsel for the Obligated Group, for any member thereof, or for the Master Trustee.

“Outstanding”, when used with reference to Notes, Guaranties and all other Indebtedness, shall mean, as of any date of determination, all Notes, Guaranties and all other Indebtedness theretofore issued or incurred and not paid and discharged except: (i) Notes theretofore cancelled by the Master Trustee or delivered to the Master Trustee for cancellation; (ii) Notes or Guaranties which are deemed paid and no longer Outstanding as provided in the Master Indenture; (iii) Notes for which provision for payment has been made in the manner provided in the Master Indenture; (iv) Notes in lieu of which other Notes have been authenticated and delivered or have been paid unless proof satisfactory to the Master Trustee has been received that any such Note is held by a bona fide purchaser; and (v) Indebtedness not represented by Notes or Guaranties which has been cancelled, paid in full, discharged in full by the obligee or defeased.

“Permitted Acquisitions” shall mean acquisitions of Property permitted by Section 5.6 of the Master Indenture.

“Permitted Debt” shall mean Indebtedness of any of the members of the Obligated Group permitted by Section 5.8 of the Master Indenture.

“Permitted Dispositions” shall mean dispositions of Property permitted by Section 5.5 of the Master Indenture.

“Permitted Encumbrances” shall mean encumbrances on Property permitted by Section 5.4 of the Master Indenture.

“Permitted Guarantees” shall mean guarantees by any of the members of the Obligated Group permitted by Section 5.9 of the Master Indenture.

“Permitted Releases” shall mean releases of interests in Property permitted by Section 5.7 of the Master Indenture.

“Permitted Reorganizations” shall mean the consolidation, merger, or reorganization of any of the members of the Obligated Group permitted by Section 5.10 of the Master Indenture.

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

“Project” shall mean any project as defined in the Agreement.

“Property” shall mean any and all assets of the members of the Obligated Group, any land, leasehold interests, buildings, machinery, equipment, hardware, and inventory of the members of the Obligated Group,

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wherever located and whether now owned or hereafter acquired, any and all rights, titles and interests in and to any and all fixtures, and property whether real or personal, tangible or intangible and wherever situated and whether now owned or hereafter acquired and shall include all Current Assets, unrestricted funds and endowments, revenues, receipts or other moneys, or right to receive any of the same, including, without limitation, Gross Receipts, Accounts Receivable, the Land, the Buildings, the Equipment, the Project, contract rights, deposit accounts, investment property and general intangibles, and all proceeds of all of the foregoing.

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

“Related Bond Indenture” shall mean any indenture, bond resolution or other comparable instrument pursuant to which a series of Related Bonds is issued.

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

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

“Related Bonds” shall mean the revenue bonds or other obligations issued by any state, territory or possession of the United States or any municipal corporation or political subdivision formed under the laws thereof or any constituted authority or agency or instrumentality of any of the foregoing empowered to issue obligations on behalf thereof (“governmental issuer”), pursuant to a single Related Bond Indenture, the proceeds of which are loaned or otherwise made available to (i) a member of the Obligated Group in consideration of the execution, authentication and delivery of a Note or Notes to or for the order of such governmental issuer, or (ii) any Person other than a member of the Obligated Group in consideration of the issuance to such governmental issuer (A) by such Person of any indebtedness or other obligation of such Person, and (B) by a member of the Obligated Group of a Guaranty issued under the Master Indenture in respect of such indebtedness or other obligation.

“Related Supplement” shall mean an indenture supplemental to, and authorized and executed pursuant to the terms of, the Master Indenture for the purpose of creating a particular series of Notes or a particular Guaranty issued hereunder.

“Short-Term Indebtedness” shall mean all Indebtedness, other than Long-Term Indebtedness, for any of the following:

(a) Payments of principal and interest with respect to money borrowed for an original term, or renewable at the option of the borrower for a period from the date originally incurred, of one year or less;

(b) Payments under leases which are capitalized in accordance with generally accepted accounting principles having an original term, or renewable at the option of the lessee for a period from the date originally incurred, of one year or less; and

(c) Payments under installment purchase contracts having an original term of one year or less.

“Subordinated Indebtedness” shall mean all obligations incurred or assumed by one or more members of the Obligated Group, the payment of which is by its terms specifically subordinated to payments on all Notes, or the principal of and interest on which would not be paid (whether by the terms of such obligation or by agreement of the obligee) when the Notes are in default or while bankruptcy, insolvency, receivership or other similar proceedings are instituted and implemented.

“Supplemental Master Indenture” shall mean each Supplemental Master Trust Indenture to the Master Indenture, by and between the Obligated Group and the Master Trustee, and when amended or supplemented, such Supplemental Master Indenture, as amended or supplemented.

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“Tax-Exempt Organization” shall mean a Person organized under the laws of the United States of America or any state thereof which is an organization described in Section 501(c)(3) and exempt from federal income taxes under Section 501(a) of the Code, or corresponding provisions of federal income tax laws from time to time in effect.

“Transaction Test” shall mean the Master Trustee shall have received any one of the following with respect to the Obligated Group:

(A) a Consultant’s opinion, report or certificate demonstrating that the Long-Term Debt Service Coverage Ratio for the Future Test Period is projected to be not less than 1.35.

(B) an Officer’s Certificate demonstrating that the Long-Term Debt Service Coverage Ratio for the Historic Test Period, assuming that the proposed additional Long-Term Indebtedness had been incurred at the beginning of the Historic Test Period and as such the proposed Long-Term Indebtedness is added to the then current aggregate outstanding principal amount of all Long-Term Indebtedness, is not less than 1.25.

(C) (1) an Officer’s Certificate demonstrating that the Long-Term Debt Service Coverage Ratio for the Historic Test Period is not less than 1.20, and (2) a Consultant’s opinion, report or certificate demonstrating that the Long-Term Debt Service Coverage Ratio for the Future Test Period is projected to be not less than 1.30.

(D) an Officer’s Certificate, verified by an opinion, report or certificate of an Accountant, demonstrating, based upon audited financial statements for the Historic Test Period, that immediately after the proposed transaction the aggregate principal amount of all outstanding Long-Term Indebtedness (less the amount of any Debt Reserves) will not exceed sixty percent (60%) of the Capitalization of the Obligated Group.

The requirements of clauses (A) through (C) of the definition of Transaction Test above shall be deemed satisfied if Law or Regulation Circumstances exist, and if there is delivered to the Master Trustee a Consultant’s opinion, report or certificate to the effect that the Long-Term Debt Service Coverage Ratio for the Future Test Period is projected to be not less than the highest practicable level, but in no event less than 1.00.

“Value” when used in connection with Property of any members of the Obligated Group, shall mean: (i) when used in connection with Property, Plant and Equipment, at the option of the Obligated Group Agent (a) the cost basis of such Property, Plant and Equipment, net of accumulated depreciation, as it is carried on the books of the members of the Obligated Group, and in conformity with generally accepted accounting principles consistently applied, or (b) the appraised value of such Property, Plant and Equipment as determined by an appraiser who is a Member of the Appraisal Institute (MAI) and acceptable to the Master Trustee, such appraisal taking place within two (2) years of the date such value is used in any computation or calculation herein, and (ii) when used in connection with Accounts Receivable, Current Assets, Fund Balance and Gross Receipts, shall mean the value of such items as set forth in the most recent audited financial statements of the applicable member of the Obligated Group.

“Variable Rate Indebtedness” shall mean Indebtedness that bears interest at a variable, adjustable or floating rate.

AUTHORIZATIONS, ISSUANCE AND TERMS OF NOTES AND GUARANTIES

Section 2.1. Series and Amount of Notes and Guaranties. The number of series of Notes that may be created under the Master Indenture is not limited. The aggregate principal amount of Notes of each series that may be issued, authenticated and delivered under the Master Indenture is not limited except as limited by the provisions of the Master Indenture or of the Related Supplement.

Section 2.5. Supplement Creating Series of Notes or a Guaranty. The members of the Obligated Group and the Master Trustee may from time to time enter into a Related Supplement in order to create a series of Notes or a Guaranty issued under the Master Indenture. Such Related Supplement shall (i) with respect to a series of Notes created thereby, set forth the date thereof, and the date or dates on which principal of and premium, if any, and interest on such Notes shall be payable, and (ii) with respect to a Guaranty created

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thereby, provide for the form of such Guaranty and in either case shall contain such other terms and provisions as shall not be inconsistent with the provisions of the Master Indenture. All members of the Obligated Group shall approve and acknowledge the issuance of any Notes or Guaranties under the Master Indenture.

PARTICULAR COVENANTS OF THE MEMBERS OF THE OBLIGATED GROUP

Section 5.1. Payment of Principal and Interest. The members of the Obligated Group jointly and severally covenant to promptly pay or cause to be paid the principal of, premium, if any, and interest on each Note issued under the Master Indenture, regardless of when such Note was issued, at the place, on the dates and in the manner provided in the Master Indenture, in the Related Supplement and in said Notes and any coupons appertaining to any Note according to the terms thereof whether at maturity, upon proceedings for redemption, by acceleration or otherwise.

The members of the Obligated Group agree and represent that they have each received fair consideration in return for the obligations undertaken and to be undertaken by the members of the Obligated Group resulting from each Note issued or to be issued by any member of the Obligated Group under the Master Indenture.

Section 5.2. Covenants as to Corporate Existence, Maintenance of Property, Etc. The members of the Obligated Group by the Master Indenture covenant:

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

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

(c) To do all things reasonably necessary to conduct its affairs and carry on its business and operations in such manner as to comply in all material respects with any and all applicable laws of the United States and the several states thereof and to duly observe and conform to all valid orders, regulations or requirements of any governmental authority relative to the conduct of its business and the ownership of its Property; provided, nevertheless, that nothing contained in the Master Indenture shall require it to comply with, observe and conform to any such law, order, regulation or requirement of any governmental authority so long as the validity thereof or the applicability thereof to it shall be contested in good faith; provided, however, that no such contest shall subject the Master Trustee or any Related Bond Issuer to the risk of any liability, and, in any event, that the Obligated Group shall jointly and severally indemnify the Master Trustee and any Related Bond Issuer against any liability resulting from such contest.

(d) Promptly to pay all lawful taxes, governmental charges and assessments at any time levied or assessed upon or against it or its Property; provided, however, that it shall have the right to contest in good faith any such taxes, charges or assessments or the collection of any such sums and pending such contest may delay or defer payment thereof; provided, however, that no such contest shall subject the Master Trustee or any Related Bond Issuer to the risk of any liability, and, in any event, that the Obligated Group shall jointly and severally indemnify the Master Trustee and any Related Bond Issuer against any liability resulting from such contest.

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(e) Promptly to pay or otherwise satisfy and discharge all of its obligations and Indebtedness and all demands and claims against it as and when the same become due and payable, other than any thereof (exclusive of the Notes and Guaranties issued and Outstanding under the Master Indenture) whose validity, amount or collectibility is being contested in good faith; provided, however, that no such contest shall subject the Master Trustee or any Related Bond Issuer to the risk of any liability, and, in any event, that the Obligated Group shall jointly and severally indemnify the Master Trustee and any Related Bond Issuer against any liability resulting from such contest.

(f) At all times to comply with all terms, covenants and provisions of any Liens at such time existing upon its Property or any part thereof or securing any of its Indebtedness; provided, however, that it shall have the right to contest in good faith any such terms, covenants or provisions and pending such contest may delay or defer compliance therewith; provided, however, that no such contest shall subject the Master Trustee or any Related Bond Issuer to the risk of any liability, and, in any event, that the Obligated Group shall jointly and severally indemnify the Master Trustee and any Related Bond Issuer against any liability resulting from such contest.

(g) In the case of each member of the Obligated Group which operates a licensed hospital, to procure and maintain all necessary licenses and permits and maintain accreditation of its hospital facilities (other than those of a type for which accreditation is not then available) by the Joint Commission, or any similar national accreditation organization, and the status of its hospital facilities (other than those not currently having such status) as a provider of health care services eligible for reimbursement under any appropriate third-party payor programs and comparable programs, including future governmental programs as long as, in the opinion of the Obligated Group Agent, such eligibility or accreditation is in the best interests of the Obligated Group.

(h) In the case of each member of the Obligated Group which is a Tax-Exempt Organization at the time it becomes a member of the Obligated Group, so long as any Related Bond remains outstanding under the Related Bond Indenture, to take no action or suffer any action to be taken by others under their control which would result in the interest on any Related Bond becoming subject to federal income taxes. Notwithstanding the foregoing, nonprofit members of the Obligated Group may change to a for-profit status provided that (i) the Master Trustee receives an Officer’s Certificate stating that such change is in the best interest of the Obligated Group and stating the reasons therefor and (ii) the Obligated Group enters into such agreements and arrangements, acceptable to the Master Trustee, as may be necessary to preserve the tax-exempt status of any tax-exempt Related Bonds that will remain outstanding after the conversion. The Obligated Group shall deliver to the Master Trustee an Opinion of Bond Counsel confirming that such agreements and arrangements will preserve such tax-exempt status prior to approving such agreements and arrangements. In addition, to the extent that a conversion to for-profit status might affect the validity of any securities issued by a Related Bond Issuer, the Master Trustee also may require an Opinion of Bond Counsel confirming that such validity will continue.

(i) On the date on which each member of the Obligated Group becomes subject to the provisions of the Master Indenture and at all times thereafter, to consent to the jurisdiction of the courts of the State of Maine for causes of action arising solely under the terms of the Master Indenture and to appoint and maintain an agent (which may be the Obligated Group Agent) in the State of Maine to receive service of process for this limited purpose.

(j) Notwithstanding the above paragraphs in this section, the members of the Obligated Group may change their status with respect to accreditations, licenses, approvals and qualifications, upon filing with the Master Trustee an Officer’s Certificate to the effect that (i) the proposed change is in the best interest of the Obligated Group and stating the reasons therefor and (ii) such change will not materially adversely affect the operations and net revenues of the Obligated Group.

Section 5.3. Filing of Financial Statements Certificate of No Default, Other Information Each member of the Obligated Group, respectively, covenants that it will, through the Obligated Group Agent:

(a) As soon as practicable but in no event later than four months after the end of each Fiscal Year, such audited financial statements may be those of the Obligated Group individually or collectively, provided if such Statements are those of the Obligated Group Agent, such statements shall have consolidating schedules

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reflecting the operations of the constituent members of the system, file with the Master Trustee, with each Noteholder who may have so requested or in whose behalf the Master Trustee may have so requested (i) its revenue and expense statement (or a revenue and expense statement of any consolidated group of companies of which it is a member) for such Fiscal Year and (ii) its balance sheet (or a balance sheet of any consolidated group of companies of which it is a member) as of the end of such Fiscal Year, each accompanied by an audit or opinion of an Accountant.

(b) As soon as practicable but in any event no later than five months after the end of each Fiscal Year file, or cause to be filed, with the Master Trustee and with each Noteholder who may have so requested or in whose behalf the Master Trustee may have so requested (i) a combining revenue and expense statement of the members of the Obligated Group (or of any consolidated group of companies of which the members of the Obligated Group are members) presenting each separately and combined, along with combining entries eliminating material inter-company balances and transactions, for such Fiscal Year and (ii) a combining balance sheet presented on the basis described in (i) above as of the end of such Fiscal Year, each accompanied by an audit or opinion of an Accountant.

(c) As soon as practicable but in no event later than five months after the end of each Fiscal Year, file with the Master Trustee, and with each Noteholder who may have so requested or in whose behalf the Master Trustee may have so requested, an Officer’s Certificate which shows the computations necessary to ascertain whether or not the ratio set forth in Section 5.12 of the Master Indenture has been achieved for such Fiscal Year and stating whether or not to the best knowledge of the signers the Obligated Group is in default in the performance of any covenant contained in the Master Indenture, and, if so, specifying each such default of which the signers may have knowledge.

(d) If a Master Indenture Event of Default shall have occurred and be continuing, (i) file with the Master Trustee such other financial statements and information concerning its operations and financial affairs (or of any consolidated group of companies of which it is a member) as the Master Trustee may from time to time reasonably request, excluding specifically donor records, patient records and personnel records and (ii) provide access to its facilities for the purpose of inspection by the Master Trustee during regular business hours or at such other times as the Master Trustee may reasonably request.

(e) Within thirty (30) days after its receipt thereof, file with the Master Trustee a copy of each report which any provision of the Master Indenture requires to be prepared by a Consultant or an Insurance Consultant.

Section 5.4. Permitted Encumbrances. (a) The members of the Obligated Group covenant that, except for Permitted Encumbrances described in paragraph (b) below, the members of the Obligated Group shall not create, permit to be created, or suffer to be created, any Lien upon any of the members of the Obligated Group’s Property now owned or hereafter acquired.

(b) Permitted Encumbrances shall include only the following:

(1) the Lien represented by any security interest to a series of Related Bonds represented by any parity security interest created upon the Gross Receipts or the equipment (if any), which Lien shall be on a parity with all Notes issued under the Master Indenture;

(2) any parity Lien upon the Facility (if any) or Gross Receipts only if and to the extent that such portion of the Facility or Gross Receipts has been or could have been released as a Permitted Release under Section 5.7 of the Master Indenture;

(3) any Lien upon Property only if and to the extent that such Property could have been disposed of as a Permitted Disposition under Section 5.5 of the Master Indenture;

(4) any Lien upon the facility or Gross Receipts given to secure Subordinated Indebtedness that is by its terms specifically junior and subordinate, in the

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Gross Receipts given by any member of the Obligated Group to a holder or holders of any Notes;

(5) any Lien upon Property (other than Current Assets) that is not part of the Facility, without limitation;

(6) any Lien in the form of a purchase money mortgage or security interest given to secure Permitted Debt described in Section 5.8(b)(9), (10) or (21) of the Master Indenture;

(7) any Lien arising by reason of good faith deposits with any member of the Obligated Group in connection with leases of real estate or personalty, bids or contracts (other than contracts for the payment of money), deposits by members of the Obligated Group to secure public or statutory obligations, or to secure, or given in lieu of, surety, stay or appeal bonds, and deposits as security for the payment of taxes or assessments or other similar charges;

(8) any Lien arising by reason of deposits with, or the giving of any form of security to any captive insurance company, any governmental agency or any body created or approved by law or governmental regulation for any purpose at any time as required by law or governmental or administrative regulation as a condition to the transaction of any business or the exercise of any privilege or license, or to enable any member of the Obligated Group to maintain self-insurance or to participate in any funds established to cover any insurance risks or in connection with worker’s compensation, unemployment insurance, pension or profit sharing plans or other social security, or to share in the privileges or benefits required for companies participating in such arrangements;

(9) any Lien in the form of a judgment lien or notice of pending action against the Obligated Group so long as such judgment or pending action is being contested and execution thereon is stayed or while the period for responsive pleadings has not lapsed;

(10) any choate or inchoate Lien in the form of (A) rights reserved to or vested in any municipality or public authority by the terms of any right, power, franchise, grant, license, permit or provision of law, affecting any Property, to (1) terminate such right, power, franchise, grant, license or permit, provided that the exercise of such right would not materially impair the use of such Property or materially and adversely affect the value thereof, or (2) purchase, condemn, appropriate or recapture, or designate a purchaser of, such Property; (B) any liens on any Property for taxes, assessments, levies, fees, water and sewer rents, and other governmental and similar charges and any liens of mechanics, materialmen, laborers, suppliers or vendors for work or services performed or materials furnished in connection with such Property, which are not due and payable or which are not delinquent or which, or the amount or validity of which, are being contested and execution thereon is stayed or, with respect to liens of mechanics, materialmen and laborers, have been due for less than one-hundred twenty (120) days or, in the aggregate, secure claims of less than $200,000; (C) easements, rights-of-way, servitudes, restrictions and other minor defects, encumbrances, and irregularities in the title to any Property which do not materially impair the use of such Property or materially and adversely affect the value thereof; and (D) rights reserved to or vested in any municipality or public authority to control or regulate any Property or to use such Property in any manner, which rights do not materially impair the use of such Property or materially and adversely affect the value thereof;

(11) any Lien described in Exhibit B to the Master Indenture which is existing on the date of authentication and delivery of the initial series of Notes, including renewals or refinancings thereof, provided that no such Lien may be extended or modified to apply to any Property of any member of the Obligated Group not subject to such Lien

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on such date, unless such Lien as so extended or modified otherwise qualifies as a Permitted Encumbrance under the Master Indenture;

(12) any Lien (other than a Lien on Property which is part of the Facility, on current Assets, on Gross Receipts or on Accounts Receivable) securing Non-Recourse Indebtedness incurred in compliance herewith;

(13) any Lien on Property (other than a Lien on Property which is part of the Land, Buildings or Equipment) acquired by any member of the Obligated Group if the assumption of the Indebtedness, secured by the Lien by any member of the Obligated Group is Permitted Indebtedness permitted under the provisions of Section 5.8 of the Master Indenture, and if an Officer’s Certificate is delivered to the Master Trustee certifying that (A) the Lien and the Indebtedness, if any, secured thereby were created and incurred by a Person other than any member of the Obligated Group prior to the acquisition of such Property by any member of the Obligated Group, (B) the Lien was created prior to the decision of any member of the Obligated Group to acquire the Property and was not created for the purpose of enabling any member of the Obligated Group to avoid the limitations of the Master Indenture on creation of Liens on Property of any member of the Obligated Group and (C) the Lien attaches solely to the Property acquired and such Lien does not by its terms extend, automatically or otherwise, to the other Property of any member of the Obligated Group;

(14) any Lien on Property, other than a Lien on the Property described in the following paragraph, if, prior to the creation of such Lien or the acquisition of Property subject to such Lien an Officer’s Certificate is delivered to the Master Trustee stating that (A) after giving effect to the Lien, the Value of the Property which is subject to a Lien under Section 5.4(b)(14) or (15) will not exceed fifteen percent (15%) of the Value of the Property, Plant and Equipment and Current Assets of the Obligated Group as of the end of the Historic Test Period giving effect to the receipt of any gifts or grants by the Obligated Group, and (B) the creation of the proposed Lien will not adversely affect the repayment of any Notes;

(15) any Lien on inventory, Accounts Receivable, Gross Receipts or pledges of gifts or grants to be received in the future, which Lien secures either Short-Term Indebtedness incurred in compliance with the provisions of Section 5.8(b)(14) of the Master Indenture or Non-Recourse Indebtedness incurred in compliance with the provisions of Section 5.8(b)(15) of the Master Indenture if, prior to the creation of such Lien or the acquisition of Property subject to such Lien an Officer’s Certificate is delivered to the Master Trustee stating that after giving effect to the Lien, the Value of the Property which is subject to such Lien will not exceed, at the election of the Obligated Group Agent, the greater of either (A) fifteen percent (15%) of the Value of the Property, Plant and Equipment and Current Assets of the Obligated Group as of the end of the Historic Test Period or (B) seventy-five percent (75%) of the aggregate net Accounts Receivable of the Obligated Group as of the end of the Historic Test Period;

(16) any Lien representing rights of setoff and banker’s liens with respect to funds on deposit in a financial institution in the ordinary course of business;

(17) any Lien on Property received by any member of the Obligated Group through gifts, grants or bequests, such Liens being due to restrictions on such gifts, grants or bequests of Property or the income thereon;

(18) any Lien in favor of the holder or holders of Notes on a parity basis with the Liens and pledges in favor of any other holder or holders of Outstanding Notes;

(19) any Lien on moneys deposited by patients or others with any member of the Obligated Group as security for or as prepayment for the cost of patient care;

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(20) any Lien due to rights of third-party payors for recoupment of amounts paid to any member of the Obligated Group;

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

(22) any Lien on Accounts Receivable securing or deemed to secure any Indebtedness incurred in accordance with Section 5.8(b)(22) of the Master Indenture; such Liens shall be entitled to a parity position with the Lien on Accounts Receivable created under the Master Indenture.

(23) Any Lien relating to the leasing of furniture, fixtures, and/or equipment in the ordinary course of business;

(24) Any Lien securing Completion Indebtedness.

(c) Notwithstanding the provisions of paragraph (b) above, the Obligated Group may create or suffer to be created or exist a Lien upon Property, in favor of the holder of any Indebtedness, with prior notice to the Master Trustee, the Related Bond Issuer and the Related Bond Trustee but without their consent, so long as such Lien, or a Lien at least on a parity therewith, is effectively granted in favor of the Holders of all Outstanding Notes and all Notes to become Outstanding under the Master Indenture.

Section 5.5. Permitted Dispositions. (a) The members of the Obligated Group covenant that, except for Permitted Dispositions described in paragraph (b) below, the members of the Obligated Group shall not sell, lease, remove, transfer, assign, convey or otherwise dispose of any of the members of the Obligated Group’s Property.

(b) Permitted Dispositions shall include only the following:

(1) the disposition of Property if the Value of such Property disposed of in any one Fiscal Year is less than the greater of five percent (5%) of the Value of the Property, Plant and Equipment at the close of the immediately preceding Fiscal Year or five percent (5%) of the Value of Property, Plant and Equipment as shown in the audited financial statements of the Obligated Group for its fiscal year ended in 2010, without limitation;

(2) the disposition of Property if the Value of such Property disposed of in any one Fiscal Year equals or exceeds the greater of five percent (5%) of the Value of the Property, Plant and Equipment at the close of the immediately preceding Fiscal Year or five percent (5%) of the Value of Property, Plant and Equipment as shown in the audited financial statements of the Obligated Group for its fiscal year ended in 2010; provided, however, that (i) the Obligated Group certifies to the Master Trustee that such disposal shall not decrease the scope of the Facility so that the Facility becomes inadequate for the requirements of the Obligated Group or the Master Trustee, (ii) the proceeds of such disposition are utilized by the Obligated Group to purchase or obtain Property (including Current Assets) of similar value to the disposed Property or are transferred to the Redemption Account and used for the redemption of Bonds, and (iii) an Officer’s Certificate is delivered to the Related Bond Issuer and the Master Trustee to the effect that the Long-Term Debt Service Coverage Ratio for the Future Test Period, after giving effect to such disposition, will be at least equal to 1.25;

(3) the disposition of Land that is unused or surplus upon which none of the Project, the Buildings or the Equipment is situated;

(4) the disposition of Property that is not part of the Facility and that does not generate Gross Receipts, based upon an Officer’s Certificate in form satisfactory to the

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Related Bond Issuer and the Master Trustee; provided that the Obligated Group certifies to the Master Trustee that either (i) the Long-Term Debt Service Coverage Ratio for the Future Test Period, after giving effect to such disposition, will be at least equal to 1.50; (ii) the Long-Term Debt Service Coverage Ratio for the Future Test Period, after giving effect to such disposition, will not decrease from what it had been prior to such disposition and will be at least equal to 1.25; or (iii) the Property disposed of has a current Value of less than the greater of ten percent (10%) of the Value of the Property, Plant and Equipment at the close of the immediately preceding Fiscal Year or ten percent (10%) of the Value of Property, Plant and Equipment as shown in the audited financial statements of the Obligated Group for its fiscal year ended in 2010;

(5) the disposition of all or any portion of Property to an Affiliate; provided that: (i) prior to the effective date of such disposition, the Master Trustee shall have been provided with an Opinion of Bond Counsel to the effect that such disposition is not in contravention of the Act and will not adversely affect the exemption from federal or State income tax of the interest paid or payable on the Bonds; (ii) the transferee shall assume in writing, and the Obligated Group shall retain, all of the obligations of the Obligated Group under the Master Indenture; (iii) prior to the effective date of such disposition, the Related Bond Issuer and the Master Trustee shall have been provided with an Opinion of Counsel to the effect that the security interest in the Gross Receipts (which is not the subject of such disposition) created under this Master Indenture, shall not be adversely affected; (iv) prior to the effective date of such disposition, such transferee shall have pledged its gross revenues to the Related Bond Issuer to the effect that such revenues are treated as Gross Receipts; (v) all covenants, agreements and obligations set forth in this Master Indenture shall be implemented and administrated on a consolidated basis between the Obligated Group and such transferee; (vi) the Obligated Group and the Affiliate certify to the Related Bond Issuer and the Master Trustee that immediately subsequent to such disposition neither the Obligated Group nor the Affiliate shall be in default of any of the covenants, agreements and obligations set forth in this Master Indenture; and (vii) an Opinion of Counsel shall be delivered to the Related Bond Issuer to the effect that the assumption by the Affiliate of all covenants, agreements and obligations in this Master Indenture shall be valid and binding and enforceable in accordance with its terms to the extent of the Value of the Property transferred; such opinion may be qualified only to the extent that enforceability may be limited by bankruptcy, insolvency, and other laws affecting creditors’ rights or remedies heretofore or hereafter enacted and by general principles of equity;

(6) the disposition of all or any portion of Property to another entity, whether or not such other entity is an Affiliate; provided that: (i) prior to the effective date of such disposition, the Related Bond Issuer and the Master Trustee shall have been provided with an Opinion of Bond Counsel to the effect that such disposition is not in contravention of the enabling legislation of the Related Bond Issuer and will not adversely affect the exemption from federal or State income tax of the interest paid or payable on the Related Bonds; (ii) the transferee shall assume in writing, and the Obligated Group shall retain, all of the obligations of the Obligated Group under the Master Indenture; (iii) prior to the effective date of such disposition, the Related Bond Issuer and the Master Trustee shall have been provided with an Opinion of Counsel to the effect that the security interest in the Gross Receipts (which is not the subject of such disposition) created under this Master Indenture shall not be adversely affected; (iv) prior to the effective date of such disposition, such transferee shall have pledged its gross revenues to the effect that such revenues are treated as Gross Receipts; (v) all covenants, agreements and obligations set forth in this Master Indenture shall be implemented and administrated on a consolidated basis between the Obligated Group and such transferee; (vi) prior to the effective date of such disposition, the Related Bond Issuer and the Master Trustee shall have been provided with (A) a Consultant’s opinion, certificate or report to the effect that the Long-Term Debt Service Coverage Ratio of the Institution would have been at least 1.25 for the Historic Test Period, with the Long-Term Debt Service Coverage Ratio calculated as if the disposition had occurred at the beginning of such Historic Test Period, or (B) a Consultant’s opinion,

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certificate or report to the effect that the projected Long-Term Debt Service Coverage Ratio for the Future Test Period is (1) greater than 1.30 during the Future Test Period, or (2) equal to or greater than the projected Long-Term Debt Service Coverage Ratio during the Future Test Period, assuming such disposition would not have occurred; (vii) the Obligated Group certifies that immediately subsequent to such disposition neither the Obligated Group nor such other entity shall be in default under any of the covenants, agreements or obligations set forth in this Master Indenture; and (viii) an Opinion of Counsel shall be delivered to the Related Bond Issuer and the Master Trustee to the effect that the assumption by the other entity of all covenants, agreements and obligations in this Master Indenture shall be valid and binding and enforceable in accordance with its terms to the extent of the Value of the Property transferred; such opinion may be qualified only to the extent that enforceability may be limited by bankruptcy, insolvency, and other laws affecting creditors’ rights or remedies heretofore or hereafter enacted and by general principles of equity;

(7) the disposition of Property in the case of any proposed or potential condemnation or taking for public or quasi-public use of the Property or any portion thereof, provided that the proceeds of any such condemnation or taking shall be applied in the manner set forth in Section 5.15 of this Master Indenture;

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

(9) the disposition of Property in the ordinary course of business;

(10) the disposition of Property (other than Current Assets) that does not constitute part of the hospital facilities of the Obligated Group, without limitation;

(11) the disposition of Property if such Property is replaced promptly by other Property of comparable utility or worth;

(12) the disposition of Property if the Obligated Group, or any member thereof, receives fair market value therefor and the proceeds of such disposition are applied to the purchase of additional capital assets, applied to the defeasance, discharge, redemption or retirement of Indebtedness or deposited into a depreciation reserve fund;

(13) the disposition of Property to any Person, provided that prior to the sale, lease, removal or other disposition the Transaction Test shall have been satisfied; provided, that in calculating the Transaction Test, income or other revenues derived from the Property to be sold, leased, removed or otherwise disposed of shall not be included;

(14) the disposition of Property constituting the sale, assignment or other disposition of Accounts Receivable to a Person, including an Affiliate, provided that the transaction is commercially reasonable and for consideration deemed fair and adequate in an Officer’s Certificate delivered to the Master Trustee;

(15) the disposition, without consideration, of any Current Assets to any Person other than a member of the Obligated Group in any Fiscal Year in an amount equal to five percent (5%) of Current Assets as of the end of the immediately preceding Fiscal Year;

(16) the disposition of Property to another member of the Obligated Group; and

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(17) the disposition of Property in connection with a Permitted Reorganization.

Section 5.6. Permitted Acquisitions. The members of the Obligated Group may acquire Property by any means without limitation; provided, however any Indebtedness incurred in connection therewith or any Liens placed thereon shall satisfy the conditions therefore set forth in this Master Indenture.

Section 5.7. Permitted Releases. (a) The members of the Obligated Group covenant that, except for Permitted Releases described in paragraph (b) below, the members of the Obligated Group shall not release any of the Gross Receipts from the security interest created in favor of any holder or holders of Notes or release any of the Property from the covenants against encumbrances and liens set forth in Section 5.4 of the Master Indenture.

(b) Permitted Releases shall include only the following:

(1) a release made with respect to Gross Receipts or other Property in which a member of the Obligated Group has granted a lien or security interest to a Related Bond Issuer that is to be disposed of in conjunction with a Permitted Disposition;

(2) a release made with respect to Gross Receipts or other Property that are permitted to be disposed of, but in fact are not to be disposed of, in accordance with the provisions of the Master Indenture relating to Permitted Dispositions;

(3) the release of the lien represented by the Gross Receipts, or on any other Property, as applicable, provided that:

(i) prior to the effective date of such release, the Master Trustee and the Related Bond Issuer shall have been provided with an Opinion of Bond Counsel to the effect that, as a legal matter, such release will not adversely affect the exemption from federal or State income tax of the interest paid or payable on the Related Bonds;

(ii) prior to the effective date of such release, the Master Trustee and the Related Bond Issuer shall have been provided with an Opinion of Counsel to the effect that the remaining security interest in the Gross Receipts, or on any other Property as applicable, created under the Master Indenture shall not be adversely affected; and

(iii) prior to the effective date of such release the Master Trustee and the Related Bond Issuer shall have been provided with a Consultant’s opinion, report or certificate to the effect that the Long-Term Debt Service Coverage Ratio of the Obligated Group would have been at least 1.25 for the Historic Test Period, with the Long-Term Debt Service Coverage Ratio calculated as if the release had occurred at the beginning of such Historic Test Period.

Section 5.8. Permitted Debt. (a) The members of the Obligated Group covenant that, except for Permitted Debt described in paragraph (b) below, the members of the Obligated Group shall not incur Indebtedness, directly, indirectly or contingently.

(b) Permitted Debt shall include only the following:

(1) Indebtedness in the form of a borrowing from another member of the Obligated Group;

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(2) Indebtedness in the form of any other financial obligation to another member of the Obligated Group;

(3) Permitted Guarantees;

(4) Indebtedness represented by a letter of credit reimbursement agreement or other similar reimbursement agreement entered into by any member of the Obligated Group and a financial institution providing either a liquidity or credit support with respect to any other Indebtedness incurred in accordance with any other provision of this paragraph (b);

(5) Indebtedness secured by a Permitted Encumbrance described in Section 5.4(b) (2) or (3); which does not in the aggregate at any time of computation exceed ten percent (10%) of the Aggregate Income Available for Debt Service of the Obligated Group for the Historic Test Period;

(6) Indebtedness, other than that described in paragraph (b)(5) above, in an amount which does not in the aggregate at any time of computation exceed ten percent (10%) of the Aggregate Income Available for Debt Service of the Obligated Group for the Historic Test Period;

(7) interim Indebtedness with respect to any construction project for which money is available therefor in the construction fund for such project;

(8) Obligations not for borrowed money, which obligations are not generally treated as indebtedness, such as contributions for employee benefit plans, social security alternative plans, self-insurance programs, captive insurance companies and unemployment insurance liabilities;

(9) Indebtedness secured by purchase money mortgages or purchase money security interests for the purpose of acquiring Property which constitutes capital assets of a member of the Obligated Group and the term of which does not exceed the useful life of such Property; provided, however that before such Permitted Debt may be incurred, the Obligated Group shall deliver to the Master Trustee, a Consultant’s opinion, report or certificate showing that the average annual Long-Term Debt Service Coverage Ratio for the Historic Test Period, as adjusted to include average annual interest payable on such Permitted Debt and depreciation to be taken on the Property being acquired during the Future Test Period, shall not be less than 1.30;

(10) Long-Term Indebtedness, if prior to incurrence of the Long-Term Indebtedness, there is delivered to the Master Trustee:

(i) Evidence that at least one of the components of the Transaction Test shall have been satisfied; or

(ii) An Officer’s Certificate (A) to the effect that the total principal amount of Long-Term Indebtedness to be incurred at such time, when added to the aggregate principal amount of all other Long-Term Indebtedness theretofore issued pursuant to this clause (ii) and then Outstanding, will not exceed fifteen percent (15%) of the Operating Revenues of the Obligated Group for the Historic Test Period and (B) projecting that the provisions of Section 5.12 hereof shall be complied with for the Future Test Period, taking into consideration projected revenues and the proposed Indebtedness. Any Long-Term Indebtedness or portion thereof incurred under this subsection (10)(ii) which is Outstanding at any time shall be deemed to have been incurred under the definition of Transaction Test if at any time subsequent to the incurrence thereof there shall be filed with the Related Bond Issuer and the Master Trustee an Officer’s Certificate to the effect that such Outstanding Indebtedness or portion thereof would satisfy such other provision, specifying such other provision, and thereupon the amount deemed to have been incurred and to be

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Outstanding under this subsection (10)(ii) shall be deemed to have been reduced by such amount and to have been incurred under such other provision. If the terms of such other provision require a Consultant’s opinion, report or certificate, such opinion, report or certificate, shall also be obtained and filed with the Related Bond Issuer and the Master Trustee;

(11) Completion Indebtedness, to the extent that there is submitted to the Master Trustee a certificate of an Architect to the effect that the net proceeds of such proposed Completion Indebtedness, other than amounts required to be deposited into any Debt Reserves, Capitalized Interest and amounts incident to the issuance of Completion Indebtedness, is needed for the completion of the construction or equipping of the facilities in question;

(12) Long-Term Indebtedness incurred for the purpose of refunding, including advance refunding, any Outstanding Long-Term Indebtedness; provided that there is delivered to the Master Trustee an Officer’s Certificate to the effect that either (i) such refunding will not increase Maximum Annual Debt Service by more than ten percent (10%) during the years that the Indebtedness to be refunded would have been Outstanding but for such proposed refunding or (ii) such refunding will result in a present value savings in the Long-Term Debt Service Requirement;

(13) Indebtedness not mentioned in any other paragraph of this Section 5.8(b) incurred in the ordinary course of business;

(14) Short-Term Indebtedness, provided that immediately after the incurrence of such Indebtedness the aggregate Outstanding principal amount of all such Short-Term Indebtedness does not exceed the greater of (i) sixty (60) days’ Operating Expenses of the Obligated Group for the Historic Test Period, (ii) fifteen percent (15%) of the aggregate of Operating Revenues of the Obligated Group for the Historic Test Period, or (iii) seventy-five percent (75%) of the aggregate net Accounts Receivable of the Obligated Group as of the end of the Historic Test Period; provided that for a period of at least thirty (30) days in each Fiscal Year, the principal amount of all such Indebtedness shall be reduced to not in excess of the greater of seven (7) days’ Operating Expenses of the Obligated Group for the Historic Test Period or five percent (5%) of the aggregate of Operating Revenues of the Obligated Group for the Historic Test Period, unless there is filed with the Related Bond Issuer and the Master Trustee an Officer’s Certificate to the effect that such Short-Term Indebtedness, because of changes in law or regulations, must or reasonably should remain Outstanding in excess of such seven (7) days’ or five percent (5%) limitation. Short-Term Indebtedness may also be incurred if such Short-Term Indebtedness could be incurred under Section 5.8(b)(10) hereof assuming it were Long-Term Indebtedness;

(15) Non-Recourse Indebtedness, in a principal amount Outstanding at any one time not in excess of fifteen percent (15%) of Operating Revenues for the Historic Test Period, which Non-Recourse Indebtedness is: (i) secured by a Lien on Property which is part of the Property, Plant and Equipment which Lien is created in compliance with the provisions of Section 5.4(b) (14) or (15) hereof; or (ii) secured by a Lien on Property which is inventory or pledges of gifts or grants to be received in the future without limit, provided that such gifts or grants shall be excluded from the calculation of Income Available for Debt Service so long as such Indebtedness is Outstanding;

(16) Subordinated Indebtedness; provided that no such Subordinated Indebtedness shall result in an increase in Annual Debt Service of the Obligated Group by more than twenty percent (20%) during the Future Test Period (on an average annual basis) over Annual Debt Service during the Historic Test Period;

(17) Balloon Indebtedness, provided that (i)(A) the final maturity of such Balloon Indebtedness is more than eighteen (18) months from the date of its incurrence or

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the date of any calculation in respect of such Balloon Indebtedness or (B) the Obligated Group has obtained a commitment on commercially reasonable terms from a financial institution providing for the refinancing of such Balloon Indebtedness over a period of at least thirty-six (36) months; and (ii) the conditions to the incurrence of Indebtedness described in Section 5.8(b)(10) hereof are satisfied assuming, at the option of the Obligated Group, that (w) such Indebtedness will be amortized over (I) twenty (20) years, if such debt matures twenty (20) or more years after the date of calculation, (II) the remaining term to maturity, if such term is less than twenty (20) years from the date of calculation, or (III) the term of refinancing if such debt is subject to a binding commitment for the refinancing of such debt, in each case with level annual debt service, at a rate of interest equal to that derived from the Bond Index, as determined by an Officer’s Certificate, (x) such Indebtedness will be amortized during the term to the maturity thereof by deposits made by the Obligated Group to a sinking fund therefor pursuant to the terms of such Indebtedness or in accordance with a sinking fund schedule therefor established by resolution of the Governing Body of the Obligated Group adopted at or subsequent to the time of the incurrence of such Indebtedness, as certified in an Officer’s Certificate, provided that, at the time of such calculation, all deposits required to have been made into such sinking fund prior to such date shall have been made, (y) the principal of such Indebtedness is due and payable on the due date thereof, or in the case of Balloon Indebtedness payable at the option of the holder thereof, on the date on which such Indebtedness may first be tendered for payment by the holder thereof, or (z) the principal of and interest on such Indebtedness is due and payable at the times and in the amounts specified in the refinancing commitment therefor, if any, referred to in clause (i)(B) above, and that the interest rate thereon equals the interest rate specified in such refinancing commitment; provided, however, that the provisions of clause (w) immediately above or, in the case of Balloon Indebtedness payable at the option of the holder, clause (x) immediately above may be implemented only in the event that (I) such Balloon Indebtedness to be incurred (together with all other Balloon Indebtedness) is in a principal amount not in excess of five percent (5%) of Operating Revenues for the Historic Test Period, or (II) the Obligated Group has obtained a commitment on commercially reasonable terms from a financial institution providing for the refinancing of such Balloon Indebtedness over a period of at least sixty (60) months;

(18) Indebtedness in the form of a borrowing from an Affiliate, from any foundation affiliated with a member of the Obligated Group, or from any restricted funds of an Affiliate;

(19) Long-Term Indebtedness incurred (i) not in connection with any other Indebtedness at such time being incurred, and (ii) primarily for the purpose of funding any Debt Reserves, other than a Debt Reserve created in connection with an advance refunding or a cross-over refunding;

(20) Indebtedness incurred directly or indirectly with respect to a self-insurance or captive insurance program benefitting any member of the Obligated Group;

(21) Indebtedness in the form of installment purchase contracts, leases, purchase money mortgages, loans, sale agreements or other borrowing instruments; provided that the aggregate Annual Debt Service on the Indebtedness permitted under this clause shall not in any Fiscal Year exceed two and one-half percent (2.5%) of total Operating Revenues for the Historic Test Period;

(22) Indebtedness incurred or deemed incurred by virtue of any recourse obligation associated with any sale or assignment of Accounts Receivable, but in no event in an amount in excess of the monetary consideration received from any such sale or assignment;

Section 5.9. Permitted Guarantees. (a) The members of the Obligated Group covenant that, except for Permitted Guarantees described in paragraph (b) below, the members of the Obligated Group shall

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not guarantee the payment of Indebtedness of third parties (other than by endorsement for collection or deposit of checks or drafts or by the guaranty of third party loans to patients).

(b) Permitted Guarantees, to the extent permitted by law, shall include only the following:

(1) the Guaranty of Indebtedness if such Guaranty could then be incurred by the Obligated Group as Long-Term Indebtedness under Section 5.8(b)(10) hereof, as Short-Term Indebtedness under Section 5.8(b)(14) hereof, or as Balloon Indebtedness under Section 5.8(b)(17) hereof, in each case taking the following sentence into account. For purposes of any covenants or computations provided for in this paragraph (b)(1), the aggregate annual principal and interest payments on, and the principal amount of, any indebtedness of a Person which is the subject of a Guaranty hereunder and which would, if such obligation were incurred by the Obligated Group, constitute Long-Term Indebtedness, shall be deemed equivalent to zero percent (0%) of the actual Annual Debt Service on, and principal amount of, such indebtedness if the Long-Term Debt Service Coverage Ratio of the Person whose indebtedness is the subject of a Guaranty hereunder is greater than or equal to 2.0, and twenty percent (20%) of the actual Annual Debt Service on, and principal amount of, such indebtedness if the Long-Term Debt Service Coverage Ratio of the Person whose indebtedness is the subject of a Guaranty hereunder is less than 2.0 but greater than or equal to 1.0 (assuming in each case that the definitions of the Master Indenture apply to such Indebtedness and to the Person whose indebtedness is the subject of a Guaranty hereunder), so long as such Guaranty constitutes a contingent liability under generally accepted accounting principles; provided, however, that the Annual Debt Service on, and principal amount of, any Long-Term Indebtedness represented by a Guaranty shall be deemed equivalent to all of the actual Annual Debt Service, and principal amount of, such Indebtedness, if a payment has been made by the Obligated Group on such Guaranty within three (3) years of the date of any computation to be made under this paragraph (b)(1) or if the Long-Term Debt Service Coverage Ratio of the Person whose indebtedness is the subject of a Guaranty hereunder is less than 1.0 (assuming the definitions of the Master Indenture apply to such Indebtedness and to the Person whose indebtedness is the subject of a Guaranty hereunder). Also for purposes of any covenants or computations provided for herein, the aggregate annual principal and interest payments on, and principal amount of, any Short-Term Indebtedness represented by a Guaranty of obligations of a Person shall be deemed equivalent to the actual principal and interest payments on the Indebtedness which is the subject of the Guaranty (assuming the definitions of the Master Indenture apply to such Indebtedness);

(2) the Guaranty of Indebtedness of another member of the Obligated Group, which Indebtedness has been or could be incurred as Permitted Debt hereunder.

Section 5.10. Permitted Reorganizations. (a) The members of the Obligated Group covenant that, except for Permitted Reorganizations described in paragraph (b) below, no member of the Obligated Group shall merge, consolidate or reorganize (which reorganization involves a transfer of a license or a substantial amount of the assets of a member of the Obligated Group) with any other corporation.

(b) Permitted Reorganizations shall include only the following:

(1) a merger, consolidation or reorganization in which (A) either a member of the Obligated Group will be the continuing corporation, or the successor corporation shall be a corporation organized and existing under the laws of the United States of America or a state thereof and such corporation shall expressly assume the due and punctual payment of the principal of and premium, if any, and interest on all Outstanding Notes according to their tenor, and the due and punctual performance and observance of all of the covenants and conditions of the Master Indenture by a supplement satisfactory to the Master Trustee, executed and delivered to the Master Trustee by such corporation; (B) the Obligated Group immediately after such merger, consolidation or reorganization would not be in default in the performance or observance of any covenant or condition contained in

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the Master Indenture; (C) the Transaction Test shall be satisfied; and (D) if Related Bonds are then outstanding, there shall have been delivered to the Master Trustee, an Opinion of Bond Counsel, in form and substance satisfactory to the Master Trustee, to the effect that under then existing law the consummation of such merger, consolidation or reorganization would not adversely affect the validity of the Related Bonds or the exemption from federal income taxation of interest payable on such Related Bonds;

(2) a merger, consolidation or reorganization between or among members of the Obligated Group.

(c) In case of any such consolidation, merger or reorganization and upon any such assumption by the successor corporation, such successor corporation shall succeed to and be substituted for its predecessor, with the same effect as if it had been named herein as a member of the Obligated Group. Such successor corporation thereupon may cause to be signed, and may issue in its own name Notes hereunder. All Outstanding Notes so issued by such successor corporation hereunder shall in all respects have the same legal rank and benefit under this Master Indenture as Outstanding Notes theretofore or thereafter issued in accordance with the terms of this Master Indenture as though all of such Notes had been issued hereunder by the Obligated Group without any such consolidation, merger or reorganization having occurred.

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

(e) The Master Trustee shall receive an Opinion of Counsel as conclusive evidence that any such consolidation, merger or reorganization, and any such assumption, complies with the provisions of this Section and that it is proper for the Master Trustee under the provisions of Section 7.1 hereof and of this Section to join in the execution of the supplement hereto provided for in this Section.

Section 5.12. Rate Covenant. (a) The Obligated Group shall maintain for each Fiscal Year the ratio of Aggregate Income Available for Debt Service to Annual Debt Service at least at 1.20. If such ratio, as calculated at the end of any Fiscal Year, is below the required level, the members of the Obligated Group covenant to retain a Consultant, within sixty (60) days after the date the audited financial statements of the members of the Obligated Group are delivered to the Governing Body of the Obligated Group Agent, to make recommendations to increase such ratio for subsequent Fiscal Years of the members of the Obligated Group at least to the required level. The members of the Obligated Group agree that they will, to the extent permitted by law, charter, by-laws or contract, follow the recommendations of the Consultant, unless the Governing Body adopts a resolution certifying to the effect that such recommendations are not in the best interests of the Noteholders, and files a certified copy of such resolution with the Master Trustee and each Related Bond Issuer and Related Bond Trustee. So long as the Obligated Group shall retain a Consultant and the members of the Obligated Group shall follow such Consultant’s recommendations to the extent permitted by law, charter, by-laws or contract, this Section shall be deemed to have been complied with even if such ratio for any subsequent Fiscal Year is below the required level of 1.20, unless the ratio at the end of any such Fiscal Year is less than 1.00. The Obligated Group shall no longer be required to retain such Consultant if and for so long as such ratio is restored to and maintained at not less than 1.20.

(b) If Law or Regulation Circumstances exist, which prevent compliance with the ratio set forth in Section 5.12(a) above, the requirements set forth in said Section shall be deemed satisfied as long as: (i) the Obligated Group maintains for each Fiscal Year the ratio of Income Available for Debt Service to Annual Debt Service of at least 1.00; (ii) the opinion or report of a Consultant issued with respect to the Law or Regulation Circumstances is received by the Master Trustee within six months of the members of the Obligated Group’s failure to maintain the covenant referred to in Section 5.12(a) above, and is received at least once during every uninterrupted three year period thereafter that the Obligated Group fails to maintain such ratio; and (iii) an Officer’s Certificate is received by the Master Trustee at least once during each year during which the Consultant’s opinion or report referred to in clause (ii) above is not received by the Master Trustee, which

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Officer’s Certificate confirms the continued existence of the factual circumstances giving rise to the Law or Regulation Circumstances.

Section 5.13. Insurance. The members of the Obligated Group agree that they will maintain, or cause to be maintained, insurance (including one or more self-insurance programs considered to be adequate under the provisions of Section 5.14(d) hereof) covering such risks and in such amounts as, in their reasonable judgment, is adequate to protect them and their Property and operations. The insurance required to be maintained pursuant hereto shall be subject to the review of an Insurance Consultant every two years, commencing on the last day of the Fiscal Year ending in 2010, and the members of the Obligated Group agree that they will follow any recommendations of the Insurance Consultant, except to the extent that the Governing Body determines in good faith that such recommendations are unreasonable and delivers an Officer’s Certificate to the Master Trustee setting forth the reasons for such determination. The members of the Obligated Group agree that they will deliver or cause to be delivered to the Master Trustee at or prior to the delivery of the initial series of Notes under the Master Indenture, and thereafter annually within thirty (30) days after the beginning of the next succeeding Fiscal Year, an Officer’s Certificate setting forth a description of the insurance maintained, or caused to be maintained, by the members of the Obligated Group pursuant to this Section and then in effect and stating whether such insurance and the manner of providing such insurance and any reductions or eliminations of the amount of any insurance coverage during the annual period covered by such report comply with the requirements of this Section and Section 5.14 hereof and adequately protect the members of the Obligated Group and their Property and operations. Such annual report shall also set forth any recommendations of the Insurance Consultant as to additional insurance, if any, reasonably required (during the period preceding the next such annual report) for the protection referred to in the next preceding sentence in light of available insurance coverage and practice in the hospital industry and, if any change shall be made in such insurance as to either amount or type of coverage, a description and notice of such change shall be immediately furnished to the Master Trustee by the members of the Obligated Group. In the event that the members of the Obligated Group fail to maintain any insurance as provided herein, the Master Trustee may procure and maintain such insurance at the expense of the members of the Obligated Group. All policies and certificates of insurance required hereby shall be open to inspection by the Master Trustee at all reasonable times.

Section 5.14. Reduction and Modification of Insurance Coverage. (a) If the members of the Obligated Group have or hereafter obtain any of the following types of insurance, the Obligated Group must secure the concurrence of an Insurance Consultant before it may reduce or eliminate (other than in the ordinary course of business) the amount of the insurance coverage for the following types of insurance: (i) comprehensive general public liability insurance, including product liability, blanket contractual liability and automobile insurance including owned, non-owned and hired automobiles (excluding collision and comprehensive coverage thereon), (ii) fire, flood, lightning, windstorm, hail, explosion, riot, riot attending a strike, civil commotion, damage from aircraft, smoke and uniform standard coverage and vandalism and malicious mischief endorsements and business interruption insurance covering such perils, (iii) professional liability or medical malpractice insurance, (iv) worker’s compensation insurance, (v) boiler insurance, and (vi) business interruption insurance.

(b) In making its decision whether to concur in such reductions or eliminations the Insurance Consultant may take into account whether the Obligated Group has established an adequate self-insurance program with respect to the risk involved in accordance with paragraph (d) below.

(c) Insurance required under the Master Indenture may be in the form of a blanket insurance policy or policies and in the case of all policies may include additional names of insureds. Required limits of coverage may be provided by so-called “umbrella” coverages.

(d) In lieu of obtaining third-party coverage for the foregoing risks, the members of the Obligated Group may self-insure any of the required coverages (or a portion thereof) except for the coverages described in Section 5.14(a)(B) and (E) hereof, provided, that if such self-insurance is other than in the ordinary course of business, the Obligated Group delivers to the Master Trustee a report of an Insurance Consultant stating that the Obligated Group’s decision to self-insure such risks is consistent with proper management and insurance practices. In addition, as long as the members of the Obligated Group maintain any self-insurance against professional liability, the members of the Obligated Group will provide the Master Trustee at least once every two years, and once every year if requested by the Master Trustee, with a report of an Insurance Consultant

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concerning the adequacy of funding and the funding determination processes employed by the members of the Obligated Group for such self-insurance.

(e) Except with respect to insurance described in paragraph (d) above, the Obligated Group may also arrange insurance coverage through a captive insurance company provided an Insurance Consultant’s report indicates that such insurance is consistent with proper management and insurance practices.

(f) In the event that the insurance required by this Master Indenture is not commercially available and the Obligated Group has chosen not to self-insure against such losses, the Obligated Group shall employ an Insurance Consultant, who shall review the insurance coverage of the Obligated Group and the Property, Plant and Equipment and make recommendations on the types, amounts and provisions of insurance that should be carried. Insurance requirements shall be modified to conform with the recommendations of the Insurance Consultant except that the Related Bond Issuer may authorize deviations from such recommendations.

Section 5.15. Insurance and Condemnation Proceeds, (a) The Obligated Group may make agreements and covenants with the holders of Indebtedness which is incurred in compliance with the provisions of the Master Indenture and which is secured by a Permitted Encumbrance with respect to the application or use to be made of insurance proceeds or condemnation awards which may be received in connection with Property which is subject to such Permitted Encumbrance.

(b) After application in accordance with paragraph (a) above, remaining amounts received by the Obligated Group as insurance proceeds with respect to any casualty loss or as condemnation awards may be used in such manner as the recipient may determine, including, without limitation, applying such moneys to the payment or prepayment of any Note or Notes in accordance with the terms thereof, subject to compliance with the provisions of the Master Indenture; provided that if the amount of such proceeds or awards received with respect to any casualty loss or condemnation exceeds ten percent (10%) of the Value of the Property, Plant and Equipment of the Obligated Group, the Obligated Group agrees that it will promptly remit such proceeds or awards to the Master Trustee (or to a Related Bond Trustee, if required), and the Obligated Group may elect to direct the Master Trustee or the Related Bond Trustee, as the case may be, to cause such funds to be applied either (i) to the repair, reconstruction, restoration or replacement of the damaged or condemned facility or the purchase of capital equipment or (ii) to the prepayment of Related Bonds issued and Outstanding. If the Obligated Group elects the provisions of clause (i) above, any remaining balance of such funds after such repair, reconstruction, restoration or replacement shall be paid to the Obligated Group.

Section 5.16. Debt Service on Balloon Indebtedness. For purposes of the computation of the Long-Term Debt Service Requirement or Annual Debt Service, whether historic or projected, Balloon Indebtedness shall, at the election of the Obligated Group Agent, be deemed to be Indebtedness which, at the later of the date of its original incurrence or the date of calculation, was payable over (a) twenty (20) years, if such debt matures twenty (20) or more years after the date of calculation, (b) the remaining term to maturity of such Indebtedness, if such term is less than twenty (20) years from the date of calculation, or (c) the term of refinancing if such Indebtedness is subject to a binding commitment for the refinancing of such Indebtedness, in each case with level annual debt service, at a rate of interest equal to that derived from the Bond Index, as determined by an Officer’s Certificate.

Section 5.17. Debt Service on Variable Rate Indebtedness. For purposes of the computation of the projected (but not historic) Long-Term Debt Service Requirement or Annual Debt Service, Variable Rate Indebtedness shall be deemed Indebtedness which bears interest at a rate derived from the Bond Index, all as determined by an Officer’s Certificate. For the purpose of computation of the historic Long Term Debt Service Requirements or Annual Debt Service, Variable Rate Indebtedness shall be computed as actual debt service.

Section 5.18. Debt Service on Discount Indebtedness. For purposes of the computation of the Long-Term Debt Service Requirement or Annual Debt Service, whether historic or projected, the amount of principal represented by Discount Indebtedness shall, at the election of the Obligated Group Agent, be deemed to be the accreted value of such Indebtedness computed on the basis of a constant yield to maturity.

Section 5.19. Credit for Debt Reserves. For purposes of the computation of the Long-Term Debt Service Requirement or Annual Debt Service, whether historic or projected, the Obligated Group Agent may

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subtract from principal due on Indebtedness any Debt Reserves which are available and are actually to be applied to make such principal payment in the year such Indebtedness matures or is redeemed or otherwise retired, at the time of such computation for the period in question.

Section 5.20. Credit for Capitalized Interest. For purposes of the computation of the Long-Term Debt Service Requirement or Annual Debt Service, whether historic or projected, the Obligated Group Agent may subtract from interest due on Indebtedness any Capitalized Interest which is available and is to be applied to make such interest payment in the year such interest comes due, at the time of such computation for the period in question.

Section 5.21. Persons Becoming Members of the Obligated Group. (a) If at any time the Obligated Group Agent and any person shall determine that such person should become a member of the Obligated Group under the Master Indenture, the members of the Obligated Group, or on their behalf the Obligated Group Agent, and such person may execute and deliver to the Master Trustee an appropriate instrument, satisfactory to the Master Trustee, containing the agreement of such person (A) to become a member of the Obligated Group under the Master Indenture and thereby become subject to compliance with all provisions of the Master Indenture pertaining to a member of the Obligated Group, including the performance and observance of all covenants and obligations of the Obligated Group under the Master Indenture, and (B) guaranteeing to the Master Trustee and each other member of the Obligated Group that all Notes and Guaranties issued and then Outstanding under the Master Indenture will be paid in accordance with the terms thereof and of the Master Indenture, when due.

(b) Each instrument executed and delivered to the Master Trustee in accordance with the paragraph above shall be accompanied by an Opinion of Counsel, addressed to and satisfactory to the Master Trustee, (i) to the effect that such instrument has been duly authorized, executed and delivered by the Obligated Group and such person and constitutes a valid and binding obligation enforceable in accordance with its terms to the extent of the fair market value of any consideration received by such person in exchange for its becoming a member of the Obligated Group, except that such Opinion of Counsel may state that enforceability may be limited by bankruptcy laws, insolvency laws and other laws affecting creditor’s rights generally, and may contain such other qualifications as shall be satisfactory to the Master Trustee, and (ii) as to such matters incidental to the transactions contemplated by this section as the Master Trustee may deem necessary.

(c) It shall be a condition precedent to the consummation of any transaction involving an instrument to be executed and delivered to the Master Trustee in accordance with the first paragraph of this section that the Master Trustee shall also have received (i) an Officer’s Certificate which demonstrates that, immediately upon any person becoming a member of the Obligated Group as part of such transaction, no member of the Obligated Group would be in default in the performance or observance of any covenant or condition to be performed or observed by it under the Master Indenture, (ii) if all amounts due or to become due on any Related Bond have not been paid to the holder thereof, an Opinion of Bond Counsel, in form and substance satisfactory to the Master Trustee, the Related Bond Issuer, and the Related Bond Trustee, to the effect that under then existing law the consummation of such transaction, whether or not contemplated on any date of the delivery of any such Related Bond, would not adversely affect the validity of such Related Bond or the exemption from federal income taxation of interest payable on any such Related Bond, and (iii) evidence that the Transaction Test (as defined in the Master Indenture) shall have been satisfied upon such person becoming a Member of the Obligated Group.

Section 5.22. Effects of Person Becoming a Member of the Obligated Group. Upon any person becoming a member of the Obligated Group pursuant to the Master Indenture:

(a) All Notes thereafter issued and any Related Supplement subsequently entered into may be executed and delivered by any member of the Obligated Group or by the Obligated Group Agent.

(b) All of the provisions, terms, covenants and representations set forth in the Master Indenture shall apply to each member of the Obligated Group from the time that each person becomes a member of the Obligated Group. All indebtedness and liens of a person becoming a member of the Obligated Group that were in existence prior to the time

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of such person becoming a member of the Obligated Group shall be permitted under the Master Indenture only if in compliance with the provisions thereof.

Section 5.23. Withdrawal From the Obligated Group. (a) No current Member of the Obligated Group may withdraw from the Obligated Group and no other member of the Obligated Group may withdraw from the Obligated Group unless:

(i) the Obligated Group Agent consents to such withdrawal;

(ii) such member is not primarily obligated under an agreement with a Related Bond Issuer whereby such member has agreed to pay debt service with respect to Related Bonds then outstanding;

(iii) if all amounts due on any Related Bond which bears interest that is exempt from federal income taxation have not been paid to the holder thereof, the Master Trustee shall have received an Opinion of Bond Counsel, in form and substance satisfactory to the Master Trustee, to the effect that under then existing law such member’s withdrawal from the Obligated Group would not adversely affect the validity of the Related Bond or cause the interest payable on such Related Bond to become subject to federal income taxation;

(iv) the Transaction Test (as defined in the Master Indenture) shall have been satisfied after giving effect to the withdrawal; and

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

(b) Upon compliance with the conditions contained in subsection (a) above, the Master Trustee shall execute any documents reasonably requested by the withdrawing member to evidence the termination of such member’s obligations under the Master Indenture, under any Supplemental Indentures and under all Notes and Guaranties issued pursuant to the Master Indenture.

DEFAULT AND REMEDIES

Section 6.1. Master Indenture Events of Defaults. Master Indenture Event of Default, shall mean any of the following events:

(a) The Obligated Group shall fail to make any payment of the principal of, the premium, if any, and interest on any Note representing Indebtedness or any payment required by any Guaranty issued and Outstanding under the Master Indenture when and as the same shall become due and payable, whether at maturity, by proceedings for redemption, by acceleration or otherwise, in accordance with the terms thereof, of the Master Indenture and the Related Supplement.

(b) Any member of the Obligated Group shall fail duly to observe or perform any covenant or agreement on its part under the Master Indenture or any Related Supplement for a period of thirty (30) days after the date on which written notice of such failure, requiring the same to be remedied, shall have been given to the members of the Obligated Group by the Master Trustee, or to the members of the Obligated Group and the Master Trustee by the holders of at least twenty-five percent (25%) in aggregate principal amount of Notes then Outstanding. If the breach is one which cannot be completely remedied within the thirty (30) days after written notice has been given, it shall not be a Master Indenture Event of Default as long as the member of the Obligated Group has taken active steps within the thirty (30) days after written notice has been given to remedy the failure and is diligently pursuing such remedy.

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(c) Any member of the Obligated Group shall default in the payment of any Indebtedness for borrowed moneys (other than Notes or Guaranties issued and Outstanding under the Master Indenture which are, and other than any other Indebtedness which is, Non-Recourse Indebtedness), in a principal amount in excess of one percent (1%) of Operating Revenues of the Obligated Group for the Historic Test Period, whether such Indebtedness now exists or shall hereafter be created, and any period of grace with respect thereto shall have expired where the effect of such default is to accelerate the maturity of such Indebtedness or to permit the holders thereof (or a trustee on behalf of such holders) to cause such Indebtedness to become due prior to its stated maturity, or an event of default as defined in any mortgage, indenture or instrument, under which there may be issued or by which there may be secured or evidenced, any Indebtedness in a principal amount in excess of one percent (1%) of Operating Revenues of the Obligated Group for the Historic Test Period, whether such Indebtedness now exists or shall hereafter be created, shall occur, provided, however, that such default shall not constitute a Master Indenture Event of Default within the meaning of this section if within thirty (30) days, or within the time allowed for service of a responsive pleading if any proceeding to enforce payment of the Indebtedness is commenced, (i) the members of the Obligated Group in good faith commence proceedings to contest the existence or payment of such Indebtedness, (ii) sufficient moneys are escrowed with a bank or trust company for the payment of such Indebtedness, or (iii) enforcement of such Indebtedness shall be stayed.

(d) The entry of a decree or order by a court having jurisdiction in the premises adjudging any member of the Obligated Group a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of any member of the Obligated Group under the Federal Bankruptcy Code or any other applicable Federal or state law, or appointing a receiver, liquidator, assignee, or sequestrator (or other similar official) of any member of the Obligated Group or of any substantial part of its Property, or ordering the winding up or liquidation of its affairs, and the continuance of any such decree or order unstayed and in effect for a period of sixty (60) consecutive days.

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

(f) An event of default added pursuant to any Related Supplement.

Provided, however, that an event described in subsections (d) or (e) above shall not be a Master Indenture Event of Default if, excluding from the Obligated Group the member or members as to which the event described in subsection (d) or (e) above has occurred, there is compliance with the provisions of the Master Indenture and an Officer’s Certificate as to such compliance is delivered to the Master Trustee within sixty (60) days of the receipt of notice of the existence of such event.

Section 6.2. Acceleration; Annulment of Acceleration. (a) Upon the occurrence and during the continuation of a Master Indenture Event of Default under the Master Indenture, the Master Trustee may and, upon the written request of the Holders of not less than twenty-five percent (25%) in aggregate principal amount of Notes Outstanding (other than Notes which represent Non-Recourse Indebtedness or Hedging Obligations), shall, by notice to the members of the Obligated Group, declare all Notes Outstanding immediately due and payable, whereupon such Notes shall become and be immediately due and payable, anything in the Notes or in the Master Indenture to the contrary notwithstanding. In such event, there shall be due and payable on the Notes an amount equal to the total principal amount of all such Notes, plus all interest accrued thereon and, to the extent permitted by applicable law, which accrues to the date of payment.

(b) At any time after the principal of the Notes shall have been so declared to be due and payable and before the entry of final judgment or decree in any suit, action or proceeding instituted on account of such default, if (i) the Obligated Group has paid or caused to be paid or deposited with the Master Trustee moneys sufficient to pay all matured installments of interest and interest on installments of principal and interest and principal or redemption prices then due (other than the principal then due only because of such declaration) of

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all Notes Outstanding; (ii) the Obligated Group has paid or caused to be paid or deposited with the Master Trustee moneys sufficient to pay the charges, compensation, expenses, disbursements, advances and liabilities of the Master Trustee (including counsel fees) and any paying agents; (iii) all other amounts then payable by the Obligated Group under the Master Indenture shall have been paid or a sum sufficient to pay the same shall have been deposited with the Master Trustee; and (iv) every Master Indenture Event of Default (other than a default in the payment of the principal of such Notes then due only because of such declaration) shall have been remedied, then the Master Trustee shall annul such declaration and its consequences with respect to any Notes or portions thereof not then due by their terms. No annulment shall extend to or affect any subsequent Master Indenture Event of Default or impair any right consequent thereon.

All rights and remedies herein given or granted to the Master Trustee are cumulative, non exclusive and in addition to any and all rights and remedies that the Master Trustee may have or be given by reason of any law, statute, ordinance or otherwise. Without limiting the generality of the foregoing, the Master Trustee shall have all rights and remedies of a secured party under the Maine Uniform Commercial Code with respect to the Gross Receipts. The Master Trustee may deal with such as collateral under said Code or in part one and in part the other. Notice in accordance with Section 7.10 hereof, mailed to the Obligated Group Agent at least fifteen (15) days before any proposed realization upon such collateral shall constitute reasonable notification of such event under said Uniform Commercial Code.

Section 6.3. Additional Remedies and Enforcement of Remedies (a) Upon the occurrence and continuance of any Event of Default, the Master Trustee may, and upon the written request of the Holders of not less than twenty-five percent (25%) in aggregate principal amount of the Notes Outstanding, together with indemnification of the Master Trustee to its satisfaction therefor, shall, proceed forthwith to protect and enforce its rights and the rights of the Noteholders under the Master Indenture by such suits, actions or proceedings as the Master Trustee, being advised by counsel, shall deem expedient, including but not limited to:

(i) Enforcement of the right of the Noteholders to collect and enforce the payment of amounts due or becoming due under the Notes;

(ii) Suit upon all or any part of the Notes;

(iii) Civil action to require any person holding moneys, documents or other property pledged to secure payment of amounts due or to become due on the Notes to account as if it were the trustee of any express trust for the Holders of Notes so secured;

(iv) Civil action to enjoin any acts or things, which may be unlawful or in violation of the rights of the Holders of Notes; and

(v) Enforcement of any other right of the Noteholders conferred by law or by the Master Indenture.

(b) Regardless of the happening of a Master Indenture Event of Default, the Master Trustee, if requested in writing by the Holders of not less than twenty-five percent (25%) in aggregate principal amount of the Notes then Outstanding, shall, upon being indemnified to its satisfaction therefor, institute and maintain such suits and proceedings as it may be advised shall be necessary or expedient (i) to prevent any impairment of the security under the Master Indenture by any acts which may be unlawful or in violation of the Master Indenture, or (ii) to preserve or protect the interests of the Holders, provided that such request and the action to be taken by the Master Trustee are not in conflict with any applicable law or the provisions of the Master Indenture and, in the sole judgment of the Master Trustee, is not unduly prejudicial to the interest of the Holders of Notes not making such request.

Section 6.4. Application of Revenues and Other Moneys After Default. During the continuance of a Master Indenture Event of Default all moneys received by the Master Trustee pursuant to any right given or action taken under the provisions of the Master Indenture, after payment of the costs and expenses of the proceedings resulting in the collection of such moneys and of the expenses and advances incurred or made by the Master Trustee with respect thereto (including counsel fees) shall be applied as follows:

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(a) Unless the principal of all Outstanding Notes shall have become or have been declared due and payable:

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

Second: To the payment to the persons entitled thereto of the unpaid principal installments of any Notes which shall have become due, whether at maturity or by call for redemption, in the order of their due dates, and if the amounts available shall not be sufficient to pay in full all the Notes due on any date, then to the payment thereof ratably, according to the amounts of principal installments due on such date, to the persons entitled thereto, without any discrimination or preference.

(b) If the principal of all Outstanding Notes shall have become or have been declared due and payable, to the payment of the principal and interest then due and unpaid upon the Notes without preference or priority of principal over interest or of interest over principal, or of any installment of interest over any other installment of interest, or of any Note over any other Note, ratably, according to the amounts due respectively for principal and interest, to the persons entitled thereto without any discrimination or preference.

(c) If the principal of all Outstanding Notes shall have been declared due and payable, and if such declaration shall thereafter have been rescinded and annulled under the provisions of the Master Indenture, then, subject to the provisions of paragraph (b) above in the event that the principal of all Outstanding Notes shall later become due or be declared due and payable, the moneys shall be applied in accordance with the provisions of paragraph (a) above.

Whenever moneys are to be applied by the Master Trustee pursuant to the provisions of this section, such moneys shall be applied by it at such times, and from time to time, as the Master Trustee shall determine, having due regard for the amount of such moneys available for application and the likelihood of additional moneys becoming available for such application in the future. Whenever the Master Trustee shall apply such moneys, it shall fix the date upon which such application is to be made and upon such date interest on the amounts of principal to be paid on such dates shall cease to accrue. The Master Trustee shall give such notice as it may deem appropriate of the deposit with it of any such moneys and of the fixing of any such date, and shall not be required to make payment to the Holder of any unpaid Note until such Note shall be presented to the Master Trustee for appropriate endorsement of any partial payment or for cancellation if fully paid.

Whenever all Notes and interest thereon have been paid under the provisions of this section and all expenses and charges of the Master Trustee have been paid, any balance remaining shall be paid to the person entitled to receive the same; if no other person shall be entitled thereto, then the balance shall be paid to the members of the Obligated Group, their successors, or as a court of competent jurisdiction may direct.

Section 6.5. Remedies Not Exclusive. No remedy by the terms of the Master Indenture conferred upon or reserved to the Master Trustee or the Noteholders is intended to be exclusive of any other remedy, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given under the Master Indenture or existing at law or in equity or by statute on or after the date of the Master Indenture.

Section 6.6. Remedies Vested in the Master Trustee. All rights of action (including the right to file proof of claims) under the Master Indenture or under any of the Notes may be enforced by the Master Trustee without the possession of any of the Notes or the production thereof in any trial or other proceedings relating thereto. Any such suit or proceeding instituted by the Master Trustee may be brought in its name as the Master Trustee without the necessity of joining as plaintiffs or defendants any Holders of the Notes. Subject to the provisions of Section 6.4 of the Master Indenture, any recovery or judgment shall be for the equal benefit of the Holders of the Outstanding Notes.

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Section 6.7. Noteholders Control of Proceedings. (a) If a Master Indenture Event of Default shall have occurred and be continuing, notwithstanding anything in the Master Indenture to the contrary, the Holders of at least a majority in aggregate principal amount of Notes then Outstanding shall have the right, at any time, by any instrument in writing executed and delivered to the Master Trustee, to direct the method and place of conducting any proceeding to be taken in connection with the enforcement of the terms and conditions of the Master Indenture or for the appointment of a receiver or any other proceedings under the Master Indenture, provided that such direction is not in conflict with any applicable law or the provisions of the Master Indenture (including indemnity to the Master Trustee as provided in the Master Indenture) and, in the sole judgment of the Master Trustee, is not unduly prejudicial to the interest of Noteholders not joining in such direction and provided further that nothing in this section shall impair the right of the Master Trustee in its discretion to take any other action under the Master Indenture which it may deem proper and which is not inconsistent with such direction by Noteholders.

(b) Notwithstanding anything in this Master Indenture to the contrary, no Holder of any Hedging Obligation, by virtue of being such Holder, shall be entitled to vote, give consents, exercise rights, or direct remedies under this Master Indenture, and provided further that any such Hedging Obligation shall be deemed to be Outstanding hereunder solely for the purpose of receiving payment hereunder.

Section 6.8. Termination of Proceedings. In case any proceeding taken by the Master Trustee on account of a Master Indenture Event of Default shall have been discontinued or abandoned for any reason or shall have been determined adversely to the Master Trustee or to the Noteholders, then the members of the Obligated Group, the Master Trustee and the Noteholders shall be restored to their former positions and rights under the Master Indenture, and all rights, remedies and powers of the Master Trustee and the Noteholders shall continue as if no such proceeding had been taken.

Section 6.9. Waiver of Master Indenture Event of Default. (a) No delay or omission of the Master Trustee or of any Holder of the Notes to exercise any right or power accruing upon any Master Indenture Event of Default shall impair any such right or power or shall be construed to be a waiver of any such Master Indenture Event of Default or an acquiescence therein. Every power and remedy given by the Master Indenture to the Master Trustee and the Holders of the Notes, respectively, may be exercised from time to time and as often as may be deemed expedient by them.

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

(c) Notwithstanding anything contained in the Master Indenture to the contrary, the Master Trustee, upon the written request of the Holders of at least a majority of the aggregate principal amount of Notes then Outstanding, shall waive any Master Indenture Event of Default under the Master Indenture and its consequences; provided, however, that, except under the circumstances set forth in paragraph (b) of Section 6.2 of the Master Indenture, a default in the payment of the principal of, premium, if any, or interest on any Note, when the same shall become due and payable by the terms thereof or upon call for redemption, may not be waived without the written consent of the Holders of all the Notes at the time Outstanding.

(d) In case of any waiver by the Master Trustee of a Master Indenture Event of Default under the Master Indenture, the members of the Obligated Group, the Master Trustee and the Noteholders shall be restored to their former positions and rights under the Master Indenture, respectively, but no such waiver shall extend to any subsequent or other Master Indenture Event of Default or impair any right consequent thereon.

Section 6.10. Appointment of Receiver. Upon the occurrence of any Master Indenture Event of Default unless the same shall have been waived as provided in the Master Indenture, the Master Trustee shall be entitled as a matter of right if it shall so elect, (A) forthwith and without declaring the Notes to be due and payable, (B) after declaring the same to be due and payable, or (C) upon the commencement of an action to enforce the specific performance of the Master Indenture or in aid thereof or upon the commencement of any other judicial proceeding to enforce any right of the Master Trustee or the Noteholders, to the appointment of a receiver or receivers of any or all of the Property of the Obligated Group with such powers as the court making

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such appointment shall confer. Each member of the Obligated Group, respectively, by the Master Indenture consents and agrees, and will if requested by the Master Trustee consent and agree at the time of application by the Master Trustee for appointment of a receiver, to the appointment of such receiver and that such receiver may be given the right, power and authority, to the extent the same may lawfully be given, to take possession of and operate and deal with such Property and the revenues, profits and proceeds therefrom, with like effect as the member of the Obligated Group could do so, and to borrow money and issue evidences of indebtedness as such receiver.

Section 6.11. Remedies Subject to Provisions of Law. All rights, remedies and powers provided by this Article may be exercised and all obligations on the part of the Obligated Group to consent or agree to the exercise of any such right, remedy as power shall apply only to the extent that the exercise thereof does not violate any applicable provision of law, and all the provisions of this Article are intended to be subject to all applicable mandatory provisions of law which may be controlling and to be limited to the extent necessary so that they will not render this instrument or the provisions hereof invalid or unenforceable under the provisions of any applicable law.

THE MASTER TRUSTEE

Section 7.7 Resignation and Removal; Appointment of Successor Master Trustee. (a) The Master Trustee may at any time resign by giving written notice of resignation to the Obligated Group Agent and by mailing notice of resignation to all registered holders of the Notes at their last addresses appearing on the registry books. Upon receiving such notice of resignation, the Obligated Group Agent shall promptly appoint a successor trustee by a written instrument, in duplicate, executed by order of the Obligated Group Agent, one copy of which instrument shall be delivered to the Master Trustee so resigning and one copy to the successor trustee. If no successor trustee shall have been so appointed and have accepted appointment within 30 days after the giving of such notice of resignation, the resigning trustee may petition any court of competent jurisdiction for the appointment of a successor trustee, or any Noteholder who has been a bona fide Noteholder for at least six months may, on behalf of himself and all others similarly situated, petition any such court for the appointment of a successor trustee. Such court may thereupon, after such notice, if any, as it may deem proper and prescribe, appoint a successor trustee.

(b) In case at any time any of the following shall occur:

(i) the Master Trustee shall fail to comply with certain provisions of the Master Indenture regarding conflicting interests after written request therefor by any Noteholder who has been a bona fide Noteholder for at least six months, or

(ii) the Master Trustee shall become incapable of acting, or shall be adjudged a bankrupt or insolvent, or a receiver of the Master Trustee or of its property shall be appointed, or any public officer shall take charge or control of the Master Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, then, in any such case, the Obligated Group Agent may remove the Master Trustee and appoint a successor trustee by written instrument, in duplicate, executed by order of the Obligated Group Agent one copy of which instrument shall be delivered to the Master Trustee so removed and one copy to the successor trustee, or any Noteholder who has been a bona fide Noteholder for at least six (6) months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Master Trustee and the appointment of a successor trustee. Such court may thereupon, after such notice, if any, as it may deem proper and prescribed, remove the Master Trustee and appoint a successor trustee.

(c) The holders of a majority in aggregate principal amount of the Notes at the time outstanding may at any time remove the Master Trustee and appoint a successor trustee by delivering to the Master Trustee to be removed, to the successor trustee so appointed and to the Obligated Group Agent evidence of the action taken by the Noteholders. Provided no Master Indenture Event of Default, or an event which upon the passage of time or the giving of notice or both would constitute a Master Indenture Event of

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Default has occurred, the Master Trustee may also be removed with or without cause, by the Obligated Group Agent upon thirty (30) days notice to the Master Trustee.

(d) Any resignation or removal of the Master Trustee and any appointment of a successor trustee pursuant to any of the provisions of this section shall become effective upon acceptance of appointment by the successor trustee.

SUPPLEMENTS AND AMENDMENTS

Section 8.1. Supplements Not Requiring Consent of Noteholders. Each member of the Obligated Group, or the Obligated Group Agent on behalf of the members of the Obligated Group, and the Master Trustee may, without the consent of or notice to any of the Holders, amend the provisions hereof prior to the time in which Notes are Outstanding hereunder, or to enter into one or more Supplements for one or more of the following purposes:

(a) To cure any ambiguity or formal defect or omission herein.

(b) To correct or supplement any provision herein which may be inconsistent with any other provision herein, or to make, add, delete, or modify any other provisions with respect to matters or questions arising hereunder which shall not materially adversely affect the interest of the Holders.

(c) To grant or confer ratably upon all of the Holders any additional rights, remedies, powers or authority that may lawfully be granted or conferred upon them subject to the provisions of Section 8.2(a) hereof.

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

(e) To create and provide for the issuance of a series of Notes or a Guaranty as permitted hereunder.

(f) To obligate a successor to any member of the Obligated Group as provided in Section 5.10 hereof.

Section 8.2. Supplements Requiring Consent of Noteholders. (a) Other than Supplements referred to in Section 8.1 hereof and subject to the terms and provisions and limitations contained in this Article and not otherwise, the Holders of not less than a majority in aggregate principal amount of the Notes then Outstanding shall have the right, from time to time, anything contained herein to the contrary notwithstanding, to consent to and approve the execution by each member of the Obligated Group, or the Obligated Group Agent on behalf of the members of the Obligated Group, and the Master Trustee of such Supplements as shall be deemed necessary and desirable for the purpose of modifying, altering, amending, adding to or rescinding, in any particular, any of the terms or provisions contained herein; provided, however, nothing in this Section shall permit or be construed as permitting a Supplement which would:

(i) Extend the stated maturity of or time for paying interest on any Note or reduce the principal amount of or the redemption premium or rate of interest payable on any Note without the consent of the Holder of such Note; or

(ii) Prefer or give priority to any Note over any other Note without the consent of the Holders of each Note then Outstanding not receiving such preference or priority; or

(iii) Reduce the aggregate principal amount of Notes then Outstanding the consent of the Holders of which is required to authorize such Supplement without the consent of the Holders of all Notes then Outstanding.

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(b) If at any time the Obligated Group Agent shall request the Master Trustee to enter into a Supplement pursuant to this Section, which request is accompanied by a copy of the proposed Supplement and if within such period, not exceeding five years, as shall be prescribed by the Obligated Group Agent, following the request, the Master Trustee shall receive an instrument or instruments purporting to be executed by the Holders of not less than the aggregate principal amount of number of Notes specified in paragraph (a) for the Supplement in question which instrument or instruments shall refer to the proposed Supplement and shall specifically consent to and approve the execution thereof in substantially the form of the copy thereof as on file with the Master Trustee, thereupon, but not otherwise, the Master Trustee may execute such Supplement in substantially such form, without liability or responsibility to any Holder of any Note, whether or not such Holder shall have consented thereto.

(c) Any such consent shall be binding upon the Holder of the Note giving such consent and upon any subsequent Holder of such Note and of any Note issued in exchange therefor (whether or not such subsequent Holder thereof has notice thereof), unless such consent is revoked in writing by the Holder of such Note giving such consent or by a subsequent Holder thereof by filing with the Master Trustee, prior to the execution by the Master Trustee of such Supplement, such revocation and, if such Note or Notes are transferable by delivery, proof that such Notes are held by the signer of such revocation in the manner permitted by Section 10.1. At any time after the Holders of the required principal amount or number of Notes shall have filed their consents to the Supplement, the Master Trustee shall make and file with the Obligated Group Agent, a written statement to that effect. Such written statement shall be conclusive that such consents have been so filed.

(d) If the Holders of the required principal amount or number of the Notes Outstanding shall have consented to and approved the execution of such Supplement as herein provided, no Holder of any Note shall have any right to object to the execution thereof, or to object to any of the terms and provisions contained therein or the operation thereof, or in any manner to question the propriety of the execution thereof, or to enjoin or restrain the Master Trustee or the Obligated Group from executing the same or from taking any action pursuant to the provisions thereof.

Section 8.3. Execution and Effect of Supplements. (a) In executing any Supplement permitted by this Article, the Master Trustee shall be entitled to receive and to rely upon the Opinion of Counsel stating that the execution of such Supplement is authorized or permitted hereby. The Master Trustee may but shall not be obligated to enter into any such Supplement which affects the Master Trustee’s own rights, duties or immunities.

(b) Upon the execution and delivery of any Supplement in accordance with this Article, the provisions hereof shall be modified in accordance therewith and such Supplement shall form a part hereof for all purposes and every Holder of a Note theretofore or thereafter authenticated and delivered hereunder shall be bound thereby.

(c) Any Note authenticated and delivered after the execution and delivery of any Supplement in accordance with this Article may, and if required by the issuer of such Note or the Master Trustee shall, bear a notation in form approved by the Master Trustee as to any matter provided for in such Supplement. If the issuer of any series of Notes then Outstanding or the Master Trustee shall so determine, new Notes so modified as to conform in the opinion of the Master Trustee and the Governing Body of such issuer to any such Supplement may be prepared and executed by the issuer and authenticated and delivered by the Master Trustee in exchange for and upon surrender of Notes then Outstanding.

SATISFACTION AND DISCHARGE OF MASTER INDENTURE

Section 9.1. Satisfaction and Discharge of Master Indenture. If (a) any member of the Obligated Group shall deliver to the Master Trustee for cancellation all Notes theretofore authenticated (other than any Notes which shall have been mutilated, destroyed, lost or stolen and which shall have been replaced or paid) and not theretofore cancelled, or (b) all Notes not theretofore cancelled or delivered to the Master Trustee for cancellation shall have become due and payable, or (c) the members of the Obligated Group or any thereof shall deposit with the Master Trustee (or with a bank or trust company acceptable to the Master Trustee pursuant to an agreement between the Obligated Group and such bank or trust company in form acceptable to the Master

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Trustee) as trust funds the entire amount of moneys or investment obligations sufficient to pay at maturity or upon redemption all Notes not theretofore cancelled or delivered to the Master Trustee for cancellation, including principal and interest due or to become due to such date of maturity or redemption date, as the case may be, and if in the case of clause (a), (b), or (c) above the members of the Obligated Group or any thereof shall also pay or cause to be paid all other sums payable hereunder by the members of the Obligated Group or any thereof, including any amounts due to the Master Trustee, then this Master Indenture shall cease to be of further effect, and the Master Trustee, on demand of the members of the Obligated Group or any thereof, and at the cost and expense of the members of the Obligated Group or any thereof, shall execute proper instruments acknowledging satisfaction of and discharging this Master Indenture and releasing and discharging any Lien created hereby; provided, however, that if there exists a Related Bond Indenture or Related Supplement with respect to any Indebtedness Outstanding hereunder, the type of investment obligations permitted for purposes of clause (c) above shall, with respect to such Indebtedness only, be limited to the type of investment obligations permitted under such Related Bond Indenture or Related Supplement for the discharge of the Related Bonds or Indebtedness. Each member of the Obligated Group, respectively, hereby agrees to reimburse the Master Trustee for any costs or expenses theretofore and thereafter reasonably and properly incurred by the Master Trustee in connection with this Master Indenture or such Note.

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APPENDIX D

Form of Approving Opinion of Hawkins Delafield & Wood LLP

July __, 2016

Maine Health and Higher Educational Facilities Authority 127 Community Drive P.O. Box 2268 Augusta, Maine 04330

Ladies and Gentlemen:

We have examined a record of proceedings relating to the issuance of $____________ Revenue Bonds, Eastern Maine Healthcare Systems Obligated Group Issue, Series 2016 (the “Bonds”) of the Maine Health and Higher Educational Facilities Authority (the “Authority”), a public body corporate and politic of the State of Maine.

The Bonds are issued under and pursuant to the Maine Health and Higher Educational Facilities Authority Act, Chapter 413 of Title 22, Sections 2051 to 2077, inclusive, of the Maine Revised Statutes Annotated, as it may be amended from time to time (the “Act”), and under and pursuant to a bond resolution of the Authority adopted on June 15, 2016 (the “Bond Resolution”), and a Bond Indenture dated as of July 1, 2016 (the “Bond Indenture”), by and between the Authority and U.S. Bank National Association, as Bond Trustee (the “Bond Trustee”).

The Bonds are dated their date of issuance and bear interest from their date, payable on each January 1 and July 1, commencing January 1, 2017, at the rates per annum, and mature on July 1 in the years and the aggregate principal amounts as follows:

Year Interest Rate Principal Amount

The Bonds are subject to redemption prior to maturity upon the terms and conditions provided therein and in the Bond Indenture. The Bonds are in the form of fully-registered bonds in the denomination of $5,000 and integral multiples thereof and are numbered separately from R-1 upward in order of issuance.

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We have also examined an executed copy of the Loan Agreement, among the Authority and Charles A. Dean Memorial Hospital, Eastern Maine Medical Center, Inland Hospital, Maine Coast Regional Health Facilities, The Aroostook Medical Center and The Blue Hill Medical Center (collectively, the “Institutions”), dated as of July 1, 2016 (the “Agreement”). Pursuant to the Agreement, in order to secure the financing and refinancing of certain facilities of the Institutions, the Institutions have agreed, among other things, to make payments to the Authority in amounts and at the times stated therein which will be applied to pay the principal of, redemption premium, if any, and interest on the Bonds when due.

We are of the opinion that:

(1) The Authority is duly created and validly existing under the provisions of the Act and has good right and lawful authority to utilize proceeds of the Bonds to assist the Institutions in the financing and refinancing of the Project (as defined in the Agreement), and to establish and maintain payments, fees or charges in respect thereof and collect revenues therefrom and to perform all obligations of the Authority under the Bond Resolution and the Bond Indenture in those respects.

(2) The Authority has the right and power under the Act to adopt the Bond Resolution, and the Bond Resolution has been duly and lawfully adopted by the Authority, is in full force and effect and is valid and binding upon the Authority and enforceable in accordance with its terms, and no other authorization for the Bond Resolution is required. The Bond Resolution and the Bond Indenture create the valid pledge which they purport to create of the Pledged Revenues (as defined in the Agreement) and all income and receipts earned on funds held or set aside under the Bond Indenture, subject only to the application thereof to the purposes and on the conditions permitted by the Bond Indenture.

(3) The Authority is duly authorized and entitled to issue the Bonds and the same have been duly and validly authorized and issued by the Authority in accordance with the Constitution and statutes of the State of Maine, including the Act, and the Bond Resolution and the Bond Indenture, and constitute valid, binding, special obligations of the Authority, enforceable in accordance with their terms and the terms of the Bond Resolution and the Bond Indenture and entitled to the benefits of the Act and of the Bond Resolution and the Bond Indenture.

(4) The Agreement has been duly authorized, executed and delivered by the Authority and, assuming due authorization, execution and delivery by the Institutions, constitutes a valid and legally binding agreement by and between the parties thereto, enforceable in accordance with its terms.

(5) The Bond Indenture has been duly authorized, executed and delivered by the Authority and, assuming due authorization, execution and delivery by the Bond Trustee, constitutes a valid and legally binding agreement by and between the parties thereto, enforceable in accordance with its terms.

(6) Under existing statutes and court decisions and assuming continuing compliance with certain tax covenants described below, (i) interest on the Bonds is excluded from gross income for Federal income tax purposes pursuant to Section 103 of the Internal Revenue Code of 1986, as amended (the “Code”); and (ii) interest on the Bonds is not treated as a preference item in calculating the alternative minimum tax imposed on individuals and corporations under the Code; such interest, however, is included in the adjusted current earnings of certain corporations for purposes of calculating the alternative minimum tax imposed on such corporations. In rendering our opinion, we have relied on certain representations, certifications of fact, and statements of reasonable expectations made by the Authority, the Institutions and others in connection with the Bonds, and we have assumed compliance by the Authority and the Institutions with certain ongoing covenants to comply with applicable requirements of the Code to assure the exclusion of interest on the Bonds from gross income under Section 103 of the Code.

The Code establishes certain requirements that must be met subsequent to the issuance and delivery of the Bonds in order that, for Federal income tax purposes, interest on the Bonds be not included in gross income pursuant to Section 103 of the Code. These requirements include, but are not limited to, requirements relating to the use and expenditure of Bond proceeds, restrictions on the investment of Bond proceeds prior to expenditure and the requirement that certain earnings be rebated to the Federal government. Noncompliance with

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such requirements may cause interest on the Bonds to become subject to Federal income taxation retroactive to their date of issue, irrespective of the date on which such noncompliance occurs or is ascertained.

On the date of delivery of the Bonds, the Authority and the Institutions will execute a Tax Regulatory Agreement (the “Tax Regulatory Agreement”) relating to the Bonds, containing provisions and procedures pursuant to which such requirements can be satisfied. In executing the Tax Regulatory Agreement, the Authority and the Institutions covenant that they will comply with the provisions and procedures set forth therein and that they will do and perform all acts and things necessary or desirable to assure that interest paid on the Bonds will, for Federal income tax purposes, be excluded from gross income.

In rendering the opinion in paragraph 6 hereof, we have relied upon and assumed (i) the material accuracy of the representations, statements of intention and reasonable expectation, and certifications of fact contained in the Tax Regulatory Agreement with respect to matters affecting the status of interest paid on the Bonds, and (ii) compliance by the Institutions with the procedures and covenants set forth in the Tax Regulatory Agreement as to such tax matters.

(7) Under existing statutes, interest on the Bonds is exempt from the State of Maine income tax imposed on individuals.

Except as stated in paragraphs 6 and 7 above, we express no opinion as to any other Federal, state or local tax consequences arising with respect to the Bonds or the ownership or disposition thereof. We render our opinion under existing statutes and court decisions as of the issue date, and we assume no obligation to update, revise or supplement this opinion after the issue date to reflect any action hereafter taken or not taken, or any facts or circumstances, or any change in law or in interpretations thereof, or otherwise, that may hereafter arise or occur, or for any other reason. Furthermore, we express no opinion herein as to the effect of any action hereafter taken or not taken in reliance upon an opinion of counsel other than ourselves on the exclusion from gross income for Federal income tax purposes of interest on the Bonds.

In rendering our opinion, we have relied on the opinion of Eaton Peabody, P.A., counsel to the Institutions and the Obligated Group (as defined in the Agreement), regarding, among other matters, the current qualification of the Members of the Obligated Group as organizations described in Section 501(c)(3) of the Code. We note that the opinion of counsel to the Obligated Group is subject to a number of qualifications and limitations. Failure of the Members of the Obligated Group to be organized and operated in accordance with the Internal Revenue Service’s requirements for the maintenance of such status as an organization described in Section 501(c)(3) of the Code may result in interest on the Bonds being included in gross income for federal income tax purposes, possibly from the date of issuance of the Bonds.

The foregoing opinions are qualified only to the extent that the enforceability of the Bonds, the Bond Resolution, the Bond Indenture, the Tax Regulatory Agreement and the Agreement may be limited by bankruptcy, insolvency, and other laws affecting creditors’ rights or remedies heretofore or hereafter enacted.

We have examined an executed Bond, and in our opinion the form of said Bond and its execution are regular and proper.

Very truly yours,

Appendix E

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FORM OF CONTINUING DISCLOSURE AGREEMENT SERIES 2016A BONDS

This Continuing Disclosure Agreement (this “Disclosure Agreement”) is executed and delivered by Eastern Maine Healthcare Systems (“EMHS”), as the Obligated Group Agent, and U.S. Bank National Association, as dissemination agent (the “Dissemination Agent”) in connection with the issuance of $_____________ Maine Health and Higher Educational Facilities Authority Revenue Bonds, Eastern Maine Healthcare Systems Obligated Group Issue, Series 2016A (the “Bonds”). The Bonds are being issued pursuant to a Bond Indenture dated as of July 1, 2016 (the “Bond Indenture”) between the Maine Health and Higher Educational Facilities Authority (the “Authority”) and U.S. Bank National Association , as bond trustee (the “Bond Trustee”). The proceeds of the Bonds are being loaned by the Authority to EMHS pursuant to a Loan Agreement dated as of July 1, 2016 (the “Agreement”) between EMHS and the Authority. The obligation of EMHS to make payments under the Agreement is secured by an obligation issued pursuant to a Master Trust Indenture dated as of April 1, 2010 (as amended and supplemented, the “Master Trust Indenture”) among the Obligated Group and U.S. Bank National Association, as Master Trustee (the “Master Trustee”). Pursuant to the Master Trust Indenture, each Obligated Group Member has agreed to be jointly and severally liable with respect to all Obligations issued under the Master Trust Indenture. The parties hereto acknowledge that no information is required to be provided with respect to the Authority and agree that no such information will be provided. The parties hereto further acknowledge that the Authority assumes no responsibility for this Disclosure Agreement or the information provided hereunder. EMHS and the Dissemination Agent covenant and agree as follows:

SECTION 1. Purpose of the Disclosure Agreement. This Disclosure Agreement is being executed and delivered by EMHS and the Dissemination Agent for the benefit of the Bondowners and in order to assist the Participating Underwriters (defined below) in complying with the Rule (defined below). EMHS and the Dissemination Agent acknowledge that the Authority has undertaken no responsibility with respect to any reports, notices or disclosures provided or required under this Disclosure Agreement, and has no liability to any person, including any Bondowner, with respect to any such reports, notices or disclosures. The Dissemination Agent, except as provided in Section 3(d), has undertaken no responsibility with respect to any reports, notices or disclosures provided or required under this Disclosure Agreement, and has no liability to any person, including any Bondowner, with respect to any such reports, notices or disclosures except for its negligent failure to comply with its obligations under Section 3(d).

SECTION 2. Definitions. In addition to the definitions set forth in the Agreement, which apply to any capitalized term used in this Disclosure Agreement unless otherwise defined in this Section, the following capitalized terms shall have the following meanings:

“Annual Report” shall mean any Annual Report provided by EMHS pursuant to, and as described in, Sections 3 and 4 of this Disclosure Agreement. “Bondowner” shall mean the registered owner of a Bond and any beneficial owner thereof, as established to the reasonable satisfaction of the Bond Trustee or EMHS. “Dissemination Agent” shall mean any Dissemination Agent or successor Dissemination Agent designated in writing by EMHS and which has filed with EMHS, the Bond Trustee and the Authority a written acceptance of such designation. The same entity may serve as both Bond Trustee and Dissemination Agent. The initial Dissemination Agent shall be U.S. Bank National Association. In the absence of a third-party Dissemination Agent, EMHS shall serve as the Dissemination Agent.

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“Listed Events” shall mean any of the events listed in Section 5(a) of this Disclosure Agreement. “MSRB” shall mean the Municipal Securities Rulemaking Board established pursuant to Section 15B(b)(1) of the Securities Exchange Act of 1934, or any successor thereto or to the functions of the MSRB contemplated by this Disclosure Agreement. Filing information relating to the MSRB is set forth in Exhibit B hereto. “Participating Underwriter” shall mean any of the original underwriters of the Bonds required to comply with the Rule in connection with offering of the Bonds. “Quarterly Statement” shall mean any Quarterly Statement provided by EMHS pursuant to, and as described in, Sections 3 and 4 of this Disclosure Agreement. “Rule” shall mean Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time.

SECTION 3. Provision of Annual Reports.

(a) Commencing in 2016, EMHS shall provide, or shall cause the Dissemination Agent to provide, not later than 120 days after the end of each fiscal year (the “Annual Report Filing Deadline”), an Annual Report to the MSRB that is consistent with the requirements of Section 4 of this Disclosure Agreement. Not later than fifteen (15) Business Days prior to the Annual Report Filing Deadline, EMHS (if it is not the Dissemination Agent) shall provide the Annual Report to the Dissemination Agent. Commencing with the Obligated Group’s fiscal quarter ending September 24, 2016, EMHS, not later than 45 days after the end of each fiscal quarter (i.e., the fiscal quarters ending the fourth Saturday of December, March, June and September, each a “Quarterly Statement Filing Deadline” and, together with the Annual Report Filing Deadline, the “Filing Deadline”), shall provide to the Dissemination Agent (if it is not the Dissemination Agent) a Quarterly Statement that is consistent with the requirements of Section 4 of this Disclosure Agreement. As soon as practicable after receipt by the Dissemination Agent of the Quarterly Statement, but in any event no more than five Business Days after receipt thereof, the Dissemination Agent shall provide the Quarterly Statement to the MSRB. EMHS may provide Quarterly Statements directly to the MSRB by the Quarterly Statement Filing Deadline in lieu of providing Quarterly Statements to the Dissemination Agent. In each case, the Annual Report and each Quarterly Statement may be submitted as a single document or as separate documents comprising a package, and may cross-reference other information as provided in Section 4 of this Disclosure Agreement; provided that the audited financial statements of the Obligated Group may be submitted separately from, and at a later date than, the balance of the Annual Report if such audited financial statements are not available as of the date set forth above. If EMHS submits the audited financial statements of the Obligated Group at a later date, then it shall provide unaudited financial statements directly to the MSRB by the Quarterly Statement Filing Deadline and shall provide the audited financial statements as soon as practicable after the audited financial statements become available. EMHS shall submit the audited financial statements to the Dissemination Agent as soon as practicable after they become available and EMHS shall submit, or cause the Dissemination Agent to submit, the audited financial statements to the MSRB as soon as practicable thereafter. EMHS shall provide a copy of each Annual Report and Quarterly Statement to the Authority and the Bond Trustee (if not also the Dissemination Agent).

(b) The Dissemination Agent shall file a report with EMHS, the Authority and the Bond Trustee (if the Bond Trustee is not then the Dissemination Agent) certifying that the Annual Report or Quarterly Statement, as applicable, has been provided pursuant to this Disclosure Agreement and stating the date it was provided (the “Compliance Certificate”); such report shall include a certification from EMHS that the

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Annual Report or Quarterly Statement, as applicable, complies with the requirements of this Disclosure Agreement.

(c) Upon request of any Bondowner or Beneficial Owner to the Dissemination Agent, the Dissemination Agent shall provide the most recent Quarterly Statements directly to such requesting Bondowner or Beneficial Owner, and the costs of complying with such requests will be borne by EMHS.

(d) If the Dissemination Agent has not provided a Compliance Certificate by the Filing Deadline, the Dissemination Agent shall send, and EMHS hereby authorizes and directs the Dissemination Agent to submit on its behalf, a notice to the MSRB in substantially the form attached as Exhibit A.

(e) If the Dissemination Agent has not provided the Annual Report to the MSRB by the Filing Deadline, EMHS shall send a notice substantially in the form of Exhibit A irrespective of whether the Dissemination Agent submits such notice.

SECTION 4. Content of Annual Reports and Quarterly Statements.

EMHS’ Annual Report shall contain or incorporate by reference the following:

(a) Financial Statements of the EMHS System and Independent Auditor’s Report similar in form and scope to the statements and report included in Appendix B to the Official Statement dated July __, 2016 (the “Official Statement”) with respect to the Bonds; and

(b) Information with respect to (1) the EMHS System the kind, and in substantially the same form and scope as found in Appendix A to the Official Statement with respect to the Bonds in the sections captioned “HISTORICAL UTILIZATION AND OTHER STATISTICS” on page A-25 of Appendix A to the Official Statement, “SELECTED FINANCIAL INFORMATION – Maximum Annual Debt Service Coverage, – Debt to Capitalization Ratio, – Days Cash on Hand, – Payor Mix and – Medicaid (MaineCare),” and (2) the Obligated Group of the kind, and in substantially the same form and scope as found in Appendix A to the Official Statement with respect to the Bonds in the section captioned “SELECTED FINANCIAL INFORMATION – Maximum Annual Debt Service Coverage,” in each case, to the extent such information is not contained in the audited financial statements and related notes.

The financial statements provided pursuant to Sections 3 and 4 of this Disclosure Agreement shall be prepared in conformity with generally accepted accounting principles, as in effect from time to time. Any or all of the items listed above may be incorporated by reference from other documents, including official statements of debt issues with respect to which EMHS or any other Obligated Group Member is an “obligated person” (as defined by the Rule), which (i) are available to the public on the MSRB Internet Web site, or (ii) have been filed with the Securities and Exchange Commission. EMHS shall clearly identify each such other document so incorporated by reference.

Each Quarterly Statement submitted by EMHS shall contain an income statement and balance sheet for the EMHS System, as well as information relating to the fiscal quarter and for the year to date of the type included in Appendix A to the Official Statement with respect to the Bonds in the sections captioned “CONSOLIDATED FINANCIAL RESULTS” and “HISTORICAL UTILIZATION AND OTHER STATISTICS” on page A-25 of Appendix A to the Official Statement. Until Project completion, each Quarterly Statement submitted by EMHS shall also include an update on the progress of the Project.

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SECTION 5. Reporting of Significant Events.

(a) This Section 5 shall govern the giving of notices of the occurrence of any of the following events:

1. Principal 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-exempt status of the Bonds.

7. Modifications to rights of the Owners of the Bonds, if material.

8. Bond calls, if material, and tender offers.

9. Defeasance of the Bonds or any portion thereof.

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 EMHS or any other Obligated Group Member.*

13. The consummation of a merger, consolidation, or acquisition involving EMHS or any other Obligated Group Member or the sale of all or substantially all of the assets of EMHS or any other Obligated Group Member, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an

* As noted in the Rule, this event is considered to occur when any of the following occur: (i) the appointment of a receiver, fiscal agent or similar officer for EMHS or any other Obligated Group Member in a proceeding under the U.S. Bankruptcy Code or in any 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 EMHS or any other Obligated Group Member, 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 (ii) 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 EMHS or any other Obligated Group Member.

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action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material.

14. Appointment of a successor or additional trustee or the change of name of a trustee, if material.

(b) Upon the occurrence of a Listed Event, EMHS shall, in a timely manner not in excess of ten (10) business days after the occurrence of the event, file or cause to be filed a notice of such occurrence with the MSRB. EMHS shall provide a copy of each such notice to the Authority and the Bond Trustee. The Dissemination Agent, if other than EMHS, shall have no duty to file a notice of an event described hereunder unless it is directed in writing to do so by EMHS, and shall have no responsibility for verifying any of the information in any such notice or determining the materiality of the event described in such notice.

SECTION 6. Transmission of Information and Notices. Unless otherwise required by law, all notices, documents and information provided to the MSRB shall be provided in electronic format as prescribed by the MSRB and shall be accompanied by identifying information as prescribed by the MSRB.

SECTION 7. Termination of Reporting Obligation. EMHS’ obligations under this Disclosure Agreement shall terminate upon the defeasance, prior redemption or payment in full of all of the Bonds or upon delivery to the Dissemination Agent of an opinion of counsel expert in federal securities laws selected by EMHS and acceptable to the Dissemination Agent to the effect that compliance with this Disclosure Agreement no longer is required by the Rule. If EMHS’ obligations under the Agreement are assumed in full by some other entity, such person shall be responsible for compliance with this Disclosure Agreement in the same manner as if it were EMHS and the original EMHS shall have no further responsibility hereunder.

SECTION 8. Dissemination Agent. EMHS may, from time to time with notice to the Bond Trustee and the Authority appoint or engage a third-party Dissemination Agent to assist it in carrying out its obligations under this Disclosure Agreement, and may, with notice to the Bond Trustee and the Authority, discharge any such third-party Dissemination Agent, with or without appointing a successor Dissemination Agent. The Dissemination Agent (if other than EMHS) may resign upon 30 days’ written notice to EMHS, the Bond Trustee and the Authority.

SECTION 9. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Agreement, EMHS and the Dissemination Agent may amend this Disclosure Agreement (and, except as provided in the last sentence of this Section 9, the Dissemination Agent shall agree to any amendment so requested by EMHS, so long as it does not adversely impact Dissemination Agent’s rights and obligations) and any provision of this Disclosure Agreement may be waived, if such amendment or waiver is supported by an opinion of counsel expert in federal securities laws acceptable to both EMHS and the Dissemination Agent to the effect that such amendment or waiver would not, in and of itself, violate the Rule. Without limiting the foregoing, EMHS and the Dissemination Agent may amend this Disclosure Agreement if (a) such amendment is made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature or status of EMHS or of the type of business conducted by EMHS, (b) this Disclosure Agreement, as so amended, would have complied with the requirements of the Rule at the time the Bonds were issued, taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; and (c) (i) the Dissemination Agent determines, or the Bond Trustee receives an opinion of counsel expert in federal securities laws and acceptable to the Dissemination Agent to the effect that, the amendment does not materially impair the interests of the Bondowners or (ii) the amendment is consented to by the

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Bondowners as though it were an amendment to the Bond Indenture pursuant to Section 9.5 of the Bond Indenture. The annual financial information containing the amended operating data or financial information will explain, in narrative form, the reasons for the amendment and the impact of the change in the type of operating data or financial information being provided. The Dissemination Agent shall be required to accept or acknowledge any amendment of this Disclosure Agreement if the amendment adversely affects its respective rights or immunities or increases its respective duties hereunder.

SECTION 10. Additional Information. Nothing in this Disclosure Agreement shall be deemed to prevent EMHS from disseminating any other information, using the means of dissemination set forth in this Disclosure Agreement or any other means of communication, or including any other information in any Annual Report, Quarterly Statement or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Agreement. If EMHS chooses to include any information in any Annual Report, Quarterly Statement or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Agreement, EMHS shall have no obligation under this Disclosure Agreement to update such information or include it in any future Annual Report, Quarterly Statement or notice of occurrence of a Listed Event.

SECTION 11. Default. In the event of a failure of EMHS or the Dissemination Agent to comply with any provision of this Disclosure Agreement, the Bond Trustee may (and, at the request of Bondowners representing at least 25% in aggregate principal amount of Outstanding Bond, shall), take such actions as may be necessary and appropriate, including seeking specific performance by court order, to cause EMHS or the Dissemination Agent, as the case may be, to comply with its obligations under this Disclosure Agreement. Without regard to the foregoing, any Bondowner may take such actions as may be necessary and appropriate, including seeking specific performance by court order, to cause EMHS or the Dissemination Agent, as the case may be, to comply with its obligations under this Disclosure Agreement. A default under this Disclosure Agreement shall not be deemed an Event of Default under the Agreement, and the sole remedy under this Disclosure Agreement in the event of any failure of EMHS or the Dissemination Agent to comply with this Disclosure Agreement shall be an action to compel performance.

SECTION 12. Duties, Immunities and Liabilities of Bond Trustee and Dissemination Agent. As to the Dissemination Agent, Article VIII of the Bond Indenture is hereby made applicable to this Disclosure Agreement as if this Disclosure Agreement were (solely for this purpose) contained in the Bond Indenture. The Dissemination Agent (if other than EMHS) shall have only such duties as are specifically set forth in this Disclosure Agreement, and EMHS agrees to indemnify and save the Dissemination Agent (if other than EMHS), its officers, director, employees and agents, harmless against any loss, expense and liabilities which it may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the costs and expenses (including attorneys fees) of defending against any claim of liability, except to the extent such loss, expense or liability shall have been finally determined by a court of competent jurisdiction to have been caused by the Dissemination Agent’s gross negligence or willful misconduct. The obligations of EMHS under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds. EMHS covenants that whenever it is serving as Dissemination Agent, it shall take any action required of the Dissemination Agent under this Disclosure Agreement.

The Bond Trustee shall have no obligation under this Disclosure Agreement to report any information to the MSRB or any Bondowner unless also acting as Dissemination Agent. If an officer of the Bond Trustee responsible for administering the Bond Indenture obtains actual knowledge of the occurrence of an event described in Section 5 hereunder, whether or not such event is material, the Bond Trustee shall timely notify EMHS of such occurrence, provided, however, that any failure by the Bond Trustee to give

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such notice to EMHS shall not affect EMHS’ obligations under this Disclosure Agreement or give rise to any liability by the Bond Trustee for such failure.

SECTION 13. Beneficiaries. This Disclosure Agreement shall inure solely to the benefit of EMHS, the Bond Trustee, the Dissemination Agent, the Participating Underwriters and the Bondowners, and shall create no rights in any other person or entity.

SECTION 14. Disclaimer. No Annual Report, Quarterly Statement or notice of a Listed Event filed by or on behalf of EMHS under this Disclosure Agreement shall obligate EMHS to file any information regarding matters other than those specifically described in Section 4 and Section 5 hereof, nor shall any such filing constitute a representation by EMHS or raise any inference that no other material events have occurred with respect to EMHS or the Bonds or that all material information regarding EMHS or the Bonds has been disclosed. EMHS shall have no obligation under this Disclosure Agreement to update information provided pursuant to this Disclosure Agreement except as specifically stated herein.

SECTION 15. Notices. Unless otherwise expressly provided, all notices to the Authority, EMHS, the Bond Trustee and the Dissemination Agent shall be in writing and shall be deemed sufficiently given if sent by registered or certified mail, postage prepaid, or delivered or sent by facsimile during business hours to such parties at the address specified in Section 11.7 of the Bond Indenture or, as to all of the foregoing, to such other address as the addressee shall have indicated by prior written notice to the party giving notice.

SECTION 16. 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]

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SECTION 17. Governing Law. This instrument shall be governed by the laws of the State of Maine.

Date: ________ __, 2016 EASTERN MAINE HEALTHCARE SYSTEMS, on

behalf of itself and the other members of the Obligated Group

By _________________________________ Authorized Officer U.S. BANK NATIONAL ASSOCIATION,

as Dissemination Agent By _________________________________ Authorized Officer

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EXHIBIT A NOTICE TO MSRB OF FAILURE TO FILE

[ANNUAL REPORT][QUARTERLY STATEMENT] Name of Authority: Maine Health and Higher Educational Facilities Authority Name of Bond Issue: $____________ Maine Health and Higher Educational Facilities Authority Revenue Bonds, Eastern Maine Healthcare Systems Obligated Group Issue, Series 2016A Name of Obligated Person: Eastern Maine Healthcare Systems Date of Issuance: ________ __, 2016 NOTICE IS HEREBY GIVEN that Eastern Maine Healthcare Systems (“EMHS”) has not provided an [Annual Report][Quarterly Statement] with respect to the above-named Bonds as required by the Continuing Disclosure Agreement dated ________ __, 2016 between EMHS and U.S. Bank National Association. Dated: ___________________ [U.S. BANK NATIONAL ASSOCIATION on

behalf of] EMHS [cc: EMHS]

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EXHIBIT B

Filing information relating to the Municipal Securities Rulemaking Board is as follows:

Municipal Securities Rulemaking Board

http://emma.msrb.org

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Maine Health and Higher Educational Facilities Authority

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Transcript of Maine Health and Higher Educational Facilities Authority