September 12, 2005 Pursuant to your request, attached herewith is ...

Frederick Memorial Hospital, Inc. And Subsidiaries
Notes To Consolidated Financial Statements
Note 9. Long-Term Debt (Continued)
In connection with the bond issuance, the Hospital was required to deposit as collateral, in a trusteed Debt Service
Fund, an amount equal to the maximum annual debt service on the Series 2002 Bonds of $4,058,000.
Series 2002 Bonds maturing on or after July 1, 2012 are subject to redemption or purchase prior to maturity,
beginning on July 1, 2012 at the option of the Authority at the principal amount of the Series 2002 Bonds to be
redeemed plus accrued interest thereon to the date set for redemption.
Under the provisions of the bond agreement, the Hospital has granted to the Authority a security interest in all
receipts now owned and hereafter acquired. The Series 2002 Bonds are secured ratably with the Series 1993 Bonds
and the loan from the State of Maryland.
The bond agreement contains certain financial covenants.
Equipment Note Payable:
In June 2004, the Hospital obtained a $5,367,028 loan from GE Capital Public Finance, Inc. to finance the acquisition
of certain equipment. The Hospital was required to place the loan proceeds into a trustee-held escrow account until
all equipment was purchased. At June 30, 2005 and 2004, unexpended loan proceeds of $125,065 and $2,550,170,
respectively, were held by the trustee in escrow. The balance on this loan was $4,625,782 and $5,367,028 at June
30, 2005 and 2004, respectively, which is payable in monthly installments of principal and interest of $53,327 and is
due on July 1, 2010. The loan bears interest at 4.83% and is collateralized by certain property and equipment.
State of Maryland Loan:
A loan agreement with the State of Maryland, dated April 27, 1967, for original borrowings of $2,575,995 is secured
on a parity basis with the MHHEFA Revenue Bonds. The loan is payable in annual installments of $136,701
including interest of approximately 5%, through 2007. The balance on this note was $235,258 and $356,874 at
June 30, 2005 and 2004, respectively.
Other Notes Payable:
(a) In December 1994, the Hospital acquired a 100% interest in Emmitsburg Properties, LLC and subsequently
conveyed a 1% interest in the limited liability company to FHSC. In accordance with the terms of the purchase
agreement, the Hospital executed two notes payable to the former owners aggregating $1,219,454. The notes are
payable in monthly installments of principal and interest of $10,200, bear interest at 8%, and are due December 31,
2014. The balance on these notes aggregated $813,163 and $868,022 at June 30, 2005 and 2004, respectively.
(b) FSCP has a note payable to a bank to finance the purchase of medical equipment. The note is collateralized by
the equipment, bears interest at the bank’s prime interest rate, and is payable in equal monthly installments of $2,210
plus interest through November 2004. The note was paid off in November 2004. The balance on this note was
$13,220 at June 30, 2004.
Debt service requirements on long-term debt, excluding the original issue discounts on the Series 1993 and Series
2002 MHHEFA Bonds, are as follows:
Years ending June 30: Principal Interest Total
2006 $ 2,146,452 $ 6,215,372 $ 8,361,824
2007 2,155,685 6,111,081 8,266,766
2008 2,911,595 6,000,337 8,911,932
2009 3,048,653 5,863,942 8,912,595
2010 3,055,156 5,719,032 8,774,188
Later Years 110,951,662 90,731,744 201,683,406
$ 124,269,203 $ 120,641,508 $
244,910,711
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