$249,260,000 $50,720,000 dekalb private hospital authority

NEW ISSUE: Book-Entry Only Ratings: Moody’s: “Aa2”S&P: “AA”

See “RATINGS” herein

In the opinion of King & Spalding LLP, Bond Counsel, assuming the accuracy of certain representations and certifications and compliance with certain tax covenants, interest on the Series 2009 Bonds (including any original issue discount properly allocable to a holder thereof) is not includable in gross income for federal income tax purposes under existing statutes, rulings and court decisions, and under applicable regulations, and will not be treated as an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals and corporations; provided, however, in the case of certain corporations (as defined for federal income tax purposes) such interest is taken into account in determining adjusted current earnings for purposes of computing the federal alternative minimum tax imposed on such corporations. In the opinion of Bond Counsel, interest on the Series 2009 Bonds is exempt from present State of Georgia income taxation under existing statutes as described herein. For a more complete discussion, see “TAX EXEMPTION” herein.

$249,260,000 DeKalb Private Hospital Authority

Revenue Anticipation Certificates (Children’s Healthcare of Atlanta, Inc. Project),

Series 2009

$50,720,000 Development Authority of Fulton County

Revenue Bonds (Children’s Healthcare of Atlanta, Inc. Project),

Series 2009

Dated: Date of Delivery Due: November 15, as shown on the inside cover

The DeKalb Private Hospital Authority (the “DeKalb Issuer”) is issuing its Revenue Anticipation Certificates (Children’s Healthcare of Atlanta, Inc. Project), Series 2009 (the “DeKalb Bonds”), pursuant to a Trust Indenture, dated as of December 1, 2009 (the “DeKalb Bond Indenture”), between the DeKalb Issuer and The Bank of New York Mellon Trust Company, N.A., as bond trustee. The DeKalb Bonds are payable solely from, and secured equally by, payments to be received by the DeKalb Issuer pursuant to a Loan Agreement, dated as of December 1, 2009 (the “DeKalb Loan Agreement”), between the DeKalb Issuer and Children’s Healthcare of Atlanta, Inc. (the “Corporation”) and a promissory note to be issued by the Corporation under a Master Trust Indenture, dated as of January 1, 2005, as supplemented (as supplemented, the “Master Indenture”), among the Obligated Group consisting of the Corporation, Children’s Healthcare of Atlanta Foundation, Inc., Egleston Affiliated Services, Inc., Egleston Children’s Hospital at Emory University, Inc., Egleston Pediatric Group, Inc., Scottish Rite Children’s Medical Center, Children’s Anesthesia Services, LLC and Children’s Sedation Services, LLC and The Bank of New York Mellon Trust Company, N.A., as master trustee.

The Development Authority of Fulton County (the “Fulton Issuer,” and together with the DeKalb Issuer, the “Issuers”) is issuing its Revenue Bonds (Children’s Healthcare of Atlanta, Inc. Project), Series 2009 (the “Fulton Bonds” and together with the DeKalb Bonds, the “Series 2009 Bonds”), pursuant to a Trust Indenture, dated as of December 1, 2009 (together with the DeKalb Indenture, the “Bond Indentures”), between the Fulton Issuer and The Bank of New York Mellon Trust Company, N.A., as bond trustee. The Series 2009 Bonds are payable solely from, and secured equally by, payments to be received by the Fulton Issuer pursuant to a Loan Agreement, dated as of December 1, 2009 (together with the DeKalb Loan Agreement, the “Loan Agreements”), between the Fulton Issuer and the Corporation and a promissory note to be issued by the Corporation under the Master Indenture. The loan payments to be made by the Corporation under the Loan Agreements constitute general unsecured obligations of the Corporation.

The Series 2009 Bonds are issuable as fully registered bonds without coupons, and when issued, will be registered in the name of Cede & Co., as Bondholder and nominee for The Depository Trust Company (“DTC”), New York, New York. DTC will act as Securities Depository for the Series 2009 Bonds. Purchases of beneficial ownership interests will be made in book-entry only form. Purchasers (“Beneficial Owners”) will not receive certificates representing their beneficial interest in the Series 2009 Bonds. So long as Cede & Co., as nominee of DTC, is the Bondholder, references herein to Bondholders or registered owners shall mean Cede & Co. and shall not mean the Beneficial Owners of the Series 2009 Bonds.

This cover page contains certain information for quick reference only. It is not a summary of this issue. Investors must read the entire Official Statement to obtain the information essential to the making of an informed investment decision.

Interest on the Series 2009 Bonds is payable semiannually on May 15 and November 15 of each year (each such date, an “Interest Payment Date”), commencing May 15, 2010. The Series 2009 Bonds will mature on November 15 of the years and in the principal amounts set forth on the inside cover page. The Series 2009 Bonds will bear interest from their date of delivery at the applicable annual interest rate set forth on the inside cover page. The Series 2009 Bonds will be subject to optional, extraordinary and mandatory redemption prior to maturity as described herein. See “THE SERIES 2009 BONDS – Redemption Provisions” herein.

THE SERIES 2009 BONDS ARE NOT A DEBT OF THE STATE OF GEORGIA (THE “STATE”) OR ANY POLITICAL SUBDIVISION THEREOF, INCLUDING DEKALB COUNTY, GEORGIA OR FULTON COUNTY, GEORGIA. EACH SERIES OF THE SERIES 2009 BONDS ARE SPECIAL LIMITED OBLIGATIONS OF THE APPLICABLE ISSUER PAYABLE SOLELY FROM THE TRUST ESTATE PLEDGED THERETO. NEITHER THE STATE, NOR ANY POLITICAL SUBDIVISION OF THE STATE, INCLUDING DEKALB COUNTY, GEORGIA OR FULTON COUNTY, GEORGIA, HAS PLEDGED ITS FAITH AND CREDIT OR TAXING POWER TO THE PAYMENT OF THE AMOUNTS DUE ON THE SERIES 2009 BONDS. THE ISSUERS HAVE NO TAXING POWER.

The Series 2009 Bonds are offered by the Underwriters, subject to prior sale, to withdrawal or modification of the offer without any notice, and to the approval of legality of the Series 2009 Bonds by King & Spalding LLP, Bond Counsel. Certain legal matters will be passed upon for the DeKalb Issuer by its counsel, Bryan Cave LLP and for the Fulton Issuer by its counsel, Schiff Hardin LLP. Certain legal matters will be passed upon for the Corporation by its counsel, King & Spalding LLP, and by its disclosure counsel, Murray Barnes Finister LLP, and for the Underwriters by their counsel, Sutherland Asbill & Brennan LLP. It is expected that the Series 2009 Bonds in book-entry form will be available for delivery through DTC in New York, New York, on or about December 2, 2009.

J.P. Morgan SunTrust Robinson HumphreyWells Fargo Securities Citi Merrill Lynch & Co.Dated: November 19, 2009

MATURITIES, PRINCIPAL AMOUNTS, INTEREST RATES, YIELDS AND CUSIP NOS.(1)

$249,260,000 DeKalb Private Hospital Authority Revenue Anticipation Certificates

(Children’s Healthcare of Atlanta, Inc. Project), Series 2009

Maturity Principal (November 15) Amount Interest Rate Yield CUSIP No.

2010 $5,500,000 3.00% 0.48% 241064DL5 2011 5,370,000 5.00 1.72 241064DM3 2012 5,500,000 5.00 2.15 241064DN1 2013 5,925,000 5.00 2.55 241064DP6 2014 6,310,000 5.00 3.00 241064DQ4 2015 6,660,000 5.00 3.40 241064DR2 2016 7,175,000 5.00 3.66 241064DS0 2017 7,440,000 5.00 3.90 241064DT8 2018 7,950,000 5.00 4.10 241064DU5 2019 8,410,000 5.00 4.26 241064DV3 2020 8,990,000 5.00 4.42* 241064EA8 2021 9,480,000 5.00 4.57* 241064EB6

$32,215,000 5.00% Term DeKalb Bonds, due November 15, 2024, Yield 4.80%,* CUSIP No. 241064DW1 $45,725,000 5.00% Term DeKalb Bonds, due November 15, 2029, Yield 5.13%, CUSIP No. 241064DX9 $37,330,000 5.125% Term DeKalb Bonds, due November 15, 2034, Yield 5.33%, CUSIP No. 241064DY7 $49,280,000 5.25% Term DeKalb Bonds, due November 15, 2039, Yield 5.40%, CUSIP No. 241064DZ4

___________________ *Yield to optional call date of November 15, 2019.


Revenue Bonds (Children’s Healthcare of Atlanta, Inc. Project), Series 2009

Maturity Principal

(November 15) Amount Interest Rate Yield CUSIP No.

2010 $ 990,000 3.00 % 0.50% 359900ZZ3 2011 905,000 3.00 1.72 359900A23 2012 930,000 3.00 2.15 359900A31 2013 960,000 3.00 2.55 359900A49 2014 985,000 3.25 3.00 359900A56 2015 1,020,000 4.00 3.40 359900A64 2016 1,060,000 4.00 3.66 359900A72 2017 1,105,000 4.00 3.90 359900A80 2018 1,145,000 4.00 4.10 359900A98 2019 1,195,000 4.125 4.26 359900B22 2020 1,240,000 4.375 4.42 359900B71 2021 1,295,000 4.50 4.57 359900B89

$4,250,000 4.625% Term Fulton Bonds, due November 15, 2024, Yield 4.80%, CUSIP No. 359900B30 $8,570,000 5.00% Term Fulton Bonds, due November 15, 2029, Yield 5.13%, CUSIP No. 359900B48 $10,960,000 5.125% Term Fulton Bonds, due November 15, 2034, Yield 5.33%, CUSIP No. 359900B55 $14,110,000 5.25% Term Fulton Bonds, due November 15, 2039, Yield 5.40%, CUSIP No. 359900B63

(1) CUSIP is a registered trademark of the American Bankers Association. CUSIP data contained herein is provided by Standard &

Poor’s, CUSIP Service Bureau, a division of The McGraw Hill Companies, Inc. This data is not intended to create a database and does not serve in any way as a substitute for the CUSIP service. CUSIP numbers are provided for convenience of reference only. The Issuers, the Corporation, the Financial Advisor and the Underwriters take no responsibility for the accuracy of such numbers.

No dealer, broker, salesperson or other person has been authorized by the Issuers, the Obligated Group or J.P. Morgan Securities Inc., SunTrust Robinson Humphrey, Inc., Citigroup Global Markets Inc., Wells Fargo Securities, Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated (collectively, the “Underwriters”) to give any information or to make any representations with respect to the Series 2009 Bonds, other than those in this Official Statement, and if given or made, such other information or representations must not be relied upon as having been authorized by any of the foregoing. This Official Statement does not constitute an offer to sell or the solicitation of any offer to buy, nor shall there be any sale of the Series 2009 Bonds by any person in any state in which it is unlawful for such person to make such offer, solicitation or sale. The information set forth herein has been obtained from the Issuers (but only with respect to the respective Issuers), the Obligated Group, The Depository Trust Company (“DTC”) and other sources that are believed to be reliable, but the Underwriters do not guarantee the accuracy or completeness of the information and such information is not to be construed as a representation by the Underwriters or, as to information from sources other than the respective Issuers, by the Issuers. The information and expressions of opinion herein are subject to change without notice, and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances create any implication that there has been no change in the affairs of the Issuers or the Obligated Group since the date hereof. The Underwriters have reviewed the information in this Official Statement in accordance with, and as a 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 SERIES 2009 BONDS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, NOR HAVE THE BOND INDENTURES OR THE MASTER INDENTURE BEEN QUALIFIED UNDER THE TRUST INDENTURE ACT OF 1939, IN RELIANCE UPON EXEMPTIONS CONTAINED IN SUCH ACTS. THE REGISTRATION OR QUALIFICATION OF THE SERIES 2009 BONDS IN ACCORDANCE WITH APPLICABLE PROVISIONS OF THE SECURITIES LAWS OF THE STATES, IF ANY, IN WHICH THE SERIES 2009 BONDS HAVE BEEN REGISTERED OR QUALIFIED AND THE EXEMPTION FROM REGISTRATION OR QUALIFICATION IN CERTAIN OTHER STATES CANNOT BE REGARDED AS A RECOMMENDATION THEREOF.

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVERALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SERIES 2009 BONDS AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING TRANSACTIONS, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

This Official Statement contains “forward-looking statements,” which generally can be identified with words or phrases such as “anticipates,” “believes,” “could,” “estimates,” “expects,” “foresees,” “may,” “plan,” “predict,” “should,” “will” or other words or phrases of similar import. All statements included in this Official Statement that any person expects or anticipates will, should or may occur in the future are forward-looking statements. These statements are based on assumptions and analyses made by the Corporation in light of its experience and perception of historical trends, current conditions and expected future developments as well as other factors it believes are appropriate in the circumstances. However, whether actual results and developments conform with expectations and predictions is subject to a number of risks and uncertainties, including, without limitation, the information discussed under “BONDHOLDERS’ RISKS” in this Official Statement as well as additional factors beyond the Corporation’s and the Issuers’ control. The important risk factors and assumptions described under that caption and elsewhere herein could cause actual results to differ materially from those expressed in any forward-looking statement. All of the forward-looking statements made in this Official Statement are qualified by these cautionary statements. There can be no assurance that the actual results or developments anticipated will be realized or, even if substantially realized, that they will have the expected consequences to or effects on the Corporation’s business or operations. All subsequent forward-looking statements attributable to the Corporation or the Issuers or persons acting on their behalf are expressly qualified in their entirety by the factors and assumptions described above. No person has any obligation to prepare or release any updates or revisions to any forward-looking statement.

THE ISSUERS HAVE NOT REVIEWED OR APPROVED AND DO NOT REPRESENT OR WARRANT IN ANY WAY THE ACCURACY OR COMPLETENESS OF ANY OF THE INFORMATION SET FORTH IN THIS OFFICIAL STATEMENT, INCLUDING THE APPENDICES HERETO, OTHER THAN THE STATEMENTS SET FORTH UNDER THE CAPTIONS “INTRODUCTION – THE ISSUERS” AND “THE ISSUERS” (IN SO FAR AS SUCH INFORMATION RELATES TO THE DEKALB ISSUER, IN THE CASE OF THE DEKALB ISSUER, OR THE FULTON ISSUER, IN THE CASE OF THE FULTON ISSUER).

[THIS PAGE INTENTIONALLY LEFT BLANK]

i

TABLE OF CONTENTS

INTRODUCTION ......................................................................................................................................................... 1

General ............................................................................................................................................................ 1

The Issuers ...................................................................................................................................................... 2

Purpose of the Series 2009 Bonds ................................................................................................................... 2

The Master Indenture ...................................................................................................................................... 3

Obligated Group .............................................................................................................................................. 3

Sources of Payment and Security for the Series 2009 Bonds .......................................................................... 3

Tax Exemption ................................................................................................................................................ 4

Legal Authority ............................................................................................................................................... 4

Offering and Delivery of the Series 2009 Bonds............................................................................................. 4

Continuing Disclosure ..................................................................................................................................... 5

Bondholders’ Risks ......................................................................................................................................... 5

Other Information ............................................................................................................................................ 5

THE ISSUERS .............................................................................................................................................................. 5

DeKalb Issuer .................................................................................................................................................. 5

Fulton Issuer .................................................................................................................................................... 5

PLAN OF FINANCE .................................................................................................................................................... 6

Sources and Uses of Funds .............................................................................................................................. 6

Refunding Plan ................................................................................................................................................ 6

Interest Rate Agreements ................................................................................................................................ 6

THE SERIES 2009 BONDS .......................................................................................................................................... 7

General ............................................................................................................................................................ 7

Denominations; Time and Place of Payment .................................................................................................. 7

Redemption Provisions ................................................................................................................................... 8

Registration of Transfer and Exchange ......................................................................................................... 11

Book-Entry Only System .............................................................................................................................. 12

ESTIMATED DEBT SERVICE REQUIREMENTS .................................................................................................. 15

SECURITY FOR THE SERIES 2009 BONDS ........................................................................................................... 16

General .......................................................................................................................................................... 16

Limited Obligations ....................................................................................................................................... 16

The Loan Agreements ................................................................................................................................... 16

The Master Indenture and the 2009 Notes ..................................................................................................... 16

Substitution of 2009 Notes ............................................................................................................................ 17

BONDHOLDERS’ RISKS .......................................................................................................................................... 17

General .......................................................................................................................................................... 17

Bankruptcy and Creditors’ Rights ................................................................................................................. 18

Enforceability ................................................................................................................................................ 19

No Initial Lien on Gross Revenues; Possible Parity Claims on Gross Revenues .......................................... 19

Interest Rate Agreements .............................................................................................................................. 21

Exposure to Interest Rate Changes and Puts ................................................................................................. 22

Other Contingent Liabilities .......................................................................................................................... 23

Dependence on Federal and State Funding ................................................................................................... 23

Audits, Exclusions, Fines and Enforcement Actions ..................................................................................... 25

Third-Party Payors and Patient Receivables ................................................................................................. 27

Changes in Healthcare Delivery .................................................................................................................... 28

Uncompensated Care ..................................................................................................................................... 28

Certificate of Need ........................................................................................................................................ 28

ii

Government Regulation of Relationships between Hospitals and Physicians ............................................... 29

Health Information Privacy ........................................................................................................................... 32

Other Sources of Liability for Healthcare Providers ..................................................................................... 32

Environmental Laws Affecting Healthcare Facilities .................................................................................... 34

Competition ................................................................................................................................................... 34

Malpractice Lawsuits and Insurance ............................................................................................................. 35

Maintenance of Exempt Status ...................................................................................................................... 35

Other Risk Factors ......................................................................................................................................... 36

LITIGATION .............................................................................................................................................................. 37

The Issuers .................................................................................................................................................... 37

The Corporation ............................................................................................................................................ 37

VALIDATION ............................................................................................................................................................ 38

LEGAL MATTERS .................................................................................................................................................... 38

TAX EXEMPTION ..................................................................................................................................................... 38

FINANCIAL STATEMENTS ..................................................................................................................................... 39

FINANCIAL ADVISOR ............................................................................................................................................. 40

UNDERWRITING ...................................................................................................................................................... 40

RATINGS .................................................................................................................................................................... 40

CERTAIN RELATIONSHIPS .................................................................................................................................... 41

MISCELLANEOUS .................................................................................................................................................... 41

APPENDIX A CHILDREN’S HEALTHCARE OF ATLANTA, INC. APPENDIX B CHILDREN’S HEALTHCARE OF ATLANTA, INC. AND AFFILIATES CONSOLIDATED

FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007 (RESTATED)

APPENDIX C SUMMARY OF CERTAIN DOCUMENTS AND DEFINITIONS OF CERTAIN TERMS APPENDIX D PROPOSED FORMS OF BOND COUNSEL OPINIONS APPENDIX E FORM OF CONTINUING DISCLOSURE AGREEMENT

OFFICIAL STATEMENT

$249,260,000 DeKalb Private Hospital Authority Revenue Anticipation Certificates

(Children’s Healthcare of Atlanta, Inc. Project), Series 2009


Revenue Bonds (Children’s Healthcare of Atlanta, Inc. Project),

Series 2009

INTRODUCTION

General

This Official Statement, including the cover page, the inside cover page and the appendices, is provided to furnish information concerning the primary offering by the DeKalb Private Hospital Authority (the “DeKalb Issuer”) of $249,260,000 aggregate principal amount of its Revenue Anticipation Certificates (Children’s Healthcare of Atlanta, Inc. Project), Series 2009 (the “DeKalb Bonds”) and the primary offering by the Development Authority of Fulton County (the “Fulton Issuer,” and together with the DeKalb Issuer, the “Issuers” and each sometimes referred to herein individually as an “Issuer”) of $50,720,000 aggregate principal amount of its Revenue Bonds (Children’s Healthcare of Atlanta, Inc. Project), Series 2009 (the “Fulton Bonds,” and together with the DeKalb Bonds, the “Series 2009 Bonds”).

The descriptions and summaries of the various legal documents described in this Official Statement do not purport to be comprehensive or definitive. Reference is made to each such legal document for the complete details of its terms and conditions. See APPENDIX C for definitions of capitalized terms and summaries of certain provisions of the Master Indenture, the Bond Indentures and the Loan Agreements (as hereafter defined).

This Introduction is not a summary of this Official Statement and is intended only for quick reference.

It is only a brief description of and guide to, and is qualified in its entirety by reference to, more complete and

detailed information contained in the entire Official Statement, including the cover page and the appendices, and

the documents summarized or described herein. Investors should fully review the entire Official Statement. The

offering of the Series 2009 Bonds to potential investors is made only by means of the entire Official Statement,

including the appendices hereto. No person is authorized to detach this Introduction from the Official Statement

or otherwise to use it without the entire Official Statement, including the appendices hereto.

The DeKalb Bonds are being issued pursuant to a Trust Indenture, dated as of December 1, 2009 (the “DeKalb Bond Indenture”), between the DeKalb Issuer and The Bank of New York Mellon Trust Company, N.A., as bond trustee (in such capacity, the “DeKalb Bond Trustee”). The Fulton Bonds are being issued pursuant to a Trust Indenture, dated as of December 1, 2009 (the “Fulton Bond Indenture,” and together with the DeKalb Bond Indenture, the “Bond Indentures” and each sometimes referred to herein individually as a “Bond Indenture”), between the Fulton Issuer and The Bank of New York Mellon Trust Company, N.A., as bond trustee (in such capacity, the “Fulton Bond Trustee,” and together with the DeKalb Bond Trustee, the “Bond Trustees” and each sometimes referred to herein individually as a “Bond Trustee”).

The DeKalb Bonds and the Fulton Bonds are separate issues. The Trust Estate pledged with respect to one series of the Series 2009 Bonds is not available to pay amounts due on the other series, and vice versa. A default with respect to one series of the Series 2009 Bonds is not necessarily a default with respect to the other series; however, each Note (as hereinafter defined) issued under the Master Indenture as described herein is cross-defaulted and secured on a parity with the other Notes and all other Obligations under the Master Indenture. See APPENDIX C – “SUMMARY OF CERTAIN DOCUMENTS AND DEFINITIONS OF CERTAIN TERMS.” Further, an Event of Default under the Master Indenture or a Loan Default under the related Loan Agreement constitutes an Event of Default under the related Bond Indenture.

2

The Issuers

The DeKalb Issuer is a public body corporate and politic organized under the Georgia Hospital Authorities Law (O.C.G.A. § 31-7-70, et seq.), as amended (the “Hospital Authorities Law”), and pursuant to an activating resolution of the Board of Commissioners of DeKalb County, Georgia adopted on August 28, 1984.

The Fulton Issuer is a public body corporate and politic organized under the Development Authorities Law (O.C.G.A. § 36-62-1, et seq.), as amended (the “Development Authorities Law” and together with the Hospital Authorities Law, the “Acts”), and pursuant to an activating resolution of the Board of Commissioners of Fulton County, Georgia adopted on May 16, 1973.

Purpose of the Series 2009 Bonds

The DeKalb Issuer will loan the proceeds of the DeKalb Bonds to Children’s Healthcare of Atlanta, Inc. (the “Corporation”) under the terms of a Loan Agreement, dated as of December 1, 2009 (the “DeKalb Loan Agreement”). The Corporation’s obligation to repay such loan will be evidenced by a 2009-1 Master Note executed and delivered to the DeKalb Bond Trustee, as assignee of the DeKalb Issuer (the “DeKalb Note”). The DeKalb Note will be issued and secured under and pursuant to the hereinafter described Master Indenture equally and ratably with the hereinafter described Fulton Note, the hereinafter described 2008 Notes and the hereinafter described Swap Notes.

The Corporation will use the DeKalb Bond proceeds to currently refund all of the DeKalb Issuer’s (a) Variable Rate Demand Revenue Anticipation Certificates (Egleston Children’s Hospital at Emory University, Inc. Project), Series 1994A, outstanding in the aggregate principal amount of $28,285,000 (the “Refunded 1994A Certificates”), (b) Variable Rate Demand Revenue Anticipation Certificates (Egleston Children’s Hospital at Emory University, Inc. Project), Series 1994B, outstanding in the aggregate principal amount of $28,285,000, (the “Refunded 1994B Certificates” and together with the Refunded 1994A Certificates, the “Refunded 1994 Certificates”), (c) Variable Rate Demand Revenue Anticipation Certificates (Egleston Children’s Health Care System Project), Series 1995A, outstanding in the aggregate principal amount of $11,550,000 (the “Refunded 1995A Certificates”), (d) Variable Rate Demand Revenue Anticipation Certificates (Egleston Children’s Health Care System Project), Series 1995B, outstanding in the aggregate principal amount of $6,650,000 (the “Refunded 1995B Certificates” and together with the Refunded 1995A Certificates, the “Refunded 1995 Certificates”), (e) Variable Rate Demand Revenue Anticipation Certificates (ESR Children’s Health Care System Project), Series 1998A, outstanding in the aggregate principal amount of $14,800,000 (the “Refunded 1998A Certificates”), (f) Variable Rate Demand Revenue Anticipation Certificates (ESR Children’s Health Care System Project), Series 1998B, outstanding in the aggregate principal amount of $14,900,000 (the “Refunded 1998B Certificates” and together with the Refunded 1998A Certificates, the “Refunded 1998 Certificates”), (g) Refunding Revenue Anticipation Certificates (Children’s Healthcare of Atlanta, Inc. Project), Series 2008B, outstanding in the aggregate principal amount of $107,975,000 (the “Refunded 2008B Certificates”) and (h) Refunding Revenue Anticipation Certificates (Children’s Healthcare of Atlanta, Inc. Project), Series 2008C, outstanding in the aggregate principal amount of $39,950,000 (the “Refunded 2008C Certificates” and together with the Refunded 2008B Certificates, the “Refunded 2008 Certificates”). The Refunded 1994 Certificates, the Refunded 1995 Certificates, the Refunded 1998 Certificates, and the Refunded 2008 Certificates are sometimes referred to as the “Refunded DeKalb Bonds.” See “PLAN OF FINANCE” herein.

The Fulton Issuer will loan the proceeds of the Fulton Bonds to the Corporation under the terms of a Loan Agreement, dated as of December 1, 2009 (the “Fulton Loan Agreement,” and together with the DeKalb Loan Agreement, the “Loan Agreements”). The Corporation’s obligation to repay such loan will be evidenced by a 2009-2 Master Note executed and delivered to the Fulton Bond Trustee, as assignee of the Fulton Issuer (the “Fulton Note” and together with the DeKalb Note, the “2009 Notes”). The Fulton Note will be issued and secured under and pursuant to the Master Indenture equally and ratably with the DeKalb Note, the hereinafter described 2008 Notes and the hereinafter described Swap Notes. The Corporation will use the Fulton Bond proceeds to currently refund all of the Fulton Issuer’s outstanding Refunding Revenue Bonds (Children’s Healthcare of Atlanta, Inc. Project), Series 2008B, outstanding in the aggregate principal amount of $50,000,000 (the “Refunded 2008B Bonds” and together with the Refunded DeKalb Bonds, the “Refunded Bonds”). See “PLAN OF FINANCE” herein.

3

The Master Indenture

The Corporation, Children’s Healthcare of Atlanta Foundation, Inc., Egleston Affiliated Services, Inc., Egleston Children’s Hospital at Emory University, Inc., Egleston Pediatric Group, Inc., Scottish Rite Children’s Medical Center, Inc., Children’s Anesthesia Services, LLC and Children’s Sedation Services, LLC (collectively, the “Obligated Group”) have entered into a Master Trust Indenture, dated as of January 1, 2005, as supplemented (the “Master Indenture”), with The Bank of New York Mellon Trust Company, N.A., as master trustee (the “Master Trustee”). Under the Master Indenture, the members of the Obligated Group, as it may exist from time to time, jointly and severally guarantee the payment of all obligations secured under the Master Indenture (“Obligations”), including the 2009 Notes and any additional Obligations executed and delivered by any member of the Obligated Group as described therein, subject to the Maximum Guaranty Liability of any member of the Obligated Group. The 2009 Notes and all other Obligations issued under the Master Indenture are general unsecured obligations of the Corporation and are not secured by a pledge of, mortgage on or a security interest in any of the assets of the Obligated Group. The Master Indenture permits other parties to become members of the Obligated Group under certain circumstances, and permits members of the Obligated Group to be released from their obligations under the Master Indenture and withdraw from the Obligated Group under certain circumstances. See APPENDIX C – “SUMMARY OF CERTAIN DOCUMENTS AND DEFINITIONS OF CERTAIN TERMS –THE MASTER INDENTURE – Membership and Withdrawal from the Obligated Group.”

In addition to the Refunded DeKalb Bonds, the DeKalb Issuer previously issued on behalf of the Corporation its Revenue Anticipation Certificates (Children’s Healthcare of Atlanta, Inc. Project), Series 2008, which are currently outstanding in the aggregate principal amount of $118,770,000 (the “DeKalb Series 2008 Certificates”). In addition to the Refunded Fulton Bonds, the Fulton Issuer has previously issued on behalf of the Corporation its Revenue Bonds (Children’s Healthcare of Atlanta, Inc. Project), Series 2008 which are currently outstanding in the aggregate principal amount of $72,225,000 (the “Fulton Series 2008 Bonds,” and collectively, with the DeKalb Series 2008 Certificates, the “Series 2008 Bonds”). The loans to the Corporation by the Issuers of the proceeds of the Series 2008 Bonds were evidenced by two separate master notes (the “2008 Notes”) issued and secured under and pursuant to the Master Indenture.

Upon the issuance of the Series 2009 Bonds, the Obligations secured under the Master Indenture will include the 2009 Notes, the 2008 Notes and the hereinafter described Swap Notes. See “SECURITY FOR THE SERIES 2009 BONDS” and “PLAN OF FINANCE – Interest Rate Agreements” herein and “Interest Rate Agreements” in APPENDIX A.

Obligated Group

The Obligated Group operates a not-for-profit, integrated pediatric healthcare system, encompassing Children’s Healthcare of Atlanta at Egleston (“Egleston Hospital”) and Children’s Healthcare of Atlanta at Scottish Rite (“Scottish Rite Hospital” and, together with Egleston Hospital, the “Hospitals”) providing inpatient, outpatient and emergency care services in the Atlanta area. The Corporation also manages, under contract through a controlled affiliate, Hughes Spalding Children’s Hospital (“Hughes Spalding”).

Certain information with respect to the Obligated Group is furnished in this Official Statement. See APPENDIX A – “CHILDREN’S HEALTHCARE OF ATLANTA, INC.” and APPENDIX B – “CHILDREN’S HEALTHCARE OF ATLANTA, INC. AND AFFILIATES CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007 (RESTATED).” All information in this Official Statement concerning the Obligated Group has been provided by the Obligated Group and has not been independently verified by the Issuers, and the Issuers make no representations or warranties, express or implied, as to the accuracy or completeness of such information.

Sources of Payment and Security for the Series 2009 Bonds

Each series of the Series 2009 Bonds will be special limited obligations of the applicable Issuer and will be payable solely from and secured solely by the related Trust Estate pledged under the related Bond Indenture. Each Trust Estate includes a pledge of the revenues derived by the applicable Issuer from the related Loan Agreement (except for certain indemnification payments and certain fees and expenses), the DeKalb Note or the Fulton Note, as

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the case may be (including the payments made thereunder), and by certain other funds pledged under the related Bond Indenture. See “SECURITY FOR THE SERIES 2009 BONDS.” The Series 2009 Bonds will not be secured by a legal or equitable pledge of, or mortgage upon any facilities of the Issuers or any other facilities of the Corporation, or by any pledge of or lien on the Gross Revenues of the Corporation. As a practical matter, prospective investors should regard the payments on the DeKalb Note to be the sole source of payment for the DeKalb Bonds and payments on the Fulton Note to be the sole source of payment for the Fulton Bonds. The DeKalb Note and the Fulton Note are direct general unsecured obligations of the Corporation. Owners of the DeKalb Note and the Fulton Note would be of the same rank as a general creditor of the Corporation.

To evidence its repayment obligations under the Loan Agreements, the Corporation will issue the 2009 Notes with each 2009 Note being in a principal amount equal to the principal amount of the related Series 2009 Bonds. The aggregate of the scheduled payments of principal and interest under each of the 2009 Notes is sufficient to pay, when due, the principal of and interest on the related Series 2009 Bonds.

The Series 2009 Bonds are not secured by a debt service reserve fund.

Tax Exemption

In the opinion of King & Spalding LLP, Bond Counsel, under existing statutes, rulings and court decisions, and under applicable regulations, and assuming the accuracy of certain representations and certifications and compliance with certain tax covenants, interest on the Series 2009 Bonds (including any original issue discount properly allocable to a holder thereof) is not includable in gross income for federal income tax purposes and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals and corporations; provided, however, in the case of certain corporations (as defined for federal income tax purposes) such interest is taken into account in determining adjusted current earnings for purposes of computing the federal alternative minimum tax imposed on such corporations. In the opinion of Bond Counsel, interest on the Series 2009 Bonds is exempt from present State of Georgia income taxation under existing statutes as described herein.

See APPENDIX D – “FORMS OF BOND COUNSEL OPINIONS” for the forms of opinion Bond Counsel proposes to deliver in connection with the issuance of the Series 2009 Bonds. For a more complete discussion of such opinions and certain tax consequences incident to the ownership of the Series 2009 Bonds, see “TAX EXEMPTION.”

Legal Authority

The DeKalb Bonds are being issued and secured pursuant to the Hospital Authorities Law. The Fulton Bonds are being issued and secured pursuant to the Development Authorities Law. All of the Series 2009 Bonds are issued under and in compliance with the Constitution of the State of Georgia and the Revenue Bond Law (O.C.G.A. §§ 36-82-60, et seq.), as amended (the “Revenue Bond Law”). The DeKalb Bonds have been authorized pursuant to a resolution of the DeKalb Issuer adopted on September 16, 2009, as supplemented by a resolution adopted on November 19, 2009 (the “DeKalb Bond Resolution”). The Fulton Certificates have been authorized pursuant to a resolution of the Fulton Issuer adopted on September 22, 2009, as supplemented by a resolution adopted on November 19, 2009 (the “Fulton Bond Resolution” and together with the DeKalb Bond Resolution, the “Bond Resolutions”). The Loan Agreements were executed and delivered pursuant to the Constitution of the State of Georgia, the Acts, the Bond Resolutions and resolutions adopted by the Board of Trustees of the Corporation.

Offering and Delivery of the Series 2009 Bonds

The Series 2009 Bonds are offered when, as and if issued by the Issuers and received by the Underwriters, subject to the approval of legality by King & Spalding LLP, Bond Counsel. Certain legal matters will be passed upon for the DeKalb Issuer by its counsel, Bryan Cave LLP and for the Fulton Issuer by its counsel, Schiff Hardin LLP. Certain legal matters will be passed upon for the Corporation by its counsel, King & Spalding LLP, and by its disclosure counsel, Murray Barnes Finister LLP, and for the Underwriters by their counsel, Sutherland Asbill & Brennan LLP. It is expected that the Series 2009 Bonds will be available for delivery through The Depository Trust Company on or about December 2, 2009.

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Continuing Disclosure

The Issuers have determined that no financial or operating data concerning the respective Issuers is material to an evaluation of the offering of the Series 2009 Bonds. The Corporation, on behalf of the Obligated Group, has undertaken all responsibilities for any continuing disclosure to bondholders as described below, and the Issuers will have no obligation to the bondholders or any other person with respect to Securities and Exchange Commission Rule 15c2-12 (the “Rule”). The Corporation, on behalf of the Obligated Group, has covenanted in a Continuing Disclosure Agreement (the “Disclosure Agreement”) for the benefit of the holders and beneficial owners of the Series 2009 Bonds (i) to provide certain financial information and operating data relating to the Obligated Group (the “Annual Report”) by no later than 150 days after the end of each fiscal year of the Obligated Group, commencing with fiscal year 2009, (ii) to provide certain financial and operating data on a quarterly basis by no later than 60 days after the end of each fiscal quarter (excluding the fourth quarter), commencing with the quarter ended March 31, 2009 and (iii) to provide notices of the occurrence of certain enumerated events, if material. The specific nature of the information to be contained in the Annual Report and the notices of material events is set forth in APPENDIX E – “FORM OF CONTINUING DISCLOSURE AGREEMENT.” The Corporation has never failed to comply with its continuing disclosure obligations.

Bondholders’ Risks

An investment decision to purchase the Series 2009 Bonds should include a review of the creditworthiness of the Obligated Group. There are certain considerations relating to the Obligated Group which are set forth in this Official Statement under the caption “BONDHOLDERS’ RISKS” and which should be carefully reviewed by prospective purchasers of the Series 2009 Bonds. See “BONDHOLDERS’ RISKS” herein.

Other Information

This Official Statement speaks only as of its date, and the information contained herein is subject to change without notice. All references in this Official Statement to the Master Indenture, the Bond Indentures and the Loan Agreements are qualified in their entirety by reference to such documents, copies of which are available upon request from, and upon payment of a reasonable copying charge to the Trustee. All references to the Series 2009 Bonds are qualified in their entirety by reference to the definitive forms thereof and the information with respect thereto contained in the Bond Indentures.

THE ISSUERS

DeKalb Issuer

The DeKalb Issuer is a public body corporate and politic of the State of Georgia created under the Hospital Authorities Law and activated by a resolution of the Board of Commissioners of DeKalb County adopted on August 28, 1984. The DeKalb Issuer has the power to perform acts in its corporate capacity and in its corporate name necessary and proper to carry out the purposes enumerated in the Hospital Authorities Law, including the full power to authorize, issue and deliver the DeKalb Bonds and to use the proceeds of the DeKalb Bonds for the purposes described herein. The DeKalb Bonds will be special limited obligations of the DeKalb Issuer as described under “SECURITY FOR THE SERIES 2009 BONDS.” The DeKalb Issuer has not participated in the preparation of this Official Statement and neither has nor will assume any responsibility as to the accuracy or completeness of any information contained herein (other than that under the headings “INTRODUCTION – The Issuers” (to the extent it contains information pertaining to the DeKalb Issuer), “THE ISSUERS – DeKalb Issuer” and “LITIGATION – The Issuers” (to the extent it contains information pertaining to the DeKalb Issuer)), all of which information has been furnished by others. The DeKalb Issuer has no taxing power.

Fulton Issuer

The Fulton Issuer is a public body corporate and politic of the State of Georgia, created under the Development Authorities Law and activated by a resolution of the Board of Commissioners of Fulton County on May 16, 1973. The Fulton Issuer has the power to perform acts in its corporate capacity and in its corporate name

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necessary and proper to carry out the purposes enumerated in the Development Authorities Law, including the full power to authorize, issue and deliver the Fulton Bonds and to use the proceeds of the Fulton Bonds for the purposes described herein. The Fulton Bonds will be special limited obligations of the Fulton Issuer as described under “SECURITY FOR THE SERIES 2009 BONDS.” The Fulton Issuer has not participated in the preparation of this Official Statement and neither has nor will assume any responsibility as to the accuracy or completeness of any information contained herein (other than that under the headings “INTRODUCTION – The Issuers” (to the extent it contains information pertaining to the Fulton Issuer), “THE ISSUERS – Fulton Issuer” and “LITIGATION – The Issuers”), all of which information has been furnished by others. The Fulton Issuer has no taxing power.

PLAN OF FINANCE

Sources and Uses of Funds

The proceeds of the Series 2009 Bonds and contributions made by the Corporation and the uses of such funds are shown below:

Sources of Funds: DeKalb Bonds Fulton Bonds Total Principal Amount of Series 2009 Bonds $249,260,000.00 $50,720,000.00 $299,980,000.00 Plus: Net Original Issue (Discount)/Premium 3,136,106.75 (715,684.45) 2,420,422.30 Contribution by the Corporation(1) 2,647,098.41 542,157.59 3,189,256.00

Total Sources of Funds $255,043,205.16 $50,546,473.14 $305,589,678.30

Uses of Funds:

Payment of Refunded Bonds $252,395,000.00 $50,000,000.00 $302,395,000.00 Costs of Issuance(2) 2,648,205.16 546,473.14 3,194,678.30

Total Uses of Funds $255,043,205.16 $50,546,473.14 $305,589,678.30

(1) The Corporation will pay substantially all costs of issuance of the Series 2009 Bonds from cash on hand. (2) Issuance costs include underwriting compensation, financial advisor fees, rating agency fees, legal fees,

accounting fees and other miscellaneous costs of issuance. Refunding Plan

The proceeds of the DeKalb Bonds will be loaned to the Corporation by the DeKalb Issuer and will be applied by the Corporation to refund the Refunded DeKalb Bonds by depositing with The Bank of New York Mellon Trust Company, N.A., as trustee for the Refunded DeKalb Bonds, immediately after delivery of the DeKalb Bonds, an amount sufficient to retire the Refunded DeKalb Bonds on December 2, 2009.

The proceeds of the Fulton Bonds loaned to the Corporation by the Fulton Issuer will be applied by the Corporation to refund the Refunded Fulton Bonds by depositing with The Bank of New York Mellon Trust Company, N.A., as trustee for the Refunded Fulton Bonds, immediately after delivery of the Fulton Bonds, an amount sufficient to retire the Refunded Fulton Bonds on December 2, 2009.

Interest Rate Agreements

Description of Outstanding Interest Rate Agreements. In connection with the original issuance of the DeKalb Issuer’s Revenue Anticipation Certificates (Children’s Healthcare of Atlanta Project), Series 2005A (the “DeKalb 2005A Certificates”) and Series 2005B (the “DeKalb 2005B Certificates”), the Corporation entered into interest rate swap agreements (the “2005A/B Interest Rate Agreements”) with Citibank, N.A and SunTrust Bank, as swap counterparties (the “2005A/B Swap Providers”) in the original aggregate notional amount of $150,000,000 (equal to the original par amount of the DeKalb 2005A Certificates and the DeKalb 2005B Certificates). The

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DeKalb 2005A Certificates and the DeKalb 2005B Certificates associated with the 2005A/B Interest Rate Agreements were subsequently refunded by the DeKalb Issuer’s Refunding Revenue Anticipation Certificates (Children’s Healthcare of Atlanta, Inc. Project), Series 2008B and Series 2008C (the “DeKalb 2008B/C Refunding Certificates”). The DeKalb 2008B/C Refunding Certificates will be refunded by the DeKalb Bonds.

In February 2008, in connection with the original issuance of the Series 2008 Bonds, the Corporation entered into an interest rate swap agreement (the “2008 Interest Rate Agreement”) with J.P. Morgan Chase Bank, N.A. (the “2008 Swap Provider” and together with the 2005A/B Swap Providers, the “Swap Providers”) in the original notional amount of $242,965,000. The notional amount represented the original aggregate par amount of the Series 2008 Bonds and $50 million related to the Fulton Issuer’s Revenue Anticipation Certificates (Children’s Healthcare of Atlanta Project), Series 2005B (the “Fulton 2005B Bonds”). The Fulton 2005B Bonds were subsequently refunded by the Fulton Issuer’s Refunding Revenue Bonds (Children’s Healthcare of Atlanta, Inc. Project), Series 2008B (the “Fulton 2008B Bonds”). The Fulton 2008B Bonds will be refunded by the Fulton Bonds.

Upon the issuance of the Series 2009 Bonds, the 2005A/B Interest Rate Agreements and the 2008 Interest Rate Agreement will remain in place and only $192,965,000 notional amount of the 2008 Interest Rate Agreement will be related to a variable rate bond issue. The 2005A/B Interest Rate Agreement and the remaining $50 million of the 2008 Interest Rate Agreement will not be associated with any bond issue (the “Nonassociated Swaps”). The notional amounts of the Interest Rate Agreements will decline in accordance with the original projected amortization of the bonds to which they originally related. The Corporation intends to allocate the Nonassociated Swaps to its long-term investment portfolio as an inflation hedge and will continue to monitor their valuation. For more detailed information concerning the Interest Rate Agreements, see APPENDIX A – “Selected Utilization and Financial Information – Interest Rate Agreements.”

Security for Interest Rate Swap Agreements. The Corporation’s payment obligations relating to the 2005A/B Interest Rate Agreements and the 2008 Interest Rate Agreement are secured by notes issued under the Master Indenture at the time the Interest Rate Agreements were executed by the Corporation (the “Swap Notes”). The Swap Notes are secured on a parity with the 2009 Notes, the 2008 Notes and any future Obligations issued under the Master Indenture.

THE SERIES 2009 BONDS

General

The following is a summary of certain provisions of the Series 2009 Bonds. Each series of the Series 2009 Bonds is a separate issue with substantially identical terms, but the series are not cross-collateralized or cross-defaulted. Reference is made to the Series 2009 Bonds and to the Bond Indentures relating to such Series 2009 Bonds for a more detailed description of such provisions. The discussion herein is qualified by such reference. See APPENDIX C – “SUMMARY OF CERTAIN DOCUMENTS AND DEFINITIONS OF CERTAIN TERMS.” Any reference herein to the Series 2009 Bonds or to the Bond Indentures or other similar documents shall be deemed to mean the Series 2009 Bonds of a particular series or the documents related thereto, unless the context or use clearly indicates otherwise. Due to the similarities in the Bond Indentures, the discussion herein of the Series 2009 Bonds is applicable to both the DeKalb Bonds and the Fulton Bonds. It should be noted, however, that the DeKalb Bond Indenture relates to the DeKalb Bonds only and that the Fulton Bond Indenture relates to the Fulton Bonds only.

Denominations; Time and Place of Payment

The Series 2009 Bonds are being issued in the aggregate principal amounts and will mature on November 15, of the years and in the principal amounts as shown on the inside front cover of this Official Statement. The Series 2009 Bonds bear interest (based upon a 360-day year comprised of twelve 30-day months) at the respective annual interest rates per annum shown on the inside cover page of this Official Statement payable semiannually on May 15 and November 15 of each year, commencing May 15, 2010 (each such date, an “Interest Payment Date”) from the Interest Payment Date next preceding the date of authentication of such Series 2009 Bond to which interest has been paid or provided for, unless the date of authentication of such Series 2009 Bond is an

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Interest Payment Date to which interest has been paid or provided for, then from the date of authentication thereof, or unless no interest has been paid on such Series 2009 Bond, in which case from the date of issuance and delivery or unless such authentication date shall be after any Record Date and before the next succeeding Interest Payment Date in which case interest shall be paid from the next succeeding Interest Payment Date.

The Series 2009 Bonds will be issued as fully registered Bonds in book-entry form only and when issued will be registered in the name of Cede & Co., as nominee of DTC. The Series 2009 Bonds may be purchased by the Beneficial Owners in denominations of $5,000 or any integral multiple of $5,000 (each, an “Authorized Denomination”). While the Series 2009 Bonds are in book-entry form, principal, redemption premium (if any) and interest on the Series 2009 Bonds will be payable by wire transfer to Cede & Co., as nominee for DTC. See “BOOK-ENTRY ONLY SYSTEM.”

In the event that the book-entry form of registration is discontinued, interest on each Series 2009 Bond shall be paid to the registered Owners by check or draft mailed by first class mail on the date on which due to their addresses as they appear on the registration books of the DeKalb Issuer or Fulton Issuer maintained by the respective Bond Trustee at the close of business on the 1st day of the calendar month in which such Interest Payment Date occurs (a “Record Date”); provided, however, that if the DeKalb Issuer or Fulton Issuer shall default in the payment of interest due on any Interest Payment Date, such interest shall be paid to the persons in whose name outstanding Series 2009 Bonds are registered on a special record date established by the respective Bond Trustee by mail to the Owners of such Series 2009 Bonds not less than 15 days preceding such special record date. In the event that the book-entry form of registration is discontinued, Owners of Series 2009 Bonds in an aggregate principal amount of at least $1,000,000 who, on or prior to any Record Date, shall supply wire transfer instructions to the respective Bond Trustee, will be paid interest due on the Interest Payment Date next succeeding such Record Date and on subsequent Interest Payment Dates shall be payable by wire transfer in accordance with such instructions.

In the event that the book-entry form of registration is discontinued, the principal of and redemption premium (if any) on the Series 2009 Bonds shall be payable only upon presentation of such Series 2009 Bonds at the principal corporate trust office of the respective Bond Trustee when due.

Redemption Provisions

Optional Redemption. The Series 2009 Bonds maturing on or after November 15, 2020 are subject to redemption prior to their respective maturities at the option of the Corporation, either in whole or in part on any Business Day (in such order of maturities as may be specified by the Corporation) on or after November 15, 2019, at a redemption price of par plus accrued interest to the redemption date.

Mandatory Sinking Fund Redemption. The DeKalb Bonds maturing on November 15, 2024 are subject to mandatory sinking fund redemption prior to their maturity, at a redemption price of par plus accrued interest to the date fixed for redemption in the following principal amounts and on November 15 of each year set forth below:

Year Principal Amount

2022 $10,230,000 2023 10,710,000 2024(1) 11,275,000

(1) Maturity.

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The DeKalb Bonds maturing on November 15, 2029 are subject to mandatory sinking fund redemption prior to their maturity, at a redemption price of par plus accrued interest to the date fixed for redemption in the following principal amounts and on November 15 of each year set forth below:


2025 $10,500,000 2026 9,750,000 2027 9,890,000 2028 9,255,000 2029(1) 6,330,000

(1) Maturity.



2030 $6,605,000 2031 6,980,000 2032 7,475,000 2033 7,925,000 2034(1) 8,345,000

(1) Maturity.



2035 $ 8,750,000 2036 9,250,000 2037 9,790,000 2038 10,415,000 2039(1) 11,075,000

(1) Maturity.

The Fulton Bonds maturing on November 15, 2024 are subject to mandatory sinking fund redemption prior to their maturity, at a redemption price of par plus accrued interest to the date fixed for redemption in the following principal amounts and on November 15 of each year set forth below:


2022 $1,355,000 2023 1,415,000 2024(1) 1,480,000

(1) Maturity.

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The Fulton Bonds maturing on November 15, 2029 are subject to mandatory sinking fund redemption prior to their maturity, at a redemption price of par plus accrued interest to the date fixed for redemption in the following principal amounts and on November 15 of each year set forth below:


2025 $1,550,000 2026 1,630,000 2027 1,710,000 2028 1,795,000 2029(1) 1,885,000

(1) Maturity.

The Fulton Bonds maturing on November 15, 2034 are subject to mandatory sinking fund redemption prior

to their maturity, at a redemption price of par plus accrued interest to the date fixed for redemption in the following principal amounts and on November 15 of each year set forth below:


2030 $1,980,000 2031 2,080,000 2032 2,185,000 2033 2,300,000 2034(1) 2,415,000

(1) Maturity.

The Fulton Bonds maturing on November 15, 2039 are subject to mandatory sinking fund redemption prior

to their maturity, at a redemption price of par plus accrued interest to the date fixed for redemption in the following principal amounts and on November 15 of each year set forth below:


2035 $2,540,000 2036 2,675,000 2037 2,815,000 2038 2,960,000 2039(1) 3,120,000

(1) Maturity.

At its option, to be exercised on or before the 45th day next preceding any sinking fund redemption date,

the Corporation may (a) deliver to the Bond Trustee for cancellation Series 2009 Bonds of the appropriate maturity and series in any aggregate principal amount desired or (b) receive a credit in respect of its sinking fund redemption obligation for any Series 2009 Bonds of the appropriate maturity and series which prior to said date have been redeemed (otherwise than through mandatory sinking fund redemption) and cancelled by the Bond Trustee and not theretofore applied as a credit against any prior mandatory sinking fund redemption obligation. Each Series 2009 Bond so delivered or previously redeemed shall be credited by the Bond Trustee at 100% of the principal amount thereof on the obligation of the Corporation on such sinking fund redemption date and any excess shall be credited on future sinking fund redemption obligations in such order as may be specified by the Corporation, and the principal amount of such Series 2009 Bonds to be redeemed by operation of the sinking fund shall be accordingly reduced.

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Extraordinary Optional Redemption. The Series 2009 Bonds (or portions of any such Series 2009 Bond) are subject to optional redemption in whole or in part at any time in the event of any damage to, or destruction or condemnation of, any part of the Project refinanced by such series to the extent that the proceeds of any insurance or condemnation award relating thereto are not applied to the repair, reconstruction or restoration of such Project. Any amounts deposited in the Redemption Account of the Sinking Fund representing proceeds of insurance or condemnation awards shall be used by the respective Bond Trustee at the written direction of the Corporation to redeem Series 2009 Bonds on the earliest practical call date after giving the required notice of redemption. The Series 2009 Bonds may be redeemed in whole or in part at a redemption price equal to 100% of the principal amount thereof plus accrued interest thereon to the redemption date.

Selection of Series 2009 Bonds to be Redeemed. If less than all of the Series 2009 Bonds of a particular series are to be redeemed, the particular Series 2009 Bonds to be redeemed shall be selected in the order of maturities selected by the Corporation. If less than all the Series 2009 Bonds of a series and of a single maturity are to be redeemed, any Series 2009 Bond of such maturity outstanding in a denomination of greater than $5,000 to be redeemed shall be selected by lot in such manner as may be designated by DTC, when in book-entry form and by the Bond Trustee, when not in book-entry form.

If a portion of a Series 2009 Bond is called for redemption, a new Series 2009 Bond of the same series in the principal amount equal to the unredeemed portion thereof will be issued to the Holder upon surrender thereof.

Notice of Redemption. Notice of redemption (unless waived) will be given by first class mail, postage prepaid, at least 15 days but not more than 60 days prior to the date fixed for redemption to each Holder of Series 2009 Bonds to be redeemed at its address shown on the registration books kept by the applicable Bond Trustee. The Corporation and the Bond Trustee may agree as to any additional or other means of giving notices of redemption with respect to the Series 2009 Bonds. Provided that notice is mailed as described in this paragraph, neither failure of any owner of a Series 2009 Bond to receive such notice nor any defect in such notice will affect the validity of the proceedings for the redemption of any of the other Series 2009 Bonds.

The Corporation may make such redemption conditioned upon the occurrence of any specified event or events, and if such event or events shall not occur, then such redemption shall be cancelled. The Bond Trustee shall give notice of such cancellation to the owners of the Bonds in the same manner as giving notice of redemption.

Effect of Redemption Call. If notice of redemption has been given in the manner provided in a Bond Indenture and payment therefor has been duly provided, the Series 2009 Bonds so called for redemption shall, on the redemption date designated in such notice, become and be due and payable at the redemption price provided for redemption of such Series 2009 Bonds on such date, interest on the Series 2009 Bonds so called for redemption shall cease to accrue, such Series 2009 Bonds shall cease to be entitled to any lien, benefit or security under such Bond Indenture, and the owners of such Series 2009 Bonds shall have no rights in respect thereof except to receive payment of the redemption price thereof.

Registration of Transfer and Exchange

The DeKalb Issuer or Fulton Issuer and the respective Bond Trustee may deem and treat the Person in whose name each Series 2009 Bond is registered as shown on the registration books kept by the respective Bond Trustee as the absolute Owner of such Series 2009 Bond for all purposes under the related Bond Indenture.

When in book-entry form, the Series 2009 Bonds held by DTC (or its nominee, Cede & Co.) on behalf of the Beneficial Owners thereof are transferable and may be exchanged in the manner described herein under the heading “BOOK-ENTRY ONLY SYSTEM.”

While the Series 2009 Bonds are not in book-entry form and upon surrender for registration of transfer of any Series 2009 Bond at the Principal Office of the respective Bond Trustee, the respective Bond Trustee shall authenticate and deliver to the transferee or transferees a new Series 2009 Bond or Series 2009 Bonds for a like aggregate principal amount of Series 2009 Bonds of the same series and of the same maturity and interest rate. While the Series 2009 Bonds are not in book-entry form, the Series 2009 Bonds may be exchanged at the Principal

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Office of the respective Bond Trustee for a like aggregate principal amount of Series 2009 Bonds of authorized denominations of the same series and of like interest rate and maturity. Every Series 2009 Bond presented or surrendered for registration of transfer or exchange shall be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the respective Bond Trustee duly executed by the registered Owner thereof or his or her attorney duly authorized in writing. No charge shall be made to any Owner for the privilege of registration of transfer or exchange, but any Owner requesting any such exchange or registration of transfer shall pay any tax or other governmental charge required to be paid with respect thereto.

Book-Entry Only System

DTC will act as securities depository for the Series 2009 Bonds. The Series 2009 Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered Series 2009 Bond will be issued for each maturity in each series of the Series 2009 Bonds, and will be deposited with DTC.

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

Purchases of the Series 2009 Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Series 2009 Bonds on DTC’s records. The ownership interest of each actual purchaser of each Series 2009 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 2009 Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the Series 2009 Bonds, except as specifically provided in the Bond Indentures in the event that use of the book-entry-only system is discontinued.

To facilitate subsequent transfers, all Series 2009 Bonds deposited by Direct Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Series 2009 Bonds with DTC and their registration in the name of Cede & Co. or such other nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Series 2009 Bonds; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Series 2009 Bonds are credited, which may or may not be the Beneficial Owners. The

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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 Series 2009 Bonds may wish to take certain steps to augment transmission to them of notices of significant events with respect to the Series 2009 Bonds, such as redemptions, tenders, defaults, and proposed amendments to the Series 2009 Bond documents. For example, Beneficial Owners of Series 2009 Bonds may wish to ascertain that the nominee holding the Series 2009 Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners.

Redemption notices shall be sent to DTC. If less than all of the Series 2009 Bonds of a series are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such series to be redeemed.

Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to the Series 2009 Bonds unless authorized by a Direct Participant in accordance with DTC’s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the Issuers as soon as practicable after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts the Series 2009 Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).

Principal and interest payments on the Series 2009 Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from the Issuers or the Bond Trustees, on the payable date in accordance with their respective holdings shown on DTC’s records. Payments by DTC Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name,” and will be the responsibility of such DTC Participant and not of DTC (nor its nominee), the Bond Trustees or the Issuers, 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 Issuers and the Bond Trustees; 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.

NEITHER THE ISSUERS NOR THE BOND TRUSTEES NOR THE OBLIGATED GROUP WILL HAVE ANY RESPONSIBILITY OR OBLIGATION TO PARTICIPANTS, BENEFICIAL OWNERS OR OTHER NOMINEES OF SUCH BENEFICIAL OWNERS FOR (1) SENDING TRANSACTION STATEMENTS; (2) MAINTAINING, SUPERVISING OR REVIEWING, THE ACCURACY OF, ANY RECORDS MAINTAINED BY DTC OR ANY PARTICIPANT OR OTHER NOMINEES OF SUCH BENEFICIAL OWNERS; (3) PAYMENT OR THE TIMELINESS OF PAYMENT BY DTC TO ANY PARTICIPANT, OR BY ANY PARTICIPANT OR OTHER NOMINEES OF BENEFICIAL OWNERS TO ANY BENEFICIAL OWNER, OF ANY AMOUNT DUE IN RESPECT OF THE PRINCIPAL OF OR REDEMPTION PREMIUM, IF ANY, OR INTEREST ON BOOK-ENTRY BONDS; (4) DELIVERY OR TIMELY DELIVERY BY DTC TO ANY PARTICIPANT, OR BY ANY PARTICIPANT OR OTHER NOMINEES OF BENEFICIAL OWNERS TO ANY BENEFICIAL OWNERS, OR ANY NOTICE (INCLUDING NOTICE OF REDEMPTION) OR OTHER COMMUNICATION WHICH IS REQUIRED OR PERMITTED UNDER THE TERMS OF THE BOND INDENTURES TO BE GIVEN HOLDERS OR OWNERS OF BOOK-ENTRY BONDS; (5) THE SELECTION OF THE BENEFICIAL OWNERS TO RECEIVE PAYMENT IN THE EVENT OF ANY PARTIAL REDEMPTION OF BOOK-ENTRY BONDS; OR (6) ANY ACTION TAKEN BY DTC OR ITS NOMINEE AS THE REGISTERED OWNER OF BOOK-ENTRY BONDS.

So long as Cede & Co. is the registered owner of the Series 2009 Bonds, as nominee for DTC, references in this Official Statement to the Owners, holders or registered owners of the Series 2009 Bonds (other than under the caption “TAX EXEMPTION” herein) will mean Cede & Co., as aforesaid, and will not mean the Beneficial Owners of the Series 2009 Bonds.

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When reference is made to any action which is required or permitted to be taken by the Beneficial Owners, such reference will only relate to those permitted to act (by statute, regulation or otherwise) on behalf of such Beneficial Owners for such purposes. When notices are given, they will be sent by the Corporation or the Bond Trustees to DTC only.

As long as the book-entry system is used for the Series 2009 Bonds, the Corporation and the Bond Trustees will give any notices required to be given to Holders of the Series 2009 Bonds only to DTC. Any failure of DTC to advise any Direct Participant, or of any Direct Participant to notify any Indirect Participant, or of any Direct Participant or Indirect Participant to notify any Beneficial Owner, of any such notice and its content or effect will not affect the validity of the action premised on such notice. 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 2009 Bonds may desire to make arrangements with a Direct Participant or Indirect Participant so that all notices of redemption or other communications to DTC which affect such Beneficial Owners will be forwarded in writing by such Direct Participant or Indirect Participant.

Under the Bond Indentures, payments made by the Bond Trustees to DTC or its nominee or any successor Securities Depository or its nominee shall satisfy the applicable Issuers’ obligations under the related Bond Indenture, the Corporation’s obligations under the Loan Agreements and the obligation of the Corporation under the 2009 Notes to the extent of the payments so made.

NONE OF THE ISSUERS, THE CORPORATION OR THE BOND TRUSTEES WILL HAVE ANY RESPONSIBILITY OR OBLIGATION TO SUCH DIRECT PARTICIPANTS, OR THE PERSONS FOR WHOM THEY ACT AS NOMINEES, WITH RESPECT TO THE PAYMENTS TO OR THE PROVIDING OF NOTICE FOR THE DIRECT PARTICIPANTS, THE INDIRECT PARTICIPANTS, OR THE BENEFICIAL OWNERS OF THE SERIES 2009 BONDS.

DTC may discontinue providing its services as securities depository with respect to the Series 2009 Bonds at any time by giving reasonable notice to the Issuers and discharging its responsibilities with respect thereto under applicable law. Under such circumstances, in the event that a successor securities depository is not obtained, certificates for the Series 2009 Bonds will be printed and delivered as provided in the Bond Indentures. The Corporation may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event, Series 2009 Bond certificates will be printed and delivered as provided in the Bond Indentures.

The information in this section concerning DTC and DTC’s book-entry system has been obtained from sources that the Corporation believes to be reliable, but neither the Issuers nor the Corporation take any responsibility for the accuracy of such information.

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ESTIMATED DEBT SERVICE REQUIREMENTS

The following table sets forth for each fiscal year ending December 31, the debt service requirements on the Series 2009 Bonds and the Series 2008 Bonds, representing all of the outstanding long-term obligations of the Obligated Group. Because the Series 2008 Bonds are variable rate bonds with an interest rate hedge, the debt service on the Series 2008 Bonds may vary from the amounts shown in the table below depending upon, among other things, market conditions.

Series 2009 Bonds Series 2008 Bonds

Fiscal Year Principal Interest Principal Interest(1) Total

2010 $ 6,490,000 $ 14,225,907 $ 1,835,000 $ 6,555,820 $ 29,106,727 2011 6,275,000 14,736,281 1,600,000 6,496,057 29,107,338 2012 6,430,000 14,440,631 1,790,000 6,441,166 29,101,797 2013 6,885,000 14,137,731 1,710,000 6,374,611 29,107,342 2014 7,295,000 13,812,681 1,675,000 6,319,163 29,101,844 2015 7,680,000 13,465,169 1,700,000 6,261,060 29,106,229 2016 8,235,000 13,091,369 1,565,000 6,207,422 29,098,791 2017 8,545,000 12,690,219 1,680,000 6,145,957 29,061,176 2018 9,095,000 12,274,019 1,595,000 6,092,178 29,056,197 2019 9,605,000 11,830,719 1,590,000 6,037,277 29,062,996 2020 10,230,000 11,360,925 1,480,000 5,986,953 29,057,878 2021 10,775,000 10,857,175 1,495,000 5,930,108 29,057,283 2022 11,585,000 10,324,900 1,255,000 5,884,902 29,049,802 2023 12,125,000 9,750,731 1,335,000 5,840,460 29,051,191 2024 12,755,000 9,149,788 1,340,000 5,797,125 29,041,913 2025 12,050,000 8,517,588 1,975,000 5,736,095 28,278,683 2026 11,380,000 7,915,088 1,955,000 5,670,996 26,921,084 2027 11,600,000 7,346,088 1,875,000 5,604,799 26,425,887 2028 11,050,000 6,766,088 3,085,000 5,524,944 26,426,032 2029 8,215,000 6,213,588 6,635,000 5,360,739 26,424,327 2030 8,585,000 5,802,838 6,905,000 5,130,582 26,423,420 2031 9,060,000 5,362,856 7,115,000 4,889,474 26,427,330 2032 9,660,000 4,898,531 7,220,000 4,645,181 26,423,712 2033 10,225,000 4,403,456 7,410,000 4,388,927 26,427,383 2034 10,760,000 3,879,425 7,655,000 4,131,983 26,426,408 2035 11,290,000 3,327,975 7,945,000 3,863,839 26,426,814 2036 11,925,000 2,735,250 8,175,000 3,588,641 26,423,891 2037 12,605,000 2,109,188 8,410,000 3,299,747 26,423,935 2038 13,375,000 1,447,425 8,595,000 3,008,727 26,426,152 2039 14,195,000 745,238 8,775,000 2,709,814 26,425,052 2040 ― ― 23,650,000 2,188,972 25,838,972 2041 ― ― 24,525,000 1,357,920 25,882,920 2042 ― ― 25,445,000 499,777 25,944,777 Total $299,980,000 $257,618,867 $190,995,000 $163,971,416 $912,565,283

(1) Interest on the Series 2008 Bonds is calculated at an assumed fixed rate equal to the fixed rate payable by the

Corporation under the related hedge agreement, which is 3.4467%. The calculation of debt service on the Series 2008 Bonds is not in accordance with the debt service calculation assumptions required by the Master Indenture. See APPENDIX C – “SUMMARY OF CERTAIN DOCUMENTS AND DEFINITIONS OF CERTAIN TERMS –THE MASTER INDENTURE – Rates and Charges.” Scheduled payments under hedge agreements that are not related to hedging the interest rate payable on variable rate debt are not included. Debt service associated with the Refunded Bonds is excluded.

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SECURITY FOR THE SERIES 2009 BONDS

General

The Series 2009 Bonds are special limited obligations of the Issuers payable solely from the respective Trust Estates created under the Bond Indentures. The Trust Estate is defined in each Bond Indenture to include all of the related Issuer’s right, title and interest in and to (i) the Loan Agreement (other than certain reserved rights), (ii) the payments under the related 2009 Note, (iii) certain moneys and investments held by the Bond Trustee in all of the funds and accounts held under the applicable Bond Indenture and (iv) any other property delivered to the Bond Trustee as additional security for the Series 2009 Bonds.

Limited Obligations

THE SERIES 2009 BONDS ARE SPECIAL LIMITED OBLIGATIONS OF THE ISSUERS AND ARE PAYABLE SOLELY FROM AND SECURED SOLELY BY FUNDS HELD BY THE BOND TRUSTEES PURSUANT TO THE BOND INDENTURES HEREIN DESCRIBED AND MONEYS AND REVENUES PAYABLE UNDER THE LOAN AGREEMENTS BETWEEN THE ISSUERS AND THE CORPORATION. NEITHER THE STATE OF GEORGIA NOR ANY POLITICAL SUBDIVISION THEREOF WILL, IN ANY EVENT, BE LIABLE FOR THE PAYMENT OF THE PRINCIPAL, REDEMPTION PREMIUM, IF ANY, OR INTEREST ON THE SERIES 2009 BONDS, OR FOR THE PERFORMANCE OF ANY PLEDGE, OBLIGATION OR AGREEMENT OF ANY KIND WHATSOEVER THAT MAY BE UNDERTAKEN BY THE ISSUERS, AND NONE OF THE SERIES 2009 BONDS OR THE ISSUERS’ AGREEMENTS OR OBLIGATIONS WILL BE CONSTRUED TO CONSTITUTE A DEBT OR PLEDGE OF THE FAITH AND CREDIT OF THE STATE OF GEORGIA OR ANY POLITICAL SUBDIVISION THEREOF WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY PROVISION WHATSOEVER. THE SERIES 2009 BONDS DO NOT DIRECTLY, INDIRECTLY OR CONTINGENTLY OBLIGATE THE STATE OF GEORGIA OR ANY POLITICAL SUBDIVISION THEREOF TO LEVY OR TO PLEDGE ANY FORM OF TAXATION WHATEVER THEREFOR OR TO MAKE ANY APPROPRIATION FOR THE PAYMENT THEREOF. THE ISSUERS HAVE NO TAXING POWER.

The Loan Agreements

Under each of the Loan Agreements, the Issuer will loan the proceeds of the related series of Series 2009 Bonds to the Corporation and the Corporation is required to make loan payments in amounts sufficient to pay the principal of, premium, if any, and interest on the applicable series of Series 2009 Bonds when due. All loan payments are required to be made directly to the Bond Trustee for the account of the related Issuer, and each Bond Indenture requires that such loan payments be deposited directly to the related Sinking Fund.

Under the Loan Agreements, the Corporation has agreed to execute and deliver to the DeKalb Issuer and the Fulton Issuer, the DeKalb Note and the Fulton Note, respectively, under the Master Indenture and deliver each of them to the applicable Bond Trustee, as assignee of the applicable Issuer, to evidence the Corporation’s obligation to make loan repayments under the applicable Loan Agreement. The aggregate of the scheduled payments of principal and interest on the DeKalb Note or the Fulton Note, as the case may be, are scheduled to be sufficient to pay when due the principal of and interest on the applicable series of Series 2009 Bonds. The Issuers will assign each of the DeKalb Note and the Fulton Note to the applicable Bond Trustee as the principal source of payment and security for the related series of Series 2009 Bonds.

The Master Indenture and the 2009 Notes

General. The 2009 Notes will be issued as Obligations under the Master Indenture. Under the Master Indenture, the members of the Obligated Group (as it may exist from time to time) have jointly and severally guaranteed to the holder of any Obligation issued under the Master Indenture, including the 2009 Notes, the due and punctual payment of the principal of and interest on any such Obligation and all other amounts due and payable under the Master Indenture when and as the same shall become due and payable, whether at the stated maturity or by declaration of acceleration, call for redemption or otherwise according to the terms thereof; provided, however, in

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the event that any Cross Guarantee would constitute or result in a violation of any applicable fraudulent conveyance or similar law, then the liability of a member of the Obligated Group under such Cross Guarantee shall be reduced to the maximum amount permissible under the applicable fraudulent conveyance or similar law.

The Obligated Group has previously issued Obligations under the Master Indenture, and the Master Indenture permits members of the Obligated Group to issue additional Obligations from time to time under certain circumstances and subject to the terms of the Master Indenture, which Obligations are equally and ratably secured under the Master Indenture with the 2009 Notes and any Obligations previously issued thereunder. In addition, the Master Indenture permits the members of the Obligated Group to incur certain other types of indebtedness, including certain guarantees under the circumstances and to the extent permitted by the Master Indenture. See APPENDIX C – “SUMMARY OF CERTAIN DOCUMENTS AND DEFINITIONS OF CERTAIN TERMS –THE MASTER INDENTURE – Additional Indebtedness.”

Obligated Group. The members of the Obligated Group will be solely responsible for the payment of the 2009 Notes and other Obligations secured under the Master Indenture from time to time and for performance of the covenants and agreements set forth in the Master Indenture. Subject to certain conditions, the Master Indenture permits additional entities to become Obligated Issuers thereunder. The Master Indenture also permits Obligated Issuers (including current members of the Obligated Group) to withdraw from the Obligated Group under specified conditions, whereupon such withdrawing Obligated Issuers will cease to be bound by the Master Indenture.

No Revenue Pledge. The 2009 Notes, the Outstanding Obligations and any other Obligations issued under the Master Indenture will be general unsecured obligations of the Corporation and are not secured by any pledge of, mortgage on or security interest in the revenues or any other assets of the Corporation, any other member of the Obligated Group, or any other person.

See APPENDIX C – “SUMMARY OF CERTAIN DOCUMENTS AND DEFINITIONS OF CERTAIN TERMS –THE MASTER INDENTURE” for further information regarding the Master Indenture, including a discussion of the conditions under which entities will be permitted to join or withdraw from the Obligated Group, the provisions regarding the incurrence of, and security for, additional Obligations or other Indebtedness and the various financial and operating covenants of, and agreements to be performed by, the Obligated Group.

Substitution of 2009 Notes

The Bond Indentures authorize and direct the Bond Trustees to accept substitute promissory notes in substitution for the DeKalb Note or the Fulton Note, as the case may be, which substitute promissory notes must provide for the full and timely repayment of the Series 2009 Bonds on substantially the same repayment terms as the DeKalb Note or the Fulton Note, as the case may be, subject to the satisfaction of certain conditions set forth therein. See “APPENDIX C – “SUMMARY OF CERTAIN DOCUMENTS AND DEFINITIONS OF CERTAIN TERMS –THE BOND INDENTURE – Substitution of Promissory Note.” Such replacement note could be issued under a master indenture or similar document containing terms and provisions that vary significantly from the terms and provisions of the Master Indenture, and the operations of the obligated entities under such replacement master indenture could vary significantly from the operations of the Obligated Group.

BONDHOLDERS’ RISKS

General

The risk factors discussed below, as well as those factors discussed under the caption “SECURITY FOR THE SERIES 2009 BONDS,” should be considered in evaluating the credit characteristics and investment quality of the Series 2009 Bonds.

The future revenues and expenses of the Corporation and the other members of the Obligated Group are subject, among other things, to federal and State policies, regulations and legislation affecting the healthcare industry, competition from other healthcare providers, the capability of the Corporation’s management, third-party reimbursement from payors, including government payors, pressures from third-party payors to limit and control

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healthcare costs, the availability and affordability of professional liability insurance, professional liability carrier insolvencies, health plans and third-party payor insolvencies, and future economic and other conditions that are impossible to predict. The ability of the Corporation and the other members of the Obligated Group to generate future revenues has a direct effect upon the timely payment of the principal of, premium, if any, and interest on the Series 2009 Bonds.

Future economic and other conditions, including inflation, demand for healthcare services, the ability of the Corporation and the Obligated Group to provide the services required or requested by patients, physicians’ confidence in the Corporation and the Obligated Group, economic developments in the applicable service areas, employee relations and unionization, competition, the level of rates or charges, increased costs, availability of professional liability insurance, casualty losses, third-party reimbursement and changes in governmental regulation may adversely affect revenues and, consequently, the ability of the Corporation and the Obligated Group to generate revenues sufficient for the payment of the principal of and interest on the Notes.

Many of these conditions and the effects they could have on the Corporation and the Obligated Group are described below. This discussion of risk factors is not, and is not intended to be, exclusive or exhaustive.

Bankruptcy and Creditors’ Rights

Each series of Series 2009 Bonds are payable solely from the related Trust Estate. Enforcement of remedies under the Bond Indentures, the Master Indenture, the Loan Agreements and the 2009 Notes may be limited or restricted by laws relating to bankruptcy and rights of creditors and by application of general principles of equity applicable to the availability of specific performance or other equitable relief and may be substantially delayed in the event of litigation or statutory remedy procedures.

While those members of the Obligated Group that are described in Section 501(c)(3) of the Internal Revenue Code (“Exempt Organizations”) are not subject to involuntary bankruptcy, such entities do have the right voluntarily to file a petition in bankruptcy. In the event of bankruptcy of a member of the Obligated Group, the rights and remedies of the owners of the Series 2009 Bonds are subject to various provisions of the federal Bankruptcy Code. In any bankruptcy proceedings for the Corporation or a member of the Obligated Group, payments made by any of them during the 90-day (or one-year, for “insiders” as defined in 11 U.S.C. §101) period immediately preceding the filing of such bankruptcy petition may be avoidable as preferential transfers to the extent such payments allow the recipients to receive more than they would have received in the event of any such debtor’s liquidation. Such a bankruptcy filing would operate as an automatic stay of the commencement or continuation of any judicial or other proceeding against such member and its property and as an automatic stay of any act or proceeding to enforce a lien upon or to otherwise exercise control over its property as well as various other actions to enforce, maintain or enhance the rights of a bankruptcy trustee. If the Bankruptcy Court so ordered, the property of such debtor, including accounts receivable and proceeds thereof, could be used for its financial rehabilitation. The rights of the Bond Trustees or Master Trustee to enforce claims for payment could be delayed during the pendency of the bankruptcy proceeding.

Any member of the Obligated Group that is the subject of a bankruptcy petition could file a plan of reorganization in accordance with the provisions of the Bankruptcy Code for the adjustment of its debts in any such proceeding, which plan could include provisions modifying or altering the rights of creditors generally or any class of them, secured or unsecured. The plan, when confirmed by a Bankruptcy Court, binds all creditors who had notice or knowledge of the plan and, with certain exceptions, discharges all claims against the debtor to the extent provided for in the plan. No plan may be confirmed unless certain conditions are met, among which are conditions that the plan be feasible and that it shall have been accepted by each class of claims impaired thereunder. Each class of claims has accepted the plan if at least two-thirds in dollar amount and more than one-half in number of the class cast votes in its favor. Even if the plan is not so accepted, it may be confirmed if the court finds that the plan is fair and equitable with respect to each class of non-accepting creditors impaired thereunder and does not discriminate unfairly.

In the event of bankruptcy of a member of the Obligated Group, there is no assurance that certain covenants, including tax covenants, contained in the Bond Indentures, Loan Agreements or other documents would survive. Accordingly, any member of the Obligated Group as a debtor in possession or a bankruptcy trustee

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appointed by the Bankruptcy Court could take action that might adversely affect the exclusion of interest on the Series 2009 Bonds from gross income for federal income tax purposes. Because the Series 2009 Bonds and the other Obligations of the Obligated Group described herein are not secured by any liens or security interests on property of the Obligated Group, the Holders and Beneficial Owners of the Series 2009 Bonds will not have any claims for special protection in bankruptcy proceedings affecting revenue producing property and will be general creditors of the bankruptcy estate.

The legal right and practical ability of the Bond Trustees and the Master Trustee to enforce rights and remedies may be limited by laws relating to bankruptcy, insolvency, reorganization, fraudulent conveyance or moratorium and by other similar laws affecting creditors’ rights. Enforcement of such rights and remedies will depend upon the exercise of various remedies specified by such documents, which, in many instances, may require judicial actions that are subject to discretion and delay, that otherwise may not be readily available or that may be limited by certain legal or equitable principles.

Enforceability

The entities constituting the Obligated Group may change from time to time. The state of insolvency, fraudulent transfer or 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 the Obligated Group to make debt service payments on behalf of another member of the Obligated Group, is unsettled. The ability to enforce the Master Indenture or any note, including the 2009 Notes, against any member of the Obligated Group which would be rendered insolvent thereby could be subject to challenge. In particular, such obligations may be voidable under the Federal Bankruptcy Code or applicable state fraudulent transfer or conveyance statutes if the obligation is incurred without “fair consideration” or “reasonably equivalent value” 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 of consideration and the manner of determining insolvency are matters of judicial discretion based upon subjective standards and may vary under the Federal Bankruptcy Code, state fraudulent transfer conveyance statutes and applicable judicial decisions. It is possible that in an action involving the enforceability of such obligation to make payments on a 2009 Note, the obligation may not be enforced in the event it is determined that sufficient consideration therefor was not received by such member of the Obligated Group and that the incurrence of such obligation rendered or will render such member of the Obligated Group insolvent.

In addition, a court could determine, in the event of the bankruptcy of a member of the Obligated Group, that payments made on a 2009 Note, by the bankrupt member or the other members of the Obligated Group could constitute payments to or for the benefit of an insider, within the meaning of Section 547(b) of the Federal Bankruptcy Code, which payments, if made during the one-year period prior to that date of the filing of the petition in bankruptcy with respect to the bankrupt member of the Obligated Group, could be recovered by the trustee in bankruptcy from the Holders of the Series 2009 Bonds.

If a court were to find, in a lawsuit by an unpaid creditor as a representative of creditors of a member of the Obligated Group, that such member did not receive fair consideration or reasonably equivalent value for the incurrence of the indebtedness evidenced by a 2009 Note, and at the time of such incurrence, such member (i) was insolvent, (ii) was rendered insolvent by reason of such incurrence, (iii) was engaged or was about to engage in a business or transaction for which the remaining assets of such member were unreasonably small in relation to the business or transaction, or (iv) intended to incur, assume or issue, or believed it would incur, assume or issue debts beyond its ability to pay such debts as they become due, such court, subject to applicable statutes of limitation, could determine to invalidate, in whole or in part, such indebtedness as fraudulent transfers or conveyances or subordinate such indebtedness to existing or future creditors of such member.

No Initial Lien on Gross Revenues; Possible Parity Claims on Gross Revenues

As of the date of issuance of the Series 2009 Bonds, there is no lien on Gross Revenues or other assets of the Obligated Group to secure Obligations issued under the Master Indenture. Under certain circumstances, however, each member of the Obligated Group must deliver to the Master Trustee a supplement to the Master Indenture pledging to the Master Trustee as part of the Trust Estate created thereunder a lien on its Gross Revenues. See APPENDIX C – “SUMMARY OF CERTAIN DOCUMENTS AND DEFINITIONS OF CERTAIN TERMS –

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THE MASTER TRUST INDENTURE – General” herein. As discussed below, this lien on Gross Revenues, however, could be voided as a preferential transfer.

As discussed above under the heading “– Bankruptcy and Creditors’ Rights,” if any member of the Obligated Group commences a proceeding in bankruptcy, payments made by such member of the Obligated Group during the 90-day period immediately preceding such commencement (or, under certain circumstances, during the preceding one-year period) may be voided as preferential transfers to the extent such payments allow the recipients thereof to receive more than they would have received in the event of the liquidation of such member of the Obligated Group. Security interests and other liens granted by members of the Obligated Group to the Master Trustee and perfected during such preference period may also be voided as preferential transfers to the extent such security interest or other lien secures obligations that arose prior to the date of such grant or perfection. As any lien on Gross Revenues that the Obligated Group grants to the Master Trustee would be to secure obligations that arose prior to the date that such a lien would be granted, the lien on Gross Revenues may be subject to being voided as a preferential transfer.

Under the Bond Indentures, the respective Issuer has granted the respective Bond Trustee a security interest in the respective Loan Agreement and the DeKalb Note or the Fulton Note, as the case may be. As discussed above, the Obligated Group is required by the terms of the Master Indenture to grant the Master Trustee a lien on Gross Revenues to secure Obligations issued under the Master Indenture under certain circumstances. Nevertheless, certain interests and claims of others may be on a parity with or prior to the pledge of a security interest in the Loan Agreements, the DeKalb Note, the Fulton Note and Gross Revenues and certain statutes and other provisions may limit the Issuers’ and Obligated Group’s right to make such grants of security interests. Examples of such claims, interest, and provisions are:

(1) statutory liens;

(2) the Georgia Uniform Commercial Code may not recognize a security interest in future revenues derived from the facilities of the Obligated Group;

(3) constructive trusts, equitable liens, or other rights impressed or conferred by any state or federal court in the exercise of its equitable jurisdiction;

(4) federal bankruptcy laws as they affect amounts earned with respect to the facilities of the Obligated Group after any effectual institution of bankruptcy proceedings by or against any member of the Obligated Group or the Issuers;

(5) as to those items in which a security interest can be perfected only by possession, including items converted to cash, the rights of third parties in such items not in the possession of the Master Trustee or the Bond Trustees;

(6) items not in possession of the Bond Trustees or the Master Trustee, the records to which are located or moved outside the State of Georgia, which are thereby not subject to or are removed from the operation of Georgia law;

(7) the requirement that appropriate continuation statements be filed in accordance with the Georgia Uniform Commercial Code as from time to time in effect; and

(8) other creditors and vendors of the Obligated Group may have claims on personal property included in the facilities of the Obligated Group for work or services periodically provided to the Obligated Group.

Impact of Market Instability

The current domestic and international financial crisis has had, and is expected to continue to have, negative repercussions upon the national and global economies, including a scarcity of credit, lack of confidence in

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the financial sector, extreme volatility in the financial markets, increase in interest rates, reduced business activity, increased consumer bankruptcies and increased business failures and bankruptcies. In response, Congress passed, and former President George W. Bush signed on October 3, 2008, the Emergency Economic Stabilization Act of 2008, which authorizes the U.S. Treasury to purchase up to $700 billion of mortgage-debt and other securities from financial institutions and take other actions for the purpose of stabilizing the financial markets. President Barack Obama, on February 17, 2009, signed the American Recovery and Reinvestment Act of 2009 (the “ARRA”), which provides approximately $787 billion in federal spending and tax initiatives. Congress, the Federal Reserve Board and other agencies of the federal government and foreign governments have taken various actions that are designed to enhance liquidity, improve the performance and efficiency of credit markets and generally stabilize securities markets and stimulate spending. There can be no assurance these actions will be effective.

The financial crisis has had a particularly acute impact upon the financial sector in recent months, and has caused many banks and other financial institutions to seek additional capital, to merge, and in some cases, to fail. Additionally, substantial amounts have been withdrawn from tax-exempt money market funds, one of the largest purchasers of variable rate tax-exempt bonds.

The members of the Obligated Group have significant holdings in a broad range of investments. Market fluctuations have affected and will continue to affect materially the value of those investments and those fluctuations may be and historically have been material. The market disruption has exacerbated the market fluctuations and has negatively affected the investment performance of securities in the Obligated Group’s portfolios. Investment income (including both realized and unrealized gains on investments) has contributed significantly to the Obligated Group’s financial results over recent years. Current market conditions have significantly reduced the Obligated Group’s investment income but have not had a material adverse effect on the Obligated Group’s financial results.

The current conditions in credit markets will likely cause the Obligated Group’s ability to borrow to fund capital expenditures to be more expensive.

The credit market situation has also caused a number of financial institutions to restrict lending, including the extension of liquidity and credit facilities. This has also resulted in the unwillingness of financial institutions to extend the term of existing liquidity facilities or credit facilities. Upon the issuance of the Series 2009 Bonds, the only outstanding credit or liquidity facilities issued for the benefit of the Corporation are two standby bond purchase agreements related to the Series 2008 Bonds, each expiring February 27, 2018 (the “Liquidity Facilities”). No assurance can be given that the provider of the Liquidity Facilities will renew the existing Liquidity Facilities or that the Obligated Group will be able to obtain alternate liquidity facilities for its Series 2008 Bonds. No assurance can be given that the liquidity facility provider will provide funds to purchase tendered Series 2008 Bonds or honor draws on the Liquidity Facilities to fund such purchases. The ability of a bondholder to tender its variable rate bond for purchase is dependent on the ability of the remarketing agent to remarket tendered variable rate bonds or the ability of the liquidity provider to purchase such bonds. Upheavals in the financial markets may make the ability to remarket variable rate bonds difficult or impossible. Additionally, the recent departure of certain investment banking firms from the securities market and the bankruptcy of others has reduced the number of firms willing to serve as remarketing agents. Without a remarketing agent, it will not be possible to remarket tendered variable rate bonds. Withdrawal of funds from tax-exempt money market funds in particular has weakened demand for variable rate bonds by both reducing the number of buyers for such bonds while increasing the market supply of such bonds as money market funds liquidate their holdings to fund withdrawals.

The reader is advised to refer to APPENDIX A of this Official Statement for specific information about the effects of these factors on the Obligated Group’s recent financial performance, financial condition and debt portfolio. In particular, reference is made to information in APPENDIX A hereto under the heading “SELECTED UTILIZATION AND FINANCIAL INFORMATION – Management’s Discussion and Analysis of Financial Performance.”


As described under the caption “PLAN OF FINANCE – Interest Rate Agreements,” the Corporation has previously entered into Interest Rate Agreements. See “Interest Rate Agreements” in APPENDIX A and Note 6 to the audited financial statements in APPENDIX B for more information concerning the terms and purpose of each

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Interest Rate Agreement. The Interest Rate Agreements created a variety of risks to the Corporation. The Interest Rate Agreements are subject to periodic “mark-to-market valuations” and may have a negative value to the Corporation. Under certain circumstances, the Interest Rate Agreements are subject to termination prior to their scheduled termination date and prior to the maturity of the Series 2008 Bonds (with respect to the 2008 Interest Rate Agreement). In the event of an early termination of any of the Interest Rate Agreements, there can be no assurance that (i) the Corporation will receive any termination payment payable to it by the applicable Swap Provider, (ii) the Corporation will have sufficient amounts to pay a termination payment payable by it to the applicable Swap Provider, or (iii) the Corporation will be able to obtain a replacement agreement with comparable terms. Payment due upon early termination may be substantial. In addition, with respect to the 2008 Interest Rate Agreement, unless the Corporation is able to replace the transaction, it could thereafter be exposed to higher unhedged variable interest rates, or a higher fixed rate if it converts or refinances the Series 2008 Bonds.

Pursuant to each Interest Rate Agreement, the Corporation may be required to post collateral in certain circumstances depending on the Corporation’s credit rating and the value of the Interest Rate Agreement at any time in order to secure obligations that would be owed to the Swap Provider under such transaction if terminated, regardless of whether such transaction is actually terminated. The amount of collateral required to be posted could be substantial. As of September 30, 2009, the collateral required to be posted by the Corporation was $8,914,732.

The 2008 Interest Rate Agreement entered into by the Corporation exposes it to basis risk because the interest rate on the Series 2008 Bonds generally reflects the interest rate on short-term tax-exempt bonds, whereas the floating rate payments to be made under the 2008 Interest Rate Agreement is determined pursuant to a formula based on a taxable short-term interest rate index – 67% of the U.S. dollar one-month LIBOR rate, reset monthly (the “LIBOR Based Formula”). The LIBOR Based Formula was determined in recognition of the historical trading relationship between the expected interest rate on auction rate bonds and variable rate demand bonds and the LIBOR Based Formula. If the relationship between the interest rate on the Series 2008 Bonds and the LIBOR Based Formula changes, or if the Series 2008 Bonds trade at higher interest rates than short-term tax-exempt bonds generally, the Corporation may be exposed to basis risk, and the amounts received from the 2008 Swap Provider under the 2008 Interest Rate Agreement may be less than the Corporation’s total interest cost on the Series 2008 Bonds, and the differences could be substantial.

The agreement by the Swap Providers to pay certain amounts to the Corporation pursuant to the Interest Rate Agreements does not alter or affect the Corporation’s obligation to pay, under the 2008 Notes or the 2009 Notes, as the case may be, amounts sufficient to pay the principal of and interest on any of the Series 2008 Bonds or the Series 2009 Bonds, respectively. The Swap Providers have no obligation to make payments with respect to the Series 2008 Bonds or the Series 2009 Bonds.

Exposure to Interest Rate Changes and Puts

After issuance of the Series 2009 Bonds, $190,995,000 aggregate principal amount of the Series 2008 Bonds will bear interest at a variable short-tem rate. Pursuant to the 2008 Interest Rate Agreement relating to the Series 2008 Bonds, the Corporation’s interest obligations in respect of all of the Series 2008 Bonds have been substantially hedged at a fixed rate. Should the interest rate on the related Swap Note increase or decrease compared to the rate payable to the Corporation under the 2008 Interest Rate Agreement or should the 2008 Swap Provider fail to timely perform in full its obligations under the 2008 Interest Rate Agreement, the net annual debt service obligations of the Corporation could be considerably greater or less than those reflected herein. In addition, all of the Series 2008 Bonds will effectively become short-term obligations if the Corporation is unable to extend or replace the Liquidity Facilities obtained to purchase the Series 2008 Bonds that are tendered for purchase but not remarketed. The Liquidity Facilities expire on February 27, 2018. If the Corporation is unable to extend or replace such facilities in the future, it could be required to refinance the Series 2008 Bonds at substantially higher interest rates than those assumed herein. See “DEBT SERVICE REQUIREMENTS” herein and “SELECTED UTILIZATION AND FINANCIAL INFORMATION – Certain Financial Ratios” in APPENDIX A.

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Other Contingent Liabilities

In addition to the contingent liabilities relating to the Interest Rate Agreements, the Corporation is subject to other potentially significant contingent liabilities, including self-insurance requirements and liabilities exceeding insurance policy limitations. See Note 8 to the audited financial statements attached as APPENDIX B.

Dependence on Federal and State Funding

General. In recent years, healthcare providers, including the Corporation, have been under increasing economic pressure from third-party payors, both governmental and private. These third-party payors have limited the payment rates for hospital stays and procedures, creating incentives that reduce hospital inpatient utilization and increase the use of outpatient services, out-of-hospital care or lower cost facilities. Moreover, certain payors have begun to design benefit plans that shift more financial responsibility for the cost of healthcare services to patients. Shifts in third-party payer policies and the need for providers to adapt to changing and complex payment arrangements have had and will continue to have a significant impact upon the economic performance of the Corporation and certain of its affiliates.

In addition to these economic trends, healthcare providers, including the Corporation, are subject to extensive government regulation, which has increased and is likely to continue to increase the cost and risk of doing business. Federal and state governments frequently revise laws, regulations and policies related to services, accounting, billing and payment, and audit and monitor compliance with Medicare, Medicaid and other federal and state healthcare programs. In fiscal year 2008, less than 1% of the Corporation’s consolidated gross patient service revenue was related to the federally funded Medicare program. Approximately 48% of the Corporation’s consolidated gross patient service revenue was related to the federally and state funded Medicaid program in fiscal year 2008. Further, many private insurers require that a hospital be Medicare-certified to qualify for payment. As a result, the Corporation is affected by changes in these programs. Congress and the states have limited total spending for these programs, limited payments to hospitals under the programs, and encouraged competition. Further payment and similar restrictions are expected to be enacted. These and future changes could negatively affect the Corporation.

Health care reform is a stated priority of President Obama’s administration. The first two major legislative acts, the Children’s Health Insurance Program Reauthorization Act of 2009 and the economic stimulus bill, the American Recovery and Reinvestment Act of 2009 (“ARRA”), include substantial appropriations for children’s health insurance, subsidized continuation health insurance for newly unemployed persons and investments in health information technology and medical research. To the extent that healthcare reform expands access to healthcare services without providing ongoing resources for payment, reform will necessarily negatively impact reimbursement rates to Children’s. Specifically, a large portion of Medicaid funding (approximately 30%) is provided by the State of Georgia. If access to the healthcare system services are increased without increased funding for the State, which suffers from significant budgetary issues, Children’s will be negatively impacted. Any such reductions may have a material adverse affect on Children’s.

Medicare. The Medicare program, established in 1965, is a governmental health insurance program that reimburses healthcare providers, such as hospitals and physicians, for services provided to eligible elderly and disabled persons. Medicare consists of four parts, typically referred to as Parts A, B, C, and D. Part A generally covers inpatient hospital, skilled nursing facility, hospice and home health services. Part B generally covers services provided in an outpatient setting, such as physician and diagnostic services. Part C, known as “Medicare Advantage,” is intended to provide Medicare beneficiaries with access to private health plan choices and serve as an alternative to the traditional fee-for-service Medicare program. Part D is a prescription drug benefit added to the Medicare program by the Medicare Prescription Drug, Improvement, and Modernization Act of 2003. The Medicare program is administered by the Centers for Medicare & Medicaid Services, which is commonly referred to as CMS, an agency within the United States Department of Health and Human Services (“DHHS”).

Most hospitals participating in Medicare are paid prospectively based on a system connected to a patient's diagnosis, called a diagnosis-related group (“DRG”) payment system. Children’s, however, is paid on the basis of reported reasonable costs, subject to limits imposed under federal law.

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Overall, the Medicare program does not represent a significant source of revenue for the Hospitals since Medicare typically does not cover services provided to children, the Hospitals’ primary patient population. Specifically, the Medicare program provides reimbursement to Children’s only for renal dialysis.

Medicaid. Medicaid is a state-administered medical assistance program that covers certain healthcare services provided to eligible disabled, low-income and medically indigent individuals including children up to age 19. The Georgia Medicaid program is jointly funded by the State of Georgia and the federal government, with the federal government funding approximately 70% of the Georgia Medicaid program. Medicaid policies relating to eligibility, services, and payment are determined by the state. In fiscal year 2008, approximately 48% of the Corporation’s consolidated gross patient service revenues were related to the Medicaid program.

The Division of Medical Assistance of the Georgia Department of Community Health (“DCH”) administers the Medicaid and other related programs such as PeachCare, the State’s child health insurance program. DCH uses DRGs to reimburse hospitals for inpatient services to Medicaid recipients. DRGs are a system of classifying inpatient hospital services based on a person’s medical diagnosis, any secondary diagnoses, surgical procedures, age, sex and presence of any complications. Payments are made to hospitals based on the DRG assignment for each patient’s diagnosis, similar to Medicare inpatient services. Hospital reimbursement will be set at specific rates established by Medicaid for that particular patient’s DRG, regardless of the actual costs incurred by the hospital for such treatment. The State of Georgia periodically audits the reimbursable costs on which patient Medicaid reimbursements are paid. While the administrative staff of the Obligated Group believes that the rates to be paid for services to Medicaid patients will be appropriately premised on allowable costs, no assurance can be given that certain costs will not be disallowed or unrecognized.

In Georgia, funding for the State portion of the program comes from various sources. Portions of these funds are matched by the federal government. CMS is currently reviewing the funding mechanisms utilized by the states in meeting their match obligations. Members of the Obligated Group receive significant supplemental Medicaid payments because they serve a disproportionate number of Medicaid and uninsured patients – so called disproportionate share payments or “DSH”. Historically, Georgia has relied on intergovernmental transfers as a source of state funding for DSH payments. Certain pending federal regulations and legislation may limit the ability of states to use intergovernmental transfers from some providers as a source of funding for the state share of Medicaid funds. If these changes are finalized, Georgia would have to either reduce DSH payments to hospitals and other providers or find other funding sources for DSH payments. Georgia is currently considering alternative sources such as an additional tax on hospital providers. Whether CMS will change its bases for determining what state funds are eligible for match and the willingness of the State of Georgia to adapt to any required changes is unknown, but such changes could have a material adverse effect on the Obligated Group. In addition, funding for the Medicaid program overall comes in part from the general fund revenue allocated by the Georgia General Assembly. Georgia’s budget has been under significant pressure due to the financial crisis and is expected to have a significant deficit in the coming year that will have to be closed. This could result in reduced Medicaid funding general in Georgia for hospitals (separate and apart from reduced DSH payments).

In addition to the budgetary pressures affecting Medicaid funding at the state level, several proposals for reforming Medicaid at the federal level are currently being considered. If implemented, such reforms may have a significant impact on the extent of federal participation in the Medicaid program. Although the specifics vary, the general object of the reforms is to slow the growth of or to reduce federal spending on the Medicaid program. If enacted, these changes may have the affect of shifting some burden of Medicaid spending to the states, which could result in limits on the number of individuals covered and reduced Medicaid reimbursement to providers. Further, increased access to healthcare services as proposed by healthcare reform, without additional funding being provided, will reduce Medicaid reimbursement to the Corporation. These changes to the Medicaid program could have a material adverse affect on the operations of the Obligated Group.

As Medicaid, including PeachCare, the State’s child health insurance program, is the single largest payor for the Corporation, changes in the qualification criteria, covered benefits and reimbursement amounts could have a material adverse affect on the Corporation’s net revenue and operating margin. The ultimate effect of the implementation of a Medicaid managed care program cannot be accurately predicted or controlled. With increased benefit limitations, more stringent authorization requirements and more restrictive payments for services, reductions in reimbursement could be materially greater than current estimates and could result in more uninsured patients.

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Accordingly, there is no assurance that Medicaid payments are, or will continue to be adequate. See APPENDIX A – “CHILDREN’S HEALTHCARE OF ATLANTA, INC. – SELECTED UTILIZATION AND FINANCIAL INFORMATION – Medicaid.”

Healthcare Reform. In recent years, the federal and state governments have enacted statutes and regulations to reform and limit payments under government healthcare programs. The currently projected federal budget deficit could result in additional legislation to limit Medicare, Medicaid and other governmental expenditures. Such legislation, if enacted, could significantly reduce the Corporation’s revenues.

The ARRA includes several provisions that are intended to provide financial relief to the healthcare sector, including the Medicaid changes discussed above, a requirement that states promptly reimburse healthcare providers, and a subsidy to the recently unemployed for health insurance premium costs. The ARRA also establishes a framework for the implementation of a nationally based health information technology program, including incentive payments commencing in 2011 to healthcare providers to encourage implementation of health information technology and electronic medical records. The incentive payments will be payable to hospitals that comply with federal requirements. The Corporation is unable to determine the cost of complying with these requirements at this time. Failure to comply may result in reduced revenues under federal healthcare programs in future years.

The federal government may pass major healthcare reform to extend coverage through private insurance, a public program, or a combination of both. It is impossible to predict the impact on the future financial condition of the Obligated Group with respect to legislation of this potential magnitude.

The Health Information Technology for Economic and Clinical Act (“HITECH”), enacted as part of ARRA, broadened the scope of the federal privacy and security regulatory landscape, including significantly expanding the reach of HIPAA (hereafter defined and described). Among other things, HITECH strengthened the enforcement provisions of HIPAA, which may result in increased enforcement activity. HITECH broadens the applicability of the criminal penalty provisions under HIPAA to employees of covered entities and requires DHHS to impose penalties for violations resulting from willful neglect. HITECH also significantly increases the amount of the civil penalties, with penalties of up to $50,000 per HIPAA violation for a maximum civil penalty of $1,500,000 in a calendar year for violations of the same requirement. In addition, HITECH authorizes state attorneys general to bring civil actions seeking either injunction or damages in response to violations of HIPAA privacy and security regulations that threaten state residents. HITECH also alters certain rules regarding the use and disclosure of protected health information, extends certain HIPAA provisions beyond “covered entities” to business associates, creates new security breach notification requirements on HIPAA covered entities, limits certain uses and disclosures of individually, identifiable health information and permits harmed individuals to receive a share of civil monetary penalties. In addition, DHHS is required to conduct periodic compliance audits of HIPAA-covered entities and their business associates. The Corporation may incur significant costs in implementing the policies and systems required to comply with these new requirements.

These standards impose very complex procedures and operational requirements with which the Corporation is required to comply. There can be no assurance that differing interpretations of existing laws and regulations or the adoption of new laws and regulations would not have a material adverse affect on the ability of the Corporation to obtain, use, or disclose patient information which, in turn, could have a material adverse effect on their businesses or a material impact on the cost of compliance. Similarly, because of the complexity of these regulations, there can be no assurances that the Corporation would not be reviewed, found to violate these standards and assessed penalties for such violations.

Audits, Exclusions, Fines and Enforcement Actions

General. On a regular basis, health facilities, including those of the Obligated Group, are subject to numerous legal, regulatory, professional and private licensing, certification and accreditation requirements. These include, but are not limited to, requirements relating to Medicare and Medicaid participation and payment, research, state licensing agencies, private payors and the Joint Commission. Currently, the facilities of the Obligated Group are licensed under the applicable provisions of federal, State and local law and are certified for participation in Medicare and Medicaid. Management of the Obligated Group believes that the facilities presently comply and will comply with all applicable laws, rules, regulations and requirements and currently anticipates no difficulty renewing

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or continuing currently held licenses, certifications or accreditations. These laws, rules, regulations and requirements, which relate to the construction, fitness and adequacy of the physical facilities, the qualification and adequacy of personnel and the quality of medical care, are, however, subject to change, and there can be no guarantee that in the future the Obligated Group will not be required to expend substantial sums in order to maintain licensed, certified and accredited status. The facilities’ continued licensure and certification to participate in the Medicare and Medicaid programs depend upon many factors, including, among other things, accommodations, equipment, services, patient care, safety, personnel, physical environment and adequate policies, procedures and controls. Federal, state and local agencies survey hospital facilities on a regular basis to determine whether such facilities are in compliance with government operating and health standards and conditions for participating in governmental reimbursement programs. Such surveys include, but may not be limited to, reviews of patient utilization and inspection of standards of patient care. The Obligated Group will attempt to assure that the facilities are operated in compliance with applicable licensing and accreditation standards and that they retain certification to participate in the Medicare and Medicaid programs. However, to the extent these standards are not met, the licenses of the facilities could be limited, suspended or revoked, decertification proceedings could be commenced against them to exclude them from participating in the Medicare or Medicaid programs, or accreditation could be denied or revised, materially adversely affecting the revenues and cash flows of the Obligated Group.

In addition to the licenses noted above, various health and safety regulations and statutes apply to the Obligated Group and are enforced by various state agencies. Violation of certain health and safety standards could result in closure or requirements that compliance with such standards be immediately achieved. Management of the Obligated Group believes that it complies and will comply with all such health and safety standards. These health and safety standards are, however, subject to change, and there can be no guarantee that in the future the Obligated Group will not be required to expend substantial sums in order to comply with those changed standards.

The availability and cost of healthcare has become a matter of social and political concern, and a number of states have adopted legislation to establish rate-setting agencies with control over hospitals and hospital rates. There is a risk that the State of Georgia could establish such an agency, and any controls adopted thereby could have an adverse effect on the revenues of the System and the Obligated Group. Management of the Obligated Group is not aware of any plans to establish such an agency.

Medicare and Medicaid Audits. Hospitals and physicians participating in Medicare and Medicaid are subject to audits and retroactive adjustments by fiscal intermediaries under the Medicare and Medicaid program. As a consequence, payments may be retroactively disallowed, including, but not limited to, claims for outlier payments or claims for inappropriate coding judgments. Under certain circumstances, payments may be determined to have been made as a consequence of improper claims subject to the federal False Claims Act or other federal statutes, subjecting a hospital to civil or criminal sanctions. Generally, the Obligated Group maintains some degree of reserves for anticipated or proposed adjustments. Nevertheless, such adjustments may exceed such reserves and may be substantial. Medicare and Medicaid regulations also provide for withholding payments in certain circumstances, and such withholdings could have a material adverse effect on the financial condition of the Obligated Group. The healthcare facilities operated by the Obligated Group are reviewed by a federally designated “quality improvement organization,” which has the authority, subject to appeal, to recommend sanctions to CMS for physician and hospital services found unnecessary or found to be performed in a substandard manner. Such sanctions may include denial of payment for the services and exclusion from participation in federal healthcare programs. In addition to the audit and adjustment authority of the Medicare and Medicaid programs, some private insurance companies with which the Obligated Group contracts may also have the ability to perform audits and retroactive adjustments, in accordance with the terms of the Obligated Group’s contract with the private insurance company.

MIC Audits. In accordance with the Deficit Reduction Act of 2005, CMS was required to contract with the eligible entities, known as Medicaid Integrity Contractors (“MICs”), to review and audit Medicaid claims, identify overpayments and educate providers with respect to payment integrity and quality of case. The Obligated Group cannot anticipate the amount or volume of future Medicaid claims that will be reviewed by the MICs or the results of any such audits. The MIC Audits, while important due to its focus on Medicaid, is only one of many audit programs being implemented by Medicare and Medicaid.

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Research. Oversight of an institution’s research activities has increased dramatically in the last several years. The Food and Drug Administration and the Office for Human Research Protection have stepped up their enforcement activities, resulting in suspensions, withdrawal of funding, fines and, in rare cases, criminal actions for non-compliance with laws, rules and regulations relating to research. Risk areas are failure of the institution to provide adequate oversight, unresolved conflicts of interest, improper expenditure of federal funds, inappropriate billing of research items and inadequate training. Management believes that it is in material compliance with laws, rules and regulations relating to research, however, there can be no assurance that the Obligated Group will not be found to have violated these laws, rules and regulations. Sanctions could have a material adverse affect on the operations and financial condition of the Obligated Group.

Except as otherwise disclosed herein under the heading “LITIGATION” and in the financial statements, the Obligated Group is not aware of any proposed material adjustment by fiscal intermediaries affecting the Obligated Group under the Medicare or Medicaid programs or by any private payer or of any recommendation by any quality improvement organization with respect to the Obligated Group. In addition, the Obligated Group has not been materially adversely affected by any such denial of payment. However, there is no assurance that the Obligated Group will not be materially adversely affected as a result of an audit or retroactive adjustment in the future.

Third-Party Payors and Patient Receivables

Payments are made to the Hospitals by patients, by various insuring organizations and by Health Maintenance Organizations (“HMO”) and Preferred Provider Organizations (“PPO”). Amounts received under HMO, PPO and other payment arrangements are generally less than established charges of the Corporation. Under HMO and PPO plans, the provider is not allowed to “balance bill” the patient for the deficiency (if any) between the provider’s normal charge and the plan reimbursement. Most private insurance carriers reimburse their policy holders or make direct payments to the Corporation for charges at rates specified under policies. The Obligated Group cannot accurately predict the future growth or the financial impact of these potential sources of revenue.

For fiscal year 2008, approximately 46% of the Corporation’s gross patient service revenue was from managed care arrangements. Payments under these contracts are based on discounts off charges or per case arrangements. Most contracts have stop loss provisions limiting losses in catastrophic cases. Some HMOs are now offering or mandating a “capitation” payment method under which hospitals are paid a predetermined periodic rate for each enrollee in the HMO who is “assigned” to or otherwise directed to receive care at a particular hospital. In a capitated payment system, the hospital assumes an insurance risk for the cost and scope of care given to such HMO enrollees for the term of the contract. Currently, the Corporation is not a party to any capitated contracts. If payments under HMO and PPO contracts are insufficient to meet the hospital’s costs of care, the financial condition of the hospital may erode rapidly and significantly.

Often, HMO or PPO contracts are enforceable for a stated term regardless of provider losses or of bankruptcy on the part of the respective HMO or PPO. Further, HMO contracts may contain a requirement that the hospital care for HMO enrollees for a certain period of time regardless of whether the HMO has funds to make payment to the hospital. In cases in which an HMO is a major purchaser of services from a particular hospital, contract rate reduction, contract cancellations, inability to pay, business failure or bankruptcy of the HMO may have a substantial negative effect on a hospital’s financial condition. As more employers adopt managed care plans and as restrictions on contract reimbursement become greater, the financial performance of the Obligated Group is likely to be adversely affected.

The growth of alternative delivery systems can have a negative impact on hospitals in several ways. First, a hospital generally will not be able to serve the patients of alternative delivery systems with which it does not contract. Second, a hospital generally is required to substantially reduce its charges to obtain a contract to service alternative delivery system patients. Third, the alternative delivery systems market is becoming increasingly competitive and certain of the alternative delivery systems with which the Corporation has contracted may not survive, which may result in the Obligated Group being responsible for providing services for which the Obligated Group ultimately may not be compensated.

Governmental bodies, employers and insurers have become increasingly concerned with the cost of healthcare programs. Such third-party payors provide a significant part of the revenues of the Corporation and there

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is no assurance that existing programs will continue or that, if continued, they will be funded at present levels. The discontinuance of existing programs or the reduction of funding of such programs could have a material adverse effect on the financial condition and results of operations of the Obligated Group.

In an effort to reduce payments for hospital services, a number of third-party payors are selectively contracting with a limited number of hospitals based on the rates and services offered by these hospitals. Such selective contracting may force the Hospitals to reduce or discount rates from current levels in order to retain or attract patients of these payors. See “SELECTED UTILIZATION AND FINANCIAL INFORMATION – Managed Care” in APPENDIX A.

Changes in Healthcare Delivery

Efforts by insurers, alternative delivery systems and governmental agencies to control and reduce the costs of healthcare services and to reduce utilization of healthcare facilities by such means as preventive medicine, vigorous utilization review and case management (such as discouraging hospital admissions unless absolutely necessary), increased competition among healthcare providers, improved standards of occupational health and safety, outpatient care, and support of health maintenance organizations and preferred provider organizations could have an adverse impact upon revenues of the Obligated Group. In addition, scientific and technological advances, new procedures, drugs and appliances, preventive medicine, occupational health and safety and outpatient healthcare delivery may reduce utilization and revenues of the Obligated Group in the future. Technological advances in recent years have accelerated the trend toward the use of sophisticated and often costly diagnostic and treatment equipment in hospitals, the availability of which may be a significant factor in hospital utilization. Also, there may be a substantial lag between the availability of valuable, but costly, new technology and when such technology may be reimbursed by Medicare or other third-party payors. The ability of the Obligated Group to operate successfully over the life of the Series 2009 Bonds may depend upon its ability to finance, acquire and support additional capital equipment, replacements and improvements, which may be affected by the availability of equipment or specialists trained to utilize such equipment, legislation, regulations and applicable principles of government program reimbursement.

Uncompensated Care

Although the Obligated Group attempts to assure payment or reimbursement for most of the care it renders, it provides a substantial amount of uncompensated care to the indigent and Medicaid patients. Obligations to provide uncompensated care arise from laws and regulations that require the Obligated Group to provide care without regard to a patient’s ability to pay for such care. In fiscal year 2008, the Obligated Group provided approximately $103 million in charity care. This amount does not include policy discounts or write-offs for bad debts. Increased unemployment, reduced coverage under Medicaid, or other adverse economic conditions could increase the proportion of patients who are unable to pay all or any of the costs of their care. Numerous proposals have been made for state and federal legislation to address the problems of uncompensated care, but there is no assurance that any such proposals will be enacted.

Certificate of Need

The obtaining of approvals in Georgia for construction of new healthcare facilities and renovation of and additions to existing healthcare facilities is subject to various governmental requirements, such as approval of sites and findings of community need for additional hospital facilities, beds and services. Under the Georgia State Health Planning and Development Act, a certificate of need (“CON”) program is administered by the Georgia Department of Community Health’s Office of General Counsel (“DCH”). Georgia’s CON program requires, among other things, DCH’s review prior to construction of a new healthcare facility, a capital expenditure in excess of a statutory threshold, an increase in bed capacity, the establishment of a new clinical health service or the purchase of diagnostic or therapeutic equipment valued in excess of a statutory threshold. In addition, CON approval also requires an ongoing commitment by the operator to provide a certain level of “free care.” DCH’s review is based on a variety of statutory requirements, including a finding of community need for additional healthcare facilities and services. A CON is issued for a specific expenditure and project, and the applicant is required to build the approved project within a specified period of time. If a new institutional health service was offered or developed without obtaining prior CON approval as required by law, or if a CON for such a new institutional health service is revoked

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for failure to comply with the Act, DCH may assess an administrative fine against the operator of $5,000 for each day the new institutional health service continues to be offered or developed without CON approval. DCH may also seek injunctive relief to enforce the law, and may inform the Department of Human Resources, which may revoke all or a portion of the license of the operator. No assurance can be given as to the ability of the Obligated Group to obtain CON approval for future projects necessary to maintain competitive rates and charges or its quality and scope of care.

Government Regulation of Relationships between Hospitals and Physicians

General. Numerous laws and regulations have been adopted by both the federal and state governments seeking to address certain perceived abuses resulting from business and referral practices between physicians and hospitals. These statutes and regulations apply to many business activities between physicians and hospitals, such as joint ventures, physician recruitment, leases of space, and payment for services rendered by a physician to a hospital. Many such relations are not prohibited per se, but, if improperly structured, may lead to significant penalties, fines and/or exclusion from government healthcare programs, including Medicare and Medicaid. Management of the Obligated Group does not believe that it is or will be involved in any such prohibited activity. However, because of the lack of comprehensive judicial or regulatory guidance and the complexity of the existing regulations, there can be no assurance that challenges and investigations will not occur in the future. The Obligated Group could suffer materially adverse effects on its operations based on the expenses and/or liabilities and other sanctions arising from such an investigation. Examples of applicable laws and regulations are described below.

Federal Fraud and Abuse Provisions. The Medicare Fraud and Abuse provisions of the Social Security Act (the “Anti-Kickback Law”) make it a felony, subject to certain statutory exceptions, to knowingly solicit, receive, offer or pay any remuneration directly or indirectly, overtly or covertly, in cash or in kind, for referring an individual for the furnishing or arranging for the furnishing or for purchasing, ordering, leasing, or arranging for or recommending the purchasing, ordering or leasing of, any item or service for which payment may be made in whole or in part under a federal or state healthcare program. The statute and its implementing regulations set forth various “safe harbors” that immunize certain arrangements under the anti-kickback law if the arrangement conforms to all requirements of the applicable safe harbor. An arrangement is unlawful if only one purpose (out of several) of the arrangement is to exchange remuneration for referrals. Each violation may result in imprisonment for up to five years and fines of up to $25,000. In addition, the Secretary of the United States Department of Health and Human Services (the “Secretary of HHS”) has the authority to impose civil assessments and fines and to exclude hospitals engaged in prohibited activities from Medicare, Medicaid and other governmental healthcare programs. The Secretary is required to exclude any hospital convicted of a criminal offense relating to the delivery of Medicare or Medicaid services for not less than five years. Any such exclusion would prohibit the hospital from participating in the federal healthcare programs (including Medicare and Medicaid) and may cause the hospital to cease operations. The Secretary of HHS has promulgated regulations known as “safe harbors” that supply certain exceptions to the sweeping prohibitions of the Anti-Kickback Law. However, the safe harbors are narrow and may not cover many common hospital/physician business arrangements. Although the management of the Obligated Group does not believe that the Obligated Group is or will be involved in any prohibited activity and is not aware of any challenge or investigation with respect to these matters, there can be no assurance that the Obligated Group will not be found to have violated the Anti-Kickback Law. Sanctions under the Anti-Kickback Law could have a materially adverse effect on the operations and financial condition of the Obligated Group.

In addition, the Balanced Budget Act of 1997 and the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) include a number of fraud and abuse initiatives. For example, the laws expand and strengthen the exclusionary authority of HHS under the Medicare program, create a Fraud and Abuse Control Program to coordinate federal, state and local law enforcement in combating fraud and create additional civil and criminal sanctions for defrauding a healthcare program, obstructing investigations of healthcare, and engaging in money laundering in the healthcare industry.

In May 2009, the Healthcare Fraud Prevention and Enforcement Action Team (known as “HEAT”) was established to combat fraud and abuse in government healthcare programs. The HEAT team will include senior officials from the U.S. Department of Justice and HHS to implement a targeted civil and criminal enforcement strategy through the use of “strike force” teams.

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Management of the Obligated Group believes that all of its relationships with physicians and other referral sources are in compliance with the Social Security Act. However, it has determined that it is appropriate to structure such relationships to the extent possible in a manner that qualifies for safe harbor protection under the regulations. However, in view of the large number of such relationships and in the light of the narrowness of the safe harbor regulations there can be no assurance that a member of the Obligated Group will not be alleged to have violated the Social Security Act. Management believes that all such relationships have heretofore been entered into in compliance with the Social Security Act. However, a sanction imposed by an agency against a member of the Obligated Group might arise and there can be no assurance that such a sanction would not have a material adverse effect on the operations of such member or the financial condition of the Obligated Group.

Restrictions on Self-Referrals. The Ethics in Patient Referrals Act, known as the “Stark Law,” prohibits certain types of referral arrangements between physicians and certain healthcare entities. Physicians are prohibited under the Stark Law from referring patients to entities with which they have a prohibited “financial relationship” for the provision of “designated health services” reimbursed under certain government funded programs. Designated health services include an array of healthcare services, including inpatient and outpatient hospital care. A financial relationship will exist if the referring physician has either a direct or indirect ownership interest in the entity performing the designated health service, or a direct or indirect compensation arrangement with such entity. The entity to which a prohibited referral is made is barred from billing for the designated health service. Violations of the Stark Law can result in denial and refund of payments, civil monetary penalties of up to $15,000 per improper referral and exclusion from certain government funded programs. In addition, a hospital may be fined up to $10,000 per day for failure to disclose a physician’s improper financial relationship. Importantly, the Stark Law is a strict liability statute − that is, no unlawful intent is needed to establish a violation of the statute. The Stark Law statute and implementing regulations are complex and continuing to evolve and undergo modifications.

Although the management of the Obligated Group does not believe that the Obligated Group is or will be involved in any prohibited activity under the Stark Law and is not aware of any challenge or investigation with respect to these matters, there can be no assurance that the Obligated Group will not be found to have violated the Stark Law. Sanctions under the Stark Law could have a materially adverse effect on the operations and financial condition of the Obligated Group.

Georgia Provider Self-Referral Act. The Georgia Provider Self-Referral Act (the “Provider Self-Referral Act”) prohibits a healthcare provider from referring a patient for the provision of “designated health service” to an entity in which the healthcare provider is an investor or has an investment interest, subject to certain exemptions. A healthcare provider is any physician or other person licensed, certified or registered under the laws of the State of Georgia to provide healthcare services. Designated health services means any healthcare procedure, service or item provided by a healthcare provider.

Penalties for violation of the anti-referral provisions of the Provider Self-Referral Act could be applied to many joint business activities between hospitals and physicians, physician recruiting and retention programs, physician referral services, hospital-physician service and management contracts, loans to physicians, space and equipment rentals and other service and vendor relationships. The Obligated Group will conduct certain activities of these general types and similar activities. While management of the Obligated Group does not believe that the Obligated Group is or will be involved in any prohibited activity and is not aware of any challenge or investigation with respect to these matters, there can be no assurance that such challenge or investigation will not occur in the future. If the Obligated Group’s activities are determined to violate the anti-referral provisions of these laws, this determination may have a materially adverse effect on its financial position, especially if violations are identified and prosecuted and result in exclusion from reimbursement programs or substantial fines.

Physician Contracting and Relations. The Obligated Group has entered into a variety of relationships with physicians. Many of these relationships may be of material importance to the operations of the facilities and, in an increasingly complex legal and regulatory environment, these relationships pose a variety of legal or business risks.

The primary relationship between a hospital and physicians who practice in it is through the hospital’s organized medical staff. Medical staff bylaws, rules, and policies establish the criteria and procedures by which a physician may have his or her privileges or membership curtailed, denied or revoked. Physicians who are denied medical staff membership or certain clinical privileges, or who have such membership or privileges curtailed, denied

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or revoked often file legal actions against hospitals and medical staffs. Such actions may include a wide variety of claims, some of which could result in substantial uninsured damages to a hospital. In addition, failure of the hospital governing body to adequately oversee the conduct of its medical staff may result in hospital liability to third parties. All hospitals, including the Corporation, are subject to such risks.

Certain contracts between hospitals and physicians might be void or voidable if challenged by one of its participants in situations where a hospital exercises certain aspects of control over a physician’s practice or where the physician is in a position to refer patients to the hospital. The validity of such agreements and the materiality of their loss are dependent on factual circumstances and on the relative position of the parties at a particular time. Consequently, the outcome cannot be determined with precision in advance of a dispute or controversy with respect to the relationship. The Obligated Group is not aware of specific, related controversies that it believes would lead to the loss of a contractual relationship with physicians which would be material with respect to the operation or financial condition of the Obligated Group.

Federal Statutes Prohibiting False Claims and Fraudulent Billing Activities. Several federal civil and criminal laws target false claims and fraudulent billing activities. One of the most significant of these laws is the Federal False Claims Act, which prohibits the submission of a false claim or the making of a false record or statement in order to secure a reimbursement from a government-sponsored program. Any person or organization found to have violated the Federal False Claims Act may be liable for civil penalties of up to $10,000 per violation and treble the amount of damages the federal government is found to have sustained because of the false claim or fraudulent billing activities. In May 2009, the Fraud Enforcement and Recovery Act of 2009 (“FERA”) was enacted. FERA further strengthened the Federal False Claims Act by (1) establishing clear liability for false claims submitted to government contractors and grantees, (2) expanding the definition of a claim, (3) expanding false claim liability to include knowing concealment of an obligation to pay the government even if no false record or statement is made and (4) establishing a lower materiality standard. In recent years, the federal government has launched several initiatives aimed at uncovering practices that violate false claims or fraudulent billing laws. Claims under these laws may be brought either by the government or by private individuals on behalf of the government, through a “whistleblower” or “qui tam” action. Although the management of the Obligated Group believes it has complied with the False Claims Act, because whistleblower or qui tam actions are filed under seal and may remain secret for years, there can be no assurance that the Obligated Group has not been named in a material qui tam action. Moreover, there can be no assurance that its operations will not become the subject of such an investigation or claim in the future. To the extent that the Obligated Group becomes involved in any such investigation or claim, there can be no assurance that it will not incur material costs and/or liability in connection with such investigation or claim.

Georgia Insurance Law; False Claims Provisions. Georgia law prohibits submitting a false claim or making a false record or statement in order to secure reimbursement from an insurance company or an HMO. Violation of this prohibition may lead to the imposition of civil or criminal penalties. In 2007, Georgia enacted the State False Medicaid Claims Act (“SFMCA”), which was modeled on the federal False Claims Act and designed to enhance Georgia’s anti-fraud efforts in the area of Medicaid fraud. SFMCA allows for civil monetary penalties of $5,500 to $11,000 for each false claim submitted to defraud the State Medicaid program and treble the damages sustained by the Georgia Medicaid program as a result of the acts. SFMCA also empowers individuals to bring civil actions on behalf of the State and obtain a share of the recovery. While the management of the Obligated Group believes the Obligated Group is in substantial compliance with these laws, there can be no assurance that its operations will not become the subject of an investigation in the future.

Physician Recruitment. The Internal Revenue Service (“IRS”) and DHHS have issued various pronouncements that could limit physician recruiting and retention arrangements. In a General Counsel Memorandum, the IRS suggested that tax-exempt hospitals that provide recruiting and retention incentives to physicians risk loss of tax-exempt status unless the incentives are necessary to obtain an overriding public benefit; improvement of a charitable hospital’s financial condition does not necessarily constitute such a purpose. The IRS also has issued guidelines for its agents to follow in conducting audits that emphasize these restrictions, and has established special audit teams and procedures to ensure compliance. The OIG has taken the position that any arrangement between a facility certified to participate in federal healthcare programs and a physician that is intended to encourage the physician to refer patients may violate the Anti-Kickback Law and/or the Stark Law unless a regulatory safe harbor and/or exception applies. While the OIG has finalized a practitioner recruitment safe harbor under the Anti-Kickback Statute, the safe harbor is limited to practice recruitment in areas that are health

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professional shortage areas and to the recruitment of new physicians (those who have been practicing their specialties for less than one year) who are relocating their practices. Therefore, the safe harbor does not allow physician retention arrangements. The OIG also has issued an advisory opinion analyzing physician recruiting arrangements and providing further insight into the manner in which it would evaluate practitioner recruitment arrangements that do not qualify for the safe harbor and apply the physician recruitment safe harbor. The Stark Law also affects physician recruiting and retention arrangements. An exception applies to payments from a hospital to a physician to induce the physician to relocate to the Corporation service area and join the Corporation’s medical staff if certain enumerated requirements are met.

Health Information Privacy

Health Insurance Portability and Accountability Act. Many of the Obligated Group’s activities involve the receipt or use by it of confidential health information which may be subject to protection under federal law. Confidentiality provisions of HIPAA resulted in the Secretary of HHS to issue standards concerning health information privacy known as the “Privacy Rule.” The Privacy Rule imposes extensive requirements on the way in which healthcare providers, health plans and their business associates use and disclose protected health information (“PHI”). Sanctions for failing to comply with the Privacy Rule include criminal penalties and civil sanctions. In addition to the federal health information privacy regulations described above, Georgia has in place healthcare information confidentiality laws which limit the disclosure of confidential medical information. The HIPAA Privacy Rule does not preempt Georgia health information privacy laws that are more restrictive than the Privacy Rule. The management of the Obligated Group believes that the Obligated Group is in substantial compliance with Georgia healthcare information confidentiality laws, but there can be no assurance that its operations will not be subject to challenge in the future under current or future Georgia health information privacy laws.

In August 2000, HHS also issued, pursuant to HIPAA, final regulations establishing transaction standards and code sets for the electronic transmission of healthcare information (the “Transactions Standards”). The Transactions Standards adopt national, uniform standards that must be used if one healthcare provider or health plan conducts certain electronic transactions with another healthcare provider or health plan.

In addition, in February 2003, HHS issued final regulations pursuant to HIPAA that govern the security of PHI (the “Security Standards”). The Security Standards impose extensive additional administrative, physical, technological and organizational requirements on healthcare providers, health plans and their business associates regarding the storage, utilization of and access to PHI. As described under “– Dependence on State and Federal Funding – Healthcare Reform,” HITECH has further strengthened the enforcement provisions and penalties for violations of HIPAA. The Privacy Rule and other HIPAA requirements are extensive and have required substantial effort by the Obligated Group to assess and implement. Management of the Obligated Group has taken the steps it believes are reasonable to ensure that its policies and procedures are in compliance with the Privacy Rule, the Transactions Standards and the Security Standards. However, there can be no assurance that the Obligated Group will not be found to have violated the Privacy Rule, the Transactions Standards, or the Security Standards. Sanctions under HIPAA could have a materially adverse effect on its operations.

Compliance Program. The Corporation has a compliance program which in the regular course of its activities monitors and audits the Corporation operations. Through these and other compliance activities, the Corporation, from time to time, identifies operational errors which require refund of an overpayment to a payor. The Corporation expects that its monitoring program will result in periodic disclosures to payors, repayment of any overpayments and the possibility of the imposition of a payor-imposed compliance agreement.

Other Sources of Liability for Healthcare Providers

Patient Transfers. The Emergency Medical Treatment and Labor Act (“EMTALA”) places certain obligations on hospitals to treat patients that come to a hospital’s emergency department even if the patients have no insurance or other means to pay for their care. Under EMTALA, a hospital must provide for an appropriate medical screening examination to any individual who comes to the emergency department and requests an examination or treatment to determine whether an emergency medical condition exists or whether the individual is in active labor. Hospitals are not allowed to delay such screening examinations to inquire about the individual’s payment or

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insurance status. If an emergency medical or active labor condition is found to exist the hospital generally may not transfer the patient, unless the patient requests a transfer, until the patient has been medically stabilized.

If a hospital knowingly, willfully or negligently fails to handle emergency treatment cases in accordance with EMTALA, CMS may terminate or suspend the hospital’s Medicare provider agreement. In addition, the Secretary may impose civil money penalties of up to $50,000 per violation on a hospital that knowingly violates EMTALA. Finally, any hospital that has a patient transferred to it in violation of EMTALA and suffers financial loss as a direct result of the transfer has a private right of action against the transferring hospital.

The Obligated Group does not believe that the Hospitals are or will be involved in any EMTALA violations and is not aware of any challenge or investigation with respect to any alleged EMTALA violations; however, there can be no assurance that such challenge or investigation will not occur in the future. If the System’s activities are determined to violate EMTALA, this determination may have a materially adverse effect on the financial position of the Obligated Group, especially if multiple violations are identified and prosecuted by both governmental and private entities and result in exclusion from reimbursement programs and/or substantial fines.

Antitrust. Enforcement of the antitrust laws against healthcare providers is becoming more common, and antitrust liability may arise in a wide variety of circumstances including medical staff privilege disputes, third-party contracting, physician relations, and joint venture, merger, affiliation and acquisition activities. In some respects, the application of the federal and state antitrust laws to healthcare providers is still evolving, and enforcement activity by federal and state agencies appears to be increasing. At various times, healthcare providers may be subject to an investigation by a governmental agency charged with the enforcement of the antitrust laws, or may be subject to administrative or judicial action by a federal or state agency or a private party. Violation of the antitrust laws could be subject to criminal and civil enforcement by federal and state agencies, as well as by private litigants.

From time to time, the Obligated Group may be involved in a variety of activities that could receive scrutiny under the antitrust laws, and it cannot be predicted when or to what extent liability may arise. With respect to payor contracting, the Obligated Group may, from time to time, be involved in joint contracting activity with hospitals or their providers. The precise degree to which joint contracting activities may expose the participants to antitrust risk from governmental or private sources is dependent on a number of factual matters which may change from time to time.

Hospitals, including those of the Obligated Group, regularly have disputes regarding credentialing and peer review, and may be subject to liability in this area. In addition, hospitals occasionally indemnify medical staff members who are involved in such credentialing or peer review activities, and may also be liable with respect to such indemnity.

Court decisions have also established private causes of action against hospitals that use their local market power to promote ancillary healthcare businesses in which they have an interest. Such activities may result in monetary liability for the participating hospitals under certain circumstances where a competitor suffers business damage.

The ability to consummate mergers, acquisitions or affiliations may also be impaired by the antitrust laws resulting in the inability of the Obligated Group to fulfill its strategic plans. Liability in any of these or other antitrust areas of liability may be substantial, depending on the facts and circumstances of each case.

Concerning the Operation of Hughes Spalding. Effective February 1, 2006, HSOC, Inc. (“HSOC”), an affiliate of Children’s, entered into a Management Agreement (the “Management Agreement”) with the Fulton-DeKalb Hospital Authority (the “FDHA”) to manage and operate Hughes Spalding, the only hospital in Atlanta aside from Children’s dedicated solely to providing healthcare to children. Hughes Spalding is part of the Grady Health System that is owned by the FDHA, a public hospital authority created by two metro Atlanta counties to advance public health. In addition to Hughes Spalding, the Grady Health System consists of Grady Memorial Hospital and various other outpatient clinics and medical facilities (collectively, “Grady”). Grady is a public teaching hospital that offers care to a large number of low-income and indigent patients, many of which are uninsured, underinsured or covered by Medicaid. In recent years, Grady has experienced significant losses.

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Under the Management Agreement, HSOC agreed to provide management, administrative and related services to Hughes Spalding, and HSOC agreed to be responsible for any operating deficit incurred by Hughes Spalding each year the contract is in effect that is in excess of $2 million (which is required to be contributed by Grady) and any available funding from governing sources. Hughes Spalding also purchases certain services from Grady and is also reliant upon access to certain Grady systems in order to operate. Finally, the FDHA granted HSOC the option to purchase Hughes Spalding under certain conditions. HSOC may terminate the agreement upon giving prior written notice to the FDHA.

In the event that Grady became subject to federal bankruptcy or similar state insolvency proceedings, HSOC’s ongoing rights, responsibilities and remedies under the Management Agreement may change. It is not possible to predict or quantify how such an occurrence could affect HSOC; however, failure of a large public health system like Grady may have a significant adverse affect on HSOC and the Obligated Group.

Environmental Laws Affecting Healthcare Facilities

The members of the Obligated Group are subject to a wide variety of federal, state and local environmental and occupational health and safety laws and regulations that address, among other things, hospital operations for facilities and properties owned or operated by hospitals. Among the types of regulatory requirements faced by hospitals are air and water quality control requirements; waste management requirements; specific regulatory requirements applicable to asbestos, polychlorinated biphenyls and radioactive substances; requirements for providing notice to employees and members of the public about hazardous materials handled by or located at the hospital and requirements for training employees in the proper handling and management of hazardous materials, wastes and blood borne pathogens. In their role as owners and operators of properties or facilities, hospitals may be subject to liability for investigating and remedying any hazardous substances that have come to be located on their property, including any such substances that may have migrated off of the property. Typical hospital operations include, in various combinations, the handling, use, storage, transportation, disposal and discharge of hazardous, infectious, toxic, radioactive, flammable and other hazardous materials, wastes, pollutants or contaminants. For these reasons, hospital operations are particularly susceptible to the practical, financial and legal risks associated with compliance with such laws and regulations. Such risks may result in damage to individuals, property or the environment; may interrupt operations or increase their cost or both; may result in legal liability, damages, injunctions or fines; or may trigger investigations, administrative proceedings, penalties or other government agency actions. There can be no assurance that the Obligated Group will not encounter such risks in the future, and such risks may result in material adverse consequences to the operations or financial condition of the Obligated Group.

Competition

The Obligated Group faces and will continue to face competition from other hospitals and physicians that offer comparable healthcare services. In addition, competition exists from alternative modes of healthcare delivery that offer lower priced services to the same population. Such alternative modes include ambulatory surgery centers, private laboratories and radiology services and home care. No assurance can be given that increasing competition and consolidation of providers in the service area will not have a materially adverse effect on its financial condition.

The ability to recruit and retain highly qualified physicians to a hospital’s medical staff is one of the most significant factors in the competitive position of a hospital. Also, management’s ability to negotiate service contracts with purchasers of group healthcare services is another major factor in the competitive position of a hospital. There can be no assurance that the impact of these factors on the Corporation and the other members of the Obligated Group will not be adverse.

Technological advances in recent years have forced hospitals to acquire sophisticated and costly equipment to remain competitive. If, due to financial constraints, lack of availability of equipment, or inability to obtain any necessary government approval, the Corporation was less able to acquire new equipment required to remain competitive, the Corporation could lose market share, and the financial condition of the Obligated Group could be materially impacted.

Non-invasive interventions, including pharmacological treatments and gene therapy, are being developed at an increasing pace and could substantially reduce the demand for hospital services before the Series 2009 Bonds are

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retired. Unless population growth offsets this trend, or the Corporation’s facilities are able to compensate by developing other services or reducing expenses, the financial condition of the Obligated Group could be materially adversely affected by such medical advances.

Additionally, the growth of e-commerce may result in a shift in the way that healthcare is delivered. Persons residing in the Corporation’s service areas may be able to receive certain health services from remote providers. For example, physicians are increasingly able to provide certain services over the internet (e.g., teleradiology and second opinions). Pharmaceuticals and other health services may also now be ordered on-line. Additionally, other service providers in competition with the Corporation may now compete through this new medium by advertising their services and providing easy registration for competing services over the internet. Also, alternative forms of healthcare payment including managed care organizations and consumer-driven care, as well as expanded preventive medicine and outpatient treatment, could affect the Corporation’s ability to maintain its market share at current levels.

Malpractice Lawsuits and Insurance

The dollar amounts of patient damage recoveries from medical malpractice lawsuits are potentially significant. Moreover, in recent years, premiums for malpractice coverage have sharply increased as a result of increased litigation and jury awards for malpractice claims. Georgia has recently passed legislation, and proposals are pending on the federal level, to reform malpractice litigation by limiting non-economic damages. However, there is no guarantee that such legislation or any other proposals will ameliorate the high malpractice premiums. For information regarding the Obligated Group’s insurance coverages, premiums, and pending litigation, see APPENDIX A – “INSURANCE AND LITIGATION – Insurance Coverage” and “LITIGATION” herein.

Maintenance of Exempt Status

The exclusion of interest on the Series 2009 Bonds from the gross income of the recipients thereof for federal income tax purposes depends upon the maintenance by the Corporation of its status as an Exempt Organization. To maintain such status, the Corporation must conduct its operations in a manner consistent with current and future IRS regulations and rulings governing exempt organizations and its operations and activities. Although the Corporation has covenanted to maintain its status as an Exempt Organization, its failure to do so would likely have a materially adverse effect on the Corporation and could result in the inclusion of interest on the Series 2009 Bonds in gross income of the owners thereof for federal income tax purposes retroactive to the date of issuance.

In certain circumstances, the loss of the exclusion of interest on the Series 2009 Bonds from gross income of the owners thereof for federal income tax purposes could be retroactive to the date of issuance of the Series 2009 Bonds. The tax liability of the owners of the Series 2009 Bonds for failure to include interest on the Series 2009 Bonds in their gross income may extend to years for which interest was received on the Series 2009 Bonds, or some portion thereof, and for which the relevant statute of limitations has not yet run.

In recent years, the IRS has devoted significant resources to the auditing of large, tax-exempt healthcare systems to determine whether the Exempt Organizations of such systems meet the general criteria for tax-exempt status. These audits focus on: the relationship between tax-exempt healthcare providers and private individuals, particularly physicians; the amount of community benefit provided; compliance with applicable laws, especially the Medicare and Medicaid fraud and abuse laws; and possible violations of the prohibitions against private inurement and/or private benefit. The significant amount of scrutiny being brought to bear on Exempt Organizations by the IRS presents a heightened risk that an Exempt Organization’s exemption might be called into question. Although the Obligated Group’s management believes that the activities of the Exempt Organizations that are members of the Obligated Group are in compliance with federal tax laws and IRS standards applicable to Exempt Organizations, no assurance can be given that the IRS will not assert that one of them have entered into transactions which violate one or more of these rules or requirements. Such a violation would jeopardize the Corporation’s tax-exempt status, as well as the exemption from federal income tax of interest on the Series 2009 Bonds.

The sanctions available to the IRS if an Exempt Organization violates the private inurement or private benefit rules are not only revocation of tax-exempt status, but also monetary penalties on the Exempt Organization

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and/or interested individuals. It is impossible to predict what additional legislation or IRS guidelines or standards might be promulgated with respect to the maintenance of tax-exempt status by Exempt Organizations.

Recent years have also seen increased efforts by local governments to tax real property owned by Exempt Organizations. In several instances, such challenges have resulted in settlements whereby Exempt Organizations have agreed to make payments to local taxing authorities in lieu of taxes. Persistent efforts on the part of state and local government officials to increase tax revenues, could lead to review of tax exemptions currently afforded in Georgia to the real property of Exempt Organizations. If these efforts result in taxation of the real property of Exempt Organizations, the Corporation’s operating expenses would be increased.

Other Risk Factors

In the future, the following factors, among others, may adversely affect the operation and revenues of healthcare facilities, including those of the Obligated Group, to an extent that cannot be determined at this time:

• The Obligated Group’s revenues may be affected by future medical and scientific advances resulting in decreased usage of inpatient hospital facilities, and by efforts by insurers, private employers and governmental agencies to limit the cost of hospital services, and to reduce utilization of hospital facilities by such means as preventive medicine, improved occupational health and safety and outpatient care, including changes in contracts for reimbursement limiting the amount of reimbursement for interest costs;

• An inflationary economy and difficulties in increasing room charges and other fees charged while at the same time maintaining the scope and quality of health services may affect the healthcare industry’s ability to maintain sufficient operating margins;

• Hospitals face the possible inability to obtain future governmental approvals to undertake projects that the Obligated Group deems necessary to remain competitive both as to rates and charges and scope of care;

• A shortage of qualified professional personnel, including registered nurses and pediatric physician subspecialists, could significantly increase payroll costs of the Obligated Group by impacting the ability to deliver services and potentially resulting in higher wage costs to retain and recruit personnel. The Obligated Group cannot control the prevailing wage rates in the service areas and any increase in such rates will directly affect its costs of operations. In addition, such a shortage might cause the Obligated Group to curtail certain operations at its healthcare facilities;

• The ability of and costs to insure or otherwise protect against malpractice claims may adversely affect the Obligated Group. Changes in the cost of paying claims in excess of insurance coverage could directly (and indirectly by affecting the number of practicing physicians) adversely affect the operating results of the Obligated Group. Prohibitive cost and unavailability of other types of insurance that the Obligated Group desires to obtain may also adversely affect the Obligated Group;

• Although the hospital rates are currently not subject to regulation under Georgia law, the State of Georgia could adopt legislation which would establish a mandatory rate-setting agency and procedures which could affect the ability of the Obligated Group to maintain or increase its current rates;

• Cost and availability of any insurance, such as malpractice, fire, automobile, and general comprehensive liability, carried by hospitals similar in size and type to those of the Authority may adversely affect the Obligated Group’s revenues;

• Failure to comply with certain legal requirements may cause interest on the Series 2009 Bonds to become subject to federal income taxation retroactive to the date of issuance of the Series 2009 Bonds. The Indenture does not provide for the payment of any additional interest or penalty in the event of taxability of the interest on the Series 2009 Bonds;

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• The occurrences of natural disasters, including floods and earthquakes, may damage part or all of the facilities of the Obligated Group, interrupt utility service to part or all of the facilities of the Obligated Group or otherwise impair the operation of part or all of the facilities of the Obligated Group or the generation of revenues from part or all of the facilities of the Obligated Group beyond existing insurance coverages;

• Although the facilities of the Obligated Group are not currently unionized and management knows of no union activity, employee strikes and other adverse labor actions resulting in increased expenses and substantial reductions in revenue without corresponding decreases in costs;

• A substantial shift of the Corporation leading admitting physicians toward the use of other hospitals or other non-hospital providers;

• A decline in the population, a change in the age composition of the population, increased unemployment, or a decline in the economic condition of the service area which would increase the proportion of patients who are unable to fully pay for the cost of their care;

• Developments or events affecting the federal or state exemption of the income of the Obligated Group from taxation or the exemption of Obligated Group transactions from sales tax or the adoption of federal or state legislation adversely affecting the Obligated Group or its revenue producing capability or adversely affecting the exemption of property owned by the Obligated Group from state and local property taxation or the ability of its members to utilize tax-exempt financing;

• Any increase in the quantity or cost of indigent care provided which is mandated by law, is the end result of the national uninsured patient litigation or enforcement action or is required due to increased needs of the community in order to maintain the charitable status of the members of the Obligated Group; and

• Increases in cost of providing healthcare relating to illnesses or diseases or catastrophic illnesses or injury, which is not matched by increases in revenue from government payor programs, Blue Cross/Blue Shield, commercial insurers or other sources sufficient to cover such increases in cost.

LITIGATION

The Issuers

There is not now pending or, to the knowledge of either of the Issuers, threatened against either of the Issuers any litigation restraining or enjoining the issuance or delivery of the applicable series of the Series 2009 Bonds or questioning or affecting the validity of the related series of the Series 2009 Bonds or the proceedings or authority under which they are to be issued. Neither the creation, organization nor existence of either of the Issuers nor the title of any of the present directors or other officials of either of the Issuers to their respective offices is being contested. There is no litigation pending or, to their knowledge, threatened against either of the Issuers, which in any manner questions the right of the Issuers to enter into the respective Bond Indenture or the respective Loan Agreement or to accept the DeKalb Note or the Fulton Note, as the case may be, in the manner provided in each of the Bond Indentures.

The Corporation

The Corporation has advised that no litigation, proceedings or investigations are pending or, to its knowledge, threatened against the Corporation or any other member of the Obligated Group except (i) litigation described in APPENDIX A under the heading “INSURANCE AND LITIGATION – Litigation” or (ii) litigation, proceedings or investigations involving other types of claims which, if adversely determined, will not have a materially adverse effect on the operation or condition, financial or otherwise, of the Corporation or the Obligated Group taken as a whole. No litigation, proceedings or investigations are pending or, to the knowledge of the

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Corporation, threatened against the Corporation or any of the other members of the Obligated Group which in any manner question the right of such parties to enter into the transactions described herein.

VALIDATION

As required by the Hospital Authorities Law, the DeKalb Issuer caused proceedings to be instituted in the Superior Court of DeKalb County, Georgia to validate the DeKalb Bonds. A final judgment confirming and validating the DeKalb Bonds and the security therefor was entered on October 14, 2009.

As required by the Development Authorities Law, the Fulton Issuer caused proceedings to be instituted in the Superior Court of Fulton County, Georgia to validate the Fulton Bonds. A final judgment confirming and validating the Fulton Bonds and the security therefor was entered on October 12, 2009.

Under the laws of the State of Georgia, the judgments of validation are final and conclusive with respect to the Series 2009 Bonds and the security therefor.

LEGAL MATTERS

All legal matters incidental to the authorization and issuance of the Series 2009 Bonds by the Issuers are subject to the approval of King & Spalding LLP, Bond Counsel, whose approving opinion will be delivered with the Series 2009 Bonds. Certain legal matters will be passed upon for the DeKalb Issuer by its counsel, Bryan Cave LLP, and for the Fulton Issuer by its counsel, Schiff Hardin LLP. Certain legal matters will be passed upon for the Corporation by its counsel, King & Spalding LLP, and by its disclosure counsel, Murray Barnes Finister LLP, and for the Underwriters by their counsel, Sutherland Asbill & Brennan LLP.

TAX EXEMPTION

In the opinion of King & Spalding LLP, Bond Counsel, under existing statutes, rulings and court decisions and under applicable regulations, interest on the Series 2009 Bonds (including any original issue discount properly allocable to a holder thereof) is not includable in gross income for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations; however, with respect to corporations (as defined for federal income tax purposes), such interest is taken into account in determining adjusted current earnings for purposes of computing the alternative minimum tax imposed on such corporations. No opinion will be expressed with respect to any other federal tax consequences relating to the receipt or accrual of interest on, or ownership of, the Series 2009 Bonds. Such opinion as to each series will be in substantially the forms attached hereto as part of APPENDIX D.

Under the provisions of the Code, the Series 2009 Bonds are deemed to be a single “issue” for federal income tax purposes, and the exclusion of interest on each series of the Series 2009 Bonds from gross income for federal income tax purposes may be contingent upon interest on the other series of the Series 2009 Bonds being excluded from gross income for federal income tax purposes.

In concluding the interest on the Series 2009 Bonds is not includable in gross income for federal income tax purposes, Bond Counsel will (i) rely as to certain factual matters upon representations of the Issuers and the Corporation with respect to, among other things, the use of the proceeds of the Series 2009 Bonds and the Refunded Bonds, the design, scope, function, cost and economic useful life of the facilities financed with the Refunded Bonds, and the qualification of the Corporation as an organization described in Section 501(c)(3) of the Code, without undertaking to verify the same by independent investigation, and (ii) assume the continued compliance by the Issuers and the Corporation with their respective covenants relating to the use of the proceeds of the Series 2009 Bonds and compliance with other requirements of the Code. The inaccuracy of any such representations or noncompliance with such covenants may cause interest on the Series 2009 Bonds to become includable in gross income for federal income tax purposes retroactive to the date of issuance of the Series 2009 Bonds.

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Ownership of the Series 2009 Bonds may result in collateral federal income tax consequences to certain taxpayers, including, without limitation, banks, thrift institutions, and other financial institutions, foreign corporations which conduct a trade or business in the United States, property and casualty insurance corporations, S corporations, individual recipients of social security or railroad retirement benefits, and taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry the Series 2009 Bonds. Purchasers of the Series 2009 Bonds should consult their tax advisors as to the applicability of such collateral federal tax consequences.

In the opinion of Bond Counsel, under existing law, the original issue discount in the selling price of each Series 2009 Bond, to the extent properly allocable to each owner of such Series 2009 Bond, is excludable from gross income for federal income tax purposes with respect to such owner. The original issue discount is the excess of the stated redemption price at maturity of such Series 2009 Bond over its initial offering price to the public, excluding underwriters, at which price a substantial amount of the Series 2009 Bonds of such maturity were sold.

Under Section 1288 of the Code, original issue discount on tax-exempt bonds accrues on a compound basis. The amount of original issue discount that accrues to an owner of a Series 2009 Bond during any accrual period generally equals (i) the issue price of such Series 2009 Bond plus the amount of original issue discount accrued in all prior accrual periods, multiplied by (ii) the yield to maturity of such Series 2009 Bond (determined on the basis of compounding at the close of each accrual period and properly adjusted for the length of the accrual period), minus (iii) any interest payable on such Series 2009 Bond during such accrual period. The amount of original issue discount so accrued in a particular accrual period will be considered to be received ratably on each day of the accrual period, will be excludable from gross income for federal income tax purposes, and will not increase the owner’s tax basis in such Series 2009 Bond. Purchasers of any Series 2009 Bond at an original issue discount should consult their tax advisors regarding the determination and treatment of original issue discount for federal income tax purposes, and with respect to state and local tax consequences of owning such Series 2009 Bonds.

An amount equal to the excess of the purchase price of a Series 2009 Bond over its stated redemption price at maturity constitutes premium on such Series 2009 Bond. A purchaser of a Series 2009 Bond must amortize any premium over such Series 2009 Bond’s term using constant yield principles, based on the purchaser’s yield to maturity. As premium is amortized, the purchaser’s basis in such Series 2009 Bond is reduced by a corresponding amount, resulting in an increase in the gain (or decrease in the loss) to be recognized for federal income tax purposes upon a sale or disposition of such Series 2009 Bond prior to its maturity. Even though the purchaser’s basis is reduced, no federal income tax deduction is allowed. Purchasers of any Series 2009 Bond at a premium, whether at the time of initial issuance or subsequent thereto, should consult with their own tax advisors with respect to the determination and treatment of premium for federal income tax purposes and with respect to state and local tax consequences of owning such Series 2009 Bonds.

In the opinion of Bond Counsel, under existing statutes, interest on the Series 2009 Bonds is exempt from all present state income taxation within the State of Georgia. Interest on the Series 2009 Bonds may or may not be subject to state or local income taxation in jurisdictions other than Georgia under applicable state or local laws. Purchasers of the Series 2009 Bonds should consult their tax advisors as to the taxable status of the Series 2009 Bonds in a particular state or local jurisdiction other than Georgia.

Bond Counsel has not undertaken to notify any person or entity of any change in fact or law after the date of issuance of the Series 2009 Bonds which might affect any of its opinions in its Bond Counsel opinion dated the date of issuance of the Series 2009 Bonds.

FINANCIAL STATEMENTS

The consolidated financial statements of the Corporation and Affiliates as of and for the years ended December 31, 2008 and 2007 (Restated), appearing in APPENDIX B, have been audited by Deloitte & Touche LLP, independent auditors, as indicated in their report thereon which appears in APPENDIX B.

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FINANCIAL ADVISOR

Government Funding Advisory Associates, Woodstock, Georgia (the “Financial Advisor”), has been engaged by the Corporation as its financial advisor for this offering. The Financial Advisor has not conducted a detailed investigation of the affairs of the Corporation to determine the completeness or accuracy of this Official Statement. Because of its limited participation, the Financial Advisor has not independently verified any of the data contained herein, makes no representations or warranties, express or implied, as to the accuracy or completeness of such information, and has no responsibility for the accuracy or completeness thereof.

UNDERWRITING

J.P. Morgan Securities Inc., SunTrust Robinson Humphrey, Inc., Citigroup Global Markets Inc., Wachovia Bank, National Association d/b/a Wells Fargo Securities and Merrill Lynch, Pierce, Fenner & Smith Incorporated (collectively, the “Underwriters”) have agreed to purchase the DeKalb Bonds pursuant to a bond purchase agreement (the “DeKalb Bond Purchase Agreement”) entered into by and among the DeKalb Issuer, the Corporation and J.P. Morgan Securities Inc., as representative for the Underwriters (the “Representative”). The DeKalb Bond Purchase Agreement provides that the Underwriters will purchase all of the DeKalb Bonds, if any are purchased, for a purchase price of $252,396,106.75 (equal to par plus net original issue premium of $3,136,106.75). The Corporation has agreed to pay the Underwriters an underwriting fee of $1,814,514.50 for their services in connection with the issuance of the DeKalb Bonds. The obligation of the Underwriters to accept delivery of the DeKalb Bonds is subject to various conditions of the DeKalb Bond Purchase Agreement. The Corporation has agreed to indemnify the Underwriters and the DeKalb Issuer against certain liabilities.

The Underwriters have agreed to purchase the Fulton Bonds pursuant to a bond purchase agreement (the “Fulton Bond Purchase Agreement”) entered into by and among the Fulton Issuer, the Corporation and the Representative. The Fulton Bond Purchase Agreement provides that the Underwriters will purchase all of the Fulton Bonds, if any are purchased, for a purchase price of $50,004,315.55 (equal to par less net original issue discount of $715,684.45). The Corporation has agreed to pay the Underwriters an underwriting fee of $372,741.50 for their services in connection with the issuance of the Fulton Bonds. The obligation of the Underwriters to accept delivery of the Fulton Bonds is subject to various conditions of the Fulton Bond Purchase Agreement. The Corporation has agreed to indemnify the Underwriters and the Fulton Issuer against certain liabilities.

J.P. Morgan Securities Inc., an underwriter of the Series 2009 Bonds, has entered into an agreement (the “Distribution Agreement”) with UBS Financial Services Inc. for the retail distribution of certain municipal securities offerings, including the Series 2009 Bonds, at the original issue prices. Pursuant to the Distribution Agreement, J.P. Morgan Securities Inc. will share a portion of its underwriting compensation with respect to the Series 2009 Bonds with UBS Financial Services Inc.

Citigroup Inc., parent company of Citigroup Global Markets Inc., an Underwriter of the Series 2009 Bonds, has entered into a retail brokerage joint venture with Morgan Stanley & Co. Incorporated. As part of the joint venture, Citigroup Global Markets Inc. will distribute municipal securities to retail investors through the financial advisor network of a new broker-dealer, Morgan Stanley Smith Barney LLC. This distribution arrangement became effective on June 1, 2009. As part of this arrangement, Citigroup Global Markets Inc. will compensate Morgan Stanley Smith Barney LLC for its selling efforts with respect to the Series 2009 Bonds.

Well Fargo Securities is the trade name for certain capital markets and investment banking services of Wells Fargo & Company and its subsidiaries, including Wachovia Bank, National Association.

RATINGS

Moody’s Investors Service, Inc. (“Moody’s”) and Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc. (“S&P”), have assigned long-term municipal ratings of “Aa2” and “AA,” respectively, to each series of the Series 2009 Bonds. Any desired explanation of the significance of such ratings should be obtained from such rating agencies. Generally, rating agencies base their rating on the information and materials furnished to the agencies and on investigations, studies and assumptions made by the agencies. There is

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no assurance that such ratings will continue for any given period of time or that they will not be lowered or withdrawn entirely if, in the judgment of the agency originally establishing the rating, circumstances so warrant. Any such change or withdrawal of such ratings could have an adverse effect on the market price of the Series 2009 Bonds. Except as described under the caption “INTRODUCTION – Continuing Disclosure” herein, none of the Issuers, the Underwriters or the Corporation has undertaken any responsibility to bring to the attention of the registered owners of the Series 2009 Bonds any proposed revision or withdrawal of the rating of the Series 2009 Bonds or to oppose any such proposed revision or withdrawal. Any such change in or withdrawal of such rating could have an adverse effect on the market price or marketability of the Series 2009 Bonds.

CERTAIN RELATIONSHIPS

The Corporation and its affiliates occasionally do business with firms, banks and other organizations which are affiliated with the members of the Corporation’s Board of Trustees, its committee members or officers or members of the Foundation’s Board of Trustees or its committee members or officers. In particular, Mark A. Chancy, a member of the Corporation’s Board of Trustees, is the Chief Financial Officer of SunTrust Banks, Inc., an affiliate of SunTrust Robinson Humphrey, Inc., the co-senior manager underwriting the Series 2009 Bonds. In addition, Michael E. Walsh, a member of the Foundation Board of Trustees, is a Managing Director of J.P. Morgan Securities, Inc., the co-senior manager underwriting the Series 2009 Bonds. All business arrangements are made on an arm’s-length basis and on terms no less favorable than other arrangements with unrelated parties.

MISCELLANEOUS

The agreement of the Issuers with the holders of the Series 2009 Bonds is fully set forth in each of the Bond Indentures, and neither any advertisement of the Series 2009 Bonds nor this Official Statement is to be construed as constituting an agreement between the Issuers and the purchasers of their respective series of Series 2009 Bonds. So far as any statements made in this Official Statement involving estimates, projections or matters of opinion, whether or not expressly so stated, they are intended merely as such and not as representations of fact.

CUSIP identification numbers will be printed on the Series 2009 Bonds, but neither the failure to print such numbers nor any error in the printing of such numbers shall constitute cause for a failure or refusal by the purchaser thereof to accept delivery of and pay for the Series 2009 Bonds.

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The attached APPENDICES A through E are integral parts of this Official Statement and must be read together with all of the foregoing statements.

The Corporation has reviewed the information contained herein which relates to the Corporation and the Obligated Group and their properties and operations, including the information in APPENDICES A and B hereto, and has approved all such information for use within this Official Statement. The Issuers have duly authorized the execution and delivery of this Official Statement.

DEVELOPMENT AUTHORITY OF FULTON COUNTY By: /s/ Robert J. Shaw

Chairman DEKALB PRIVATE HOSPITAL AUTHORITY By: /s/ Judy Turner

Chairman This Official Statement is approved: CHILDREN’S HEALTHCARE OF ATLANTA, INC. By: /s/ Ruth Fowler

Chief Financial Officer

APPENDIX A

CHILDREN’S HEALTHCARE OF ATLANTA, INC. The information contained in APPENDIX A to this Official Statement has been provided by Children’s Healthcare of Atlanta, Inc. and its Affiliates.

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TABLE OF CONTENTS Page

INTRODUCTION ..................................................................................................................................................... A-3

General ........................................................................................................................................................ A-3

Organizational Chart ................................................................................................................................... A-3

Obligated Group Members .......................................................................................................................... A-5

Non-Obligated Group Affiliates .................................................................................................................. A-5

Affiliations .................................................................................................................................................. A-6

GOVERNANCE AND MANAGEMENT ................................................................................................................ A-7

Board of Trustees of Children’s .................................................................................................................. A-7

Foundation Board of Trustees ..................................................................................................................... A-8

Executive Management ............................................................................................................................. A-10

FACILITIES AND PROGRAMS ........................................................................................................................... A-12

Overview ................................................................................................................................................... A-12

Facilities Map ............................................................................................................................................ A-13

Services ..................................................................................................................................................... A-14

MASTER FACILITIES PLAN ............................................................................................................................... A-16

Recent Expansions and Renovations ......................................................................................................... A-16

Ongoing and Future Capital Improvements .............................................................................................. A-17

MEDICAL STAFF .................................................................................................................................................. A-17

Physicians .................................................................................................................................................. A-17

Top 20 Admitting Physicians .................................................................................................................... A-19

Education ................................................................................................................................................... A-19

Research .................................................................................................................................................... A-19

NURSING STAFF .................................................................................................................................................. A-20

Direct Nursing Staff .................................................................................................................................. A-20

Supplemental Nursing Staff ...................................................................................................................... A-20

Retention ................................................................................................................................................... A-21

Compensation ............................................................................................................................................ A-21

Recruitment ............................................................................................................................................... A-21

SERVICE AREA AND OTHER PROVIDERS ...................................................................................................... A-21

Primary and Secondary Service Areas ...................................................................................................... A-21

Historical and Projected Population .......................................................................................................... A-22

Income, Employment and Employers ....................................................................................................... A-23

Other Pediatric Service Providers ............................................................................................................. A-25

SELECTED UTILIZATION AND FINANCIAL INFORMATION ...................................................................... A-26

Summary of Historical Utilization ............................................................................................................ A-26

Payor Mix .................................................................................................................................................. A-26

Managed Care ........................................................................................................................................... A-26

Medicaid .................................................................................................................................................... A-27

Indigent Care Trust Fund .......................................................................................................................... A-28

Uncompensated Care ................................................................................................................................. A-28

Summary Financial Information................................................................................................................ A-28

Management’s Discussion and Analysis of Financial Performance .......................................................... A-31

Certain Financial Ratios ............................................................................................................................ A-33

Investments ............................................................................................................................................... A-34

Interest Rate Agreements .......................................................................................................................... A-34

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INSURANCE AND LITIGATION ......................................................................................................................... A-35

Insurance ................................................................................................................................................... A-35

Litigation ................................................................................................................................................... A-35

ADDITIONAL INFORMATION ........................................................................................................................... A-36

Employees ................................................................................................................................................. A-36

Licenses, Accreditation and Membership ................................................................................................. A-36

Fundraising Activities ............................................................................................................................... A-37

Volunteers ................................................................................................................................................. A-37

COMMUNITY EDUCATION AND ADVOCACY ............................................................................................... A-37

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INTRODUCTION

General

Children’s Healthcare of Atlanta, Inc. (“Children’s”) is one of the leading pediatric healthcare systems in the country, encompassing Children’s Healthcare of Atlanta at Egleston (“Egleston Hospital”) and Children’s Healthcare of Atlanta at Scottish Rite (“Scottish Rite Hospital” and, together with Egleston Hospital, the “Hospitals”) with a combined 505 licensed beds and 16 neighborhood locations. Children’s also manages, under contract through a controlled affiliate, Hughes Spalding Children’s Hospital (“Hughes Spalding”), with 24 licensed beds. Children’s physicians represent more than 30 pediatric specialties with particular expertise in pediatric cardiac care, hematology/oncology and solid organ transplantation. In 2008, the Hospitals handled more than 481,000 patient visits, treating children from every county in Georgia and throughout the Southeast. U.S. News & World

Report ranked Children’s Hospitals among the best pediatric hospitals in the United States in its 2008 issue of “America’s Best Children’s Hospitals.” Two specialty areas at Children’s ranked among the top 10 in the nation by U.S. News – orthopedics (No. 5) and heart/heart surgery (No. 7). Four specialty areas at Children’s ranked among the top 20 in the nation – cancer (No. 12), digestive disorders (No. 12), respiratory disorders (No. 17) and urology (No. 18). Also, Parents magazine named Children’s one of America’s top 10 pediatric hospitals. The magazine also ranked two specialty areas at Children’s among the top five in the nation - orthopedics (No. 5) and cardiac (No. 5).

Children’s was formed in 1998 when Egleston Children’s Health Care System and Scottish Rite Children’s

Medical Center effectively merged by creating Children’s as the controlling company for both hospitals. This merger enabled Children’s to combine existing services, eliminate operational redundancies and reduce costs. It also allowed the newly formed organization to develop a joint vision with the Emory University School of Medicine aimed at improving patient care and advancing research and education.

Egleston began in 1928 as a children’s hospital in downtown Atlanta with 52 beds, serving 605 patients in

the first year. Egleston became affiliated with the Emory University School of Medicine in 1956 and moved its hospital to its current location on Clifton Road adjacent to Emory University in 1959. In 1978, Egleston increased its number of beds to 165. Egleston established an integrated healthcare system in 1994, providing prevention, primary care, minor emergency care, specialty care and home care. Today, Egleston Hospital is licensed to operate 255 beds.

The Scottish Rite Convalescent Hospital for Crippled Children opened in Decatur in 1915 with two rented

cottages that accommodated up to 18 patients. In 1976, Scottish Rite moved to its current location in North Atlanta, and after 1989 it changed its name to Scottish Rite Children’s Hospital, including the Scottish Rite Medical Center Foundation, the Meridian Mark Corporation, and the Wilbur and Hilda Glenn Hospital for Children. Today, Scottish Rite Hospital is licensed to operate 250 beds.

In 2006, HSOC, Inc., an affiliate of Children’s, began managing daily operations at Hughes Spalding

Children’s Hospital (“Hughes Spalding”). Hughes Spalding is owned by the Fulton-DeKalb Hospital Authority (the “FDHA”), a public hospital authority created by two metro Atlanta counties that does business under the name of the Grady Health System (“Grady”). Hughes Spalding is licensed to operate 24 beds. Unless otherwise specifically noted, utilization and other financial data with respect to Children’s and the Hospitals contained in this Appendix A excludes such data with respect to Hughes Spalding.

During the past decade, Children’s has experienced significant growth in patient volume in response to

community growth and increasing patient needs. In 1998, Egleston Hospital and Scottish Rite Hospital cared for nearly five of every ten children seeking pediatric medical services in Atlanta. By 2007, that number had increased to almost eight of every ten children in Atlanta.

Organizational Chart

Children’s is the sole corporate member of Scottish Rite Children’s Medical Center, Inc., Egleston Children’s Hospital at Emory University, Inc. and several additional affiliated entities. Children’s is a tax-exempt 501(c)(3) corporation that employs all of the staff of Children’s, employs and/or leases a number of physicians, and provides professional, administrative and clinical support to its affiliates. The following pages display an organizational chart of Children’s and a description of each direct affiliate.

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CHILDREN’S HEALTHCARE OF ATLANTA , INC. ORGANIZATIONAL CHART

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Obligated Group Members

Currently, the following entities, together with Children’s, make up the Obligated Group (the “Obligated Group”) under the Master Trust Indenture, dated as of January 1, 2005, among the Obligated Group and The Bank of New York Mellon Trust Company, N.A., as master trustee, as supplemented (the “Master Trust Indenture”), and are jointly and severally liable for all Obligations (as defined in the Master Trust Indenture) issued thereunder, subject to the provisions of the Master Trust Indenture permitting the withdrawal or addition of Obligated Group Members. In fiscal year 2008, the Obligated Group accounted for more than 90% of Children’s consolidated total operating revenues and support.

Scottish Rite Children’s Medical Center, Inc. (“Scottish Rite”) is a tax-exempt 501(c)(3) organization

operating as Children’s Healthcare of Atlanta at Scottish Rite. This entity owns and operates Scottish Rite Hospital, an acute-care children’s hospital currently licensed to operate 250 beds.

Egleston Children’s Hospital at Emory University, Inc. (“Egleston”) is a tax-exempt 501(c)(3) organization

operating as Children’s Healthcare of Atlanta at Egleston. This entity owns and operates Egleston Hospital, an acute-care children’s hospital facility currently licensed to operate 255 beds.

Egleston Pediatric Group, Inc. is a tax-exempt 501(c)(3) organization operating as Egleston Pediatric

Group (“EPG”). EPG is the sole member of Children’s Anesthesia Services, LLC and Children’s Sedation Services, LLC, each described below.

Egleston Affiliated Services, Inc. is a tax-exempt 501(c)(3) organization (“EAS”) which provides non-

hospital based healthcare services, including medical services, radiology and laboratory services, through four immediate care and urgent care centers located throughout the Atlanta area. Children’s provides physicians and clinical staff for EAS.

Children’s Healthcare of Atlanta Foundation, Inc. is a tax-exempt 501(c)(3) organization established to

promote and support Children’s and its affiliates (the “Foundation”). The Foundation’s primary purpose is to represent Children’s in the community and to generate financial support for the services and operations of Children’s. All contributions received by the Foundation are transferred to Children’s for investment management and for deployment of funds in accordance with donor designations and restrictions. The Foundation is responsible for major fundraising programs, including many charitable events and activities, and has taken the leading role in the capital fundraising campaign for Children’s expansion projects. See “ADDITIONAL INFORMATION – Fundraising Activities” herein.

Children’s Anesthesia Services, LLC is a Georgia limited liability company (“Children’s Anesthesia

Services”) established in 2003 as a single member LLC, with EPG being the sole member. Children’s Anesthesia Services provides anesthesiology services during medical treatments and procedures at Scottish Rite and Children’s Healthcare of Atlanta Surgery Center at Meridian Mark Plaza, LLC described below.

Children’s Sedation Services, LLC is a Georgia limited liability company (“Children’s Sedation Services”)

established in 2002 as a single member LLC, with EPG being the sole member. Children’s Sedation Services provides conscious sedation services during medical treatments and procedures at Egleston Hospital.

Non-Obligated Group Affiliates

The following affiliates of Children’s that are included in the Children’s consolidated financial statements are not members of the Obligated Group and, therefore, are not liable for Obligations issued under the Master Trust Indenture.

Emory-Egleston Children’s Heart Center, Inc. is a taxable Georgia corporation that is operated as a

physician practice group employing pediatric cardiologists who provide services at Egleston Hospital and Scottish Rite Hospital, as well as administrative and clinical staff (“EECHC”).

The Children’s Health Network, Inc. is a taxable physician hospital organization (“TCHN”). TCHN

negotiates contracts with managed care payors on behalf of community-based physicians and acts as a liaison

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between third-party payors and physicians. TCHN does not negotiate price related terms or manage accounts receivable. Participating physicians pay dues (currently $875/year/physician) to be a member of the network. Currently, there are approximately 639 participating physicians from 24 counties in Georgia representing all pediatric specialties. TCHN provides educational programs, provider relations teams, assistance with claims resolution-denials and underpaid claims. TCHN has delegated credentialing for managed care payors to Children’s.

Premier Pediatric Providers, LLC is a Georgia limited liability company established in 1998 (“PPP”). PPP

is an association that provides a clinically integrated network of primary care pediatricians and works with physicians to improve the quality of care provided to their patients as well as working with managed care payors on their behalf. Participating physicians pay dues (currently $3,300/year/physician) to be a member of the network. Currently, there are approximately 200 participating physicians from 15 counties in Georgia representing all pediatric specialties. PPP provides group purchasing, provider advocacy, provider relations teams, assistance with claims resolution-denials and underpaid claims. Scottish Rite owns a 49% interest in PPP.

Children’s Healthcare of Atlanta Surgery Center at Meridian Mark Plaza, LLC is a Georgia limited

liability company that owns and operates an ambulatory surgery center (“ASC”) located in Atlanta. ASC, previously a wholly-owned operation of Scottish Rite, commenced operation as a separate company on January 6, 2003. Scottish Rite owns a 51.0% interest in ASC. Services provided at ASC currently include outpatient surgery in the specialties of otolaryngology, general surgery, plastic surgery, ophthalmology, orthopedics and urology.

Marcus Autism Center, Inc. is a tax-exempt 501(c)(3) organization that provides outpatient therapy and

counseling services for children with autism and other behavioral disorders (“Marcus”). Emory Egleston Children’s Research Center, Inc. is a tax exempt 501(c)(3) organization (“EECRC”) that

conducts scientific research, provides quality instruction and raises funds to support pediatric research. EECRC has equal board representation from Children’s and Emory.

Emory-Children’s Center, Inc. is a pediatric physician faculty group joint venture (“E-CC”) between

Children’s (49%) and an affiliate of Emory University (51%). The intent of the joint venture is to create a pediatric faculty group that further integrates Emory University’s Department of Pediatrics in support of Children’s and Emory’s strategic goal of preeminence in pediatrics. Pursuant to a financial support agreement, Children’s may make annual financial support payments to E-CC to support its mission.

HSOC, Inc. is a tax exempt 501(c)(3) organization (“HSOC”). HSOC is a subsidiary of Egleston and

manages Hughes Spalding pursuant to a management agreement, effective February 1, 2006 (the “Management Agreement”), between HSOC and the FDHA. The Management Agreement provides for a sharing of annual operating losses between HSOC and the FDHA. Pursuant to the Management Agreement, HSOC was required to make, and has made, $15 million in capital improvements to the facilities at Hughes Spalding funded from its own funds and contributions from third-parties. While the Management Agreement remains in place, HSOC is responsible for any operating deficit incurred in each year by Hughes Spalding in excess of $2 million, which is required to be contributed by FDHA, and any available funding from governmental sources. HSOC has the right to terminate the Management Agreement upon written notice to the FDHA. As discussed in “MASTER FACILITIES PLAN – Ongoing and Future Capital Improvements” herein, HSOC is in the final stage of completing a $43 million master facility plan.

Affiliations

Emory University. The Hospitals serve as the main in-patient pediatric teaching sites for the Emory University School of Medicine Pediatric Resident Physician Program, and more than 350 residents were trained during the 2008-2009 academic year. Physicians completing their post-doctoral fellowships train at Egleston Hospital and Scottish Rite Hospital in 17 specialties including cardiology, critical care, hematology-oncology, emergency medicine, urology, rehabilitation, cardio-thoracic surgery, and pediatric surgery. Children’s also provides pediatric training for more than 100 medical students annually. During the past five years Children’s and Emory’s leadership have worked together to develop a joint vision to be “a preeminent healthcare institution for children.” To achieve this vision, Children’s and Emory have developed strategies for the Department of Pediatrics intended to yield both clinical excellence and advances in research and teaching. This joint vision resulted in the

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construction and equipping by Emory of a new Department of Pediatrics facility providing patient services and research space adjacent to Egleston Hospital.

Aflac. In 1995, Aflac Incorporated (“Aflac”) took a leadership role in the battle against pediatric cancer

and blood disorders when Aflac executives pledged $3 million to establish the Aflac Cancer Center at Egleston. Pulling together patients, parents, nurses, doctors and psycho-social services, Aflac led a team of architects to design an award-winning pediatric cancer center. After Egleston and Scottish Rite merged in February 1998, the Aflac Cancer Center expanded to both campuses.

In November 2007, at a national ceremony in Washington, D.C., the U.S. Chamber of Commerce presented

the Partnership Award to Aflac and the Aflac Cancer Center in honor of their collaborative efforts to support pediatric cancer research and treatment. The Partnership Award recognizes a company and a charitable organization that have exemplified cooperative success in addressing an important social issue.

To date, Aflac has contributed over $40 million to the Aflac Cancer Center at Children’s, representing gifts

from Aflac’s corporate foundation, as well as support from nearly 11,000 independent Aflac national sales agents who contribute approximately $270,000 per month from their commissions. These agents regularly engage in fundraisers and volunteer their time for the Aflac Cancer Center.

GOVERNANCE AND MANAGEMENT

Board of Trustees of Children’s

The Board of Trustees is currently composed of 19 members, three of whom are ex-officio voting members. All non-ex-officio regular trustees serve a six-year term. Trustees who are At Large members may serve up to four consecutive one-year terms and are appointed on an annual basis. Members of the Board of Trustees of Children’s also serve as members of the Board of Trustees of Egleston, Scottish Rite, EAS and EPG. The Children’s Board of Trustees has the following standing committees: Audit & Compliance, Finance, Investment, Governance & Board Development, Quality and Compensation & Benefits. In addition, there is a Facilities Oversight Subcommittee. The Board of Trustees may appoint other committees, as it deems appropriate. Currently, the Board of Trustees has six regular meetings and two special meetings per year.

The current members of the Board of Trustees, their principal occupations or civic affiliations, the

expiration of their board terms, and their committee memberships are listed in the following table:

Principal Occupation Board Name or Civic Affiliation Term Expires Committees/Office

Douglas J. Hertz President, United Distributors, Inc. 2012 Chairman of the Board of Trustees,

Governance & Board Development, Compensation & Benefits (Chair)

Richard A. Anderson Executive Director, Georgia Regional Transportation Authority

2010 Audit & Compliance

Carolyn Bannister, MD President, Medical Staff, Children’s at Egleston Ex-officio Quality

Liz Blake Senior Vice President of Government Affairs, Advocacy, General Counsel, Habitat for Humanity International

2014 Audit & Compliance

Mark A. Chancy Corporate Executive Vice President & Chief Financial Officer, SunTrust Banks, Inc.

2011 Finance

Donald L. Chapman Chairman, Chapco Investments, LLC 2009 Investment

Tom Coley Community Leader 2011 Audit & Compliance, Investment, Compensation & Benefits

Doug Garges Vice President, Cummings, Horsley & Maddox, Inc.

2010 Finance Committee (Chair), Facilities Oversight Subcommittee

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Lillian Giornelli Nonami Enterprises, Inc. 2009

Dan Graveline Executive Director, Georgia World Congress Center

At Large Quality, Finance, Compensation & Benefits

Tycho Howle Chairman, NuBridges, Inc. 2013 Investment

Donna W. Hyland President/Chief Executive Officer, Children’s Healthcare of Atlanta, Inc.

Ex-officio Finance, Quality, Governance & Board Development

Teri Plummer McClure Senior Vice President, General Counsel and Corporate Secretary, United Parcel Service

2012 Audit & Compliance (Chair)

Cedric Miller, MD President, Medical Staff, Children’s at Scottish Rite

Ex-officio Quality

Tom Noonan Operating Partner, Tech Operations, LLC 2014 Quality

Egbert L.J. Perry Chairman/Chief Executive Officer, The Integral Group

At Large Finance, Facility Oversight Subcommittee (Chair)

Fran Rogers Chief Executive Officer, Checks & Balances, Inc. At Large Investment (Chair), Compensation & Benefits

Jesse Spikes Partner, McKenna, Long & Aldridge LLP 2012

Joseph K. Williams, MD Pediatric Plastic Surgery At Large Quality

Foundation Board of Trustees

The Children’s Board of Trustees holds certain reserved powers of the Foundation. The Foundation Board of Trustees oversees the areas of development (fundraising), marketing and public relations, child health promotion and government affairs. In accordance with the Foundation bylaws, the Foundation Board of Trustees is comprised of 32 members, three of which are ex-officio voting members. All non-ex-officio regular trustees serve a three-year term, and all At Large trustees serve one-year terms, not to exceed four consecutive years. The Foundation Board of Trustees has the following standing committees: Executive, Major & Planned Giving, Annual Giving, Corporate Giving, Wellness & Legislative, and Marketing & Public Relations. The officers of the Foundation Board of Trustees consist of a Chair and a Vice Chair.

The members of the Foundation Board of Trustees, their principal occupations or civic affiliations, the expiration of their board terms and their committee memberships are listed on the following table.

Principal Occupation Board

Name or Civic Affiliation Term Expires Committees/Office Stephanie V. Blank Trustee, The Arthur M. Blank Family

Foundation

2010 Chair of the Foundation Board of Trustees

Douglas K. Garges Vice President, Cummings, Horsley & Maddox Inc.

2010 Vice Chairman of Foundation Board of Trustees; Major & Planned Giving

G.F. Agerton, III Chairman, Children’s Sports Network Advisory Board

2011 Corporate Giving

Yetty L. Arp Vice President, Southeast Commercial Properties

2009 Major & Planned Giving

Robert Campbell, M.D. Chief of Cardiac Services, Sibley Heart Center

2011 Annual Giving

Allen M. Chan Chairman/Chief Executive Officer, Resource Mosaic

2011 Corporate Giving, Wellness & Legislative

Sylvia L. Dick Community Volunteer At Large Marketing & Public Relations

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Dean H. Eisner President/Chief Executive Officer,

Manheim


Rev. Darrell Elligan President, Concerned Black Clergy of Metro Atlanta

At Large Wellness & Legislative

R. Brad Foster Executive Vice President, The Zeist Foundation

2009 Annual Giving

Tom Giddens Tom Giddens and Associates Inc. 2009 Major & Planned Giving

Jonathan D. Goldman Managing Partner, Genesis Capital At Large Corporate Giving

Eugene A. Hayes, III President, Children’s Healthcare of Atlanta Foundation, Inc.

Ex-officio President; Executive Committee

Thomas M. Holder Chairman/Chief Executive Officer, Holder Construction Company

2009 Major & Planned Giving

Clarence E. Horne Chief Executive Officer, Scottish Rite for North Georgia

Ex-officio

Donna W. Hyland President/Chief Executive Officer, Children’s Healthcare of Atlanta, Inc.

Ex-officio Executive Committee

Mary Ellen Imlay Executive Director, The Imlay Foundation 2009 Annual Giving, Wellness & Legislative

Naghma S. Khan, M.D. Director, Emergency Medicine, Children’s at Egleston

2010 Annual Giving, Wellness & Legislative

Keith Mason Partner, McKenna Long & Aldridge LLP 2010 Corporate Giving

Rickard J. McKay President, Atlanta Falcons At Large Corporate Giving

Jackie E. Montag A. Montag & Associates 2009 Major & Planned Giving

C. David Moody, Jr. President, C.D. Moody Construction Company

2009 Annual Giving

Charles H. Ogburn Executive Director, Arcapita Inc. 2010 Major & Planned Giving

Beatriz Perez Senior Vice President, Integrated Marketing, Coca-Cola North America

2011 Annual Giving, Marketing & Public Relations

Margaret Conant Reiser Senior Director, BoardWalk Consulting 2011 Major & Planned Giving

Christy Roberts Community Volunteer 2010 Major & Planned Giving

Michael B. Russell Chief Executive Officer, H.J. Russell & Company


Williams B. Schwartz III Senior Director, BNY Mellon 2010 Major & Planned Giving

Suzanne Sitherwood President, Atlanta Gas Light 2009 Corporate Giving, Wellness & Legislative

Terri Theisen President, Theisen Consulting LLC 2011 Annual Giving

Michael E. Walsh Managing Director, J.P. Morgan 2011 Major & Planned Giving

Nancy R. Williams Community Volunteer 2010 Annual Giving, Marketing & Public Relations

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Executive Management

Responsibility for the daily operations of Children’s and its affiliates is delegated to the executive management staff under the direction and oversight of their respective Board of Trustees. Principal executive management staff includes:

Donna W. Hyland, 49, became President and Chief Executive Officer of Children’s in June 2008, and she

has been with Children’s since 1986. Ms. Hyland provides executive oversight, vision and support to lead the development and operation of system departments, programs, policies, and inpatient and outpatient clinical service lines to ensure continuity of care. Prior to her current position, Ms. Hyland served as the Senior Vice President/Chief Operating Officer and prior to that served as the Senior Vice President/Chief Financial Officer of Children’s. Ms. Hyland has also served as controller and executive responsible for strategic planning during her tenure with Children’s. Prior to joining Children’s, she was employed by American Medical International and The Home Depot. Ms. Hyland attended the University of Kentucky and graduated from Western Kentucky University with a bachelor’s degree in accounting and is a certified public accountant. She currently serves as a Board member of the Metro Atlanta YMCA and the Metro Atlanta Chamber of Commerce and as a Trustee on the Board of the Ronald McDonald House Charities.

Carolyn Kenny, 53, is the Executive Vice President, Clinical Care, at Children’s and has been with

Children’s since January 2009. In this capacity, Ms. Kenny oversees clinical operations, focusing on achieving operational excellence and enhancing delivery of clinical care at the Hospitals and Hughes Spalding. Before joining Children’s, Ms. Kenny most recently served as president of Kaiser Permanente of Georgia. She is currently on the boards of the Georgia Association of Health Plans, Georgia State University for Health Administration Advisory Board, Woodruff Arts Center Young Audiences of Atlanta Board and the Georgia Conservancy. Ms. Kenny earned a Bachelor of Science degree from University of California Irvine and a master’s degree in health services administration from the University of Michigan. She also is a graduate of the Stanford Executive Program.

Eugene A. Hayes III, 60, has been President of the Children’s Healthcare of Atlanta Foundation since 1998.

As president of the Foundation, Mr. Hayes leads all fundraising efforts in support of Children’s, including annual gifts, major and planned gifts, corporate partnerships, grant development, endowment enhancement, special events, volunteer services and marketing. Mr. Hayes joined Children’s in 1989, serving as president of the Scottish Rite Children’s Medical Center Foundation. Previously, he served at First National Bank of Atlanta from 1972 to 1989 in a number of senior capacities in charitable fund management, personal trust administration, and probate and taxable trusts. Mr. Hayes serves on the Board of the Woodmark Group, a national association of 22 children’s hospital foundations. He also has served in many leadership capacities for the Association of Healthcare Philanthropy, and was Chairman of the 2003 International Educational Conference. Mr. Hayes earned his bachelor’s degree from Furman University in 1971. He received his master’s degree in management from Georgia State University in 1973 and graduated from the National Graduate Trust School in 1981.

Jay E. Berkelhamer, M.D., 67, is Senior Vice President, Chief Academic Officer, and has been with

Children’s since September 1999. He provides leadership and support for Children’s research activities and medical education. Before joining Children’s, Dr. Berkelhamer served as Chair of the Department of Pediatrics of the Henry Ford Medical Group in Detroit, Michigan, one of the nation’s largest group practices. Dr. Berkelhamer received a bachelor’s degree in Zoology and a medical degree from the University of Michigan. After his residency, he spent two years in public health service as Deputy Chief of Pediatrics in the U.S. Public Health Service Hospital in Norfolk, Virginia. He then joined the University of Chicago School of Medicine, where he served as Associate Chairman of the Pediatrics department and Pediatric Residency Program Director. Dr. Berkelhamer was a Robert Wood Johnson Health Policy Fellow in 1978, and is an active member and past president of the American Academy of Pediatrics (“AAP”). He currently serves on AAP’s Committee on Continuing Medical Education and the National Conference and Exhibition Planning Group.

Dan Salinas, M.D., 50, is Senior Vice President and Chief Medical Officer, and has been with Children’s

since August 2007. In this role, Dr. Salinas provides leadership for the clinical delivery systems for the Hospitals and Hughes Spalding and draws on his skills as a relationship-builder and facilitator to forge partnerships with physician practices. In addition, he provides oversight to the Children’s Medical Directors, service line Chief Medical Officers and Medical Affairs department. Dr. Salinas has a proven track record as a well-known

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pediatrician and physician leader committed to the care of Georgia’s children. Before coming to Children’s, he served as Regional Vice President and National Medical Director for WellPoint Inc. Previously, he was Vice President and Medical Director for Blue Cross Blue Shield of Georgia and served in a number of leadership roles at Kaiser Permanente. A native of Houston, Texas, Dr. Salinas earned his medical degree at the University of Texas Medical School, after earning his bachelor’s degree from Texas Lutheran College. He currently serves on the HSOC Board of Trustees and is a member of the Board of Trustees for ASC and the Fragile Kids Foundation Board.

Ruth Fowler, 46, is Senior Vice President and Chief Financial Officer of Children’s. Ms. Fowler joined

Children’s in January 2001 as the Vice President of Finance, and was promoted to Chief Financial Officer in July 2002. As Senior Vice President/Chief Financial Officer, she provides executive oversight, vision and support to corporate finance, financial planning and operation, managed care and reimbursement, information systems & technology, supply chain, and treasury management. Prior to joining Children’s, Ms. Fowler worked as Chief Financial Officer and Vice President of Finance at Rockdale Hospital and Health System in Conyers, Georgia. She also worked at Ernst & Young as a consultant and Humana, Inc., as an Associate Director of Finance. Ms. Fowler graduated from the University of North Carolina at Chapel Hill with a bachelor’s degree in business. She also earned a master’s degree in business from Georgia State University. Ms. Fowler is a Certified Public Accountant licensed in the State of Georgia.

Linda Matzigkeit, 42, is the Senior Vice President, Strategy, Planning & Human Resources. Since 2003,

Ms. Matzigkeit has provided executive oversight, vision, and support in the following areas: recruiting, retention, volunteer services, compensation and benefits, internal communication, and learning services. In addition, she serves as Executive Leader for Strategy and Business Development and Service Excellence. Ms. Matzigkeit has had more than fifteen years of human resources experience in the healthcare industry. Previously, she served 10 years as a human resources consultant with Hewitt Associates. Ms. Matzigkeit earned a bachelor’s degree in healthcare administration from Florida Atlantic University and an MBA with a focus in human resources from the University of Illinois.

Beth Howell, 48, is Senior Vice President, Academic Administration of Children’s. She provides executive

oversight, vision and support for the research and teaching business lines, as well as compliance and internal audit. Ms. Howell joined Children’s in 1990 in program planning. She became Chief Compliance Officer in 2001, was promoted to Vice President, Corporate Oversight in 2004 and was promoted to Senior Vice President, Academic Administration in 2008. Prior to joining Children’s, she held positions at the Centers for Disease Control and Deloitte and Touche. Ms. Howell is a native of Atlanta and earned her bachelor’s degree from Agnes Scott College.

Leslie Jones, 53, is Senior Vice President, General Counsel of Children’s, where she oversees Legal

Services, Risk Management and Governance. Prior to joining Children’s in November 2008, Ms. Jones was of counsel with the law firm Chorey, Taylor & Feil in Atlanta, Georgia. Ms. Jones brings almost 30 years of legal experience to the senior leadership team at Children’s having served as general counsel or vice president of legal services for various healthcare companies, including AirLogix, Inc., Healthcare.com, Inc., Charter Behavioral Health System, LLC, Healthdyne Technologies, Inc. and Healthyne, Inc. She earned her bachelor’s degree from University of Florida and received her juris doctor degree from the University of Virginia School of Law. Following law school, she clerked for the Honorable William C. O’Kelley, United States District Judge for the Northern District of Georgia.

Ron Frieson, 51, is Senior Vice President of External Affairs at Children’s and has been with Children’s

since June 2008. In this role, he focuses on expanding and developing new opportunities within Children’s broad vision of leading legislative, marketing, public relations and community wellness initiatives within the community. Mr. Frieson served in several key positions for BellSouth, including President of Georgia Operations and the organization’s first Vice President, Chief Diversity Officer. Most recently, he completed an interim role as President of the Atlanta Urban League. Mr. Frieson is active within the community, serving as a board member for several organizations, including American InterContinental University, Hands on Atlanta, 100 Black Men of DeKalb County Inc. and the Atlanta Police Foundation. In addition, he is a National Trustee Chair Elect of the American Kidney Fund. He earned his bachelor’s degree in finance from the University of Tennessee Knoxville and an MBA with a focus on information systems from Georgia State University.

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Don Mueller, 38, is Executive Director of the Marcus Autism Center. Mr. Mueller provides strategic direction for the human, fiscal and capital resources of that organization. By collaborating with Children’s and the Marcus Autism Center leadership teams, he helped align the goals of these two nonprofit organizations. Prior to becoming the Executive Director of the Marcus Autism Center in 2009, Mr. Mueller served as Vice President, Strategy and Business Development, Facilities Planning and Development of Children’s. In May 2000, Mr. Mueller joined Children’s as Director of Tertiary Services Contracting. He was promoted to Director of Transplant Services—responsible for the solid organ transplant programs, the dialysis unit and the gastrointestinal program—in August 2003. Mr. Mueller graduated from The Catholic University of America with a Bachelor of Arts in Business. He received a Master of Business Administration from Loyola College in Maryland. Mr. Mueller is the President of the Georgia Chapter of the American Liver Foundation. He serves on the Board for the Georgia Transplant Foundation and the Georgia Coalition on Donation.

FACILITIES AND PROGRAMS

Overview

Children’s owns facilities located at 14 developed sites containing over 1.9 million square feet. These owned sites include Egleston Hospital, Scottish Rite Hospital, seven active clinic locations, a separate building currently leased to another provider, a 14-building administrative office park located on 22 acres, a Ronald McDonald House, and a storage warehouse. In addition, Children’s owns two undeveloped sites held for possible future expansion containing a total of 33.6 acres.

Children’s also leases space at 14 different locations containing a total of 186,460 square feet. There are

eight active clinic locations which are leased and five more leased locations around the Scottish Rite campus which are a mixture of hospital based services and support services. There is also one other location that is leased for support services use only.

Scottish Rite Hospital and Egleston Hospital are currently licensed to operate a total of 505 beds, as set

forth in the table below. The Hospitals are fully capable of operating at their respective licensed capacities.

Egleston Scottish Rite Intensive Care 103(1) 72(2) Cardiac 27 0 Pediatrics 91 130 Hematology/Oncology 34 20 Comprehensive Rehabilitation 0 28

Total 255 250 (1) Includes nine technology-dependent intensive care units (“TICUs”). (2) Includes 11 TICUs.

During calendar year 2008, the Hospitals experienced over 481,000 patient visits, including more than

22,900 hospital admissions representing more than 138,000 inpatient days, over 38,000 surgical procedures (both inpatient and outpatient), more than 126,000 emergency department visits, approximately 113,000 immediate care visits, approximately 23,000 primary care visits and more than 33,000 specialty clinic visits.

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Facilities Map

DeKalbDeKalbDeKalbDeKalbDeKalbDeKalbDeKalbDeKalbDeKalb

CobbCobbCobbCobbCobbCobbCobbCobbCobb

DouglasDouglasDouglasDouglasDouglasDouglasDouglasDouglasDouglas

GwinnettGwinnettGwinnettGwinnettGwinnettGwinnettGwinnettGwinnettGwinnettPauldingPauldingPauldingPauldingPauldingPauldingPauldingPauldingPaulding

BarrowBarrowBarrowBarrowBarrowBarrowBarrowBarrowBarrow

WaltonWaltonWaltonWaltonWaltonWaltonWaltonWaltonWalton

ClaytonClaytonClaytonClaytonClaytonClaytonClaytonClaytonClayton RockdaleRockdaleRockdaleRockdaleRockdaleRockdaleRockdaleRockdaleRockdaleFultonFultonFultonFultonFultonFultonFultonFultonFulton

HaralsonHaralsonHaralsonHaralsonHaralsonHaralsonHaralsonHaralsonHaralson

NewtonNewtonNewtonNewtonNewtonNewtonNewtonNewtonNewtonCarrollCarrollCarrollCarrollCarrollCarrollCarrollCarrollCarroll

HenryHenryHenryHenryHenryHenryHenryHenryHenry

FayetteFayetteFayetteFayetteFayetteFayetteFayetteFayetteFayette

HeardHeardHeardHeardHeardHeardHeardHeardHeard

CowetaCowetaCowetaCowetaCowetaCowetaCowetaCowetaCowetaJasperJasperJasperJasperJasperJasperJasperJasperJasper

ButtsButtsButtsButtsButtsButtsButtsButtsButtsSpaldingSpaldingSpaldingSpaldingSpaldingSpaldingSpaldingSpaldingSpalding

CherokeeCherokeeCherokeeCherokeeCherokeeCherokeeCherokeeCherokeeCherokeeBartowBartowBartowBartowBartowBartowBartowBartowBartow

ForsythForsythForsythForsythForsythForsythForsythForsythForsyth

DawsonDawsonDawsonDawsonDawsonDawsonDawsonDawsonDawson

PickensPickensPickensPickensPickensPickensPickensPickensPickens

PikePikePikePikePikePikePikePikePike LamarLamarLamarLamarLamarLamarLamarLamarLamarMeriwetherMeriwetherMeriwetherMeriwetherMeriwetherMeriwetherMeriwetherMeriwetherMeriwether

GA-400

I-285

I-20

I-85

I-985

I-75

I-575

I-20

I-75I-8

5

North PointNorth PointNorth PointNorth PointNorth PointNorth PointNorth PointNorth PointNorth PointSatellite Blvd.Satellite Blvd.Satellite Blvd.Satellite Blvd.Satellite Blvd.Satellite Blvd.Satellite Blvd.Satellite Blvd.Satellite Blvd.

Mt ZionMt ZionMt ZionMt ZionMt ZionMt ZionMt ZionMt ZionMt Zion

Town CenterTown CenterTown CenterTown CenterTown CenterTown CenterTown CenterTown CenterTown Center

FayetteFayetteFayetteFayetteFayetteFayetteFayetteFayetteFayette

CobbCobbCobbCobbCobbCobbCobbCobbCobb

AlpharettaAlpharettaAlpharettaAlpharettaAlpharettaAlpharettaAlpharettaAlpharettaAlpharetta

N. Druid HillsN. Druid HillsN. Druid HillsN. Druid HillsN. Druid HillsN. Druid HillsN. Druid HillsN. Druid HillsN. Druid Hills

Sandy PlainsSandy PlainsSandy PlainsSandy PlainsSandy PlainsSandy PlainsSandy PlainsSandy PlainsSandy Plains

Meridan MarkMeridan MarkMeridan MarkMeridan MarkMeridan MarkMeridan MarkMeridan MarkMeridan MarkMeridan Mark

SnellvilleSnellvilleSnellvilleSnellvilleSnellvilleSnellvilleSnellvilleSnellvilleSnellvilleChambleeChambleeChambleeChambleeChambleeChambleeChambleeChambleeChamblee

Webb BridgeWebb BridgeWebb BridgeWebb BridgeWebb BridgeWebb BridgeWebb BridgeWebb BridgeWebb Bridge

SuwaneeSuwaneeSuwaneeSuwaneeSuwaneeSuwaneeSuwaneeSuwaneeSuwanee

MarcusMarcusMarcusMarcusMarcusMarcusMarcusMarcusMarcus ECCECCECCECCECCECCECCECCECC

Children's Office Park

Marcus Autism Center

Primary Care Location

Satellite Locations

Egleston, Hughes Spalding

and Scottish Rite

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In addition to medical, surgical and emergency services provided at the Hospitals and at Hughes Spalding,

Children’s provides medical care at 16 neighborhood locations across metro Atlanta. A combination of various specialty services, including rehabilitation services, orthotic and prosthetic services, and sports medicine, is provided at 10 of such neighborhood locations. Immediate care services are provided at four neighborhood locations and primary care is provided at one location that supports low-income children in the immediate community. Children’s also has a freestanding imaging center and two ambulatory surgery centers, one of which, ASC, is a joint venture with Children’s as the majority partner with a 51.0% ownership.

Services

Currently, Children’s offers a continuum of care for children’s healthcare needs by providing services in the following areas:

Allergy/Immunology Anesthesia Cardiology Cardiothoracic Surgery Critical Care Dental/Oral Surgery Dermatology Emergency Medicine Endocrinology Gastroenterology General Surgery General Pediatrics

Genetics Hematology/Oncology Hepatology Infectious Diseases Medical Toxicology Neonatology Nephrology Neurology Neurosurgery Ophthalmology Orthopedics Otolaryngology

Pathology Pediatric Surgery Pediatrics Plastic/Reconstructive Surgery Psychiatry/Psychology Pulmonary Medicine Radiology Rehabilitation Rheumatology Transplant Urgent Care Urology

Children’s is recognized for its clinical excellence in many areas, including: Cardiac Care. Children’s Sibley Heart Center is one of the country’s largest pediatric heart programs and

was named one of the top five programs in the country by Child magazine’s bi-annual survey in 2003, 2005, and 2007. Children’s cardiac care program was ranked in the top five in the country of Parents magazine’s survey of pediatric hospitals appearing in its February 2009 issue. Children’s Sibley Heart Center uses non-invasive techniques including tissue Doppler imaging, cardiac MRI and 3D echocardiography to diagnose pediatric heart conditions. In 2008, Children’s Sibley Heart Center performed approximately 900 cardiothoracic surgical operations with a 97.6%, 30-day in-hospital survival rate. It also performed nearly 64,000 non-invasive procedures, more than 8,900 catheterization procedures and handled more than 63,000 patient visits. In 2008, the heart transplant team reached the 200th transplant milestone.

Cancer and Blood Disorders. The Aflac Cancer Center and Blood Disorders Service of Children’s is a

national leader in pediatric cancer and blood disorders programs, as a result of the strategic alliance between Children’s and Aflac. Each year, the Aflac Cancer Center treats more than 350 new cancer patients and 2,500 patients with sickle cell disease, hemophilia and other blood disorders. In 2008, the Aflac Cancer Center performed 57 allogeneic and autologous blood and marrow transplants. The Aflac Cancer Center is a leader in cancer research in collaboration with clinical and academic institutions such as the Emory University School of Medicine and Morehouse School of Medicine, the Winship Cancer Institute of Emory University, the Children’s Oncology Group, the National Cancer Institute, and the Pediatric Blood and Marrow Transplant Consortium, among others. The Aflac Cancer Center also follows nearly 1,000 cancer survivors who are at least two years off therapy. The Aflac Cancer Center exceeds the national patient-outcome standards in comparison to the Surveillance, Epidemiology and End Results (“SEER”) program. A program of the National Cancer Institute, SEER is the authoritative source of information on cancer incidence and survival in the United States. SEER currently collects and publishes cancer incidence and survival data from population-based cancer registries covering approximately 26 percent of the U.S. population. In collaboration with the Sickle Cell Consortium, the Aflac Cancer Center treats the largest pediatric sickle cell population in the country. To date, more than 25 children with sickle cell disease have been treated through blood and marrow transplants. See “INTRODUCTION – Affiliations” herein.

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Transplantation Services. Children’s performs heart, liver and kidney transplants. In 2002, Children’s opened the Center for Transplantation, GI Diagnostics and Dialysis, which provides outpatient specialty services in a centralized location. Since 2000, Children’s has ranked among the country’s top 10 pediatric hospitals for solid organ transplant volumes according to the United Network for Organ Sharing. Children’s also is the recipient of the Medal of Honor for Organ Donation through the U.S. Department of Health and Human Services (“HHS”) Health Resources and Services Administration. This recognizes organizations that have raised their donation rates to 75 percent or higher of eligible donors for a 12-month period. Since the inception of the program, Children’s has recently reached the milestone of performing 1,000 solid organ transplants. In 2008, Children’s performed 24 liver transplants, 10 heart transplants and 25 kidney transplants. In 2008, the heart transplant team reached a milestone, having performed 200 heart transplants since the inception of the program, making Children’s one of the largest pediatric heart transplant centers in the country.

Craniofacial Services. The Children’s Center for Craniofacial Disorders treats children from birth to 21

years old with cleft lip and/or cleft palate, tumors, skull deformities, various syndromes, and traumatic injury. Services at the Center include oral and maxillofacial surgery, plastic and reconstructive surgery, pediatric dentistry and orthodontic services, genetics, feeding, as well as a speech science lab. The Children’s Center for Craniofacial Disorders developed the first dissolvable midface and mandibular distractors for children with craniofacial abnormalities. Children’s was the first healthcare system in Georgia to perform endoscopic synostosis, a minimally invasive procedure to treat children with cranial birth defects. Children’s also is among the few craniofacial centers to offer the nasal alveolar molding (“NAM”) device. Children’s installed more than 30 NAMs in 2008. The Children’s Center for Craniofacial Disorders has significant experience in using bone substitutes for pediatric craniofacial surgery. Bone substitutes may prevent the need for harvesting bone grafts from the patient’s own body.

Neurosciences. The Children’s Neurosciences program is a leading provider of pediatric neurology and

pediatric neurosurgery in the country. The Children’s Epilepsy Center is recognized by the National Association of Epilepsy Centers (“NAEC”) as a Level 4 pediatric epilepsy center, the highest level recognized by the NAEC. In 2008, the Children’s Epilepsy Center was among the largest in the country, with 12 state-of-the-art, all-digital video monitored beds. In 2007, the intraoperative magnetic resonance imaging (“iMRI”) system was installed to provide neurosurgeons access to important clinical data about the patient’s brain condition during surgery. The increased level of information—converging in real time—can assist in improving the precision and accuracy of procedures. Children’s is one of only a few pediatric hospitals in the world, and the first in the southeastern United States, to house the high-field strength iMRI technology.

Orthopedics. Children’s represents the national benchmark for spine surgery regarding cost and quality.

The Children’s Limb Deficiency Center has certified prosthetists who use advanced technology in designing both upper- and lower-extremity prostheses for children born with a partial or malformed limb (e.g., hand, arm, foot or leg). Children’s provides orthopedic services at 16 neighborhood locations, offers orthotics and prosthetics at eight neighborhood locations, and operates two mobile orthotics units that work on braces, wheelchairs and prostheses at outpatient centers. With seven neighborhood locations, the Children’s Sports Medicine Program is one of the leading pediatric sports medicine programs in the country with 27,000 patient visits annually. Children’s leads a scoliosis program that provides the primary screening for 65,000 of Georgia’s children each year and the secondary screening for 25,000 additional children. Children’s orthopedics program was ranked in the top five in the country in Parents magazine’s bi-annual survey of pediatric hospitals appearing in its 2009 Best Children’s Hospitals issue.

Ambulatory and General Surgery. Children’s provides surgical services in areas such as ear, nose and

throat, ophthalmology, urology, orthopedics, hand surgery, plastic surgery, and general surgery. Children’s employs advanced minimally invasive surgical techniques to perform laparoscopic and thoracoscopic surgery with specialized pediatric equipment to provide patients with fewer complications, shorter hospital stays and faster recovery.

Emergency. Both Egleston and Scottish Rite hold a Level II Trauma Center designation. In 2008, the

emergency care staffs at the Hospitals handled 126,594 patient visits. Immediate Care Centers. These centers are intended to serve patients when their regular pediatricians are

not available. Located throughout metro Atlanta, the four immediate care facilities are open from 11 a.m. to 9 p.m. Monday through Friday and 9 a.m. to 9 p.m. Saturday and Sunday, 365 days a year. In addition to treating minor

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illnesses and injuries, immediate care center staff provide the first steps in treatment for children who require additional hospital care. An average immediate care center visit takes less time and is often less expensive than an emergency department visit. Children’s Immediate Care Centers handled nearly 113,000 patient visits in 2008.

Pulmonology. Pulmonary services at Children’s provide comprehensive diagnostic and therapeutic

services to children with disorders of the respiratory system. The pulmonary program cares for more than 5,400 patient visits annually. These services include care for apnea of prematurity, asthma, bronchiolitis, bronchopulmonary dysplasia, persistent cough, cystic fibrosis, interstitial lung disease, pneumonia, sleep disorders and ventilator care. Asthma is the number one reason for admission to Children’s. In 2008, the Children’s Asthma Management Education program distributed 41,851 asthma educational collateral pieces statewide; delivered 543 asthma supplies including nebulizers, holding chambers and peak flow meters; and educated 1,707 school and health professionals statewide. The Children’s Asthma Center opened at Hughes Spalding in 2008 and conducts weekly sessions by appointment. It features a team of specialists trained in pediatric allergy and immunology, asthma pulmonology and respiratory therapy. The Children’s Sleep Center is accredited by the American Academy of Sleep Medicine. Additionally, the technology-dependent program at Children’s cares for more than 250 patients with a number of medically complex diagnoses who require ventilators. Children’s is ranked among the top in the country for pulmonology services by U.S. News & World Report.

Rehabilitation. The Comprehensive Inpatient Rehabilitation Unit (“CIRU”) holds the distinction of being

one of only five programs in the southeastern United States accredited by the Commission on Accreditation of Rehabilitation Facilities. The CIRU offers services 24 hours a day, 365 days a year. Inpatient physical, occupational, speech therapy and audiology services are provided at both Egleston Hospital and Scottish Rite Hospital. The Day Rehabilitation program offers all-day services, available five days a week, to help children re-enter their community and school. Children’s also offers occupational, physical and speech therapy services in nine outpatient neighborhood clinics and audiology services at six outpatient neighborhood clinics.

Transport Services. The Children’s Response Team offers rapid 24-hour access to pediatric and neonatal

specialists at Children’s via ambulance, helicopter and airplane. The air transport team responds to emergency scene calls and provides inter-hospital transportation for critically ill or injured children.

MASTER FACILITIES PLAN

Recent Expansions and Renovations

In 2009, Children’s completed a five year master facilities plan (the “Master Facilities Plan”) which expanded and renovated the campuses of both Egleston and Scottish Rite and required capital expenditures of approximately $300 million. Egleston facilities increased from 376,800 to 659,300 square feet, and Scottish Rite facilities increased from 379,200 to 632,600 square feet.

Highlights of the changes at Egleston include:

• A centralized facility for the Emory-Egleston Children’s Heart Center housing the 27-bed Cardiac Intensive Care Unit; the 27-bed Cardiac Step-down Unit; and a cardiac catheterization lab consolidated with non-invasive cardiology services.

• An integrated Surgical Services Department which consolidated the pre-operative clinic, surgical waiting room, day surgery, operating suites and the Post Anesthesia Care Unit together on one floor. The operating suites were increased in size and quantity, expanding from 10 operating rooms to 14.

• Four new levels of underground parking with approximately 860 spaces for Children’s patient families and staff.

• A significantly expanded Emergency Department.

• An increase of 5,000 square feet to the Radiology Department.

• A state-of-the-art 10-bed Blood and Marrow Transplant Unit, which increased the Aflac Cancer Center’s existing inpatient capacity.

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• Additional amenities for families, including a library and business center, located near the Intensive Care Units.

Highlights of the changes at Scottish Rite include:

• An increase of approximately 65 percent square feet to the Emergency Department, housing 54 beds, four trauma rooms, 12 “fast track” rooms and three orthopedics rooms.

• A consolidated Surgical Services Department complete with 13 state-of-the-art operating suites (up from 10), each large enough to house the latest intra-operative medical technology, 60 day surgery beds and a 12-bed Post Anesthesia Care Unit, all in one location to improve accessibility for patients, families and staff.

• A reconfigured front entrance with a dedicated elevator for patients and families of the Comprehensive Inpatient Rehabilitation Unit.

• Three levels of underground parking with nearly 400 spaces for patients and families.

• A relocated and enlarged 20-bed Aflac Cancer Center inpatient unit to insulate Children’s immuno-suppressed patients from routine hospital traffic.

• Increased patient family amenities including lounges, kitchens, and business and sleep centers.

• A remodeled Sleep Center for children suffering from sleep disorders. Ongoing and Future Capital Improvements

Children’s established a $43 million capital campaign to build a new facility and renovate existing facilities at Children’s at Hughes Spalding. A new four-story building was opened in 2009 housing 24 child-friendly inpatient beds, an enhanced and expanded Emergency department and vital specialty clinics for sickle cell, asthma and child protection. The entire project, including renovations, is expected to be completed in 2010.

Children’s does not anticipate any major expansions of its facilities in the next five years. Management expects to incur routine capital expenditures over the next five years in annual amounts ranging between $45 million and $80 million, which are expected to be funded from operations.

MEDICAL STAFF

Physicians

As of September 30, 2009, the medical staff at Children’s (the “Medical Staff”) was comprised of 1,637 physicians representing the following pediatric specialties:

Acupuncture Allergy/Immunology Anesthesia Cardiology Cardiothoracic Surgery Colon and Rectal Surgery Critical Care Dental/Oral Surgery Dermatology Emergency Medicine Endocrinology Gastroenterology General Surgery

Genetics Gynecology Hematology/Oncology Infectious Diseases Neonatology Nephrology Neurology Neurosurgery Ophthalmology Orthopedics Otolaryngology Pain Management Pathology Pediatric Surgery

Pediatrics Plastic/Reconstructive Surgery Psychiatry/Psychology Pulmonary Medicine Radiation Oncology Radiology Rehabilitation Rheumatology Toxicology Transplant Urology Vascular Surgery

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The Medical Staff is comprised of private practice community-based physicians, employed physicians and Emory faculty. The Medical Staff includes 214 employed physicians working in various capacities. Ninety-seven percent (97%) of the physicians on the Medical Staff are Board Certified or Board Eligible.

Distribution of the Medical Staff by specialty, privilege category, board status and average age as of September 30, 2009 is set forth in the chart below.

Departments/Division

Active

Associate

Total

Board Certified/ Eligible (%)(1)

Average Age

Acupuncture 1 — 1 100% 46 Allergy/Immunology 8 34 42 100 50 Anesthesia 36 4 40 98 47 Cardiology 38 11 49 96 50 Cardiothoracic Surgery 4 1 5 100 50 Colon & Rectal Surgery 5 1 6 100 51 Critical Care 22 — 22 100 46 Dental/Oral Surgery 29 28 57 91 48 Dermatology 4 20 24 96 52 Emergency Medicine 57 1 58 100 46 Endocrinology 14 — 14 100 52 Gastroenterology 22 1 23 100 47 General Surgery — 1 1 100 62 Genetics 4 3 7 86 55 Gynecology 3 5 8 100 49 Hematology/Oncology 41 1 42 98 45 Infectious Diseases 16 6 22 100 52 Neonatology 37 10 47 100 50 Nephrology 7 — 7 100 52 Neurology 19 1 20 100 49 Neurosurgery 14 — 14 100 48 Ophthalmology 35 17 52 100 42 Orthopedics 27 16 43 98 47 Otolaryngology 27 67 94 99 49 Pain Management 1 — 1 100 61 Pathology 12 10 22 100 48 Pediatric Surgery 14 1 15 100 48 Pediatrics 358 384 742 97 47 Plastic Surgery 10 10 20 100 48 Psychiatry & Psychology 21 3 24 96 49 Pulmonary Medicine 17 2 19 100 47 Radiation Oncology 1 3 4 100 52 Radiology 46 2 48 100 46 Rehabilitation 5 — 5 100 48 Rheumatology 4 1 5 100 55 Toxicology 1 5 6 100 43 Transplant 8 1 9 100 44 Urology 8 3 11 91 50 Vascular Surgery 5 3 8 100 48

Staff Totals 981 656 1,637

(1) These figures include both Board Certified and Board Eligible physicians and have been rounded to the nearest

percent.

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Top 20 Admitting Physicians

The profile of the top 20 admitting physicians of Children’s ranked by percentage of total charges for the period January 1 through September 30, 2009 is presented below.

Physician Specialty Percentage of

(# of Physicians) Total Charges Average Age

Neonatology (8) 14.3% 48 Cardiothoracic Surgery (3) 5.4 45 Cardiology (2) 3.3 50 Orthopedics (2) 2.8 46 Physical Medicine and Rehabilitation (1) 1.9 48 Cystic Fibrosis (1) 1.4 70 Transplant (1) 1.3 46 Neurosurgery (1) 1.2 46 Critical Care Medicine (1) 1.2 42 Total for Top 20 Admitting Physicians 32.8% Other Admitting Physicians 67.2%

Total 100.0%

These top 20 admitting physicians represent eight different group practices. No more than four of the top

20 admitting physicians are members of the same group practice.

Education

The Hospitals and Hughes Spalding serve as the main inpatient pediatric teaching sites for the Emory University School of Medicine and Morehouse School of Medicine Pediatric Resident Physician Programs. More than 470 residents and post-doctoral fellows are expected to be trained at Children’s during the 2009-2010 school year in 26 specialties including cardiology, critical care, hematology-oncology, emergency medicine, urology, rehabilitation, cardio-thoracic surgery, and pediatric surgery. In addition, more than 150 medical students are receiving pediatric training at Egleston Hospital and Scottish Rite Hospital. See “INTRODUCTION – Affiliations” herein.

Children’s provides accredited continuing education for physicians, nurses, and clinical staff. Types of

Continuing Medical Education (CME) activities offered include Pediatric Grand Rounds, in-house regularly scheduled departmental conferences, web-streamed education, computer-based training modules, and CME dinners. Additionally, three to six pediatric and subspecialty conferences attended by physicians from around the southeastern United States are offered annually. CME is provided to the outlying community physicians through Children’s Speaker’s Bureau. The Children’s Speaker’s Bureau has approximately 198 physicians offering lectures on over 500 topics. Approximately 960 hours of CME programs were offered to physicians and 608 contact hours of continuing education offered to nurses in 2008 with over 15,000 physicians and clinical staff attending. Children’s provides CME to its clinicians in accordance with applicable laws and regulations.

Research

Research is a cornerstone of Children’s Mission. In conjunction with Emory University School of Medicine, Morehouse School of Medicine, Georgia Institute of Technology (“Georgia Tech”) and other academic institutions, Children’s seeks the answers for the most perplexing childhood medical conditions through research. By constantly investigating new techniques, treatments and cures, Children’s is committed to improving the health of Georgia’s children.

In 2008, Children’s researchers, including faculty of Emory School of Medicine, Morehouse School of

Medicine, and Georgia Tech, Children’s employed physicians, nurses and allied health professionals and community physicians were engaged in more than 800 active clinical studies in a variety of areas. These studies are generally aimed at improving the delivery of pediatric care in all specialty areas. For example, the cardiac research program is focused in four themes: Imaging, Heart Development, Cardiac Outcomes, and Genetics, which each span basic

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laboratory, translational and clinical research. The research team includes cardiologists, cardiothoracic surgeons, anesthesiologists, PhD research scientists, lab technologists, software engineers and clinical research nurses and coordinators. Currently, there are 133 active cardiac clinical studies both prospective and retrospective in nature, 27 of which are funded, three by the National Institutes of Health.

The hematology/oncology research program in the Aflac Cancer Center is also focused in four main

themes: brain tumor research, neuroblastoma, sickle cell disease, and clotting disorders and includes basic laboratory, translational and clinical research, and 48 investigators. Currently, there are over 300 hematology/oncology clinical trials actively enrolling or following patients.

Children’s and the Emory School of Medicine Department of Pediatrics faculty have collaborated with

Georgia Tech to apply science, engineering, technology and clinical expertise to improve the healthcare of children by addressing both treatment and prevention. This partnership addresses the entire spectrum of healthcare including prevention, diagnosis, delivery, therapeutics, organization of healthcare delivery and pediatric specific medical technologies. Collaborative projects include investigating tissue engineering for treatment of craniofacial anomalies such as cleft lip and palate, development of an innovative MRI technology to plan complex cardiac surgeries, development of a novel device for fluid management for patients on Extracorporeal Membrane Oxygenation, as well as studying the implementation of an electronic medical record.

In 2009, Children’s opened an outpatient general clinical research unit as a clinical interaction site and

partner in the Atlanta Clinical and Translational Science Institute, an NIH funded Clinical and Translational Science Award. Emory Department of Pediatrics, in collaboration with Morehouse School of Medicine and with support from Children’s, was awarded one of 22 sites in the NIH funded National Children’s Study. Additionally, in 2009 Children’s earned accreditation for its Institutional Review Board from the American Association of Human Research Protections Program. Children’s became the fifth pediatric hospital to achieve such accreditation. In addition, the Children’s Board of Trustees is considering the establishment of an irrevocable research trust fund as described herein under “Management’s Discussion and Analysis of Financial Performance – Nine Months Ended September 30, 2009 Compared to Nine Months Ended September 30, 2008.”

NURSING STAFF

Direct Nursing Staff

Children’s direct care nursing staff is entirely non-union and composed of Registered Nurses (“RNs”), Licensed Practical Nurses (“LPNs”) and Pediatric Nurse Practitioners (“PNPs”). A breakdown of the nursing staff as of September 30, 2009 by discipline is as follows:

Discipline Full-Time Part-Time PRN(1)

RNs 1,294 479 302 LPNs 6 1 2 PNPs 42 19 21 Total 1,342 499 325

(1) Nurses who are scheduled to work on an as-needed basis.

As of September 30, 2009, Children’s had 68 vacancies in direct care nursing positions.

Supplemental Nursing Staff

Children’s on occasion and where there is a need utilizes contingency labor consisting of both per diem and travel nurses (i.e., nurses who move to the Atlanta MSA on a temporary basis for the purpose of providing temporary nursing help to Children’s and whose living expenses are included in the fees paid by Children’s while they are living in the Atlanta MSA), which represents less than 3% of the nurses working at Children’s. Children’s nursing staff strategy involves minimizing the use of travel nurses and restricting the use of per diem nurses to only periods of increased volumes and employee vacations.

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Retention

During the period January 1, 2009 to September 30, 2009, Children’s system-wide retention rate was 93.2% and RN retention was 93.3%. Children’s retention strategies include the use of employee engagement surveys, re-evaluation of Children’s sponsored health plans, ongoing reviews of compensation levels, creation of retention action plans for high risk departments, a career advancement program for nurses, implementation of Targeted Selection behavioral interviewing, expansion of learning programs for managers, creation of new employee reunions after 90 days on the job, creation of an on-boarding toolkit for hiring managers, and introduction of a compensation and benefits program targeted at expecting and adopting families.

Compensation

Children’s seeks to maintain salaries that are competitive among Atlanta Metropolitan Statistical Area (“MSA”) hospitals. Nursing salaries are reviewed annually for market equity.

Recruitment

Strategic Alliances. Children’s actively recruits qualified nursing staff by using a variety of sourcing methods such as advertising, employee referrals, networking at conferences and associations, direct mail and college recruiting. Children’s maintains strong affiliations with a number of colleges providing nursing programs, including those affiliated with Clayton College and State University, Emory University, Mercer University, Georgia Perimeter College, Georgia State University and Kennesaw State University.

Scholarships. Children’s offers three nursing scholarships:

• The Chances scholarship program, which is targeted at nursing students.

• The Candlish scholarship program for Children’s employees enrolled in a National League of Nursing program.

• The Opportunities scholarship, which provides tuition assistance for bilingual nursing candidates.

SERVICE AREA AND OTHER PROVIDERS

Primary and Secondary Service Areas

The primary inpatient service area of Children’s consists of the 28-county Atlanta MSA, which includes: Barrow, Bartow, Butts, Carroll, Cherokee, Clayton, Cobb, Coweta, Dawson, DeKalb, Douglas, Fayette, Forsyth, Fulton, Gwinnett, Haralson, Heard, Henry, Jasper, Lamar, Meriwether, Newton, Paulding, Pickens, Pike, Rockdale, Spalding, and Walton counties. The Atlanta MSA generated approximately 80 percent of the inpatient discharges for Children’s during 2008. Due to the nature of Children’s extended services and its unique position in the State of Georgia, Children’s secondary service area consists of the remaining 131 counties in the State which generated approximately 18 percent of Children’s inpatient discharges during 2008 according to the Georgia Hospital Association’s Inpatient Database. The remaining discharges were from out of state.

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Historical and Projected Population

The table below shows the historical and projected population data for the Atlanta MSA, the State of Georgia and the United States. During the 1990s, the population of the Atlanta MSA grew at a faster rate than that of all but one of the nation’s 30 largest metropolitan areas. Between 2004 and 2008, the Atlanta MSA population increased an average of 2.9% per year, compared with 2.1% per year in the State, and 0.9% per year for the nation as a whole. By 2014, the population of the Atlanta MSA is projected to be 6,210,294, the population of the State of Georgia is projected to be 10,812,557 and the population of the United States is projected to be 322,320,436.

Historical Atlanta MSA(1) State of Georgia United States

2004 4,801,265 8,910,741 292,892,127 2005 4,945,773 9,093,958 295,560,549 2006 5,113,924 9,318,715 298,362,973 2007 5,261,296 9,523,297 301,290,332 2008 5,376,285 9,685,744 304,059,724

Projected

2009 5,494,339 9,838,832 306,624,699 2014 6,210,294 10,812,557 322,320,436

Projected CAGR(2)

2009 to 2014 2.48% 1.91% 1.00%

(1) Metropolitan Statistical Area. All population figures are for the 28 counties in the Atlanta MSA. (2) Compound annual growth rate. Source: U.S. Department of Commerce, Bureau of the Census; Projections obtained from Nielsen Claritas

population data. The following table shows the age distribution of population as of 2008 of the Atlanta MSA, the State of

Georgia and the United States.

2008 Age Distribution of Population

Age Group Atlanta MSA(1) State of Georgia United States

0 to 14 22.50% 21.97% 20.10% 15 to 24 13.10 13.84 14.00 25 to 44 30.90 29.39 27.44 45 to 64 25.16 24.67 25.67 65 and over 8.33 10.13 12.78

100.00% 100.00% 100.00% (1) Metropolitan Statistical Area. All population figures are for the 28 counties in the Atlanta MSA. Source: U.S. Department of Commerce, Bureau of the Census.

According to the U. S. Census Bureau, three of the counties included in the Atlanta MSA, Forsyth, Henry,

and Paulding, were among the ten fastest growing counties in the United States with 10,000 or more population between April 1, 2000 and July 1, 2008, each experiencing population growth during this period of 60% or more.

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The following table sets forth the 2009 and 2014 estimated child population, and projected growth in children for the ten largest US MSAs in the nation. As indicated, the projected Atlanta MSA pediatric population is expected to grow by 183,201 during the years 2009-2014, which is the second highest projected net increase of the ten largest MSAs in the nation.

Top National MSAs Ranked by Projected 5 Year Net Increase in Children

2009 Population 2014 Population 5 Year Net

Rank MSA Ages 0-18 Ages 0-18 Increase CAGR%(1) 1 Dallas-Fort Worth-Arlington, TX Metro 1,849,955 2,042,604 192,649 2.0% 2 Atlanta-Sandy Springs-Marietta, GA Metro 1,545,108 1,728,309 183,201 2.3 3 Houston-Sugar Land-Baytown, TX Metro 1,716,850 1,881,504 164,654 1.8 4 Riverside-San Bernardino-Ontario, CA Metro 1,279,318 1,423,352 144,034 2.2 5 Washington-Arlington-Alexandria, DC-VA-MD-WV Metro 1,388,230 1,449,930 61,700 0.9 6 Miami-Fort Lauderdale-Pompano Beach, FL Metro 1,318,575 1,376,862 58,287 0.9 7 Los Angeles-Long Beach-Santa Ana, CA Metro 3,597,452 3,643,473 46,021 0.3 8 Chicago-Naperville-Joliet, IL-IN-WI Metro 2,604,181 2,632,686 28,505 0.2 9 Philadelphia-Camden-Wilmington, PA-NJ-DE-MD Metro 1,485,734 1,460,405 (25,329) (0.3)

10 New York et al, NY-NJ-PA Metro 4,658,639 4,610,803 (47,836) (0.2) (1) Compound annual growth rate. Source: Nielsen Claritas Database

Income, Employment and Employers

The following table reflects per capita income trends in the Atlanta MSA as compared to the State of Georgia for the years shown.

Trends in Per Capita Personal Income

Atlanta MSA State of Georgia

2003 $32,739 $28,720 2004 33,838 29,723 2005 35,262 31,260 2006 36,487 32,299 2007 37,744 33,499 2008(1) 37,655 33,975

(1) 2008 data is preliminary. Source: United States Department of Commerce, Bureau of Economic Analysis.

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The table below shows the historical nonagricultural employment data for the Atlanta MSA, the State and the nation. As with population, nonagricultural employment in the Atlanta MSA has increased in recent years at rates higher than in the State of Georgia as a whole. Between 2002 and 2008, nonagricultural employment in the Atlanta MSA increased an average of 1.2% per year compared with 1.0% per year in the State of Georgia and 0.8% per year in the United States.

Historical Nonagricultural Employment (In Millions)

Atlanta MSA State of Georgia United States

2002 2,259 3,870 130,341 2003 2,237 3,845 129,999 2004 2,269 3,901 131,435 2005 2,338 4,003 133,703 2006 2,398 4,086 136,086 2007 2,452 4,146 137,598 2008 2,426 4,103 137,066

Source: Georgia Department of Labor, Workforce Information & Analysis Division, Georgia Labor Market Explorer. United States Data Source: United States Department of Labor, Bureau of Labor Statistics.

The following tables compare employment and unemployment data (consisting of agriculture plus non-

agriculture employment) for the State of Georgia, the Atlanta MSA and the United States for the calendar years presented below. For September 2009, the unemployment rates for Georgia, the Atlanta MSA and the United States were 10.2%, 10.5% and 9.5%, respectively.

Georgia, Atlanta MSA & U.S. Average Annual Employment and Unemployment

2004 2005 2006 2007 2008

Georgia

Labor Force 4,468,080 4,622,105 4,741,860 4,798,003 4,847,650

Employment 4,257,465 4,384,030 4,522,025 4,578,828 4,545,675

Unemployment 210,615 238,075 219,835 219,175 301,975

Unemployment Rate 4.7% 5.2% 4.6% 4.6% 6.2%

Atlanta MSA

Labor Force 2,502,089 2,595,020 2,666,062 2,720,851 2,746,408

Employment 2,384,251 2,461,193 2,544,722 2,599,056 2,577,453

Unemployment 117,838 133,827 121,340 121,795 168,955


United States

Labor Force 147,401,000 149,320,000 151,428,000 153,124,000 154,287,000

Employment 139,252,000 141,730,000 144,427,000 146,047,000 145,363,000

Unemployment 8,149,000 7,591,000 7,001,000 7,078,000 8,924,000


Source: Georgia Department of Labor, Workforce Information & Analysis Division, Georgia Labor Market Explorer.

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The table below lists the top ten largest corporate employers in the Atlanta MSA in 2008 and illustrates the diversity of the region’s economy.

Largest Corporate Employers

Atlanta MSA 2008

Number of Employer Industry Atlanta Employees

Delta Air Lines(1) Air Transportation 22,257 AT&T Telecommunications 21,915 Emory University(1) Education Institution 21,000 Cox Enterprises(1) Communications 13,583 UPS(1) Express Document and Package Delivery 10,745 Wellstar Health System(1) Healthcare services 10,112 SunTrust Banks(1) Financial services, bank holding company 7,700 Lockheed Martin Aeronautics Aircraft design, development, manufacturing, & support 7,531 IBM Corporation Information Technology 7,500 Georgia Institute of Technology(1) Education Institution 7,342 (1) Headquartered in the Atlanta MSA. Source: Metropolitan Atlanta Chamber of Commerce.

Other Pediatric Service Providers

Within the primary service area, the following providers also offer pediatric inpatient services.

Other Inpatient Pediatric Service Providers Within the Atlanta MSA in 2008

2008 Pediatric

Hospital Inpatient Discharges Pediatric Beds(1) Total Beds(1)

WellStar Cobb Hospital 497 14(2) 368

Gwinnett Medical Center 276 8 300

WellStar Kennestone Hospital 167 0 572

Tanner Medical Center/Carrollton 163 14 179

Atlanta Medical Center 148 0 370

(1) Refers to beds that are set up and staffed, as opposed to licensed beds. (2) In May 2009, WellStar Cobb Hospital closed its pediatric unit. Source: 2008 Georgia Hospital Association Inpatient Database. Annual Hospital Questionnaires for beds.

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SELECTED UTILIZATION AND FINANCIAL INFORMATION

Summary of Historical Utilization

The following table sets forth certain utilization information relating to Egleston Hospital and Scottish Rite Hospital for the fiscal years ended December 31, 2006, 2007 and 2008, and for the nine-month periods ended September 30, 2008 and 2009.

Nine Months Ended Fiscal Year Ended December 31, September 30,

2006 2007 2008 2008 2009 Licensed Beds 441 479 505 505 505 Total Admissions 22,703 22,569 22,925 16,695 17,822 Average Daily Census (incl. Observ.) 371 389 395 393 398 Average Length of Stay (days) 5.7 6.0 6.0 6.2 5.8 Patient Days 130,441 136,025 138,628 103,348 103,711 Observation Cases 5,142 5,966 5,980 4,365 4,992 Occupancy (% inc. Observ.) 85% 87% 82% 80% 78% Emergency Room Visits 124,306 126,868 126,594 92,114 108,246 Inpatient Surgeries 8,979 9,521 9,753 7,434 7,180 Outpatient Surgeries (incl. ASC) 26,578 27,936 28,421 21,367 22,653 Total Surgeries 35,557 37,457 38,174 28,801 29,833 Payor Mix

The following table presents the historical composition by percentage of gross patient service revenues for Egleston and Scottish Rite by payor classes for the fiscal years ended December 31, 2006, 2007 and 2008, and for the nine-month periods ended September 30, 2008 and 2009.

Nine Months Ended Fiscal Year Ending December 31, September 30,

Payor Class 2006 2007 2008 2008 2009

Medicaid & Medicare(2) 49.54% 50.22% 50.24% 50.15% 50.82% Managed Care 46.26 45.91 46.42 46.31 45.89 Commercial 1.00 0.79 0.76 0.90 0.84 Self Pay 3.20 3.09 2.58 2.64 2.45 Totals 100.00% 100.00% 100.00% 100.00% 100.00%

(1) In the above table, gross patient service revenues include professional fees, but do not include the revenues of

Emory-Egleston Children’s Heart Center, Inc. and Children’s Healthcare of Atlanta Surgery Center at Meridian Mark Plaza, LLC.

(2) Historically, Medicare comprises less than 1% of gross patient service revenues. Source: Children’s Records Managed Care

Children’s contracts with all major managed care payors. Insurance verification, authorization and precertification, and payment verification are all aggressively pursued. Children’s has experience with all types of payment terms (per case, per diem, carve-outs, stop-loss, etc.) but currently nearly all commercial managed care contract terms are based on a percent of billed charges. In accordance with Children’s managed care contracting policy, a variety of factors are considered when determining the discount provided to payors. Some of these factors include: billing costs, plan membership, timeliness of payment, ease of administration, excluded services, case mix stability, and participating physician providers.

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Medicaid

Under Title XIX of the Social Security Act, 42, U.S.C. Section 1396, et seq., the Federal government supplements the funds provided by the State of Georgia for medical assistance under the Medical Assistance Program (“Medicaid”). The Georgia Department of Community Health (“DCH”) generally administers the Medicaid program in Georgia. There are several aid categories through which individuals may receive Medicaid benefits. These aid categories are more particularly described below.

Aid Category Description

Disabled/Medically Needy Pregnant women, children, aged, blind, and disabled individuals

whose family income exceeds the established income limit for Medicaid may be eligible under the Medically Needy program. The Medically Needy program allows a person to use incurred/unpaid medical bills to “spend down” the difference between their income and the income limit to become eligible.

Right from the Start Medicaid for Pregnant Women and their Infants

Pregnant women and their infants with family income at or below 200% of the federal poverty level.

Right from the Start Medicaid (Children Less than One Year Old) – 185% FPL

Children under 1 whose family income is at or below 185% of the federal poverty level.

Right from Start Medicaid (Children 1 to 5 years Old) – 133% FPL

Children 1 to 5 whose family income is at or below 133% of the federal poverty level.

Right from the Start Medicaid (Children 6 to 19 Years Old) – 100% FPL

Children 6 to 17 whose family income is at or below 100% of the federal poverty level.

SSI Aged, blind or disabled individuals who receive Supplemental Security Income (“SSI”).

Community Care Aged, blind or disabled individuals who need regular nursing care and personal services but can stay at home with special community care services.

Hospice Terminally ill individuals who are not expected to live more than six months may be eligible for coverage. Recipients must agree to receive hospice services through a Medicaid participating hospice care provider.

Low-Income Medicaid (LIM) Adults and children who meet the income standards of the old AFDC (Aid to Families with Dependent Children) program.

PeachCare Qualification for benefits under this program is based on being uninsured with a low income. Monthly premiums must be paid by the beneficiary. Medicaid providers in Georgia must accept PeachCare. PeachCare reimbursement is essentially the same as Medicaid.

All Other Includes the Katie Beckett Waiver Program benefiting children with physical or mental disabilities without regard to income or financial resources.

The Medicaid payment methodology for inpatient hospital services is generally based on Diagnostic

Related Groups (“DRGs”). The payment is based on a standard per case amount modified for the case mix index or weight of the specific patient discharge DRG. The standard per case base payment is higher for a freestanding pediatric provider such as Children’s than for other hospital providers. Add-on payments for capital costs and medical education also are provided. Unlike the standard per case base payments, these add-on payments are based on Children’s historic data related to its expenditures on capital and medical education. There also is a mechanism for additional payment if the cost for a hospital inpatient stay exceeds a cost outlier threshold established for each

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DRG by approximately two standard deviations above the expected DRG. Above the DRG specific threshold, costs in excess of the case mix adjusted payment are paid at 89.3%.

Hospital outpatient services are reimbursed at approximately 85.6% of allowable cost per the Medicaid cost

report with selected services based on fee schedule and other services with limited payment maximums. Physician services are reimbursed at 84.6% of Medicare’s 2000 Physician Fee Schedule for Atlanta. Overall, Medicaid payments to Children’s equates to approximately 70-75% of cost.

As Medicaid is the single largest payor for Children’s representing approximately 50 percent of fiscal year

2008 gross patient service revenues, changes in the qualification criteria, covered benefits and reimbursement amounts could have a material effect on Children’s net revenue and operating margin. See “BONDHOLDERS’ RISKS – Dependence on Federal and State Funding” in the Official Statement.

Beginning June 1, 2006, Georgia Medicaid implemented capitated contracts with three private care

management organizations (“CMOs”). Medicaid and PeachCare eligible members have their choice of health plan. Each CMO negotiates terms with each Medicaid provider individually and each CMO adopts its own administrative rules and processes.

Indigent Care Trust Fund

To help offset a portion of the unreimbursed cost of care provided to Medicaid beneficiaries, Children’s is eligible (subject to legislative appropriation and other conditions) for additional payments under the Medicaid disproportionate share program. Georgia’s disproportionate share program is funded through the State’s Indigent Care Trust Fund. For the State of Georgia’s 2009 fiscal year (beginning July 1, 2008), Children’s received approximately $9.3 million from the State Indigent Care Trust Fund. For the State of Georgia Fiscal year 2010 (beginning July 1, 2009), Children’s is projected to receive approximately $7.1 million from the Indigent Care Trust Fund.

Uncompensated Care

The approximate dollar amounts of unreimbursed costs from indigent and charity care and the treatment of Medicaid patients for the fiscal years ended December 31, 2006, 2007 and 2008 are set forth below:

Fiscal Years Ended December 31, ($ Thousands)

Unreimbursed Cost 2006 2007 2008

Indigent & Charity $21,709 $25,341 $26,619 Medicaid and Other 59,422 72,861 76,409 Total Unreimbursed Costs $81,131 $98,202 $103,028

Children’s maintains processes that actively focus on identifying patients in need of financial support.

These patient families are assisted by financial counselors and on-site case workers to become enrolled in Medicaid or obtain PeachCare coverage. In addition, patients that are not eligible for other assistance may have all or part of their bill written off as indigent and charity. Records are maintained to identify and monitor the level of indigent and charity care provided on an on-going basis. The State of Georgia’s Indigent Care Trust Fund and Certificate of Need program require that Children’s provide indigent and charity care services.

Summary Financial Information

Summary of Consolidated Statements of Operations. The following summary of statements of operations for the years ended December 31, 2006, 2007 and 2008 are derived from the audited consolidated financial statements of Children’s. Although the information for fiscal years 2006 through 2008 was taken from audited financial statements, no representation is made that the information is comparable from year to year, or that the information as shown by itself presents fairly the results of operations for the periods shown. For more complete information, reference is made to the consolidated audited financial statements for fiscal years 2007 and 2008

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included in Appendix B to this Official Statement and the consolidated audited financial statements for fiscal year 2006, copies of which are available from Children’s.

The financial data for the nine months ended September 30, 2008 and 2009 are derived from unaudited

financial statements that is not included in this Official Statement. This summary financial information includes all adjustments, consisting of normal recurring accruals, which Children’s considers necessary for a fair presentation of the financial position and the results of operations for these periods for Children’s. Operating results for the nine months ended September 30, 2009 are not necessarily indicative of the results that may be expected for the entire year ending December 31, 2009.

[Remainder of Page Intentionally Left Blank]

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The information presented in the following table includes consolidated financial information for Children’s and all of its affiliates, some of which are not members of the Obligated Group. For fiscal year 2008, the Obligated Group contributed over 90% of the total consolidated operating revenues of Children’s and its affiliates. See “INTRODUCTION – Obligated Group Members” herein.

Summary of Consolidated Statements of Operations

($ Thousands) Nine Months Ended

Fiscal Year Ended December 31, September 30,

2006 2007 2008 2008 2009 OPERATING REVENUES AND SUPPORT Net patient service revenue $691,973 $749,186 $814,581 $606,534 $651,781 Other operating revenue 16,298 17,759 17,124 12,070 13,625 Unrestricted contributions 8,803 11,968 10,647 3,960 4,326 Net assets released from restrictions used for

operations 11,134 15,741 23,723 11,960 13,014 Total operating revenues and support 728,208 794,654 866,075 634,524 682,746 OPERATING EXPENSES Salaries and wages 341,418 364,162 400,415 293,567 302,504 Employee benefits 65,751 67,788 74,118 54,562 59,655 Supplies and other 200,198 209,086 209,183 171,899 173,729 Provision for bad debts 10,765 10,752 10,780 8,604 8,347 Interest expense 11,002 13,447 20,648 15,218 12,944 Depreciation and amortization 41,716 51,079 56,409 43,732 57,797 Total expenses 670,850 716,314 771,553 587,582 614,976 OPERATING INCOME 57,358 78,340 94,522 46,943 67,770 Realized investment income (loss) and other 89,633 157,496 (100,754) (16,614) (76,437) Unrealized gain and (losses) on investments(1) — (81,630) (351,836) (121,865) 189,488 Loss from early extinguishment of debt — — (4,463) (4,463) — Net change in fair value of interest rate swaps — (8,521) (93,619) (11,163) 50,531 Contributions to Hughes Spalding Children’s

Hospital(4) (1,834) (2,000) (2,095) (1,571) (1,715) Net cumulative unrealized gains transferred to

trading securities(1) — 193,281 — — — Equity in income (loss) of unconsolidated

investments 3,191 (557) (9,007) (6,755) (1,480) Equity in loss of unconsolidated affiliates(2) (2,757) (6,464) (5,479) (3,245) (2,880) Minority interest in earnings of subsidiary(3) (4,691) (5,137) (5,410) (4,265) (3,810)

REVENUES OVER (UNDER) EXPENSES $140,900 $324,808 $(478,141) $(122,998) $221,467

(1) Effective October 31, 2007, Children’s elected to transfer the majority of its investments in equity securities with readily

determinable fair values and investments in debt securities from available-for-sale to trading securities. After reassessment, Children’s determined that transferring investments to the trading securities category is appropriate based on Children’s investment strategy and policies. Investment managers may execute purchases and sales of investments without prior approval of Children’s. The transfer had the effect of Children’s recording $193.3 million of cumulative unrealized gains in non-operating investment income.

(2) Represents equity gains and losses related to E-CC. (3) Represents Children’s minority interest in earnings of ASC. (4) Represents financial support provided to Hughes Spalding pursuant to the Management Agreement (see “INTRODUCTION

– Non-Obligated Group Affiliates – HSOC, Inc.”). Other than this line item, the above data excludes all financial data pertaining to the operations of Hughes Spalding.

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Summary of Consolidated Balance Sheets. The following table sets forth the total unrestricted cash and investments, total assets, total long-term debt and total net assets of Children’s at December 31, 2006, 2007 and 2008 as reported in Children’s consolidated audited financial statements for such fiscal years. The balance sheet data at September 30, 2009 is derived from unaudited financial statements that is not included in this Official Statement.

Fiscal Year Ended December 31, At September 30, ($ Thousands) ($ Thousands)

2006 2007 2008 2009

Total unrestricted cash and investments $1,451,635 $1,577,593 $1,267,176 $1,252,512 Total assets 2,339,661 2,576,956 2,291,276 2,263,757 Long term debt 383,228 382,697 502,287 296,648(1) Total net assets 1,766,075 1,982,192 1,481,796 1,715,235

(1) Long term debt as of September 30, 2009 is net of $197,925,000 in outstanding bonds held by Children’s, which are being

refunded by the Series 2009 Bonds. Upon the issuance of the Series 2009 Bonds, long-term debt will increase in the approximate amount of $197,925,000 and a corresponding increase in cash and investments will occur.

Management’s Discussion and Analysis of Financial Performance

Unless otherwise indicated, the figures contained in the analysis below are represented in thousands of dollars.

Nine Months Ended September 30, 2009 Compared to Nine Months Ended September 30, 2008 Total operating revenues for the nine months ended September 30, 2009 were $682,746 compared to

$634,525 for the nine months ended September 30, 2008, an increase of $48,221 (7.6%). Management attributes the increase to a variety of factors. Net patient service revenue increased $45,247 (7.5%) between the periods resulting from increased patient volumes, selective price increases and a higher mix of services utilized by patients.

Other operating revenues increased $1,556 (12.9%) from the comparable period in 2008. Unrestricted

contributions comprised of unrestricted donor gifts, income from trusts and bequests, increased $366 (9.2%). Net assets released from restrictions to support operations increased $1,053 (8.8%), reflecting the increased level of restricted giving and the timing of the spending of restricted gifts.

Total operating expenses increased $27,394 (4.7%) which management attributes primarily to an increase

in employee benefits of $5,093 (9.3%) and depreciation of $14,064 (32.2%). The growth in depreciation is a result of certain Master Facilities Plan and electronic medical record assets going into service in 2008 and 2009. The current period also recognizes a loss on disposal of impaired assets attributable to the Master Facilities Plan ($5,655) and loss on disposal attributable to the conveyance of land ($1,083) adjoining an immediate care center to the county for a new road.

Egleston and Scottish Rite operating expenses per adjusted patient day decreased from $2,212 in the nine

months ended September 30, 2008 to $2,168 in the nine months ended September 30, 2009 or a 2.0% decrease. Salaries and wages increased as a result of increased staff to support patient volumes (full-time equivalents increased from 5,502 to 5,774, or 4.9%), merit wage adjustments of approximately 2.0% and general market and inflationary factors affecting the average wage expense for a healthcare professional. As noted above, employee benefit expense increased $5,093 (9.3%) primarily due to a medical cost inflation increase and growth in full-time equivalents. Benefit expense as a percent of non-contract salaries increased slightly, and was 19.7% in the nine months ended September 30, 2009 compared to 18.6% in the nine months ended September 30, 2008. Supplies, drugs and other expenses increased by $1,830 (1.1%) primarily due to growth in volumes, pricing of general medical supplies, blood products, drugs and implants and increased computer software and support expenses. Interest expense decreased by $2,273 (14.9%) as a result of market rate stabilization on the outstanding variable rate debt and the repurchase of $200 million in outstanding debt by Children’s in April 2009.

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In 2009 Children’s and the Woodruff Health Science Center of Emory University approved a new pediatric research strategic plan setting a goal that by 2018, the Emory School of Medicine Department of Pediatrics will be one of the top ten research programs in National Institutes of Health funding. Children’s Board of Trustees has discussed and may establish in 2009 an irrevocable trust with up to $50 million to demonstrate a commitment toward achieving the research goal and potentially serve as a catalyst for increased philanthropic support. If a commitment is made by Children’s prior to December 31, 2009, operating income for fiscal year 2009 will be reduced by the amount of the commitment.

Fiscal Year Ended December 31, 2008 Compared to Fiscal Year Ended December 31, 2007 Total operating revenues for fiscal year 2008 were $866,075 compared to $794,654 in fiscal year 2007, an

increase of $71,421 (9.0%). Management attributes the increase to a variety of factors. Net patient service revenue increased $65,395 (8.7%) from fiscal year 2007 as a result of increased patient volumes, selective price increases, a higher mix of services utilized by patients and continued improvements in the revenue cycle.

In total, other operating revenues, unrestricted contributions and net assets released from restrictions

increased $6,026 (13.2%) from 2007 to 2008. Net assets released from restrictions increased from $15,740 in 2007 to $23,723 in 2008, an increase of $7,982 (50.7%), due to an increased use of restricted funds.

Total operating expenses increased $55,239 (7.7%), which management attributes to overall growth in

expenses for supplies, salaries, interest expense and depreciation. Interest expense increased $7,202 (53.6%) as a result of volatility in variable interest rates due to market conditions and the issuance of additional debt in February 2008. Depreciation and amortization expense increased $5,330 (10.4%) as a result of certain Master Facilities Plan and electronic medical record assets going in service during 2007.

Egleston and Scottish Rite operating expenses per adjusted patient day increased from $2,154 in 2007 to

$2,222 (3.2%) in 2008. Salaries and wages for Children’s increased as a result of increased staff to support patient volumes and master facility plan expansion (full-time equivalents increased from 5,171 in 2007 to 5,582 in 2008 (7.9%)), merit wage adjustments of approximately 3.5%, and general market and inflationary factors affecting the average wage expense for a healthcare professional. Employee benefit expense increased $6,329 (9.3%) from 2007 to 2008 primarily due to general market and inflationary factors along with and the growth in full time equivalents. Benefit expense as a percent of non-contract salaries was stable at 18.5% in 2008 compared to 18.6% in 2007. Supplies, drugs and other expenses were stable due to supply chain and cost saving initiatives.

Fiscal Year Ended December 31, 2007 Compared to Fiscal Year Ended December 31, 2006

Total operating revenues for fiscal year 2007 were $794,654 compared to $728,208 in fiscal year 2006, an

increase of $66,446 (9.1%). Management attributes the increase to a variety of factors. Net patient service revenue increased $57,213 (8.3%) from fiscal year 2006 as a result of increased patient volumes, increased acuity, selective price increases, a higher mix of services utilized by patients.

In total, other operating revenues, unrestricted contributions and net assets released from restrictions

increased $9,233 (25.5%) from 2006 to 2007. Unrestricted contributions comprised of unrestricted donor gifts, income from trusts and bequests, increased $3,165 (36.0%) primarily related to the publicity of the One to Grow

On: The Campaign for Children’s and the timing of year-end gifts and bequests. Net assets released from restrictions increased from $11,134 in 2006 to $15,740 in 2007, an increase of $4,606 (41.4%), due to an increased use of restricted funds.

Total operating expenses increased $45,464 (6.8%), which management attributes to overall growth in

expenses for salaries, supplies and depreciation. The growth in these expenses is attributable to the increases in capacity and volume which is the result of certain Master Facilities Plan assets going into service in 2007.

Egleston and Scottish Rite operating expenses per adjusted patient day increased from $2,068 in 2006 to

$2,154 (4.2%) in 2007. Salaries and wages for Children’s increased as a result of increased staff to support patient volumes and Master Facilities Plan expansion (full-time equivalents increased from 4,927 in 2006 to 5,171 in 2007 (4.9%)), merit wage adjustments of approximately 3.5%, and general market and inflationary factors affecting the

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average wage expense for a healthcare professional. Employee benefit expense increased $2,037 (3.1%) from 2006 to 2007 primarily due to general market and inflationary factors along with and the growth in full time equivalents. Benefit expense as a percent of non-contract salaries declined to 18.6% in 2007 from 19.3% in 2006. Supplies, drugs and other expenses were stable due to supply chain and cost saving initiatives.

Effective October 31, 2007, Children’s elected to transfer the majority of its investments in equity

securities with readily determinable fair values and investments in debt securities from available-for-sale to trading securities. After reassessment, Children’s determined that transferring investments to the trading securities category was appropriate based on Children’s investment strategy and policies. Investment managers may execute purchases and sales of investments without prior approval of Children’s. The transfer had the effect of Children’s recording $193,281 of cumulative unrealized gains in non-operating investment income. Prior to 2007, investments were considered as securities Available for Sale. For investments classified as Trading Securities, unrealized gains and losses are reflected on the Statement of Operations above Revenues Over (Under) Expenses. The cumulative effect of this change in accounting policy was reflected in 2007 as prescribed under Statement of Financial Accounting Standard 154. Certain Financial Ratios

The following tables set forth certain financial ratios for fiscal years 2006, 2007 and 2008 for Children’s and its consolidated affiliates. There can be no assurance that Children’s operations will generate comparable ratios in future years.

Days Cash on Hand ($ Thousands)

2006 2007 2008 Unrestricted cash and investments $1,451,635 $1,577,593 $1,267,176 Total Operating Expense $670,850 $716,314 $771,553 Less: Non cash expense Depreciation and Amortization 41,716 51,079 56,409 Provision for Bad Debt 10,765 10,752 10,780 Net Operating Expense $618,369 $654,483 $704,364 Average daily operating expense(1) $1,694 $1,793 $1,930 Days cash on hand 857 880 657

(1) Equal to net operating expense divided by 365 days.

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Actual and Pro Forma Maximum Annual Debt Service Coverage ($ Thousands)

2006 2007 2008

Operating income $ 57,358 $ 78,340 $ 94,522 Non-operating gains (losses)(1) 89,633 157,496 (100,754) Affiliate/subsidiary expenses(2) (9,282) (13,601) (12,984) Depreciation and amortization 41,716 51,079 56,409 Interest 11,002 13,447 20,648 Total income available for debt service(3) $190,427 $286,761 $57,841 Debt service requirement(3) $14,375 $15,312 $19,315 Historical debt service coverage ratio(3)(5) 13.2x 18.7x 3.0x Pro forma maximum annual debt service(4) $29,107 $29,107 $29,107 Historical pro forma maximum annual debt

service coverage ratio(5) 6.5x 9.8x 2.0x (1) Non-operating gains (losses) exclude all unrealized gains (losses) during the respective periods. (2) Affiliate/subsidiary expense includes contributions to Hughes Spalding, losses related to E-CC, and minority

interest in earnings of ASC. (3) These terms are consistent with the defined terms used in the Master Trust Indenture. (4) Pro forma maximum annual debt service requirement is not calculated in accordance with the Master Trust

Indenture. Interest expense on the Series 2008 Bonds was calculated assuming the 3.4467% swap rate associated with those Series 2008 Bonds.

(5) These are rounded to the nearest one-tenth (1/10).

Investments

Children’s has a long-term investment portfolio totaling approximately $1.35 billion as of September 30, 2009, which has been accumulated through gifts from donors, excess earnings from operations and market appreciation. Of this amount, approximately 12% is restricted by donors for specific projects. The remaining portion of the investment portfolio is available to support long-term strategic initiatives, with the approval of the Children’s Board of Trustees. It is Children’s policy to target spending for strategic initiatives between 3% and 5% of the twelve quarter average of the unrestricted portfolio market value, net of outstanding debt.

The Investment Committee, a committee of the Children’s Board of Trustees, maintains oversight of

Children’s investment portfolio. Children’s has a formal investment policy that establishes the asset allocation ranges for the long term investment pool. The Investment Committee reviews the performance of all investment managers quarterly. As of September 30, 2009, there were 30 investment managers across the various asset classes. Children’s targeted asset allocation is 60% equities (including both domestic and international equities) (with a range of 20% to 90%), 10% fixed income (with a range of 0% to 30%) and 30% alternative assets (with a range of 20% to 45%). The investment policy can be modified at the recommendation of the Investment Committee and the approval of Children’s Board of Trustees. It is the responsibility of the Chief Financial Officer and the Chief Investment Officer of Children’s to report the performance of the portfolio to the Investment Committee on a quarterly basis.

As of September 30, 2009, Children’s actual allocation was 50% equities, 16% fixed income, 28%

alternative assets and 6% cash. The actual allocation reflects a conservative tilt taken in the portfolio as a result of recent changes in the capital markets.


As described in the Official Statement under “PLAN OF FINANCE – Interest Rate Agreements – Description of Outstanding Interest Rate Agreements,” Children’s has entered into various Interest Rate Agreements all of which will remain in effect upon the issuance of the Series 2009 Bonds.

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The table below provides for each Interest Rate Agreement, the original and current notional amounts, the

fixed rates payable by the Corporation to the Swap Providers and the floating rates payable by each Swap Provider to the Corporation under each Interest Rate Agreement, and the current value as of September 30, 2009.

Swap Original Current Fixed Rate Floating Rate Providers Notional Amount Notional Amount Current Value

Unassociated Swap 3.484% 62.2% of 1 month

LIBOR + 0.27% Citi Bank, N.A. and SunTrust Bank

$110,000,000 $107,975,000 $(12,225,580)

Unassociated Swap 3.513 62.2% of 1 month LIBOR + 0.27%

Citi Bank, N.A. and SunTrust Bank

40,000,000 39,950,000 (4,897,377)

Series 2008 Bonds/ Unassociated Swap

3.4467 67% of 1 month LIBOR

J.P. Morgan Chase Bank, N.A.

242,965,000 240,995,000 (33,914,732)

Pursuant to each Interest Rate Agreement, Children’s may be required to post collateral in certain

circumstances depending on Children’s credit rating and the value of the Interest Rate Agreement at any time in order to secure obligations that would be owed to the Swap Provider under such transaction if terminated, regardless of whether such transaction is actually terminated. The amount of collateral required to be posted could be substantial. As of September 30, 2009, the collateral required to be posted by Children’s was $8,914,732.

Risks associated with the Interest Rate Agreements are described in the Official Statement under the heading “BONDHOLDERS’ RISKS – Interest Rate Agreements.”

INSURANCE AND LITIGATION

Insurance

Professional and General Liability. Children’s maintains professional and general liability coverage through a self-insured retention with limits of $3 million per occurrence and $10 million in the annual aggregate. Children’s maintains reserves for the use of funding the self-insured retention, which is determined by an annual actuarial analysis. As of September 30, 2009, these accrued reserves totaled approximately $22.2 million.

Excess Coverages. Children’s maintains excess insurance coverage with a $50 million limit. This

coverage is provided through several commercial insurance carriers. These policies attach to the professional and general liability self insured retention, automobile liability (non-emergency and emergency), employer’s liability, managed care errors and omissions and aviation liability policies.

Worker’s Compensation and Employment Practices Liability. Children’s self-insures its worker’s

compensation under a self-insured program with a $350,000 deductible per loss. As of September 30, 2009, accrued reserves totaled approximately $1.8 million. Coverage for excess liability is provided by a commercial insurance carrier. The employer’s liability is provided through a commercial insurance carrier with a $1 million annual aggregate limit.

Property. Children’s maintains property and business interruption coverage through a commercial

insurance carrier with a limit of $1 billion per occurrence. Other Coverages. Children’s maintains directors and officers liability, employer’s liability, fiduciary

liability, crime insurance, automobile liability (non-emergency and emergency), non-owned aviation and helipad liability, multimedia liability and managed care errors and omissions liability and management errors and omissions liability.

Litigation

There is no litigation or proceedings pending or, to the knowledge of Children’s, threatened except (a) litigation involving claims against Children’s and/or its professional employees, residents and fellows for professional liability in which the probable recoveries and estimated costs and expenses of defense, in the opinion of

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Children’s claims resolution management and legal personnel, is expected to be within Children’s applicable insurance policy limits, subject to applicable deductibles (for claims covered by third-party insurers) or insurance reserves (for claims that are self-insured by Children’s) and (b) other litigation, reimbursement appeals and administrative proceedings, which if adversely determined, would not, in the judgment of the management of Children’s, be expected to have a material adverse effect on the financial condition, operations or cash flows of Children’s. As of September 30, 2009, Children’s had accrued reserves of approximately $22.2 million to cover potential liability for such claims and litigation. There can be no assurance, however, that the currently pending or threatened litigation will not be subject to future adverse developments or result in settlements or verdicts in excess of the policy limits for the applicable coverage purchased or reserved by Children’s.

ADDITIONAL INFORMATION

Employees

As of September 30, 2009, Children’s had 7,533 employees, including 5,445 full-time employees, 1155 part-time employees and 933 per diem staff. In addition, during 2008, more than 75,000 volunteer hours were donated to Children’s, saving Children’s more than $1.5 million dollars in salary expense.

There are no labor unions at Children’s. The average length of employment at Children’s is 6.4 years.

Children’s provides a competitive benefit package and enjoys a good relationship with its employees. In 2006, 2007, 2008, and 2009, Children’s was recognized by Fortune magazine on their “100 Best Companies to Work for” list. In addition, Children’s was named a 2009 “Working Mother 100 Best Company” by Working Mother magazine for the fifth consecutive year and voted one of the top ten employers in Atlanta for seven consecutive years (2003-2009) by the Atlanta Business Chronicle.

Licenses, Accreditation and Membership

Egleston Children’s Hospital at Emory University, Inc. and Scottish Rite Children’s Medical Center, Inc. D/B/A Wilbur and Hilda Glenn Hospital for Children are licensed by the Georgia Department of Human Resources which has also accredited both entities as trauma centers. Both Egleston and Scottish Rite are approved providers under Medicaid and Medicare and also receive Medicaid Disproportionate Share Hospital funds to help offset the cost of serving a disproportionate number of low-income patients with special needs. In addition, both Egleston and Scottish Rite are accredited by the following:

The Joint Commission Commission on Accreditation of Rehabilitation Facilities American Board of Accreditation for Orthotics and Prosthetics National Child Advocacy American Academy of Sleep Medicine Accreditation for Graduate Medical Education College of American Pathologists Clinical Laboratory Improvement Amendments Georgia Department of Human Resources Food and Drug Administration American Association of Blood Banks American Diabetes Association American College of Radiology American Society for Hospital Pharmacies Continuing Education Review Committee approved Children’s Provider Status Medical Association of Georgia ; CME Association for Postdoctoral Programs in Clinical Neuropsychology Intersocietal Commission for the Accreditation of Echocardiography Laboratories Foundation for the Accreditation of Cellular Therapy Association for the Accreditation of Human Research Protection Programs United Network Organ Sharing and Organ Procurement and Transplantation Network) Georgia Department of Natural Resources (EPD-Environmental Protection Division)

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American College of Surgeons Trauma Center Designation Institute for Chaplaincy, Care and Counseling Centers National Association of Epilepsy Centers

Both Egleston and Scottish Rite are members of the Georgia Hospital Association, the National Association

of Children’s Hospitals and Related Institutions, the Council of Teaching Hospitals of the Association of American Medical Colleges, and Child Health Corporation of America.

Fundraising Activities

The Foundation is a 509(a)(1) charitable organization that oversees all fundraising efforts in support of Children’s, including annual giving, major and planned gifts, corporate partnerships, grant development, endowment enhancement, special events and volunteer services. The Foundation works with individual donors, charitable foundations and corporations to enhance medical services and programs, and to help care for children whose families could not otherwise afford to pay.

In 2008, the Children’s Foundation raised $62.8 million thanks to the community’s generous support. As a

not-for-profit organization, Children’s is committed to strong stewardship and operational fundraising costs at or below national averages and standards. In 2008, Children’s costs were only 13.3 cents for every dollar raised.

The Foundation’s goal is to become the “charity of choice” in Georgia, focusing on four key growth

strategies for major and planned gifts: leadership, service line fundraising, outreach and technology. From January 2003 through December 31, 2007, the Foundation spearheaded the single largest fundraising

initiative in the history of Children’s. The goal for One to Grow On: The Campaign for Children’s was to provide critical philanthropic support and ensure fulfillment of Children’s mission. The One to Grow On: The Campaign

for Children’s ended on December 31, 2007 having raised over $268 million toward a goal of $265 million.

Volunteers

The Children’s Friends organization, a division of the Foundation, is a 6,500-member volunteer organization supporting the patients, families and operations at Children’s through volunteer service, fundraising and advocacy activities. There are four official divisions: Community Friends, Special Events Friends, the Friends Junior Committee, and Hospital Friends, the division that serves inside the three Hospitals, working in direct patient care, customer service and administrative support. During 2008, Hospital Friends donated 79,515 hours of service, saving Children’s more than $1.5 million. From January 1, 2009 through September 30, 2009, Hospital Friends donated more than 71,000 hours, saving Children’s more than $1.4 million.

COMMUNITY EDUCATION AND ADVOCACY

Children’s Child Health Promotion department works with community partners to improve the health of Georgia’s children. Focusing on injury and illness prevention, promoting healthy behaviors, and coordinating statewide efforts around healthy births, childhood obesity and child abuse and neglect, Children’s plays a leadership role in child health advocacy and coalition building. Children’s Child Health Promotion program is a statewide educational resource for professionals, teachers, parents and children. As the lead agency for Safe Kids of Georgia, Children’s is dedicated to building and supporting community-based coalitions and legislative advocacy to make Georgia a safer place for children to play and grow. The Children’s illness prevention focus provides professionals with expertise and resources regarding immunizations and other health issues. The Healthy Behaviors team promotes nutrition and physical activity to early childcare providers and schools. Georgia Children’s Health Alliance, a division of the Foundation, coordinates statewide collaboration with public, private and non-profit organizations addressing child health issues.

Children’s provides a free 24-hour physician referral source and health information line, which is staffed by

pediatric nurses. In 2008, the call center handled more than 278,000 calls from the community.

APPENDIX B

CHILDREN’S HEALTHCARE OF ATLANTA, INC. AND AFFILIATES CONSOLIDATED FINANCIAL STATEMENTS

AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007 (RESTATED)

Children’s Healthcare of Atlanta, Inc. and Affiliates Consolidated Financial Statements as of and for the Years Ended December 31, 2008 and 2007 (Restated), and Independent Auditors’ Report

CHILDREN’S HEALTHCARE OF ATLANTA, INC. AND AFFILIATES

TABLE OF CONTENTS

Page

INDEPENDENT AUDITORS’ REPORT 1

CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007 (Restated):

Balance Sheets 2

Statements of Operations 3

Statements of Changes in Net Assets 4

Statements of Cash Flows 5

Notes to Consolidated Financial Statements 6–18

INDEPENDENT AUDITORS’ REPORT

To the Board of Trustees of Children’s Healthcare of Atlanta, Inc. and Affiliates Atlanta, Georgia

We have audited the accompanying consolidated balance sheets of Children’s Healthcare of Atlanta, Inc. and Affiliates (a Georgia not-for-profit corporation) (“Children’s”) as of December 31, 2008 and 2007, and the related consolidated statements of operations, changes in net assets, and cash flows for the years then ended. These consolidated financial statements are the responsibility of Children’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on Children’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Children’s as of December 31, 2008 and 2007, and the results of its operations, the changes in its net assets, and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 1, Children’s elected to transfer its investments in marketable equity and debt securities from available-for-sale to trading securities as of October 31, 2007.

As discussed in Note 2, the accompanying 2007 consolidated statement of cash flows has been restated.

May 15, 2009

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CONSOLIDATED BALANCE SHEETSAS OF DECEMBER 31, 2008 AND 2007(In thousands)

2008 2007ASSETS

CURRENT ASSETS: Cash and cash equivalents 56,020$ 38,077$ Patient accounts receivable — less allowance for uncollectible accounts of $8,127 and $6,302 in 2008 and 2007, respectively 97,067 101,160 Assets whose use is limited (Note 5) 59,093 - Contributions receivable — net 15,745 24,386 Other receivables 7,240 3,863 Supplies and prepaid expenses 9,451 9,903

Total current assets 244,616 177,389

ASSETS WHOSE USE IS LIMITED (Note 5) 1,317,799 1,724,613

PROPERTY AND EQUIPMENT — Net 622,395 557,630

OTHER NONCURRENT ASSETS: Bond issuance costs — net 2,776 5,150 Deposits and other assets 5,748 10,103 Noncurrent contributions receivable — net 9,409 10,356

Total other noncurrent assets 17,933 25,609

BENEFICIAL INTERESTS IN TRUSTS 88,533 91,715

TOTAL 2,291,276$ 2,576,956$

LIABILITIES AND NET ASSETS

CURRENT LIABILITIES: Current maturities of long-term debt 7,796$ 531$ Long-term debt classified as current (Note 6) 59,093 - Accounts payable and other 132,309 140,174 Salaries, related taxes, and benefits 37,399 32,980 Accrued interest 1,102 431

Total current liabilities 237,699 174,116

LONG-TERM DEBT — Net of portion classified as current (Note 6) 435,398 382,166

OTHER NONCURRENT LIABILITIES 136,383 38,482

COMMITMENTS AND CONTINGENCIES (Note 8)

NET ASSETS: Unrestricted 1,202,373 1,612,185 Temporarily restricted 156,077 240,050 Permanently restricted 123,346 129,957

1,481,796 1,982,192

TOTAL 2,291,276$ 2,576,956$

See notes to consolidated financial statements.

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CONSOLIDATED STATEMENTS OF OPERATIONSFOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007(In thousands)

2008 2007

OPERATING REVENUES AND SUPPORT: Net patient service revenue 814,581$ 749,186$ Other operating revenue 17,124 17,759 Unrestricted contributions 10,647 11,968 Net assets released from restriction for operations 23,723 15,741

Total operating revenues and support 866,075 794,654

OPERATING EXPENSES: Salaries and wages 400,415 364,162 Employee benefits 74,118 67,788 Supplies and other 209,183 209,086 Provision for bad debts 10,780 10,752 Interest expense 20,648 13,447 Depreciation and amortization 56,409 51,079

Total operating expenses 771,553 716,314

OPERATING INCOME 94,522 78,340

Investment (loss) income and other (Note 5) (452,590) 75,866

Loss from extinguishment of debt (Note 6) (4,463) -

Net change in fair value of interest rate swaps (Notes 1 and 6) (93,619) (8,521)

Contributions to Hughes Spalding Children’s Hospital (Note 1) (2,095) (2,000)

Net cumulative unrealized gains transferred to trading securities (Note 1) - 193,281

Equity in loss of unconsolidated investments (9,007) (557)

Equity in loss of unconsolidated affiliates (5,479) (6,464)

Minority interest in earnings of subsidiary (5,410) (5,137)

REVENUES (UNDER) OVER EXPENSES (478,141)$ 324,808$


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CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETSFOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007(In thousands)

Temporarily PermanentlyUnrestricted Restricted Restricted Total

NET ASSETS — December 31, 2006 1,437,813$ 208,318$ 119,944$ 1,766,075$

Revenues over expenses 324,808 - - 324,808 Contributions and other 225 42,085 12 42,322 Investment income and other - 12,282 709 12,991 Net assets released from restriction for operations - (15,741) - (15,741) Net assets released from restriction for Hughes Spalding Children’s Hospital (Note 1) - (2,233) - (2,233) Net assets released from restriction for property additions 4,661 (4,661) - - Net unrealized gains (losses) on investments 37,959 - (243) 37,716 Net cumulative unrealized gains transferred to trading securities (193,281) - - (193,281) Increase in value of beneficial interest in trusts - - 9,535 9,535

Increase in net assets 174,372 31,732 10,013 216,117

NET ASSETS — December 31, 2007 1,612,185 240,050 129,957 1,982,192

Revenues under expenses (478,141) - - (478,141) Contributions and other 102 61,035 11 61,148 Investment loss and other - (48,321) (3,440) (51,761) Net assets released from restriction for operations - (23,723) - (23,723) Net assets released from restriction for Hughes Spalding Children’s Hospital (Note 1) - (4,737) - (4,737) Net assets released from restriction for property additions 68,227 (68,227) - -

Decrease in value of beneficial interest in trusts - - (3,182) (3,182)

Decrease in net assets (409,812) (83,973) (6,611) (500,396)

NET ASSETS — December 31, 2008 1,202,373$ 156,077$ 123,346$ 1,481,796$


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CONSOLIDATED STATEMENTS OF CASH FLOWSFOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007(In thousands)

2008 2007(As Restated –

See Note 2)

CASH FLOWS FROM OPERATING ACTIVITIES: (Decrease) increase in net assets (500,396)$ 216,117$ Adjustments to reconcile (decrease) increase in net assets to net cash provided by operating activities: Depreciation and amortization 56,409 51,079 Net change in unrealized losses on investments 351,836 43,914 Loss (gain) on sale of marketable securities 123,089 (121,174) Loss from early extinguishment of debt 4,463 - Net change in fair value of interest rate swaps 93,619 8,521 Equity in loss of unconsolidated investments 9,007 557 Equity in loss of unconsolidated affiliates 5,479 6,464 Provision for bad debts 10,780 10,752 Restricted contributions and investment income (9,387) (55,313) Minority interest in earnings of subsidiary 5,410 5,137 Changes in assets and liabilities: Patient accounts receivable and other receivables (10,063) (19,825) Supplies and prepaid expenses 451 1,665 Other noncurrent assets 17,126 (7,010) Accounts payable and accrued liabilities (7,749) 24,789 Other noncurrent liabilities 4,175 (8,516)

Total adjustments 654,645 (58,960)

Net cash provided by operating activities 154,249 157,157

CASH FLOWS FROM INVESTING ACTIVITIES: Property additions (121,540) (159,680) Proceeds from disposal of / purchase of assets whose use is limited — net (136,210) (126,164)

Net cash used in investing activities (257,750) (285,844)

CASH FLOWS FROM FINANCING ACTIVITIES: Issuance of long-term debt 392,965 - Payment of bond issuance costs (2,230) - Proceeds from restricted contributions and investment income 9,387 55,313 Distributions to minority shareholders of subsidiary (5,303) (4,561) Repayments of long-term debt (273,375) (531)

Net cash provided by financing activities 121,444 50,221

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 17,943 (78,466)

CASH AND CASH EQUIVALENTS — Beginning of year 38,077 116,543

CASH AND CASH EQUIVALENTS — End of year 56,020$ 38,077$


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES

Organization — Children’s Healthcare of Atlanta, Inc. (“Children’s”) formed in 1998 when Egleston Children’s Health Care System and Scottish Rite Children’s Medical Center effectively merged by creating Children’s as the controlling company for both hospitals. Today, Children’s is a pediatric healthcare system based in Atlanta, Georgia, and includes the following organizations:

a. Egleston Children’s Hospital at Emory University, Inc. (“Egleston”) operates as Children’s Healthcare of Atlanta at Egleston and provides inpatient and outpatient pediatric healthcare services.

b. Scottish Rite Children’s Medical Center, Inc. (“Scottish Rite”) operates as Children’s Healthcare of Atlanta at Scottish Rite and provides inpatient and outpatient pediatric healthcare services.

c. Egleston Affiliated Services, Inc. operates as Children’s Affiliated Services and provides immediate and urgent pediatric care.

d. Egleston Pediatric Group, Inc. operates as Children’s Pediatric Group and provides pediatric physician services. Children’s Pediatric Group is the sole member of two limited liability companies that provide sedation services and anesthesiology services, Children’s Anesthesia Services, LLC and Children’s Sedation Services, LLC, respectively.

e. Children’s Healthcare of Atlanta Foundation, Inc. promotes Children’s in the community and raises financial support for Children’s services through fund-raising activities.

f. Emory-Egleston Children’s Heart Center, Inc. operates as Sibley Heart Center and provides cardiac physician services.

g. The Children’s Health Network, a physician hospital organization.

h. HSOC, Inc. (“HSOC”), a subsidiary of Egleston, provides management, administrative, and related services to Hughes Spalding Children’s Hospital (“Hughes Spalding”), a pediatric hospital wholly-owned by Grady Health System, Inc. (“Grady”). Pursuant to a management agreement, HSOC may be required to provide minimum capital investments and other financial support as defined in the management agreement. HSOC may terminate the management agreement with 60 days notice to Grady.

i. Marcus Autism Center, Inc. (“Marcus”), a provider of outpatient therapy and counseling services for children with autism and other behavioral disorders. In August 2008, Children’s acquired certain assets (primarily real estate assets) and assumed no liabilities for Marcus. The acquisition was accounted for using the purchase method of accounting. Accordingly, the purchase price was allocated to the assets acquired based on their estimated fair market values. The impact of this acquisition was not material to Children’s consolidated financial position or results of operations as of and for the year ended December 31, 2008.

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j. Children’s Healthcare of Atlanta Surgery Center at Meridian Mark Plaza, LLC (“Surgery Center”) is a 51% joint venture with physicians to operate an outpatient surgery center. Minority interest of $4,423,000 and $4,346,000 at December 31, 2008 and 2007, respectively, is included in other noncurrent liabilities in the accompanying consolidated balance sheets. Minority owners’ share of the Surgery Center’s net income for the years ended December 31, 2008 and 2007 of $5,410,000 and $5,137,000, respectively, has been recorded in the consolidated statements of operations.

Children’s and Emory own 49% and 51%, respectively, of a joint venture for a pediatric physician faculty group operating as the Emory-Children’s Center, Inc. (“E-CC”). Pursuant to a financial support agreement, Children’s may make annual financial support payments to E-CC. Children’s accounts for this investment under the equity method of accounting in conformity with Accounting Principles Board Opinion No. 18, The Equity Method of Accounting for Investments in Common Stock. The accompanying consolidated statements of operations reflect equity losses related to Children’s investment in this joint venture of approximately $5,479,000 and $6,464,000 for the years ended December 31, 2008 and 2007, respectively.

Egleston and Scottish Rite (collectively the “Hospitals”) are located in Atlanta, Georgia. The Hospitals were organized for the purposes of treating sick children, encouraging scientific investigation into the medical problems of children, and providing instruction in the diseases and care of children.

Summary of Significant Accounting and Reporting Policies — A summary of the significant accounting and reporting policies followed by Children’s in the preparation of its consolidated financial statements is presented below:

Principles of Consolidation — The consolidated financial statements include the accounts of Children’s and all wholly-owned, majority-owned, and controlled organizations. All material intercompany transactions and account balances have been eliminated in consolidation.

Cash and Cash Equivalents — Cash and cash equivalents include highly liquid instruments with original maturities of three months or less at the date of purchase and are recorded at cost, which approximates market value. Children’s invests cash, which is not required for immediate operating needs in major financial institutions in amounts that exceed Federal Deposit Insurance Corporation limits.

Assets Whose Use Is Limited — Assets whose use is limited primarily include assets restricted by donors and assets set aside by the Board of Trustees (the “Board”) over which the Board retains control and may, at its discretion, subsequently use for other purposes.

Investments in marketable equity and other securities with readily determinable fair values and all investments in debt securities are measured at fair value in the balance sheets. Generally, investment income or loss (including realized and unrealized gains and losses on investments, interests, and dividends) is included in the revenues over (under) expenses as investment income.

Prior to October 31, 2007, unrealized gains and losses on investments were included in the statement of changes in net assets as increases or decreases of net assets according to restrictions as to use. Effective October 31, 2007, Children’s elected to transfer its investments in marketable equity and debt securities from available-for-sale to trading securities. Children’s determined that transferring investments to the trading security category is appropriate based on Children’s investment strategy and policies. Investment managers may execute individual purchases and sales of investments without prior approval of Children’s, as long as they meet the overall strategies and polices, which are set at the Board’s discretion. As a result of the transfer, Children’s recorded approximately $193,281,000 of net cumulative unrealized gains in non-operating investment income for the year ended December 31, 2007.

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Investments in non-marketable securities (which primarily includes investments in partnerships and limited liability corporations) without readily determinable fair values are accounted for using the cost method of accounting where Children’s owns less than 5% of the ownership interest or the equity method of accounting where Children’s owns between 5% and 50% of the ownership interest.

Derivative Instruments — Children’s occasionally uses derivative financial instruments primarily to manage its exposure to movements in interest rates. Interest rate swaps are contractual agreements between two parties for the exchange of interest payments on a notional principal amount at agreed-upon fixed or floating rates, for defined periods. Children’s does not enter into derivative financial instruments for trading purposes. Credit risk related to the derivative financial instruments is considered minimal and is managed by requiring high credit standards for its counterparties and periodic settlements. Any change in the fair value of these derivative instruments is included in revenues over (under) expenses.

Property and Equipment — Property and equipment are recorded at cost. Children’s policy is to capitalize major additions, including interest costs involving certain tax-exempt borrowings during construction, and to remove retired items from the accounts. Depreciation is provided using the straight-line method over the estimated service lives of the depreciable property and equipment. The depreciable lives applied are generally 16 to 40 years for buildings and renovations, 15 years for fixed equipment, 10 years for movable equipment, and 3 to 5 years for computer software and hardware.

A detail of property, equipment, and accumulated depreciation as of December 31, 2008 and 2007, is as follows (in thousands):

2008 2007

Land and land improvements 61,412$ 43,369$ Buildings and fixed equipment 593,815 543,738 Movable equipment and computer software 436,633 381,503 Construction in progress 19,855 24,915

Total property and equipment 1,111,714 993,525

Less accumulated depreciation (489,319) (435,895)

Property and equipment — net 622,395$ 557,630$

Bond Issuance Costs — Costs incurred in issuing long-term debt are amortized based on the straight-line method over the life of the underlying debt. The gross amount of bond issuance costs as of December 31, 2008 and 2007 totaled $3,368,000 and $6,200,000, respectively, and the related accumulated amortization totaled $592,000 and $1,050,000, respectively.

Beneficial Interests in Trusts — Children’s is the beneficiary of the proportional income from certain perpetual third-party trusts. Children’s has no access to the corpus of these trusts and has only limited input into the investment mix of the funds in the trusts, in some cases. The estimated present value of the future distributions to be received from these trusts has been recorded as an asset and as a component of permanently restricted net assets in the accompanying consolidated balance sheets. Management’s estimate of the present value of the future distributions to be received is updated annually, the effect of which is included in the accompanying consolidated statements of changes in net assets.

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Net Patient Service Revenue, Patient Accounts Receivable, and Bad Debts — Children’s has agreements with third-party payors that provide for payments to Children’s at amounts different from its established rates. Payment arrangements may include prospectively determined rates per discharge, reimbursed costs, discounted charges, and per-diem payments. Net patient service revenue and patient accounts receivable are 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. Retroactive adjustments are accrued on an estimated basis in the period that related services are rendered and adjusted in future periods as final settlements are determined.

A summary of the payment arrangements with major third-party payors is as follows:

Medicaid and Other Governmental Programs — Payments for inpatient services rendered to Medicaid patients are based on prospectively determined rates per discharge. These rates vary according to a patient classification system that is based on clinical, diagnostic, and other factors. Payments for outpatient services rendered under this program are generally based on the reasonable cost of providing care or fee schedules.

Net patient service revenue from the Medicaid program accounted for approximately 34% and 35% of Children’s total net patient revenue for fiscal 2008 and 2007, respectively. Laws and regulations governing the Medicaid program are extremely complex and subject to interpretation. Net patient service revenue increased approximately $1,897,000 and $8,334,000 in 2008 and 2007, respectively, due to the removal of allowances previously estimated that are no longer necessary as a result of final settlements and years that are no longer subject to reviews, audits, or investigation. Children’s recognizes that net patient service revenue and patient accounts receivable from government agencies are significant to its operations.

Children’s receives funding from a variety of federal, state, and local agencies. Under provisions of the Indigent Care Trust Fund Act (“ICTF”), qualifying Georgia public hospitals contribute funds, supplemented by federal and state funds, to compensate Georgia hospitals that serve a disproportionate share of Medicaid and uninsured patients. For the years ended December 31, 2008 and 2007, the Hospitals recorded $7,663,000 and $9,594,000, respectively, of ICTF funds, which are included in net patient service revenue. ICTF contributions were not required by the Hospitals in 2008 and 2007. While Children’s expects continued funding from ICTF in the near term, there can be no assurances that any such funding will continue, or continue at the levels experienced in recent years.

Managed Care and Commercial Programs — Children’s has entered into payment arrangements with certain commercial insurance companies and managed care providers. The basis for payment to Children’s under these agreements may include prospectively determined rates per discharge, discounts from established charges, and prospectively determined daily rates.

Net revenue from managed care and commercial programs accounted for approximately 65% and 63% of Children’s total net patient revenue for fiscal 2008 and 2007, respectively. Children’s recognizes that net patient service revenue and patient accounts receivable from managed care and commercial programs are significant to its operations.

The provision for bad debts relating to patient service revenue is based on an evaluation of potentially uncollectible portions of accounts receivable. The provision considered necessary for such bad debts is based on an analysis of current and past-due accounts, collection experience in relation to amounts

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billed, and other relevant information. The allowance for uncollectible accounts represents the estimated uncollectible portion of patient accounts receivable. Management believes these allowances for uncollectible accounts are adequate at December 31, 2008 and 2007.

Contributions — Contributions are recorded at fair value upon receipt of cash or other assets or when unconditional promises to contribute are received and are included in contributions receivable and noncurrent contributions receivable in the accompanying consolidated balance sheets. Conditional promises to give are reported at fair value at the date the gift is received or at the time the condition is substantially met. Promises to pay are discounted to their present value using an interest rate commensurate with the collection risk involved. Gifts, bequests, and promises to pay, which are restricted by donors as to use or to be received in excess of one year, are recorded as temporarily restricted net assets until used in the manner designated or upon expiration of the time period over which the assets are to be received.

The assets released for their intended purposes are included in operating revenue in the accompanying consolidated statements of operations or as a transfer to unrestricted net assets if the use is for a capital item. Donated property and equipment are recorded as temporarily restricted net assets at fair market value on the date of receipt. When donated property and equipment are used for their intended purposes, the applicable amount is transferred to unrestricted net assets.

At December 31, 2008 and 2007, unconditional promises to contribute are as follows (in thousands):

2008 2007

Due in less than 1 year 16,663$ 25,627$ Due between 1 and 5 years 10,446 11,372

Total contributions receivables 27,109 36,999

Allowance for uncollectible amounts (1,955) (2,257)

Contributions receivables — net 25,154$ 34,742$

Children’s had no material conditional promises to contribute outstanding at December 31, 2008 and 2007, respectively.

Income Taxes — Children’s is comprised primarily of organizations that have been recognized by the Internal Revenue Service as tax-exempt under Internal Revenue Code Section 501(c)(3). Accordingly, no provision for income taxes has been made in the accompanying consolidated statements of operations. Sibley Heart Center is a taxable not-for-profit entity, and the provision for income taxes was not material for the years ended December 31, 2008 and 2007.

Statements of Cash Flows — Cash payments for interest totaled approximately $17,291,000 and $10,742,000 for the years ended December 31, 2008 and 2007, respectively.

Use of Estimates — The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the consolidated financial statements. Estimates also affect the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

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Fair Values of Financial Instruments — The following methods and assumptions were used by Children’s to estimate the fair value of each class of financial instrument for which it is practicable to estimate that value:

Cash and Cash Equivalents, Patient Accounts Receivable, Accounts Payable, and Accrued Liabilities — The carrying amount approximates fair value because of the short-term nature of these instruments.

Assets Whose Use Is Limited — Fair value for financial reporting purposes is based on quoted market prices or an amount determined by external investment managers if quoted market prices are not available. Management reviews and evaluates fair value provided by the external investment managers, as well as the valuation methods and assessments used in determining the fair value of such investments. Such estimated fair values (amounting to $936,886,000 and $1,357,130,000 for investments with estimated fair values based on quoted market prices and $425,021,000 and $380,306,000 for investments with estimated fair values provided by external investment managers at December 31, 2008 and 2007, respectively) may differ from the ultimate realizable value of the investments, and these differences may be material.

Long-Term Debt — The fair market value of long-term debt is based on the current rates offered for debt of the same remaining maturities.

Industry — The healthcare industry is subject to numerous laws and regulations of federal, state, and local governments. These laws and regulations include, but are not limited to, matters such as licensure, accreditation, government healthcare program participation requirements, reimbursement for patient services, the federal False Claims Act, and Medicare and Medicaid fraud and abuse. Government activity is ongoing with respect to investigations and allegations concerning possible violations of the False Claims Act and fraud and abuse statutes and regulations by healthcare providers. Violations of these laws and regulations could result in expulsion from government healthcare programs together with the imposition of significant fines and penalties, as well as significant repayments for patient services previously billed. Management believes that Children’s is in compliance with the False Claims Act and fraud and abuse statutes, as well as other applicable government laws and regulations. While no regulatory inquiries have been made, compliance with such laws and regulations can be subject to future government review and interpretation, as well as regulatory actions unknown or unasserted at this time.

2. RESTATEMENT OF CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 2007

As discussed in Note 1, effective October 31, 2007, Children’s elected to transfer its investments in equity securities with readily determinable fair values and investments in debt securities from available-for-sale to trading securities. Subsequent to the issuance of Children’s consolidated financial statements as of and for the year ended December 31, 2007, management determined the impact of this transfer had been inappropriately presented in the consolidated statement of cash flows. The net change in unrealized losses on investments and the change in the fair value of interest rate swaps were also inappropriately presented in the consolidated statement of cash flows. As a result, Children’s has restated its consolidated statement of cash flow for the year ended December 31, 2007.

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The table below reflects the effects of the corrections on operating activities and investing activities on the consolidated statement of cash flows for the year ended December 31, 2007 (in thousands):

As Reported Adjustments As Restated

Cash flows from operating activities: Net change in unrealized losses on investments 37,716$ 6,198$ 43,914$ Net change in unrealized gains transferred to trading securities (193,281) 193,281 - Net change in fair value of interest rate swaps (8,521) 17,042 8,521 Other noncurrent liabilities 8,527 (17,043) (8,516) Total adjustments (258,438) 199,478 (58,960) Net cash (used in) provided by operating activities (42,321) 199,478 157,157

Cash flows from investing activities: Proceeds from disposal of/purchases of assets whose use is limited — net 73,314 (199,478) (126,164) Net cash used in investing activities (86,366) (199,478) (285,844)

This restatement did not impact Children’s consolidated balance sheet, statement of operations, or statement of changes in net assets as of and for the year ended December 31, 2007.

3. TEMPORARILY AND PERMANENTLY RESTRICTED NET ASSETS

Temporarily restricted net assets are those net assets whose use has been limited by donors to a specific time or purpose. Temporarily restricted net assets of approximately $156,077,000 and $240,050,000 as of December 31, 2008 and 2007, respectively, are available for various purposes, including charity care for children, investment in medical technology and facilities, and the expansion of medical services.

Permanently restricted net assets have been restricted by donors to be maintained in perpetuity by Children’s. Investment income on permanently restricted net assets is generally available for unrestricted purposes. Permanently restricted net assets as of December 31, 2008 and 2007 were approximately $123,346,000 and $129,957,000, respectively.

For the years ended December 31, 2008 and 2007, temporarily and permanently restricted net assets of approximately $25,154,000 and $34,742,000, respectively, were included in contributions receivable — net in the accompanying consolidated balance sheets.

4. CHARITY CARE

Children’s provides assistance to patients who meet certain criteria under its charity care policy without charge or at amounts less than its established rates. Because Children’s does not pursue collection of amounts determined to qualify as charity care, they are not reported as revenue or accounts receivable in the accompanying consolidated financial statements. Children’s maintains records to identify and monitor the level of charity care it provides. These records include the cost of services and supplies furnished under its charity care policy. Children’s estimates that unreimbursed costs for charity care and Medicaid services, net of funding from the state of Georgia for ICTF, neonatal, and trauma care, and other funding provided to defray these costs, were approximately $103,000,000 and $98,000,000 for the years ended December 31, 2008 and 2007, respectively.

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5. ASSETS WHOSE USE IS LIMITED

The composition of assets limited as to use as of December 31, 2008 and 2007, is set forth in the following table (in thousands):

2008 2007

Board-designated for asset acquisition, uncompensated care, debt service, strategic, and operational activities: Cash and cash equivalents 16,487$ 27,543$ Equity securities 471,901 987,087 Debt securities 33,338 157,404 Investments in non-marketable securities accounted for under the equity method 240,532 228,705 Investments in non-marketable securities carried at cost 199,474 138,777 Cash and cash equivalents held for self-liquidity for long-term debt 200,000 - Cash, cash equivalents, and debt securities held for interest rate swap agreement 49,424 -

1,211,156 1,539,516

Donor-restricted for special purposes, such as uncompensated child care: Cash and cash equivalents 5,237 4,350 Equity securities 149,908 155,888 Debt securities 10,591 24,859

165,736 185,097

Total assets whose use is limited 1,376,892 1,724,613

Less: portion classified as current (Note 6) (59,093) -

Total assets whose use is limited — noncurrent 1,317,799$ 1,724,613$

Investment (Loss) Income and Other — For the years ended December 31, 2008 and 2007, significant components of investment income on marketable securities are as follows (in thousands):

2008 2007

Investment (loss) income: Interest and dividends — net of fees 22,417$ 36,573$ Realized (losses) gains on sales of securities (123,089) 121,174 Net change in unrealized losses on securities (351,836) (81,630) Other (82) (251)

Total (452,590)$ 75,866$

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Investments in Non-Marketable Securities Carried at Cost — Children’s investments in non-marketable securities carried at cost consist primarily of partnerships created for the purpose of investing in privately held companies. Current asset values of the partnerships may be below amounts funded by Children’s due to partnership management fees incurred in the early years of the partnership before significant investments have been made by the partnerships. Children’s does not consider these investments to be other-than-temporarily impaired at December 31, 2008 and 2007.

The following table shows the gross unrealized losses and fair values of Children’s investments in non-marketable securities carried at cost with unrealized losses that are not deemed to be other-than-temporarily impaired, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at December 31, 2008 (in thousands):

Fair Unrealized Fair Unrealized Fair UnrealizedValue Losses Value Losses Value Losses

Investments in non-marketable securities carried at cost 62,151$ (17,496)$ 52,508$ (16,784)$ 114,659$ (34,280)$

Less Than 12 Months 12 Months or Greater Total

Investments in Non-Marketable Securities Accounted for under the Equity Method — The accompanying consolidated statements of operations reflect equity losses related to Children’s investment in non-marketable securities required to be accounted for under the equity method of accounting of approximately $(9,007,000) and $(557,000) for the years ended December 31, 2008 and 2007, respectively.

Summarized unaudited financial information for the entities represented by the non-marketable securities Children’s accounts for under the equity method as of and for the years ended December 31, 2008 and 2007 are as follows (in thousands):

2008 2007

Total assets 1,579,665$ 1,020,363$ Total liabilities 91,659 66,922 Equity 1,488,006 953,441 Revenue 8,072 6,781 Net loss (147,048) (5,258)

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6. LONG-TERM DEBT

A summary of long-term debt as of December 31, 2008 and 2007 is as follows:

2008 2007

1994 Certificates — 1994 variable rate revenue anticipation certificates due March 2024. Interest rates ranged from 0.65% to 8.5% for the year ended December 31, 2008, and payable monthly. Mandatory sinking fund redemption beginning March 2015. 60,000$ 60,000$

1995 Certificates — 1995 variable rate revenue anticipation certificates due December 2017. Interest rates ranged from 0.65% to 7.92% for the year ended December 31, 2008, and payable monthly. Mandatory sinking fund redemption beginning December 2012. 18,200 18,200

1998 Certificates — 1998 variable rate revenue anticipation certificates due December 2028. Interest rates ranged from 0.65% to 7.92% for the year ended December 31, 2008. Mandatory sinking fund redemption beginning December 2018. 29,700 29,700

2005 Certificates & Bonds — 2005 variable rate revenue anticipation certificates extinguished in April 2008. - 272,100

February 2008 Certificates & Bonds — 2008 variable rate revenue anticipation certificates and bonds due July 2042. Interest rates ranged from 0.75% to 7.92% for the year ended December 31, 2008. Mandatory sinking fund redemption beginning July 2009. 192,965 -

April 2008 Certificates & Bonds — 2008 variable rate refunding revenue anticipation certificates and bonds due July 2039. Interest rates ranged from 0.35% to 7.87% for the year ended December 31, 2008. 200,000 -

Surgery Center Commercial Note — Term loan payable to bank due February 2013. Interest rate of 4.9% at December 31, 2008. Principal and interest payable monthly. 1,422 2,697

Subtotal 502,287 382,697

Less current maturities of long-term debt (7,796) (531) Less portion classified as current due to terms of standby purchase agreements and letters of credit (59,093) -

Long-term debt — net of portion classified as current 435,398$ 382,166$

Children’s long-term debt obligations, with the exception of the Surgery Center Commercial Note, are remarketed on a weekly basis, and the bondholders have the ability to tender any or all of the certificates and bonds at each remarketing date.

Egleston has obtained irrevocable letters of credit with certain financial institutions to serve as security for the payment of the 1994 Certificates, 1995 Certificates, and 1998 Certificates (collectively “Egleston Debt”). In the event bondholders elect to tender any or all the Egleston Debt for purchase and the revenue anticipation certificates are not able to be remarketed, the letters of credit are utilized by the financial institutions to purchase the revenue anticipation certificates. Any amounts outstanding on the letters of credit for more than 180 days are repayable by Children’s each December 1 in five annual installments. As a result, Children’s has included $20,894,000 in current liabilities as of December 31, 2008. The letters of credit expire in 2015, and there were no amounts outstanding at December 31, 2008 and 2007.

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Under the terms of the agreements governing the Egleston Debt, the obligated group (consisting of Egleston, Children’s Affiliated Services, and Children’s Pediatric Group) is subject to certain covenants, including limitations on the incurrence of additional indebtedness, maintenance of certain amounts of insurance, mergers, transfers of assets, and various other financial covenants and tests. The obligated group is in compliance with all financial covenants as of December 31, 2008.

In February 2008, the DeKalb Private Hospital Authority (the “DeKalb Authority”) issued approximately $120,000,000 in tax-exempt revenue anticipation certificates, and the Development Authority of Fulton County (the “Fulton Authority”) issued approximately $72,965,000 of tax-exempt revenue bonds (collectively “February 2008 Certificates & Bonds”) pursuant to a Trust Indenture by and between the DeKalb Authority, the Fulton Authority, and certain investment banks. The proceeds were loaned to Children’s pursuant to loan agreements between the DeKalb Authority and Children’s and the Fulton Authority and Children’s and are being used to make capital additions and renovations at Egleston and Scottish Rite.

Children’s has standby bond purchase agreements (“SBPAs”) with a financial institution to serve as security for the payment of the February 2008 Certificates & Bonds. In the event bondholders elect to tender any or all the February 2008 Certificates & Bonds for purchase and the revenue anticipation certificates are not able to be remarketed, the SBPAs are utilized to purchase the revenue anticipation certificates. Any amounts outstanding on the SBPAs are repayable by Children’s over a five-year term in quarterly installments. As a result, Children’s has included $38,199,000 in current liabilities as of December 31, 2008. The SBPAs expire February 2018, and there were no amounts outstanding at December 31, 2008.

In April 2008, the DeKalb Authority issued approximately $150,000,000 in tax-exempt refunding revenue anticipation certificates, and the Fulton Authority issued approximately $50,000,000 in tax-exempt refunding revenue bonds (collectively “April 2008 Certificates & Bonds”) pursuant to a Trust Indenture by and between the DeKalb Authority, the Development Authority, and certain investment banks. The proceeds were loaned to Children’s pursuant to loan agreements between the DeKalb Authority and Children’s and the Development Authority and Children’s and were used to extinguish 2005 Certificates & Bonds. In connection with this extinguishment, Children’s recognized a loss from the extinguishment of debt of approximately $4,463,000 in the accompanying consolidated statement of operations for the year ended December 31, 2008.

Children’s has a self-liquidity fund of $200,000,000 in cash and cash equivalents to serve as security for the payment of the April 2008 Certificates & Bonds. In the event bondholders elect to tender any or all the April 2008 Certificates & Bonds for purchase and the revenue anticipation certificates are not able to be remarketed, these funds are utilized to purchase the revenue anticipation certificates. In April 2009, Children’s repurchased the outstanding April 2008 Certificates & Bonds utilizing these funds.

In connection with the 2005 Certificates & Bonds, the February 2008 Certificates & Bonds and the April 2008 Certificates & Bonds, Children’s entered into interest rate swap agreements with various banks effectively converting Children’s interest rate exposure on a portion of this debt from a variable to a fixed rate. The interest rate swaps had an aggregate notional amount of approximately $392,000,000. As of December 31, 2008 and 2007, Children’s has recorded a liability of approximately $101,569,000 and $7,950,000, respectively, related to these interest rate swaps in other noncurrent liabilities in the accompanying consolidated balance sheet. The change in fair value of these interest rate swaps of approximately $93,619,000 and $8,521,000 is included in revenues (under) over expenses in the accompanying consolidated statements of operations for the years ended December 31, 2008 and 2007, respectively.

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Line of Credit — Children’s has a $35 million unsecured line of credit with an interest rate based on the London InterBank Offered Rate plus 0.30%. Interest is payable monthly, and the line of credit expires on May 29, 2009. At December 31, 2008 and 2007, there were no amounts outstanding under the line of credit.

Debt Maturities — Future scheduled maturities of long-term debt are as follows (in thousands):

Years EndingDecember 31

2009 7,796$ 2010 8,177 2011 8,349 2012 8,737 2013 8,703 Thereafter 460,525

502,287$

7. RETIREMENT BENEFITS

Children’s maintains defined contribution retirement plans. Contributions to the plans were $19,456,000 and $18,288,000 for the years ended December 31, 2008 and 2007, respectively.

8. COMMITMENTS AND CONTINGENCIES

Capital Expenditures — At December 31, 2008, Children’s had committed to capital expenditures in 2009, including construction programs of approximately $38,235,000. Of this amount, Children’s expects to expend approximately $28,235,000 on the Hughes Spalding master facility plan and $10,000,000 on the Egleston master facility plan.

Investment Commitments — At December 31, 2008, Children’s had outstanding funding commitments to purchase general investment partnership interests of approximately $263,500,000. These commitments will be met over the next five years.

Insurance Arrangements — Children’s is self-insured for a substantial portion of its general and professional medical malpractice risks. Children’s maintains coverage in excess of its self-insurance plan limits (currently $3,000,000 per occurrence and $10,000,000 annual aggregate). General liability coverage is subject to an occurrence-based policy, and professional liability coverage is limited to claims made rather than claims incurred during its term. In addition, claims incurred but not reported prior to January 1, 2001, are covered under a commercial insurance policy subject to a $250,000 per occurrence and $750,000 aggregate retention.

The accrual for self-insured general and professional medical malpractice losses, including loss adjustment expense, is based on actuarial estimates using historical claims experience adjusted for current industry trends. The actual claim settlements and expenses may differ from amounts provided, but in the opinion of management, an adequate accrual has been made for such claims at December 31, 2008 and 2007.

Children’s self-insures its health insurance and workers’ compensation programs, supplemented with certain stop-loss coverages. An estimate is made for known claims outstanding and claims incurred but not reported under the programs and are recorded as accrued liabilities in the accompanying consolidated balance sheets.

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Leases — Children’s leases office space and non-clinical equipment under operating leases expiring from 2008 and thereafter. Total rent expense for all operating leases amounted to approximately $8,906,000 and $8,796,000 for the years ended December 31, 2008 and 2007, respectively.

The aggregate minimum rental commitments under all noncancelable operating leases at December 31, 2008, are as follows (in thousands):

Years Ending December 31

2009 5,348$ 2010 4,483 2011 4,004 2012 3,503 2013 2,272 Thereafter 684

20,294$

Litigation — Certain lawsuits have been filed against Children’s claiming alleged personal and punitive damages. While the outcome of these lawsuits is not presently determinable, it is the opinion of management that the claims will not have a material adverse effect on Children’s consolidated financial position, results of operations, or cash flows.

9. FUNCTIONAL EXPENSES

Children’s primarily provides inpatient and outpatient medical care for pediatric residents in the Atlanta metropolitan area. For the years ended December 31, 2008 and 2007, expenses relating to providing these services are as follows (in thousands):

2008 2007

Health care services 613,891$ 567,091$ General and administrative 157,662 149,223

Total 771,553$ 716,314$

* * * * * *

APPENDIX C

SUMMARY OF CERTAIN DOCUMENTS AND DEFINITIONS OF CERTAIN TERMS

SUMMARY OF CERTAIN DOCUMENTS AND DEFINITIONS OF CERTAIN TERMS

The following are summaries of the Bond Indenture, the Agreement, the Master Indenture and the Supplemental Master Indenture. The statements made herein relating to such documents are summaries and do not purport to be complete. A copy of the Bond Indenture, the Agreement, the Master Indenture and the Supplemental Master Indenture is on file at the principal corporate trust office of the Master Trustee. The following summaries are qualified in their entirety by express reference to such documents.

DEFINITIONS

Set forth below is a summary of certain of the defined terms used in the Bond Indenture, the Agreement, the Master Indenture, the Supplemental Master Indenture and in this summary of the provisions thereof. Reference is made to such documents for the full definition of all terms and for the definition of capitalized terms used herein but not defined herein.

“Act” shall mean, with respect to the Fulton Bonds, the Development Authorities Law of the State of Georgia (O.C.G.A. Section 36-62-1 et seq.), as amended, and with respect to the DeKalb Bonds, the Hospital Authorities Law of the State of Georgia (O.C.G.A. Section 31-7-70, et seq.), as amended.

“Additional Indebtedness” means any Indebtedness (including all Obligations, other than the Initial Obligation) incurred by any Obligated Issuer subsequent to its becoming an Obligated Issuer.

“Affiliate” of any specified Person shall mean any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, (i) “control” when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the power to appoint and remove its directors, the ownership of voting securities, by contract, membership or otherwise, and (ii) the terms “controlling” and “controlled” have meanings correlative to the foregoing.

“Agreement” shall mean, with respect to the Fulton Bonds, the Loan Agreement, dated as of December 1, 2009, between the Fulton Issuer and Children’s, and with respect to the DeKalb Bonds, the Loan Agreement, dated as of December 1, 2009, between the DeKalb Issuer and Children’s.

“Audited Financial Statements” means the annual financial statements of Children’s, or of the consolidated group of which Children’s is a member, delivered to the Master Trustee in accordance with the Master Indenture.

“Authorized Children’s Representative” shall mean the person or persons at the time designated from time to time in writing to the Trustee and the Issuer by a certificate signed by an authorized officer of Children’s to represent Children’s, which certificate shall set forth the specimen signature of such person or persons.

“Balloon Indebtedness” means:

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(a) Long-Term Indebtedness as to which, when issued, 25% or more of the debt service thereon is due in a single year whether by maturity or mandatory redemption, or

(b) Long-Term Indebtedness as to which, when issued, 25% or more of the

original principal amount thereof may, at the option of the holder or registered owner thereof, be redeemed or repurchased at one time, which portion of the principal is not required by the documents pursuant to which such Indebtedness is issued to be amortized by redemption prior to such date, or

(c) Any Guaranty of Long-Term Indebtedness that is Balloon Indebtedness under paragraphs (a) or (b) of this definition.

“Bond Indenture” shall mean, with respect to the Fulton Bonds, the Indenture of Trust, dated as of December 1, 2009, between the Fulton Issuer and the Trustee, and with respect to the DeKalb Bonds, the Indenture of Trust, dated as of December 1, 2009, between the DeKalb Issuer and the Trustee.

“Bond Owner” or “Owner of Bonds” or “Owners” or “registered owners” shall mean the person in whose name(s) any Bond or Bonds are registered from time to time in accordance with the Indenture.

“Bonds” shall mean any one or all of the Fulton Bonds or the DeKalb Bonds, as the case may be.

“Capitalization” means, as of the date of measurement, the sum of the aggregate Long-Term Indebtedness, plus the aggregate unrestricted fund balance or the aggregate excess of assets over liabilities, if any, as shown in the Audited Financial Statements all as calculated in accordance with generally accepted accounting principles.

“Children’s” shall mean Children’s Healthcare of Atlanta, Inc., a nonprofit corporation operating under the laws of the State created pursuant to the laws of the State, and its successors and assigns.

“Code” shall mean the Internal Revenue Code of 1986, as amended, and any temporary, final or proposed Treasury Regulations as may be applicable.

“Combined Group” means the Obligated Group and all Restricted Affiliates.

“Commitment Indebtedness” means the obligation of any Person to repay amounts disbursed pursuant to a Credit Facility issued to pay when due such Person’s obligations under Indebtedness permitted or incurred in accordance with the provisions of the Master Indenture.

“Completion Indebtedness” means any Long-Term Indebtedness (i) incurred by any Person for the purpose of financing the completion of constructing or equipping property with respect to which Long-Term Indebtedness was theretofore incurred in accordance with the provisions of the Master Indenture, and (ii) in a principal amount not in excess of the amount required (a) to provide a completed and equipped property of substantially the type and scope contemplated at the time such prior Long-Term Indebtedness was incurred, (b) to provide for capitalized interest during the period of construction, (c) to capitalize a reserve with respect to

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such Completion Indebtedness and (d) to pay the costs and expenses of issuing such Completion Indebtedness.

“Consultant” shall mean a Person who or which is appointed by the Obligated Group Agent for the purpose of passing on questions relating to the financial affairs, management or operations of one or more members of the Combined Group or the entire Combined Group and, in the good faith opinion of the Obligated Group Agent, has a favorable reputation for skill and experience in performing similar services in respect of entities engaged in reasonably comparable endeavors. If any Consultant’s report or opinion is required to be given with respect to matters partly within and partly without the expertise of such Consultant, such Consultant may rely upon the report or opinion of another Consultant, which other Consultant shall be reasonably satisfactory to the relying Consultant and the Obligated Group Agent.

“Counsel” shall mean a lawyer duly admitted to practice law before the highest court of any state in the United States of America or the District of Columbia, or any law firm, who or which, as the case may be, is not unsatisfactory to any recipient of the opinion to be rendered by such Counsel.

“Credit Facility” means any letter of credit, line of credit, insurance policy, guaranty or other agreement constituting a credit enhancement or liquidity facility which is issued by a bank, trust company, savings and loan association or other institutional lender, insurance company or surety company for the benefit of the holder of any Indebtedness in order to provide a source of funds for the payment of all or any portion of an Obligated Issuer’s payment obligations under such Indebtedness.

“Cross Guaranty” means the obligations of each Obligated Issuer pursuant to the Master Indenture.

“Debt Service Requirement” of any Person means, for any period of time, the amounts payable or the payments required to be made by such Person in respect of principal and interest on Outstanding Long-Term Indebtedness during such period (calculated in such a manner that no portion of Long-Term Indebtedness is included more than once), taking into account for purposes of calculating any debt service requirements (i) that any Indebtedness with respect to the current or any future period represented by a Guaranty will be deemed payable on the dates and in the amounts contemplated in the provisions of the Master Indenture concerning the assumptions to be used in including debt service requirements of the guaranteed obligation, (ii) that any payments to be made in respect of Balloon Indebtedness and Variable Rate Indebtedness will be calculated in accordance with the provisions the Master Indenture, (iii) that, with respect to Indebtedness refunded or refinanced during such period, only an amount of principal and interest equal to the principal and interest not payable from the proceeds of Indebtedness will be taken into account during such period, and (iv) any amounts payable from funds available under an Escrow Deposit (other than amounts so payable solely by reason of the obligor’s failure to make payments from other sources), or funded from the proceeds of such Long-Term Indebtedness (e.g., accrued and capitalized interest), will be excluded from the determination of the Debt Service Requirement.

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“DeKalb Bonds” means any one or all of the $249,260,000 aggregate principal amount DeKalb Private Hospital Authority Revenue Anticipation Certificates (Children’s Healthcare of Atlanta, Inc. Project), Series 2009.

“DeKalb Issuer” means the DeKalb Private Hospital Authority.

“DeKalb Refunded Bonds” means, collectively, the DeKalb Issuer’s (i) Variable Rate Demand Revenue Anticipation Certificates (Egleston Children’s Hospital at Emory University, Inc. Project), Series 1994A and 1994B, (ii) Variable Rate Demand Revenue Anticipation Certificates (Egleston Children’s Health Care System Project), Series 1995A and 1995B, (iii) Variable Rate Demand Revenue Anticipation Certificates (ESR Children’s Health Care System Project), Series 1998A and 1998B, and (iv) Refunding Revenue Anticipation Certificates (Children’s Healthcare of Atlanta, Inc.) Project, Series 2008B and 2008C.

“Depository” means the commercial bank or banks from time to time designated by the Obligated Group Agent to act as a depository for the Revenue Fund in accordance with the provisions of the Master Indenture and the Depository Agreement.

“Depository Agreement” means any Depository Agreement, among the Master Trustee, the Obligated Group Agent or another member of the Obligated Group and the Depository, as amended, supplemented or modified from time to time, entered into in connection with the pledge of Gross Revenues under the Master Indenture.

“Eleventh Supplemental Master Indenture” means the Eleventh Supplemental Master Trust Indenture, dated as of December 1, 2009, between Children’s and the Master Trustee authorizing the issuance of a Promissory Note relating to the Fulton Bonds.

“Escrow Deposit” means a segregated escrow fund or other similar fund, account or deposit in trust, of cash in an amount (or Permitted Investments (as defined in the Master Indenture) the principal of and interest on which will be in an amount), and under terms, sufficient, without further reinvestment, to pay all or a portion of the principal of, and premium, if any, and interest on, the indebtedness secured by such escrow fund or other similar fund, account or deposit as the same becomes due or payable upon redemption.

“Event of Default” -- see “Events of Default and Remedies” under the Master Indenture heading herein.

“Facilities” means all land, leasehold interests and buildings and all furniture, fixtures and equipment of a Person.

“Fair Value Net Worth” of a Person as of any date means:

(a) the fair value or fair saleable value (as the case may be, determined in accordance with applicable federal and state laws affecting creditors’ rights and governing determinations of insolvency of debtors) of such Person’s assets (including such person’s rights to contribution and subrogation under the Master Indenture or in respect of any other guarantee) as of such date, minus

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(b) the amount of all liabilities of such Person (determined in accordance with such laws) as of such date, excluding (x) such Person’s Cross Guaranty and (y) any liabilities subordinated in right of payment to such Cross Guaranty, minus

(c) $1.00.

“Fiscal Year” means a period of twelve consecutive months ending on December 31 or on such other date as may be specified in an Officer’s Certificate of the Obligated Group Agent executed and delivered to the Master Trustee.

“Fulton Bonds” means any one or all of the $50,720,000 aggregate principal amount Development Authority of Fulton County Revenue Bonds (Children’s Healthcare of Atlanta, Inc. Project), Series 2009.

“Fulton Issuer” means the Development Authority of Fulton County.

“Fulton Refunded Bonds” means the Fulton Issuer’s outstanding Refunding Revenue Bonds (Children’s Healthcare of Atlanta, Inc. Project), Series 2008B.

“Governing Body” shall mean, when used with respect to any Person, its board of directors, board of trustees, or other board, committee or group of individuals in which the powers of a board of directors or board of trustees is vested generally or for the specific matters under consideration.

“Government Issuer” means any federal, state or municipal corporation or political subdivision thereof or any instrumentality of any of the foregoing empowered to issue obligations on behalf thereof.

“Government Obligations” shall mean direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by the United States of America, including evidences of a direct ownership interest in future interest or principal payments on obligations issued or guaranteed by the United States of America, which obligations are held in a custody account by a custodian pursuant to the terms of a custody agreement.

“Gross Revenues” means all revenues, income, receipts, accounts receivable and money derived from the operation of the Property or from the performance of management services, regardless of where such management services are performed, received in any period by the Initial Obligated Group (on account of the Obligated Issuers) or the Obligated Issuers, including, but without limiting the generality of the foregoing, (a) proceeds derived from (i) insurance, except to the extent the use thereof is otherwise specifically required by any agreement or indenture, (ii) accounts receivable, (iii) securities and other investments, (iv) inventory and other tangible and intangible property, (v) hospital expense reimbursement or medical expense reimbursement for hospital functions or insurance programs or agreements, (vi) condemnation awards except to the extent that the use thereof is otherwise specifically required by any agreement or indenture, (vii) contract and other rights and assets now or hereafter owned or held or possessed by or on behalf of any Obligated Issuer; (b) amounts earned on amounts deposited into the funds and accounts created under the Depository Agreement and (c) the revenues of any surviving, resulting or transferee entity provided for in the Master Indenture; provided, however, there will not be included in Gross Revenues (A) the proceeds of borrowing and interest earned

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thereon if and to the extent such interest is required to be excluded by the terms of the borrowing, (B) revenues, income, receipts and money received by the Initial Obligated Group (on account of the Obligated Issuers) or the Obligated Issuers as agent for and on behalf of someone other than the Initial Obligated Group (on account of the Obligated Issuers) or the Obligated Issuers and (C) donor restricted gifts, grants, bequests, donations or contributions to the Initial Obligated Group (on account of the Obligated Issuers) or the Obligated Issuers for use in connection with the Property to the extent restricted by the donor thereof.

“Guaranty” means any obligation of a Combined Group member guaranteeing any obligation of any other Person other than a Combined Group member, whether or not issued under the Master Indenture as a Guaranty, which obligation would, if such other Person were a member of the Combined Group, constitute Indebtedness under the Master Indenture.

“Hedge Agreement” means an interest rate swap, cap, collar, floor, forward, option, put, call or other agreement, arrangement or security, however denominated, entered into in order to hedge interest rate fluctuations on all or a portion of any Indebtedness or to change the payments to be made with respect to any Indebtedness from fixed to variable or from variable to fixed with the goal of achieving lower interest costs.

“Historical Debt Service Coverage Ratio” means, for any period of time, the ratio determined by dividing Total Income Available For Debt Service for such period by the Debt Service Requirement of the Combined Group for such period.

“Historical Pro Forma Debt Service Coverage Ratio” means for any period of time, the ratio determined by dividing Total Income Available for Debt Service for such period by the Maximum Annual Debt Service of the Combined Group for all Long-Term Indebtedness then Outstanding and the Long-Term Indebtedness then proposed to be issued.

“Holder” means, as the context requires, the registered owner of any Note, the beneficiary of any Guaranty in whose name any Guaranty is issued or the holder or beneficiary of any other type of Obligation. In the case of an Obligation issued to a trustee or other fiduciary acting on behalf of the holders of any bonds, notes or other similar obligations which are secured by such Obligation, including any registered securities depository then in the business of holding (for the benefit of beneficial owners whose interests may be evidenced by book-entry registration) substantial amounts of obligations of types comprising the Obligations, the term Holder will mean the trustee or other fiduciary or, if so provided in the Related Financing Documents, the holders of the Related Bonds in proportion to their respective interests therein, including any registered securities depositary then in the business of holding (for the benefit of beneficial owners whose interests may be evidenced by book-entry registration) substantial amounts of obligations of types comprising the Obligations.

“Income Available For Debt Service” of a Person means, with respect to any period of time, the excess of Gross Revenues over expenses related thereto, or, in the case of for-profit entities, net income after tax, as determined in accordance with generally accepted accounting principles, to which will be added, in either case, (i) depreciation, (ii) amortization, and (iii) interest expense on Indebtedness, and from which will be excluded (a) any extraordinary items, (b) any gain or loss resulting from either the extinguishment of indebtedness or the sale, exchange or other disposition of assets not made in the ordinary course of business and

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(c) unrealized gains or losses on securities and realized or unrealized gains or losses on Interest Rate Swap Obligations or obligations under a Hedge Agreement.

“Indebtedness” of a Person means (i) all Notes and Guaranties, (ii) all liabilities (exclusive of reserves) recorded as indebtedness on the audited financial statements of such Person as of the end of the most recent Fiscal Year for which financial statements reported upon by an accountant are available, and (iii) all other obligations for borrowed money; provided that Indebtedness will not include (1) Interest Rate Swap Obligations or obligations under a Hedge Agreement, (2) any other Indebtedness of any member of the Combined Group to any other member of the Combined Group, (3) rentals payable under leases which are not properly capitalized under generally accepted accounting principles or (4) any other obligation which does not constitute indebtedness under generally accepted accounting principles.

“Initial Obligated Group” means Children’s, Children’s Anesthesia Services, LLC, Children’s Healthcare of Atlanta Foundation, Inc., Children’s Sedation Services, LLC, Egleston Affiliated Services, Inc., Egleston Children’s Hospital at Emory University, Inc., Egleston Pediatric Group, Inc., Scottish Rite Children’s Medical Center, Inc. and TRE Properties, Inc.

“Initial Obligation” means the Obligations denominated as the 2005 Promissory Notes issued pursuant to the Master Indenture which was executed and delivered by the members of the Obligated Group and the Master Trustee simultaneously with the execution and delivery of the Master Indenture.

“Interest Payment Date” shall mean each May 15 and November 15 of each year, commencing May 15, 2010.

“Interest Rate Swap Obligations” means obligations of any Person pursuant to any arrangement with any other Person whereby, directly or indirectly, such Person is entitled to receive from time-to-time periodic payments calculated by applying either a floating or a fixed rate of interest on a stated notional amount in exchange for periodic payments made by such other Person calculated by applying a fixed or a floating rate of interest on the same notional amount.

“Investment Securities” shall mean: (a) Under the Bond Indenture with respect to the DeKalb Bonds any one or more of

the following investments, if and to the extent the same are then legal investments under the applicable laws of the State for moneys proposed to be invested therein:

(i) Bonds or obligations of counties, municipal corporations, school districts,

political subdivisions, authorities, or bodies of the State; (ii) Bonds or other obligations of the United States or of subsidiary

corporations of the United States Government which are fully guaranteed by such government;

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(iii) Obligations of agencies of the United States Government issued by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, and the Central Bank for Cooperatives;

(iv) Bonds or other obligations issued by any Public Housing Agency or

Municipal Corporation in the United States, which such Bonds or obligations are fully secured as to the payment of both principal and interest by a pledge of annual contributions under an annual contributions contract or contracts with the United States Government, or project notes issued by any public housing agency, urban renewal agency, or municipal corporation in the United States which are fully secured as to payment of both principal and interest by a requisition, loan, or payment agreement with the United States Government;

(v) Certificates of deposit of national or state banks located within the state

which have deposits insured by the Federal Deposit Insurance Corporation and certificates of deposit of federal savings and loan associations and state building and loan associations located within this state which have deposits insured by the Savings Association Insurance Fund of the Federal Deposit Insurance Corporation or the Georgia Credit Union Deposit Insurance Corporation, including the certificates of deposit of any bank, savings and loan association, or building and loan association acting as depositary, custodian, or trustee for any such bond proceeds. The portion of such certificates of deposit in excess of the amount insured by the Federal Deposit Insurance Corporation, the Savings Association Insurance Fund of the Federal Deposit Insurance Corporation or the Georgia Credit Union Deposit Insurance Corporation, if any, shall be secured by deposit, with the Federal Reserve Bank of New York, or with any national or state bank or federal savings and loan association or state building and loan or savings and loan association located within this state, of one or more the following securities in an aggregate principal amount equal at least to the amount of such excess; direct and general obligations of this state or of any county or municipal corporation in this state, obligations of the United States or subsidiary corporations included in paragraph (ii) hereof, obligations of the agencies of the United States Government included in paragraph (iii) hereof, or bonds, obligations, or project notes of public housing agencies, urban renewal agencies, or municipalities included in paragraph (iv) hereof;

(vi) Any other investments to the extent at the time permitted by then

applicable law for the investment of public funds; and (vii) Securities of or other interests in any no-load, open-end management type

investment company or investment trust registered under the Investment Company Act of 1940, as from time to time amended, or any common trust fund maintained by any bank or trust company which holds such proceeds as trustee or by an affiliate thereof so long as:

(a) the portfolio of such investment company or investment trust or common trust fund is limited to the obligations referenced in paragraph (ii) hereof and repurchase agreements fully collateralized by any such obligations;

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(b) such investment company or investment trust or common trust fund takes delivery of such collateral either directly or through an authorized custodian;

(c) such investment company or investment trust or common trust

fund is managed so as to maintain its shares at a constant net asset value; and

(d) securities of or other interests in such investment company or investment trust or common trust fund are purchased and redeemed only through the use of national or state banks having corporate trust powers and located within the State.

(b) Under the Bond Indenture with respect to the Fulton Bonds any one or more of the following investments, if and to the extent the same are then legal investments under the applicable laws of the State for moneys proposed to be invested therein:

(i) Direct obligations of the United States of America (including obligations issued or held in book-entry form on the books of the Department of the Treasury, and CATS and TIGRS) or obligations the principal of and interest on which are unconditionally guaranteed by the United States of America. (ii) Bonds, debentures, notes or other evidence of indebtedness issued or guaranteed by any of the following federal agencies and provided such obligations are backed by the full faith and credit of the United States of America (stripped securities are only permitted if they have been stripped by the agency itself): (a) U.S. Export-Import Bank (Eximbank) Direct obligations or fully guaranteed certificates of beneficial ownership (b) Farmers Home Administration (FmHA) Certificates of beneficial ownership (c) Federal Financing Bank (d) Federal Housing Administration Debentures (FHA) (e) General Services Administration Participation certificates (f) Government National Mortgage Association (GNMA or "Ginnie Mae") GNMA - guaranteed mortgage-backed bonds GNMA - guaranteed pass-through obligations (not acceptable for certain cash-flow sensitive issues.) (g) U.S. Maritime Administration Guaranteed Title XI financing

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(h) U.S. Department of Housing and Urban Development (HUD) Project Notes Local Authority Bonds New Communities Debentures - U.S. government guaranteed debentures U.S. Public Housing Notes and Bonds - U.S. government guaranteed public housing notes and bonds (iii) 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 (stripped securities are only permitted if they have been stripped by the agency itself): (a) Federal Home Loan Bank System Senior debt obligations (b) Federal Home Loan Mortgage Corporation (FHLMC or "Freddie Mac") Participation Certificates Senior debt obligations (c) Federal National Mortgage Association (FNMA or "Fannie Mae") Mortgage-backed securities and senior debt obligations (d) Student Loan Marketing Association (SLMA or "Sallie Mae") Senior debt obligations (e) Resolution Funding Corp. (REFCORP) obligations (f) Farm Credit System

Consolidated system-wide bonds and notes.

“Issuer” shall mean, with respect to the Fulton Bonds, the Development Authority of Fulton County, and with respect to the DeKalb Bonds, the DeKalb Private Hospital Authority, together with any successors or assigns.

“Lien” means any mortgage or pledge of, security interest in or lien or encumbrance on any Property of any member of the Combined Group in favor of, or which secures any Indebtedness or any other obligation of any member of the Combined Group to any Person other than another member of the Combined Group, but specifically excluding subordination arrangements among creditors.

“Limited Obligor” means any Person, other than a member of the Combined Group, on whose account any Obligated Issuer has issued a Guaranty as consideration for such Person’s execution and delivery to such Obligated Issuer of a Pledged Note.

“Loan” in connection with any Bonds, shall mean the advance of funds by the Issuer to Children’s in a principal amount equal to the aggregate principal amount of the Bonds made pursuant to the Agreement.

“Loan Default” shall mean a Loan Default as defined in Section 8.01 of the Agreement.

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“Loan Obligation” shall mean Children’s’ obligation to repay the Loan as evidenced by the Promissory Note.

“Loan Payment” in connection with the Bonds, shall mean a payment by Children’s pursuant to the Promissory Note of payments which correspond to interest, or principal and interest on account of debt service on the Bonds, plus related fees and expenses, all in accordance with Article V of the Agreement and the Promissory Note.

“Long-Term Indebtedness” means (i) all Indebtedness which, at the time of incurrence or issuance, has a final maturity or term greater than one year or which is renewable at the option of the obligor thereof for a term greater than one year from the date of original incurrence or issuance; and (ii) Short-Term Indebtedness which is incurred as interim financing and which is intended to be repaid out of the proceeds of other Long-Term Indebtedness; provided, however, that Long-Term Indebtedness will not include (a) Non-Recourse Indebtedness or Subordinated Indebtedness; (b) current obligations payable out of current revenues, including current payments for the funding of pension plans and contributions to self insurance programs; (c) obligations under contracts for supplies, services or pensions, allocated to the current operating expenses of future years in which the supplies are to be furnished, the services rendered or the pensions paid; and (d) rentals payable under leases which are not properly categorized as capital leases under generally accepted accounting principles.

“Master Indenture” means the Master Trust Indenture, dated as of January 1, 2005, as supplemented, among the Obligated Group consisting of Children’s, Children’s Healthcare of Atlanta Foundation, Inc., Egleston Affiliated Services, Inc., Egleston Children’s Hospital at Emory University, Inc., Egleston Pediatric Group, Inc., Scottish Rite Children’s Medical Center, Inc., Inc., Children’s Anesthesia Services, LLC and Children’s Sedation Services, LLC and the Master Trustee.

“Master Trustee” shall mean The Bank of New York Mellon Trust Company, N.A., formerly known as The Bank of New York Trust Company, N.A., and its successors and assigns.

“Maximum Annual Debt Service” of the Combined Group means the highest annual Debt Service Requirement of the Combined Group for the current or any succeeding Fiscal Year during the remaining term of all Outstanding Obligations.

“Maximum Guaranty Liability” of a Person as of any date means the greater of either (i) or (ii) below:

(a) the greater of (i) or (ii) as of such date:

(i) the outstanding amount of all Obligations issued by such Person, or

(ii) the fair market value of all Property acquired, in whole or part, with the proceeds of such Obligations by such Person; or

(b) the greatest of the Fair Value Net Worth of such person as of the latest of the Fiscal Year-end of such Person, each fiscal quarter-end of such Person thereafter occurring on or prior to the date of the determination of Maximum Guaranty Liability,

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the date on which enforcement of the pertinent Cross Guaranty is sought, and the date on which a case under the United States Bankruptcy Code is commenced with respect to any Obligated Issuer.

“Net Operating Revenues” of a Person means, with respect to any period of time, operating revenues less free care, discounts and allowances for bad debts, and less contractual allowances, all determined in accordance with generally accepted accounting principles.

“Non-Recourse Indebtedness” means any Indebtedness secured by a Lien on all or any portion of the Facilities of any Obligated Issuer, liability for which is effectively limited to such Facilities subject to such Lien, with no recourse, directly or indirectly, to any other Facilities of any Obligated Issuer.

“Note” means any note issued under the Master Indenture by an Obligated Issuer to evidence Long-Term Indebtedness, Short-Term Indebtedness or any other obligation, such as Subordinated Indebtedness or a Hedge Agreement, incurred pursuant to the terms hereof.

“Obligated Group” means all Obligated Issuers.

“Obligated Group Agent” has the meaning set forth in the Master Indenture and initially means Children’s.

“Obligated Issuers” or “Obligated Issuer” means (i) the Initial Obligated Group and each other Person which becomes an Obligated Issuer in accordance with the provisions of the Master Indenture, whether or not such Person has issued any obligations under the Master Indenture, and which has not withdrawn from the Obligated Group pursuant to the Master Indenture, and (ii) when used in respect of any particular Obligation or other Indebtedness, means the obligor thereunder.

“Obligations” means all Notes and Guaranties issued under the Master Indenture, any lease, contractual agreement to pay money or other obligations of any Obligated Issuer issued hereunder, any Hedge Agreement or Note relating thereto, any Interest Rate Swap Obligation or Note relating thereto and any additional forms of Obligations created pursuant to the Master Indenture.

“Officer’s Certificate” means a certificate (i) signed, in the case of a corporation, by the Chairman, Vice Chairman, President or Chief Financial Officer or, in the case of a certificate delivered by any other Person, the chief executive or chief financial officer of such Person, in either case whose authority to execute such certificate will be evidenced to the satisfaction of the Master Trustee and (ii) signed in the case of the Initial Obligated Group, by the Chairman of the Board, the President and Chief Executive Officer or the Chief Financial Officer of the Obligated Group Agent. When an Officer’s Certificate is required under the Master Indenture to set forth matters relating to one or more Obligated Issuers, such Officer’s Certificate may be given in reliance upon another certificate, or other certificates, and supporting materials, if any, provided by any duly authorized officer of the applicable Obligated Issuer.

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“Outstanding”

(1) when used with reference to Bonds, means as of the time in question, all Bonds which have been authenticated and delivered hereunder, except: (i) Bonds theretofore canceled or required to be canceled pursuant to Article II of the Bond Indenture; (ii) Bonds deemed to have been paid in accordance with Article IX of the Bonds Indenture; and (iii) Bonds in substitution for which other Bonds have been authenticated and delivered pursuant to Article II of the Bond Indenture. In determining whether the registered owners of a requisite aggregate principal amount of Bonds outstanding have concurred in any request, demand, authorization, direction, notice, consent or waiver under the provisions of this Indenture, Bonds which, to the actual knowledge of a Responsible Officer of the Trustee, are held by or on behalf of Children’s or any Affiliate thereof shall be disregarded for the purposes of any such determination unless all such Bonds are so owned; or,

(2) when used with reference to Notes, means, as of any date of determination, all Notes theretofore issued or incurred and not paid and discharged other than (i) Notes theretofore cancelled by the Master Trustee or delivered to the Master Trustee for cancellation, (ii) Notes deemed paid and no longer Outstanding as provided in the Master Indenture or for which an Escrow Deposit has been established, (iii) Notes in lieu of which other Notes have been authenticated and delivered or have been paid pursuant to the provisions of the Supplemental Indenture regarding mutilated, destroyed, lost or stolen Notes unless proof satisfactory to the Master Trustee has been received that any such Note is held by a bona fide purchaser for value without notice, and (iv) any Note held by any Obligated Issuer; or,

(3) when referring to Guaranties, means all Guaranties unless the Master Trustee has received from the Holder thereof a written release of all claims thereof against the Obligated Issuer thereunder and all other Obligated Issuers; or,

(4) when referring to Obligations or other evidences of Indebtedness other than Notes and Guaranties, means, as of any date of determination, all Obligations or other evidences of Indebtedness theretofore issued or incurred other than (i) Obligations or other evidences of Indebtedness which have been paid, (ii) Obligations or other evidences of Indebtedness for which an opinion of Counsel stating that such Obligations or other evidences of Indebtedness have been discharged has been provided to the Master Trustee, (iii) Obligations or other evidences of Indebtedness for which new Obligations or other evidences of Indebtedness have been substituted in a manner analogous to clause (2)(iii) above and (iv) any Obligations or other evidences of Indebtedness held by any Obligated Issuer, provided that Obligations or evidences of Indebtedness held by any Obligated Issuer may be deemed by such Obligated Issuer to be continuously Outstanding if such Obligations or evidences of Indebtedness were acquired with an intent that they only be held temporarily in connection with an effort to remarket them to Persons other than the Obligated Issuer. For purposes of determining consents, directions to the Master Trustee, approval of amendments or supplements and other similar purposes, Notes, Guaranties or other similar Obligations incurred hereunder relating to Subordinated Indebtedness, Commitment Indebtedness, Interest Rate Swap Obligations or Hedge Agreements will not be considered to be Outstanding.

“Permitted Investments” under the Master Indenture shall mean and include the following:

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(a) Government Obligations;

(b) bonds, debentures, notes or other evidence of indebtedness issued or guaranteed by any of the following federal agencies and provided such obligations are backed by the full faith and credit of the United States of America (stripped securities are only permitted if they have been stripped by the agency itself):

1. U.S. Export-Import Bank (Eximbank)

Direct obligations or fully guaranteed certificates of beneficial ownership

2. Farmers Home Administration (FHA)

Certificates of beneficial ownership

3. Federal Financing Bank

4. Federal Housing Administration Debentures (FHA)

5. General Services Administration

Participation Certificates

6. Government National Mortgage Association (GNMA or “Ginnie Mae”)

GNMA - guaranteed mortgage-backed bonds

GNMA - guaranteed pass-through obligations

7. U.S. Maritime Administration

Guaranty Title XI financing

8. U.S. Department of Housing and Urban Development (HUD)

Project Notes

Local Authority Bonds

New Communities Debentures - U.S. government guaranteed debentures

U.S. Public Housing Notes and Bonds - U.S. government guaranteed public housing notes and bonds;

(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 (stripped securities are only permitted if they have been stripped by the agency itself):

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1. Federal Home Loan Bank System

Senior debt obligations

2. Federal Home Loan Mortgage Corporation (FHLMC or “Freddie Mac”)

Participation Certificates


3. Federal National Mortgage Association (FNMA or “Fannie Mae)

Mortgage-backed securities and senior debt obligations

4. Student Loan Marketing Association (SLMA or “Sallie Mae”)


5. Resolution Funding Corp. (REFCORP) obligations;

(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 Standard & Poor’s Corporation (“S&P”) of AAAm-G; AAAm; or AAm;

(e) certificates of deposit secured at all times by collateral described in (a) or (b) above, issued by commercial banks, savings and loan associations or mutual savings banks, provided that the collateral must be held by a third party and the Master Trustee must have a perfected first security interest in the collateral;

(f) certificates of deposit, savings accounts, deposit accounts or money market deposits which are fully insured by the FDIC;

(g) investment agreements, including GICs;

(h) commercial paper rated, at the time of purchase, “Prime-1” by Moody’s Investors Service, Inc. (“Moody’s”) or “A-1” or better by S&P;

(i) bonds or notes issued by any state or municipality which are rated by Moody’s or S&P in one of the two highest rating categories assigned by such agencies;

(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 (a “repo”) providing for the transfer of securities from a dealer bank or securities firm (seller/borrower) to the Master Trustee or member of the Combined Group, as the case may be (buyer/lender), and the transfer of cash from

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the Master Trustee or member of the Combined Group, as the case may be, to the dealer bank or securities firm with an agreement that the dealer bank or securities firm will repay the cash plus a yield to the Master Trustee or member of the Combined Group, as the case may be, in exchange for the securities at a specified date provided that:

1. the repo must be between the Master Trustee or member of the Combined Group, as the case may be, and a dealer bank or securities firm which is either (a) a primary dealer on the Federal Reserve reporting dealer list which is rated “A” or better by S&P and Moody’s, or (b) a bank rated “A” or above by S&P and Moody’s; and

2. the repo must be in writing and must include the following: (a) securities which are acceptable for transfer which are: (1) direct U.S. governments, or (2) federal agencies backed by the full faith and credit of the U.S. government (and FNMA and FHLMC); (b) the collateral must be delivered to the member of the Combined Group, the Master Trustee (if such trustee is not supplying the collateral) or third party acting as agent for the Master Trustee (if such trustee is supplying the collateral) before or simultaneously with payment; and (c) the securities must be valued weekly, marked-to-market at current market price plus accrued interest and the value of collateral must be equal to 104% of the amount of cash transferred by the Master Trustee or member of the Combined Group, as the case may be, to the dealer bank or security firm under the repo plus accrued interest. If the value of securities held as collateral is below 104% of the value of the cash transferred by the Master Trustee or member of the Combined Group, as the case may be, then additional cash or acceptable securities must be transferred. If, however, the securities used as collateral are FNMA or FHLMC, then the value of collateral must equal 105%;

(l) Forward Purchase Agreements by a financial institution rated not less than A by a major 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 a part of the bankruptcy estate in the event of a declaration of bankruptcy or insolvency by the provider.

“Person” means an individual, a corporation, a partnership, an association, a joint stock company, a limited liability company, a joint venture, a trust, an unincorporated organization, a governmental unit or an agency, political subdivision or instrumentality thereof or any other group or organization of individuals.

“Pledged Note” means a promissory note executed by a Limited Obligor, as maker, in favor of an Obligated Issuer, as payee, evidencing a sum certain liability of such maker to such payee, which is assigned by such payee to the Master Trustee pursuant to the Master Indenture.

“Project” shall mean the acquisition; construction, and equipping of certain additions, extensions and improvements to the related facilities of Children’s located in Fulton County, Georgia (with respect to the Fulton Bonds) and in DeKalb County, Georgia (with respect to the DeKalb Bonds).

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“Projected Debt Service Coverage Ratio” means for any future period of time, the ratio determined by dividing projected Total Income Available for Debt Service for such period as shown in the Audited Financial Statements by Maximum Annual Debt Service of the Combined Group.

“Promissory Note” shall mean (i) with respect to the DeKalb Bonds, the promissory note of Children’s, denominated its “2009-1 Promissory Note” relating to the DeKalb Bonds in the form attached to the Tenth Supplemental Master Indenture, which evidences Children’s obligation to repay the Loan, and (ii) with respect to the Fulton Bonds, the promissory note of Children’s, denominated its “2009-2 Promissory Note” relating to the Fulton Bonds in the form attached to the Eleventh Supplemental Master Indenture, which evidences Children’s obligation to repay the Loan.

“Property” means any and all rights, titles and interests in and to any and all property whether real or personal, tangible or intangible, including cash, and wherever situated.

“Rating Agency” shall mean

(1) under the Master Indenture, severally or collectively, if applicable (i) Standard & Poor’s, a division of the McGraw-Hill Companies, Inc. (“S&P”) and any successor thereto, if it has assigned a rating to any Obligation issued and Outstanding under the Master Indenture or any Related Bonds issued and Outstanding pursuant to any Related Financing Documents, (ii) Moody’s Investors Service, Inc. (“Moody’s”) and any successor thereto, if it has assigned a rating to any Obligation issued and Outstanding under the Master Indenture or any Related Bonds issued and Outstanding pursuant to any Related Financing Documents, and (iii) Fitch’s Investors Service (“Fitch”) and any successor thereto, if it has assigned a rating to any Obligation issued and outstanding pursuant to any Related Financing Documents. If any such Rating Agency no longer performs the functions of a securities rating service for whatever reason, the term “Rating Agency” will thereafter be deemed to refer to the others, but if both of the others will no longer perform the functions of a securities rating service for whatever reason, the term “Rating Agency” will thereafter be deemed to refer to any other nationally recognized rating service or services as will be designated in writing by the Obligated Group Agent to the Master Trustee; provided that such designee will not be unsatisfactory to the Master Trustee; or

(2) under the Bond Indenture, Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, or Moody’s Investors Service, Inc., whichever has provided and is maintaining a rating for the Bonds, and shall include their respective successors and assigns. If any such corporation which has provided a rating for the Bonds shall no longer perform the functions of a securities rating service, such corporation shall thereafter be deemed to refer to any other nationally recognized rating service which provides a rating for the Bonds, as shall be designated by Children’s, upon written notice to the Trustee and the Issuer.

“Redemption Price” with respect to a Bond shall mean the principal amount of such Bond plus the applicable premium, if any, payable upon redemption thereof pursuant to the Bond Indenture.

“Refunded Bonds” means, with respect to the Fulton Bonds, the Fulton Refunded Bonds, and with respect to the DeKalb Bonds, the DeKalb Refunded Bonds.

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“Related Bond Indenture” means any indenture, bond resolution or other comparable instrument pursuant to which a series of Related Bonds is issued.

“Related Bonds” means the revenue bonds, revenue anticipation certificates, notes, other evidences of indebtedness or any other obligations issued by a Government Issuer pursuant to a single Related Bond Indenture, the proceeds of which are loaned or otherwise made available to an Obligated Issuer in consideration of the execution, authentication and delivery of a Note to or for the order of such Government Issuer.

“Related Financing Documents” means:

(a) in the case of any Note, (i) all documents, including any Related Bond Indenture, pursuant to which the proceeds of the Note are made available to an Obligated Issuer, the payment obligations evidenced by the Note are created and any security for the Note (if permitted under the Master Indenture) is granted, and (ii) all documents creating any additional payment or other obligations on the part of an Obligated Issuer which are executed in favor of the Holder in consideration of the Note proceeds being loaned or otherwise made available to the Obligated Issuer;

(b) in the case of any Guaranty, all documents creating the indebtedness being guaranteed pursuant to the Guaranty and providing for the loan or other disposition of the proceeds of the indebtedness and all documents pursuant to which any security for the Guaranty (if permitted under the Master Indenture) is granted; and

(c) in the case of Indebtedness other than Notes and Guaranties, all documents relating thereto which are of the same nature and for the same purpose as the documents described in clauses (a) and (b) above.

“Restricted Affiliate” means any Affiliate of a member of the Combined Group that:

(a) is either (i) a non-stock membership corporation of which one or more members of the Combined Group are the sole members, or (ii) a non-stock, non-membership corporation or a trust of which the sole beneficiaries or controlling Persons are one or more members of the Combined Group, or (iii) a stock corporation all of the outstanding shares of stock of which are owned by one or more members of the Combined Group, and

(b) if such Affiliate is a non-stock corporation or a trust, (i) has the legal

power, with approval of a majority of its governing body but without the consent of any other person, to transfer to any Obligated Issuer (or to another Restricted Affiliate that possesses the power to transfer to any Obligated Issuer) money required for the payment of Indebtedness of any Obligated Issuer, and (ii) one or more members of the Combined Group have the sole right to elect or appoint and to remove, with or without cause, a majority of the members of the governing body thereof, and (iii) has the ability under applicable law and its organizational documents, with approval of a majority of the members of its governing body, to transfer all assets of such Affiliate remaining after payment of its debts to any Obligated Issuer or to another Restricted Affiliate whose remaining assets may be so transferred, provided that if such Affiliate is an organization

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described in Section 501(c)(3) of the Code, then for so long as the applicable Obligated Issuer is an organization described in Section 501(c)(3) of the Code, the organizational documents of such Affiliate and applicable law may (1) provide for the naming of another member of the Combined Group as a substitute beneficiary if the then current beneficiary ceases to be an organization described in Section 501(c)(3) of the Code and (2) prohibit transfers to organizations not described in Section 501(c)(3) of the Code, and

(c) has satisfied (or a predecessor has satisfied) the requirements set forth in the Master Indenture for becoming a Restricted Affiliate and has not thereafter ceased to satisfy the requirements of clauses (a) and (b) above or satisfied the requirements set forth in the Master Indenture for ceasing to be a Restricted Affiliate.

“Revenue Fund” shall mean the fund by that name created in the Master Indenture.

“Sinking Fund” shall mean the fund established in Section 403 of the Bond Indenture.

“State” shall mean the State of Georgia.

“Subordinated Indebtedness” means any promissory note, guaranty, lease, contractual agreement to pay money or other obligation of any Obligated Issuer which is expressly made subordinate and junior in right of payment of principal of, redemption premium, if any, and interest on, (a) all Obligations issued pursuant to the Master Indenture, and (b) all other obligations of the Obligated Group thereunder, on terms and conditions which substantially require that (i) no payment on account of principal of, redemption premium, if any, or interest on such Subordinated Indebtedness will be made, nor will any property or assets be applied to the purchase or other acquisition or retirement of such Subordinated Indebtedness, unless full payment of all amounts then due and payable upon maturity of Obligations issued under the Master Indenture have been made or duly provided for in accordance with the terms of such Obligations; (ii) no payment on account of principal of, redemption premium, if any, or interest on such Subordinated Indebtedness will be made, nor will any property or assets be applied to the purchase or other acquisition or retirement of such Subordinated Indebtedness if, at the time of such payment or application, or immediately after giving effect thereto, (1) there will exist a default in the payment of the principal of, redemption premium, if any, or interest on any Obligations (whether at maturity or upon mandatory redemption), or (2) there will have occurred an Event of Default with respect to any Obligations, as defined therein and in the Master Indenture, and such Event of Default will not have been cured or waived or will not have ceased to exist; and (iii) in the event that any Subordinated Indebtedness is declared or otherwise becomes due and payable because of the occurrence of an event of default with respect thereto, (1) the Holders at such time will be entitled to receive payment in full thereon before the holders of the Subordinated Indebtedness will be entitled to receive any payment on account of such Subordinated Indebtedness as a result of such event of default, and (2) no holder of Subordinated Indebtedness, or a trustee acting on such holder’s behalf, will be entitled to exercise any control over proceedings to enforce the terms and conditions of the Master Indenture.

“Supplemental Indenture” means an indenture supplemental to, and authorized and executed pursuant to, the terms of the Master Indenture.

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“Supplemental Master Indenture” means with respect to the DeKalb Bonds, the Tenth Supplemental Master Indenture, and with respect to the Fulton Bonds, the Eleventh Supplemental Master Indenture.

“Tenth Supplemental Master Indenture” means the Tenth Supplemental Master Trust Indenture, dated as of December 1, 2009, between Children’s and the Master Trustee authorizing the issuance of a Promissory Note relating to the DeKalb Bonds.

“Total Income Available for Debt Service” shall mean, as to any period (a) the aggregate of Income Available for Debt Service of each member of the Combined Group for such period, determined in such a manner that no portion of Income Available for Debt Service of any member of the Combined Group is included more than once, plus (b) the Income Available for Debt Service of each Limited Obligor up to amount equal to the amount of such Limited Obligor’s Debt Service Requirement for such period with respect to the Indebtedness of such Limited Obligor guaranteed by a member of the Combined Group.

“Total Income Available for Debt Service” means, as to any period, (a) the aggregate of Income Available for Debt Service as shown in the Audited Financial Statements for such period, plus (b) the Income Available For Debt Service of each Limited Obligor whose financial results are not included in the Audited Financial Statements up to an amount equal to the amount of such Limited Obligor’s Debt Service Requirement for such period with respect to the Indebtedness of such Limited Obligor guaranteed by a member of the Combined Group.

“Total Net Operating Revenues” means, as to any period, the Net Operating Revenues for such period as shown in the Audited Financial Statements.

“Trust Estate” (i) for purposes of the Bond Indenture, shall mean the Trust Estate as defined in the granting clauses of the Bond Indenture, and (ii) for purposes of the Master Indenture, shall have the meaning set forth in the granting clauses thereof.

“Trustee” shall mean The Bank of New York Mellon Trust Company, N.A., a national banking association, and any successor trustee or trustees under the Bond Indenture.

“Variable Rate Indebtedness” means any portion of Indebtedness the interest rate on which fluctuates subsequent to the time of incurrence; provided, however, that any Indebtedness for which payment obligations do not fluctuate in the aggregate do not constitute Variable Rate Indebtedness.

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THE BOND INDENTURE

Application of Proceeds of Bonds

Upon the issuance and delivery of the DeKalb Bonds, the proceeds of the sale thereof in an amount equal to $252,396,106.75 (representing the par amount of the DeKalb Bonds, plus a net original issue premium of $3,136,106.75) shall be deposited as follows: (i) $252,395,000 with The Bank of New York Mellon Trust Company, N.A., in its separate capacities as trustee for each series of the DeKalb Refunded Bonds and used to refund the DeKalb Refunded Bonds and (ii) $1,106.75 with Children's to pay a portion of the costs of issuance of the DeKalb Bonds. Upon the issuance and delivery of the Fulton Bonds, the proceeds of the sale thereof in an amount equal to $50,004,315.55 (representing the par amount of the Fulton Bonds, less net original issue discount of $715,684.45) shall be deposited as follows: (i) $50,000,000 with The Bank of New York Mellon Trust Company, N.A., in its capacity as trustee for the Fulton Refunded Bonds and used to refund the Fulton Refunded Bonds and (ii) $4,315.55 with Children's to pay a portion of the costs of issuance of the Fulton Bonds.

Establishment of Sinking Fund

The Bond Indenture creates and establishes with the Trustee a special trust fund designated as the “Development Authority of Fulton County Revenue Bonds (Children’s Healthcare of Atlanta, Inc. Project) Sinking Fund” with respect to the Fulton Bonds, and the “DeKalb Private Hospital Authority Revenue Anticipation Certificates (Children’s Healthcare of Atlanta, Inc. Project) Sinking Fund” with respect to the DeKalb Bonds (in each case, the “Sinking Fund”), which shall be held in trust by the Trustee separate and apart from all other deposits or funds. Moneys in the Sinking Fund constitute part of the Trust Estate and shall be applied as provided in the Bond Indenture. The Issuer may, from time to time, designate additional accounts within the Sinking Fund. The Trustee is authorized under the Bond Indenture to deposit into the Sinking Fund (and into any account therein) any moneys or securities transferred to it by, or at the direction of, the Issuer which are accompanied by instructions that such moneys or securities are to be deposited into the Sinking Fund. Under the Bond Indenture there are created, within the Sinking Fund, three accounts designated as follows: the “Interest Account,” the “Principal Account” and the “Redemption Account.” The Issuer may establish from time to time additional accounts or sub-accounts in the Sinking Fund.

Use of Moneys in Sinking Fund; Priority of Payments

There will be deposited into the Interest Account in the Sinking Fund the accrued interest received upon the sale of the Bonds, if any, and all amounts paid by Children’s pursuant to the Promissory Note with respect to interest on the Bonds. There shall be deposited into the Principal Account in the Sinking Fund amounts paid by Children’s pursuant to the Promissory Note with respect to the payment of the principal of the Bonds on any maturity date. There will be deposited into the Redemption Account in the Sinking Fund amounts paid by Children’s pursuant to the Promissory Note with respect to any redemption of the Bonds.

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Investment of Moneys Held by the Trustee

Any moneys held as a part of any fund other than the Sinking Fund shall be invested or reinvested by the Trustee, at the written request of and as directed in writing by an Authorized Children’s Representative; provided, however, such Authorized Children’s Representative shall only direct that such moneys shall be invested only in Investment Securities. Any moneys held as a part of the Sinking Fund shall be invested or reinvested by the Trustee, at the written direction of Children’s, only in Investment Securities with such maturities as shall be required in order to assure full and timely payment of amounts required to be paid from the Sinking Fund. The Trustee may conclusively rely upon the Authorized Children’s Representative’s written instructions as to both the suitability and legality of the directed investments. In the absence of written investment instructions from an Authorized Children’s Representative, the Trustee shall not be responsible or liable for keeping the moneys held by it under the Indenture fully invested in Investment Securities.

The Trustee may make any and all such investments through its own bond or investment department or the bond or investment department of any bank or trust company under common control with the Trustee, and may charge its ordinary and customary fees for such trades, including cash sweep account fees. All such investments shall at all times be a part of the fund or account from which the moneys used to acquire such investments shall have come and all income and profits on such investments shall be credited to, and losses thereon shall be charged against, such fund. All investments under the Indenture shall be registered in the name of the Trustee, as Trustee under the Bond Indenture. All investments under the Indenture shall be held by or under the control of the Trustee. The Trustee shall sell and reduce to cash a sufficient amount of investments of funds in any account of the Sinking Fund whenever the cash balance in such account of the Sinking Fund is insufficient, together with any other funds available therefor, to pay the principal of, premium, if any, and interest on the Bonds when due. The Trustee shall not be liable or responsible for any reduction in value or loss with respect to any investment made in accordance with the instructions received from an Authorized Children’s Representative.

Payment of Principal of and Interest on Bonds

The Issuer has covenanted that it will promptly pay, or cause to be paid, the principal of, premium (if any) and the interest on the Bonds at the places, on the dates and in the manner provided herein and in the Bonds, according to the true intent and meaning thereof, but only from the Trust Estate. The Issuer has further covenanted that it will faithfully perform at all times all of its covenants, undertakings and agreements contained in this Indenture, the Agreement, in the Bonds or in any proceedings of the Issuer pertaining thereto.

Neither the State nor any political subdivision thereof shall in any event be liable for the payment of the principal of or interest on the Bonds, or for the performance of any pledge, mortgage, obligation or agreement of any kind whatsoever that may be undertaken by the Issuer, and none of the Bonds shall be construed to constitute a debt or a pledge of the faith and credit of the State or any political subdivision thereof, including Fulton County and DeKalb County, within the meaning of any constitutional or statutory provision whatsoever, and shall not directly, indirectly or contingently obligate the State or any of its political subdivisions to levy or to pledge any form of taxation whatever therefor or to make any appropriation for the payment

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thereof; nor shall any breach of any such pledge, mortgage, obligation or agreement impose any pecuniary liability upon any member, officer, employee or agent of the Issuer, or any charge upon the general credit of the Issuer, or any pecuniary liability upon the Issuer payable from any moneys, revenues, payments, and proceeds other than the Trust Estate.

Covenant Against Encumbrances

The Issuer has good right, full power and lawful authority to grant, bargain and assign, and to transfer in trust, convey and pledge the Trust Estate in the manner and form provided in the Indenture; and the Issuer forever will warrant and defend the title to the Trust Estate to the Trustee against the claims of all persons whomsoever. The Issuer has agreed to take such actions, including any actions reasonably requested by the Trustee, as may be required to perfect or to protect the lien created under the Indenture on the Trust Estate. The Issuer has agreed that it shall not create any other lien on the Trust Estate except as created under the Indenture.

Arbitrage Covenant

In reliance upon the covenant of Children’s in the Agreement, the Issuer has agreed that it shall not take or cause, or fail to take or cause, any action which may cause interest on the Bonds to become includable in gross income of the owners thereof for federal income tax purposes or which would render the interest on any of the Bonds subject to Georgia income taxation. Without limiting the generality of the foregoing, the Issuer has agreed that it will take all actions reasonably requested by Children’s to comply with the provisions of Section 148 of the Code, including particularly Section 148(f) of the Code; provided, however, that Children’s and not the Issuer or the Trustee shall be solely responsible for the computation of all amounts required to be paid pursuant to Section 148 of the Code and for directing in writing the Trustee to pay such amounts as and when the same are due and payable.

Events of Default; Acceleration of Maturity

Each of the following are an “Event of Default” under the Bond Indenture:

(a) failure to make payment of the principal or Redemption Price of any Bond when the same shall become due and payable, either at maturity or by proceedings for redemption or otherwise;

(b) failure to make payment of any installment of interest on any Bond when same shall become due and payable;

(c) the occurrence of a Loan Default;

(d) failure of the Issuer to duly and punctually perform any other of the covenants, conditions, agreements and provisions on its part contained in the Series 200l Certificates or in this Bond Indenture, which failure shall continue for 60 days after written notice specifying such default and requiring the same to be remedied has been given to the Issuer and Children’s by the Trustee, provided, however, if the failure stated in such notice cannot to be corrected within the applicable period, the Trustee will not unreasonably withhold its consent to an extension of such time if it is possible to correct such failure and corrective action is instituted by the Issuer within the applicable period and is diligently pursued until such failure is corrected; or

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(e) an “Event of Default” shall occur under the Master Indenture.

If such an event of default occurs, then in each and every such case the Trustee may, and (i) upon the written request of the owners of 25% of the outstanding principal amount of Bonds affected by each event of default, or (ii) upon the occurrence of an event of default described in (e) above, the Trustee will, upon receiving indemnity or security satisfactory to it, proceed to protect and enforce its rights and right of the owners of the Bonds by a suit, action or special proceeding in equity or at law, by mandamus or otherwise, either for the specific performance of any covenant or agreement contained in the Bond Indenture or in aid or execution of any power granted in the Bond Indenture or for any enforcement of any proper legal or equitable remedy as the Trustee, being advised by Counsel, will deem most effectual to protect and enforce the rights aforesaid.

Upon the happening of an event of default, then and in every such case, the Trustee may, and (i) upon written request of the owners of at least 25% of the outstanding principal amount of the Bonds or (ii) upon the occurrence of an event of default described in (e) above, the Trustee will, by notice in writing delivered to the Issuer and Children’s, declare the principal of all Bonds then outstanding and the interest accrued thereon to be immediately due and payable. The Trustee will give notice of any such declaration as soon as practicable to the Trustee by telephone or telecopy, promptly confirmed in writing.

The right of the Trustee or the owners of not less than 25% of the Bonds to make any such declaration as aforesaid, however, is subject to the condition that if, at any time after such declaration, but before the Bonds shall have been paid in full, all overdue installments of interest upon such Bonds, together with interest on such overdue installments of interest to the extent permitted by law, and the reasonable and proper charges, expenses and liabilities of the Trustee, and all other sums then payable by the Issuer under the Bond Indenture (except the principal of, and interest accrued since the next preceding interest date on, the Bonds due and payable solely by virtue of such declaration) shall either be paid by or for the account of the Issuer or provision satisfactory to the Trustee shall be made for such payment, all defaults under the Bonds or under the Bond Indenture (other than the payment of principal and interest due and payable solely by reason of such declaration) shall be made good or be secured to the satisfaction of the Trustee or provision deemed by the Trustee to be adequate shall be made therefor, then and in every such case, the owners of 25% of the outstanding principal amount of the Bonds, by written notice to the Issuer, Children’s and the Trustee, may rescind such declaration and annul such default in its entirety or, if the Trustee shall have acted upon direction of the owners of not less than 25% of the outstanding principal amount of the Bonds, unless there shall have been delivered to the Trustee written direction to the contrary by the owners of 25% of the outstanding principal amount of the Bonds, the Trustee may rescind such declaration and annul such default in its entirety, but no such rescission or annulment shall extend to or affect any subsequent default or impair or exhaust any right or power consequent thereon. The Trustee shall give notice of any such rescission to the Master Trustee.

In lieu of or in addition to a declaration of acceleration, the Trustee may also exercise any other right or remedy available to it at law or in equity, including the appointment of a receiver to the extent permitted by law or any other right or remedy available under the Act or the Uniform Commercial Code of the State of Georgia.

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When the Trustee incurs costs or expenses (including legal fees, costs and expenses) or renders services after the occurrence of an Event of Default, such costs and expenses and the compensation for such services are intended to constitute expenses of administration under any federal or state bankruptcy, insolvency, arrangement, moratorium, reorganization or other debtor relief law.

Termination of Proceedings by Trustee

In case any proceedings taken by the Trustee on account of any default are discontinued or abandoned, or are determined adversely to the Trustee, then the Issuer, the Trustee, Children’s and the owners of the Bonds will be restored to their former positions and rights as though no such proceedings had been taken.

Right of Bond Owners to Control Proceedings.

The owners of a majority of the outstanding principal amount of the Bonds will have the right, by an instrument in writing, executed and delivered to the Trustee, to direct the method and place of a conducting all remedial proceedings to be taken by the Trustee under the Bond Indenture in respect to the Bonds; provided that such direction will not be otherwise than in accordance with law and the Trustee will be indemnified to its satisfaction against the costs, expenses and liabilities (including reasonable attorney’s fees, costs and expenses) which may be incurred therein and thereby.

Right of Bond Owners to Institute Suit.

No owner of any of the Bonds will have any right to institute any suit, action or proceeding in equity or at law for the execution of any trust under the Bond Indenture, or for any other remedy under the Bond Indenture or on the Bonds unless (a) such owner previously shall have given to the Trustee written notice of an event of default, (b) the owner, or owners, of 25% of the outstanding principal amount of the Bonds shall have made written request of the Trustee after the right to exercise such powers or right of action, as the case may be, shall have accrued, and shall have afforded the Trustee a reasonable opportunity either to proceed to exercise the powers granted in the Indenture, or to institute such action, suit, or proceeding in its name; (c) there shall have been offered to the Trustee security and indemnity satisfactory to it against the costs, expenses and liabilities (including reasonable attorney’s fees, costs and expenses) which may be incurred therein or thereby, and (d) the Trustee shall have refused or neglected to comply with such request within a reasonable time; and such notification, request, offer of indemnity and refusal or neglect are declared under the Bond Indenture in every such case, at the option of the Trustee, to be conditions precedent to the execution of the powers and trusts of the Indenture. All proceedings at law or in equity will be instituted, had and maintained in the equal benefit of all owners of the outstanding Bonds.

Application of Moneys in Event of Default

Any moneys received by the Trustee under the terms described in the above section entitled “Events of Default; Acceleration of Maturity” will be applied first to the payment of various costs, fees and expenses as detailed in the Bond Indenture; second to the payment of principal or Redemption Price (as the case may be) and interest then owing on the Bonds as outlined in the Bond Indenture, and in case such moneys will be insufficient to pay the same in

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full, then to the payment of principal or Redemption Price and interest ratably, without preference or priority of one over another or of any installment of interest over any other installment of interest, and third to the payment of premium of and the principal of any Bond called for redemption pursuant to the provisions of the Bond Indenture.

Any remaining moneys will be paid to Children’s or the Person lawfully entitled to receive the same as a court of competent jurisdiction may direct.

Substitution of Promissory Note

The Trustee is authorized and directed under the Bond Indenture to accept a substitute promissory note (the “Substitute Promissory Note”) in substitution for the Promissory Note, which Substitute Promissory Note must provide for the full and timely repayment of the Bonds on substantially the same repayment terms of the existing Promissory Note and must be executed and delivered to the Trustee by an entity or a group of entities of which Children’s is a part, upon receipt of

(i) the written request of Children’s; (ii) an opinion of Bond Counsel to the effect that the substitution of the

Substitute Promissory Note for the Promissory Note complies with the terms of the Bond Indenture and the Master Indenture and will not cause the interest on the Bonds to become includable in the gross income of the owners thereof for federal tax purposes; and

(iii) an opinion of counsel to Children’s to the effect that the Substitute

Promissory Note is a valid and binding obligation of the obligor or obligors, including Children’s, under the Master Indenture.

Defeasance

If (1) the Issuer or Children’s shall pay or cause to be paid to the owners of the Bonds the principal, redemption, premium (if any) and interest to become due thereon at the times and in the manner stipulated therein and in the Bond Indenture, (2) all fees and expenses of the Trustee (including reasonable attorney’s fees, costs and expenses) then due and owing or accrued and all fees and expenses to accrue until the payment in full of the Bonds shall have been paid or provided for to the satisfaction of the Trustee, and (3) the Issuer and Children’s shall keep, perform and observe all and singular the covenants and promises in the Bonds, the Agreement and the Bond Indenture expressed as to be kept, performed and observed by it or on its part, then, these presents and the rights granted in the Bond Indenture shall cease, determine and be discharged, and thereupon the Trustee shall cancel and discharge the Bond Indenture and execute and deliver to the Issuer and Children’s such instruments in writing as shall be requisite to evidence such cancellation and discharge. If the Issuer or Children’s shall pay or cause to be paid to the owners of all outstanding Bonds of a particular maturity, the principal, premium, if any, and interest to become due thereon at the times and in the manner stipulated therein and in the Bond Indenture, such Bonds shall cease to be entitled to any lien, benefit or security under the Bond Indenture, and all covenants, agreements and obligations of the Issuer to the owners of such Bonds shall thereupon cease, terminate and become discharged and satisfied.

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Bonds (or such portion thereof as is to be defeased) shall be deemed to be paid prior to the earlier of the redemption thereof within the meaning of the Bond Indenture and no longer outstanding under the Bond Indenture if there shall be delivered to the Trustee by the Issuer or by Children’s on behalf of the Issuer (i) sufficient Permitted Defeasance Investments (hereinafter defined), (ii) an opinion of nationally recognized bond counsel satisfactory to, and addressed to, the Issuer and the Trustee, to the effect that the pledge of Permitted Defeasance Investments to the payment of the Bonds will not, by itself, result in the interest on any Bonds becoming includable in gross income for federal income tax purposes under the Code and the Bonds are no longer “Outstanding” under the Bond Indenture, (iii) a report of an independent firm of nationally recognized certified public accountants (the “Accountant”) verifying the sufficiency of the escrow established to pay the Bonds in full on the maturity or redemption date (the “Verification”), and (iv) an escrow deposit agreement; provided, however, that if such Bonds are to be redeemed prior to the maturity thereof, notice of such redemption shall have been duly given as provided in the Bond Indenture or irrevocable arrangements satisfactory to the Trustee shall have been made for the giving thereof. Permitted Defeasance Investments will be considered sufficient if (i) such investments, with interest, mature and bear interest in such amounts and at such times as will assure sufficient cash to pay currently maturing interest and to pay principal and redemption premiums (if any) when due on the Bonds (or such portion thereof with respect to which such deposit is made). For the purposes of this paragraph, “Permitted Defeasance Investments” shall mean only (1) non-callable direct obligations of the United States of America (“Treasuries”), (2) evidences of ownership of proportionate interests in future interest and principal payments on Treasuries held by a bank or trust company as custodian, under which the owner of the investment is the real party in interest and has the right to proceed directly and individually against the obligor and the underlying Treasuries are not available to any person claiming through the custodian or to whom the custodian may be obligated or (3) pre-refunded municipal obligations rated “AAA” and “Aaa” by S&P and Moody’s, respectively, or any combination thereof, shall be authorized to be used to effect defeasance of the Bonds.

All moneys and Government Obligations deposited with the Trustee pursuant to the Bond

Indenture as described in the foregoing paragraphs shall be held in trust and applied by it to the payment to the Owners of the Bonds for the payment or redemption of which such moneys and Government Obligations have been deposited with the Trustee, and after such deposit such Bonds shall no longer be deemed to be Outstanding under the Bond Indenture (except for the provisions thereof relating to payments, registration of transfer and similar provisions) and shall no longer be secured by a lien on the Trust Estate.

Children’s may at any time surrender to the Trustee for cancellation by it any Bonds previously authenticated and delivered under the Bond Indenture which Children’s may have acquired in any manner whatsoever, and such Bonds, upon such surrender and cancellation, shall be deemed to be paid and retired.

Amendments and Supplements Without Bond Owners’ Consent

The Bond Indenture may be amended or supplemented at any time, subject to the conditions and restrictions in the Bond Indenture and with the written consent of Children’s but without the consent of the Bond Owners, by a supplemental indenture, for one or more of the following purposes:

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(a) to add additional covenants of the Issuer or to surrender any right or power conferred under the Bond Indenture upon the Issuer;

(b) to cure any ambiguity or to cure, correct or supplement any defective provision of the Bond Indenture in such manner as will not be inconsistent with the Bond Indenture;

(c) to qualify the Bond Indenture under the Trust Indenture Act of 1939 or similar federal or state statute;

(d) to grant additional rights and powers to the Trustee;

(e) to create additional accounts or subaccounts under the Bond Indenture as requested in writing by Children’s; or

(f) to provide for or modify existing provisions with respect to, a book-entry system of registration for the Bonds.

The Issuer and the Trustee will have the right at any time and from time to time, without the Bond Owners, consent, to amend, delete, add to, modify or supplement the provisions of the Bond Indenture in connection with the foregoing purposes provided only that Children’s will have first given its written consent to such amendment.

Amendments With Bond Owners’ Consent

With the consent of the owners of not less than a majority of the outstanding principal amount of the Bonds and the written consent of Children’s, the Issuer and the Trustee may enter into an indenture or indentures supplemental to the Bond Indenture, provided, however, that no such supplemental indenture will (1) extend the fixed maturity of any Bond or reduce the rate of interest thereon or extend the time for payment of interest, or reduce the amount of the principal thereof, or reduce or extend the time for payment of any premium payable on the redemption thereof, without the consent of the owners of each Bond so affected, or (2) the aforesaid percentage of owners of Bonds required to approve any such supplemental indenture, or (3) deprive the owners of the Bonds (except as aforesaid) of the lien created by the Bond Indenture, without the consent of the owners of all the Bonds then outstanding.

Prior to the execution and delivery of any supplemental indenture and after being indemnified to its satisfaction with respect to the costs and expenses, the Trustee will mail to the Issuer and the registered owners of the Bonds, at least 30 days prior to the proposed effective date of such supplemental indenture a notice of such proposed supplemental indenture. Such notice need not set forth such supplemental indenture in full but will contain a summary of the provisions thereof. Such notice will set forth a time and procedure for consenting to such proposed supplemental indenture.

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THE AGREEMENT

Financing Clauses

The Issuer has undertaken to issue the Bonds in accordance with the Bond Indenture. Upon the issuance and delivery thereof, the proceeds of the sale of the Bonds shall be loaned to Children’s by disbursing such amount in accordance with the provisions of the Bond Indenture.

Unless and until so disbursed, moneys or investments in any fund established under the Bond Indenture will be trust funds pledged to and held solely for the security and benefit of the owners of the Bonds, subject to the provisions of the Agreement and the Bond Indenture permitting the investment or use of such moneys.

Agreement to Refund the Refunded Bonds

Children’s has covenanted and agreed to apply (or cause to be applied) the proceeds of the Bonds to refund the Refunded Bonds within 90 days of the date of issuance and delivery of the Bonds.

Covenants

The Agreement contains, among others, the following covenants of Children’s for the benefit of the Issuer, the Trustee and the Bond Owners:

(a) Children’s will perform its covenants under the Master Indenture or any successor agreement.

(b) Children’s may assign its interest in the Agreement and, subject to the provisions thereof, may sell, lease and dispose of the portion of the property and facilities financed or refinanced with the proceeds of the Bonds, in whole or in part, without the prior written consent of the Issuer and the Trustee; provided that in connection with any such assignment of the Agreement or any sale, lease or disposition of such property and facilities, in whole or in part, other than in the ordinary course of business, Children’s shall provide the Trustee an opinion of Bond Counsel to the effect that such assignment or such sale, lease or disposition is authorized or permitted under the terms of the Act and will not, by itself, result in the interest on the Bonds becoming includable in gross income for federal income tax purposes. No such assignment, sale, lease or disposition shall relieve Children’s from its obligations under the Agreement or under the Promissory Note.

(c) Children’s will not take (or fail to take) any action or permit (or fail to permit) any action to be taken in its behalf, or cause or permit any circumstance within its control to arise or continue, if such action or circumstance, or its reasonable expectation on the date of issue of the Bonds, would cause the interest paid by the Issuer on the Bonds to be included in gross income of owners thereof for federal income tax purposes. Children’s has made a number of other covenants in the Agreement that are pertinent to the tax-exempt status of the Bonds.

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Payment of Loan Payments

Children’s shall provide for the repayment of the Loan by issuing to the Trustee, pursuant to the Master Indenture, the Promissory Note which provides for payments which correspond as to time and amount with the payments due on the Bonds. Children’s has agreed to make prompt payment to the Trustee for the account of the Issuer of all amounts payable on the Promissory Note when due; provided, however, that if for any reason the amounts paid by Children’s on the Promissory Note, together with any other amounts available in the Bond Fund, are not sufficient to pay the principal of, premium (if any) and interest on the Bonds when due, Children’s agrees to immediately pay the amount required to make up such deficiency.

Credits for Loan Payments

Children’s shall receive credit for payments under the Promissory Note, in addition to any credits resulting from payment or prepayment from other sources as follows:

(a) On the interest portion of its payments under the Promissory Note in an amount equal to the moneys deposited in the Interest Account in the Sinking Fund which amounts are available to pay interest on the Bonds and to the extent such interest amounts have not previously been credited against payments under the Promissory Note.

(b) On the principal portion of its payments under the Promissory Note in an amount equal to the moneys deposited in the Principal Account or Redemption Account of the Sinking Fund which amounts are available to pay principal of the Bonds to the extent such principal amounts have not previously been credited against payments under the Promissory Note.

(c) On installments of principal and interest portions, respectively, of its payments under the Promissory Note, in an amount equal to the principal and interest of Bonds which have been called by the Trustee for redemption prior to maturity and for the redemption of which sufficient amounts are on deposit in the Redemption Account of the Sinking Fund to the extent such amounts have not previously been credited against such portions of payments under the Promissory Note, and interest on such Certificates from and after the Redemption Date. Such credits will be made against principal and interest portions of payments under the Promissory Note which would be used, but for such call for redemption, to pay principal and interest of such Bonds when due at maturity or upon mandatory sinking fund redemption.

(d) On installments of principal and interest portions, respectively, of its payments under the Promissory Note, in an amount equal to the principal amount of Bonds acquired by Children’s and delivered to the Trustee for cancellation or purchased by the Trustee and cancelled, and interest on such Bonds from and after the date interest thereon has been paid prior to cancellation. Such credits will be made against principal and interest portions of payments under the Promissory Note which would be used, but for such cancellation, to pay principal and interest on the Bonds when due, and with respect to mandatory sinking fund requirements for the Bonds so cancelled, against principal installments which would be used to pay Bonds in order of such mandatory sinking fund requirements.

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Obligations of Children’s Unconditional

Children’s obligations under the Agreement, the Master Indenture and the Promissory Note are continuing, unconditional and absolute and are independent of and separate from any obligations of the Issuer and will not be diminished or deferred for any reason whatsoever, irrespective of the doing of any act or the omission thereof by the Issuer or the Trustee, irrespective of the existence of any other circumstances which might otherwise constitute a legal or equitable defense or discharge of the obligations of Children’s under the Agreement. Children’s waives, to the extent permitted by applicable law, any and all rights which it may have or which at any time may be conferred upon it, by statute or otherwise, to terminate, cancel, quit or surrender the Agreement except in accordance with the express terms thereof. Children’s and the Issuer have agreed and intend that the payments made pursuant to the Promissory Note shall be paid to the Trustee on behalf of the Issuer without diminution of any kind.

Prepayment of Loan Obligation

At the option of Children’s and after giving at least 30 days written notice by certified or registered mail to the Issuer and the Trustee (or such lesser period of notice as may be acceptable to the Trustee), Children’s may prepay all or a portion of its Loan Obligation (and the Promissory Note) (i) by paying to the Trustee the then applicable optional prepayment price applicable under the Bond Indenture pertaining to the Bonds to which such prepayment applies (to the extent permitted by law), or (ii) by paying to the Trustee an amount sufficient to defease all or any portion of the Bonds under the Bond Indenture or to redeem any certificates otherwise subject to redemption under the Bond Indenture.

Assignment

The Agreement and the Promissory Note, including the right to receive payments required to be made by Children’s under the Agreement and the Promissory Note, and to compel or otherwise enforce performance by Children’s, may be assigned in whole or in part to one or more assignees or subassignees by the Issuer or the Trustee at any time subsequent to its execution without the necessity of obtaining the consent of Children’s. Children’s expressly acknowledges that all right, title and interest of the Issuer in and to the Agreement and the Promissory Note (excluding the Issuer’s right to indemnification, fees and expenses) has been assigned to the Trustee, as security for the Bonds as provided in the Bond Indenture, and that if any Event of Default shall occur, the Trustee shall be entitled to act under the Agreement in the place and stead of the Issuer (other than with respect to matters to which the Issuer is entitled to consent) and may sell or otherwise realize value on the Trust Estate held to secure payment of the Bonds.

Children’s has consented to such assignment and has agreed to make the payments due under the Promissory Note directly to the Trustee or its agent and has agreed that, as to the Trustee, its obligation to make the payments required by the Promissory Note and to observe and perform all other covenants, conditions and agreements under the Agreement shall be absolute and unconditional, irrespective of any rights of set-off, recoupment or counterclaim it might otherwise have against the Issuer or the Trustee. Prior to prepayment in full of the Promissory Note, Children’s will not suspend or discontinue any such payment or fail to observe and perform any of its other covenants, conditions and agreements under the Agreement, and will not terminate the Agreement for any cause, including, without limitation, failure of consideration,

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failure of title to any part or all of the facilities financed or refinanced with the proceeds of the Bonds, or commercial frustration of purpose, or any damage to or destruction or condemnation of all or any part of the facilities financed or refinanced with the proceeds of the Bonds, or any change in the tax or other laws of the United States of America, the State or any political subdivision thereof, or any failure of the Issuer to observe and perform any covenants, conditions and agreements, whether express or implied, or any duty, liability or obligation arising out of or in connection with the Agreement or the Bond Indenture. Children’s may, however, after giving to the Issuer and the Trustee ten days notice of its intention to do so, at its own expense and in its own name, or in the name of the Issuer, prosecute or defend any action or proceeding or take any other action involving third persons which Children’s deems necessary or desirable in order to secure or protect any of its rights under the Agreement. Upon receipt by the Issuer and the Trustee of an indemnity or indemnities from Children’s satisfactory in all respects to the Issuer and the Trustee, the Issuer and the Trustee shall reasonably cooperate with Children’s and will take all reasonable and necessary action, at Children’s sole cost and expense, to effect the substitution of Children’s for the Issuer or the Trustee in any such action or proceeding if Children’s shall so request. Children’s has approved the Bond Indenture and consents to said assignment and appointment.

Loan Defaults Defined

The following events constitute “Loan Defaults” under the Agreement:

(a) Failure by Children’s to pay any Loan Payment or other payment on or before the date on which such Loan Payment is due and payable;

(b) Failure by Children’s, subject to the force majeure limitation in the Agreement, to observe and perform any covenant, condition or agreement on its part to be observed or performed under the Agreement, other than the failure referred to in (a) above, for a period of 30 days after written notice specifying such failure and requesting that it be remedied, is given to Children’s by the Issuer or the Trustee, unless the Issuer and the Trustee will agree in writing to an extension of such time prior to its expiration; provided, however, that if the failure stated in the notice is correctable but cannot be corrected within the applicable period, the Issuer and the Trustee will not unreasonably withhold their consent to an extension of such time if corrective action is instituted by Children’s within the applicable period and diligently pursued until such failure is corrected;

(c) The filing by Children’s of a petition seeking relief for itself under Title 11 of the United States Code, as now constituted or hereafter amended, or the filing by Children’s of an answer consenting to, admitting the material allegations of or otherwise not controverting, or the failure of Children’s to timely controvert, a petition filed against it seeking relief under Title 11 of the United States Code, as now constituted or hereafter amended, or the filing of such petition or answer by Children’s or the failure of Children’s to timely controvert such a petition, with respect to relief under the provisions of any other now existing or future applicable bankruptcy, insolvency or other similar law of the United States of America or any state thereof;

(d) The entry of an order for relief, which is not stayed, against Children’s under Title 11 of the United States Code, as not constituted or hereafter amended, or the

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entry of an order, judgment or decree by operation of law or by a court having jurisdiction, which is not stayed, adjudging Children’s a bankrupt or insolvent under, or ordering relief against Children’s under, or approving as properly filed a petition seeking relief against Children’s under, the provisions of any other now existing or future applicable bankruptcy or insolvency or other similar law of the United States of America or any state thereof, or appointing a receiver, liquidator, assignee, sequestrator, trustee or custodian of Children’s or all or any of substantial portion of the property of Children’s, or ordering the reorganization, winding up or liquidation of the affairs of Children’s, or the expiration of 60 days after the filing of any involuntary petition against Children’s seeking any of the relief specified in this Section without the petition being dismissed prior to that time;

(e) An event of default shall occur under the Bond Indenture; or

(f) A default under the Master Indenture shall have occurred, which default is not cured or waived and extends beyond any period of grace with respect thereto.

The foregoing provision (b) is subject to the following limitation: if by reason of force majeure, Children’s is unable in whole or in part to carry out the agreements on its part herein contained, Children’s shall not be deemed in default during the continuance of such inability. The term “force majeure” as used herein shall mean, without limitation, the following: acts of God; strikes, lockouts or other industrial disturbances; acts of public enemies; orders or restraints of any kind of the government of the United States of America or of the State or any of their departments, agencies or officials, or any civil or military authority; insurrections; riots; landslides; earthquakes; fires; storms; droughts; floods; explosions; or breakage or accident to machinery, transmission pipes or canals.

Remedies on Default

Whenever any Loan Default shall have happened and be continuing, the Issuer and the Trustee shall, in addition to any other remedies provided in the Agreement or by law have the right, at its or their option without any further demand or notice, to take one or any combination of the following remedial steps:

(a) Declare all amounts due under the Promissory Note to be immediately due and payable, and upon notice to Children’s the same will become immediately due and payable by Children’s without further notice or demand; and

(b) Take whatever other action at law or in equity may appear necessary or desirable to collect the amounts then due and thereafter to become due under the Agreement or to enforce any other rights of the Trustee or the Issuer under the Agreement or as the owner of an Obligation issued under the Master Indenture.

Any moneys collected by the Issuer or the Trustee under a Loan Default will be applied in accordance with the provisions of the Bond Indenture governing the application of moneys after an Event of Default thereunder. See “THE INDENTURE: Application of Moneys in Event of Default.”

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No Remedy Exclusive; Waiver

No remedy conferred upon or reserved to the Issuer or the Trustee is intended to be exclusive, and every such remedy will be cumulative and will be in addition to every other remedy given under the Agreement or now or hereafter existing at law or in equity. No delay or omission to exercise any right, remedy or power accruing upon any Default will impair any such right, remedy or power or will be construed to be a waiver thereof, but any such right, remedy or power may be exercised from time to time and as often as may be deemed expedient.

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THE MASTER INDENTURE

General

Each Note will be issued as an Obligation under the Master Indenture. Under the Master Indenture, the members of the Obligated Group (as it may exist from time to time) have jointly and severally guaranteed to the owner of any Obligation issued under the Master Indenture the due and punctual payment of the principal of and interest on any such Obligation and all other amounts due and payable under the Master Indenture when and as the same become due and payable, whether at the stated maturity or by declaration of acceleration, call for redemption or otherwise according to the terms thereof; provided, however, that the maximum aggregate liability of each member of the Obligated Group as of any date will be its Maximum Guaranty Liability as of such date.

The Master Indenture permits members of the Obligated Group to issue additional Obligations from time to time under certain circumstances and subject to the terms of the Master Indenture, which Obligations are equally and ratably secured under the Master Indenture with all other Obligations issued under the Master Indenture. In addition, the Master Indenture permits the members of the Obligated Group to incur certain other types of indebtedness, including certain guarantees under the circumstances, and to the extent, permitted by the Master Indenture.

On the date of issuance of the Bonds, there is no lien on Gross Revenues or other assets of the Obligated Group to secure Obligations issued under the Master Indenture. In the event that the long-term indebtedness rating of S&P, Fitch or Moody’s on any Obligations, or any series of bonds or other indebtedness secured by an Obligation issued under the Master Indenture (without regard to bond insurance or other similar credit enhancement), falls below A- for S&P, A- for Fitch or A3 for Moody’s, the Obligated Group Agent must immediately notify the Master Trustee and each Obligated Issuer must deliver to the Master Trustee, among other things, within 15 days of notice of such rating a supplement to the Master Indenture pledging to the Master Trustee as part of the Trust Estate created under the Master Indenture a lien on its Gross Revenues. Pursuant to the Master Indenture, the Obligated Issuers have agreed that if a lien on Gross Revenues is established, they will deposit daily, so far as practicable, all of the Gross Revenues into the Revenue Fund established by the Master Trustee and held by one or more Depositories in accordance with the Master Indenture. Upon the occurrence of an Event of Default under the Master Indenture, amounts on deposit in the Revenue Fund will be transferred from the Depositories to the Master Trustee and will be applied in accordance with the Master Indenture. Prior to an Event of Default the members of the Obligated Group may expend the Gross Revenues in any manner they choose subject to the limitations set forth in the Master Indenture.

Subject to certain conditions, the Master Indenture permits additional entities to become members of the Obligated Group (members of the Obligated Group are also referred to herein and in the Master Indenture as “Obligated Issuers”), and permits Obligated Issuers to designate any or all of their respective affiliates as “Restricted Affiliates.” The members of the Obligated Group are also obligated to cause their respective Restricted Affiliates (such Restricted Affiliates, together with the Obligated Group, being herein referred to collectively as the “Combined Group”) to make such payments and perform such covenants and agreements as are necessary for the Combined Group to comply with the Master Indenture.

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The Master Indenture also permits Obligated Issuers and Restricted Affiliates to withdraw from the Combined Group under specified conditions, whereupon such withdrawing Obligated Issuers and Restricted Affiliates will cease to be bound by the Master Indenture. Any Combined Group member may withdraw from the Combined Group and be released from further liability or obligation under the provisions of the Master Indenture, provided that prior to such withdrawal the Master Trustee receives an Officer's Certificate to the effect that immediately following the withdrawal of such member of the Combined Group, no remaining member of the Combined Group would be in default in the performance or observance of any term of the Master Indenture. Upon compliance with the above conditions, the Master Trustee, at no expense to the Master Trustee, will execute any documents reasonably requested by the withdrawing member of the Combined Group to evidence the termination of such withdrawing member’s obligations under the Master Indenture, under any Supplemental Indenture and under all Obligations.

The Notes, together with any other Obligations presently outstanding or issued from time to time under the Master Indenture, are equally secured under the Master Indenture and rank on a parity with each other.

Membership and Withdrawal from the Obligated Group

Conditions for Membership. A Person may become an Obligated Issuer, provided that prior to such addition the Master Trustee receives:

(a) a certified copy of a resolution of the Governing Body of the proposed new Obligated Issuer that authorizes the execution and delivery of a Supplemental Indenture and compliance with the terms of the Master Indenture; and

(b) a Supplemental Indenture executed by the Obligated Group Agent, the new Obligated Issuer and the Master Trustee pursuant to which the proposed new Obligated Issuer

(i) agrees to become an Obligated Issuer, and

(ii) agrees to be bound by the terms of the Master Indenture, each Supplemental Indenture and the Obligations, and

(iii) irrevocably appoints the Obligated Group Agent as its agent and attorney-in-fact and grants to the Obligated Group Agent full power to execute Supplemental Indentures authorizing the issuance of Obligations; and

(c) an Opinion of Counsel to the proposed new Obligated Issuer to the effect that the proposed new Obligated Issuer has taken all necessary action to become an Obligated Issuer and that all requirements and conditions for membership set forth in the Master Indenture shall have been complied with and satisfied, and upon execution of the Supplemental Indenture, such proposed new Obligated Issuer will be bound by the terms of the Master Indenture; and

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(d) an Officer's Certificate to the effect that immediately after the addition of the proposed new Obligated Issuer, no Obligated Issuer would be in default in the performance or observance of any term of the Master Indenture; and

(e) an Opinion of Bond Counsel to the effect that the addition of the proposed new Obligated Issuer:

(i) will not, in and of itself, result in the inclusion of interest on any Related Bonds in gross income for purposes of federal income taxation; and

(ii) will not cause the Master Indenture or any Obligations to be subject to registration under federal or state securities laws or the Trust Indenture Act of 1939, as amended (or, that any such registration, if required, has occurred).

Withdrawal from the Obligated Group. Any Obligated Issuer may withdraw from the

Obligated Group and be released from further liability or obligation under the provisions of the Master Indenture, provided that prior to such withdrawal the Master Trustee receives an Officer's Certificate to the effect that immediately following the withdrawal of such Obligated Issuer, no remaining Obligated Issuer would be in default in the performance or observance of any term of the Master Indenture.

Upon compliance with the conditions contained in the foregoing paragraph, the Master

Trustee, at no expense to the Master Trustee, shall execute any documents reasonably requested by the withdrawing Obligated Issuer to evidence the termination of such Obligated Issuer’s obligations under the Master Indenture, under any Supplemental Indenture and under all Obligations.

Additional Indebtedness

Short-Term Indebtedness. Each Obligated Issuer has agreed that it will not incur, nor permit any of its Restricted Affiliates to incur, any Additional Indebtedness constituting Short-Term Indebtedness unless, immediately after the incurrence of such Short-Term Indebtedness,

(a) (i) the principal amount of all Short-Term Indebtedness of the Combined Group then Outstanding does not exceed 25% of the Total Net Operating Revenues for the most recent Fiscal Year for which Audited Financial Statements are available, or

(ii) any such Short-Term Indebtedness could be incurred under the tests set

forth in “-- Long-Term Indebtedness,” below, for Long-Term Indebtedness treating such Short-Term Indebtedness as Long-Term Indebtedness, and

(b) For a period of not fewer than 10 consecutive days within each Fiscal

Year, the Combined Group reduces the aggregate principal amount of all Outstanding Short-Term Indebtedness described in (a)(i) above to an amount not in excess of 5% of Total Net Operating Revenues.

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Long-Term Indebtedness. Each Obligated Issuer has agreed that it will not incur, nor permit any of its Restricted Affiliates to incur, any Additional Indebtedness constituting Long-Term Indebtedness unless such Long-Term Indebtedness consists of one or more of the following:

(a) Long-Term Indebtedness of any member of the Combined Group, if prior to the incurrence thereof, there is delivered to the Master Trustee (i) an Officer’s Certificate of the Obligated Group Agent certifying the Historical Pro Forma Debt Service Coverage Ratio for the two most recent Fiscal Years was not less than 1.25; or (ii) (A) an Officer’s Certificate of the Obligated Group Agent certifying the Historical Debt Service Coverage Ratio for the two most recent Fiscal Years was not less than 1.15, and (B) a Consultant’s report (or, in lieu thereof, an Officer’s Certificate of the Obligated Group Agent if the Projected Debt Service Coverage Ratio described in this subsection (B) is 1.75 or greater) to the effect that the Projected Debt Service Coverage Ratio, taking the proposed Additional Indebtedness into account, (x) in the case of Additional Indebtedness (other than a Guaranty) to finance capital improvements, for each of the two Fiscal Years succeeding the date on which such capital improvements are expected to be in operation, or (y) in the case of Long-Term Indebtedness not financing capital improvements or in the case of a Guaranty, for each of the two Fiscal Years succeeding the date on which the Indebtedness or Guaranty is incurred, is not less than 1.15.

The requirements of (a)(ii)(A) and (B) above will be deemed satisfied under the

Master Indenture if (i) a Consultant’s report filed with the Master Trustee states that applicable laws or regulations have prevented or will prevent the achievement of such debt service coverage ratios, and (ii) the Combined Group has generated Total Income Available for Debt Service in an amount which, in the opinion of such Consultant, the Combined Group could reasonably have generated given such laws and regulations during the period affected thereby.

(b) Completion Indebtedness of any member of the Combined Group without limit if there is delivered to the Master Trustee (i) an Officer’s Certificate of the applicable member of the Combined Group stating at the time the original Long-Term Indebtedness for the property to be completed was incurred, such Combined Group member had reason to believe the proceeds of such Long-Term Indebtedness, together with other moneys then expected to be available, would provide sufficient moneys for the completion of such property; (ii) a statement of an architect or an expert setting forth the amount estimated to be needed to complete the property; and (iii) an Officer’s Certificate of such member of the Combined Group, stating the proceeds of such Completion Indebtedness to be applied to the completion of the property, together with a reasonable estimate of investment income to be earned on such proceeds and the amount of moneys, if any, committed to such completion by such Combined Group member or through enumerated bank loans (including letters or lines of credit) or through federal or state grants, will be in an amount not less than the amount estimated by an architect or expert to be needed to complete the property.

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(c) Commitment Indebtedness of any member of the Combined Group or any Guaranty of any Commitment Indebtedness of any member of the Obligated Group without limit.

(d) Long-Term Indebtedness of any member of the Combined Group incurred

for the purpose of refunding, repurchasing (other than as Commitment Indebtedness) or refinancing (whether in advance or otherwise) any Outstanding Long-Term Indebtedness.

(e) The conversion without limit of Long-Term Indebtedness of any member

of the Combined Group that is convertible from one interest or payment mode to another interest or payment mode (e.g., weekly to monthly or to a fixed rate) from one mode to another pursuant to the terms of the documentation authorizing such Long-Term Indebtedness.

(f) Subordinated Indebtedness without limit of any member of the Combined

Group or Non-Recourse Indebtedness without limit of any member of the Combined Group.

(g) Indebtedness incurred in connection with a sale of accounts receivable

with recourse by any member of the Combined Group consisting of an obligation to repurchase all or a portion of such accounts receivable upon certain conditions, provided that the principal amount of such Indebtedness will not exceed 50% of the aggregate value of such accounts receivable based upon the values shown in the most recent Audited Financial Statements.

(h) Long-Term Indebtedness of any member of the Combined Group

(including capitalized lease obligations), provided that the principal amount of which at the time incurred does not exceed 25% of the Total Net Operating Revenues for the most recent Fiscal Year for which Audited Financial Statements are available.

(i) Long-Term Indebtedness if immediately after the incurrence of the

proposed Long-Term Indebtedness the aggregate principal amount of all Long-Term Indebtedness does not exceed 66-2/3% of Capitalization, as certified to the Master Trustee by an Officer’s Certificate based upon the most recent Audited Financial Statements.

(j) The 2005 Promissory Notes.

The aggregate outstanding amount of (i) Long-Term Indebtedness incurred pursuant to clause (h) above and (ii) Short-Term Indebtedness (other than Short-Term Indebtedness described in the clause (a)(ii) above under “—Short Term Indebtedness”) may not exceed 25% of the Total Net Operating Revenues for the most recent Fiscal Year for which Audited Financial Statements are available.

Guaranties. Each Obligated Issuer has agreed that it will not enter into, or become liable in respect of, or permit any Restricted Affiliate to enter into, or become liable in respect of, any Guaranty dated after the date of the Master Indenture unless (i) such Guaranty is Indebtedness of

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another member of the Obligated Group or (ii) the principal amount of the indebtedness being guaranteed could then be incurred as Long-Term Indebtedness under the tests described under “—Long-Term Indebtedness” above, taking into account the assumptions contained in the Master Indenture.

Each Obligated Issuer agrees that it will not, and will not permit any of its Restricted Affiliates to, create or suffer to be created or exist any Lien upon the Trust Estate or upon any Property, including, without limitation, all proceeds thereof, whether cash or non-cash, now owned or hereafter acquired by it, other than (i) Permitted Liens or (ii) liens on any Property if, at the time such lien or liens are incurred, an Obligated Issuer would be permitted to sell, lease or dispose of the Property to be subject to such lien under Section 6.3 (other than under Section 6.3(b)).

Limitations on Creation of Liens

Each Obligated Issuer agrees under the Master Indenture that it will not, and will not permit any of its Restricted Affiliates to, create or suffer to be created or exist any Lien upon the Trust Estate or upon any Property, including, without limitation, all proceeds thereof, whether cash or non-cash, now owned or hereafter acquired by it, other than (i) Permitted Liens or (ii) liens on any Property if, at the time such lien or liens are incurred, an Obligated Issuer would be permitted to sell, lease or dispose of the Property to be subject to such lien under the Master Indenture.

Rates and Charges

The Obligated Issuers have agreed that they will fix, charge and collect, or cause to be fixed, charged and collected, subject to applicable requirements or restrictions imposed by law, rates, fees and charges for the use of and for the services furnished or to be furnished by the Obligated Issuers which will be sufficient in each Fiscal Year (a) to produce Total Income Available for Debt Service equal to at least one hundred ten per centum (110%) of Maximum Annual Debt Service for such and any subsequent Fiscal Year, after deducting any interest to be paid from proceeds of any Indebtedness, and (b) together with any other moneys that shall be available to the Obligated Issuers, to enable the Obligated Issuers to discharge their obligations as they shall become due and payable for such and any subsequent Fiscal Year

The Obligated Issuers have further agreed that, from time to time and as often as shall be necessary, they will revise, or cause to be revised, subject to applicable requirements or restrictions imposed by law, the rates, fees and charges as may be necessary or proper in order to comply with the requirements described in the foregoing paragraph. The Obligated Issuers have further agreed that if in any Fiscal Year the Total Income Available for Debt Service shall be less than the amount required by the terms described in the foregoing paragraph, they will immediately employ a Consultant to examine the rates, fees and charges of the Obligated Issuers and the methods of the operation of the Property and to make, within 90 days after being so retained, such recommendations as to rates, fees and charges as the Consultant believes are appropriate to enable the Obligated Issuers to produce the Total Income Available for Debt Service as are required by the provisions described under this “Rates and Charges” heading. If in the judgment of the Consultant it is not possible for the Obligated Issuers to meet the

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requirement that the Total Income Available for Debt Service shall be at least equal to one hundred ten per centum (110%) of Maximum Annual Debt Service for such Fiscal Year and any subsequent Fiscal Year the report of the Consultant shall so indicate and shall further indicate the projected ratio of Total Income Available for Debt Service to the Maximum Annual Debt Service anticipated if the recommendations of the Consultant are followed. The recommendations of the Consultant shall be filed with the Master Trustee.

The Obligated Issuers have agreed that promptly upon the receipt of such recommendations, subject to applicable requirements or restrictions imposed by law, they shall revise their rates, fees and charges as shall be in conformity with such recommendations. If the Obligated Issuers comply with the provisions described in the immediately preceding paragraph, they shall for the Fiscal Year in which such Consultant is employed and for the subsequent Fiscal Year, be excused from compliance with the requirements described in the first paragraph under this “Rates and Charges” heading with respect to the amount of Total Income Available for Debt Service, or if the report of the Consultant projects a ratio of Total Income Available for Debt Service to Maximum Annual Debt Service of less than one hundred ten per centum (110%) but at least one hundred per centum (100%), they shall be excused from compliance with the requirements described in the first paragraph under this “Rates and Charges” heading that the Total Income Available for Debt Service be equal to at least one hundred ten per centum (110%) of Maximum Annual Debt Service for such Fiscal Year and any subsequent Fiscal Year so long as such ratios shall equal or exceed that which is projected; but the provisions described in this paragraph shall not be construed as in any way excusing the Obligated Issuers from taking any action or performing any duty required under any other section of the Master Indenture or be construed as constituting a waiver of any other Event of Default or be construed as excusing the Obligated Issuers from so fixing their rates, fees and charges which together with any other moneys that shall be available to the Obligated Issuers shall be sufficient to enable the Obligated Issuers to discharge their obligations as they shall become due and payable.

The Obligated Issuers may permit the rendering of service by, or the use of, the Property free of charge or at discounted or reduced rates (except as and incident to prepayment programs) to the extent necessary for retaining their eligibility for grants, loans, subsidies or payments from the United States of America or any instrumentality thereof or from the State of Georgia or any instrumentality thereof, or in compliance with any recommendation for free or discounted services that may be made by a Consultant, or to such further extent as may be consistent with the public charitable purposes of the Obligated Issuers and shall not prevent the Obligated Issuers from complying with the terms and provisions of the Master Indenture.

Events of Default and Remedies

The Master Indenture provides that the occurrence of one or more of the following events will constitute an Event of Default thereunder:

(i) failure by any Obligated Issuer to make any payment of principal, redemption price or interest when due under the terms of any Obligation and such failure continues to exist upon the expiration of any applicable grace period; or

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(ii) if any Obligated Issuer shall fail to observe or perform any covenant or agreement contained in the Master Indenture or any Related Financing Documents for any Obligations (other than a failure to pay as specified in (a) above) for a period of 30 days after written notice of such failure, requiring the same to be remedied, will have been given by the Master Trustee to each of the Obligated Issuers; provided, however, that if such observance or performance requires work to be done, actions to be taken, or conditions to be remedied, which by their nature cannot reasonably be done, taken or remedied within such 30-day period, no Event of Default will be deemed to have occurred or to exist if, and so long as, the defaulting Obligated Issuer will commence such observance or performance within such 30-day period and will diligently and continuously prosecute the same to completion; or

(iii) if (a) any Obligated Issuer defaults in the payment of any Indebtedness

(other than Obligations issued and Outstanding hereunder) the principal amount of which in the aggregate exceeds 5% of the book value of all Property as shown in the Audited Financial Statements for the most recent Fiscal Year for which such Audited Financial Statements are available, whether such Indebtedness now exists or is hereafter created, and any period of grace with respect thereto shall have expired, or (b) an event of default as defined in any Related Financing Documents under which any Indebtedness may be issued, secured or evidenced occurs, which default in payment or event of default, in the case of either (a) or (b), results in such Indebtedness becoming or being declared due and payable prior to the date on which it would otherwise become due and payable; provided, however, that such default will not constitute an Event of Default if within the time allowed for service of a responsive pleading in any proceeding to enforce payment of the Indebtedness under the laws governing such proceeding (A) the Obligated Issuers commence proceedings to contest the existence or payment of such Indebtedness, and (B) in the absence of such contest, neither the pledge and security interest created under the Master Indenture nor any Property of the Combined Group will be materially impaired or subject to material loss or forfeiture; or

(iv) if a decree or order by a court having jurisdiction is entered adjudging any

Obligated Issuer as bankrupt or insolvent, or approving as properly filed a petition seeking reorganization or arrangement of any Obligated Issuer under Title 11 of the United States Code, as amended from time to time, or any other similar applicable federal or state law, and such decree or order of a court having jurisdiction in the premises for the appointment of a receiver or trustee or assignee in bankruptcy or insolvency of the Obligated Issuer or of its property, or for the winding-up or liquidation of its affairs, and such decree or order remains in force undischarged and unstayed for a period of 180 days; or

(v) certain other events of bankruptcy, dissolution, liquidation or

reorganization by any Obligated Issuer as provided for in the Master Indenture; or (vi) failure by any of the Obligated Issuers to deliver to the Master Trustee

either (A) the items required by the provisions of the Master Indenture concerning the

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pledge of Gross Revenues or (B) the Gross Revenues under the circumstances described in the Master Indenture.

Remedies. In the event that there is a lien on the Gross Revenues of each member of the Obligated Group, the Master Trustee may, at any time that an Event of Default under the Master Indenture exists, (a) by prompt written notice to the Depositories in which any funds in the Revenue Fund are deposited, direct that such funds be immediately transferred to the Master Trustee, and upon such receipt of such funds the same will be held in trust by the Master Trustee and disposed of as provided in the Master Indenture, and (b) by written notice to the Obligated Issuers direct that all subsequent deposits into the Revenue Fund be made with the Master Trustee as the depository thereof as provided in the Master Indenture. During the continuance of an Event of Default, all moneys received by the Master Trustee under the Master Indenture from the Obligated Issuers or from any other source will be applied by the Master Trustee as set forth below under “—Application of Moneys Collected.”

Upon the occurrence of an Event of Default under the Master Indenture, the Master Trustee may, by notice in writing to the Obligated Issuers, declare the principal of all (but not less than all) Outstanding Obligations to be due and payable immediately; provided that the Master Trustee will be required to make such a declaration (a) if an Event of Default described in subsection (i) of “ -- Events of Default and Remedies” above has occurred, (b) if an Event of Default described in subsection (ii) of “-- Events of Default and Remedies” above has occurred as a result of a default under the Related Financing Documents for any Obligations, if the Related Financing Documents permit the Holders of such Obligations to declare (or to request the Master Trustee to declare) such Obligations to be immediately due and payable and if the Master Trustee is requested to make such a declaration by the Holders of not less than 25% in aggregate principal amount of such Obligations then Outstanding or such greater percentage as may be required under the Related Financing Documents, or (c) if the Master Trustee is requested to make such a declaration by the Holders of not less than 25% in aggregate principal amount of all Outstanding Obligations.

Any declaration of acceleration pursuant to the above paragraph will be subject to the condition that if, at any time after the principal of all Outstanding Obligations has been so declared due and payable, and before any judgment or decree for the payment of the moneys due has been obtained or entered as provided in the Master Indenture: (i) one or more Obligated Issuers deposits with the Master Trustee an aggregate sum sufficient to pay (A) all matured installments of interest upon all Outstanding Notes issued under the Master Indenture and the principal and premium, if any, of all such Outstanding Notes that have become due otherwise than by acceleration (with interest on overdue installments of interest, to the extent permitted by law and on such principal and premium, if any, at the respective rates borne by such Notes to the date of such deposit) and any other amounts required to be paid pursuant to such Notes, (B) all amounts due under any Guaranty other than by reason of acceleration, (C) all sums due under any Obligations other than Notes and Guaranties, other than by reason of acceleration, and (D) the expenses and fees of the Master Trustee; and (ii) any and all Events of Default under the Master Indenture, other than the nonpayment of principal of and accrued interest on Outstanding Obligations that have become due by acceleration, have been remedied, then and in every such case, the Master Trustee will, if requested in writing by the Holders of 25% in aggregate principal amount of all Obligations then Outstanding, waive all Events of Default and rescind

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and annul such declaration and its consequences, but no such waiver or rescission and annulment will extend to or affect any subsequent Event of Default.

Payment of Obligations Upon Default. Upon the occurrence of an Event of Default under the Master Indenture and upon demand of the Master Trustee, each Obligated Issuer will pay to the Master Trustee, for the benefit of the Holders of all Obligations then Outstanding, (a) the whole amount that then will have become due and payable on all such Obligations for principal or interest, or both, and such other amounts as may be required to be paid on all such Obligations, with interest upon the overdue principal and installments of interest (to the extent permitted by law) at the respective rates of interest borne by such Obligations or as provided in the applicable Supplemental Indenture, and (b) such further amounts as will be sufficient to cover the costs and expenses of collection, including a reasonable compensation to the Master Trustee, its agents, attorneys and counsel, and any expenses incurred by the Master Trustee other than as a result of its gross negligence or bad faith.

Application of Moneys Collected. Any amounts collected by the Master Trustee as provided in the Master Indenture, all money and Permitted Investments on deposit in any funds which the Master Trustee may establish under the Master Indenture will be applied for the equal and ratable benefit of the Holders of Obligations in the following order at the date or dates fixed by the Master Trustee for the distribution of such moneys, upon presentation of such Obligations, and stamping thereon the payment, if only partially paid, and upon surrender thereof if fully paid:

(a) to the payment of costs and expenses of collection, including fees and expenses of Counsel and reasonable compensation to the Master Trustee; and, thereafter,

(b) whether or not the principal of all Outstanding Obligations has become or

has been declared due and payable, to Holders of the Outstanding Obligations for amounts due and unpaid on the Obligations, ratably, without preference or priority of any kind, according to the amounts due and payable on the Obligations; provided that for the purpose of determining the unpaid amount of any Obligation, there will be deducted the amount, if any, which has been realized by the Holder by exercise of its rights as a secured party with respect to any Liens permitted pursuant to the Master Indenture or is on deposit in any fund established pursuant to any Related Financing Documents for such Obligations (other than amounts consisting of payments of principal and interest previously made and credited against the payments due under such Obligations) as of the date of payment by the Master Trustee pursuant to this subsection (b), all as certified to the Master Trustee by the Holder; and

(c) to the payment of the remainder, if any, to the Obligated Group Agent, its successors or assigns, or to whomsoever may be lawfully entitled to receive the same, or as a court of competent jurisdiction may direct.

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THE SUPPLEMENTAL MASTER INDENTURE

Authorization of Promissory Note; Purpose

There is authorized under the Supplemental Master Indenture to be issued by Children’s pursuant to the provisions of the Supplemental Master Indenture and under the provisions of the Master Indenture a Promissory Note of Children’s to be designated as the “2009-1 Promissory Note” with respect to the DeKalb Bonds, and the “2009-2 Promissory Note” with respect to the Fulton Bonds. The Supplemental Master Indenture will be executed and delivered for the purpose of authorizing the Promissory Note, and the Promissory Note is being issued for the purpose of evidencing Children’s obligation to repay the Loan made pursuant to the Agreement.

Terms of Promissory Note

The Promissory Note shall be dated the date of issuance and delivery thereof and shall be issued in fully registered form as a single note in the denomination of $249,260,000 with respect to the DeKalb Bonds, and as a single note in the denomination of $50,720,000 with respect to the Fulton Bonds. The Promissory Note shall be registered in the name of the Trustee, as assignee of the Issuer under the Bond Indenture, and shall be executed and delivered by Children’s in the manner provided in the Master Indenture and authenticated by the Master Trustee and delivered to the Trustee simultaneously with the issuance and delivery of the Bonds and the Loan of the proceeds thereof to Children’s pursuant to the Agreement. The Promissory Note shall be payable, mature, bear interest, and be subject to prepayment as provided in the form thereof. Children’s intends that the Promissory Note shall constitute an Obligation issued pursuant to the Master Indenture.

Registration of Transfer and Exchange

The Promissory Note may only be issued in the principal amount equal to the outstanding principal amount of the Bonds and may not be exchanged for Obligations in any other principal amount. The Promissory Note may not be registered as transferred, except to a successor trustee of the Trustee or in the case of the appointment of a co-Trustee, to the Trustee and such co- Trustee.

Payments to Correspond to Payments on Bonds

Notwithstanding any schedule of payments to be made on the Promissory Note as set forth therein or in the Supplemental Master Indenture, the Children’s has agreed that it shall make payments on the Promissory Note at the times and in amounts sufficient to provide for the payment when due of the principal, redemption premium (if any) and interest on the Bonds as may be outstanding from time to time under the Bond Indenture, whether at maturity, upon redemption, by declaration of acceleration, or otherwise.

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APPENDIX D

PROPOSED FORMS OF BOND COUNSEL OPINIONS

King & Spalding LLP

1180 Peachtree Street, N.E.

Atlanta, Georgia 30309-3521

Main: 404/572-4600

Fax: 404/572-5100

December 2, 2009 DeKalb Private Hospital Authority Decatur, Georgia Children’s Healthcare of Atlanta, Inc. Atlanta, Georgia

J.P. Morgan Securities, Inc., as representative of the underwriters listed on Schedule I

New York, New York The Bank of New York Mellon Trust Company, N.A., as trustee Atlanta, Georgia

Re: $249,260,000 DeKalb Private Hospital Authority Revenue Anticipation Certificates (Children’s Healthcare of Atlanta, Inc. Project), Series 2009

To the Addressees:

We have acted as Bond Counsel in connection with the issuance by the DeKalb Private Hospital Authority (the “Issuer”) of its $249,260,000 in aggregate principal amount Revenue Anticipation Certificates (Children’s Healthcare of Atlanta, Inc. Project), Series 2009 (the “Series 2009 Bonds”). We have examined the law and such certified proceedings and other papers as we have deemed necessary to render this opinion, including a copy of the validation proceeding concluded in the Superior Court of DeKalb County, Georgia, with respect to the Series 2009 Bonds. In all such examinations, we have assumed the genuineness of signatures of original documents and the conformity to original documents of all copies submitted to us as certified, conformed or photographic copies, and as to certificates of public officials, we have assumed the same to have been properly given and to be accurate.

The Series 2009 Bonds are being issued pursuant to the Hospital Authorities Law of the

State of Georgia (O.C.G.A. § 31-7-70, et seq., as amended), a resolution of the Issuer adopted on September 16, 2009, as supplemented on November 19, 2009, and a Trust Indenture, dated as of December 1, 2009 (the “Indenture”), between the Issuer and The Bank of New York Mellon Trust Company, N.A., as trustee (the “Trustee”). The Series 2009 Bonds are being sold to J.P. Morgan Securities, Inc. (the “Representative”), pursuant to a Bond Purchase Agreement, dated November 19, 2009 (the “Bond Purchase Agreement”), among Children’s Healthcare of Atlanta, Inc. (“Children’s”), the Issuer and the Representative, as representative of the underwriters named therein. The Series 2009 Bonds are being issued for the purpose of refunding all or a portion of the Issuer’s (a) Variable Rate Demand Revenue Anticipation Certificates (Egleston Children’s Hospital at Emory University, Inc. Project), Series 1994A (the “Series 1994A

D-1

December 2, 2009 Page 2

Certificates”); (b) Variable Rate Demand Revenue Anticipation Certificates (Egleston Children’s Hospital at Emory University, Inc. Project), Series 1994B (the “Series 1994B Certificates”); (c) Variable Rate Demand Revenue Anticipation Certificates (Egleston Children’s Health Care System Project), Series 1995A (the “Series 1995A Certificates”); (d) Variable Rate Demand Revenue Anticipation Certificates (Egleston Children’s Health Care System Project), Series 1995B (the “Series 1995B Certificates”); (e) Variable Rate Demand Revenue Anticipation Certificates (ESR Children’s Health Care System Project), Series 1998A (the “Series 1998A Certificates”); (f) Variable Rate Demand Revenue Anticipation Certificates (ESR Children’s Health Care System Project), Series 1998B (the “Series 1998B Certificates”); (g) Refunding Revenue Anticipation Certificates (Children’s Healthcare of Atlanta, Inc. Project), Series 2008B (the “Series 2008B Certificates”), and (h) Refunding Revenue Anticipation Certificates (Children’s Healthcare of Atlanta, Inc. Project), Series 2008C (the “Series 2008C Certificates”).

The Issuer and Children’s are entering into a Loan Agreement relating to the Series 2009 Bonds, dated as of December 1, 2009 (the “Agreement”), between the Issuer and Children’s, under which the Issuer has agreed to issue the Series 2009 Bonds and loan the proceeds of the sale thereof to Children’s for the purposes described above. The obligation of Children’s to repay the loan made pursuant to the Agreement is evidenced by the 2009-1 Master Note, dated the date of authentication of the Series 2009 Bonds (the “2009-1 Master Note”), under which Children’s has agreed to make payments sufficient to provide for the payment of the principal of, redemption premium (if any), and interest on the Series 2009 Bonds as the same become due and payable.

The 2009-1 Master Note is secured under the Master Trust Indenture, dated as of January 1, 2005 (the “Original Master Indenture”), between Children’s, Egleston Children’s Hospital at Emory University, Inc., Egleston Affiliated Services, Inc., TRE Properties, Inc., Children’s Healthcare of Atlanta Foundation, Inc., Scottish Rite Children’s Medical Center, Inc., Egleston Pediatric Group, Inc., Children’s Sedation Services, LLC and Children’s Anesthesia Services, LLC (collectively, the “Initial Obligated Group”) and The Bank of New York Mellon Trust Company, N.A., as master trustee (in such capacity, the “Master Trustee”), as supplemented by various supplemental indentures, between Children’s and the Master Trustee (the Original Master Indenture, as so supplemented, the “Master Indenture”). The Master Indenture permits the addition and removal of entities obligated under the Master Indenture under the circumstances and subject to the provisions of the Master Indenture (the Initial Obligated Group, with such additions or removals, the “Obligated Group”). Under the Master Indenture, each member of the Obligated Group has agreed, among other things, to guarantee the obligations of each other member of the Obligated Group secured under the Master Indenture, subject to the “Maximum Guaranty Liability” (as defined therein). Under the terms of the Master Indenture, additional obligations may be issued and secured thereunder from time to time in accordance with the terms of the Master Indenture that rank on a parity as to the lien on the trust estate created thereunder with the lien thereon created in favor of the Master Notes. Obligations issued under the Master Indenture are not secured by any lien on, or pledge of, any property, assets or revenues of the Obligated Group.

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Under the Indenture, the Issuer has assigned to the Trustee and pledged to the payment of the Series 2009 Bonds the trust estate (the “Trust Estate”) which includes (i) all right, title and interest of the Issuer in and to the Agreement and the 2009-1 Master Note, including the payments made under such 2009-1 Master Note, and (ii) all right, title and interest of the Issuer in and to all moneys and securities from time to time held by the Trustee in certain funds established under the terms of the Indenture. The Series 2009 Bonds are subject to registration of transfer and to exchange, and to optional, extraordinary and mandatory redemption at the times, in the amounts and on the terms specified in the Indenture.

Contemporaneously with the sale and issuance of the Series 2009 Bonds, the Development Authority of Fulton County (the “Fulton Authority” and, together with the Issuer, the “Issuers”) is issuing its revenue bonds in the aggregate principal amount of $50,720,000 (the “Fulton Bonds,” and together with the Series 2009 Bonds, the “Composite Bonds”) for the purpose of refunding all or a portion of the Fulton Authority’s Refunding Revenue Bonds (Children’s Healthcare of Atlanta Project), Series 2008B (the “Fulton Series 2008B Bonds” and, together with the Series 1994A Certificates, the Series 1994B Certificates, the Series 1995A Certificates, the Series 1995B Certificates, the Series 1998A Certificates, the Series 1998B Certificates, the Series 2008B Certificates and the Series 2008C Certificates, the “Refunded Bonds”). Under the provisions of the Internal Revenue Code of 1986, as amended (the “Code”), and applicable Treasury Regulations, the Composite Bonds may be deemed to be a single issue of obligations for certain purposes under the Code, and the exclusion from gross income for federal income tax purposes of the interest on each series of the Composite Bonds may be dependent upon whether the interest on each other series of the Composite Bonds is excluded from gross income for federal income tax purposes.

As to questions of fact material to our opinion, we have relied upon (i) representations of the Issuers and Children’s, (ii) certified proceedings and other certifications of public officials furnished to us, (iii) certifications by officials of Children’s, and (iv) representations of Children’s relating to, among other things, the use of the proceeds of the Composite Bonds and the Refunded Bonds, the design, scope, function, cost and reasonably expected weighted average economic life of the facilities financed or refinanced with the Composite Bonds, the purpose for which Children’s and other members of the Obligated Group are organized and the nature of their activities, and the status of certain members of the Obligated Group as entities described in Section 501(c)(3) of the Code, contained in certifications of Children’s, dated the date of this opinion, without undertaking to verify the same by independent investigation.

We have not been engaged or undertaken to review the accuracy, completeness or sufficiency of the Official Statement, dated November 19, 2009 (the “Official Statement”), relating to the Composite Bonds, or any other offering material relating to the Composite Bonds, and we express no opinion relating thereto. We express no opinion as to compliance by the Issuer or the Representative with any federal or state statute, rule or regulation which may be applicable to the offer or sale of the Series 2009 Bonds. We express no opinion herein as to the corporate existence and good standing of Children’s or other members of the Obligated Group, or the authorization, execution, delivery or enforceability of the Agreement, the 2009-1 Master

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Note or the Master Indenture, but have assumed the same are enforceable against the parties thereto other than the Issuer.

Based upon our examination, we are of the opinion, as of the date hereof and under existing law as follows:

1. The Issuer is a duly created and validly existing public body corporate and politic of the State of Georgia with full power and authority (a) to issue and sell the Series 2009 Bonds, (b) to loan the proceeds from the sale of the Series 2009 Bonds to Children’s for the purposes described in the Agreement and (c) to execute, deliver and perform its obligations under the Indenture and the Agreement.

2. The Indenture and the Agreement have been duly authorized, executed and delivered by the Issuer and constitute valid and binding obligations of the Issuer enforceable upon the Issuer. The Indenture creates a valid security interest or lien on the Trust Estate.

3. The Series 2009 Bonds have been duly authorized, executed and delivered by the Issuer and are valid and binding limited obligations of the Issuer, secured by the related Indenture and payable by the Issuer solely from the Trust Estate for such series.

4. Under existing statutes, rulings and court decisions, and under applicable regulations and proposed regulations, interest on the Series 2009 Bonds is not includable in gross income for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations; however, with respect to corporations (as defined for federal income tax purposes), such interest is taken into account in determining adjusted current earnings for purposes of computing the alternative minimum tax imposed on such corporations. We express no opinion regarding any other federal tax consequences caused by the receipt or accrual of interest on, or ownership of, the Series 2009 Bonds. In rendering this opinion, we have assumed continuing compliance by the Issuers and Children’s with their respective covenants regarding certain requirements of the Code that must be satisfied subsequent to the issuance of the Series 2009 Bonds in order that the interest on the Series 2009 Bonds be, and continue to be, excluded from gross income for federal income tax purposes. Failure to comply with such covenants could cause interest on the Series 2009 Bonds to be included in federal gross income retroactive to the date of issuance of the Series 2009 Bonds.

5. Under existing statutes, interest on the Series 2009 Bonds is exempt from all present State of Georgia income taxation.

The rights of the owners of the Series 2009 Bonds and the enforceability of the Series 2009 Bonds, the Agreement and the Indenture may be subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting the enforcement of creditor’s rights generally and principles of equity applicable to the availability of specific performance or other equitable relief. We have not undertaken to notify any addressee of this opinion or any other person of any change in law or fact after the date of this opinion which might affect any of the opinions expressed herein.

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Very truly yours, KING & SPALDING LLP By:

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Schedule I

SunTrust Robinson Humphrey, Inc. Citigroup Global Markets Inc. Wachovia Bank, National Association d/b/a Wells Fargo Securities Merrill Lynch, Pierce, Fenner & Smith Incorporated

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King & Spalding LLP

1180 Peachtree Street, N.E.

Atlanta, Georgia 30309-3521

Main: 404/572-4600

Fax: 404/572-5100

December 2, 2009 Development Authority of Fulton County Atlanta, Georgia Children’s Healthcare of Atlanta, Inc. Atlanta, Georgia

J.P. Morgan Securities, Inc., as representative of the underwriters listed on Schedule I

New York, New York The Bank of New York Mellon Trust Company, N.A., as trustee Atlanta, Georgia

Re: $50,720,000 Development Authority of Fulton County Revenue Bonds (Children’s Healthcare of Atlanta, Inc. Project), Series 2009

To the Addressees:

We have acted as Bond Counsel in connection with the issuance by the Development Authority of Fulton County (the “Issuer”) of its $50,720,000 in aggregate principal amount Revenue Bonds (Children’s Healthcare of Atlanta, Inc. Project), Series 2009 (the “Series 2009 Bonds”). We have examined the law and such certified proceedings and other papers as we have deemed necessary to render this opinion, including a copy of the validation proceeding concluded in the Superior Court of Fulton County, Georgia, with respect to the Series 2009 Bonds. In all such examinations, we have assumed the genuineness of signatures of original documents and the conformity to original documents of all copies submitted to us as certified, conformed or photographic copies, and as to certificates of public officials, we have assumed the same to have been properly given and to be accurate.

The Series 2009 Bonds are being issued pursuant to the Development Authorities Law of

the State of Georgia (O.C.G.A. § 36-62-1, et seq., as amended), a resolution of the Issuer adopted on September 22, 2009, as supplemented on November 19, 2009, and the Trust Indenture, dated as of December 1, 2009 (the “Indenture”), between the Issuer and The Bank of New York Mellon Trust Company, N.A., as trustee (in such capacity, the “Trustee”). The Series 2009 Bonds are being sold to J.P. Morgan Securities, Inc. (the “Representative”), pursuant to a Bond Purchase Agreement, dated November 19, 2009 (the “Bond Purchase Agreement”), among Children’s Healthcare of Atlanta, Inc. (“Children’s”), the Issuer and the Representative, as representative of the underwriters named therein. The Series 2009 Bonds are being issued for the purpose of refunding all or a portion of the Issuer’s Refunding Revenue Bonds (Children’s Healthcare of Atlanta Project), Series 2008B (the “Fulton Series 2008B Bonds”), issued pursuant to a Trust Indenture, dated as of April 1, 2008, between the Issuer and The Bank of New York Mellon Trust Company, N.A.

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The Issuer and Children’s are entering into a Loan Agreement, dated as of December 1, 2009 (the “Agreement”), between the Issuer and Children’s, under which the Issuer has agreed to issue the Series 2009 Bonds and loan the proceeds of the sale thereof to Children’s for the purposes described above. The obligation of Children’s to repay the loan made pursuant to the Agreement is evidenced by the 2009-2 Master Note, dated the date of authentication of the Series 2009 Bonds (the “2009-2 Master Note”), under which Children’s has agreed to make payments sufficient to provide for the payment of the principal of, redemption premium (if any), and interest on the Series 2009 Bonds as the same become due and payable.

The 2009-2 Master Note is secured under the Master Trust Indenture, dated as of January 1, 2005 (the “Original Master Indenture”), between Children’s, Egleston Children’s Hospital at Emory University, Inc., Egleston Affiliated Services, Inc., TRE Properties, Inc., Children’s Healthcare of Atlanta Foundation, Inc., Scottish Rite Children’s Medical Center, Inc., Egleston Pediatric Group, Inc., Children’s Sedation Services, LLC and Children’s Anesthesia Services, LLC (collectively, the “Initial Obligated Group”) and The Bank of New York Mellon Trust Company, N.A., as master trustee (in such capacity, the “Master Trustee”), as supplemented by various supplemental indentures, between Children’s and the Master Trustee (the Original Master Indenture, as so supplemented, the “Master Indenture”). The Master Indenture permits the addition and removal of entities obligated under the Master Indenture under the circumstances and subject to the provisions of the Master Indenture (the Initial Obligated Group, with such additions or removals, the “Obligated Group”). Under the Master Indenture, each member of the Obligated Group has agreed, among other things, to guarantee the obligations of each other member of the Obligated Group secured under the Master Indenture, subject to the “Maximum Guaranty Liability” (as defined therein). Under the terms of the Master Indenture, additional obligations may be issued and secured thereunder from time to time in accordance with the terms of the Master Indenture that rank on a parity as to the lien on the trust estate created thereunder with the lien thereon created in favor of the 2009-2 Master Note. Obligations issued under the Master Indenture are not secured by any lien on, or pledge of, any property, assets or revenues of the Obligated Group.

Under the Indenture, the Issuer has assigned to the Trustee and pledged to the payment of the Series 2009 Bonds the trust estate (the “Trust Estate”) which includes (i) all right, title and interest of the Issuer in and to the Agreement and the 2009-2 Master Note, including the payments made under the 2009-2 Master Note, and (ii) all right, title and interest of the Issuer in and to all moneys and securities from time to time held by the Trustee in certain funds established under the terms of the Indenture. The Series 2009 Bonds are subject to registration of transfer and to exchange, and to optional, extraordinary and mandatory redemption at the times, in the amounts and on the terms specified in the Indenture.

Contemporaneously with the sale and issuance of the Series 2009 Bonds, the DeKalb Private Hospital Authority (the “DeKalb Authority” and, together with the Issuer, the “Issuers”) is issuing its Revenue Anticipation Certificates (Children’s Healthcare of Atlanta, Inc. Project), Series 2009 in the aggregate principal amount of $249,260,000 (the “DeKalb Series 2009 Certificates” and, together with the Series 2009 Bonds, the “Composite Bonds”) for the purpose of refunding all or a portion of the DeKalb Authority’s (a) Variable Rate Demand Revenue

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Anticipation Certificates (Egleston Children’s Hospital at Emory University, Inc. Project), Series 1994A (the “Series 1994A Certificates”); (b) Variable Rate Demand Revenue Anticipation Certificates (Egleston Children’s Hospital at Emory University, Inc. Project), Series 1994B (the “Series 1994B Certificates”); (c) Variable Rate Demand Revenue Anticipation Certificates (Egleston Children’s Health Care System Project), Series 1995A (the “Series 1995A Certificates”); (d) Variable Rate Demand Revenue Anticipation Certificates (Egleston Children’s Health Care System Project), Series 1995B (the “Series 1995B Certificates”); (e) Variable Rate Demand Revenue Anticipation Certificates (ESR Children’s Health Care System Project), Series 1998A (the “Series 1998A Certificates”); (f) Variable Rate Demand Revenue Anticipation Certificates (ESR Children’s Health Care System Project), Series 1998B (the “Series 1998B Certificates”); (g) Refunding Revenue Anticipation Certificates (Children’s Healthcare of Atlanta, Inc. Project), Series 2008B (the “Series 2008B Certificates”), and (h) Refunding Revenue Anticipation Certificates (Children’s Healthcare of Atlanta, Inc. Project), Series 2008C (the “Series 2008C Certificates” and together with the Series 1994A Certificates, the Series 1994B Certificates, the Series 1995A Certificates, the Series 1995B Certificates, the Series 1998A Certificates, the Series 1998B Certificates, the Series 2008B Certificates and the Fulton Series 2008B Bonds, the “Refunded Bonds”). Under the provisions of the Internal Revenue Code of 1986, as amended (the “Code”), and applicable Treasury Regulations, the Composite Bonds may be deemed to be a single issue of obligations for certain purposes under the Code, and the exclusion from gross income for federal income tax purposes of the interest on each series of the Composite Bonds may be dependent upon whether the interest on each other series of the Composite Bonds is excluded from gross income for federal income tax purposes.

As to questions of fact material to our opinion, we have relied upon (i) representations of the Issuers and Children’s, (ii) certified proceedings and other certifications of public officials furnished to us, (iii) certifications by officials of Children’s, and (iv) representations of Children’s relating to, among other things, the use of the proceeds of the Composite Bonds and the Refunded Bonds, the design, scope, function, cost and reasonably expected weighted average economic life of the facilities financed or refinanced with the Composite Bonds, the purpose for which Children’s and other members of the Obligated Group are organized and the nature of their activities, and the status of certain members of the Obligated Group as entities described in Section 501(c)(3) of the Code, contained in certifications of Children’s, dated the date of this opinion, without undertaking to verify the same by independent investigation.

We have not been engaged or undertaken to review the accuracy, completeness or sufficiency of the Official Statement, dated November 19, 2009 (the “Official Statement”), relating to the Composite Bonds, or any other offering material relating to the Composite Bonds, and we express no opinion relating thereto. We express no opinion as to compliance by the Issuer or the Representative with any federal or state statute, rule or regulation which may be applicable to the offer or sale of the Series 2009 Bonds. We express no opinion herein as to the corporate existence and good standing of Children’s or other members of the Obligated Group, or the authorization, execution, delivery or enforceability of the Agreement, the 2009-2 Master Note or the Master Indenture, but have assumed the same are enforceable against the parties thereto other than the Issuer.

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Based upon our examination, we are of the opinion, as of the date hereof and under existing law as follows:

1. The Issuer is a duly created and validly existing public body corporate and politic of the State of Georgia with full power and authority (a) to issue and sell the Series 2009 Bonds, (b) to loan the proceeds from the sale of the Series 2009 Bonds to Children’s for the purposes described in the Agreement and (c) to execute, deliver and perform its obligations under the Indenture and the Agreement.

2. The Indenture and the Agreement have been duly authorized, executed and delivered by the Issuer and constitute valid and binding obligations of the Issuer enforceable upon the Issuer. The Indenture creates a valid security interest or lien on the Trust Estate.

3. The Series 2009 Bonds have been duly authorized, executed and delivered by the Issuer and are valid and binding limited obligations of the Issuer, secured by the Indenture and payable by the Issuer solely from the Trust Estate.

4. Under existing statutes, rulings and court decisions, and under applicable regulations and proposed regulations, interest on the Series 2009 Bonds is not includable in gross income for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations; however, with respect to corporations (as defined for federal income tax purposes), such interest is taken into account in determining adjusted current earnings for purposes of computing the alternative minimum tax imposed on such corporations. We express no opinion regarding any other federal tax consequences caused by the receipt or accrual of interest on, or ownership of, the Series 2009 Bonds. In rendering this opinion, we have assumed continuing compliance by the Issuers and Children’s with their respective covenants regarding certain requirements of the Code that must be satisfied subsequent to the issuance of the Series 2009 Bonds in order that the interest on the Series 2009 Bonds be, and continue to be, excluded from gross income for federal income tax purposes. Failure to comply with such covenants could cause interest on the Series 2009 Bonds to be included in federal gross income retroactive to the date of issuance of the Series 2009 Bonds.

5. Under existing statutes, interest on the Series 2009 Bonds is exempt from all present State of Georgia income taxation. The rights of the owners of the Series 2009 Bonds and the enforceability of the Series 2009 Bonds, the Agreement and the Indenture may be subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting the enforcement of creditor’s rights generally and principles of equity applicable to the availability of specific performance or other equitable relief. We have not undertaken to notify any addressee of this opinion or any other person of any change in law or fact after the date of this opinion which might affect any of the opinions expressed herein.

Very truly yours,

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KING & SPALDING LLP By:

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Schedule I

SunTrust Robinson Humphrey, Inc. Citigroup Global Markets Inc. Wachovia Bank, National Association d/b/a Wells Fargo Securities Merrill Lynch, Pierce, Fenner & Smith Incorporated

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APPENDIX E

FORM OF CONTINUING DISCLOSURE AGREEMENT

CONTINUING DISCLOSURE AGREEMENT

This Continuing Disclosure Agreement, dated as of December __, 2009 (this “Disclosure Agreement”) is executed and delivered by Children’s Healthcare of Atlanta, Inc. (“CHOA”) and The Bank of New York Mellon Trust Company, N.A., as trustee (the “Trustee”) under the Trust Indenture, dated as of December 1, 2009 (the “Indenture”), between the ________________ (the “Authority”) and the Trustee pursuant to which $______________ aggregate principal amount of the Authority’s _________________ (Children’s Healthcare of Atlanta, Inc.), Series 2009 (the “Bonds”) are being issued.

The proceeds of the Bonds are being loaned to CHOA pursuant to a Loan Agreement, dated as of December 1, 2009 (the “Loan Agreement”), between the Authority and CHOA. CHOA and the Trustee hereby covenant and agree as follows:

SECTION 1. Purpose of the Disclosure Agreement. This Disclosure Agreement is being executed and delivered by CHOA and the Trustee for the benefit of the Beneficial Owners (as defined herein) of the Bonds and in order to assist the Participating Underwriter (as defined herein) in complying with Securities and Exchange Commission Rule 15c2-12(b)(5).

SECTION 2. Definitions. In addition to the definitions set forth above and in the Indenture and Loan Agreement, which apply to any capitalized term used in this Disclosure Agreement unless otherwise defined in this Section 2, the following capitalized terms shall have the following meanings:

“Annual Report” means any Annual Report provided by CHOA pursuant to, and as described in, Sections 5 and 6 of this Disclosure Agreement.

“Beneficial Owner” means any person which (a) has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Bonds (including persons holding Bonds through nominees, depositories or other intermediaries), or (b) is treated as the owner of any Bonds for federal income tax purposes.

“Dissemination Agent” means CHOA or any successor Dissemination Agent designated in writing by CHOA and which has filed with CHOA a written acceptance of such designation.

“EMMA” shall mean the Electronic Municipal Market Access system as described in 1934 Act Release No. 59062 and maintained by the Municipal Securities Rulemaking Board for purposes of the Rule as further described in Section 6(b) hereof.

“Fiscal Quarter” means each quarter, other than the final quarter, occuring during each Fiscal Year of CHOA.

“Fiscal Year” means any period of 12 consecutive months adopted by CHOA as CHOA’s fiscal year for financial reporting purposes and initially shall mean the period beginning on January 1 of a calendar year and ending on December 31 of the following calendar year.

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“Listed Events” shall mean any of the events Listed in Section 7(a) of this Disclosure Agreement.

“MSRB” means the Municipal Securities Rulemaking Board.

“Participating Underwriter” means collectively the original underwriters of the Bonds required to comply with the Rule in connection with the offering of the Bonds.

“Quarterly Report” means any Quarterly Report provided by CHOA pursuant to, and as described in, Sections 3 and 4 of this Disclosure Agreement.

“Rule” means 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.

“SID” means any public or private repository or entity designated by the State of Georgia as a state repository for the purpose of the Rule. As of the date of this Disclosure Agreement, there is no SID.

SECTION 3. Provision of Quarterly Reports.

(a) CHOA shall provide, or cause the Dissemination Agent (if other than CHOA) to provide, to the MSRB in an electronic format as prescribed by the MSRB (which, as of the date hereof, is EMMA), and accompanied by identifying information as prescribed by the MSRB, not later than 60 days after the end of each Fiscal Quarter of CHOA, commencing with the report for the first Fiscal Quarter in 2010, a Quarterly Report which is consistent with the requirements of Section 4 of this Disclosure Agreement. The Quarterly Report may be submitted as a single document or as separate documents comprising a package, and may cross-reference other information as provided in Section 4 of this Disclosure Agreement.

(b) The Dissemination Agent shall:

(i) (if the Dissemination Agent is other than CHOA), file a report with CHOA certifying that the Quarterly Report has been provided pursuant to this Disclosure Agreement, stating the date it was provided to the MSRB; and

(ii) send a notice to the MSRB in substantially the form attached as Exhibit A if CHOA is unable to verify that a Quarterly Report has been provided to the MSRB by the date required in paragraph (a) of this Section 3.

SECTION 4. Content of Quarterly Reports.

The Quarterly Report for each Fiscal Quarter, which is to be provided within 60 days after the end of such Fiscal Quarter pursuant to Section 3(a), shall contain or include by reference: information for the preceding Fiscal Quarter regarding the following categories of financial information and operating data of CHOA, as originally set forth under the heading “SELECTED UTILIZATION AND FINANCIAL INFORMATION” in Appendix A to the Official Statement dated November 19, 2009 (the “Official Statement”) with respect to the Bonds: (i) historical utilization set forth in the table entitled “Summary of Historical Utilization”;

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(ii) percentages of gross patient service revenues set forth in the table under the heading “Payor Mix”; (iii) information contained in the tables with respect to CHOA’s consolidated statement of operations and balance sheets under the heading “Summary of Financial Information”; and (iv) information contained in the table entitled “Days Cash on Hand” for CHOA and its consolidated affiliates as set forth under the heading “Certain Financial Ratios.”

SECTION 5. Provision of Annual Reports.

(a) CHOA shall provide, or cause the Dissemination Agent (if other than CHOA) to provide, to the MSRB in an electronic format as prescribed by the MSRB (which, as of the date hereof, is EMMA), and accompanied by identifying information as prescribed by the MSRB, not later than 150 days after the end of CHOA’s Fiscal Year, commencing with the report for Fiscal Year 2009, an Annual Report which is consistent with the requirements of Section 6 of this Disclosure Agreement. The Annual Report may be submitted as a single document or as separate documents comprising a package, and may cross-reference other information as provided in Section 6 of this Disclosure Agreement; provided that the audited financial statements of CHOA may be submitted separately from the balance of the Annual Report and later than the date required above for the filing of the Annual Report if they are not available by that date. In such event, the audited financial statements will be submitted promptly upon their availability.

(b) The Dissemination Agent shall:

(i) (if the Dissemination Agent is other than CHOA), file a report with CHOA certifying that the Annual Report has been provided pursuant to this Disclosure Agreement, stating the date it was provided to the MSRB; and

(ii) send a notice to the MSRB in substantially the form attached as Exhibit B if CHOA is unable to verify that an Annual Report has been provided to the MSRB by the date required in paragraph (a) of this Section 5.

SECTION 6. Content of Annual Reports.

(a) The Annual Report for each Fiscal Year, which is to be provided within 150 days after the end of such Fiscal Year pursuant to Section 5(a), shall contain or include by reference:

(i) the audited financial statements of CHOA for the preceding Fiscal Year, which shall be prepared in accordance with generally accepted accounting principles, as in effect from time to time, and which shall be accompanied by an opinion letter, if available at the time of submission of the Annual Report to the MSRB pursuant to Section 5(a) hereof, resulting from an audit conducted by an independent certified public accountant or firm of independent certified public accountants in conformity with generally accepted auditing standards;

(ii) to the extent not included in the audited financial statements (including the notes thereto) of CHOA, if generally accepted accounting principles have changed since the last Annual Report submitted pursuant to Section 5(a) hereof and if such changes are material to CHOA, a narrative explanation describing the impact of such changes on CHOA; and

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(iii) information for the preceding Fiscal Year regarding the following categories of financial information and operating data of CHOA, as originally set forth under the heading “SELECTED UTILIZATION AND FINANCIAL INFORMATION” in Appendix A to the Official Statement, to the extent not included in the audited financial statements (including the notes thereto) of CHOA furnished pursuant to paragraph 6(a)(i) above: (i) all information required by CHOA to be furnished in the Quarterly Reports pursuant to Section 4 above; (ii) amounts of unreimbursed costs for indigent and charity care and the treatment of Medicaid patients as set forth in the table under the heading “Uncompensated Care”; (iii) information contained in the table entitled “Actual and Pro Forma Maximum Annual Debt Service Coverage” with respect to certain financial ratios of CHOA and its consolidated affiliates (other than the information with respect to pro forma amounts in the table) as set forth under the heading “Certain Financial Ratios”; (iv) information with respect to CHOA’s Interest Rate Agreements under the heading “Interest Rate Agreements”; and (v) the percentage of total consolidated revenues for such Fiscal Year contributed by the Obligated Group.

(b) Any or all of the items listed in paragraph (a) of this Section 6 may be included by specific reference to other documents, including official statements of debt issues with respect to which CHOA is an “obligated person” (as defined in the Rule), which have been submitted to the MSRB or the Securities and Exchange Commission. If the document included by reference is a final official statement, it must be available from the MSRB or have been deposited with the MSRB. CHOA shall clearly identify each such other document so included by reference.

SECTION 7. Reporting of Significant Events.

(a) CHOA shall provide or cause to be provided through the Dissemination Agent, in a timely manner, to the MSRB in an electronic format as prescribed by the MSRB (which, as of the date hereof, is EMMA) and to the SID, if any, notice of the occurrence of any of the following events with respect to the Bonds, if such event is material:

1. Principal and interest payment delinquencies,

2. Non-payment related defaults,

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 or events affecting the tax-exempt status of the Bonds,

7. Modifications to rights of holders of the Bonds,

8. Bond calls,

9. Defeasances,

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10. Release, substitution, or sale of property securing repayment of the Bonds, and

11. Rating changes.

(b) Notwithstanding the foregoing, notice of Listed Events described in paragraph (a)(8) and (9) need not be given under this Section 7 any earlier than the date notice (if any) of the underlying event is given to Beneficial Owners of affected Bonds pursuant to the Indenture.

SECTION 8. Additional Information. Nothing in this Disclosure Agreement shall be deemed to prevent CHOA 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 or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Agreement. If CHOA chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Agreement, CHOA shall have no obligation under this Disclosure Agreement to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event.

SECTION 9. Termination of Reporting Obligation. CHOA reserves the right to terminate its obligations under this Disclosure Agreement if and when it no longer remains an obligated person with respect to the Bonds within the meaning of the Rule; in particular upon the occurrence of the legal defeasance, prior redemption, or payment in full of all of the Bonds. The Dissemination Agent will provide notice of such termination to the MSRB through EMMA, and the SID, if any.

SECTION 10. Dissemination Agent. CHOA, from time to time, may appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Agreement, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. A Dissemination Agent other than CHOA shall not be responsible in any manner for the content of any notice or report prepared by CHOA pursuant to this Disclosure Agreement.

SECTION 11. Amendment. Notwithstanding any other provision of this Disclosure Agreement, CHOA and the Trustee may amend this Disclosure Agreement (and the Trustee shall agree to any amendments requested by CHOA), and any provision of this Disclosure Agreement may be waived, if:

(a) such amendment is made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature, or status of the obligated person on the Bonds, or type of business conducted;

(b) such amendment is supported by an opinion of counsel expert in federal securities laws, to the effect that the undertakings contained herein, as amended, would have complied with the requirements of the Rule on the date hereof, after taking into account any amendments or official interpretations of the Rule, as well as any change in circumstances; and

(c) such amendment does not materially impair the interests of the Beneficial Owners, as determined either by an opinion counsel expert in securities laws filed with CHOA, or by the

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approving vote of the Beneficial Owners pursuant to the terms of the Indenture at the time of such amendment.

If any provision of this Disclosure Agreement is amended, the first release of the Annual Report containing any amended financial information or operating data shall explain, in narrative form, the reasons for the amendment and the impact of the change in the type (or in the case of a change of accounting principles, on the presentation) of financial information or operating data being provided. In addition, if the amendment relates to the accounting principles to be followed in preparing financial statements, (i) notice of such change shall be given in the same manner as for a Listed Event under Section 7 and (ii) the Annual Report for the year in which the change is made should present a comparison (in narrative form and also, if feasible, in quantitative form) between the financial statements as prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles.

SECTION 12. Default. If CHOA fails to comply with any provision of this Disclosure Agreement, any Beneficial Owner’s right to enforce the provisions of this undertaking shall be limited to a right to obtain mandamus or specific performance by court order of CHOA’s obligations pursuant to this Disclosure Agreement. Any failure by CHOA to comply with the provisions of this Disclosure Agreement shall not be an event of default under the Indenture or the Agreement.

SECTION 13. Duties, Immunities, and Liabilities of Dissemination Agent and Trustee. The Dissemination Agent and the Trustee shall have only such duties as are specifically set forth in this Disclosure Agreement. The Trustee is entering into this Disclosure Agreement in its capacity as Trustee under the Indenture, and as such shall be entitled to the protection of the provisions thereof, including specifically Article VII thereof.

SECTION 14. Beneficiaries. This Disclosure Agreement shall inure solely to the benefit of CHOA, the Dissemination Agent (if other than CHOA), the Participating Underwriter, the Trustee and Beneficial Owners, and shall create no rights in any other person or entity.

SECTION 15. Governing Law. This Disclosure Agreement shall be interpreted in accordance with the laws of the State of Georgia.

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CHILDREN’S HEALTHCARE OF ATLANTA, INC. By:___________________________________

Name: Title:

THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A., as Trustee By:___________________________________

Name: Title:

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EXHIBIT A

NOTICE TO MSRB OF FAILURE TO FILE QUARTERLY REPORT

Name of Issuer: ___________________________________

Name of Bond Issue: $__________________________________ (Children’s Healthcare of Atlanta, Inc.), Series 2009

Name of Obligated Person: Children’s Healthcare of Atlanta, Inc.

Date of Issuance: ___________, 2009

NOTICE IS HEREBY GIVEN that Children’s Healthcare of Atlanta, Inc. (“CHOA”) has not provided a Quarterly Report with respect to the above-named Bonds as required by Section 3(a) of the Continuting Disclosure Agreement dated as of December __, 2009, by CHOA in favor of The Bank of New York Mellon Trust Company, N.A., as Trustee. CHOA anticipates that the Quarterly Report will be filed by __________________.

This notice is based on the best information available at the time of dissemination. Any questions regarding this notice should be directed to _________________________________.

Dated:___________________ [Name of Dissemination Agent] By:___________________________________

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EXHIBIT B

NOTICE TO MSRB OF FAILURE TO FILE ANNUAL REPORT

Name of Issuer: ___________________________________

Name of Bond Issue: $__________________________________(Children’s Healthcare of Atlanta, Inc.), Series 2009

Name of Obligated Person: Children’s Healthcare of Atlanta, Inc.

Date of Issuance: ___________, 2009

NOTICE IS HEREBY GIVEN that Children’s Healthcare of Atlanta, Inc. (“CHOA”) has not provided an Annual Report with respect to the above-named Bonds as required by Section 5(a) of the Continuting Disclosure Agreement dated as of December __, 2009, by CHOA in favor of The Bank of New York Mellon Trust Company, N.A., as Trustee. CHOA anticipates that the Annual Report will be filed by __________________.

This notice is based on the best information available at the time of dissemination. Any questions regarding this notice should be directed to _________________________________.

Dated:___________________ [Name of Dissemination Agent] By:___________________________________

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