$74,540,000. Health Care Facilities Bonds, Series 2008-B

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1 New Issue Book Entry Only Rating: S&P: A See Ra t i n g herein In the opinion of Bond Counsel, subject to the qualifications described herein under Tax Matters, under existing law (i) interest on the Series 2008-B Bonds will not be includable in gross income of the holders thereof for purposes of federal income taxation, and (ii) interest on the Series 2008-B Bonds will not be an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations. Bond Counsel is also of the opinion that, under existing law, interest on the Series 2008-B Bonds is exempt from State of Alabama income taxation. See Ta x Mat t e r s herein for further information and other federal tax consequences arising with respect to the Series 2008-B Bonds. Dated: Date of Delivery $74,540,000 The East Alabama Health Care Authority Health Care Facilities Bonds, Series 2008-B Due: September 1, as shown on inside cover The Series 2008-B Bonds are being issued under a Trust Indenture dated March 15, 2008 (the Indenture ) between The East Alabama Health Care Authority and Regions Bank, as Trustee (the Trustee ). The Series 2008-B Bonds will constitute special or limited obligations of the Authority payable solely from, and secured by a pledge of, (1) revenues to be derived by the Authority from the Facilities (as defined herein) and from certain other of its properties and assets and (2) 75% of the proceeds of a special 2 1/2 mill ad valorem tax levied in Lee County, Alabama for public hospital purposes. The pledge of revenues will be on a parity of lien with certain outstanding obligations of the Authority heretofore issued under, or secured by, the 1991 Indenture referred to herein (the 1991 Indenture ). See Se c u r i t y a n d So u r c e o f Pa y m e n t Pledge of Gross Receipts, Pledged Tax Revenues and Other Properties. The Authority may, under the terms of the 1991 Indenture, incur other debt having a claim or charge on the pledged revenues and tax proceeds on a parity with that of the Series 2008-B Bonds, subject to certain conditions referred to herein and in the 1991 Indenture. Registration, transfer, exchanges and payment of the Series 2008-B Bonds will be governed by the rules and regulations of the Book Entry System maintained by The Depository Trust Company. For a description of the Book Entry System, see Appendix F. The Series 2008-B Bonds will be issued in denominations of $5,000 or integral multiples thereof. Interest on the Series 2008-B Bonds is payable on each March 1 and September 1, commencing September 1, The Series 2008-B Bonds are subject to redemption prior to their respective maturities as described herein. The Series 2008-B Bonds will not be general obligations of the Authority, and the covenants and representations contained in the Indenture or the Series 2008-B Bonds will not and shall never constitute a liability or charge against the general credit of the Authority. The Series 2008-B Bonds will not be obligations or debts of the State of Alabama, Lee County, Alabama, or any municipality or other county in the State of Alabama, nor will the faith and credit of the State of Alabama or any county or municipality therein be pledged for payment of the Series 2008-B Bonds. The Authority has no taxing power. The Series 2008-B1 Bonds will initially be issued in the Fixed Rate Mode and the Series 2008-B2 Bonds and Series 2008-B3 Bonds will initially be issued in the Term Rate Mode. For pricing information, see inside front cover. The Series 2008-B Bonds are offered when, as and if issued, subject to the approval of the validity thereof by Presley Burton & Collier, LLC, Birmingham, Alabama, Bond Counsel. Certain legal matters will be passed upon for the Authority by its legal counsel, Presley Burton & Collier, LLC, Birmingham, Alabama, and for the Underwriters by their legal counsel, Balch & Bingham LLP, Birmingham, Alabama. It is expected that the Series 2008-B Bonds in definitive form will be available for delivery on or about April 3, THE FRAZER LANIER COMPANY, In c o r p o r a t e d The date of this Official Statement is March 19, MERRILL LYNCH & CO.

2 $74,540,000 THE EAST ALABAMA HEALTH CARE AUTHORITY HEALTH CARE FACILITIES BONDS, SERIES 2008-B SERIES 2008-B1 BONDS PRICING INFORMATION Year Amount Interest Rate Price CUSIP 2009 $1,190, % 100% EF ,240, EG ,415, EH ,500, EJ ,550, EK2 SERIES 2008-B2 BONDS PRICING INFORMATION The Series 2008-B2 Bonds mature on September 1, The Series 2008-B2 Bonds will initially be issued in the Term Rate Mode. Pricing for the Bonds in the Term Rate Mode is as follows: Term Rate Period Ending Amount Interest Rate Price CUSIP 2013 $27,645, % 100% EL0 SERIES 2008-B3 BONDS PRICING INFORMATION The Series 2008-B3 Bonds mature on September 1, The Series 2008-B3 Bonds will initially be issued in the Term Rate Mode. Pricing for the Bonds in the Term Rate Mode is as follows: Term Rate Period Ending Amount Interest Rate Price CUSIP 2018 $40,000, % 100% EM8 On the last day of the initial Term Rate Periods the Series 2008-B2 Bonds and the Series 2008-B3 Bonds will be subject to Mandatory Tender, and the Interest Rate Mode on the Bonds will be converted to another Interest Rate Mode. See THE SERIES 2008-B BONDS - Interest Rate Modes and - Mandatory Tender for Purchase.

3 THE EAST ALABAMA HEALTH CARE AUTHORITY BOARD OF DIRECTORS OF THE AUTHORITY E. L. Spencer, Jr., Chairman Joel C. Pittard, M.D., Vice Chairman Rhett E. Riley, Secretary-Treasurer William O. Baker, Jr. David Smalley, M.D. Lucinda S. Cannon William L. Garrett, Jr., M.D. R. Kenneth McKemie Paul H. Waddy, Jr., Ph.D. COUNSEL TO THE AUTHORITY Presley Burton & Collier, LLC Birmingham, Alabama BOND COUNSEL Presley Burton & Collier, LLC Birmingham, Alabama COUNSEL TO THE UNDERWRITERS Balch & Bingham LLP Birmingham, Alabama INDEPENDENT AUDITORS Ernst & Young LLP Birmingham, Alabama

4 This Official Statement is not to be construed as a contract or agreement between the Authority and the purchasers or holders of any of the Series 2008-B Bonds. Quotations from and summaries and explanations of provisions of laws and documents herein do not purport to be complete, and reference is made to such laws and documents for full and complete statements of their provisions. The information in this Official Statement has been obtained from sources which are considered dependable and which are customarily relied upon in the preparation of similar official statements, but such information is not guaranteed as to accuracy or completeness. All estimates and assumptions contained herein are believed to be reasonable, but no representation is made that such estimates or assumptions are correct or will be realized. No person, including any broker, dealer or salesman, has been authorized to give any information or to make any representation other than those contained in this Official Statement, and if given or made, such other information or representations must not be relied upon as having been authorized by the Authority. The Series 2008-B Bonds will not be registered under the Securities Act of 1933, as amended, or any state securities laws and will not be listed on any stock or other securities exchange, and neither the Securities and Exchange Commission nor any federal, state, municipal or other governmental agency will pass upon the accuracy, completeness or adequacy of this Official Statement. Any information or expressions of opinion herein are subject to change without notice, and neither the delivery of this Official Statement nor any sale hereunder shall under any circumstances create an implication that there has been no change as to the affairs of the Authority since the date hereof. IN CONNECTION WITH THE OFFERING OF THE SERIES 2008-B BONDS THE UNDERWRITERS MAY OVER- ALLOT OR EFFECT TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SERIES 2008-B BONDS AT LEVELS ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. 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. All such forward-looking statements are expressly qualified by the cautionary statements set forth in this Official Statement.

5 TABLE OF CONTENTS INTRODUCTION... 1 GLOSSARY... 1 THE SERIES 2008-B BONDS... 4 SECURITY AND SOURCE OF PAYMENT... 7 THE PLAN OF REFUNDING... 9 OUTSTANDING DEBT SCHEDULE OF DEBT SERVICE REQUIREMENTS DEBT SERVICE COVERAGE THE AUTHORITY THE SPECIAL HOSPITAL TAX BONDHOLDERS RISKS TAX MATTERS UNDERWRITING RATING LITIGATION CONTINUING DISCLOSURE LEGAL MATTERS FINANCIAL STATEMENTS MISCELLANEOUS Appendix A - East Alabama Medical Center Appendix B - Audited Financial Statements of the Authority for the Fiscal Years Ended September 30, 2007 and 2006 Appendix C - The Indenture and Summaries of Other Financing Documents Appendix D - Proposed Form of Opinion of Bond Counsel Appendix E - Summary of Continuing Disclosure Agreement Appendix F - DTC Book Entry System Page

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7 OFFICIAL STATEMENT regarding $74,540,000 Health Care Facilities Bonds, Series 2008-B issued by THE EAST ALABAMA HEALTH CARE AUTHORITY INTRODUCTION This Official Statement is furnished in connection with the issuance of the Series 2008-B Bonds referred to above (the Series 2008-B Bonds ) by The East Alabama Health Care Authority (the Authority ). The Authority owns and operates (a) a 314 licensed bed general acute care hospital (the Hospital ) and a 38 licensed bed skilled nursing facility located in the City of Opelika, Alabama, known as East Alabama Medical Center and (b) Auburn Medical Park in Auburn, Alabama, consisting of an assisted living facility, independent living cottages, fitness center and inpatient hospice services. The Series 2008-B Bonds will be issued pursuant to a Trust Indenture dated March 15, 2008 (the Indenture ), between the Authority and Regions Bank, Birmingham, Alabama, as trustee (the Trustee ). The Series 2008-B Bonds will be issued for the purpose of (i) refunding the Authority s Series 2008-A3 Bond (herein, the Bridge Loan ), which was issued on March 13, 2008 to provide the amount necessary to refund the Authority s Series 2003-A Bonds and (ii) paying the costs of issuance of the Series 2008-B Bonds. See THE PLAN OF REFUNDING Application of Proceeds of Series 2008-B Bonds and Sources and Uses of Funds. GLOSSARY This section of the Official Statement contains the definitions of certain capitalized terms used frequently in this Official Statement. In addition, certain capitalized terms used in this Official Statement and not defined in this section are defined in APPENDIX C - THE INDENTURE AND SUMMARIES OF OTHER FINANCING DOCUMENTS. Authority means The East Alabama Health Care Authority, an Alabama public corporation. Book Entry System means the book-entry system for registration, transfer and exchange of debt obligations maintained by DTC. DTC means The Depository Trust Company, and its successors and assigns. Bridge Loan means the Authority s Health Care Facilities Taxable Bonds, Series 2008-A3, dated March 13, 2008, outstanding in the aggregate principal amount of $73,334,837.50, which were issued to Regions Bank for the purpose of providing the amount necessary to refund the Series 2003-A Bonds. Bridge Loan Indenture means that certain Trust Indenture dated March 1, 2008 between the Authority and Regions Bank, as trustee, pursuant to which the Bridge Loan was issued. Business Day means a day which is not (a) a Saturday, a Sunday or a legal holiday on which banking institutions in the State of Alabama or the State of New York are authorized by law to close or (b) a day on which the New York Stock Exchange is closed. 1

8 County means Lee County, Alabama. Enabling Law means Articles 11 and 11A of Chapter 21 of Title 22 (Sections , et seq.) of the Code of Alabama 1975, as amended. Fixed Rate, when used with respect to any Series 2008-B Bond in the Fixed Rate Mode, means the fixed interest rate borne by such Bond until its maturity. Fixed Rate Mode means the Interest Rate Mode in which a Series 2008-B Bond bears interest at a Fixed Rate until the maturity of such Series 2008-B Bond. Facilities means the entire hospital and health-care system and facilities owned by the Authority, as they now or may hereafter exist, including (without limiting the generality of the foregoing) the Hospital and any other health-care facilities owned by the Authority, but excluding any health-care facilities that are not wholly and directly owned by the Authority (notwithstanding the fact that revenues derived from the ownership interest of the Authority and any such facilities not wholly and directly owned by the Authority constitute Gross Receipts). Gross Receipts means the revenues derived by the Authority from the Facilities and all other revenues, receipts and income of the Authority from its other assets and properties, and interests therein including, without limitation, (i) the Authority s rights under agreements with insurance companies, governmental units and prepaid health organizations, (ii) gifts, grants, bequests, donations, contributions and pledges to the Authority and (iii) insurance proceeds or any award, or payment in lieu of an award, resulting from condemnation proceedings, and all rights to receive the foregoing, whether now owned or hereafter acquired by the Authority and regardless of whether generated in the form of accounts, accounts receivable, contract rights, chattel paper, documents, general intangibles, instruments, investment property, proceeds of insurance and all proceeds of the foregoing, whether cash or noncash; excluding, however, (1) the proceeds from any tax or taxes that may be allocated, apportioned or paid to or levied for the benefit of the Authority and (2) gifts, grants, bequests, donations, contributions and pledges to the Authority heretofore or hereafter made, and the income and gains derived therefrom, which are specifically restricted by the donor or grantor to a particular purpose which is inconsistent with its use for payments required under the Indenture or on the Indenture Indebtedness except that gifts, grants, bequests, donations, contributions and pledges which may be applied at the discretion of the Authority to the payments due under the Indenture on the Indenture Indebtedness for any period shall not be excluded for purposes of determining Gross Receipts of the Authority. Hospital means the Authority s hospital facilities located in Opelika, Alabama and known as East Alabama Medical Center. Hospital Bond Amendment means Amendment No. 76 to the Constitution of the State of Alabama of 1901, which amendment authorizes the designation of the Authority as the agency of the County with respect to public hospital facilities and authorizes the issuance of obligations by the Authority payable from, and secured by a pledge of, 75% of the annual proceeds of the Special Hospital Tax. Indenture means that certain Trust Indenture dated March 15, 2008, between the Authority and the Trustee, under which the Series 2008-B Bonds will be issued. Interest Rate Mode means an interest rate mode authorized pursuant to the Indenture. Mandatory Tender means a required tender of a Bond for purchase pursuant to the provisions of the Indenture. See THE SERIES 2008-B BONDS Mandatory Tender for Purchase. Mandatory Tender Date means a date on which a Bond is to be purchased pursuant to a Mandatory Tender. 2

9 Mortgage means the Mortgage and Security Agreement dated June 1, 2002, between the Authority and Regions Bank, Birmingham, Alabama, as supplemented by that certain First Supplement to Mortgage dated December 1, 2003, that certain Second Supplement to Mortgage dated January 1, 2006, that certain Third Supplement to Mortgage dated March 1, 2008 and as further supplemented by a Fourth Supplement to Mortgage dated March 15, Other Senior Debt means any bonds, notes, certificates of indebtedness or other obligations for the payment of money that are issued or incurred by the Authority in accordance with the applicable provisions of the 1991 Indenture and that are, under certain circumstances, entitled to a charge, lien or claim on the Gross Receipts and Pledged Tax Proceeds on a parity with the charge, lien or claim of the 1991 Indenture Bonds thereon. Parity Bonds means any bonds that may hereafter be issued by the Authority in accordance with the applicable provisions of the 1991 Indenture on a parity with the Series 1998-A Bonds, the Series 2002-A Bonds, the Series 2008-A Bonds and the Series 2008-B Bonds. Pledged Tax Proceeds means 75% of the annual proceeds of the Special Hospital Tax paid to the Authority, which is that portion of the proceeds of the Special Hospital Tax authorized by law to be pledged to the payment of obligations of the Authority. Series 1998-A Bonds means the Authority s Health Care Facilities Revenue and Tax Anticipation Bonds, Series 1998-A, dated May 1, 1998, now outstanding in the aggregate principal amount of $22,550,000. Series 2002-A Bonds means the Authority s Health Care Facilities Revenue and Tax Anticipation Bonds, Series 2002-A, dated June 1, 2002, now outstanding in the aggregate principal amount of $42,030,000. Series 2003-A Bonds means the Authority s Health Care Facilities Revenue and Tax Anticipation Bonds, Series 2003-A, Auction Market Securities (AMS), dated December 30, 2003, which were refunded on March 13, 2008 with the proceeds of the Bridge Loan. Series 2006-A Bonds means the Authority s Health Care Facilities Revenue and Tax Anticipation Bonds, Series 2006-A, Auction Market Securities (AMS), dated January 26, 2006, which were refunded on March 11, 2008 with the proceeds of the Series 2008-A Bonds. Series 2008-A Bonds means the Authority s Health Care Facilities Bonds, Series 2008-A, dated March 11, 2008, issued and now outstanding in the aggregate principal amount of $27,015,000. Special Hospital Tax means the special ad valorem tax of 2-1/2 mills levied on taxable property in Lee County, Alabama for public hospital purposes pursuant to the Special Tax Amendment and a special election in the County held on December 13, Special Tax Amendment means Amendment No. 72 to the Constitution of Alabama of 1901, which amendment authorizes the levy of the Special Hospital Tax by the County. 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 for a Term Rate Period. 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 Term Rate established for such period. Trustee means Regions Bank, Birmingham, Alabama, in its capacity as trustee under the Indenture. 3

10 1991 Indenture means that certain Trust Indenture dated as of April 15, 1991, as heretofore supplemented, pursuant to which the Series 1998-A Bonds and the Series 2002-A Bonds were issued Indenture Bonds means all bonds outstanding under the 1991 Indenture. Interest Rate Modes THE SERIES 2008-B BONDS The Indenture provides for the issuance of the Series 2008-B Bonds in various Interest Rate Modes. The Series 2008-B1 Bonds are being issued in the Fixed Rate Mode. The Series 2008-B2 Bonds and the Series 2008-B3 Bonds are being issued in the Term Rate Mode. The Series 2008-B1 Bonds will remain in the Fixed Rate Mode until their respective maturities. The Series 2008-B2 Bonds will remain in the Term Rate Mode until September 1, 2013, and the Series 2008-B3 Bonds will remain in the Term Rate Mode until September 1, 2018 (the end of the respective initial Term Rate Periods). The Series 2008-B2 Bonds and the Series 2008-B3 Bonds are subject to Mandatory Tender for purchase on the last day of their respective Term Rate Periods, and the Interest Rate Mode on the Series 2008-B2 Bonds and Series 2008-B3 Bonds will be converted to a new Interest Rate Mode on that date. See Mandatory Tender for Purchase below. This Official Statement describes only the Fixed Rate Mode and the Term Rate Mode and the related provisions of the Indenture applicable to the Series 2008-B Bonds in those modes. When the Series 2008-B2 Bonds and the Series 2008-B3 Bonds are converted to a new Interest Rate Mode, a new official statement, or a supplement to this Official Statement, will be prepared for the offering of the Series 2008-B2 Bonds and the Series 2008-B3 Bonds in the new Interest Rate Mode. Date, Form of Bonds and Denominations The Series 2008-B Bonds will be dated as of the date of initial delivery. The Series 2008-B Bonds will be issuable in denominations of $5,000 and any integral multiple thereof. Book-Entry System The Series 2008-B Bonds are being issued in book entry form under the book entry system (the Book Entry System ) maintained by DTC. While the Series 2008-B Bonds are subject to the Book Entry System, the registration, transfer, exchange and payment of Series 2008-B Bonds will be governed by the Book Entry System. If the Book Entry System is discontinued, the Indenture contains alternate provisions for the registration, transfer, exchange and payment of Series 2008-B Bonds. See APPENDIX F for a description of the DTC Book Entry System. Maturity See the pricing terms on the inside cover of this Official Statement for the maturity dates for the Series 2008-B Bonds. The Series 2008-B2 Bonds and the Series 2008-B3 Bonds will also be subject to scheduled mandatory redemption prior to maturity. See Redemption Prior to Maturity. Interest Rate See the pricing terms on the inside cover of this Official Statement for the Term Rate applicable to the Bonds in the initial Term Rate Period. Interest at the Term Rate for this Term Rate Period will be computed on the basis of a 360-day year with 12 months of 30 days each. 4

11 Interest Payment Dates Interest on the Bonds at the Term Rate for the initial Term Rate Period will be payable on March 1 and September 1 in each year, beginning September 1, Interest will also be payable on the last day of the Term Rate Period, when the Bonds are subject to Mandatory Tender. Redemption Prior to Maturity No Optional Redemption. The Series 2008-B Bonds will not be subject to optional redemption during a Term Rate Period or a Fixed Rate Period. Scheduled Mandatory Redemption of Series 2008-B2 Term Bonds. Unless serial maturities have been assigned to the Series 2008-B2 Bonds maturing on September 1, 2033 (the 2008-B2 Term Bonds ), the 2008-B2 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 September 1 in the years and in principal amounts (after credit as provided below) as follows: Year Amount 2014 $1,600, ,710, ,790, ,885, ,975, , , , , , , , , , , ,445, ,580, ,710, ,870, ,025,000 (maturity) Scheduled Mandatory Redemption of Series 2008-B3 Term Bonds. Unless serial maturities have been assigned to the Series 2008-B3 Bonds maturing on September 1, 2033 (the 2008-B3 Term Bonds ), the 2008-B3 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 September 1 in the years and in principal amounts (after credit as provided below) as follows: Year Amount 2019 $1,435, ,490, ,595, ,685, ,780, , ,000 5

12 , , ,910, ,240, ,530, ,815, ,155, ,495,000 (maturity) If any of such scheduled mandatory redemption dates is not a Business Day, the actual redemption date for the Bonds shall be the next succeeding Business Day, and interest shall not accrue from the scheduled mandatory redemption date to the actual redemption date with respect to the principal to be redeemed. Not later than the date on which notice of scheduled mandatory redemption is to be given to Bondholders, the Trustee shall proceed to select for redemption, by lot, Bonds or portions thereof in an aggregate principal amount equal to the amount required to be redeemed and shall call such Bonds or portions thereof for redemption on such scheduled mandatory redemption date; provided, however, that the Authority may, upon direction delivered to the Trustee not less than 30 days prior to such scheduled mandatory redemption date, direct that any or all of the following amounts be credited against the principal amount of Bonds scheduled for redemption on such date: (i) the principal amount of Bonds delivered by the Authority to the Trustee for cancellation and not previously claimed as a credit; (ii) the principal amount of Bonds previously redeemed (other than Bonds redeemed pursuant to the scheduled mandatory redemption provisions) and not previously claimed as a credit; and (iii) the principal amount of Bonds otherwise defeased under the terms of the Indenture and not previously claimed as a credit. Optional Redemption Upon Damage, Destruction or Condemnation of Operating Assets. The Bonds may be redeemed in whole or in part at the option of the Authority on any date 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 Authority exceed the cost of any repairs or replacements to its operating assets which the Authority elects to make with such proceeds. Partial Redemption of Bonds. If less than all Bonds outstanding are to be redeemed, the principal amount of Bonds to be redeemed may be specified by the Authority by notice delivered to the Trustee not less than 20 days before the date fixed for redemption (unless a shorter notice is acceptable to the Trustee), or, in the absence of timely receipt by the Trustee of such notice, shall be selected by the Trustee by lot or by such other method as the Trustee shall deem fair and appropriate; provided, however, that the principal amount of Bonds to be redeemed may not be larger than the principal amount of Bonds of such Maturity then eligible for redemption and may not be smaller than the smallest authorized denomination. Except as otherwise provided in the specific redemption provisions for the Bonds, if less than all Bonds are to be redeemed, the particular Bonds to be redeemed shall be selected by the Trustee not less than 15 days prior to the redemption date from the outstanding Bonds by lot or by such other method as the 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 a denomination larger than the smallest Authorized Denomination. Effect of Redemption. Bonds (or portions thereof as aforesaid) for the redemption and payment of which provision is made in accordance with the Indenture, shall thereupon cease to be entitled to the benefits of the Indenture and shall cease to bear interest from and after the date fixed for redemption. Notice of Redemption. Notice of redemption shall be given to Bondholders not less than 15 days prior to the redemption date. If the Book Entry System is in effect, such notice shall be given to DTC by such method as shall be specified in the rules and regulations of the Book Entry System. If the Book Entry System has been terminated, such notice shall be given by registered or certified mail. 6

13 No Optional Tender for Purchase The Series 2008-B Bonds are not subject to optional tender for purchase during a Term Rate Period or a Fixed Rate Period. Mandatory Tender for Purchase The Series 2008-B2 Bonds and the Series 2008-B3 Bonds are subject to Mandatory Tender for purchase on the last day of their respective initial Term Rate Periods. The Indenture does not require notice of Mandatory Tender under these circumstances. Authority for Issuance The Series 2008-B Bonds have been issued pursuant to applicable provisions of (1) Articles 11 and 11A of Chapter 21 of Title 22 (Sections et seq.) of the Code of Alabama 1975, as amended (Act No enacted at the 1982 Regular Session of the Legislature of Alabama), (2) resolutions adopted by the Board of Directors of the Authority, and (3) the Indenture. The Authority is authorized to enter into the Indenture pursuant to the aforesaid statute and the aforesaid resolutions. Legal Investment Status Section of the Code of Alabama 1975, as amended, provides in substance that unless otherwise directed by the court having jurisdiction or by the document that is the source of authority, a fiduciary may, with the exercise of reasonable business prudence, invest funds in any securities of the Authority. Source of Payment SECURITY AND SOURCE OF PAYMENT The Series 2008-B Bonds, which are to be issued as Other Senior Debt pursuant to the 1991 Indenture, are special or limited obligations of the Authority and are payable as to principal, premium (if any) and interest on a parity with the 1991 Indenture Bonds and any additional Parity Bonds and Other Senior Debt solely from: (1) The Gross Receipts (including without limitation the Accounts described in the 1991 Indenture); and (2) The Pledged Tax Proceeds. For a description of the Pledged Tax Proceeds, see THE SPECIAL HOSPITAL TAX. Other Sources of Payment The Series 2008-B Bonds are further payable as to principal, premium (if any) and interest from: (1) all right, title and interest of the Authority in and to the funds created under the Indenture and all amounts held therein, including investment earnings; and (2) any and all other property of every kind and nature from time to time hereafter, by delivery or by writing of any kind, conveyed, pledged, assigned or transferred as and for additional security under the Indenture by the Authority, or by anyone on its behalf, to the Trustee, including without limitation any moneys or investments held by the Trustee in any of the funds established under the Indenture as security for the Series 2008-B Bonds. The Series 2008-B Bonds will not be general obligations of the Authority, and the covenants and representations contained in the Indenture or in the Series 2008-B Bonds will not and shall never constitute a 7

14 liability or charge against the general credit of the Authority. The Series 2008-B Bonds will not be obligations or debts of the State of Alabama, Lee County, Alabama (the County ), or any municipality or other county in the State of Alabama, nor will the faith and credit of the State of Alabama or any county or municipality therein be pledged for payment of the Series 2008-B Bonds. Pledge of Gross Receipts, Pledged Tax Revenues and Other Properties Pursuant to the Indenture, the Authority has pledged and assigned to the Trustee, for the benefit of the Series 2008-B Bonds: (1) the Pledged Tax Proceeds; (2) the Gross Receipts; (3) proceeds of the collateral under the Mortgage; (4) all right, title and interest of the Authority in and to the funds created under the Indenture and all amounts held therein, including investment earnings; and (5) any and all other property of every kind and nature from time to time hereafter, by delivery or by writing of any kind, conveyed, pledged, assigned or transferred as and for additional security under the Indenture by the Authority, or by anyone on its behalf, to the Trustee; provided, however, that the pledge and assignment of the Gross Receipts and Pledged Tax Proceeds is on a parity of lien with the pledge and assignment of such property pursuant to the 1991 Indenture, it being intended that the Series 2008-B Bonds be Other Senior Debt under the terms of the 1991 Indenture and that the Series 2008-B Bonds be secured on an equal and proportionate basis with all 1991 Indenture Bonds and Other Senior Debt now outstanding or hereafter issued or incurred by the Authority under the terms of the 1991 Indenture. Upon the issuance of the Series 2008-B Bonds, (i) the Authority will have no obligations that constitute 1991 Indenture Bonds or Other Senior Debt other than the Series 1998-A Bonds, the Series 2002-A Bonds, the Series 2008-A Bonds and the Series 2008-B Bonds. The Authority is, however, authorized under the 1991 Indenture to issue Parity Bonds and otherwise to incur indebtedness in addition to the Series 2008-B Bonds, without express limit as to principal amount but in any event upon the terms and conditions specified in the 1991 Indenture, having under certain circumstances a claim or charge on the aforesaid Gross Receipts and Pledged Tax Proceeds on a parity with that of the Series 2008-B Bonds. See SUMMARY OF CERTAIN COVENANTS INCORPORATED FROM THE 1991 INDENTURE Additional Parity Bonds and Other Senior Debt in APPENDIX C hereto. The Mortgage In addition to the pledge of Gross Receipts and the Pledged Tax Proceeds, payment of the Series 2008-B Bonds is secured pursuant to a Mortgage and Security Agreement dated June 1, 2002 (the Mortgage ) executed by the Authority in favor of Regions Bank, Birmingham, Alabama, in its capacity as collateral agent for the holders of all debt secured by the Mortgage (in such capacity, the Collateral Agent ), as supplemented by that certain First Supplement to Mortgage dated December 1, 2003, that certain Second Supplement to Mortgage dated January 1, 2006, that certain Third Supplement to Mortgage dated March 1, 2008 and as further supplemented by a Fourth Supplement to Mortgage dated March 15, For a description of the terms of the Mortgage, see APPENDIX C. The Mortgage constitutes a mortgage on the real property and buildings and fixtures that comprise the Hospital (referred to in the Mortgage as the Hospital Facilities ). The Hospital Facilities include all real property and buildings necessary for the continued operation of the Hospital, including access and parking. The Mortgage constitutes a first priority lien on the collateral covered by the Mortgage, subject only to various encumbrances that arise in the ordinary course of business that are not expected to be material to a first mortgage holder. 8

15 The Indenture contains a covenant restricting the liens that may be placed by the Authority on its assets not covered by the Mortgage. See SUMMARY OF CERTAIN COVENANTS INCORPORATED FROM THE 1991 INDENTURE Restrictions as to Creation of Liens in APPENDIX C. The Mortgage permits the Authority to issue Additional Bonds pursuant to the 1991 Indenture and to issue or incur other obligations or liabilities that it may designate as Other Secured Obligations under the terms of the Mortgage. All 1991 Indenture Bonds and all Other Secured Obligations are referred to in the Mortgage as the Secured Obligations. In the proceedings authorizing the issuance of the Series 2008-B Bonds, the Authority will designate the Series 2008-B Bonds as Other Secured Obligations under the terms of the Mortgage. All Secured Obligations will be secured by the Mortgage on an equal and proportionate basis with the Bonds. For a description of the terms and conditions for the issuance of Additional Debt and the creation of Other Secured Obligations see SUMMARY OF CERTAIN COVENANTS INCORPORATED FROM THE 1991 INDENTURE Restrictions as to Additional Debt and SUMMARY OF THE MORTGAGE AND SECURITY AGREEMENT Creation of Other Secured Obligations in APPENDIX C. Upon the issuance of the Series 2008-B Bonds, the only Secured Obligations under the Mortgage will be the Series 1998-A Bonds, the Series 2002-A Bonds, the Series 2008-A Bonds and the Series 2008-B Bonds. When the Series 2002-A Bonds were issued, the Authority obtained customary title insurance for a mortgagee insuring the Collateral Agent s interest in the Hospital Facilities with coverage in the amount of $25,000,000. The Mortgage does not require additional title insurance coverage when Parity Bonds are issued or Other Secured Obligations are created. Concerning the Reserve Fund The Indenture establishes a Reserve Fund for the benefit of the Series 2008-B Bonds as security for the payment of debt service as to which there would otherwise be a default. See THE INDENTURE AND SUMMARIES OF OTHER FINANCING DOCUMENTS Section 9.3 of the Indenture in APPENDIX C hereto. Remedies The Authority is, under existing law, subject to suit in the event that it defaults in payment of the principal of or the interest on the Series 2008-B Bonds. However, the extent of the remedies afforded to the holders of the Series 2008-B Bonds by any such suit, and the enforceability of any judgment against the Authority resulting therefrom, are subject to those limitations inherent in the fact that the Series 2008-B Bonds are special or limited obligations of the Authority, and may be subject to, among other things, bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors rights and the exercise of judicial discretion in appropriate cases. Application of Proceeds of Series 2008-B Bonds THE PLAN OF REFUNDING The proceeds of the Series 2008-B Bonds will be used to (i) refund the Authority s Series 2008-A3 Bonds (herein, the Bridge Loan ), which were issued on March 13, 2008 to provide the amount necessary to refund the Authority s Series 2003-A Bonds and (ii) pay the costs of issuance of the Series 2008-B Bonds. The Series 2003-A Bonds were retired on March 13, The Bridge Loan will be retired on the date of issuance of the Series 2008-B Bonds. 9

16 Sources and Uses of Funds The estimated sources and uses of funds for the plan of financing are as follows: Sources of Funds Principal proceeds of Series 2008-B Bonds $74,540, Amounts transferred from accounts held under the Bridge Loan Indenture 6,646, Total Sources of Funds $81,186, Uses of Funds Payment of the Bridge Loan (1) $73,334, Deposit to Reserve Fund established under the Indenture (2) 7,185, Issuance expenses (3) 666, Total Uses of Funds $81,186, (1) (2) (3) The Authority will pay accrued interest due on the Bridge Loan from its own funds. See SECURITY AND SOURCE OF PAYMENT Concerning the Reserve Fund above. This deposit will be made out of the proceeds of the Series 2008-B Bonds and amounts transferred from accounts held under the Bridge Loan Indenture. Underwriting discount, legal, accounting and financial expenses. OUTSTANDING DEBT Long-Term Debt When the Series 2008-B Bonds are issued the Authority will have the following long-term debt outstanding: Series 1998-A Bonds. The Authority s Health Care Facilities Revenue and Tax Anticipation Bonds, Series 1998-A (the Series 1998-A Bonds ) were originally issued in the principal amount of $22,550,000 and are now outstanding in the principal amount of $22,550,000. The Series 1998-A Bonds mature or are subject to scheduled mandatory redemption on September 1, 2022 through 2028 and bear interest at fixed rates ranging from 5.20% to 5.25%. The Series 1998-A Bonds are payable from and secured by the Gross Receipts and Pledged Tax Revenues and are secured by the Mortgage. The Series 1998-A Bonds are on a parity of lien with the Series 2002-A Bonds, the Series 2003-A Bonds and the Series 2008-B Bonds. The Series 1998-A Bonds are insured by MBIA Insurance Corporation. Series 2002-A Bonds. The Authority s Health Care Facilities Revenue and Tax Anticipation Bonds, Series 2002-A (the Series 2002-A Bonds ) were originally issued in the principal amount of $49,340,000 and are now outstanding in the principal amount of $42,030,000. The Series 2002-A Bonds mature or are subject to scheduled mandatory redemption on September 1, 2008 through 2027 and bear interest at fixed rates ranging from 5.20% to 5.25%. The Series 2002-A Bonds are payable from and secured by the Gross Receipts and Pledged Tax Revenues and are secured by the Mortgage. The Series 2002-A Bonds are on a parity of lien with the Series 1998-A Bonds, the Series 2003-A Bonds and the Series 2008-B Bonds. The Series 2002-A Bonds are insured by MBIA Insurance Corporation. Series 2008-A Bonds. The Authority s Health Care Facilities Bonds, Series 2008-A (the Series 2008-A Bonds ) were issued on March 11, 2008 in the principal amount of $27,015,000. The Series A1 Bonds were issued in a Fixed Rate Mode; they mature on September 1, 2008 through 2018; and bear interest at fixed rates ranging from 4.00% to 5.00%. The Series 2008-A2 Bonds mature on September 1, 10

17 2036; they were issued in a Term Rate Mode that expires on September 1, 2018; they bear interest at a term rate of 5.250%; and are subject to mandatory tender for purchase on September 1, Series 2008-B Bonds. The Series 2008-B Bonds are the bonds being offered pursuant to this Official Statement. The Authority does not have any capitalized lease agreements or any other long-term debt outstanding other than the Series 1998-A Bonds, the Series 2002-A Bonds, the Series 2008-A Bonds and the Series 2008-B Bonds. Short-Term Debt The Authority does not have any short-term debt outstanding and does not have a line of credit or other short-term financing arrangement. Interest Rate Swap Agreements The Authority has entered into various interest rate swap transactions to hedge interest rate risk with respect to its long-term debt. The terms of the existing interest rate swap agreements are summarized in the Authority s audited financial statements included in APPENDIX B. The Authority entered into an interest rate swap in connection with the issuance of Series 2006-A Bonds of the Authority (the 2006-A Swap ) with Merrill Lynch Capital Services, Inc. ( Merrill Lynch Capital ). The A Swap expires October 1, 2032, and requires the Authority to make fixed rate interest payments on a monthly basis at a rate of 3.475% on a notional amount of $25,000,000 in return for receiving quarterly floating rate interest payments of 67% of 5-year LIBOR less 31 basis points. The Authority does not expect to terminate the 2006-A Swap. The Authority entered into an interest rate swap in connection with the issuance of the Series 2003-A Bonds (the 2003-A Swap ) with Merrill Lynch Capital on December 5, 2003, providing for payment by the Authority of a fixed rate of interest equal to 4.40% and a variable rate payment by Merrill Lynch Capital equal to the SIFMA Index. The 2003-A Swap has a notional amount of $46,800,000 that amortizes annually and a term that ends September 1, The Authority does not expect to terminate the Series 2003-A Swap. The Authority may be required to post collateral under the 2003-A Swap as a result of gain or loss on the periodic valuation of the 2003-A Swap. The 2003-A Swap may be terminated prior to the final termination date as a result of certain events of default or other termination events. The Authority also has entered into a basis swap agreement with a notional amount of $40,000,000 in order to hedge its tax-exempt interest rates related to its Series 2002-A Bonds. The basis swap agreement, which expires on August 15, 2022, requires the Authority to make floating-rate interest payments based on the SIFMA Index on a monthly basis in return for receiving quarterly floating-rate interest payments of 71.51% of five-year LIBOR. Debt of Affiliated Entity The Authority and some members of its medical staff are members of a separate limited liability company, East Alabama Leasing, LLC ( EAL ) that owns medical equipment. The Authority owns a majority interest in EAL. EAL leases the equipment it owns to the Authority. For financial reporting purposes EAL is consolidated with the Authority. See pages 10, 17 and 29 of APPENDIX B. EAL has incurred debt for equipment acquisition through a series of bank notes. As of January 31, 2008, the combined balance on these notes was $2,600,249. The Authority is not directly obligated for the payment of these notes. Although this debt is included on the balance sheet of the Authority for financial reporting purposes, for purposes of the Authority s debt covenants under the 1991 Indenture, the debt of EAL is not treated as debt of the 11

18 Authority. Accordingly, debt service on these notes is not included in the table below entitled SCHEDULE OF DEBT SERVICE REQUIREMENTS. Anticipated Debt The Authority does not have any authorized, but unissued, debt other than the Series 2008-B Bonds. The Authority may from time to time issue additional debt in accordance with the terms of the Indenture and the 1991 Indenture. For a summary of the terms for issuance of additional debt, see APPENDIX C. For a description of the anticipated sources of funding for its current capital spending program, see Capital Spending Plans under MANAGEMENTS DISCUSSION OF PLANNING AND OPERATIONS in APPENDIX A. 12

19 SCHEDULE OF DEBT SERVICE REQUIREMENTS The following table sets forth the debt service requirements on the Series 1998-A Bonds, the Series 2002-A Bonds, the Series 2008-A Bonds and the Series 2008-B Bonds which will constitute all of the Authority s short-term or long-term indebtedness after issuance of the Series 2008-B Bonds (1) : Fiscal Year 9/30 (2) Series 1998-A Bonds Series 2002-A Bonds Series 2008-B Bonds Series 2008-A Bonds Principal Interest Total Total Debt Service 2008 $1,182,755 $3,655,919 $802,501 $ - $1,598,904 $1,598,904 $7,240, ,182,755 3,658,669 1,443,131 1,190,000 3,889,225 5,079,225 11,363, ,182,755 3,657,169 1,441,731 1,240,000 3,841,625 5,081,625 11,363, ,182,755 3,530,494 1,445,331 1,415,000 3,788,925 5,203,925 11,362, ,182,755 3,520,269 1,438,631 1,500,000 3,725,250 5,225,250 11,366, ,182,755 3,532,281 1,442,144 1,550,000 3,655,875 5,205,875 11,363, ,182,755 3,530,656 1,470,394 1,600,000 3,582,250 5,182,250 11,366, ,182,755 3,527,694 1,442,156 1,710,000 3,502,250 5,212,250 11,364, ,182,755 3,533,194 1,440,019 1,790,000 3,416,750 5,206,750 11,362, ,182,755 3,529,194 1,442,825 1,885,000 3,327,250 5,212,250 11,367, ,182,755 3,527,313 1,445,325 1,975,000 3,233,000 5,208,000 11,363, ,182,755 3,525,069 1,442,575 2,110,000 3,134,250 5,244,250 11,394, ,182,755 3,532,219 1,469,688 2,190,000 3,021,575 5,211,575 11,396, ,182,755 3,528,031 1,440,225 2,345,000 2,904,625 5,249,625 11,400, ,272,755 2,437,750 1,442,075 2,470,000 2,779,400 5,249,400 11,401, ,276,075 2,431,750 1,443,663 2,610,000 2,647,475 5,257,475 11,408, ,721,275 2,436,500 1,439, ,000 2,508,075 2,813,075 11,410, ,724,388 2,431,250 1,471, ,000 2,491,800 2,786,800 11,413, ,722,263 2,436,250 1,440, ,000 2,476,050 2,811,050 11,410, ,724,638 2,430,750 1,441, ,000 2,458,175 2,813,175 11,410, ,725,725-1,442,138 2,805,000 2,439,225 5,244,225 11,412, ,442,413 7,685,000 2,289,425 9,974,425 11,416, ,442,425 8,110,000 1,878,975 9,988,975 11,431, ,472,175 8,525,000 1,445,825 9,970,825 11,443, ,440,088 9,025, ,500 10,015,500 11,455, ,439,313 9,520, ,475 10,028,475 11,467, ,458,275 9,458, ,255,925 9,255, ,056,763 9,056,763 Total $44,725,689 $64,392,421 $64,735,630 $74,540,000 $71,535,154 $146,075,154 $319,928,894 (1) (2) Does not include EAL notes described under Debt of Affiliated Entity above. Includes debt service for the entire fiscal year, commencing October 1,

20 DEBT SERVICE COVERAGE The following table reflects, for the fiscal years ended September 30, 2005, 2006, and 2007, the Authority s Net Income Available for Debt Service (as defined in the Indenture - See APPENDIX C - THE INDENTURE AND SUMMARIES OF OTHER FINANCING DOCUMENTS ), the maximum annual debt service on the Series 1998-A Bonds, the Series 2002-A Bonds, the Series 2003-A Bonds and the Series 2008-B Bonds (payable in fiscal year 2033), and historical pro forma debt service coverage for the fiscal years ended September 30, 2005, 2006 and (in thousands) 2007 Excess of revenues over expenses $7,162 $12,810 $10,186 Unrealized gains/(losses) (4,643) 1,120 1,164 Excess of revenues over expenses (excluding unrealized gains or (losses)) 11,805 11,690 9,022 Plus: Depreciation and amortization 12,461 13,689 16,415 Interest expense 6,120 6,539 7,046 Net income available for debt service (1) 30,386 31,918 32,483 Maximum annual debt service on Series 1998-A Bonds, Series 2002-A Bonds, Series 2003-A Bonds and Series 2008-B Bonds 11,468 (2)(3) 11,468 (2)(3) 11,468 (2)(3) Coverage of maximum annual debt service (1) (2) (3) For purposes of calculating Net Income Available for Debt Service under the 1991 Indenture, the full 100% of Special Hospital Tax Proceeds is included. Annual receipts from the Special Hospital Tax are reported under The Special Hospital Tax below. Only 75% of the Special Hospital Tax proceeds may be pledged for the payment of bonds and other obligations of the Authority; however, the remaining 25% of such proceeds may be used by the Authority for payment of operating expenses or for any other lawful purpose, including debt service on the Series 1998-A Bonds, Series 2002-A Bonds, Series 2008-A Bonds and Series 2008-B Bonds. Based upon the Schedule of Debt Service Requirements shown above. The Series 2008-A Bonds and the Series 2008-B Bonds constitute Put Debt (as defined in the 1991 Indenture). If the debt service requirements for the Series 2008-A Bonds and the Series 2008-B Bonds were calculated assuming that the principal balances (i) will be refinanced on their Put Dates, (ii) will be payable over a term equal to the number of years from the respective Put Dates until the final maturity (iii) will bear interest at the Revenue Bond Index as published by The Bond Buyer (the Prevailing Rate ) (5.11% published on March 6, 2008), and (iv) will be payable after the respective Put Dates in equal annual installments of principal and interest (as required by the 1991 Indenture for purposes of calculating the debt service coverage requirements for the issuance of Parity Bonds and Other Senior Debt), the estimated maximum annual debt service after the issuance of the Series 2008-B Bonds would be $14,960,031 resulting in coverage of 2.03x in 2005, 2.13x in 2006 and 2.17x in EAL notes are not included in this maximum annual debt service calculation for the reasons stated above under Debt of Affiliated Entity. THE AUTHORITY Creation and Powers The Authority was originally incorporated and organized (under the name Lee County Hospital Board ), with the consent of the governing body of the County, under Act No. 46 enacted at the 1949 Regular Session of the Legislature of Alabama, as amended, by Certificate of Incorporation filed in the office of the Judge of Probate of the County on June 14, With the further consent of the governing body of the County, the Authority was subsequently reincorporated as a health care authority (and public corporation) under the Enabling Law by Certificate of Reincorporation filed in the office of the Judge of Probate of the County on October 1, By virtue of its reincorporation as aforesaid, the Authority is no longer governed by said Act No. 46 but is instead governed exclusively by the Enabling Law, insofar as the subject matter of the Enabling Law is concerned. 14