Transcript
Page 1: Florida Development Finance Corporation · Florida development Finance corporation ... provided, the Borrower is not ... Securities Offered $59,405,000 Florida Development Finance

New Issue – Book eNtry oNly ratINgs: see “ratINgs” hereIN

$59,405,000Florida development Finance corporation

Healthcare Facilities revenue Bonds (UF Health-Jacksonville project), Series 2013B (r-Floats)

Bond Issuer. The Bonds are being issued by Florida Development Finance Corporation (the “Issuer”).

Beneficiary of Financing. The Bonds are being issued to provide financing for the benefit of Shands Jacksonville Medical Center, Inc. (the “Borrower” or “SJMC”).

Shands Jacksonville medical center, inc.

Purpose of Financing. Proceeds of the Bonds will be used to refund certain outstanding debt of the Borrower.

Authorizing Document. The Bonds are being issued pursuant to a Series 2013B Bond Trust Indenture to be dated as of November 1, 2013 (the “Bond Indenture”) between the Issuer and U.S. Bank National Association, as bond trustee.

Source of Payment. The Bonds are limited obligations payable solely out of (a) payments to be made by the Borrower pursuant to a Loan Agreement to be dated as of November 1, 2013 (the “Loan Agreement”) between the Issuer and the Borrower and (b)  an obligation (the “Master Indenture Obligation”) issued by the Borrower under the Master Trust Indenture dated June 1, 2013, as supplemented (the “Master Trust Indenture”), between the Members of the Obligated Group and U.S. Bank National Association, as master trustee, to evidence and secure the Borrower’s obligation under the Loan Agreement and (c) any other assets that constitute part of the trust estate established under the Bond Indenture, including money in the funds and accounts established under the Bond Indenture. the Bonds are limited obligations of the issuer, payable solely out of (a) payments to be made by the Borrower pursuant to the loan agreement with respect to debt service on the Bonds, (b) payments by the obligated Group pursuant to the master indenture obligation, and (c) any other assets that constitute part of the trust estate established under the Bond indenture, including money in the funds and accounts established under the Bond indenture. the Bonds do not constitute general obligations of the issuer, the State of Florida (the “State”) or any political subdivision or agency of the State. none of the issuer, the State nor any political subdivision or agency of the State has pledged its full faith and credit to the payment of the Bonds. the issuer has no taxing power.

Pricing Terms and Payment Dates. Pricing information for the Bonds, principal maturities, interest rates, payment dates and authorized denominations are shown on the inside cover of this Official Statement. All Bonds will be issued initially in the R-FLOATs Mode with an R-FLOATs Weekly Period. While in this mode, the Bonds shall be in authorized denominations of $100,000 or any larger amount that is a multiple of $1,000. The initial interest rate for the Bonds will be communicated by the Remarketing Agent to the prospective purchasers of such Bonds, and thereafter will be determined as described herein for Bonds in the R-FLOATs Mode with an R-FLOATs Weekly Period. Interest on the Bonds will accrue from the date of delivery, and while in the R-FLOATs Mode with an R-FLOATs Weekly Period, will be payable on the first Business Day of each month, commencing December 2, 2013. The Bonds will continue to bear interest at the R-FLOATs Weekly Rate unless, at the option of the Borrower, the Bonds are converted to bear interest for a different R-FLOATs Period or at a different Interest Rate Mode, as described herein. this official Statement describes the Bonds only while in the r-Floats mode.

Redemption; Tender Rights. The Bonds are subject to optional and mandatory redemption and purchase in lieu of optional redemption prior to maturity as more fully described herein. The Bonds are also subject to optional and mandatory tender to the extent and as described herein while in the R-FLOATs Mode. Payment for Bonds which are tendered for purchase will be made from proceeds of the remarketing of such Bonds or funds the Borrower elects (at its sole discretion) to provide for such purpose; provided, the Borrower is not obligated to pay the purchase price of any Bonds tendered for purchase. For so long as the Bonds are in the R-FLOATs Mode, the Bonds will not be supported by a letter of credit, line of credit, standby bond purchase agreement, bond insurance or any other liquidity facility.

Form and Date of Delivery. The Bonds are being issued in the book-entry only form under the DTC system. The Bonds are expected to be delivered on November 21, 2013.

Legal Opinions. Nabors, Giblin & Nickerson, P.A., Tampa, Florida, has served as bond counsel and will deliver its opinion with respect to the Bonds in substantially the form attached as Appendix e. In connection with the issuance of the Bonds, Broad and Cassel, Orlando, Florida, has served as counsel to the Issuer, Jonathan W. Dixon III, Senior Counsel to SJHC, Jacksonville, Florida, has served as counsel to the Borrower and the Obligated Group, and Balch & Bingham LLP, Birmingham, Alabama, has served as counsel to the Underwriter.

Tax Status. Under existing statutes, regulations, rulings and court decisions, interest on the Bonds (i) will not be included in gross income of the holders for purposes of federal income taxation and (ii) will not be an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations, subject to limitations or exceptions described under “TAx STATuS”. The opinion of bond counsel will address these aspects of the tax status of the Bonds and should be read in its entirety for a complete understanding of the scope of the opinion and the conclusions expressed.

Bofa merrill lynchThe date of this Official Statement is November 13, 2013.

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$59,405,000 Florida Development Finance Corporation

Healthcare Facilities Revenue Bonds (UF Health-Jacksonville Project), Series 2013B (R-FLOATs)

MATURITY, PRINCIPAL AMOUNT, PRICE AND INTEREST RATE INFORMATION AND ORIGINAL CUSIP

Principal Amount: $59,405,000 Price: 100% CUSIP Number: 34061QAK3

Last Day of First R-FLOATs Weekly Rate: Wednesday, November 27, 2013 First R-FLOATs Rate Determination Date: Wednesday, November 27, 2013 First Interest Payment Date: December 2, 2013 R-FLOATs Rate Determination Dates: Generally, Thursday of each week Interest Payment Dates: Generally, the first Business Day of each month Maturity Date: February 1, 2029

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TABLE OF CONTENTS Page

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

DEFINITIONS ................................................................................................................................................................... 2

THE BONDS .................................................................................................................................................................... 5 Interest Rate Mode .................................................................................................................................................... 5 Date, Form of Bonds and Denominations ................................................................................................................. 6 Book Entry System ................................................................................................................................................... 6 Interest Rate and R-FLOATs Periods ....................................................................................................................... 6 Calculation of Interest Payments .............................................................................................................................. 7 Interest Payment Dates ............................................................................................................................................. 7 Optional Tender of Bonds in R-FLOATs Mode ....................................................................................................... 7 Mandatory Tender of Bonds in the R-FLOATs Mode .............................................................................................. 7 R-FLOATs Non-Remarketed Bonds ........................................................................................................................ 8 Redemption Prior to Maturity ................................................................................................................................... 8 Purchase of Bonds Upon Conversion of Interest Rate Mode .................................................................................. 10

SOURCE OF PAYMENT AND SECURITY .......................................................................................................................... 10 Source of Payment .................................................................................................................................................. 10 Security for Payment of the Bonds ......................................................................................................................... 11 The Master Trust Indenture .................................................................................................................................... 11 Mortgage ................................................................................................................................................................. 13 No Debt Service Reserve Fund ............................................................................................................................... 13 Limitations on Remedies ........................................................................................................................................ 13

THE PLAN OF FINANCE ................................................................................................................................................. 14 Sources and Uses of Funds ..................................................................................................................................... 14 Debt Service Requirements on the Bonds and Series 2013A Bonds ...................................................................... 15

THE ISSUER .................................................................................................................................................................. 16 General .................................................................................................................................................................... 16 Disclosure Required by Section 517.051, Florida Statutes ..................................................................................... 16

THE BORROWER AND THE OBLIGATED GROUP ............................................................................................................ 17

RISK FACTORS .............................................................................................................................................................. 17 General .................................................................................................................................................................... 17 Mortgage or Other Liens ......................................................................................................................................... 17 Limitation on Remedies Upon Default ................................................................................................................... 18 Secondary Market ................................................................................................................................................... 18 Parity and Additional Indebtedness ........................................................................................................................ 18 Interest Rate Swap Risk .......................................................................................................................................... 18 Impact of Market Turmoil ...................................................................................................................................... 18 Health Care Reform ................................................................................................................................................ 19 Health Care Industry Factors Affecting the Obligated Group ................................................................................ 20 Increased Competition ............................................................................................................................................ 26 Affiliation, Merger, Acquisition and Divestiture .................................................................................................... 26 Licensing, Surveys, Investigations and Audits ....................................................................................................... 27 Antitrust .................................................................................................................................................................. 27 Cybersecurity .......................................................................................................................................................... 27 Nonprofit Health Care Environment ....................................................................................................................... 28 Tax-Exempt Status of Bonds .................................................................................................................................. 28 Other Risk Factors .................................................................................................................................................. 29

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CONTINUING DISCLOSURE ............................................................................................................................................ 30 General .................................................................................................................................................................... 30 Consequences of Failure to Provide Information ................................................................................................... 30 Compliance with Previous Undertakings ................................................................................................................ 30

TAX STATUS ................................................................................................................................................................. 31 General .................................................................................................................................................................... 31 Opinion of Bond Counsel ....................................................................................................................................... 31 Collateral Tax Consequences .................................................................................................................................. 31 Other Tax Matters ................................................................................................................................................... 32

LEGAL COUNSEL .......................................................................................................................................................... 32

INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS ........................................................................................................ 32

LITIGATION .................................................................................................................................................................. 33

RATINGS ....................................................................................................................................................................... 33

UNDERWRITING ............................................................................................................................................................ 33

REMARKETING ............................................................................................................................................................. 34 General .................................................................................................................................................................... 34 Certain Considerations Concerning the Remarketing of the Bonds........................................................................ 34

MISCELLANEOUS .......................................................................................................................................................... 35 APPENDIX A - Information Regarding UF Health – Jacksonville APPENDIX B - Financial Statements of SJHC and Subsidiaries APPENDIX C - Form of Bond Indenture APPENDIX D - Excerpted Provisions of the Loan Agreement and Master Trust Indenture APPENDIX E - Form of Approving Opinion of Bond Counsel APPENDIX F - The DTC Book-Entry Only System APPENDIX G - Form of Continuing Disclosure Agreement

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SUMMARY OF THE OFFERING Issuer

Borrower

Florida Development Finance Corporation

Shands Jacksonville Medical Center, Inc.

Securities Offered $59,405,000 Florida Development Finance Corporation Healthcare Facilities Revenue Bonds (UF Health-Jacksonville Project), Series 2013B (R-FLOATs) due on the date set forth on the inside cover page.

Payment Obligations The Bonds are limited obligations of the Issuer, payable solely out of (a) payments to be made by the Borrower pursuant to the Loan Agreement with respect to debt service on the Bonds, (b) payments by the Obligated Group pursuant to the Master Indenture Obligation, and (c) any other assets that constitute part of the Trust Estate established under the Bond Indenture, including money in the funds and accounts established under the Bond Indenture. The Bonds do not constitute general obligations of the Issuer, the State of Florida (the “State”) or any political subdivision or agency of the State. None of the Issuer, the State nor any political subdivision or agency of the State has pledged its full faith and credit to the payment of the Bonds. The Issuer has no taxing power. See “SOURCE OF PAYMENT AND SECURITY”.

Interest Accrual and Payment at R-FLOATs Weekly Rate

The Bonds will initially be issued in the R-FLOATs Mode and will bear interest at an R-FLOATs Weekly Rate. For the period from and including the date of delivery of the Bonds to and including the last effective date of the first R-FLOATs Weekly Rate listed on the inside cover page, the interest rate on the Bonds will be determined by Merrill Lynch, Pierce, Fenner & Smith Incorporated, in its capacity as remarketing agent for the Bonds (in such capacity, the “Remarketing Agent”), on or about the Business Day immediately preceding such date of delivery of the Bonds, and thereafter during the initial Weekly Rate Period will be determined by the Remarketing Agent as described herein for Bonds in the R-FLOATs Mode with an R-FLOATs Weekly Period. The first R-FLOATs Rate Determination Date for the Bonds will be Wednesday, November 27, 2013, and thereafter R-FLOATs Rate Determination Dates for Bonds bearing interest at an R-FLOATs Weekly Rate will occur every Thursday, subject to certain conditions and exceptions. While the Bonds are in an R-FLOATs Weekly Period, interest accrued through the day prior to the first Business Day of each month will be payable on the first Business Day of each month, commencing December 2, 2013. The Borrower may from time to time elect for the Bonds to bear interest at another R-FLOATs Rate as set forth and described herein. See “THE BONDS– Interest Payment Dates”.

Redemption The Bonds are subject to optional and mandatory redemption and purchase in lieu of the optional redemption prior to maturity as more fully described herein. See “THE BONDS– Redemption Prior to Maturity”.

Tender The Bonds are subject to optional and mandatory tender to the extent and as described herein while in the R-FLOATs Mode. Payment for Bonds which are tendered for purchase will be made solely from the proceeds of the remarketing of such Bonds or funds that the Borrower elects (at its sole discretion) to provide for such purchase; provided, however, the Borrower is not obligated to pay the purchase price of any Bonds tendered for purchase. For so long as the Bonds are in the R-FLOATs Mode, the Bonds will not be supported by a letter of credit, line of credit, standby bond purchase agreement, bond insurance, or any other liquidity facility. See “THE BONDS– Optional Tender of the Bonds in R-FLOATs Mode” and “THE BONDS– Mandatory Tender of Bonds in the R-FLOATs Mode”.

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Date of Delivery November 21, 2013.

Authorized Denominations $100,000, and any larger amount that is a multiple of $1,000.

Form and Depository The Bonds will be delivered solely in registered form under a global book-entry system through the facilities of DTC.

Use of Proceeds Proceeds of the Bonds will be used to refund certain outstanding debt of the Borrower. See “THE PLAN OF FINANCING” herein.

Ratings Moody’s: “Baa3/NR”; Fitch: “BBB+”.

THE BONDS HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION (“SEC”) UNDER THE SECURITIES ACT OF 1933, AS AMENDED, IN RELIANCE UPON THE EXEMPTION CONTAINED IN SECTION 3(a)(2) OF SUCH ACT; AND THE BOND INDENTURE HAS NOT BEEN QUALIFIED UNDER THE TRUST INDENTURE ACT OF 1939, AS AMENDED, IN RELIANCE UPON CERTAIN EXEMPTIONS CONTAINED IN SUCH ACT.

THE BONDS HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SEC OR BY THE SECURITIES COMMISSION OR ANY REGULATORY AUTHORITY OF ANY STATE, NOR HAS THE SEC OR ANY STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY PASSED UPON THE ACCURACY OR ADEQUACY OF THIS OFFICIAL STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

Right to Tender and Non-Remarketed Bonds

The Borrower does not expect to maintain a letter of credit, line of credit, standby bond purchase agreement, bond insurance or any other type of liquidity facility with respect to the Bonds. Payment for Bonds which are tendered for purchase will be made only from the proceeds of the remarketing of such Bonds. The Borrower may, but is not obligated to, pay the purchase price of any Bond tendered for purchase.

If adequate funds are not available in the Bond Purchase Fund on any R-FLOATs Tender Date to pay the Purchase Price of all Bonds tendered for purchase pursuant to the R-FLOATs Tender provisions of the Bond Indenture, no Bonds shall be purchased on such R-FLOATs Tender Date pursuant to the R-FLOATs Tender provisions of the Bond Indenture, and all Bonds tendered for purchase on such R-FLOATs Tender Date pursuant to the R-FLOATs Tender provisions of the Bond Indenture are referred to in the Bond Indenture as “R-FLOATs Non-Remarketed Bonds”. The Bond Trustee shall return all R-FLOATs Non-Remarketed Bonds to the holders thereof, and the Bond Trustee shall return any Remarketing Proceeds deposited in the Bond Purchase Fund with respect to such R-FLOATs Non-Remarketed Bonds to the Remarketing Agent for return to the Persons providing such Remarketing Proceeds.

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USE OF THIS OFFICIAL STATEMENT

This Official Statement is not to be construed as a contract or agreement between the Issuer and the Underwriter or the purchasers or holders of the Bonds. No dealer, broker, salesman or other person has been authorized by the Issuer or the Borrower to give any information or to make any representation other than as contained in this Official Statement, and, if given or made, such other information or representation must not be relied upon as having been authorized by them. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the Bonds by any person in any jurisdiction in which it is unlawful for such person to make such offer, solicitation or sale. The Bonds have not been registered under The Securities Act of 1933, as amended, or any state securities laws, and neither the Securities and Exchange Commission nor any state regulatory agency will pass upon the accuracy, completeness or adequacy of this Official Statement. Neither the Bond Indenture nor the Master Trust Indenture has been qualified under the Trust Indenture Act of 1939, as amended. The information in this Official Statement is provided as of the date of this Official Statement. Nothing contained in this Official Statement shall under any circumstances create an implication that there has been no change in such information after the date of this Official Statement. The information set forth in this Official Statement has been obtained from the sources which are deemed to be reliable but is not guaranteed as to accuracy or completeness. All estimates and assumptions contained herein are believed to be reliable, but no representation is made that such estimates or assumptions are correct or will be realized. Certain statements contained in this Official Statement reflect forecasts and forward-looking statements, rather than historical facts. In this respect, the words “estimate,” “project,” “anticipate,” “expect,” “intend,” “believe,” and similar expressions are intended to identify forward-looking statements. Such forward-looking statements include, among others, certain of the information under the caption “Management Discussion and Analysis” in APPENDIX A and “RISK FACTORS” in the forepart of this Official Statement. All such forward-looking statements are expressly qualified by the cautionary statements set forth in this Official Statement. All quotations from and summaries and explanations of provisions of laws and documents in this Official Statement do not purport to be complete, and reference is made to such laws and documents for full and complete statements of their provisions. In connection with this offering the Underwriter may engage in transactions that stabilize, maintain or otherwise affect the price of the Bonds. Such transactions may include purchases of the Bonds for the purpose of maintaining the price of the Bonds. Such transactions, if commenced, may be discontinued at any time.

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OFFICIAL STATEMENT Regarding $59,405,000

Florida Development Finance Corporation Healthcare Facilities Revenue Bonds

(UF Health-Jacksonville Project), Series 2013B (R-FLOATs)

INTRODUCTION

This Official Statement provides certain information for use in connection with the offering by the Florida Development Finance Corporation (the “Issuer”) of its $59,405,000 Florida Development Finance Corporation Healthcare Facilities Revenue Bonds (UF Health-Jacksonville Project), Series 2013B (R-FLOATs) (the “Bonds”). The Issuer is a public body corporate and politic organized under the laws of the State of Florida. See “THE ISSUER”. The Bonds are being issued to provide financing for the benefit of Shands Jacksonville Medical Center, Inc. (the “Borrower”). The Borrower is a Florida not-for-profit corporation and an organization described in Section 501(c)(3) of the Internal Revenue Code. The Borrower controls or owns various affiliated entities that operate facilities and services that are a part of a larger healthcare network now known as “UF Health” (previously known as “Shands HealthCare”). The Borrower does business as “UF Health-Jacksonville.”

The Bonds are being issued pursuant to a Series 2013B Bond Trust Indenture to be dated as of November 1, 2013 (the “Bond Indenture”) between the Issuer and U.S. Bank National Association (in such capacity, the “Bond Trustee”). The Issuer will loan the proceeds of the Bonds to the Borrower pursuant to a Loan Agreement to be dated as of November 1, 2013 (the “Loan Agreement”) between the Issuer and the Borrower. Proceeds of the Bonds will be used to (i) refund a portion of the Borrower’s Taxable Notes, Series 2013, currently outstanding in the aggregate principal amount of $100,000,000 (the “Refunded Notes”) and (ii) pay certain costs associated with the issuance of the Bonds. See “THE PLAN OF FINANCE”.

The Borrower has entered into a Master Trust Indenture dated June 1, 2013, as supplemented (the “Master Trust Indenture”), with U.S. Bank National Association, as master trustee (the “Master Trustee”). The Master Trust Indenture establishes an obligated group (the “Obligated Group”) of affiliated entities that are jointly and severally liable for all obligations issued under the Master Trust Indenture. The Borrower, Shands Jacksonville HealthCare, Inc., a Florida not-for-profit corporation (“SJHC”), and Shands Jacksonville Properties, Inc., a Florida not-for-profit corporation (“SJP”) are currently the only members of the Obligated Group. See APPENDIX A for additional information about the Obligated Group. The Borrower, as Obligated Group Representative, will issue an obligation (the “Master Indenture Obligation”) under the Master Trust Indenture to evidence and secure the Borrower’s obligations under the Loan Agreement. The Borrower, as Obligated Group Representative, will execute and deliver a supplement to the Master Trust Indenture (the “Master Indenture Supplement”) in connection with the issuance of the Master Indenture Obligation. The holder of the Master Indenture Obligation and the holders of all other Obligations issued under the Master Trust Indenture are entitled to the equal and proportionate benefit of the Master Trust Indenture. See APPENDIX D for excerpted provisions of the Master Trust Indenture.

The Bond Indenture establishes a trust estate (the “Trust Estate”) for the benefit of the holders of the Bonds. The Trust Estate includes, among other things, (i) the Issuer’s rights to receive payments being made by the Borrower under the Loan Agreement with respect to debt service on the Bonds, (ii) the Master Indenture Obligation, and (iii) money in the funds and accounts established under the Bond Indenture. See “SOURCE OF PAYMENT AND SECURITY”. The Bonds are limited obligations of the Issuer, payable solely out of (a) payments to be made by the Borrower pursuant to the Loan Agreement with respect to debt service on the Bonds, (b) payments by the

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Obligated Group pursuant to the Master Indenture Obligation, and (c) any other assets that constitute part of the Trust Estate established under the Bond Indenture, including money in the funds and accounts established under the Bond Indenture. The Bonds do not constitute general obligations of the Issuer, the State of Florida (the “State”) or any political subdivision or agency of the State. None of the Issuer, the State nor any political subdivision or agency of the State has pledged its full faith and credit to the payment of the Bonds. The Issuer has no taxing power. Investment in the Bonds involves a certain degree of risk. See “RISK FACTORS” for a description of those risks.

DEFINITIONS

This section contains the definition of terms frequently used in this Official Statement. For additional definitions see APPENDIX C – PROPOSED FORM OF BOND INDENTURE.

“Alternate Rate” means (i) with respect to the R-FLOATs Rate during an R-FLOATs Weekly Period or an R-FLOATs Monthly Period, the SIFMA Index as most recently published prior to the date the Alternate Rate is determined, and (ii) with respect to the R-FLOATs Rate during an R-FLOATs Term Period, an annual rate equal to 75% of the highest quoted yield on United States Government Obligations – State and Local Government Series, with a maturity equal to the length of the R-FLOATs Term Period for which the Alternate Rate is calculated, which yield is published in Form PD4262, Department of Treasury, Bureau of Public Debt, as most recently published prior to the date the Alternate Rate is determined. “Authorized Denominations” means $100,000 or any larger amount that is a multiple of $1,000.

“Bond Indenture” means the Series 2013B Bond Trust Indenture to be dated as of November 1, 2013 between the Issuer and the Bond Trustee.

“Bond Purchase Fund” means the fund by that name established pursuant to the Bond Indenture.

“Bond Trustee” means U.S. Bank National Association.

“Bonds” mean the bonds offered by this Official Statement. “Book Entry System” means the book entry system maintained by DTC for the ownership, transfer,

exchange and payment of debt obligations.

“Borrower” or “SJMC” means Shands Jacksonville Medical Center, Inc., a Florida not-for-profit corporation. “Business Day” means a day that is not (i) a Saturday, a Sunday or a legal holiday on which banking institutions are authorized to remain closed in the State of Alabama, the State of New York or state where the Bond Trustee performs its business with respect to the Bond Indenture or (ii) a day on which the New York Stock Exchange is closed. “Conversion Date” means the day on which the Interest Rate Mode on a Bond is converted from one Interest Rate Mode to another Interest Rate Mode. “DTC” means The Depository Trust Company and its successors and assigns. “Enabling Law” means the Florida Development Finance Corporation Act of 1993, Chapter 288, Part IX, Florida Statutes, Part II, Chapter 159, Florida Statutes, and other applicable provisions of law.

“Financing Documents” means the Bond Indenture, the Loan Agreement, the Master Trust Indenture, the Master Indenture Supplement, the Remarketing Agreement, and the Master Indenture Obligation.

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“Fitch” means Fitch Ratings, Inc.

“Interest Rate Mode” means an interest rate mode authorized by the Bond Indenture.

“Issuer” means the Florida Development Finance Corporation, a public body politic and corporate public

instrumentality organized under the laws of the State of Florida.

“Loan Agreement” means the Loan Agreement to be dated as of November 1, 2013 between the Issuer and the Borrower. “Master Indenture Obligation” means the obligation issued under the Master Trust Indenture to evidence and secure the Borrower’s obligations under the Loan Agreement. “Master Indenture Supplement” means the supplement to the Master Trust Indenture executed and delivered in connection with the issuance of the Master Indenture Obligation.

“Master Trust Indenture” means the Master Trust Indenture dated as of June 1, 2013, as previously supplemented, and as further supplemented pursuant to the Master Indenture Supplement being executed and delivered in connection with the issuance of the Bonds, between the Members of the Obligated Group and the Master Trustee.

“Master Trustee” means U.S. Bank National Association. “Maturity Date”, when used with respect to any Bond, means the date specified in the Bond Indenture as

the date on which principal of such Bond is due and payable. “Maximum Rate” means 12.0% per annum. “Moody’s” means Moody’s Investors Service, Inc. “Mortgage” means the Mortgage dated as of November 1, 2013, executed by SJP in favor of the Master Trustee. “Obligated Group” means the Borrower and all other entities that are part of the Obligated Group. The current members of the Obligated Group are the Borrower, SJHC and SJP. The Master Trust Indenture permits the addition and withdrawal of members of the Obligated Group. See APPENDIX C for the pertinent provisions of the Master Trust Indenture.

“Obligor Bonds” means Bonds registered in the name of (or in the name of a nominee for) a member of

the Obligated Group, or any Affiliate of the Obligated Group. The Bond Trustee may assume that no Bonds are Obligor Bonds unless it has actual notice to the contrary. “Purchase Price”, when used with respect to a Tendered Bond, means 100% of the principal amount of such Bond plus accrued interest to the Tender Date. If the Tender Date for a Tendered Bond is also an Interest Payment Date for such Bond, the interest due on such Date shall not be considered part of the Purchase Price; rather, such interest shall be paid in accordance with the provisions of the Bond Indenture governing regular interest payments.

“R-FLOATs Mandatory Tender” means a required tender of a Bond in the R-FLOATs Mode. See “THE BONDS – Mandatory Tender of Bonds in the R-FLOATs Mode”. “R-FLOATs Mode” means the Interest Rate Mode in which a Bond bears interest at an R-FLOATs Rate.

“R-FLOATs Monthly Period” means a period during the R-FLOATs Mode when a Bond bears interest at an R-FLOATs Monthly Rate.

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“R-FLOATs Monthly Rate” means a variable rate during an R-FLOATs Monthly Period.

“R-FLOATs Non-Remarketed Bond” means a Bond returned to the holder after such holder tendered the Bond for purchase pursuant to the R-FLOATs Tender provisions. “R-FLOATs Optional Tender” means tender of a Bond in the R-FLOATs Mode for purchase at the option of the holder. See “THE BONDS – Optional Tender of Bonds in the R-FLOATs Mode”. “R-FLOATs Period” means an R-FLOATs Weekly Period, an R-FLOATs Monthly Period, or an R-FLOATs Term Period. “R-FLOATs Period Change Date” means the date on which the Bonds are converted from one R-FLOATs Period to another R-FLOATs Period (excluding any such date on which the Bonds are converted from the R-FLOATs Term Period to another R-FLOATs Period).

“R-FLOATs Rate” when used with respect to any Bond in the R-FLOATs Mode, means the R-FLOATs Weekly Rate, the R-FLOATs Monthly Rate, or the R-FLOATs Term Rate borne by such Bond during the R-FLOATs Mode. “R-FLOATs Rate Determination Date” means the date on which an R-FLOATs Rate is determined. “R-FLOATs Reset Date” means the day on which each change in the R-FLOATs Rate is effective. “R-FLOATs Special Non-Remarketing Period” means a period beginning on the date when a Bond is not purchased from the holder after such holder tenders such Bond for purchase pursuant to an R-FLOATs Tender and ending on the date that all R-FLOATs Non-Remarketed Bonds are successfully remarketed. “R-FLOATs Tender” means an R-FLOATs Mandatory Tender or an R-FLOATs Optional Tender. “R-FLOATs Tender Date” means a date on which Bonds are tendered for purchase pursuant to the R-FLOATs Tender provisions.

“R-FLOATs Term Period” means a period during the R-FLOATs Mode when a Bond bears interest at an R-FLOATs Term Rate. “R-FLOATs Term Rate” means a fixed rate during an R-FLOATs Term Period. “R-FLOATs Term-Out Event”, when used with respect to any R-FLOATs Non-Remarketed Bond, means:

(1) the R-FLOATs Special Non-Remarketing Period with respect to such Bond lasts more than 180 consecutive days; or (2) the long-term debt of the Obligated Group ceases to be rated Investment Grade by at least two Rating Agencies.

If the Obligated Group’s long-term debt had already ceased to be rated Investment Grade by at least two Rating Agencies when the R-FLOATs Special Non-Remarketing Period began, then an R-FLOATs Term-Out Event shall be deemed to have occurred on the first day of the R-FLOATs Special Non-Remarketing Period. For purposes of this definition, “Investment Grade” means one of the four highest rating categories currently maintained by the Rating Agency, or an equivalent rating for any rating scale subsequently adopted. For purposes of this definition, rating categories are determined without regard to qualifiers, such as “+”, “—” or “1” (for example, ratings of “Baa-3” and “BBB-”are considered part of the same rating category and are Investment Grade under current rating standards).

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“R-FLOATs Weekly Period” means a period during the R-FLOATs Mode when a Bond bears interest at an R-FLOATs Weekly Rate. “R-FLOATs Weekly Rate” means a variable rate during an R-FLOATs Weekly Period. “Rating Agency” means Moody’s, S & P, Fitch and any other nationally recognized securities rating agency.

“Refunded Notes” means a portion of the Borrower’s Taxable Notes, Series 2013, currently outstanding in the aggregate principal amount of $100,000,000.

“Regular Record Date”, when used with respect to the payment of interest on Bonds in the R-FLOATs

Mode, means the Business Day immediately prior to each Interest Payment Date for such Bond. “Remarketing Agent” means Merrill Lynch, Pierce Fenner & Smith Incorporated. “Remarketing Proceeds” means the proceeds of remarketing of Bonds by the Remarketing Agent. “S & P” means Standard & Poor’s Ratings Services, a business of Standard & Poor’s Financial Services LLC.

“Series 2013A Bonds” means the Florida Development Finance Corporation Healthcare Facilities Revenue Bonds, Series 2013A (UF Health-Jacksonville Project), to be issued in the aggregate principal amount of $64,240,000 at or about the date of issuance of the Bonds.

“SIFMA Index” means the “USD-SIFMA Municipal Swap Index”, which is an index compiled by the

Securities Industry and Financial Markets Association (SIFMA). If the USD-SIFMA Municipal Swap Index is no longer published, the Calculation Agent shall select an alternative index that, in the judgment of the Calculation Agent, is based on criteria reasonably similar to the current SIFMA Index criteria.

“SJHC” means Shands Jacksonville HealthCare, Inc., a Florida not-for-profit corporation and the sole

member of SJMC and SJP. “SJP” means Shands Jacksonville Properties, Inc., a Florida not-for-profit corporation.

“Trust Estate” means the trust estate established under the Bond Indenture.

THE BONDS

Interest Rate Mode

Under the terms of the Bond Indenture the Bonds can be issued in various interest rate modes (“Interest Rate Modes”), including the R-FLOATS Mode. All Bonds will be issued initially in the R-FLOATS Mode. This Official Statement does not describe the terms of the Bonds in any Interest Rate Mode other than the R-FLOATs Mode. If Bonds are converted to another Interest Rate Mode, the affected Bonds must be purchased from the holders pursuant to the Mandatory Tender provisions and then remarketed to investors in the new Interest Rate Mode. If Bonds are converted to another Interest Rate Mode, the Issuer will prepare a separate Official Statement describing the new Interest Rate Mode or will offer and sell the converted Bonds in a limited placement that does not require preparation of an Official Statement. For a description of other Interest Rate Modes, see the form of the Bond Indenture included in APPENDIX C – PROPOSED FORM OF BOND INDENTURE.

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Date, Form of Bonds and Denominations

The Bonds will be dated as of the date of initial delivery. The Bonds will be issuable only as fully registered bonds in denominations of $100,000 or any larger amount that is a multiple of $1,000. Book Entry System

The Bonds are being issued in electronic form under the Book Entry System procedures of The Depository Trust Company (“DTC”). While the Bonds are in the Book Entry System, the method and procedures for payment of the Bonds and matters pertaining to transfers and exchanges of the Bonds will be governed by the rules and procedures of the Book Entry System. If the Book Entry System is discontinued, the Bond Indenture contains alternate provisions for the method of payment and for transfers and exchanges. See APPENDIX F for a description of the DTC Book Entry System. See APPENDIX C – PROPOSED FORM OF BOND INDENTURE for a description of applicable Bond Indenture provisions if the Book Entry System is terminated. Interest Rate and R-FLOATs Periods

R-FLOATs Periods. Bonds in the R-FLOATS Mode may be in an R-FLOATs Weekly Period, an R-FLOATs Monthly Period, or an R-FLOATs Term Period. All Bonds will initially be in an R-FLOATs Weekly Period. All Bonds in the R-FLOATs Mode shall be in the same R-FLOATs Period, and all Bonds with an R-FLOATs Term Period shall have the same R-FLOATs Period. The Issuer may elect to change the R-FLOATs Period. If the Issuer elects to change the R-FLOATs Period, the Bond Trustee will give notice of the change to holders of the Bonds not less than 5 Business Days prior to the effective date of such change; provided, however that a change to an R-FLOATs Term Period shall require not less than 20 days’ notice of the change, and the Bonds shall be subject to a Mandatory Tender for purchase on the first day of the R-FLOATs Term Period. R-FLOATs Weekly Rate. When Bonds are in an R-FLOATs Weekly Period, the R-FLOATs Weekly Rate shall change on each Thursday (each Thursday being an “R-FLOATs Reset Date”). The R-FLOATs Weekly Rate shall be determined on each R-FLOATs Reset Date or, if any R-FLOATs Reset Date is not a Business Day, on the last Business Day prior to such R-FLOATs Reset Date (each such date being an “R-FLOATs Rate Determination Date”). The R-FLOATs Weekly Rate so determined shall be effective on the R-FLOATs Reset Date and shall remain in effect until (and including) the following Wednesday. R-FLOATs Monthly Period. When Bonds are in an R-FLOATs Monthly Period, the R-FLOATs Monthly Rate shall be determined (i) on the last Business Day immediately prior to the first day of an R-FLOATs Monthly Period and (ii) on the last Business Day of each month during the R-FLOATs Monthly Period (each such date being an “R-FLOATs Rate Determination Date”). The R-FLOATs Monthly Rate so determined shall be effective on the first Business Day following the R-FLOATs Rate Determination Date (each such date being an “R-FLOATs Reset Date”), and shall remain in effect until (and including) the day immediately prior to the first Business Day of the following month. R-FLOATs Term Periods and R-FLOATs Term Rate. The Issuer may elect an R-FLOATs Term Period, which must be more than 35 days and must end on the last day of a calendar month prior to the Maturity Date for the Bonds. If the Issuer elects an R-FLOATs Term Period that ends on a day that is not in fact immediately prior to a Business Day, then such R-FLOATs Term Period shall automatically extend to the next day that is immediately prior to a Business Day. An R-FLOATs Term Rate shall be set on the last Business Day immediately prior to the first day of an R-FLOATs Term Period (each such date being an “R-FLOATs Rate Determination Date”). The R-FLOATs Term Rate so determined shall be effective on the first day of the R-FLOATs Term Period (each such date being an “R-FLOATs Reset Date”) and shall remain in effect until (and including) the last day of such R-FLOATs Term Period. Remarketing Agent Sets R-FLOATs Rates. R-FLOATS Rates shall be set by the Remarketing Agent. The R-FLOATs Rate shall be the lowest interest rate that would, in the opinion of the Remarketing Agent, result in the market value of such Bond being 100% of the principal amount thereof on the Rate Determination Date, taking

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into account relevant market conditions and credit rating factors as they exist on such date. If the Remarketing Agent fails to determine the R-FLOATs Rate on any R-FLOATs Rate Determination Date, the R-FLOATs Rate on the following R-FLOATs Reset Date shall be deemed to be the Alternate Rate. Interest on Non-Remarketed Bonds. A Bond that is not successfully remarketed on an R-FLOATs Tender Date is referred to in the Bond Indenture as a “R-FLOATs Non-Remarketed Bond”. Any R-FLOATs Non-Remarketed Bond shall be in an R-FLOATs Weekly Period and shall bear interest at the Maximum Rate. Calculation of Interest Payments

Interest at the R-FLOATs Rate shall be computed on the basis of a 365 or 366-day year, as the case may be, for the actual number of days elapsed. Interest Payment Dates

Interest on Bonds in the R-FLOATs Mode with an R-FLOATs Weekly Period or an R-FLOATs Monthly Period shall be payable (i) on the first Business Day of each month, (ii) on the Conversion Date if such Bond is converted to another Interest Rate Mode, and (iii) on the Maturity Date. Interest on Bonds in the R-FLOATs Mode with an R-FLOATs Term Period of 180 days or less shall be payable on the day immediately following the R-FLOATs Term Period (which must be a Business Day). Interest on Bonds in the R-FLOATs Mode with an R-FLOATs Term Period of more than 180 days shall be payable on (i) each February 1 and August 1 during the R-FLOATs Term Period and (ii) the day immediately following the R-FLOATs Term Period (which must be a Business Day). Optional Tender of Bonds in R-FLOATs Mode

The holder of any Bond in the R-FLOATs Mode shall have the right to tender such Bond to the Bond Trustee for purchase in whole or in part on the following dates (each an “R-FLOATs Optional Tender Date”):

(1) If such Bond is in an R-FLOATs Weekly Period, on any Business Day. In order to exercise such option with respect to a Bond in an R-FLOATs Weekly Period, the holder must deliver notice to the Bond Trustee not less than 5 Business Days prior to the related R-FLOATs Optional Tender Date. on (2) If such Bond is in an R-FLOATs Monthly Period, on any Interest Payment Date. In order to exercise such option with respect to a Bond in an R-FLOATs Monthly Period, the holder must deliver notice to the Bond Trustee not less than 3 Business Days prior to the related R-FLOATs Optional Tender Date. Holders of Bonds in the R-FLOATs Mode with an R-FLOATs Term Period shall not have the right to

tender such Bonds for purchase during the R-FLOATs Term Period, but shall be required to tender such Bonds for mandatory purchase pursuant to the Bond Indenture on the day immediately following the R-FLOATs Term Period.

Any notice of Optional Tender must be substantially in the form provided in the Bond Indenture. See

APPENDIX D – PROPOSED FORM OF BOND INDENTURE, Exhibit 6.1(c). Mandatory Tender of Bonds in the R-FLOATs Mode

The holder of any Bond in the R-FLOATs Mode shall be required to tender such Bond to the Bond Trustee for purchase on (a) any R-FLOATs Period Change Date or (b) the day immediately after an R-FLOATs Term Period with respect to such Bond (each such date, an “R-FLOATs Mandatory Tender Date”). If any R-FLOATs Mandatory Tender Date is not a Business Day, the R-FLOATs Mandatory Tender Date shall be the next succeeding Business Day.

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Notice of any such Mandatory Tender shall be given by the Bond Trustee to the affected holders not less than 15 days prior to the R-FLOATs Mandatory Tender Date. R-FLOATs Non-Remarketed Bonds

Funds for the purchase of Bonds pursuant to an R-FLOATs Tender shall be derived solely from (i) Remarketing Proceeds or (ii) funds that the Borrower elects to provide for such purchase; provided, however, that the Borrower shall not be required to provide funds for the purchase of Bonds tendered pursuant to an R-FLOATs Tender. If adequate funds are not available in the Bond Purchase Fund on any R-FLOATs Tender Date to pay the Purchase Price of all Bonds tendered for purchase pursuant to the R-FLOATs Tender provisions, no Bonds shall be purchased on such R-FLOATs Tender Date pursuant to the R-FLOATs Tender provisions, and all Bonds tendered for purchase on such R-FLOATs Tender Date pursuant to the R-FLOATs Tender provisions are referred to in the Bond Indenture as “R-FLOATs Non-Remarketed Bonds”. The Bond Trustee shall return all R-FLOATs Non-Remarketed Bonds to the holders thereof, and the Bond Trustee shall return any Remarketing Proceeds deposited in the Purchase Fund with respect to such R-FLOATs Non-Remarketed Bonds to the Remarketing Agent for return to the Persons providing such Remarketing Proceeds. The date on which a Bond is returned to the holder shall be the first day of an R-FLOATs Special Non-Remarketing Period with respect to such Bond. During the R-FLOATs Special Non-Remarketing Period (i) if the Bonds are not already in an R-FLOATs Weekly Period, the R-FLOATs Period shall automatically change to an R-FLOATs Weekly Period and (ii) all Bonds in the R-FLOATs Mode shall bear interest at the Maximum Rate. During any R-FLOATs Special Non-Remarketing Period the Remarketing Agent shall continue to use its best efforts to remarket R-FLOATs Non-Remarketed Bonds. If an R-FLOATs Term-Out Event occurs during the R-FLOATs Special Non-Remarketing Period, all Bonds in the R-FLOATs Mode are subject to mandatory redemption as described below under “Redemption Prior to Maturity – Mandatory Redemption of Unremarketed R-FLOATs Bonds (the “R-FLOATs Mandatory Redemption Provisions”). If all R-FLOATs Non-Remarketed Bonds are successfully remarketed or is successfully converted to another Interest Rate Mode, the R-FLOATs Special Non-Remarketing Period with respect to the Bonds shall end, and no further redemption of Bonds shall be required pursuant to the R-FLOATs Mandatory Redemption Provisions. Redemption Prior to Maturity

The Bonds shall be subject to redemption prior to maturity as follows:

Optional Redemption. Bonds in the R-FLOATs Mode are subject to optional redemption in whole or in part at a redemption price equal to 100% of the principal amount to be redeemed plus accrued interest thereon to the date of redemption on the following dates:

(A) Bonds in an R-FLOATs Weekly Period or an R-FLOATs Monthly Period are subject to optional redemption on the first Business Day of each month. (B) Bonds in an R-FLOATs Term Period are subject to optional redemption on the day following such R-FLOATs Term Period (which must be a Business Day). (C) During any R-FLOATs Special Non-Remarketing Period, all Bonds in the R-FLOATs Mode are subject to optional redemption on any Business Day.

Scheduled Mandatory Redemption of Bonds. All Bonds mature on February 1, 2029 and for purposes of

the scheduled mandatory redemption provisions of the Bond Indenture are referred to as “Term Bonds”. Term Bonds shall be redeemed, at a redemption price equal to 100% of the principal amount to be redeemed plus accrued interest thereon to the redemption date, on dates and in principal amounts (after credit as provided below) as follows:

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Redemption Date

(February 1)

Principal Amount to be

Redeemed

2015 $ 2,865,000 2016 3,005,000 2017 3,145,000 2018 3,290,000 2019 3,465,000 2020 3,575,000 2021 3,775,000 2022 3,950,000 2023 4,125,000 2024 4,330,000 2025 4,525,000 2026 4,740,000 2027 4,980,000 2028 5,190,000 2029 4,445,000

If the scheduled mandatory redemption date is not a Business Day, the actual date for such redemption shall be the next succeeding Business Day, and interest shall accrue to the actual redemption date with respect to Term Bonds being redeemed. Not later than the date on which notice of scheduled mandatory redemption is to be given, the Bond Trustee shall select affected Term Bonds for redemption by lot; provided, however, that (A) any R-FLOATs Non-Remarketed Bonds shall be selected for scheduled mandatory redemption before Bonds in other Interest Rate Modes are selected and (B) the Borrower may, by timely notice delivered to the Bond Trustee, direct that any or all of the following amounts be credited against the principal amount of Term Bonds scheduled for redemption on such date: (i) the principal amount of Term Bonds delivered by the Borrower to the Bond Trustee for cancellation and not previously claimed as a credit; (ii) the principal amount of Term Bonds previously redeemed (other than Term Bonds redeemed pursuant to the scheduled mandatory redemption requirement) and not previously claimed as a credit; and (iii) the principal amount of Term Bonds otherwise defeased and not previously claimed as a credit. Special Mandatory Redemption of R-FLOATs Non-Remarketed Bonds. If an R-FLOATs Term-Out Event occurs while any R-FLOATs Non-Remarketed Bond is in an R-FLOATs Special Non-Remarketing Period, all Bonds in the R-FLOATs Mode (including Bonds in the R-FLOATs Mode that are not R-FLOATs Non-Remarketed Bonds) shall be redeemed, at a redemption price equal to 100% of the principal amount to be redeemed plus accrued interest thereon to the redemption date, on the first February 1 or August 1 that is at least 24 months after such R-FLOATs Term-Out Event occurs with respect to such Bond. The foregoing notwithstanding, no such Bonds in the R-FLOATs Mode will be required to be redeemed pursuant to the foregoing provisions if all such Bonds in the R-FLOATs Mode are either converted to bear interest in another Interest Rate Mode or are remarketed. Optional Redemption Upon Damage, Destruction or Condemnation of Operating Assets. The Bonds may be redeemed in whole or in part on any Business Day at the option of the Issuer (exercised by the Borrower on behalf of the Issuer) at a redemption price equal to 100% of the principal amount of Bonds to be redeemed plus accrued interest thereon to the redemption date if, and to the extent that, the net proceeds of any insurance or condemnation award resulting from damage, destruction or condemnation of operating assets of the Borrower exceed the cost of any repairs or replacements to its operating assets which the Borrower elects to make with such proceeds. Selection of Bonds for Redemption. If less than all Bonds outstanding are to be redeemed, the principal amount of Bonds to be redeemed may be specified by the Issuer by timely notice delivered to the Bond Trustee, or, in the absence of timely receipt by the Bond Trustee of such notice, shall be selected by the Bond Trustee by lot or by such other method as the Bond Trustee shall deem fair and appropriate; provided, however, that the principal

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amount of Bonds to be redeemed may not be larger than the principal amount of Bonds then eligible for redemption and may not be smaller than the smallest Authorized Denomination. Notice of Redemption. Notice of redemption shall be given to affected Bondholders not less than 20 days prior to the redemption date. Notice of redemption will be given through methods established by the rules and regulations of the Book Entry System or, if the Book Entry System is not in effect or its rules and regulations are not applicable under the circumstances, by certified mail. The notice of redemption may state that the redemption of Bonds is contingent upon specified conditions, such as receipt of a specified source of funds, or the occurrence of specified events. If the conditions for such redemption are not met, the Issuer shall not be required to redeem the Bonds identified in such notice, and any Bonds surrendered on the specified redemption date shall be returned to the holders of such Bonds. Purchase of Bonds in Lieu of Redemption. The Bond Indenture provides that the Borrower has the option to purchase Bonds subject to optional redemption (“Callable Bonds”) in lieu of optional redemption. If the Borrower makes a timely election to purchase Callable Bonds, such Callable Bonds shall not be redeemed, but shall instead be subject to mandatory tender on the date that would have been the optional redemption date at a purchase price equal to the redemption price that would have been payable with respect to such Callable Bonds. The Borrower’s option to purchase shall be effective whether or not the notice of optional redemption sent to Bondholders indicates that the Borrower has exercised, or intends to exercise, such option. No further or additional notice to Bondholders shall be required in connection with the purchase in lieu of redemption. Purchase of Bonds Upon Conversion of Interest Rate Mode

On any date when the Bonds are subject to optional redemption at par, the Borrower may, at its option convert the Bonds to a new Interest Rate Mode. If the Borrower elects to convert the Interest Rate Mode, it must purchase all outstanding Bonds pursuant to the mandatory tender and purchase provisions of the Bond Indenture. See APPENDIX C for related provisions of the Bond Indenture. The obligation of the Borrower to purchase the Bonds upon a conversion of the Interest Rate Mode is not contingent upon a successful remarketing of the Bonds.

SOURCE OF PAYMENT AND SECURITY

Source of Payment

The Bonds are limited obligations of the Issuer payable solely out of the following sources:

1. The loan payments received by or on behalf of the Issuer from the Borrower under the Loan Agreement with respect to debt service on the Bonds and all rights of the Issuer under the Loan Agreement, except for the right to receive notices, the right to indemnification by the Borrower, and other rights personal to the Issuer. 2. The Master Indenture Obligation. 3. Any other assets that constitute part of the Trust Estate established under the Bond Indenture, including money in the funds and accounts established under the Bond Indenture.

The Loan Agreement requires the Borrower to make loan payments at times and in amounts sufficient to pay debt service on the Bonds when due. These loan payments are to be deposited in the Debt Service Fund established under the Bond Indenture upon receipt by the Bond Trustee. The Bonds are limited obligations of the Issuer, payable solely out of (a) payments to be made by the Borrower pursuant to the Loan Agreement with respect to debt service on the Bonds, (b) payments by the Obligated Group pursuant to the Master Indenture Obligation, and (c) any other assets that constitute part of the Trust Estate established under the Bond Indenture, including money in the funds and accounts established under the Bond Indenture. The Bonds do not constitute general obligations of the Issuer, the

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State of Florida (the “State”) or any political subdivision or agency of the State. None of the Issuer, the State nor any political subdivision or agency of the State has pledged its full faith and credit to the payment of the Bonds. The Issuer has no taxing power. Security for Payment of the Bonds

As security for the payment of the Bonds, the Issuer has assigned and pledged to the Bond Trustee all right, title and interest of the Issuer in and to the Trust Estate (other than rights to reimbursement, indemnification and receipt of notices). This pledge and assignment will convey a security interest in the Trust Estate. The funds and accounts under the Bond Indenture (referred to as the “Bond Indenture Funds”) include the following:

Debt Service Fund. The Debt Service Fund will be established to collect loan payments by the Borrower and payments on the Master Indenture Obligation. Payments under the Loan Agreement with respect to debt service on the Bonds are credited against the amount due under the Master Indenture Obligation. Amounts in the Debt Service Fund will be used to make debt service payments on the Bonds.

Bond Purchase Fund. The Bond Purchase Fund will be established to collect payments from the

Borrower to pay the Purchase Price of Tendered Bonds to the extent that funds for the payment of such Purchase Price are not obtained from Remarketing Proceeds. The Borrower will have no obligation to make payments to the Bond Purchase Fund with respect to R-FLOATs Non-Remarketed Bonds.

Costs of Issuance Fund. This Fund will be established to disburse Bond proceeds for the

payment of the costs of issuance of the Bonds. Money may be withdrawn from the Costs of Issuance Fund for this purpose upon requisition of the Borrower.

Although the Bond Indenture creates a security interest in the Bond Indenture Funds, money in the Bond Indenture Funds may be disbursed for the designated purpose of each Bond Indenture Fund. See APPENDIX C for a further description of each Bond Indenture Fund and the terms and conditions for use of money in the Bond Indenture Funds. A Rebate Fund will be established pursuant to the Tax Exemption Agreement delivered by the Borrower in connection with the issuance of the Bonds to be used to pay arbitrage rebate liability if and when due. The Rebate Fund is not part of the Trust Estate. The Master Trust Indenture

SJMC, as Obligated Group Representative, will issue the Master Indenture Obligation under the Master Trust Indenture to evidence and secure its obligations under the Loan Agreement. The holder of the Master Indenture Obligation and the holders of all other Obligations issued and outstanding under the Master Trust Indenture are entitled to the equal and proportionate benefit of the Master Trust Indenture. See APPENDIX D for excerpted provisions of the Master Trust Indenture. Upon the issuance of the Master Indenture Obligation and the completion of the plan of financing, the Master Indenture Obligation, the Master Indenture Obligation made in connection with SJMC’s swap obligations, the Master Indenture Obligation issued in connection with the Series 2013A Bonds and the Master Indenture Obligation issued in connection with the 2013 Bridge Loan will be the only Obligations outstanding under the Master Trust Indenture. For a description of outstanding Obligations, see APPENDIX A – DEBT STRUCTURE OF THE OBLIGATED GROUP. Obligations issued under the Master Trust Indenture are the joint and several obligation of each Member of the Obligated Group. SJMC, SJHC and SJP are currently the only Members of the Obligated Group. Pledged Revenues. Pursuant to the Master Indenture Obligation the Members of the Obligated Group, jointly and severally, promise to pay to the Bond Trustee amounts sufficient to pay the principal of and interest and any premium on the Bonds, and all other amounts due under the Master Trust Indenture. The Master Indenture Obligation will be secured on a parity basis with all other Obligations issued and outstanding under the Master Trust

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Indenture by a lien on and pledge of the Pledged Revenues of the Obligated Group (the “Security Interest”). Under the Master Trust Indenture, Pledged Revenues is defined as follows:

“Pledged Revenues” shall mean all gross receipts, revenues, income, rents, royalties, benefits and other moneys received by or on behalf of the Obligated Group, including, without limitation, contributions, donations and pledges, whether in the form of cash, securities or other personal property, gross revenues derived from the operation of the facilities of the Obligated Group, and all rights to receive the same, whether in the form of accounts, contract rights, chattel paper, instruments, rights under agreements with insurance companies, or other rights, and the proceeds thereof, and any insurance thereon, whether now existing or hereafter coming into existence and whether now owned or held or hereafter acquired by the Obligated Group; provided, however, that gifts, grants, bequests, donations and contributions heretofore or hereafter made, designated at the time of making thereof by the donor or maker as being for certain specific purposes, and the income derived therefrom, to the extent required by such designation, shall be excluded from Pledged Revenues.

The Security Interest may be limited by a number of factors, including: (i) rights of third parties in Pledged Revenues converted to cash and not in the possession of the Bond Trustee or the Master Trustee; (ii) statutory liens; (iii) rights arising in favor of the United States or any agency thereof; (iv) present or future prohibitions against assignment of amounts due under the Medicare or Medicaid programs or any other federal or state health care programs contained in federal or State of Florida law; (v) constructive trusts, equitable liens or other rights impressed or conferred by any state or federal court in the exercise of its equitable jurisdiction; (vi) federal bankruptcy laws or State of Florida laws respecting bankruptcy, insolvency or creditors’ rights; (vii) claims that might arise if appropriate financing or continuation statements are not filed in accordance with the Uniform Commercial Code of the State of Florida as from time to time in effect; (viii) state fraudulent conveyance laws; (ix) rights of parties with prior perfected security interests; and (x) the inability of the Master Trustee to perfect a security interest in those components of Pledged Revenues that can be perfected only by possession or only by possession and filing or that represent proceeds of prior perfected security interests. Debt Service Coverage Ratio Covenant. In the Master Trust Indenture, the Members of the Obligated Group have covenanted that the Debt Service Coverage Ratio of the Obligated Group for any Fiscal Year shall not be less than 100%. If the Debt Service Coverage Ratio of the Obligated Group for any Fiscal Year is less than 100%, the Obligated Group is required to retain an Independent Consultant to make recommendations to increase such Debt Service Coverage Ratio to at least 100%, or, if applicable laws and governmental regulations will not permit the Obligated Group to maintain such Debt Service Coverage Ratio, to the highest level permitted by such laws and regulations, but in no event shall the Debt Service Coverage Ratio for any Fiscal Year be less than 100%. The Obligated Group is required, to the extent feasible and lawful, to follow the recommendations of the Independent Consultant. An event of default under the Master Trust Indenture will exist if the Debt Service Coverage Ratio of the Obligated Group is less than 100% for any two consecutive Fiscal Years.

Liquidity Covenant. In the Master Trust Indenture, the Members of the Obligated Group have also covenanted to maintain not less than 45 Days’ Cash on Hand as of each June 30. The term “Days’ Cash on Hand” means the quotient of (i) Unrestricted Cash and Investments divided by (ii) one day of Operating Expenses, calculated as follows:

(1) “Unrestricted Cash and Investments” means all cash and marketable securities that the Obligated Group could, in its discretion, apply to the payment of Debt without violating any Lien or other security agreement or applicable law or the restrictions of any grant or gift. Without limiting the generality of the foregoing, Unrestricted Cash and Investments does not include (A) construction funds, (B) malpractice funds, self-insurance or captive insurer funds, (C) pension or retirement funds, or (D) the undisbursed proceeds of any borrowing. Marketable securities shall be valued at fair market value as of the date of determination.

(2) Unrestricted Cash and Investments shall be reduced by the following: (A) bank

overdrafts and (B) the amount received from the sale or factoring of accounts receivable or inventory.

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(3) “Operating Expenses” means the Obligated Group’s annual operating expenses for the last Fiscal Year of the Obligated Group Representative for which audited financial statements are available, including interest expense, less depreciation, amortization, unrealized gain or loss on investments and hedges (including without limitation interest rate swap agreements), and other non-cash items that may be included on such financial statements as operating expenses.

(4) One day of operating expenses shall be calculated by dividing Operating Expenses by

365.

Parity Obligations. The Master Indenture Obligation will secure the Bonds on a parity with outstanding Obligations issued in connection with the Series 2013A Bonds, the 2013 Bridge Loan and certain swap obligations of the Obligated Group. See APPENDIX A – “DEBT STRUCTURE OF THE OBLIGATED GROUP – Outstanding Debt of Obligated Group Secured by Master Trust Indenture” and “- Derivative Instruments” for a discussion of parity Obligations.

Additional Obligations. The Master Trust Indenture permits the issuance of additional Obligations from

time to time that may be secured equally and proportionately with the Master Indenture Obligation. For a description of the terms for issuance of such additional obligations see APPENDIX D.

Joining and Withdrawing from the Obligated Group. The Master Trust Indenture permits entities to join

and withdraw from the Obligated Group. For a description of the terms of joining or withdrawing from the Obligated Group, see APPENDIX D. SJMC and SJP have covenanted that they will not withdraw from the Obligated Group while the Bonds are outstanding.

Mortgage

The Master Indenture Obligation and all other Obligations issued under the Master Trust Indenture are further secured by the Mortgage. Under the Mortgage, SJP, as mortgagor, has granted to the Master Trustee a mortgage on the real property utilized by the former Methodist Medical Center, which consists of acute care health care facilities now operated by the Borrower. The Mortgage does not cover acute care facilities located at the former University Medical Center or any other property of the Obligated Group. In connection with the execution and delivery of the Mortgage, the Master Trustee will receive a title insurance policy which provides title insurance coverage in an amount not less than $10,000,000 to the Master Trustee.

No Debt Service Reserve Fund

The Bond Indenture does not establish a debt service reserve fund for the benefit of the Bonds. Limitations on Remedies

The rights of the Bond Trustee and the holders of the Bonds may be limited by (i) bankruptcy, insolvency, or other similar laws affecting the enforcement of creditors’ rights and (ii) general principles of equity, including the exercise of judicial discretion in appropriate cases. See “RISK FACTORS.”

If an event of default exists under the Bond Indenture, the Bond Trustee may, on behalf of the holders of the Bonds, declare the principal of all the Bonds and the interest accrued thereon to be due and payable immediately and may exercise any other legal or equitable remedies available for the payment of debt instruments such as the Bonds. The Bond Indenture contains provisions for the direction of remedies by the holders of specified percentages of the aggregate principal amount of Bonds outstanding. For a description of the specific terms of the Bond Indenture for remedies and the rights of the Bond Trustee and the holders of the Bonds upon the occurrence of an event of default, see the form of the Bond Indenture contained in APPENDIX C.

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THE PLAN OF FINANCE

At or about the date of issuance of the Bonds, the Issuer will also issue the Series 2013A Bonds. Proceeds of the Bonds, together with proceeds of the Series 2013A Bonds, will be used for the purpose of (i) currently refunding the Refunded Notes and (ii) paying costs associated with the issuance of the Bonds and the Series 2013A Bonds. A portion of the proceeds of the Series 2013A Bonds will also be used for the purpose of financing, refinancing or reimbursing the Borrower for the cost of certain capital improvements for or to the health care facilities of the Borrower, including a new electronic records system, fire alarm modifications, preadmission testing and lab station construction and other miscellaneous improvements (the “2013 Project”) Sources and Uses of Funds

The estimated sources and uses of funds for the plan of financing are as follows (rounded to the nearest whole dollar):

Sources of Funds Principal amount of Bonds $59,405,000 Total sources $59,405,000 Uses of Funds Retirement of Refunded Notes $58,725,000 Costs of issuance of the Bonds (1) 680,000 Total uses $59,405,000

____________________

Note (1) Includes underwriter’s discount, legal and accounting fees, printing costs, rating agency fees, and other costs of issuance.

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Debt Service Requirements on the Bonds and Series 2013A Bonds

The following table contains the estimated debt service requirements on the Bonds and the Series 2013A Bonds.

Fiscal Year Ending June 30

Debt Service on Bonds

and Series 2013A Bonds1

Total

Debt Service

Principal Interest

2014 - $1,651,197 $1,651,197 2015 $2,865,000 5,424,542 8,289,542 2016 3,005,000 5,340,157 8,345,157 2017 4,895,000 5,242,735 10,137,735 2018 5,125,000 5,062,401 10,187,401 2019 5,395,000 4,870,225 10,265,225 2020 5,600,000 4,670,894 10,270,894 2021 3,775,000 4,456,013 8,231,013 2022 3,950,000 4,343,241 8,293,241 2023 4,125,000 4,223,015 8,348,015 2024 6,455,000 4,098,557 10,553,557 2025 6,755,000 3,857,856 10,612,856 2026 7,085,000 3,607,012 10,692,012 2027 9,850,000 3,339,332 13,189,332 2028 10,320,000 2,920,255 13,240,255 2029 10,615,000 2,489,264 13,104,264 2030 6,545,000 2,029,800 8,574,800 2031 6,935,000 1,637,100 8,572,100 2032 7,350,000 1,221,000 8,571,000 2033 13,000,000 780,000 13,780,000 2034 - - - 2035 - - - 2036 - - - 2037 - - - 2038 - - - 2039 - - - 2040 - - - 2041 - - - 2042 - - - 2043 - - - 2044 - - -

Total $ 123,645,000 $ 71,264,597 $ 194,909,597

________________ Note 1: Assumes interest on the Bonds at 3.00%.

For a discussion of debt of the Obligated Group, See APPENDIX A – “DEBT STRUCTURE OF THE OBLIGATED GROUP”

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THE ISSUER

General

The Issuer is a public body corporate and politic of the State of Florida created pursuant to the Florida Development Finance Corporation Act of 1992 (Chapter 228, Part IX, Florida Statutes) (the “Issuer Act”). The Issuer Act provides that the Issuer may issue revenue bonds and loan the proceeds to approved applicants to finance and refinance projects relating to the economic development of the State of Florida provided that the Issuer has entered into an interlocal agreement with a local government agency having jurisdiction over the location of the project. The powers of the Issuer are vested in a Board of Directors consisting of five members appointed by the Governor of the State of Florida and confirmed by the Florida Senate. The Issuer Act provides that at least three (3) of the Directors of the Issuer be bankers and one shall be an economic development specialist and that the chairperson of the Florida Black Business Investment Board shall be an ex officio member of the Board.

The Bonds will be limited and special obligations of the Issuer as described under the caption “THE BONDS – General.”

The Issuer has not participated in the preparation of this Official Statement and makes no representation with respect to the accuracy or completeness of any of the material contained in this Official Statement other than in this section entitled “THE ISSUER.” The Issuer is not responsible for providing any purchaser of the Bonds with any information relating to the Bonds or any of the parties or transactions referred to in this Official Statement or for the accuracy or completeness of any such information obtained by any purchaser. Disclosure Required by Section 517.051, Florida Statutes

Section 517.051, Florida Statutes, as amended, provides for the exemption from registration of certain governmental securities, provided that if an issuer or guarantor of governmental securities has been in default at any time after December 31, 1975 as to principal and interest on any obligation, its securities may not be offered or sold in Florida pursuant to the exemption except by means of an offering circular containing full and fair disclosure, as prescribed by rules of the Florida Department of Banking and Finance (the “Department”). Rule 69W-400.003, Rules for Government Securities, promulgated by the Financial Services Commission (“Rule 69W-400.03”), requires the Issuer to disclose each and every default as to the payment of principal and interest with respect to an obligation issued by the Issuer after December 31, 1975. Rule 69W-400.03 further provides, however, that if the Issuer in good faith believes that such disclosures would not be considered material by a reasonable investor, such disclosures may be omitted.

The Issuer, in the case of the Bonds, is merely a conduit for payment, in that the Bonds do not constitute a general debt, liability or obligation of the Issuer, but are instead secured by and payable solely from payments of the Borrower under the Loan Agreement and by other security discussed herein. The Bonds are not being offered on the basis of the financial strength or condition of the Issuer. The Issuer believes, therefore, that disclosure of any default related to a financing not involving the Borrower or any Member of the Obligated Group would not be material to a reasonable investor. Accordingly, the Issuer has not taken affirmative steps to contact any trustee of any other conduit bond issue of the Issuer not involving the Borrower or any Member of the Obligated Group to determine the existence of prior defaults. The Issuer has not been a party to any other financing involving the Borrower or any Member of the Obligated Group or, to the Issuer’s knowledge, any person or entity related to the Borrower or any Member of the Obligated Group.

The Members of the Obligated Group have not defaulted in the payment of principal or interest on any

obligations since 1999 (the year in which Shands Gainesville became affiliated with SJHC), and the Members of the Obligated Group are not aware of any such prior payment defaults; any such defaults, if they occurred, would not be material to the current financial picture of the Obligated Group because of the passage of time since they occurred.

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THE BORROWER AND THE OBLIGATED GROUP

The Borrower, or SJMC, is a not-for-profit corporation under the laws of the State of Florida. SJMC is a Member of the Obligated Group under the Master Trust Indenture. SJMC and SJP have agreed in the Master Trust Indenture that they will not cease to be Members of the Obligated Group. The address of the corporate office of SJMC is 655 W. 8th Street, Jacksonville, Florida 32209. SJMC is headquartered in Jacksonville, Florida and, together with its affiliates, operates a health care delivery system in Jacksonville and the surrounding area known as “UF Health-Jacksonville.” For information about SJMC and the Obligated Group, see APPENDIX A.

RISK FACTORS

General

The ability of the Obligated Group to realize revenues in amounts sufficient to make payments on the Bonds when due is affected by and subject to conditions which may change in the future to an extent and with effects that cannot be determined at this time. SJMC is a health care provider which derives significant portions of its revenues from Medicare, Medicaid and other third party payor programs. The Obligated Group is subject to governmental regulations applicable to health care providers, and the receipt of future revenues by the Obligated Group is subject to changes in future economic and other conditions, including increased competition, inflation, demand for hospital services, the capability of management of the facilities of the Obligated Group and its affiliates, the ability of the Obligated Group to provide the services required or requested by patients, physicians’ confidence in the Obligated Group, employee relations and unionization, malpractice claims and other litigation, demographic changes and other factors that are impossible to predict. The effect on the Obligated Group of recently enacted laws and regulations, of future changes in federal and state laws and policies and changes in third party payor policies cannot be fully or accurately determined at this time. The risks described herein and other risks which may arise in the future may adversely affect revenues and, consequently, payment of the principal of and interest on the Bonds. No representation or assurance is given or can be made that revenues will be realized by the Obligated Group in amounts sufficient to make payments on the Bonds when due and to pay necessary operating expenses. The risk factors discussed below should be considered in evaluating the Obligated Group’s ability to make payments of the principal of and interest due on the Bonds. The following discussion of risk factors is not intended to be exhaustive and should be read in conjunction with all other parts of this Official Statement. Mortgage or Other Liens

The Master Indenture Obligation and other Obligations issued under the Master Trust Indenture will be secured pari passu by the Mortgage. The Mortgage covers the real property utilized by the former Methodist Medical Center (the “Mortgaged Property”), but does not include any other real estate owned by the Obligated Group. The value of the Mortgaged Property, together with any other collateral, may be significantly less than the principal amount of the Obligations outstanding. The Mortgaged Property was designed for use as a health care facility and generally would not be suitable for industrial or commercial use. Consequently, it could be difficult to find a buyer or lessee for such facility, and, upon a default, the Bond Trustee or the Master Trustee may not obtain an amount sufficient to satisfy the liabilities of the Obligated Group, including any amounts due on the Master Indenture Obligation.

In connection with the execution and delivery of the Mortgage, title insurance in an amount not less than $10,000,000 will be obtained by the Master Trustee. In the event of any impairment or total loss of the lien of the Mortgage or any loss of title in the Mortgaged Property, the amount of title insurance coverage will, more likely than not, be insufficient to cure or pay any such impairment or loss.

Other than the Mortgage, no mortgage or other lien will be created on other facilities of the Obligated Group as security for the payment of the Bonds. Although the Master Trust Indenture contains restrictions on liens and encumbrances that the Obligated Group Members may create with respect to their property, the Master Trust Indenture also permits the Members to create certain liens and encumbrances for the benefit of creditors other than the holders of the Bonds. If the Obligated Group encounters financial difficulty, a creditor secured by an

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encumbrance permitted by the Master Trust Indenture may be entitled to a prior claim against the proceeds of the property of the Obligated Group subject to such permitted encumbrance. See APPENDIX D - “EXCERPTED PROVISIONS OF THE MASTER TRUST INDENTURE” for a description of encumbrances permitted by the Master Trust Indenture. If a Member creates or permits a lien that is not permitted under the Master Trust Indenture, such lien may be enforceable against such Member even though a default may exist under the Master Trust Indenture for violation of the restrictions on such liens. Neither the Master Trust Indenture nor any other financing document with respect to the Bonds restricts liens or encumbrances created by affiliates of the Obligated Group that are not Members of the Obligated Group. Limitation on Remedies Upon Default

Enforcement of remedies under the Master Trust Indenture may be limited or restricted by bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors’ rights and general principles of equity, including the exercise of judicial discretion in appropriate cases. Secondary Market

There can be no assurance that there will be a secondary market for the purchase or sale of the Bonds. From time to time there may be no market for them depending upon prevailing market conditions. The financial condition or market position of firms who may make the secondary market and the market evaluation of the capabilities, financial condition, and results of operations of the Obligated Group, are two significant factors that will influence the availability of a secondary market.

Parity and Additional Indebtedness

The Master Indenture Obligation will secure the Bonds on a parity with outstanding Obligations issued in connection with the Series 2013A Bonds, the 2013 Bridge Loan and certain swap obligations of the Obligated Group. See APPENDIX A – “DEBT STRUCTURE OF THE OBLIGATED GROUP – Outstanding Debt of Obligated Group Secured by Master Trust Indenture” and “- Derivative Instruments” for a discussion of parity Obligations. The Master Trust Indenture permits the Obligated Group Members to issue additional obligations under the Master Trust Indenture secured on a parity with the Master Indenture Obligation issued with respect to the Bonds. The Master Trust Indenture also permits the Obligated Group Members to incur additional debt that is not secured by the Master Trust Indenture. See APPENDIX D for a description of the terms for issuance of additional Master Indenture Obligations and additional debt not secured by the Master Trust Indenture. Additional debt, whether or not secured by the Master Trust Indenture, will increase debt service requirements and could adversely affect debt service coverage on the Bonds and the ability of the Obligated Group to meet its obligations under the Master Indenture Obligation. Interest Rate Swap Risk

SJMC is a party to certain interest rate swap agreements. If the agreements terminate early as a result of default or early termination during a negative value situation, SJMC may be subject to a termination payment to its counterparty, and such payment may be substantial. While such swaps are effective, if the mark-to-market valuation exceeds the limitations in the interest rate swap agreements, SJMC will be subject to the collateral provisions in the agreements. At June 30, 2013, the fair value of SJMC’s swaps was approximately $(2,100,000).

The ability of the Obligated Group to achieve its economic objectives through the use of interest rate swaps is dependent in part upon the ability of its counterparty to make any payments owed to the Obligated Group under the swaps. From time to time the Obligated Group evaluates various strategies with respect to the use of derivative hedging products and may enter into additional derivatives in connection with its debt and assets. For a discussion of outstanding hedge agreements, see APPENDIX A – “DEBT STRUCTURE OF THE OBLIGATED GROUP– Derivative Instruments.”

Impact of Market Turmoil

The disruption of the credit and financial markets in the last several years resulted in volatility in the securities markets, significant losses in investment portfolios, increased business failures and consumer and business

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bankruptcies and is a major cause of the current economic crisis. In response to this disruption of the credit and financial markets, federal legislation has been enacted, including the Recovery Act (as defined below) and the Dodd-Frank Act (as defined below). The health care sector has been materially adversely affected by this market turmoil. Patient service revenues and inpatient volumes have not increased as historic trends would otherwise indicate. Unemployment rates remain high nationally and are higher than pre-turmoil levels in the market area in which the Obligated Group owns and operate health care facilities. Higher unemployment has resulted in increases in self-pay admissions, increased levels of bad debt and uncompensated care, reduced demand for elective procedures, and reduced availability and affordability of health insurance. The economic crisis is also increasing stresses on the Florida budget, where the Obligated Group’s facilities are located, potentially resulting in reductions in Medicaid payment rates or Medicaid eligibility standards, and delays of payment of amounts due under Medicaid and other state or local payment programs. For a discussion of the effects of these factors on the Obligated Group, see APPENDIX A – “MANAGEMENT’S DISCUSSION AND ANALYSIS.” In July 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Financial Reform Act”) was enacted and includes broad changes to the existing financial regulatory structure, including the creation of new federal agencies to identify and respond to risks to the financial stability of the United States. Additional legislation is pending or under active consideration by Congress and regulatory action is being considered by various Federal agencies and the Federal Reserve Board and foreign governments, which are intended to increase the regulation of domestic and global credit markets. The effects of the Financial Reform Act and of these legislative, regulatory and other governmental actions, if implemented, are unclear. Health Care Reform

On March 23, 2010, the Patient Protection and Affordable Care Act (“ACA”) was enacted by Congress. Some of the provisions of ACA took effect immediately, while others have been and will continue to be phased in over time, ranging from one year to ten years. The ACA, including its insurance mandate requiring individuals to obtain coverage, has been challenged on constitutional grounds. A recent decision of the U.S. Supreme Court generally upheld the ACA, although the Court also ruled that states must be allowed to decline participation in the expanded Medicaid program under ACA without losing their eligibility under the existing Medicaid program. The possible effects if Florida chooses not to participate are discussed below. One of the primary objectives of ACA is to provide or make available, or subsidize the premium costs of, health care insurance for some of the millions of currently uninsured (or underinsured) people who fall below certain income levels. ACA proposes to accomplish that objective through various provisions, including (i) creation of active markets (referred to as exchanges) in which individuals and small employers can purchase health care insurance for themselves and their families or their employees and dependents, (ii) provision of subsidies for premium costs to individuals and families based upon their income relative to federal poverty levels, (iii) a mandate that individual consumers obtain and certain employers provide a minimum level of health care insurance and provision for penalties or taxes on consumers and employers that do not comply with these mandates, (iv) establishment of insurance reforms that expand coverage generally through such provisions as prohibitions on denials of coverage for pre-existing conditions and elimination of lifetime or annual cost caps, and (v) expansion of existing public programs, including Medicaid for individuals and families. To the extent these provisions produce the intended result, the amount of uncompensated care provided by the Obligated Group’s facilities should decrease, but it is uncertain how the level of compensation for services will compare to the cost of providing those services. Some other provisions of ACA that may affect hospital operations include (i) reduction of certain automatic increases in Medicare reimbursement, (ii) reduction in payments under so-called “Medicare advantage” programs, (iii) quality improvement covenants required in contracts between insurers and providers, (iv) loss of eligibility for insurance contracts for hospitals that fail to implement programs designed to ensure patient safety and enhance quality of care, (v) reduction or elimination of special reimbursement (so-called disproportionate share payments referred to below) for hospitals that provide substantial levels of uncompensated care, (vi) a reduction in payments under Medicare for hospitals with excess and preventable readmissions, (vii) provisions designed to reduce waste,

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fraud and abuse through provider enrollment screening, compliance programs, increased penalties for violations, and increased funding for anti-abuse programs, (viii) additional requirements for tax-exempt status of hospitals, including periodic community needs assessments, (ix) the establishment of independent agencies to develop proposals for quality of care and cost reduction, and (x) programs to develop and test new payment structures to reduce costs and improve quality. Management of the Obligated Group will continue to analyze ACA in order to assess the effects of the legislation on current and projected operations, financial performance and financial condition. However, management cannot predict with any reasonable degree of certainty or reliability any interim or ultimate effects of the legislation. There are numerous factors that contribute to the uncertainty of ACA’s effects, including the actual content of extensive implementing regulations that must be developed by the federal and state governments, the decision by individuals whether to comply with the insurance mandate, the results and scope of various cost control initiatives mandated by ACA, and the decision by states whether to participate in the expanded Medicaid program. Participation Under the Expanded Medicaid Program. The recent U.S. Supreme Court decision regarding ACA holds in effect that states must be allowed to decline participation in the expanded Medicaid program under ACA without losing their eligibility under the existing Medicaid program. It is not known whether Florida will participate. A decision by Florida not to participate in the expanded Medicaid program could have numerous consequences, including the following:

● Previously uninsured Florida residents could enroll in Medicaid under the expanded program. It is doubtful that these residents have the financial resources to purchase private insurance that might otherwise be available through ACA programs. If the Obligated Group provides services to any of those residents who do not purchase individual insurance, the Obligated Group will not receive the reimbursement otherwise available under the expanded Medicaid program for these residents.

● A significant number of Florida residents who are currently eligible for the Florida Medicaid program have not enrolled. If those residents enroll in Medicaid to avoid the tax or penalty otherwise payable under ACA, the number of Medicaid patients served by the Obligated Group under the existing program could increase. The contribution formula for the existing Medicaid program will require increased funding by the State for its share of the cost of serving these residents. If the State does not participate in the expanded Medicaid program, it will not receive any federal funding that might otherwise be available from the expanded Medicaid program to offset the cost of serving these residents.

● Under the current Medicaid program hospitals that provide relatively high levels of uncompensated care receive disproportionate share payments (so-called “DSH payments”). Under ACA these DSH payments are phased out over a period of years based on ACA’s assumption that substantially all people will be covered by Medicaid or Medicare or some form of insurance, thus significantly reducing or eliminating uncompensated care. The Obligated Group could lose DSH payment funding but could still be providing significant levels of uncompensated care.

These consequences could have a significant adverse effect on the results of operations of the Obligated Group. Health Care Industry Factors Affecting the Obligated Group

The health care industry is highly dependent on a number of factors that may limit the ability of the Obligated Group to pay debt service on the Bonds. Among other things, participants in the health care industry are subject to significant regulatory requirements of federal, state and local governmental agencies and independent professional organizations and accrediting bodies, technological advances and changes in treatment modes, various competitive factors and changes in third party reimbursement programs. Discussed below are certain of these factors which could have a significant impact on the future operations and financial condition of the Obligated Group. Federal and State Legislation and Regulation. Federal and state legislative and regulatory actions over the past several years have included changes in the structure of the Medicare and Medicaid payment systems, limitations on increases in Medicare and Medicaid payments and efforts to increase competition among health care

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providers. Any new, significant legislation or governmental policies affecting hospital, governmental and commercial medical insurance payment or reimbursement programs or the health care industry in general, including any significant deregulation measures designed to stimulate competition among hospitals, could adversely affect the revenues of the Obligated Group. Third Party Reimbursement and Health Care Reform. The Obligated Group derives a significant portion of its revenues from Medicare, Medicaid, Blue Cross and other third party payor programs. Such programs generally provide payment for services rendered to their beneficiaries in an amount that is less than actual patient charges. Contractual allowances result from participation in third party payor programs, and revenues received under reimbursement agreements are subject to audit and adjustment by such third party payors. The receipt of future revenues by the Obligated Group is subject to, among other factors, federal and state policies affecting the health care industry, federal and state health care reform initiatives and other conditions that are impossible to predict. The effect on the Obligated Group of recently enacted laws and regulations and of future changes in federal and state laws and policies and the interpretation thereof and third party payor policies cannot be fully or accurately determined at this time. No assurance is given or can be given that any of the third party programs presently in effect for the Obligated Group will remain at their current levels of reimbursement or that they will be maintained in the present form. For information concerning third party payor revenue of the Obligated Group, see APPENDIX A – “SOURCES OF PATIENT SERVICE REVENUE.” From time to time, Congress has considered and may consider legislative proposals to reform the health care system of the nation, many of which would substantially alter the methods by which health care is delivered and financed throughout the nation, and which would assure some type of insurance coverage for all citizens. In addition, the state legislature may enact health care reform measures which have a similar effect. It is not possible to predict the provisions of any legislation that may be passed or the date on which it will become effective. There are many possible financial effects, both positive and negative, that could result from enactment of any federal or state legislation proposing to regulate or reform the health care industry, and it is not possible at this time to predict with certainty the effect on the Obligated Group of any health care reform proposals which might be enacted. Medicare reimbursement methodologies are changed frequently by Congress and may adversely affect various components of the Obligated Group’s health care provider system. The current trend of federal Medicare legislation and regulations favors the replacement of cost-based, provider-specific reimbursement with prospectively determined payment rates, which may be periodically adjusted. The impact of the change to a prospective payment system for outpatient services on the Obligated Group’s revenue, and the overall trend away from cost-based reimbursement, cannot be precisely determined at this time. The net effect, however, could be lower revenues which could adversely affect the Obligated Group and affiliates and the operation of their facilities. Attempts to reduce the federal deficit may also affect Medicare reimbursement. For example, in 1985, Congress passed the Balanced Budget and Emergency Deficit Control Act of 1985 (“Gramm-Rudman”) in an attempt to eliminate the federal deficit through control of the federal budgeting process and the gradual reduction of the deficit by specific amounts. Several times since the inception of Gramm-Rudman, Medicare hospital payments have been reduced in order to meet the requirements of Gramm-Rudman. Possible Congressional action to reduce the federal deficit, periodically under discussion, could adversely affect Medicare reimbursement to the Obligated Group. Federal and state funds support the Medicaid program. The Florida Medicaid Program is administered by the Agency for Health Care Administration (“AHCA”) and is funded by federal and state appropriations. The financial condition of and budgetary factors facing the State of Florida may affect the level of Medicaid revenues. Payments made to health care providers under the Medicaid program are subject to changes as a result of federal or state legislative and administrative actions, including further changes in the methods for calculating payments, the amount of payments that will be made for covered services and the types of services that will be covered under the program. Increasing budgetary pressures may lead to further reimbursement limits, reductions in existing programs or elimination of coverage for certain individuals under the Florida Medicaid Program. Federal legislation could result in a reduction of Medicaid funding or an increase in state discretionary funding through block grants, or a combination thereof. It is possible that any such limitations may have a material adverse effect on the operations or financial condition of the Obligated Group. See also “Florida Medicaid Reform” below.

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Florida Medicaid Reform. In 2004, then Governor Bush proposed a major reform of Florida’s Medicaid system. The reform, called a “waiver” seeks federal permission to waive certain federal requirements that govern the regular Medicaid program. The goals of the reform are to establish a new Medicaid system that achieves patient choice, Medicaid marketplace innovation, better care, and budget predictability. In 2005, the Florida Legislature passed legislation authorizing AHCA to continue developing a plan to pilot the Governor’s proposal for a capitated managed care system to replace the current fee-for-service Medicaid system. The plan initially covered two geographic areas designated for pilot projects, one in Broward County and one pilot project in Duval County and surrounding Baker, Clay, and Nassau Counties. Other components include requirements that health care plans in Medicaid reform pilot areas include mandatory and optional Medicaid services and that actuarially sound, risk-adjusted capitation rates for coverage of Medicaid recipients be established, separated into comprehensive and catastrophic care premium components and a method developed to phase in financial risk for approved provider service networks over a three year period. Subsequent legislation provides AHCA the authority to implement this project and a federal waiver for the pilot project in the two areas was received. During the 2011 legislative session, the Florida Legislature passed a bill expanding Medicaid reform statewide. In June 2013 the State received federal approval for its Medicaid reform, which is set to begin statewide in April 2014. It is unknown at this time what effect the implementation of recent Medicaid reforms will have on the finances of the Obligated Group. Anti-Fraud and Abuse Laws. In addition to the foregoing Medicare and Medicaid reimbursement limitations, other aspects of the Medicare and Medicaid programs may affect the Obligated Group. In 1977, Congress adopted the Medicare and Medicaid Anti-Fraud and Abuse Amendments of 1977 (the “Anti-Fraud and Abuse Law”), which have been strengthened by subsequent amendments and the creation of the Office of Inspector General (“OIG”) to enforce compliance with the statute. The laws provide for civil monetary and criminal penalties and exclusion from the Medicare/Medicaid programs for knowing and willful solicitation, receipt, offer or payment of remuneration directly or indirectly in return for or to induce the referral of Medicare or Medicaid business. Civil monetary penalties may be imposed for violation of the Anti-Fraud and Abuse Law, thereby applying the civil burden of proof to such law instead of the higher burden required in criminal cases. The Anti-Fraud and Abuse Law and the related Civil Monetary Penalties Law has been amended several times to, among other things, expand the scope of their prohibitions to include most federal health programs, to define additional prohibited behaviors and to significantly increase the penalties thereunder. The United States Department of Health and Human Services (“HHS”) has issued regulations from time to time setting forth so-called “safe harbors” which would protect providers from prosecution under the Anti-Fraud and Abuse Law for certain limited types of arrangements. To date, a limited number of final safe harbors have been developed. The safe harbors are narrow and do not cover a wide range of common economic relationships between and among hospitals. The regulations do not purport to describe comprehensively all lawful or unlawful economic arrangements or other relationships between health care providers and referral sources. While the failure to qualify for a safe harbor does not necessarily lead to the conclusion that such arrangement violates federal law, such failure may increase the potential for investigation or challenge to the arrangement due to the broad language within the statute itself. The Obligated Group has entered into arrangements with other health care providers, one or more of which arrangements may not meet all of the requirements of the “safe harbor” regulations. Congress has created a new program operated jointly by the Secretary of HHS and the Attorney General to coordinate federal, state and local law enforcement with respect to fraud and abuse. The budget for prosecutions also has been significantly expanded, and prosecution of health care fraud has become a priority for the federal government. In recent years, federal prosecutors have increased the use of the False Claims Act (“FCA”) to prosecute health care providers, and particularly hospitals, for billing practices prohibited by Medicare. Recent enforcement activity of this type includes billing laboratory procedures within three days prior to inpatient admission and upcoding for certain diagnoses. Such federal prosecutions are expected to continue. Private enforcement actions filed under the FCA in qui tam suits brought by private plaintiffs known as “relators” are also beginning to increase in the state, and if successful can result in very significant monetary payments either in damages or in settlement actions. Qui tam lawsuits are kept under seal while the federal government evaluates whether the United States will join the lawsuit. In the opinion of management, all known and expected liabilities of the Obligated Group are fully

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reserved, and accordingly Obligated Group management does not anticipate that such liabilities would have a material adverse effect on the finances of the Obligated Group. No assurance can be given, however, that the Obligated Group will never be required to defend an action brought under the FCA in the future or that any resulting liability would not have a material adverse effect on the financial conditions of the Obligated Group. Federal Self-Referral Prohibitions. A federal law, commonly referred to as the Stark Law, prohibits a physician who has a financial relationship, or whose immediate family member has a financial relationship, with an entity, from referring a Medicare or Medicaid patient to the entity for certain designated health services, with limited exceptions. Such designated health services include inpatient and outpatient hospital services, physical therapy services, occupational therapy services, radiology services, including MRIs, CAT scans and ultrasound services, durable medical equipment, radiation therapy services, parenteral and enteral nutrients, equipment and supplies, prosthetics, orthotics and prosthetic devices, home health services, outpatient prescription drugs, and clinical laboratory services. The Stark Law also prohibits the entity receiving the referral from filing a claim or billing for the services arising out of the prohibited referral. The prohibition applies regardless of the reasons for the financial relationship and the referral; that is, unlike the federal Anti-Fraud and Abuse Laws, no finding of intent to violate the Stark Law is required. Sanctions include denial of payment for the services provided in violation of the prohibition, refunds of amounts collected in violation, and various civil penalties. Exclusion from the Medicare and Medicaid programs would have a material adverse effect on the operations and financial condition of the Obligated Group, as would any significant penalties, demands for refund or denials of payment. The types of financial arrangements between a physician and an entity that would trigger the self-referral prohibition are broad, and include ownership and investment interests and compensation arrangements. Regulations have been promulgated from time to time implementing the Stark Law. While some guidance can be obtained from these regulations, the Obligated Group cannot be assured that financial relationships with referring physicians fully meet the requirements of the regulations that permit referrals notwithstanding the existence of a financial relationship. The Obligated Group has reviewed its arrangements with physicians and is satisfied that it is in compliance with the Stark Law, but there can be no assurance that the Obligated Group will not be found to have violated the Stark Law, and if so, there can be no assurance that any sanction imposed would not have a material adverse effect on the operations or the financial condition of the Obligated Group. Florida Patient Self-Referral Act. In 1992, the Florida Legislature enacted the Patient Self-Referral Act. In addition, in 1996, the Florida Legislature adopted a patient brokering law. These laws contain provisions that are similar to those of the federal Anti-Fraud and Abuse Law and the Stark Law described above. Unlike the federal laws, the Florida laws are not restricted to activities where payments are made under a federal health care program, such as Medicare or Medicaid. Although the Obligated Group believes that it is in compliance with these laws and regulations, there can be no assurance that federal or state regulatory authorities will not challenge past, current or future activities under these laws, and there can be no assurance that the Obligated Group and future Members of the Obligated Group will not be found to have violated these laws, and if so, whether any enforcement activity would have a material adverse effect on the operations and financial condition of the Obligated Group and future Members of the Obligated Group.

Charity Care. Hospitals are permitted to acquire tax-exempt status under the Internal Revenue Code because the provision of health care historically has been treated as a “charitable” enterprise. Some commentators and others have taken the position that, with the onset of employer health insurance and governmental reimbursement programs, there is no longer any justification for special tax treatment for the health care industry, and the availability of tax-exempt status should be eliminated. Management of the Obligated Group considers such a dramatic change in the law to be unlikely in the near term; nevertheless, federal and state tax authorities are beginning to demand that tax-exempt hospitals justify their tax-exempt status by documenting their charitable care and other community benefits.

Charity care issues also serve as the basis of certain claims against major hospital systems throughout the United States on behalf of uninsured patients. Many lawsuits filed against nonprofit hospitals raise a number of claims against the hospital defendants, including claims that the defendants, by accepting tax-exempt status, entered into agreements with the federal, state and local governments promising to provide free or reduced care to all those who need it; the uninsured patients are beneficiaries of those agreements and can bring suit on them; the defendants engaged in illegal and oppressive tactics against the uninsured; the defendants engaged in illegal price

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discrimination by charging the uninsured rates far in excess of the rates charged to such third party payors as Medicare and certain insurers; the defendants violated state consumer fraud statutes; the defendants allowed a portion of their properties to be used by for-profit entities at less than fair value and engaged in other inappropriate transactions with doctors and certain insiders; the defendants transferred monies illegally to their affiliates for other than charitable purposes; and the defendants and the American Hospital Association, another named defendant in many of the lawsuits, conspired with the defendants to charge illegal prices to the uninsured. The ACA imposes additional requirements for tax-exemption upon tax- exempt hospitals, including obligations to adopt and publicize a financial assistance policy; limit charges to patients who qualify for financial assistance to the amounts generally billed to insured patients; and control the billing and collection processes. Additionally, effective for tax years commencing January 1, 2013, tax-exempt hospitals must conduct a community needs assessment and adopt an implementation strategy to meet those identified needs. Failure to complete a community health needs assessment in any applicable three-year period can result in financial penalties and possible revocation of status as a section 501(c)(3) organization. Physician Recruitment. The Internal Revenue Service (“IRS”) and HHS have issued various pronouncements that could limit physician recruiting and retention arrangements. The IRS has stated that tax-exempt hospitals that provide recruiting and retention incentives to physicians risk loss of tax-exempt status unless the incentives are necessary to serve a charitable purpose; improvement of a charitable hospital’s financial condition does not necessarily constitute such a purpose. The IRS has also issued a revenue ruling setting forth certain guidelines for recruiting and 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 Medicare-certified facility and a physician that is intended to encourage the physician to refer patients may violate the federal Anti-Fraud and Abuse Law. The Obligated Group believes that its physician recruitment activities are in material compliance with these policies. Anti-Dumping. In response to concerns regarding inappropriate hospital transfers of emergency patients based on the patient’s inability to pay for the services provided, in 1986 Congress enacted the Emergency Medical Treatment and Active Labor Act. This so-called “anti-dumping” law imposes certain requirements on hospitals prior to transferring a patient to another facility. Failure to comply with the law can result in exclusion from the Medicare and/or Medicaid programs as well as civil and criminal penalties. Failure of the Obligated Group to meet its responsibilities under the law could adversely affect the Obligated Group’s financial condition. Managed Care. Managed care organizations, such as health maintenance organizations (“HMOs”) and preferred provider organizations (“PPOs”), are expected to place increasing pressure on the Obligated Group’s revenues in the future. HMO and PPO provider contracts generally obligate a health care provider to provide services to HMO and PPO participants at a discount from established charges. It is not possible for the Obligated Group to predict the extent to which HMOs and PPOs and other managed care entities will be a source of the Obligated Group’s revenues in the future. The continued development of managed care programs could result in reductions in the Obligated Group’s revenues, and such reductions could be material. Relations with Alternative Delivery Systems. Certain private insurance companies contract with some hospitals on an “exclusive” or a “preferred” provider basis, and some insurers have introduced plans known as PPOs. Under an exclusive provider plan, which includes most HMOs, private payors limit coverage to those services provided by selected hospitals. With this contracting authority, private payors may direct patients away from nonselected hospitals by denying coverage for services provided by them. 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 Obligated Group has contracted may not survive, which may result in the Obligated Group being responsible for providing services for which the Obligated Group may not ultimately be compensated. Environmental Matters. Health care providers are subject to a wide variety of federal, state and local environmental and occupational health and safety laws and regulations which address, among other things, provider

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operations or facilities and properties owned or operated by providers. The types of regulatory requirements faced by health care providers include, but are not limited to: 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; requirements for training employees in the proper handling and management of hazardous materials and wastes; and other requirements. In their role as owners and/or operators of properties or facilities, health care providers, including the Obligated Group, may be subject to liability for investigating and remedying any hazardous substances which have come to be located on the property, as well as for any such substances that may have migrated off of the property or have been improperly disposed of off-site. Typical health care provider operations include, but are not limited to, in various combinations, the handling, use, storage, transportation, disposal and/or discharge of hazardous, infectious, toxic, radioactive, flammable and other hazardous materials, wastes, pollutants or contaminants. As such, health care provider operations are particularly susceptible to the practical, financial and legal risks associated with compliance with such laws and regulations. Such risks may result in injury to individuals and damages to property or the environment, may interrupt operations and/or increase their costs, may result in legal liability which could in turn result in significant damages, injunctions or fines, and may result in investigations, administrative proceedings, penalties or other governmental agency actions and may not be covered by insurance. 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. No environmental site assessment was prepared in connection with the issuance of the Bonds or the delivery of the Mortgage. The Obligated Group is not aware, however, of any pending or threatened claim, investigation or enforcement action regarding environmental matters which management believes would have a material adverse impact on the financial condition of the Obligated Group. The Master Trustee may decline to enforce the Master Trust Indenture if the Master Trustee has not been indemnified to its satisfaction, in accordance with the Master Trust Indenture, for all liabilities it may incur as a consequence thereof. Such liabilities may include, but are not limited to, costs associated with complying with environmental laws and regulations. HIPAA. The Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) adds additional criminal sanctions for health care fraud and applies to all health care benefit programs, whether public or private. HIPAA also provides for punishment of a health care provider for knowingly and willfully embezzling, stealing, converting or intentionally misapplying any money, funds, or other assets of a health care benefit program. A health care provider convicted of health care fraud could be subject to mandatory exclusion from Medicare. HIPAA also addresses the confidentiality of individuals’ health information. Disclosure of certain broadly defined protected health information is prohibited unless expressly permitted under the provisions of the HIPAA statute and regulations or authorized by the patient. HIPAA’s confidentiality provisions extend not only to patient medical records, but also to a wide variety of health care clinical and financial settings where patient privacy restrictions often impose new communication, operational, accounting and billing restrictions. These add costs and create potentially unanticipated sources of legal liability. HIPAA imposes a range of civil monetary penalties for violations and criminal penalties for knowingly obtaining or using individually identifiable health information. For example, the penalties are $250,000 and/or imprisonment if the information was obtained or used with the intent to sell, transfer or use the information for commercial advantage, personal gain or malicious harm. Indigent Care. Tax-exempt and governmental hospitals often treat large numbers of indigent patients who are unable to pay in full for their medical care. Typically, urban, inner-city hospitals may treat significant numbers of indigents. These hospitals may be susceptible to economic and political changes that could increase the number of indigents or their responsibility for caring for this population. General economic conditions that affect the number of employed individuals who have health coverage affect the ability of patients to pay for their care. Similarly, changes in governmental policy, which may result in coverage exclusions under local, state and federal health care programs (including Medicare and Medicaid) may increase the frequency and severity of indigent

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treatment by such hospitals and other providers. It also is possible that future legislation could require that healthcare providers maintain minimum levels of indigent care. Florida’s Public Medical Assistance Act (the “Assistance Act”) provides a mechanism for the funding of health care services to indigent persons. The Assistance Act imposes upon each hospital in Florida an assessment in an amount equal to one and one-half percent (1.5%) of each hospital’s annual net operating revenue for inpatient services and one percent (1%) of the annual net operating revenue for outpatient services each fiscal year, with the exception of outpatient radiation therapy services. AHCA determines such revenues based on a hospital’s actual experience reported to AHCA and certifies the amount of the assessment for each hospital within six (6) months after the end of each hospital fiscal year. The assessment is payable to and collected by AHCA in equal quarterly amounts, on or before the first day of each calendar quarter beginning with the first full calendar quarter that occurs after AHCA certifies the amount of assessment for each hospital. All moneys collected pursuant to the Assistance Act are to be deposited into the Public Medical Assistance Trust Fund. AHCA may impose administrative fines for the failure of any hospital to timely pay its quarterly assessment. Purchasers, successors or assignees of a facility, which are subject to AHCA’s jurisdiction, are liable for any assessments, fines or penalties incurred by a facility or its employees, regardless of when it was identified. Budget deficits for the State of Florida may lead to changes to the Medicaid program and such changes may have a material adverse effect on the operations or financial condition of the Obligated Group. Charity Care Litigation. Litigation was initiated against many hospitals in the United States, including the Obligated Group, by individual uninsured plaintiffs alleging, among other things, that the hospitals violated their duty to the plaintiffs by charging higher rates and fees for services to those plaintiffs than the hospitals received from Blue Cross entities, Medicare, Medicaid or other third party payors. Among the remedies sought by the plaintiffs are money damages and a court order against the defendants compelling them to reduce the rates and fees charged to uninsured patients. In the event the plaintiffs prevail, the amounts that hospitals charge uninsured patients could be materially affected. Staffing. In recent years, the health care industry has suffered from a scarcity of nursing personnel, respiratory therapists, pharmacists and other trained health care technicians. In addition, aging medical staffs and difficulties in recruiting physicians are leading to physician shortages. A significant factor underlying this trend includes a decrease in the number of persons entering such professions. This is expected to intensify in the future, aggravating the general shortage and increasing the likelihood of hospital-specific shortages. Competition for physicians and employees, coupled with increased recruiting and retention costs, will increase hospital operating costs, possibly significantly. This trend could have a material adverse impact on hospitals, including those operated by the Obligated Group. Increased Competition

It is likely that the Obligated Group will face increased competition in the future from other hospitals serving its service area, from HMOs and from other health care providers that offer health care services to the population that the Obligated Group currently serves. In addition, the development of HMOs and PPOs which do not use the Obligated Group’s facilities or the development of other alternative forms of health care delivery which are able to offer lower priced services could result in decreased utilization of the services provided by the Obligated Group. Moreover, other forms of competition may affect the Obligated Group’s ability to maintain or improve its market share, including increasing competition (i) between physicians who generally use hospitals and non-physician practitioners such as nurse practitioners, chiropractors, physical and occupational therapists and others who may not generally use hospitals, and (ii) from nursing homes, home health agencies, ambulatory care facilities, surgical centers, outpatient radiology centers, rehabilitation and therapy centers, physician group practices, and other non-hospital providers of many services for which patients generally rely on hospitals currently. Affiliation, Merger, Acquisition and Divestiture

Significant numbers of affiliations, mergers, acquisitions and divestitures have occurred in the health care industry recently, and the Obligated Group continuously evaluates and pursues potential affiliation candidates as part of its overall strategic plan for its healthcare system. Any such affiliation, merger, acquisition or divestiture is subject to compliance with the provisions of the Master Trust Indenture applicable to such matters.

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Licensing, Surveys, Investigations and Audits

On a regular basis, health care facilities, including those of the Obligated Group and its affiliates, are subject to numerous legal, regulatory, professional and private licensing, certification and accreditation requirements. These include, but are not limited to, requirements relating to Medicare and Medicaid participation and payment, state licensing agencies, private payors, the Joint Commission and other accrediting bodies. Renewal and continuance of certain of these licenses, certifications and accreditations are based on inspections, surveys, audits, investigations or other reviews, some of which may require or include affirmative action or response by the Obligated Group. These activities generally are conducted in the normal course of business of health care facilities. Nevertheless, an adverse result could result in a loss or reduction in the Obligated Group’s scope of licensure, certification or accreditation, or could reduce the payment received or require repayment of amounts previously remitted. Obligated Group management believes it is in material compliance with these requirements and currently anticipates no difficulty renewing or continuing currently held licenses, certifications or accreditations. Nevertheless, adverse actions in any of these areas could result in the loss of utilization or revenues, or the Obligated Group’s ability to operate all or a portion of the facilities of the Obligated Group and its affiliates, and, consequently, could adversely affect the Obligated Group’s ability to make payments of principal of or interest on the Bonds. In addition, no assurance can be given as to the effect on future operations of the Obligated Group of existing laws, regulations and standards for certification or accreditation or of any future changes in such laws, regulations and standards. For information regarding the status of the Obligated Group’s current licenses, certifications and accreditations, see APPENDIX A. Antitrust

Enforcement of the antitrust laws against health care providers is becoming more common, and antitrust liability may arise in a wide variety of circumstances including medical staff privilege disputes, third party contracting, physician relations, and joint venture, merger, affiliation and acquisition activities. In some respects, the application of the federal and state antitrust laws to health care is still evolving, and enforcement activity by federal and state agencies appears to be increasing. Violation of the antitrust laws could subject a hospital to criminal and civil enforcement by federal and state agencies, as well as by private litigants. The most common areas of potential liability are joint activities among providers with respect to payor contracting, medical staff credentialing, and use of a hospital’s local market power for entry into related health care businesses. From time to time, the Obligated Group is or will be involved in joint contracting activity with hospitals or providers. The precise degree to which this or similar joint contracting activities may expose the participants to antitrust risk from governmental or private sources is dependent on a myriad of factual matters which may change from time to time. A U.S. Supreme Court decision now allows physicians who are subject to adverse peer review proceedings to file federal antitrust actions against hospitals and seek treble damages. SJMC periodically has disputes regarding credentialing and peer review, and therefore may be subject to liability in this area. Court decisions have also established private causes of action against hospitals which use their local market power to promote ancillary health care business 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. Liability in any of these or other antitrust areas of liability may be substantial, depending on the facts and circumstances of each case and such liability may not be covered by insurance. Cybersecurity

Like many other large organizations, the Obligated Group relies on electronic systems and technologies to conduct its operations in support of its medical treatment activities, its finances and its research and educational activities. In the past several years, a number of entities have sought to gain unauthorized access to electronic systems of large organizations for the purposes of misappropriating assets or personal, operational, financial or other sensitive information, or causing operational disruption. These attempts, which are increasing, including highly sophisticated efforts to electronically circumvent security measures as well as more traditional intelligence gathering aimed at obtaining information necessary to gain access. The Obligated Group is committed to deterring attacks on its electronic systems and responding to such attacks to minimize their impact on operations. However, no

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assurances can be given that the Obligated Group’s security measures will be able to prevent cyber attacks on its electronic systems, and no assurances can be given that any cyber attacks, if successful, will not have a material adverse effect on the operations or financial condition of the Obligated Group and its affiliates. Nonprofit Health Care Environment

Each of the Members of the Obligated Group is a Florida not-for- profit corporation, exempt from federal income taxation as an organization described in Section 501(c)(3) of the Code. As not-for-profit tax-exempt organizations, the Members of the Obligated Group are subject to federal, state and local laws, regulations, rulings and court decisions relating to their organization and operation, including their operation for charitable purposes. At the same time, the Obligated Group conducts large-scale complex business transactions and is a major employer in its service area. There can often be a tension between the rules designed to regulate a wide range of charitable organizations and the day-to-day operations of a complex health care organization.

Recently, an increasing number of the operations or practices of health care providers have been challenged or questioned to determine if they are consistent with the regulatory requirements for nonprofit tax-exempt organizations. These challenges are broader than concerns about compliance with federal and state statutes and regulations, such as Medicare and Medicaid compliance, and instead in many cases are examinations of core business practices of the health care organizations. Areas which have come under examination have included pricing practices, billing and collection practices, charitable care policies and practices, executive compensation, exemption of property from real property taxation, and others. These challenges and questions have come from a variety of sources, including state attorneys general, the Internal Revenue Service, labor unions, Congress, state legislatures, and patients, and in a variety of forums, including hearings, audits and litigation. The Obligated Group can provide no assurance with respect to the effect of any such challenges on its operations or finances. Tax-Exempt Status of Bonds

It is expected that the Bonds will qualify as tax-exempt obligations for federal income tax purposes as of the date of issuance. See “TAX STATUS”. Bond counsel is delivering an opinion with respect to certain aspects of the tax status of the Bonds. That opinion is attached to this Official Statement as APPENDIX E and should be read in its entirety for a complete understanding of the scope of the opinion and the conclusions expressed. A legal opinion is only the expression of professional judgment and does not constitute a guaranty with respect to the matters covered. In addition, the opinion of bond counsel speaks only as of its date, and bond counsel does not undertake to advise Bondholders about subsequent developments. The tax status of the Bonds could be affected by post-issuance events. There are various requirements of the Internal Revenue Code that must be observed or satisfied after the issuance of the Bonds in order for the Bonds to qualify for, and retain, tax-exempt status. These requirements include use of the proceeds of the Bonds, use of the facilities financed by the Bonds, investment of Bond proceeds, and the rebate of so-called excess arbitrage earnings. Compliance with these requirements is the responsibility of the Issuer and the Borrower. The Internal Revenue Service conducts an audit program to examine compliance with the requirements regarding tax-exempt status. Under current IRS procedures, in the initial stages of an audit with respect to the Bonds the Borrower would be treated as the taxpayer, and the owners of the Bonds may have limited rights to participate in the audit process. The initiation of an audit with respect to the Bonds could adversely affect the market value and liquidity of the Bonds, even though no final determination about the tax-exempt status has been made. If an audit results in a final determination that the Bonds do not qualify as tax-exempt obligations, such a determination could be retroactive in effect to the date of issuance of the Bonds. In addition to post-issuance compliance, a change in law after the date of issuance of the Bonds could affect the tax-exempt status of the Bonds or the effect of investing in the Bonds. For example, Congress could eliminate the exemption for interest on the Bonds, or it could reduce or eliminate the federal income tax, or it could adopt a so-called flat tax. The Bond Indenture does not provide for the payment of any additional interest or penalty if a determination is made that the Bonds do not comply with the existing requirements of the Internal Revenue Code or

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if a subsequent change in law adversely affects the tax-exempt status of the Bonds or the effect of investing in the Bonds. Other Risk Factors

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

(1) Increased efforts by insurers, private employers and governmental agencies to limit the cost of hospital services (including, without limitation, the implementation of a system of prospective review of hospital rate changes and negotiating discounted rates), to reduce the number of hospital beds and to reduce utilization of hospital facilities by such means as preventive medicine, improved occupational health and safety, and outpatient care. (2) Cost increases without corresponding increases in revenue which could result from, among other factors, increases in the salaries, wages, and fringe benefits of hospital employees, increases in costs associated with advances in medical technology or with inflation or future legislation which would prevent or limit the ability of the Obligated Group to increase revenues. (3) Any termination or alteration of existing agreements between SJMC and individual physicians and physician groups who render services to SJMC’s patients or any termination or alteration of referral patterns by individual physicians and physician groups with whom SJMC does not have contractual arrangements. (4) Future contract negotiations between public and private insurers and participating hospitals, including SJMC, and other efforts of these insurers and of employers to limit hospitalization costs and coverage which could adversely affect the level of reimbursement to the Obligated Group. (5) The ability of, and costs to, the Obligated Group to insure or otherwise protect itself against malpractice and general liability claims. (6) Future legislation and regulations affecting hospitals, their tax-exempt status, governmental and commercial medical insurance and the health care industry in general which could adversely affect the operations of the Obligated Group’s facilities. (7) The reduced need for hospitalization or other services, including those of the Obligated Group and its affiliates, arising from medical and other scientific advances. (8) An inflationary economy and difficulty in increasing charges and other fees charged while at the same time maintaining the amount or quality of health services which may affect the ability of the Obligated Group to maintain sufficient operating margins. (9) Risks in connection with Obligated Group employees, including, but not limited to strikes, and other work-related actions, contract disputes, discrimination claims, tort actions related to personnel, work-related injuries, exposure to hazardous materials, interpersonal torts, and other risks that may flow from the relationship between employer and employee or between physicians, patients and employees. Many of these risks are not covered by insurance, and certain of them cannot be anticipated or prevented in advance. (10) The possible inability to obtain future governmental approvals to undertake projects necessary to remain competitive both as to rates and charges as well as quality and scope of care. (11) Imposition of wage and price controls for the health care industry, such as those that were imposed and adversely affected health care facilities in the early 1970s.

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(12) Limitations on the availability of or increased compensation necessary to secure and retain nursing, technical or other personnel. (13) Proposals to eliminate the tax-exempt status of obligations issued to finance health facilities, or to limit the use of such tax-exempt obligations, which have been made in the past, and which may be made again in the future. The adoption of such proposals could increase the cost to the Obligated Group of financing future capital needs. (14) Increased unemployment or other adverse economic conditions which could increase the proportion of patients who are unable to pay fully for the cost of their care. In addition, increased unemployment caused by a general downturn in the economy of the service area of the Obligated Group and its affiliates or by the closing of operations of one or more major employers in such service areas may result in a significant change in the demographics of such service areas, such as a reduction in the population, which could result in reduced demand for the services of the Obligated Group and its affiliates. (15) Judicial interpretations of existing law that reduce payments to hospitals for workers’ compensation services. (16) Technological advances in recent years have accelerated the trend toward the use by hospitals of sophisticated and costly equipment and services for diagnosis and treatment. The acquisition and operation of certain equipment or services may continue to be significant factors in hospital utilization, but the ability of a hospital to offer such equipment or services may be subject to governmental approval, the availability of equipment or specialists or the ability to finance such acquisition or operation.

CONTINUING DISCLOSURE

General

SJMC, on behalf of the Obligated Group, will enter into a Continuing Disclosure Agreement (the “Continuing Disclosure Agreement”) for the benefit of the beneficial owners of the Bonds pursuant to the requirements of Rule 15c2-12 (“Rule 15c2-12”) adopted by the Securities and Exchange Commission (the “SEC”) under the Securities Exchange Act of 1934, as amended. The form of Continuing Disclosure Agreement is attached hereto as APPENDIX G. Under the Continuing Disclosure Agreement, the Members of the Obligated Group will agree to provide certain quarterly and annual financial and operating information and will agree to provide annual audited financial statements, including consolidated statements that provide financial information with respect to the Members of Obligated Group, as well as other affiliates. In addition, the Continuing Disclosure Agreement will obligate the Members of the Obligated Group to provide notice of the occurrence of certain listed events. The quarterly and annual information and event notices are required to be filed with the Municipal Securities Rulemaking Board pursuant to the “EMMA” filing system. Consequences of Failure to Provide Information

Failure by SJMC to comply with the provisions of the Continuing Disclosure Agreement will not constitute an event of default under the Bond Indenture, the Master Trust Indenture, or the related financing documents; however, nothing in the Continuing Disclosure Agreement precludes the beneficial owner of any Bond from seeking a court order requiring SJMC to comply with its obligations under the Continuing Disclosure Agreement, and the failure to comply will itself be a reportable event under the Continuing Disclosure Agreement. Compliance with Previous Undertakings

Other than as described in this paragraph, during the last five years SJMC and the Obligated Group have not failed to comply, in all material respects, with any previous undertaking relating to the continuing disclosure of information pursuant to Rule 15c2-12. In connection with prior continuing disclosure undertakings, members of the Obligated Group agreed to provide certain financial information on a quarterly basis within 45 days of the end of each fiscal quarter. Information for certain fiscal quarters in the years 2010 – 2012 was not filed on a timely basis,

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but rather was filed from 46 to 56 days after the end of the respective fiscal quarter. The Obligated Group has reviewed its procedures to improve the timeliness of future filings.

TAX STATUS

General

Under existing law, the tax status of the Bonds will include the following characteristics: Federal Tax-Exempt Status. Interest on the Bonds will be excluded from the gross income of the bondholders for federal income tax purposes if the Issuer and the Borrower comply with all requirements of the Internal Revenue Code of 1986 (the “Internal Revenue Code”) that must be satisfied subsequent to the issuance of the Bonds in order that interest thereon be and remain excluded from gross income. Failure to comply with such requirements could cause the interest on the Bonds to be included in gross income, retroactive to the date of issuance of the Bonds. The Issuer and the Borrower have covenanted to comply with all such requirements. Federal Tax Preference Treatment. Interest on the Bonds will not be an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations; however, it should be noted that with respect to corporations, such interest is taken into account in determining adjusted current earnings for the purpose of computing the alternative minimum tax imposed on such corporations. State Tax-Exempt Status. Interest on the Bonds will be exempt from taxation under the laws of the State of Florida, except as to estate taxes and taxes imposed by Chapter 220, Florida Statutes, as amended, and interest, income or profits on debt obligations owned by corporations, as defined in said Chapter 220.

See “RISK FACTORS—Tax-Exempt Status of Bonds” for a discussion of certain risk factors relating to investment in the Bonds. Opinion of Bond Counsel

Nabors, Giblin & Nickerson, P.A., Tampa, Florida, has served as bond counsel with respect to the issuance of the Bonds. The form of opinion of bond counsel will address the tax status summarized above and is attached to this Official Statement as APPENDIX E. The opinion should be read in its entirety for a complete understanding of the scope of the opinion and the conclusions expressed. Collateral Tax Consequences

Prospective purchasers of the Bonds should be aware that ownership of the Bonds may result in collateral federal income tax consequences to certain taxpayers, including, without limitation, financial institutions, property and casualty insurance companies, individual recipients of Social Security or Railroad Retirement benefits, certain S corporations with “excess net passive income”, foreign corporations subject to a branch profits tax, life insurance companies, and taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry the Bonds. Bond Counsel will not express any opinion as to such collateral tax consequences. Prospective purchasers of the Bonds should consult their tax advisors as to collateral federal income tax consequences. PURCHASE, OWNERSHIP, SALE OR DISPOSITION OF THE BONDS AND THE RECEIPT OR ACCRUAL OF THE INTEREST THEREON MAY HAVE ADVERSE FEDERAL TAX CONSEQUENCES FOR CERTAIN INDIVIDUAL OR CORPORATE BONDHOLDERS, INCLUDING, BUT NOT LIMITED TO, THE CONSEQUENCES DESCRIBED ABOVE. PROSPECTIVE BONDHOLDERS SHOULD CONSULT WITH THEIR TAX SPECIALISTS FOR INFORMATION IN THAT REGARD.

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Other Tax Matters

Interest on the Bonds may be subject to state or local income taxation under applicable state or local laws in other jurisdictions. Purchasers of the Bonds should consult their tax advisors as to the income tax status of interest on the Bonds in their particular state or local jurisdictions. During recent years legislative proposals have been introduced in Congress, and in some cases enacted, that altered certain federal tax consequences resulting from the ownership of obligations that are similar to the Bonds. In some cases these proposals have contained provisions that altered these consequences on a retroactive basis. Such alteration of federal tax consequences may have affected the market value of obligations similar to the Bonds. From time to time, legislative proposals are pending which could have an effect on both the federal tax consequences resulting from ownership of the Bonds and their market value. No assurance can be given that additional legislative proposals will not be introduced or enacted that would or might apply to, or have an adverse effect upon, the Bonds.

LEGAL COUNSEL

Nabors, Giblin & Nickerson, P.A., Tampa, Florida, has served as bond counsel with respect to the issuance of the Bonds. Bond counsel will render an opinion with respect to the Bonds in substantially the form attached as APPENDIX E. The opinion of bond counsel should be read in its entirety for a complete understanding of the scope of the opinion and the conclusions expressed. Delivery of the Bonds is contingent upon the delivery of the opinion of bond counsel. Bond counsel has not been engaged nor undertaken to review (a) the accuracy, completeness or sufficiency of this Official Statement or any other offering material related to the Bonds, except as may be provided in a supplemental opinion of Bond Counsel to the Underwriter, upon which only it may rely, and which will relate only to certain information contained in this Official Statement regarding (i) the terms of the Bonds and the Financing Documents, to the extent those statements purport to summarize the terms of the Bonds and the Financing Documents, (ii) the security and source of payment for the Bonds, and (iii) the tax-exempt status of the Bonds. In connection with the issuance of the Bonds, Broad and Cassel, Orlando, Florida, has served as counsel to the Issuer, Jonathan W. Dixon III, Senior Counsel to SJHC, Jacksonville, Florida, has served as counsel to the Borrower and the Obligated Group, and Balch & Bingham LLP, Birmingham, Alabama, has served as counsel to the Underwriter. The legal opinions of Bond Counsel, counsel to the Borrower and Obligated Group, counsel to the Issuer, and counsel to the Underwriter are based on existing law, which is subject to change. Such legal opinions are further based on factual representations made to such counsel as of the date thereof. Bond Counsel, counsel to the Borrower and Obligated Group, counsel to the Issuer, and counsel to the Underwriter assume no duty to update or supplement their respective opinions to reflect any facts or circumstances, including changes in law, which may thereafter occur or become effective. The legal opinions to be delivered concurrently with the delivery of the Bonds express the professional judgment of the attorneys rendering the opinions regarding the legal issues expressly addressed therein. By rendering a legal opinion, the opinion giver does not become an insurer or guarantor of the result indicated by that expression of professional judgment, of the transaction on which the opinion is rendered, or of the future performance of parties to the transaction. Nor does the rendering of an opinion guarantee the outcome of any legal dispute that may arise out of the transaction.

INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

The consolidated financial statements of SJHC and subsidiaries as of June 30, 2013 and 2012 and for the years then ended, included in APPENDIX B to this Official Statement, have been audited by PricewaterhouseCoopers LLP, independent certified public accountants, as stated in their report also included in APPENDIX B. Such financial statements speak only as of June 30, 2013 and 2012.

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LITIGATION

There is not now pending or, to the Issuer’s knowledge, threatened any litigation or other proceeding restraining or enjoining the issuance or delivery of the Bonds or questioning or affecting the validity of the Bonds or the proceedings or authority under which they are to be issued. Neither the creation, organization or existence of the Issuer or the title of any of the present officials of the Issuer to their respective offices is being contested. There is no litigation or other proceeding pending or, to the Issuer’s knowledge, threatened which in any manner questions the right of the Issuer to enter into the Financing Documents to which it is a party or to secure the Bonds in accordance with the Bond Indenture. For a description of litigation pending against the Borrower and the Obligated Group, see APPENDIX A.

RATINGS

Moody’s Investor Service, Inc. (“Moody’s”) has assigned a rating of “Baa3/NR” (stable outlook) to the Bonds. The first part of the Moody’s rating is based on its assessment of the Obligated Group’s ability to make payments on the Bonds. The second part of the rating indicates that Moody’s has not given a short-term rating to the tender feature of the Bonds. Fitch, Inc. has assigned a rating of “BBB+” (stable outlook) to the Bonds based on its assessment of the Obligated Group’s ability to make payments on the Bonds. Any further explanation as to the significance of these ratings may be obtained only from the appropriate rating agency. There is no assurance that any such rating will remain in effect for any given period of time or that the rating will not be revised downward or withdrawn entirely by the rating agency furnishing the same, if, in its judgment, the circumstances so warrant. The above ratings are not recommendations to buy, sell or hold the Bonds. Neither the Issuer nor the Underwriter has undertaken any responsibility after the issuance of the Bonds to bring to the attention of the holders of the Bonds any proposed revision or withdrawal. Any such downward revision or withdrawal of a rating may have an adverse effect on the market price of the Bonds.

UNDERWRITING

Merrill Lynch, Pierce, Fenner & Smith Incorporated (the “Underwriter”), will enter into a bond purchase agreement in which the Underwriter will agree to purchase the Bonds, subject to certain conditions precedent, at a purchase price of $59,096,094.00 (face amount less underwriter’s discount of $308,906.00). The Underwriter’s address is One Bryant Park, 12th Floor, New York, New York 10036. The Underwriter will purchase all of the Bonds if any are purchased. The Underwriter may offer the Bonds to certain dealers (including dealers depositing the Bonds in unit investment trusts, certain of which may be sponsored or managed by the Underwriter) and others at a price lower than that offered to the public. The initial public offering price may be changed from time to time by the Underwriter. Under the bond purchase agreement the Borrower will agree to indemnify the Underwriter against certain costs, claims and liabilities, including certain liabilities arising under the Securities Act of 1933. The Underwriter is also acting as Remarketing Agent with respect to the Bonds.

The Underwriter and its affiliates are full service financial institutions engaged in various activities, which may include securities trading, commercial and investment banking, financial advisory, investment management, principal investment, hedging, financing and brokerage services. The Underwriter and its affiliates have, from time to time, performed, and may in the future perform, various financial advisory and investment banking services for the Issuer, Borrower or the Obligated Group, for which they received or will receive customary fees and expenses.

The Borrower intends to use a portion of the proceeds from this offering to redeem the Refunded Notes. To the extent the Underwriter or an affiliate thereof is an owner of Refunded Notes, the Underwriter or its affiliate, as applicable, would receive a portion of the proceeds from the issuance of the Bonds contemplated herein in connection with such Refunded Notes being redeemed by the Borrower.

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In the ordinary course of their various business activities, the Underwriter and their respective affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities, which may include credit default swaps) and financial instruments (including bank loans) for their own account and for the accounts of their customers and may at any time hold long and short positions in such securities and instruments. Such investment and securities activities may involve securities and instruments of the Issuer or the Borrower.

The Underwriter and its affiliates may also communicate independent investment recommendations, market color or trading ideas and/or publish or express independent research views in respect of such assets, securities or instruments and may at any time hold, or recommend to clients that they should acquire, long and/or short positions in such assets, securities and instruments.

REMARKETING

General

The initial Remarketing Agent for the Bonds will be Merrill Lynch, Pierce, Fenner & Smith Incorporated. The Remarketing Agent has agreed to remarket the Bonds on a best efforts basis, subject to the provisions of a remarketing agreement by and between the Borrower and the Remarketing Agent (the “Remarketing Agreement”). The Borrower has agreed to indemnify the Remarketing Agent against certain liabilities, including certain liabilities arising under federal and state securities laws.

The Remarketing Agent will set the interest rates on the Bonds during the R-FLOATs Mode or for other interest rate modes and perform the other duties and remarket the Bonds as provided for in the Bond Indenture, subject to the provisions of the Remarketing Agreement. The Remarketing Agent may deal in Bonds for its own account or as broker or agent for others and may do anything any other Bondholder may do to the same extent as if the Remarketing Agent were not serving as such.

The Remarketing Agent and its affiliates are full service financial institutions engaged in various activities, which may include securities trading, commercial and investment banking, financial advisory, investment management, principal investment, hedging, financing and brokerage activities. The Remarketing Agent and its affiliates have, from time to time, performed and may in the future perform, various investment banking services for the Borrower, for which they received or will receive customary fees and expenses. In the ordinary course of their various business activities, the Remarketing Agent and its affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (which may include bank loans and/or credit default swaps) for their own account and for the accounts of their customers and may at any time hold long and short positions in such securities and instruments. Such investment and securities activities may involve securities and instruments of the Borrower.

Certain Considerations Concerning the Remarketing of the Bonds

The Remarketing Agent is Paid by the Borrower. The Remarketing Agent’s responsibilities include determining the interest rate from time to time and remarketing Bonds that are optionally or mandatorily tendered by the owners thereof (subject, in each case, to the terms of the Remarketing Agreement), all as further described in this Official Statement. The Remarketing Agent is appointed by the Borrower and is paid by the Borrower for its services. As a result, the interests of the Remarketing Agent may differ from those of existing holders and potential purchasers of Bonds.

The Remarketing Agent Routinely Purchases Bonds for its Own Account. The Remarketing Agent may, at its option, purchase Bonds (including Tendered Bonds) for its own account at market prices (which may be at, below or above par), but shall not be required to purchase Bonds (including Tendered Bonds). If the Remarketing Agent purchases Bonds, it shall have all rights of a holder of such Bonds, including without limitation the right to tender such Bonds for purchase pursuant to the Optional Tender provisions of the Bond Indenture.

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The Remarketing Agent, in its sole discretion, routinely acquires tendered bonds for its own inventory in order to achieve a successful remarketing of such bonds (i.e., because there are otherwise not enough buyers to purchase the bonds) or for other reasons. However, the Remarketing Agent is not obligated to purchase tendered Bonds and may cease doing so at any time without notice. The Remarketing Agent also may make a market in the Bonds by routinely purchasing and selling Bonds other than in connection with an optional or mandatory tender and remarketing. Such purchases and sales may be at, below or above par. However, the Remarketing Agent is not required to make a market in the Bonds. The Remarketing Agent also may sell any Bonds it has purchased to one or more affiliated investment vehicles for collective ownership or enter into derivative arrangements with affiliates or others in order to reduce its exposure to the Bonds. The purchase of Bonds by the Remarketing Agent may create the appearance that there is greater third party demand for the Bonds in the market than is actually the case. The practices described above also may reduce the supply of Bonds that may be tendered in a remarketing.

Bonds May be Offered at Different Prices on Any Date Including an R-FLOATs Rate Determination Date. Pursuant to the Remarketing Agreement, the Remarketing Agent is required to determine the applicable rate of interest that, in its judgment, is the lowest rate that would permit the sale of the Bonds at par plus accrued interest, if any, on and as of the applicable R-FLOATs Rate Determination Date. The interest rate will reflect, among other factors, the level of market demand for the Bonds (including whether the Remarketing Agent is willing to purchase Bonds for its own account). There may or may not be Bonds tendered and remarketed on an R-FLOATs Rate Determination Date, the Remarketing Agent may or may not be able to remarket any Bonds tendered for purchase on such date at par and the Remarketing Agent may sell Bonds at varying prices to different investors on such date or any other date. The Remarketing Agent is not obligated to advise purchasers in a remarketing if it does not have third party buyers for all of the Bonds at the remarketing price. In the event the Remarketing Agent owns any Bonds for its own account, it may, in its sole discretion in a secondary market transaction outside the tender process, offer such Bonds on any date, including the R-FLOATs Rate Determination Date, at par, at a discount to par, or at a premium to par, to some investors.

The Ability to Sell the Bonds May Be Limited. While the Remarketing Agent may buy and sell Bonds, it is not obligated to do so and may cease doing so at any time without notice. Thus, investors who purchase the Bonds, whether in a remarketing or otherwise, should not assume that they will be able to sell their Bonds.

Under Certain Circumstances, the Remarketing Agent May Be Removed, Resign or Cease Remarketing the Bonds, Without a Successor Being Named. Under certain circumstances the Remarketing Agent may be removed or have the ability to resign or cease its remarketing efforts, without a successor having been named, subject to the terms of the Remarketing Agreement.

MISCELLANEOUS

The summaries and explanations of the provisions of the Bonds and the financing documents do not purport to be complete, and reference is made to the pertinent provisions of the Bonds and the Financing Documents for a complete statement of their provisions. Such documents are on file and available for review during regular business hours upon request at the corporate trust offices of the Bond Trustee, U.S. Bank National Association, 225 Water Street, 7th Floor, Suite 700, Jacksonville, Florida 32202. The agreement of the Issuer and the Obligated Group with the holders of the Bonds is fully set forth in the Bonds and the Financing Documents, and neither any advertisement of the Bonds nor this Official Statement is to be construed as constituting an agreement with the purchasers, holders or beneficial owners of the Bonds. So far as any statements are made in this Official Statement involving matters of opinion, whether or not expressly so stated, they are intended merely as such and not as representations of fact. The attached appendices are integral parts of this Official Statement and must be read together with all of the foregoing statements. The Borrower has reviewed the information contained herein which relates to it and its facilities and operations and has approved all such information for use within the Official Statement. The delivery of this Official Statement has been duly authorized by the Issuer and the Borrower.

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APPENDIX A

Information Regarding UF Health – Jacksonville

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APPENDIX A

INFORMATION REGARDING UF HEALTH-JACKSONVILLE

TABLE OF CONTENTS

Page

INTRODUCTION ............................................................................................................................................................... 1 Corporate Structure ................................................................................................................................................... 1

RELATED ENTITIES OF SJHC .......................................................................................................................................... 2 Assets Operated by SJMC ........................................................................................................................................ 3

SHANDS JACKSONVILLE HEALTHCARE, INC. .................................................................................................................. 3 Board of Directors .................................................................................................................................................... 3

SHANDS JACKSONVILLE MEDICAL CENTER, INC. ........................................................................................................... 4 Board of Directors .................................................................................................................................................... 4 Administrative Officers ............................................................................................................................................ 6 Reorganization .......................................................................................................................................................... 8

FACILITIES AND SERVICES .............................................................................................................................................. 8 Health Care Facilities - General Description ............................................................................................................ 8 Service Line Offerings .............................................................................................................................................. 9 Capital Improvement Plans ..................................................................................................................................... 10 Affiliation, Merger, Acquisition and Divestiture .................................................................................................... 10 Accreditation, License and Memberships ............................................................................................................... 10 Medical Staff .......................................................................................................................................................... 11

SERVICE AREA AND MARKET SHARE ........................................................................................................................... 13 Definition of Service Area ...................................................................................................................................... 13 Primary Service Area Facilities .............................................................................................................................. 15 Major Developments in the Service Area ............................................................................................................... 18

ECONOMIC AND DEMOGRAPHIC INFORMATION FOR THE SERVICE AREA ...................................................................... 20 Population ............................................................................................................................................................... 20 Employment ............................................................................................................................................................ 20 Major Employers .................................................................................................................................................... 21 Income .................................................................................................................................................................... 22

UTILIZATION AND FINANCIAL INFORMATION ............................................................................................................... 23 Utilization Statistics ................................................................................................................................................ 23 Summary of Condensed Financial Data.................................................................................................................. 24 Effect of Consolidation ........................................................................................................................................... 25

MANAGEMENT’S DISCUSSION AND ANALYSIS ............................................................................................................. 26 Financial Results for the Year Ended June 30, 2013 Compared to June 30, 2012 ................................................. 26 Financial Results for the Year Ended June 30, 2012 Compared to June 30, 2011 ................................................. 27

SOURCES OF PATIENT SERVICE REVENUE .................................................................................................................... 27 Overview ................................................................................................................................................................ 27

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Medicare ................................................................................................................................................................. 27 Medicaid ................................................................................................................................................................. 28 Payor Mix ............................................................................................................................................................... 29

DEBT STRUCTURE OF THE OBLIGATED GROUP ............................................................................................................. 29 Outstanding Debt of Obligated Group Secured by Master Trust Indenture ............................................................ 29 Other Debt, Guaranteed Obligations and Capital Lease Obligations ...................................................................... 30 Anticipated Changes in Debt Structure ................................................................................................................... 30 Debt Covenants ....................................................................................................................................................... 30 Outstanding Debt of Obligated Group Not Secured by Master Trust Indenture ..................................................... 31 Annual Debt Service Requirements for Obligated Group ...................................................................................... 31 Derivative Instruments ............................................................................................................................................ 33 Debt Service Coverage Ratios ................................................................................................................................ 33

MISCELLANEOUS .......................................................................................................................................................... 34 Insurance Coverage ................................................................................................................................................ 34 Human Resources ................................................................................................................................................... 35 Employee Benefit Plans and Other Postemployment Benefits ............................................................................... 35 Litigation ................................................................................................................................................................ 35

Affiliated Entities ............................................................................................................................................ 1 Table 1. Board of Directors ........................................................................................................................................... 4 Table 2. Medical Staff for SJMC ................................................................................................................................. 12 Table 3. Map: Service Area and Market Share ........................................................................................................... 13 Table 4. SJMC Patient Origin by County .................................................................................................................... 14 Table 5. Acute Care Hospitals –Service Area ............................................................................................................. 15 Table 6. Inpatient Market Share (All Discharges) –Service Area ............................................................................... 16 Table 7. Inpatient Market Share (Tertiary/Quaternary Discharges Only) –Service Area ............................................ 17 Table 8. Population by Service Area ........................................................................................................................... 20 Table 9. Jacksonville MSA 2012 Annual Averages .................................................................................................. 20 Table 10. Comparative Unemployment Rates ............................................................................................................. 21 Table 11. Largest Employers – City of Jacksonville/Duval County ............................................................................ 21 Table 12. Income by Service Area............................................................................................................................... 22 Table 13. SJHC Selected Operating Statistics ............................................................................................................. 23 Table 14. Consolidated Statements of Net Position for Shands Jacksonville HealthCare, Inc. and Subsidiaries ........ 24 Table 15. Consolidated Statements of Revenues, Expenses and Changes in Net Position for Shands Jacksonville Table 16.

HealthCare, Inc. and Subsidiaries ............................................................................................................ 25 Payor Mix .................................................................................................................................................... 29 Table 17. Annual Debt Service Requirements of Obligated Group ............................................................................. 32 Table 18. Debt Service Coverage Ratios ..................................................................................................................... 33 Table 19.

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INTRODUCTION

Corporate Structure

Shands Jacksonville Medical Center, Inc. (“SJMC”), which now does business as “UF Health – Jacksonville,” operates a 695-bed academic medical center/acute care hospital and various complementary medical facilities located at 655 West 8th Street in Jacksonville, Florida, largely consisting of the assets associated with the former University Medical Center and Methodist Medical Center, two previously unrelated acute care hospitals that were located directly across the street from each other. Shands Jacksonville HealthCare, Inc. (“SJHC”) is the sole member of SJMC. SJHC and SJMC each is a not-for-profit corporation organized under the laws of the State of Florida. SJHC’s and SJMC’s respective income is exempt from federal income tax pursuant to Section 501(c)(3) of the Internal Revenue Code.

SJHC is an affiliate of the University of Florida; the President of the University has the right to appoint and remove members of SJHC’s Board of Directors. SJMC is one of two primary teaching hospitals supporting the medical education programs of the University of Florida. SJHC controls or owns various affiliated entities that operate facilities and services that are a part of a larger healthcare network now known as “UF Health” (previously known as “Shands HealthCare”).

The following table identifies the significant affiliates of SJHC and their respective primary operations.

Table 1.Affiliated Entities

Obligated Group Members

Shands Jacksonville HealthCare, Inc. Parent company of SJMC and SJP

Shands Jacksonville Medical Center, Inc. (“SJMC,” doing business as “UF Health-Jacksonville”) Operates one of two primary teaching hospitals for the University of Florida medical education

programs, located in Jacksonville, Florida Shands Jacksonville Properties, Inc. (“SJP”)

Holds title to former Methodist Medical Center facilities now operated by SJMC

Non-Obligated Affiliates

Shands Jacksonville Foundation, Inc. (“Shands Foundation”)

A fund-raising organization, which also owns some real property that it plans to develop.

Shands Jacksonville Community Services, Inc. Holds title to property granted by the City of Jacksonville pursuant to Community Development Block Grant Program.

First Coast Advantage East, LLC

A provider service network (PSN) established to administer Medicaid in the Jacksonville market and certain contiguous counties in Northeast Florida.

SJHC, SJMC and SJP are the only members of the Obligated Group and the only affiliates of UF Health – Jacksonville that are liable for payment of the Bonds. Although SJHC directly or indirectly owns a controlling interest (membership interest or stock) in each of the SJHC affiliates, SJHC affiliates other than the

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Obligated Group Members are not liable for payment of the Bonds. For financial reporting purposes, the results of operations of the SJHC affiliates are consolidated with the results of operations of the members of the Obligated Group. For a discussion of the effects of this accounting treatment, see “UTILIZATION AND FINANCIAL INFORMATION—Effect of Consolidation.” The shared mission of the University of Florida College of Medicine and SJMC is to heal, comfort, educate, and discover. These organizations dedicate their work to improving the lives of those they touch through quality healthcare, medical education, innovation and research. University of Florida faculty and community physicians on the medical staff of SJHC offer comprehensive care in more than 70 clinical specialties. Areas of expertise include cardiovascular, neurological, orthopedic, pediatric and trauma services.

RELATED ENTITIES OF SJHC

The following entities have significant relationships with SJHC, but are not controlled by SJHC. These entities are not liable in any way for payment of the Bonds. Shands Teaching Hospital and Clinics, Inc. (doing business as “UF Health Shands Hospital”). Shands Teaching Hospital and Clinics, Inc. (“Shands Gainesville”) is a Florida not-for-profit corporation and a 501(c)(3) organization that serves as the sponsoring entity for a health care delivery system serving north Florida. The Shands health system uses the name “UF Health” for marketing and identification of its system and is referred to in this APPENDIX A as “Shands”. Shands Gainesville is headquartered in Gainesville, Florida. Shands Gainesville includes an 852-bed academic medical center and two specialty hospitals. Shands Gainesville is an affiliate of the University of Florida; by statute the President of the University has the right to appoint and remove members of its Board of Directors. University of Florida. The University of Florida (the “University” or “UF”) was established by the Florida legislature in 1905. The University is a major, public, comprehensive, land grant, research university. It is the State of Florida’s oldest and most comprehensive university. The University is located on a 2,000 acre campus in Gainesville, Florida with approximately 50,000 students. It is home to 16 colleges and more than 150 research centers and institutes. Since 1985, UF has been a member of the Association of American Universities, the prestigious higher-education organization comprised of the top 62 public and private institutions in North America. The UF President has been granted rights by Shands Gainesville’s originating statute and by subsequent Board approvals of amendments to the bylaws of Shands Gainesville both to appoint and remove all directors. Additionally, the UF President and SVP of Health Affairs have discretionary rights by statute to hold the Shands Gainesville Board governance roles of Chairman and Vice Chairman. As a result and although the two entities and their governance are distinctly and legally separated, the relationship between Shands Gainesville and the University is very close and strategically integrated. University of Florida Health Science Center. The Health Science Center, created in 1956, is a major academic division of the University and the principal educational and teaching center for the healthcare professions of the University’s medical education system. The Health Science Center consists of six colleges, offering graduate and undergraduate degrees in healthcare professions. The Health Science Center consists of the Colleges of Medicine, Nursing, Public Health and Health Professions, Pharmacy, Dentistry and Veterinary Medicine. The Health Science Center’s extensive involvement in research affords students the opportunity to be aware of the most current information on diagnosis, treatment and prevention of illness. The opportunity is enhanced by the Health Science Center’s facilities sharing agreement with the Veteran’s Administration Medical Center in Gainesville and its teaching affiliation with SJMC. Additionally, the Health Science Center reaches low-income patients through rural medical and dental clinics, maternal and infant care services, and various other preventive health care programs.

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University of Florida Faculty Group Practice - Jacksonville. The College of Medicine has centralized much of its administrative functions for its clinical activities within the University of Florida Jacksonville Faculty Group Practice (the “Faculty Group Practice”). The Faculty Group Practice is responsible for coordinating the clinical services of University faculty physicians and managing the Health Science Center’s outpatient clinics and subspecialty clinics. The revenue from the patient care activities is used solely for the purpose of supporting the College of Medicine’s activities. It is through the Faculty Group Practice that the revenue from patient care activities is collected for the benefit of the College of Medicine. Clinic physicians may refer their patients to SJMC facilities for testing or for admission. SJHC affiliates derive revenue from diagnostic tests performed in SJHC facilities on patients seen in these UF outpatient clinics. Patients referred from these outpatient clinics also generate a significant portion of inpatient revenues for SJMC. Assets Operated by SJMC

SJMC leases from the City of Jacksonville, Florida (the “City”), the hospital assets comprising the former University Medical Center pursuant to an Amended and Restated Lease Agreement dated as of December 15, 1987, as amended by the First Amendment to the Amended and Restated Lease Agreement and the Addendum to First Amendment to Amended and Restated Lease Agreement dated as of October 1, 1999 and the Second Amendment to Amended and Restated Lease Agreement dated as of December 29, 2003 (collectively, the “City Lease”). SJMC is the primary provider of care to qualifying indigent residents of the City pursuant to an Amended and Restated Agreement with the City dated as of June 2, 2005, as amended (the “Indigent Care Agreement”). The City Lease and the Indigent Care Agreement are discussed below.

The City Lease and the Indigent Care Agreement were the principal basis for University Medical Center’s

operations and continue as essential agreements for SJMC. All of the former University Medical Center assets comprising the “Clinical Center” are leased by SJMC pursuant to the City Lease for a rental that has been prepaid and in consideration of SJMC’s agreement to provide certain services and comply with certain covenants. Pursuant to the Indigent Care Agreement, SJMC receives an amount appropriated by the City Council of the City for each fiscal year of the City commencing on October 1. The City does not guarantee that the City Council will appropriate any level of funding for any fiscal year. SJMC will continue to have an obligation to provide care under the Indigent Care Agreement as long as it leases assets under the City Lease, regardless of the level of funds (if any) appropriated by the City Council, although SJMC may reduce certain admissions and non-emergency outpatient services if the City underfunds the services when compared to historical levels. The amount paid by the City to SJMC under the Indigent Care Agreement in respect of each of the City’s fiscal years ended September 30, 2011, 2012 and 2013, was approximately $23.8 million. The level of support has been increased to $26.3 million for the City’s fiscal year ending September 30, 2014. The term of the City Lease runs through September 30, 2067, and the term of the Indigent Care Agreement runs through March 25, 2028.

SHANDS JACKSONVILLE HEALTHCARE, INC.

Board of Directors

SJHC is governed by a Board of Directors (the “Board”) consisting of no less than thirteen (13) nor more than nineteen (19) directors divided into the following categories:

Category One: Five (5) shall be voting ex-officio directors, including: (1) The University President, as Chair of the Corporation, or such other person as the University of Florida President may designate to act in that role pursuant to a written instrument executed by the University President and delivered to the Secretary of SJHC; (2) The University College of Medicine Dean of the Jacksonville Regional Campus;

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(3) The University Vice President for Health Affairs; (4) A member or representative of the University Board of Trustees designated by the President of the University; and (5) The Chief Executive Officer of SJHC.

The occupancy by a director of any two or more of the above offices shall not empower the director to cast more than one vote on any matter coming before the Board of Directors, or to be counted more than once to determine a quorum.

Category Two: No less than three (3) nor more than five (5) members of the SJMC medical staff, at least

three (3) of whom shall also be from among the Faculty Group Practice. Category Three: No less than five (5) nor more than nine (9) directors shall be appointed from among the

individuals who are residents of the State of Florida. Preference may be given to individuals residing in the service area of SJMC. No director in this category may be a member of the faculty of a college of the University of Florida Health Science Center, an employee of the University, or of SJMC.

One director shall be appointed following nomination by the Mayor of the City. The obligation to appoint

the Mayor’s nominee shall be subject to satisfaction of SJHC’s standard appointment criteria and procedures.

SHANDS JACKSONVILLE MEDICAL CENTER, INC.

Board of Directors

SJMC is governed by a Board of Directors (the “Board”), whose members are the same individuals serving from time to time as members of the Board of Directors of SJHC, subject to the right of the Mayor of the City to nominate one director. The obligation to appoint the Mayor’s nominee shall be subject to satisfaction of SJMC’s standard appointment criteria and procedures. Each such individual shall possess the corresponding rights and obligations as a director of SJMC, including with respect to such matters as voting, notice of, attendance, quorum and participation at meetings of the Board of Directors, as they possess in their service as a director of SJHC, or, in the case of the Mayor's nominee, as that individual's counterpart on the Board of Directors of SJHC possesses.

Table 2.Board of Directors

Category One: Ex-Officio David S. Guzick, M.D., Ph.D. (Chairman) Senior Vice President, Health Affairs; President, UF Health System Russell E. Armistead, Jr., M.B.A. Chief Executive Officer Shands Jacksonville Medical Center, Inc. Daniel R. Wilson, MD, Ph.D. Vice President for Health Affairs Dean, College of Medicine - Jacksonville University of Florida

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W.A. (Mac) McGriff Community Investor Category Two Linda R. Edwards, MD Term expires December 2013 Chief of Internal Medicine UF Faculty Group Samir Y. Array, MD Term expires December 2013 Medical Director UF Baymeadows Family Practice & Pediatric Center Christopher R. Williams, MD Term expires December 2013 Associate Professor of Surgery Director of Urologic Oncology and Research Director of Robotic Surgery UF College of Medicine-Jacksonville Theodore A. Bass, MD Term expires December 2013 Professor of Medicine/Chief, Division of Cardiology/Program Director, Interventional Cardiology Fellowship Program Kelly R. Gray-Eurom, MD, MMM, FACEP Term expires December 2013 Associate Chair/Associate Professor Dept. of Emergency Medicine Academic Office Category Three Elizabeth “Beth” McCague Term expires December 2013 Chairman North Florida Board Seaside National Bank & Trust Founder, McCague Mediation Margaret “Lynn” Pappas, Esq. Term expires December 2013 Partner, Gunster, Yoakley & Stewart, P.A. Nathaniel Glover, Jr. Term expires December 2013 Edward Waters College President Lawrence (Laurie) DuBow Term expires December 2013 Consultant of Ranbaxy Pharmaceuticals, Inc. Chairman of HMS Sales and Marketing, Inc. Michelle M. Boynton Term expires December 2014 Community Investor Toni Crawford Term expires December 2014 Community Investor

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The Board has four (4) committees, which include the Finance Committee, Audit & Compliance Committee, Quality Committee and Compensation Committee. Administrative Officers

The principal members of the SJMC administrative staff and related biographical information are provided below. Executive compensation for certain officers and highly compensated employees for the year ended June 30, 2012 is detailed in Internal Revenue Service Form 990, Part VII, Section A, available at www.guidestar.org or for public inspection at SJMC.

David S. Guzick, M.D., Ph.D., Senior Vice President for Health Affairs, University of Florida, and President, UF Health System (60). Dr. Guzick also serves as board chair for SJMC and Shands Gainesville. From 2002-2009, Dr. Guzick was dean of the School of Medicine and Dentistry at the University of Rochester in Rochester, NY. In addition to serving as dean, he was principal investigator for Rochester’s NIH Clinical and Translational Science Award. From 1995 until 2002, Dr. Guzick served as the Henry A. Thiede professor and chair of the Department of Obstetrics and Gynecology at the University of Rochester. From 1986-1995, he was at the University of Pittsburgh School of Medicine, where he was professor of Obstetrics, Gynecology and Reproductive Science and Director of Reproductive Endocrinology.

Dr. Guzick earned his M.D. degree and Ph.D. in 1979 from New York University as part of the Medical

Scientist Training Program of the National Institutes of Health. Following a residency in obstetrics and gynecology at The Johns Hopkins Hospital, he completed a fellowship in reproductive endocrinology at the University of Texas, Southwestern Medical School. An internationally-recognized expert in reproductive endocrinology, Dr. Guzick was inducted into the Society of Scholars at the Johns Hopkins University in 2004. In 2008, Dr. Guzick was elected to the Institute of Medicine, one of the nation’s highest honors in the fields of medicine and health.

Russell E. Armistead, Chief Executive Officer (66). Prior to his current position, Mr. Armistead served as the Associate Vice President of the UF Health Science Center’s Office of Finance and Planning in Gainesville from 2004 until January 2013.

Prior to joining the UF Health System, Mr. Armistead served 24 years at Wake Forest University (WFU) in

Winston-Salem, N.C., He served 14 of those years as Vice President for Health Services Administration, managing all business operations for the university’s nationally ranked medical school. In addition to core financial duties, he was responsible for strategic planning, human resources, government relations and contractual relationships between the medical school and its teaching hospital. Prior to his employment with Wake Forest University, he was director of both the WFU Group Faculty Practice and the Strategic Planning Office over a seven-year period.

Mr. Armistead was also president of Armistead Consulting LLC, a North Carolina firm that provided

management and consulting services to academic health centers, hospitals and other health care organizations. During that time, he served dual roles at the Medical College of Ohio (MCO) in Toledo, as interim executive director of MCO hospitals and as vice president for finance and chief financial officer/treasurer. Mr. Armistead began his career as a member of the audit staff at Ernst & Young in Winston-Salem. A native of Virginia, he has a bachelor’s degree in business administration from Virginia Polytechnic Institute and State University, and a master’s degree in business administration from Wake Forest University. He is a certified public accountant in Florida and North Carolina.

Gregory L. Miller, Senior Vice President and Chief Operating Officer (49). Mr. Miller joined SJMC

in 1993 and has served in a senior leadership role since 1999. He served previously as Director, Managerial Accounting for the hospital. Mr. Miller is responsible for numerous hospital departments including Laboratory, Radiology, Pharmacy, Rehab Services, Perioperative Services, Information Technology Services, and numerous support departments. He is a Fellow of the American College of Healthcare Executives and a member of the Healthcare Financial Management Association. Mr. Miller received his MBA from the University of North Florida and a B.S. in Hospitality Administration from Florida State University. He currently serves on the boards of Community Hospice of Northeast Florida and Duval Federal Credit Union.

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Michael E. Gleason, Senior Vice President and Chief Financial Officer (44). Mr. Gleason joined SJMC in February 1998. Mr. Gleason has over 20 years of healthcare experience, and has worked on both the provider and payer sides of the industry. Prior to being appointed Senior Vice President and Chief Financial Officer, Mr. Gleason previously held positions as Controller and Director of Managed Care within SJMC. Before joining SJMC, Mr. Gleason held the position of Director of Finance for the Central and North Florida regions with Humana Medical Plans, Inc., a for-profit HMO. Mr. Gleason has served on several not-for-profit community boards and finance committees, with a focus on investment management, cost control and ways to serve the healthcare needs of the uninsured. Most recently, Mr. Gleason was honored by the Jacksonville Business Journal as a recipient of the 2012 Ultimate CFO award. Mr. Gleason received his Bachelors degree in Accounting from the University of North Florida, and is a member of the American College of Healthcare Executives and the Healthcare Financial Management Association. Mr. Gleason also serves on the Florida Hospital Association’s CFO Council.

David J. Vukich, M.D., Senior Vice President, Chief Medical & Chief Quality Officer (62). Dr.

Vukich joined SJMC in 1984. Dr. Vukich received his medical degree from the University of Colorado and completed his residency training at Baylor Medical Center and Denver General Hospital. Prior to joining SJMC, he served in the Navy Medical Corps as Assistant Professor in the Department of Operational & Emergency Medicine at the Uniformed Services University of Health Sciences in Bethesda, Maryland. Since joining SJMC, Dr. Vukich has served as Assistant Professor, Associate Professor, Professor and currently as Senior Associate Dean of Hospital Affairs for the University of Florida College of Medicine Jacksonville. Dr. Vukich played a major role in obtaining departmental status for the former Division of Emergency Medicine. Under his leadership the department has maintained a high level of quality in the academic and clinical programs concerned with teaching, administration, research and service. Dr. Vukich is very active in numerous medical organizations such as the American College of Physicians and the Florida Medical Association. Dr. Vukich is also a past president of the Duval County Medical Society and the Florida College of Emergency Physicians. He serves on numerous local, state and national medical committees.

James M. Roberts, Senior Vice President and General Counsel and Board Secretary (58). Education, JD, University of Maryland School of Law; BA, Biology, University of Maryland. Experience: Mr. Roberts joined Shands as Senior Vice President and General Counsel in October 2008. Prior to joining Shands, he served as (2002-2008) Senior Vice President, General Counsel and Secretary, University of Wisconsin Hospitals and Clinics, Madison, Wisconsin; (1996-2002) Managing Director/Registered Representative, PNC Capital Markets, Pittsburgh, Pennsylvania; (1994–1996) Vice President, General Counsel and Secretary, Shadyside Hospital, University of Pittsburgh Medical Center System; (1993-1994) Acting Vice President and General Counsel; (1986-1993) Deputy General Counsel and Corporate Secretary, Johns Hopkins Hospital & Health System Corporation, Baltimore, Maryland. Prior to 1986, Mr. Roberts was in-house counsel for predecessor companies of Citigroup, AON and Verizon. He is admitted to practice in the Maryland Court of Appeals, the U. S. District Court for the District of Maryland, and U. S. Bankruptcy Court for the District of Maryland. Mr. Roberts practices at Shands as Florida Authorized House Counsel pursuant to Rule 17 of The Florida Bar. Mr. Roberts is a member of the American Health Lawyer’s Association, the UHC Legal and Compliance Council Steering Committee and is adjunct healthcare faculty of the University of Florida’s Levin College of Law.

Patrice I. Jones, Vice President and Chief Nursing Officer (55). Ms. Jones joined SJMC in March 2012. Ms. Jones has 33 years of experience in Nursing with 10 of those at the executive level. As Vice President and Chief Nursing Officer (CNO) of SJMC, Ms. Jones oversees approximately 1,200 LPNs, RNs and other certified caregivers. Her role is to provide the strategic plan and vision to fulfill the organization’s ongoing commitment to nursing excellence as well as the embracing of nursing research and evidence-based practices to influence the way nurses conduct their work. Among her achievements is the contribution she made at the executive level toward earning Magnet Recognition for University of Alabama in 2002, then its re-designation in 2006. Her previous position was CNO of DCH Regional Medical Center and Northport Medical Center, both in the Tuscaloosa, Alabama area. Patrice received her BSN from Troy State University in 1980. She has an MSN in Nursing and Healthcare Administration from UAB School of Nursing. She is certified by the American Nurses Credentialing Center in Nursing Administration. She is currently enrolled in the Doctor of Nursing Practice program at Capstone

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College of Nursing, University of Alabama. Patrice serves as a Board member for Community Hospice of Northeast Florida and for Act One Partnership of the United Way. She is also on the Advisory Board for the Chamberlain College of Nursing. She is a member of the American Nurses Association, The American Organization of Nurse Executives and the Emergency Nurses Association.

Leslie Ward, Vice President, Human Resources (53). Ms. Ward joined SJMC in September 2001. Ms. Ward is a human resources professional with over 15 years’ experience in all aspects of Human Resources management. Ms. Ward began her career with Republic Bank Dallas in 1984, specializing in compensation. She continued her career moving to Barnett Bank, Inc. in 1986, a multi-state financial institution with over 19,000 employees. For the next 12 years she was responsible for providing consultation to executive and senior management on staffing their business units, identifying key talent within the organization, and the design and implementation of compensation programs. Ms. Ward’s most recent position prior to joining SJMC was with Dynamic Corporate Solutions, Inc. providing human resources consulting from 1998 to 2001. She received her B.S. degree in Communications from Lamar University in Beaumont, Texas. Jonathan Dixon, III, Esq., Vice President and Senior Counsel (40). Vice President and Senior Counsel and Board Assistant Secretary. Education: JD, University of Pittsburgh School of Law; BS, Business Management, University of Pittsburgh. Experience: Mr. Dixon joined Shands Jacksonville Medical Center as Vice President and Senior Counsel in August 2012; (2011-2012) Counsel, Adecco Group N.A., Jacksonville, Florida; (2008-2011) Associate General Counsel, Shands Jacksonville Medical Center; (2006-2008) Assistant General Counsel, Shriners’ Hospitals for Children, Tampa, Florida; (2000-2006) Judge Advocate in the United States Air Force. Mr. Dixon is admitted to practice law in Pennsylvania and Florida. Mr. Dixon is a member of the American Health Lawyer’s Association, the Florida Association of Healthcare Attorneys and serves on the Board of Directors of the Association of Corporate Counsel’s North Florida Chapter. Reorganization

Effective September 8, 2010, the Board of Directors of Shands Gainesville approved a motion to reorganize its corporate structure. Under the reorganization, Shands Gainesville was no longer the sole corporate member of SJHC, but continued as an affiliated entity under the common control of UF. Effective September 27, 2010, the Board of Directors of SJMC approved Shands Gainesville no longer being the sole corporate member of SJMC. Shands Gainesville provides contracted services at cost to SJMC, which include administrative and information services support.

FACILITIES AND SERVICES

Health Care Facilities - General Description

SJMC is a tertiary teaching and general acute care hospital facility with 695 licensed beds, consisting of: 548 acute care; 43 adult psychiatric; 32 NICU Level 3; 16 NICU Level 2; and 56 skilled nursing unit beds. SJMC is located north of downtown Jacksonville, Florida, serving 19 counties in Northeast Florida and South Georgia, including Duval, Nassau and Clay Counties in Florida, and the northern portion of St. John’s County, Florida. SJMC’s facilities include: (i) two acute care hospital facilities known as the Pavilion (which also houses the skilled nursing unit and inpatient space leased to North East Community Hospice, Inc.) and the Clinical Center; (ii) two ten-story facilities joined at the ground level known as Tower I and Tower II, housing various clinical, administrative and related or miscellaneous functions; (iii) one six-story outpatient clinic building known as the Ambulatory Care Center; (iv) one six-story office building known as the Professional Office Building; (v) one four-story office building known as the Health Science Center; and (vi) three multi-level parking garages adjoining the Clinical Center and Professional Office Building.

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Service Line Offerings

SJMC, together with its University colleagues and affiliates, provides a wide range of healthcare services across the continuum of care to both inpatients and outpatients. These services include over 70 medical specialties. The major service lines offered by SJMC are discussed below. Cardiovascular Services: The Cardiovascular Center at SJMC is made up of an interdisciplinary team of University physicians in cardiology and cardiothoracic surgery, advanced practice nurses, pharmacists, technicians and administrative personnel. By participating in numerous national and international research projects and investing in the most sophisticated equipment available, the center offers state of-the-art diagnostic, therapeutic and rehabilitative cardiac services. The 24,000-square-foot outpatient center includes examination areas, stress testing labs, quantitative two-dimensional echocardiographic labs, patient and family education libraries and a technologically advanced observation unit for patients undergoing outpatient heart catheterization and angioplasty. Other features of SJMC’s comprehensive cardiovascular program include computerized catheterization and electrophysiologic laboratories designed to provide the safest, most advanced interventional treatments and a full range of open heart surgical services. Orthopaedic Services: The Bone and Joint Institute at SJMC is led by a team of University Department of Orthopaedics fellowship-trained specialists with expertise in arthroscopy, sports medicine, joint reconstruction and replacement, podiatry, musculoskeletal oncology and pediatric and adult bone and soft tissue tumors. The Bone and Joint Institute offers state-of-the-art care for such conditions as arthritis, spinal malformations, fractures and dislocations. Poison Control Center: The Florida Poison Information Center/Jacksonville (“FPIC/Jax”), located at SJMC, is a 24-hour poison emergency treatment and information resource for health care professionals and the public in the northern and eastern coastal counties of Florida. It is one of three centers in the state comprising the Florida Poison Information Center Network. The center is certified by the American Association of Poison Control Centers as a regional poison center and serves a population of approximately six million people. FPIC/Jax is a cooperative effort among the University of Florida College of Medicine, SJMC, Children’s Medical Services, and the State of Florida Department of Health. Care Center for Women: The Care Center for Women provides services from genetic counseling to a Level III Neonatal Intensive Care Unit, including labor and delivery services, treatment for high-risk pregnancies and pregnant women’s acute care services. In addition, the Center offers “The Little Miracles” program, which provides prenatal care to young expectant mothers. Neuroscience Services: The Neuroscience Institute at SJMC provides comprehensive care to patients in Northeast Florida and South Georgia and offers dedicated programs for the diagnosis and treatment of stroke, neuromuscular disease, epilepsy, spinal disorders, Parkinson’s disease and movement disorders, multiple sclerosis and sleep disorders. University neurologists were the first in Jacksonville to implement some of the most advanced neurological medications and procedures, and SJMC was among the first medical centers in the nation to use air transport for stroke patients. In addition, the Neuroscience Institute offers workshops for those living with neurological disorders, support groups for patients and caregivers, exercise classes, patient education and the latest clinical research trials. Pediatrics: University physicians at SJMC are involved in clinical care and research related to all phases of pediatric care: primary care, cardiology, early intervention, HIV-infected infants and children, neonatology, learning and behavioral delays and child abuse prevention and intervention. A dedicated pediatric emergency department located on the first floor of the Clinical Center at SJMC provides convenient access and expert care for babies and children through age 17. Level 1 Trauma Center: SJMC has the only Level I adult and pediatric trauma center in North Florida and Southeast Georgia. The Trauma Center is staffed by University surgeons and physicians as well as nurses, paramedics and support personnel who have had special training in the care of trauma patients and are available to

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help severely injured patients 24 hours a day, seven days a week. The Trauma Center is supported by a high-tech surgical/trauma intensive care unit, step-down unit and post-trauma unit equipped with the latest lifesaving technology and equipment. Serving more than 4,000 patients each year, SJMC is widely recognized as one of the largest trauma programs in the nation. TraumaOne is a state-of-the-art helicopter ambulance service operated by SJMC and used exclusively to transport severely injured patients and those suffering from strokes, poison exposure or cardiac emergencies. TraumaOne transports approximately 1,200 patients each year. Cancer Services: The SJMC cancer program provides personalized cancer care based on a patient’s needs, including traditional treatments and innovative research alternatives. University faculty cancer specialists offer surgical procedures, chemotherapy, hematology/oncology, radiation oncology, gene therapy, minimally invasive techniques to remove tumors and genetic counseling for breast cancer, lung cancer, gynecological cancer, prostate cancer and sarcomas. The Breast Health Center at SJMC offers comprehensive care from diagnosis to treatment and rehabilitation. The SJMC cancer program was recently awarded a three-year accreditation by the American College of Surgeons. Proton Beam Therapy: Florida Proton Therapy Institute, Inc. (the “Proton Therapy Institute”), a not-for- profit corporation that is exempt from federal income taxation under Section 501(c)(3) of the Internal Revenue Code of 1986, operates a proton therapy treatment facility on a site immediately adjacent to SJMC’s main hospital facility. The Proton Therapy Institute is an independent corporation that is not affiliated with SJMC, although its six-person Board of Directors includes three members appointed by the University of Florida College of Medicine and one member appointed by Shands Gainesville. Proton therapy utilizes protons generated through a particle accelerator process, which destroy tumors with little or no damage to adjacent healthy tissues. Patients of the Proton Therapy Institute also obtain services at SJMC, such as traditional radiation oncology, imaging, and lab services. Capital Improvement Plans

Routine Capital. SJMC maintains an ongoing capital budget that provides for development of special projects, as well as routine capital projects for expansion or improvement of services or relocation of related facilities, including building renovation and improvement projects and acquisition of new or replacement equipment. North Campus Medical Office Building Project. Construction is underway on a developer-financed 180,000 square foot 6-story medical office building located in the rapidly growing area of north Jacksonville in close proximity to the Jacksonville International Airport. SJMC will be leasing the first two floors of the building, while the top four floors will be leased by a combination of both UF and independent community physicians. Hospital-based services within the first two floors will include a freestanding emergency department, surgical center, imaging and lab services. SJMC is in the process of applying for a Certificate of Need with eventual plans to build an inpatient bed tower at the same location. Such a project could require additional borrowing within the next three years. Affiliation, Merger, Acquisition and Divestiture

Significant numbers of affiliations, mergers, acquisitions and divestitures have occurred in the health care industry recently, and SJMC continuously evaluates and pursues potential affiliation candidates as part of its overall strategic plan for its healthcare system. Any such affiliation, merger, acquisition or divestiture is subject to compliance with the provisions of the Master Indenture applicable to such matters. Accreditation, License and Memberships

SJMC is accredited by The Joint Commission and is licensed by the State of Florida’s Agency for Health Care Administration (“AHCA”). The facility has received the following state level designations:

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• Level I Trauma Center, • Brain & Spinal Cord Injury Program, • Level III Neonatal Intensive Care Unit and • Comprehensive Stroke Program.

The following additional accreditations/certifications were obtained:

• The Sleep Disorder Center is accredited by the American Academy of Sleep Medicine (“AASM”);

• SJMC Clinical and Special Function Laboratories are inspected and accredited by the College of American Pathologists (“CAP”);

• SJMC Blood Bank is accredited by the Federal Food and Drug Administration, the College of American Pathologists and the American Association of Blood Banks;

• The Tumor Registry and the Cancer Program are surveyed and accredited by the American College of Surgeons Commission on Cancer;

• The Stroke Program is certified by The Joint Commission; • “Magnet Hospital” designation for Nursing Excellence by the American Nurses

Credentialing Center; • The Life Quest Organ Recovery Services (“OPO”) is accredited by the Association of

Organ Procurement Organizations; • SJMC is an accredited Chest Pain Center by the Society of Chest Pains Centers; • The Governor’s Sterling Award; • Nuclear Cardiology Laboratory is accredited by the ICANL, Intersocietal Accreditation

Commission; • Echocardiography Laboratory is accredited by the ICAEL, Commission for Accreditation

Echocardiography Laboratory SJMC’s Department of Pharmacy offers patient care services through its on-campus ambulatory pharmacy (the “Pharmacy”), which is licensed by the Florida Department of Health with three permits: Class 2 Institutional Pharmacy, Community Pharmacy and Compounding Sterile Preparations. Additionally, the Pharmacy is registered with the federal Drug Enforcement Administration (DEA) for controlled substance utilization. The Department of Pharmacy at SJMC participates in the education and post-graduate training of pharmacists and is accredited by the American Society of Hospital Pharmacists for four residency programs: PGY-1 Pharmacy Practice, PGY-2 Critical Care Pharmacy, PGY-2 Ambulatory Care Pharmacy and PGY-2 Drug Information Practice. AHCA routinely inspects the facility for Life Safety Code compliance; laboratory licensure; risk management program compliance; and the Long Term Care Unit; SJMC is also designated as a Baker Act Receiving Facility. Medical Staff

As of September 30, 2013, there were 619 physicians, dentists, and podiatrists (excluding honorary staff) serving on the medical staff for SJMC. The following table provides a general overview of information relating to the medical staff:

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Table 3.

Medical Staff for SJMC

Specialty

Total Physicians

Number of Board

Certified Physicians

Percent Board

Certified Physicians

Average Age of Total

Physicians

Anesthesiology 26 19 73% 52 Cardiovascular Disease 18 16 89% 54 Critical Care Medicine/Pulmonary 7 7 100% 46 Dentistry 5 1 20% 61 Maxillofacial/Oral Surgery 17 11 65% 53 Dermatology 1 1 100% 57 Emergency Medicine 50 42 84% 44 Family Medicine 51 49 94% 50 Medicine 92 81 88% 48 Neurology 15 13 87% 51 Neurological Surgery 13 8 62% 52 Obstetrics and Gynecology 30 27 90% 52 Ophthalmology 22 18 82% 51 Orthopaedic Surgery 25 21 84% 54 Otolaryngology 10 9 90% 52 Pathology 11 11 100% 55 Pediatrics 98 92 94% 50 Physical Medicine & Rehabilitation 3 3 100% 52 Plastic Surgery 7 7 100% 52 Podiatry 11 10 91% 53 Psychiatry 13 12 92% 54 Radiation Oncology 14 11 79% 49 Radiology 26 23 88% 52 Surgery 43 41 95% 50 Urology 11 11 100% 50

Totals 619 544 88% 52

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SERVICE AREA AND MARKET SHARE

Definition of Service Area

The SJMC market comprises a 5-county portion of northeast Florida; Duval, Clay, St. John’s, Nassau and Baker counties. The table that follows shows SJMC’s distribution of discharges by county:

Table 4.Map: Service Area and Market Share

UF Health Jacksonville

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Table 5.SJMC Patient Origin by County

Calendar Year Patient Residence (1) 2010 2011 2012

Duval 84.1% 84.7% 84.0% Nassau 3.3% 3.5% 3.5% Clay 2.5% 2.6% 2.3% St. Johns 1.8% 1.6% 1.6% Baker 1.2% 1.1% 1.3% Other 7.1% 6.5% 7.3% Total 100.0% 100.0% 100.0%

Note (1): Includes all discharges except normal newborns and observation patients. SJMC defines tertiary/quaternary services as, in essence, those inpatient discharges assigned an MS-DRG

(Medicare severity diagnosis-related group) having a relative weight of 4.0 or higher in the corresponding federal fiscal year. These MS-DRGs reflect patients receiving more complex or intensive services such as transplant procedures, open heart surgery, some neurosurgery, ventilator, burn, neonatology, and other medical and surgical services.

The Centers for Medicare & Medicaid Services (CMS) revises the weights for each MS-DRG annually.

These weights are referenced in the Federal Register as part of the Inpatient Prospective Payment System (“IPPS”) rule each year and are available through the CMS website. A MS-DRG with a relative weight of 4.0 or higher in one year may have a weight lower than 4.0 in a subsequent year (and vice versa); in those cases MS-DRGs characterized as tertiary/quaternary one year may no longer be considered tertiary/quaternary in a subsequent year (and vice versa). However, in some cases a relative weight may fall below 4.0 for a procedure that is still considered a tertiary service from a regulatory standpoint (such as transplant or open heart surgery), and in those cases SJMC continues to include them in the tertiary/quaternary volumes. The market share information presented above includes data on all discharges regardless of MS-DRG relative weight and for tertiary/quaternary discharges.

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Primary Service Area Facilities

The following table provides information on the acute care hospitals located in SJMC’s service area.

Table 6.Acute Care Hospitals –Service Area

Hospital

Hospital System

County

City

Licensed Beds

Baptist MC Downtown Baptist Health System, Inc. Duval Jacksonville 676 Baptist MC South Baptist Health System, Inc. Duval Jacksonville 225 Baptist MC Beaches Baptist Health System, Inc. Duval Jacksonville

Beach 146

Baptist MC Nassau Baptist Health System, Inc. Nassau Fernandina Beach 54

Total Baptist 1,101 St. Vincent’s MC Riverside Ascension Health Duval Jacksonville 528 St. Vincent’s MC Southside Ascension Health Duval Jacksonville 311 St. Vincent’s MC Clay Ascension Health Clay Middleburg 64 Total Ascension Health 903 Memorial Hospital Jacksonville HCA Duval Jacksonville 418 Orange Park MC HCA Clay Orange Park 297 Total HCA 715 SJMC (dba “UF Health Jacksonville”)

UF Health Duval Jacksonville 695

Flagler Hospital Flagler Hospital Inc. St. John’s St. Augustine 335 Mayo Clinic Mayo Clinic Duval Jacksonville 249 Ed Fraser Memorial Hospital Baker County Medical

Services Inc. Baker Macclenny 25

Total 4,023

_____________________

Sources: Florida Agency for Health Care Administration (AHCA) licensure website (http://www.floridahealthfinder.gov) for beds (accessed 10/02/13); Florida Hospital Association (FHA) financial data files for hospital parent information.

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The following tables show historical inpatient market share data for acute care hospital discharges of primary service area residents and patients outside of the service area for all discharges (excluding normal newborns, comprehensive medical rehabilitation patients, and skilled nursing unit patients) and for tertiary/quaternary discharges only.

Table 7.

Inpatient Market Share (All Discharges) –Service Area

Calendar Year Hospital Hospital System 2010 2011 2012 Baptist MC Downtown Baptist Health System, Inc. 16.6% 16.4% 16.5% Baptist MC South Baptist Health System, Inc. 5.2% 5.5% 5.8% Baptist MC Beaches Baptist Health System, Inc. 4.5% 4.3% 4.2% Baptist MC Nassau Baptist Health System, Inc. 1.8% 1.7% 1.8% Total Baptist 28.0% 27.9% 28.2% St. Vincent’s MC Riverside Ascension Health 15.3% 15.1% 15.3% St. Vincent’s MC Southside Ascension Health 4.4% 5.6% 6.4% Total Ascension Health 20.0% 20.7% 21.7% Memorial Hospital Jacksonville HCA 11.9% 11.6% 12.0% Orange Park MC HCA 9.6% 9.8% 10.6% Total HCA 21.4% 21.4% 22.6%

SJMC (dba “UF Health Jacksonville”)

UF Health 15.9% 15.7% 13.3%

Flagler Hospital Flagler Hospital Inc. 7.7% 7.5% 7.2% Mayo Clinic Mayo Clinic 6.8% 6.8% 7.0% Ed Fraser Memorial Hospital Baker County Medical

Services Inc. 0.01% 0.01% 0.02%

Service Area total 100.0% 100.0% 100.0%

_____________________

Source: AHCA inpatient discharge data for years ended December 31. Acute care hospitals only. Excludes normal newborns, comprehensive medical rehabilitation discharges, and skilled nursing unit patients.

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Table 8.Inpatient Market Share (Tertiary/Quaternary Discharges Only) –Service Area

Calendar Year Hospital Hospital System 2010 2011 2012 Baptist MC Downtown Baptist Health System, Inc. 19.5% 17.6% 17.2% Baptist MC South Baptist Health System, Inc. 2.0% 1.8% 1.9% Baptist MC Beaches Baptist Health System, Inc. 1.1% 1.4% 1.5% Baptist MC Nassau Baptist Health System, Inc. 0.5% 0.3% 0.4% Total Baptist 23.1% 21.1% 20.9% St. Vincent’s MC Riverside Ascension Health 17.0% 18.2% 17.3% St. Vincent’s MC Southside Ascension Health 2.6% 3.3% 4.0% Total Ascension Health 19.6% 21.5% 21.3%

Memorial Hospital Jacksonville HCA 15.8% 14.3% 12.6% Orange Park MC HCA 4.4% 5.4% 7.5% Total HCA 20.2% 19.6% 20.1%

SJMC (dba “UF Health Jacksonville”)

UF Health 16.7% 16.0% 15.0%

Flagler Hospital Flagler Hospital Inc. 14.5% 15.5% 16.3% Mayo Clinic Mayo Clinic 5.9% 6.2% 6.4%

Service Area total 100.0% 100.0% 100.0% ___________________

Sources: AHCA inpatient discharge data for years ended December 31 (acute care hospitals only, excluding normal newborns, comprehensive medical rehabilitation discharges, and skilled nursing unit patients); CMS MS-DRG weights and Shands Planning Department for tertiary/quaternary designation.

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Major Developments in the Service Area

SJMC • In December 2011, SJMC obtained initial certificate of need (“CON”) approval for construction of a

100-bed hospital in a rapidly growing area of north Jacksonville. The approval was challenged by Memorial Hospital (HCA), and the recommended order from the state’s Division of Administrative Hearings was to deny the CON. In August 2013, SJMC submitted a new letter of intent to obtain CON approval for a 92-bed hospital on the same site in north Jacksonville. As of October 1, 2013, there have been no public hearings regarding any potential opposition to the project. The initial CON decision from the Agency for HealthCare Administration is expected in early December 2013.

• In February 2013, SJMC’s Trauma One program entered into a contract with air medical transport company; Med-Trans. Under the new contract SJMC replaced the two existing helicopters that were located at SJMC and in Lake City with three new helicopters now located in Nassau County, in Lake City and at Flagler Hospital in St. Augustine. This expands Trauma One’s area of coverage and decreased response times to rural areas.

HCA

• In November 2010, HCA and the University of South Florida (USF) announced the formation of a statewide trauma network, in which USF would run trauma centers at a number of HCA hospitals. Over the past three years, HCA has applied for State approval for new Level II trauma centers at the following secondary service area hospitals (in addition to several hospitals in other parts of Florida): Orange Park Medical Center, Regional Medical Center Bayonet Point, and Osceola Regional Medical Center. The programs at Orange Park and Bayonet Point were granted provisional approval and began operating in November 2011 despite administrative law challenges brought by several not-for-profit hospitals including SJMC. Although rulings from Florida’s Division of Administrative Hearings and First District Court of Appeal have been favorable for the nonprofit challengers, the consequences for the provisional trauma centers and the additional trauma center applicant hospitals are unknown at this time.

• In January 2011, Memorial Hospital Jacksonville announced it will be moving ahead with plans to build an 85-bed acute care hospital and medical complex in western Jacksonville. Due to legal challenges by St. Vincent’s, a settlement agreement is expected to delay the hospital’s opening until 2016.

• In October 2012, Memorial Hospital Jacksonville opened a freestanding Emergency Department in southern Duval County.

• January 2013, Orange Park Medical Center received preliminary approval for a Certificate of Need to add a 20-bed CMR (rehab) unit to their hospital, however that approval has been challenged by Brooks Rehab Hospital and is currently set for hearing in early 2014 at the Florida Division of Administrative Hearings.

• On February 14, 2013, Orange Park Medical Center was notified by the Florida Department of Health (DOH) that they do not meet the standards for verification as a Level II Trauma Center. As a consequence their provisional approval was rescinded as of the date of the notification. Orange Park is currently appealing the decision.

Baptist Health (Jacksonville)

• In early 2010, Baptist South completed a new eight-story patient tower that features a neonatal ICU, a well-baby nursery, and additional labor, delivery, recovery and postpartum, acute care, and ICU beds.

• In December 2012, Baptist Medical Center opened a new 11-story tower. In addition to a slight increase in total beds, the expansion allowed the hospital to convert all its semi-private rooms to private rooms and to expand Wolfson Children’s Hospital, its children’s hospital-within-a-hospital. Baptist is expanding its pediatric behavioral health programs and its Neuroscience Institute as well.

• In April 2013, Baptist opened Baptist Clay, a freestanding Emergency Department and a medical office building in Clay County, where it had originally planned to open an acute care hospital in 2005 before losing CON approval to St. Vincent’s.

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• In September 2013, Baptist Nassau announced it will be adding 8 acute care beds (4 med. Surg. & 4 OB) bringing total licensed beds to 62. Also in September 57 licensed beds were added to Baptist downtown’s license bringing its total licensed beds to 676.

Ascension Health (Jacksonville)

• St. Vincent’s Medical Center is planning to open a new 64-bed acute care hospital in Middleburg (Clay County) in October 2013. The hospital anticipates adding obstetrics services at this location in 2014-2015.

• On October 1, 2013, Ascension opened St. Vincent’s Clay County, a $110 million, 64-bed acute care hospital.

Mayo Clinic

• Mayo Clinic Jacksonville began a $97 million expansion during the summer of 2012. The project includes adding 92 beds to its 214-bed, all-private room hospital and constructing a third off-site primary care center.

• In September 2013, Mayo Clinic added 35 beds bringing total licensed beds to 249. These 35 beds are a part of the 92 bed expansion noted above.

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ECONOMIC AND DEMOGRAPHIC INFORMATION FOR THE SERVICE AREA

Population

The following table sets forth comparative population statistics relating to the service area, the State and the U.S.

Table 9.Population by Service Area

% Change 2000 -

2010 2013

Estimated 2018

Projected

% Change 2013- 2018 2000 2010

Total Service Area(1) 1,119,442 1,345,255 20.2% 1,375,879 1,433,131 4.2% Florida 15,982,378 18,801,310 17.6% 19,156,005 20,139,760 5.1% United States 281,421,906 308,745,538 9.7% 313,095,504 325,256,835 3.9%

_______________________ Note (1): Includes Duval, Clay, Nassau, Baker and St. John’s counties Sources: Decennial Census data from U.S. Census Bureau; Estimates and Projections from Nielsen.

Employment

The following table sets forth employment statistics for the Jacksonville Metropolitan Statistical Area (“MSA”).

Table 10.Jacksonville MSA 2012 Annual Averages

(000s)

Jacksonville

MSA % of Total

Total Non-Farm Employment 605.9 100.0% Goods-Producing 51.5 8.5% Manufacturing 26.3 4.3% Nat’l Resources, Mining & Construction 25.2 4.2% Service-Providing 554.4 91.5% Trade, Transportation & Utilities 129.8 21.4% Information 9.5 1.6% Financial Activities 59.6 9.8% Professional & Business Services 100 16.5% Education & Health Services 89.1 14.7% Leisure & Hospitality 67 11.1% Other Services 22.5 3.7% Government 76.9 12.7%

__________________

The Jacksonville MSA includes Duval, Nassau, Clay, Baker and St. John’s counties. Note: Government employment includes state-run universities. Source: Bureau of Labor Statistics

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The following table sets forth unemployment rates for the Jacksonville MSA, the State and the U.S. for the dates indicated:

Table 11.Comparative Unemployment Rates

Annual Average July 2013* 2008 2009 2010 2011 2012

Jacksonville MSA 5.8% 9.8% 10.9% 9.9% 8.3% 7.0% State of Florida 6.3% 10.4% 11.3% 10.3% 8.6% 7.4% United States 5.8% 9.3% 9.6% 8.9% 8.1% 7.7%

_____________________ *Preliminary. Source: Bureau of Labor Statistics

Major Employers

The major public and private employers in the Jacksonville MSA are as follows:

Table 12.Largest Employers – City of Jacksonville/Duval County

Employer Product/Industry Employees

Naval Air Station Jacksonville U.S. Navy 25,240 Duval County Public Schools Public Education 14,480 Naval Station Mayport U.S. Navy 9,000 City of Jacksonville City Government 8,820 Baptist Health HealthCare 8,270 Bank of America Merrill Lynch Financial 8,000 Florida Blue Insurance 6,500 Mayo Clinic HealthCare 4,970 Citi Financial 4,200 J P Morgan Chase Financial 4,200 United Parcel Service Parcel Delivery 4,100 CSX Railroad 4,000 St. Vincent’s Medical Center HealthCare 4,000 U.S. Postal Service Mail Delivery 3,790 UF Health-Jacksonville (SJMC) HealthCare 3,500 Wells Fargo Financial 3,500 Jacksonville Sherriff’s Office Law Enforcement 3,300 Fleet Readiness Center Aviation Maintenance 3,200 Florida State College at Jacksonville Education 3,100 AT&T Communication 2,600

_____________________ Source: City of Jacksonville, Office of Economic Development, as of November, 2012. According to the City of

Jacksonville, Office of Economic Development, there have been no significant changes to the list.

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Income

The following table shows per capita and median household income levels relating to the service areas, the State and the U.S. for the years indicated.

Table 13.Income by Service Area

Per Capita Income Median Household

Income 2000 2013 2000 2013 Duval $20,528 $22,261 $52,646 $55,964 Clay 20,966 25,081 58,792 69,580 St. Johns 28,284 33,246 70,204 84,087 Nassau 22,552 30,817 59,154 78,068 Baker 14,431 20,110 45,679 62,097 Total Service Area 21,418 24,689 55,569 63,206 State of Florida 21,557 24,990 38,953 45,672 United States 21,587 25,919 42,307 49,581

__________________

Sources: 2000: U.S. Census Bureau; 2013 Estimates: Nielsen.

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UTILIZATION AND FINANCIAL INFORMATION

Utilization Statistics

The following table summarizes selected utilization statistics for SJHC for the fiscal years ended June 30, 2011, 2012 and 2013.

Table 14.SJHC Selected Operating Statistics

Fiscal Year Ended June 30

2011 2012

2013

Licensed beds 695 695 695 Beds in service 617 593 556 Admissions (1) 28,644 26,476 24,001 Patient days (1) 173,760 159,164 155,513 Average length of stay (1) 6.1 6.0 6.5 Percent occupancy(2) 81.0% 77.5% 82.6% Emergency room visits 87,611 90,208 89,820 Inpatient surgical procedures 6,693 5,899 5,964 Ambulatory surgical procedures 8,093 8,207 8,634 Outpatient visits 339,486 351,818 365,249 Case mix index - Medicare 1.605 1.640 1.739 Case mix index - all payers 1.515 1.509 1.596

__________________ Note (1): Excludes newborns and observation cases Note (2): Occupancy of beds in service. Includes observation days. Source: SJHC Records

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Summary of Condensed Financial Data

The following consolidated statements of net position and statements of revenues, expenses and changes in net position as of and for the years ended June 30, 2011, 2012 and 2013 are derived from the audited consolidated financial statements of SJHC. This information should be read in conjunction with the consolidated financial statements, related notes, and other financial information included in APPENDIX B.

Table 15.Consolidated Statements of Net Position for

Shands Jacksonville HealthCare, Inc. and Subsidiaries

($ in thousands)

Fiscal Year Ended June 30 2011 2012 2013

Assets: Current assets

Cash, cash equivalents and short-term investments $ 127,432 $ 107,857 $ 89,350 Patient accounts receivable, net 65,911 63,486 82,316 Due from city and state agencies 7,358 6,395 5,185 Prepaid expenses and other current assets 19,410 17,103 18,981 Total current assets 220,111 194,841 195,832

Property and equipment, net 161,359 179,426 170,987 Other assets 37,252 42,974 66,372

Total assets $ 418,722 $ 417,241 $ 433,191

Liabilities and Net Position: Current liabilities $ 92,411 $ 108,695 $ 109,269 Noncurrent liabilities 132,922 137,206 158,362

Total liabilities 225,333 245,901 267,631

Net position Net investment in capital assets 69,388 86,439 62,505 Restricted:

Expendable 3,006 3,843 3,887 Unrestricted 120,995 81,058 99,168

Total net position 193,389 171,340 165,560 Total liabilities and net position $ 418,722 $ 417,241 $ 433,191

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Table 16.Consolidated Statements of Revenues, Expenses and Changes in Net Position for

Shands Jacksonville HealthCare, Inc. and Subsidiaries

($ in thousands)

Fiscal Year Ended June 30

2011 2012 2013 Revenues

Net patient service revenue, net of provision for bad debts $ 430,073 $ 428,151 $ 430,090 City and state funding 71,887 55,679 57,346 Other operating revenue 24,621 31,446 35,440

Total operating revenues 526,581 515,276 522,876

Expenses Salaries and benefits 247,838 254,300 240,324 Supplies and services 229,253 232,353 239,426 Depreciation and amortization 22,299 21,805 23,588

Total operating expenses 499,390 508,458 503,338

Operating income 27,191 6,818 19,538

Nonoperating revenues (expenses) Interest expense (3,331) (3,621) (3,787) Other nonoperating gains (losses) and contributions, net (50) (1,077) 699 Net investment gain (loss), including change in fair value 2,047 2,490 (6) Gain (loss) on disposal of capital assets, net 5,325 (59) 33

Total nonoperating revenues (expenses) 3,991 (2,267) (3,061)

Excess of revenues over expenses before transfers, capital contributions and other changes in net assets 31,182 4,551 16,477

Capital contributions 206 837 44 Transfers and expenditures in support of the

University of Florida and its medical programs (26,647) (27,437) (22,301) Note payable to Shands Teaching Hospital and Clinics (42,276) - - Decrease in net assets (37,535) (22,049) (5,780)

Net position Beginning of year 230,924 193,389 171,340 End of year $ 193,389 $ 171,340 $ 165,560 Effect of Consolidation

Under generally accepted accounting principles, the accounts of related entities owned by SJHC are consolidated into the financial statements of SJHC. SJHC, SJMC and SJP are the only members of the Obligated Group liable for payment of the Bonds; the other related entities are not members of the Obligated Group. APPENDIX B includes consolidating statements under “Other Financial Information” that shows the effect of consolidation of these various related entities for the periods indicated.

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If members of the Obligated Group encounter financial difficulty, there can be no assurance that the funds of any of the non-obligated related entities will be available to satisfy the debts and obligations of the Obligated Group. The funds of the non-obligated related entities may be retained in the related entity as a matter of operating practice or procedure or by agreement with unrelated parties who share in ownership or control of the non-obligated related entity. Transfers of funds to the Obligated Group may be subject to approval of the governing body of the non-obligated related entity or approval of such unrelated parties who share in ownership or control. Transfers of funds from a non-obligated related entity may also be subject to financial covenants of such entity and various principles of creditors’ rights, including the so-called fraudulent conveyance principle prohibiting conveyances that would render the conveying party insolvent. Effective September 8, 2010, the Board of Directors of Shands Gainesville voted to reorganize its corporate structure. Under the reorganization, Shands Gainesville is no longer the sole corporate member of SJHC, but continues as an affiliated entity under common control of the University of Florida. Effective September 27, 2010, the Board of Directors of SJHC and SJMC approved Shands Gainesville no longer being the sole corporate member of SJHC.

MANAGEMENT’S DISCUSSION AND ANALYSIS

Financial Results for the Year Ended June 30, 2013 Compared to June 30, 2012

For the year ended June 30, 2013, SJHC reported excess of revenues over expenses before transfers, capital contributions, changes in fair value of hedging derivative instruments and other changes in net assets of $16.5 million, compared to $4.6 million for the year ended June 30, 2012. Patient Volumes. Inpatient admissions, excluding observation cases, compared to the prior year have decreased by 2,475 or 9.3%. This decrease is primarily due to the termination of the Humana Medicare Advantage contract in October 2011, as well as a continuing shift toward more observation cases, which are included as outpatient visits, rather than inpatient admissions. Total outpatient visits have increased by 3.8% due to the shift just mentioned and the opening of the Total Care Clinic, which is utilized to manage uninsured patients. Operating Revenues. June 30, 2013 fiscal year-end patient service revenue of approximately $487.4 million, net of allowances for contractual discounts, charity care and bad debt expense, represents an increase of approximately $3.6 million, or 0.7% in comparison to the same time period from the prior fiscal year. Other operating revenues of approximately $35.4 million is an increase of approximately $4.0 million, or 12.7%, from the prior year. This increase is primarily related to an approximately $4.2 million settlement related to the provider service network (PSN) plan year 2009, increased enrollment in the PSN and increases in electronic medical records meaningful use grant revenue. Operating Expenses. Operating expenses of approximately $503.3 million through fiscal year-end June 30, 2013, decreased by approximately $5.1 million, or 1.0%, in comparison to fiscal year-end June 30, 2012. The net decrease is primarily related to a $9.2 million reduction in self-insured employee health costs. The reduction was driven by improved claims experience prior to January 2013 and participating with other UF Health affiliates in a self-insured employee health pool known as GatorCare beginning January 2013. The decrease was offset by growth in PSN membership; additional expenditures related to the PSN plan year 2009 settlement described above and increases in depreciation, service/maintenance and consulting costs as the result of implementing the first phase of the EPIC electronic health record system in January 2012 and the second phase in March 2013. Nonoperating Revenues, Net. Nonoperating expenses, net, for fiscal year-end June 30, 2013, were approximately $3.1 million, which includes interest expense of approximately $3.8 million, investment income of approximately $1.4 million, an investment fair value decrease of approximately $1.4 million and a fair value increase for derivatives for approximately $0.7 million. The nonoperating expenses, net, increase over the fiscal year ended June 30, 2012 was $0.8 million, or 35%.

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Financial Results for the Year Ended June 30, 2012 Compared to June 30, 2011

For the year ended June 30, 2012, SJHC reported excess of revenues over expenses before transfers, capital contributions, changes in fair value of hedging derivative instruments and other changes in net assets of $4.6 million, compared to $31.2 million for the year ended June 30, 2011. Patient Volumes. Compared to the prior fiscal year, inpatient volumes decreased while outpatient volumes increased during fiscal year 2012. Inpatient admissions, excluding observation cases, compared to the prior year have decreased by 2,168 or 7.6%. This decrease is primarily due to the termination of the Humana Medicare Advantage contract as well as a decrease in certain surgical cases. The decrease in admissions from prior year is seen largely in Medicine, OB/GYN, and Orthopedics. Total outpatient visits have increased by 3.6%. The increase in the ancillary visits over prior year was partially offset by a reduction in hospital based clinic visits. Operating Revenues. June 30, 2012 fiscal year-end patient service revenue of approximately $483.8 million, net of allowances for contractual discounts, charity care and bad debt expense, represents a $18.1 million, or 3.6% decrease in comparison to the same time period from the prior fiscal year. In addition to the impact from the termination of the Humana contract, patient service revenue for the fiscal year ending June 30, 2012 was materially impacted by a $16.2 million decrease in State disproportionate share funding. Revenue increases associated with higher outpatient volumes and reimbursement rates were offset by the previously noted decreases in State funding and inpatient volumes. Other operating revenues of approximately $31.4 million represents an increase of approximately $6.8 million, or 27.7%, higher than the prior year, primarily due to partial revenue recognition of a Medicaid Meaningful Use of electronic health records grant. Operating Expenses. Operating expenses of approximately $508.5 million through fiscal year-end June 30, 2012, increased by $9.1 million, or 1.8%, in comparison to fiscal year-end June 30, 2011. Growth in membership in the provider service network led to increased costs as did increases in salaries, wages and benefits for additional staffing, which corresponds with the increase in outpatient patient volume and increased employee and retiree medical claims expense. Implementation of a new electronic health records system resulted in expenditures of $4.6 million, which included $1.4 million for consultants, $1.2 million for backfill and overtime wages, $1.2 million for support and maintenance contracts and $0.5 million for training costs. These increases were offset by approximately $4.0 million in reduced insurance costs. Nonoperating Revenues (Expenses), Net. Nonoperating expenses, net for fiscal year-ended June 30, 2012, were approximately $2.3 million. Interest expense of approximately $3.6 million is included in nonoperating expenses, net, in accordance with GASB Statement No. 34, Basic Financial Statements and Management’s Discussion and Analysis for State and Local Governments. Investment income totaled approximately $1.9 million. The fair value increase for investments is $0.6 million. The fair value decrease for derivatives is approximately $1.1 million.

SOURCES OF PATIENT SERVICE REVENUE

Overview

SJMC participates in the federal Medicare program, administered by the Centers for Medicare and Medicaid Services (CMS), and maintains an agreement with the State of Florida under the Medicaid program. In addition, SJMC contracts with Blue Cross Blue Shield, other private commercial insurance carriers, HMO’s, PPO’s and other organizations for the provision of services to patients covered by these payers. SJMC also recognizes revenue from self-pay patients that do not qualify for charity care. Medicare

Medicare reimburses acute care hospitals for most services provided to eligible inpatients according to the inpatient prospective payment system (“IPPS”). Under IPPS, payments are based on a prospectively-determined

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standard national base rate that is established without regard to each hospital’s actual inpatient operating and capital costs. Each patient is assigned to a mutually-exclusive Diagnosis Related Group (“DRG”) based on the patient’s diagnoses and the type of care provided. Each DRG is assigned a relative weight that is based on the average cost of treating that DRG nationwide. These DRG weights are recalibrated annually. The base rate is multiplied by the DRG weight to determine the fixed payment for that DRG. Hospitals receive additional payments for cases that exceed DRG-specific cost thresholds, referred to as “outlier payments,” as well as the costs of organ procurement.

The DRG base rate is adjusted annually by the wage index applicable to the area where the hospital is

located, but all such adjustments must be budget neutral to the Medicare program on a national basis. The DRG base rate is also updated annually (the update factor) based on a statistical estimate of the increase in the cost of goods and services used by hospitals in providing care (the market basket), subject to Congress-mandated market basket reductions. Teaching hospitals receive Medicare payments for training physicians and other medical professionals (graduate medical education or GME payments) that include direct medical education payments to support the direct costs of training, such as resident stipends and costs of supervision, and indirect medical education (IME) payments to support the additional patient care costs associated with the teaching mission, including the costs arising out of greater patient acuity and the extensive “stand-by” capabilities maintained by teaching hospitals.

Hospitals also receive an additional per discharge payment to reimburse them for capital costs based on a standard federal rate that is adjusted for various factors, including the hospital’s geographic location, low-income patient mix for certain hospitals and IME costs incurred by teaching hospitals. CMS updates capital rates annually based on its calculation of the change in prices of capital related costs as measured by the capital input price index and adjusted by other policy factors.

Hospitals providing care to a high level of Medicare and Medicaid disabled patients receive additional

Medicare payments (disproportionate share payments or “DSH” payments). In certain circumstances hospitals receive additional payments for new services and new technologies that represent a substantial clinical improvement to existing services and technologies.

Most hospital outpatient services are reimbursed by Medicare according to an outpatient prospective payment system (“OPPS”). Under OPPS, most outpatient services are grouped into one of approximately 750 Ambulatory Payment Classifications (“APC”) based upon clinical similarity and resources required. Each APC is assigned a relative weight reflecting the average cost of providing the care encompassed within that APC. Hospitals are paid a uniform national payment amount (the conversion factor) per APC adjusted for area wage differences and the applicable APC weight. CMS includes in the APC payment certain categories of supportive ancillary services that it views as integral to the performance of the primary diagnostic or treatment procedures with which they are performed. Certain drugs, biologicals and radiopharmaceuticals provided in an outpatient setting are bundled into payments for their associated procedures while others are reimbursed separately at their average sale price plus 4%. Medicaid

Medicaid is a cooperative federal-state program of medical care for the poor and other eligible groups. Eligibility for Medicaid is usually based on the family’s or individual’s income and assets. States obtain federal matching funds for their Medicaid programs by obtaining CMS approval of a “state plan” that conforms to the requirements of Title XIX of the Social Security Act and its implementing regulations. In Florida, AHCA is responsible for the administration of the Medicaid program.

Medicaid reimburses for inpatient hospital service prospectively based on reported costs. The State

changed the Inpatient reimbursement methodology from a per diem to a AP-DRG basis effective July 1, 2013, as more fully described in the subsequent paragraph. Outpatient rates are reimbursable for services rendered under allowable revenue code centers. Each distinct allowable revenue code listed on a claim is reimbursable at the generated outpatient per diem rate. Outpatient reimbursement is also prospective and determined based on a payment plan that determines a per occasion of service rate.

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Chapter 409.905(5)(f) of the 2011 Florida Statutes authorized AHCA to develop a plan to convert Medicaid

inpatient hospital rates to a prospective payment system that categorizes each case into DRGs and assigns a payment weight based on the average resources used to treat Medicaid patients in that DRG. To the extent possible, the agency shall propose an adaptation of an existing prospective payment system, such as the one used by Medicare, and shall propose such adjustments as are necessary for the Medicaid population and to maintain budget neutrality for inpatient hospital expenditures. The agency submitted the Medicaid DRG plan to the Governor, the President of the Senate, and the Speaker of the House of Representatives by January 1, 2013, and the plan was implemented effective July 1, 2013. Payor Mix

The following table presents a percentage breakdown of the gross patient charges of Shands by source of payment for the last three fiscal years:

Table 17.Payor Mix

Fiscal Year Ended June 30

Payor 2011 2012 2013 Medicare (includes HMOs) 33.6% 31.4% 32.2% Medicaid (includes HMOs) 29.1% 30.1% 29.5% Blue Cross 4.4% 4.2% 5.4% Commercial 4.6% 4.8% 5.6% Managed care 10.1% 10.4% 9.3% Self-pay & Medicaid Pending(1) 17.7% 18.3% 17.3% Other 0.7% 0.8% 0.7% Total 100.0% 100.0% 100.0%

____________________

Note (1): SJMC sees a significant number of patients who are eligible but not enrolled in Medicaid when they seek healthcare services. Based upon an initial financial evaluation, these patients are initially classified as Self-pay / Medicaid pending and subsequently reclassified to Medicaid if they are ultimately qualified for the program. The qualifications typically cover the initial services rendered to the patient even if they were not enrolled at the time of service. The percentages above represent the initial rather than the final classification of the patient.

Source: SJMC records.

DEBT STRUCTURE OF THE OBLIGATED GROUP

After giving effect to the issuance of the Bonds offered pursuant to this Official Statement, SJMC and the other members of the Obligated Group will have the following debt and guarantees outstanding: Outstanding Debt of Obligated Group Secured by Master Trust Indenture

After the issuance of the Bonds and giving effect to the plan of finance, the Obligated Group will have the following outstanding long-term debt secured by the Master Trust Indenture:

Series 2013B Bonds. These are the Bonds offered pursuant to this Official Statement. The Bonds will be secured by the Master Trust Indenture.

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Series 2013A Bonds. The Obligated Group anticipates that at or about the time of issuance of the Series 2013B Bonds, it will cause the Issuer to issue its $64,240,000 Healthcare Facilities Revenue Bonds (UF Health-Jacksonville Project), Series 2013A (the “Series 2013A Bonds”). The Series 2013A Bonds will bear interest at fixed rates and mature or be subject to mandatory redemption in the years 2017 - 2020 and 2024 - 2033. The Series 2013A Bonds will also be secured by the Master Trust Indenture. 2013 Bridge Loan. After giving effect to the plan of financing, the Obligated Group will have outstanding approximately $19,190,000 in SMJC’s Taxable Notes, Series 2013 (the “2013 Bridge Loan”). The Bridge Loan bears interest at a variable rate and matures in July 2014. The Obligated Group anticipates having the maturity of the Series 2013 Bridge Loan extended or entering into a direct bank loan at a variable rate to refinance the Bridge Loan. The Bridge Loan is, and the anticipated direct bank loan is expected to be, secured by the Master Trust Indenture.

Other Debt, Guaranteed Obligations and Capital Lease Obligations

Shands 2011 Note. As previously mentioned, the Board of Directors of Shands approved the reorganization of its corporate structure in September 2010. Under the reorganization, Shands Gainesville is no longer the sole corporate member of SJHC, but continues as an affiliated entity under the common control of the University. SJMC continues to receive management and operational services from Shands Gainesville. As a part of the reorganization, SJMC delivered a promissory note to Shands Gainesville in the amount of approximately $42,276,000, payable over 20 years, in acknowledgement of historical investments in SJMC. The Shands 2011 Note is unsecured. Guarantee of FCI Bonds. SJMC and University of Florida Jacksonville Physicians, Inc. are contingently liable as co-guarantors in connection with Industrial Revenue Bonds, outstanding at June 30, 2013 in the aggregate principal amount of $4,200,000 (the “FCI Bonds”), related to indebtedness of Faculty Clinic, Inc. The FCI Bonds bear interest at a variable rate and mature on July 1, 2019. Capital Lease Obligations. At June 30, 2013, the Obligated Group had capital lease obligations, inclusive of current portions, in the principal amount of $8,418,155. Such obligations are not secured by the Master Trust Indenture.

Anticipated Changes in Debt Structure

The Obligated Group anticipates borrowing approximately $20 million within the next two years to finance equipment to be used in the North Campus medical office building. See “FACILITIES AND SERVICES – Capital Improvement Plans – North Campus Medical Office Building Project” in this APPENDIX A for a description of this project.

Other than as described therein, the Obligated Group has not authorized any additional debt and currently has no specific plans for additional debt. The Obligated Group may issue or incur additional debt or guarantees in the future. Any additional debt or guarantees of the Obligated Group must meet the requirements of the Master Trust Indenture. Debt Covenants

The Obligated Group was in compliance with all of its debt covenants as of June 30, 2013. As indicated in Note 6 on page 29 of the Notes to the consolidated financial statements of SJHC and subsidiaries as of June 30, 2013 and 2012, and for the fiscal years then ended, attached as APPENDIX B, at June 30, 2012, the Obligated Group was in violation of its debt service coverage ratio with respect to certain prior debt with certain of its credit enhancers and lenders. Such covenant violations also caused a cross default under its Shands 2011 Note. There was no default in payment of principal or interest on the Series 2011 Note. The Obligated Group obtained waivers with respect to such defaults, effective through July 1, 2013. Upon the issuance of the Refunded Notes and the retirement or defeasance of the prior debt in June 2013, the Obligated Group became compliant with all applicable covenants.

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Outstanding Debt of Obligated Group Not Secured by Master Trust Indenture

Other than the Shands 2011 Note (unsecured) and capital leases in durations commensurate with the estimated useful life of the equipment associated with such leases, the Obligated Group will not have long-term debt outstanding that is not secured on a parity basis by the Master Trust Indenture. Annual Debt Service Requirements for Obligated Group

The following table sets forth actual annual debt service requirements on long-term debt of the Obligated Group secured by the Master Trust Indenture after giving effect to the plan of financing for the Bonds.

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Annual Debt Service Requirements of Obligated Group Table 18.

Fiscal Year

Ending June 30

Principal Requirements (1)(2)

Series 2013A Series 2013B (3)2013 Bridge

Loan Total

Principal Estimated Interest (4)

Aggregate Debt Service

2014 - - - - $ 2,226,897 $ 2,226,897 2015 - $ 2,865,000 $ 19,190,000 $ 22,055,000 5,712,392 27,767,392 2016 - 3,005,000 - 3,005,000 5,340,157 8,345,157 2017 $ 1,750,000 3,145,000 - 4,895,000 5,242,735 10,137,735 2018 1,835,000 3,290,000 - 5,125,000 5,062,401 10,187,401 2019 1,930,000 3,465,000 - 5,395,000 4,870,225 10,265,225 2020 2,025,000 3,575,000 - 5,600,000 4,670,894 10,270,894 2021 - 3,775,000 - 3,775,000 4,456,013 8,231,013 2022 - 3,950,000 - 3,950,000 4,343,241 8,293,241 2023 - 4,125,000 - 4,125,000 4,223,015 8,348,015 2024 2,125,000 4,330,000 - 6,455,000 4,098,557 10,553,557 2025 2,230,000 4,525,000 - 6,755,000 3,857,856 10,612,856 2026 2,345,000 4,740,000 - 7,085,000 3,607,012 10,692,012 2027 4,870,000 4,980,000 - 9,850,000 3,339,332 13,189,332 2028 5,130,000 5,190,000 - 10,320,000 2,920,255 13,240,255 2029 6,170,000 4,445,000 - 10,615,000 2,489,264 13,104,264 2030 6,545,000 - - 6,545,000 2,029,800 8,574,800 2031 6,935,000 - - 6,935,000 1,637,100 8,572,100 2032 7,350,000 - - 7,350,000 1,221,000 8,571,000 2033 13,000,000 - - 13,000,000 780,000 13,780,000 2034 - - - - - - 2035 - - - - - - 2036 - - - - - - 2037 - - - - - - 2038 - - - - - - 2039 - - - - - - 2040 - - - - - - 2041 - - - - - - 2042 - - - - - - 2043 - - - - - - 2044 - - - - - - Total $ 64,240,000 $ 59,405,000 $ 19,190,000 $ 142,835,000 $ 72,128,147 $ 214,963,147

______________________ Note (1): Excludes the unsecured Series 2011 Note, guaranteed debt and capital lease obligations, none of which is secured by the Master Trust Indenture. Note (2): Includes scheduled mandatory redemption requirements and “balloon payments” on the 2013 Bridge Loan. Note (3): These are the Bonds offered by this Official Statement. Note (4): Variable rate interest payments are estimated based on current market conditions.

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Derivative Instruments

SJMC’s objectives with respect to its use of derivative instruments include managing the risk of increased debt service resulting from rising long-term interest rates, the risk of decreased surplus returns resulting from falling short-term interest rates, and the management of the risk of an increase in the fair value of outstanding fixed-rate obligations resulting from declining market interest rates. Consistent with its interest rate risk management objectives, the Corporation entered into various interest rate swap agreements with a fair value at June 30, 2013 of ($2,125,000).

At June 30, 2013, all of SMJC’s swap agreements were executed with Merrill Lynch Capital Services, Inc. The following table summarizes the Corporation’s interest rate swap agreements:

Swap Type Expiration

Date SJMC Receives SJMC Pays

Notional Amount at

June 30, 2013 Fixed Receiver 2014 3.401% SIFMA Index $2,485,000 Fixed Receiver 2014 3.35% SIFMA Index 245,000

Fixed Payer 2021 67% of 1 mo. LIBOR 3.337% 20,875,000

SMJC’s obligation to make regularly scheduled payments under the swap agreements is secured under the Master Indenture on a parity with the Bonds.

Debt Service Coverage Ratios

Set forth in the table below are certain debt service coverage ratios for the Obligated Group for the fiscal years indicated, calculated in accordance with the provisions of the Master Trust Indenture and giving effect to the issuance of the Bonds and the Series 2013A Bonds.

Table 19.Debt Service Coverage Ratios

Year Ended

June 30

Net Income Available for Debt Service

for Obligated Group ($ in thousands)(1)

Historical Pro Forma Coverage of

Maximum Annual Debt Service

Requirements (2)

2011 22,018 1.84 2012 697 0.06 2013 20,423 1.70

_____________________ Note (1): Net Income Available for Debt Service for the Obligated Group was calculated as follows (in 000’s):

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Fiscal Year Ended June 30 2011 (3) 2012 (3) 2013 Operating income $26,579 $6,531 $18,715 Plus (less): Transfers and expenditures in support of the University of Florida and its medical programs (26,647) (27,437) (22,301) Finance costs - - 524 Depreciation and amortization 22,086 21,603 23,485 Net Income Available for Debt Service $22,018 $697 $20,423

Note (2): Net Income Available for Debt Service for the fiscal year in question divided by Maximum Annual Debt Service

Requirements on long-term debt of $11,978,374, payable in fiscal year 2015. Debt service requirements for purposes of this table were calculated in accordance with the provisions of the Master Trust Indenture related to the calculation of the “Maximum Annual Debt Service Requirement.” Under this calculation, as permitted by the Master Trust Indenture, debt service on the unsecured Series 2011 Note is excluded. The alternate method permitted under the Master Trust Indenture for the calculation of the “Maximum Annual Debt Service Requirement” would include debt service on the unsecured Series 2011 Note, resulting in lower coverage. See APPENDIX C for a summary of the related provisions of the Master Trust Indenture.

Note (3): Amounts are calculated according to membership of Obligated Group as of June 30, 2013 and are not reflected in audited financial statements.

MISCELLANEOUS

Insurance Coverage

SJMC currently maintains the following basic types of insurance: (1) Property Insurance on real and personal property leased and owned by Shands; (2) Business Interruption and Extra expense Insurance; (3) Boiler and Machinery Insurance, including loss to owned property, costs of temporary repair of damaged property, and legal liability for losses on property of others; (4) General Liability Insurance covering a per occurrence and aggregate limit for Bodily Injury including death and Property Damage to third parties including defense expenses and also includes Employee Benefits Liability; (5) Excess Workers’ Compensation including Employer’s Liability. SJMC is a qualified Florida self-insurer for workers compensation and self-insures the first $600,000 of each occurrence or accident or employee for disease; (6) Excess Automobile Liability with personal injury protection for bodily injury including death and property damage to third parties including defense expenses. SJMC is a qualified Florida self-insurer for auto liability and self-insures the first $250,000 of each accident; (7) Crime Insurance covering employee theft, premises, in-transit, forgery, computer fraud, and funds transfers; (8) Directors’ and Officers’ liability protection; (9) Employment Practices Liability; (10) Fiduciary Liability and excess fiduciary liability; (11) Cyber Liability; (12) Helipad Liability; (13) Non-Owned Aircraft Liability; (14) Storage Tank Liability; (15) Pollution Legal Liability; and (16) Umbrella Liability Insurance providing excess liability limits over the following underlying coverages and limits: General Liability, Auto Liability, Employers Liability, Employee Benefits Liability, Helipad Liability and Non-Owned Aircraft Liability.

SJMC participates with other healthcare providers in the University of Florida J. Hillis Miller Health Center Self-Insurance Program (UFSIP). UFSIP is an operating unit of the Board of Governors of the State of Florida (FBOG). UFSIP provides occurrence based coverage to SJMC. Insurance in excess of the coverage provided by UFSIP is provided by the University of Florida Healthcare Education Insurance Company (UFHEIC). UFHEIC is wholly owned by FBOG. UFHEIC provides coverage to SJMC on an occurrence basis. UFHEIC obtains reinsurance for a substantial portion of the insurance coverage that it provides to participants in its insurance program. The policies between UFSIP and UFHEIC and SJMC are not retrospectively rated. The costs incurred by SJMC related to these policies are expensed in the period that coverage is provided. SJMC could be subject to malpractice claims in excess of insurance coverage through UFSIP, UFHEIC, and reinsurance coverage levels; however, the estimated potential loss cannot be estimated. Management of SJMC is

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not aware of any potential uninsured losses that could materially affect the financial position of SJMC. See Note 10 to the financial statements included in APPENDIX B. Effective January 1, 2013 SJMC along with other participating groups, began participating in a self-insurance plan for health and medical coverage for their employees known as “GatorCare.” Amounts contributed by SJMC and its employees to the plan are determined by the level of benefits coverage selected by each employee. SJMC is self-insured for workers compensation of $600,000, per occurrence, and has purchased excess coverage from commercial carriers up to the amount allowed by Florida statutes. See Note 10 to the financial statements included in APPENDIX B for a discussion of self-insurance. Effective July 1, 2011 SJMC was granted sovereign immunity under the provisions of Chapter 2011-114, Laws of Florida. Recovery in tort actions against SJMC will be limited to $100,000 for any one person and all recovery related to one incident is limited to a total of $200,000. Effective October 1, 2011, the limits recoverable against SJMC increased to $200,000 for any one person and a total of $300,000 related to one incident. Human Resources

SJMC employs approximately 3,238 individuals, of whom approximately 2,987 are full-time and 251 are part-time. Certain employees are represented by the American Federation of State, County and Municipal Employees (“AFSCME”). SJMC negotiates contracts with AFSCME on a three-year basis. To date, SJMC has experienced no strikes or work stoppages, and management considers its relationship with its employees to be good. Employee Benefit Plans and Other Postemployment Benefits

SJMC has a defined contribution plan and participates in a defined benefit pension plan covering eligible employees. See Note 8 to the financial statements included in APPENDIX B. SJMC also provides certain other postemployment benefits to retired employees. For a discussion of such benefits, see Note 9 to the financial statements included in APPENDIX B.

Litigation

SJHC and affiliates are involved in litigation arising in the normal course of business. After consultation with legal counsel, management believes that these matters will be resolved without material adverse effect on the future financial position of SJHC or its results of operations.

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APPENDIX B

Financial Statements of SJHC and Subsidiaries

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Shands Jacksonville HealthCare, Inc. and Subsidiaries Consolidated Basic Financial Statements, Required Supplementary Information and Supplemental Consolidating Information June 30, 2013 and 2012

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Shands Jacksonville HealthCare, Inc. and Subsidiaries Index June 30, 2013 and 2012

Page(s)

Management’s Discussion and Analysis (Unaudited) ............................................................................... 1-9

Report of Independent Certified Public Accountants ..................................................................... 10-11

Consolidated Basic Financial Statements

Consolidated Basic Statements of Net Position ........................................................................................ 12

Consolidated Basic Statements of Revenues, Expenses, and Changes in Net Position .......................... 13

Consolidated Basic Statements of Cash Flows .................................................................................... 14-15

Notes to Consolidated Basic Financial Statements .............................................................................. 16-41

Required Supplementary Information

Schedule of Plan Funding Progress (Unaudited) ...................................................................................... 42

Historical Summary of Actual and Required Pension Contributions (Unaudited) ...................................... 43

Historical Summary of Actual and Required Other Postemployment Contributions Under GASB Statement No. 45 (Unaudited) ........................................................................................... 44

Supplemental Consolidating Information

Consolidating Basic Statements of Net Position ................................................................................... 45-46

Consolidating Basic Statements of Revenues, Expenses, and Changes in Net Position .................... 47-48

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Shands Jacksonville HealthCare, Inc. and Subsidiaries Management’s Discussion and Analysis (Unaudited) June 30, 2013 and 2012

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This section of the Shands Jacksonville HealthCare, Inc. and Subsidiaries’ (“SJH” or the “Company”) annual financial report presents the Company’s analysis of its financial performance as of June 30, 2013 and 2012, and for the fiscal years then ended. Please read this analysis in conjunction with the consolidated basic financial statements, which follow this section.

Introduction

Shands Jacksonville HealthCare, Inc., formerly known as Jacksonville Health Group, Inc., is a Florida not-for-profit corporation with direct or indirect legal control over numerous subsidiaries.

Shands Jacksonville Medical Center, Inc. (“SJMC”), formerly known as University Medical Center, Inc. (“UMC”), is a Florida not-for-profit corporation and the principal operating subsidiary of SJH. SJMC operates a teaching hospital located in Jacksonville, Florida, through a lease with the City of Jacksonville (the “City”). During 2013, SJMC began doing business as UF Health Jacksonville.

On September 30, 1999, Methodist Medical Center, Inc., Methodist Health System, Inc. and The Methodist Hospital Foundation, Inc. (collectively, “Methodist”), SJH, UMC and Shands Teaching Hospital and Clinics, Inc. (“Shands”) completed an affiliation agreement (the “Affiliation”) which allowed for the combination of the hospital operations of UMC and Methodist under SJMC. SJH became the sole member of both SJMC and Methodist.

The Affiliation was approved by the City and secured creditors of both UMC and Methodist. As a result of the Affiliation, the requisite corporate actions were taken on February 1, 2003 to designate Shands as the sole corporate member of SJH.

Effective September 8, 2010, the Board of Directors of Shands approved a motion to reorganize its corporate structure. Under the reorganization, Shands would no longer be the sole corporate member of the Company, but would continue as an affiliated entity under common control of the University of Florida. Effective September 27, 2010, the Board of Directors of the Company approved the motion for Shands to no longer be the sole corporate member of the Company. The Company continues to receive management and operational services from Shands. As a part of the reorganization, the Company delivered a promissory note to Shands in the amount of approximately $42,276,000, payable over 20 years, in acknowledgement of historical investments in the Company.

The accompanying consolidated basic financial statements include the accounts of SJH, SJMC, Methodist and other subsidiaries of SJH as of and for the years ended June 30, 2013 and 2012. The “Company” in these consolidated basic financial statements refers to the consolidated operations of these entities. Significant transactions between these entities have been eliminated.

This section of the Company’s consolidated basic financial statements presents analysis of the financial net position, the results of operations and cash flows for the fiscal years ended June 30, 2013 and 2012. Along with the information in this report, the notes to the consolidated basic financial statements should be used to provide additional information that is essential for a full understanding of the consolidated basic financial statements.

Overview of the Consolidated Basic Financial Statements

Along with management’s discussion and analysis, the annual financial report includes the independent certified public accountants’ report and the consolidated basic financial statements of the Company. The consolidated basic financial statements also include notes that explain in more detail some of the information in the consolidated basic financial statements. By referring to the accompanying notes to the consolidated basic financial statements, a broader understanding of issues impacting financial performance can be realized.

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Shands Jacksonville HealthCare, Inc. and Subsidiaries Management’s Discussion and Analysis (Unaudited) June 30, 2013 and 2012

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June 30, 2013

Consolidated Basic Statements of Net Position

The consolidated basic statements of net position presents the financial position of the Company and includes all assets and liabilities of the Company. The Company’s net position, or the difference between total assets and total liabilities, are one indicator of the current financial condition of the Company. Changes in net position are an indicator of whether the overall financial condition of the organization has improved or worsened over a period of time. Assets and liabilities are generally measured using current values, with the exception of capital assets, which are stated at historical cost less allowances for depreciation.

A summary of the Company’s condensed consolidated basic statements of net position is presented below:

2013 2012

Cash and cash equivalents and short-term investments 89,350$ 107,857$

Other current assets 106,482 86,984

Capital assets, net 170,987 179,426

Other noncurrent assets 66,372 42,974

Total assets 433,191$ 417,241$

Current liabilities 109,269$ 108,695$

Noncurrent liabilities 158,362 137,206

Total liabilities 267,631 245,901

Net position

Net investment in capital assets 62,505 86,439

Restricted:

Expendable 3,887 3,843

Unrestricted 99,168 81,058

Total net position 165,560 171,340

Total liabilities and net assets 433,191$ 417,241$

(in thousands of dollars)

Cash and cash equivalents and short-term investments decreased by approximately $18.5 million, or 17.2%, since June 30, 2012. See the “Consolidated Basic Statements of Cash Flows” section below for further information regarding cash activity.

Other current assets increased by approximately $19.5 million since June 30, 2012. Net patient accounts receivable increased approximately $18.8 million largely as the result of implementing EPIC patient accounting software and the expected transition collection lag; prepaid expenses and other miscellaneous receivables increased approximately $4.0 million primarily related to a $1.9 million deposit and timing of receivable collections; due from city and state agencies decreased approximately $1.2 million due to improved collection timing; inventories increased $1.3 million and the sinking fund deposit decreased by approximately $3.6 million when the related debt was refunded.

Capital assets, net, decreased approximately $8.4 million since June 30, 2012. While gross capital assets increased, primarily for equipment purchases including EPIC patient accounting software that went live March 1, 2013, there was an overall decrease as a result of depreciation expense.

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Shands Jacksonville HealthCare, Inc. and Subsidiaries Management’s Discussion and Analysis (Unaudited) June 30, 2013 and 2012

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Other noncurrent assets increased $23.4 million. The increase relates primarily to a deposit for land improvements for the Northside project of approximately $2.0 million and a new $20 million debt service reserve fund related to the Shands Jacksonville Medical Center Taxable Notes, Series 2013.

Since June 30, 2012, other current liabilities increased approximately $0.6 million and other noncurrent liabilities increased approximately $21.2 million, primarily related to the Shands Jacksonville Medical Center Taxable Notes, Series 2013, resulting in a net liability increase of $21.7 million.

As of June 30, 2013, the Company has approximately $139.9 million in debt outstanding compared to approximately $124.7 million at June 30, 2012. On June 27, 2013, the Company issued the index rate $100 million Shands Jacksonville Medical Center Taxable Notes, Series 2013, which are held in their entirety by Bank of America, N.A. This enabled the Company to finance various capital improvement projects, refund the outstanding principal of the Series 2005 and Series 2008 Bonds, escrow funds for an in-substance defeasance of the Series 2004 Bonds and to pay related issuance costs.

The promissory note owed to Shands for $42.3 million, as mentioned above, was recorded by the Company during fiscal year 2011. The note payable balance at June 30, 2013 is approximately $39.9 million.

The Company was in compliance with all covenants at June 30, 2013.

Consolidated Basic Statements of Revenues, Expenses and Changes in Net Position

The following table presents the Company’s condensed consolidated basic statements of revenues, expenses and changes in net position. The table presents the extent to which the Company’s overall net position decreased as a result of operations or other reasons.

2013 2012

Net patient service revenue 487,436$ 483,830$

Other operating revenue 35,440 31,446

Total operating revenues 522,876 515,276

Operating expenses 503,338 508,458

Operating Income 19,538 6,818

Nonoperating revenues (expenses), net (3,061) (2,267)

Excess of revenues over expenses before

transfers and capital contributions 16,477 4,551

Other changes in net assets:

Transfers and expenditures in support of the University

of Florida and its medical programs (22,301) (27,437)

Capital contributions, net 44 837

Decrease in net position (5,780)$ (22,049)$

(in thousands of dollars)

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Shands Jacksonville HealthCare, Inc. and Subsidiaries Management’s Discussion and Analysis (Unaudited) June 30, 2013 and 2012

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Patient Volumes

Compared to prior fiscal year, inpatient volumes decreased while outpatient volumes increased during fiscal year 2013. The following table reflects the associated volumes on a comparative basis to the prior year for fiscal year-end as of June 30:

2013 2012 Net Change % Change

Inpatient admissions 24,001 26,476 (2,475) -9.3%

Outpatient visits 365,249 351,818 13,431 3.8%

Inpatient admissions, excluding observation cases, compared to the prior year have decreased by 2,475 or 9.3%. This decrease is primarily due to the termination of the Humana Medicare Advantage contract in October 2011 as well as a shift toward more observation cases, which are included as outpatient visits, rather than inpatient admissions. Total outpatient visits have increased by 3.8% due to the shift just mentioned and the opening of the Total Care Clinic.

Operating Revenues

June 30, 2013 fiscal year-end patient service revenue of approximately $487.4 million, net of allowances for contractual discounts, charity care and bad debt expense, represents an increase of approximately $3.6 million, or 0.7% in comparison to the same time period from the prior fiscal year. Other operating revenues of approximately $35.4 million, is an increase of approximately $4.0 million, or 12.7%, from the prior year. This increase is primarily related to an approximately $4.2 million settlement related to the provider service network (PSN) plan year 2009, increased enrollment in the PSN and increases in electronic medical records meaningful use grant revenue.

Operating Expenses

Operating expenses of approximately $503.3 million through fiscal year-end June 30, 2013, decreased by approximately $5.1 million, or 1.0%, in comparison to fiscal year-end June 30, 2012. The net decrease is primarily related to a $9.2 million reduction in self-insured employee health costs. The reduction was driven by improved claims experience prior to January 2013 and participating with other UF Health affiliates in a self-insured employee health pool known as GatorCare beginning January 2013. The decrease was offset by growth in PSN membership; additional expenditures related to the PSN plan year 2009 settlement described above and increases in depreciation, service/maintenance and consulting costs as the result of implementing the first phase of the EPIC system in January 2012 and the second phase in March 2013.

Nonoperating (Expenses) Revenues, net

Nonoperating expenses, net, for fiscal year-end June 30, 2013, were approximately $3.1 million, which includes interest expense of approximately $3.8 million, investment income of approximately $1.4 million, an investment fair value decrease of approximately $1.4 million and a fair value increase for derivatives for approximately $0.7 million. The nonoperating expenses, net, increase over the fiscal year ended June 30, 2012 was $0.8 million, or 35%.

Consolidated Basic Statements of Cash Flows

The consolidated basic statements of cash flows provides additional information in regards to the Company’s financial results by reporting the major sources and uses of cash.

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Shands Jacksonville HealthCare, Inc. and Subsidiaries Management’s Discussion and Analysis (Unaudited) June 30, 2013 and 2012

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Total cash and cash equivalents increased in fiscal year 2013 by approximately $17.6 million and short-term investments decreased $36.1 million producing a net decrease of $18.5 million over June 30, 2012. Amounts due from patient accounts receivable, net, are approximately $82.3 million at June 30, 2013 as compared to approximately $63.5 million at June 30, 2012, which as previously noted was expected to increase as a result of a collection lag from implementing the EPIC patient accounting system only three (3) months prior to fiscal year-end 2013. Amounts due from City and State agencies are approximately $5.2 million at June 30, 2013 as compared to approximately $6.4 million at June 30, 2012. Assets whose use is restricted increased $16.4 million, with a $20 million increase in the non-current portion for a debt service reserve fund related to the Shands Jacksonville Medical Center Taxable Notes, Series 2013 and a decrease of $3.6 million related to refunding the Series 2005 Bonds. Prepaid expenses and other current assets increased approximately $4.1 million since June 30, 2012. Estimated third-party payor settlements increased approximately $8.3 million during fiscal year 2013.

Cash paid for capital asset acquisitions during fiscal year 2013 totaled approximately $10.0 million. Fiscal year 2013 payments of principal on long-term debt and capital lease obligations totaled approximately $12.2 million, which excludes Shands Jacksonville Medical Center Taxable Notes, Series 2013 debt proceeds paid directly to refund debt and into an irrevocable trust for an in-substance defeasance. Interest payments were approximately $2.4 million and amounts paid on other borrowings were $5.5 million. Proceeds from the issuance of the Shands Jacksonville Medical Center Taxable Notes, Series 2013 totaled approximately $25.9 million of the $100 million issuance, which, as described previously, excludes amounts not received directly by SJMC and then disbursed. The Company also made funding contributions of approximately $3.3 million into the frozen defined benefit employee pension plan during fiscal year 2013.

Credit Ratings

The Company’s underlying credit rating of BBB+ was provided by Fitch Ratings in June 2013.

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Shands Jacksonville HealthCare, Inc. and Subsidiaries Management’s Discussion and Analysis (Unaudited) June 30, 2013 and 2012

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June 30, 2012

Consolidated Basic Statements of Net Position

The consolidated basic statements of net position presents the financial position of the Company and includes all assets and liabilities of the Company. The Company’s net position, or the difference between total assets and total liabilities, are one indicator of the current financial condition of the Company. Changes in net position are an indicator of whether the overall financial condition of the organization has improved or worsened over a period of time. Assets and liabilities are generally measured using current values, with the exception of capital assets, which are stated at historical cost less allowances for depreciation.

A summary of the Company’s condensed consolidated basic statements of net position is presented below:

2012 2011

Cash and cash equivalents and short-term investments 107,857$ 127,432$

Other current assets 86,984 92,679

Capital assets, net 179,426 161,359

Other noncurrent assets 42,974 37,252

Total assets 417,241$ 418,722$

Current liabilities 108,695$ 92,411$

Noncurrent liabilities 137,206 132,922

Total liabilities 245,901 225,333

Net position

Net investment in capital assets 86,439 69,388

Restricted:

Expendable 3,843 3,006

Unrestricted 81,058 120,995

Total net position 171,340 193,389

Total liabilities and net position 417,241$ 418,722$

(in thousands of dollars)

Cash and cash equivalents and short-term investments at June 30, 2012 decreased by approximately $19.6 million since June 30, 2011. See the “Consolidated Basic Statements of Cash Flows” section below for further information regarding cash activity.

Other current assets decreased by approximately $5.7 million since June 30, 2011 largely due to improved collection timing in several areas. Net patient accounts receivable declined approximately $2.4 million, prepaid expenses and other miscellaneous receivables decreased approximately $2.0 million, due from city and state agencies decreased approximately $1.0 million, inventories decreased approximately $0.4 and the sinking fund deposit increased by approximately $0.1 million.

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Shands Jacksonville HealthCare, Inc. and Subsidiaries Management’s Discussion and Analysis (Unaudited) June 30, 2013 and 2012

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Capital assets, net, increased approximately $18.1 million since June 30, 2011 related primarily to the new electronic medical records system.

Other noncurrent assets increased $5.7 million. A deposit for land improvements for the Northside project contributed approximately $2.0 million to that increase. The remaining increase relates primarily to pension plan contributions, net of amortization.

Since June 30, 2011, other current liabilities increased approximately $16.3 million and other noncurrent liabilities increased approximately $4.3 million. Both are primarily related to amounts due for the new electronic medical records system. Additionally, the Company entered into new capital leases, which were used for a variety of equipment including a chemical analyzer and MRI.

As of June 30, 2012, the Company has approximately $124.7 million in debt outstanding compared to approximately $133.3 million at June 30, 2011. The long-term debt is comprised of a number of bond issues and a promissory note. The promissory note with an original balance of $42.3 million, as mentioned above, was recorded by the Company during fiscal year 2011. During 2010, the Series 2008 Bonds were converted from variable to index rate bonds, which are now held in their entirety by Wells Fargo Bank, during the initial index rate period. The Series 2005 Bonds are variable rate bonds, which are backed by a bank letter of credit from TD Bank issued during 2010 for approximately $29,000,000, which expires in October 2015 (coterminous with the maturity of the bonds). No amounts were outstanding under this letter of credit at either June 30, 2012 or June 30, 2011.

As of June 30, 2012, the Company was in violation of its debt service coverage ratio covenants on its bond debt. The covenant violations also caused the Company to violate a cross-default provision in the 2011 note payable to Shands. The Company obtained waiver letters for these violations covering the events of default through July 1, 2013, with the exception of the Series 2004 Bonds with Ambac Financial Group, Inc. ("Ambac"). Therefore, approximately $2,730,000 due to Ambac was reclassified from long-term debt to current portion of long-term debt in the consolidated basic statements of net position as of June 30, 2012. The Company was in compliance with all other covenants at June 30, 2012. For additional details, please see note 6 of the consolidated basic financial statements.

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Shands Jacksonville HealthCare, Inc. and Subsidiaries Management’s Discussion and Analysis (Unaudited) June 30, 2013 and 2012

8

Consolidated Basic Statements of Revenues, Expenses and Changes in Net Position

The following table presents the Company’s condensed consolidated basic statements of revenues, expenses and changes in net position. The table presents the extent to which the Company’s overall net position decreased as a result of operations or other reasons.

2012 2011

Net patient service revenue 483,830$ 501,960$

Other operating revenue 31,446 24,621

Total operating revenues 515,276 526,581

Operating expenses 508,458 499,390

Operating Income 6,818 27,191

Nonoperating (expenses) revenues, net (2,267) 3,991

Excess of revenues over expenses before

transfers, capital contributions, and note

payable to Shands 4,551 31,182

Other changes in net assets:

Transfers and expenditures in support of the University

of Florida and its medical programs (27,437) (26,647)

Capital contributions, net 837 206

Note payable to Shands - (42,276)

Decrease in net position (22,049)$ (37,535)$

(in thousands of dollars)

Patient Volumes

Compared to prior fiscal year, inpatient volumes decreased while outpatient volumes increased during fiscal year 2012. The following table reflects the associated volumes on a comparative basis to the prior year for fiscal year-end as of June 30:

2012 2011 Net Change % Change

Inpatient admissions 26,476 28,644 (2,168) -7.6%

Outpatient visits 351,818 339,486 12,332 3.6%

Inpatient admissions, excluding observation cases, compared to the prior year have decreased by 2,168 or 7.6%. This decrease is primarily due to the termination of the Humana Medicare Advantage contract as well as a decrease in certain surgical cases. The decrease in admissions from prior year is seen largely in Medicine, OB/GYN, and Orthopedics. Total outpatient visits have increased by 3.6%. The increase in the ancillary visits over prior year was partially offset by a reduction in hospital-based clinic visits.

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Shands Jacksonville HealthCare, Inc. and Subsidiaries Management’s Discussion and Analysis (Unaudited) June 30, 2013 and 2012

9

Operating Revenues

June 30, 2012 fiscal year-end patient service revenue of approximately $483.8 million, net of allowances for contractual discounts, charity care and bad debt expense, represents an $18.1 million, or 3.6%, decrease in comparison to the same time period from the prior fiscal year. In addition to the impact from the termination of the Humana contract, patient service revenue for the fiscal year ending June 30, 2012 was materially impacted by a $16.2 million decrease in state of Florida disproportionate share funding. Revenue increases associated with higher outpatient volumes and reimbursement rates were offset by the previously noted decreases in state of Florida funding and inpatient volumes. Other operating revenues of approximately $31.4 million is an increase of approximately $6.8 million, or 27.7%, over the prior year, primarily due to revenue recognition of a Medicaid Meaningful Use of electronic health records.

Operating Expenses

Operating expenses of approximately $508.5 million through fiscal year-end June 30, 2012, increased by $9.1 million, or 1.8%, in comparison to fiscal year-end June 30, 2011. Growth in membership in the provider service network led to increased costs as did increases in salaries, wages and benefits for additional staffing, which corresponds with the increase in outpatient volume and increased employee and retiree medical claims expense. Implementation of a new electronic health records system resulted in expenditures of $4.6 million, which included $1.4 million for consultants, $1.2 million for backfill and overtime wages, $1.2 million for support and maintenance contracts and $0.5 million for training costs. These increases were offset by approximately $4.0 million in reduced insurance costs.

Nonoperating (Expenses) Revenues, net

Nonoperating expenses, net for the fiscal year-ended June 30, 2012 were approximately $2.3 million. Interest expense of approximately $3.6 million is included in nonoperating expenses, net. Investment income totaled approximately $1.9 million. The fair value increase for investments is $0.6 million. The fair value decrease for derivatives is approximately $1.1 million.

Consolidated Basic Statements of Cash Flows

The consolidated basic statements of cash flows provides additional information in regards to the Company’s financial results by reporting the major sources and uses of cash.

Total cash and cash equivalents decreased in fiscal year 2012 by approximately $21.9 million. Amounts due from patient accounts receivable, net, are approximately $63.5 million at June 30, 2012 as compared to approximately $65.9 million at June 30, 2011. Amounts due from City and State agencies are approximately $6.4 million at June 30, 2012 as compared to approximately $7.4 million at June 30, 2011. Capital asset acquisitions during the fiscal year 2012 totaled approximately $12.6 million. The approximately $5.2 million of proceeds from disposal of capital assets relate primarily to two sale-leaseback agreements. As previously mentioned, a $2 million deposit was made related to the Northside project. Fiscal year 2012 payments of principal on long-term debt and capital lease obligations were approximately $9.6 million and interest payments were approximately $3.7 million. The Company also made funding contributions of $7.2 million into the frozen defined benefit employee pension plan during fiscal year 2012.

Credit Ratings

The Company’s underlying credit rating of Baa1, from Moody’s Investor Services, was reaffirmed in December 2011.

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Report of Independent Certified Public Accountants

The Board of Directors of Shands Jacksonville HealthCare, Inc. and Subsidiaries

We have audited the accompanying consolidated basic financial statements of Shands Jacksonville HealthCare, Inc. and Subsidiaries (the “Company”) as of and for the years ended June 30, 2013 and 2012, and the related notes to the consolidated basic financial statements, which comprise the consolidated basic statements of net position, and the related consolidated basic statements of revenues, expenses and changes in net position and the consolidated basic statements of cash flows for the years then ended.

Management’s Responsibility for the Consolidated Basic Financial Statements

Management is responsible for the preparation and fair presentation of the consolidated basic financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated basic financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on the consolidated basic 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 our audits to obtain reasonable assurance about whether the consolidated basic financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated basic financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the consolidated basic financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Company’s preparation and fair presentation of the consolidated basic financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated basic financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated basic financial statements referred to above present fairly, in all material respects, the respective financial net position of Shands Jacksonville HealthCare, Inc. and Subsidiaries at June 30, 2013 and 2012, and the respective changes in financial net position and cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

PricewaterhouseCoopers LLP, 4040 West Boy Scout Boulevard, Suite 1000, Tampa, FL 33607-5745 T: (813) 229 0221, F: (813) 229 3646, www.pwc.com/us

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11

Emphasis of Matter

As discussed in Note 2 to the consolidated basic financial statements, the Company adopted Governmental Accounting Standards Board (“GASB”) No. 63, Financial Reporting of Defined Outflows of Resources, Deferred Inflows of Resources, and Net Position, effective July 1, 2011. Our opinion is not modified with respect to this matter.

Other Matters

The accompanying Management’s Discussion and Analysis (“MD&A”) (Unaudited) for the years ended June 30, 2013 and 2012 on pages 1 through 9, the Schedule of Plan Funding Progress (Unaudited) as of July 1, 2008 through March 31, 2013, the Historical Summary of Actual and Required Pension Contributions (Unaudited) as of July 1, 2007 through June 30, 2013, and the Historical Summary of Actual and Required Other Postemployment Contributions under GASB Statement No. 45 (Unaudited) as of July 1, 2010 through June 30, 2013 on pages 42 through 44 are required by accounting principles generally accepted in the United States of America to supplement the consolidated basic financial statements.

Such information, although not a part of the consolidated basic financial statements, is

required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the consolidated basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the consolidated basic financial statements, and other knowledge we obtained during our audits of the consolidated basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

Our audit was conducted for the purpose of forming an opinion on the Company’s consolidated basic financial statements. The consolidating information is presented for purposes of additional analysis and is not a required part of the consolidated basic financial statements. The information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the consolidated basic financial statements. The information has been subjected to the auditing procedures applied in the audit of the consolidated basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the consolidated basic financial statements or to the consolidated basic financial statements themselves and other additional procedures, in accordance with auditing standards generally accepted in the United States of America. In our opinion, the consolidating information is fairly stated, in all material respects, in relation to the consolidated basic financial statements taken as a whole.

September 30, 2013

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Shands Jacksonville HealthCare, Inc. and Subsidiaries Consolidated Basic Statements of Net Position June 30, 2013 and 2012

(in thousands of dollars)

The accompanying notes are an integral part of these consolidated basic financial statements.

12

2013 2012

AssetsCurrent assets

Cash and cash equivalents 48,209$ 30,638$ Short-term investments 41,141 77,219 Patient accounts receivable, net of allowance for uncollectibles of $65,869 and $51,920, respectively 82,316 63,486 Due from city and state agencies 5,185 6,395 Inventories 10,336 9,016 Prepaid expenses and other current assets 8,645 4,519 Assets whose use is restricted, current portion - 3,568

Total current assets 195,832 194,841

Assets whose use is restricted, less current portion 39,500 19,500

Capital assets, net 170,987 179,426

Other assets 26,872 23,474

Total assets 433,191$ 417,241$

Liabilities and Net PositionCurrent liabilities

Long-term debt, current portion 2,575$ 11,585$ Capital lease obligations, current portion 2,225 1,873Accounts payable and accrued expenses 53,965 49,458Accrued salaries and leave payable 19,708 23,269Estimated third-party payor settlements 30,796 22,510

Total current liabilities 109,269 108,695

Long-term liabilities

Long-term debt, noncurrent portion 137,341 113,141

Capital lease obligations, noncurrent portion 6,256 7,064

Other liabilities 14,765 17,001

Total long-term liabilities 158,362 137,206

Total liabilities 267,631 245,901

Commitments and contingencies

Net position

Net investment in capital assets 62,505 86,439

Restricted

Expendable 3,887 3,843

Unrestricted 99,168 81,058

Total net position 165,560 171,340

Total liabilities and net position 433,191$ 417,241$

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Shands Jacksonville HealthCare, Inc. and Subsidiaries Consolidated Basic Statements of Revenues, Expenses, and Changes in Net Position Years Ended June 30, 2013 and 2012

(in thousands of dollars)

The accompanying notes are an integral part of these consolidated basic financial statements.

13

2013 2012

Operating revenuesNet patient service revenue, net of provision for bad debts of $86,208 and $68,372, respectively 487,436$ 483,830$ Other operating revenue 35,440 31,446

Total operating revenues 522,876 515,276

Operating expensesSalaries and benefits 240,324 254,300Supplies and services 239,426 232,353Depreciation and amortization 23,588 21,805

Total operating expenses 503,338 508,458

Operating income 19,538 6,818

Nonoperating revenues (expenses)Interest (3,787) (3,621)Other nonoperating gains (losses) 699 (1,077)Net investment (loss) gain, including change in fair value (6) 2,490Gain (loss) on disposal of capital assets, net 33 (59)

Total nonoperating revenues (expenses), net (3,061) (2,267)

Excess of revenues over expenses before transfersand capital contributions 16,477 4,551

Transfers and expenditures in support of the University of Florida and its medical programs (22,301) (27,437)Capital contributions, net 44 837

Decrease in net position (5,780) (22,049)

Net positionBeginning of year 171,340 193,389

End of year 165,560$ 171,340$

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Shands Jacksonville HealthCare, Inc. and Subsidiaries Consolidated Basic Statements of Cash Flows Years Ended June 30, 2013 and 2012

(in thousands of dollars)

The accompanying notes are an integral part of these consolidated basic financial statements.

14

2013 2012

Cash flows from operating activitiesCash received from patients and third-party payors 478,101$ 486,739$ Other receipts from operations 31,317 33,716Salaries and benefits paid to employees (244,626) (257,327)Payments to suppliers and vendors (238,952) (231,805)

Net cash provided by operating activities 25,840 31,323

Cash flows from noncapital financing activitiesInterest paid on Shands note (453) (1,851)Payments in support of the University of Florida and its medical programs (22,301) (27,437)Payments of long-term debt of Shands (352) (1,368)

Net cash used in noncapital financing activities (23,106) (30,656)

Cash flows from capital and related financing activitiesPurchases of capital assets (10,041) (12,552)Proceeds from sale of capital assets 50 5,233Proceeds from issuance of note payable 25,890 -Payments of long-term debt and capital lease obligations (12,214) (8,258)Payments of other capital borrowings (5,500) (6,101)Interest paid (1,914) (1,808)Capital contributions 44 837

Net cash used in capital and related

financing activities (3,685) (22,649)

Cash flows from investing activitiesInvestment income received 1,500 1,951Investment purchases (1,222) -Redemption of short-term investments and assets whose use is restricted 36,000 -Purchase of short-term investments and assets whose use is restricted (17,756) (1,846)

Net cash provided by investing activities 18,522 105

Net increase (decrease) in cash and cash equivalents 17,571 (21,877)

Cash and cash equivalentsBeginning of year 30,638 52,515

End of year 48,209$ 30,638$

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Shands Jacksonville HealthCare, Inc. and Subsidiaries Consolidated Basic Statements of Cash Flows Years Ended June 30, 2013 and 2012

(in thousands of dollars)

The accompanying notes are an integral part of these consolidated basic financial statements.

15

2013 2012

Reconciliation of operating income to net cash provided by operating activities

Operating income 19,538$ 6,818$

Adjustments to operating income to net cash provided by

operating activities

Depreciation and amortization 23,588 21,805

Provision for bad debts 86,208 68,372

Changes in:

Patient accounts receivable (103,828) (64,984)

Prepaid expenses, inventories and other current assets (5,689) 2,253

Other assets (2,768) (5,984)

Accounts payable and accrued expenses 902 5,197

Estimated third-party payor settlements 8,286 (479)

Other liabilities (397) (1,675)

Total adjustments 6,302 24,505

Net cash provided by operating activities 25,840$ 31,323$

Disclosure of supplemental cash flow informationCapital assets purchased through capital lease obligations and

other borrowings 11,271$ 31,001$

Net (decrease) increase in fair value of investments (1,400) 564

Net increase (decrease) in fair value of derivatives 698 (1,077)

Loss related to undepreciated costs on capital asset disposals 33 4,889Series 2013 notes payable proceeds paid directly to

redeem Series 2005 and 2008 bonds 71,281 -

Series 2013 notes payable escrowed immediaty in an irrevocable

trust for defeasance of Series 2004 A&B bonds 2,829 -

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Shands Jacksonville HealthCare, Inc. and Subsidiaries Notes to Consolidated Basic Financial Statements June 30, 2013 and 2012

16

1. Organization

Shands Jacksonville HealthCare, Inc. (the “Company”) formerly known as Jacksonville Health Group, Inc., is a not-for-profit corporation with direct control over Shands Jacksonville Medical Center, Inc. (“SJMC”) and direct or indirect control over numerous other entities. During 2013, SJMC began doing business as UF Health Jacksonville. SJMC, formerly known as University Medical Center, Inc. (“UMC”), is a not-for-profit corporation and the principal operating subsidiary of the Company. SJMC operates a teaching hospital located in Jacksonville, Florida, through a lease with the City of Jacksonville (the “City”) under the terms described in Note 10. The teaching hospital is licensed to operate 695 beds and provides clinical settings for medical education programs at the University of Florida (“UF”).

The President of UF, or his designee, is responsible for the oversight of the Company. The President of UF is appointed by a Board of Trustees that governs UF (the “UF Board”). The members of the UF Board are appointed by the Governor and Board of Governors of the state of Florida.

Effective September 8, 2010, the Board of Directors of Shands Teaching Hospital and Clinics, Inc. (“Shands”) approved a motion to reorganize its corporate structure. Under the reorganization, Shands would no longer be the sole corporate member of the Company, but would continue as an affiliated entity under common control of UF. Effective September 27, 2010, the Board of Directors of the Company approved the motion for Shands to no longer be the sole corporate member of the Company. The Company continues to receive management and operational services from Shands.

2. Summary of Significant Accounting Policies

Basis of Presentation The accompanying consolidated basic financial statements have been prepared on the accrual basis of accounting and include the accounts of the Company and its subsidiaries. Significant intercompany accounts and transactions have been eliminated.

Use of Estimates The preparation of these consolidated basic 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 amounts reported in the consolidated basic financial statements and accompanying notes. Actual results could differ from those estimates.

Tax Status The Company and its subsidiaries are exempt from federal income taxes pursuant to Section 501(a) as organizations described in Section 501(c)(3) of the Internal Revenue Code and from state income taxes pursuant to Chapter 220 of the Florida Statutes.

Cash and Cash Equivalents Cash and cash equivalents include investments in highly liquid instruments with maturities of three months or less when purchased, except those classified as assets whose use is restricted in the accompanying consolidated basic financial statements.

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Shands Jacksonville HealthCare, Inc. and Subsidiaries Notes to Consolidated Basic Financial Statements June 30, 2013 and 2012

17

Investments Investments consist of money market funds and participation in the Florida State Treasury special investment program (“SPIA”). Investments are carried at fair value. Interest, dividends, and gains and losses on investments, both realized and unrealized, are included in nonoperating revenues (expenses) when earned.

The estimated fair value of investments is based on quoted market prices. Unrealized gains or losses on investments resulting from fair value fluctuations are recorded in the accompanying consolidated basic statements of revenues, expenses, and changes in net position in the period such fluctuations occur.

Inventories Inventories, consisting primarily of medical supplies and pharmaceuticals, are stated at the lower of cost (first-in, first-out) or market value.

Contributions Receivable Contributions receivable include unconditional promises to give and amounts collected on behalf of the Company held by Southeastern Healthcare Foundation or the University of Florida Foundation. Unconditional promises to give that are expected to be collected within one year are recorded at net realizable value. Unconditional promises to give that are expected to be collected in the future are recorded at the present value of their estimated future cash flows. The discounts on those amounts are computed using risk-free interest rates applicable to the years in which the promises are received. Conditional promises to give are not included as revenue until the conditions are substantially met. Contributions receivable are recorded in other assets in the accompanying consolidated basic statements of net position.

Assets Whose Use is Restricted Assets whose use is restricted are cash and cash equivalents comprised of a debt service reserve fund and internally designated funds for clinical support, education, research, and other health programs and amounts to be used for mandatory redemption of bonds.

Capital Assets Capital assets are recorded at cost, except for donated items, which are recorded at fair value at the date of receipt as an addition to net position. Depreciation for financial reporting purposes is computed using the straight-line method over the estimated useful lives of the related depreciable assets. Capital assets under capital leases are amortized using the straight-line method over the shorter period of the lease term or the estimated useful life of the related assets. Such amortization is included in depreciation and amortization expense in the accompanying consolidated basic statements of revenues, expenses, and changes in net position. Gains and losses on dispositions are recorded in the year of disposal.

Costs of Borrowing Interest costs incurred on borrowed funds during the period of construction or development of capital assets are capitalized as a component of the cost of acquiring those assets. At June 30, 2013 all bond issue costs were expensed or fully amortized as were all original discounts or premiums. During fiscal year 2012, bond issuance costs and original issue discounts and premiums were amortized over the period the obligation was outstanding using the effective interest method. Amortization expense of approximately $408,000 and $78,000 was recorded for the years ended June 30, 2013 and 2012. There was no unamortized bond costs at June 30, 2013 and approximately $408,000 at June 30, 2012 was recorded in other assets in the accompanying consolidated basic statements of net position.

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Shands Jacksonville HealthCare, Inc. and Subsidiaries Notes to Consolidated Basic Financial Statements June 30, 2013 and 2012

18

Accrued Personal Leave The Company provides accrued time off to eligible employees for vacations, holidays, and short-term illness dependent on their years of continuous service and their payroll classification. The Company accrues the estimated expense related to personal leave based on pay rates currently in effect. Upon termination of employment, employees will have their eligible accrued personal leave paid in full.

Long-Term Debt The fair value of long-term debt is estimated based on dealer quotes for hospital tax-exempt debt with similar terms and maturities and using discounted cash flow analyses based on current interest rates for similar types of borrowing arrangements. The carrying amount at June 30, 2013 and 2012 is approximately $139,916,000 and $124,726,000, respectively. The estimated fair value at June 30, 2013 and 2012 is approximately $139,916,000 and $124,984,000, respectively. This value represents a general approximation of possible value and may never actually be realized.

Net Position Net position is categorized as “net investment in capital assets,” “restricted - expendable,” and “unrestricted.” Net investment in capital assets is intended to reflect the portion of net position that is associated with non-liquid capital assets, less outstanding balances due on borrowings used to finance the purchase or construction of those assets related to debt. Restricted – expendable have restrictions placed on their use through external constraints imposed by contributors. Unrestricted are those that do not meet the definition of invested in capital assets, net of related debt and have no third-party restrictions on use.

Operating Revenues and Expenses The Company’s consolidated basic statements of revenues, expenses, and changes in net position distinguish between operating and nonoperating revenues and expenses. Operating revenues result from exchange transactions associated with providing health care services, the Company’s principal activity. Net investment income, interest expense, and gain (loss) on disposal of assets are reported as nonoperating revenues (expenses). Donations received for the purpose of acquiring or constructing capital assets are recorded below nonoperating revenues (expenses) as capital contributions. Operating expenses are all expenses incurred to provide health care services.

Net Patient Service Revenue and Patient Accounts Receivable SJMC has agreements with third-party payors that provide for payments to SJMC at amounts different from its established rates. Payment arrangements 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 and include estimated retroactive revenue adjustments due to future audits, reviews, and investigations. Retroactive adjustments are considered in the recognition of revenue on an estimated basis in the period the related services are rendered, and such amounts are adjusted in future periods as adjustments become known or as years are no longer subject to such audits, reviews, and investigations. For the years ended June 30, 2013 and 2012, net patient service revenue increased by approximately $1,826,000 and $14,941,000, respectively, due to such adjustments.

Laws and regulations governing the Medicare and Medicaid programs are extremely complex and subject to interpretation. As a result, there is at least a reasonable possibility that recorded estimates will change by a material amount in the near term.

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Shands Jacksonville HealthCare, Inc. and Subsidiaries Notes to Consolidated Basic Financial Statements June 30, 2013 and 2012

19

Medicare The Company participates in the federal Medicare program ("Medicare"). Approximately 29% and 27% of the Company's net patient service revenue in fiscal years 2013 and 2012, respectively, was derived from services to Medicare beneficiaries. Inpatient acute care services rendered to Medicare beneficiaries are reimbursed at prospectively determined rates per discharge. These rates vary according to a patient classification system that is based on clinical, diagnostic, and other factors.

Inpatient non-acute services, outpatient services, and defined capital costs related to Medicare beneficiaries are reimbursed based upon a prospective reimbursement methodology. The Company is paid for cost-reimbursable items at a tentative rate with final settlement determined after submission of annual cost reports by the Company and audits by the Medicare fiscal intermediary. The Company's classification of patients under the Medicare program and the appropriateness of their admission are subject to an independent review. As of June 30, 2013, the Medicare cost reports were final settled by the Company's Medicare fiscal intermediary through June 30, 2008.

Medicaid Approximately 27% of the Company's net patient service revenue for fiscal years 2013 and 2012 was derived under the Medicaid program. Inpatient and outpatient services rendered to Medicaid program beneficiaries are paid based upon a cost reimbursement methodology subject to certain ceilings. The Company is reimbursed at a tentative rate with final settlement determined after submission of annual cost reports by the health care facilities and audits by the Medicaid fiscal intermediary. The Medicaid cost reports have been audited by the Medicaid fiscal intermediary through June 30, 2008. In addition to the tentative payments received by the Company for the provision of health care services to Medicaid beneficiaries, the state of Florida provides supplemental Medicaid and disproportionate share payments to reflect the additional costs associated with treating the Medicaid population in Florida. These amounts are reflected in net patient service revenue in the accompanying consolidated basic statements of revenues, expenses, and changes in net position.

The Company's Medicaid interim rates are based on the most recent “as filed” Medicare/Medicaid cost reports. The rates used in fiscal year 2013 were based on the unaudited 2011 cost report. The rates used in fiscal year 2012 were based on the unaudited 2010 cost report.

Other Third-Party Payors The Company has also entered into reimbursement agreements with certain commercial insurance carriers, health maintenance organizations, and preferred provider organizations. The basis for reimbursement under these agreements includes prospectively determined rates per discharge, discounts from established charges and prospectively determined per diem rates.

It is management’s opinion that settlements of outstanding Medicare and Medicaid cost reports, when received, will not vary materially from the estimated amounts, which are recorded as current liabilities in the accompanying consolidated basic statements of net position.

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Shands Jacksonville HealthCare, Inc. and Subsidiaries Notes to Consolidated Basic Financial Statements June 30, 2013 and 2012

20

Provision for Bad Debts and Allowance for Uncollectible Accounts The provision for bad debts is based on management’s assessment of historical and expected net collections, considering business and economic conditions, trends in federal and state governmental health care coverage, and other collection indicators. Throughout the year, management assesses the adequacy of the allowance for uncollectible accounts based upon these trends. The results of this review are then used to make any modification to the provision for bad debts to establish an appropriate allowance for uncollectible accounts. Patient accounts receivable are written off after collection efforts have been followed under the Company’s policies.

Derivative Financial Instruments The Company uses interest rate swaps, which are not designated as hedge instruments, to manage net exposure to interest rate changes related to its borrowings and to lower its overall borrowing costs. The Company accounts for its derivatives in accordance with GASB Statement No. 53, Accounting and Financial Reporting for Derivative Instruments (“GASB No. 53”). GASB No. 53 addresses the recognition, measurement, and disclosure of information regarding derivative instruments entered into by state and local governments (Note 7). Changes in fair value of interest rate swaps that do not qualify for hedge accounting are included within other nonoperating losses in the consolidated basic statements of revenues, expenses, and changes in net position.

Accounting Pronouncements In June 2011, the GASB issued GASB Statement No. 63, Financial Reporting and Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position (“GASB No. 63”). GASB No. 63 improves financial reporting by standardizing the presentation of deferred outflows of resources and deferred inflows of resources and their effects on a government’s net position. It alleviates uncertainty about reporting those financial statement elements by providing guidance where none previously existed. The provisions of GASB No. 63 are effective for financial statements for periods beginning after December 15, 2011. The Company adopted GASB No. 63 on July 1, 2012. The adoption of GASB No. 63 did not have a significant impact on the Company’s consolidated basic financial statements as there were no deferred inflows or outflows.

In June 2011, the GASB issued GASB Statement No. 64, Derivative Instruments: Application of Hedge Accounting Termination Provisions (“GASB No. 64”), an amendment of GASB No. 53. GASB No. 64 clarifies whether an effective hedging relationship continues after the replacement of a swap counterparty or a swap counterparty’s credit support provider. GASB No. 64 sets forth criteria that establish when the effective hedging relationship continues and hedge accounting should continue to be applied. The provisions of GASB No. 64 are effective for financial statements for periods beginning after June 15, 2011. The Company adopted GASB No. 64 on July 1, 2012. The adoption of GASB No. 64 did not have an impact on the Company’s consolidated basic financial statements.

In March 2012, the GASB issued GASB Statement No. 65, Items Previously Reported as Assets and Liabilities ("GASB No. 65"). GASB No. 65 establishes accounting and financial reporting standards that reclassify, as deferred outflows of resources or deferred inflows of resources, certain items that were previously reported as assets and liabilities and recognizes, as outflows of resources or inflows of resources, certain items that were previously reported as assets and liabilities. GASB No. 65 also provides other financial reporting guidance related to the impact of the financial statement elements deferred outflows of resources and deferred inflows of resources, such as changes in the determination of the major fund calculations, and limits the use of the term 'deferred' in financial statements. The provisions of GASB No. 65 are effective for financial statements for periods beginning after December 15, 2012. The Company is currently evaluating the impact GASB No. 65 will have on its consolidated basic financial statements.

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In March 2012, the GASB issued GASB Statement No. 66, Technical Corrections - 2012, an Amendment of GASB Statements No. 10 and No. 62 ("GASB No. 66"). The objective of GASB No. 66 is to improve accounting and financial reporting for a governmental financial reporting entity by resolving conflicting guidance that resulted from the issuance of two pronouncements, GASB Statements No. 54, Fund Balance Reporting and Governmental Fund Type Definitions, and No. 62, Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements. GASB No. 66 amends GASB Statement No. 10, Accounting and Financial Reporting for Risk Financing and Related Insurance Issues, by removing the provision that limits fund-based reporting of an entity’s risk financing activities to the general fund and the internal service fund type. As a result, governments should base their decisions about fund type classification on the nature of the activity to be reported, as required in GASB Statement No. 54 and GASB Statement No. 34, Basic Financial Statements—and Management's Discussion and Analysis—for State and Local Governments. GASB No. 66 also amends GASB Statement No. 62 by modifying the specific guidance on accounting for (1) operating lease payments that vary from a straight-line basis, (2) the difference between the initial investment (purchase price) and the principal amount of a purchased loan or group of loans, and (3) servicing fees related to mortgage loans that are sold when the stated service fee rate differs significantly from a current (normal) servicing fee rate. These changes clarify how to apply GASB Statement No. 13, Accounting for Operating Leases with Scheduled Rent Increases, and result in guidance that is consistent with the requirements in GASB Statement No. 48, Sales and Pledges of Receivables and Future Revenues and Intra-Entity Transfers of Assets and Future Revenues, respectively. The provisions of GASB No. 66 are effective for financial statements for periods beginning after December 15, 2012. The Company is currently evaluating the impact GASB No. 66 will have on its consolidated basic financial statements.

In June 2012, the GASB issued GASB Statement No. 68, Accounting and Financial Reporting for Pensions, an Amendment of GASB Statement No. 27 ("GASB No. 68"). The primary objective of GASB No. 68 is to improve accounting and financial reporting by state and local governments for pensions. It also improves information provided by state and local governmental employers about financial support for pensions that is provided by other entities. GASB No. 68 results from a comprehensive review of the effectiveness of existing standards of accounting and financial reporting for pensions with regard to providing decision-useful information, supporting assessments of accountability and interperiod equity, and creating additional transparency. GASB No. 68 replaces the requirements of GASB Statement No. 27, Accounting for Pensions by State and Local Governmental Employers, as well as the requirements of GASB Statement No. 50, Pension Disclosures, as they relate to pensions that are provided through pension plans administered as trusts or equivalent arrangements (hereafter jointly referred to as trusts) that meet certain criteria. GASB No. 68 establishes standards for measuring and recognizing liabilities, deferred outflows of resources, deferred inflows of resources, and expense/expenditures. For defined benefit pensions, GASB No. 68 identifies the methods and assumptions that should be used to project benefit payments, discount projected benefit payments to their actuarial present value, and attribute that present value to periods of employee service. Note disclosure and required supplementary information requirements about pensions also are addressed. In addition, GASB No. 68 details the recognition and disclosure requirements for employers with liabilities (payables) to a defined benefit pension plan and for employers whose employees are provided with defined contribution pensions. GASB No. 68 is effective for fiscal years beginning after June 15, 2014. The Company is currently evaluating the impact GASB No. 68 will have on its consolidated basic financial statements.

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In January 2013, the GASB issued GASB Statement No. 69, Government Combinations and Disposals of Government Operations (“GASB No. 69”), which establishes accounting and financial reporting standards related to government combinations and disposals of government operations. As used in GASB No. 69, the term government combinations includes a variety of transactions referred to as mergers, acquisitions, and transfers of operations. Until now, governments have accounted for mergers, acquisitions, and transfers of operations by analogizing to accounting and financial reporting guidance intended for the business environment, generally APB Opinion No. 16, Business Combinations. GASB No. 69 provides specific accounting and financial reporting guidance for combinations in the governmental environment. GASB No. 69 is effective for government combinations and disposals of government operations occurring in financial reporting periods beginning after December 15, 2013, and should be applied on a prospective basis. The Company is currently evaluating the impact GASB No. 69 will have on its consolidated basic financial statements.

In April 2013, the GASB issued GASB Statement No. 70, Accounting and Financial Reporting for Nonexchange Financial Guarantees (“GASB No. 70”), which requires a state or local government guarantor that offers a nonexchange financial guarantee to another organization or government to recognize a liability on its financial statements when it is more likely than not that the guarantor will be required to make a payment to the obligation holders under the agreement. Except for disclosures related to cumulative amounts paid or received in relation to a financial guarantee, the provisions of GASB No. 70 are required to be applied retroactively. Disclosures related to cumulative amounts paid or received in relation to a financial guarantee may be applied prospectively. GASB No. 70 is effective for fiscal years beginning after June 15, 2013. The Company is currently evaluating the impact GASB No. 70 will have on its consolidated basic financial statements.

3. Unsponsored Community Benefit

Community benefit is a planned, managed, organized, and measured approach to a health care organization’s participation in meeting identified community health needs. It implies collaboration with a “community” to “benefit” its residents, particularly the poor and other underserved groups, by improving health status and quality of life. Community benefit projects and services are identified by health care organizations in response to findings of a community health assessment, strategic and/or clinical priorities, and partnership areas of attention.

Community benefit categories include financial assistance, community health services, health professions education, research, and donations. The Company has a long history of providing community benefits and has quantified these benefits using national guidelines developed by the Catholic Health Association in collaboration with the Voluntary Hospital Association (“VHA”).

The Company has policies providing financial assistance for patients requiring care but who have limited or no means to pay for that care. These policies provide free or discounted health and health-related services to persons who qualify under certain income and assets criteria. Because the Company does not pursue collection of amounts determined to qualify for financial assistance, they are not reported as net patient service revenue. The Company maintains records to identify and monitor the level of financial assistance it provides. Charges forgone for services provided under the Company's financial assistance policy for the years ended June 30, 2013 and 2012 were approximately $267,694,000 and $300,163,000, respectively.

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In addition to direct financial assistance, the Company provides benefits for the broader community. The cost of providing these community benefits can exceed the revenue sources available. Examples of the benefits provided by the Company and general definitions regarding those benefits are described below:

� Community health services include activities carried out to improve community health. They extend beyond patient care activities and are usually subsidized by the health care organization. Examples include community health education, counseling and support services, and health care screenings.

� Health professions education includes education provided in clinical settings such as internships and programs for physicians, nurses, and allied health professionals. Also included are scholarships for health professional education related to providing community health improvement services and specialty in-service programs to professionals in the community.

� Donations include funds and in-kind services benefiting the community-at-large.

The Company’s valuation of unsponsored community benefits at cost for the years ended June 30, 2013 and 2012 is as follows:

(in thousands of dollars) 2013 2012

Financial assistance provided 63,089$ 77,166$ Government support applied to charity care (23,776) (23,776)

Net unreimbursed financial assistance 39,313 53,390

Benefits for the broader communityCommunity health services 1,336 1,239Health professions education 21,463 24,968Donations 51 88

Total quantifiable benefits for the broader community 22,850 26,295

Total community benefits 62,163$ 79,685$

The cost of financial assistance provided was determined by applying the Company’s overall expense to charge ratio to total charges foregone. Cost of benefits for the broader community represents actual expenses incurred.

The Company also plays a leadership role in the communities it serves by providing additional community benefits that have not been quantified. This role includes serving as a state designated Level I trauma center and maintaining air ambulance services to help meet the emergency healthcare needs in Jacksonville.

In addition to the community benefits described above, the Company provides additional benefits to the community through advocacy of community service by employees. The Company’s employees serve numerous organizations through board representation, in-kind and direct donations, fund-raising, youth sponsorship, and other related activities.

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4. Cash, Cash Equivalents, Investments and Assets Whose Use is Restricted

The composition of cash, cash equivalents, investments and assets whose use is restricted at June 30, 2013 and 2012 is as follows:

(in thousands of dollars)Market Less Than More Than

2013 Value 1 Year 1–3 Years 4 Years

Commercial paper 20,000$ 20,000$ -$ -$

Florida Treasury Investment Pool ("SPIA") 41,141 - 41,141 -

Money markets 5,732

Bank deposits 61,977

128,850$

Market Less Than More Than2012 Value 1 Year 1–3 Years 4 Years

Florida Treasury Investment Pool ("SPIA") 77,219$ -$ 77,219$ -$

Money markets 18,872

Bank deposits 34,834

130,925$

Investment Maturities

Investment Maturities

SPIA funds are combined with State of Florida funds invested in a fixed income portfolio. SPIA participants have the ability to invest and withdraw funds same day with an 11:00 a.m. transaction deadline.

Assets whose use is restricted include amounts internally designated by the Board of Directors and amounts held by trustees and are comprised of the following at June 30, 2013 and 2012:

(in thousands of dollars) 2013 2012

Internally designated by the Board of Directors for:Clinical support, education, research and other health programs 19,500$ 19,500$

Debt service reserve fund 20,000 -Held by bank - under reimbursement agreement - 3,568

39,500 23,068

Less: Current portion - (3,568)

Long-term portion 39,500$ 19,500$

Investment Risk Factors There are many factors that can affect the value of investments. Some, such as concentration of credit risk, custodial credit risk, interest rate risk and foreign currency risk may affect both equity and fixed income securities. Equity securities respond to such factors as economic conditions, individual company earnings performance and market liquidity, while fixed income securities may be sensitive to credit risk and changes in interest rates.

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Credit Risk This is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. The Company invests either by participating in SPIA or through an investment agent. The agreement with the investment agent has specific objectives and guidelines, which includes issuer credit quality, a list of specific allowable investments and credit ratings.

The credit risk profile of the Company’s investments and assets whose use is restricted as of June 30, 2013 and 2012 is as follows:

(in thousands of dollars) FairValue AAA A1+/P1 A+f

2013Money markets 5,732$ 5,732$ -$ -$

Commercial paper 20,000 - 20,000 -

Florida Treasury Investment Pool (SPIA) 41,141 - - 41,141

66,873$ 5,732$ 20,000$ 41,141$

FairValue AAA A1+/P1 A+f

2012Money markets 18,872$ 18,872$ -$ -$

Florida Treasury Investment Pool (SPIA) 77,219 - - 77,219

96,091$ 18,872$ -$ 77,219$

Ratings

Ratings

Concentration of Credit Risk Investments in any one issuer that represent 5% or more of the Company’s investment portfolio are required to be disclosed. Investments issued or explicitly guaranteed by the U.S. government and investments in mutual funds, external investment pools, and other pooled investments are excluded from this requirement. As of June 30, 2013 and 2012, the Company did not have any investments that equaled or exceeded this threshold.

Custodial Credit Risk As of June 30, 2013 and 2012, the Company’s investments were not exposed to custodial credit risk since the full amount of investments were insured, collateralized, or registered in the Company’s name.

Interest Rate Risk The Company’s investment agent guidelines limit maximum effective maturities to one year as a means of managing its exposure to fair value losses arising from increasing interest rates. While SPIA does hold some longer term maturities, participants have the ability to invest and obtain funds same day. Refer to the distribution of the Company’s investment in fixed income securities by maturity as of June 30, 2013 and 2012.

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Deposit Risk In addition to insurance provided by the Federal Deposit Insurance Corporation, all demand deposits are held in banking institutions approved by the State of Florida state treasurer to hold public funds. Under the Florida Statutes Chapter 280, Florida Security for Public Deposits Act ("Chapter 280"), the state treasurer requires all qualified public depositories to deposit with the treasurer or another banking institution eligible collateral equal to amounts ranging from 50% to 125% of the average daily balance for each month of all public deposits in excess of any applicable deposit insurance held. The percentage of eligible collateral (generally, U.S. government and agency securities, state or local government debt, or corporate bonds) to public deposits is dependent upon the depository’s financial history and its compliance with Chapter 280. In the event of a failure of a qualified public depository, the remaining public depositories would be responsible for covering any resulting losses in excess of amounts insured and collateralized.

Investment (loss) gain, net for fiscal years 2013 and 2012 is as follows:

(in thousands of dollars) 2013 2012

Dividends, interest and other income 1,394$ 1,926$ Net (decrease) increase in the fair value of investments (1,400) 564

Investment (loss) gain, net (6)$ 2,490$

5. Capital Assets

A summary of changes in capital assets during fiscal years 2013 and 2012 is as follows:

(in thousands of dollars) Balance at Balance atJune 30, June 30,

2012 Additions Deletions Transfers 2013

Land 22,820$ 989$ -$ -$ 23,809$

Buildings and leasehold improvements 285,046 181 - 10,129 295,356

Equipment 193,809 1,187 (301) 5,720 200,415

Totals at historical cost 501,675 2,357 (301) 15,849 519,580

Less: Accumulated depreciation for

Buildings and leasehold improvements (182,628) (10,502) - - (193,130)

Equipment (151,162) (12,600) 268 - (163,494)

167,885 (20,745) (33) 15,849 162,956

Construction-in-progress 11,541 12,846 (507) (15,849) 8,031

Capital assets, net 179,426$ (7,899)$ (540)$ -$ 170,987$

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(in thousands of dollars) Balance at Balance atJune 30, June 30,

2011 Additions Deletions Transfers 2012

Land 22,820$ -$ -$ -$ 22,820$

Buildings and leasehold improvements 277,945 2,621 (3,912) 8,392 285,046

Equipment 240,587 12,136 (71,253) 12,339 193,809

Totals at historical cost 541,352 14,757 (75,165) 20,731 501,675

Less: Accumulated depreciation for

Buildings and leasehold improvements (175,695) (9,866) 2,933 - (182,628)

Equipment (206,914) (11,728) 67,480 - (151,162)

158,743 (6,837) (4,752) 20,731 167,885

Construction-in-progress 2,616 30,799 (1,143) (20,731) 11,541

Capital assets, net 161,359$ 23,962$ (5,895)$ -$ 179,426$

Amortization expense on equipment held under capital lease which is included within depreciation and amortization expense in the consolidated basic statements of revenues, expenses, and changes in net position was approximately $2,235,000 and $1,031,000 for the years ended June 30, 2013 and 2012, respectively. Depreciation and amortization expense was approximately $23,588,000 and $21,805,000 for the years ended June 30, 2013 and 2012, respectively.

6. Long-Term Debt

Long-term debt is comprised of the following at June 30, 2013 and 2012:

(in thousands of dollars) 2013 2012

SJMC Hospital Revenue BondsSeries 2004A, final maturity February 2014 -$ 4,905$ Series 2004B, final maturity February 2014 - 510Series 2008, final maturity February 2019 - 59,405

Notes Payable2011 Shands Note Payable, final maturity October 2030 39,916 40,267Series 2013 SJMC Taxable Notes, final maturity July 2014 100,000 -

Hospital Revenue Refunding Bonds Series 2005(Methodist Hospital Projects), final maturity October 2015 - 19,840

139,916 124,927

Less: Net unamortized bond discount - (201)

Total long-term debt 139,916 124,726

Less: Current portion (2,575) (11,585)

Long-term portion 137,341$ 113,141$

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Changes in the Company’s long-term debt, excluding any unamortized discounts or premiums were as follows:

(in thousands of dollars) Balance at Balance at AmountsJune 30, June 30, Due Within

2012 Additions Reductions 2013 One Year

SJMC Hospital Revenue BondsSeries 2004A, final maturity February 2014 4,905$ -$ (4,905)$ -$ -$ Series 2004B, final maturity February 2014 510 - (510) - -Series 2008, final maturity February 2019 59,405 - (59,405) - -

Notes Payable2011 Shands Note Payable, final maturity

October 2030 40,267 - (351) 39,916 2,575 Series 2013, SJMC Taxable Notes

final maturity July 2014 - 100,000 - 100,000 -Hospital Revenue Refunding Bonds

Series 2005, final maturity October 2015 19,840 - (19,840) - -

Total long-term debt 124,927$ 100,000$ (85,011)$ 139,916$ 2,575$

(in thousands of dollars) Balance at Balance at AmountsJune 30, June 30, Due Within

2011 Additions Reductions 2012 One Year

SJMC Hospital Revenue BondsSeries 2004A, final maturity February 2014 7,250$ -$ (2,345)$ 4,905$ 4,905$ Series 2004B, final maturity February 2014 770 - (260) 510 510Series 2008, final maturity February 2019 59,405 - - 59,405 -

2011 Shands Note Payable, final maturity October 2030 41,635 - (1,368) 40,267 1,430Hospital Revenue Refunding Bonds

Series 2005, final maturity October 2015 24,445 - (4,605) 19,840 4,740

Total long-term debt 133,505$ -$ (8,578)$ 124,927$ 11,585$

Maturities of long-term debt including corresponding interest, over the next five years and in five-year increments thereafter are as follows:

(in thousands of dollars)

Year Ending June 30, Principal Interest

2014 2,575$ 5,221$ 2015 101,564 3,337 2016 1,636 1,564 2017 1,711 1,489 2018 1,789 1,409 2019-2023 10,251 5,726 2024-2028 12,821 3,127 2029-2033 7,569 391

139,916$ 22,264$

Debt Service

Cash paid for interest was approximately $2,367,000 and $3,581,000 for the years ended June 30, 2013 and 2012, respectively. Capitalized interest was approximately $339,000 for the year ended June 30, 2013. No interest was capitalized for the year ended June 30, 2012.

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See Note 11 for further description of the 2011 Shands Note Payable.

Series 2013 Taxable Notes On June 27, 2013, the Company issued index rate taxable notes (“Series 2013”) to finance various capital improvement projects, refund the outstanding principal of the Series 2005 Bonds and Series 2008 Bonds, escrow funds for an in-substance defeasance of the Series 2004 Bonds and to pay related issuance costs. The notes are privately held by Bank of America, N.A. The index rate is based on one-month LIBOR plus a spread of between 1.50% and 2.25% depending on the date. Although total cash flows related to the new debt service, excluding the increase for capital improvements, will improve by approximately $2.7 million, the Company will have an economic loss (the difference between the present values of the old and new debt service payments) of approximately $5.8 million, in the event the Series 2013 Taxable notes are held to maturity.

Series 2004A and 2004B Hospital Revenue Bonds In 2004, the Jacksonville Economic Development Commission (“JEDC”) issued the Series 2004A and 2004B Hospital Revenue Bonds (“Series 2004 Bonds”) on behalf of SJMC to finance various capital improvement projects, to refund outstanding principal of the Series 1992 City of Jacksonville Hospital Revenue Bonds, and to pay related issuance costs. Funds to repay the outstanding principal and interest were escrowed and are held by a trustee to achieve an in-substance defeasance as of June 27, 2013.

Series 2005 Hospital Revenue Refunding Bonds In 2005, the JEDC issued the Series 2005 Hospital Revenue Refunding Bonds (“Series 2005 Bonds”) on behalf of Methodist Medical Center, Inc., Methodist Health System, Inc., and The Methodist Hospital Foundation, Inc. (the “Methodist Group”), of which Shands Jacksonville is the sole member. The bonds were used to refund the outstanding principal of the Series 1989A and 1989B City of Jacksonville Hospital Revenue Refunding Bonds and to pay related issuance costs. The Series 2005 were redeemed on June 27, 2013.

Series 2008 Hospital Revenue Bonds In 2008, the JEDC issued the Series 2008 Hospital Revenue Bonds (“Series 2008 Bonds”) on behalf of SJMC to retire the bridge loan used to retire the 2004A and 2004B auction rate bonds and to pay related issuance costs. During 2010, the Series 2008 Bonds were converted from variable to index rate bonds, which are privately held by Wells Fargo Bank, during the five-year initial index rate period. The Series 2008 Bonds were redeemed on June 27, 2013.

Debt Covenants The Company and SJMC are subject to certain restrictive financial covenants. At June 30, 2013, these covenants require cash on hand of at least 45 days and a minimum debt service coverage ratio of 1.0. The Company was in compliance at June 30, 2013.

As of June 30, 2012, the Company was in violation of its debt service coverage ratio covenants on the Series 2004 Bonds, Series 2005 Bonds, and Series 2008 Bonds with Ambac, TD Bank, N.A. and Wells Fargo Bank, N.A., respectively. The covenant violations also caused the Company to violate a cross-default provision in the 2011 Shands Note Payable with Shands. The Company obtained waiver letters for these violations from TD Bank, N.A., Wells Fargo Bank, N.A. and Shands dated September 21, 2012, October 19, 2012 and September 13, 2012, respectively. The waiver letters from TD Bank, N.A. and Shands covered the events of default through July 1, 2013. In conjunction with the waiver letter from Wells Fargo Bank, N.A., additional restrictive covenants were put in place, the most restrictive of which required quarterly calculations for the minimum debt service coverage covenant and changes to the days cash on hand covenant requirements. The

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Company must maintain a minimum debt service coverage ratio of 0.9 to 1.0, 1.0 to 1.0, and 1.25 to 1.0 for the quarters ending December 31, 2012, March 31, 2013, and June 30, 2013, respectively. The calculation of minimum debt service coverage is cumulative throughout fiscal year 2013. The Company must also maintain days cash on hand of 55 days as of December 31, 2012 and June 30, 2013, 60 days as of December 31, 2013, and 65 days as of June 30, 2014 and for all periods thereafter. The days cash on hand calculation is to be made based on a rolling 12 month period. The Company was unable to obtain a waiver letter from Ambac and therefore amounts due to Ambac of approximately $2,730,000 have been reclassified from long-term debt to current portion of long-term debt in the consolidated basic statements of net position as of June 30, 2012. The Company was in compliance with all other covenants at June 30, 2012.

7. Interest Rate Swaps

On June 30, 2013 and 2012, the Company had the following nonhedged derivative instruments outstanding:

(in thousands) Company Counterparty 2013 2012Notional Notional Effective Maturity Fair Fair

Type Objective Amount Amount Date Date Terms Value Value

Fixed rate payer

interest rate

swap

Hedge

changes in

interest rate

$ 20,875 $ 20,875 1/30/2004 2/1/2021 Receive 67% of USD-

LIBOR-BBA, Pay

Fixed 3.337%

$ (2,177) $ (3,005)

Fixed rate

receiver interest

rate swap

Hedge

changes in

interest rate

2,420 2,420 1/30/2004 2/1/2013 Receive fixed

3.291%, Pay variable

SIFMA

- 43

Fixed rate

receiver interest

rate swap

Hedge

changes in

interest rate

2,485 2,485 1/30/2004 2/1/2014 Receive fixed

3.401%, Pay variable

SIFMA

47 122

Fixed rate

receiver interest

rate swap

Hedge

changes in

interest rate

265 265 1/30/2004 2/1/2013 Receive fixed

3.226%, Pay variable

SIFMA

- 5

Fixed rate

receiver interest

rate swap

Hedge

changes in

interest rate

245 245 1/30/2004 2/1/2014 Receive fixed

3.350%, Pay variable

SIFMA

5 12

(2,125)$ (2,823)$

At June 30, 2013 and 2012, approximately $2,125,000 and $2,823,000, respectively, related to the fair value of interest rate swaps, is recorded in other liabilities in the accompanying consolidated basic statements of net position.

The fair values of interest rate swaps are estimated using the present value of expected discounted future cash flows based on the maturity date.

Credit Risk The Company has sought to limit its counterparty risk by contracting only with highly rated entities. As of June 30, 2013, the credit ratings for the counterparty of all of the swap agreements is A/Baa2/A-.

Interest Rate Risk The Company is not exposed to interest rate risk on its fixed rate payer interest rate swap which hedges the changes in interest rates on the variable rate positions. The fixed rate receiver interest rate swaps convert fixed rate positions to a variable rate basis and will mature on February 1, 2014.

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Basis Risk The Company is exposed to basis risk on its fixed rate payer swap agreement because the variable rate payments received by the Company on the derivative instrument is based on a rate or index other than the interest rates the Company pays on its variable rate position.

Termination Risk The interest rate swap agreements use the International Swap Dealers Association Master Agreement, which includes standard termination events provisions, such as failure to pay and bankruptcy.

Commitments The Company’s interest rate swap agreements require collateral to be posted if the fair value of the interest rate swap is negative and meets certain thresholds. The threshold amount depends on the Company’s unenhanced credit rating as determined by Fitch Ratings. No collateral was required to be posted as of June 30, 2013 or 2012.

Swap Termination A portion of fixed receiver interest rate swaps matured, as scheduled, on February 1, 2013.

8. Employee Benefit Plans

Defined Contribution Plan SJMC has a defined contribution plan which allows participants to defer up to 6% of their salary, pursuant to Section 401(k) of the Internal Revenue Code and all limitations contained therein. During fiscal years 2013 and 2012, SJMC made contributions of 3% of the salary of all eligible employees and matched employee contributions up to a maximum of an additional 2.25% of their salary. Contributions to this plan by SJMC were approximately $6,363,000 and $6,234,000 for the years ended June 30, 2013 and 2012, respectively.

Defined Benefit Pension Plan The Company participates in the Shands HealthCare Pension Plan (the “Plan”) which is a defined benefit pension plan that covers eligible Company employees.

Contribution Requirements and Contributions Made The annual required contribution ("ARC") for the current year was determined as part of the actuarial valuation using the projected unit credit actuarial cost method. The Plan’s funding policy provides for actuarially determined periodic contributions so that sufficient assets will be available to pay benefits when due. All contributions to the Plan are made by the employer and are intended to fund both the actuarially determined costs, as well as the Plan’s operating costs. The Company’s practice is to make sufficient annual contributions in accordance with the actuarial funding requirements. Annual required contributions to the Plan for fiscal years 2013 and 2012 totaled approximately $1,613,000 and $1,859,000, respectively. The contributions represent approximately 194.10% and 152.28% of current covered payroll for fiscal years 2013 and 2012, respectively. Total pension expense for the years ended June 30, 2013 and 2012 totaled approximately $3,127,000 and $2,952,000, respectively. As of June 30, 2013 and 2012, the Company has a pension asset of approximately $15,861,000 and $15,672,000, respectively. Pension expense is allocated to the Company based on valuation of payroll.

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Shands Jacksonville HealthCare, Inc. and Subsidiaries Notes to Consolidated Basic Financial Statements June 30, 2013 and 2012

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Information regarding payroll and participant data used in the calculation of the current-year actuarial information is as follows:

2013 2012

Covered payroll for the calculation of the actuarial information 830,903$ 1,220,733$

Participant data as of July 1, 2012 (date of most recent valuation)Active 16Retired 232Terminated vested 505

753

The more significant actuarial assumptions utilized in the most recent actuarial valuation (April 1, 2013) for computing the annual required contributions for the Plan are as follows:

Assumed rate of return on investments 7.25% per year (net of expenses)

Mortality basis 2013 PPA separate static annuitant and nonannuitant mortality tables

Amortization method Level dollar closed

Remaining amortization period 8 years

Asset valuation method Market value smoothed over 5 years

Termination Graduated rates from 20 to 50 are as follows:

Age <2 2–2.99 3 or more

20 38.5% 21.1% 21.0%

25 35.0% 20.0% 18.5%

30 31.8% 18.6% 17.0%

35 29.3% 17.1% 15.5%

40 27.4% 15.3% 14.0%

45 25.7% 13.8% 12.0%

50 24.2% 12.3% 10.0%

Age Percentage

20 16.7%

25 16.7%

30 13.3%

35 6.4%

40 5.9%

45 4.3%

50 3.6%

Table of Select Withdrawal Rates (Cash Balance Plan Benefits)Withdrawal (Based on Years of Service)

Table of Select and Ultimate Withdrawal Rates (Traditional Plan Benefits)

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Age Percentage

20 3.65%

25 3.95%

30 3.65%

35 3.45%

40 3.25%

45 3.15%

50+ 3.05%

Table of Salary Increases

Attained TraditionalAge Benefits Benefits

50 8.5% 1.5%

51 10.0% 1.7%

52 10.1% 1.9%

53 10.2% 2.0%

54 10.3% 2.0%

55 10.4% 3.5%

56 10.5% 3.5%

57 10.6% 3.5%

58 10.7% 3.5%

59 10.8% 5.0%

60 10.9% 5.0%

61 11.0% 20.0%

62 12.0% 35.0%

63 14.0% 25.0%

64 16.0% 25.0%

65 17.0% 35.0%

66 18.0% 30.0%

67 19.0% 50.0%

68 20.0% 50.0%

69 20.0% 50.0%

70+ 100.0% 100.0%

Cash BalanceRetirement Rates

Funding Status and Progress The Company’s actuarial accrued liability (“AAL”) and the actuarial value of Plan net assets for the current year are based upon the April 1, 2013 actuarial valuation. The schedules of Plan funding progress, following the notes to the consolidated basic financial statements, present multiyear trend information about whether the actuarial values of Plan assets are increasing or decreasing over time relative to the AAL for benefits.

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The funded status of the Plan is summarized as follows:

UAAL as aActuarial AAL Unfunded Percentage

Actuarial Value of (Projected AAL Funded Covered of CoveredValuation Assets Unit Credit) ("UAAL") Ratio Payroll PayrollDate (a) (b) (b-a) (a/b) (c) (b-a)/(c)

April 1, 2013 65,662,661$ 72,505,410$ 6,842,749$ 90.56% 830,903$ 823.53%

April 1, 2012 65,212,450 71,756,738 6,544,288 90.88% 1,220,733 536.09%

The present value of accumulated plan benefits is computed to measure the funds required as of the valuation date to provide in full the benefits earned to date by all Plan participants. As of April 1, 2013 and 2012, the present values of accumulated Plan benefits were approximately $72,505,000 and $71,756,000, respectively.

Trend Information This information gives an indication of the progress made in accumulating sufficient assets to pay benefits when due. The trend information for each of the last three fiscal years is as follows:

April 1, April 1, April,2013 2012 2011

Net assets available for benefits as a percentage of the AAL 90.56% 90.88% 88.40%

Unfunded actuarial accrued liability as a percentage of covered payroll 823.53% 536.09% 628.30%

Annual required contributions as a percentage of covered payroll 194.10% 152.28% 250.37%

Showing unfunded pension benefit obligation as a percentage of annual covered payroll approximately adjusts for the effects of inflation for analysis purposes. For the three fiscal years presented, contributions to the Plan were made in accordance with actuarially determined requirements.

A summary of annual pension cost, contribution information, and the change in the net pension obligation for the last three fiscal years is as follows:

2013 2012 2011

Annual required contribution 1,612,780$ 1,858,876$ 3,254,121$ Interest on net pension obligation (1,136,210) (856,826) (158,897)Adjustment to annual required contribution 2,650,014 1,950,446 353,403

Annual pension cost 3,126,584 2,952,496 3,448,627

Contributions made with interest (3,316,118) (7,200,000) (12,822,691)

Increase in net pension asset (189,534) (4,247,504) (9,374,064)

Net pension assetBeginning of year (15,671,857) (11,424,353) (2,050,289)

End of year (15,861,391)$ (15,671,857)$ (11,424,353)$

Percentage of annual pension cost contributed 106.1% 243.9% 371.8%

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The net pension asset of approximately $15,861,000 and $15,672,000 is included within other assets in the consolidated basic statements of net position at June 30, 2013 and 2012, respectively.

A summary of Plan assets as of June 30, 2013 and 2012 and of the changes in Plan assets for fiscal years 2013 and 2012 is as follows:

(in thousands of dollars) 2013 2012

Statements of Plan Net Assets

Cash and short-term investments 504$ 482$

Investments at fair valueDomestic equity funds and securities 19,713 19,074International equity funds and securities 18,649 18,047Fixed income funds 18,813 15,459High yield fund 5,504 5,101Private equity 2,897 3,063

Total investments 65,576 60,744

Net assets held in trust for pension benefits 66,080$ 61,226$

(in thousands of dollars) 2013 2012

Statements of Changes in Plan Net Assets

Beginning investment value of account 61,226$ 60,685$

ReceiptsEmployer contributions 3,316 7,200Realized and unrealized gains (losses), net 6,585 (1,509)Interest and dividends 1,390 950

Total receipts 11,291 6,641

DisbursementsBenefit payments 5,986 5,716Investment management and administrative fees 451 384

Total disbursements 6,437 6,100

Ending investment value of account 66,080$ 61,226$

9. Other Postemployment Benefits

SJMC sponsors the Shands Jacksonville Health Plan (the “Health Plan”). In addition to providing pension benefits, the Company provides certain health care benefits for 35 retired employees.

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Shands Jacksonville HealthCare, Inc. and Subsidiaries Notes to Consolidated Basic Financial Statements June 30, 2013 and 2012

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The GASB requires state and local governmental employers to account for and report the annual cost of other postemployment benefits ("OPEB") and the outstanding obligations and commitments related to OPEB in essentially the same manner as they currently do for pensions. Annual OPEB cost will be based on actuarially determined amounts that, if paid on an ongoing basis, generally would provide sufficient resources to pay benefits as they become due. The GASB's provisions may be applied prospectively and do not require governments to fund their OPEB plans. The actuarially determined cost for providing benefits to retirees and current employees during fiscal years 2013 and 2012 was approximately $619,000 and $570,000, respectively. SJMC made approximately $974,000 and $151,000 of actual payments (contributions) during fiscal years 2013 and 2012, respectively.

Funding Policy The GASB does not require funding of the OPEB expense. The ARC is based on projected pay-as-you-go financing requirements, with an additional amount required to be recognized and accumulated as the net OPEB obligation. For fiscal years 2013 and 2012, SJMC contributed approximately $974,000 and $151,000, respectively, to the Health Plan, which is net of retiree contributions. Retiree contributions for fiscal years 2013 and 2012 were approximately $96,000 and $94,000, respectively, according to the following table:

Average annual retiree contributions(Pre and post Medicare) Spouse/ Spouse/

Retiree Family Retiree Family

Preferred Plan 1,297$ 1,297$ 1,297$ 1,297$ Post 65 BMM 230 230 230 230Dental/Vision 253 253 253 253

2013 2012

Annual OPEB Cost and Net OPEB Obligation – SJMC’s annual OPEB cost is calculated based on its ARC, an amount actuarially determined in accordance with the GASB parameters. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial liabilities (or funding excess) over an 8 year period. The components of SJMC’s annual OPEB cost for the year, the amount actually contributed to the Health Plan, and changes in SJMC’s net OPEB obligation as of June 30, 2013 and 2012 are as follows:

2013 2012

Annual required contribution 730,390$ 635,400$ Interest on net OPEB obligation 44,726 29,540Adjustment to annual required contribution (156,409) (95,251)

Annual OPEB cost 618,707 569,689

Contributions made (974,052) (151,445)

(Decrease) increase in net OPEB obligations (355,345) 418,244

Net OPEB obligationBeginning of year 1,040,140 621,896

End of year 684,795$ 1,040,140$

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SJMC’s annual OPEB cost, the percentage of annual OPEB cost contributed to the Health Plan, and the net OPEB obligation for the last three fiscal years was as follows:

% of Annual NetAnnual OPEB Cost OPEB

Fiscal Year Ended OPEB Cost Contributed Obligation

June 30, 2013 618,707$ 157.4% 684,795$ June 30, 2012 569,689 26.6% 1,040,140June 30, 2011 583,038 152.5% 621,896

Funded Status and Funding Progress As discussed above, the GASB does not require, and SJMC has not funded, the AAL. As of April 1, 2013 and 2012, the unfunded actuarial accrued liabilities ("UAAL") for benefits were approximately $2,910,000 and $2,927,000, respectively.

Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and the health care cost trend. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The schedule of funding progress, presented as required supplementary information following the notes to the consolidated basic financial statements, presents multiyear trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits.

Actuarial Methods and Assumptions Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and the plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations.

In the April 1, 2013 and 2012 actuarial valuations, the projected unit credit method was used. The actuarial assumptions included 4.36% and 4.30% discount rates, respectively, representing an estimate of the discount rate for the unfunded plan at April 1, 2013 and 2012. The UAAL is being amortized as a level dollar base for a closed 8 year period.

The significant actuarial assumptions utilized in the most recent actuarial analysis are as follows:

Discount rate 4.36% per year

Retiree contribution increases Retiree contributions are assumed to increase at 5% each year until the point at which the employer cost cap is reached.

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Health care cost trend rates The trend rates of incurred claims represent the rate of increase in employer claims payments:

Medical Annual Rates of Increase Initial Trend Rate 7.40% Ultimate Trend Rate 4.50% Year that the rate reaches the ultimate trend rate 2028

10. Commitments and Contingencies

Leases SJMC entered into an amended lease agreement with the City as of October 1, 1987, further amended as of October 1, 1999, with respect to the former UMC facilities to provide for a lease term expiring in 2067 with an additional 30-year renewal option. The agreement provides for annual rentals of $1 for the lease term. The leased assets are returned to the possession of the City at the termination of the lease. SJMC is responsible for the management, operation, maintenance, and repair of the facilities.

The following is a schedule, by year, of future minimum lease payments under noncancelable operating leases as of June 30, 2013:

(in thousands of dollars)

Years Ending2014 7,547$ 2015 5,6512016 3,6022017 2,3082018 2,308Thereafter 8,971

Total minimum lease payments 30,387$

Rent expense related to operating leases for the years ended June 30, 2013 and 2012 was approximately $9,427,000 and $9,710,000, respectively.

Total gross assets under capital leases included in capital assets were approximately $11,613,000 and $11,193,000 at June 30, 2013 and 2012, respectively. Accumulated amortization on capital leases at June 30, 2013 and 2012 was approximately $3,245,000 and $2,790,000, respectively.

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Shands Jacksonville HealthCare, Inc. and Subsidiaries Notes to Consolidated Basic Financial Statements June 30, 2013 and 2012

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Future lease payments are as follows:

(in thousands of dollars)

Years Ending2014 2,444$

2015 2,405

2016 2,302

2017 1,736

2018 87

Total minimum lease payments 8,974

Less: Amount representing interest (493)

Present value of net minimum lease payments 8,481$

Construction and Other Commitments The Company has contracts for the construction and remodeling of facilities and for the purchase and maintenance of computer application software for its core operation systems. As of June 30, 2013 and 2012, the remaining commitment relating to these contracts was approximately $5,035,000 and $4,114,000, respectively.

Professional Liability SJMC participates with other health care providers in the University of Florida J. Hillis Miller Health Center/Jacksonville Self-Insurance Program (“UFJSIP”). UFJSIP is an operating unit of the Board of Governors of the State of Florida (“FBOG”). UFJSIP provides occurrence-based coverage to the Company. Insurance in excess of the coverage provided by UFJSIP is provided by the University of Florida Healthcare Education Insurance Company (“UFHEIC”). UFHEIC is wholly-owned by FBOG. UFHEIC provides coverage to the Company on a claims reported basis. UFHEIC obtains reinsurance for a substantial portion of the insurance coverage that it provides to the participants in its insurance program. The policies between both UFJSIP and UFHEIC and SJMC are not retrospectively rated. The costs incurred by the Company related to these policies are expensed in the period that coverage is provided.

SJMC could be subject to malpractice claims in excess of insurance coverage through UFJSIP or UFHEIC; however, the estimated potential loss, if any, cannot be estimated. Management of the Company is not aware of any potential uninsured losses that could materially affect the financial position of the Company.

Effective July 1, 2011, the Company was granted sovereign immunity under the provision of Chapter 2011-114, Laws of Florida. As such, recovery in tort actions arising subsequent to June 30, 2011 will be limited to $100,000 for any one person for one incident and all recovery related to one incident is limited to a total of $200,000. Effective October 1, 2011, the limits increased to $200,000 for any one person for one incident and $300,000 in total for one incident.

Self-Insurance The Company has a self-insurance plan for health and medical coverage for the employees of the Company. Amounts contributed by the Company and its employees to the plan are determined by the level of benefits coverage selected by each employee. Expenses related to the self-insured health and medical plan for the years ended June 30, 2013 and 2012 were approximately $23,422,000 and $32,623,000, respectively.

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Shands Jacksonville HealthCare, Inc. and Subsidiaries Notes to Consolidated Basic Financial Statements June 30, 2013 and 2012

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SJMC is self-insured for workers’ compensation up to $500,000 per occurrence, and has purchased excess coverage from commercial carriers up to the amount allowed by Florida Statutes. Total expenses for the years ended June 30, 2013 and 2012 were approximately $690,000 and $729,000, respectively.

Litigation The Company is involved in litigation arising in the normal course of business. After consultation with legal counsel, management believes that these matters will be resolved without material adverse effect on the Company’s future consolidated basic financial position or results of operations.

11. Transactions with Related Parties

As of June 30, 2013 and 2012, SJMC and University of Florida Jacksonville Physicians, Inc. (“UFJP”) were contingently liable as joint and several co-guarantors for the payment of 100% of both the principal and interest on $8,500,000 of Industrial Revenue Bonds related to the indebtedness of the Faculty Clinic, Inc. The guarantees were issued in connection with the Industrial Revenue Bonds, which were used to build the facility in which SJMC and UFJP are currently tenants. The bonds were issued on January 11, 1989, bearing variable interest rates and mature on July 1, 2019. At June 30, 2013 and 2012, the outstanding amount of the Industrial Revenue Bonds is $4,200,000 and $4,600,000, respectively. The bonds are collateralized by an irrevocable letter of credit with a bank which expires in August 2015.

Shands, a related party controlled by UF, entered into a Support Services Agreement to support, as needed, the management team of SJMC in the administrative functions of the hospital through the provision of services and personnel. Expenses related to these services were approximately $4,454,000 and $5,712,000 for the years ended June 30, 2013 and 2012, respectively.

SJMC receives contracted services at cost from UF for support of the clinical and research activities of the College of Medicine, maintenance, utilities, telephone communication and various other services. Expenses related to these services were approximately $22,301,000 and $27,437,000 for the years ended June 30, 2013 and 2012, respectively. At June 30, 2013 and 2012, payables related to this arrangement amounted to approximately $777,000 and $711,000, respectively, and are included in accounts payable and accrued expenses in the accompanying consolidated basic statements of net position.

At June 30, 2013 and 2012, the Company has a note payable of approximately $39,916,000 and $40,267,000, respectively, due to Shands. The original amount of the note was approximately $42,276,000 to be paid in quarterly installments of $804,620 including interest of 4.5% and matures on October 1, 2030. The current portion of the note payable of approximately $2,575,000 and $1,430,000 is included within long-term debt, current portion, and the long-term portion of the note payable of approximately $37,341,000 and $38,837,000 is included within long-term debt, noncurrent portion, at June 30, 2013 and 2012, respectively, in the accompanying consolidated basic statements of net position.

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Shands Jacksonville HealthCare, Inc. and Subsidiaries Notes to Consolidated Basic Financial Statements June 30, 2013 and 2012

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12. Concentrations of Credit Risk

SJMC grants credit without collateral to its patients, many of whom are local residents and are insured under third-party payor agreements. The mix of net receivables from patients and third-party payors is as follows:

2013 2012

Medicare 26% 23%Medicaid 32% 32%Other third-party payors 42% 45%Patients 0% 0%

100% 100%

Certain financial instruments potentially subject the Company to concentrations of credit risk. These financial instruments consist primarily of cash and cash equivalents, investments and patient accounts receivable. Concentrations of credit risk with respect to patient accounts receivable are limited to Medicare, Medicaid and various commercial payors. The Company places its cash and cash equivalents and investments with what management believes to be high-quality financial institutions and thus limits its credit exposure. The Company has deposits in excess of the federal insured amount of $250,000. Management does not anticipate nonperformance risk by the financial institutions.

13. Subsequent Events

The Company has assessed the impact of subsequent events through September 30, 2013, the date the audited consolidated basic financial statements were issued, and has concluded that there is no such events, other than the payment of the previously accrued settlement described below, that require adjustment to the consolidated basic financial statements.

In July 2013, the Company paid approximately $6,809,000 to resolve allegations made under the False Claims Act that billing practices at the Company resulted in overpayments by Medicare and Medicaid covering fiscal years 2003 through 2008. The settlement resulted from a whistleblower lawsuit filed in the U.S. District Court – Middle District of Florida – Jacksonville Division on April 30, 2008, which had been under court seal. The whistleblower was an independent consultant hired by the Company in 2006 and 2007 to conduct a routine audit of its billing practices. The audit showed inconsistent billing practices. In some instances, the Company billed Medicare and Medicaid for short overnight inpatient admissions rather than for outpatient or observation services. The Company’s officials fully cooperated with the state and federal investigation and negotiated the settlement agreement. While there has been no admission of liability, the Company paid approximately $6,592,000 to the Federal Government under the Medicare program and approximately $217,000 to the State of Florida under its Medicaid program.

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Shands Jacksonville HealthCare, Inc. and Subsidiaries Schedule of Plan Funding Progress (Unaudited) July 1, 2008 Through March 31, 2013

42

Actuarial Accrued UAAL as aActuarial Liability (AAL) Unfunded Percentage

Actuarial Value of Entry Age AAL Funded Covered of CoveredValuation Assets Normal (UAAL) Ratio Payroll Payroll

Date (a) (b) (b–a) (a/b) (c) (b–a) / (c)

July 1, 2008 58,021,779$ 63,353,295$ 5,331,516$ 91.6% 2,180,660$ 244.5%July 1, 2009 51,905,053 65,734,526 13,829,473 79.0% 1,809,586 764.2%July 1, 2010 51,816,038 69,248,158 17,432,120 74.8% 1,809,586 963.3%April 1, 2011 62,202,826 70,369,005 8,166,179 88.4% 1,299,716 628.3%April 1, 2012 65,212,450 71,756,738 6,544,288 90.9% 1,220,733 536.1%April 1, 2013 65,662,661 72,505,410 6,842,749 90.6% 830,903 823.5%

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Shands Jacksonville HealthCare, Inc. and Subsidiaries Historical Summary of Actual and Required Pension Contributions (Unaudited) July 1, 2007 Through June 30, 2013

43

AnnualRequired Percentage

(Fiscal) Plan Year Contribution Contributed

July 1, 2007 to June 30, 2008 178,045$ 355.5%

July 1, 2008 to June 30, 2009 763,720 69.1%

July 1, 2009 to June 30, 2010 1,469,518 174.0%

July 1, 2010 to June 30, 2011 3,254,141 394.0%

July 1, 2011 to June 30, 2012 1,858,876 387.3%

July 1, 2012 to June 30, 2013 1,612,780 205.6%

Employer Contributions

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Shands Jacksonville HealthCare, Inc. and Subsidiaries Historical Summary of Actual and Required Other Postemployment Contributions Under GASB Statement No. 45 (Unaudited) July 1, 2010 Through June 30, 2013

44

AnnualRequired Percentage

(Fiscal) Plan Year Contribution Contributed

July 1, 2010 to June 30, 2011 679,326$ 130.8%

July 1, 2011 to June 30, 2012 635,400 23.8%

July 1, 2012 to June 30, 2013 730,390 133.4%

Employer Contributions

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Shands Jacksonville HealthCare, Inc. and Subsidiaries Consolidating Basic Statement of Net Position June 30, 2013

(in thousands of dollars)

45

ShandsJacksonville

Medical Center ConsolidatedObligated Group* Other Eliminations Total

AssetsCurrent assets

Cash and cash equivalents 43,177$ 5,032$ -$ 48,209$ Short-term investments 41,141 - - 41,141Patient accounts receivable, net 82,316 - - 82,316Due from city and state agencies 5,185 - - 5,185Inventories 10,336 - - 10,336Prepaid expenses and other current assets 40,421 8,347 (40,123) 8,645

Total current assets 222,576 13,379 (40,123) 195,832

Assets whose use is restricted 39,500 - - 39,500Capital assets, net 154,954 16,033 - 170,987Other assets 22,839 4,033 - 26,872

Total assets 439,869$ 33,445$ (40,123)$ 433,191$

Liabilities and Net PositionCurrent liabilities

Long-term debt, current portion 2,575$ -$ -$ 2,575$ Capital lease obligations, current portion 2,225 - - 2,225Accounts payable and accrued expenses 60,856 33,232 (40,123) 53,965Accrued salaries and leave payable 19,708 - - 19,708Estimated third-party payor settlements 30,796 - - 30,796

Total current liabilities 116,160 33,232 (40,123) 109,269

Long-term liabilities

Long-term debt, noncurrent portion 137,341 - - 137,341

Capital lease obligations, noncurrent portion 6,256 - - 6,256

Other liabilities 14,765 - - 14,765

Total long-term liabilities 158,362 - - 158,362

Total liabilities 274,522 33,232 (40,123) 267,631

Commitments and contingencies

Net position

Net investment in capital assets 46,472 16,033 - 62,505

Restricted

Expendable 3,159 728 - 3,887Unrestricted 115,716 (16,548) - 99,168

Total net position 165,347 213 - 165,560

Total liabilities and net position 439,869$ 33,445$ (40,123)$ 433,191$

* Per the Master Trust Indenture dated June 1, 2013, the Obligated Group is comprised of Shands Jacksonville HealthCare, Inc.,

Shands Jacksonville Medical Center, Inc. and Shands Jacksonville Properties, Inc.

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Shands Jacksonville HealthCare, Inc. and Subsidiaries Consolidating Basic Statement of Net Position June 30, 2012

(in thousands of dollars)

46

ShandsJacksonville

Medical Center ConsolidatedObligated Group* Other Eliminations Total

AssetsCurrent assets

Cash and cash equivalents 19,912$ 10,726$ -$ 30,638$ Short-term investments 77,219 - - 77,219Patient accounts receivable, net 63,486 - - 63,486Due from city and state agencies 6,395 - - 6,395Inventories 9,016 - - 9,016Prepaid expenses and other current assets 4,112 2,093 (1,686) 4,519Assets whose use is restricted, current portion 3,568 - - 3,568

Total current assets 183,708 12,819 (1,686) 194,841

Assets whose use is restricted, less current portion 19,500 - - 19,500Capital assets, net 170,251 9,175 - 179,426Other assets 22,619 855 - 23,474

Total assets 396,078$ 22,849$ (1,686)$ 417,241$

Liabilities and Net AssetsCurrent liabilities

Long-term debt, current portion 6,845$ 4,740$ -$ 11,585$ Capital lease obligations, current portion 1,873 - - 1,873Accounts payable and accrued expenses 51,137 7 (1,686) 49,458Accrued salaries and leave payable 23,269 - - 23,269Estimated third-party payor settlements 22,510 - - 22,510

Total current liabilities 105,634 4,747 (1,686) 108,695

Long-term liabilities

Long-term debt, noncurrent portion 98,079 15,062 - 113,141

Capital lease obligations, noncurrent portion 7,064 - - 7,064

Other liabilities 17,001 - - 17,001

Total long-term liabilities 122,144 15,062 - 137,206

Total liabilities 227,778 19,809 (1,686) 245,901

Commitments and contingencies

Net assets

Net investment in capital assets 96,997 (10,558) - 86,439

Restricted

Expendable 3,643 200 - 3,843Unrestricted 67,660 13,398 - 81,058

Total net assets 168,300 3,040 - 171,340

Total liabilities and net assets 396,078$ 22,849$ (1,686)$ 417,241$

* The Obligated Group is comprised of Shands Jacksonville Medical Center, Inc., Shands Jacksonville Foundation, Inc.

Shands Jacksonville Community Services, Inc., Shands Jacksonville Affiliates, Inc. and Southern Hospital Systems, Inc.

at June 30, 2012.

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Shands Jacksonville HealthCare, Inc. and Subsidiaries Consolidating Basic Statement of Revenues, Expenses, and Changes in Net Position Year Ended June 30, 2013

(in thousands of dollars)

47

ShandsJacksonville

Medical Center ConsolidatedObligated Group* Other Eliminations Total

Operating revenuesNet patient service revenue, net of provision for bad debts of $86,208 487,436$ -$ -$ 487,436$ Other operating revenue 32,473 3,265 (298) 35,440

Total operating revenues 519,909 3,265 (298) 522,876

Operating expensesSalaries and benefits 239,905 419 - 240,324Supplies and services 237,804 1,920 (298) 239,426Depreciation and amortization 23,485 103 - 23,588

Total operating expenses 501,194 2,442 (298) 503,338

Operating income 18,715 823 - 19,538

Nonoperating revenues (expenses)Interest (3,787) - - (3,787)Other nonoperating gains 699 - - 699Net investment gain (loss), including change in fair value (8) 2 - (6)Gain on disposal of capital assets, net 33 - - 33

Total nonoperating revenues (expenses), net (3,063) 2 - (3,061)

Excess of revenues over expenses before transfers and capital contributions 15,652 825 - 16,477

Transfers and expenditures in support of the University of Florida and its medical programs (22,301) - - (22,301)Capital contributions, net 44 - - 44

(Decrease) increase in net position (6,605) 825 - (5,780)

Net positionBeginning of year 171,952 (612) - 171,340

End of year 165,347$ 213$ -$ 165,560$

* Per the Master Trust Indenture dated June 1, 2013, the Obligated Group is comprised of Shands Jacksonville

HealthCare, Inc., Shands Jacksonville Medical Center, Inc. and Shands Jacksonville Properties, Inc.

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Shands Jacksonville HealthCare, Inc. and Subsidiaries Consolidating Basic Statement of Revenues, Expenses, and Changes in Net Position Year Ended June 30, 2012

(in thousands of dollars)

48

ShandsJacksonville

Medical Center ConsolidatedObligated Group* Other Eliminations Total

Operating revenuesNet patient service revenue, net of provision for bad debts of $68,372 483,830$ -$ -$ 483,830$ Other operating revenue 31,607 5,142 (5,303) 31,446

Total operating revenues 515,437 5,142 (5,303) 515,276

Operating expensesSalaries and benefits 254,300 - - 254,300Supplies and services 236,244 1,412 (5,303) 232,353Depreciation and amortization 20,838 967 - 21,805

Total operating expenses 511,382 2,379 (5,303) 508,458

Operating income 4,055 2,763 - 6,818

Nonoperating revenues (expenses)Interest (3,621) - - (3,621)Other nonoperating losses (838) (239) - (1,077)Net investment gain, including change in fair value 2,489 1 - 2,490Loss on disposal of capital assets, net (59) - - (59)

Total nonoperating revenues (expenses), net (2,029) (238) - (2,267)

Excess of revenues over expenses before transfers and capital contributions 2,026 2,525 - 4,551

Transfers and expenditures in support of the University of Florida and its medical programs (27,437) - - (27,437)Capital contributions, net 837 - - 837

(Decrease) increase in net position (24,574) 2,525 - (22,049)

Net positionBeginning of year 192,874 515 - 193,389

End of year 168,300$ 3,040$ -$ 171,340$

* The Obligated Group is comprised of Shands Jacksonville Medical Center, Inc., Shands Jacksonville Foundation, Inc.,Shands Jacksonville Community Services, Inc., Shands Jacksonville Affiliates, Inc. and Southern Hospital Systems, Inc.

as of June 30, 2012.

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APPENDIX C

Form of Bond Indenture

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SERIES 2013B BOND TRUST INDENTURE

BETWEEN

FLORIDA DEVELOPMENT FINANCE CORPORATION

AND

U.S. BANK NATIONAL ASSOCIATION AS BOND TRUSTEE

DATED AS OF NOVEMBER 1, 2013

$59,405,000 Florida Development Finance Corporation

Healthcare Facilities Revenue Bonds (UF Health - Jacksonville Project),

Series 2013B

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TABLE OF CONTENTS

PAGE

Parties .................................................................................................................................. 1 Recitals ................................................................................................................................ 1

ARTICLE I DEFINITIONS

SECTION 1.1 DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION. ........................................................................... 8

SECTION 1.2 GENERAL RULES OF CONSTRUCTION. .................................. 21 SECTION 1.3. EFFECT OF ACTION BY HOLDERS ........................................... 22 SECTION 1.4. EFFECT OF HEADINGS AND TABLE OF CONTENTS ............ 22 SECTION 1.5. DATE OF BOND INDENTURE ..................................................... 22 SECTION 1.6 SEPARABILITY CLAUSE ............................................................. 22 SECTION 1.7. GOVERNING LAW ........................................................................ 23 SECTION 1.8. COUNTERPARTS........................................................................... 23 SECTION 1.9. DESIGNATION OF TIME FOR PERFORMANCE ...................... 23

ARTICLE II SOURCE OF PAYMENT

SECTION 2.1. SOURCE OF PAYMENT OF BONDS AND OTHER OBLIGATIONS ......................................................................... 23

SECTION 2.2. SPONSORING ENTITIES AND POLITICAL SUBDIVISIONS EXEMPT FROM LIABILITY ...................... 23

SECTION 2.3. INCORPORATORS, OFFICERS AND DIRECTORS OF THE ISSUER EXEMPT FROM INDIVIDUAL LIABILITY ........... 23

ARTICLE III SECURITY FOR PAYMENT

SECTION 3.1. PLEDGE AND ASSIGNMENT ...................................................... 24

ARTICLE IV REGISTRATION, TRANSFER, EXCHANGE AND PAYMENT OF THE BONDS

SECTION 4.1. THE BOOK ENTRY SYSTEM ....................................................... 25 SECTION 4.2. ALTERNATE PROVISIONS REGARDING PAYMENT,

REGISTRATION, TRANSFER AND EXCHANGE OF BONDS ....................................................................................... 26

SECTION 4.3. PERSONS DEEMED OWNERS ..................................................... 29 SECTION 4.4. BOND TRUSTEE AS PAYING AGENT ....................................... 29 SECTION 4.5. PAYMENTS DUE ON NON-BUSINESS DAYS .......................... 29

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ARTICLE V SPECIFIC TERMS FOR BONDS AND DISPOSITION OF PROCEEDS

SECTION 5.1. SPECIFIC TITLE AND TERMS ..................................................... 29 SECTION 5.2. DETERMINATION OF INTEREST RATES ................................. 33 SECTION 5.3. CONVERSION OF INTEREST RATE MODE .............................. 41 SECTION 5.4. PROCEEDS FROM SALE OF BONDS ......................................... 44

ARTICLE VI PURCHASE AND REMARKETING OF BONDS

SECTION 6.1. OPTIONAL TENDERS. .................................................................. 44 SECTION 6.2. MANDATORY TENDERS ............................................................. 46 SECTION 6.3. R-FLOATS NON-REMARKETED BONDS .................................. 48 SECTION 6.4. REMARKETING OF TENDERED BONDS. ................................. 48 SECTION 6.5. PURCHASE OF TENDERED BONDS. ......................................... 49 SECTION 6.6. DISPOSITION OF PURCHASED BONDS. ................................... 50 SECTION 6.7. REMARKETING AGENT. ............................................................. 51

ARTICLE VII REDEMPTION OF BONDS

SECTION 7.1. REDEMPTION PROVISIONS. ...................................................... 51 SECTION 7.2. MANDATORY REDEMPTION ..................................................... 55 SECTION 7.3. ELECTION TO REDEEM .............................................................. 55 SECTION 7.4. SELECTION BY BOND TRUSTEE OF BONDS TO BE

REDEEMED ............................................................................... 55 SECTION 7.5. NOTICE OF REDEMPTION. ......................................................... 56 SECTION 7.6. DEPOSIT OF REDEMPTION PRICE. ........................................... 57 SECTION 7.7. BONDS PAYABLE ON REDEMPTION DATE............................ 57 SECTION 7.8. BONDS REDEEMED IN PART. .................................................... 58 SECTION 7.9. PURCHASE OF CALLABLE BONDS IN LIEU OF

REDEMPTION ........................................................................... 58

ARTICLE VIII NO ADDITIONAL BONDS

ARTICLE IX INDENTURE FUNDS

SECTION 9.1. DEBT SERVICE FUND. ................................................................. 59 SECTION 9.2. BOND PURCHASE FUND. ............................................................ 59 SECTION 9.3. COSTS OF ISSUANCE FUND. ...................................................... 60 SECTION 9.4. INVESTMENT OF INDENTURE FUNDS .................................... 60 SECTION 9.5. APPLICATION OF FUNDS AFTER INDENTURE

INDEBTEDNESS DEFEASED. ................................................ 61

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ARTICLE X REPRESENTATIONS AND COVENANTS

SECTION 10.1. GENERAL REPRESENTATIONS. ................................................ 61 SECTION 10.2. ENCUMBRANCES ON TRUST ESTATE..................................... 61 SECTION 10.3. PAYMENT OF BONDS. ................................................................. 62 SECTION 10.4. INSPECTION OF RECORDS. ........................................................ 62 SECTION 10.5. ADVANCES BY BOND TRUSTEE. .............................................. 62 SECTION 10.6. CORPORATE EXISTENCE; MERGER, CONSOLIDATION,

ETC. ............................................................................................ 62 SECTION 10.7. COMPLIANCE WITH THE TAX CERTIFICATE AND

AGREEMENT ............................................................................ 63 SECTION 10.8. NOTICE WITH RESPECT TO CERTAIN R-FLOATS TERM-

OUT EVENTS. ........................................................................... 63

ARTICLE XI DEFAULTS AND REMEDIES

SECTION 11.1. EVENTS OF DEFAULT. ................................................................ 63 SECTION 11.2. REMEDIES ...................................................................................... 64 SECTION 11.3. APPLICATION OF MONEY COLLECTED. ................................ 65 SECTION 11.4. TRUSTEE MAY ENFORCE CLAIMS WITHOUT

POSSESSION OF BONDS. ....................................................... 66 SECTION 11.5. LIMITATION ON SUITS. .............................................................. 66 SECTION 11.6. UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE

PRINCIPAL, PREMIUM AND INTEREST. ............................ 67 SECTION 11.7. RESTORATION OF POSITIONS. ................................................. 67 SECTION 11.8. DELAY OR OMISSION NOT WAIVER. ...................................... 68 SECTION 11.9. CONTROL BY HOLDERS. ............................................................ 68 SECTION 11.10. WAIVER OF PAST DEFAULTS. .................................................. 68 SECTION 11.11. SUITS TO PROTECT THE TRUST ESTATE. .............................. 69 SECTION 11.12. REMEDIES UNDER LOAN AGREEMENT OR MASTER

INDENTURE. ............................................................................ 69

ARTICLE XII THE BOND TRUSTEE

SECTION 12.1. CERTAIN DUTIES AND RESPONSIBILITIES OF TRUSTEE. .................................................................................. 69

SECTION 12.2. NOTICE OF DEFAULTS. ............................................................... 71 SECTION 12.3. CERTAIN RIGHTS OF TRUSTEE. ............................................... 71 SECTION 12.4. NOT RESPONSIBLE FOR RECITALS. ........................................ 74 SECTION 12.5. MAY HOLD BONDS. ..................................................................... 74 SECTION 12.6. MONEY HELD IN TRUST. ............................................................ 74 SECTION 12.7. COMPENSATION AND REIMBURSEMENT. ............................ 74 SECTION 12.8. CORPORATE TRUSTEE REQUIRED; ELIGIBILITY. ............... 75

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SECTION 12.9. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR. ............................................................................ 75

SECTION 12.10. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR. ............. 76 SECTION 12.11. MERGER, CONVERSION, CONSOLIDATION OR

SUCCESSION TO BUSINESS. ................................................. 77

ARTICLE XIII AMENDMENT OF BOND DOCUMENTS

SECTION 13.1. GENERAL REQUIREMENTS FOR AMENDMENTS. ................ 77 SECTION 13.2. AMENDMENTS WITHOUT CONSENT OF HOLDERS. ............ 77 SECTION 13.3. AMENDMENTS REQUIRING CONSENT OF ALL

AFFECTED HOLDERS. ............................................................ 78 SECTION 13.4. AMENDMENTS REQUIRING MAJORITY CONSENT OF

HOLDERS. ................................................................................. 79 SECTION 13.5. DISCRETION OF TRUSTEE. ........................................................ 79 SECTION 13.6. TRUSTEE PROTECTED BY OPINION OF COUNSEL. ............. 80 SECTION 13.7. AMENDMENTS AFFECTING TRUSTEE’S PERSONAL

RIGHTS ...................................................................................... 80 SECTION 13.8. EFFECT ON HOLDERS. ................................................................ 80 SECTION 13.9. REFERENCE IN BONDS TO AMENDMENTS. .......................... 80 SECTION 13.10. AMENDMENTS NOT TO AFFECT TAX EXEMPTION. ............ 80

ARTICLE XIV DEFEASANCE

SECTION 14.1. PAYMENT OF INDENTURE INDEBTEDNESS; SATISFACTION AND DISCHARGE OF INDENTURE. ....... 80

SECTION 14.2. TRUST FOR PAYMENT OF DEBT SERVICE. ............................ 81

ARTICLE XV THE LOAN AGREEMENT AND RIGHTS OF SJMC

SECTION 15.1. RIGHT OF SJMC TO EXERCISE RIGHTS AND OPTIONS WITH RESPECT TO TERMS OF THE BONDS. .................... 83

SECTION 15.2. PERFORMANCE BY ISSUER UNDER LOAN AGREEMENT. ........................................................................... 83

SECTION 15.3. RIGHTS OF SJMC WITH RESPECT TO DEFAULTS BY ISSUER. ...................................................................................... 83

SECTION 15.4. SJMC MAY DIRECT INVESTMENT OF INDENTURE FUNDS. ...................................................................................... 83

SECTION 15.5. AMENDMENT OF BOND DOCUMENTS. .................................. 83 SECTION 15.6. APPOINTMENT AND REMOVAL POWERS. ............................. 84 SECTION 15.7. DISPOSITION OF INDENTURE FUNDS AND TRUST

ESTATE. .................................................................................... 84 SECTION 15.8. BENEFITS OF INDENTURE FOR SJMC. .................................... 84

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ARTICLE XVI MISCELLANEOUS

SECTION 16.1. NOTICES TO FINANCING PARTICIPANTS. ............................. 84 SECTION 16.2. NOTICES TO HOLDERS. .............................................................. 85 SECTION 16.3. SUCCESSORS AND ASSIGNS. .................................................... 85 SECTION 16.4. BENEFITS OF INDENTURE. ........................................................ 85 SECTION 16.5. CALCULATION AGENT. .............................................................. 85

EXHIBIT 5.1(c) ............................................................................................. Form of Bonds EXHIBIT 6.1(c) ................................................................. Form of Optional Tender Notice EXHIBIT 9.3(b) ................................................................................................... Requisition EXHIBIT 16.1(b) ................................................................................Directions for Notices

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BOND TRUST INDENTURE

THIS SERIES 2013B BOND TRUST INDENTURE dated as of November 1, 2013 is entered into by FLORIDA DEVELOPMENT FINANCE CORPORATION, a Florida public body corporate and politic (the "Issuer"), and U.S. BANK NATIONAL ASSOCIATION, a national banking association, as bond trustee (the "Bond Trustee").

Recitals

A. The Issuer has duly authorized the issuance of its $59,405,000 aggregate principal amount of Healthcare Facilities Revenue Bonds (UF Health - Jacksonville Project), Series 2013B (the "Bonds") pursuant to this Bond Indenture.

B. The Bonds are being issued to provide financing for the benefit of Shands Jacksonville Medical Center, Inc., a Florida not for profit corporation ("SJMC"), and its affiliates.

C. The Bonds are being issued for the purposes of (i) refunding the Refunded Notes (defined herein) that provided financing for the benefit of SJMC and its affiliates and (ii) paying certain costs associated with the issuance of the Bonds.

D. The proceeds of the Bonds have been loaned by the Issuer to SJMC pursuant to a Loan Agreement dated as of November 1, 2013 (the "Loan Agreement") between the Issuer and SJMC. Pursuant to the Loan Agreement SJMC has agreed to make payments at times and in amounts sufficient to pay Debt Service on the Bonds and the Purchase Price of Tendered Bonds (as such terms are defined herein).

E. SJMC, Shands Jacksonville HealthCare, Inc. ("SJHC") and Shands Jacksonville Properties, Inc. ("SJP") have entered into a Master Trust Indenture dated as of June 1, 2013, as supplemented (the "Master Indenture"), with U.S. Bank National Association, as master trustee (the "Master Trustee"). SJMC, SJHC and SJP are the current members of the Obligated Group (the "Obligated Group") described in the Master Indenture. The Obligated Group is authorized to issue obligations ("Master Indenture Obligations") under the Master Indenture to evidence or secure debt and other obligations of the Obligated Group. The Master Indenture Obligations are secured by a pledge of the revenues of the Obligated Group. As additional security for the Master Indenture Obligations, SJP has executed a Mortgage dated as of November 1, 2013 (the "Mortgage") in favor of the Master Trustee, whereby the Master Trustee has been granted a mortgage on the property and interests in property described therein (the "Mortgaged Property"). To evidence and secure its obligation with respect to payment of the Bonds, SJMC, on behalf of itself and all other members of the Obligated Group, has issued its Series 2013B Related Debt Obligation (the "Series 2013B Master Indenture Obligation") under the Master Indenture.

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F. The Bonds are limited obligations of the Issuer payable solely out of (i) payments by SJMC pursuant to the Loan Agreement and (ii) payments by the Obligated Group pursuant to the Series 2013B Master Indenture Obligation.

G. Payment of the Bonds is secured by the Trust Estate established under this Bond Indenture, which includes (i) all right, title and interest of the Issuer in and to the Loan Agreement, including without limitation payments by SJMC with respect to the Bonds, (ii) all right, title and interest of the Issuer in and to the Series 2013B Master Indenture Obligation, and (iii) money and investments in the funds and accounts established under this Bond Indenture.

H. This Bond Indenture provides for the issuance of the Bonds in various Interest Rate Modes. The Bonds shall be issued initially in the R-FLOATs Mode. The Bonds may, at the option of SJMC, be converted to another Interest Rate Mode in accordance with the terms of this Bond Indenture at any time when the Bonds are subject to optional redemption at par.

I. All things have been done which are necessary to make the Bonds, when executed by the Issuer and authenticated and delivered by the Bond Trustee hereunder, the valid obligations of the Issuer, and to constitute this Bond Indenture a valid trust indenture for the security of the Bonds, in accordance with the terms of the Bonds and this Bond Indenture.

NOW, THEREFORE, THIS BOND INDENTURE WITNESSETH:

It is hereby covenanted and declared that all the Bonds are to be authenticated and delivered and the property subject to this Bond Indenture is to be held and applied by the Bond Trustee, subject to the covenants, conditions and trusts hereinafter set forth, and the Issuer does hereby covenant and agree to and with the Bond Trustee, for the equal and proportionate benefit (except as otherwise expressly provided herein) of all Holders as follows:

ARTICLE I DEFINITIONS

SECTION 1.1 DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION.

For all purposes of this Bond Indenture, except as otherwise expressly provided or unless the context otherwise requires, the following terms shall have the meaning indicated:

"Act of Bankruptcy" means the filing of a petition in bankruptcy (or the other commencement of a bankruptcy or similar proceeding) by or against a person under any

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applicable bankruptcy, insolvency, reorganization, or similar law, now or hereafter in effect.

"Affiliate" of any specified person means 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, "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 ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing.

"Alternate Rate" means (i) with respect to the Weekly Rate, the CP Rate and the Index Rate, the SIFMA Index as most recently published prior to the date the Alternate Rate is determined plus 100 basis points (ii) with respect to the R-FLOATs Rate during an R-FLOATs Weekly Period or an R-FLOATs Monthly Period, the SIFMA Index as most recently published prior to the date the Alternate Rate is determined, and (iii) with respect to the R-FLOATs Rate during an R-FLOATs Term Period, an annual rate equal to 75% of the highest quoted yield on United States Government Obligations – State and Local Government Series, with a maturity equal to the length of the R-FLOATs Term Period for which the Alternate Rate is calculated, which yield is published in Form PD4262, Department of Treasury, Bureau of Public Debt, as most recently published prior to the date the Alternate Rate is determined.

"Applicable Spread", when used with respect to the Index Rate, means the margin or spread that is added to, or subtracted from, the Designated Index to determine the Index Rate.

"Authorized Denominations" means: (i) for Bonds in the Daily Rate Mode, the Weekly Rate Mode and the Commercial Paper Rate Mode, $100,000 or any larger amount that is a multiple of $1,000, (ii) for Bonds in the R-FLOATs Mode, $100,000 or any larger amount that is a multiple of $1,000, and (iii) for Bonds in the Term Rate Mode, the Index Rate Mode, or the Fixed Rate Mode, $5,000 or any multiple thereof.

"Authorized Representative of the Issuer" means the chairman, vice-chairman or the executive director of the Issuer, or any other officer or agent of the Issuer authorized by the governing body of the Issuer to act as "Authorized Representative of the Issuer" for purposes of the Bond Documents.

"Authorized Representative of SJMC" means the chief executive officer or the chief financial officer of SJMC or any other officer or agent of SJMC authorized by the governing body of SJMC to act as "Authorized Representative of SJMC" for purposes of the Bond Documents.

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"Bond Buyer Index" means the "Bond Buyer Revenue Bond Index" rate for 30-year tax-exempt revenue bonds, as published by The Bond Buyer on any date selected by the Issuer that is within 30 days prior to the date of such determination; provided, however, that if the Bond Buyer Index is no longer published, the Calculation Agent shall select an alternative index that, in the judgment of the Calculation Agent, is based on criteria reasonably similar to the current Bond Buyer Index.

"Bond Documents" means the Bonds, this Bond Indenture and the Loan Agreement.

"Bond Indenture" means this instrument as originally executed or as it may from time to time be supplemented, modified or amended by one or more indentures or other instruments supplemental hereto entered into pursuant to the applicable provisions hereof.

"Bond Indenture Default" shall have the meaning assigned in Section 11.1. A Bond Indenture Default shall "exist" if a Bond Indenture Default shall have occurred and be continuing.

"Bond Indenture Funds" means any fund or account established pursuant to this Bond Indenture.

"Bond Indenture Indebtedness" means all indebtedness of the Issuer at the time secured by this Bond Indenture, including without limitation (a) all Debt Service on the Bonds and (b) all reasonable fees, charges and disbursements of the Bond Trustee for services performed and disbursements made under this Bond Indenture.

"Bond Payment Date" means each date on which Debt Service is payable on the Bonds, including any date fixed for redemption of Bonds.

"Bond Purchase Fund" means the fund established pursuant to Section 9.2.

"Bond Register" means the register or registers for the registration and transfer of Bonds maintained by the Issuer pursuant to Section 4.2(c).

"Bonds" means the bonds issued pursuant to this Bond Indenture.

"Bond Trustee" means U.S. Bank National Association, a national banking association, until a successor Bond Trustee shall have become such pursuant to the applicable provisions of this Bond Indenture, and thereafter "Bond Trustee" means such successor.

"Book Entry System" means the book entry system maintained by DTC for the ownership, transfer, exchange and payment of debt obligations.

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"Business Day" means a day that is not (i) a Saturday, a Sunday or a legal holiday on which banking institutions are authorized to remain closed in the State of Florida, the State of New York or state where the Bond Trustee performs its business with respect to the Bond Indenture or (ii) a day on which the New York Stock Exchange is closed.

"Calculation Agent", when used with respect to Bonds in the Index Rate Mode, means the Calculation Agent appointed pursuant to Section 16.5.

"Callable Bonds" means Bonds that are subject to optional redemption.

"Commercial Paper Rate Mode" means the Interest Rate Mode in which a Bond bears interest at the CP Rate for each CP Rate Period.

"Continuing Disclosure Agreement" means the Continuing Disclosure Agreement entered into by SJMC, on behalf of the Obligated Group, in connection with the issuance of the Bonds.

"Conversion Date" means the day on which the Interest Rate Mode on a Bond is converted from one Interest Rate Mode to another Interest Rate Mode.

"Costs of Issuance" means the expenses incurred in connection with the issuance of the Bonds, including legal, consulting, accounting and underwriting fees and expenses.

"Costs of Issuance Fund" means the fund established pursuant to Section 9.3.

"CP Rate", when used with respect to any Bond in the Commercial Paper Rate Mode, means the fixed interest rate borne by such Bond during the applicable CP Rate Period.

"CP Rate Period", when used with respect to any Bond in the Commercial Paper Rate Mode, means each period during which such Bond bears interest at a specified CP Rate.

"Daily Rate", when used with respect to any Bond in the Daily Rate Mode, means the variable interest rate borne by such Bond while such Bond is in the Daily Rate Mode.

"Daily Rate Mode" means the Interest Rate Mode in which a Bond bears interest at the Daily Rate.

"Debt Service" means the principal, redemption premium (if any) and interest payable on the Bonds.

"Debt Service Fund" means the fund established pursuant to Section 9.1.

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"Defaulted Interest" has the meaning assigned in Section 4.2(l).

"Defeased", when used with respect to Bond Indenture Indebtedness, shall have the meaning assigned in Section 14.1.

"Designated Index" means an index used to determine the Index Rate.

"DTC" means The Depository Trust Company and its successors and assigns.

"Enabling Law" means Chapter 288, Part IX, Florida Statutes, Chapter 159, Part II, Florida Statutes, and other applicable provisions of law.

"Favorable Tax Opinion" means an Opinion of Counsel stating in effect that the proposed action, together with any other changes with respect to the Bonds made or to be made in connection with such action, will not cause interest on the Bonds to become includible in gross income of the Holders for purposes of federal income taxation.

"Federal Securities" means noncallable, nonprepayable, direct obligations of, or obligations the full and timely payment of which is guaranteed by, the United States of America.

"Financing Participants" means the Issuer, SJMC, the Obligated Group Members, the Bond Trustee, the Calculation Agent, and the Remarketing Agent.

"Fitch" means Fitch Ratings, Inc.

"Fixed Rate", when used with respect to any Bond in the Fixed Rate Mode, means the fixed interest rate borne by such Bond.

"Fixed Rate Mode" means the Interest Rate Mode in which a Bond bears interest at a Fixed Rate.

"Holder" or "Bondholder", when used with respect to any Bond, means (i) if the Book Entry System is not in effect, the person in whose name such Bond is registered on the Bond Register maintained by the Bond Trustee and (ii) if the Book Entry System is in effect, the beneficial owner of such Bond on the records maintained pursuant to the Book Entry System.

"Independent", when used with respect to any person, means a person who (i) does not have any direct financial interest or any material indirect financial interest in any Financing Participant or any Affiliate of a Financing Participant, (ii) does not serve as a member of the governing body of any Financing Participant or any Affiliate of a Financing Participant, and (iii) is not employed by any Financing Participant or any Affiliate of a Financing Participant.

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"Index Rate", when used with respect to any Bond in the Index Rate Mode, means a variable rate equal to the Designated Index plus or minus the Applicable Spread for the related Index Rate Period.

"Index Rate Mode" means the Interest Rate Mode in which a Bond bears interest at the Index Rate.

"Index Rate Period", when used with respect to a Bond in the Index Rate Mode, means a period during which such Bond bears interest at the Designated Index and the Applicable Spread for such period.

"Index Rate Redemption Premium" means:

[Principal amount of Bond] – [Present value of Remaining Cash Flow at Premium Discount Rate]

Where:

Remaining Cash Flow =

Principal and interest on such Bond payable from the optional redemption date until the First Par Call Date (or, if sooner, its Maturity Date), assuming that such Bond bears interest during such period at the Index Rate in effect on the redemption date and that such Bond is redeemed at par on the First Par Call Date (or, if sooner, retired at par on the Maturity Date)

Premium Discount Rate =

Index Rate in effect on the optional redemption date plus 25 basis points

First Par Call Date = The First Par Call Date for Bonds in the Index Rate Mode specified in Section 7.1(a).

"Interest Payment Date", when used with respect to any installment of interest

on a Bond, means the date specified in this Bond Indenture as the date on which such installment of interest is due and payable.

"Interest Rate Mode" means an interest rate mode authorized pursuant to Section 5.2.

"Issuer" means Florida Development Finance Corporation, a Florida public body corporate and politic, until a successor corporation shall have become such pursuant to the applicable provisions of the Enabling Law and this Bond Indenture, and thereafter "Issuer" means such successor corporation.

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"Loan Agreement" means the Loan Agreement, dated as of November 1, 2013, between the Issuer and SJMC.

"Loan Default" has the meaning assigned in Article 6 of the Loan Agreement. A Loan Default shall "exist" if a Loan Default shall have occurred and be continuing.

"Loan Payments" means payments by SJMC pursuant to the Loan Agreement with respect to payment of Debt Service on the Bonds.

"Mandatory Tender" means a required tender of a Bond for purchase pursuant to Section 6.2.

"Mandatory Tender Date" means a date on which a Bond is to be purchased pursuant to a Mandatory Tender.

"Master Indenture" means the Master Trust Indenture, dated as of June 1, 2013, between the Obligated Group and the Master Trustee, as heretofore supplemented and as further supplemented by the Master Indenture Supplement.

"Master Indenture Obligations" means all obligations issued under the Master Indenture.

"Master Indenture Supplement" means the Fourth Supplemental Master Indenture dated as of November 1, 2013, between the Obligated Group and the Master Trustee, authorizing the issuance of the Series 2013B Master Indenture Obligation.

"Master Trustee" means U.S. Bank National Association, a national banking association, and its successors and assigns, in its capacity as trustee under the Master Indenture.

"Maturity Date", when used with respect to any Bond, means the date specified in this Bond Indenture as the date on which principal of such Bond is due and payable.

"Maximum Rate" means 12.0% per annum.

"Members" and "Members of the Obligated Group" has the respective meanings assigned such terms in the Master Indenture.

"Moody’s" means Moody’s Investors Service, Inc.

"Mortgage" means the Mortgage, dated as of November 1, 2013, executed by SJP in favor of the Master Trustee.

"Mortgaged Property" means the property and interests in property mortgaged and assigned to the Master Trustee pursuant to the Mortgage.

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"Obligated Group" means SJMC and all other entities that may from time to time be Members of the Obligated Group under the terms of the Master Indenture. The current Members of the Obligated Group are SJMC, SJHC and SJP.

"Obligor Bonds" means Bonds registered in the name of (or in the name of a nominee for) a Member of the Obligated Group, or any Affiliate of the Obligated Group. The Bond Trustee may assume that no Bonds are Obligor Bonds unless it has actual notice to the contrary.

"Office of the Bond Trustee" means the office of the Bond Trustee for hand delivery of notices, as specified pursuant to Section 16.1.

"Opinion of Counsel" means an opinion from an attorney or firm of attorneys with experience in the matters to be covered in the opinion. Except as otherwise expressly provided in this Bond Indenture, the attorney or attorneys rendering such opinion may be counsel for one or more of the Financing Participants, including counsel in the full-time employment of a Financing Participant.

"Optional Tender" means tender of a Bond for purchase at the option of the Holder thereof pursuant to Section 6.1.

"Optional Tender Date" means a date on which a Bond is to be purchased pursuant to an Optional Tender.

"Outstanding", when used with respect to Bonds means, as of the date of determination, all Bonds authenticated and delivered under this Bond Indenture, except:

(a) Bonds cancelled by the Bond Trustee or delivered to the Bond Trustee for cancellation;

(b) Bonds for whose payment or redemption money in the necessary amount has been deposited with the Bond Trustee in trust for the Holders of such Bonds, provided that, if such Bonds are to be redeemed, notice of such redemption has been duly given pursuant to this Bond Indenture or provision therefor satisfactory to the Bond Trustee has been made;

(c) Bonds in exchange for or in lieu of which other Bonds have been authenticated and delivered under this Bond Indenture; and

(d) Tendered Bonds for the purchase of which money in the necessary amount has been deposited in the Bond Purchase Fund and is held in trust for the Holders of such Tendered Bonds;

provided, however, that in determining whether the Holders of the requisite principal amount of Bonds Outstanding have given any request, demand, authorization,

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direction, notice, consent or waiver hereunder, Obligor Bonds shall be disregarded and deemed not to be Outstanding. Obligor Bonds which have been pledged in good faith may be regarded as Outstanding for such purposes if the pledgee establishes to the satisfaction of the Bond Trustee the pledgee’s right so to act with respect to such Bonds and that if such pledgee was the Holder such Bonds would not be considered Obligor Bonds.

"Post-Default Rate" means (a) when used with respect to any payment of Debt Service on any Bond and the Purchase Price of any Tendered Bond, the interest rate applicable to such Bond on the date such Debt Service or Purchase Price became due, and (b) when used with respect to all other payments due under this Bond Indenture, a variable rate equal to the Bond Trustee’s prime or base rate plus 2.0% (200 basis points), in each case computed on the basis of a 365 or 366-day year, as the case may be, for actual days elapsed.

"Purchase Price", when used with respect to a Tendered Bond, means 100% of the principal amount of such Bond plus accrued interest to the Tender Date. If the Tender Date for a Tendered Bond is also an Interest Payment Date for such Bond, the interest due on such Date shall not be considered part of the Purchase Price; rather, such interest shall be paid in accordance with the provisions of this Bond Indenture governing regular interest payments.

"Qualified Investments" means:

(a) direct obligations of, or obligations the full and timely payment of which is guaranteed by, the United States of America, including unit investment trusts and mutual funds that invest solely in such obligations,

(b) bonds, debentures, notes or other obligations issued or guaranteed by any federal agency if such obligations are (i) backed by the full faith and credit of the United States of America or (ii) rated by at least one Rating Agency in one of the three highest rating categories assigned by such Rating Agency,

(c) money market funds rated by at least one Rating Agency in one of the three highest rating categories assigned by such Rating Agency,

(d) certificates of deposit or other bank deposits that are described in one of the following clauses: (i) certificates of deposit or bank deposits issued by, or made with, a bank whose unsecured, long-term obligations are rated by at least one Rating Agency in one of the three highest rating categories assigned by such Rating Agency, or (ii) certificates of deposit or bank deposits secured at all times by collateral described in paragraphs (a) and (b) above that is held by the Bond Trustee or by a third party custodian acceptable to the Issuer and the Bond Trustee with a perfected first security interest in the collateral,

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(e) certificates of deposit, savings accounts, deposit accounts or money market deposits which are fully insured by the FDIC,

(f) investment agreements, including guaranteed investment contracts, repurchase agreements and forward purchase agreements, provided that (i) any securities purchased or held pursuant to such agreement are otherwise Qualified Investments under this Bond Indenture, (ii) the counterparty’s long-term debt obligations are rated by at least one Rating Agency in one of the three highest rating categories assigned by such Rating Agency, and (iii) the securities, if purchased, are owned by the Issuer or the Bond Trustee and are held by the Bond Trustee or by a third party custodian acceptable to the Issuer and the Bond Trustee or, if held as collateral, are held by the Bond Trustee or a third party custodian acceptable to the Issuer and the Bond Trustee with a perfected first security interest in such collateral,

(g) commercial paper rated, at the time of purchase, not less than "Prime-1" by Moody’s or not less than "A-1" by S & P, and

(h) bonds or notes issued by any state, county or municipality which are rated by at least one Rating Agency in one of the three highest rating categories assigned by such Rating Agency.

For purposes of this definition, rating categories are determined without regard to qualifiers, such as "+" or "1" (for example, ratings of "A-1", "A-2", "A-" and "A+" are considered part of the same rating category).

"R-FLOATs Mandatory Tender" means a required tender of a Bond for purchase pursuant to Section 6.2(a).

"R-FLOATs Mode" means the Interest Rate Mode in which a Bond bears interest at the R-FLOATs Rate.

"R-FLOATs Monthly Period" means a period during the R-FLOATs Mode when a Bond bears interest at an R-FLOATs Monthly Rate.

"R-FLOATs Monthly Rate" means a variable rate during an R-FLOATs Monthly Period, determined as provided in Section 5.2(g)(3).

"R-FLOATs Non-Remarketed Bond" means a Bond returned to the Holder pursuant to Section 6.3 after such Holder tendered the Bond for purchase pursuant to the R-FLOATs Tender provisions.

"R-FLOATs Optional Tender" means tender of a Bond for purchase at the option of the Holder thereof pursuant to Section 6.1(a).

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"R-FLOATs Period" means an R-FLOATs Weekly Period, an R-FLOATs Monthly Period, or an R-FLOATs Term Period.

"R-FLOATs Period Change Date" means the date on which the Bonds are converted from one R-FLOATs Period to another R-FLOATs Period (excluding any such date on which the Bonds are converted from the R-FLOATs Term Period to another R-FLOATs Period).

"R-FLOATs Rate" when used with respect to any Bond in the R-FLOATs Mode, means the R-FLOATs Weekly Rate, the R-FLOATs Monthly Rate, or the R-FLOATs Term Rate borne by such Bond during the R-FLOATs Mode.

"R-FLOATs Rate Determination Date" means the date on which an R-FLOATs Rate is determined pursuant to Section 5.2(g).

"R-FLOATs Reset Date" means the day on which each new R-FLOATs Rate is effective, as determined pursuant to Section 5.2(g).

"R-FLOATs Special Non-Remarketing Period" means a period beginning on the date when a Bond is not purchased from the Holder after such Holder tenders such Bond for purchase pursuant to an R-FLOATs Tender and ending on the date that all R-FLOATs Non-Remarketed Bonds are successfully remarketed.

"R-FLOATs Tender" means an R-FLOATs Mandatory Tender or an R-FLOATs Optional Tender.

"R-FLOATs Tender Date" means a date on which Bonds are tendered for purchase pursuant to the R-FLOATs Tender provisions.

"R-FLOATs Term-Out Event", when used with respect to any R-FLOATs Non-Remarketed Bond, means:

(1) the R-FLOATs Special Non-Remarketing Period with respect to such Bond lasts more than 180 consecutive days; or

(2) the long-term debt of the Obligated Group ceases to be rated Investment Grade by at least two Rating Agencies.

If the Obligated Group’s long-term debt had already ceased to be rated Investment Grade by at least two Rating Agencies when the R-FLOATs Special Non-Remarketing Period began, then an R-FLOATs Term-Out Event shall be deemed to have occurred on the first day of the R-FLOATs Special Non-Remarketing Period.

For purposes of this definition, "Investment Grade" means one of the four highest rating categories currently maintained by the Rating Agency, or an equivalent rating for

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any rating scale subsequently adopted. For purposes of this definition, rating categories are determined without regard to qualifiers, such as "+", "—" or "1" (for example, ratings of "Baa3" and "BBB-" are considered part of the same rating category and are Investment Grade under current rating standards).

"R-FLOATs Term Period" means a period during the R-FLOATs Mode when a Bond bears interest at a R-FLOATs Term Rate.

"R-FLOATs Term Rate" means a fixed rate during an R-FLOATs Term Period, determined as provided in Section 5.2(g)(3).

"R-FLOATs Weekly Period" means a period during the R-FLOATs Mode when a Bond bears interest at an R-FLOATs Weekly Rate.

"R-FLOATs Weekly Rate" means a variable rate during an R-FLOATs Weekly Period, determined as provided in Section 5.2(g)(2).

"Rating Agency" means Moody’s, S&P, Fitch and any other nationally recognized securities rating agency.

"Refunded Notes" means a portion of the outstanding $100,000,000 Shands Jacksonville Medical Center, Inc. Taxable Notes, Series 2013 issued by SJMC on June 27, 2013.

"Regular Record Date", when used with respect to the payment of interest on the Bonds, means: (i) with respect to any Bond in the Daily Rate Mode, the Weekly Rate Mode, the Commercial Paper Rate Mode, or the R-FLOATs Mode, the Business Day immediately prior to each Interest Payment Date for such Bond, and (ii) with respect to any Bond in the Index Rate Mode, the Term Rate Mode, or the Fixed Rate Mode, the 15th day (whether or not a Business Day) of the month next preceding each Interest Payment Date for such Bond.

"Remarketing Agent" means the entity appointed pursuant to Section 6.7 to serve as Remarketing Agent under this Bond Indenture, until a successor Remarketing Agent shall have become such pursuant to the applicable provisions of this Bond Indenture, and thereafter "Remarketing Agent" means such successor.

"Remarketing Proceeds" means the proceeds of remarketing of Bonds by the Remarketing Agent in accordance with the provisions of Section 6.4.

"Reset Date" means the date specified in this Bond Indenture when the interest rate changes on Bonds in the Daily Rate Mode, the Weekly Rate Mode, the Commercial Paper Rate Mode, the Index Rate Mode or the R-FLOATs Mode.

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"S & P" means Standard & Poor’s Ratings Services, a business of Standard & Poor's Financial Services LLC.

"Series 2013B Bonds Clearing Account" means the account established pursuant to Section 5.4(a) for receipt and distribution of proceeds from the initial sale and delivery of the Bonds.

"Series 2013B Master Indenture Obligation" means the Master Indenture Obligation issued by the Obligated Group pursuant to the Master Indenture as additional evidence of and security for the obligations of the Issuer with respect to the Bonds.

"SIFMA Index" means the "USD-SIFMA Municipal Swap Index", which is an index compiled by the Securities Industry and Financial Markets Association (SIFMA). If the USD-SIFMA Municipal Swap Index is no longer published, the Calculation Agent shall select an alternative index that, in the judgment of the Calculation Agent, is based on criteria reasonably similar to the current SIFMA Index criteria.

"SJHC" means Shands Jacksonville HealthCare, Inc., a Florida not for profit corporation.

"SJMC" means Shands Jacksonville Medical Center, Inc., a Florida not for profit corporation.

"SJP" means Shands Jacksonville Properties, Inc., a Florida not for profit corporation.

"Special Record Date" for the payment of any Defaulted Interest on the Bonds means a date fixed by the Bond Trustee pursuant to Section 4.2(l).

"Tax Certificate and Agreement" means that certain Tax Certificate and Agreement entered into by the Issuer and SJMC in connection with the issuance of the Bonds.

"Tender Date" means an Optional Tender Date or a Mandatory Tender Date, as the case may be.

"Tendered Bonds" means Bonds tendered (or deemed tendered) for purchase pursuant to the Optional Tender or Mandatory Tender provisions of this Bond Indenture.

"Tenor", when used to describe the distinguishing characteristics of a Bond or group of Bonds, means the series designation, Maturity Date, interest rate and CUSIP number of such Bond or group of Bonds. Bonds of the same Tenor have the same series designation, Maturity Date, interest rate and CUSIP number.

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"Term Bonds" means Bonds subject to scheduled mandatory redemption in accordance with the provisions of Section 7.1(b). If serial maturities are assigned to less than all Bonds pursuant to Section 5.1(h) and a portion of the Bonds will continue to have scheduled mandatory redemption requirements, the provisions of Section 7.1(b) shall be amended to reflect the revised scheduled mandatory redemption requirements.

"Term Rate", when used with respect to any Bond in the Term Rate Mode, means the fixed interest rate borne by such Bond during the applicable Term Rate Period.

"Term Rate Mode" means the Interest Rate Mode in which a Bond bears interest at a Term Rate.

"Term Rate Period", when used with respect to any Bond in the Term Rate Mode, means a period during which such Bond bears interest at a specified Term Rate established for such period.

"Trust Estate" shall have the meaning assigned in Section 3.1.

"Weekly Rate", when used with respect to any Bond in the Weekly Rate Mode, means the variable interest rate borne by such Bond while such Bond is in the Weekly Rate Mode.

"Weekly Rate Mode" means the Interest Rate Mode in which a Bond bears interest at the Weekly Rate.

SECTION 1.2 GENERAL RULES OF CONSTRUCTION.

For all purposes of this Bond Indenture, except as otherwise expressly provided or unless the context otherwise requires:

(a) Defined terms in the singular shall include the plural as well as the singular, and vice versa.

(b) The definitions in the recitals to this instrument are for convenience only and shall not affect the construction of this instrument.

(c) All accounting terms not otherwise defined herein have the meaning assigned to them, and all computations herein provided for shall be made, in accordance with generally accepted accounting principles. All references herein to "generally accepted accounting principles" refer to such principles as they exist at the date of application thereof.

(d) All references in this instrument to designated "Articles", "Sections" and other subdivisions are to the designated Articles, Sections and subdivisions of this instrument as originally executed.

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(e) The terms "herein", "hereof" and "hereunder" and other words of similar import refer to this Bond Indenture as a whole and not to any particular Article, Section or other subdivision.

(f) All references in this instrument to a separate instrument are to such separate instrument as the same may be amended or supplemented from time to time pursuant to the applicable provisions thereof.

(g) The term "person" shall include any individual, corporation, partnership, limited liability company, joint venture, association, trust, unincorporated organization and any government or any agency or political subdivision thereof.

(h) The term "including" means "including without limitation" and "including, but not limited to".

SECTION 1.3. EFFECT OF ACTION BY HOLDERS.

Any request, demand, authorization, direction, notice, consent, waiver or other action by the Holder of any Bond shall bind every future Holder of the same Bond and the Holder of every Bond issued upon the transfer thereof or in exchange therefor or in lieu thereof, in respect of anything done or suffered to be done by the Bond Trustee or the Issuer or SJMC in reliance thereon, whether or not notation of such action is made upon such Bond.

SECTION 1.4. EFFECT OF HEADINGS AND TABLE OF CONTENTS.

The Article and Section headings herein and in the Table of Contents are for convenience only and shall not affect the construction hereof.

SECTION 1.5. DATE OF BOND INDENTURE.

The date of this Bond Indenture is intended as and for a date for the convenient identification of this Bond Indenture and is not intended to indicate that this Bond Indenture was executed and delivered on said date.

SECTION 1.6 SEPARABILITY CLAUSE.

If any provision in this Bond Indenture or in the Bonds shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

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SECTION 1.7. GOVERNING LAW.

This Bond Indenture shall be construed in accordance with and governed by the laws of the State of Florida.

SECTION 1.8. COUNTERPARTS.

This instrument may be executed in any number of counterparts, each of which so executed shall be deemed an original, but all such counterparts shall together constitute but one and the same instrument.

SECTION 1.9. DESIGNATION OF TIME FOR PERFORMANCE.

Except as otherwise expressly provided herein, any reference in this Bond Indenture to the time of day means (i) if the Book Entry System is in effect, the time of day in the city where DTC maintains its place of business for the performance of its obligations under the Book Entry System or (ii) if the Book Entry System is no longer in effect, the time of day in the city where the Bond Trustee maintains its place of business for the performance of its obligations under this Bond Indenture.

ARTICLE II

SOURCE OF PAYMENT

SECTION 2.1. SOURCE OF PAYMENT OF BONDS AND OTHER OBLIGATIONS.

The Bonds and all other payment obligations under this Bond Indenture are limited obligations of the Issuer payable solely out of (i) payments by SJMC pursuant to the Loan Agreement and (ii) payments by the Obligated Group pursuant to the Series 2013B Master Indenture Obligation.

SECTION 2.2. SPONSORING ENTITIES AND POLITICAL SUBDIVISIONS EXEMPT FROM LIABILITY.

The Bonds and any other payment obligations under this Bond Indenture shall not constitute or give rise to an indebtedness or liability of, and shall not constitute a charge against the general credit or taxing powers of the State of Florida or any political subdivision of the State of Florida.

SECTION 2.3. INCORPORATORS, OFFICERS AND DIRECTORS OF THE ISSUER EXEMPT FROM INDIVIDUAL LIABILITY.

No recourse under or upon any covenant or agreement of this Bond Indenture, or of any Bonds, or for any claim based thereon or otherwise in respect thereof, shall be had

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against any past, present or future incorporator, officer or director of the Issuer, or of any successor, either directly or through the Issuer, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise; it being expressly understood that this Bond Indenture and the Bonds issued hereunder are solely corporate obligations, and that no personal liability whatever shall attach to, or is or shall be incurred by, any incorporator, officer or director of the Issuer or any successor, or any of them, because of the issuance of the Bonds, or under or by reason of the covenants or agreements contained in this Bond Indenture or in any Bonds or implied therefrom.

ARTICLE III SECURITY FOR PAYMENT

SECTION 3.1. PLEDGE AND ASSIGNMENT.

To secure the payment of Debt Service on the Bonds and all other Bond Indenture Indebtedness and the performance of the covenants contained in this Bond Indenture and the Bonds, and to declare the terms and conditions on which the Bonds are secured, and in consideration of the premises and of the purchase of the Bonds by the Holders thereof, the Issuer hereby pledges and assigns to the Bond Trustee, and grants to the Bond Trustee a security interest in, the following property:

(a) Indenture Funds. Money and investments from time to time on deposit in, or forming a part of, the Bond Indenture Funds.

(b) Loan Agreement. All right, title and interest of the Issuer in and to the Loan Agreement, including all Loan Payments and all other payments by SJMC pursuant to the Loan Agreement; provided, however, that:

(1) The Issuer shall retain the right to reimbursement of its expenses and indemnity payments pursuant to Sections 3.4 and 5.7 of the Loan Agreement.

(2) The Issuer shall retain the right to receive notices and other communications to be sent to it under the Loan Agreement.

(3) Nothing contained in this Bond Indenture shall impair, diminish or otherwise affect the Issuer’s obligations under the Loan Agreement or impose any of such obligations on the Bond Trustee.

(c) Series 2013B Master Indenture Obligation. All right, title and interest of the Issuer in and to the Series 2013B Master Indenture Obligation, including all payments by the Obligated Group pursuant to the Series 2013B Master Indenture Obligation and all distributions to the holder of the Series 2013B

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Master Indenture Obligation of proceeds from the exercise of remedies under the Master Indenture or the Mortgage.

(d) Other Property. Any and all property of every kind or description which may, from time to time hereafter, by delivery or by writing of any kind, be subjected to the lien of this Bond Indenture as additional security by the Issuer or anyone on its part or with its consent, or which pursuant to any of the provisions hereof may come into the possession or control of the Bond Trustee or a receiver appointed pursuant to this Bond Indenture; and the Bond Trustee is hereby authorized to receive any and all such property as and for additional security for the obligations secured hereby and to hold and apply all such property subject to the terms hereof.

TO HAVE AND TO HOLD all such property, rights and privileges (collectively called the "Trust Estate") unto the Bond Trustee and its successors and assigns.

BUT IN TRUST, NEVERTHELESS, for the equal and proportionate benefit and security of the Holders from time to time of the Bonds (without any priority of any such Bond over any other such Bond).

PROVIDED, HOWEVER, that money and investments in the Bond Indenture Funds may be applied for the purposes and on the terms and conditions set forth in this Bond Indenture.

ARTICLE IV REGISTRATION, TRANSFER, EXCHANGE AND PAYMENT OF THE BONDS

SECTION 4.1. THE BOOK ENTRY SYSTEM.

(a) The ownership, transfer, exchange and payment of Bonds shall be governed by the Book Entry System administered by DTC until the Book Entry System is terminated pursuant to Section 4.1(c).

(b) Except as otherwise expressly provided in this Bond Indenture, while Bonds are in the Book Entry System the following provisions shall apply:

(1) In order to facilitate the Book Entry System, a physical certificate or physical certificates for the Bonds shall be executed and authenticated, registered in the name of DTC or its nominee, and delivered to DTC for safekeeping (including safekeeping by the Bond Trustee pursuant to the "FAST" system or other procedures of the Book Entry System).

(2) The term "Bond" means each separate security credited to a beneficial owner (or entitlement holder) pursuant to the Book Entry System, and

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the term "Holder" means the person identified pursuant to the Book Entry System as the beneficial owner of the related security.

(3) The terms and limitations of this Bond Indenture with respect to each separate Bond shall be applicable to each separate security credited to a beneficial owner under the Book Entry System.

(4) All payments of Debt Service on the Bonds shall be made by the Bond Trustee through the Book Entry System, and payments by such method shall be valid and effective fully to satisfy and discharge the Issuer’s obligations with respect to such payments.

(5) A tender of a Bond shall be made by the Holder to the Bond Trustee through the Book Entry System.

(c) The Bond Trustee shall discontinue the Book Entry System at the request of the Issuer and SJMC. The Bond Trustee may terminate the Book Entry System without direction from, or consent of, the Issuer or SJMC if the Bond Trustee determines in good faith that termination is in the best interest of the Holders. Notice of termination of the Book Entry System shall be given to Holders not less than 20 days before such termination is effective.

(d) If the Book Entry System is discontinued, (i) a physical certificate or physical certificates shall be executed, authenticated and delivered to each beneficial owner, or entitlement holder, under the Book Entry System in accordance with such holder’s ownership of Bonds, (ii) such certificates shall be registered in the Bond Register maintained by the Bond Trustee, and (iii) the remaining provisions of this Article shall govern the registration, transfer, exchange and payment of Bonds.

SECTION 4.2. ALTERNATE PROVISIONS REGARDING PAYMENT, REGISTRATION, TRANSFER AND EXCHANGE OF BONDS.

(a) If the Book Entry System is discontinued, the provisions of this Section shall control the registration, transfer, exchange and payment of Bonds.

(b) Payment of Debt Service on the Bonds shall be made as follows:

(1) Payment of interest on the Bonds which is due on any Interest Payment Date shall be made by check or draft mailed or wire by the Bond Trustee to the persons entitled thereto at their addresses appearing in the Bond Register. Such payments of interest shall be deemed timely made if so mailed on the Interest Payment Date (or, if such Interest Payment Date is not a Business Day, on the Business Day next following such Interest Payment Date).

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(2) Payment of the principal of (and premium, if any, on) the Bonds and payment of accrued interest on the Bonds due upon redemption on any date other than an Interest Payment Date shall be made only upon surrender thereof at the Office of the Bond Trustee.

(3) Upon the written request of any Holder, the Bond Trustee shall make payments of Debt Service by wire transfer, provided that (i) such request contains adequate instructions for the method of payment, and (ii) payment of the principal of (and redemption premium, if any, on) such Bonds and payment of the accrued interest on such Bonds due upon redemption on any date other than an Interest Payment Date shall be made only upon surrender of such Bonds to the Bond Trustee.

(c) The Issuer shall cause to be kept at the Office of the Bond Trustee a register (herein sometimes referred to as the "Bond Register") in which, subject to such reasonable regulations as it may prescribe, the Issuer shall provide for the registration of Bonds and registration of transfers of Bonds entitled to be registered or transferred as herein provided. The Bond Trustee is hereby appointed as agent of the Issuer for the purpose of registering Bonds and transfers of Bonds as herein provided.

(d) Upon surrender for transfer of any Bond at the Office of the Bond Trustee, the Issuer shall execute, and the Bond Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Bonds of the same Tenor, of any Authorized Denominations and of a like aggregate principal amount.

(e) At the option of the Holder, Bonds may be exchanged for other Bonds of the same Tenor, of any Authorized Denominations and of a like aggregate principal amount, upon surrender of the Bonds to be exchanged at the Office of the Bond Trustee. Whenever any Bonds are so surrendered for exchange, the Issuer shall execute, and the Bond Trustee shall authenticate and deliver, the Bonds which the Holder making the exchange is entitled to receive.

(f) All Bonds surrendered upon any exchange or transfer provided for in this Bond Indenture shall be promptly cancelled by the Bond Trustee.

(g) All Bonds issued upon any transfer or exchange of Bonds shall be the valid obligations of the Issuer and entitled to the same security and benefits under this Bond Indenture as the Bonds surrendered upon such transfer or exchange.

(h) Every Bond presented or surrendered for transfer or exchange shall contain, or be accompanied by, all necessary endorsements for transfer.

(i) No service charge shall be made for any transfer or exchange of Bonds, but the Bond Trustee may require payment of a sum sufficient to cover any tax or other

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governmental charge that may be imposed in connection with any transfer or exchange of Bonds.

(j) The Bond Trustee shall not be required (i) to transfer or exchange any Bond during a period beginning at the opening of business 15 days before the day of the mailing of a notice of redemption of Bonds and ending at the close of business on the day of such mailing, or (ii) to transfer or exchange any Bond so selected for redemption in whole or in part.

(k) Interest on any Bond which is payable, and is punctually paid or duly provided for, on any Interest Payment Date shall be paid to the person in whose name that Bond is registered at the close of business on the Regular Record Date for such Interest Payment Date.

(l) Any interest on any Bond which is payable, but is not punctually paid or duly provided for, on any Interest Payment Date (herein called "Defaulted Interest") shall forthwith cease to be payable to the Holder on the relevant Regular Record Date solely by virtue of such Holder having been such Holder; and such Defaulted Interest shall be paid by the Issuer to the persons in whose names such Bonds are registered at the close of business on a special record date (herein called a "Special Record Date") for the payment of such Defaulted Interest, which shall be fixed in the following manner. The Issuer shall notify the Bond Trustee of the amount of Defaulted Interest proposed to be paid on each Bond and the date of the proposed payment (which date shall be such as will enable the Bond Trustee to comply with the next sentence hereof), and at the same time the Issuer shall deposit with the Bond Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Bond Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the persons entitled to such Defaulted Interest as in this subsection provided and not to be deemed part of the Trust Estate. Thereupon, the Bond Trustee shall fix a Special Record Date for the payment of such Defaulted Interest which shall be not more than 15 nor less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Bond Trustee of the notice of the proposed payment. The Bond Trustee shall promptly notify the Issuer of such Special Record Date and, in the name and at the expense of the Issuer, shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be mailed, first-class postage prepaid, to each Holder at his address as it appears in the Bond Register not less than 10 days prior to such Special Record Date. Notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor having been mailed as aforesaid, such Defaulted Interest shall be paid to the persons in whose names the Bonds are registered on such Special Record Date.

(m) Subject to the foregoing provisions of this Section, each Bond delivered under this Bond Indenture upon transfer of or in exchange for or in lieu of any other

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Bond shall carry all the rights to interest accrued and unpaid, and to accrue, which were carried by such other Bond and each such Bond shall bear interest from such date that neither gain nor loss in interest shall result from such transfer, exchange or substitution.

(n) All Bonds surrendered for payment, redemption, transfer or exchange, shall be promptly cancelled by the Bond Trustee. The Bond Trustee may destroy cancelled certificates. No Bond shall be authenticated in lieu of or in exchange for any Bond cancelled as provided in this Section, except as expressly provided by this Bond Indenture.

SECTION 4.3. PERSONS DEEMED OWNERS.

The Holder of a Bond shall be treated as the owner of such Bond for purposes of this Bond Indenture.

SECTION 4.4. BOND TRUSTEE AS PAYING AGENT.

Debt Service on the Bonds shall be payable on behalf of the Issuer by the Bond Trustee, which has been designated as the paying agent of the Issuer for purposes of this Bond Indenture.

SECTION 4.5. PAYMENTS DUE ON NON-BUSINESS DAYS.

Except as otherwise expressly provided by this Bond Indenture, if any payment on the Bonds is due on a day which is not a Business Day, such payment may be made on the first succeeding day which is a Business Day with the same effect as if made on the day such payment was due.

ARTICLE V SPECIFIC TERMS FOR BONDS AND DISPOSITION OF PROCEEDS

SECTION 5.1. SPECIFIC TITLE AND TERMS.

(a) Title and Amount. The Bonds shall be entitled "Florida Development Finance Corporation Healthcare Facilities Revenue Bonds (UF Health - Jacksonville Project), Series 2013B". The aggregate principal amount of the Bonds which may be Outstanding is limited to $59,405,000. A separate series or subseries designation may be assigned to specific Bonds or groups of Bonds to facilitate identification of Bonds in different Interest Rate Modes. The title of the Bonds may, in addition to the series or subseries designation, also include a reference to the Interest Rate Mode then in effect. When the Bonds are issued initially all Bonds will be in the R-FLOATs Mode and the title of the Bonds during the R-FLOATs Mode shall be "Series 2013B Bonds (R-FLOATs)".

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(b) Authorized Denominations. The Bonds shall be in Authorized Denominations.

(c) Form and Number. The Bonds shall be issuable as registered bonds without coupons in Authorized Denominations. The Bonds shall be numbered separately from 1 upward. In order to facilitate the Book Entry System, a single Bond certificate for all Bonds of the same Tenor shall be delivered to the Bond Trustee. The Bonds and the certificate of authentication shall be substantially as set forth in Exhibit 5.1(c), with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Bond Indenture.

(d) Maturity Dates and Interest Rates. The Bonds shall mature on February 1, 2029. All Bonds shall be issued initially in the R-FLOATs Mode with an R-FLOATs Weekly Period.

(e) Date. The Bonds shall be dated as of the date of initial delivery of the Bonds.

(f) Conversion of Interest Rate Modes. The Interest Rate Mode applicable to the Bonds may be converted to another Interest Rate Mode in accordance with the provisions of Section 5.3. Each Bond shall be in only one Interest Rate Mode at a time, but different Interest Rate Modes may be applicable at the same time to different Bonds. A Bond that is initially issued in an Interest Rate Mode or that is converted to an Interest Rate Mode shall remain in such Interest Rate Mode until (i) a Conversion Date for such Bond or (ii) the Maturity Date of such Bond. The Bond Trustee shall specify on its bond payment system which Interest Rate Mode is in effect with respect to such Bond and the applicable pricing details with respect to such Bond.

(g) Interest Payment Dates. Interest on the Bonds shall be payable in arrears on the following dates:

(1) with respect to interest on any Bond in the Daily Rate Mode, the Weekly Rate Mode, or the Index Rate Mode, (i) on the first Business Day of each month, (ii) on the Conversion Date if such Bond is converted to another Interest Rate Mode, and (iii) on the Maturity Date;

(2) with respect to any Bond in the R-FLOATs Mode with an R-FLOATs Weekly Period or an R-FLOATs Monthly Period, (i) on the first Business Day of each month, beginning December 1, 2013, (ii) on the Conversion Date if such Bond is converted to another Interest Rate Mode, and (iii) on the Maturity Date;

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(3) with respect to any Bond in the R-FLOATs Mode with an R-FLOATs Term Period of 180 days or less, the day immediately following the R-FLOATs Term Period (which must be a Business Day);

(4) with respect to any Bond in the R-FLOATs Mode with an R-FLOATs Term Period of more than 180 days, (i) on each February 1 and August 1 during the R-FLOATs Term Period and (ii) the day immediately following the R-FLOATs Term Period (which must be a Business Day);

(5) with respect to interest on any Bond in the Commercial Paper Rate Mode, the day immediately following the last day of the CP Rate Period (which must be a Business Day);

(6) with respect to interest on any Bond in the Term Rate Mode, (i) on February 1 and August 1 each year, (ii) on the Conversion Date if such Bond is converted to another Interest Rate Mode, and (iii) on the day immediately following the last day of the Term Rate Period (which must be a Business Day); and

(7) with respect to interest on any Bond in the Fixed Rate Mode, (i) on February 1 and August 1 in each year, (ii) on the Conversion Date if such Bond is converted to another Interest Rate Mode, and (iii) on the Maturity Date.

(h) Assignment of Serial Maturities to Term Bonds. The Term Bonds are subject to scheduled mandatory redemption as provided in Section 7.1(b). The Bond Trustee shall assign serial maturities to Term Bonds upon request of the Issuer, subject to the following terms and conditions:

(1) The Issuer shall deliver a Favorable Tax Opinion to the Bond Trustee.

(2) Assignment of serial maturities may only be effected in connection with a conversion of all Bonds to the Fixed Rate Mode and shall be effective as of the Conversion Date.

(3) If serial maturities are assigned to Term Bonds, the resulting schedule for retirement of principal of the Term Bonds must correspond to the original schedule for principal retirement of Term Bonds contained in this Bond Indenture (taking into account the mandatory redemption schedule). If serial maturities are assigned to less than all Term Bonds, the remaining Term Bonds may have scheduled mandatory redemption requirements, provided that the resulting schedule for retirement of principal of the Term Bonds (taking into account the mandatory redemption schedule for the Term Bonds that continue to have scheduled mandatory redemption requirements) must correspond to the

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original schedule for principal retirement of Term Bonds contained in this Bond Indenture (taking into account the mandatory redemption schedule). If serial maturities are assigned to less than all Term Bonds and a portion of the Term Bonds will continue to have scheduled mandatory redemption requirements, the provisions of Section 7.1(b) shall be amended to reflect the revised scheduled mandatory redemption requirements.

(4) The Bond Trustee shall establish a procedure it determines to be fair and appropriate, by lot or otherwise, for selecting and identifying Term Bonds to reflect the assignment of serial maturities.

(5) The Bond Trustee shall notify Financing Participants of the results of such procedure.

(i) Person to Whom Interest Payable. If the Book Entry System is in effect, the Bond Trustee shall pay interest to DTC, and interest payments shall be distributed by DTC to Holders in accordance with the rules and regulations of DTC. If the Book Entry System is terminated, the interest due on any Interest Payment Date for the Bonds shall be payable to Holders as of the Regular Record Date for such Interest Payment Date.

(j) Computation of Interest Accrual. The Bonds shall bear interest from their date, or the most recent date to which interest has been paid or duly provided for, at the applicable rate per annum set forth in this Article. Interest at the Daily Rate, the Weekly Rate, the CP Rate or the R-FLOATs Rate shall be computed on the basis of a 365 or 366-day year, as the case may be, for the actual number of days elapsed. Interest at the Index Rate, the Term Rate, or the Fixed Rate shall be computed on the basis of a 360-day year with 12 months of 30 days each.

(k) Interest on Overdue Payments. Interest shall be payable on overdue principal on the Bonds and (to the extent legally enforceable) on any overdue installment of interest on the Bonds at the Post-Default Rate.

(l) Execution and Authentication. Physical certificates evidencing the Bonds shall be executed on behalf of the Issuer by its Chairman or Vice Chairman under its corporate seal reproduced thereon and attested by its Secretary. The signature of any of these officers on the Bonds may be manual or, to the extent permitted by law, facsimile. Bonds bearing the manual or facsimile signatures of individuals who were at any time the proper officers of the Issuer shall bind the Issuer, notwithstanding that such individuals or any of them shall have ceased to hold such offices prior to the authentication and delivery of such Bonds or shall not have held such offices at the date of such Bonds. No Bond shall be secured by, or be entitled to any lien, right or benefit under, this Bond Indenture or be valid or obligatory for any purpose, unless there appears on such Bond a certificate of authentication substantially in the form provided for herein, executed by the Bond Trustee by manual signature, and such certificate upon any Bond shall be conclusive

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evidence, and the only evidence, that such Bond has been duly authenticated and delivered hereunder.

(m) Currency for Payment. Payment of Debt Service on the Bonds shall be made in such coin or currency of the United States of America as at the time of payment is legal tender for the payment of public and private debts.

SECTION 5.2. DETERMINATION OF INTEREST RATES.

(a) Daily Rate. The Daily Rate shall be a variable rate per annum for any Bond in the Daily Rate Mode, subject to the following terms and conditions:

(1) The Daily Rate shall be set initially on the date of initial delivery of such Bond (if initially issued in the Daily Rate Mode) or on the Conversion Date (if converted to the Daily Rate Mode) and shall change on each Business Day while such Bond is in the Daily Rate Mode (each Business Day being a "Reset Date"). The Daily Rate shall be determined by the Remarketing Agent when set initially and on each Reset Date. The Daily Rate shall be the lowest interest rate that would, in the opinion of the Remarketing Agent, result in the market value of such Bond being 100% of the principal amount thereof on the date of such determination, taking into account relevant market conditions and credit rating factors as they exist on such date. If the Remarketing Agent fails to determine the Daily Rate for any Reset Date, the Daily Rate for such Reset Date shall be the Alternate Rate.

(2) Interest accrual at each Daily Rate so determined shall begin on (and shall include) the date when initially set and each Reset Date, as the case may be, and shall end on (and shall include) the day immediately prior to the next Reset Date (or, if sooner, a Conversion Date).

(3) The Daily Rate may not exceed the Maximum Rate.

(4) On each determination date the Remarketing Agent shall give notice to the Bond Trustee of the Daily Rate so determined. Upon the request of any Holder or any Financing Participant, the Bond Trustee shall confirm the Daily Rate then in effect.

(b) Weekly Rate. The Weekly Rate shall be a variable rate per annum for any Bond in the Weekly Rate Mode, subject to the following terms and conditions:

(1) The Weekly Rate shall be set initially on the date of initial delivery of such Bond (if initially issued in the Weekly Rate Mode) or on the Conversion Date (if converted to the Weekly Rate Mode) and shall change on each Thursday while such Bond is in the Weekly Rate Mode (each Thursday being a "Reset Date"). The Weekly Rate shall be determined by the Remarketing Agent when set

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initially and on each Reset Date (or, if any Reset Date is not a Business Day, on the Business Day prior to such Reset Date). The Weekly Rate shall be the lowest interest rate that would, in the opinion of the Remarketing Agent, result in the market value of such Bond being 100% of the principal amount thereof on the date of such determination, taking into account relevant market conditions and credit rating factors as they exist on such date. If the Remarketing Agent fails to determine the Weekly Rate for any Reset Date, the Weekly Rate for such Reset Date shall be the Alternate Rate.

(2) Interest accrual at each Weekly Rate so determined shall begin on (and shall include) the date when set initially and each Reset Date, as the case may be, and shall end on (and shall include) the day immediately prior to the next Reset Date (or, if sooner, a Conversion Date).

(3) The Weekly Rate may not exceed the Maximum Rate.

(4) On each determination date the Remarketing Agent shall give notice to the Bond Trustee of the Weekly Rate so determined. Upon the request of any Holder or any Financing Participant, the Bond Trustee shall confirm the Weekly Rate then in effect.

(c) CP Rate. The CP Rate for any Bond in the Commercial Paper Rate Mode shall be a fixed rate per annum for each CP Rate Period, subject to the following terms and conditions:

(1) The initial CP Rate Period shall be established on the date of initial delivery of such Bond (if initially delivered in the Commercial Paper Rate Mode) or on the Conversion Date for such Bond (if converted to the Commercial Paper Rate Mode), and subsequent CP Rate Periods shall be established on the day immediately after each expiring CP Rate Period (the day immediately after each expiring CP Rate Period being a "Reset Date"), subject to the terms and conditions of Section 5.2(c)(2). On the date of initial delivery, the Conversion Date and each Reset Date, the Remarketing Agent shall determine the CP Rate for the related CP Rate Period, which shall be the lowest interest rate that would, in the opinion of the Remarketing Agent, result in the market value of such Bond being 100% of the principal amount thereof on the date of such determination, taking into account relevant market conditions and credit rating factors as they exist on such date. If the Remarketing Agent fails to establish a CP Rate Period or fails to determine the related CP Rate, a CP Rate Period extending to the day immediately prior to the next Business Day shall be automatically established and the CP Rate for such CP Rate Period shall be the Alternate Rate.

(2) The duration of each CP Rate Period for a Bond shall be subject to the following terms and conditions:

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(A) Each Bond shall have only one CP Rate Period at one time, but different CP Rate Periods may be applicable at the same time to different Bonds in the Commercial Paper Rate Mode.

(B) The Remarketing Agent shall establish CP Rate Periods of such duration as, in the judgment of the Remarketing Agent, is likely to provide the lowest average interest rate on Bonds in the Commercial Paper Rate Mode, taking into account demand for particular CP Rate Periods and other market conditions. The Remarketing Agent may seek advice of SJMC in establishing CP Rate Periods.

(C) Each CP Rate Period may be for any number of days up to 270 days. No CP Rate Period may extend beyond the Maturity Date for such Bond.

(D) A CP Rate Period must end on a day immediately prior to a Business Day. If the specified end date for a CP Rate Period is not in fact a day immediately prior to a Business Day, then such CP Rate Period shall be deemed to extend to the next day that is immediately prior to a Business Day.

(E) If the Issuer gives notice of conversion to another Interest Rate Mode, any CP Rate Period established after such notice must end on or before the Conversion Date.

(F) In order to facilitate the selection of Bonds to be redeemed on any scheduled mandatory redemption date, the Remarketing Agent shall establish CP Rate Periods of such lengths as will assure that the principal amount of Bonds subject to optional redemption at par on any scheduled mandatory redemption date is not less than the principal amount of Bonds subject to scheduled mandatory redemption on such date.

(3) On the day immediately following each CP Rate Period (which must be a Business Day and is also a Reset Date) such Bond shall be repurchased from the Holder pursuant to the Mandatory Tender provisions of this Bond Indenture. A new CP Rate for a new CP Rate Period shall be established on the Mandatory Tender Date, and the Bond shall be remarketed by the Remarketing Agent.

(4) Interest accrued at the CP Rate for any CP Rate Period shall begin on (and shall include) the first day of each CP Rate Period and shall end on (and shall include) the last day of the CP Rate Period.

(5) The CP Rate may not exceed the Maximum Rate.

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(6) On each determination date the Remarketing Agent shall give notice to the Bond Trustee of the CP Rate so determined. Upon the request of any Holder or any Financing Participant, the Bond Trustee shall confirm the CP Rate so determined.

(d) Index Rate. The Index Rate shall be a variable rate per annum for any Bond in the Index Rate Mode, subject to the following terms and conditions:

(1) The Index Rate shall be set initially on the date of initial delivery of such Bond (if initially issued in the Index Rate Mode) or on the Conversion Date (if converted to the Index Rate Mode) and shall change on each Reset Date designated as such pursuant to Section 5.1(d) (for a Bond initially issued in the Index Rate Mode) or Section 5.3 (for a Bond converted to the Index Rate Mode). The Index Rate shall be determined by the Calculation Agent based on the publication of the Designated Index on the date initially set and on each Reset Date (or, if not published on any such date, as published most recently prior to such date).

(2) Interest accrual at the Index Rate shall begin on (and shall include) the date when initially set and each Reset Date, and shall end on (and shall include) the day immediately prior to the next Reset Date (or, if sooner, a Conversion Date).

(3) The Index Rate may not exceed the Maximum Rate.

(4) On each determination date the Calculation Agent shall give notice to the Bond Trustee of the Index Rate so determined. Upon the request of any Holder or any Financing Participant, the Bond Trustee shall confirm the Index Rate then in effect.

(5) The Index Rate Period shall be specified in Section 5.1(d) (if such Bond is initially issued in the Index Rate Mode) or shall be specified on the Conversion Date (if such Bond is converted to the Index Rate Mode). A Bond in the Index Rate Mode shall remain in such Mode until the end of the applicable Index Rate Period, or, if sooner, the date that the Interest Rate Mode for such Bond is converted to another Interest Rate Mode pursuant to Section 5.3(b). The day immediately following the last day of an Index Rate Period shall be a Mandatory Tender Date and a Conversion Date for such Bond.

(e) Term Rate and Term Rate Periods. The Term Rate for any Bond in the Term Rate Mode shall be a fixed rate per annum for the related Term Rate Period, subject to the following terms and conditions:

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(1) The Term Rate shall be applicable for the related Term Rate Period. The duration of each Term Rate Period is subject to the terms and conditions of Section 5.2(e)(2). If a Bond is initially issued in the Term Rate Mode, the Term Rate Period and Term Rate will be specified in Section 5.1(d). If a Bond is converted to the Term Rate Mode, the Term Rate Period will be specified pursuant to Section 5.3(b). On or before the Conversion Date for a Bond being converted to the Term Rate Mode the Remarketing Agent shall determine the Term Rate for the related Term Rate Period, which shall be the lowest interest rate that would, in the opinion of the Remarketing Agent, result in the market value of such Bond being 100% of the principal amount thereof on the date of such determination, taking into account relevant market conditions and credit rating factors as they exist on such date.

(2) The duration of each Term Rate Period for a Bond shall be subject to the following terms and conditions:

(A) A Term Rate Period shall be not less than 180 days and must end prior to the Maturity Date of such Bond. A Bond with a fixed rate until the Maturity Date is considered a Bond in the Fixed Rate Mode for purposes of this Bond Indenture.

(B) A Term Rate Period must end on a day immediately prior to a Business Day. If the specified end date for a Term Rate Period is not in fact a day immediately prior to a Business Day, then such Term Rate Period shall be deemed to extend to the next day that is immediately prior to a Business Day.

(3) On the day after the last day of the Term Rate Period such Bond shall be purchased from the Holder pursuant to the Mandatory Tender provisions of this Bond Indenture, and such Bond shall be converted to another Interest Rate Mode, which may be the Term Rate Mode, in which case a new Term Rate Period and Term Rate shall be established pursuant to Section 5.3(b) and this Section 5.2(e).

(4) Interest accrued at the Term Rate for any Term Rate Period shall begin on (and shall include) the date of initial delivery or the Conversion Date, as the case may be, and shall end on (and shall include) the last day of the Term Rate Period (or, if sooner, a Conversion Date).

(5) The Term Rate may not exceed the Maximum Rate.

(6) On each determination date the Remarketing Agent shall give notice to the Bond Trustee of the Term Rate so determined. Upon the request of any

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Holder or any Financing Participant, the Bond Trustee shall confirm the Term Rate so determined.

(f) Fixed Rate. The Fixed Rate for any Bond in the Fixed Rate Mode shall be a fixed rate per annum, subject to the following terms and conditions:

(1) The Fixed Rate shall be applicable until the Maturity Date of such Bond (or, if sooner, a Conversion Date). If a Bond is initially issued in the Fixed Rate Mode, the Fixed Rate will be specified in Section 5.1(d). If a Bond is converted to the Fixed Rate Mode, on or before the Conversion Date the Remarketing Agent shall determine the Fixed Rate. Except as otherwise provided in Section 5.2(f)(2), the Fixed Rate shall be the lowest interest rate that would, in the opinion of the Remarketing Agent, result in the market value of such Bond being 100% of the principal amount thereof on the date of such determination, taking into account relevant market conditions and credit rating factors as they exist on such date.

(2) The Issuer may permit the Remarketing Agent to establish a Fixed Rate that results in original issue discount or original issue premium (for a Holder purchasing on or after the Conversion Date) provided that:

(A) The Issuer delivers a Favorable Tax Opinion to the Bond Trustee.

(B) If the Fixed Rate will result in a sale of such Bond on the Conversion Date at a price lower than 100% of the principal amount of such Bond, on or before the Conversion Date the Issuer must deposit in the Bond Purchase Fund an amount equal to the difference between the sale price and par.

(C) If the Fixed Rate will result in a sale of such Bond on the Conversion Date at a price higher than 100% of the principal amount of such Bond, the difference between the sale price and par shall be transferred to the Issuer and applied by the Issuer in such manner as shall be approved by a Favorable Tax Opinion. At the option of the Issuer, such amount may be deposited in the Costs of Issuance Fund and disbursed from such Fund.

(3) Interest accrued at the Fixed Rate shall begin on (and shall include) the date of initial delivery or the Conversion Date, as the case may be, and shall end on (and shall include) the day immediately prior to the Maturity Date of such Bond (or, if sooner, a Conversion Date).

(4) The Fixed Rate may not exceed the Maximum Rate.

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(5) On each determination date the Remarketing Agent shall give notice to the Bond Trustee of the Fixed Rate so determined. Upon the request of any Holder or any Financing Participant, the Bond Trustee shall confirm the Fixed Rate so determined.

(g) R-FLOATs Rate. The R-FLOATs Rate for any Bond in the R-FLOATs Mode shall be determined as follows:

(1) A Bond in the R-FLOATs Mode may be in an R-FLOATs Weekly Period, an R-FLOATs Monthly Period, or an R-FLOATs Term Period. All Bonds in the R-FLOATs Mode shall be in the same R-FLOATs Period, and all Bonds with an R-FLOATs Term Period shall have the same R-FLOATs Term Period. During the R-FLOATs Mode, the Issuer may elect to establish the applicable R-FLOATs Period. The Issuer has elected to establish an R-FLOATs Weekly Period when the Bonds are initially issued. If a Bond is converted to the R-FLOATs Mode, the Issuer shall elect the R-FLOATs Period for such Bond on the last Business Day before the Conversion Date. During the R-FLOATs Mode, the Issuer may elect to change the R-FLOATs Period for Bonds in the R-FLOATs Mode, subject to the following terms and conditions:

(A) Any change in the R-FLOATs Period may be effective only on an R-FLOATs Reset Date.

(B) The Issuer’s election to change the R-FLOATs Period to an R-FLOATs Weekly Period or an R-FLOATs Monthly Period must be given to the Bond Trustee and the Remarketing Agent not less than 5 Business Days prior to the R-FLOATs Reset Date when the change is to be effective (unless a shorter period is acceptable to the Bond Trustee and Remarketing Agent). The Issuer’s election to establish an R-FLOATs Term Period must be given to the Bond Trustee and the Remarketing Agent not less than 20 days prior to the first day of the proposed R-FLOATs Term Period (unless a shorter period is acceptable to the Bond Trustee and Remarketing Agent).

(C) Bonds in an R-FLOATs Weekly Period or an R-FLOATs Monthly Period shall remain in such Period unless the Issuer elects to change the Period.

(D) The Issuer may elect an R-FLOATs Term Period, which must be more than 35 days and must end on the last day of a calendar month prior to the Maturity Date for the Bonds. If the Issuer elects an R-FLOATs Term Period that ends on a day that is not in fact immediately prior to a Business Day, then such R-FLOATs Term Period shall automatically extend to the next day that is immediately prior to a Business Day.

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(E) An election by the Issuer to establish an R-FLOATs Term Period may provide that successive R-FLOATs Term Periods of specified length shall be established with respect to Bonds in the R-FLOATs Mode. If such a notice is delivered, no additional notice shall be required from the Issuer with respect to the subsequent R-FLOATs Term Periods so specified. Any such notice may be revoked by the Issuer, but the revocation shall be applicable only with respect to R-FLOATs Term Periods that would have commenced after the date of the notice of revocation.

(F) Upon the expiration of any R-FLOATs Term Period, the R-FLOATs Period shall automatically revert to an R-FLOATs Weekly Period unless the Issuer makes a timely election to change the R-FLOATs Period to the R-FLOATs Monthly Period or another R-FLOATs Term Period.

The Bond Trustee shall notify Bondholders of each change to an R-FLOATs Weekly Period or an R-FLOATs Monthly Period not later than 3 Business Days prior to the effective date of such change. The Bond Trustee shall notify Bondholders of each change to an R-FLOATs Term Period in the R-FLOATs Mandatory Tender notice required by Section 6.2.

(2) The R-FLOATs Weekly Rate shall be set initially on the date of initial delivery of the Bonds (if initially issued in the R-FLOATs Mode with an R-FLOATs Weekly Period) or on the Conversion Date (if converted to the R-FLOATs Mode with an R-FLOATs Weekly Period) and shall change on each Thursday while the Bonds are in an R-FLOATs Weekly Period (each Thursday being an "R-FLOATs Reset Date"). The R-FLOATs Weekly Rate shall be determined when set initially and on each R-FLOATs Reset Date or, if any R-FLOATs Reset Date is not a Business Day, on the last Business Day prior to such R-FLOATs Reset Date (each such date being an "R-FLOATs Rate Determination Date"). The R-FLOATs Weekly Rate so determined shall be effective on the R-FLOATs Reset Date and shall remain in effect until (and including) the following Wednesday.

(3) The R-FLOATs Monthly Rate shall be determined (i) on the last Business Day immediately prior to the first day of an R-FLOATs Monthly Period and (ii) on the last Business Day of each month during the R-FLOATs Monthly Period (each such date being an "R-FLOATs Rate Determination Date"). The R-FLOATs Monthly Rate so determined shall be effective on the first day of the R-FLOATs Monthly Period or the first Business Day following the R-FLOATs Rate Determination Date, as the case may be (each such date being an "R-FLOATs Reset Date"), and shall

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remain in effect until (and including) the day immediately prior to the first Business Day of the following month.

(4) An R-FLOATs Term Rate shall be set on the last Business Day immediately prior to the first day of an R-FLOATs Term Period (each such date being an "R-FLOATs Rate Determination Date"). The R-FLOATs Term Rate so determined shall be effective on the first day of the R-FLOATs Term Period (each such date being an "R-FLOATs Reset Date") and shall remain in effect until (and including) the last day of such R-FLOATs Term Period.

(5) The R-FLOATs Rate shall be the lowest interest rate that would, in the opinion of the Remarketing Agent, result in the market value of the Bonds being 100% of the principal amount thereof on the Rate Determination Date, taking into account relevant market conditions and credit rating factors as they exist on such date. If the Remarketing Agent fails to determine the R-FLOATs Rate on any R-FLOATs Rate Determination Date, the R-FLOATs Rate on the following R-FLOATs Reset Date shall be deemed to be the Alternate Rate.

(6) The R-FLOATs Rate may not exceed the Maximum Rate.

(7) On each R-FLOATs Rate Determination Date the Remarketing Agent shall give notice to the Bond Trustee of any R-FLOATs Rate so determined. Upon the request of any Holder or any Financing Participant, the Bond Trustee shall confirm the R-FLOATs Rate so determined.

(8) Notwithstanding the provisions of Section 5.2(g)(1) through (g)(7), during any R-FLOATs Non-Remarketing Period, all Bonds in the R-FLOATs Mode (including any Bonds in the R-FLOATs Mode that are not R-FLOATs Non-Remarketed Bonds) shall bear interest at the Maximum Rate.

(h) Rate Determinations Conclusive. The interest rates determined as provided in this Section shall be conclusive and binding on the Financing Participants.

SECTION 5.3. CONVERSION OF INTEREST RATE MODE.

(a) Automatic Conversion to Weekly Rate Mode. Bonds shall automatically convert to the Weekly Rate Mode under the following circumstances:

(1) The day after the last day of any Term Rate Period with respect to a Bond in the Term Rate Mode (which must be a Business Day) will be a Conversion Date for such Bond, and the Interest Rate Mode on such Bond shall

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automatically convert to the Weekly Rate Mode unless the Interest Rate Mode for such Bond is effectively converted on such date to another Interest Rate Mode.

(2) The period during which the Index Rate Mode will be applicable may be specified when a Bond is initially issued in the Index Rate Mode or when a Bond is converted to the Index Rate Mode pursuant to Section 5.3(b). The day after the last day of an Index Rate Period (which must be a Business Day) shall be a Conversion Date, and the Interest Rate Mode on such Bond shall automatically convert to the Weekly Rate Mode unless the Interest Rate Mode for such Bond is effectively converted on such date to another Interest Rate Mode.

(3) If the Issuer revokes its election to effect the conversion of a Bond to another Interest Rate Mode, or if the conditions for such conversion are not satisfied, such Bond shall automatically convert to the Weekly Rate Mode, notwithstanding the notice of conversion to another Interest Rate Mode.

Any Bond that is converted automatically to the Weekly Rate Mode pursuant to this Section may be converted to another Interest Rate Mode in accordance with the terms and conditions of Section 5.3(b).

(b) Optional Conversion to Another Interest Rate Mode. At the option of the Issuer, any Bond may be converted from one Interest Rate Mode to another Interest Rate Mode, subject to the following terms and conditions:

(1) The Issuer must give the other Financing Participants notice of such conversion not less than 3 Business Days prior to the date when notice of the related Mandatory Tender must be given to Holders (unless a shorter notice is acceptable to the Bond Trustee). Such notice must specify the Conversion Date and the principal amount of the Bond for which the conversion is requested.

(2) Less than the entire principal amount of a Bond may be converted if both the amount converted and the remaining portion of such Bond will be in Authorized Denominations.

(3) The Conversion Date must be a date when such Bond is subject to optional redemption at par.

(4) Not later than the last Business Day prior to the Conversion Date the Issuer shall give notice to the Bond Trustee and Remarketing Agent specifying the Interest Rate Mode to which such Bond is being converted.

(5) If a Bond is being converted to the Index Rate Mode, such notice shall also specify the Designated Index, the Applicable Spread, the Reset Date, and the Index Rate Period.

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(6) If a Bond is being converted to the R-FLOATs Mode, such notice shall also specify the initial R-FLOATs Period, subject to the terms and conditions of Section 5.2(g)(1).

(7) If a Bond is being converted to the Term Rate Mode, such notice shall also specify the applicable Term Rate Period, subject to the terms and conditions of Section 5.2(e)(2). A notice from the Issuer of conversion to the Term Rate Mode may provide that successive Term Rate Periods of specified length shall be established with respect to a Bond. If such a notice is delivered, no additional notice of conversion shall be required from the Issuer prior to the Term Rate Periods so specified. Any such notice may be revoked as provided in Section 5.3(c), but the revocation shall be applicable only with respect to Term Rate Periods that would have commenced after the date of the notice of revocation.

(8) On the proposed Conversion Date the Bond Trustee must receive a Favorable Tax Opinion.

(c) Revocation of Election. The election to convert a Bond to another Interest Rate Mode shall be revoked as follows:

(1) The election to convert shall automatically be deemed revoked if such Bond has not been remarketed in the designated Interest Rate Mode before DTC’s deadline for delivery of converted Bonds on the proposed Conversion Date.

(2) The Issuer may, at its option, revoke the election to convert a Bond to another Interest Rate Mode (or to establish successive Term Rate Periods) by notice delivered to the other Financing Participants (i) before such Bond has been delivered to a purchaser in the new Interest Rate Mode or (ii) if such Bond has not been delivered to a purchaser in the new Interest Rate Mode, at any time prior to noon on the Conversion Date.

If a conversion is revoked, the Bond shall automatically convert to the Weekly Rate Mode as provided in Section 5.3(a). Any Bond that is converted automatically to the Weekly Rate Mode pursuant to Section 5.3(a) may be converted to another Interest Rate Mode at the option of the Issuer in accordance with the terms and conditions of Section 5.3(b). The Issuer’s right to revoke an election pursuant to this Section shall not affect any rights or remedies that the Remarketing Agent may have against the Issuer or SJMC pursuant to any bond purchase agreement, remarketing agreement, or other agreement entered into by the Remarketing Agent in connection with the proposed conversion.

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(d) Mandatory Tender Notwithstanding Failed Conversion. If a notice of Mandatory Tender is given by the Bond Trustee in connection with a proposed conversion of a Bond to another Interest Rate Mode, such Bond shall be subject to a Mandatory Tender on the date specified in such notice notwithstanding the revocation of the election to effect such conversion or the failure to satisfy the conditions for such conversion.

(e) R-FLOATs Periods. Conversion of a Bond to or from the R-FLOATs Mode must be in accordance with the terms and conditions of this Section. The Issuer’s election to establish an R-FLOATs Period with respect to any Bond is not a conversion within the meaning of this Section, but must comply with the terms and conditions of Section 5.2(g).

(f) Exercise of Conversion Rights by SJMC

If no Loan Default exists, SJMC may, on behalf of the Issuer, exercise the rights of the Issuer with respect to the conversion of Interest Rate Modes.

SECTION 5.4. PROCEEDS FROM SALE OF BONDS.

The proceeds from the sale of the Bonds to the original purchaser or purchasers thereof shall be deposited initially into the Series 2013B Bonds Clearing Account and shall then be applied as follows:

(1) The amount to be used for the retirement of the Refunded Notes shall be paid to the holder of the Refunded Notes per such holder's instructions; and

(2) The amount to be used for Costs of Issuance shall be deposited in the Costs of Issuance Fund.

The amount of Bond proceeds to be applied to each purpose identified in this Section 5.4(a) shall be specified by directions from an Authorized Representative of the Issuer delivered to the Bond Trustee in the form of a closing statement.

ARTICLE VI PURCHASE AND REMARKETING OF BONDS

SECTION 6.1. OPTIONAL TENDERS.

(a) The Holder of any Bond in the R-FLOATs Mode shall have the right to

tender such Bond to the Bond Trustee for purchase in whole or in part on the following dates (each an "R-FLOATs Optional Tender Date"):

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(1) If such Bond is in an R-FLOATs Weekly Period, on any Business Day. In order to exercise such option with respect to a Bond in an R-FLOATs Weekly Period, the Holder must deliver notice to the Bond Trustee not less than 5 Business Days prior to the related R-FLOATs Optional Tender Date.

(2) If such Bond is in an R-FLOATs Monthly Period, on any Interest Payment Date. In order to exercise such option with respect to a Bond in an R-FLOATs Monthly Period, the Holder must deliver notice to the Bond Trustee not less than 3 Business Days prior to the related R-FLOATs Optional Tender Date.

Holders of Bonds in the R-FLOATs Mode with an R-FLOATs Term Period shall not have the right to tender such Bonds for purchase during the R-FLOATs Term Period, but shall be required to tender such Bonds for purchase pursuant to Section 6.2(a) on the day immediately following the R-FLOATs Term Period.

(b) The Holder of a Bond in the Daily Rate Mode or the Weekly Rate Mode (but not a Bond in any other Interest Rate Mode) shall have the option to tender such Bond to the Bond Trustee for purchase in whole or in part on any Business Day. In order to exercise such option with respect to any Bond the Holder of such Bond must deliver notice to the Bond Trustee, as follows:

(1) If such Bond is in the Daily Rate Mode, such notice must be delivered not later than 10:00 a.m. on the Optional Tender Date.

(2) If such Bond is in the Weekly Rate Mode, such notice must be delivered at least 7 days prior to the Optional Tender Date.

(c) Any such notice of Optional Tender must be duly executed by the Holder and must specify (i) the name of the Holder of the Bond to be tendered for purchase, (ii) the Optional Tender Date, (iii) the principal amount of such Bond, and (iv) the principal amount of such Bond to be purchased (if such amount is less than the entire principal amount, both the amount to be purchased and the amount remaining must be in an Authorized Denomination). The notice of Optional Tender must be substantially as set forth in Exhibit 6.1(c) or in such other form as shall be acceptable to the Bond Trustee. The Bond Trustee shall promptly forward a copy of such notice to the other Financing Participants.

(d) If any notice of Optional Tender specifies an Optional Tender Date that is not a Business Day, then such notice shall be deemed to specify the next following Business Day as the Optional Tender Date. Unless a notice of Optional Tender indicates that less than the entire principal amount of the Bond is being tendered for purchase, the Holder will be deemed to have tendered the Bond in its entire principal amount for purchase.

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(e) Upon delivery of a written notice of Optional Tender, the election to tender shall be irrevocable and binding upon such Holder and may not be withdrawn. The Bond Trustee shall, in its sole discretion, determine whether, with respect to any Bond, notice of Optional Tender was properly completed with respect to such Bond by the Holder thereof.

(f) If a written notice of tender shall have been duly given with respect to any Bond, the Holder of such Bond shall deliver such Bond to the Bond Trustee on the Optional Tender Date. If only a portion of such Bond is to be purchased (as a result of the exercise of the Optional Tender right only with respect to such portion), the Holder shall receive a new Bond or Bonds of the same Tenor and of any Authorized Denomination or Denominations as requested by such Holder in aggregate principal amount equal to and in exchange for the unpurchased portion of the principal amount of the Bond surrendered. Any Bond (or portion thereof) that is to be so purchased but that is not so delivered to the Bond Trustee shall nevertheless be deemed to have been tendered by the Holder thereof on the Optional Tender Date.

(g) Except as provided in Section 6.3 with respect to R-FLOATs Non-Remarketed Bonds, on each Optional Tender Date the Bond Trustee shall pay to the Holder of each Bond (or portion thereof) properly tendered for purchase an amount equal to the Purchase Price. Funds for payment of the Purchase Price of such Bonds shall be paid by the Bond Trustee from the sources specified in Section 6.5.

(h) If there has been irrevocably deposited in the Bond Purchase Fund an amount sufficient to pay the Purchase Price of any Bond to be purchased on an Optional Tender Date, such Bond shall be deemed to have been tendered for purchase and purchased from the Holder thereof on such Optional Tender Date, and the Holder of such Bond shall not be entitled to receive interest on such Bond for any period on and after the Optional Tender Date. The Bond Trustee shall issue a new Bond or Bonds in the same aggregate principal amount for any such Bond which is not tendered for purchase on any Optional Tender Date and, upon receipt by the Bond Trustee of any such Bond from the Holder thereof, shall pay, or cause to be paid, the Purchase Price of such Tendered Bond to the Holder thereof and cancel such Tendered Bond.

(i) Holders may exercise Optional Tender rights notwithstanding the existence of a Bond Indenture Default.

SECTION 6.2. MANDATORY TENDERS.

(a) The Holder of a Bond in the R-FLOATs Mode shall be required to tender such Bond to the Bond Trustee for purchase on the following dates (each an "R-FLOATs Mandatory Tender Date"):

(1) Any R-FLOATs Period Change Date with respect to such Bond.

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(2) The day immediately after an R-FLOATs Term Period with respect to such Bond.

If any R-FLOATs Mandatory Tender Date is not a Business Day, the R-FLOATs Mandatory Tender Date shall be the next succeeding Business Day.

(b) The Holder of a Bond shall be required to tender such Bond to the Bond Trustee for purchase on the following dates:

(1) The day immediately following any Index Rate Period, Term Rate Period or CP Rate Period with respect to such Bond.

(2) Each Conversion Date with respect to such Bond.

If any of such dates is not a Business Day, the Mandatory Tender Date shall be the next succeeding Business Day.

(c) No notice is required for a Mandatory Tender on the last day of a Term Rate Period or the last day of a CP Rate Period, even if that day is also a Mandatory Tender Date for a separate reason. For all other Mandatory Tenders notice of the Mandatory Tender shall be given by the Bond Trustee to the affected Holder not less than 15 days prior to the Mandatory Tender Date.

(d) Except as provided in Section 6.3 with respect to R-FLOATs Non-Remarketed Bonds, on the Mandatory Tender Date with respect to any Bond, the Bond Trustee shall pay to the Holder of such Bond an amount equal to the Purchase Price. Funds for payment of the Purchase Price of such Bond shall be drawn by the Bond Trustee from the sources specified in Section 6.5.

(e) If there has been irrevocably deposited in the Bond Purchase Fund an amount sufficient to pay the Purchase Price of any Bond to be purchased on a Mandatory Tender Date, such Bond shall be deemed to be tendered for purchase and purchased from the Holder thereof on such Mandatory Tender Date and the Holder of such Bond shall not be entitled to receive interest on such Bond for any period on and after the relevant Mandatory Tender Date. The Bond Trustee shall issue a new Bond or Bonds in the same aggregate principal amount and Tenor for any such Bond which is not tendered for purchase on any Mandatory Tender Date and, upon receipt by the Bond Trustee of any such Bond from the Holder thereof, shall pay, or cause to be paid, the Purchase Price of such Tendered Bond to the Holder thereof and cancel such Tendered Bond.

(f) After notice of a Mandatory Tender has been given by the Bond Trustee with respect to any Bond, such Bond shall be subject to Mandatory Tender notwithstanding the fact that the reasons for giving such notice cease to exist or are no longer applicable.

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SECTION 6.3. R-FLOATS NON-REMARKETED BONDS.

(a) Funds for the purchase of Bonds pursuant to an R-FLOATs Tender shall be derived solely from (i) Remarketing Proceeds or (ii) funds that SJMC elects to provide for such purchase; provided, however, that the Issuer shall not be required to provide funds for the purchase of Bonds tendered pursuant to an R-FLOATs Tender.

(b) If adequate funds are not available in the Bond Purchase Fund on any R-FLOATs Tender Date to pay the Purchase Price of all Bonds tendered for purchase pursuant to the R-FLOATs Tender provisions, no Bonds shall be purchased on such R-FLOATs Tender Date pursuant to the R-FLOATs Tender provisions, and all Bonds tendered for purchase on such R-FLOATs Tender Date shall be considered "R-FLOATs Non-Remarketed Bonds". The Bond Trustee shall return all R-FLOATs Non-Remarketed Bonds to the Holders thereof, and the Bond Trustee shall return any Remarketing Proceeds deposited in the Purchase Fund with respect to such R-FLOATs Non-Remarketed Bonds to the Remarketing Agent for return to the Persons providing such Remarketing Proceeds.

(c) The date on which a Bond is returned to the Holder pursuant to Section 6.3(b) shall be the first day of an R-FLOATs Special Non-Remarketing Period with respect to such Bond. During the R-FLOATs Special Non-Remarketing Period if the Bonds are not already in an R-FLOATs Weekly Period, the R-FLOATs Period for the Bonds shall automatically change to an R-FLOATs Weekly Period. During any R-FLOATs Non-Remarketing Period, all Bonds in the R-FLOATs Mode (including Bonds in the R-FLOATs Mode that are not R-FLOATs Non-Remarketed Bonds) shall bear interest at the Maximum Rate. During any R-FLOATs Special Non-Remarketing Period the Remarketing Agent shall continue to use its best efforts to remarket R-FLOATs Non-Remarketed Bonds. If an R-FLOATs Term-Out Event occurs during the R-FLOATs Special Non-Remarketing Period, all Bonds in the R-FLOATs Mode are subject to mandatory redemption pursuant to Section 7.1(c). If all R-FLOATs Non-Remarketed Bonds are successfully remarketed or are successfully converted to another Interest Rate Mode before an R-FLOATs Term-Out Event occurs, redemption of Bonds in the R-FLOATs Mode shall not be required pursuant to Section 7.1(c).

SECTION 6.4. REMARKETING OF TENDERED BONDS.

(a) The Remarketing Agent will use its best efforts to remarket Tendered Bonds, subject to the following terms and conditions:

(1) The Remarketing Agent shall not remarket Tendered Bonds to the Issuer or SJMC or any Affiliate of the Issuer or SJMC; provided, however, that SJMC may purchase Tendered Bonds with its own funds as provided in Section 6.5(b)(2) and Section 6.5(b)(3). The Issuer shall give the Bond Trustee prompt notice of any purchase of Bonds.

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(2) If a Tendered Bond is not remarketed within 90 days after the Tender Date, such Bond may not be remarketed unless the Bond Trustee receives a Favorable Tax Opinion.

(b) Promptly after arranging for the remarketing of any Bond, the Remarketing Agent shall give the Bond Trustee notice specifying delivery instructions with respect to such Bond, including, to the extent requested by the Bond Trustee, (i) such purchaser’s name, (ii) the principal amount, Tenor and Authorized Denomination of the Bond to be purchased, and (iii) delivery instructions with respect to such Bond.

(c) The Remarketing Agent may, at its option, purchase Bonds (including Tendered Bonds) for its own account at market prices (which may be above or below par), but shall not be required to purchase Bonds (including Tendered Bonds). If the Remarketing Agent purchases Bonds, it shall have all rights of a Holder of such Bonds, including without limitation the right to tender such Bonds for purchase pursuant to the Optional Tender provisions of this Bond Indenture.

SECTION 6.5. PURCHASE OF TENDERED BONDS.

(a) The Bond Trustee shall hold any Tendered Bond delivered to it in trust solely for the benefit of the tendering Holder until money representing the Purchase Price of such Bond shall have been delivered to or for the account of such Holder.

(b) The Bond Trustee shall obtain funds for payment of the Purchase Price of Tendered Bonds from the following sources:

(1) The Remarketing Agent shall deliver all Remarketing Proceeds to the Bond Trustee or shall instruct the purchaser of any remarketed Bond to deliver the Purchase Price of such remarketed Bond directly to the Bond Trustee. Remarketing Proceeds shall be held in a separate, segregated account in the Bond Purchase Fund and shall not be commingled with other money in the Bond Purchase Fund.

(2) Except as provided in Section 6.3 with respect to R-FLOATs Non-Remarketed Bonds, pursuant to the Loan Agreement SJMC shall provide the Purchase Price of all Tendered Bonds that will not be paid with Remarketing Proceeds. Funds obtained from the Issuer shall be held in a separate, segregated account in the Bond Purchase Fund and shall not be commingled with other money in the Bond Purchase Fund.

(3) Neither the Issuer nor SJMC shall be required to provide funds for the purchase of Bonds tendered pursuant to an R-FLOATs Tender, but SJMC may, at its option, provide funds for the purchase of Bonds tendered pursuant to an R-FLOATs Tender. Funds obtained from SJMC shall be held in a separate,

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segregated account in the Bond Purchase Fund and shall not be commingled with other money in the Bond Purchase Fund.

(c) Except as provided in Section 6.3 with respect to R-FLOATs Non-Remarketed Bonds, on the Tender Date with respect to any Bond, the Bond Trustee shall pay the Purchase Price to the Holder of such Bond. Funds available for the Purchase Price of Tendered Bonds shall be applied by the Bond Trustee as follows, in the order and priority indicated:

(1) First, Remarketing Proceeds shall be used to pay the Purchase Price of Tendered Bonds other than Obligor Bonds.

(2) Second, funds provided by SJMC shall be used to pay the Purchase Price of Tendered Bonds that are not purchased with Remarketing Proceeds.

The Bond Trustee shall not be required to use its own funds to pay the Purchase Price of Tendered Bonds. The Bond Trustee shall not pay the Purchase Price of any Tendered Bond, unless and until the Holder of such Bond presents such Bond to the Bond Trustee. Any Bond so delivered to the Bond Trustee after the Bond Trustee’s close of business on a Business Day shall be deemed delivered on the following Business Day.

SECTION 6.6. DISPOSITION OF PURCHASED BONDS.

(a) Tendered Bonds remarketed by the Remarketing Agent shall be delivered

to the purchaser in accordance with instructions provided by the Remarketing Agent. Tendered Bonds purchased with funds provided by SJMC shall be delivered to SJMC in accordance with instructions provided by SJMC.

(b) Any remarketed Bond that has been called for redemption shall be delivered with a copy of the redemption notice, and any remarketed Bond as to which notice of Mandatory Tender has been given shall be delivered with a copy of the notice of Mandatory Tender.

(c) Any Bond purchased pursuant to an Optional or Mandatory Tender shall not, by virtue of such purchase, be deemed paid or cancelled, but shall remain Outstanding until Defeased.

(d) If the Issuer or one of its Affiliates acquires Bonds through direct purchase from a Holder, the Issuer shall promptly notify the Bond Trustee. The Loan Agreement provides that if SJMC or one of its Affiliates acquires Bonds through direct purchase from a Holder, SJMC shall promptly notify the Bond Trustee. The Bond Trustee may assume that no Bonds are owned by the Issuer, SJMC or an Affiliate of either of them unless the Bond Trustee has notice to the contrary.

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SECTION 6.7. REMARKETING AGENT.

(a) The Issuer and SJMC have appointed Merrill Lynch, Pierce, Fenner &

Smith Incorporated as Remarketing Agent.

(b) Any Remarketing Agent appointed by the Issuer and SJMC shall accept such appointment and the duties and obligations imposed by this Bond Indenture by executing and delivering an agreement satisfactory to SJMC and the Bond Trustee.

(c) The Remarketing Agent may resign at any time by giving 30 days’ notice to the other Financing Participants.

(d) SJMC may remove the Remarketing Agent at any time upon 30 days’ notice to the Remarketing Agent and the other Financing Participants.

(e) If the Remarketing Agent shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Remarketing Agent for any cause, the Issuer and SJMC shall promptly appoint a successor Remarketing Agent. Any successor Remarketing Agent shall signify its acceptance of such appointment and its assumption of the duties and obligations imposed upon it by this Bond Indenture by execution and delivery of an agreement satisfactory to the Issuer, SJMC and the Bond Trustee.

(f) The Bond Trustee shall give notice to Holders of the initial appointment of the Remarketing Agent, each resignation and each removal of the Remarketing Agent, and each appointment of a successor Remarketing Agent.

(g) Compensation and expenses of the Remarketing Agent shall be paid by the Issuer, as provided in the agreement of the Remarketing Agent accepting its appointment.

(h) The Remarketing Agent shall not have a lien on any portion of the Trust Estate, including any Remarketing Proceeds and any money on deposit in the Bond Purchase Fund, for payment of its compensation or expenses.

ARTICLE VII REDEMPTION OF BONDS

SECTION 7.1. REDEMPTION PROVISIONS.

The Bonds shall be subject to redemption prior to maturity as follows:

(a) Optional Redemption. Bonds may be redeemed at the option of the Issuer (exercised by SJMC on behalf of the Issuer if no Loan Default exists) as follows:

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(1) Bonds in the R-FLOATs Mode. Bonds in the R-FLOATs Mode are subject to optional redemption in whole or in part at a redemption price equal to 100% of the principal amount to be redeemed plus accrued interest thereon to the date of redemption on the following dates:

(A) Bonds in an R-FLOATs Weekly Period or an R-FLOATs Monthly Period are subject to optional redemption on the first Business Day of each month.

(B) Bonds in an R-FLOATs Term Period are subject to optional redemption on the day following such R-FLOATs Term Period (which must be a Business Day).

(C) During any R-FLOATs Special Non-Remarketing Period, all Bonds in the R-FLOATs Mode are subject to optional redemption on any Business Day.

(2) Bonds in the Daily Rate Mode or Weekly Rate Mode. Any Bond in the Daily Rate Mode or the Weekly Rate Mode may be redeemed in whole or in part on any Business Day at a redemption price equal to 100% of the principal amount to be redeemed plus accrued interest thereon to the date of redemption.

(3) Bonds in the Commercial Paper Rate Mode. Any Bond in the Commercial Paper Rate Mode may be redeemed in whole or in part on any Reset Date with respect to such Bond at a redemption price equal to 100% of the principal amount to be redeemed plus accrued interest thereon to the date of redemption.

(4) Bonds Converted to the Index Rate Mode. For any Bond converted to the Index Rate Mode, such Bond may be redeemed in whole or in part on any Business Day (i) on or after the tenth anniversary of the conversion of such Bond (the "First Par Call Date") at a redemption price equal to 100% of the principal amount redeemed plus accrued interest thereon to the date of redemption or (ii) prior to the First Par Call Date at a redemption price equal to 100% of the principal amount redeemed plus accrued interest to the date of redemption plus a redemption premium equal to the Index Rate Redemption Premium.

(5) Bonds Converted to the Term Rate Mode. For any Bond converted to the Term Rate Mode if the Term Rate Period is 5 years or less, such Bond shall be subject to optional redemption on the last day of the Term Rate Period, but shall not be subject to optional redemption before the last day of the Term Rate Period. If the Term Rate Period is more than 5 years, such Bond may be redeemed in whole or in part on any Business Day on or after the First Optional Call Date (as defined below) at a redemption price equal to 100% of the principal amount to

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be redeemed plus accrued interest thereon to the date of redemption. For any Term Rate Period of more than 5 years but not more than 10 years, the First Optional Call Date shall be the fifth anniversary of the beginning of the Term Rate Period. For any Term Rate Period of more than 10 years but not more than 20 years, the First Optional Call Date shall be the anniversary of the beginning of the Term Rate Period that is on or immediately after the midpoint of such Term Rate Period. For any Term Rate Period of more than 20 years, the First Optional Call Date shall be the tenth anniversary of the beginning of the Term Rate Period.

(6) Bonds Converted to the Fixed Rate Mode. For any Bond converted to the Fixed Rate Mode, if the period from the Conversion Date to the maturity of such Bond is 5 years or less, such Bond shall not be subject to optional redemption. If the period from the Conversion Date to maturity of such Bond is more than 5 years, such Bond may be redeemed in whole or in part on any Business Day on or after the First Optional Call Date (as defined below) at a redemption price equal to 100% of the principal amount to be redeemed plus accrued interest thereon to the date of redemption. If the period from the Conversion Date to maturity is more than 5 years but not more than 10 years, the First Optional Call Date shall be the fifth anniversary of the Conversion Date. If the period from the Conversion Date to maturity is more than 10 years but not more than 20 years, the First Optional Call Date shall be the anniversary of the Conversion Date that is on or immediately after the midpoint of the remaining period to maturity. If the period from the Conversion Date to maturity is more than 20 years, the First Optional Call Date shall be the tenth anniversary of the Conversion Date.

The optional redemption provisions with respect to any Bond may be amended as of any Conversion Date with respect to such Bond if the Issuer and SJMC delivers a Favorable Tax Opinion.

(b) Scheduled Mandatory Redemption of Term Bonds. All Bonds mature on February 1, 2029 and for purposes of the scheduled mandatory redemption provisions of this Section 7.1(b) are referred to as "Term Bonds". Unless serial maturities have been assigned to Term Bonds pursuant to Section 5.1(h), Term Bonds shall be redeemed, at a redemption price equal to 100% of the principal amount to be redeemed plus accrued interest thereon to the redemption date, on dates and in principal amounts (after credit as provided below) as follows:

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Redemption Date

(February 1)

Principal Amount to be

Redeemed

2015 $ 2,865,000 2016 3,005,000 2017 3,145,000 2018 3,290,000 2019 3,465,000 2020 3,575,000 2021 3,775,000 2022 3,950,000 2023 4,125,000 2024 4,330,000 2025 4,525,000 2026 4,740,000 2027 4,980,000 2028 5,190,000 2029 4,445,000

If the Term Bonds are in the Daily Rate Mode, the Weekly Rate Mode, the

Commercial Paper Rate Mode or the R-FLOATs Mode on the scheduled mandatory redemption date and the scheduled date is not a Business Day, the actual date for such redemption shall be the next succeeding Business Day, and interest shall accrue to the actual redemption date with respect to Term Bonds being redeemed.

Not later than the date on which notice of scheduled mandatory redemption is to be given, the Bond Trustee shall select affected Term Bonds for redemption by lot; provided, however, that (A) any R-FLOATs Non-Remarketed Bonds shall be selected for scheduled mandatory redemption before Bonds in other Interest Rate Modes are selected and (B) SJMC may, by timely notice delivered to the Bond Trustee, direct that any or all of the following amounts be credited against the principal amount of Term Bonds scheduled for redemption on such date: (i) the principal amount of Term Bonds of such Tenor delivered by SJMC to the Bond Trustee for cancellation and not previously claimed as a credit; (ii) the principal amount of Term Bonds of such Tenor previously redeemed (other than Term Bonds of such Tenor redeemed pursuant to the scheduled mandatory redemption requirement) and not previously claimed as a credit; and (iii) the principal amount of Term Bonds of such Tenor otherwise defeased and not previously claimed as a credit.

(c) Special Mandatory Redemption of R-FLOATs Non-Remarketed Bonds. If an R-FLOATs Term-Out Event occurs while any R-FLOATs Non-Remarketed Bond is in an R-FLOATs Special Non-Remarketing Period, all Bonds in the R-FLOATs Mode

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(including Bonds in the R-FLOATs Mode that are not R-FLOATs Non-Remarketed Bonds) shall be redeemed, at a redemption price equal to 100% of the principal amount to be redeemed plus accrued interest thereon to the redemption date, on the first February 1 or August 1 that is at least 24 months after the R-FLOATs Term-Out Event occurs. The foregoing notwithstanding, no such Bonds in the R-FLOATs Mode will be required to be redeemed pursuant to the forgoing provisions if all such Bonds in the R-FLOATSs Mode are either converted to bear interest in another Interest Rate Mode or are remarketed.

(d) Optional Redemption Upon Damage, Destruction or Condemnation of Operating Assets. The Bonds may be redeemed in whole or in part on any Business Day at the option of the Issuer (exercised by SJMC on behalf of the Issuer) at a redemption price equal to 100% of the principal amount of Bonds to be redeemed plus accrued interest thereon to the redemption date if, and to the extent that, the net proceeds of any insurance or condemnation award resulting from damage, destruction or condemnation of operating assets of SJMC exceed the cost of any repairs or replacements to its operating assets which SJMC elects to make with such proceeds.

SECTION 7.2. MANDATORY REDEMPTION.

Bonds shall be redeemed in accordance with the applicable mandatory redemption provisions without any direction from or consent by the Issuer or SJMC. Unless the date fixed for such mandatory redemption is otherwise specified by this Bond Indenture, the Bond Trustee shall select the date for mandatory redemption, subject to the provisions of this Bond Indenture with respect to the permitted period for such redemption.

SECTION 7.3. ELECTION TO REDEEM.

The election of the Issuer to exercise any right of optional redemption shall be evidenced by notice from an Authorized Representative of the Issuer to the Bond Trustee at least 3 Business Days prior to the date when notice of the redemption must be given to Holders (unless a shorter notice is acceptable to the Bond Trustee). If no Loan Default exists, SJMC may elect to exercise such right of optional redemption and may give the notice of election on behalf of the Issuer. An election to redeem shall specify (i) the principal amount of Bonds to be redeemed (if less than all Bonds Outstanding are to be redeemed pursuant to such option), (ii) the Tenor of Bonds to be redeemed, (iii) the redemption date, and (iv) any conditions to such redemption specified in accordance with the provisions of Section 7.5(d).

SECTION 7.4. SELECTION BY BOND TRUSTEE OF BONDS TO BE REDEEMED.

(a) Except as otherwise provided in the specific redemption provisions for the Bonds, if less than all Bonds Outstanding are to be redeemed, the principal amount of Bonds of each Tenor to be redeemed may be specified by the Issuer (or by SJMC on

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behalf of the Issuer if no Loan Default exists) by notice delivered to the Bond Trustee not less than 3 Business Days prior to the date when the Bond Trustee must give notice of the redemption to Holders (unless a shorter notice is acceptable to the Bond Trustee), or, in the absence of timely receipt by the Bond Trustee of such notice, shall be selected by the Bond Trustee by lot or by such other method as the Bond Trustee shall deem fair and appropriate; provided, however, that the principal amount of Bonds of each Tenor to be redeemed may not be larger than the principal amount of Bonds of such Tenor then eligible for redemption and may not be smaller than the smallest Authorized Denomination.

(b) Except as otherwise provided in the specific redemption provisions for the Bonds, if less than all Bonds with the same Tenor are to be redeemed, the particular Bonds of such Tenor to be redeemed shall be selected by the Bond Trustee from the Outstanding Bonds of such Tenor then eligible for redemption by lot or by such other method as the Bond Trustee shall deem fair and appropriate and which may provide for the selection for redemption of portions (in Authorized Denominations) of the principal of Bonds of such Tenor of a denomination larger than the smallest Authorized Denomination.

(c) The Bond Trustee shall promptly notify the Issuer and SJMC of the Bonds selected for redemption and, in the case of any Bond selected for partial redemption, the principal amount thereof to be redeemed.

(d) For all purposes of this Bond Indenture, unless the context otherwise requires, all provisions relating to the redemption of Bonds shall relate, in the case of any Bond redeemed or to be redeemed only in part, to the portion of the principal of such Bond which has been or is to be redeemed.

SECTION 7.5. NOTICE OF REDEMPTION.

(a) Notice of redemption shall be given to the affected Holder not less than 20 days prior to the redemption date. If the Book Entry System is in effect, notice of redemption shall be given to DTC and shall be forwarded by DTC to Holders through methods established by the rules and regulations of the Book Entry System. If the Book Entry System is not in effect, notice of redemption shall be given to Holders by certified mail.

(b) All notices of redemption shall state:

(1) the redemption date,

(2) the redemption price,

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(3) the principal amount of Bonds to be redeemed, and, if less than all Outstanding Bonds are to be redeemed, the identification (and, in the case of partial redemption, the respective principal amounts) of the Bonds to be redeemed,

(4) that on the redemption date the redemption price of each of the Bonds to be redeemed will become due and payable and that the interest thereon shall cease to accrue from and after said date, and

(5) any conditions to such redemption specified in accordance with the provisions of Section 7.5(d).

(c) Notice of optional redemption shall be given by the Bond Trustee on behalf of the Issuer unless the Issuer elects to give such notice itself. If the Issuer gives notice of optional redemption, it shall deliver a copy of such notice to the Bond Trustee on the following Business Day. Notice of redemption of Bonds in accordance with the scheduled mandatory redemption provisions of the Bonds shall be given by the Bond Trustee on behalf of the Issuer without any notice to, or consent of, the Issuer or SJMC.

(d) A notice of optional redemption may state that the redemption of Bonds is contingent upon specified conditions, such as receipt of a specified source of funds, or the occurrence of specified events. If the conditions for such redemption are not met, the Issuer shall not be required to redeem the Bonds (or portions thereof) identified in such notice, and any Bonds surrendered on the specified redemption date shall be returned to the Holders of such Bonds.

SECTION 7.6. DEPOSIT OF REDEMPTION PRICE.

On the applicable redemption date, an amount of money sufficient to pay the redemption price of all the Bonds which are to be redeemed on that date shall be deposited with the Bond Trustee, unless the notice of redemption specified contingencies that were not met on the redemption date. Such money shall be held in trust for the benefit of the persons entitled to such redemption price and shall not be deemed to be part of the Trust Estate.

SECTION 7.7. BONDS PAYABLE ON REDEMPTION DATE.

If notice of redemption is given and any conditions to such redemption specified pursuant to Section 7.5(d) are met, the Bonds to be redeemed shall become due and payable on the redemption date at the applicable redemption price and from and after such date (unless the Issuer shall default in the payment of the redemption price) such Bonds shall cease to bear interest.

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SECTION 7.8. BONDS REDEEMED IN PART.

(a) If the Book Entry System is in effect, partial redemption of any Bond shall be effected in accordance with the Book Entry System.

(b) If the Book Entry System has been terminated, any Bond which is to be redeemed only in part shall be surrendered at the Office of the Bond Trustee with all necessary endorsements for transfer, and the Issuer shall execute and the Bond Trustee shall authenticate and deliver to the Holder of such Bond, without service charge, a new Bond or Bonds of the same Tenor and of any Authorized Denomination or Denominations as requested by such Holder in aggregate principal amount equal to and in exchange for the unredeemed portion of the principal of the Bond surrendered.

SECTION 7.9. PURCHASE OF CALLABLE BONDS IN LIEU OF REDEMPTION

SJMC shall have the option to purchase Callable Bonds in lieu of optional redemption. If a Callable Bond has been called for optional redemption, SJMC may exercise its right of purchase by delivery to the Bond Trustee on or prior to the Business Day preceding the optional redemption date of written notice from SJMC specifying that the Callable Bonds shall not be redeemed, but instead shall be purchased pursuant to this Section. Upon delivery of such notice from SJMC, the Callable Bonds shall not be redeemed, but shall instead be subject to mandatory tender on the date that would have been the optional redemption date at a purchase price equal to the redemption price that would have been payable with respect to such Callable Bonds. SJMC’s option to purchase pursuant to this Section shall be effective whether or not the notice of optional redemption sent to Holders indicates that SJMC has exercised, or intends to exercise, such option. No further or additional notice to Holders shall be required in connection with the purchase in lieu of redemption. The Callable Bonds purchased pursuant to this Section (i) shall not be cancelled or retired, but shall continue to be outstanding, (ii) shall be delivered to, or as directed by, SJMC, and (iii) shall continue to bear interest at the rate provided for in this Bond Indenture.

ARTICLE VIII NO ADDITIONAL BONDS

This Bond Indenture authorizes the issuance of Bonds described in Article 5. No additional bonds may be issued pursuant to this Bond Indenture.

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ARTICLE IX INDENTURE FUNDS

SECTION 9.1. DEBT SERVICE FUND.

(a) There is hereby established a special trust fund which shall be designated the "Debt Service Fund". The Bond Trustee shall be the depository, custodian and disbursing agent for the Debt Service Fund.

(b) The Loan Agreement requires SJMC to make Loan Payments for deposit to the Debt Service Fund at times and in amounts sufficient to pay Debt Service on the Bonds.

(c) On each Bond Payment Date money in the Debt Service Fund shall be applied by the Bond Trustee to pay Debt Service on the Bonds.

(d) If money is on deposit in the Debt Service Fund on any Bond Payment Date sufficient to pay Debt Service on the Bonds due and payable on such Date, but the Holder of any Bond that matures on such Date or that is subject to redemption on such Date fails to surrender such Bond to the Bond Trustee for payment of Debt Service due and payable on such Date, the Bond Trustee shall segregate and hold in trust for the benefit of the person entitled thereto money sufficient to pay the Debt Service due and payable on such Bond on such Date. Money so segregated and held in trust shall not be a part of the Trust Estate and shall not be invested, but shall constitute a separate trust fund for the benefit of the persons entitled to such Debt Service.

SECTION 9.2. BOND PURCHASE FUND.

(a) There is hereby established a special trust fund which shall be designated the "Bond Purchase Fund". The Bond Trustee shall be the depositary, custodian and disbursing agent for the Bond Purchase Fund.

(b) Section 6.5 specifies the sources of funds available to the Bond Trustee for the payment of Tendered Bonds. The Bond Trustee shall keep such funds in separate, segregated accounts within the Bond Purchase Fund as provided in Section 6.5.

(c) Except as provided in Section 6.3 with respect to R-FLOATs Non-Remarketed Bonds, the Loan Agreement requires SJMC to make deposits to the Bond Purchase Fund at times and in amounts sufficient to pay the Purchase Price of Tendered Bonds to the extent that funds for payment of such Purchase Price are not obtained from Remarketing Proceeds.

(d) On each Tender Date, money in the Bond Purchase Fund shall be applied by the Bond Trustee to the payment of the Purchase Price of Tendered Bonds as provided in Section 6.5.

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(e) If money is on deposit in the Bond Purchase Fund on any Tender Date sufficient to pay the Purchase Price on the Bonds to be paid on such Tender Date, but the Holder of any Tendered Bond fails to deliver such Bond to the Bond Trustee for payment of such Purchase Price on such Tender Date, the Bond Trustee shall segregate and hold in trust for the benefit of the person entitled thereto money sufficient to pay such Purchase Price due and payable on such Bond on such Tender Date. Money so segregated and held in trust shall not be a part of the Trust Estate and shall not be invested, but shall constitute a separate trust fund for the benefit of the persons entitled to such Purchase Price.

SECTION 9.3. COSTS OF ISSUANCE FUND.

(a) There is hereby established with the Bond Trustee a trust fund which shall be designated the "Costs of Issuance Fund". A deposit to the Costs of Issuance Fund is to be made pursuant to Section 5.4.

(b) Money in the Costs of Issuance Fund shall be paid out by the Bond Trustee from time to time for the purpose of paying Costs of Issuance with respect to the Bonds upon delivery to the Bond Trustee of a requisition substantially in the form attached as Exhibit 9.3(b), executed by an Authorized Representative of SJMC.

(c) After an Authorized Representative of SJMC certifies to the Bond Trustee that money remaining in the Costs of Issuance Fund is not needed to pay Costs of Issuance with respect to the Bonds, any balance remaining in the Costs of Issuance Fund shall be transferred to the Debt Service Fund, as directed by an Authorized Representative of SJMC.

SECTION 9.4. INVESTMENT OF INDENTURE FUNDS

(a) Except as otherwise expressly provided in this Bond Indenture, any money held as part of a Bond Indenture Fund shall be invested or reinvested in Qualified Investments by the Bond Trustee in accordance with the written instructions of SJMC, to the extent that such investment is, in the opinion of the Bond Trustee, feasible and consistent with the purposes for which such Fund was created. Any investment made with money on deposit in a Bond Indenture Fund shall be held by or under control of the Fund custodian and shall be deemed at all times a part of the Bond Indenture Fund where such money was on deposit, and the interest and profits realized from such investment shall be credited to such Fund and any loss resulting from such investment shall be charged to such Fund.

(b) Any investment of money in the Bond Indenture Funds may be made by the Bond Trustee through its own bond department, investment department, other commercial banking department providing investment services or affiliated securities dealer, and may charge its ordinary and customary fees for such transactions.

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(c) The Bond Trustee shall follow the written instructions of SJMC with respect to investments of the Bond Indenture Funds as provided in this Section. The Bond Trustee may conclusively rely upon the Issuer’s written instructions as to both the suitability and legality of all investments directed hereunder. Ratings of investments shall be determined at the time of purchase of such investments and without regard to ratings subcategories. The Bond Trustee shall have no responsibility to monitor the ratings of investments after the initial purchase of such investments. In the absence of written investment instructions from SJMC, the Bond Trustee shall not be responsible or liable for keeping the moneys held by it hereunder fully invested. The Bond Trustee shall not be liable for any losses from any investments. Confirmations of investments are not required to be issued by the Bond Trustee for each month in which a monthly statement is rendered.

SECTION 9.5. APPLICATION OF FUNDS AFTER INDENTURE INDEBTEDNESS DEFEASED.

After all Indenture Indebtedness has been Defeased, any money or investments remaining in the Bond Indenture Funds or otherwise constituting part of the Trust Estate shall be paid to SJMC if no Indenture Default exists.

ARTICLE X

REPRESENTATIONS AND COVENANTS

SECTION 10.1. GENERAL REPRESENTATIONS.

The Issuer makes the following representations and warranties as the basis for the undertakings on its part herein contained:

(a) Under the provisions of the Enabling Law it has the power to consummate the transactions described in the Bond Documents to which it is a party.

(b) The Bond Documents to which it is a party constitute legal, valid and binding obligations of the Issuer and are enforceable against it in accordance with the terms of such Documents, except as enforcement thereof may be limited by (i) bankruptcy, insolvency, or other similar laws affecting the enforcement of creditors’ rights and (ii) general principles of equity, including the exercise of judicial discretion in appropriate cases.

SECTION 10.2. ENCUMBRANCES ON TRUST ESTATE.

The Issuer will not create or permit the creation of any pledge, lien, charge or encumbrance of any kind on the Trust Estate or any part thereof prior to or on a parity of lien with this Bond Indenture.

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SECTION 10.3. PAYMENT OF BONDS.

(a) The Issuer will, from funds constituting part of the Trust Estate, duly and punctually pay, or cause to be paid, the Debt Service on the Bonds as and when the same shall become due and will duly and punctually deposit, or cause to be deposited, in the Bond Indenture Funds the amounts required to be deposited therein, all in accordance with the terms of the Bonds and this Bond Indenture.

(b) The Issuer will not extend or consent to the extension of the time for payment of Debt Service on the Bonds or the Purchase Price of Tendered Bonds, unless such extension is consented to by the Holder of the Bond affected; provided, however, that payment of the Purchase Price of R-FLOATs Non-Remarketed Bonds shall be extended as provided in Section 6.3 without consent of the Bond Trustee or the affected Holder.

SECTION 10.4. INSPECTION OF RECORDS.

The Issuer will at any and all times, upon the request of the Bond Trustee, afford and procure a reasonable opportunity for the Bond Trustee by its representatives to inspect any books, records, reports and other papers of the Issuer relating to the performance by the Issuer of its covenants in this Bond Indenture, and the Issuer will furnish to the Bond Trustee any and all information as the Bond Trustee may reasonably request with respect to the performance by the Issuer of its covenants in this Bond Indenture and the Loan Agreement.

SECTION 10.5. ADVANCES BY BOND TRUSTEE.

If the Issuer shall fail to perform any of its covenants in this Bond Indenture, the Bond Trustee may, but shall not be required, at any time and from time to time, to make advances to effect performance of any such covenant on behalf of the Issuer. Any money so advanced by the Bond Trustee, together with interest at the Post-Default Rate, shall be repaid upon demand and such advances shall be secured under this Bond Indenture prior to the Bonds.

SECTION 10.6. CORPORATE EXISTENCE; MERGER, CONSOLIDATION, ETC.

(a) The Issuer will do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence.

(b) The Issuer may consolidate with or merge into any other corporation or transfer its property substantially as an entirety to another person if:

(1) the corporation formed by such consolidation or into which the Issuer is merged or the person which acquires by conveyance or transfer the

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Issuer’s property substantially as an entirety (the "Successor") shall execute and deliver to the Bond Trustee an instrument in form recordable and acceptable to the Bond Trustee containing an assumption by such Successor of the due and punctual payment of the Debt Service on the Bonds and the performance and observance of every covenant and condition of the Bond Documents to be performed or observed by the Issuer; and

(2) the Issuer shall deliver to the Bond Trustee a Favorable Tax Opinion.

(c) Upon any consolidation or merger or any conveyance or transfer of the Issuer’s property substantially as an entirety in accordance with this Section, the Successor shall succeed to, and be substituted for, and may exercise every right and power of, the Issuer under this Bond Indenture with the same effect as if such Successor had been named as the Issuer herein.

SECTION 10.7. COMPLIANCE WITH THE TAX CERTIFICATE AND AGREEMENT

The Issuer will comply with the covenants and agreements on its part contained in the Tax Certificate and Agreement.

SECTION 10.8. NOTICE WITH RESPECT TO CERTAIN R-FLOATS TERM-OUT EVENTS.

The Loan Agreement provides that SJMC shall provide notice to the Bond Trustee if an R-FLOATs Term-Out Event occurs with respect to the ratings on SJMC’s long-term debt. The Bond Trustee may assume that no such R-FLOATs Term-Out Event has occurred unless it receives written notice from the Issuer or the Holder of a Bond or Bonds in the R-FLOATs Mode.

ARTICLE XI DEFAULTS AND REMEDIES

SECTION 11.1. EVENTS OF DEFAULT.

Any one or more of the following shall constitute an event of default (a "Bond Indenture Default") under this Bond Indenture (whatever the reason for such event and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body):

(a) failure to pay (i) the interest on any Bond when such interest becomes due and payable, or (ii) the principal of (or premium, if any, on) any Bond when such

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principal (or premium, if any) becomes due and payable, whether at its stated Maturity Date, by declaration of acceleration or call for redemption or otherwise; or

(b) failure to pay the Purchase Price of any Bond due on any Tender Date (other than the Purchase Price of R-FLOATs Non-Remarketed Bonds); or

(c) An Act of Bankruptcy with respect to the Issuer; or

(d) default in the performance, or breach, of any covenant or warranty of the Issuer in this Bond Indenture (other than a covenant or warranty a default in the performance or breach of which is elsewhere in this Section specifically dealt with), and continuance of such default or breach for a period of 60 days after notice of such default or breach, stating that such notice is a "notice of default" hereunder, has been given to the Issuer by the Bond Trustee, or to the Issuer and the Bond Trustee by the Holders of at least 25% in principal amount of the Outstanding Bonds, unless, in the case of a default or breach that cannot be cured by the payment of money, the Issuer initiates efforts to correct such default or breach within 30 days from the receipt of such notice and diligently pursues such action until the default or breach is corrected; or

(e) the occurrence of an event of default, as therein defined, under the Loan Agreement or the Master Indenture and the expiration of the applicable notice period or grace period, if any.

SECTION 11.2. REMEDIES

(a) Acceleration of Maturity. If a Bond Indenture Default exists, the Bond Trustee or the Holders of not less than 25% in principal amount of the Bonds Outstanding may declare the principal of all the Bonds and the interest accrued thereon to be due and payable immediately, by notice to the Issuer (and to the Bond Trustee, if given by Holders), and upon any such declaration such Debt Service shall become immediately due and payable. At any time after such a declaration of acceleration has been made pursuant to this Section, the Holders of a majority in principal amount of the Bonds Outstanding may, by notice to the Issuer and the Bond Trustee, rescind and annul such declaration and its consequences if

(1) the Issuer has deposited with the Bond Trustee a sum sufficient to pay

(A) all overdue installments of interest on all Bonds,

(B) the principal of (and premium, if any, on) any Bonds which have become due otherwise than by such declaration of acceleration and interest thereon at the rate or rates prescribed therefor in such Bonds,

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(C) to the extent that payment of such interest is lawful, interest upon overdue installments of interest at the rate or rates prescribed therefor in the Bonds, and

(D) all sums paid or advanced by the Bond Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Bond Trustee, its agents and counsel; and

(2) all Indenture Defaults, other than the nonpayment of the principal of Bonds which has become due solely by such declaration of acceleration, have been cured or have been waived as provided in Section 11.10.

No such rescission and annulment shall affect any subsequent default or impair any right consequent thereon.

(b) Rights and Remedies Cumulative. No right or remedy herein conferred upon or reserved to the Bond Trustee or to the Holders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy.

(c) Remedies Subject to Applicable Law. All rights, remedies and powers provided by this Article may be exercised only to the extent that the exercise thereof does not violate any applicable provision of law in the premises, and all the provisions of this Article are intended to be subject to all applicable mandatory provisions of law which may be controlling in the premises and to be limited to the extent necessary so that they will not render this Bond Indenture invalid, unenforceable or not entitled to be recorded, registered or filed under the provisions of any applicable law.

(d) Costs and Expenses. When the Bond Trustee incurs costs or expenses (including legal fees, costs and expenses) or renders services after the occurrence of a Bond Indenture 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.

SECTION 11.3. APPLICATION OF MONEY COLLECTED.

Any money collected by the Bond Trustee pursuant to this Article and any other sums then held by the Bond Trustee as part of the Trust Estate, shall be applied in the following order, at the date or dates fixed by the Bond Trustee and, in case of the distribution of such money on account of principal (or premium, if any) or interest, upon

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presentation of the Bonds and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid:

(a) First: To the payment of all undeducted amounts due the Bond Trustee under Section 12.7;

(b) Second: To the payment of the whole amount then due and unpaid upon the Outstanding Bonds for principal (and premium, if any) and interest, in respect of which or for the benefit of which such money has been collected, with interest (to the extent that such interest has been collected by the Bond Trustee or a sum sufficient therefor has been so collected and payment thereof is legally enforceable at the respective rate or rates prescribed therefor in the Bonds) on overdue principal (and premium, if any) and on overdue installments of interest; and in case such proceeds shall be insufficient to pay in full the whole amount so due and unpaid upon such Bonds, then to the payment of such principal (and premium, if any) and interest, without any preference or priority, ratably according to the aggregate amount so due; provided, however, that payments with respect to Obligor Bonds shall be made only after all other Bonds have been Defeased; and

(c) Third: To the payment of the remainder, if any, to the Issuer or to whosoever may be lawfully entitled to receive the same or as a court of competent jurisdiction may direct.

SECTION 11.4. TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF BONDS.

All rights of action and claims under this Bond Indenture or the Bonds may be prosecuted and enforced by the Bond Trustee without the possession of any of the Bonds or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Bond Trustee shall be brought in its own name as trustee of an express trust. Any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Bond Trustee, its agents and counsel, be for the ratable benefit of the Holders of the Bonds in respect of which such judgment has been recovered.

SECTION 11.5. LIMITATION ON SUITS.

No Holder of any Bond shall have any right to institute any proceeding, judicial or otherwise, under or with respect to this Bond Indenture, or for the appointment of a receiver or trustee or for any other remedy hereunder, unless

(a) such Holder has previously given notice to the Bond Trustee of a continuing Indenture Default;

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(b) the Holders of not less than 25% in principal amount of the Outstanding Bonds shall have made request to the Bond Trustee to institute proceedings in respect of such Indenture Default in its own name as Trustee hereunder;

(c) such Holder or Holders have offered to the Bond Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request;

(d) the Bond Trustee for 60 days after its receipt of such notice, request and offer of indemnity has failed to institute any such proceeding; and

(e) no direction inconsistent with such request has been given to the Bond Trustee during such 60-day period by the Holders of a majority in principal amount of the Outstanding Bonds;

it being understood and intended that no one or more Holders of Bonds shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Bond Indenture to affect, disturb or prejudice the lien of this Bond Indenture or the rights of any other Holders of Bonds, or to obtain or to seek to obtain priority or preference over any other Holders or to enforce any right under this Bond Indenture, except in the manner herein provided and for the equal and ratable benefit of all Outstanding Bonds.

SECTION 11.6. UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE PRINCIPAL, PREMIUM AND INTEREST.

Notwithstanding any other provision in this Bond Indenture, the Holder of any Bond shall have the right which is absolute and unconditional to receive payment of the principal of (and premium, if any) and interest on such Bond on the Maturity Date expressed in such Bond (or, in the case of redemption, on the redemption date) and to institute suit for the enforcement of any such payment, and such rights shall not be impaired without the consent of such Holder.

SECTION 11.7. RESTORATION OF POSITIONS.

If the Bond Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Bond Indenture and such proceeding has been discontinued or abandoned for any reason or has been determined adversely to the Bond Trustee or to such Holder, then and in every such case the Issuer, the Bond Trustee and the Holders shall, subject to any determination in such proceeding, be restored to their former positions hereunder, and thereafter all rights and remedies of the Bond Trustee and the Holders shall continue as though no such proceeding had been instituted.

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SECTION 11.8. DELAY OR OMISSION NOT WAIVER.

No delay or omission of the Bond Trustee or of any Holder to exercise any right or remedy accruing upon a Bond Indenture Default shall impair any such right or remedy or constitute a waiver of any such Indenture Default or an acquiescence therein. Every right and remedy given by this Article or by law to the Bond Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Bond Trustee or by the Holders, as the case may be.

SECTION 11.9. CONTROL BY HOLDERS.

The Holders of a majority in principal amount of the Outstanding Bonds shall have the right, during the continuance of a Bond Indenture Default,

(a) to require the Bond Trustee to proceed to enforce this Bond Indenture, either by judicial proceedings for the enforcement of the payment of the Bonds or otherwise, and

(b) to direct the time, method and place of conducting any proceeding for any remedy available to the Bond Trustee, or exercising any trust or power conferred upon the Bond Trustee hereunder, including the power to direct or withhold directions for acceleration of the maturity of the Bonds pursuant to Section 11.2(a); provided that

(1) such direction shall not be in conflict with any rule of law or this Bond Indenture,

(2) the Bond Trustee may take any other action deemed proper by the Bond Trustee which is not inconsistent with such direction, and

(3) the Bond Trustee shall not determine that the action so directed would be unjustly prejudicial to the Holders not taking part in such direction.

SECTION 11.10. WAIVER OF PAST DEFAULTS.

(a) Before any judgment or decree for payment of money due has been obtained by the Bond Trustee, the Holders of not less than a majority in principal amount of the Outstanding Bonds may, by notice to the Bond Trustee and the Issuer, on behalf of all Holders waive any past default hereunder or under any other Bond Document and its consequences, except a default

(1) in the payment of Debt Service on any Bond, or

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(2) in respect of a covenant or provision hereof which under Article 13 cannot be modified or amended without the consent of the Holder of each Outstanding Bond affected.

(b) Upon any such waiver, such default shall cease to exist, and any Indenture Default arising therefrom shall be deemed to have been cured, for every purpose of this Bond Indenture; but no such waiver shall extend to any subsequent or other default or impair any right consequent thereon.

SECTION 11.11. SUITS TO PROTECT THE TRUST ESTATE.

The Bond Trustee shall have power to institute and to maintain such proceedings as it may deem expedient to prevent any impairment of the Trust Estate by any acts which may be unlawful or in violation of this Bond Indenture and to protect its interests and the interests of the Holders in the Trust Estate and in the rents, issues, profits, revenues and other income arising therefrom, including power to institute and maintain proceedings to restrain the enforcement of or compliance with any governmental enactment, rule or order that may be unconstitutional or otherwise invalid, if the enforcement of or compliance with such enactment, rule or order would impair the security hereunder or be prejudicial to the interests of the Holders or the Bond Trustee.

SECTION 11.12. REMEDIES UNDER LOAN AGREEMENT OR MASTER INDENTURE.

(a) Except as otherwise provided in Section 11.9 and Section [15.6]:

(1) The Bond Trustee shall have the right, in its own name or on behalf of the Issuer, to declare any default and exercise any remedies available under the Loan Agreement and the Bond.

(2) The Bond Trustee, as the holder of the Series 2013B Master Indenture Obligation, shall have the right to declare any default and exercise any remedies available under the Series 2013B Master Indenture Obligation or the Master Indenture.

(b) Any money collected by the Bond Trustee pursuant to the exercise of any such remedies shall be applied as provided in this Article 11.

ARTICLE XII THE BOND TRUSTEE

SECTION 12.1. CERTAIN DUTIES AND RESPONSIBILITIES OF TRUSTEE.

(a) Except during the continuance of a Bond Indenture Default,

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(1) the Bond Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Bond Indenture, and no implied covenants or obligations shall be read into this Bond Indenture against the Bond Trustee; and

(2) in the absence of bad faith on its part, the Bond Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Bond Trustee and conforming to the requirements of this Bond Indenture; but in the case of any such certificates or opinions which by any provision hereof are specifically required to be furnished to the Bond Trustee, the Bond Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Bond Indenture.

(b) If a Bond Indenture Default exists, the Bond Trustee shall exercise such of the rights and powers vested in it by this Bond Indenture, and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs.

(c) The Bond Trustee shall not incur liability for its action or inaction with respect to the performance of its duties and obligations under this Bond Indenture unless such action or inaction constitutes willful misconduct or gross negligence under the circumstances. Liability of the Bond Trustee for such action or inaction shall be further limited as follows:

(1) the Bond Trustee shall not be liable for any error of judgment made in good faith, unless it shall be proved that the Bond Trustee was grossly negligent in ascertaining the pertinent facts;

(2) the Bond Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders of a majority in aggregate principal amount of the Outstanding Bonds relating to the time, method and place of conducting any proceeding for any remedy available to the Bond Trustee, or exercising any trust or power conferred upon the Bond Trustee, under this Bond Indenture; and

(3) no provision of this Bond Indenture shall require the Bond Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it.

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(d) Whether or not therein expressly so provided, every provision of this Bond Indenture relating to the conduct or affecting the liability of or affording protection to the Bond Trustee shall be subject to the provisions of this Section.

SECTION 12.2. NOTICE OF DEFAULTS.

(a) If a notice event described in Section 12.2(b) exists, the Bond Trustee shall notify Holders of such event within 30 days after the Bond Trustee becomes aware of its existence; provided, however, that the Bond Trustee shall be protected in withholding such notice if (1) the notice event has been cured or waived or otherwise ceases to exist before such notice is given; or (2) the Bond Trustee determines in good faith that the withholding of such notice is in the interest of Holders.

(b) For purposes of this Section, the following shall constitute "notice events":

(1) the occurrence of a Bond Indenture Default; and

(2) any event which is, or after notice or lapse of time or both would become, a Bond Indenture Default.

SECTION 12.3. CERTAIN RIGHTS OF TRUSTEE.

Except as otherwise provided in Section 12.1:

(a) The Bond Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, coupon or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties.

(b) Any request or direction of the Issuer mentioned herein shall be sufficiently evidenced by a certificate or order executed by an Authorized Representative of the Issuer.

(c) Whenever in the administration of this Bond Indenture the Bond Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Bond Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, rely upon a certificate executed by an Authorized Representative of the Issuer or a certificate executed by an Authorized Representative of SJMC.

(d) The Bond Trustee may consult with counsel, and the written advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by the Bond Trustee hereunder in good faith and in reliance thereon.

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(e) The Bond Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Bond Indenture at the request or direction of any of the Holders pursuant to this Bond Indenture, unless such Holders shall have offered to the Bond Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction.

(f) The Bond Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, coupon or other paper or document, but the Bond Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Bond Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books and records of the Issuer, personally or by agent or attorney.

(g) The Bond Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Bond Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder.

(h) the permissive right of the Bond Trustee to do things enumerated in this Bond Indenture shall not be construed as a duty;

(i) notwithstanding the effective date of this Bond Indenture or anything to the contrary in this Bond Indenture, the Bond Trustee shall have no liability or responsibility for any act or event relating to this Bond Indenture which occurs prior to the date the Bond Trustee formally executes this Bond Indenture and commences acting as Trustee hereunder;

(j) the Bond Trustee shall have no responsibility for compliance with any state or federal securities laws in connection with the Bonds;

(k) the Bond Trustee shall not be accountable for the use or application by the Issuer of any of the Bonds or the proceeds thereof or for the use or application of any money paid over by the Bond Trustee in accordance with the provisions of this Bond Indenture;

(l) the Bond Trustee shall not be responsible or liable for any failure or delay in the performance of its obligations under this Bond Indenture arising out of or caused, directly or indirectly, by circumstances beyond its reasonable control, including, without limitation, acts of God; earthquakes; fire; flood; hurricanes or other storms; wars; terrorism; similar military disturbances;

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sabotage; epidemic; pandemic; riots; interruptions, loss or malfunctions of utilities, computer (hardware or software) or communications services; accidents; labor disputes; acts of civil or military authority or governmental action; it being understood that the Bond Trustee shall use commercially reasonable efforts which are consistent with accepted practices in the banking industry to resume performance as soon as reasonably practicable under the circumstances;

(m) the Bond Trustee may act upon instructions or directions pursuant to this Bond Indenture or any other document reasonably relating to the Bonds sent by the Issuer by unsecured e-mail, facsimile transmission or other similar unsecured electronic methods, provided, however, that the Issuer shall provide to the Bond Trustee an incumbency certificate listing designated persons with the authority to provide such instructions, which incumbency certificate shall be amended whenever a person is to be added or deleted from the listing. If the Issuer elects to give the Bond Trustee e-mail or facsimile instructions (or instructions by a similar electronic method) and the Bond Trustee in its discretion elects to act upon such instructions, the Bond Trustee’s understanding of such instructions shall be deemed controlling. The Bond Trustee shall not be liable for any losses, costs, or expenses arising directly or indirectly from the Bond Trustee’s reliance upon and compliance with such instructions notwithstanding such instructions conflict or are inconsistent with a subsequent written instruction. The Issuer agrees to assume all risks arising out of the use of such electronic methods to submit instructions and directions to the Bond Trustee, including without limitation the risk of the Bond Trustee acting on unauthorized instructions, and the risk of interception and misuse by third parties;

(n) no provision of this Bond Indenture shall require the Bond Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it;

(o) The Bond Trustee shall have no obligation to file financing statements or continuation statements; and

(p) The Bond Trustee’s immunities and protections from liability and its right to indemnification in connection with the performance of its duties under this Bond Indenture shall extend to the Bond Trustee’s officers, directors, agents, attorneys and employees. Such immunities and protections and rights to indemnification, together with the Bond Trustee’s right to compensation, shall survive the Bond Trustee’s resignation or removal, the discharge of this Bond Indenture, and final payment of the Bonds.

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SECTION 12.4. NOT RESPONSIBLE FOR RECITALS.

The recitals contained herein and in the Bonds, except the certificate of authentication on the Bonds, shall be taken as the statements of the Issuer, and the Bond Trustee assumes no responsibility for their correctness. The Bond Trustee makes no representations as to the value or condition of the Trust Estate or any part thereof, or as to the title of the Issuer thereto or as to the security afforded thereby or hereby, or as to the validity or sufficiency of this Bond Indenture or of the Bonds.

SECTION 12.5. MAY HOLD BONDS.

The Bond Trustee in its individual or any other capacity, may become the Holder or pledgee of Bonds and may otherwise deal with the Issuer with the same rights it would have if it were not Trustee.

SECTION 12.6. MONEY HELD IN TRUST.

Money held by the Bond Trustee in trust hereunder need not be segregated from other funds except to the extent expressly provided in this Bond Indenture or required by law. The Bond Trustee shall be under no liability for interest on any money received by it hereunder except as otherwise provided in Article 9.

SECTION 12.7. COMPENSATION AND REIMBURSEMENT.

(a) The Issuer agrees to pay to the Bond Trustee, or to reimburse the Bond Trustee for:

(1) reasonable compensation for all services rendered by the Bond Trustee hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); and

(2) all reasonable expenses, disbursements and advances incurred or made by the Bond Trustee in accordance with any provision of this Bond Indenture (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to the Bond Trustee’s gross negligence or bad faith.

(b) As security for the performance of the obligations of the Issuer under this Section, the Bond Trustee shall be secured under this Bond Indenture by a lien prior to the Bonds, and for the payment of such compensation, expenses, reimbursements and indemnity the Bond Trustee shall have the right to use and apply any money held by it as a part of the Trust Estate.

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SECTION 12.8. CORPORATE TRUSTEE REQUIRED; ELIGIBILITY.

(a) There shall at all times be a Trustee hereunder which shall (1) be a commercial bank or trust company organized and doing business under the laws of the United States of America or of any state, (2) be authorized under such laws to exercise corporate trust powers, and (3) be subject to supervision or examination by federal or state authority.

(b) Any successor Trustee must have an investment grade rating for its long-term deposits from each Rating Agency that provides a rating on the Bonds unless each Rating Agency without such a rating of the Bond Trustee’s deposits confirms in writing that the Bond Trustee’s long-term deposit rating will not result in a reduction or withdrawal of the rating then assigned to the Bonds.

SECTION 12.9. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR.

(a) No resignation or removal of the Bond Trustee and no appointment of a successor Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee under Section 12.10.

(b) The Bond Trustee may resign at any time by giving notice thereof to the Issuer and SJMC. If an instrument of acceptance by a successor Trustee shall not have been delivered to the Bond Trustee within 30 days after the giving of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee.

(c) The Bond Trustee may be removed at any time by the Holders of a majority in principal amount of the Outstanding Bonds by notice delivered to the Bond Trustee, the Issuer and SJMC. If no Loan Default exists, the Bond Trustee may be removed at any time by SJMC by notice delivered to the Bond Trustee.

(d) If at any time:

(1) the Bond Trustee shall cease to be eligible under Section 12.8 and shall fail to resign after request therefor by SJMC or by any Holder who has been a bona fide Holder of a Bond for at least 6 months, or

(2) the Bond Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent or a receiver of the Bond Trustee or of its property shall be appointed or any public officer shall take charge or control of the Bond Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation,

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then, in any such case (i) the Issuer (with the consent of SJMC) may remove the Bond Trustee, or (ii) any Holder who has been a bona fide Holder of a Bond for at least 6 months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Bond Trustee and the appointment of a successor Trustee.

(e) If the Bond Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any cause, a successor Trustee shall be appointed by the Issuer (with the consent of SJMC). In case all or substantially all of the Trust Estate shall be in the possession of a receiver or trustee lawfully appointed, such receiver or trustee may similarly appoint a successor to fill such vacancy until a new Trustee shall be so appointed by the Holders. If, within 1 year after such resignation, removal or incapability or the occurrence of such vacancy, a successor Trustee shall be appointed by the Holders of a majority in principal amount of the Outstanding Bonds, the successor Trustee so appointed shall, forthwith upon its acceptance of such appointment, become the successor Trustee and supersede the successor Trustee appointed by the Issuer or SJMC or by such receiver or trustee. If no successor Trustee shall have been so appointed by the Issuer, SJMC or the Holders and accepted appointment in the manner hereinafter provided, any Holder who has been a bona fide Holder of a Bond for at least 6 months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee.

(f) The Issuer shall give notice of each resignation and each removal of the Bond Trustee and each appointment of a successor Trustee to the Holders.

SECTION 12.10. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR.

(a) Every successor Trustee appointed hereunder shall execute, acknowledge and deliver to the Issuer and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the estates, properties, rights, powers, trusts and duties of the retiring Trustee; but, on request of the Issuer or the successor Trustee, such retiring Trustee shall, upon payment of its charges, execute and deliver an instrument conveying and transferring to such successor Trustee upon the trusts herein expressed all the estates, properties, rights, powers and trusts of the retiring Trustee, and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder, subject nevertheless to its lien, if any, provided for in Section 12.7. Upon request of any such successor Trustee, the Issuer shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all such estates, properties, rights, powers and trusts.

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(b) No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be qualified and eligible under this Article, to the extent operative.

SECTION 12.11. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS.

Any corporation into which the Bond Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Bond Trustee shall be a party, or any corporation succeeding to all or substantially all of the corporate trust business of the Bond Trustee, shall be the successor of the Bond Trustee hereunder, provided such corporation shall be otherwise qualified and eligible under this Article, to the extent operative, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any Bonds shall have been authenticated, but not delivered, by the Bond Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Bonds so authenticated with the same effect as if such successor Trustee had itself authenticated such Bonds.

ARTICLE XIII AMENDMENT OF BOND DOCUMENTS

SECTION 13.1. GENERAL REQUIREMENTS FOR AMENDMENTS.

The Bond Trustee may, on behalf of the Holders, from time to time enter into, or consent to, an amendment of any Bond Document only as permitted by this Article.

SECTION 13.2. AMENDMENTS WITHOUT CONSENT OF HOLDERS.

An amendment of the Bond Documents for any of the following purposes may be made, or consented to, by the Bond Trustee without the consent of the Holders of any Bonds:

(a) to correct or amplify the description of any property at any time subject to the lien of any Bond Document, or better to assure, convey and confirm unto any secured party any property subject or required to be subjected to the lien of any Bond Document, or to subject to the lien of any Bond Document, additional property; or

(b) to evidence the succession of another person to any Financing Participant and the assumption by any such successor of the covenants of such Financing Participant (provided that the requirements of the related Bond Document for such succession and assumption are otherwise satisfied); or

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(c) to add to the covenants of any Financing Participant for the benefit of Holders and to make the occurrence, or the occurrence and continuance, of a default in any of such additional covenants an event of default under the specified Bond Documents permitting the enforcement of all or any of the several remedies provided therein; provided, however, that with respect to any such covenant, such amendment may provide for a particular period of grace after default (which period may be shorter or longer than that allowed in the case of other defaults) or may provide for an immediate enforcement upon such default or may limit the remedies available upon such default; or

(d) to surrender any right or power conferred upon any Financing Participant other than rights or powers for the benefit of Holders; or

(e) to cure any ambiguity or to correct any inconsistency, provided such action shall not adversely affect the interests of the Holders; or

(f) to appoint a separate agent of the Issuer or the Bond Trustee to perform any one or more of the following functions: (i) acceptance of delivery of Tendered Bonds, (ii) registration of transfers and exchanges of Bonds, (iii) payment of Debt Service on the Bonds, or (iv) payment of the Purchase Price of Tendered Bonds; provided, however, that any such agent must be a bank or trust company with long-term obligations, at the time such appointment is made, in one of the three highest rating categories of at least one Rating Agency; or

(g) to make any amendment that will be effective on a Conversion Date after the Purchase Price of all Tendered Bonds has been paid; or

(h) to facilitate and administer the addition of credit enhancement for the benefit of Holders (including without limitation, bond insurance, a letter of credit, or a standby purchase agreement), provided that, in the reasonable judgment of the Bond Trustee, such provisions do not adversely affect the interests of Holders.

SECTION 13.3. AMENDMENTS REQUIRING CONSENT OF ALL AFFECTED HOLDERS.

An amendment of the Bond Documents for any of the following purposes may be entered into, or consented to, by the Bond Trustee only with the consent of the Holder of each Bond affected:

(a) to change the stated Maturity Date of the principal of, or any installment of interest on, any Bond, or reduce the principal amount thereof or the interest thereon or any premium payable upon the redemption thereof, or change the coin or currency in which, any Bond, or the interest thereon is payable, or

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impair the right to institute suit for the enforcement of any such payment on or after the stated Maturity Date thereof (or, in the case of redemption, on or after the redemption date); or

(b) to reduce the percentage in principal amount of the Outstanding Bonds, the consent of whose Holders is required for any amendment of the Bond Documents, or the consent of whose Holders is required for any waiver provided for in the Bond Documents; or

(c) to modify or alter the provisions of the proviso to the definition of the term "Outstanding"; or

(d) to modify any of the provisions of this Section or Section 11.10, except to increase any percentage provided thereby or to provide that certain other provisions of this Bond Indenture cannot be modified or waived without the consent of the Holder of each Bond affected thereby; or

(e) to permit the creation of any lien ranking prior to or on a parity with the lien of this Bond Indenture with respect to any of the Trust Estate or terminate the lien of this Bond Indenture on any property at any time subject hereto or deprive the Holder of any Bond of the security afforded by the lien of this Bond Indenture; or

(f) to eliminate, reduce or delay the obligation of the Issuer or SJMC to make payments at times and in amounts sufficient to pay Debt Service on the Bonds or the Purchase Price of Tendered Bonds.

SECTION 13.4. AMENDMENTS REQUIRING MAJORITY CONSENT OF HOLDERS.

An amendment of the Bond Documents for any purpose not described in Sections 13.2 or 13.3 may be entered into, or consented to, by the Bond Trustee only with the consent of the Holders of a majority in principal amount of Bonds Outstanding.

SECTION 13.5. DISCRETION OF TRUSTEE.

The Bond Trustee may in its discretion determine whether or not any Bonds would be affected by any amendment of the Bond Documents and any such determination shall be conclusive upon the Holders of all Bonds, whether theretofore or thereafter authenticated and delivered hereunder. The Bond Trustee shall not be liable for any such determination made in good faith.

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SECTION 13.6. TRUSTEE PROTECTED BY OPINION OF COUNSEL.

In executing or consenting to any amendment permitted by this Article, the Bond Trustee shall be entitled to receive, and, subject to Section 12.1, shall be fully protected in relying upon, an Opinion of Counsel stating that the execution of such amendment is authorized or permitted by this Bond Indenture.

SECTION 13.7. AMENDMENTS AFFECTING TRUSTEE’S PERSONAL RIGHTS

The Bond Trustee may, but shall not be obligated to, enter into any amendment that affects the Bond Trustee’s own rights, duties or immunities under the Bond Documents.

SECTION 13.8. EFFECT ON HOLDERS.

Upon the execution of any amendment under this Article, every Holder of Bonds theretofore or thereafter authenticated and delivered hereunder shall be bound thereby.

SECTION 13.9. REFERENCE IN BONDS TO AMENDMENTS.

Bonds authenticated and delivered after the execution of any amendment under this Article shall, if required by such amendment or by the Bond Trustee, bear a notation in form approved by the Bond Trustee as to any matter provided for in such amendment. New Bonds so modified as to conform to any such amendment shall, if required by such amendment or by the Bond Trustee, be prepared and executed by the Issuer and authenticated and delivered by the Bond Trustee in exchange for Outstanding Bonds.

SECTION 13.10. AMENDMENTS NOT TO AFFECT TAX EXEMPTION.

No amendment may be made to the Bond Documents unless the Bond Trustee receives a Favorable Tax Opinion.

ARTICLE XIV DEFEASANCE

SECTION 14.1. PAYMENT OF INDENTURE INDEBTEDNESS; SATISFACTION AND DISCHARGE OF INDENTURE.

(a) Whenever all Indenture Indebtedness has been Defeased, then (i) this Bond Indenture and the lien, rights and interests created hereby shall cease, terminate and become null and void (except as to any surviving rights of transfer or exchange of Bonds herein or therein provided for), and (ii) the Bond Trustee shall, upon the request of the Issuer, execute and deliver a termination statement and such instruments of satisfaction and discharge as may be necessary and pay, assign, transfer and deliver to the Issuer or

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upon the order of the Issuer, all cash and securities then held by it hereunder as a part of the Trust Estate.

(b) A Bond shall be deemed "Defeased" if

(1) such Bond has been cancelled by the Bond Trustee or delivered to the Bond Trustee for cancellation, or

(2) such Bond shall have matured or been called for redemption and, on such Maturity Date or redemption date, money for the payment of Debt Service on such Bond is held by the Bond Trustee in trust for the benefit of the person entitled thereto, or

(3) a trust for the payment of such Bond has been established in accordance with Section 14.2, or

(4) such Bond is subject to Optional Tender or Mandatory Tender and, on the Tender Date, money for payment of the Purchase Price of such Bond is held by the Bond Trustee in trust for the benefit of the person entitled thereto.

(c) Indenture Indebtedness other than Debt Service on the Bonds shall be deemed "Defeased" whenever the Issuer has paid, or made provisions satisfactory to the Bond Trustee for payment of, all such Indenture Indebtedness.

SECTION 14.2. TRUST FOR PAYMENT OF DEBT SERVICE.

(a) The Issuer may provide for the payment of any Bond by establishing a trust for such purpose with the Bond Trustee and depositing therein cash and/or Federal Securities which (assuming the due and punctual payment of the principal of and interest on such Federal Securities, but without reinvestment) will provide funds sufficient to pay the Debt Service on such Bond as the same becomes due and payable until the maturity or redemption of such Bond; provided, however, that:

(1) Such Federal Securities must not be subject to redemption prior to their respective maturities at the option of the issuer of such Securities.

(2) If such Bond is to be redeemed prior to its Maturity Date, either (i) the Bond Trustee shall receive evidence that notice of such redemption has been given in accordance with the provisions of this Bond Indenture and such Bond or (ii) the Issuer and SJMC shall confer on the Bond Trustee irrevocable authority for the giving of such notice.

(3) If such trust relates to a Bond in the Term Rate Mode, such Bond must mature or be called for redemption (if permitted by this Bond Indenture) on or before the last day of the Term Rate Period then in effect.

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(4) If such trust relates to a Bond in the Commercial Paper Rate Mode, such Bond must be called for redemption on the last day of the CP Rate Period then in effect.

(5) If such trust relates to a Bond that does not have a fixed or determinable amount of interest payable until the date when such Bond will be retired in accordance with the terms of such trust, the trust must provide funds sufficient for payment of interest on such Bond at the Maximum Rate until such Bond will be retired. Such trust may provide that any excess funds in the trust remaining after such Bond has been retired shall be paid to SJMC.

(6) Prior to the establishment of such trust the Bond Trustee must receive a Favorable Tax Opinion.

(7) Prior to the establishment of such trust, the Bond Trustee must receive verification satisfactory to the Bond Trustee demonstrating that the principal and interest payments on the Federal Securities in such trust, without reinvestment, together with the cash balance in such trust remaining after purchase of such Securities, will be sufficient to make the required payments from such trust.

(b) Any trust established pursuant to this Section may provide for payment of less than all Bonds outstanding or less than all Bonds of any remaining maturity.

(c) If any trust provides for payment of less than all Bonds of the same Tenor, the Bonds of such Tenor to be paid from the trust shall be selected by the Bond Trustee by lot by such method as shall provide for the selection of portions (in Authorized Denominations) of the principal of Bonds of such Tenor of a denomination larger than the smallest Authorized Denomination. Such selection shall be made within 7 days after such trust is established. This selection process shall be in lieu of the selection process otherwise provided with respect to redemption of Bonds. After such selection is made, Bonds that are to be paid from such trust (including Bonds issued in exchange for such Bonds pursuant to the transfer or exchange provisions of this Bond Indenture) shall be identified by a separate CUSIP number or other designation satisfactory to the Bond Trustee. The Bond Trustee shall notify Holders whose Bonds (or portions thereof) have been selected for payment from such trust and shall direct such Holders to surrender their Bonds to the Bond Trustee in exchange for Bonds with the appropriate designation. The selection of Bonds for payment from such trust pursuant to this Section shall be conclusive and binding on the Financing Participants.

(d) Cash and/or Federal Securities deposited with the Bond Trustee pursuant to this Section shall not be a part of the Trust Estate but shall constitute a separate, irrevocable trust fund for the benefit of the Holder of the Bond to be paid from such fund.

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ARTICLE XV THE LOAN AGREEMENT AND RIGHTS OF SJMC

SECTION 15.1. RIGHT OF SJMC TO EXERCISE RIGHTS AND OPTIONS WITH RESPECT TO TERMS OF THE BONDS.

(a) If no Loan Default exists, this Bond Indenture permits SJMC to exercise various rights and options on behalf of the Issuer with respect to the terms of the Bonds, including without limitation: (i) the exercise of any optional redemption rights, (ii) the selection of Bonds for redemption, (iii) the termination of the Book Entry System, and (iv) the establishment or conversion of Interest Rate Modes with respect to the Bonds.

(b) If a Loan Default exists, such rights and options of SJMC shall be suspended, and the Issuer may exercise such rights and powers in its own name (or on behalf of SJMC), provided that the Issuer gives SJMC 10 days’ prior notice of its intention to do so. If the Loan Agreement has been terminated, the Issuer may exercise such rights and options without prior notice to SJMC.

SECTION 15.2. PERFORMANCE BY ISSUER UNDER LOAN AGREEMENT.

The Issuer will perform and observe all covenants required to be performed and observed by it under the Loan Agreement.

SECTION 15.3. RIGHTS OF SJMC WITH RESPECT TO DEFAULTS BY ISSUER.

Without relieving the Issuer from the responsibility for performance and observance of the agreements and covenants required to be performed and observed by it hereunder, SJMC, on behalf of the Issuer, may perform any such covenant or agreement.

SECTION 15.4. SJMC MAY DIRECT INVESTMENT OF INDENTURE FUNDS.

If no Loan Default exists, SJMC may, on behalf of the Issuer, direct the investment of Indenture Funds pursuant to Article 9.

SECTION 15.5. AMENDMENT OF BOND DOCUMENTS.

If no Loan Default exists, no amendment may be made to the Bond Documents without the consent of SJMC.

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SECTION 15.6. APPOINTMENT AND REMOVAL POWERS.

If no Loan Default exists, SJMC may, on behalf of the Issuer, exercise any right of the Issuer to appoint or remove (i) the Bond Trustee, (ii) the Remarketing Agent, and (iii) the Calculation Agent.

SECTION 15.7. DISPOSITION OF INDENTURE FUNDS AND TRUST ESTATE.

If no Loan Default exists, any remaining Indenture Funds or Trust Estate assets otherwise payable to the Issuer after all Indenture Indebtedness has been Defeased shall be paid or transferred to SJMC.

SECTION 15.8. BENEFITS OF INDENTURE FOR SJMC.

This Bond Indenture shall also be for the benefit of SJMC to the extent provided herein.

ARTICLE XVI MISCELLANEOUS

SECTION 16.1. NOTICES TO FINANCING PARTICIPANTS.

(a) Notices and other communications to Financing Participants pursuant to this Bond Indenture must be in writing except as otherwise expressly provided in this Bond Indenture. Any specific reference in this Bond Indenture to "written notice" shall not be construed to mean that any other notice may be oral, unless such oral notice is specifically permitted by this Bond Indenture under the circumstances.

(b) Notices and other communications pursuant to this Bond Indenture may be delivered by any method provided in the directions for notices attached as Exhibit 16.1(b). A Financing Participant may change its directions for notices by giving notice to the other Financing Participants.

(c) Any notice shall be deemed given when actually received by the Financing Participant to whom the notice is addressed. In addition, any notice sent by certified mail shall be deemed received when sent by certified mail, addressed as provided in the notice directions included in Exhibit 16.1(b) or, if the designated Financing Participant has delivered a change notice, as specified in such change notice.

(d) Notice to any Financing Participant required by this Bond Indenture may be waived in writing by such Financing Participant, either before or after the event, and such waiver shall be the equivalent of such notice.

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SECTION 16.2. NOTICES TO HOLDERS.

(a) Notices and other communications to DTC or Holders pursuant to this Bond Indenture must be in writing except as otherwise expressly provided in this Bond Indenture. Any specific reference in this Bond Indenture to "written notice" shall not be construed to mean that any other notice may be oral, unless such oral notice is specifically permitted by this Bond Indenture under the circumstances.

(b) If the Book Entry System is in effect, notices and other communications to Holders will be delivered to Holders through the Book Entry System and shall be deemed delivered to Holders upon receipt by DTC. If the Book Entry System is terminated, notices and other communications to Holders may be delivered to such Holders at their address as it appears in the Bond Register.

(c) Any notice to DTC or a Holder shall be deemed given when received by DTC or the Holder, as the case may be, or when sent by certified mail.

(d) Any defect in a notice to any particular Holder shall affect the sufficiency of such notice with respect to other Holders.

(e) Notice to any Holder required by this Bond Indenture may be waived in writing by such Holder, either before or after the event, and such waiver shall be the equivalent of such notice.

SECTION 16.3. SUCCESSORS AND ASSIGNS.

All covenants and agreements in this Bond Indenture by the Issuer shall bind its successors and assigns, whether so expressed or not.

SECTION 16.4. BENEFITS OF INDENTURE.

Nothing in this Bond Indenture or in the Bonds, express or implied, shall give to any person, other than (i) the parties hereto and their successors hereunder, (ii) the Holders of the Outstanding Bonds, and (iii) SJMC, any benefit or legal or equitable right, remedy or claim under this Bond Indenture.

SECTION 16.5. CALCULATION AGENT.

(a) Merrill Lynch, Pierce, Fenner & Smith Incorporated is hereby appointed as "Calculation Agent" for purposes of this Bond Indenture. The acceptance by the Calculation Agent of its duties under this Bond Indenture shall be evidenced by an agreement in form and substance satisfactory to the Issuer and SJMC.

(b) The Calculation Agent may resign at any time by giving 30 days’ notice to the Issuer and, if the Calculation Agent is not the Bond Trustee, to the Bond Trustee. No

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such resignation shall become effective until a successor Calculation Agent has been appointed and has accepted its duties and obligations hereunder.

(c) SJMC may remove the Calculation Agent at any time upon 30 days’ notice to the Calculation Agent and, if the Calculation Agent is not the Bond Trustee, to the Bond Trustee. No such removal shall become effective until a successor Calculation Agent has been appointed and has accepted its duties and obligations hereunder.

(d) If the Calculation Agent shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Calculation Agent for any cause, the Issuer shall, with the consent of SJMC, promptly appoint a successor Calculation Agent, which shall be Independent from the Issuer and SJMC. Any successor Calculation Agent shall signify its acceptance of such appointment and its assumption of the duties and obligations imposed upon it by this Bond Indenture by execution and delivery of an agreement satisfactory to the Issuer and SJMC.

(e) The compensation and expenses of the Calculation Agent shall be paid by SJMC, as provided in the agreement of such person accepting its appointment as Calculation Agent; provided, however, that such person shall not have a lien on the Trust Estate for payment of its compensation or expenses.

[SIGNATURES ON NEXT PAGE]

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IN WITNESS WHEREOF, the Issuer and the Bond Trustee have caused this instrument to be duly executed by their duly authorized officers.

FLORIDA DEVELOPMENT FINANCE CORPORATION By: Executive Director

U.S. BANK NATIONAL ASSOCIATION By:

Vice President This instrument was prepared by: John R. Stokes, Esq. Nabors, Giblin & Nickerson, P.A. 2502 Rocky Point Drive, Suite 1060 Tampa, Florida 813/281-2222

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STATE OF FLORIDA ORANGE COUNTY The foregoing instrument was acknowledged before me as of the ____ day of ________, 2013, by William Franklin Spivey, Jr., Executive Director of the Florida Development Finance Corporation, a Florida public body corporate and politic ("FDFC"), on behalf of FDFC, whose signature was attested by __________, Secretary of FDFC. Such person did not take an oath and:

� is/are personally known to me.

� produced a current __________ driver's license as identification.

� produced _______________________________ as identification.

IN WITNESS WHEREOF, I have hereunto set my hand and seal as of the ____ day of __________, 2013. (SEAL)

Name: Notary Public, State of Florida

My Commission Expires: STATE OF FLORIDA DUVAL COUNTY The foregoing instrument was acknowledged before me as of the ____ day of ________, 2013, by __________________, __________________ of U.S. Bank National Association, on behalf of U.S. Bank National Association. Such person did not take an oath and:

� is/are personally known to me.

� produced a current __________ driver's license as identification.

� produced _______________________________ as identification.

IN WITNESS WHEREOF, I have hereunto set my hand and seal as of the ____ day of __________, 2013. (SEAL)

Name: Notary Public, State of Florida My Commission Expires:

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EXHIBIT 5.1(c)

Form of Bonds

Florida Development Finance Corporation HealthCare Facilities Revenue Bond (UF Health - Jacksonville Project),

Series 2013B Number: Principal Amount: Maturity Date: Date of Initial Delivery: Interest Rate Mode: [Other Details Required by Indenture for the Interest Rate Mode]: CUSIP:

FLORIDA DEVELOPMENT FINANCE CORPORATION, a Florida public body corporate and politic (the "Issuer", which term includes any successor corporation under the Bond Indenture hereinafter referred to), for value received, hereby promises to pay to

___________________________________________, or registered assigns, the principal sum of

________________________________________ DOLLARS on the Maturity Date specified above and to pay interest hereon from the date of initial delivery of this Bond, or the most recent date to which interest has been paid or duly provided for, until the principal hereof shall become due and payable at the applicable interest rate specified below.

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Authorizing Document

This Bond is issued pursuant to a Bond Trust Indenture dated as of November 1, 2013 (the "Indenture"), between the Issuer and U.S. Bank National Association, a national banking association (the "Trustee", which term includes any successor trustee under the Bond Indenture). The bonds issued pursuant to the Bond Indenture are referred to herein as the "Bonds". Capitalized terms not otherwise defined herein shall have the meaning assigned in the Bond Indenture. The provisions of the Bond Indenture are hereby incorporated by reference as if fully set forth in this Bond.

Beneficiary of Financing

The Bonds are being issued to provide financing for the benefit of Shands Jacksonville Medical Center, Inc., a Florida not for profit corporation ("SJMC") and Affiliates. Proceeds of the Bonds have been loaned by the Issuer to SJMC pursuant to a Loan Agreement, dated as of November 1, 2013 (the "Loan Agreement"). Pursuant to the Loan Agreement SJMC has agreed to make payments at times and in amounts sufficient to pay Debt Service on the Bonds and the Purchase Price of Tendered Bonds.

SJMC, Shands Jacksonville HealthCare, Inc. ("SJHC") and Shands Jacksonville Properties, Inc. ("SJP") have entered into a Master Trust Indenture, dated as of June 1, 2013, as supplemented (the "Master Indenture"), with U.S. Bank National Association, as trustee (the "Master Trustee"). SJMC, SJHC and SJP are the current members of the Obligated Group (the "Obligated Group") described in the Master Indenture. The Obligated Group is authorized to issue obligations ("Master Indenture Obligations") under the Master Indenture to evidence or secure debt and other obligations of the Obligated Group. The Master Indenture Obligations are secured by a pledge of the revenues of the Obligated Group. As additional security for the Master Indenture Obligations, SJP has executed a Mortgage, dated as of November 1, 2013 (the "Mortgage"), in favor of the Master Trustee, whereby the Master Trustee has been granted a mortgage on the property and interests in property described therein (the "Mortgaged Property"). To evidence and secure its obligation with respect to payment of the Bonds, SJMC, on behalf of itself and all other Members of the Obligated Group, has issued its Series 2013B Related Debt Obligation (the "Series 2013B Master Indenture Obligation") under the Master Indenture.

Source of Payment

The Bonds and all other payment obligations under the Bond Indenture are limited obligations of the Issuer payable solely out of (i) payments by SJMC pursuant to the Loan Agreement and (ii) payments by the Obligated Group pursuant to the Series 2013B Master Indenture Obligation.

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Security for Payment

Payment of the Bonds is secured by the Trust Estate established under the Bond Indenture, which includes (i) all right, title and interest of the Issuer in and to the Loan Agreement, including without limitation payments by SJMC with respect to the Bonds, (ii) all payments by the Obligated Group pursuant to the Series 2013B Master Indenture Obligation, and (iii) money and investments in the funds and accounts established under the Bond Indenture.

Bond Documents

Copies of the Bond Documents are on file at the Office of the Bond Trustee, and reference is hereby made to such instruments for a description of the properties pledged and assigned, the nature and extent of the security, the respective rights thereunder of the Holders of the Bonds and the Financing Participants, and the terms upon which the Bonds are, and are to be, authenticated and delivered.

Transfer, Registration, Exchange and Payment Provisions

The ownership, transfer, exchange and payment of Bonds shall be governed by the Book Entry System administered by DTC until the Book Entry System is terminated pursuant to the terms and conditions of the Bond Indenture. If the Book Entry System is terminated, the Bond Indenture provides alternate provisions for the ownership, transfer, registration, exchange and payment of Bonds.

Interest Rate Modes

The Bonds may be issued in various Interest Rate Modes, as specified in the Bond Indenture. The Interest Rate Mode applicable to this Bond is specified in the heading to this certificate.

Conversion of Interest Rate Modes

This Bond may be converted to another Interest Rate Mode, subject to the terms and conditions of the Bond Indenture. On the Conversion Date this Bond shall be subject to Mandatory Tender, as described below.

Applicable Interest Rate

The applicable interest rate for this Bond is determined according to the Interest Rate Mode in effect for this Bond, which is specified above.

[Specify procedures for setting interest rate, as described in applicable provisions of Section 5.2. If Bonds are in the Fixed Rate Mode, no description is necessary.]

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Maximum Interest Rate

The interest on this Bond may not exceed the Maximum Rate specified in the Bond Indenture.

Computation of Interest Accrual

Interest on Bonds in the Interest Rate Mode applicable to this Bond shall be computed on the basis of [specify from Indenture].

Interest Payment Dates

Interest on Bonds in the Interest Rate Mode applicable to this Bond is payable on the following dates: [specify from Indenture].

Regular Record Date for Interest Payments

If the Book Entry System is in effect, the Bond Trustee shall pay interest on this Bond to DTC, and interest shall be distributed to the Holder of this Bond in accordance with the rules and regulations of DTC. If the Book Entry System is terminated, the interest due on any Interest Payment Date with respect to this Bond shall be payable to the Holder of this Bond on the Regular Record Date for such Interest Payment Date.

Interest on Overdue Payments

Interest shall be payable on overdue principal on this Bond and (to the extent legally enforceable) on any overdue installment of interest on this Bond at the Post-Default Rate specified in the Bond Indenture. To the extent legally enforceable, interest shall be payable on the overdue Purchase Price of this Bond at the Post-Default Rate specified in the Bond Indenture.

Authorized Denominations

Bonds issued in the Interest Rate Mode applicable to this Bond may be in denominations of [specify from Indenture].

Currency of Payment

Payment of Debt Service on this Bond shall be made in such coin or currency of the United States of America as at the time of payment is legal tender for the payment of public and private debts.

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[The following provisions with respect to the Optional Tender of Bonds for purchase are to be included only for Bonds in the Daily Rate Mode, the Weekly Rate Mode or the R-FLOATs Mode.]

Optional Tender

[Insert applicable Optional Tender provisions from Section 6.1(a) or 6.1(b).]

Any such notice of Optional Tender must be duly executed by the Holder and must specify (i) the name of the Holder of the Bond to be tendered for purchase, (ii) the Optional Tender Date, (iii) the principal amount of such Bond, and (iv) the principal amount of such Bond to be purchased (if such amount is less than the entire principal amount, both the amount to be purchased and the amount remaining must be in an Authorized Denomination). The notice of Optional Tender must be substantially as set forth in the Bond Indenture or in such other form as shall be acceptable to the Bond Trustee.

If any notice of Optional Tender specifies an Optional Tender Date that is not a Business Day, then such notice shall be deemed to specify the next following Business Day as the Optional Tender Date. Unless a notice of Optional Tender indicates that less than the entire principal amount of the Bond is being tendered for purchase, the Holder will be deemed to have tendered the Bond in its entire principal amount for purchase.

Upon delivery of a written notice of Optional Tender, the election to tender shall be irrevocable and binding upon the Holder and may not be withdrawn.

If a written notice of tender shall have been duly given with respect to this Bond, the Holder of this Bond shall deliver this Bond to the Bond Trustee on the Optional Tender Date. If only a portion of this Bond is to be purchased (as a result of the exercise of the Optional Tender right only with respect to such portion), the Holder shall receive a new Bond or Bonds of the same Tenor and of any Authorized Denomination or Denominations as requested by the Holder in aggregate principal amount equal to and in exchange for the unpurchased portion of the principal amount of this Bond. Any Bond (or portion thereof) that is to be so purchased but that is not so delivered to the Bond Trustee shall nevertheless be deemed to have been tendered by the Holder thereof on the Optional Tender Date.

On each Optional Tender Date the Bond Trustee shall pay to the Holder of each Bond (or portion thereof) properly tendered for purchase an amount equal to the Purchase Price. Funds for payment of the Purchase Price of such Bonds shall be paid by the Bond Trustee from the sources specified in the Bond Indenture.

If there has been irrevocably deposited in the Bond Purchase Fund an amount sufficient to pay the Purchase Price of any Bond to be purchased on an Optional Tender

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Date, such Bond shall be deemed to have been tendered for purchase and purchased from the Holder thereof on such Optional Tender Date, and the Holder of such Bond shall not be entitled to receive interest on such Bond for any period on and after the Optional Tender Date. The Bond Trustee shall issue a new Bond or Bonds in the same aggregate principal amount for any such Bond which is not tendered for purchase on any Optional Tender Date and, upon receipt by the Bond Trustee of any such Bond from the Holder thereof, shall pay, or cause to be paid, the Purchase Price of such Tendered Bond to the Holder thereof and cancel such Tendered Bond.

Holders may exercise Optional Tender rights notwithstanding the existence of a Bond Indenture Default.

Mandatory Tender

The Holder of this Bond shall be required to tender this Bond to the Bond Trustee for purchase on the following dates:

[Insert applicable Mandatory Tender provisions from Section 6.2(a) or 6.2(b).]

If any of such dates is not a Business Day, the Mandatory Tender Date shall be the next succeeding Business Day.

No notice is required for a Mandatory Tender on the last day of a Term Rate Period or the last day of a CP Rate Period, even if that day is also a Mandatory Tender Date for a separate reason. For all other Mandatory Tenders notice of the Mandatory Tender shall be given by the Bond Trustee to the affected Holder not less than 15 days prior to the Mandatory Tender Date.

On the Mandatory Tender Date with respect to this Bond, the Bond Trustee shall pay to the Holder an amount equal to the Purchase Price. Funds for payment of the Purchase Price of such Bond shall be drawn by the Bond Trustee from the sources specified in the Bond Indenture.

If there has been irrevocably deposited in the Bond Purchase Fund an amount sufficient to pay the Purchase Price of any Bond to be purchased on a Mandatory Tender Date, such Bond shall be deemed to be tendered for purchase and purchased from the Holder thereof on such Mandatory Tender Date and the Holder of such Bond shall not be entitled to receive interest on such Bond for any period on and after the relevant Mandatory Tender Date. The Bond Trustee shall issue a new Bond or Bonds in the same aggregate principal amount and Tenor for any such Bond which is not tendered for purchase on any Mandatory Tender Date and, upon receipt by the Bond Trustee of any such Bond from the Holder thereof, shall pay, or cause to be paid, the Purchase Price of such Tendered Bond to the Holder thereof and cancel such Tendered Bond.

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After notice of a Mandatory Tender has been given by the Bond Trustee with respect to any Bond, such Bond shall be subject to Mandatory Tender notwithstanding the fact that the reasons for giving such notice cease to exist or are no longer applicable.

Redemption Prior to Maturity

This Bond will be subject to redemption prior to its Maturity Date as follows:

[Specify applicable redemption provisions from Section 7.1.]

If less than all Bonds outstanding are being redeemed, the Bond Indenture provides procedures for selection of Bonds to be redeemed.

Notice of redemption of any Bond shall be given to the affected Holder not less than 20 days prior to the redemption date. Notice of redemption will be given to affected Holders through methods established by the rules and regulations of the Book Entry System or, if the Book Entry System is not in effect, by certified mail.

A notice of optional redemption may state that the redemption of Bonds is contingent upon specified conditions, such as receipt of a specified source of funds, or the occurrence of specified events. If the conditions for such redemption are not met, the Issuer shall not be required to redeem the Bonds (or portions thereof) identified in such notice, and any Bonds surrendered on the specified redemption date shall be returned to the Holders of such Bonds.

On the applicable redemption date, an amount of money sufficient to pay the redemption price of all the Bonds which are to be redeemed on that date shall be deposited with the Bond Trustee, unless the notice of redemption specified contingencies that were not met on the redemption date. Such money shall be held in trust for the benefit of the persons entitled to such redemption price and shall not be deemed to be part of the Trust Estate.

If notice of redemption is given and any conditions to such redemption are met, the Bonds to be redeemed shall become due and payable on the redemption date at the applicable redemption price, and from and after such date (unless the Issuer shall default in the payment of the redemption price) such Bonds shall cease to bear interest.

Any Bond which is to be redeemed only in part shall be surrendered at the Office of the Bond Trustee with all necessary endorsements for transfer, and the Issuer shall execute and the Bond Trustee shall authenticate and deliver to the Holder of such Bond, without service charge, a new Bond or Bonds of the same Tenor and of any Authorized Denomination or Denominations as requested by such Holder in aggregate principal

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amount equal to and in exchange for the unredeemed portion of the principal of the Bond surrendered.

The Bond Indenture permits SJMC to purchase Bonds that have been called for optional redemption in lieu of retiring such Bonds on the redemption date. No notice to Holders is required in connection with a purchase in lieu of redemption.

Remedies

If an "Indenture Default", as defined in the Bond Indenture, shall occur, the principal of all Bonds then Outstanding may become or be declared due and payable in the manner and with the effect provided in the Bond Indenture.

The Holder of this Bond shall have no right to enforce the provisions of the Bond Indenture, or to institute any action to enforce the covenants therein, or to take any action with respect to any default thereunder, or to institute, appear in or defend any suit or other proceeding with respect thereto, except as provided in the Bond Indenture.

Amendments

The Bond Indenture permits the amendment of the Bond Documents and waivers of past defaults under such Documents and the consequences of such defaults, in certain circumstances without consent of Holders and in other circumstances with the consent of all Holders or a specified percentage of Holders. Any such consent or waiver by the Holder of this Bond shall be conclusive and binding upon such Holder and upon all future Holders of this Bond and of any Bond issued in exchange herefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Bond.

Exoneration of Incorporators, Directors and Officers of the Issuer

No recourse under or upon any covenant or agreement of the Bond Indenture, or of any Bonds, or for any claim based thereon or otherwise in respect thereof, shall be had against any past, present or future incorporator, officer or director of the Issuer, or of any successor, either directly or through the Issuer, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise; it being expressly understood that the Bond Indenture and the Bonds are solely corporate obligations, and that no personal liability whatever shall attach to, or is or shall be incurred by, any incorporator, officer or director of the Issuer or any successor, or any of them, because of the issuance of the Bonds, or under or by reason of the covenants or agreements contained in the Bond Indenture or in any Bonds or implied therefrom.

It is hereby certified, recited and declared that all acts, conditions and things required to exist, happen and be performed precedent to and in the execution and delivery

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of the Bond Indenture and issuance of this Bond do exist, have happened and have been performed in due time, form and manner as required by law.

Unless the certificate of authentication hereon has been executed by the Bond Trustee by manual signature, this Bond shall not be entitled to any benefit under the Bond Indenture or be valid or obligatory for any purpose.

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IN WITNESS WHEREOF, the Issuer has caused this Bond to be duly executed under its corporate seal.

Dated: Date of initial delivery of this Bond identified above.

FLORIDA DEVELOPMENT FINANCE CORPORATION By: Executive Director

Certificate of Authentication This is one of the Bonds referred to in the within-mentioned Indenture. Date of authentication:_________________

U.S. BANK NATIONAL ASSOCIATION, as Trustee By Authorized Officer

Assignment For value received, __________________________________________ hereby sell(s), assign(s) and transfer(s) unto [Please insert name and taxpayer identification number] ___________________________________ this Bond and hereby irrevocably constitute(s) and appoint(s) _______________________________ attorney to transfer this Bond on the books of the within named Issuer at the office of the within named Trustee, with full power of substitution in the premises.

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Dated: ________________________

NOTE: The name signed to this assignment must correspond with the name of the payee written on the face of the within bond in all respects, without alteration, enlargement or change whatsoever.

Signature Guaranteed: (Bank or Trust Company) By (Authorized Officer) *Signature(s) must be guaranteed by an eligible guarantor institution which is a member of the recognized signature guarantee program, i.e., Securities Transfer Agents Medallion Program (STAMP), Stock Exchanges Medallion Program (SEMP), or New York Stock Exchange Medallion Signature Program (MSP).

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EXHIBIT 6.1(c)

Form of Optional Tender Notice U.S. Bank National Association Atlanta, Georgia Re: Series 2013B Bonds issued by Florida Development Finance Corporation

pursuant to a Series 2013B Bond Trust Indenture dated as of November 1, 2013 The undersigned is the Holder of the following Bond, which is part of the above-referenced issue of Bonds: CUSIP Number: _________________________________ Principal Amount: _________________________________ The undersigned hereby elects to have (check one as appropriate, and be certain to designate the principal amount tendered, if less than the entire amount):

____ the entire principal amount ____ $_________________________ of the principal amount of such Bond

(Note: If such amount is less than the entire principal amount, both the amount to be purchased and the remaining amount must be an Authorized Denomination, as defined in the Bond Indenture)

purchased on the following date: . (Note: If Bonds are in the Weekly Rate Mode, this notice must be delivered at least 7 days prior to the Optional Tender Date. If Bonds are in the Daily Rate Mode, this notice must be delivered not later than 10:00 a.m. on the Optional Tender Date. If Bonds are in the R-FLOATs Mode, this notice must be delivered not later than 3:00 p.m. on the Business Day prior to the R-FLOATs Optional Tender Date.) THE UNDERSIGNED ACKNOWLEDGES THAT THIS ELECTION IS IRREVOCABLE AND BINDING ON THE UNDERSIGNED AND CANNOT BE WITHDRAWN. Dated: _________________. Print or Type Name(s) of Holder(s) Address

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Telephone Number Signature

(The name(s) and signature(s) must correspond exactly to the name appearing on the registration books maintained by the Bond Trustee)

Signature guaranteed: (Bank or Trust Company) By (Authorized Officer

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EXHIBIT 9.3(b)

Requisition To: U.S. Bank National Association, as trustee under the Bond Indenture referred to below No. __________________ Re: Florida Development Finance Corporation Healthcare Facilities Revenue Bonds

(UF Health - Jacksonville Project), Series 2013B issued pursuant to a Series 2013B Bond Trust Indenture dated as of November 1, 2013 (the "Bond Indenture")

Capitalized terms not otherwise defined herein shall have the meanings assigned in the Bond Indenture.

Request for Payment by SJMC SJMC hereby requests payment from the Costs of Issuance Fund

of $______________________ to Name of payee: Address of payee: Such payment will be made for the following purpose(s): (Note: SJMC is to describe purpose in reasonable detail. The Bond Trustee shall be entitled to rely upon the certification by SJMC in the following paragraph with respect to the purpose of this payment and shall not be required to verify that such purpose is authorized by the Bond Indenture or that such purpose will not cause or result in a violation of any covenant in the Tax Certificate and Agreement.)

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SJMC hereby certifies that: (a) such payment is for Costs of Issuance, (b) no Indenture Default exists, and (c) such payment will not cause or result in the violation of any covenant contained in the Tax Certificate and Agreement. Dated: ___________________.

SHANDS JACKSONVILLE MEDICAL CENTER, INC. By: Authorized Representative

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EXHIBIT 16.1(b)

Directions for Notices

Florida Development Finance Corporation

Mailing address: Florida Development Finance Corporation

800 North Magnolia Avenue, Suite 1100 Orlando, Florida 32803 Attention: William Franklin Spivey, Jr.

Hand delivery or courier delivery address:

Florida Development Finance Corporation 800 North Magnolia Avenue, Suite 1100 Orlando, Florida 32803 Attention: William Franklin Spivey, Jr.

Email address: [email protected] Facsimile transmissions: 407/956-5545

U.S. Bank National Association Mailing address: U.S. Bank National Association

1349 W. Peachtree Street, Ste. 1050 Atlanta, GA 30309 Attention: Corporate Trust Department

Hand delivery or courier delivery address:

U.S. Bank National Association 1349 W. Peachtree Street, Ste. 1050 Atlanta, GA 30309 Attention: Corporate Trust Department

Email address: [email protected]

Facsimile transmissions TBD

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Shands Jacksonville Medical Center, Inc.

Mailing address: Shands Jacksonville Medical Center, Inc.

655 8th Street Jacksonville, Florida 32209 Attention: Vice President and Chief Financial Officer

Hand delivery or courier delivery address:

Shands Jacksonville Medical Center, Inc. 655 8th Street Jacksonville, Florida 32209 Attention: Vice President and Chief Financial Officer

Email address: [email protected] Facsimile transmissions: 904/244-8675

Merrill Lynch, Pierce, Fenner & Smith Incorporated (as Remarketing Agent and Calculation Agent)

Mailing address: Merrill Lynch, Pierce, Fenner & Smith

Incorporated One Bryant Park Ninth Floor New York, New York 10036 Attention: Municipal Markets Department

Hand delivery or courier delivery address:

Merrill Lynch, Pierce, Fenner & Smith Incorporated One Bryant Park Ninth Floor New York, New York 10036 Attention: Municipal Markets Department

Email address: [email protected] Facsimile transmissions: 646/736-6960

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APPENDIX D

Excerpted Provisions of the Loan Agreement and Master Trust Indenture

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EXCERPTED PROVISIONS OF THE LOAN AGREEMENT

ARTICLE I DEFINITIONS AND OTHER PROVISIONS OF

GENERAL APPLICATION

SECTION 1.1. DEFINITIONS.

For all purposes of this Agreement, except as otherwise expressly provided or

unless the context otherwise requires:

(1) Capitalized terms not otherwise defined herein shall have the meaning assigned in the Bond Indenture.

(2) The terms defined in this Article shall have the meanings assigned to them in this Article. Singular terms shall include the plural as well as the singular, and vice versa.

(3) The definitions in the recitals to this instrument are for convenience only and shall not affect the construction of this instrument.

(4) All accounting terms not otherwise defined herein have the meanings assigned to them, and all computations herein provided for shall be made, in accordance with generally accepted accounting principles. All references herein to "generally accepted accounting principles" refer to such principles as they exist at the date of application thereof.

(5) All references in this instrument to designated "Articles", "Sections" and other subdivisions are to the designated Articles, Sections and subdivisions of this instrument as originally executed.

(6) The terms "herein", "hereof" and "hereunder" and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section or other subdivision.

(7) All references in this instrument to a separate instrument are to such separate instrument as the same may be amended or supplemented from time to time pursuant to the applicable provisions thereof.

(8) The term "person" shall include any individual, corporation, partnership, limited liability company, joint venture, association, trust, unincorporated organization and any government or any agency or political subdivision thereof.

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SECTION 1.2. EFFECT OF HEADINGS AND TABLE OF CONTENTS.

The Article and Section headings herein and in the Table of Contents are for convenience only and shall not affect the construction hereof.

SECTION 1.3. DATE OF LOAN AGREEMENT.

The date of this Agreement is intended as and for a date for the convenient identification of this Agreement and is not intended to indicate that this Agreement was executed and delivered on said date.

SECTION 1.4. SEPARABILITY CLAUSE.

If any provision in this Agreement shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

SECTION 1.5. GOVERNING LAW.

This Loan Agreement shall be construed in accordance with and governed by the laws of the State of Florida.

SECTION 1.6. COUNTERPARTS.

This instrument may be executed in any number of counterparts, each of which so executed shall be deemed an original, but all such counterparts shall together constitute but one and the same instrument.

ARTICLE II THE LOAN

SECTION 2.1. ISSUANCE OF BONDS.

Simultaneously with the delivery of this Agreement, the Issuer shall issue the Bonds pursuant to the Bond Indenture.

SECTION 2.2. LOAN OF BOND PROCEEDS.

The Issuer does hereby loan the principal amount of the Bonds to SJMC, and SJMC does hereby borrow such amount from the Issuer and instruct the Issuer to apply the proceeds of the Bonds in the manner set forth in Section 5.4 of the Bond Indenture.

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SECTION 2.3. WITHDRAWALS FROM COSTS OF ISSUANCE FUND.

SJMC may cause withdrawals to be made from the Costs of Issuance Fund for the payment of Costs of Issuance, but only if the related conditions of the Bond Indenture are satisfied and SJMC delivers to the Bond Trustee a duly completed requisition for each such withdrawal in the form attached to the Bond Indenture as Exhibit 9.3(b), executed on behalf of SJMC by an Authorized Representative of SJMC.

ARTICLE IIII LOAN PAYMENTS

SECTION 3.1. LOAN PAYMENTS.

(a) SJMC shall make payments (collectively, "Loan Payments") to the Bond Trustee, for the account of the Issuer, on each Bond Payment Date in an amount equal to the Debt Service on the Bonds due on such Bond Payment Date. All Loan Payments shall be made in funds immediately available to the Bond Trustee not later than one hour prior to the Bond Trustee’s deadline for timely payment of such Debt Service.

(b) SJMC may credit the amount of investment earnings in the Debt Service Fund against any Loan Payment required by Section 3.1(a), provided that if the amount on deposit in the Debt Service Fund is not sufficient for any reason to pay Debt Service due on any Bond Payment Date, SJMC shall pay the amount of such deficiency in funds immediately available to the Bond Trustee not later one hour prior to the Bond Trustee’s deadline for timely payment of such Debt Service.

SECTION 3.3. PAYMENT OF PURCHASE PRICE OF TENDERED BONDS.

(a) Except as provided in Section 6.3 of the Bond Indenture with respect to R-FLOATs Non-Remarketed Bonds, SJMC agrees to pay the Purchase Price of Tendered Bonds due on each Tender Date. All such payments shall be made in funds immediately available to the Bond Trustee on the related Tender Date not later than one hour prior to the Bond Trustee’s deadline for timely payment of such Purchase Price on the related Tender Date.

(b) SJMC may credit the amount of investment earnings in the Bond Purchase Fund against any payment required by Section 3.3(a), provided that if the amount on deposit in the Bond Purchase Fund is not sufficient for any reason to pay the Purchase Price of Tendered Bonds due on such Tender Date, SJMC shall pay the amount of such deficiency in funds immediately available to the Bond Trustee not later one hour prior to the Bond Trustee’s deadline for timely payment of such Purchase Price.

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SECTION 3.4. ADDITIONAL PAYMENTS.

(a) SJMC shall pay to the Issuer or to the Bond Trustee, as the case may be, the following:

(1) the acceptance fee of the Bond Trustee and the annual (or other regular) fees, charges and expenses of the Bond Trustee under the Bond Indenture;

(2) any amount to which the Bond Trustee may be entitled under Section 12.7 of the Bond Indenture; and

(3) the reasonable expenses of the Issuer incurred at the request of SJMC, or in the performance of its duties under any of the Bond Documents, or in connection with any litigation which may at any time be instituted involving any of the Bond Documents, or in the pursuit of any remedies under any of the Bond Documents.

(b) SJMC shall make such payments to the Issuer or the Bond Trustee, as the case may be, within 10 days after receipt of an invoice therefor.

SECTION 3.5. OVERDUE PAYMENTS.

Any Loan Payments required by Section 3.1 that are overdue shall bear interest from the related Bond Payment Date until paid at the Post-Default Rate for overdue Debt Service payments specified in the Bonds. Any other payments required by this Article 3 that are overdue shall bear interest from the date due until paid at the Post-Default Rate specified in the Bond Indenture.

SECTION 3.6. FULL FAITH AND CREDIT OBLIGATION.

SJMC’s obligation to make Loan Payments and the other payments required by this Agreement shall be a full faith and credit obligation of SJMC. SJMC’s obligation to make such payments and to perform and observe the other agreements and covenants on its part contained in this 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 Bond Trustee.

SECTION 3.7. DELIVERY OF SERIES 2013B MASTER INDENTURE OBLIGATION.

(a) As evidence of and security for the payment obligations of SJMC under this Agreement with respect to Debt Service on the Bonds, SJMC shall deliver the Series 2013B Master Indenture Obligation to the Bond Trustee on behalf of the Obligated Group. All Loan Payments and all payments with respect to this Agreement shall be credited against the required payments under the Series 2013B Master Indenture

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Obligation, all to the end that the unpaid aggregate principal amount of the Series 2013B Master Indenture Obligation shall be equal to the unpaid aggregate principal amount of the Bonds.

(b) After all Bonds have been Defeased, the Series 2013B Master Indenture Obligation shall be deemed fully paid and the Issuer shall cause the Bond Trustee to surrender the Series 2013B Master Indenture Obligation to SJMC.

ARTICLE IV CONCERNING THE BONDS,

THE BOND INDENTURE AND THE BOND TRUSTEE

SECTION 4.1. ASSIGNMENT BY ISSUER.

(a) Simultaneously with the delivery of this Agreement the Issuer shall, pursuant to the Bond Indenture, assign and pledge to the Bond Trustee all right, title and interest of the Issuer in and to the Loan Agreement (except for certain rights personal to the Issuer) and the Series 2013B Master Indenture Obligation. SJMC hereby consents to such assignment and pledge.

(b) Until the Bond Indenture Indebtedness has been Defeased, the Bond Trustee shall have all rights and remedies herein accorded to the Issuer and any reference herein to the Issuer shall be deemed, with the necessary changes in detail, to include the Bond Trustee; provided, however, that the Issuer shall retain the rights to indemnification and reimbursement of expenses granted to it by this Agreement.

SECTION 4.2. REDEMPTION OF BONDS.

(a) The Issuer will redeem any or all of the Bonds in accordance with the scheduled mandatory redemption provisions of the Bonds and upon the occurrence of any event or contingency requiring the mandatory redemption of Bonds, all in accordance with the applicable provisions of the Bonds and the Bond Indenture.

(b) If no Loan Default exists, SJMC may exercise any optional redemption rights with respect to the Bonds on behalf of the Issuer. If a Loan Default exists, this right of SJMC shall be suspended, and the Issuer may exercise any optional redemption rights in its own name (or on behalf of SJMC), provided that the Issuer gives SJMC 10 days’ prior notice of its intention to do so. If this Agreement has been terminated, the Issuer may exercise any right of optional redemption without prior notice to SJMC.

(c) Upon the redemption of Bonds pursuant to any optional or mandatory redemption provisions and the Series 2013B Master Indenture Obligation shall be deemed prepaid in the amount equal to the principal amount of the Bonds redeemed.

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SECTION 4.3. AMENDMENT OF BOND INDENTURE OR BONDS.

The Issuer will not cause or permit the amendment of the Bond Indenture or the Bonds without the prior written consent of SJMC.

SECTION 4.4. THE BOND INDENTURE FUNDS.

(a) If no Loan Default exists, any money held as part of an Bond Indenture Fund shall be invested or reinvested in Qualified Investments by the Bond Trustee in accordance with the terms of the Bond Indenture and instructions of SJMC.

(b) SJMC shall be solely responsible for (i) determining that any such investment complies with the arbitrage limitations imposed by Section 148 of the Internal Revenue Code, and (ii) calculating the amount of, and making payment of, any rebate due to the United States under Section 148(f) of the Internal Revenue Code.

(c) As security for the performance by SJMC of the covenants hereunder, SJMC hereby assigns and pledges to the Issuer, and grants to the Issuer a security interest in, all right, title and interest of SJMC in and to all money and investments from time to time on deposit in, or forming a part of, the Bond Indenture Funds, subject to the provisions of this Agreement and the Bond Indenture permitting the application thereof for the purposes and on the terms and conditions set forth herein and in the Bond Indenture. SJMC acknowledges that the rights of the Issuer created by this Section shall be assigned by the Issuer to the Bond Trustee pursuant to the Bond Indenture.

SECTION 4.5. DEFEASANCE OF BOND INDENTURE INDEBTEDNESS.

(a) After the Bond Indenture Indebtedness is Defeased, all references in this Agreement to the Bonds, the Bond Indenture and the Bond Trustee shall be ineffective and neither the Bond Trustee nor the Holders of the Bonds shall thereafter have any rights hereunder, except those rights that shall have vested prior to termination.

(b) If any money or investments remain in the Bond Indenture Funds after the Bond Indenture Indebtedness has been Defeased, the Issuer will pay and deliver such money and investments to SJMC.

ARTICLE V REPRESENTATIONS AND COVENANTS

SECTION 5.1. GENERAL REPRESENTATIONS.

SJMC makes the following representations and warranties as the basis for the undertakings on its part contained in this Agreement:

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(1) It is duly organized as a private not for profit corporation under the laws of the State of Florida and is not in default under any of the provisions contained in its organization documents or in the laws of the State of Florida.

(2) It is a charitable organization under Section 501(c)(3) of the Internal Revenue Code and has done nothing to impair its status as such.

(3) It has the power to consummate the transactions contemplated by the Bond Documents to which it is a party.

(4) By proper corporate action it has duly authorized the execution and delivery of the Bond Documents to which it is a party and the consummation by SJMC of the transactions described in the Bond Documents.

(5) It has obtained all consents, approvals, authorizations and orders of governmental authorities that are required to be obtained by it as a condition to the execution and delivery of the Bond Documents to which it is a party.

(6) The execution and delivery by it of the Bond Documents to which it is a party and the consummation by it of the transactions described therein will not (i) conflict with, be in violation of, or constitute (upon notice or lapse of time or both) a default under its organization documents or any agreement, instrument, order or judgment to which it is a party or is subject, or (ii) result in or require the creation or imposition of any lien of any nature upon or with respect to any of its properties now owned or hereafter acquired, except as provided by the Bond Documents.

(7) The Bond Documents to which it is a party constitute legal, valid and binding obligations and are enforceable against it in accordance with the terms of such instruments, except as enforcement thereof may be limited by (i) bankruptcy, insolvency, or other similar laws affecting the enforcement of creditors’ rights and (ii) general principles of equity, including the exercise of judicial discretion in appropriate cases.

SECTION 5.2. ELIGIBILITY OF FINANCING UNDER ENABLING LAW.

SJMC makes the following representations and warranties regarding the eligibility of the financing under the Enabling Law:

The Refunded Notes financed or refinanced capital improvements constituting a "project" within the meaning of the Enabling Law.

SECTION 5.3. COMPLIANCE WITH TAX CERTIFICATE.

SJMC will comply with all covenants and agreements on its part contained in the Tax Certificate and Agreement.

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SECTION 5.4. COMPLIANCE WITH CONTINUING DISCLOSURE AGREEMENT.

SJMC will comply with all covenants and agreements on its part contained in the Continuing Disclosure Agreement.

SECTION 5.5. CORPORATE EXISTENCE.

(a) Except as provided in Section 5.5(b), SJMC will do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence in accordance with the terms of the Master Indenture.

(b) SJMC may consolidate with or merge into any other not for profit corporation or transfer its property substantially as an entirety to any person if:

(1) such consolidation, merger, conveyance or transfer shall be on such terms as shall fully preserve the rights and powers of the Bond Trustee and the Holders of the Bonds;

(2) the corporation formed by such consolidation or into which SJMC is merged or the person which acquires by conveyance or transfer SJMC’s property substantially as an entirety (the "Successor") shall execute and deliver to the Bond Trustee an instrument in form recordable and acceptable to the Bond Trustee containing an assumption by such Successor of the performance and observance of every covenant and condition of this Agreement and the other Bond Documents to be performed or observed by SJMC;

(3) immediately after giving effect to such transaction, no Loan Default, or any event which upon notice or lapse of time or both would constitute such a Loan Default, shall have occurred and be continuing;

(4) SJMC delivers to the Issuer and the Bond Trustee a Favorable Tax Opinion; and

(5) SJMC shall have delivered to the Bond Trustee a certificate executed by an Authorized Representative of SJMC and an Opinion of Counsel, each of which shall state in effect that such consolidation, merger, conveyance or transfer complies with this Section and that all conditions precedent herein provided relating to such transactions shall have been complied with.

(c) Upon any consolidation or merger or any conveyance or transfer of SJMC’s property substantially as an entirety in accordance with this Section, the Successor shall succeed to, and be substituted for SJMC under this Agreement with the same effect as if such Successor had been named as SJMC herein.

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SECTION 5.6. ADVANCES BY ISSUER OR BOND TRUSTEE.

If SJMC shall fail to perform any of its covenants in this Agreement, the Issuer or the Bond Trustee may, at any time and from time to time, after written notice to SJMC if no Loan Default exists, make advances to effect performance of any such covenant on behalf of SJMC. Any money so advanced by the Issuer or the Bond Trustee, together with interest at the Post-Default Rate, shall be repaid upon demand.

SECTION 5.7. INDEMNITY OF ISSUER AND BOND TRUSTEE

(a) To the extent permitted by law, SJMC agrees to indemnify the Issuer and the Bond Trustee for, and hold each of them harmless against, any loss, liability or expense (including reasonable attorneys’ fees) incurred without bad faith or willful misconduct on their part, arising out of or in connection with the issuance of the Bonds, the acceptance of their duties and responsibilities under the Bond Documents, or their performance or observance of any agreement or covenant on their part to be observed or performed under the Bond Documents, including without limitation (i) the offer and sale of the Bonds or a subsequent sale or distribution of any of the Bonds, (ii) the exercise, or failure to exercise, any right, privilege or power of the Issuer or the Bond Trustee under the Bond documents, and (iii) the administration of the trust established by the Bond Indenture.

(b) The covenant of indemnity by SJMC contained in this Section shall survive the termination of this Agreement.

ARTICLE VI REMEDIES

SECTION 6.1. EVENTS OF DEFAULT.

Any one or more of the following shall constitute an event of default (a "Loan Default") under this Agreement (whatever the reason for such event and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body):

(1) default in the payment of any Loan Payment required by Section 3.1 when such Loan Payment becomes due and payable; or

(2) default in the payment of the Purchase Price of Tendered Bonds pursuant to Section 3.3 when such Purchase Price becomes due and payable; or

(3) default in the performance, or breach, of any covenant or warranty of SJMC in this Agreement (other than a covenant or warranty, a default in the performance or

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breach of which is elsewhere in this Section specifically dealt with), and the continuance of such default or breach for a period of 60 days after notice to SJMC by the Issuer or by the Bond Trustee specifying such default or breach and requiring it to be remedied and stating that such notice is a "notice of default" hereunder; or

(4) an Act of Bankruptcy shall occur with respect to SJMC; or

(5) an event of default shall exist under the Master Indenture and any applicable grace or notice period shall have expired.

The Continuing Disclosure Agreement contains the exclusive remedies for breach by SJMC of the covenants on its part contained in such Agreement, and no such breach shall constitute a Loan Default or an event of default under this Agreement or any other Bond Document.

SECTION 6.2. REMEDIES ON DEFAULT.

If a Loan Default occurs and is continuing, the Issuer (or the Bond Trustee, as provided in Section 4.1) may exercise any of the following remedies:

(1) declare all Loan Payments to be immediately due and payable in an amount not to exceed the principal amount of all Outstanding Bonds, plus the redemption premium (if any) payable with respect thereto, plus the interest accrued thereon to the date of such declaration; and

(2) take whatever legal proceedings may appear necessary or desirable to collect the Loan Payments then due, whether by declaration or otherwise, or to enforce any obligation or covenant or agreement of SJMC under this Agreement or by law.

SECTION 6.3. RIGHTS WITH RESPECT TO SERIES 2013B MASTER INDENTURE OBLIGATION.

SJMC acknowledges that if any Loan Default exists the Bond Trustee shall be entitled to exercise all rights and remedies afforded to the holder of the Series 2013B Master Indenture Obligation.

SECTION 6.4. PROCEEDINGS IN BANKRUPTCY

In case there shall be pending proceedings for the bankruptcy or for the reorganization or arrangement of SJMC under the Federal Bankruptcy Code or any other similar federal or state law, or in case a receiver or trustee shall have been appointed for its property, the Issuer, irrespective of whether all Loan Payments shall then be due and payable as herein expressed or by declaration or otherwise and irrespective of whether the Issuer or the Bond Trustee shall have made any demand pursuant to the provisions of Section 6.2 hereof, the Issuer or the Bond Trustee (as the case may be) shall be entitled

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and empowered, by intervention in such proceedings or otherwise, to file and prove a claim or claims for the whole amount of Loan Payments owing and unpaid, and, in case of any judicial proceedings, to file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Issuer allowed in such judicial proceedings relative to SJMC, its creditors or its property, and to collect and receive any money or other property payable or deliverable on any such claims.

SECTION 6.5. NO REMEDY EXCLUSIVE.

No remedy herein conferred upon or reserved to the Issuer or the Bond Trustee is intended to be exclusive of any other available remedy or remedies, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given under this Agreement or now or hereafter existing at law or in equity or by statute. No delay or omission to exercise any right or power accruing upon any default shall impair any such right or power or shall be construed to be a waiver thereof but any such right or power may be exercised from time to time and as often as may be deemed expedient.

SECTION 6.6. AGREEMENT TO PAY ATTORNEYS’ FEES AND EXPENSES.

If SJMC should default under any of the provisions of this Agreement and the Issuer or the Bond Trustee (in its own name or in the name and on behalf of the Issuer) should employ attorneys or incur other expenses for the collection of Loan Payments or the enforcement of performance or observance of any agreement or covenant on the part of SJMC herein contained, SJMC will on demand therefor pay to the Issuer or the Bond Trustee (as the case may be) the reasonable fee of such attorneys and such other expenses so incurred.

SECTION 6.7. NO ADDITIONAL WAIVER IMPLIED BY ONE WAIVER.

In the event any agreement contained in this Agreement should be breached by either party and thereafter waived by the other party, such waiver shall be limited to the particular breach so waived and shall not be deemed to waive any other breach hereunder.

SECTION 6.8. REMEDIES SUBJECT TO APPLICABLE LAW.

All rights, remedies and powers provided by this Article may be exercised only to the extent the exercise thereof does not violate any applicable provision of law in the premises, and all the provisions of this Article are intended to be subject to all applicable mandatory provisions of law which may be controlling in the premises and to be limited to the extent necessary so that they will not render this Agreement invalid or unenforceable.

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ARTICLE VII MISCELLANEOUS

SECTION 7.1. INCORPORATORS, OFFICERS AND DIRECTORS OF ISSUER EXEMPT FROM INDIVIDUAL LIABILITY.

No recourse under or upon any covenant or agreement of this Agreement, or for any claim based thereon or otherwise in respect thereof, shall be had against any past, present or future incorporator, officer or director of the Issuer, or of any successor, either directly or through the Issuer, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise; it being expressly understood that this Agreement is solely a corporate obligation, and that no personal liability whatever shall attach to, or is or shall be incurred by, any incorporator, officer or director of the Issuer or any successor, or any of them, because of the execution and delivery of this Agreement, or under or by reason of the covenants or agreements contained in this Agreement or implied therefrom.

SECTION 7.2. CORPORATE EXISTENCE OF ISSUER.

The Issuer shall not consolidate with or merge into any other corporation or transfer its property substantially as an entirety, except as provided in Section 10.6 of the Bond Indenture.

SECTION 7.3. NOTICES.

(a) Notices and other communications to Financing Participants pursuant to this Agreement must be in writing except as otherwise expressly provided in this Agreement. Any specific reference in this Agreement to "written notice" shall not be construed to mean that any other notice may be oral, unless such oral notice is specifically permitted by this Agreement under the circumstances.

(b) Notices and other communications pursuant to this Agreement may be delivered by any method provided in the directions for notices attached as Exhibit 16.1(b) of the Bond Indenture. A Financing Participant may change its directions for notices by giving notice to the other Financing Participants.

(c) Any notice shall be deemed given when actually received by the Financing Participant to whom the notice is addressed. In addition, any notice sent by registered mail shall be deemed received 3 days after such notice is deposited in the United States mail, addressed as provided in the notice directions included in Exhibit 16.1(b) of the Bond Indenture or, if the designated Financing Participant has delivered a change notice, as specified in such change notice.

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(d) Notice to any Financing Participant required by this Agreement may be waived in writing by such Financing Participant, either before or after the event, and such waiver shall be the equivalent of such notice.

SECTION 7.4. SUCCESSORS AND ASSIGNS.

All covenants and agreements in this Agreement by the Issuer or SJMC shall bind their respective successors and assigns, whether so expressed or not.

SECTION 7.5. BENEFITS OF LOAN AGREEMENT.

Nothing in this Agreement, express or implied, shall give to any person, other than the parties hereto and their successors hereunder, the Bond Trustee and the Holders of the Outstanding Bonds, any benefit or any legal or equitable right, remedy or claim under this Agreement.

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EXCERPTED PROVISIONS OF THE MASTER TRUST INDENTURE

ARTICLE I Definitions and Other Provisions

of General Application

SECTION 1.1 DEFINITIONS

For all purposes of the Indenture, except as otherwise expressly provided or unless the context otherwise requires, the following terms shall have the meaning indicated:

"Accelerated Payments", when used with respect to a Secured Hedge Agreement, shall mean payments under such Secured Hedge Agreement other than Regularly Scheduled Payments. Amounts due as a result of early termination, amounts due as a result of default and acceleration, indemnification payments, tax-gross-up payments, expenses incurred as a result of default, interest payments at a post-default rate, or other similar payments constitute Accelerated Payments.

"Act of Bankruptcy" shall mean the filing of a petition in bankruptcy (or the other commencement of a bankruptcy or similar proceeding) by or against a person under any applicable bankruptcy, insolvency, reorganization, or similar law, now or hereafter in effect.

"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, "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 ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing.

"Ancillary Commitment" shall mean a commitment made or incurred by a Member that is an obligation for the payment of money pursuant to (i) a Contingent Debt Liability, (ii) a Hedge Agreement, (iii) a reimbursement obligation with respect to credit support of Debt incurred by the Member, (iv) a guaranty agreement, or (v) any other type of contractual commitment (other than Debt) requiring the payment of money by the Member.

"Ancillary Commitment Document" shall mean a contract or other document that evidences or provides for the obligations of a Member pursuant to any Ancillary Commitment.

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"Ancillary Obligations" shall mean Obligations issued by the Obligated Group to secure a Member's obligations under any Ancillary Commitment, such Obligations to be issued substantially in the form specified in Section 4.1(a)(3).

"Authorized Denominations", when used with respect to Direct Debt Obligations, shall have the meaning assigned in the Supplemental Indenture relating to the issuance of such Direct Debt Obligations.

"Authorized Officer", when used with respect to any Member, shall mean the chief executive officer or chief financial officer of such Member or any other officer of such Member duly authorized by action of such Member's governing body to take the action contemplated.

"Balloon Debt" shall mean Long-Term Debt that 20% or more of the original principal amount of which matures during any 12-month period. For purposes of this definition, the principal amount of Long-Term Debt required to be redeemed prior to maturity shall be deemed to be payable on the mandatory redemption date rather than at maturity.

"Book Entry System" means the book entry system maintained by The Depository Trust Company, or any successor thereto, for the ownership, transfer, exchange and payment of debt obligations.

"Book Value", when used in connection with an asset of the Obligated Group or a Member, means the value of such asset as shown on the balance sheet of the Obligated Group or such Member. For depreciable assets Book Value shall be net of accumulated depreciation.

"Business Day" shall mean any day other than a Saturday, a Sunday or a day on which the Master Trustee is authorized to be closed under general law or regulation applicable in the place where the Master Trustee performs its business with respect to the Indenture.

"Completion Debt" shall mean Debt incurred by the Obligated Group for the purpose of financing the completion of facilities for which the Obligated Group has already incurred Debt (the "original Debt") if the Obligated Group expected when the original Debt was incurred that the proceeds of such original Debt, together with any funds of the Obligated Group dedicated to the completion of such facilities, would be sufficient for the completion of such facilities. The expectations of the Obligated Group may be established by a certificate of the chief executive officer or chief financial officer of the Obligated Group Representative.

"Conduit Issuer" shall mean an entity that issues bonds or other evidence of indebtedness to provide financing for the benefit of a Member and makes the proceeds of

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such indebtedness available to such Member pursuant to a loan agreement, lease agreement or other similar instrument.

"Consultant" shall mean shall mean a person or firm qualified in the judgment of the Obligated Group Representative to pass upon questions relating to the financial affairs of a hospital and having a favorable reputation for skill and experience in the financial affairs of hospitals, who shall be appointed by the Obligated Group Representative.

"Contingent Debt Liabilities" shall mean all guaranties, endorsements, assumptions and other contingent liabilities in respect of, or to purchase or otherwise acquire, Debt of others.

"Counsel" shall mean a person qualified to practice law in any State of the United States or in the District of Columbia, who shall be appointed by the Obligated Group Representative.

"Credit Facility" shall mean a letter of credit, insurance policy, standby purchase agreement, guaranty agreement or other credit enhancement with respect to (i) Obligations issued under the Indenture, (ii) Related Debt of any Member of the Obligated Group, (iii) any bonds or other obligations of a Conduit Issuer with respect to which a Member of the Obligated Group has incurred Related Debt, or (iv) any Ancillary Obligation of a Member of the Obligated Group.

"Credit Facility Agreement" shall mean an agreement pursuant to which the provider of a Credit Facility makes a Credit Facility available for the benefit of a Member of the Obligated Group, including without limitation a reimbursement agreement, an insurance agreement, and a credit agreement.

"Days' Cash on Hand" shall have the meaning assigned in Section 8.9.

"Debt" shall mean (i) all indebtedness, whether or not represented by Obligations, notes or other securities, for the repayment of borrowed money and (ii) all capitalized leases, installment sale agreements and other similar obligations for the payment of the purchase price of property or assets purchased.

"Debt Obligations" shall mean Direct Debt Obligations and Related Debt Obligations.

"Debt Service" shall mean the principal of, premium (if any) and interest on Direct Debt Obligations.

"Debt Service Coverage Ratio" shall mean the ratio (expressed as a percentage) of Net Income Available for Debt Service for the Fiscal Year in question to Maximum Annual Debt Service as of the date of computation.

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"Defaulted Interest" shall have the meaning assigned in Section 5.3.

"Direct Debt Obligation Payment Date" shall mean each date (including any date fixed for redemption of Obligations) on which debt service is payable on Direct Debt Obligations.

"Direct Debt Obligations" shall mean Obligations that are issued by the Obligated Group to evidence and secure the Obligated Group's obligation for repayment of indebtedness for borrowed money, such Obligations to be substantially in the form specified in Section 4.1(a)(1).

"Electronic Means", when used with respect to the delivery of notices, shall mean telecopy, telegraph, telex, facsimile transmission, or other similar electronic means of communication.

"Escrow Securities" shall mean direct obligations of, or obligations the full and timely payment of which is guaranteed by, the United States of America, including unit investment trusts and mutual funds that invest solely in such obligations.

"Financing Participants" shall mean the Obligated Group and the Master Trustee.

"Fiscal Year" shall mean the fiscal year of the Obligated Group, as established from time to time by requisite corporate action.

"Fitch" shall mean Fitch Ratings, Inc.

"Fully Paid", when used with respect to Obligations, shall have the meaning stated in Article XII.

"Guaranteed Debt" shall mean Debt of another person (other than another Member) with respect to which any Member has any Contingent Debt Liability.

"Guaranteed Long-Term Debt" shall mean Long-Term Debt of another person (other than another Member) with respect to which any Member has any Contingent Debt Liability.

"Guaranteed Short-Term Debt" shall mean Short-Term Debt of another person (other than another Member) with respect to which any Member has any Contingent Debt Liability.

"Hedge Agreement" shall mean a contract entered into to modify the risk on interest rate changes with respect to Debt, including without limitation an interest rate swap, an interest rate cap, a futures contract, a forward contract or an option.

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"Holder" or "Obligationholder", when used with respect to any Obligation, means (i) if the Book Entry System is not in effect with respect to such Obligation, the person in whose name such Obligation is registered on the Register maintained by the Master Trustee and (ii) if the Book Entry System is in effect with respect to such Obligation, the beneficial owner of such Obligation on the records maintained pursuant to the Book Entry System.

"Indenture" or "the Indenture" shall mean this instrument, as amended and supplemented from time to time by one or more indentures or other instruments supplemental thereto entered into pursuant to the applicable provisions thereof.

"Indenture Default" shall have the meaning stated in Article IX. An Indenture Default shall "exist" if an Indenture Default shall have occurred and be continuing.

"Indenture Indebtedness" shall mean all amounts due and payable under the Indenture, including without limitation, (i) all amounts payable on the Obligations, and (ii) all reasonable fees, charges and disbursements of the Master Trustee for services performed and disbursements made under the Indenture.

"Independent", when used with respect to any person, shall mean a person who (a) is in fact independent, (b) does not have any direct financial interest or any material indirect financial interest in any Financing Participant or any Affiliate of a Financing Participant, and (c) is not connected with any Financing Participant or any Affiliate of a Financing Participant as an officer, employee, promoter, underwriter, trustee, partner, director or person performing similar functions.

"Index Rate" shall mean the "Bond Buyer Revenue Bond Index" rate for 30-year tax-exempt revenue bonds, as published by The Bond Buyer on any date selected by the Obligated Group that is within 30 days prior to the date of such determination; provided, however, that if The Bond Buyer (or a successor publication) ceases to publish such rate, the Index Rate shall be established by an Independent nationally recognized securities dealer selected by the Obligated Group Representative, shall be established on any date selected by the Obligated Group that is within 30 days prior to the date of such determination, and shall be the rate that would cause 30-year tax-exempt obligations of the Obligated Group to trade at par, taking into account relevant market conditions and credit rating factors as they exist on the date the Index Rate is so established.

"Insurance Consultant" shall mean a person qualified in the judgment of the Obligated Group to survey risks and recommend insurance coverage for hospital facilities and services and organizations engaged in operations similar to those of the Obligated Group and having a favorable reputation for skill and experience in such surveys and recommendations, who shall be appointed by the Obligated Group Representative.

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"Interest Payment Date", when used with respect to any installment of interest on a Direct Debt Obligation, shall mean the date specified in the Indenture and in such Obligation as the date on which such installment of interest is due and payable.

"Liabilities" shall mean Debt, Contingent Debt Liabilities, and all other liabilities (within the meaning of generally accepted accounting principles) that may be incurred by the Obligated Group, including without limitation the obligation to make payments or post collateral under a Hedge Agreement.

"Lien" shall mean any mortgage, pledge, encumbrance, security interest, assignment or other charge of any kind.

"Long-Term Debt" shall mean Debt that matures by its terms, more than 1 year after the date of the original creation or assumption of such Debt (or that is renewable or extendable at the option of the obligor to a date more than one year after the original creation or assumption of such Debt).

"Master Trustee" shall mean U.S. Bank National Association, a national banking association, until a successor Master Trustee shall have become such pursuant to the applicable provisions of the Indenture, and thereafter "Master Trustee" shall mean such successor.

"Maturity", when used with respect to any Direct Debt Obligation, shall mean the date specified in the related Supplemental Indenture and in such Obligation as the date on which the final installment of principal of such Obligation is due and payable.

"Maximum Annual Debt Service" shall mean the maximum aggregate amount of principal and interest payable during the then current or any subsequent Fiscal Year on Debt and Guaranteed Debt of the Obligated Group, projected, at the option of the Obligated Group Representative, either in accordance with paragraph (a) or paragraph (b):

(a) "Maximum Annual Debt Service" shall be based on Long-Term Debt and Guaranteed Long-term Debt of the Obligated Group (excluding Short-Term Debt and Guaranteed Short-Term Debt), and the amount of principal and interest payable in each Fiscal Year shall be projected in accordance with the following assumptions:

(1) The interest payable on any Long-Term Debt incurred to finance the acquisition or construction of operating assets shall be excluded from interest payable until such operating assets are placed in service, if and to the extent that funds dedicated to the payment of such interest are held by or under the control of a person other than the Obligated Group or an Affiliate of the Obligated Group.

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(2) The principal amount of Long-Term Debt required to be redeemed in any Fiscal Year shall be deemed to be payable in such Fiscal Year rather than the Fiscal Year of its stated maturity.

(3) With respect to Long-Term Debt bearing interest at a variable rate, the amount of interest payable during any period for which the actual rate cannot be determined shall (except as otherwise provided below with respect to Put Debt and Balloon Debt) be projected using the Index Rate; provided, however, that if a Hedge Agreement is entered into that in effect provides for payment of a fixed rate for any portion of such Debt, the Obligated Group may project the interest payments on the related portion of such Debt for the term of the Hedge Agreement by using the fixed rate payable as a result of the Hedge Agreement.

(4) With respect to Put Debt, debt service payable on such Debt shall be projected assuming (i) that the principal balance of such Debt on the date of determination is refinanced on the date of determination over a term equal to 30 years (or any number of years less than 30 selected by the Obligated Group Representative at its option) less the number of whole years that have elapsed since such Debt was incurred, (ii) that such principal balance will bear interest at the Index Rate, and (iii) that debt service on such Debt after the date of determination will be payable in equal annual installments sufficient to pay both principal and interest.

(5) With respect to Balloon Debt, debt service payable on such Debt shall be projected assuming (i) that the principal balance of such Debt on the date of determination is refinanced on the date of determination over a term equal to 30 years (or any number of years less than 30 selected by the Obligated Group Representative at its option) less the number of whole years that have elapsed since such Debt was incurred, (ii) that such principal balance will bear interest at the Index Rate, and (iii) that debt service on such Debt after the date of determination will be payable in equal annual installments sufficient to pay both principal and interest.

(6) With respect to Guaranteed Long-Term Debt, the amount of principal and interest payable during each Fiscal Year (the "annual debt service requirements") on such Debt shall be projected using the assumptions contained in this definition (treating such Debt as Debt of the Obligated Group). After projecting the annual debt service requirements on such Guaranteed Long-Term Debt, the percentage of the annual debt service requirements on such Debt included in annual debt service requirements of the Obligated Group shall be as follows:

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(A) If the Obligated Group has paid, directly or indirectly, any principal or interest on such Guaranteed Long-Term Debt at any time during the 24-month period next preceding such determination, 100% of the annual debt service requirements on such Guaranteed Debt shall be included.

(B) If the Obligated Group has not paid, directly or indirectly, any principal or interest on such Guaranteed Long-Term Debt at any time during the 24-month period next preceding such determination, 20% of the annual debt service requirements on such Guaranteed Debt shall be included.

(7) Debt Service on Subordinated Debt and Nonrecourse Debt shall be excluded from Maximum Annual Debt Service.

(8) If (i) cash or Escrow Securities have been irrevocably deposited in escrow or trust in an amount that, together with earnings thereon (but without reinvestment), is sufficient to pay the principal of or interest on Debt (or any portion thereof) as it comes due and (ii) the Obligated Group has provided the Master Trustee with an Opinion of Counsel to the effect that such Debt has been defeased and discharged in accordance with its terms , such principal or interest (or portion thereof), as the case may be, shall not be included in the calculation of Maximum Annual Debt Service.

(b) "Maximum Annual Debt Service" shall be based on the total amount of Debt and Guaranteed Debt of the Obligated Group (including Short-Term Debt and Guaranteed Short-Term Debt), and the amount of principal and interest payable in each Fiscal Year shall be projected in accordance with the following assumptions:

(1) The amount of principal and interest payable during each Fiscal Year on such Debt after the date of determination shall be projected assuming (i) that the principal balance of such Debt (after adjustment as provided in paragraph (b)(2) of this definition) on the date of determination will be refinanced, (ii) that such principal balance will be payable over a term of 30 years, (iii) that such principal balance will bear interest at the Index Rate, and (iv) that debt service on such Debt after the date of determination will be payable in equal annual installments sufficient to pay both principal and interest.

(2) If the Obligated Group has paid, directly or indirectly, any principal or interest on such Guaranteed Debt at any time during the 24-month period next preceding such determination, 100% of the principal

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balance of such Guaranteed Debt shall be included in the projection. If the Obligated Group has not paid, directly or indirectly, any principal or interest on such Guaranteed Debt at any time during the 24-month period next preceding such determination, only 20% of the principal balance on such Debt shall be included in the projection.

(3) If (i) cash or Escrow Securities have been irrevocably deposited in escrow or trust in an amount that, together with earnings thereon (but without reinvestment), is sufficient to pay the principal of or interest on Debt (or any portion thereof) as it comes due and (ii) the Obligated Group has provided the Master Trustee with an Opinion of Counsel to the effect that such Debt has been defeased and discharged in accordance with its terms , such principal or interest (or portion thereof), as the case may be, shall not be included in the calculation of Maximum Annual Debt Service.

"Member" or "Obligated Group Member" or "Member of the Obligated Group" shall mean all entities that are a Member of the Obligated Group formed under the Indenture at the time of determination.

"Moody's" shall mean Moody's Investors Services, Inc.

"Mortgage" shall mean that certain Mortgage in favor of the Master Trustee, dated the date of delivery by SJP in accordance with Section 8.16. Until delivered in accordance with Section 8.16, all references in the Indenture to the "Mortgage" shall be disregarded.

"Net Income Available for Debt Service" shall mean the excess of (i) revenues (after adjustments, discounts or contractual allowances) and gains over (ii) expenses and losses other than depreciation, amortization and interest; provided, however, that the following items shall be excluded from the computation of "Net Income Available for Debt Service": (A) extraordinary items of income or loss, (B) gain or loss from the extinguishment of Debt, (C) unrealized gains and losses on investments or hedges (including without limitation interest rate swap agreements), (D) any gain or loss from the disposition of assets not in the ordinary course of business, (E) any loss from impairment of the value of assets, (F) financing costs that are treated as a current expense, rather than amortized and (G) other non-cash expenses.

"Net Proceeds", when used with respect to the Mortgage, shall have the meaning assigned in Section 3.1(b). Until such time as the Mortgage is delivered in accordance with Section 8.16, any references therein to "Net Proceeds" shall be disregarded.

"Nonrecourse Debt" shall mean any Long-Term Debt secured by a Purchase Money Mortgage if the liability for payment of such Debt is effectively limited to the

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assets subject to such Purchase Money Mortgage with no recourse, directly or indirectly, to any other assets of the Obligated Group or the general credit of the Obligated Group.

"Obligated Group" shall mean all Members of the Obligated Group formed under the Indenture at the time of determination.

"Obligated Group Representative" shall mean SJMC, acting in its capacity as representative of the Obligated Group pursuant to Section 14.6.

"Obligation" shall mean any obligation issued pursuant to the Indenture, including Direct Debt Obligations, Related Debt Obligations, and Ancillary Obligations.

"Obligation Documents" shall mean the Indenture, and the Obligations, and the Mortgage.

"Office of the Master Trustee" shall mean the office of the Master Trustee for hand delivery of notices and other documents, as specified pursuant to Article XIV.

"Operating Expenses," when used with respect to the liquidity covenant in Section 8.9, shall have the meaning assigned in Section 8.9(b)(3).

"Operating Revenue" shall mean the total operating revenue of the Obligated Group (after adjustments, discounts or contractual allowances under Medicare, Medicaid, Blue Cross and similar programs) during the period in question, for its own account, from the conduct of its business.

"Opinion of Counsel" shall mean an opinion from an attorney or firm of attorneys with experience in the matters to be covered in the opinion. Except as otherwise expressly provided in the Indenture, the attorney or attorneys rendering such opinion may be counsel for one or more of the Financing Participants.

"Outstanding" when used with respect to Obligations shall mean, as of the date of determination, all Obligations authenticated and delivered under the Indenture, except:

(a) Obligations cancelled by the Master Trustee or delivered to the Master Trustee for cancellation;

(b) Obligations for whose payment or redemption money in the necessary amount has been deposited with the Master Trustee in trust for the Holders of such Obligations, provided that, if such Obligations are to be redeemed, notice of defeasance and/or such redemption has been duly given pursuant to the Indenture or provision therefor satisfactory to the Master Trustee has been made; and

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(c) Obligations in exchange for or in lieu of which other Obligations have been authenticated and delivered under the Indenture; and

(d) Obligations excluded pursuant to Section 3.1.

"Payment Date", when used with respect to Direct Debt Obligations, shall mean each date (including any date fixed for redemption of Direct Debt Obligations), on which Debt Service is payable on Direct Debt Obligations.

"Pledged Revenues" shall mean all gross receipts, revenues, income, rents, royalties, benefits and other moneys received by or on behalf of the Obligated Group, including, without limitation, contributions, donations and pledges, whether in the form of cash, securities or other personal property, gross revenues derived from the operation of the facilities of the Obligated Group, and all rights to receive the same, whether in the form of accounts, contract rights, chattel paper, instruments, rights under agreements with insurance companies, or other rights, and the proceeds thereof, and any insurance thereon, whether now existing or hereafter coming into existence and whether now owned or held or hereafter acquired by the Obligated Group; provided, however, that gifts, grants, bequests, donations and contributions theretofore or thereafter made, designated at the time of making thereof by the donor or maker as being for certain specific purposes, and the income derived therefrom, to the extent required by such designation, shall be excluded from Pledged Revenues.

"Post-Default Rate" shall mean (a) when used with respect to any payment of Debt Service on any Direct Debt Obligation, the rate specified in such Obligation for overdue installments of Debt Service on such Obligation, computed as provided in such Obligation, and (b) when used with respect to all other payments due under the Indenture, a variable rate equal to the Master Trustee's prime rate plus 1% (100 basis points), computed on the basis of a 365 or 366-day year, as the case may be, for actual days elapsed.

"Purchase Money Mortgage" shall mean a Lien held by any person (whether or not the seller of the assets subject to such Lien) on fixed assets acquired or constructed by a Member after the date of delivery of this instrument and granted contemporaneously with such acquisition or construction, which Lien secures all or a portion of the related purchase price or construction costs of such assets.

"Put Debt" shall mean Debt that must be purchased by the obligor prior to its stated maturity date, including Debt subject to mandatory tender for purchase and Debt that may be tendered for purchase at the option of the holder.

"Rating Agency" shall mean Moody's, S&P, Fitch or any other nationally recognized securities rating agency.

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"Refunding Debt" shall mean any Long-Term Debt issued for the purpose of refunding or refinancing outstanding Long-Term Debt.

"Register" shall mean the register or registers for the registration and transfer of Obligations maintained by the Obligated Group pursuant to Section 5.1.

"Regular Record Date" shall have the meaning assigned in the related Supplemental Indenture for any series of Direct Debt Obligations.

"Regularly Scheduled Payments" shall mean:

(1) When used with respect to Debt evidenced by Direct Debt Obligations and Related Debt Obligations, shall mean principal and interest payments on such Direct Debt or Related Debt on the maturity or due date or any scheduled mandatory redemption date;

(2) When used with respect to Secured Hedge Agreements, means payments scheduled for regular payment on specified dates or at specific intervals;

(3) When used with respect to an Ancillary Commitment that is a Contingent Debt Liability, payments under the Contingent Debt Liability with respect to principal and interest payments on the related indebtedness on the maturity or due date or any scheduled mandatory redemption date for such indebtedness; and

(4) When used with respect to any other Ancillary Obligations, shall mean regularly scheduled payments under an Ancillary Commitment; but shall not, in any case, include amounts payable as a result of acceleration, prepayment, redemption or other early payment resulting from a default, an early termination event, or any other similar event or contingency.

"Reimbursement Obligation" shall mean an obligation on the part of a Member to reimburse the obligor under a Credit Facility for amounts paid by such obligor with respect to any Debt or Contingent Debt Liability of such Member.

"Related Debt" shall mean Debt of a Member (other than Direct Debt Obligations) that is evidenced by a note, bond or other form of indebtedness for borrowed money issued pursuant to a Related Debt Document. Related Debt may include a loan agreement, lease agreement or other similar instrument that constitutes Debt of such Member and is delivered to a Conduit Issuer.

"Related Debt Document" shall mean any indenture, loan agreement, or other similar instrument evidencing Related Debt incurred by a Member or Members of the Obligated Group.

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"Related Debt Obligation" shall mean an Obligation issued by the Obligated Group to secure Related Debt, such Obligations to be substantially in the form specified in Section 4.1(a)(2).

"S&P" shall mean Standard & Poor's Rating Services, a business of Standard & Poor's Financial Services LLC.

"Secured Hedge Agreement" shall have the meaning assigned in Section 4.2.

"Short-Term Debt" shall mean Debt that matures by its terms within 1 year after the date of original creation or assumption of such Debt (and is not renewable or extendable at the option of the obligor to a date more than one year after the time of original creation or assumption of such Debt.

"SJHC" shall mean Shands Jacksonville HealthCare, Inc., a Florida not for profit corporation, until a successor corporation shall have become such pursuant to the applicable provisions of the Indenture, and thereafter "SJHC" shall mean such successor corporation.

"SJMC" shall mean Shands Jacksonville Medical Center, Inc., a Florida not for profit corporation, until a successor corporation shall have become such pursuant to the applicable provisions of the Indenture, and thereafter "SJMC" shall mean such successor corporation.

"SJP" shall mean Shands Jacksonville Properties, Inc., a Florida not for profit corporation, until a successor corporation shall have become such pursuant to the applicable provisions of the Indenture, and thereafter "SJP" shall mean such successor corporation.

"Special Record Date" for the payment of any Defaulted Interest on Direct Debt Obligations means a date fixed by the Master Trustee pursuant to Section 5.3.

"Subordinated Debt" shall mean Debt payment of which is, by the terms of such Debt and any instrument evidencing or securing the same, effectively subordinated in right of payment to the Obligations as follows:

(1) If no Indenture Default exists, Regularly Scheduled Payments of principal and interest on such Subordinated Debt shall be permitted.

(2) If an Indenture Default exists (including without limitation an Act of Bankruptcy with respect to any Member), all payments of principal and interest on such Subordinated Debt shall be deferred until payment in full of all amounts due on the Obligations.

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"Supplemental Indenture" shall mean an instrument supplementing, modifying or amending the Indenture.

"Trust Estate" shall have the meaning stated in Article III.

"Unrestricted Cash and Investments" shall have the meaning assigned in Section 8.9(b)(1).

"Wire Transfer" shall mean a transfer of funds by electronic means between banks that are members of the Federal Reserve System, or such other method of transferring funds for same-day settlement or credit as shall be acceptable to the Master Trustee.

ARTICLE II Source of Payment

SECTION 2.1 SOURCE OF PAYMENT OF OBLIGATIONS AND OTHER OBLIGATIONS

(a) The Obligations and all other payment obligations under the Indenture shall be general obligations of the Obligated Group for the payment of which its general credit is hereby pledged.

(b) The Indenture shall not constitute or effect a pledge or assignment of, or any other type of security interest in, the property, taxes or revenues of the Obligated Group other than the property specifically identified by the Indenture as part of the Trust Estate.

SECTION 2.2 SPONSORING ENTITIES AND POLITICAL SUBDIVISIONS EXEMPT FROM LIABILITY

The Obligations and any other payment obligations under the Indenture shall not constitute or give rise to an indebtedness or liability of, and shall not constitute a charge against the general credit or taxing powers of (i) the State of Florida or any of its political subdivisions, including without limitation Duval County, Florida or the City of Jacksonville, Florida or (ii) the University of Florida, or any of its colleges, divisions or affiliates, other than the Members of the Obligated Group.

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SECTION 2.3 OFFICERS, DIRECTORS, ETC. EXEMPT FROM INDIVIDUAL LIABILITY

No recourse under or upon any covenant or agreement of the Indenture, or of any Obligations, or for any claim based thereon or otherwise in respect thereof, shall be had against any past, present or future incorporator, officer, employee, agent or member of the governing body of any Member, or of any successor, either directly or through the Member, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise; it being expressly understood that the Indenture and the Obligations issued hereunder are solely corporate obligations, and that no personal liability whatever shall attach to, or is or shall be incurred by, any incorporator, officer, employee, agent or member of the governing body of any Member or any successor, or any of them, because of the issuance of the Obligations, or under or by reason of the covenants or agreements contained in the Indenture or in any Obligations or implied therefrom.

ARTICLE III Security for Payment

SECTION 3.1 PLEDGE AND ASSIGNMENT

To secure the payment of the Obligations and all other amounts due and payable under the Indenture and the performance of the covenants contained in the Indenture, and to declare the terms and conditions on which the Obligations are secured, and in consideration of the premises and of the purchase or acceptance of the Obligations by the Holders thereof, the Obligated Group hereby pledges and assigns to the Master Trustee, and grants to the Master Trustee a security interest in, the following property:

(a) Pledged Revenues. All right, title and interest of the Obligated Group in and to the Pledged Revenues.

(b) Proceeds from Mortgage Rights. All proceeds received by the Master Trustee from the exercise of any rights or remedies under the Mortgage after deducting the expenses incurred by the Master Trustee in the exercise of such rights or remedies (the "Net Proceeds").

(b) Other Property. Any and all property of every kind or description which may, from time to time hereafter, by delivery or by writing of any kind, be subjected to the Lien of the Indenture as additional security by the Obligated Group or anyone on its part or with its consent, or which pursuant to any of the provisions thereof may come into the possession or control of the Master Trustee or a receiver appointed pursuant to the Indenture; and the Master Trustee is hereby authorized to receive any and all such property as and for additional security for

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the obligations secured hereby and to hold and apply all such property subject to the terms of the Loan Agreement.

TO HAVE AND TO HOLD all such property, rights and privileges (collectively called the "Trust Estate") unto the Master Trustee and its successors and assigns;

BUT IN TRUST, NEVERTHELESS, for the equal and proportionate benefit and security of the Holders from time to time of the Obligations (without any priority of any such Obligation over any other such Obligation);

PROVIDED, HOWEVER, that:

(1) If no Indenture Default exists the Obligated Group may use the Pledged Revenues as provided in Section 8.13.

(2) If the Master Trustee receives Pledged Revenues after an Indenture Default exists, but prior to a declaration of acceleration of all Obligations pursuant to Section 9.2, such Pledged Revenues may, in the discretion of the Master Trustee (or upon instructions from Holders of the Obligations in accordance with Section 9.9), be applied to the payment of operating expenses and other liabilities of the Obligated Group, but, with respect to payments on Obligations, shall be applied only to Regularly Scheduled Payments; and

(3) For purposes of determining whether the Holders of the requisite amount of Obligations Outstanding have given any request, demand, authorization, direction, notice, consent or waiver hereunder (including any request, demand, authorization, direction, notice, consent or waiver pursuant to the remedy provisions of Article IX or an amendment pursuant to Article XI), Ancillary Obligations and Obligations registered in the name of (or in the name of a nominee for) the Obligated Group or any Affiliate of the Obligated Group shall be excluded.

SECTION 3.2 MORTGAGE

SJP is required to deliver the Mortgage to the Master Trustee on behalf of the Obligated Group as additional security for the payment of the Obligations and the performance of the covenants contained in the Indenture in accordance with Section 8.16. The Master Trustee's rights and remedies under the Mortgage shall be governed by the terms of the Mortgage and the Indenture, including without limitation Section 9.2(b). Any Net Proceeds received or collected by the Master Trustee pursuant to the Mortgage shall be part of the Trust Estate under the Indenture.

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SECTION 3.3 SEPARATE SECURITY FOR OBLIGATIONS

The Obligated Group may deliver to the Master Trustee a separate Credit Facility solely for the benefit of specified Obligations issued under the Indenture, which may be all or any portion of one or more series of Obligations. Such Credit Facility will not be considered part of the Trust Estate. The terms of the Supplemental Indenture authorizing the issuance of the specified secured Obligations (1) may grant to the provider of such Credit Facility the right to exercise certain rights or powers, or to grant or withhold any consent, on behalf of the Holders of Obligations secured by such Credit Facility and (2) may provide that such provider shall be subrogated to the rights of the Holders of Obligations secured by such Credit Facility if, and to the extent that, such provider is not paid or reimbursed for amounts paid to Holders of Obligations secured by such Credit Facility.

ARTICLE IV Terms for Issuance of Obligations

SECTION 4.1 GENERAL TERMS AND TYPES OF OBLIGATIONS

(a) The following types of Obligations may be issued under the Indenture:

(1) Direct Debt Obligations. The Obligated Group may issue Obligations (which Obligations may be in the form of bonds or notes) that evidence the Obligated Group's obligation for repayment of indebtedness for borrowed money (referred to in the Indenture as "Direct Debt Obligations"). The form of Direct Debt Obligations shall be a note substantially as provided in Exhibit 4.1(a)(1), with such appropriate changes or variations as are required or permitted by the Indenture.

(2) Related Debt Obligations. The Obligated Group may issue Obligations that secure the obligations of a Member (or Members) issued or incurred with respect to Related Debt under a separate Related Debt Document (referred to in the Indenture as "Related Debt Obligations"). The form of Related Debt Obligations shall be substantially as provided in Exhibit 4.1(a)(2), with such appropriate changes or variations as are required or permitted by the Indenture.

(3) Ancillary Obligations. The Obligated Group may issue Obligations that secure the obligations of a Member (or Members) issued or incurred with respect to an Ancillary Commitment under a separate Ancillary Commitment Document; provided, however, that Ancillary Obligations issued with respect to Secured Hedge Agreements must meet the requirements of Section 4.2. The form of Ancillary Obligations shall be substantially as provided in Exhibit 4.1(a)(3),

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with such appropriate changes or variations as are required or permitted by the Indenture.

(b) The terms of each Obligation shall be specified in the related Supplemental Indenture that authorizes the issuance of such Obligation. The amount of Obligations that may be issued under the Indenture is not limited, except as provided in the covenants set forth in the Indenture and in the related Supplemental Indenture for any separate Obligations to be issued under that Supplemental Indenture.

(c) Any Supplemental Indenture relating to Direct Debt Obligations shall specify the terms of issuance for such Obligations, including the following: the aggregate principal amount, the series designation, the Maturity or Maturities of principal, the interest rate or rates (or provisions for the determination thereof), the Authorized Denominations, the Interest Payment Dates for such Obligations, the redemption provisions with respect to such Obligations, and the form of such Obligations, which shall be consistent with the form of Obligations specified in Exhibit 4.1(a)(1). The terms of issuance for such Direct Debt Obligations must be consistent with the general terms of the Indenture relating to Direct Debt Obligations.

(d) Any Supplemental Indenture relating to Related Debt Obligations and Ancillary Obligations may adopt by reference the payment provisions of the Related Debt Document or Ancillary Commitment Document pursuant to which the Obligated Group issues or incurs the Related Debt or the related Ancillary Commitment.

(e) The Holders of all Obligations will be secured equally and proportionately with the Holders of all other Obligations issued under the Indenture; provided, however, that for purposes of determining whether the Holders of the requisite amount of Obligations Outstanding have given any request, demand, authorization, direction, notice, consent or waiver hereunder (including any request, demand, authorization, direction, notice, consent or waiver pursuant to the remedy provisions of Article IX or an amendment pursuant to Article XI), Ancillary Obligations shall be excluded.

SECTION 4.2 ANCILLARY OBLIGATIONS TO SECURE HEDGE AGREEMENTS

(a) The Obligated Group may issue Ancillary Obligations to secure Regularly Scheduled Payments under a Hedge Agreement (such Hedge Agreements being referred to as "Secured Hedge Agreements"); provided, however, that any Accelerated Payment with respect to a Secured Hedge Agreement shall not be secured by such Ancillary Obligation. Accelerated Payments under a Secured Hedge Agreement may be made by the Obligated Group with unrestricted funds of the Obligated Group or funds pledged to secure the Secured Hedge Agreement pursuant to Section 8.10(a)(10).

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(b) Ancillary Obligations issued to secure Regularly Scheduled Payments under a Secured Hedge Agreement may adopt by reference the Regularly Scheduled Payment terms of the Secured Hedge Agreement.

(c) The provisions of any Ancillary Obligation issued pursuant to this Section and the related Supplemental Indenture shall provide that such Obligation may not be transferred to any person other than the counterparty under the Secured Hedge Agreement, or a trustee or other legal representative for such counterparty.

(d) Ancillary Obligations issued pursuant to this Section do not constitute Debt and may be incurred without regard to provisions of the Indenture restricting or limiting the issuance or incurrence of Debt.

SECTION 4.3 CONDITIONS PRECEDENT TO ISSUANCE OF OBLIGATIONS

(a) Prior to the issuance of any Obligations, the Obligated Group Representative shall deliver to the Master Trustee the following:

(1) Proceedings. A certified copy of the proceedings taken by the Obligated Group Representative and, if necessary, one or more other Members of the Obligated Group, authorizing such Obligations.

(2) Supplemental Indenture. A Supplemental Indenture duly executed on behalf of the Obligated Group by the Obligated Group Representative and containing (to the extent applicable) (i) a description of the Obligations proposed to be issued, including the information required in this Article IV, (ii) a statement of the purpose or purposes for which such Obligations are to be issued, (iii) a representation that no Indenture Default exists, (iv) the identity of the person or persons to whom such Obligations will be issued and (v) any other matters deemed appropriate by the Obligated Group and not inconsistent with the terms of the Indenture.

(3) Executed Obligations. The Obligations duly executed on behalf of the Obligated Group by the Obligated Group Representative, for authentication by the Master Trustee.

(4) Certificate Regarding Additional Debt. If such Obligations constitute Debt Obligations, a certificate by an Authorized Representative of the Obligated Group Representative stating in effect that the Obligated Group is entitled to issue or incur such Debt pursuant to an identified exception contained in Section 8.8, together with any documents or opinions required for compliance with such exception.

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(5) Opinion of Counsel. An Opinion of Counsel stating in effect (with such qualifications and assumptions as the Master Trustee may deem appropriate) that (i) such Obligations are valid and binding obligations of the Obligated Group in accordance with their terms and are entitled to the benefit and security of the Indenture equally and proportionately with all other Obligations Outstanding under the Indenture and (ii) the Indenture (as so supplemented) constitutes a valid and binding obligation of the Obligated Group in accordance with its terms.

(6) Opinion of Independent Counsel. The Obligated Group Representative shall have delivered to the Master Trustee an opinion of Independent Counsel to the effect that registration of such Obligations under the Securities Act of 1933, as amended, is not required, or, if such registration is required, that the Obligated Group has complied with all applicable provisions of said Securities Act and the Master Indenture is exempt from qualification under the Trust Indenture Act of 1939, as amended (the "TIA"), or if such qualification is required, the Obligated Group has complied with all applicable provisions of said TIA.

(b) Upon receipt of the documents required by the provisions of this Section to be furnished to it, the Master Trustee shall, unless it has cause to believe that any of the statements set out in such documents is incorrect, thereupon execute and deliver the Supplemental Indenture so presented and shall authenticate such Obligations and deliver the same upon written order executed by the Obligated Group Representative. Any Obligations issued pursuant to and in compliance with the terms of the Indenture shall be entitled to the benefit and protection of the Indenture equally and proportionately with all other Obligations issued hereunder.

ARTICLE V

Registration, Exchange and General Provisions Regarding the Obligations

SECTION 5.1 REGISTRATION, TRANSFER AND EXCHANGE

(a) The Obligated Group shall cause to be kept at the Office of the Master Trustee a register (in the Indenture sometimes referred to as the "Register") in which, subject to such reasonable regulations as it may prescribe, the Obligated Group shall provide for the registration of Obligations and registration of transfers of Obligations entitled to be registered or transferred as therein provided. The Master Trustee is hereby appointed as agent of the Obligated Group for the purpose of registering Obligations and transfers of Obligations as therein provided.

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(b) Upon surrender for registration of transfer of any Obligation at the Office of the Master Trustee, an Authorized Officer of the Obligated Group Representative shall execute, and the Master Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Obligations of like tenor and amount.

(c) At the option of the Holder, Direct Debt Obligations may be exchanged for other Direct Debt Obligations of the same series and Maturity, of any Authorized Denominations and of a like aggregate principal amount, upon surrender of the Direct Debt Obligations to be exchanged at the Office of the Master Trustee. Whenever any Direct Debt Obligations are so surrendered for exchange, the Obligate Group Representative shall execute, and the Master Trustee shall authenticate and deliver, the Direct Debt Obligations which the Obligationholder making the exchange is entitled to receive.

(d) All Obligations surrendered upon any exchange or registration of transfer provided for in the Indenture shall be promptly cancelled by the Master Trustee.

(e) All Obligations issued upon any registration of transfer or exchange of Obligations shall be the valid obligations of the Obligated Group and entitled to the same security and benefits under the Indenture as the Obligations surrendered upon such registration of transfer or exchange.

(f) Every Obligation presented or surrendered for transfer or exchange shall contain, or be accompanied by, all necessary endorsements for transfer.

(g) No service charge shall be made for any registration of transfer or exchange of Obligations, but the Obligated Group may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any transfer or exchange of Obligations.

(h) The Obligated Group shall not be required (1) to register the transfer of or to exchange any Direct Debt Obligation during a period beginning at the opening of business 15 days before the day of the mailing of a notice of redemption of Direct Debt Obligations and ending at the close of business on the day of such mailing, or (2) to transfer or exchange any Direct Debt Obligation so selected for redemption in whole or in part.

SECTION 5.3 PAYMENT OF INTEREST ON DIRECT DEBT OBLIGATIONS; INTEREST RIGHTS PRESERVED

(a) Interest on any Direct Debt Obligation which is payable, and is punctually paid or duly provided for, on any Interest Payment Date shall be paid to the person in

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whose name that Direct Debt Obligation is registered at the close of business on the Regular Record Date for such Interest Payment Date.

(b) Any interest on any Direct Debt Obligation which is payable, but is not punctually paid or duly provided for, on any Interest Payment Date (in the Indenture called "Defaulted Interest") shall forthwith cease to be payable to the Holder on the relevant Regular Record Date solely by virtue of such Holder having been such Holder; and such Defaulted Interest shall be paid by the Obligated Group to the persons in whose names such Direct Debt Obligations are registered at the close of business on a special record date (in the Indenture called a "Special Record Date") for the payment of such Defaulted Interest, which shall be fixed in the following manner. The Obligated Group Representative shall notify the Master Trustee of the amount of Defaulted Interest proposed to be paid on each Direct Debt Obligation and the date of the proposed payment (which date shall be such as will enable the Master Trustee to comply with the next sentence hereof), and at the same time the Obligated Group shall deposit with the Master Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Master Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the persons entitled to such Defaulted Interest as in this subsection provided and not to be deemed part of the Trust Estate. Thereupon the Master Trustee shall fix a Special Record Date for the payment of such Defaulted Interest which shall be not more than 15 nor less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Master Trustee of the notice of the proposed payment. The Master Trustee shall promptly notify the Obligated Group Representative of such Special Record Date and, in the name and at the expense of the Obligated Group, shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be mailed, first-class postage prepaid, to each Holder of a Direct Debt Obligation at his address as it appears in the Register not less than 10 days prior to such Special Record Date. Notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor having been mailed as aforesaid, such Defaulted Interest shall be paid to the persons in whose names the Direct Debt Obligations are registered on such Special Record Date.

(c) Subject to the foregoing provisions of this Section, each Direct Debt Obligation delivered under the Indenture upon registration of transfer of or in exchange for or in lieu of any other Direct Debt Obligation shall carry all the rights to interest accrued and unpaid, and to accrue, which were carried by such other Direct Debt Obligation and each such Direct Debt Obligation shall bear interest from such date that neither gain nor loss in interest shall result from such registration of transfer, exchange or substitution.

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SECTION 5.4 PERSONS DEEMED OWNERS

The Obligated Group and the Master Trustee may treat the person in whose name any Obligation is registered as the owner of such Obligation for the purpose of receiving payment on such Obligation and for all other purposes whatsoever whether or not such Obligation is overdue, and, to the extent permitted by law, neither the Obligated Group nor the Master Trustee shall be affected by notice to the contrary.

ARTICLE VI General Provisions Regarding Redemption of Direct Debt

Obligations

SECTION 6.1 SPECIFIC REDEMPTION PROVISIONS

The terms of the related Supplemental Indenture authorizing any series of Direct Debt Obligations shall specify the specific redemption provisions with respect to such series.

SECTION 6.2 MANDATORY REDEMPTION

Direct Debt Obligations shall be redeemed in accordance with the applicable mandatory redemption provisions without any direction from or consent by the Obligated Group. Unless the date fixed for such mandatory redemption is otherwise specified by the Indenture, the Master Trustee shall select the date for mandatory redemption, subject to the provisions of the Indenture with respect to the permitted period for such redemption.

SECTION 6.3 ELECTION TO REDEEM

The election of the Obligated Group to exercise any right of optional redemption shall be evidenced by notice to the Master Trustee from the Obligated Group Representative. The notice of election to redeem must be received by the Master Trustee at least 35 days prior to the date fixed for redemption (unless a shorter notice is acceptable to the Master Trustee) and shall specify (a) the principal amount of Direct Debt Obligations to be redeemed (if less than all Direct Debt Obligations Outstanding are to be redeemed pursuant to such option) and (b) the redemption date, subject to the provisions of the Indenture with respect to the permitted period for such redemption.

SECTION 6.4 SELECTION BY MASTER TRUSTEE OF DIRECT DEBT OBLIGATIONS TO BE REDEEMED

(a) Except as otherwise provided in the specific redemption provisions for the Direct Debt Obligations, and except as permitted by Section 12.2(c), if less than all Direct Debt Obligations Outstanding are to be redeemed, the principal amount of Direct

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Debt Obligations of each series and Maturity to be redeemed may be specified by the Obligated Group Representative by notice delivered to the Master Trustee not less than 45 days before the date fixed for redemption (unless a shorter notice is acceptable to the Master Trustee), or, in the absence of timely receipt by the Master Trustee of such notice, shall be selected by the Master Trustee by lot or by such other method as the Master Trustee shall deem fair and appropriate; provided, however, that the principal amount of Direct Debt Obligations of each Maturity to be redeemed may not be larger than the principal amount of Direct Debt Obligations of such Maturity then eligible for redemption and may not be smaller than the smallest Authorized Denomination.

(b) Except as otherwise provided in the specific redemption provisions for the Direct Debt Obligations, if less than all Direct Debt Obligations with the same series and Maturity are to be redeemed, the particular Direct Debt Obligations of such series and Maturity to be redeemed shall be selected by the Master Trustee not less than 30 nor more than 45 days prior to the redemption date from the Outstanding Direct Debt Obligations of such series and Maturity then eligible for redemption by lot or by such other method as the Master Trustee shall deem fair and appropriate and which may provide for the selection for redemption of portions (in Authorized Denominations) of the principal of Direct Debt Obligations of such Maturity of a denomination larger than the smallest Authorized Denomination.

(c) The Master Trustee shall promptly notify the Obligated Group Representative of the Direct Debt Obligations selected for redemption and, in the case of any Direct Debt Obligation selected for partial redemption, the principal amount thereof to be redeemed.

(d) For all purposes of the Indenture, unless the context otherwise requires, all provisions relating to the redemption of Direct Debt Obligations shall relate, in the case of any Direct Debt Obligation redeemed or to be redeemed only in part, to the portion of the principal of such Direct Debt Obligation which has been or is to be redeemed.

SECTION 6.5 NOTICE OF REDEMPTION

(a) Unless waived by the Holders of all Direct Debt Obligations then Outstanding to be redeemed, notice of redemption shall be given by registered or certified mail, mailed not less than 20 nor more than 60 days prior to the redemption date, to each Holder of Direct Debt Obligations to be redeemed, at his address appearing in the Register.

(b) All notices of redemption shall state:

(1) the redemption date,

(2) the redemption price,

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(3) the principal amount of Direct Debt Obligations to be redeemed, and, if less than all Outstanding Direct Debt Obligations are to be redeemed, the identification (and, in the case of partial redemption, the respective principal amounts) of the Direct Debt Obligations to be redeemed,

(4) that on the redemption date the redemption price of each of the Direct Debt Obligations to be redeemed will become due and payable and that the interest thereon shall cease to accrue from and after said date,

(5) the place or places where the Direct Debt Obligations to be redeemed are to be surrendered for payment of the redemption price, and

(6) if such redemption is subject to one or more conditions, a description of such condition(s).

(c) Notice of redemption of Direct Debt Obligations to be redeemed at the option of the Obligated Group shall be given by the Obligated Group Representative or, at the Obligated Group's request, by the Master Trustee in the name and at the expense of the Obligated Group. Notice of redemption of Direct Debt Obligations in accordance with the mandatory redemption provisions of the Direct Debt Obligations shall be given by the Master Trustee in the name and at the expense of the Obligated Group.

SECTION 6.6 DEPOSIT OF REDEMPTION PRICE

On the applicable redemption date, an amount of money sufficient to pay the redemption price of all the Direct Debt Obligations which are to be redeemed on that date shall be deposited with the Master Trustee. Such money shall be held in trust for the benefit of the persons entitled to such redemption price and shall not be deemed to be part of the Trust Estate. If such moneys are not so deposited with the Master Trustee on the redemption date, such redemption shall be cancelled on such date.

SECTION 6.7 DIRECT DEBT OBLIGATIONS PAYABLE ON REDEMPTION DATE

Notice of redemption having been given as aforesaid, the Direct Debt Obligations to be redeemed shall, on the redemption date, become due and payable at the redemption price therein specified and from and after such date (unless the Obligated Group shall fail to deposit sufficient funds with the Master Trustee on the redemption date) such Direct Debt Obligations shall cease to bear interest. Upon surrender of any such Direct Debt Obligation for redemption in accordance with said notice such Direct Debt Obligation shall be paid by the Master Trustee using the funds deposited with it by the Obligated Group at the redemption price. Installments of interest due on or prior to the redemption date shall be payable to the Holders of the Direct Debt Obligations registered as such on the relevant Record Dates according to the terms of such Direct Debt Obligations.

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SECTION 6.8 DIRECT DEBT OBLIGATIONS REDEEMED IN PART

Unless otherwise provided in the Trust Indenture, any Direct Debt Obligation which is to be redeemed only in part shall be surrendered at the Office of the Master Trustee with all necessary endorsements for transfer, and an Authorized Officer of the Obligated Group Representative shall execute and the Master Trustee shall authenticate and deliver to the Holder of such Direct Debt Obligation, without service charge, a new Direct Debt Obligation or Direct Debt Obligations of the same series and Maturity and of any Authorized Denomination or Denominations as requested by such Holder in aggregate principal amount equal to and in exchange for the unredeemed portion of the principal of the Direct Debt Obligation surrendered.

ARTICLE VII Funds for Payment or Security of Obligations

SECTION 7.1 FUNDS FOR PAYMENT OR SECURITY OF SPECIFIED OBLIGATIONS

Any Supplemental Indenture may establish a debt service fund, a reserve fund, or any similar fund for the payment or security of specified Obligations, and such fund may be held by the Master Trustee under the terms of such Supplemental Indenture; provided, however, that the establishment of any such fund must comply with the provisions of Section 8.10 of the Indenture with respect to the creation of Liens or encumbrances on property of the Obligated Group that are not for the benefit of all Obligations issued under the Indenture. Any such fund shall be for the sole security and benefit of the specified Obligations.

SECTION 7.2 FUNDS FOR PAYMENT OR SECURITY OF ALL OBLIGATIONS

Any Supplemental Indenture may establish a fund for the payment or security of all Obligations issued under the Indenture, and such fund may be held by the Master Trustee under the terms of such Supplemental Indenture. The establishment of any such fund need not comply with the provisions of Section 8.10.

ARTICLE VIII Representations and Covenants

SECTION 8.1 GENERAL REPRESENTATIONS

Each Member, as applicable, makes the following representations and warranties as the basis for the undertakings on its part contained in the Indenture:

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(a) Under the provisions of applicable law and its certificate of incorporation, it has the power to consummate the transactions contemplated by the Obligation Documents.

(b) The Obligation Documents constitute legal, valid and binding obligations of such Member and are enforceable against it in accordance with the terms of such instruments, except as enforcement thereof may be limited by (1) bankruptcy, insolvency, or other similar laws affecting the enforcement of creditors' rights and (2) general principles of equity, including the exercise of judicial discretion in appropriate cases.

SECTION 8.2 NO ENCUMBRANCE ON TRUST ESTATE

The Obligated Group will not create or permit the creation of any pledge, Lien, charge or encumbrance of any kind on the Trust Estate or any part thereof prior to or on a parity of Lien with the Indenture and the Mortgage.

SECTION 8.3 PAYMENT OF OBLIGATIONS

(a) The Obligated Group will duly and punctually pay, or cause to be paid, all amounts due on the Obligations as and when the same shall become due, all in accordance with the terms of the Obligations and the Indenture.

(b) The Obligated Group will not extend or consent to the extension of the time for payment of amounts due on any Obligation, unless such extension is consented to by the Holder of the Obligation affected.

SECTION 8.4 COVENANTS REGARDING CORPORATE EXISTENCE, PROPERTIES AND OPERATIONS

Each Member, as applicable, covenants and agrees that it will:

(a) preserve its corporate existence and all its rights and licenses to the extent necessary or desirable in the operation of its business and affairs and be qualified to do business in each jurisdiction where its ownership of property or the conduct of its business requires such qualification; provided, however, that nothing contained in the Indenture shall be construed to obligate it to retain or preserve any of its rights or licenses no longer used or useful in the conduct of its business;

(b) at all times cause its properties used or useful in the conduct of its business to be maintained, preserved and kept in good condition, repair and working order and cause to be made all needful and proper repairs, renewals and replacements thereof; provided, however, that nothing contained in the Indenture shall be construed (i) to prevent it from ceasing to operate any portion of its properties, if in the judgment of its governing body it is advisable not to operate the same for the time being, or if it intends

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to sell or otherwise dispose of the same and within a reasonable time endeavors to effect such a sale or other disposition, or (ii) to obligate it to retain, preserve, repair, renew or replace any property, leases, rights, privileges or licenses no longer used or useful in the conduct of its business;

(c) conduct its affairs and carry on its business and operations in such manner as to comply with any and all applicable laws of the United States and the several states thereof and duly observe and conform to all valid orders, regulations or requirements of any governmental authority relative to the conduct of its business and the ownership of its properties; provided, however, that nothing contained in the Indenture shall require it to comply with, observe and conform to any such law, order, regulation or requirement of any governmental authority so long as the validity thereof shall be contested in good faith by appropriate proceedings;

(d) promptly pay all lawful taxes, assessments or other governmental charges or levies at any time levied or assessed upon or against it or its properties; provided, however, that it shall have the right to contest in good faith by appropriate proceedings any such taxes, charges or assessments or the collection of any such sums and pending such contest may delay or defer payment thereof;

(e) promptly pay or otherwise satisfy and discharge all obligations, indebtedness, demands and claims as and when the same become due and payable, other than any thereof whose validity, amount or collectibility is being contested in good faith by appropriate proceedings;

(f) at all times comply with all terms, covenants and provisions contained in any mortgages or instruments evidencing any Liens at any time existing upon its properties or any part thereof securing any indebtedness incurred or assumed by it and pay or cause to be paid, or to be renewed, refunded or extended or to be taken up, by it, all bonds, notes or other evidences of indebtedness secured by any such mortgage or Lien, as and when the same shall become due and payable;

(g) procure and maintain all necessary licenses and permits and, unless it shall in good faith determine that it is not in its best interest and not in the best interest of the Obligationholders, maintain (i) accreditation of its health care facilities (other than those not presently accredited) by the Joint Commission on Accreditation of Hospitals or a similar nationally recognized accrediting agency and (ii) the status of its health care facilities as a provider of health care services eligible for reimbursement under Medicare, Medicaid and a sufficient number of private insurance programs; and

(h) maintain insurance (including self-insurance or self-insurance pools or trusts, if deemed prudent under the circumstances by an Insurance Consultant) covering such risks and in such amounts as, in its judgment, is adequate to protect it and its properties and operations. The insurance required to be maintained pursuant thereto shall

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be subject to the annual review and approval of an Insurance Consultant, and it shall follow any recommendations of the Insurance Consultant to the extent feasible.

SECTION 8.6 CORPORATE EXISTENCE; MERGER, CONSOLIDATION, ETC.

(a) Except as permitted by this Section, each Member will do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence.

(b) A Member may consolidate with or merge into any other corporation or transfer its property substantially as an entirety to another person if the corporation formed by such consolidation or into which such Member is merged or the person which acquires by conveyance or transfer the Member's property substantially as an entirety (the "Successor") shall execute and deliver to the Master Trustee an instrument in form recordable and acceptable to the Master Trustee containing an assumption by such Successor of the due and punctual payment of all amounts due on the Obligations and the performance and observance of every covenant and condition of the Obligation Documents to be performed or observed by the Obligated Group.

(c) Upon any consolidation or merger or any conveyance or transfer of a Member's property substantially as an entirety in accordance with this Section, the Successor shall succeed to, and be substituted for, and may exercise every right and power of, such Member under the Indenture with the same effect as if such Successor had been named as such Member herein. Upon the consummation of such transaction, such Member shall be released from all liability under the Indenture.

(d) Nothing contained in this Section shall be construed to restrict or prohibit a change in control or ownership of a Member of the Obligated Group.

SECTION 8.7 DEBT SERVICE COVERAGE RATIO

(a) If the Debt Service Coverage Ratio of the Obligated Group for any Fiscal Year is less than 100%, the Obligated Group shall retain an Independent Consultant to make recommendations to increase such Debt Service Coverage Ratio to at least 100%, or, if applicable laws and governmental regulations will not permit the Obligated Group to maintain such Debt Service Coverage Ratio, to the highest level permitted by such laws and regulations. The Obligated Group will, to the extent feasible and lawful, follow the recommendations of the Independent Consultant.

(b) An Indenture Default shall exist if the Debt Service Coverage Ratio of the Obligated Group is less than 100% for any two consecutive Fiscal Years.

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SECTION 8.8 RESTRICTION ON ADDITIONAL DEBT

(a) The Obligated Group will not incur, or otherwise become liable in respect of, any additional Debt unless the additional Debt meets the requirements of any one or more of the following paragraphs:

(1) Historical Pro Forma Test. The Obligated Group may incur Long-Term Debt if the Debt Service Coverage Ratio for the preceding Fiscal Year (taking into account the Long-Term Debt to be incurred) was not less than 120%.

(2) Historical Test and Forecast. The Obligated Group may incur Long-Term Debt if both of the following tests are met:

(A) The Debt Service Coverage Ratio (without taking into account the Long-Term Debt to be incurred) for the most recently completed Fiscal Year was not less than 110%.

(B) The Debt Service Coverage Ratio (taking into account the Long-Term Debt to be incurred) for each of the two Fiscal Years immediately following the Fiscal Year in which such Debt is incurred (or, if the acquisition or construction of facilities is being financed by such Long-Term Debt, in each of the two Fiscal Years following the Fiscal Year in which such facilities are expected to be placed in service) is expected to be not less than 120% according to a forecast prepared by the chief financial officer of the Obligated Group Representative. Such forecast must contain a certificate of the chief financial officer stating that, to the best of such officer's knowledge, the assumptions contained in the forecast are reasonable.

If the Obligated Group shall deliver to the Master Trustee a report of an Independent Consultant expressing the opinion (accompanied by the Opinion of Independent Counsel as to any conclusion of law supporting such opinion) that applicable laws or governmental regulations have prevented or will prevent the Obligated Group from complying with the Debt Service Coverage Ratios specified in Section 8.8(a)(2) and that the Obligated Group has implemented, or is in the process of implementing with reasonable diligence, to the extent feasible and lawful, the recommendations (if any) made by such Independent Consultant pursuant to Section 8.7 of the Indenture, then the Debt Service Coverage Ratios referred to in Section 8.8(a)(2) need only be equal to or greater than 100%.

(3) Completion Debt. The Obligated Group may incur Completion Debt.

(4) Refunding Debt. The Obligated Group may incur Refunding Debt.

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(5) Nonrecourse Debt. The Obligated Group may incur Nonrecourse Debt.

(6) Subordinated Debt. The Obligated Group may incur Subordinated Debt.

(7) Reimbursement Obligations. The Obligated Group may undertake Reimbursement Obligations with respect to Debt incurred pursuant to a separate exception.

(8) Debt Owed to Other Members. Any Member may incur Debt owed to another Member.

(9) Debt Based on Percentage of Operating Revenue. The Obligated Group may incur Debt (including without limitation Short-Term Debt and Debt evidenced by capitalized leases, installment sale agreements and other similar obligations for the payment of the purchase price of property or assets) if the amount of Debt to be incurred pursuant to this exception, together with the outstanding principal amount of all other Debt incurred by the Obligated Group pursuant to this exception, does not exceed 20% of the Obligated Group's Operating Revenue for the most recently completed Fiscal Year for which audited financial statements are available.

(b) The Obligated Group may elect to have Debt issued pursuant to one exception contained in Section 8.8(a) reclassified as having been incurred under another exception of Section 8.8(a) by demonstrating compliance with such other exception on the assumption that such Debt is being reissued or incurred on the date of such reclassification; provided, however, that prior to any such reclassification the Obligated Group Representative must deliver to the Master Trustee the documents and opinions, if any, required by the relevant exception of Section 8.8(a) and a certificate of the chief financial officer of the Obligated Group Representative stating in effect that as of the date of such reclassification all other facts or conditions exist that are necessary for such Debt to be so reclassified.

(c) The Obligated Group may become liable with respect to Guaranteed Long-Term Debt on the same terms and conditions provided above with respect to direct Long-Term Debt incurred by the Obligated Group, provided that the annual debt service requirements on such Guaranteed Long-Term Debt to be included in the calculation of the relevant Debt Service Coverage Ratio shall be determined as provided in the definition of "Maximum Annual Debt Service". The Obligated Group may become liable with respect to Guaranteed Short-Term Debt on the same terms and conditions provided above with respect to direct Short-Term Debt incurred by the Obligated Group.

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(d) The Indenture does not restrict or preclude the Obligated Group from incurring Liabilities that do not constitute Debt or Contingent Debt Liabilities.

SECTION 8.9 LIQUIDITY COVENANT

(a) The Obligated Group shall maintain not less than 45 Days' Cash on Hand as of each June 30.

(b) As used in the Indenture, the term "Days' Cash on Hand" shall mean the quotient of (i) Unrestricted Cash and Investments divided by (ii) one day of Operating Expenses, with each component of Days' Cash on Hand calculated as follows:

(1) "Unrestricted Cash and Investments" shall mean all cash and marketable securities that the Obligated Group could, in its discretion, apply to the payment of Debt without violating any Lien or other security agreement or applicable law or the restrictions of any grant or gift. Without limiting the generality of the foregoing, Unrestricted Cash and Investments shall not include (A) construction funds, (B) malpractice funds, self-insurance or captive insurer funds, (C) pension or retirement funds, or (D) the undisbursed proceeds of any borrowing. Marketable securities shall be valued at fair market value as of the date of determination.

(2) Unrestricted Cash and Investments shall be reduced by the following: (A) bank overdrafts and (B) the amount received from the sale or factoring of accounts receivable or inventory.

(3) "Operating Expenses" shall mean the Obligated Group's annual operating expenses for the last Fiscal Year of the Obligated Group Representative for which audited financial statements are available, including interest expense, less depreciation, amortization, unrealized gain or loss on investments and hedges (including without limitation interest rate swap agreements), and other non-cash items that may be included on such financial statements as operating expenses.

(4) One day of Operating Expenses shall be calculated by dividing Operating Expenses by 365.

SECTION 8.10 RESTRICTIONS ON CREATION OF LIENS

(a) The Obligated Group will not create, or suffer to be created or to exist, any mortgage, pledge, encumbrance, security interest or other Lien upon assets (including without limitation accounts receivable) now owned or hereafter acquired by it other than the following:

(1) any Lien existing on the date of delivery of the Indenture; provided, that no such Lien may be extended, renewed or modified to apply to any assets of

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the Obligated Group not subject to such Lien on such date, unless such Lien as so extended, renewed or modified qualifies as a permitted Lien under a separate paragraph of this Section;

(2) Liens arising in the ordinary course of business (other than Liens to secure Debt or Contingent Debt Liabilities incurred by a Member of the Obligated Group), including without limitation (i) Liens for taxes, assessments, or other governmental charges, provided that payment of such charge is not delinquent or payment is being contested in good faith by appropriate proceedings, (ii) pledges or deposits to secure obligations under workmen's compensation laws or similar legislation, including Liens of judgments thereunder which are not currently dischargeable, (iii) pledges or deposits to secure performance in connection with bids, tenders, contracts (other than contracts for the payment of money) or leases made in the ordinary course of business to which a Member of the Obligated Group is a party as lessee, (iv) pledges or deposits to secure public or statutory obligations of a Member of the Obligated Group, (v) materialmen's, mechanics', carriers', workmen's, repairmen's, or other similar Liens arising in the ordinary course of business, or deposits to obtain the release of such Liens, provided that payment of the amount secured by such Lien is not delinquent or payment is being contested in good faith by appropriate proceedings, (vi) Liens resulting from any judgment that is being contested in good faith by appropriate proceedings if execution on such judgment is effectively stayed, and pledges or deposits to secure, or provided in lieu of, any surety, stay or appeal Obligation with respect to any such judgment, (vii) leases made, or existing on assets acquired, in the ordinary course of business, (viii) statutory landlords' Liens under leases to which a Member of the Obligated Group is a party, (ix) zoning restrictions, easements, licenses, restrictions on the use of real property or minor irregularities in title thereto, which do not, in the opinion of the affected Obligated Group Member, materially impair the use of such property in the operation of the business of such Obligated Group Member or the value of such property for the purpose of such business, (x) pledges or deposits to enable a Member of the Obligated Group to maintain self-insurance or to participate in any self-insurance pools or trusts, (xi) Liens on money deposited by patients or others with a Member of the Obligated Group as security for, or as prepayment of, the cost of services to be rendered by a Member of the Obligated Group, (xii) Liens in favor of Medicare, Medicaid and similar insurance programs to secure the repayment by a Member of the Obligated Group of reimbursement payments in excess of contractual limitations, provided that the repayment secured by such Lien is not delinquent or repayment is being contested in good faith by appropriate proceedings, and (xiii) restrictions or other Liens created prior to, or as a condition of, the transfer of the affected assets to a Member of the Obligated Group by gift, grant, legacy or bequest;

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(3) Purchase Money Mortgages if, after giving effect thereto and to any concurrent transactions, each such Purchase Money Mortgage secures an amount not in excess of the cost of the particular asset to which it relates and any related financing charges;

(4) any Lien on an asset created prior to, or as a condition of, the transfer of such asset to the Obligated Group by gift, grant, legacy or bequest;

(5) any Lien on an asset acquired by a Member of the Obligated Group after the date of delivery of the Indenture if such Lien was already in existence at the time of acquisition of such asset by such Member;

(6) any Lien created by a Member of the Obligated Group in favor of any other Member;

(7) any Lien already in existence at the time an entity becomes a Member of the Obligated Group;

(8) any Lien on money and investments on deposit in a debt service reserve fund or other similar fund created in connection with any Debt incurred by the Obligated Group (provided that (i) except with respect to the Debt Service Reserve Fund established in connection with the issuance by SJMC of its Shands Jacksonville Medical Center Taxable Notes, Series 2013, the amount subject to such Lien does not exceed 15% of the original principal amount of the Debt secured and (ii) the Lien is for the benefit of the provider of the Debt or a trustee for the holders of the Debt), and any Lien on the proceeds of any Debt until disbursed for the purpose for which such Debt was incurred;

(9) a Lien on assets of the Obligated Group securing a Liability of a Member of the Obligated Group (other than any Liability with respect to a Hedge Agreement), if on the date such Lien is granted the amount of the Liability to be secured by such Lien, together with (i) the outstanding amount of all other Liabilities secured by a Lien created pursuant to this paragraph and (ii) the amount of money and investments pledged pursuant to Section 8.10(a)(10), does not exceed 25% of the aggregate amount of Book Value of all assets of the Obligated Group as of the end of the most recent Fiscal Year of the Obligated Group Representative for which financial statements of the Obligated Group Representative are available;

(10) any Lien on money or investments of the Obligated Group to secure a Member's obligations under a Hedge Agreement if, after giving effect to such Lien, no default exists under Section 8.9; and

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(11) any Lien on property now owned or hereafter acquired by a Member of the Obligated Group if effective provision is made in each instance and by the instrument creating such Lien that all Obligations are secured thereby equally and ratably with the Liability to be secured by such Lien.

(b) When executed and recorded, the Mortgage will create a mortgage Lien on certain hospital facilities of the Obligated Group and secure all Obligations on an equal and ratable basis.

SECTION 8.11 SALE, LEASE OR OTHER DISPOSITION OF ASSETS

(a) The Obligated Group will not convey, transfer, sell, lease or otherwise dispose of any of its assets (other than in the ordinary course of business) unless such disposition meets one of the following tests:

(1) Such disposition is made to another Member.

(2) Such disposition is made pursuant to a merger, consolidation or transfer permitted by the provisions of the Indenture.

(3) In the judgment of the Member disposing of such asset, the asset to be disposed of consists of property, plant or equipment and such asset is obsolete, worn out, unprofitable or unsuitable and such disposition will not materially impair the structural soundness, efficiency or economic value of the remaining operating assets of the Obligated Group.

(4) The Obligated Group shall receive consideration in an amount not less than the fair market value of the asset disposed of.

(5) The aggregate Book Value of the asset to be disposed of, together with the aggregate Book Value of all other assets previously disposed of pursuant to this test in the same Fiscal Year, is not more than 5% of the Book Value of the assets of the Obligated Group at the end of the Fiscal Year immediately prior to such disposition.

(6) Prior to the disposition of such asset the Obligated Group Representative delivers to the Master Trustee the report of an Independent Consultant expressing the opinion that the Debt Service Coverage Ratio for the Fiscal Year following such disposition will be not less than (i) 65% of what it would have been if such disposition had not occurred and (ii) not less than 100%.

(b) The Obligated Group will not invest in, or make any equity contribution to, or make any loan or advance to, any other entity unless:

(1) such entity is a Member of the Obligated Group; or

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(2) after giving effect to such transaction, (i) no Indenture Default exists and (ii) the Obligated Group could borrow $1 of additional Debt under the provisions of Section 8.8(a)(2).

SECTION 8.12 COMPLIANCE CERTIFICATE OF OBLIGATED GROUP REPRESENTATIVE

(a) Within 7 days after the Obligated Group receives its annual audited financial statements, the Obligated Group Representative shall deliver to the Master Trustee a certificate of its chief executive officer or chief financial officer (i) providing a calculation in reasonable detail of the Obligated Group's Debt Service Coverage Ratio and the Obligated Group's Days' Cash on Hand and (ii) stating whether, to the best of such officer's knowledge, any condition exists which is, or could be with notice or lapse of time, an Indenture Default. If any such condition exists, such certificate shall also describe the nature of such condition and the action the Obligated Group intends to take to cure such condition.

(b) Within 60 days after the end of each Fiscal Year, a certificate from an Insurance Consultant confirming in effect that the Obligated Group is in compliance with the requirements of Section 8.4(h) of the Indenture and Section 4.2 of the Mortgage.

SECTION 8.13 APPLICATION OF PLEDGED REVENUES

(a) If no Indenture Default exists, the Obligated Group may use the Pledged Revenues for any lawful purpose.

(b) If an Indenture Default exists, (1) the Obligated Group shall, upon demand of the Master Trustee, deposit all Pledged Revenues with the Master Trustee immediately upon receipt by the Obligated Group, (2) the Master Trustee may direct all third parties from whom any Pledged Revenues are due or payable to pay such Pledged Revenues directly to the Master Trustee, and (3) the Master Trustee may exercise any other rights with respect to the Pledged Revenues that are available to a secured party under the provisions of applicable law.

(c) Subject to the provisions of Section 3.1, if an Indenture Default exists, any Pledged Revenues collected by the Master Trustee shall be applied as provided in Article IX.

SECTION 8.14 UCC FILINGS

The Obligated Group Representative warrants and represents that as of the date of delivery of the Indenture and, with respect to the Mortgage, the date of the recording of the Mortgage, no filing of a financing statement under the Florida Uniform Commercial Code is required to establish or perfect (i) the Lien of the Mortgage on the Mortgaged Property (as therein defined) or (ii) the pledge and assignment of the Pledged Revenues

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pursuant to the Indenture or such filing has been made and the Lien on and perfection of such interest in the Pledged Revenues has been established to the extent a filing can establish or perfect such Lien under the Florida Uniform Commercial Code.

SECTION 8.15 EFFECT OF ACCOUNTING PRINCIPLES

(a) For purposes of the financial covenants contained in the Indenture (i) all accounting terms not otherwise defined in the Indenture have the meaning assigned to them, and all computations therein provided for shall be made, in accordance with generally accepted accounting principles and (ii) all references therein to "generally accepted accounting principles" applied to entities such as the Members of the Obligated Group refer to such principles as they exist at the date of application thereof.

(b) It is acknowledged and agreed that to the extent generally accepted accounting principles require the consolidation or other combination of accounts (including revenues and gains, expenses and losses, assets and liabilities) of a Member of the Obligated Group with the accounts of a subsidiary or affiliate of such Member:

(1) Net Income Available for Debt Service for the Obligated Group shall be calculated giving effect to such combination;

(2) Operating Revenue for the Obligated Group shall be calculated giving effect to such combination; and

(3) the Book value of assets or fixed assets of the Obligated Group shall be calculated giving effect to such combination.

(c) Notwithstanding any consolidation or combination of accounts described in Section 8.15(b):

(1) Debt of any such affiliate or subsidiary shall not be included in Debt of the Obligated Group, except that Debt of any such affiliate or subsidiary that is guaranteed by a Member shall be included in Guaranteed Debt of such Member;

(2) Guaranteed Debt of any such affiliate or subsidiary shall not be included in Guaranteed Debt of such Member; and

(3) Unrestricted Cash and Investments of any such affiliate or subsidiary shall not be included in Unrestricted Cash and Investments of the Obligated Group.

SECTION 8.16 DELIVERY OF MORTGAGE

Upon the earlier of (i) the occurrence of an Indenture Default or (ii) January 1, 2014, the Obligated Group Representative shall cause the Mortgage to be executed and

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recorded by SJP, pay any excise or documentary taxes related thereto and delivered to the Master Trustee in the form attached to the Indenture as Exhibit 8.16. Concurrently with the date of execution and recording of the Mortgage, the Obligated Group Representative shall deliver to the Master Trustee a title report, marked-down title commitment, title policy or Opinion of Counsel stating or confirming in effect that except for Permitted Encumbrances, no Lien or encumbrance has appeared of record that would have priority over the Lien of the Mortgage with respect to the Mortgaged Property (as defined in the Mortgage).

ARTICLE IX Defaults and Remedies

SECTION 9.1 EVENTS OF DEFAULT

Any one or more of the following shall constitute an event of default (an "Indenture Default") under the Indenture (whatever the reason for such event and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body):

(a) default in the payment of any amount due on an Obligation, whether at its stated maturity or due date, upon declaration of acceleration, upon call for redemption, or otherwise; or

(b) default in the performance, or breach, of any covenant or warranty of the Obligated Group in the Indenture (other than a covenant or warranty a default in the performance or breach of which is elsewhere in this Section specifically dealt with), and continuance of such default or breach for a period of 60 days after notice of such default or breach, stating that such notice is a "notice of default" hereunder, has been given to the Obligated Group by the Master Trustee, or to the Obligated Group and the Master Trustee by the Holders of at least 25% in principal amount of the Outstanding Debt Obligations; or

(c) an Act of Bankruptcy by a Member of the Obligated Group; or

(d) the existence of an event of default, as therein defined, under the Mortgage, a Related Debt Document or an Ancillary Commitment Document and the expiration of the grace period, if any, specified therein; or

(e) the Master Trustee shall receive written notice from the provider of any Credit Facility stating that (i) an event of default, as therein defined, exists under the related Credit Facility Agreement and (ii) such notice constitutes an Indenture Default under the Indenture; or

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(f) the existence of an event of default under any bond, debenture, note or other evidence of indebtedness of a Member of the Obligated Group, or under any indenture or other instrument under which any such evidence of indebtedness has been issued or by which it is governed or secured, if (i) such event of default permits the holder or owner of such evidence of indebtedness to demand immediate payment or acceleration of amounts due under such evidence of indebtedness, (ii) such a demand for payment is made by the holder or owner, and (iii) the Obligated Group fails to make the required payment or to cure the default within 30 days after such demand; or

(g) a default in the performance, or breach, of Section 8.7 or Section 8.9; or

(h) the existence of any additional Event of Default specified in a Supplemental Indenture.

SECTION 9.2 REMEDIES

(a) Acceleration of Maturity. If an Indenture Default exists, then and in every such case, the Master Trustee or the Holders of a majority in principal amount of the Debt Obligations Outstanding may declare the principal of all the Debt Obligations and the interest accrued thereon, together with the full amount of all other Obligations, to be due and payable immediately, by notice to the Obligated Group (and to the Master Trustee, if given by the Holders of Debt Obligations), and upon any such declaration such amounts shall become immediately due and payable. At any time after such a declaration of acceleration has been made pursuant to this Section, the Holders of a majority in principal amount of the Debt Obligations Outstanding may, by notice to the Obligated Group and the Master Trustee, rescind and annul such declaration and its consequences, if

(1) the Obligated Group has deposited with the Master Trustee a sum sufficient to pay

(A) all overdue installments of interest on all Debt Obligations,

(B) the principal of (and premium, if any, on) any Debt Obligations which have become due otherwise than by such declaration of acceleration and interest thereon at the rate or rates prescribed therefor in such Debt Obligations,

(C) to the extent that payment of such interest is lawful, interest upon overdue installments of interest at the rate or rates prescribed therefor in the Debt Obligations,

(D) all amounts due and payable on Ancillary Obligations; and

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(E) all sums paid or advanced by the Master Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Master Trustee, its agents and counsel; and

(2) all Indenture Defaults, other than the non-payment of the principal of Debt Obligations which has become due solely by such declaration of acceleration, have been cured or have been waived as provided in Section 9.10.

No such rescission and annulment shall affect any subsequent default or impair any right consequent thereon.

(b) Rights Under Mortgage. If an Indenture Default exists the Master Trustee may, subject to the provisions of the Indenture, including without limitation this Section 9.2, exercise all rights and remedies provided by the Mortgage. All money collected by the Master Trustee from the exercise of rights and remedies under the Mortgage shall be part of the Trust Estate and shall be applied in accordance with the provisions of the Indenture.

(c) Rights and Remedies Cumulative. No right or remedy therein conferred upon or reserved to the Master Trustee or to the Obligationholders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy.

(d) Remedies Subject to Applicable Law. All rights, remedies and powers provided by this Article may be exercised only to the extent that the exercise thereof does not violate any applicable provision of law in the premises, and all the provisions of this Article are intended to be subject to all applicable mandatory provisions of law which may be controlling in the premises and to be limited to the extent necessary so that they will not render the Indenture invalid, unenforceable or not entitled to be recorded, registered or filed under the provisions of any applicable law.

(e) Effect of Acceleration of Ancillary Commitment or Related Debt. If any event of default or other termination event, as defined therein, exists under any Ancillary Commitment Document or Related Debt Document, nothing contained in the Indenture shall restrict or prohibit the holder or owner of such Ancillary Commitment Document or Related Debt Document from accelerating, or otherwise declaring due and payable, amounts due under the Ancillary Commitment Document or Related Debt Document and pursuing any remedy provided under such Ancillary Commitment Document or Related Debt Document; provided, however, that unless all Outstanding Obligations have been accelerated pursuant to Section 9.2(a), for purposes of the Indenture and the remedy provisions of the Indenture, no such acceleration or declaration

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under a Related Debt Document or Ancillary Commitment Document shall have the effect of accelerating the time for payment of amounts due on the related Obligation or Obligations. Unless and until all Outstanding Obligations under the Indenture have been declared immediately due and payable pursuant to Section 9.2, proceeds from the Trust Estate shall only be applied to payment of Regularly Scheduled Payments on the Obligations.

SECTION 9.3 APPLICATION OF MONEY COLLECTED

Any money collected by the Master Trustee pursuant to this Article and any other sums then held by the Master Trustee as part of the Trust Estate, shall be applied in the following order, at the date or dates fixed by the Master Trustee and, in case of the distribution of such money on account of principal (or premium, if any) or interest, upon presentation of the Obligations and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid:

(a) First: To the payment of all undeducted amounts due the Master Trustee under Section 10.7;

(b) Second: To the payment of the whole amount then due and unpaid upon the Outstanding Obligations, in respect of which or for the benefit of which such money has been collected, with interest (to the extent that such interest has been collected by the Master Trustee or a sum sufficient therefor has been so collected and payment thereof is legally enforceable at the respective rate or rates prescribed therefor in the Obligations) on overdue amounts, and in case such proceeds shall be insufficient to pay in full the whole amount so due and unpaid upon such Obligations, then to the payment of the amounts due, without any preference or priority, ratably according to the aggregate amount so due; provided, however, that payments with respect to Obligations owned by the Obligated Group or an Affiliate of the Obligated Group shall be made only after all other Obligations have been Fully Paid; and

(c) Third: To the payment of the remainder, if any, to the Obligated Group or to whosoever may be lawfully entitled to receive the same or as a court of competent jurisdiction may direct.

SECTION 9.5 LIMITATION ON SUITS

No Holder of any Obligation shall have any right to institute any proceeding, judicial or otherwise, under or with respect to the Indenture, or for the appointment of a receiver or trustee or for any other remedy hereunder, unless

(a) such Holder has previously given notice to the Master Trustee of a continuing Indenture Default;

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(b) the Holders of not less than 25% in principal amount of the Outstanding Debt Obligations shall have made request to the Master Trustee to institute proceedings in respect of such Indenture Default in its own name as Master Trustee hereunder;

(c) such Holder or Holders have offered to the Master Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request;

(d) the Master Trustee for 60 days after its receipt of such notice, request and offer of indemnity has failed to institute any such proceeding; and

(e) no direction inconsistent with such request has been given to the Master Trustee during such 60-day period by the Holders of a majority in principal amount of the Outstanding Debt Obligations;

it being understood and intended that no one or more Holders of Obligations shall have any right in any manner whatever by virtue of, or by availing of, any provision of the Indenture to affect, disturb or prejudice the Lien of the Indenture or the rights of any other Holders of Obligations, or to obtain or to seek to obtain priority or preference over any other Holders or to enforce any right under the Indenture, except in the manner provided in the Indenture and for the equal and ratable benefit of all Outstanding Obligations.

SECTION 9.6 UNCONDITIONAL RIGHT OF HOLDERS OF DEBT OBLIGATIONS TO RECEIVE PRINCIPAL, PREMIUM AND INTEREST

Notwithstanding any other provision in the Indenture, the Holder of any Debt Obligation shall have the right which is absolute and unconditional to receive payment of the principal of (and premium, if any) and interest on such Obligation on the Maturity date expressed in such Obligation (or, in the case of redemption, on the redemption date) and to institute suit for the enforcement of any such payment, and such rights shall not be impaired without the consent of such Holder.

SECTION 9.7 RESTORATION OF POSITIONS

If the Master Trustee or any Obligationholder has instituted any proceeding to enforce any right or remedy under the Indenture and such proceeding has been discontinued or abandoned for any reason or has been determined adversely to the Master Trustee or to such Obligationholder, then and in every such case the Obligated Group, the Master Trustee and the Obligationholders shall, subject to any determination in such proceeding, be restored to their former positions hereunder, and thereafter all rights and remedies of the Master Trustee and the Obligationholders shall continue as though no such proceeding had been instituted.

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SECTION 9.8 DELAY OR OMISSION NOT WAIVER

No delay or omission of the Master Trustee or of any Holder of any Obligation to exercise any right or remedy accruing upon an Indenture Default shall impair any such right or remedy or constitute a waiver of any such Indenture Default or an acquiescence therein. Every right and remedy given by this Article or by law to the Master Trustee or to the Obligationholders may be exercised from time to time, and as often as may be deemed expedient, by the Master Trustee or by the Obligationholders, as the case may be.

SECTION 9.9 CONTROL BY HOLDERS OF DEBT OBLIGATIONS

The Holders of a majority in principal amount of the Outstanding Debt Obligations shall have the right, during the continuance of an Indenture Default,

(a) to require the Master Trustee to proceed to enforce the Indenture, either by judicial proceedings for the enforcement of the payment of the Obligations or otherwise, and

(b) to direct the time, method and place of conducting any proceeding for any remedy available to the Master Trustee, or exercising any trust or power conferred upon the Master Trustee hereunder or under the Mortgage, provided that

(1) such direction shall not be in conflict with any rule of law or the Indenture,

(2) the Master Trustee may take any other action deemed proper by the Master Trustee which is not inconsistent with such direction, and

(3) the Master Trustee shall not determine that the action so directed would be unjustly prejudicial to the Holders not taking part in such direction.

SECTION 9.10 WAIVER OF PAST DEFAULTS

(a) Before any judgment or decree for payment of money due has been obtained by the Master Trustee, the Holders of not less than a majority in principal amount of the Outstanding Debt Obligations may, by notice to the Master Trustee and the Obligated Group, on behalf of the Holders of all the Obligations waive any past default hereunder or under any other Obligation Document and its consequences, except a default

(1) in the payment of principal or interest on any Debt Obligation, or

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(2) in respect of a covenant or provision of the Indenture which under Article XI cannot be modified or amended without the consent of the Holder of each Outstanding Obligation affected.

(b) Upon any such waiver, such default shall cease to exist, and any Indenture Default arising therefrom shall be deemed to have been cured, for every purpose of the Indenture; but no such waiver shall extend to any subsequent or other default or impair any right consequent thereon.

SECTION 9.11 SUITS TO PROTECT THE TRUST ESTATE

The Master Trustee shall have power to institute and to maintain such proceedings as it may deem expedient to prevent any impairment of the Trust Estate by any acts which may be unlawful or in violation of the Indenture and to protect its interests and the interests of the Obligationholders in the Trust Estate and in the rents, issues, profits, revenues and other income arising therefrom, including power to institute and maintain proceedings to restrain the enforcement of or compliance with any governmental enactment, rule or order that may be unconstitutional or otherwise invalid, if the enforcement of or compliance with such enactment, rule or order would impair the security hereunder or be prejudicial to the interests of the Obligationholders or the Master Trustee.

ARTICLE XI Amendment of Obligation Documents

SECTION 11.1 GENERAL REQUIREMENTS FOR AMENDMENTS

The Master Trustee may, on behalf of the Obligationholders, from time to time enter into, or consent to, an amendment of any Obligation Document only as permitted by this Article.

SECTION 11.2 AMENDMENTS WITHOUT CONSENT OF OBLIGATIONHOLDERS

An amendment of the Obligation Documents for any of the following purposes may be made, or consented to, by the Master Trustee without the consent of the Holders of any Obligations:

(a) to correct or amplify the description of any property at any time subject to the Lien of any Obligation Document, or better to assure, convey and confirm unto any secured party any property subject or required to be subjected to the Lien of any Obligation Document, or to subject additional property to the Lien of any Obligation Document; or

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(b) to evidence the succession of another person to any Financing Participant and the assumption by any such successor of the covenants of such Financing Participant (provided that the requirements of the related Obligation Document for such succession and assumption are otherwise satisfied); or

(c) to add to the covenants of any Financing Participant for the benefit of Obligationholders and to make the occurrence, or the occurrence and continuance, of a default in any of such additional covenants an event of default under the specified Obligation Documents permitting the enforcement of all or any of the several remedies provided therein; provided, however, that with respect to any such covenant, such amendment may provide for a particular period of grace after default (which period may be shorter or longer than that allowed in the case of other defaults) or may provide for an immediate enforcement upon such default or may limit the remedies available upon such default;

(d) to surrender any right or power conferred upon any Financing Participant other than rights or powers for the benefit of Obligationholders;

(e) to cure any ambiguity or to correct any inconsistency, provided such action shall not adversely affect the interests of the Holders of the Obligations;

(f) to appoint a separate agent of the Obligated Group or the Master Trustee to perform any one or more of the following functions: (1) registration of transfers and exchanges of Obligations, or (2) payment of Debt Service on the Obligations; provided, however, that any such agent must be a bank or trust company with long-term obligations, at the time such appointment is made, in one of the three highest rating categories of at least one Rating Agency; or

(g) to make any other amendment which in the opinion of the Master Trustee (which may be made in sole reliance upon an opinion of Independent Counsel) does not materially adversely affect the rights of the Obligationholders.

SECTION 11.3 AMENDMENTS REQUIRING CONSENT OF ALL AFFECTED OBLIGATIONHOLDERS

An amendment of the Obligation Documents for any of the following purposes may be entered into, or consented to, by the Master Trustee only with the consent of the Holder of each Obligation affected:

(a) to change the stated Maturity of the principal of, or any installment of interest on, any Debt Obligation, or reduce the principal amount thereof or the interest thereon or any premium payable upon the redemption thereof, or change the coin or currency in which, any Obligation, or the interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment on or

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after the stated Maturity thereof (or, in the case of redemption, on or after the redemption date); or

(b) to reduce the percentage in principal amount of the Outstanding Obligations, the consent of whose Holders is required for any amendment of the Obligation Documents, or the consent of whose Holders is required for any waiver provided for in the Obligation Documents; or

(c) to modify or alter the provisions of the proviso to the definition of the term "Outstanding"; or

(d) to modify any of the provisions of this Section or Section 9.10, except to increase any percentage provided thereby or to provide that certain other provisions of the Indenture cannot be modified or waived without the consent of the Holder of each Obligation affected thereby; or

(e) to permit the creation of any Lien ranking prior to or on a parity with the Lien of the Indenture with respect to any of the Trust Estate or terminate the Lien of the Indenture on any property at any time subject thereto or deprive the Holder of any Obligation of the security afforded by the Lien of the Indenture; or

(f) to reduce the amount of, or change the due date of any payments due on, any Ancillary Obligation.

SECTION 11.4 AMENDMENTS REQUIRING MAJORITY CONSENT OF OBLIGATIONHOLDERS

An amendment of the Obligation Documents for any purpose not described in Sections 11.2 or 11.3 may be entered into, or consented to, by the Master Trustee only with the consent of the Holders of a majority in principal amount of Debt Obligations Outstanding.

SECTION 11.8 EFFECT ON OBLIGATIONHOLDERS

Upon the execution of any amendment under this Article, every Holder of Obligations theretofore or thereafter authenticated and delivered hereunder shall be bound thereby.

SECTION 11.9 REFERENCE IN OBLIGATIONS TO AMENDMENTS

Obligations authenticated and delivered after the execution of any amendment under this Article shall, if required by such amendment or by the Master Trustee, bear a notation in form approved by the Master Trustee as to any matter provided for in such amendment. New Obligations so modified as to conform to any such amendment shall, if required by such amendment or by the Master Trustee, be prepared and executed by the

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Obligated Group and authenticated and delivered by the Master Trustee in exchange for Outstanding Obligations.

SECTION 11.10 SUPPLEMENTAL INDENTURES

A Supplemental Indenture that authorizes the issuance of Obligations in accordance with the terms of the Indenture and a Supplemental Indenture that provides for the addition or withdrawal of a Member of the Obligated Group in accordance with the terms of the Indenture shall not be considered an amendment of the Indenture for purposes of this Article XI. A Supplemental Indenture that changes the terms of the Indenture shall be considered an amendment for purposes of this Article XI.

ARTICLE XII Defeasance

SECTION 12.1 PAYMENT OF INDENTURE INDEBTEDNESS; SATISFACTION AND DISCHARGE OF INDENTURE

(a) Whenever all Indenture Indebtedness has been Fully Paid, then (1) the Indenture and the Lien, rights and interests created thereby shall cease, determine and become null and void (except as to any surviving rights of registration of transfer or exchange of Obligations therein provided for), and (2) the Master Trustee shall, upon the request of the Obligated Group, execute and deliver a termination statement and such instruments of satisfaction and discharge as may be necessary and pay, assign, transfer and deliver to the Obligated Group or upon the order of the Obligated Group, all cash and securities then held by it hereunder as a part of the Trust Estate.

(b) An Obligation shall be deemed "Fully Paid" if

(1) such Obligation has been cancelled by the Master Trustee or delivered to the Master Trustee for cancellation, or

(2) if the Obligation is a Direct Debt Obligation, such Obligation shall have matured or been called for redemption and, on such Maturity date or redemption date, money for the payment of Debt Service on such Obligation is held by the Master Trustee in an irrevocable trust for the benefit of the person entitled thereto, or

(3) such Obligation is alleged to have been destroyed, lost or stolen and has been replaced as provided in Section 5.2, or

(4) if such Obligation is a Direct Debt Obligation, a trust for the payment of such Obligation has been established in accordance with Section 12.2, or

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(5) if such Obligation is a Related Debt Obligation or an Ancillary Obligation, the Obligated Group has paid all such Obligations or has made provisions for the payment or defeasance of such Obligations in accordance with the terms of the Related Debt Document or the Ancillary Commitment Document, as the case may be. The Master Trustee may, in its discretion, require written confirmation from the holder of any Ancillary Commitment or from the Holder of any Related Debt Obligation that the conditions of this paragraph have been met.

(c) Indenture Indebtedness other than Obligations shall be deemed "Fully Paid" whenever the Obligated Group has paid all such Indenture Indebtedness, or has made provisions satisfactory to the Master Trustee for the payment or defeasance of such Indebtedness.

SECTION 12.2 TRUST FOR PAYMENT OF DEBT SERVICE

(a) The Obligated Group may provide for the payment of any Direct Debt Obligation by establishing a trust for such purpose with the Master Trustee and depositing therein cash and/or Escrow Securities which (assuming the due and punctual payment of the principal of and interest on such Escrow Securities, but without reinvestment) will provide funds sufficient to pay the Debt Service on such Obligation as the same becomes due and payable until the Maturity or redemption of such Obligation; provided, however, that:

(1) Such Escrow Securities must not be subject to redemption prior to their respective maturities at the option of the issuer of such Securities.

(2) If such Obligation is to be redeemed prior to its Maturity, either (A) the Master Trustee shall receive evidence that notice of such redemption has been given or provided for in accordance with the provisions of the Indenture and such Obligation or (B) the Obligated Group shall confer on the Master Trustee irrevocable authority for the giving of such notice on behalf of the Obligated Group.

(3) If the interest rate on such Obligation is not fixed until the Maturity or redemption date of such Obligation, such trust must provide for the payment of interest on such Obligation at the maximum rate permitted by the Indenture for any period when interest is not fixed.

(4) Prior to the establishment of such trust the Master Trustee must receive verification satisfactory to the Master Trustee demonstrating that the principal and interest payments on the Escrow Securities in such trust, without reinvestment, together with the cash balance in such trust remaining after purchase of such Escrow Securities, will be sufficient to make the required payments from such trust.

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(b) Any trust established pursuant to this Section may provide for payment of less than all Direct Debt Obligations outstanding or less than all Direct Debt Obligations of any remaining series or Maturity.

(c) If any trust provides for payment of less than all Direct Debt Obligations of a series and Maturity, the Direct Debt Obligations of such series and Maturity to be paid from the trust shall be selected by the Master Trustee by lot by such method as shall provide for the selection of portions (in Authorized Denominations) of the principal of Direct Debt Obligations of such series and Maturity of a denomination larger than the smallest Authorized Denomination. Such selection shall be made within 7 days after such trust is established. This selection process shall be in lieu of the selection process otherwise provided with respect to redemption of Direct Debt Obligations. After such selection is made, Direct Debt Obligations that are to be paid from such trust (including Direct Debt Obligations issued in exchange for such Obligations pursuant to the transfer or exchange provisions of the Indenture) shall be identified by a separate CUSIP number or other designation satisfactory to the Master Trustee. The Master Trustee shall notify Holders whose Direct Debt Obligations (or portions thereof) have been selected for payment from such trust and shall direct such Obligationholders to surrender their Direct Debt Obligations to the Master Trustee in exchange for Direct Debt Obligations with the appropriate designation. The selection of Direct Debt Obligations for payment from such trust pursuant to this Section shall be conclusive and binding on the Financing Participants.

(d) Cash and/or Escrow Securities deposited with the Master Trustee pursuant to this Section shall not be a part of the Trust Estate but shall constitute a separate, irrevocable trust fund for the benefit of the Holder of the Direct Debt Obligation to be paid from such fund.

ARTICLE XIII

Formation of an Obligated Group

SECTION 13.1 CONDITIONS FOR BECOMING A MEMBER OF THE OBLIGATED GROUP

An entity may become a Member of the Obligated Group for purposes of the Indenture if:

(1) such entity shall execute and deliver to the Master Trustee an appropriate instrument containing the agreement of such entity to become jointly and severally liable (together with all other Members of the Obligated Group) for the payment of all Obligations Outstanding hereunder and for the performance of all obligations of the Obligated Group hereunder;

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(2) the Obligated Group Representative consents in writing to such entity becoming a Member of the Obligated Group;

(3) no Indenture Default exists;

(4) the Obligated Group Representative shall deliver to the Master Trustee an Opinion of Counsel stating in effect that the instrument delivered pursuant to Section 13.1(1) constitutes a valid and binding agreement of such entity, except as limited by bankruptcy, insolvency, reorganization and other similar laws affecting creditors' rights.

SECTION 13.2 EFFECT OF STATUS AS MEMBER OF OBLIGATED GROUP

After any entity becomes a Member of the Obligated Group:

(1) all computations provided for in the Indenture shall be made on a consolidated basis for the entire Obligated Group in accordance with generally accepted accounting principles consistently applied, eliminating inter-company items; and

(2) any reference in the Indenture to the Obligated Group shall be deemed to include such additional Member, and any covenant contained therein obligating the Obligated Group to perform or observe any agreement with respect to its property or its operations shall be deemed to obligate such Member to perform or observe such covenant with respect to its property or its operations; and the events of default specified therein shall apply to action or failure to act by such Member.

SECTION 13.3 TERMINATION OF STATUS AS A MEMBER OF THE OBLIGATED GROUP

(a) Any Member, other than SJMC and SJP, may cease to be a Member of the Obligated Group if:

(1) the remaining Members shall execute and deliver to the Master Trustee a Supplemental Indenture providing in effect that such entity will no longer be a Member of the Obligated Group;

(2) no Indenture Default exists; and

(3) the Obligated Group Representative delivers to the Master Trustee a certificate (together with supporting calculations) stating in effect that if such person had not been a Member of the Obligated Group as of the end of the most recent Fiscal Year, no Indenture Default would have existed on such testing dates.

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(b) Upon satisfaction of the conditions set forth in Section 13.3(a), the Master Trustee shall execute and deliver any releases or other documents reasonably requested by the entity ceasing to be a Member of the Obligated Group.

ARTICLE XIV Miscellaneous

SECTION 14.1 NOTICES

(a) Exhibit 14.1(a) contains address information provided by the Financing Participants for the receipt of notices. Any Financing Participant may change the address information listed in Exhibit 14.1(a), or may specify additional addresses for the receipt of notices, by giving notice of the change or addition to the other Financing Participants.

(b) In order to be effective for purposes of the Indenture:

(1) Any request, demand, authorization, direction, notice, consent, waiver or other document (collectively referred to in this Section as "notices") provided or permitted by the Indenture to be made upon, given or furnished to, or filed with, any of the Financing Participants must (except as otherwise expressly provided in the Indenture) be in writing. Notice by Electronic Means shall constitute written notice.

(2) The notice must be actually received by the Financing Participant to whom such notice is directed. If notice is sent by registered or certified mail to a Financing Participant to the mailing address for such Financing Participant provided pursuant to Section 14.1(a), such notice shall be deemed received by such Financing Participant 3 days after such notice is deposited in the United States mail.

(c) Any specific reference in the Indenture to "written notice" shall not be construed to mean that any other notice may be oral, unless oral notice is specifically permitted by the Indenture under the circumstances.

SECTION 14.2 NOTICES TO OBLIGATIONHOLDERS; WAIVER

(a) Where the Indenture provides for giving of notice to Obligationholders of any event, such notice must (unless otherwise therein expressly provided) be in writing and mailed, first-class postage prepaid, to such Obligationholder at the address of such Obligationholder as it appears in the Register, not later than the latest date, and not earlier than the earliest date, prescribed for the giving of such notice.

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(b) In any case where notice to Obligationholders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Obligationholder shall affect the sufficiency of such notice with respect to other Obligationholders. Where the Indenture provides for notice in any manner, such notice may be waived in writing by the person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Obligationholders shall be filed with the Master Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver.

SECTION 14.3 HOLDERS OF RELATED DEBT DEEMED HOLDERS OF RELATED DEBT OBLIGATIONS

If any Related Debt Obligation is held by a trustee or other agent for the benefit of the holder or holders of the Related Debt, such Related Debt Obligation shall be disregarded and deemed not Outstanding hereunder for purposes of determining whether the Holders of a requisite aggregate principal amount of Debt Obligations have concurred in taking any action hereunder (including the making of any demand or request, the giving of any notice, consent or waiver, or the taking of any other action), and, except as otherwise provided in the Related Debt Document, each holder of the Related Debt Outstanding under the Related Debt Document shall, for purposes of such determination, be deemed to hold a Related Debt Obligation in a principal amount equal to the aggregate principal amount of such Related Debt held by such holder.

SECTION 14.4 SUCCESSORS AND ASSIGNS

All covenants and agreements in the Indenture by the Members of the Obligated Group shall bind their successors and assigns, whether so expressed or not.

SECTION 14.5 BENEFITS OF INDENTURE

Nothing in the Indenture or in the Obligations, express or implied, shall give to any person, other than the parties thereto and their successors hereunder and the Holders of the Outstanding Obligations any benefit or any legal or equitable right, remedy or claim under the Indenture.

SECTION 14.6 OBLIGATED GROUP REPRESENTATIVE

(a) SJMC shall serve as the Obligated Group Representative for purposes of the Indenture.

(b) As Obligated Group Representative SJMC shall, on behalf of all Members of the Obligated Group, perform the following functions for the Obligated Group for purposes of the Indenture:

(1) Execute and deliver Obligations under the Indenture.

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(2) Execute and deliver supplements and amendments to the Indenture; provided, however, that any supplement or amendment to the Indenture that purports to add or remove any Member of the Obligated Group shall also be executed by the Member being added or removed.

(3) Execute and deliver notices, directions, elections and consents on behalf of the Obligated Group.

(c) Except as otherwise expressly provided in the Indenture, no further authorization or approval by any Member shall be required for actions by the Obligated Group Representative under the Indenture.

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APPENDIX E

Form of Approving Opinion of Bond Counsel

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APPENDIX E

FORM OF OPINION OF NABORS, GIBLIN & NICKERSON, P.A., WITH RESPECT TO THE SERIES 2013B BONDS

Upon delivery of the Series 2013B Bonds in definitive form, Nabors, Giblin &

Nickerson, P.A., Tampa, Florida, Bond Counsel, proposes to render its opinion with respect to such Series 2013B Bonds in substantially the following form:

(Date of Delivery)

Florida Development Finance Corporation Orlando, Florida Members:

In the capacity of Bond Counsel we have examined a record of proceedings relating to the issuance by the Florida Development Finance Corporation (the "Issuer") of its $59,405,000 aggregate principal amount of Healthcare Facilities Revenue Bonds (UF Health - Jacksonville Project), Series 2013B (the "Series 2013B Bonds"). We have examined the law and such certified proceedings and other papers as we deem necessary to render this opinion.

The Series 2013B Bonds are issued under and pursuant to the Florida Development Finance Corporation Act of 1993, Chapter 288, Part IX, Florida Statutes, Part II, Chapter 159, Florida Statutes, and other applicable provisions of law (the "Act"). The Series 2013B Bonds are issued pursuant to a Series 2013B Bond Trust Indenture, dated as of November 1, 2013 (the "Bond Indenture") between the Issuer and U.S. Bank National Association, as bond trustee (the "Trustee").

The Series 2013B Bonds are being issued to (i) currently refund a portion of the $100,000,000 Shands Jacksonville Medical Center, Inc. Taxable Notes, Series 2013 issued by Shands Jacksonville Medical Center, Inc. ("SJMC") on June 27, 2013 (the "Refunded Notes") and (ii) pay costs associated with the issuance of the Series 2013B Bonds.

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The proceeds of the Refunded Notes were applied by SJMC to (i) refund the outstanding (A) Jacksonville Economic Development Commission Hospital Revenue Bonds (Shands Jacksonville Medical Center, Inc. Project), Series 2004A and Jacksonville Economic Development Commission Hospital Revenue Bonds (Shands Jacksonville Medical Center, Inc. Project), Series 2004B, (B) Jacksonville Economic Development Commission Healthcare Facilities Refunding Revenue Bonds (Methodist Refunding Project), Series 2005 and (C) Jacksonville Economic Development Commission Hospital Revenue Bonds (Shands Jacksonville Medical Center, Inc. Project), Series 2008, and (ii) finance (or reimburse SJMC or affiliates for) the cost of acquisition and construction of various capital improvements to the health care facilities of SJMC or affiliates.

The Series 2013B Bonds are payable from and secured solely by a pledge of and lien upon the "trust estate" (as defined in the granting clauses of the Bond Indenture), including loan repayments made by SJMC to the Issuer pursuant to that certain Series 2013B Loan Agreement, dated as of November 1, 2013, between the Issuer and SJMC (the "Loan Agreement"). Pursuant to the Loan Agreement, SJMC (i) agrees to make loan payments sufficient to pay, among other obligations, the principal of and interest on the Series 2013B Bonds, when due, and to make any required deposits into certain funds established by the Bond Indenture and (ii) expressly assumes the performance of all of the Issuer's obligations under the Bond Indenture.

SJMC has, in its capacity as Obligated Group Representative, in order to evidence and further secure its obligation to make payments under the Loan Agreement, issued its Shands Jacksonville Medical Center, Inc. Obligated Group – Related Debt Obligation (Series 2013B Bonds) (the "Related Debt Obligation") in a principal amount equal to the aggregate principal amount of the Series 2013B Bonds. The Related Debt Obligation is being issued pursuant to a Master Trust Indenture, dated as of June 1, 2013 among U.S. Bank National Association, as master trustee (the "Master Trustee"), SJMC, Shands Jacksonville HealthCare, Inc. ("SJHC") and Shands Jacksonville Properties, Inc. ("SJP") (SJMC, SJHC and SJP are collectively referred to as the "Obligated Group"), as amended and supplemented (the "Master Indenture"). The Related Debt Obligation is being issued on parity with the other Obligations (as defined in the Master Indenture) issued, or to be issued, and outstanding under the terms of the Master Indenture and is secured by a pledge of and lien upon the Pledged Revenues (as defined in the Master Indenture) of the Obligated Group and the Mortgaged Property (as defined in the Mortgage, as defined in the Master Indenture).

None of the Issuer, the State of Florida (the "State") nor any political subdivision or agency of the State shall in any event be liable for the payment of the principal of, premium, if any, or interest on the Series 2013B Bonds or for the performance of any pledge, obligation or agreement undertaken by the Issuer, except to the extent that the

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trust estate created under the Bond Indenture are sufficient therefor. No owner of any Series 2013 Bond has the right to compel any exercise of the taxing power of the State or any political subdivision or agency thereof to pay the Series 2013B Bonds or the interest thereon, and the Series 2013B Bonds do not constitute an indebtedness of the Issuer within the meaning of any constitutional or statutory provision or limitation. The Issuer has no taxing power.

The Series 2013B Bonds are dated and shall bear interest from their date of issue, except as otherwise provided in the Bond Indenture. The Series 2013B Bonds will mature on the dates and in the principal amounts, and will bear interest at the respective rates per annum, as provided in the Bond Indenture. Interest on the Series 2013B Bonds shall be payable in arrears (i) on the first Business Day of each month, beginning December 1, 2013, (ii) on the Conversion Date if such Bond is converted to another Interest Rate Mode, and (iii) on the Maturity Date, so long as the Series 2013B Bonds bear interest in the R-FLOATs Mode. The Series 2013B Bonds are subject to redemption prior to maturity in accordance with the terms of the Bond Indenture. The Series 2013B Bonds are in the form of fully registered Series 2013B Bonds in the following denominations: (i) for Series 2013B Bonds in the Daily Rate Mode, the Weekly Rate Mode and the Commercial Paper Rate Mode (all as defined in the Bond Indenture), $100,000 or any larger amount that is a multiple of $1,000, (ii) for Series 2013B Bonds in the R-FLOATs Mode (as defined in the Bond Indenture), $100,000 or any larger amount that is a multiple of $1,000, and (iii) for Series 2013B Bonds in the Term Rate Mode, the Index Rate Mode, or the Fixed Rate Mode (all as defined in the Bond Indenture, $5,000 or any multiple thereof. The Series 2013B Bonds will initially be issued in the R-FLOATs Mode.

Reference is made to the opinion of even date of Jonathan Walker Dixon III, Esq., Vice President and Senior Counsel of SJMC, as Obligated Group Representative, with respect to various matters, including, (i) the status of SJMC, SJHC and SJP as organizations described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (the "Code"), (ii) the corporate power of SJMC, SJHC and SJP to enter into and perform their respective obligations (as applicable) under the Master Indenture, the Loan Agreement, the Mortgage (as defined in the Master Indenture) and the Related Debt Obligation, and (iii) the authorization, execution and delivery of the Master Indenture, the Related Debt Obligation, the Mortgage and the Loan Agreement by SJMC, SJHC and SJP (as applicable). In rendering the opinions set forth herein we have relied on said opinion.

As to questions of fact material to our opinion we have relied upon representations of the Issuer, SJMC, SJHC and SJP, and the certified proceedings and other certifications of appropriate officials of the Issuer, SJMC, SJHC and SJP furnished to us (including

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certifications as to the use of the proceeds of the Series 2013B Bonds), without undertaking to verify the same by independent investigation.

Based upon the foregoing and in reliance upon the matters hereinafter referred to, we are of the opinion that:

1. The Issuer is a public body corporate and politic, a public instrumentality and a local agency organized and existing under the laws of the State of Florida including, particularly, the Act and has full power and authority to enter into, execute and deliver the Bond Indenture and the Loan Agreement, to issue, sell and deliver the Series 2013B Bonds, and to perform its obligations under the terms and conditions of the Bond Indenture and the Loan Agreement.

2. The resolution of the Issuer authorizing, among other things, the issuance and sale of the Series 2013B Bonds has been duly adopted by the Issuer, and no further action of the Issuer is required for their continued validity.

3. The Bond Indenture and the Loan Agreement have each been duly authorized and approved by the Issuer, have each been duly executed and delivered by the Issuer, and, assuming the due authorization, execution and delivery of such documents by the other parties thereto, constitute legal, valid and binding obligations of the Issuer enforceable in accordance with their respective terms.

4. The Series 2013B Bonds have been duly authorized by the Issuer, duly executed by authorized representatives of the Issuer, authenticated by the Trustee and validly issued by the Issuer and constitute the legal, valid and binding limited obligations of the Issuer enforceable in accordance with their terms and are entitled to the benefit and security of the trust estate created under the Bond Indenture.

5. The Series 2013B Bonds and interest thereon are exempt from taxation under the laws of the State of Florida, except as to estate taxes and taxes imposed by Chapter 220, Florida Statutes, on interest, income or profits on debt obligations owned by corporations, as defined in said Chapter 220.

6. Under existing statutes, regulations, rulings and court decisions, the interest on the Series 2013B Bonds is excluded from gross income for federal income tax purposes. Such interest is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations and is not taken into account in determining adjusted current earnings for purposes of computing such alternative minimum tax on corporations. The opinion set forth in the first sentence of this paragraph is subject to the condition that the Issuer, SJMC, SJHC and SJP comply with all requirements of the Code that must be satisfied subsequent to the issuance of the

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Series 2013B Bonds in order that interest thereon be (or continues to be) excluded from gross income for federal income tax purposes. Failure to comply with certain of such requirements could cause the interest on the Series 2013B Bonds to be so included in gross income retroactive to the date of issuance of the Series 2013B Bonds. The Issuer, SJMC, SJHC and SJP have covenanted to comply with all such requirements. Ownership of the Series 2013B Bonds may result in collateral federal tax consequences to certain taxpayers and we express no opinion regarding such collateral federal tax consequences.

7. The Series 2013B Bonds and the Related Debt Obligation are exempt from registration under the Securities Act of 1933, as amended, and the Master Indenture and the Bond Indenture are exempt from qualification under the Trust Indenture Act of 1939, as amended.

Except as may expressly be set forth in an opinion delivered by us to the underwriter of the Series 2013B Bonds on the date hereof (upon which only the underwriter may rely), (1) we have not been engaged or undertaken to review the accuracy, sufficiency or completeness of the Official Statement or other offering material relating to the Series 2013B Bonds and we express no opinion relating thereto and (2) we have not been engaged or undertaken to review the compliance with any federal or state law with regard to the sale or distribution of the Series 2013B Bonds and we express no opinion relating thereto.

The opinions expressed in paragraphs 3 and 4 hereof are qualified to the extent that the enforceability of the Series 2013B Bonds, the Loan Agreement and Bond Indenture, respectively, may be limited by any applicable bankruptcy, insolvency, moratorium, reorganization, or other similar laws affecting creditors' rights generally, or by the exercise of judicial discretion in accordance with general principles of equity.

This opinion is given as of the date hereof and we assume no obligation to update, raise or supplement this opinion to reflect any facts or circumstances that may hereafter come to our attention or any changes in law that may hereafter occur.

We have examined the form of the Series 2013B Bonds and, in our opinion, the form of the Series 2013B Bonds is regular and proper.

Respectfully submitted,

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APPENDIX F

The DTC Book-Entry Only System

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The DTC Book-Entry Only System

1. The Depository Trust Company (“DTC”), New York, NY, will act as securities depository for the Bonds (the “Securities”). The Securities 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 Security certificate will be issued for each maturity of the Securities, in the aggregate principal amount of such maturity, and will be deposited with DTC. 2. DTC, the world’s largest depository, is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 2.2 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 (“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 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 (“Indirect Participants”). DTC has Standard & Poor’s highest rating: AAA. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com and www.dtc.org. 3. Purchases of Securities under the DTC system must be made by or through Direct Participants, which will receive a credit for the Securities on DTC’s records. The ownership interest of each actual purchaser of each Security (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Securities are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Securities, except in the event that use of the book-entry system for the Securities is discontinued. 4. To facilitate subsequent transfers, all Securities 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 Securities 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 Securities; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Securities are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. 5. 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.

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6. Redemption notices shall be sent to DTC. If less than all of the Securities of a single maturity are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such maturity to be redeemed. 7. Neither DTC nor Cede & Co. (nor such other DTC nominee) will consent or vote with respect to the Securities unless authorized by a Direct Participant in accordance with DTC’s Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the Issuer as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts the Securities are credited on the record date (identified in a listing attached to the Omnibus Proxy). 8. Payments of principal and interest and the redemption price on the Securities 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 Issuer or Bond Trustee on the payable date in accordance with their respective holdings shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers registered in “street name,” and will be the responsibility of such Participant and not of DTC, the Issuer, or the Bond Trustee, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal and interest and the redemption price to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the Issuer and Bond Trustee, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. 9. DTC may discontinue providing its services as securities depository with respect to the Securities at any time by giving reasonable notice to the Issuer or Bond Trustee. Under such circumstances, in the event that a successor securities depository is not obtained, Security certificates are required to be printed and delivered. 10. The Issuer may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event, Security certificates will be printed and delivered to DTC. 11. The information in this section concerning DTC and DTC’s book-entry system has been obtained from sources that the Issuer and the Borrower believe to be reliable, but neither the Issuer nor the Borrower takes responsibility for the accuracy thereof.

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APPENDIX G

Form of Continuing Disclosure Agreement

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CONTINUING DISCLOSURE AGREEMENT

THIS CONTINUING DISCLOSURE AGREEMENT (the “Agreement”) is entered into by SHANDS JACKSONVILLE MEDICAL CENTER, INC., a Florida not-for-profit corporation (“SJMC”) on behalf of itself and the following affiliates of SJMC (SJMC and such affiliates being collectively referred to as the “Obligors” in this Agreement):

Shands Jacksonville HealthCare, Inc. (“SJHC”) Shands Jacksonville Properties, Inc. (“SJP”)

SJMC is authorized to enter into this Agreement on behalf of itself and the other Obligors. This Agreement is being delivered in connection with the issuance by Florida Development Finance Corporation (the “Issuer”) of its $59,405,000 Florida Development Finance Corporation Healthcare Facilities Revenue Bonds (UF Health - Jacksonville Project), Series 2013B (the “Bonds”). The Bonds are being issued pursuant to a Series 2013B Bond Trust Indenture dated as of November 1, 2013 (the “Bond Indenture”), between the Issuer and U.S. Bank National Association, as trustee (the “Bond Trustee”). The Bonds are being issued to provide financing for the benefit of the Obligors. Pursuant to the Loan Agreement and the Master Trust Indenture referred to in the Bond Indenture, each of the Obligors is liable for payment of the Bonds. In consideration of the purchase of such Bonds by the beneficial owners thereof, the Obligors covenant and agree as follows:

Section 1. Definitions

Capitalized terms not otherwise defined in this Agreement shall have the meanings assigned to them in the Bond Indenture. In addition, the terms set forth below shall have the meanings assigned unless the context clearly otherwise requires: “Bond Indenture” means the Series 2013B Bond Trust Indenture dated as of November 1, 2013 between the Issuer and the Bond Trustee. “Bonds” means the $59,405,000 Florida Development Finance Corporation Healthcare Facilities Revenue Bonds (UF Health - Jacksonville Project), Series 2013B issued by the Issuer. “Bond Trustee” means U.S. Bank National Association, as trustee under the Bond Indenture.

“EMMA” means the MSRB’s Electronic Municipal Market Access System (EMMA) established pursuant to the Rule. “Issuer” means Florida Development Finance Corporation, a Florida public body corporate and politic. “MSRB” means the Municipal Securities Rulemaking Board. “Obligors” means SJMC, SJHC and SJP, collectively. “Official Statement” means the Official Statement dated November 13, 2013 with respect to the Bonds. “Rule” means Rule 15c2-12 adopted by the Securities and Exchange Commission, as the same may be amended from time to time.

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“SJHC” means Shands Jacksonville HealthCare, Inc., a Florida not-for-profit corporation and a 501(c)(3) organization under the Internal Revenue Code.

“SJMC” means Shands Jacksonville Medical Center, Inc., a Florida not-for-profit corporation and a 501(c)(3) organization under the Internal Revenue Code.

“SJP” means Shands Jacksonville Properties, Inc., a Florida not-for-profit corporation and a 501(c)(3) organization under the Internal Revenue Code.

Section 2. Purpose and Beneficiaries of this Agreement

This Agreement is entered into by the Obligors for the benefit of the holders of the Bonds in order to assist the underwriter or underwriters for the Bonds in complying with the requirements of the Rule.

Section 3. Annual Financial Information

(a) Within 120 days after the end of each fiscal year, the Obligors shall file with the MSRB the following information in the form found in Appendix A to the Official Statement:

“UTILIZATION AND FINANCIAL INFORMATION”

(b) The Obligors may omit or modify any part of the annual information required by this section if the operations to which it relates have been discontinued or materially changed. The Obligors will include an explanation to that effect as part of the annual information for the year in which such event first occurs. (c) If any amendment is made to this Agreement, the annual information for the year in which such amendment is made shall contain a description of the reasons for such amendment and its impact on the type of information being provided.

Section 4. Audited Financial Statements

(a) Within 30 days after receipt, but in no event more than 120 days after the end of each fiscal year, the Obligors shall file with the MSRB audited financial statements of SJHC and its affiliates. The audited financial statements shall be prepared on a basis consistent with the accounting standards used to prepare the financial statements attached as APPENDIX B to the Official Statement, as such standards may be modified from time to time under generally accepted accounting principles applicable to SJHC.

(b) The Obligors operate acute care hospitals and related healthcare facilities that are part of a healthcare delivery system. The annual audited financial statements of SJHC include combining statements that provide financial information with respect to the Obligors, as well as other affiliates of the Obligors. The combining statements are for information purposes only and are not audited. The Obligors intend to comply with their continuing disclosure obligations under this Agreement by providing annual audited financial information for SJHC that will include information about the Obligors in the combining statements of the annual audit substantially in the form included in Appendix B to the Official Statement.

Section 5. Quarterly Financial Information

(a) The Obligors shall file with the MSRB the following information within 45 days after the close of each fiscal quarter: information about the operations and financial condition of the Obligors that is substantially the same as the annual financial information, including unaudited year-to-date information for the quarter just ended and the corresponding quarter of the prior fiscal year. The Obligors agree to make a filing for all four fiscal quarters. (b) The Obligors may omit or modify any part of the quarterly information required by this section if the operations to which it relates have been discontinued or materially changed. The Obligors will include an explanation to that effect as part of the quarterly information for the quarter in which such event first occurs (or, if

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such event occurs in the last quarter of the fiscal year, as part of the annual financial information provided by Section 4).

Section 6. Event Disclosure

(a) In a timely manner not in excess of 10 business days after the occurrence of the event, the Obligors shall file with the MSRB notice of the occurrence of any of the following events affecting the Bonds (some of which may not be applicable to the Bonds):

(1) principal and interest payment delinquencies; (2) non-payment related defaults, if material; (3) unscheduled draws on debt service reserves reflecting financial difficulties; (4) unscheduled draws on credit enhancements reflecting financial difficulties; (5) substitution of credit or liquidity providers, or their failure to perform; (6) adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notice of Proposed Issue (IRS Form 5701-TEB), or other material notices or determinations with respect to the tax status of the Bonds, or other material events affecting the tax status of the Bonds; (7) modifications to rights of the holders of the Bonds, if material; (8) Bond calls, if material, and tender offers; (9) defeasances; (10) release, substitution or sale of property securing repayment of the Bonds, if material; (11) rating changes; (12) bankruptcy, insolvency, receivership or similar events affecting an Obligor; (13) the consummation of a merger, consolidation, or acquisition involving an Obligor or the sale of all or substantially all of the assets of an Obligor, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material: and (14) appointment of a successor or additional trustee or the change of name of a trustee, if material.

(b) In a timely manner the Obligors shall file with the MSRB notice of failure to make a filing, on or before the date specified in this Agreement, of annual information required by Section 3 or Section 4 of this Agreement.

Section 7. Consequences of Failure to File

If the Obligors fail to comply with any provision of this Agreement, the holder of any Bond may seek mandamus or specific performance by court order, to cause the Obligors to comply with their obligations under this Agreement. A default under this Agreement shall not be deemed an event of default under the Bond Indenture or any other financing document related to the issuance of the Bonds, including without limitation the Loan Agreement and the Master Trust Indenture referred to in the Bond Indenture. The sole remedy under this Agreement shall be an action to compel performance.

Section 8. Amendment

This Agreement may be amended by the Obligors if the amendment is required by, or consistent with, changes to, or interpretations of, the Rule made by governmental authority after the Bonds are issued.

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Section 9. Termination

(a) This Agreement shall terminate when (i) all Bonds have been paid or defeased in accordance with the terms of the Bond Indenture or (ii) the continuing disclosure obligation of the Rule is no longer applicable to the Bonds. (b) Any Obligor may terminate its obligations under this Agreement if and when such Obligor no longer remains an obligated person with respect to the Bonds.

Section 10. Filing

(a) The Obligors shall make the information filings required or permitted by this Agreement with the MSRB through EMMA. (b) All documents provided to the MSRB pursuant to this Agreement shall be filed in electronic format as prescribed by the MSRB and shall be accompanied by identifying information as prescribed by the MSRB. (c) Information about the filing system and requirements of EMMA is available at www.emma.msrb.org.

Section 11. Additional Information

The Obligors may, in their sole discretion, file with the MSRB additional notices with information not required by this Agreement or the Rule. Such additional filings may be discontinued by the Obligors at any time in their sole discretion.

Section 12. No Indirect Beneficiaries

This Agreement is for the benefit of the underwriter or underwriters for the Bonds and the holders of the Bonds and shall not create rights or benefits in favor of any other person or entity.

Section 13. Agent for Filings

The Obligors may appoint an agent for purposes of making the filings required or permitted by this Agreement, but no such appointment, or failure of such agent to perform, shall relieve the Obligors of their responsibilities under this Agreement.

Section 14. Governing Law

This Agreement shall be governed by the laws of the State of Florida. Dated: ______________.

Shands Jacksonville Medical Center, Inc., on its own behalf and on behalf of each other Obligor identified in this Agreement By: Its:

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