Limited Offering Memorandum

Transcription

1 New Issue (Book Entry Only) Limited Offering Memorandum Rating: Not Rated In the opinion of Bond Counsel, assuming compliance with certain covenants of the Authority and the University, interest on the 2007 Bonds is excluded from the gross income of the owners of the 2007 Bonds for federal income tax purposes under existing law, as currently enacted and construed. Interest on the 2007 Bonds is not an item of tax preference for purposes of either individual or corporate alternative minimum tax. Interest on the 2007 Bonds may be indirectly subject to corporate alternative minimum tax and certain other taxes imposed on certain corporations as more fully described under the caption TAX EXEMPTION herein. Under the laws of the Commonwealth of Pennsylvania, as currently enacted and construed, the 2007 Bonds are exempt from personal property taxes in Pennsylvania and the interest on the 2007 Bonds is exempt from Pennsylvania personal income tax and Pennsylvania corporate net income tax. $87,915,000 THE HARRISBURG AUTHORITY (Dauphin County, Pennsylvania) University Revenue Bonds, Series of 2007 (The Harrisburg University of Science and Technology Project) $27,690,000 University Revenue Bonds, Series A of 2007 $60,225,000 University Revenue Bonds, Series B of 2007 Dated: Date of Delivery Due: September 1, as shown on the inside cover Interest Payable: March 1 and September 1 First Interest Payment: March 1, 2007 The University Revenue Bonds, Series of 2007 (The Harrisburg University of Science and Technology Project), consisting of the University Revenue Bonds, Series A of 2007 (the Series A Bonds, ) and of the University Revenue Bonds, Series B of 2007 (the ( Series B Bonds and with the Series A Bonds, collectively the 2007 Bonds ) are being issued by The Harrisburg Authority (the Authority ) under a Trust Indenture dated as of January 1, 2007 (the Indenture ) between the Authority and Commerce Bank, National Association (the Trustee ). Pursuant to a Loan Agreement (the Loan Agreement ) dated as of January 1, 2007 between the Authority and The Harrisburg University of Science and Technology (the University ), THE HARRISBURG UNIVERSITY OF SCIENCE AND TECHNOLOGY a Pennsylvania non-profit corporation, the proceeds of the 2007 Bonds will be loaned to the University and applied to the 2007 Project being undertaken by the University as described herein. The 2007 Bonds will be issued only as fully registered bonds in the minimum denomination of $100,000 and integral multiples of $5,000 in excess thereof and, when issued, will be registered in the name of Cede & Co., as registered owner and nominee for The Depository Trust Company, New York, New York ( DTC ). DTC will act as securities depository for the 2007 Bonds. Purchasers will not receive certificates representing their interest in 2007 Bonds purchased. So long as Cede & Co. is the registered owner of the 2007 Bonds, as nominee of DTC, references herein to the Bondholders or registered owners shall mean Cede & Co., as aforesaid, and not the Beneficial Owners of the 2007 Bonds. See THE 2007 BONDS - Book-Entry-Only-System herein. The 2007 Bonds are limited obligations of the Authority and will be payable solely from and secured by certain moneys held under the Indenture (other than the Rebate Fund) and from payments made by the University to the Authority for repayment of the loan pursuant to the Loan Agreement and assigned by the Authority to the Trustee. Performance of the obligations of the University under the Loan Agreement will be secured further by an Open-End Mortgage and Security Agreement from the University, as mortgagor, to the Trustee, as mortgagee, on the University Facility (as such term is described hereinafter). As to the Series B Bonds only, the University has arranged for the issuance of a standby letter of credit by Commerce Bank/Harrisburg, National Association in the amount of $3,300,000 for the benefit of the owners of the Series B Bonds to be exercised by the Trustee in the event of certain revenue deficiencies for the payment of debt service on the Series B Bonds. The County of Dauphin also has issued a limited guaranty of up to $1.5 million a year to be provided for the payment of a portion of debt service on the Series B Bonds over a period of 10 years commencing in 2010 in the event of revenue deficiencies for the payment of debt service on the Series B Bonds. The 2007 Bonds are subject to redemption prior to maturity as described herein. See THE 2007 BONDS - Redemption Provisions herein. THE 2007 BONDS ARE BEING OFFERED AND SOLD ONLY TO QUALIFIED INSTITUTIONAL BUYERS AS DEFINED HEREIN. PURCHASE OF THE 2007 BONDS INVOLVES A SIGNIFICANT DEGREE OF RISK. INVESTORS SHOULD READ THIS ENTIRE LIMITED OFFERING MEMORANDUM TO OBTAIN INFORMATION ESSENTIAL TO THE MAKING OF AN INFORMED INVESTMENT DECISION. THE 2007 BONDS ARE LIMITED OBLIGATIONS OF THE AUTHORITY PAYABLE SOLELY FROM THE SOURCES REFERRED TO HEREIN. NEITHER THE GENERAL CREDIT OF THE AUTHORITY NOR THE CREDIT OR TAXING POWER OF THE CITY OF HARRISBURG, PENNSYLVANIA, THE COMMONWEALTH OF PENNSYLVANIA, OR ANY POLITICAL SUBDIVISION THEREOF (EXCEPT FOR THE LIMITED GUARANTY BY THE COUNTY OF DAUPHIN (THE COUNTY ) WITH RESPECT TO THE SERIES B BONDS) IS PLEDGED FOR THE PAYMENT OF THE PRINCIPAL OF, PREMIUM, IF ANY, OR INTEREST ON THE 2007 BONDS, NOR SHALL SUCH 2007 BONDS BE DEEMED TO BE OBLIGATIONS OF THE CITY OF HARRISBURG, PENNSYLVANIA, THE COMMONWEALTH OF PENNSYLVANIA, OR ANY POLITICAL SUBDIVISION THEREOF (EXCEPT FOR THE LIMITED GUARANTY BY THE COUNTY WITH RESPECT TO THE SERIES B BONDS), NOR SHALL THE CITY OF HARRISBURG, PENNSYLVANIA, THE COMMONWEALTH OF PENNSYLVANIA, OR ANY POLITICAL SUBDIVISION THEREOF (EXCEPT FOR THE LIMITED GUARANTY BY THE COUNTY WITH RESPECT TO THE SERIES B BONDS) BE LIABLE FOR THE PAYMENT OF THE PRINCIPAL OF, PREMIUM, IF ANY, OR INTEREST ON THE 2007 BONDS. THE AUTHORITY HAS NO TAXING POWER. This cover page contains certain information for quick reference only. It is not a summary of the issue. Investors must read the entire Limited Offering Memorandum to obtain information essential to the making of an informed investment decision. The 2007 Bonds are offered for delivery when, as and if issued by the Authority and received by the Underwriter and subject to the approving legal opinion of Buchanan Ingersoll & Rooney, P.C., Bond Counsel. Certain legal matters will be passed upon for the Authority by its General Counsel, Foreman & Foreman, P.C., Harrisburg, Pennsylvania; for the University by McNees, Wallace & Nurick LLC, Harrisburg, Pennsylvania; and for the Underwriter by Eckert Seamans Cherin & Mellott, LLC, Harrisburg, Pennsylvania. It is expected that the 2007 Bonds in definitive form will be available for delivery to DTC in New York. New York on or about January 11, Dated: January 8, 2007

2 $87,915,000 THE HARRISBURG AUTHORITY University Revenue Bonds, Series of 2007 (The Harrisburg University of Science and Technology Project) $27,690,000 University Revenue Bonds, Series A of 2007 $60,225,000 University Revenue Bonds, Series B of 2007 SERIES A BONDS Dated: Date of Delivery Principal Due: September 1, as shown below Interest Payable: March 1 and September 1 First Interest Payment: March 1, 2007 CUSIP Number Due Principal Amount Interest Rate Price or Yield (Base) September 1, 2016 $27,690, % 100% 41473X AA7 SERIES B BONDS Dated: Date of Delivery Principal Due: September 1, as shown below Interest Payable: March 1 and September 1 First Interest Payment: March 1, 2007 CUSIP Number Due Principal Amount Interest Rate Price or Yield (Base) September 1, 2036 $60,225,000 6% 100% 41473X AB5 Copyright 2003, American Bankers Association. CUSIP data herein are provided by Standard & Poor s CUSIP Service Bureau, a division of The McGraw-Hill Companies, Inc. The CUSIP numbers listed above are being provided solely for the convenience of the 2007 Bond owners only at the time of issuance of the 2007 Bonds and the Authority and the University do not make any representation with respect to such numbers nor does it undertake any responsibility for their accuracy now or at any time in the future. The CUSIP number for a specific maturity is subject to being changed after the issuance of the 2007 Bonds as a result of various subsequent actions, including, but not limited to, a refunding in whole or in part of such maturity or as a result of the procurement of secondary market portfolio insurance or other similar enhancement by investors that is applicable to all or a portion of such maturity of the 2007 Bonds.

3 NOTICE TO INVESTORS The Authority intends that the 2007 Bonds are to be offered in a limited public offering and sold (including upon resale) only to "qualified institutional buyers", such term being used herein as defined in Rule 144A(a)(1) of the Securities Act of 1933, as amended (the "Securities Act"). The 2007 Bonds have not been registered under the Securities Act (or under any state securities laws), nor will the Indenture be qualified under the Trust Indenture Act of 1939, as amended, in reliance upon exemptions contained in such acts. The 2007 Bonds have not been recommended by any federal or state securities commission or regulatory authority. Such commissions and regulatory authorities will not have reviewed or passed upon the accuracy or adequacy of this Limited Offering Memorandum. No dealer, broker, salesman or other person has been authorized to give any information or make any representations other than those contained in this Limited Offering Memorandum in connection with the limited offering of the 2007 Bonds, and, if made or given, such other information or representations must not be relied upon as having been authorized by the Authority, the University or the Underwriter. Neither the delivery of this Limited Offering Memorandum nor any placement of the 2007 Bonds hereunder shall under any circumstances create any implication that there has been no change in the affairs of the Authority or the University since the date hereof. This Limited Offering Memorandum does not constitute an offer to sell or solicitation of an offer to buy, nor shall there be any offering of the 2007 Bonds by any person in any jurisdiction in which such offer or solicitation is not authorized, or in which the person making such offer or solicitation is not qualified to do so or to any person to whom it is unlawful to make such offer or solicitation. The information set forth herein relating to the business and affairs of the University has been supplied by the University. Such information is not to be construed as a representation by the Authority or the Underwriter, except as described below. The Underwriter has provided the following sentence for inclusion in this Limited Offering Memorandum. The Underwriter has reviewed the information in the Limited Offering Memorandum in accordance with, and as part of, its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information. The Authority makes no representation as to the accuracy or completeness of any information in this Limited Offering Memorandum and takes no responsibility for its contents, other than the information relating to the Authority under the headings "INTRODUCTORY STATEMENT - THE AUTHORITY", "THE AUTHORITY" and "LITIGATION - THE AUTHORITY." This Limited Offering Memorandum is submitted in connection with the limited public offering of securities referred to herein and may not be reproduced or be used, as a whole or in part, for any other purpose. Certain statements in this Limited Offering Memorandum are forward-looking statements. Forwardlooking statements can generally be identified by the use of forward-looking terms, such as "believes," "expects," "may," "intends," "will," "should" and "anticipates" or other similar terms. Such forward-looking statements include, but are not limited to, certain statements contained in the information in APPENDIX A, APPENDIX B and APPENDIX C to this Limited Offering Memorandum. No assurance can be given that the future results covered by the forward-looking statements will be achieved. Forward-looking statements are subject to uncertainties that could cause actual results to differ materially from those expressed or implied. The most significant of these uncertainties and risks are discussed under the heading "BONDHOLDERS' RISKS" in this Limited Offering Memorandum, which prospective investors are urged to read carefully. Such risks and uncertainties include, among others, changes in economic conditions and various other events, conditions and circumstances, many of which are beyond the control of the University or the Authority. Such forward-looking statements speak only as of the date of this Limited Offering Memorandum. The University and the Authority disclaim any obligation or undertaking to release publicly any updates or revisions to any forward-looking statement contained herein to reflect any changes in the University's or the Authority's 1

4 expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. In connection with the private placement of the 2007 Bonds, the Underwriter may over-allot or effect transactions which stabilize or maintain the market price of the 2007 Bonds at levels above those which might otherwise prevail in the open market. Such stabilization, if commenced, may be discontinued at any time. The contents of this Limited Offering Memorandum are not to be construed as legal, business or tax advice and prospective investors should consult their own attorneys and business and tax advisors. PURCHASE OF THE 2007 BONDS INVOLVES A SIGNIFICANT DEGREE OF RISK. INVESTORS SHOULD READ THIS ENTIRE LIMITED OFFERING MEMORANDUM TO OBTAIN INFORMATION ESSENTIAL TO MAKING AN INFORMED INVESTMENT DECISION. SEE "BONDHOLDERS' RISKS" FOR CERTAIN FACTORS THAT PROSPECTIVE PURCHASERS SHOULD CONSIDER PRIOR TO PURCHASING ANY OF THE 2007 BONDS. 2

5 TABLE OF CONTENTS Page INTRODUCTORY STATEMENT...1 THE AUTHORITY...3 THE UNIVERSITY...4 THE 2007 BONDS...4 ESTIMATED SOURCES AND USES OF 2007 BOND PROCEEDS...10 SOURCES OF AND SECURITY FOR PAYMENT OF THE 2007 BONDS...10 PLAN OF FINANCE...16 LITIGATION...18 BONDHOLDERS' RISKS...18 APPROVAL OF LEGALITY...20 TAX EXEMPTION...21 FINANCIAL STATEMENTS OF THE UNIVERSITY...21 RATINGS...22 UNDERWRITING...22 RELATIONSHIPS OF PARTIES...22 FINANCIAL ADVISOR...22 CONTINUING DISCLOSURE...23 LEGALITY FOR INVESTMENT...24 NEGOTIABILITY...25 MISCELLANEOUS...25 APPENDIX A - Information Concerning The Harrisburg University of Science and Technology APPENDIX B - Harrisburg University of Science and Technology Business Model , dated December, 2006 and prepared by The Harrisburg University of Science and Technology APPENDIX C - Harrisburg University of Science and Technology Enrollment Projections Review ( ), dated March 17, 2006 and prepared by Kaludis Consulting APPENDIX D - Report on audits of Financial Statements of The Harrisburg University of Science and Technology APPENDIX E - Definitions of Certain Terms and Summary of Certain Provisions of the Legal Documents APPENDIX F - Information Concerning the Harrisburg Parking Authority APPENDIX G - Description of Commerce Bank/Harrisburg, National Association and forms of documents relating to the Bank's Standby Letter of Credit for the benefit of a portion of the Series B Bonds APPENDIX H - Information Concerning the County of Dauphin, Pennsylvania, including the forms of documents relating to the County's limited guaranty of a portion of the Series B Bonds APPENDIX I - Form of Opinion of Bond Counsel APPENDIX J - Forms of Continuing Disclosure Agreement J-1 University J-2 County APPENDIX K - Forms of Investor's Letters K-1 Form of Letter for Owners of Series A Bonds K-2 Form of Letter for Owners of Series B Bonds i

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7 PRELIMINARY LIMITED OFFERING MEMORANDUM $87,915,000 THE HARRISBURG AUTHORITY (Dauphin County, Pennsylvania) University Revenue Bonds, Series of 2007 (The Harrisburg University of Science and Technology Project) $27,690,000 University Revenue Bonds, Series A of 2007 $60,225,000 University Revenue Bonds, Series B of 2007 INTRODUCTORY STATEMENT Purpose of this Limited Offering Memorandum. The purpose of this Limited Offering Memorandum is to provide certain information in connection with the limited public offering by The Harrisburg Authority (the "Authority") of $87,915,000 aggregate principal amount of University Revenue Bonds, Series of 2007 (The Harrisburg University of Science and Technology Project) (the "2007 Bonds"). The 2007 Bonds are comprised of the Authority's University Revenue Bonds, Series A of 2007 (the "Series A Bonds") in the principal amount of $27,690,000 and University Revenue Bonds, Series B of 2007 (the "Series B Bonds") in the principal amount of $60,225,000. The 2007 Bonds will be issued pursuant to a Trust Indenture dated as of January 1, 2007 (the "Indenture") between the Authority and Commerce Bank, National Association, as trustee (the "Trustee"). The net proceeds of the 2007 Bonds, together with other available funds, will be used to pay the costs of a project (the "2007 Project") to be undertaken by The Harrisburg University of Science and Technology (the "University") in the Commonwealth of Pennsylvania described below. See Appendix E for the definition of capitalized terms used herein and not otherwise defined. The Authority. The Authority is a public instrumentality of the Commonwealth of Pennsylvania (the "Commonwealth") and a body politic and corporate, organized by the City of Harrisburg, Dauphin County, Pennsylvania (the "City") pursuant to the Municipality Authorities Act, 53 Pa.C.S.A et seq., as amended and supplemented (the "Act"). For additional information concerning the Authority, see "THE AUTHORITY" herein. The Harrisburg University of Science and Technology. The University is a non-profit corporation organized and incorporated under the laws of the Commonwealth and is an organization described under Section 501(c)(3) of the Internal Revenue Code of 1986, as amended, as a tax-exempt charitable organization. The Board of Trustees of the University was established in 2001 at the time of the University's incorporation and, since then, has worked toward the start of classes for this new university. The University opened its doors for the first class in a baccalaureate degree program in August of The University has a unique prospective of emphasizing science, mathematics and new technologies for the 21 st century. The 2007 Project. The 2007 Bonds are being issued by the Authority to finance a portion of the 2007 Project for the benefit of the University consisting of (i) construction of a sixteen-story building on a site located on approximately 0.82 acres of land in the City, consisting of seven floors of academic and university office space (the "University Facility"), and further consisting of a nine-floor structured parking facility (the "Parking Garage") to allow parking on the site to accommodate approximately 392 cars (the University Facility and the Parking Garage are collectively referred to herein as the "Project Facilities"); (ii) the refunding of a loan in the approximate outstanding aggregate principal amount of $1,868,000 from Sovereign Bank and its various participating lenders (the "Land Loan Lender") to the University, the proceeds of which were applied toward the acquisition of land upon which the Project Facilities will be constructed (the "Land Loan"); (iii) the refunding of a loan in the approximate outstanding aggregate principal amount of $9,000,000 from Sovereign Bank and its various participating lenders (the "215 Market Street Lender") to the University, the proceeds of which were applied toward the construction, renovation and equipping of the University's initial facilities located at 215 Market Street, Harrisburg, Pennsylvania (the "215 Market Street Loan"); (iv) the provision of capitalized interest; (v) the funding of debt service reserve funds; and (vi) the payment of certain costs and expenses related to issuing the 2007 Bonds. 1

8 Security for the 2007 Bonds. The 2007 Bonds will be issued under and secured by the Indenture and a Loan Agreement dated as of January 1, 2007 (the "Loan Agreement"), between the Authority and the University. Pursuant to the Loan Agreement, and as security for its obligations thereunder, the University has pledged a lien and security interest in the Unrestricted University Revenues, on an equal and ratable basis with Additional Bonds now or hereafter issued and on parity with the pledge of Unrestricted University Revenues to Commerce Bank/Harrisburg, National Association (the "Bank") to secure the University reimbursement obligations with respect to the standby letter of credit being issued by the Bank to secure the Series B Bonds. To secure the University's performance of its obligations under the Loan Agreement, the University has granted an Open-End Mortgage and Security Agreement (the "Mortgage") to the Trustee as mortgagee. As to the Series A Bonds only, it is expected that grant funds from the Commonwealth will be available for the payment of principal of and interest on the Series A Bonds. As to the Series B Bonds only, the University has arranged for the issuance of a standby letter of credit (the "SLOC") by the Bank pursuant to a Reimbursement Agreement dated as of January 1, 2007 (the "Reimbursement Agreement") between the University and the Bank. The County of Dauphin, Pennsylvania (the "County") has also issued a limited guaranty (the "County Guaranty") of up to $1.5 million a year to be provided for the payment of a portion of debt service on the Series B Bonds. See "SOURCES OF AND SECURITY FOR PAYMENT OF THE 2007 Bonds" herein and Appendix E hereto. Additional Bonds and Additional Debt. Upon compliance with the terms and conditions of the Loan Agreement, the University may incur additional debt on a parity with the 2007 Bonds with respect to the lien on the Unrestricted University Revenues. See "SOURCES OF AND SECURITY FOR PAYMENT OF THE 2007 Bonds Additional Bonds and Other Permitted Indebtedness". Continuing Disclosure Agreement. In order to assist the Underwriter in complying with the requirements of Rule 15c2-12, as amended ("Rule 15c2-12"), promulgated under the Securities Exchange Act of 1934, as amended, the University has covenanted in a Continuing Disclosure Agreement dated the date of the issuance of the 2007 Bonds, between the University and the Trustee (the "Continuing Disclosure Agreement") (i) to file with each nationally recognized municipal securities information repository and the appropriate state information depository, if any, certain annual information, consisting of certain financial and operating data of the University and (ii) to disclose the occurrence, if any, of certain events material to the 2007 Bonds. The obligations of the University under the Continuing Disclosure Agreement will constitute a written undertaking for the benefit of the holders and beneficial owners from time to time of the 2007 Bonds. The County will, pursuant to a Continuing Disclosure Undertaking, also provide certain annual information for the benefit of the Series B Bondholders as long as the County Guaranty is in effect. See "CONTINUING DISCLOSURE" herein and Appendix H hereto. Bondholders' Risks. Purchase of the 2007 Bonds involves a significant degree of investment risk. Certain risks associated with the purchase of the 2007 Bonds are set forth in the section entitled "BONDHOLDERS' RISKS" herein. Careful evaluation should be made of the risks set forth in such section and elsewhere in the Limited Offering Memorandum and the attached Appendices concerning the factors which may affect the payment of principal of and interest on the 2007 Bonds when due. Limited Offering Memorandum and the Underlying Documents. Brief descriptions of the Authority, the 2007 Project, the 2007 Bonds, the Loan Agreement, the Indenture, the SLOC and the Reimbursement Agreement, the limited County Guaranty and the Mortgage are included in this Limited Offering Memorandum. Certain information regarding the University and projections made by the University are included in Appendix A and Appendix B respectively attached to and made part of this Limited Offering Memorandum. A review of the University's Enrollment Projections ( ) prepared by Kaludis Consulting is set forth in Appendix C. Certain definitions and summaries of the Indenture, the Loan Agreement and the Mortgage are set forth in Appendix E. The descriptions herein of the Indenture, the Loan Agreement and the Mortgage are qualified in their entirety by reference to such documents, and the description herein of the 2007 Bonds is qualified in its entirety by reference to the form thereof and the information with respect thereto included in the aforesaid documents. A. G. Edwards & Sons, Inc. is acting as the Underwriter (the "Underwriter") for the 2007 Bonds. Copies of such documents may be obtained during the limited offering period from the principal office of the Underwriter, One North Jefferson, St. Louis, MO 63103; Attention: Public Finance Department, and thereafter from the Trustee, 101 2

9 North Second Street, Harrisburg, PA Capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed thereto as set forth in the Indenture. The information and expressions of opinion herein are subject to change without notice and neither the delivery of this Limited Offering Memorandum nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in any of the information set forth herein since the date hereof. This Limited Offering Memorandum is not to be construed as a contract with the purchasers of the 2007 Bonds. Statements contained in this Limited Offering Memorandum which involve estimates, forecasts or matters of opinion, whether or not expressly so described herein, are intended solely as such and are not to be construed as representations of facts. All summaries of statutes and documents are made subject to the provisions of such statutes and documents, respectively, and do not purport to be complete statements of any or all of such provisions. THE AUTHORITY The Authority is a public body corporate and politic existing under the Act. The Authority was created by the Council (the "City Council") of the City. Articles of Incorporation for the Authority (under the original name of the "Harrisburg Sewerage Authority") were filed with the Commonwealth on June 3, The Authority's powers include all those powers authorized for a general purpose municipal authority under the Act. The term of the Authority's existence extends until January 1, The governing body of the Authority is a Board consisting of five (5) members historically nominated by the Mayor of the City and appointed by the City Council. City Council has introduced and has pending legislation which wholly places the appointment power of Authority members within the Office of City Council pursuant to the Act. There are presently two vacancies on the Board. Board members' terms of office are staggered. None of the board members of the Authority is a member of the City Council, nor is any Board member of the Authority an elected official of the City. The Officers and Board members of the Authority, with the expiration dates of their terms, are as follows: Fredrick A. Clark (Chairman) Term expires: Expired Term. Shall serve until successor appointed. Robert D. Ambrose (Assistant Secretary- Treasurer/Executive Director) Non-Board Member John J. Keller (Vice Chairman) Term expires: First Monday in January, 2008 Leonard L. House (Secretary/Treasurer) Term expires: First Monday in January, 2008 The Board of the Authority recently appointed Robert D. Ambrose as Executive Director and Assistant Secretary-Treasurer to the Authority, with his appointment commencing as of January 2, Mr. Ambrose succeeds Karen M. McKillip, an employee of the Authority, who was serving on an interim basis as Acting Assistant Secretary-Treasurer/Acting Executive Director since October, 2006, following the retirement of the Authority's previous Executive Director, Thomas J. Mealy. The 2007 Bonds are limited obligations of the Authority. See "SOURCES OF AND SECURITY FOR PAYMENT OF THE 2007 Bonds Limited Obligations" herein. The Authority has issued other series of bonds and notes and expects to issue additional bonds and notes in the future. Each series of bonds or notes issued by the Authority is payable only from revenues provided by the institution for which such series was issued, and the general funds of the Authority are not pledged to the payment or security of any such securities. Accordingly, moneys available for the payment of such other issues will not be available for the payment of the 2007 Bonds nor will the moneys available for the payment of the 2007 Bonds be available for the payment of such other issues or any future bond or note issues except for the pledge of Unrestricted University Revenues which secures all 3

10 Additional Bonds issued on behalf of the University as well as the University's reimbursement obligations to the Bank with respect to the Series B Bonds SLOC. The Authority has not prepared or assisted in the preparation of this Limited Offering Memorandum, except the statements with respect to the Authority contained under the captions "INTRODUCTORY STATEMENT The Authority" and "LITIGATION The Authority" and under this caption and, except as aforesaid, the Authority is not responsible for any statements made in this Limited Offering Memorandum. Except for the execution and delivery of documents required to effect the issuance of the 2007 Bonds, the Authority has not otherwise assisted in the public offer, sale or distribution of the 2007 Bonds. Accordingly, except as aforesaid, the Authority disclaims responsibility for the disclosures set forth in this Limited Offering Memorandum or otherwise made in connection with the offer, sale and distribution of the 2007 Bonds. THE UNIVERSITY The Harrisburg University of Science and Technology, formerly known as the Harrisburg Polytechnic Development Corporation, is a non-profit corporation organized and incorporated in 2001 under the Nonprofit Corporation Law of 1988, as amended, of the Commonwealth. The University has received a determination by the Internal Revenue Service to be an organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended, as exempt from federal income taxation under Section 501(a) of the Code. The primary purposes of the University include providing certificate, associate, baccalaureate and graduate degree programs with a principal focus on applied science, mathematics, existing and emerging technologies and systems; engaging in research, development, innovation and creation of new technologies and systems and providing training and work force development services. The University was organized by Stephen R. Reed, Mayor of the City of Harrisburg, and other community leaders and educators, on the basis of combining a new approach to teaching science, mathematics and technology and bridging the gap between the student's high school years and entrance into the work force. Mayor Reed, the Board of County Commissioners of the County of Dauphin and other government leaders view the development of this University and its unique approach as an important economic development project for the region. For more information relating to the University, including its Business Model for , see Appendices A through and including D. THE 2007 BONDS The following is a summary of certain provisions of the 2007 Bonds. Reference is hereby made to the 2007 Bonds in their entirety for the detailed provisions thereof. General The 2007 Bonds will be dated and will bear interest from the date and at the rates set forth on the inside front cover page hereof payable on March 1 and September 1 of each year, commencing March 1, The 2007 Bonds shall be subject to redemption prior to maturity as stated below. Interest shall be payable on each interest payment date to the registered owner of 2007 Bonds as appears on the registration books maintained by the Trustee on each regular record date, which is the close of business on the 15th day of the calendar month (whether or not a Business Day) immediately preceding each interest payment date. Interest accruing on the 2007 Bonds shall be calculated on the basis of a 360-day year of twelve 30-day months. The 2007 Bonds are issuable only as fully registered bonds in denominations of $100,000 and integral multiples of $5,000 in excess thereof. The Authority has established a book-entry-only system of registration for the 2007 Bonds (the "Book-Entry System"). Except as otherwise provided in the Indenture, The Depository Trust Company, New York, New York, or its successor as securities depository (the "Securities Depository" or "DTC") (or its nominee) will be the registered owner of the 2007 Bonds. By acceptance of a confirmation of purchase, delivery or transfer, each Beneficial Owner (defined herein) of an interest in the 2007 Bonds will be deemed to 4

11 have consented to the Book-Entry System. The Securities Depository (or its nominee), as registered owner of the 2007 Bonds, will be the registered owner or holder of the 2007 Bonds for all purposes of the Indenture. See "Book- Entry-Only System" below. So long as the 2007 Bonds are held in the Book-Entry System, the principal, premium, if any, and interest on the 2007 Bonds will be paid through the facilities of the Securities Depository. Interest on the 2007 Bonds is payable by check mailed to the Owner of record; provided that upon the written request of an Owner of at least $1,000,000 in aggregate principal amount of 2007 Bonds received by the Trustee at least three Business Days prior to the corresponding regular record date, interest accrued on such 2007 Bonds will be paid by wire transfer, in immediately available funds, to a bank account within the continental United States specified in such written notice. If sufficient funds for the payment of interest becoming due on any interest payment date are not on deposit with the Trustee on a regular record date, the interest so becoming due shall cease to be payable to the Owner of record otherwise entitled thereto as of the applicable regular record date. If sufficient funds thereafter become available for the payment of such overdue interest, the Trustee shall establish a special record date for the payment of such overdue interest, which shall not be more than 15 nor fewer than 10 days prior to the date of the proposed payment, and shall mail a notice of the proposed payment and of the special record date to the Owners of all 2007 Bonds at least 10 days prior to the special record date, and thereafter interest shall be payable to the persons listed on the registration books of the Trustee as the Owners of the 2007 Bonds at the close of business on the special record date. If the Book-Entry System is discontinued and the 2007 Bonds are issued in certificated form, the 2007 Bonds may be transferred or exchanged for an equal total amount of 2007 Bonds of other authorized denominations upon surrender of such 2007 Bonds at Commerce Bank, National Association, as Bond Registrar (the "Bond Registrar"), with the address of Commerce Bank, National Association, Corporate Trust Services, 101 Haddonfield Road, Second Floor, Cherry Hill, New Jersey , duly endorsed for transfer or accompanied by an assignment executed by the Owner or the Owner's duly authorized attorney and with a guaranty of signature satisfactory to the Trustee. Except as provided in the Indenture, the Bond Registrar will not be required to register the transfer or exchange of (i) any 2007 Bond during the period of 15 days preceding any interest payment date, or (ii) any 2007 Bond after such 2007 Bond has been selected for redemption in whole or in part. Registration of transfers and exchanges shall be made without charge to the Owners, except that the Bond Registrar may require the Owner requesting registration of transfer or exchange to pay any required tax or governmental charge. As the 2007 Bonds are being marketed and sold only to "qualified institutional buyers" within the meaning of Rule 144A under the Securities Act and "accredited investors" within the meaning of Rule 501(a) under the Securities Act, each prospective purchaser will be required to represent that it is both a "qualified institutional buyer" and an "accredited investor." A prospective purchaser will also be required to represent that it is purchasing the 2007 Bonds solely for its own account for investment purposes, with no present intention to resell or distribute these 2007 Bonds, and to acknowledge and agree to the following: THE 2007 BONDS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OR THE SECURITIES LAWS OF ANY STATE AND MAY BE OFFERED, RESOLD, PLEDGED OR TRANSFERRED ONLY IF THEY ARE REGISTERED UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS, OR PURSUANT TO AVAILABLE EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS. THE AUTHORITY IS UNDER NO OBLIGATION TO REGISTER, AND DOES NOT INTEND TO REGISTER, THE 2007 BONDS UNDER THE SECURITIES ACT OR ANY STATE SECURITIES LAW. The Trustee, as Bond Registrar (of if the 2007 Bonds are in book-entry form, DTC, as registrar), will not register on the register any sale or transfer of the 2007 Bonds by any Owner (or if the 2007 Bonds are in book-entry form, the Beneficial Owner), unless the proposed transferee represents to the Bond Registrar (or if the 2007 Bonds are in book-entry form, DTC as registrar) and the Authority that it is acquiring the

12 Bonds for investment purposes and not with a view to the resale or distribution thereof, in whole or in part, and the proposed transferee acknowledges that the 2007 Bonds have not been registered under the Securities Act or the securities laws of any state and may not be resold, transferred, pledged or hypothecated, in whole or in part, unless they are registered under the Securities Act and applicable state securities laws, or pursuant to available exemptions from the registration requirements of the Securities Act and applicable state securities laws. Book-Entry-Only System The 2007 Bonds will be available initially only in book-entry form. Purchasers of the 2007 Bonds will not receive certificates representing their interest in the 2007 Bonds. The following information concerning DTC and DTC's book-entry only system has been obtained from DTC. The Authority, the Underwriter, the University and the Trustee make no representation as to the accuracy of such information. The Depository Trust Company ("DTC"), New York, NY, will act as securities depository for the 2007 Bonds. The 2007 Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC's partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fullyregistered certificate will be issued for each maturity of the 2007 Bonds, in the principal amount of such maturity, and will be deposited with DTC. DTC, the world's largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of DTC holds and provides asset servicing for over 2.2 million issues of U.S. and non-u.s. equity issues, corporate and municipal debt issues, and money market instruments from over 100 countries that DTC's participants ("Direct Participants") deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized bookentry 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 and Purchases of 2007 Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the 2007 Bonds on DTC's records. The ownership interest of each actual purchaser ("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 the 2007 Bonds, except in the event that use of the book-entry system for the 2007 Bonds is discontinued. 6

13 To facilitate subsequent transfers, all 2007 Bonds deposited by Direct Participants with DTC are registered in the name of DTC's partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of 2007 Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the 2007 Bonds; DTC's records reflect only the identity of the Direct Participants to whose accounts such 2007 Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Redemption notices shall be sent to DTC. If less than all of the 2007 Bonds within an issue are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to the 2007 Bonds unless authorized by a Direct Participant in accordance with DTC's Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the Authority as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts the 2007 Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). Redemption proceeds, distributions, and dividend payments on the 2007 Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC's practice is to credit Direct Participants' accounts upon DTC's receipt of funds and corresponding detail information from the Authority or the Trustee, on payable date in accordance with their respective holdings shown on DTC's records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such Participant and not of DTC, the Trustee or the Authority, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the Authority or the 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. DTC may discontinue providing its services as depository with respect to the 2007 Bonds at any time by giving reasonable notice to the Authority and the Trustee. Under such circumstances, in the event that a successor depository is not obtained, 2007 Bond certificates are required to be printed and delivered. The Authority may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event, 2007 Bond certificates will be printed and delivered. The information in this section concerning DTC and DTC's book-entry system has been obtained from sources that the Authority believes to be reliable, but the Authority takes no responsibility for the accuracy thereof. Redemption Provisions Optional Redemption. The Series A Bonds are not subject to optional redemption prior to maturity by the Authority, at the direction of the University. (The Series A Bonds are subject to Special Mandatory Redemption as described hereinafter.) The Series B Bonds maturing on September 1, 2036 are subject to redemption prior to maturity by the Authority, at the written direction of the University, on or after September 1, 2017 in whole at any time or in part 7

14 from time to time by lot, at the redemption price of 100% of the principal amount thereof, plus accrued interest to the redemption date. Extraordinary Optional Redemption. The 2007 Bonds are subject to redemption prior to maturity, at the option of the University, in whole or in part and if in part, pro rata as to each Series, at any time, at a redemption price equal to 100% of the principal amount thereof, plus accrued interest to the redemption date, upon the occurrence of any of the following events and in accordance with requirements set forth in the Indenture: (i) All or a substantial portion of the Project Facilities are damaged or destroyed by fire or other casualty, or title to or the temporary use of all or a substantial portion of such facilities is condemned or taken for any public or quasi-public use by any authority exercising or threatening the exercise of the power of eminent domain, or title thereto is found to be deficient, to such extent that in the determination of the University (A) such facilities cannot be reasonably restored or replaced to the condition thereof preceding such event, or (B) the University is thereby prevented from carrying on its normal operations, or (C) the cost of restoration or replacement thereof would exceed the net proceeds of any casualty insurance, title insurance, condemnation awards or sale under threat of condemnation with respect thereto; or (ii) As a result of any changes in the Constitution of the Commonwealth or the Constitution of the United States of America or of legislative or administrative action (whether state or federal) or by final direction, judgment or order of any court or administrative body (whether state or federal) entered after the contest thereof by the University in good faith, the Indenture or Loan Agreement becomes void or unenforceable or impossible of performance. The University's right to exercise the foregoing extraordinary optional redemption due to damage, casualty, condemnation or title deficiency is subject to the consent of a majority in interest of all of the owners of all Bonds outstanding under the Indenture in the event the net proceeds of any casualty insurance, title insurance, condemnation awards or sale under threat of condemnation is greater than $1,000,000. Scheduled Mandatory Redemption of Series B Bonds. The Series B Bonds are subject to scheduled mandatory redemption by the Authority on September 1 in the years and the amounts set forth at a redemption price equal to 100% of the principal amount thereof, plus accrued interest to the redemption date: *Final Maturity Year Principal Amount Year Principal Amount 2015 $ 1,250, $ 2,415, ,325, ,565, ,405, ,725, ,495, ,890, ,585, ,070, ,685, ,260, ,790, ,460, ,900, ,675, ,015, ,905, ,140, ,145, ,275, ,250,000* Special Mandatory Redemption of Series A Bonds. Upon receipt by the Trustee of Redevelopment Capital Assistance Payments, the Series A Bonds are subject to special mandatory redemption by the Authority prior to maturity, in whole, or in part by lot, on the next succeeding Interest Payment Date at a redemption price equal to 100% of the principal amount thereof, plus accrued interest to the redemption date, subject to required notice provisions under the Indenture. Special Mandatory Redemption from Project Fund Moneys. The Series 2007 Bonds are subject to mandatory redemption prior to maturity, in part and pro rata as to the Series A Bonds and the Series B Bonds, at 8

15 any time, at a redemption price equal to 100% of the principal amount of excess moneys remaining on deposit in the Project Fund and equaling at least $200,000 upon completion of the 2007 Project when such completion is certified in accordance with the requirements of the Indenture. Partial Redemption. If fewer than all of the 2007 Bonds of any maturity are to be redeemed, the selection of 2007 Bonds of such maturity to be redeemed, or portions thereof in amounts of $100,000 and any integral multiple of $5,000 in excess thereof, shall be made by lot by the Trustee; provided no 2007 Bond shall be outstanding in a denomination of less than $100,000 after any redemption and provided, however, if DTC or its nominee is the Registered Owner of the 2007 Bonds, such selection shall be made by lot by DTC, the DTC Participants and Indirect Participants in such manner as they may determine. Notice of Redemption. Any redemption under the preceding paragraphs shall be made as provided in the Indenture upon no more than 60 nor fewer than 30 days' notice by mailing a copy of the redemption notice by first class mail, postage prepaid to the registered owner thereof at the address shown on the registration books maintained by the Trustee; provided, however, that failure to mail any notice or any defect therein or in the mailing thereof, as it affects any particular 2007 Bond, shall not affect the validity of the proceedings for redemption of any other 2007 Bonds. If the Authority deposits funds (as more fully described in the Indenture) with the Trustee sufficient to pay the redemption price of any 2007 Bonds, together with interest accrued to the redemption date, as provided in and limited by the terms of the Indenture, interest on such 2007 Bonds will cease to accrue on the redemption date and thereafter such 2007 Bonds will be payable as to principal and interest only out of the funds so deposited. If at the time of mailing of notice of any optional redemption, the Authority shall not have deposited with the Trustee moneys sufficient to redeem all the 2007 Bonds called for redemption, such notice shall state that it is conditional, in that it is subject to the deposit of moneys with the Trustee not later than 10:00 a.m. prevailing time on the scheduled redemption date and shall be of no effect unless such moneys are so deposited. So long as DTC or its nominee is the registered owner of the 2007 Bonds, any failure on the part of DTC or failure on the part of a nominee of a beneficial owner (having received notice from a DTC Participant or otherwise) to notify the beneficial owner affected by any redemption of such redemption shall not affect the validity of the redemption. So long as DTC or its nominee is the registered owner of the 2007 Bonds, if less than all of the 2007 Bonds of any one maturity shall be called for redemption, the particular 2007 Bonds or portions of 2007 Bonds of such maturity to be redeemed shall be selected by lot by DTC, the DTC Participants and Indirect Participants in such manner as they may determine. 9

16 ESTIMATED SOURCES AND USES OF 2007 BOND PROCEEDS Set forth below are the estimated amounts of the 2007 Bonds proceeds and the University's contribution for costs and the estimated uses of the 2007 Bond proceeds and the University's cost contribution: Series A of 2007 Series B of 2007 Total Sources: Bond Proceeds: Par Amount $27,690, $60,225, $87,915, Other Sources of Funds: Contribution for Cost over 2% 8, , , $27,698, $60,258, $87,956, Uses: Project Fund Deposits: Land Loan Payoff $ 1,868, $ 1,868, Market Street Payoff 9,000, ,000, Pre-Construction & Soft Costs 7,446, ,446, Technology, Fixtures, etc. 4,141, ,141, Hard Construction Costs 924, ,689, ,613, $23,379, $45,689, $69,069, Other Fund Deposits: Series A Debt Service Reserve Fund $ 1,489, $ 1,489, Series A Capitalized Interest Fund 2,266, ,266, Series B Capitalized Interest Fund 8,369, ,369, Series B Debt Service Reserve Fund 4,826, ,826, $ 3,756, $13,195, $16,951, Delivery Date Expenses: Cost of Issuance (1) $ 562, $ 1,374, $ 1,936, $27,698, $60,258, $87,956, (1) Includes Authority fee, Underwriter's discount, printing costs, fees and expenses of the Trustee, the County and the Bank, legal fees and costs and other miscellaneous costs of issuance. Limited Obligations SOURCES OF AND SECURITY FOR PAYMENT OF THE 2007 BONDS The 2007 Bonds are limited obligations of the Authority payable solely from the sources referred to herein. Neither the general credit of the Authority nor the credit or taxing power of the City, the Commonwealth or any political subdivision thereof, except for the limited guaranty provided by the County with respect to the Series B Bonds, is pledged for the payment of the principal of, premium, if any, or interest on the 2007 Bonds, nor shall such 2007 Bonds be deemed to be obligations of the City, the Commonwealth or any political subdivision thereof, except for the County in connection with its limited guaranty with respect to the Series B Bonds, nor shall the City, the Commonwealth or any political subdivision thereof, except for the County's limited guaranty with respect to the Series B Bonds, be liable for the payment of the principal of, premium, if any, or interest on the 2007 Bonds. The Authority has no taxing power. 10

17 Sources of Payment and Security for the 2007 Bonds The 2007 Bonds will be payable solely from (i) payments received from the University under the Loan Agreement and (ii) moneys held by the Trustee in the funds and accounts established under the Indenture (except as otherwise described therein). For additional information regarding the Indenture and the Loan Agreement, see Appendix E hereto. As security for its obligations under the Loan Agreement, the University has granted to the Authority a security interest in the Unrestricted University Revenues, on an equal and ratable basis with any Additional Bonds and on parity with the SLOC being issued by the Bank for the benefit of the Series B Bonds, which security interest has been assigned to the Trustee for the benefit of the Bondholders. In the event of a failure to make payments when due, the Trustee shall have and may exercise all of its statutory rights as a secured party, and the University covenants thereafter to pay directly to the Trustee, or permit the Trustee to collect Unrestricted University Revenues for the equal and ratable benefit of the owners of the 2007 Bonds and the holders of any Parity Obligations, as described below. See "Additional Bonds and Other Permitted Indebtedness" below. Redevelopment Assistance Capital Program Funds - Series A Bonds The University is the subrecipient of several commitments from the Commonwealth acting through the Office of the Budget for Redevelopment Assistance Capital Program ("RACP") funding for the development of the University and the funding of construction of the University Facility. The commitments amount to a total of $37 million, and are at different stages of documentation and funding. Each commitment is to receive funding via legislative authorization in the Capital Budget Project Itemization Act The RACP funds will be granted to the Authority at the direction of the City under a Contract between the Authority and the Commonwealth. The Authority will then enter into a subrecipient grant agreement with the University in order to grant the funds to the University. The Authority will transfer the proceeds received under the RACP (the "Redevelopment Capital Assistance Payments") to the Trustee pursuant to the assigned Loan Agreement for deposit by the Trustee to the Redevelopment Capital Assistance Payment Account of the Series A Bonds Debt Service Fund established under the Indenture. Monies on deposit in the Redevelopment Capital Assistance Payment Account will be used for the special mandatory redemption of the Series A Bonds as described in "The 2007 Bonds - Redemption Provisions" herein. In this manner, the RACP funds provide security for the Series A Bonds through the special mandatory redemption provisions of such bonds. If at any time all of the Series A Bonds shall have been purchased, redeemed or paid, the Trustee shall make no further transfers to the Redevelopment Capital Assistance Payment Account. Upon receipt of an Officer's Certificate of the University that all or any portion of the balance of Redevelopment Capital Assistance Payments in such account is not required for reimbursement to the Commonwealth pursuant to the requirements of the RACP, the Officer's Certificate of the University shall specify such amount and the Trustee shall transfer any balance then in the Redevelopment Capital Assistance Payment Account to the Series B Bonds Debt Service Fund. Should the University certify in its Officer's Certificate that all or a portion of the balance remaining in the Redevelopment Capital Assistance Payment Account is required for reimbursement to the Commonwealth pursuant to the requirements of the RACP, the Officer's Certificate of the University shall specify such amount, and this amount shall be returned to the Authority for reimbursement to the Commonwealth. Initially, the University received a written commitment from the Commonwealth's Office of Budget under then Governor Mark Schweiker for $12,000,000 in The Commonwealth's commitment of the $12,000,000 was reviewed in an re-examination by the then new Rendell administration of the allocation of Commonwealth capital funds and was continued by Governor Edward G. Rendell in This approval initiated the submission of the formal application by the City, the Authority and the University and was followed by the contract (the "Contract") between the Commonwealth and the Authority being executed ("Grant Number 1"). The capital funding of Grant Number 1 for the University was made available to the University under a subrecipient agreement between the Authority and the University. 11

18 The capital funding under the Contract is provided on a proportional reimbursement basis of eligible expenses related to the project, taking into account the Commonwealth's requirement of recipient matching funds to Commonwealth funds. The funding under the Contract is specifically conditioned upon and payable solely from available funds appropriated by the General Assembly for purposes of the Contract, are contingent upon the verification by the Office of the Budget of the grantee's matching funds for the project, and are to be paid out of the proceeds of the sale of bonds of the Commonwealth at such times as the Office of the Budget shall determine to be appropriate. These conditions are present in all RACP contracts; and as long as the grantee matching funds are available, historically, the payments have been made under RACP contracts to grantees and their subrecipients. The University expects that payments under the Contract for Grant No. 1 will be received as has been the historical experience of similarly situated grantees. The City and the University have received two other written commitments for capital funding: Grant No. 2 in the amount of $15,000,000 in August of 2005 and Grant No. 3 in the amount of $10,000,000 in June of The University is in the process of preparing the applications for these grants for submission to the Office of the Budget in the near future. No contracts or grant agreements have been executed between the Commonwealth and the Authority with respect to Grant No. 2 and Grant No. 3. While University management believes that such contracts will be executed and that such capital funds will be received, no assurance can be given that such capital grant funding will be available to the University without executed contracts or grant agreements. The University has difficulty in predicting with any degree of certainty a schedule for anticipated receipt of Commonwealth monies. Payments under RACP contracts are made on a reimbursement basis after the Commonwealth audits or reviews for actual construction progress of a project and for the expenditure of the local match to the Commonwealth funds. The University expects construction on the 2007 Project to be started in January of 2007 with an expected completion date of construction of December 31, If the contracts for Grant No. 2 and Grant No. 3 are finalized in the spring of 2007 and construction activities are proceeding, the University may see some Commonwealth money available for reimbursement to the University by June of 2007 at the earliest. Such monies would then be available to undertake the first redemption of the Series A Bonds under the special mandatory provisions of the Series A Bonds. It may take between 2 to 3 months for the University to receive Commonwealth funds after submission of requisitions to the Commonwealth. After completion of construction of the Project Facilities, it may take a year or more to have a final audit and final release of RACP Funds. The terms and maturity date of the Series A Bonds are structured to address the uncertainties and timing of receipt of RACP funds. Additional Security for the Series B Bonds In the event there are insufficient monies on deposit in the Series B Debt Service Account for the payment of principal of and interest on the Series B Bonds when due, the Trustee shall make the following transfers in order to pay interest on and principal of the Series B Bonds when due: SLOC, First, from draws on the SLOC issued by the Bank pursuant to the terms of the Second, transfers from the County Guaranty described hereinafter pursuant to the terms of the County Guaranty, and Third, transfer from the Series B Bonds Debt Service Reserve Fund established under the Indenture. SLOC - Series B Bonds On the date of execution and delivery of the Series B Bonds, the Bank will issue in favor of the Trustee the SLOC in the amount of $3,300,000, which may be drawn to pay the debt service on the Series B Bonds as 12

19 described in the Indenture, as such amounts may from time to time be reduced and reinstated as provided in the SLOC. All drawings under the SLOC will be paid with the Bank's own funds. The SLOC shall terminate on the date which is the earliest of (i) the Bank's honoring a final nonreinstateable draft presented by the Trustee under the SLOC, (ii) the receipt by the Bank of a certificate signed by the Trustee stating that the University has provided and Trustee has accepted a substitute letter of credit in accordance with the terms of the Reimbursement Agreement that has been delivered to and accepted by the Trustee, (iii) the receipt by the Bank of a certificate of the Trustee stating that there are no longer any Series B Bonds "Outstanding" under the Indenture, or (iv) September 1, 2011 (the "Expiration Date"). The Expiration Date may be extended by the Bank in its sole discretion, by grants of one or more one (1) year extensions of such expiration date upon the prior written request of the University. Limited County Guaranty - Series B Bonds The payment of a portion of the debt service on the Series B Bonds is supported, also, by a limited, ten (10) year guaranty (the County Guaranty ) of the County. The period for which the guaranty is in effect begins January 1, 2010 and ends December 31, 2019, unless terminated earlier due to a Termination Event described below (the Guaranty Period ). The County Guaranty is provided under the terms of a Credit Support Agreement between the County and the University and a Guaranty Agreement among the County, the Authority and the Trustee (collectively, the Guaranty Agreements ). Under the Guaranty Agreements, the County will make payment toward the amount of annual principal and interest due to the holders of the Series B Bonds if the Authority or the Trustee shall fail to pay, in full, for any year during the Guaranty Period the principal of and interest on the Series B Bonds when the same becomes due and payable. The amount of the County s payment obligation is limited to the sum of $1,500,000 per year for each of the years in the Guaranty Period. The total maximum aggregate amount of the County Guaranty over the Guaranty Period is $15,000,000. As a condition for the County to make any payment under the Guaranty Agreements, the Trustee is required to, first, draw amounts available, if any, under the SLOC or other credit support facility. The Guaranty Agreements provide that County's payment obligations shall immediately be suspended without notice or demand and thereafter the County shall be under no further obligation upon, but only upon, the occurrence of any of the following (each, a Termination Event ): Insolvency. (i) The University shall commence any case, proceeding or other action (A) under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its debts, or (B) seeking appointment of a receiver, trustee, custodian or other similar official for it or for all or any substantial part of its assets, or the University shall make a general assignment for the benefit of its creditors; or (ii) there shall be commenced against the University any case, proceeding or other action of a nature referred to in clause (i) above which (x) results in an order for such relief or in the appointment of a receiver or similar official or (y) remains undismissed, undischarged or unbonded for a period of 60 days; or (iii) there shall be commenced against the University any case, proceeding or other action seeking issuance of a warrant of attachment, execution, distraint or similar process against all or any substantial part of its assets, which results in the entry of an order for any such relief which shall not have been vacated, discharged, or stayed or bonded pending appeal within 60 days from the entry thereof; or (iv) the University shall take any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth in any of clauses (i), (ii) or (iii) above; or Loss of Certificate of Authority. The Pennsylvania Department of Education withdraws its Certificate of Authority issued to the University; or 13

20 Acceleration of the Bonds. The principal of the Series B Bonds outstanding, together with interest accrued thereon are declared by the Trustee to be immediately due and payable due to an Event of Default under the Indenture; provided, however, that if, after such declaration, all arrears of principal of and interest on the Series B Bonds outstanding and certain fees and expenses are paid and no other Termination Event has occurred and is continuing, and certain other conditions set forth in the Guaranty Agreements have been satisfied, the Guaranty Agreements shall be reinstated. Additional Bonds and Other Permitted Indebtedness The Authority at the direction of the University or the University directly may incur indebtedness on a parity with the 2007 Bonds, in addition to the University's reimbursement obligations to the Bank with respect to draws under the SLOC, with respect to the lien on the Unrestricted University Revenues to the extent permitted in the Loan Agreement and the Indenture. In order for such indebtedness to be issued or incurred, the University must satisfy certain conditions as set forth in the Loan Agreement and the Indenture. A description of the conditions under which such indebtedness may be issued, is set forth in the following. (a) The University may not incur or assume Long Term Debt until such time as the Series A Bonds have been defeased pursuant to Article IX of the Indenture. (b) If no Event of Default under the Loan Agreement shall have occurred and then be continuing and the Series A Bonds have been defeased, the University may incur or assume Long Term Debt for such lawful purposes of the University as shall be specified in reasonable detail in a certified resolution of the University, provided that, on or before the date on which any Long Term Debt, whether secured or unsecured, is to be incurred or assumed, the University shall deliver to the Authority and the Trustee: (i) A certificate of the chief financial officer of the University in form and substance acceptable to the Authority stating that for the Fiscal Year immediately preceding the incurring or assumption of the Long Term Debt, the University was in compliance with the liquidity and rate covenants of the Loan Agreement. (ii) Except in the case of incurring or assuming Long Term Debt for refunding purposes where the Debt Service Requirement will not be increased by more than 3%, for any period or for completion of a Capital Addition, or where the aggregate principal amount of such Long Term Debt to be incurred or assumed is not in excess of 1% of Unrestricted University Revenues for the Fiscal Year immediately preceding the incurring or assuming of such Long Term Debt, a certificate of the chief financial officer of the University in form and substance acceptable to the Authority stating in the case of Long Term Debt the Net Revenues, as projected for the first full Fiscal Year for which interest due in such Fiscal Year has not been funded, following the completion of a Capital Addition or Extraordinary Repairs to be financed with the proceeds of the Long Term Debt or, in the case of Long Term Debt assumed or incurred for the purpose of refinancing any Long Term Debt then outstanding or incurred or assumed for any other purpose not involving construction, the first full Fiscal Year for which interest due in such Fiscal Year has not been funded, following the date on which it is incurred or assumed, will equal not less than 125% of the average Debt Service Requirements in future Fiscal Years on Long Term Debt Outstanding in such first Fiscal Year. (c) The University may, from time to time, incur or assume Short Term Debt in any amount up to 20% of Unrestricted University Revenues for the immediately preceding Fiscal Year, less any Short Term Debt then outstanding, provided, however, that during each Fiscal Year there shall be a period of thirty (30) consecutive days during which there shall not be outstanding any Short Term Debt in excess of fifty percent (50%) of the University's Expendable Funds. 14

21 Rate Covenant; Liquidity Covenant Rate Covenant The University has covenanted in the Loan Agreement that it will establish, charge and collect tuition and other student fees for the use and occupancy of the University facilities, and charges for services provided by the University such that Unrestricted University Revenues, together with other funds, available for the payment of Unrestricted University Expenses and principal and interest on Long Term Debt will be sufficient in the Fiscal Year ending June 30, 2011, and in each Fiscal Year thereafter, to provide funds for the following: (i) (ii) (iii) Commencing in the Fiscal Year ending June 30, 2011, Net Revenues at least equal to 100% of the actual Debt Service Requirements for such Fiscal Year; and, in the Fiscal Year ending June 30, 2012 and in each Fiscal Year thereafter, Net Revenues at least equal to 125% of the actual Debt Service Requirements for such Fiscal Year; The amount required, if any, to be deposited in such Fiscal Year into any reserve fund or account created in connection with any Parity Obligations; and The payment by the University in such Fiscal Year of Unrestricted University Expenses. Liquidity Covenant Commencing in the Fiscal Year ending June 30, 2009 and as of December 31 and June 30 of each Fiscal Year thereafter, the University covenants that it shall maintain Expendable Funds in the minimum amount of $5,000,000. The University covenants that it shall maintain as of December 31 and June 30 of each of the Fiscal Years as set forth below a ratio of Expendable Funds to Long Term Debt Outstanding, as follows: Ratio of Expendable Funds to Long Fiscal Year Term Debt Outstanding % % 2013, 2014 and % 2016 and % 2018 and thereafter 30% The University covenants that it shall not use Expendable Funds to construct or acquire Capital Additions in any Fiscal Year if (i) the University fails as of June 30 of the immediately preceding Fiscal Year to meet the rate covenant described above or if the University fails as of December 31 or June 30 of the immediately preceding Fiscal Year to meet the liquidity covenant described above; and (ii) the Expendable Funds as of June 30 of the immediately preceding Fiscal Year is in an amount less than $10,000,000. The University may use Expendable Funds to acquire or construct such Capital Additions only with Expendable Funds in excess of $10,000,000. Consultants If in any two consecutive Fiscal Years the University fails to meet the Rate Covenant described above, or if in any Fiscal Year the University fails to meet the rate covenant described above and the Liquidity Covenant described above, the University covenants that it will request a Consultant to make a report and recommendation to the University with respect to such tuition, student fees and other charges, and with regard to operations of the University. Upon receipt of such report and recommendation from the Consultant, the University will cause copies thereof to be filed with the Trustee and the Authority, and will within sixty (60) days of receipt thereof describe in writing to the Trustee and Authority what action, if any, the University shall take upon the report and recommendation of the Consultant. The University further covenants that it shall, from time to time and as often as necessary, revise such tuition fees, student fees, rates, rentals and charges to the extent required by those covenants. Notwithstanding any other provision of the Loan Agreement, the failure of the University to satisfy the Rate 15

22 Covenant will not constitute an Event of Default under the Loan Agreement so long as the University takes the actions required above in response thereto. PLAN OF FINANCE The 2007 Project has several components described previously and summarized as follows: funding the repayment of the Land Loan and the 215 Market Street Loan, making initial deposits to certain funds under the Indenture, funding a portion of the costs of construction of the Project Facilities and paying the costs of issuance of the 2007 Bonds. The Land Loan and the Market Street Loan were early stage financings undertaken by the University to finance the acquisition of the site for the Project Facilities and to finance the acquisition and construction of the University's initial facilities of classrooms and administrative offices at 215 Market Street, Harrisburg, respectively. These financings will be fully refinanced by a portion of the 2007 Bond proceeds. Proceeds of the 2007 Bonds will be applied, first, to repay the Land Loan and the 215 Market Street Loan, fund the initial deposits to the Series A Bonds Debt Service Reserve Fund and the Series B Bonds Debt Service Reserve Fund and pay the costs of issuance of the 2007 Bonds. The balance of the proceeds of the 2007 Bonds will be applied toward the costs of construction of the Project Facilities, including capitalized interest during construction of the Project Facilities and an initial operating period. Series 2007 Bond proceeds to be used for capitalized interest will be deposited to the Series A Bonds Debt Service Fund and the Series B Bonds Debt Service Fund. The total cost of the 2007 Project, including the acquisition of land, the design, permitting and construction of the Project Facilities, the refinancing of interim early stage financing, the funding of various reserves, capitalized interest and initial working capital and the purchase of furnishings and equipment, is approximately $101,645,874. This total cost is being funded from a combination of sources, including the 2007 Bond proceeds and the investment earnings thereon estimated to be approximately $1,625, and the Harrisburg Parking Authority's purchase price of $14,000,000 derived from the sale of its bonds earmarked for the garage portion of the Project Facilities, as further described hereinafter. Project Fund The Project Fund established under the Indenture will be funded with approximately $83,069, consisting of the balance of the proceeds of the 2007 Bonds in the approximate amount of $69,069,169.85, (after payment of the costs of issuance, deposits to reserve funds and setting aside funds for capitalized interest) and a purchase payment in the amount of $14,000,000 from the Harrisburg Parking Authority (the "Parking Authority"), payable in installments over a period of time as set forth in the proposed Agreement of Sale and Purchase (the "Agreement of Sale") between the University and the Parking Authority and as described hereinafter. Monies will be drawn down from the Project Fund for payment of Project Costs, which include, but are not limited to, costs incurred in the acquisition, construction, installation, equipment or improvement of the Project Facilities, costs incurred in respect of the Project Facilities for preliminary planning and studies; architectural, engineering, accounting, consulting, legal and other professional fees and expenses; annual administrative fee and expenses of the Authority; and payment of fees of the Trustee during the construction period. Payments will be made from the Project Fund in accordance with a requisition procedure set forth in the Indenture. Agreement of Sale Prior to the closing on the 2007 Bonds, the University and the Parking Authority will have entered into the Agreement of Sale under which the Parking Authority will purchase from the University a condominium property unit or units consisting of nine floors of parking facilities, containing 392 parking spaces, the Parking Garage, within the Project Facilities for a purchase price of $14,000,000 (the "Purchase Price"). The Purchase Price will be payable with a deposit of $100,000 upon signing the Agreement of Sale and the balance due, in equal monthly installments of approximately $579,167 over 24 months beginning at the time of closing on the 2007 Bonds. Such installments are to be deposited to the Project Fund. The Agreement of Sale requires the University to prepare, file and obtain approvals of preliminary and final plans and specifications and condominium documents, creating and 16

23 providing condominium proper by rights in favor of the Parking Authority and related obligations in the Parking Garage, pursuant to the Pennsylvania Uniform Condominium Code. The Parking Authority will issue its Guaranteed Parking Revenue Bonds, Series R of 2007 (the "Series R Parking Bonds") in the principal amount of $16,965,000 in order to fund the Purchase Price. The City is providing its guaranty for the payment of principal of and interest on the Series R Parking Bonds. The proceeds of the Series R Parking Bonds allocated to the Purchase Price will remain on deposit with the trustee for the Series R Parking Bonds until the monthly installments are made to the Project Fund for the 2007 Project. Those proceeds will be invested in securities permitted under the indenture for the Series R Parking Bonds and as described in Appendix F to this Limited Offering Memorandum. In connection with the Agreement of Sale, the Parking Authority, as landlord, and the University, as tenant, will enter into a Parking License and Option to Purchase (the "Parking License Agreement"), pursuant to which the Parking Authority will lease up to 300 parking spaces (the "Tenant's Parking Spaces") constituting a portion of the Parking Facilities acquired pursuant to the Agreement of Sale to the University for use in providing educational services. The Parking License Agreement will provide for the administration of the Tenant's Parking Spaces by the Parking Authority, as landlord, for a monthly adjustment of the Tenant's Parking Spaces to net out parking spaces not required during the following month by the University which shall be leased to other third party parking tenants by the Parking Authority on a best efforts basis, and for a monthly adjustment of net rentals due by the University to the Parking Authority to provide minimum specified net rentals to the Parking Authority for application to its operating expenses and debt service requirements on the Series R Parking Bonds. Under the Parking License Agreement, the Parking Authority also grants to the University a total of five options to purchase the Parking Garage. The first option occurs on the tenth anniversary of the date of the Parking License Agreement and the remaining options on each succeeding five year anniversary date of the Parking License Agreement. The Parking License Agreement sets forth the notice requirements for the University's exercise of an option and the procedure for determining the purchase price of the Parking Garage when an option is exercised. Architectural and Construction Contracts The University has engaged the firm of Burt Hill, Butler, Pennsylvania, to provide architectural services with respect to the Project Facilities. For construction of the Project Facilities, the University has engaged R.T. Reynolds, Inc., Harrisburg, Pennsylvania ("Reynolds") to serve as its construction manager at risk providing preconstruction services and serving as the contractor during construction. All major aspects of the work under Reynolds' agreement will be performed by subcontractors, as opposed to Reynolds itself. Reynolds and the University have entered into a Guaranteed Maximum Price ("GMP") Agreement for the Project Facilities of $63,500,000 with a completion date of December 31, 2008, which Agreement is contingent upon closing of bond financing. Completion of the Project Facilities by said date will allow for the University to utilize such facilities for the second semester of the 2008/2009 academic year. In the event the University is delayed in taking possession of the new facilities as a result of construction delays which are the fault of the contractor, Reynolds is obligated to pay to the University the sum of $9,500 per calendar day as liquidated damages. Such sums are to offset the cost to the University of leasing temporary space and debt service costs. Should the University experience a delay in completion of the Project Facilities of eight (8) months or longer, the potential of a negative impact on student enrollment exists, as well as the financial burden of leasing temporary space. In addition to liquidated damages, the University has chosen to require Reynolds to purchase Subguard Insurance to cover any delays caused by its subcontractors. Sale of 215 Market Street Facility The University has entered into an Agreement of Sale dated as of October 12, 2006 (the "215 Market Street Sale Agreement") with The School District of the City of Harrisburg (the "Harrisburg School District") to sell the University's initial facilities located at 215 Market Street, Harrisburg, Pennsylvania, to the Harrisburg School District. Under the 215 Market Street Sale Agreement, the School District will pay a purchase price of $20,750,000 17

24 payable in the following manner: (i) $2,500,000 payable within 30 days of execution of the 215 Market Street Sale Agreement; (ii) $2,500,000 payable on or before March 31, 2007; (iii) credit of $8,250,000 given at closing (the "Closing" ) for amounts previously received by the University from the Harrisburg School District; and (iv) the balance $7,500,000 payable at Closing. Under the 215 Market Street Sale Agreement, Closing is to take place on or before June 15, The University expects to use the proceeds from the sale of 215 Market Street facilities towards meeting the liquidity covenant under the Loan Agreement and initial operating expenses. The Authority LITIGATION There is no litigation of any nature pending or, to the Authority's knowledge, threatened against the Authority at the date of this Limited Offering Memorandum to restrain or enjoin the issuance, sale, execution or delivery of the 2007 Bonds, or in any way contesting or affecting the validity of the 2007 Bonds or any proceedings of the Authority taken with respect to the issuance or sale thereof, or the pledge or application of any moneys or the security provided for the payment of the 2007 Bonds or the existence or powers of the Authority. The University There are various claims and legal actions pending against the University, which have arisen in the ordinary course of the University's business. The University believes, following consultation with its legal counsel and financial advisors, that, none of such pending claims, legal actions or audits would adversely affect the business, financial condition or properties of the University. General BONDHOLDERS' RISKS The 2007 Bonds are limited obligations of the Authority payable solely from amounts payable by the University under the Loan Agreement. Future revenues and expenses of the University are subject to change and no representation or assurance can be made that the University will be able to generate sufficient revenues to meet its obligations, including its obligations to make payments under the Loan Agreement. The paragraphs below discuss certain Bondholders' risks but are not intended to be a complete enumeration of all of the risks associated with the 2007 Bonds and the University. Neither the Underwriter nor the Authority has made any independent investigation of the extent to which any of these risk factors may have an adverse impact on the revenues of the University. Start-up University The University is in its second academic year of operation and has a limited proven track record or history of successful operation. There is no guaranty that the University can successfully compete with established educational institutions. Further, because it is a start-up University, the University does not possess a significant endowment and has relied primarily upon loans, Commonwealth grants and advances from the Harrisburg School District to finance its operations to date. The University has experienced several covenant defaults under its loan agreements with the 215 Market Street Lender and the Land Loan Lender. However, as of the date hereof, all such defaults have been cured or waived by the lenders. In addition, the University has requested several extensions of the maturity dates of the Land Loan and the 215 Market Street Loan. The 215 Market Street Lender and the Land Loan Lender have granted all such extension requests and the current maturity date for each of the Land Loan and the 215 Market Street Loan is December 31, The University has made and continues to make all interest payments when due. The University was granted the status of a Candidate for Accreditation by the Middle States Commission on Higher Education ("Middle States") in June of The granting of Candidate status is critical to the 18

25 University's eligibility for and access to federal funding as well as a student's eligibility for certain federal student assistance programs. The Candidate status is a conditional status and, as such, the University is subject to review and site visits by the Middle States. The University believes that it is ahead of schedule in meeting the requirements for final accreditation. The University anticipates receiving final accreditation by Middle States in 2009 after the University confers its first baccalaureate degrees. However, in the event the University both (1) fails to become fully accredited by the Middle States and (2) loses the Candidate status, the University and its students will not be eligible for certain federal funding. Such an event may result in a detrimental financial effect on the University. Uncertainty of University Revenues and Expenses There are a number of factors affecting institutions of higher education, including the University, that could have an adverse effect on the University's financial position and its ability to make the payments required under the Loan Agreement. Without intending to limit the generality of the foregoing, these factors include: competition from other educational institutions; an economic downturn, locally or in the regions served by the University; shortfalls in sources of University revenue other than tuition and fees, such as capital campaigns and other general donor contributions, grants, or appropriations from governmental agencies (including changes in federally guaranteed student financial aid programs); investment losses in endowment and other funds; increasing costs of compliance with governmental regulations, including accommodations for handicapped or special needs students, and costs of compliance with the changes in such regulations; future legislation, regulatory, and judicial or administrative determinations affecting colleges and universities and their exemptions from various taxes; and future economic and other conditions which are unpredictable Commonwealth Funding As discussed previously in this Limited Offering Memorandum under "SOURCES OF AND SECURITY FOR PAYMENT OF THE 2007 Bonds - Redevelopment Assistance Capital Program Funds - Series A Bonds," the University expects that monies received from the Commonwealth's Redevelopment Assistance Capital Program ("RACP") will be sufficient to pay off the Series A Bonds through a series of special mandatory redemptions as the RACP funds are received. However, it must be noted that at this time only the amount of $12,000,000 of the $37,000,000 of RACP commitments is actually under contract between the Commonwealth and the Authority for the benefit of the University. While University management believes that completed applications for the outstanding $25,000,000 will be submitted to the Commonwealth and the corresponding grant agreements or contracts for $25,000,000 will be executed, no assurance can be given that these expectations will be definitely fulfilled. The RACP fund contracts are subject to actions to be taken by the Office of the Budget, the Office of General Counsel, the Office of Attorney General and other Commonwealth agencies under the Commonwealth's contract process. The Commonwealth contracting process can cause delays in funding which can affect the availability of monies for the anticipated redemption and pay off of the Series A Bonds. The typical Commonwealth RACP contract, including the executed contract for $12,000,000 referenced above, provides that the Commonwealth's obligations under the contract are conditioned upon and payable solely from available funds that have been appropriated by the Pennsylvania General Assembly for purposes of the contract, are contingent upon the verification by the Office of the Budget of the grantee's matching funds for the project and are to be paid out of proceeds of the sale of bonds of the Commonwealth at such times as the Office of the Budget determines to be appropriate. Potential Construction Difficulties The University has entered into a guaranteed maximum price contract for the construction of the Project Facilities with a construction completion date, which if not met due to the fault of the contractor, will result in the contractor's payment of $9,500 per day as liquidated damages. Although the University may appear to be contractually protected in construction pricing and completion, unanticipated events may occur preventing completion, and, thereby, occupancy of the Project Facilities. Such delays in completion could cause the University to incur additional costs in the renting of facilities until completion. The University could also lose enrollment and prospective students due to the non-completion of the Project Facilities. Liquidated damages will 19

26 be available if the delay is due to the fault of the contractor. Delays may occur which are beyond the control of the contractor and the University and for which liquidated damages are not available. The University is also dependent upon the contractor having the financial wherewithal to be able to pay the liquidated damages in the event of a delay. Enforceability of Remedies General. The remedies available to Bondholders upon an event of default under the Indenture and Loan Agreement are in many respects dependent upon judicial action which may be subject to discretion or delay. In addition, under existing law and judicial decisions, the remedies specified in the Indenture and Loan Agreement may not be readily available or may be limited. The various legal opinions to be delivered concurrently with the original delivery of the 2007 Bonds will be qualified as to enforceability of the various legal instruments (including the Indenture and Loan Agreement) by a number of limitations, including those imposed by the bankruptcy, reorganization, insolvency or other similar laws affecting creditors' rights and by the application of equitable principles. Potential Effects of Bankruptcy. If the University were to file a petition for relief (or if a petition were filed against the University under the Federal Bankruptcy Code), the filing would operate as an automatic stay of the commencement or continuation of any judicial or other proceeding against the University and its property. If the bankruptcy court so ordered, the University's property could be used for the benefit of the University despite the claims of its creditors (including the Trustee). In a bankruptcy proceeding, the University could file a plan for the adjustment of its debts which modifies the rights of creditors generally or the rights of any class of creditors, secured or unsecured. The plan, when confirmed by the court, would bind all creditors who had notice or knowledge of the plan and would discharge all claims against the University provided for in the plan. No plan may be confirmed unless, among other conditions, the plan is in the best interest of creditors, is feasible and has been accepted by each class of claims impaired thereunder present to the Bankruptcy Code. Even if the plan is not accepted, it may be confirmed if the court finds that the plan is fair and equitable with respect to each class of nonaccepting creditors impaired thereunder and does not discriminate unfairly. State and Federal Legislation In recent years, the activities of non-profit tax-exempt corporations have been subjected to increasing scrutiny by federal, state and local legislative and administrative agencies (including the United States Congress, the Internal Revenue Service, the Pennsylvania General Assembly and local taxing authorities). Various proposals either have been considered previously or are presently being considered at the federal, state, and local level which would restrict the definition of tax-exempt or non-profit status, impose new restrictions on the activities of taxexempt non-profit corporations, and/or tax or otherwise burden the activities of such corporations (including proposals to broaden or strengthen federal, state and local tax law provisions respecting unrelated business income of non-profit corporations). There can be no assurance that future changes in the laws, rules, regulations, interpretations, and policies relating to the definition, activities, and/or taxation of non-profit tax-exempt corporations will not have material adverse effects on the future operations of the University. APPROVAL OF LEGALITY Certain legal matters incident to the authorization, issuance and sale of the 2007 Bonds will be passed upon by Buchanan Ingersoll & Rooney, P.C., as Bond Counsel, whose approving opinion in the form attached as Appendix D to this Limited Offering Memorandum will be delivered with the 2007 Bonds. (The Preliminary Limited Offering Memorandum, dated November 21, 2006, printed in connection with the limited offering and sale of the 2007 Bonds indicated that the law firm of Pepper Hamilton, LLP would be Bond Counsel relating to the issuance of the 2007 Bonds. However, since the printing and distribution of the Preliminary Limited Offering Memorandum, certain principals of Pepper Hamilton LLP, who had been providing those legal services as Bond Counsel in connection with the structuring of the 2007 Bond issue, have resigned from Pepper Hamilton LLP and have joined the law firm of Buchanan Ingersoll & Rooney, P.C. As a result of such change in law firms, Buchanan Ingersoll & Rooney, P. C. is now serving as Bond Counsel with respect to the issuance and delivery of the

27 Bonds.) Certain legal matters will be passed upon for the Authority by its General Counsel, Foreman & Foreman, P.C., Harrisburg, Pennsylvania; for the University by McNees, Wallace & Nurick LLC, Harrisburg, Pennsylvania; for the Underwriter by Eckert Seamans Cherin & Mellott, LLC, Harrisburg, Pennsylvania; and for the Bank by Mette Evans & Woodside, Harrisburg, Pennsylvania. TAX EXEMPTION In the opinion of Bond Counsel, assuming compliance with certain covenants of the Authority and the University, interest on the 2007 Bonds is excluded from the gross income of the owners of the 2007 Bonds for federal income tax purposes under existing law, as currently enacted and construed. Interest on the 2007 Bonds will not be an item of tax preference under the Internal Revenue Code of 1986, as amended (the "Code"), for purposes of determining the alternative minimum tax imposed on individuals and corporations. Interest on a 2007 Bond held by a corporation (other than an S corporation, regulated investment company, real estate investment trust or real estate mortgage investment conduit) may be indirectly subject to alternative minimum tax because of its inclusion in the earnings and profits of the corporate holder. Interest on a 2007 Bond held by a foreign corporation may be subject to the branch profits tax imposed by the Code. Ownership of the 2007 Bonds may give rise to collateral federal income tax consequences to certain taxpayers, including, without limitation, financial institutions, property and casualty insurance companies, S corporations with Subchapter C earnings and profits, individual recipients of Social Security or Railroad Retirement benefits and taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry the 2007 Bonds. Bond Counsel expresses no opinion as to any such collateral federal income tax consequences. Purchasers of the 2007 Bonds should consult their own tax advisors as to collateral federal income tax consequences. The Code sets forth certain requirements which must be met subsequent to the issuance and delivery of the 2007 Bonds for interest thereon to remain excludible from the gross income of the owners of the 2007 Bonds for federal income tax purposes. The Authority and the University covenant to comply with such requirements in the Indenture, in the Loan Agreement, in the Authority's Non-Arbitrage Certificate and in the University's Tax Certificate and Agreement. Noncompliance with such requirements may cause the interest on the 2007 Bonds to be includible in the gross income of the owners of the 2007 Bonds for federal income tax purposes, retroactive to the date of issue of the 2007 Bonds. The opinion of Bond Counsel assumes compliance with such covenants and Bond Counsel has not undertaken to determine (or to inform any person) whether any actions taken (or not taken) or events occurring (or not occurring) after the date of issuance of the 2007 Bonds may affect the tax status of interest on the 2007 Bonds. Bond Counsel is of the opinion that, under the laws of the Commonwealth of Pennsylvania, as currently enacted and construed, the 2007 Bonds are exempt from personal property taxes in Pennsylvania and the interest on the 2007 Bonds is exempt from Pennsylvania personal income tax and Pennsylvania corporate net income tax. Pursuant to the provisions of Act 68 of 1993 of the Commonwealth of Pennsylvania ("Act 68"), profits, gain or income from the sale of the 2007 Bonds shall be subject to Pennsylvania personal income tax and Pennsylvania corporate net income tax. FINANCIAL STATEMENTS OF THE UNIVERSITY The consolidated financial statements of the University as of June 30, 2005 and 2004, and for each of the two years in the period ended June 30, 2005, included in this Limited Offering Memorandum in Appendix D, have been audited by Brown Schultz Sheridan & Fritz, independent accountants, as stated in their report appearing herein. 21

28 Ratings will not be applied for the 2007 Bonds. RATINGS UNDERWRITING A.G. Edwards & Sons, Inc. (the "Underwriter") has agreed to purchase the 2007 Bonds from the Authority at a purchase price of $86,596,275 (the par amount of the 2007 Bonds, $87,915,000, less underwriting discount of $1,318,725). The Underwriter's obligations are subject to certain conditions precedent and if obligated to purchase any of the 2007 Bonds, the Underwriter will be obligated to purchase all of the 2007 Bonds. The 2007 Bonds may be offered and sold by the Underwriter at prices lower than the initial offering prices stated on the cover hereof, and such initial offering prices may be changed from time to time by the Underwriter. RELATIONSHIPS OF PARTIES Commerce Bank/Harrisburg, National Association issued the SLOC in support of the 2007 Bonds. Commerce Bank, National Association, is serving as trustee under the Indenture for the 2007 Bonds. Commerce Bank/Harrisburg, National Association is an independent member of the Commerce Network, a network of banks established by Commerce Bankcorp, Inc. Gary L. Nalbandian is the Chairman, President and CEO of Commerce Bank/Harrisburg, National Association and is a member of the Board of Trustees of the University as well as fundraising campaign committee chairman of Connect: The Campaign for Harrisburg University. Stephen R. Reed, Mayor of the City, is a member of the Board of Trustees of the University and one of the original incorporators of the University. Mayor Reed historically has appointed members to the Boards of Directors of the Authority and the Parking Authority with the approval of the City Council. Calobe Jackson, Jr. and Gerald W. Kohn are ex-officio members of the Board of Trustees of the University in their respective roles of Chairman of the Board of Control of the Harrisburg School District and the Superintendent of the Harrisburg School District. Sheila Dow Ford, a member of the University's Board of Trustees is also Executive Vice President and Chief Counsel to Pennsylvania Higher Education Assistance Agency, which provides substantial financial assistance to students attending the University. In connection with the issuance of the 2007 Bonds, Eckert Seamans Cherin & Mellott, LLC serves as counsel to the Underwriter. Eckert Seamans also serves as counsel to the County with respect to the County Guaranty relating to the 2007 Bonds. McNees, Wallace & Nurick, LLC serves as counsel to the University in connection with the 2007 Project and has represented R. T. Reynolds, Inc., the primary contractor for the construction of the Project Facilities, in other matters unrelated to the 2007 Project. Milt Lopus Associates serves as financial advisor to the Authority in connection with the issuance of the 2007 Bonds and serves as financial advisor to the Parking Authority in connection with the Parking Authority's issuance of its Series R Parking Bonds, the proceeds of which will fund the Purchase Price to be paid to the University for deposit to the Project Fund to pay for a portion of the costs of the 2007 Project. Buchanan Ingersoll & Rooney, P.C., acting as Bond Counsel with respect to the 2007 Bonds, also serves as Bond Counsel in connection with the Parking Authority's issuance of its Series R Parking Bonds. FINANCIAL ADVISOR Milt Lopus Associates, Harrisburg, Pennsylvania, has acted as financial advisor to the Authority (the "Financial Advisor") in connection with the issuance of the 2007 Bonds. The Financial Advisor is not obligated to undertake, and has not undertaken to make, an independent verification or to assume responsibility for the accuracy, completeness or fairness of the information contained in the Limited Offering Memorandum. Milt Lopus Associates is an independent advisory firm and is not engaged in the business of underwriting, trading or distributing municipal securities or other public securities. 22

29 CONTINUING DISCLOSURE The University will enter into a Continuing Disclosure Undertaking (the "Undertaking") for the benefit of the beneficial owners of the 2007 Bonds to send, or, where applicable, cause to be sent, certain information annually and to provide, or, where applicable, cause to be provided, notice of certain events to certain information repositories pursuant to the requirements of Rule 15c2-12(b)(5) (the "Rule") adopted by the Securities Exchange Commission (the "SEC") under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The information to be provided on an annual basis, the events which will be noticed on an occurrence basis and a summary of other terms of the Undertaking, including termination, amendment and remedies, are set forth below. A failure by the University to comply with the Undertaking will not constitute an Event of Default under the Indenture or the Loan Agreement and beneficial owners of the 2007 Bonds are limited to the remedies described in the Undertaking. See "Consequences of Failure of the University to Provide Information" below. A failure by the University to comply with the Undertaking must be reported in accordance with the Rule and must be considered by any broker, dealer or municipal securities dealer before recommending the purchase or sale of the 2007 Bonds in the secondary market. Consequently, such a failure may adversely affect the transferability and liquidity of the 2007 Bonds and their market price. The following is a brief summary of certain provisions of the Undertaking of the University and does not purport to be complete. The statements made under this caption are subject to the detailed provisions of the Undertaking, a copy of which is attached hereto in Appendix J. Annual Financial Information Disclosure In the Undertaking, the University will undertake to provide in a timely manner after the end of each fiscal year of the University, commencing with the fiscal year ending June 30, 2006, certain financial and operating data (referred to herein as "Annual Information"), including (i) its annual financial statements prepared in accordance with generally accepted accounting principles and (ii) to the extent not included in the actual audited financial statements, certain annual financial information and operating data, generally consistent with the operating information contained in Appendix A to this Limited Offering Memorandum. The University will file the Annual Information with each nationally recognized municipal securities information repository designated by the Securities and Exchange Commission (the "Repository"), and if and when one is established, a Commonwealth of Pennsylvania information depository (the "State Information Depository"). The Undertaking is a written agreement that is executed and delivered by the University for the benefit of the owners and Beneficial Owners of the 2007 Bonds. The Authority has undertaken no responsibility with respect to any reports, notices or information provided or required under the Undertaking, and has no liability to any person, including any owner or Beneficial Owner of the 2007 Bonds, with respect to any such reports, notices or disclosures. The University will provide the Annual Information in no event later than 270 days after the end of each Fiscal Year, to each Repository and to the State Information Depository, if any. In addition, the University will provide to each Repository or to the Municipal Securities Rulemaking Board ("MSRB"), and to the State Information Depository, in a timely manner, the notices required to be provided by the Rule. Material Events Disclosure The notices required to be provided by the Rule, which the University will undertake to provide as described above, include notices of any of the following events with respect to the 2007 Bonds, if material: (1) principal and interest payment delinquencies; (2) non-payment related defaults; (3) unscheduled draws on debt service reserves reflecting financial difficulties; (4) unscheduled draws on credit enhancement reflecting financial difficulties; (5) substitution of a credit enhancer or liquidity provider, or its failure to perform; (6) adverse tax opinions or events affecting the tax-exempt status of the 2007 Bonds; (7) modification to the rights of registered or beneficial owners of the 2007 Bonds; (8) bond redemptions (other than mandatory or sinking fund redemptions); (9) defeasances; (10) release, substitution, or sale of property securing repayment of the 2007 Bonds; and (11) rating changes. Certain of these events may not be applicable to the 2007 Bonds. 23

30 Consequences of Failure of the University to Provide Information In the event of a failure of the University to comply with any provision of the Undertaking, the beneficial owner of any 2007 Bond may seek mandamus or specific performance by court order, to cause the University to comply with its obligations under the Undertaking. A default under the Undertaking will not be deemed an Event of Default under the Indenture or any other agreement or a Loan Default Event under the Loan Agreement, and the sole remedy under the Undertaking in the event of any failure of the University to comply with the Undertaking will be an action to compel performance. Amendment to Undertaking; Termination of Undertaking The Undertaking may be amended upon the terms and conditions set forth in the Undertaking. The Undertaking will be automatically terminated if the University no longer has any legal liability for any obligation on or relating to repayment of the 2007 Bonds. The University will give notice in a timely manner to each Repository and to the State Information Depository, if any, or to the MSRB and to the State Information Depository, if any, if the Undertaking is so terminated. Other Information Nothing in the Undertaking will be deemed to prevent the University from disseminating any other information, using the means of dissemination set forth in the Undertaking or any other means of communication, or including any other information in any Annual Financial Information or Audited Financial Statements or notice of occurrence of a material event, in addition to that which is required by the Undertaking. If the University chooses to include any information from any document or notice of occurrence of a material event in addition to that which is specifically required by the Undertaking, the University will have no obligation under the Undertaking to update such information or include it in any future disclosure or notice of occurrence of a material event. Central Post Office Under the Undertaking, the University will be in compliance with the filing requirements thereof with respect to the 2007 Bonds if the required disclosure information is timely provided to the "Central Post Office" which is the internet-based electronic filing system operated by the Texas Municipal Advisory Council under the name "DisclosureUSA" at the following internet address: Information provided to the Central Post Office will be automatically transmitted to each Repository and the State Information Depository, if any. County Disclosure Undertaking So long as the County Guaranty secures a portion of the debt service on the Series B Bonds, the County, pursuant to a Continuing Disclosure Undertaking (the "County Disclosure Undertaking"), will provide certain annual financial information included in its annual audits of the County's Financial Statements and notices of certain events in accordance with the requirements of the Rule, for the benefit of the beneficial owners of the Series B Bonds. Under the County Disclosure Undertaking, the County will be in compliance with the filing requirements thereof with respect to the Series B Bonds if the required disclosure information is timely provided to the Central Post Office. See "Central Post Office" above. LEGALITY FOR INVESTMENT Under the Act, the 2007 Bonds are designated securities in which all officers of the Commonwealth and its political subdivisions, municipal officers and administrative departments, boards and commissions of the Commonwealth, all banks, bankers, savings banks, trust companies, savings and loans associations, investment companies and other persons carrying on a banking business, all insurance companies, insurance associations and other persons carrying on an insurance business, and all administrators, executors, guardians, trustees and other 24

31 fiduciaries, and all other persons whatsoever who are authorized to invest in bonds or other obligations of the Commonwealth, may properly and legally invest any funds, including capital, belonging to them or within their control. The Act also provides that the 2007 Bonds are securities which may properly and legally be deposited with, and received by, any state or municipal officer or agency of the Commonwealth for any purpose for which the deposit of bonds or other obligations of the Commonwealth is authorized by law. NEGOTIABILITY Under the Act, the 2007 Bonds have all the qualities of negotiable instruments under the law merchant and the laws of the Commonwealth relating to negotiable instruments. MISCELLANEOUS All the summaries of the provisions of the Act, the 2007 Bonds, the Indenture and the Loan Agreement set forth herein and all other summaries and references to such other materials not purporting to be quoted in full, are only brief outlines of certain provisions thereof and are made subject to all of the detailed provisions thereof, to which reference is hereby made for further information, and do not purport to be complete statements of any or of all such provisions of such documents. All estimates and assumptions herein have been made on the best information available and are believed to be reliable, but no representations whatsoever are made that such estimates or assumptions are correct or will be realized. So far as any statements herein involve matters of opinion, whether or not expressly so stated, they are intended merely as such and not as representations of fact. The information set forth in this Limited Offering Memorandum, and that which follows in the Appendices, should not be construed as representing all the conditions affecting the Authority, the University or the 2007 Bonds. The Authority has not assisted in the preparation of this Limited Offering Memorandum, except for the statements under the captions "INTRODUCTORY STATEMENT The Authority", "THE AUTHORITY" and "LITIGATION The Authority" herein and, except for those sections, the Authority is not responsible for any statements made in this Limited Offering Memorandum. Except for the authorization, execution, and delivery of documents to which it is a party that are required to effect the issuance of the 2007 Bonds, and Authority assumes no responsibility for the disclosures set forth in this Limited Offering Memorandum. (Remainder of Page Intentionally Left Blank) 25

32 The Authority and the University have authorized the execution and distribution of this Limited Offering Memorandum. THE HARRISBURG AUTHORITY Approved: By: Chairman THE HARRISBURG UNIVERSITY OF SCIENCE AND TECHNOLOGY By: Chairman, Board of Trustees By: President 26

33 APPENDIX A INFORMATION CONCERNING THE HARRISBURG UNIVERSITY OF SCIENCE AND TECHNOLOGY

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47 APPENDIX B HARRISBURG UNIVERSITY OF SCIENCE AND TECHNOLOGY BUSINESS MODEL , DATED DECEMBER, 2006 AND PREPARED BY THE HARRISBURG UNIVERSITY OF SCIENCE AND TECHNOLOGY

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49 Risks Related to Financial Projections and Information and Forward-Looking Statements Contained in the Harrisburg University of Science and Technology Business Model The financial projections and information presented in the attached Harrisburg University of Science and Technology Business Model (the "Business Model") are based on a number of assumptions and estimates that, while considered reasonable by The Harrisburg University of Science and Technology (the "University") when taken as a whole, are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond the control of the University or its management. These projections and information were not prepared with a view toward compliance with published guidelines of the American Institute of Certified Public Accountants, any regulatory agency or professional body or generally accepted accounting principles. Moreover, no independent expert has reviewed these projections and information, and projections are, by definition, speculative in nature. It can be expected that some or all of the underlying assumptions and estimates will not materialize or will vary significantly from actual results. No representation or warranty of any kind is made by the University, its management or any other person with respect to the financial projections or the underlying assumptions described in the Business Model including the Narrative, the Model Assumptions attached as Appendix A to the Business Model and the projections of revenue and expenses, Financial Model and Cash Position attached to the Business Model. Prospective investors are urged to consult their own advisors with respect to the financial projections and the assumptions on which they are based. The Business Model contains forward-looking statements, including statements regarding, among other items, (i) anticipated trends in revenue sources and operating expense, (ii) competitive factors, (iii) student enrollment projections, (iv) faculty requirements; (v) projected tuition rates for undergraduates, masters and doctoral levels; (vi) projected revenues from tuition, contributions, governmental grants and contracts, public service revenues; and (vii) projected corresponding expenses to revenue sources. Forward-looking statements are typically identified by the words believe, expect, anticipate, intend, estimate, project, will and similar expressions. These forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond the University s control. Actual results could differ materially from those contemplated by these forward-looking statements as a result. In light of such risks and uncertainties, there can be no assurance that the results and events contemplated by the forward-looking information contained in the Business Model will in fact transpire. Readers are cautioned not to place undue reliance on these forward-looking statements which speak only as of their dates. The University undertakes no obligation to update or revise any forward-looking statements. The financial projections presented in the Business Model represent the subjective views of the management of the University and management's current estimates of future performance based on various assumptions which management believes are reasonable, but which may or may not prove to be correct. There can be no assurance that management's views are accurate or that management's projections will be realized. Industry experts may disagree with these assumptions and with management's view of the market and the prospects for the University. Neither the Business Plan nor its delivery to any prospective purchaser shall constitute an offer to sell any security or enter into any other transaction or commercial agreement. The sole purpose of the Business Model is to assist prospective purchasers in deciding whether to proceed with a further investigation and evaluation of the University in connection with their consideration of a transaction with the University. Prospective purchasers should conduct their own independent evaluation of the University. {L }

50 Harrisburg University of Science and Technology Business Model Fiscal Years December 2006 {L }

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79 APPENDIX C HARRISBURG UNIVERSITY OF SCIENCE AND TECHNOLOGY ENROLLMENT PROJECTIONS REVIEW ( ), DATED MARCH 17, 2006 AND PREPARED BY KALUDIS CONSULTING

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129 APPENDIX E DEFINITIONS OF CERTAIN TERMS AND SUMMARY OF CERTAIN PROVISIONS OF THE LEGAL DOCUMENTS

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131 APPENDIX E DEFINITIONS OF CERTAIN TERMS AND SUMMARY OF CERTAIN PROVISIONS OF THE LEGAL DOCUMENTS The following are definitions of certain terms used in the Indenture, the Loan Agreement and the Mortgage. Capitalized terms used in these summaries but not otherwise defined shall have the meanings given to such terms in the forepart of this Limited Offering Memorandum. Additional Bonds shall mean all Bonds authenticated and delivered under the Indenture and of any series other than the 2007 Bonds. Administrative Expenses shall mean those expenses reasonably and properly incurred by the Authority including without limitation, reasonable attorneys fees and expenses, in carrying out its responsibilities and duties, or in providing its services and facilities to the University, under the Act or the Indenture or pursuant to the Loan Agreement. Affiliate shall mean any person directly or indirectly controlling, controlled by or under common control of the University. Annual Administrative Fee shall mean the annual fee for the general administrative services of the Authority. Authorized Representative shall mean, with respect to the Authority, each person at the time designated to act on behalf of the Authority by written certificate furnished to the Trustee containing the specimen signature of such person and signed on behalf of the Authority by its Secretary or Assistant Secretary, and, with respect to the University, each person at the time designated to act on behalf of the University by written certificate furnished to the Trustee containing the specimen signature of such person and signed on behalf of the University by its Secretary or Assistant Secretary or other such authorized officer. Bond or Bonds shall mean any bond or all the bonds, as the case may be, authenticated and delivered under the Indenture, including the 2007 Bonds. Bond Counsel shall mean an attorney-at-law or firm of attorneys of nationally recognized standing in matters pertaining to bonds (including the tax status of interest thereon) issued by states and their political subdivisions, duly admitted to the practice of law before the highest court of any state of the United States of America. Bonds Debt Service shall mean, for any period or payable at any time, the principal of, premium, if any, on and interest on the 2007 Bonds for that period or payable at the time whether due on an Interest Payment Date, at maturity or upon acceleration or redemption. Bond Year shall mean with respect to any series of Bonds, the one-year period beginning on the day after the expiration of the preceding Bond Year except that the last Bond Year shall end on the date on which such Bonds mature). The first Bond Year shall be the one # v2 E-1

132 year period beginning on the calendar date on which the Bonds are issued and ending on the date which is December 31 in the next succeeding calendar year. Business Day shall mean any day other than (a) Saturday or Sunday or legal holiday (b) a day on which banks located in Philadelphia, Pennsylvania, New York, New York or the city in which the Payment Office of the Trustee is located are required or authorized by law or effective order to close, or (c) a day on which the New York Stock Exchange is closed. Capital Additions shall mean all new or additional land and buildings, structures or other permanent improvements to land which the University or the Authority has authority to construct or acquire in connection with the University Facility and other ancillary projects, which new or additional land, buildings or structures and permanent improvements, replacements, additions, extensions and betterments to land shall be hereafter constructed or otherwise acquired by the University or the Authority. Certified Resolution of the Authority shall mean a copy of a resolution certified by the Secretary or Assistant Secretary of the Authority, under its corporate seal, to have been duly adopted by the Authority board and to be in full force and effect on the date of such certification. Certified Resolution of the University shall mean a copy of a resolution of the Board of Trustees or of a duly authorized committee thereof, certified by the secretary or assistant secretary of the Board of Trustees or other officer of the Board of Trustees serving in a similar capacity to have been duly adopted and to be in full force and effect on the date of such certification. Closing Statement means the Closing Receipt, Closing Statement and Settlement Reconciliation executed by the Trustee, the University and the Authority on the date of issuance of the 2007 Bonds, pursuant to which the Trustee acknowledges receipt of the proceeds of the 2007 Bonds and the Authority directs the initial disposition thereof. Construction Monitor means any independent firm, who is qualified to pass upon construction questions relating to educational facilities and parking garages and having a favorable reputation for skill and experience in construction and inspection of educational facilities and parking garages and is appointed in writing by Registered Owners of a majority in aggregate principal amount of 2007 Bonds Outstanding and shall not be unsatisfactory to the Trustee and the University. Construction Monitor Agreement shall mean the agreement by and between the University and the Construction Monitor. Consultant shall mean a person, who shall be otherwise unaffiliated with the University, appointed by the University, or if required to be appointed by the Authority or another person, not unsatisfactory to the University, and in each instance not unsatisfactory to the Registered Owners of a majority in aggregate principal amount of 2007 Bonds Outstanding, qualified to pass upon the matters under consideration and having a favorable reputation for skill and experience in such matters. # v2 E-2

133 Cost or Costs, in connection with any portion of any Project, means all expenses which are properly chargeable thereto as a cost of a project under the Act or which are incidental to the financing, acquisition, and construction of any portion of any such Project. Whenever Costs are to be paid, such payment may be made by way of reimbursement to the University, the Authority or others who have paid the same. Counsel shall mean an attorney-at-law or law firm (who or which may be Bond Counsel or counsel for the University, the Trustee or the Authority). Debt Service shall mean, collectively, the Series A Bonds Debt Service and Series B Bonds Debt Service. Debt Service Funds shall mean, collectively, the Series A Bonds and Series B Bonds Debt Service Funds so designated and created under the Indenture. Debt Service Requirements with reference to a specified period, shall mean: (a) interest payable on Long-Term Debt during the period, excluding (i) interest funded from the proceeds thereof and (ii) interest on Long-Term Debt to be redeemed during such period through any sinking fund account which would otherwise accrue after the redemption date; (b) amounts required to be paid into any mandatory sinking fund account for Long-Term Debt during the period; (c) amounts required to pay the principal of Long-Term Debt maturing during the period and not to be redeemed prior to maturity through any mandatory sinking fund account; and (d) in the case of Long Term Debt in the form of lease rental obligations, the lease rentals payable during the period; provided that Debt Service Requirements do not include payments of principal of and interest on any obligation which, on the date of the Loan Agreement or on the date of incurrence of such obligation (if such obligation is not outstanding on the date of the Loan Agreement), is classified as an off-balance sheet obligation or is debt that has been incurred by a bankruptcy remote corporation and is secured by a distinct revenue source, but which is reclassified on a future date as an on-balance sheet item, provided that at the time of such reclassification such obligation is self-supporting and payments with respect thereto are not a general obligation of the University. Debt Service Reserve Funds shall mean, collectively, the Series A Bonds and Series B Bonds Debt Service Reserve Funds so designated and created under the Indenture. Debt Service Reserve Fund Requirements shall mean, collectively, the Series A Bonds Debt Service Reserve Requirement and the Series B Bonds Debt Service Reserve Fund Requirement. # v2 E-3

134 Delivery Office shall mean the office of the Trustee as registrar and transfer agent, designated as such as provided in the Indenture, where 2007 Bonds may be delivered for transfer or exchange. Event of Default shall mean the events as described in the Indenture and the Loan Agreement. Excess Earnings shall mean an amount equal to the sum of (a) plus (b) where: (a) is the excess of (i) the aggregate amount earned from the date of issuance of the 2007 Bonds on all nonpurpose investments in which gross proceeds of the 2007 Bonds are invested (other than investments attributable to an excess described in this clause (a)), over (ii) the amount that would have been earned if such nonpurpose investments (other than amounts attributable to an excess described in this clause (a)) were invested at a rate equal to the yield on the 2007 Bonds; and (b) is any income attributable to the excess described in clause (a). The sum of (a) plus (b) shall be determined in accordance with Section 148(f) of the Code. As used herein, the terms gross proceeds, nonpurpose investments and yield have the meanings assigned to them for purposes of Section 148(f) of the Code. Excess Earnings, however, shall not include any amount earned on the Debt Service Funds during the period from March 30 of any year to March 30 of the immediately following year, if the gross earnings on such Fund for such period are less than $100,000. Expendable Funds shall mean (Unrestricted Net Assets plus Temporarily Restricted Net Assets) minus Net Investment in Plant. Extraordinary Repairs shall mean repairs to facilities of the University necessary for the continued operation of such facilities and which cannot be paid for from the Unrestricted University Revenues in the normal course of operations of the University. Extraordinary Services and Extraordinary Expenses shall mean all services rendered and all reasonable expenses properly incurred by the Trustee or any of its agents under the Indenture, other than Ordinary Services and Ordinary Expenses. Financial Consultant shall mean a firm of investment bankers, a financial consulting firm, a law firm or a firm of certified public accountants, satisfactory to the University and the Trustee, which is experienced in the calculation of amounts required to be rebated to the United States under Section 148 (f) of the Code. June 30. Fiscal Year shall mean the fiscal year of the University, currently ending on Insurance Consultant means a person, who shall be otherwise unaffiliated with the University, appointed by the University, or if required to be appointed by the Authority or another person, not unsatisfactory to the University, and in each instance not unsatisfactory to the Trustee, qualified to survey risks and to recommend insurance coverage for the Project Facilities # v2 E-4

135 and for facilities of institutions of higher education and like organizations, and having a favorable reputation for skill and experience in such surveys and such recommendations, who may be a broker or agent with whom the University or the Authority transacts business. Investment Securities shall mean and include any of the following securities which at the time are legal investments under the laws of the Commonwealth for moneys held pursuant to the Indenture: (a) U.S. Government Obligations; (b) obligations issued or guaranteed by any of the following federal agencies which are fully guaranteed by the full faith and credit of the United States of America: (i) General Services Administration participation certificates; (ii) Government National Mortgage Association ( GNMAs ) guaranteed mortgage-backed securities and guaranteed participation certificates; (iii) Farmers Home Administration certificates of beneficial ownership; (iv) and (v) U.S. Maritime Administration guaranteed Title XI financings; provided, however, that stripped securities are only permitted if stripped by the agency itself; (c) obligations issued by any of the following federal agencies which obligations represent the full faith and credit of the United States of America: (i) Export-Import Bank of the United States; (ii) Rural Economic Community Development Administration; (iii) U.S. Maritime Administration; (iv) Small business Administration; (v) Federal Housing Administration; (vi) U.S. Department of Housing & Urban Development local authority bonds; and (vii) Federal Financing Bank; (d) direct obligations issued or guaranteed by any of the following federal agencies which are not fully guaranteed by the faith and credit of the United States of America: (i) Federal National Mortgage Association ( FNMAs ) senior debt obligations rated Aaa by Moody s and AAA by Standard & Poor s; (ii) Federal Home Loan Mortgage Corporation ( FHLMCs ) participation certificates and senior debt obligations rated Aaa by Moody s and AAA by Standard & Poor s; (iii) Federal Home Loan Banks senior debt obligations; and (iv) Resolution Funding Corp. (REFCORP) debt obligations; (e) obligations issued by any state of the United States of America or any political subdivision thereof which are rated in one of the two highest rating categories by Moody s and Standard & Poor s; (f) commercial paper (having original maturities of not more than 270 days) rated, at the time of purchase, P-1 by Moody s and A-1 or better by Standard & Poor s; (g) certificates of deposit, savings accounts, deposit accounts or money market deposits in amounts that are continuously and fully insured by the Federal Deposit Insurance Corporation, including the Bank Insurance Fund and the Savings Association Insurance Fund; (h) federal funds or bankers acceptances (in each case having maturities of not more than 365 days following the date of purchase) of any domestic commercial bank (including without limitation the Trustee or any bank affiliated with the # v2 E-5

136 Trustee) or United States branch office of a foreign bank; provided that such bank has an unsecured, uninsured and unguaranteed obligation rating of P-1 or A-3 or better by Moody s and A-1 or A or better by Standard & Poor s; (i) investments in money market funds registered under the Federal Investment Company Act of 1940, whose shares are registered under the Federal Securities Act of 1933, and having a rating of AAAm or AAAm-G by Standard & Poor s, and if rated by Moody s rated Aaa, Aa1 or Aa2, including without limitation any mutual fund for which the Trustee or an affiliate of the Trustee serves as investment manager, administrator, shareholder servicing agent, and/or custodian or subcustodian, notwithstanding that (i) the Trustee or an affiliate of the Trustee receives fees from such funds for services rendered, (ii) the Trustee charges and collects fees for services rendered pursuant to the Indenture, which fees are separate from the fees received from such funds, and (iii) services performed for such funds and pursuant to the Indenture may at times duplicate those provided to such funds by the Trustee or its affiliates; (j) repurchase agreements, investment agreements (also referred to as guaranteed investment contracts) and forward delivery agreements; and (k) savings accounts, deposit accounts or money market deposits of any bank (including any banking affiliates of the Trustee), trust company or savings and loan association which are fully insured by the Federal Deposit Insurance Corporation or, to the extent not so insured, collateralized in accordance with the laws of the Commonwealth relating to the investment of public funds (72 Pa. C.S.A et seq., Act of August 6, 1971, P.L. 281, No. 72); Loan shall mean the loan by the Authority to the University of the proceeds of the 2007 Bonds pursuant to the Loan Agreement in the original principal amount of $87,915,000. Loan Payments means the amounts required to be paid by the University in repayment of the Loan pursuant to the Loan Agreement. Long Term Debt means the outstanding 2007 Bonds, all Additional Bonds and all outstanding obligations for the repayment of borrowed money incurred by the University after the Closing Date, whether due and payable in all events, or upon the performance of work, the possession of property as lessee, or the rendering of services by others, except: (a) Short Term Debt including, but not limited to, the repayment in twelve (12) consecutive equal monthly installments of principal and interest to retire any draw of the Standby Letter of Credit commencing one (1) month from the date of such draw; (b) Current obligations payable out of current revenues, including current payments for the funding of pension plans; (c) Obligations under contracts for supplies, services, and pensions, allocable to current operating expenses of future years in which the supplies are to be furnished, the services rendered, or the pensions paid; # v2 E-6

137 (d) Rentals payable in future years under leases not required to be capitalized under generally accepted accounting principles applicable in the preparation of the University s financial statements; (e) Any obligation to the extent the same (i) is paid from restricted funds of the University or (ii) is secured or payable solely from specific property of the University and is in the form of a purchase money debt incurred to acquire a specific asset; and property. (f) Any obligation payable in future years for the purchase of For purposes of the Indenture, interest rate swaps, hedges or other derivatives transactions based upon a notional principal amount shall not be deemed to constitute Long Term Debt, Short Term Debt, or other debt under any section or provisions of the Indenture. Net Investment in Plant shall mean Property and Equipment (as presented in the University s most recent audited financial statements) less outstanding debt used to finance the Property and Equipment. Net Revenues shall mean for any period the Unrestricted University Revenues less Unrestricted University Expenses. Officer s Certificate shall mean, in the case of the University, a certificate, executed by the Chairman of the Board of Trustees of the University, or any other authorized officer, and, in the case of the Authority, the Executive Director or Assistant Executive Director, and Secretary, Treasurer, or Assistant Secretary-Treasurer of the Authority, or any other authorized officer. Ordinary Services and Ordinary Expenses shall mean those services normally rendered, and those expenses normally incurred, by a trustee under instruments similar to the Indenture, excluding any service performed in anticipation of or after the occurrence of an Event of Default. Outstanding Bonds, Bonds outstanding, Outstanding or outstanding shall mean as of the applicable date, all Bonds which have been authenticated and delivered, or which are being delivered by the Trustee under the Indenture except (i) Bonds canceled by the Trustee and (ii) Bonds or portions thereof for the payment of which cash or certain Investment Securities shall have been deposited with the Trustee (whether on or prior to a maturity or redemption date). For purposes of approval or consent by the Registered Owners, Outstanding Bonds, Bonds outstanding, Outstanding or outstanding shall not include Bonds owned by or on behalf of the Authority, the University or an Affiliate (unless all of the Outstanding Bonds are so owned). Outstanding in connection with Long-Term Debt shall mean, as of the time in question, all Bonds which have been authenticated and delivered under the Indenture or in case of other Long-Term Debt, all such Long-Term Debt issued under the particular debt-incurring instrument, except: # v2 E-7

138 (a) Long-Term Debt theretofore canceled or required to be canceled pursuant to the terms of the debt incurring instrument; (b) Long-Term Debt for the payment, redemption, or purchase of which moneys or non-callable Government Obligations the principal of and interest on which, when due, will provide sufficient moneys to fully pay such Long-Term Debt in accordance with the debt-incurring instrument, shall have been or shall concurrently be deposited with the Trustee or the obligee or trustee or escrow agent appointed for such purpose; provided that, if such Long- Term Debt is being redeemed or prepaid, the required notice of redemption or prepayment, if any, shall have been given or provision satisfactory to the Trustee shall have been made therefore, and that if such Long-Term Debt is being purchased, there shall be firm commitment for the purchase and sale thereof; and (c) Long-Term Debt in substitution for which other Long-Term Debt has been authenticated and delivered pursuant to the debt incurring instrument. Partially Amortizing Debt shall mean Long Term Debt which in any one year requires principal or sinking fund and interest payments which exceed such payments in the immediately preceding year by at least 25% (excepting from such calculation the first year in which such payments are required). Parity Obligations shall mean any Long Term Debt which by its terms is intended to be secured on a parity basis with the 2007 Bonds by a security interest in the Unrestricted University Revenues, together with the obligations of the University under the Reimbursement Agreement. Payment Office shall mean the office of the Trustee designated as such as provided in the Indenture where Bonds may be surrendered for payment upon redemption, acceleration or maturity Permanently Restricted Net Assets shall mean net assets subject to donorimposed stipulations that they be maintained permanently by the University, as recorded on the annual financial statements of the University, or the equivalent as estimated by the University if the University s accounting presentation format changes materially in the future. Principal User shall mean, with respect to any facility, a principal user as such term is used in Section 144(a) of the Code, including, without limiting the generality of the foregoing, (i) any person whose ownership interest in such facility exceeds 10% or, if no ownership interest in such facility exceeds 10%, any person (or persons, in the case of multiple equal owners) holding the largest ownership interest in such facility, (ii) any person who leases more than 10% of such facility under a lease with a term (taking into account all options to renew and reasonably anticipated renewals) of more than one year, and (iii) any person who enjoys the use of such facility in a degree comparable to the enjoyment of a person described in clauses (i) and (ii); for purposes of determining the extent of a person s ownership interest, lease interest, lease term and degree of enjoyment of a facility, the term person includes a person and all Related Persons with respect to such person. # v2 E-8

139 Project shall mean each project the Costs of which shall be financed with the proceeds of the Additional Bonds issued under the Indenture, excluding the 2007 Project. Project Costs shall mean, with respect to the 2007 Project, costs of the 2007 Project permitted under the Act, including, but not limited to, the following: (a) costs incurred in acquisition, construction, installation, equipment or improvement of the Project Facilities, including costs incurred in respect of the Project Facilities for preliminary planning and studies; architectural, engineering, accounting, consulting, legal and other professional fees and expenses; labor, services and materials; (b) fees, charges and expenses incurred in connection with the authorization, sale, issuance and delivery of the 2007 Bonds, including without limitation bond discount, printing expense, insurance, recording fees and the initial fees and expenses of the Trustee and Authority; provided that the amount of the proceeds of the 2007 Bonds used to finance issuance costs shall not exceed 2% of the aggregate face amount of the 2007 Bonds less the net amount of original issue discount in connection with the first sale thereof, within the meaning of Section 147(g) of the Code; Authority; (c) the Annual Administrative Fee and Administrative Expenses of the (d) payment of fees of the Trustee accruing during the construction period for the Project Facilities; (e) any other costs, expenses, fees and charges properly chargeable to the cost of acquisition, construction, installation, equipment or improvement of the Project Facilities; and (f) payments made to the Rebate Fund. Indenture. Project Fund shall mean the fund so designated and established pursuant to the Qualified 501(c)(3) Bonds shall mean bonds issued for the benefit of organizations described in Section 501(c)(3) of the Code meeting the requirements imposed by Section 145 of the Code or Section 103 of the Internal Revenue Code of Rating Service shall mean Moody s Investors Service ( Moody s ), if the Bonds are rated by such at the time, Standard & Poor s Ratings Services, a division of The McGraw-Hill Companies ( Standard & Poor s ), if the Bonds are rated by such at the time, and Fitch Ratings ( Fitch ), if the Bonds are rated by such at the time, and their respective successors and assigns, or if any of them shall be dissolved or no longer assigning credit ratings to long term debt, then any other nationally recognized entity assigning credit ratings to long term debt designated in writing by the Authority. Indenture. # v2 Rebate Fund shall mean the fund so designated and established pursuant to the E-9

140 Redevelopment Capital Assistance Payments shall mean the payments received by the Authority pursuant to its Grant Agreement with the Commonwealth of Pennsylvania, acting by and through the Office of the Budget, under the Redevelopment Capital Assistance Program for the funding of the 2007 Project and transferred to the Trustee for deposit in the appropriate account of the Series A Bonds Debt Service Fund. Register shall mean the books of the Authority maintained by the Trustee, as registrar and transfer agent, for the registration of the Bonds and the transfer of the Bonds. the Register. Registered Owner shall mean the person in whose name a Bond is registered on Regular Record Date shall mean the close of business on the fifteenth day of the calendar month (whether or not a Business Day) next preceding each Interest Payment Date. Regulatory Body shall mean and include (a) the United States of America and any department of or corporation, agency or instrumentality heretofore or hereafter created, designated or established by the United States of America, (b) the Commonwealth, any political subdivision thereof, and any department of or corporation, agency or instrumentality heretofore or hereafter created, designated or established by the Commonwealth, (c) the County and any department of or corporation, agency or instrumentality heretofore or hereafter created, designated or established by the County, and (d) any other public or private body having or exercising regulatory jurisdiction and authority over the School or accrediting organizations, but shall not include the Authority. Related Person shall have the meaning set forth in Section 144(a)(3) of the Code and shall include (to the extent there provided) any parent, subsidiary, affiliated corporation or unincorporated enterprise, majority shareholder and commonly owned entity. Resolution shall mean the resolutions of the Board of the Authority authorizing the 2007 Bonds, the Indenture and the Loan Agreement. Series A Bonds Debt Service shall mean for any period or payable at any time, the principal of, premium, if any, on and interest on the Series A Bonds for that period or payable at that time whether due on an Interest Payment Date, at maturity or upon acceleration or redemption. Series A Bonds Debt Service Reserve Fund Requirement shall mean with respect to the Series A Bonds Debt Service Reserve Fund, to the extent permitted by applicable law, including, without limitation, federal income tax law, the maximum annual debt service due for the current or succeeding Bond Year, calculated as of the date of issuance of Series A Bonds secured by the Series A Bonds Debt Service Reserve Fund in any Fiscal Year. Pursuant to Section 148 of the Code, the amount of sale proceeds of the Series A Bonds deposited to the Series A Bonds Debt Service Reserve Fund may not exceed 10% of such sale proceeds and the Series A Bonds Debt Service Reserve Fund will be treated as reasonable required reserve only to the extent the amount deposited therein upon issuance of the Series A Bonds does not exceed the least of (a) the maximum annual principal and interest requirements on the Series A Bonds, # v2 E-10

141 (b) 10% of the sale proceeds of the Series A Bonds, and (c) 125% of the average annual principal and interest requirements for the Series A Bonds. Series B Bonds Debt Service shall mean for any period or payable at any time, the principal of, premium, if any, on and interest on the Series B Bonds for that period or payable at that time whether due on an Interest Payment Date, at maturity or upon acceleration or redemption. Series B Bonds Debt Service Reserve Fund Requirement shall mean with respect to the Series B Bonds Debt Service Reserve Fund, to the extent permitted by applicable law, including, without limitation, federal income tax law, the maximum annual debt service due for the current or succeeding Bond Year, calculated as of the date of issuance of Series B Bonds secured by the Series B Bonds Debt Service Reserve Fund in any Fiscal Year. Pursuant to Section 148 of the Code, the amount of sale proceeds of the Series B Bonds deposited to the Series B Bonds Debt Service Reserve Fund may not exceed 10% of such sale proceeds and the Series B Bonds Debt Service Reserve Fund will be treated as reasonable required reserve only to the extent the amount deposited therein upon issuance of the Series B Bonds does not exceed the least of (a) the maximum annual principal and interest requirements on the Series B Bonds, (b) 10% of the sale proceeds of the Series B Bonds, and (c) 125% of the average annual principal and interest requirements for the Series B Bonds. Short-Term Debt shall mean all obligations of the University for the repayment of borrowed money payable upon demand or having a maturity of less than two years from the date incurred, including but not limited to the repayment in twelve (12) consecutive equal monthly installments of principal and interest to retire any draw of the Standby Letter of Credit commencing one (1) month from the date of such draw, excluding the current portion of any Long Term Debt, trade debt for goods and services incurred in the ordinary course of business, non-capital leases and all other items (b) through (f) excluded under the definition of Long Term Debt. Special Record Date shall mean the date established by the Trustee pursuant to the Indenture in connection with the payment of overdue interest on the Bonds. Supplemental Indenture shall mean any amendment or supplement to the Indenture, duly executed by the Trustee and the Authority. Supplemental Loan Agreement shall mean any amendment or supplement to the Loan Agreement, duly executed by the Authority and the University. Temporarily Restricted Net Assets shall mean net assets resulting from (a) contributions and other inflows of assets whose use by the University is limited by donorimposed stipulations that either expire by passage of time or can be fulfilled and removed by actions of the University pursuant to those stipulations as recorded in the University s most recent audited financial statements. Unassigned Authority s Rights shall means all of the rights of the Authority to receive Additional Payments, to be held harmless and indemnified, to be reimbursed for attorney s fees and expenses, to receive copies of notices, reports and similar matters required # v2 E-11

142 hereunder, to give or withhold approvals and consents required or permitted hereunder, and to execute amendments, modifications or termination of the Loan Agreement. University s Agreements shall mean the Loan Agreement and the Bond Purchase Agreement. Unrestricted Net Assets shall mean net assets that are neither Permanently Restricted Net Assets nor Temporarily Restricted Net Assets. Unrestricted University Expenses shall mean such expenses and other costs incurred by the University that would properly be recorded as deductions from Unrestricted Net Assets under generally accepted accounting principles during the period being measured, exclusive of depreciation and interest on Long-Term Debt; or the equivalent as estimated by the University if the University s accounting presentation format changes materially in the future. Unrestricted University Revenues shall mean such revenues, income and other moneys (both operating and non-operating) received by the University that would properly be recorded as additions to Unrestricted Net Assets under generally accepted accounting principles during the period being measured; provided that, for purposes of this definition, in each context involving measuring coverage for purposes of a financial covenant, an amount equal to the budgeted unrestricted investment earnings (realized and unrealized gains and income) of the University pursuant to the University s endowment spending formula as determined by the Board of Trustees of the University for such fiscal year shall be included and the balance of realized and unrealized gains or losses and any income earned on such investments shall be excluded; or the equivalent as estimated by the University if the University s accounting presentation format changes materially in the future. U.S. Government Obligations shall mean direct obligations of, and obligations the timely payment of the principal of and interest on which is unconditionally guaranteed by, the United States of America, including obligations issued or held in book-entry form on the books of the Department of the Treasury of the United States of America. SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE, THE LOAN AGREEMENT AND THE MORTGAGE The following are summaries of certain provisions of the Indenture, the Loan Agreement and the Mortgage. These summaries should not be regarded as full statements of the documents themselves, or of the portions summarized. Reference is made to the documents in their entireties, copies of which are on file at the principal corporate trust office of the Trustee, for the complete statements of the provisions thereof. Pledge and Assignment THE INDENTURE Under the Indenture, the Authority pledges to the Trustee all of its right, title and interest in and to the Trust Estate to secure the payment of the Bonds and the performance and observance of the Authority s covenants under the Indenture. Except as otherwise provided in # v2 E-12

143 the Indenture, the Loan Payments under the Loan Agreement (other than its rights to receive payment of its Annual Administrative Fees and all Administrative Expenses), the Unrestricted University Revenues, the amounts on deposit in the funds and accounts established under the Indenture (other than the Rebate Fund and the Debt Service Reserve Funds, which shall be pledged as described in the Indenture) and amounts payable under the Mortgage shall be held for the equal and ratable benefit of the holders of all Bonds issued and outstanding under the Indenture. The County Guaranty and the SLOC shall provide additional security as to the Series B Bonds only. Additional Bonds Under the Indenture, the Authority may issue one or more series of Additional Bonds from time to time to pay the Project Costs of completing the 2007 Project, the Cost of undertaking a Capital Addition or the Cost of refunding all or a portion of the Outstanding Bonds of any one or more series or all of any particular Long-Term Debt other than the 2007 Bonds. The Trustee shall authenticate and deliver such Additional Bonds at the request of the Authority, but only upon compliance with the applicable requirements as set forth in the Indenture and in the Loan Agreement, and upon delivery to the Trustee of certain Officer s Certificates, Certified Resolutions, executed counterparts of such documents as are necessary or appropriate for the purposes for which the Additional Bonds are being issued, and opinions of Counsel. Project Fund The Trustee shall establish a Project Fund for the payment of Project Costs of the 2007 Project or the Costs of Projects. The Project Fund shall consist of amounts deposited therein pursuant to the Indenture. Moneys on deposit in the Project Fund shall be used only to pay the Project Costs of the 2007 Project upon submission of appropriate requisitions to the Trustee required by the Indenture and upon the satisfaction of such conditions as described in the Indenture. Moneys remaining on deposit upon completion of the 2007 Project and satisfaction of the conditions as described in the Indenture shall be applied to the mandatory redemption of the Series A Bonds and the Series B Bonds, on a proportionate basis. Debt Service Funds The Trustee shall establish two funds designated as the Series A Bonds Debt Service Fund and the Series B Bonds Debt Service Fund. Moneys held in the Debt Service Funds shall be applied by the Trustee in accordance with the Indenture to make payments when due of principal of, redemption price, if any, and interest on the Series A Bonds and Series B Bonds, as applicable. If on the fifth Business Day prior to any principal or interest payment date there are not sufficient moneys in the Series A Bonds Debt Service Fund on such date to pay principal of and interest on the Series A Bonds to become due and owing on such date, moneys shall be transferred to the Series A Bonds Debt Service Fund from the Series A Bonds Debt Service Reserve Fund in an amount which, together with the amount then on deposit in the Series A Bonds Debt Service Fund, will result in the Series A Bonds Debt Service Fund having the # v2 E-13

144 balance required to be on deposit therein in order to pay interest and principal to become due and payable on such date. If on the sixty-fifth (65 th ) Business Day prior to any principal or interest payment date there are not sufficient moneys in the Series B Bonds Debt Service Fund on such date to pay principal of and interest on the Series B Bonds to become due and owing on such date, the Trustee shall immediately notify the County of such shortfall, not less than sixty (60) days prior to such principal or interest payment date pursuant to the terms of the Guaranty, and moneys shall be transferred to the Series B Bonds Debt Service Fund from the following sources in an amount which, together with the amount then on deposit in the Series B Bonds Debt Service Fund, will result in the Series B Bonds Debt Service Fund having the balance required to be on deposit therein in order to pay interest and principal to become due and payable on such date: First, transfers shall be made pursuant to the terms and conditions of the Standby Letter of Credit; and Second, transfers shall be made pursuant to the terms and conditions of the Guaranty; and Fund. Third, transfers shall be made from the Series B Bonds Debt Service Reserve Capitalized Interest. The Trustee shall deposit the proceeds of the Series A Bonds in such amount as designated in the Indenture for deposit in the Series A Bonds Capitalized Interest Account and the proceeds of the Series B Bonds in such amount as designated in the Indenture for deposit in the Series B Bonds Capitalized Interest Account to provide for payment of interest on the 2007 Bonds during construction of the Project Facilities and an initial operating period. Redevelopment Capital Assistance Payment Account. The Trustee shall establish as part of the Series A Bonds Debt Service Fund a Redevelopment Capital Assistance Payment Account for the special mandatory redemption of Series A Bonds. Upon the receipt of the Redevelopment Capital Assistance Payments from the Authority, the Trustee shall deposit such Redevelopment Capital Assistance Payments in the Redevelopment Capital Assistance Payment Account. If at any time all of the Series A Bonds shall have been purchased, redeemed or paid, the Trustee shall make no further transfers to the Redevelopment Capital Assistance Payment Account. Upon receipt of an Officer s Certificate of the University that all or any portion of the balance of Redevelopment Capital Assistance Payments in such account is not required for reimbursement to the Commonwealth pursuant to the requirements of the Redevelopment Capital Assistance Program, the Officer s Certificate of the University shall specify such amount and the Trustee shall transfer any balance then in the Redevelopment Capital Assistance Payment Account to the Series B Bonds Debt Service Fund. Should the University certify in its Officer s Certificate that all or a portion of the balance remaining in the Redevelopment Capital Assistance Payment Account is required for reimbursement to the Commonwealth pursuant to the requirements of the Redevelopment Capital Assistance Program, the Officer s Certificate of the University shall specify such amount, and this amount shall be returned to the Authority for reimbursement to the Commonwealth. # v2 E-14

145 When the principal of, redemption premium, if any, and interest on the Series A Bonds have been paid or provision for payment of the same has been made, all proceeds remaining in the Series A Bonds Debt Service Fund shall be transferred to the Series B Bonds Debt Service Fund. Whenever the amount in the Series B Bonds Debt Service Fund available for the payment of principal, premium, if any, and interest is sufficient to redeem all of the outstanding Series B Bonds and to pay interest accrued to the redemption date, the Authority will, upon the written request of the University, cause the Trustee to redeem all such Series B Bonds on the redemption date specified by the University pursuant to the Series B Bonds and the Indenture. Debt Service Reserve Funds The Trustee shall establish two funds designated as the Series A Bonds Debt Service Reserve Fund and the Series B Bonds Debt Service Reserve Fund. Funds will be deposited in the appropriate Debt Service Reserve Fund in sufficient amounts to satisfy the Series A Bonds Debt Service Reserve Fund Requirement for the Series A Bonds and the Series B Bonds Debt Service Reserve Fund Requirement for the Series B Bonds. The moneys on deposit in the Series A Bonds Debt Service Reserve Fund and the Series B Bonds Debt Service Reserve Fund are pledged and shall be available for the payment of principal and interest, on the related series of 2007 Bonds. In the event the Trustee utilizes any moneys in the Debt Service Reserve Funds to make up any deficiencies in the respective Debt Service Funds, the Authority will require the University to pay pursuant to the Loan Agreement, as requested by the Trustee, the amount necessary to maintain in the Debt Service Reserve Funds an amount equal to the appropriate Debt Service Reserve Fund Requirements on all Outstanding 2007 Bonds secured by such Debt Service Reserve Fund, such amount to be paid by the University within ten (10) Business Days, following receipt by the University of written notice from the Trustee. If any series of the 2007 Bonds secured by the Debt Service Reserve Funds is paid or redeemed in part or in full, the amount required to be maintained in such Debt Service Reserve Fund shall not be reduced to an amount equal to the Debt Service Reserve Fund Requirement on the 2007 Bonds so secured and Outstanding thereafter, but shall be maintained at the Debt Service Reserve Fund Requirement as of the date of issuance of the 2007 Bonds. If the value of investments held in the Debt Service Reserve Funds, falls below the appropriate Debt Service Reserve Fund Requirements on such 2007 Bonds secured by the Debt Service Reserve Funds, the Trustee shall notify the University of such deficiency and the University shall pay such deficiency as additional payments under the Loan Agreement when so requested by the Trustee. If such deficiency occurs as a result of a decline in value of the Debt Service Reserve Funds, funds sufficient to meet the appropriate Debt Service Reserve Fund Requirements shall be deposited into the appropriate Debt Service Reserve Fund in three consecutive equal monthly installments, the first of which shall be due on the first day of the month succeeding such notice from the Trustee. If at any time the value of the investments exceeds the Debt Service Reserve Fund Requirements on the Outstanding 2007 Bonds secured # v2 E-15

146 by the appropriate Debt Service Reserve Fund, and provided that no Event of Default has occurred and is then continuing hereunder, the University shall be entitled to withdraw the amount of such excess by a transfer by the Trustee of such excess amount to the appropriate Debt Service Fund; provided, however, that upon liquidation of any investments to effect such payment or transfer, the value of the remaining investments in the appropriate Debt Service Reserve Funds is not less than the applicable Debt Service Reserve Fund Requirements on Outstanding 2007 Bonds secured by the appropriate Debt Service Reserve Fund. Rebate Fund The Trustee shall establish a Rebate Fund. In accordance with the terms of the Loan Agreement, the University shall determine, or furnish information to a Financial Consultant to determine, the amount of Excess Earnings as of the following dates: (i) a date selected by the University that is not later than five years after the date of issuance of the 2007 Bonds, (ii) the last day of each succeeding five year period following such date on which there are 2007 Bonds outstanding, and (iii) the date on which the last 2007 Bond matures or is redeemed (each a Computation Date ). A copy of such determination shall be provided to the Trustee and the Authority. Upon receipt of such determination, the Trustee shall notify the University in writing of the amount then on deposit in the Rebate Fund. If the amount then on deposit in the Rebate Fund is in excess of the Excess Earnings as determined by the University or the Financial Consultant, the Trustee shall at the written direction of the University forthwith pay that excess amount to the University. If the amount then on deposit in the Rebate Fund is less than such Excess Earnings, the University shall, within five days after receipt of the aforesaid notice from the Trustee (but in no event more than sixty (60) days after the Computation Date), pay to the Trustee for deposit in the Rebate Fund an amount sufficient to cause the Rebate Fund to contain an amount equal to such Excess Earnings. If the University does not pay that required amount within five days after receipt of the aforesaid notice from the Trustee (but in no event more than sixty (60) days after the Computation Date), the Trustee shall immediately transfer that amount from the Project Fund or from the Series A Bonds Debt Service Fund and the Series B Bonds Debt Service Fund in a proportionate fashion to the Rebate Fund to the extent there are moneys available in either thereof. Within 60 days following each Computation Date, the Trustee, acting at the written direction of the University and on behalf of the Authority and the University, shall pay to the United States (in such manner and accompanied by such forms as the University shall deliver) from the moneys then on deposit in the Rebate Fund an amount equal to 90% (or such greater percentage not in excess of 100% as the University may direct the Trustee to pay) of the Excess Earnings earned from the date of the original delivery of the 2007 Bonds to the Computation Date. Within 60 days after the payment in full of all outstanding 2007 Bonds, the Trustee shall pay to the United States (in such manner and accompanied by such forms as the University shall deliver) from the moneys then on deposit in the Rebate Fund an amount equal to 100% of the Excess Earnings earned from the date of the original delivery of the 2007 Bonds to the date of such payment (less the amount of Excess Earnings, if any, previously paid to the United States pursuant to this paragraph) and any moneys remaining in the Rebate Fund following such payment shall be paid to the University. All computations of Excess Earnings pursuant to this paragraph and the Loan Agreement shall treat the amount or amounts, if any, previously paid to the United States pursuant to this paragraph as amounts on deposit in the Rebate Fund. # v2 E-16

147 If all the gross proceeds of the 2007 Bonds, within the meaning of Section 148(f) of the Code, together with the gross proceeds of any other obligations treated as part of the same issue for purposes of Section 148(f) of the Code, are invested solely in tax-exempt obligations or are fully expended for the governmental purpose for which the 2007 Bonds were issued within six months of the date of issuance of the 2007 Bonds, or if the 2007 Bonds qualify for the exemption from rebate by virtue of the 18-month spend-out exception or the two-year construction issue rebate exception under Section 148 of the Code and the regulations promulgated thereunder, then the provisions of the Indenture and of the Loan Agreement shall not be applicable to the investment of original proceeds of the 2007 Bonds and the University shall not be required to comply with the Indenture with respect to such proceeds; provided that the University shall remain responsible to determine Excess Earnings, if any, and to cause to be paid to the Trustee for deposit in the Rebate Fund and payment to the United States such amounts, if any, at such times as may be necessary to comply with the requirements of Section 148(f) of the Code with respect to the 2007 Bonds. The University shall notify the Trustee in writing of the applicability of this paragraph to the 2007 Bonds. Investment of Funds All moneys received by the Trustee under the Indenture shall be deposited with the Trustee, until or unless invested or deposited as provided in the Indenture. All deposits with the Trustee (whether original deposits or deposits or redeposits in time accounts) shall be secured as required by applicable law for such trust deposits. Moneys in the Project Fund, the Debt Service Funds and the Debt Service Reserve Funds (except moneys representing principal of, premium, if any, or interest on any 2007 Bonds which are deemed paid under the Indenture) shall be invested and reinvested by the Trustee (a) at the written direction of an Authorized Representative of the University, and so long as no Event of Default has occurred and is continuing under the Indenture, in Investment Securities that the University s Authorized Representative assures meet the requirements of the Loan Agreement or (b) absent written direction from the University, in shares of a money market fund described in clause (i) of the definition of Investment Securities. Moneys in the Debt Service Funds representing principal of, premium, if any, or interest on any 2007 Bonds which are deemed paid under the Indenture shall be invested only if and as provided in the Indenture. Investments of moneys in the Debt Service Funds shall mature or be redeemable at the direction of the University at the times and in the amounts necessary to provide moneys to make Debt Service payments as they become due on Interest Payment Dates, at stated maturity or by redemption. The Trustee shall sell or redeem investments credited to the Debt Service Funds to produce sufficient moneys available hereunder at the times required for the purpose of paying Debt Service when due as aforesaid, and shall do so without necessity for any order by or on behalf of the Authority or the University and without restriction by reason of any order. Each investment of moneys deposited in the Project Fund for application to the Project Costs shall mature or be redeemable by the Trustee at the written direction of the University at such time as may be foreseeably necessary to make payments from the Project Fund. # v2 E-17

148 Subject to any directions from an Authorized Representative of the University with respect thereto, the Trustee may from time to time sell investments in the Project Fund, the Debt Service Funds and the Debt Service Reserve Funds made pursuant to the Indenture and reinvest the proceeds at the written direction of an Authorized Representative of the University in Investment Securities maturing or redeemable as provided in the Indenture. Any investment made from moneys credited to any fund established hereunder shall constitute part of that respective fund. Each fund established hereunder shall be credited with all proceeds of sale and income from the respective investment of moneys credited to such Fund, except that interest and income derived from any investments or deposits in the Series A Bonds Debt Service Reserve Fund may be transferred to the Series A Bonds Debt Service Fund to make up any deficiency therein and any investments or deposits in the Series B Bonds Debt Service Reserve Fund may be transferred to the Series B Bonds Debt Service Fund to make up any deficiency therein. The value of Investment Securities in any fund established hereunder shall be determined as follows: (a) For the purpose of determining the amount in any fund, all Investment Securities credited to such fund shall be valued at fair market value. The Trustee shall determine the fair market value based on accepted industry standards and from information derived from accepted industry providers. Accepted industry providers shall include but are not limited to pricing services provided by Financial Times Interactive Data Corporation, Merrill Lynch, Citigroup Global Markets Inc., Bear Stearns, and Lehman Brothers. (b) As to certificates of deposit and bankers acceptances: the value thereof shall be the face amount thereof, plus accrued interest thereon; and (c) As to any Investment Securities not specified above: The value thereof shall be established by prior agreement among the University and the Trustee. Covenants of the Authority The Authority covenants, among other things, promptly to pay, but only from the Trust Estate, the principal of the Bonds and interest and premium, if any, thereon. The Authority shall enforce payment of all amounts payable by the University under the Loan Agreement, and shall otherwise enforce all of its rights and privileges, and honor all of its obligations thereunder. The Authority covenants that the proceeds of the Bonds will not be used in a manner which would cause the Bonds to be arbitrage bonds within the meaning of the Code. The Authority further covenants that it shall take all actions that may be required of the Authority for the interest on the Bonds to e and remain excluded from the gross income of the Registered Owners for federal income tax purposes. The Authority covenants that it shall maintain its corporate existence, use its best efforts to maintain all of its rights, powers and privileges, and shall comply with all valid laws, rules and regulations relating to the Authority s participation in the 2007 Bonds. # v2 E-18

149 Defeasance When the principal of, redemption premium, if any, and interest on all Bonds issued under the Indenture have been paid, or provision has been made for payment of the same together with the compensation and expenses of the Trustee and all other sums payable under the Indenture by the Authority or the University, the right, title and interest of the Trustee in and to the Trust Estate shall thereupon cease and the Trustee, on the written demand of the Authority or the University, shall release the Indenture and shall, at the expense of the University, execute such documents to evidence such release as may be reasonably required by the Authority or the University and shall turn over to the University or to such person, body or authority as may be entitled to receive the same, all balances then held by it under the Indenture not required for the payment of the Bonds and such other sums payable under the Indenture. If payment or provision therefor is made with respect to less than all of the Bonds of any maturity, the particular Bonds (or portions thereof) of such maturity for which provision for payment shall have been considered made shall be selected by lot by the Trustee, and thereupon the Trustee shall take similar action for the release of the Indenture with respect to such Bonds. Provision for the payment of Bonds shall be deemed to have been made when the Trustee holds in the Debt Service Fund (1) cash in an amount sufficient to make all payments (including principal and interest payments) with respect to such Bonds, or (2) noncallable investments listed in paragraphs (a) and (b) of the definition of Investment Securities herein, or any combination of the foregoing, maturing on or before the date or dates when the payments specified above shall become due, the principal amount of which and the interest thereon, when due are or will be in the aggregate sufficient without reinvestment to make all such payments, or (3) any combination of cash and such obligations the amounts of which and interest thereon, when due, are or will be, in the aggregate, sufficient without reinvestment to make all such payments; provided that the Trustee shall have received (i) an opinion of Bond Counsel to the effect that a deposit of obligations described in clause (2) or (3) above will not adversely affect the exclusion from gross income for federal income tax purposes of the interest on any of the Bonds or cause any of the Bonds to be classified as arbitrage bonds within the meaning of Section 148 of the Code; and (ii) a verification report from an independent certified public accountant confirming that the deposit of such obligations is sufficient to make all payments specified in the Indenture. If a forward supply contract is employed in connection such deposit, (y) the verification report shall expressly state that the adequacy of the escrow to accomplish the refunding relies solely on the initial escrowed investments and the maturing principal thereof and interest income thereon, and does not assume performance under or compliance with the forward supply contract, and (z) the applicable escrow agreement shall provide that in the event of any discrepancy or difference between the terms of the forward supply contract and the escrow agreement (or the Indenture, if no separate escrow agreement is used), the terms of the escrow agreement or the Indenture, if applicable, shall be controlling. Neither the moneys nor the obligations deposited with the Trustee pursuant to the Indenture shall be withdrawn or used for any purpose other than, and such obligations and moneys shall be segregated and held in trust for, the payment of the principal or redemption price of and interest on the Bonds (or portions thereof). # v2 E-19

150 Whenever moneys or obligations shall be deposited with the Trustee for the payment or redemption of Bonds more than 60 days prior to the date that such Bonds are to mature or be redeemed, the Trustee shall mail a notice to the Registered Owners of Bonds for the payment of which such moneys or obligations are being held at their registered addresses stating that such moneys or obligations have been deposited. Notwithstanding the foregoing, no deposit with the Trustee under this subsection shall be deemed a payment of any Bonds which are to be redeemed prior to their stated maturity until such Bonds shall have been irrevocably called or designated for redemption on a date thereafter on which such Bonds may be redeemed in accordance with the provisions of the Indenture and proper notice of such redemption shall have been given in accordance with the Indenture or the Authority shall have given the Trustee, in form satisfactory to the Trustee, irrevocable instructions to give, in the manner and at the times prescribed by the Indenture, notice of redemption. If the principal of any Bonds becoming due, either at maturity or by call for redemption or otherwise, together with the premium (if any) thereon and all interest accruing thereon to the due date, has been paid or provision therefor made in accordance with the Indenture, all interest on such Bonds shall cease to accrue on the due date and all liability of the Authority with respect to such Bonds shall likewise cease, except as hereinafter provided. Thereafter, the Registered Owners of such Bonds shall be restricted exclusively to the funds so deposited for any claim of whatsoever nature with respect to such Bonds, and the Trustee shall hold such funds in trust for such Registered Owners uninvested and without liability for interest thereon. Moneys so deposited with the Trustee which remain unclaimed two years after the date payment thereof becomes due shall, at the written request of the University and if neither the Authority nor the University is at the time to the knowledge of the Trustee in default with respect to any covenant contained in the Indenture, the Bonds or the Loan Agreement, be paid to the University, and the Registered Owners of the Bonds for which the deposit was made shall thereafter be limited to a claim against the University; provided that the Trustee, before making payment to the University, may, at the expense of the University, cause a notice to be given to the Registered Owners at their registered addresses, stating that the moneys remaining unclaimed will be returned to the University after a specified date. In the absence of any such written request from the University, the Trustee shall from time to time deliver such unclaimed funds to or as directed by pertinent escheat authority, as identified by the Trustee in its sole discretion, pursuant to and in accordance with applicable unclaimed property laws, rules or regulations. Any such delivery shall be in accordance with the customary practices and procedures of the Trustee and the escheat authority. Defaults and Remedies Events of Default, as defined in the Indenture, include the following: (a) Failure to pay the principal of or any premium on any Bond when such principal or premium shall become due and payable, whether at stated maturity, by redemption, by acceleration or otherwise; (b) become due and payable; Failure to pay any interest on any Bond when such interest shall # v2 E-20

151 (c) Failure by the Authority to comply with the provisions of the Act relating to the Bonds or the 2007 Project or any Projects, or to observe or perform any other covenant, agreement or obligation on its part to be observed or performed and which is contained in the Indenture or in the Bonds, which failure shall have continued for a period of 30 days after written notice, by registered or certified mail, to the Authority and the University specifying the failure and requiring that it be remedied, which notice may be given by the Trustee in its discretion and shall be given by the Trustee at the written request of the Registered Owners of not less than the 25% in aggregate principal amount of Bonds outstanding; (d) A draw on the Debt Service Reserve Fund and an accompanying failure of the University to replenish the same as required by the Indenture; (e) in the Loan Agreement; The occurrence and continuance of an Event of Default as defined Mortgage; and (f) The occurrence and continuance of an Event of Default under the (g) Credit Support Agreement. The occurrence and continuance of a Termination Event under the Upon the occurrence and during the continuance of any Event of Default, the Trustee may, and upon written direction of the Registered Owners of a majority in principal amount of the Bonds then outstanding, shall, declare, by a notice in writing delivered to the Authority and the University, the principal of all Bonds outstanding (if not then already due and payable), together with interest accrued thereon, to be due and payable immediately. Upon any declaration that the principal of and interest on the Bonds are due and payable immediately, such principal and interest shall become and be due and payable immediately. The Trustee promptly after such declaration shall give notice thereof to all Registered Owners of the Bonds with respect to redemption of the Bonds, except that there shall be no minimum period of notice prior to the date of payment. Such notice shall specify the date, if known, on which payment of principal and interest shall be tendered to the Registered Owners of the Bonds. Upon any such declaration hereunder, the Trustee shall immediately exercise such rights as it may have under the Loan Agreement to declare all payments thereunder to be immediately due and payable. If, after the principal of the Bonds has been so declared to be due and payable, all arrears of principal of and interest on the Bonds outstanding are paid, and the Authority and the University also perform all other things in respect of which either of them may have been in default hereunder or under the Loan Agreement and pay the reasonable fees and charges of the Trustee, including reasonable attorney s fees and expenses, then, and in every such case, the Trustee or the Registered Owners of a majority in principal amount of the Bonds then outstanding, by notice to the Authority and the University (and to the Registered Owners or the Trustee, as the case may be) may annul such declaration and its consequences, and such annulment shall be binding upon the Trustee and all Registered Owners; provided that no annulment shall extend to or affect any subsequent Event of Default or shall impair any rights consequent thereon. # v2 E-21

152 Upon the occurrence and continuance of an Event of Default, the Trustee may pursue any available remedy to enforce the payment of Debt Service or the observance and performance of any other covenant, agreement or obligation under the Indenture, the Loan Agreement or any other instrument providing security, directly or indirectly, for the Bonds; provided that, if the University shall be in breach of the Loan Agreement, the Authority, upon five (5) days written notice to the University and the Trustee, in addition to any rights and remedies of the Trustee, may independently seek specific performance or otherwise enforce the covenants set forth in such Section; provided further that nothing herein shall be construed to require the Trustee to seek specific performance or otherwise enforce the covenants in such Section or to diminish, impair or otherwise limit the rights of the Trustee to enforce the Loan Agreement. If any Event of Default has occurred and is continuing, the Trustee in its discretion may, and upon the written request of Registered Owners of a majority in principal amount of all Bonds outstanding and receipt of indemnity to its satisfaction shall, in its own name: (a) By mandamus, or other suit, action or proceeding at law or in equity, enforce all rights of the Registered Owners, including the right to require the Authority to enforce any rights under the Loan Agreement and to require the Authority to carry out any other provisions of the Indenture for the benefit of the Registered Owners and to perform its duties under the Act; (b) Bring suit upon the Bonds; (c) By action or suit in equity require the Authority to account as if it were the trustee of an express trust for the Registered Owners; and (d) By action or suit in equity enjoin any acts or things which may be unlawful or in violation of the rights of the Registered Owners. If an Event of Default occurs and is continuing, the Trustee in its discretion may, and upon the written request of Registered Owners of a majority in principal amount of all Bonds outstanding and upon receipt of indemnity to its satisfaction shall, enforce each and every right granted to it as assignee of the Loan Agreement. After payment of any amount required pursuant to the Indenture, including those in the collection of moneys pursuant to any right given or action taken under the provisions of the Loan Agreement (including, without limitation, reasonable attorneys fees and expenses, and the allocated costs and expenses of in-house counsel and legal staff, except as limited by law or judicial order or decision entered in any action taken under this paragraph), all moneys so received by the Trustee, shall be applied as follows: (a) Unless the principal of all of the Bonds shall have become, or shall have been declared to be, due and payable, all of such moneys shall be deposited in a proportionate basis in the Debt Service Funds and shall be applied: # v2 E-22

153 First To the payment to the Registered Owners entitled thereto of all installments of interest then due on the Bonds, in the order of the dates of maturity of the installments of that interest, beginning with the earliest date of maturity and, if the amount available is not sufficient to pay in full any particular installment, then to the payment thereof ratably, according to the amounts due on that installment, to the Registered Owners entitled thereto, without any discrimination or privilege, except as to any difference in the respective rates of interest specified in the Bonds; and Second To the payment to the Registered Owners entitled thereto of the unpaid principal of any of the Bonds which shall have become due (other than Bonds previously called for redemption for the payment of which moneys are held pursuant to the provisions of the Indenture), whether at stated maturity or by redemption, in the order of their due dates, beginning with the earliest due date, with interest on those Bonds from the respective dates upon which they became due at the rates specified in those Bonds, and if the amount available is not sufficient to pay in full all Bonds due on any particular date, together with that interest, then to the payment thereof ratably, according to the amounts of principal due on that date, to the Registered Owners entitled thereto, without any discrimination or privilege. The surplus, if any, remaining after the application of the moneys as set forth above shall be paid to the University or the person lawfully entitled to receive the same as a court of competent jurisdiction may direct. (b) If the principal of all of the Bonds shall have become due or shall have been declared to be due and payable, all of those moneys shall be deposited in a proportionate basis into the Debt Service Funds and shall be applied to the payment of the principal and interest then due and unpaid upon the Bonds, without preference or priority of principal over interest, of interest over principal, of any installment of interest over any other installment of interest, or of any Bond over any other Bond, ratably, according to the amounts due respectively for principal and interest, to the Registered Owners entitled thereto, without any discrimination or privilege, except as to any difference in the respective rates of interest specified in the Bonds. (c) If the principal of all of the Bonds shall have been declared to be due and payable, and if that declaration thereafter shall have been rescinded and annulled subject to the provisions of paragraph (b) of the preceding paragraph in the event that the principal of all of the Bonds shall become due and payable later, the moneys shall be deposited in a proportionate basis in the Debt Service Funds and shall be applied in accordance with the provisions of the Indenture. (d) Whenever moneys are to be applied pursuant to the provisions of the preceding paragraphs, those moneys shall be applied at such times, and from time to time, as the Trustee shall determine, having due regard to the amount of moneys available for application and the likelihood of additional moneys becoming available for application in the future. Whenever the Trustee shall direct the application of those moneys, it shall fix the date upon # v2 E-23

154 which the application is to be made (and with respect to acceleration such date shall be fixed in accordance with the Indenture, and upon that date, interest shall cease to accrue on the amounts of principal, if any, to be paid on that date, provided the moneys are available therefor. The Trustee shall give notice of the deposit with it of any moneys and of the fixing of that date, all consistent with the requirements of the Indenture for the establishment of, and for giving notice with respect to, a Special Record Date for the payment of overdue interest. Except as otherwise provided in the Indenture, the Trustee shall not be required to make payment of principal of and any premium on a Bond to the Registered Owner thereof, until the Bond shall be presented to the Trustee for appropriate endorsement or for cancellation if it is paid fully. Amendments and Supplements The Authority and the Trustee may enter into supplements to the Indenture, without consent of, or notice to, the Bondholders, for one or more of the purposes set forth in the Indenture, which purposes include, but are not limited to, the following: (a) to add additional covenants of the Authority or to surrender any right or power conferred upon the Authority by the Indenture; (b) for any purpose not inconsistent with the terms of the Indenture or to cure any ambiguity, supply any omission or to cure, correct or supplement any defective (whether because of any inconsistency with any provision of the Indenture or otherwise) provision of the Indenture in such manner as shall not be inconsistent with the Indenture and shall not impair the security thereof or adversely affect the Bondholders; or (c) to implement the issuance of Additional Bonds as provided by the Indenture. Any amendment or supplement of the Indenture and of the rights and obligations of the Authority and of the owners of the Bonds thereunder, in any particular, may be made by a Supplemental Indenture, with the written consent of the owners of a majority in aggregate principal amount of the Bonds Outstanding at the time such consent is given. No such amendment or supplement shall permit a change in the terms of redemption or maturity of the principal of any Outstanding Bond or of any installment of interest thereon or a reduction in the principal amount or the redemption price, if any, thereof, or in the rate of interest thereon or the security provisions hereof without the consent of the owners of such Bond, or shall reduce the percentages or otherwise affect the classes of Bonds the consent of the owners of which is required to effect any such amendment or supplement, or shall change or modify any of the rights or obligations of the Trustee without the written consent thereto of the Trustee in addition to the consent of the Bond owners. Loan of Bond Proceeds THE LOAN AGREEMENT Upon issuance and sale of the 2007 Bonds, the Authority will deposit the proceeds thereof with the Trustee. The Authority will loan such proceeds to the University, and direct the Trustee to disburse such proceeds in accordance with the terms of the Loan Agreement and the Indenture, to or for the benefit of the University for the payment of Project Costs. Unless and until so disbursed, 2007 Bond proceeds and other moneys or investments in any fund or account under the Indenture shall be trust funds pledged to and held solely for the security and benefit of the holders of the 2007 Bonds to the extent provided in the Indenture. # v2 E-24

155 Covenants for Benefit of Bondholders The Loan Agreement is executed in part to induce the purchase by others of the 2007 Bonds, and, accordingly, all covenants and agreements on the part of the University and the Authority, as set forth in the Loan Agreement, are expressly recited to be for the benefit of the holders from time to time of the 2007 Bonds. Pledge of Unrestricted University Revenues As security for its obligation to make payments required under the Loan Agreement, and to make all other payments due and to perform all other obligations under the Loan Agreement, the University pledges, assigns and grants to the Authority a lien on and security interest in the Unrestricted University Revenues and the proceeds thereof. The Authority shall assign the Loan Agreement and all amounts payable thereunder, except Unassigned Authority s Rights, to the Trustee, in trust, to be held and applied pursuant to the provisions of the Indenture. Nature of Obligations Under Loan Agreement All payment and other obligations of the University under the Loan Agreement are general obligations of the University to which its full faith and credit are pledged. Loan Payments In consideration of and in repayment of the Loan the University shall make, as Loan Payments, payments which correspond, as to amounts and due dates, to the Bonds Debt Service. To provide funds to pay the Bonds Debt Service as and when due as specified above, the University agrees to make and shall make Loan Payments at least seventy-five (75) Business Days (or earlier if required by the Indenture) prior to the date when such principal, premium, if any, and interest is due and payable. It is the intention of the Authority and the University that, notwithstanding any other provision of the Loan Agreement, the Trustee, as assignee of the Authority, shall receive funds from or on behalf of the University in such amounts and at such times as will enable the Authority to pay when due all of its Bonds Debt Service. All Loan Payments shall be payable in lawful money of the United States of America and shall be made by or on behalf of the University to the Trustee, for the account of the Authority and deposited in the Debt Service Funds created by the Indenture. Such Loan Payments shall be applied as provided in the Indenture. The University shall pay as Additional Payments hereunder: (a) to the Authority, the Annual Administrative Fee and any and all Administrative Expenses, including costs and expenses (including reasonable legal fees and expenses) incurred or to be paid by the Authority in connection with the issuance and delivery of the 2007 Bonds or otherwise related to actions taken by the Authority under the Loan Agreement or the Indenture or any amendment thereof, supplement thereto or consent or waiver thereunder, including without limitation any annual charge made by a Rating Service to maintain a rating on the 2007 Bonds; (b) to the Trustee, the # v2 E-25

156 reasonable fees, charges and expenses of the Trustee and its agents for acting as such under the Indenture; and (c) to the Trustee, and at the times required under the Indenture, such additional amounts as are required to make up any deficiency which may occur in any of the funds established under the Indenture with respect to the 2007 Bonds. The obligations of the University to make Loan Payments, Additional Payments and any payments required under the Loan Agreement shall be absolute and unconditional, and the University shall make such payments without abatement, diminution or deduction regardless of any cause or circumstances whatsoever including without limitation any defense, set-off, recoupment or counterclaim which the University may have or assert against the Authority, the Trustee or any other person, whether express or implied, or any duty, liability or obligation arising out of or connected with the Loan Agreement, it being the intention of the parties that the payments required of the University will be paid in full when due without any delay or diminution whatsoever. Loan Payments required to be paid by or on behalf of the University shall be received by the Authority or the Trustee as net sums and the University agrees to pay or cause to be paid all charges against or which might diminish such net sums. To secure the payment of the Bonds Debt Service, the Authority shall pledge and assign to the Trustee all the Authority s rights in, to and under the Loan Agreement (except for the Unassigned Authority s Rights), the Unrestricted University Revenues and the other property comprising the Trust Estate. The University consents to such pledge and assignment and agrees to make or cause to be made Loan Payments directly to the Trustee without defense or set-off by reason of any dispute between the University and the Trustee. Whenever the University is required to obtain the consent of the Authority, the University shall also obtain the consent of the Trustee; provided that, except as otherwise expressly stipulated in the Loan Agreement or in the Indenture, the University shall not be required to obtain the Trustee s consent with respect to the Unassigned Authority s Rights. Establishment of Completion Date; Obligation of the University to Complete Subject to the provisions of the Indenture, the University will proceed to complete the construction, installation and equipping of the Project Facilities with all reasonable dispatch and will use its best efforts to complete or cause the completion of the same to take place on or before September 1, 2009; but for any reason the Project Facilities shall not be completed by said date there shall be no resulting diminution in or postponement of the Loan Payments required to be made by the University hereunder. The completion date of the University s undertakings with respect to the Project Facilities shall be evidenced by delivery to the Authority and to the Trustee of a certificate of an Authorized Representative of the College, on behalf of the College, as approved by the Construction Monitor, upon which the Authority and the Trustee can conclusively rely, stating that except for any Project Costs of the 2007 Project not then due and payable, or the liability for which the University is disputing or contesting, (a) the University s undertakings with respect thereto have been substantially completed and, where applicable, such completion is in accordance with the plans and specifications; and (b) such Project Facilities are satisfactory to the University and are suitable for use as educational facilities; and (c) the University has obtained and is maintaining insurance complying with the Loan Agreement. Notwithstanding # v2 E-26

157 the foregoing, such certificate may state that it is given without prejudice to any rights of the University against third parties for any claims or for the payment of any amount not then due and payable which exists at the date of such certificate or which may subsequently exist. Permitted Indebtedness The University covenants and agrees that it will not incur or assume (the terms incur and assume, for the purposes of the Loan Agreement, to mean and include the guaranteeing of or the direct or indirect assumption of liability for the debts of others) any indebtedness other than the Long Term Debt and Short Term Debt hereinafter permitted, which are in the aggregate referred to hereinafter as Permitted Indebtedness : (a) The University may not incur or assume Long Term Debt until such time as the Series A Bonds have been defeased pursuant to the Indenture. (b) If no Event of Default hereunder shall have occurred and then be continuing and the requirement of subsection (a) above has been satisfied, the University may incur or assume Long Term Debt for such lawful purposes of the University as shall be specified in reasonable detail in a certified resolution of the University, provided that, on or before the date on which any Long Term Debt, whether secured or unsecured, is to be incurred or assumed, the University shall deliver to the Authority and the Trustee: (i) A certificate of the chief financial officer of the University in form and substance acceptable to the Authority stating that for the Fiscal Year immediately preceding the incurring or assumption of the Long Term Debt, the University was in compliance with the covenants set forth in the Loan Agreement; (ii) Except in the case of incurring or assuming Long Term Debt for refunding purposes where the Debt Service Requirement will not be increased by more than 3% for any period, or for completion of a Capital Addition, or where the aggregate principal amount of such Long Term Debt to be incurred or assumed is not in excess of 1% of Unrestricted University Revenues for the Fiscal Year immediately preceding the incurring or assuming of such Long Term Debt, a certificate of the chief financial officer of the University in form and substance acceptable to the Authority stating in the case of Long Term Debt, the Net Revenues, as projected for the first full Fiscal Year for which interest due in such Fiscal Year has not been funded, following the completion of a Capital Addition or Extraordinary Repairs to be financed with the proceeds of the Long Term Debt or, in the case of Long Term Debt assumed or incurred for the purpose of refinancing any Long Term Debt then outstanding or incurred or assumed for any other purpose not involving construction, the first full Fiscal Year for which interest due in such Fiscal Year has not been funded, following the date on which it is incurred or assumed, will equal not less than 125% of the average Debt Service Requirements in future Fiscal Years on Long Term Debt Outstanding in such first Fiscal Year; (iii) The University may, from time to time, incur or assume Short Term Debt in any amount up to 20% of Unrestricted University Revenues for the immediately preceding Fiscal Year, less any Short Term Debt then outstanding, provided, however, that during each Fiscal Year there shall be a period of thirty (30) consecutive days # v2 E-27

158 during which there shall not be outstanding any Short Term Debt in excess of fifty percent (50%) of the University s Expendable Funds. Security for Permitted Indebtedness Any Permitted Indebtedness incurred or assumed as provided in the preceding paragraphs may be secured only as hereinafter provided: (a) In the case of the issuance of Additional Bonds, by a lien on and security interest in the Unrestricted University Revenues ranking on a parity with the lien and security interest granted herein in such collateral; or Term Debt: (b) In the case of all other Permitted Indebtedness, exclusive of Short (i) by a lien on and security interest in any property or interest in property, real, personal, or mixed, of the University; or (ii) by a purchase money security interest in fixtures and equipment made part of the University facilities; or (iii) by a lien on and security interest in the Unrestricted University Revenues of the University ranking on a parity with the lien and security interest granted herein; provided, however, that no such Permitted Indebtedness shall be secured by the moneys and investments held by the Trustee in any Funds created under the Indenture. (c) Any Short Term Debt constituting Permitted Indebtedness may be secured solely by: (i) a purchase money security interest in personal property acquired with the proceeds thereof; or (ii) a lien on and security interest in the Unrestricted University Revenues ranking on a parity with the lien and security interest granted herein, provided that the aggregate outstanding amount of Short Term Debt secured in accordance with this paragraph shall not exceed 30% of Unrestricted University Revenues for the preceding Fiscal Year. Maintenance of Existence The University shall do all things necessary to preserve and keep in full force and effect its existence as a not-for-profit corporation under the laws of the Commonwealth and shall not (a) dissolve or otherwise sell, transfer or dispose of all, or substantially all, of its assets or (b) consolidate with or merge into any other entity; provided that, the preceding restrictions shall not apply to a transaction to which the Authority consents in writing (which consent shall not be unreasonably withheld) if the transferee or the surviving or resulting entity, if other than the University, by written instrument satisfactory to the Authority and the Trustee, irrevocably and unconditionally assumes and agrees to perform and observe the agreements and obligations of the University under the Loan Agreement are satisfied and the University has obtained the consent of a majority in aggregate principal amount of 2007 Bonds Outstanding. # v2 E-28

159 The University covenants that it will maintain the necessary accreditation to enable it to maintain its authority to operate as an institution of higher education in the Commonwealth. Additional Covenants of the University The University shall prepare or have prepared annual financial statements and shall keep true and proper books of records and accounts in which full and correct entries are made of all its business transactions. Copies of such annual financial statements and reports shall be provided to the Authority and the Trustee promptly upon request, and such books of records and accounts shall be made available for inspection during normal business hours upon request by the Authority, the Trustee and their respective agents upon reasonable notice. The University will not take any action or permit any action to be taken on its behalf, or cause or permit any circumstance within its control to arise or continue, such action or circumstance would cause the interest paid by the Authority on the 2007 Bonds not to be excluded from the gross revenues of the owners of the Bonds for federal income tax purposes. The University shall, at its own cost and expense, obtain or cause to be obtained insurance policies and fidelity bonds in such amounts and contain such provisions as comply with the requirements as described in the Loan Agreement and such other insurance as is customarily carried by like organizations. The University shall use its best efforts to obtain such policies and bonds as shall provide that no notice of cancellation or of intention not to renew coverage shall become effective until at least thirty (30) days prior written notice has been given to the University, the Trustee and the Authority. All policies of insurance and fidelity bonds shall be issued by responsible insurance or fidelity bonding companies, acceptable to the University and the Authority, qualified to do business in the Commonwealth and qualified under the laws of the Commonwealth to assume risks covered by such policy or policies or bond or bonds. All insurance policies, to the extent such policies relate to the Project Facilities, shall be written in the names of the Authority, the Trustee and the University as their interests may appear and shall be made payable to the Trustee. The Trustee shall have the exclusive right to receive the proceeds of such policies, but, unless an Event of Default has occurred and is continuing, the University shall have the right to negotiate and settle all claims. The University shall use its best efforts to obtain such insurance policies as shall not be cancelable without at least 30 days written notice to the Authority and the Trustee; in addition, the insurance policies shall provide that all losses thereunder shall be payable to the Authority and the Trustee notwithstanding any act or neglect of the Authority or the University which might otherwise result in a forfeiture of such insurance. The University covenants to furnish to the Authority and the Trustee on or before the execution and delivery of the Loan Agreement, and thereafter at six-month intervals, a certificate of an Insurance Consultant, setting forth amounts, types and expiration dates of insurance then in force with respect to the Project Facilities and operation thereof, stating whether in the opinion of such Insurance Consultant, such insurance then in force is in # v2 E-29

160 accordance with its recommendations and with the provisions hereof, stating the amounts and types of insurance which should be maintained during the next ensuing six-month period and specifying the insurance renewals and replacements to be made during the next six-month period. The University covenants to maintain such amounts and types of insurance. Immediately after the occurrence of loss or damage covered by insurance required by the Loan Agreement, or after notice of condemnation has been received, or the occurrence of injury or damage, the University shall promptly notify the Authority and the Trustee. If the Project Facilities shall be wholly or partially destroyed or damaged by fire or other casualty covered by insurance required by the Loan Agreement, or shall be wholly or partially condemned, the Authority and University covenant that they will take all actions and will do all things which may be necessary to enable recovery to be made upon such policies of insurance or on account of such taking, condemnation, conveyance, damage or injury in order that moneys due on account of losses suffered may be collected and paid to the Trustee. Subject to the rights of any holder of any of the documents securing Permitted Indebtedness, the University is authorized to demand, collect, sue, settle claims, receipt and release moneys which may be due and payable under such policies of insurance or on account of such condemnation, damage or injury and the University shall pay the moneys to the Trustee. Any appraisement or adjustment of loss or damage and any settlement or payment therefore, which may be agreed upon by the University and the appropriate insurer or condemnor shall be evidenced to the Trustee by a certificate of an Authorized Representative of the University. The Trustee may rely conclusively upon such certificate. If moneys are received by the Trustee or the University on account of condemnation of, sale under threat of condemnation of or damage or injury to the Project Facilities, which, with respect to any one loss, shall equal or exceed $1,000,000 the University shall retain a Consultant to determine whether repair, reconstruction or replacement of the affected portion of the Project Facilities is practicable and desirable and shall cause such Consultant to, within sixty (60) days of receipt of such moneys, deliver to the Authority and the Trustee a report and recommendation stating whether repair, reconstruction or replacement of the affected portion of the Project Facilities is practicable and desirable and stating the approximate cost of such repair, reconstruction or replacement. The University agrees that if the Consultant determines that repair, reconstruction or replacement is practicable and desirable, and upon the consent of the Registered Owners of a majority in aggregate principal amount of 2007 Bonds Outstanding, the University shall deposit, or cause to be deposited, such moneys, together with moneys from the University, if the casualty or condemnation proceeds are insufficient to cover the estimated costs of repair, reconstruction or replacement, with the Trustee into a Project Fund created under the Indenture and shall be disbursed for costs of such repair, reconstruction or replacement upon requisitions of the University meeting the requirements of the Indenture. If the Trustee receives moneys on account of condemnation of, sale under threat of condemnation of or damage or injury to, the Project Facilities, which, with respect to any one loss, shall be less than $1,000,000, and the University shall have determined that repair, reconstruction or replacement of the affected portion of the Project Facilities is practicable and desirable, the Authority agrees that the Trustee shall pay such moneys to the University to be # v2 E-30

161 used by it for the purpose of paying the costs of such repair, reconstruction or replacement pursuant to the process set forth in the Indenture. The University will retain a Construction Monitor to perform such duties as imposed on the Construction Monitor under the Indenture, the Loan Agreement and the Construction Monitor Agreement. The University covenants and agrees to comply, or to cause compliance with, federal Securities and Exchange Commission Rule 15c2-12 promulgated under the Securities Exchange Act of 1934, as such Rule may from time to time hereafter be amended or supplemented. Notwithstanding any other provision of the Loan Agreement, failure of the University to comply, or cause compliance with, the requirements of Rule 15c2-12, as it may from time to time hereafter be amended or supplemented, shall not be considered an Event of Default. The University covenants and agrees that the University shall diligently pursue the completion of grant agreements from the Commonwealth, acting by and through the Office of the Budget, with regard to Redevelopment Capital Assistance Program Commitments, and that the required applications to the Commonwealth for such grants shall be substantially final as of the date of delivery of the 2007 Bonds. The University covenants and agrees that the University shall apply the sale proceeds arising under the 215 Market Street Sale Agreement exclusively toward the operating expenses and capital projects of the University. Events of Default and Remedies Events of Default under the Loan Agreement shall include the following: (a) Failure by the University to make or cause to be made any Loan Payment on or prior to the date on which such payment is due and payable; (b) Failure by the University to observe and perform any other agreement, term or condition contained in the Loan Agreement and continuation of such failure for a period of 30 days after notice thereof shall have been given to the University by the Authority or the Trustee, or for such longer period as the Authority and the Trustee may agree to in writing but in no event longer than one hundred twenty days; provided that if the failure is other than the payment of money and is of such nature that it can be corrected but not within the applicable period, such failure shall not constitute an Event of Default so long as the University institutes curative action within the applicable period and diligently pursues such action to completion; (c) The University shall (i) apply for or consent to the appointment of a receiver, trustee, liquidator or custodian or the like of itself or of its property, or (ii) admit in writing its inability to pay its debts generally as they become due, or (iii) make a general assignment for the benefit of creditors, or (iv) be adjudicated a bankrupt or insolvent, or (v) commence a voluntary case under the United States Bankruptcy Code, or file a voluntary petition or answer seeking reorganization, an arrangement with creditors or an order for relief, or seeking # v2 E-31

162 to take advantage of any insolvency law or file an answer admitting the material allegations of a petition filed against it in any bankruptcy, reorganization, or insolvency proceeding, or action shall be taken by it for the purpose of effecting any of the foregoing, or (vi) have instituted against it, without the application, approval or consent of the University, a proceeding in any court of competent jurisdiction, under any law relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking in respect of the University an order for relief or an adjudication in bankruptcy, reorganization, dissolution, winding up, liquidation, a composition or arrangement with creditors, a readjustment of debts, the appointment of a trustee, receiver, liquidator or custodian or the like of the University or of all or any substantial part of its assets, or other like relief in respect thereof under any bankruptcy or insolvency law, and, if such proceeding is being contested by the University in good faith, the same shall (A) result in the entry of an order for relief or any such adjudication or appointment or (B) remain unvacated, undismissed and undischarged for a period of 60 days; (d) Any representation or warranty made by the University in the Loan Agreement or any statement in any report, certificate, financial statement or other instrument furnished in connection with the Loan Agreement or with the purchase of the 2007 Bonds shall at any time prove to have been false or misleading in any material respect when made or given; Indenture; (e) The occurrence and continuance of an Event of Default under the (f) The University sells, assigns or otherwise disposes of (whether in one transaction or in a series of transactions) its interest in facilities of the University or any substantial portion thereof which are essential to its operations or financial condition or undertakes or permits any demolition or removal of a substantial portion of such facilities without the prior written consent of the Authority, or assigns its interest under the Loan Agreement in violation of the Loan Agreement; Mortgage; (g) There shall occur and be continuing an event of default under the (h) Credit Support Agreement; There shall occur and be continuing a Termination Event under the (i) The SLOC shall terminate prior to its expiration date by reason of a default by the University on the Reimbursement Agreement; and (j) The withdraw of the Certificate of Authority by the Pennsylvania Department of Education and the expiration of all available appeal periods. The declaration of an Event of Default under paragraph (c) above, and the exercise of remedies upon any such declaration, shall be subject to any applicable limitations of federal bankruptcy law affecting or precluding that declaration or exercise during the pendency of or immediately following any bankruptcy, liquidation or reorganization proceedings. Whenever an Event of Default shall have happened and be subsisting, any one or more of the following remedial steps may be taken: # v2 E-32

163 (a) If acceleration of the principal amount of the 2007 Bonds has been declared pursuant to the Indenture, the Trustee shall declare all Loan Payments to be immediately due and payable, whereupon the same shall become immediately due and payable; and (b) The Authority or the Trustee may pursue any and all remedies now or hereafter existing at law or in equity to collect all amounts then due and thereafter to become due under the Loan Agreement or to enforce the performance and observance of any other obligation or agreement of the University under the Loan Agreement. The University covenants that, in case it shall fail to pay or cause to be paid any Loan Payments as and when the same shall become due and payable whether at maturity or by acceleration or otherwise, then, upon demand of the Trustee, the University will pay to the Trustee the whole amount that then shall have become due and payable hereunder; and, in addition thereto, any unpaid Additional Payments and such further amounts as shall be sufficient to cover the costs and expenses of collection, including a reasonable compensation to the Trustee, its agents and counsel, and any expenses or liabilities incurred by the Authority or the Trustee. In case the University shall fail forthwith to pay such amounts upon such demand, the Trustee shall be entitled and empowered to institute any actions or proceedings at law or in equity for the collection of the sums so due and unpaid. In case there shall be pending proceedings for the bankruptcy or reorganization of the University under the federal bankruptcy laws or any other applicable law, or in case a receiver or trustee shall have been appointed for the benefit of the creditors or the property of the University, the Trustee shall be entitled and empowered, by intervention in such proceedings or otherwise, to file and prove a claim or claims for the whole amount due hereunder, including interest owing and unpaid in respect thereof, 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 Trustee allowed in such judicial proceedings relative to the University, its creditors or its property, and to collect and receive any moneys or other property payable or deliverable on any such claims, and to distribute the same after the deduction of its fees, charges and expenses. Any receiver, assignee or trustee in bankruptcy or reorganization is hereby authorized to make such payments to the Authority or the Trustee, and to pay to the Authority or the Trustee any amount due it for compensation and expenses, including counsel fees and expenses incurred by it up to the date of such distribution. Notwithstanding the foregoing, the Trustee shall not be obligated to take any step which in its opinion will or might cause it to expend money or otherwise incur liability unless and until satisfactory indemnity has been furnished to the Trustee at no cost or expense to the Trustee. Any amounts collected as Loan Payments or applicable to Loan Payments and any other amounts which would be applicable to payment of Debt Service collected pursuant to the Loan Agreement shall be paid into the Debt Service Funds and applied in accordance with the provisions of the Indenture or, if the outstanding 2007 Bonds have been paid and discharged in accordance with the provisions of the Indenture, shall be paid as provided in the Indenture for transfers of remaining amounts in the Debt Service Fund. # v2 E-33

164 No remedy conferred upon or reserved to the Authority or the Trustee by the Loan Agreement 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 the Loan Agreement, or now or hereafter existing at law or in equity. No delay or omission to exercise any right or power accruing upon any default shall impair that right or power or shall be construed to be a waiver thereof, but any such right and power may be exercised from time to time and as often as may be deemed expedient. THE MORTGAGE The Mortgage is given by the Mortgagor to the Mortgagee in order to secure the performance of the University s obligations under the Loan Agreement. Under the Mortgage, the Mortgagor grants a mortgage lien on, and a security interest in, among other things, all of the Mortgagor s right, title and interest in and to the following properties, whether the Mortgagor now possesses any right, title or interest or may hereafter acquire such right, title and interest for the objects and purposes of the Mortgage (which property is referred to collectively as the Mortgaged Property ): (a) The land, premises and property (the Premises ) as more fully described in the Mortgage, together with all buildings, additions, improvements, fixtures (including, without limitation, electrical, antipollution, heating, lighting, laundry, incinerating, power, air-conditioning, plumbing, lifting, cleaning, fire prevention, fire extinguishing, refrigerating, ventilating, communication, garage and cooking systems, conduits, ducts, compressors and switchboards, and all storm doors and windows, dishwashers, attached cabinets and partitions), structures, devices and related equipment now or hereafter affixed thereto, together with the tenements, hereditaments, servitudes, appurtenances, rights, privileges and immunities thereunto belonging or appertaining, and all streets, alleys, passages, ways and water courses, and all leasehold estates, easements, licenses, permits, approvals, covenants and other agreements now existing or hereafter created for the benefit of the owners, the Mortgagor or any subsequent owner or tenant of such real estate and all rights to enforcement and maintenance thereof, and all other rights, liberties and privileges of whatsoever kind or character, and the reversions and remainders, income, rents, issues and profits arising therefrom, and all the estate, right, title, interest, property, possession, claim and demand whatsoever, at law or in equity, of the Mortgagor in and to said real estate or any part thereof, and all awards or payments, including interest thereon, and the right to receive the same, that may be made with respect to said real estate as a result of the exercise of the right of eminent domain, the alteration of the grade of any street, or any other injury to or decrease in the value of said real estate; (b) All machinery, apparatus, equipment, fittings, appliances and other personal property of every kind and nature whatsoever now owned or hereafter acquired by the Mortgagor and installed in, attached to or situated in or at the Premises (the Chattels ); (c) All leases of the Premises or Chattels, or any part thereof, now or hereafter entered into, and all right, title and interest of the Mortgagor thereunder, including cash or securities deposited thereunder to secure performance by the tenants of their obligations # v2 E-34

165 thereunder, and further including the right to receive and collect the rents thereunder (collectively, the Leases or individually, Lease ); (d) All revenues, income, rents, issues and profits of any of the Premises, Chattels or Leases (collectively, the Rents ); (e) All proceeds of the conversion, voluntary or involuntary, of any of the Premises or Chattels into cash or liquidated claims, including proceeds of insurance, and any and all awards heretofore or hereafter made to the Mortgagor by any governmental or other lawful authority for taking or damaging or affecting the value of any of the Premises or any easement therein, including any award for any change of grade of streets, deprivation of use or access, or inverse or de facto condemnation, which awards are hereby assigned to the Mortgagee; and (f) Any and all other right, title and interest of any name or nature in any real or personal property from time to time hereafter in writing expressly conveyed, mortgaged, pledged, assigned or transferred, as and for additional security under the Mortgage, by the Mortgagor or by anyone in its or their behalf or with its or their written consent to the Mortgagee, which is hereby authorized to receive any and all such property at any and all times and to hold and apply the same subject to the terms hereof. Payment of Indebtedness The Mortgagor shall punctually perform all of its obligations under the Loan Agreement and the Mortgage, including its obligation to pay all sums to become due in respect of such instruments, at the time and place and in the manner specified therein and herein, and shall promptly perform and comply with all the terms, conditions, agreements, covenants, provisions, warranties and stipulations of the Loan Agreement and the Mortgage. Legal Requirements Subject to any rights of the Mortgagor, as may be provided in the Loan Agreement or at law, to contest a Legal Requirement (as hereinafter defined), the Mortgagor shall promptly comply with and conform to all present and future laws, statutes, codes, ordinances, orders, judgments, decrees, injunctions, rules, regulations and requirements of every duly constituted governmental authority or agency and all covenants, restrictions and conditions now or hereafter of record which may be applicable to it or to any of the Mortgaged Property, or to the use, manner of use, occupancy, possession, operation, maintenance, alteration, repair or reconstruction of any of the Mortgaged Property (collectively, the Legal Requirements ). Payment of Impositions Subject to any rights of the Mortgagor, as may be provided in the Loan Agreement, to contest an Imposition (as hereinafter defined), the Mortgagor, from time to time when the same shall become due and payable, and before interest or penalties are due thereon, without deduction, defalcation, set-off or abatement, will pay and discharge all taxes and liens of every kind and nature (including real property taxes or contributions required in lieu thereof, personal property taxes and income, franchise, withholding, profits and gross receipt taxes), all # v2 E-35

166 charges for any easement or agreement maintained for the benefit of the Mortgaged Property, all general and special assessments, levies, permits, inspection and license fees, all water and sewer rents and charges, all other public charges whether of a like or different nature imposed upon or assessed against the Mortgagor (with respect to the Mortgaged Property or any part thereof) or upon the revenues, rents, issues, income and profits of the Mortgaged Property or arising in respect of the occupancy, use or possession thereof (collectively called the Impositions ). Insurance The Mortgagor will provide and maintain insurance on the Mortgaged Property as required under the Loan Agreement, and apply the proceeds thereof as required under the Loan Agreement. Proper Care and Use The Mortgagor will maintain the Mortgaged Property (including, without limitation, all buildings, improvements, streets, sidewalks and curbs that constitute a portion of the Mortgaged Property) in good repair, order and condition and will not commit or suffer waste with respect thereto. The Mortgagor will not remove from the Mortgaged Property any of the improvements without having obtained the prior written consent of the Mortgagee. Environmental Matters The Mortgagor shall comply with and cause compliance by all tenants and subtenants with all Environmental Laws, as such term is defined in the Loan Agreement. The Mortgagor agrees to indemnify the Mortgagee and hold the Mortgagee harmless from and against any losses, expenses and liabilities suffered by them by reason of any breach or default by the Mortgagor of its representations or obligations under this provision, including, without limitation, enforcing the obligations of the Mortgagor under this provision and including, without limitation, reasonable attorneys fees. Events of Default Upon the occurrence of any one or more of the following events, the Mortgagee may, in its sole discretion, by written notice to the Mortgagor, declare an event of default under the Mortgage (an Event of Default ): (a) the occurrence of an Event of Default under and as defined in the Loan Agreement, or (b) the Mortgagor fails to perform any covenant or agreement under the Mortgage and continuation of such failure for a period of 30 days after notice thereof shall have been given to the Mortgagor by the Mortgagee, or for such longer period as the Mortgagee may agree to in writing but in no event longer than one hundred twenty days; provided that if the failure is other than the payment of money and is of such nature that it can be corrected but not within the applicable period, such failure shall not constitute an Event of Default so long as the Mortgagor institutes curative action within the applicable period and diligently pursues such action to completion. # v2 E-36

167 Remedies In case of an Event of Default on the part of the Mortgagor, as herein provided, then and in every such case the Mortgagee, subject to any prior rights, shall be entitled to do any or all of the following: (a) The Mortgagee may declare all amounts payable pursuant to the Loan Agreement, together with all interest accrued and all other amounts then payable to the Authority or the Mortgagee to be immediately due and payable, all as provided in the Loan Agreement. (b) The Mortgagee may (i) institute and maintain an action of mortgage foreclosure against any of the Mortgaged Property, (ii) have judgment entered by possession pursuant to any power to confess judgment contained in the Loan Agreement or the Mortgage, (iii) sell any of the Mortgaged Property, or (iv) take such other action at law or in equity for the enforcement of the Loan Agreement or the Mortgage as the law may allow. The Mortgagee may proceed in any such action to final judgment and execution thereon for (A) all sums due under paragraph (a) above, together with all costs of suit and reasonable attorneys fees, or (B) at the Mortgagee s option, all sums then due and unpaid under the Loan Agreement or the Mortgage, without acceleration (collectively in paragraph (b) below, the Unaccelerated Indebtedness ), together with all costs of suit and reasonable attorneys fees. (c) The Mortgagee may, without releasing the Mortgagor from any obligation or waiving any Event of Default: (i) collect any or all of the Rents, including any Rents past due and unpaid, (ii) perform any obligation or exercise any right or remedy of the Mortgagor under any Lease, or (iii) enforce any obligation of any tenant of any of the Mortgaged Property. The Mortgagee shall not be obligated to do any of the foregoing, even if the Mortgagor may have performed any obligation or exercised any remedy of landlord or have enforced any obligation of a tenant. The Mortgagee may exercise any right under this paragraph (c) whether or not the Mortgagor shall have entered into possession of any of the Mortgaged Property; and nothing herein contained shall be construed as constituting the Mortgagee a mortgagee in possession unless the Mortgagee shall have entered into and shall remain in actual possession of the Mortgaged Property. The Mortgagor authorizes and instructs each and every present and future tenant of any of the Mortgaged Property to pay all Rents directly to the Mortgagee and to perform all other obligations of that tenant for the direct benefit of the Mortgagee, as if the Mortgagee were the landlord under the Lease with that tenant, immediately upon receipt of a demand by the Mortgagee to make such payment or perform such obligations. No tenant shall have any responsibility to ascertain whether such demand is permitted under the Mortgage or whether an Event of Default shall have occurred; the Mortgagor waives any right, claim or demand either may now or hereafter have against any such tenant by reason of such payment of Rents or performance of obligations to the Mortgagee; and any such payment or performance to the Mortgagee shall discharge the obligations of the tenant to make such payment or performance to the Mortgagor. The Mortgagor shall indemnify the Mortgagee against, and hold the Mortgagee harmless from, any and all liability under any Lease and from any and all claims and demands which may be asserted against the Mortgagee by reason of any alleged obligations to perform any provision of any Lease. # v2 E-37

168 (d) The Mortgagee may, without releasing the Mortgagor from any obligation or waiving any Event of Default, enter upon and take possession of any of the Mortgaged Property, with or without legal action and by force if necessary, or have a receiver appointed without proof of depreciation or inadequacy of the value of the Mortgaged Property or other security or proof of the insolvency of the Mortgagor. The Mortgagee or said receiver may manage and operate any of the Mortgaged Property; make, cancel, enforce or modify Leases; obtain and evict tenants; establish or change the amount of any Rents; make additions, repairs, improvements or alterations to any of the Mortgaged Property; and perform any other acts which the Mortgagee deems proper to protect the security of the Mortgage. Any Lease made by the Mortgagee shall survive the cure of any Event of Default or payment of the Mortgagor s obligations under the Loan Agreement, except to the extent that such Lease provides otherwise. The Mortgagee may apply the Rents received by the Mortgagee, unless otherwise provided in the Loan Agreement, to the payment of any or all of the following, in such order and amounts as the Mortgagee, in its sole discretion, may elect: all costs and expenses, whenever and by whomever incurred, of operation, alteration and management of the Mortgaged Property and of collection of the Rents (including attorneys fees, administration expenses, management fees and brokers commission), liens on any of the Mortgaged Property, Impositions, claims, insurance premiums, other carrying charges, invoices of persons who have supplied goods or services to or for the benefit of any of the Mortgaged Property, costs and expenses of maintenance, repair, restoration, alteration or improvement of any of the Mortgaged Property, or the Mortgagor s obligations under the Loan Agreement or the Mortgage. The Mortgagee may, in its sole discretion, determine the method by which, and extent to which, the Rents will be collected and obligations of tenants enforced; and the Mortgagee may waive or fail to enforce any right or remedy of the landlord under a Lease. The Mortgagee shall not be accountable for any Rents or other sums it does not actually receive. The Mortgagor appoints the Mortgagee as its attorney-in-fact to perform all acts which the Mortgagor are required or permitted to perform under any and all Leases. (e) The Mortgage contains a warrant of authority for an attorney to confess judgment against the Mortgagor. For the purpose of obtaining possession of the Mortgaged Property, upon and after the occurrence of any Event of Default, the Mortgagor authorizes and empowers any attorney of any court of record in the Commonwealth of Pennsylvania or elsewhere, as attorney for the Mortgagor and all persons claiming under or through the Mortgagor to appear for and confess judgment against the Mortgagor and against all persons claiming under or through the Mortgagor, in favor of the Mortgagee, for recovery by the Mortgagee of possession of the Mortgaged Property, for which the Mortgage or a copy thereof verified by affidavit, shall be a sufficient warrant; and thereupon a writ of possession may immediately issue for possession of the Mortgaged Property, without any prior writ or proceeding whatsoever and without any stay of execution. If for any reason after such action has been commenced it shall be discontinued, or possession of the Mortgaged Property shall remain in or be restored to the Mortgagor, the Mortgagee shall have the right to confess judgment as above provided to recover possession of the Mortgaged Property. The Mortgagee may confess judgment before or after the Mortgagor of proceedings to foreclose the Mortgage or to enforce the Loan Agreement, or after entry of judgment therein, or after a sheriff s sale of the Mortgaged Property in which the Mortgagee is a successful bidder, it being the understanding of the Mortgagor and the Mortgagee that the # v2 E-38

169 authorization to pursue such proceedings for obtaining possession and confession of judgment therein is an essential part of the remedies for enforcement of the Mortgage, and shall survive any execution sale to the Mortgagee. (a) The Mortgagee may disaffirm and cancel any Lease which is subordinate to the Mortgage at any time before the expiration of sixty (60) days after the Mortgagee acquires the legal title to the Mortgaged Property by any transfer pursuant to the exercise of a remedy under the Mortgage or otherwise even though the Mortgagee shall have enforced such Lease, collected Rents thereunder or taken any action that might be deemed by law to constitute an affirmance of the Lease. Such disaffirmance shall be made by notice addressed to the tenant at the Mortgaged Property or, at Mortgagee s option, such other address of the tenant as may be provided in that tenant s Lease. (b) The Mortgagee may take possession of any of the Mortgaged Property and may sell such property pursuant to the provisions of the applicable Uniform Commercial Code and exercise such other rights and remedies with respect to such property as may be provided by said Code. The Mortgagor shall, if the Mortgagee so requests, assemble any such property and make it available to the Mortgagee at a place or places designated by the Mortgagee. (c) Any real estate sold in the exercise of any remedy under the Mortgage may be sold in one parcel, as an entirety (whether or not such real estate consists of separate or non-contiguous parcels) or in such parcels and in such manner or order as the Mortgagee, in its sole discretion, may elect. Future Advances The parties to the Mortgage intend that, in addition to any other debt or obligation secured by the Mortgage, the Mortgage shall secure unpaid balances of all advances and other such extensions of credit made after the Mortgage is filed for recordation in the official records of the county in which the Mortgaged Property is located, whether made pursuant to an obligation of the Mortgagee or otherwise. All future advances will have the same priority as the original advance. Chattels As to Chattels, all Leases as to Chattels and all Rents derived from Chattels, the lien created by the Mortgage is subject and subordinate to the lien of the Bank pursuant to the SLOC. The lien created by the Mortgage shall be superior to the lien of the Bank in all other respects, and superior to all other liens in all respects. # v2 E-39

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171 APPENDIX F INFORMATION CONCERNING THE HARRISBURG PARKING AUTHORITY

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173 APPENDIX F The Harrisburg Parking Authority plans to issue its Guaranteed Parking Revenue Bonds, Series R of 2007 (the "Series R Parking Bonds") in order to fund the Purchase Price for the purchase of the Parking Garage as described in the section entitled "Plan of Finance - Agreement of Sale" in the front part of this Limited Offering Memorandum. The proceeds of the Series R Parking Bonds, allocated to the Purchase Price, are to be deposited to the Series R Construction Account established when the Series R Parking Bonds are issued and are to remain on deposit in such account until paid over on an installment basis over a two-year period to the University. Moneys on deposit in the Series R Construction Account are to be invested in "Permitted Investments" as such term is defined in the draft indenture relating to the proposed Series R Parking Bonds as follows: "Permitted Investments" shall mean: (1) direct obligations of the United States of America (including obligations issued or held in book-entry form on the books of the Department of the Treasury, and CATS and TIGRS) or obligations the principal of and interest on which are unconditionally guaranteed by the United States of America; (2) bonds, debentures, notes or other evidence of indebtedness issued or guaranteed by any of the following federal agencies and provided such obligations are backed by the full faith and credit of the United States of America (stripped securities are only permitted if they have been stripped by the agency itself): a. U.S. Export-Import Bank (Eximbank) Direct obligations or fully guaranteed certificates of beneficial ownership b. Farmers Home Administration (FmHA) Certificates of beneficial ownership c. Federal Financing Bank d. Federal Housing Administration Debentures (FHA) e. General Services Administration -Participation certificates f. Government National Mortgage Association (GNMA or "Ginnie Mae") GNMA guaranteed mortgage-backed bonds or GNMA guaranteed pass-through obligations g. U.S. Maritime Administration Guaranteed Title XI financing h. U.S. Department of Housing and Urban Development (HUD) Project Notes; Local Authority Bonds; New Communities Debentures U.S. government guaranteed debentures; or U.S. Public Housing Notes and Bonds U.S. government guaranteed public housing notes and bonds; (3) bonds, debentures, notes or other evidence of indebtedness issued or guaranteed by any of the following non-full faith and credit United States government agencies (stripped securities are only permitted if they have been stripped by the agency itself);

174 a. Federal Home Loan Bank System -Senior debt obligations b. Federal Home Loan Mortgage Corporation (FHLMC or "Freddie Mac") -Participation certificates and senior debt obligations c. Federal National Mortgage Association (FNMA or "Fannie Mae") Mortgage-backed securities and senior debt obligations d. Student Loan Marketing Association (SLMA or "Sallie Mae") - Senior debt obligations e. Resolution Funding Corp (REFCORP) -Obligations notes; f. Farm Credit System -Consolidated system-wide bonds and (4) Money market funds registered under the Federal Investment Company Act of ]940, whose shares are registered under the Federal Securities Act of 1933, and have a rating by S&P of "AAArn-G," "AAArn" or "AAm" and if rated by Moody's, a rating of "Aaa," "Aa1" or "Aa2," including, without limitation, the JPMorgan Funds or any other mutual fund for which the Trustee or an affiliate of the Trustee serves as investment manager, administrator, shareholder, servicing agent and/or custodian or subcustodian, notwithstanding that (i) the Trustee or an affiliate of the Trustee receives fees from such funds for services rendered, (ii) the Trustee charges and collects fees for services rendered pursuant to the Indenture, which fees are separate from the fees received from such funds, and (iii) services performed for such funds and pursuant to the Indenture may at times duplicate those provided to such funds by the Trustee or its affiliates; (5) Certificates of deposit secured at all times by collateral described in (1) and/or (2) above. Such certificates must be issued by commercial banks, savings and loans associations or mutual savings banks. The collateral must be held by a third party and the bondholders must have a perfected first security interest in the collateral; (6) Certificates of deposit, savings accounts, deposit accounts or money market deposits which are fully insured by Federal Deposit Insurance Corporation, including the Bank Insurance Fund and the Savings Association Insurance Fund, or any similar successor agency of the United States government which performs functions similar to those of the Federal Deposit Insurance Corporation; (7) Investment agreements, including guaranteed investment contracts, forward purchase agreements and reserve fund put agreements acceptable to the Bond Insurer; (8) Commercial paper rated, at the time of purchase, "Prime-I" by Moody's and "A- 1" or better by S&P; (9) Bonds or notes issued by the Commonwealth or any political subdivision thereof or school district therein, which are rated by Moody's and S&P in one of the two highest rating categories assigned by such agencies; 2

175 (10) Federal funds or bankers acceptances with a maximum term of one year of any bank which has an unsecured, uninsured and unguaranteed obligation rating of "Prime-I" or "A3" or better by Moody's and "A-I" or "A" or better by S&P; (11) Repurchase agreements providing for the transfer of securities from a dealer bank or securities firm (seller/borrower) to the Trustee (buyer/lender), and the transfer of cash from the Trustee to the dealer bank or securities firm with an agreement that the dealer bank or securities firm will repay the cash plus a yield to the Trustee in exchange for the securities at a specified date. Repurchase agreements must satisfy the following criteria: (1) The repurchase agreement must be between the Trustee and a dealer bank or securities firm that are: a. Primary dealers on the Federal Reserve reporting dealer list which are rated "A" or better by S&P and Moody's, or b. Banks rated "A" or above by S&P and Moody's. (2) The written repurchase agreement must including the following: a. Securities which are acceptable for transfer are: (i) Direct U.S. governments, or (ii) Federal agencies backed by the full faith and credit of the U.S. government (and FNMA and FHLMC). days. b. The tern of the repurchase agreement may be up to 30 c. The collateral must be delivered to the Trustee or third party acting as agent for the Trustee before/simultaneous with payment (perfection by possession of certificated securities). d. Valuation of Collateral (i) The securities must be valued weekly, marked-tomarket at current market price plus accrued interest: The value of collateral must be equal to 104% of the amount of cash transferred by the Trustee to the dealer bank or security firm under the repurchase agreement plus accrued interest. If the value of securities held as collateral slips below 104% of the value of the cash transferred by the Trustee, then additional cash and/or acceptable securities must be transferred to the Trustee. If, however, the securities used as collateral are FNMA or FHLMC, then the value of collateral must equal 105%. (3) Legal opinion which must be delivered to the Trustee: 3

176 a. Repurchase agreement meets guidelines under state law for legal investment of public funds. (4) If the term of the repurchase agreement exceeds 30 days, such repurchase agreement must be acceptable to the Bond Insurer. 4

177 APPENDIX G DESCRIPTION OF COMMERCE BANK/HARRISBURG, NATIONAL ASSOCIATION AND FORMS OF DOCUMENTS RELATING TO THE BANK'S STANDBY LETTER OF CREDIT FOR THE BENEFIT OF A PORTION OF THE SERIES B BONDS

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179 THE BANK General Pennsylvania Commerce Bancorp, Inc. (the Company ) is a Pennsylvania business corporation, which is registered as a bank holding company under the Bank Holding Company Act of 1956, as amended (the Holding Company Act ). The Company was incorporated on April 23, 1999 and became an active bank holding company on July 1, 1999 through the acquisition of 100% of the outstanding shares of Commerce Bank/Harrisburg, N.A. (the Bank ). The Company is a member of the Commerce Bancorp, Inc. Network (the Network ) and has the exclusive right to use the Commerce Bank name and the America s Most Convenient Bank logo within its primary service area. The Network provides certain marketing and support services to the Bank. As of September 30, 2006, the Company had approximately $1.84 billion in assets, $1.61 billion in deposits, $940.2 million in total net loans (including loans held for sale), and $99.2 million in stockholders equity. The Bank is a member of the Federal Reserve System and substantially all of the Bank s deposits are insured up to applicable limits by the Bank Insurance Fund (BIF) of the Federal Deposit Insurance Corporation (FDIC) to the fullest extent permitted by law. The Company s total revenues (net interest income plus noninterest income) were $53.4 million and the Company recorded $5.7 million in net income for the nine months ended September 30, The Company s principal executive offices are located at 3801 Paxton Street, Harrisburg, Pennsylvania 17111, and its telephone number is (717) Commerce Bank/Harrisburg, National Association The Company has one reportable segment, consisting of Commerce Bank/Harrisburg, N.A. On July 13, 1984, Commerce Bank/Harrisburg, National Association filed an application to establish a statechartered banking institution with the Pennsylvania Department of Banking. On September 7, 1984, the Bank was granted preliminary approval of its application, and on September 11, 1984, was incorporated as a Pennsylvania state-chartered banking institution under the laws of the Commonwealth of Pennsylvania. The Bank opened for business on June 1, On October 7, 1994, the Bank was converted from a Pennsylvania state-chartered banking institution to a national banking association under the laws of the United States of America and changed its name to Commerce Bank/Harrisburg, National Association. The Bank s conversion was consummated pursuant to preliminary and conditional approval of the conversion granted by the Office of the Comptroller of the Currency (OCC) on July 5, 1994 in response to a letter of intent to convert to a national bank filed by the Bank with the OCC on April 6, The Bank provides a full range of retail and commercial banking services for consumers and small and mid-sized companies. The Bank s lending and investment activities are funded principally by retail deposits gathered through its retail store office network. Service Area The Bank offers its lending and depository services from its main office in Harrisburg, Pennsylvania, and its 30 full-service stores located in Berks, Cumberland, Dauphin, Lancaster, Lebanon and York Counties, Pennsylvania. Available Information The Company makes available free of charge under the Investor Relations link on the Company s website, its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form

180 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after the Company electronically files such material with, or furnishes to, the SEC. Additionally, the SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at the web address,

181 APPENDIX G-2 FORM OF THE BANK'S STANDBY LETTER OF CREDIT FOR THE BENEFIT OF A PORTION OF THE SERIES B BONDS

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183 STANDBY EXPIRATION LETTER OF OUR CREDIT NO. ISSUE DATE DATE CREDIT AMOUNT 1719 January 11, 2007 September 1, 2011 $3,300, BENEFICIARY APPLICANT Commerce Bank National Association The Harrisburg University of 101 North Second Street Science and Technology Harrisburg, PA Market Street Harrisburg, PA Attention: Corporate Trust Services Dear Beneficiary: At the request, on the instructions and for the account of the applicant, The Harrisburg University of Science and Technology, a Pennsylvania not-for-profit corporation (the "Company"), with a business address at 215 Market Street, Harrisburg, Pennsylvania 17101, we (the "Bank") hereby establish our Standby Letter of Credit No (the "Letter of Credit ) in your favor, as Trustee under the Trust Indenture, dated as of January 1, 2007 (the "Indenture"), between The Harrisburg Authority (the "Authority") and you pursuant to which $60,225,000 in aggregate principal amount of the Authority's University Revenue Bonds, Series B of 2007 (Harrisburg University Project) (the "Series B Bonds") are being issued. This Letter of Credit is issued with respect to the Bonds. This Standby Letter of Credit is issued in the aggregate initial amount of Three Million Three Hundred Thousand Dollars ($3,300,000.00) (such amount, as reduced and reinstated from time to time in accordance with the provisions hereof, the "Stated Amount") effective immediately and expiring on September 1, 2011 (the "Expiration Date"). Subject to the foregoing and the further provisions of this Letter of Credit, a demand for payment may be made by you, in whole or in part, under this Letter of Credit by presentation to us of your sight draft(s) drawn on us, signed by an Authorized Officer (as defined hereinafter) stating on its face the clause, "Drawn under Commerce Bank/Harrisburg, National Association Standby Letter of Credit No and accompanied by receipt by us of your written certificate in the form of Exhibit A attached hereto appropriately completed and signed by an Authorized Officer. Presentation of such sight draft(s) and certificate(s) shall be made by writing (including telecopier) at our office located at Commerce Bank/Harrisburg, National Association, 3810 Paxton Street, Harrisburg, Pennsylvania 17111, Loan Servicing Department, Attention: Melissa Williams, telephone number (717) ; telecopier number: (717) or at any other office which may be designated by us by written notice delivered to you.

184 Demand for payment may be made by you under this Letter of Credit on or prior to the Expiration Date at any time during our business hours on a Business Day at the address at which your sight draft(s) and certificate(s) is(are) to be presented in accordance with the terms hereof. As used herein the term "Business Day" means any day other than (i) a Saturday or Sunday, or (ii) a legal holiday on which banking institutions in the State of New York, the Commonwealth of Pennsylvania, the City of New York, New York, the city in which the principal corporate trust office of the Trustee is located, or the city in which the principal office of the Bank is located, are authorized or required by law to close, or (iii) a day on which the New York Stock Exchange is closed. If your sight draft accompanied by documents conforming to the terms and conditions of this Letter of Credit is presented by you at or prior to 12:00 noon (Eastern Time) on a Business Day, such draft will be honored by us by 12:00 noon (Eastern Time) on the next succeeding Business Day. If your sight draft accompanied by documents conforming to the terms and conditions of this Letter of Credit is presented by you after 12:00 noon (Eastern Time) on a Business Day such draft will be honored by us by 12:00 noon (Eastern Time) on the second succeeding Business Day. Payment of any draft indicating a payment date which is not a Business Day as defined herein will be effected the next succeeding Business Day. If a demand for payment made by you hereunder does not, in any instance, conform to the terms and conditions of this Letter of Credit, we shall give you prompt notice that the purported negotiation was not effected in accordance with the terms and conditions of this Letter of Credit, stating the reasons therefor and that we are holding any documents at your disposal or are returning the same to you, as we may elect. Upon being notified that the purported negotiation was not effected in conformity with this Letter of Credit, you may attempt to correct any such nonconforming demand for payment if, and to the extent that, you are entitled (without regard to the provisions of this sentence) and able to do so. Demands for payment hereunder honored by us shall not, in the aggregate, exceed the Stated Amount, as the Stated Amount may have been reduced by us or reinstated as provided below. Subject to the reinstatement effected in accordance with the terms hereof, each drawing honored by the Bank hereunder shall result in a corresponding reduction in the Stated Amount. Upon reimbursement to us from the Applicant of amounts paid by us pursuant to a draw honored by us, the Stated Amount shall be reinstated automatically by the amount of such reimbursement. In addition, unless you have received, not later than the close of business on the fourth (4 th ) Business Day following the date of any payment with respect to a draw, written notice that the Bank has determined not to reinstate the Letter of Credit because either: (i) (ii) the Applicant has failed to reimburse the Bank for the amount of such draw, together with interest thereon, or there is presently existing an Event of Default under and as defined in the Reimbursement Agreement dated as of January 1, 2007 (the Reimbursement Agreement ) by and between the Applicant and us, 2

185 the Stated Amount shall be reinstated automatically, as of the opening of business on the fifth (5 th ) Business Day following such payment by the amount of such payment. Upon presentation to us by the Trustee of the Reduction Certificate attached hereto as Exhibit C, we will automatically reduce the Stated Amount of this Letter of Credit. Only you as Trustee may make a drawing under this Letter of Credit. Upon the payment to you, to your designee or to your order of the amount specified in a sight draft drawn, we shall not thereafter be obligated to make any further payments under this Letter of Credit with respect to such sight draft to you or any other person who may have made to you or makes to you a demand for payment of principal of, purchase price of, or interest on, any Series B Bond. By paying to you an amount demanded in accordance herewith, we make no representation as to the correctness of the amount demanded. Payments made by us hereunder will be made to you in immediately available funds and out of our funds, and not, directly or indirectly, out of funds or other assets of the Applicant. This Letter of Credit shall automatically terminate and shall be delivered to the Bank for cancellation, at 4 p.m. (Eastern time) on the date which is the earliest of (i) receipt of your certificate in the form of Exhibit B signed by an Authorized Officer and the honoring by us of the final non-reinstateable drawing available to be made hereunder, (ii) five (5) Business Days after the date upon which we receive your certificate in the form of Exhibit B signed by an Authorized Officer with respect to receipt of a Substitute Letter of Credit, (iii) receipt of your certificate in the form of Exhibit B signed by an Authorized Officer to the effect that no Series B Bonds remain outstanding under the Indenture, together with the Letter of Credit and (iv) September 1, 2011, the stated Expiration Date. This Letter of Credit shall be promptly surrendered to us by you upon such termination. Communications with respect to this Letter of Credit shall be in writing and shall be addressed to us at Commerce Bank/Harrisburg, National Association, Loan Processing Department, 3801 Paxton Street, Harrisburg, Pennsylvania 17111, Attn: Melissa Williams, specifically referring thereon to this Letter of Credit by number. This Letter of Credit is transferable in its entirety (but not in part) to any transferee who has succeeded you as Trustee under the Indenture. We agree to issue a substitute Letter of Credit to any such successor trustee (and to successively replace any such substitute letter of credit) upon the return to us for cancellation of the original of the Letter of Credit to be replaced, accompanied by a request relating to such Letter of Credit, which (I) shall be substantially in the form of Exhibit D attached hereto with the blanks appropriately completed, (ii) shall be signed by an Authorized Officer, (ill) shall specifically refer to the letter of credit number as the number of the letter or credit to be replaced and (iv) shall state the name and address of the successor trustee. As used herein "Authorized Officer shall mean any person signing as one of your Vice Presidents, Assistant Vice Presidents, Trust Officers or Assistant Trust 3

186 Officers. Other capitalized terms used herein but not defined herein shall have the same meanings as in the Indenture or in the Reimbursement Agreement. This Letter of Credit sets forth in full our undertaking, and such undertaking shall not in any way be modified, amended, amplified or limited by reference to any document, instrument or agreement referred to herein (including, without limitation, the Bonds), except only the certificate(s) and sight draft(s) referred to herein; and any such reference shall not be deemed to incorporate herein by reference any document, instrument or agreement except for such certificate(s) and such sight draft(s). This Letter of Credit is subject to the International Standby Practices 1998 (ISP98). This Letter of Credit shall be deemed to be made under the laws of the Commonwealth of Pennsylvania and shall, as to matters not governed by the Uniform Customs, be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania. Very truly yours, COMMERCE BANK/HARRISBURG, NATIONAL ASSOCIATION (AUTHORIZED SIGNATURE) 4

187 EXHIBIT A CERTIFICATE FOR DRAWING [Date] Commerce Bank/Harrisburg, National Association Loan Processing 3801 Paxton Street Harrisburg, PA Attention: Melissa Williams Re: Standby Letter of Credit No.1719 The undersigned, a duly authorized officer of Commerce Bank, National Association (the "Trustee"), hereby certifies to Commerce Bank/Harrisburg, National Association (the "Bank") with reference to the Bank's Standby Letter of Credit No (the "Letter of Credit") (any capitalized terms used herein and not defined shall have its respective meaning as set forth in the Letter of Credit issued by the Bank in favor of the Trustee) that: (1) The Trustee is the Trustee under the Trust Indenture, dated as of January 1, 2007 for the holders of the Series B Bonds. (2) The Trustee is making a drawing under the above-referenced Letter of Credit in the amount of $. (3) The amount of the sight draft accompanying this certificate does not exceed the Stated Amount or the amount available on the date hereof to be drawn under the above-referenced Letter of Credit. (4) Upon receipt by the undersigned of the amount demanded hereby, (a) the undersigned will transfer such amount for the payment when due of the interest on, the principal of, or the purchase price, if any, owing on the Series B Bonds payable on, (b) no portion of said amount shall be applied by the undersigned for any other purpose, and (c) no portion of said amount shall be commingled with other funds held by the undersigned. IN WITNESS WHEREOF, the Trustee has executed and delivered this Certificate as of the day of,. COMMERCE BANK, NATIONAL ASSOCIATION, Trustee By: Title:

188 EXHIBIT B TERMINATION CERTIFICATE Commerce Bank/Harrisburg, National Association Loan Processing Department 3801 Paxton Street Harrisburg, PA Attn: Melissa Williams Re: Standby Letter of Credit No.1719 The undersigned, a duly authorized officer of Commerce Bank, National Association (the "Trustee"), hereby certifies as follows to Commerce Bank/Harrisburg, National Association as issuer of the above-referenced letter of credit (the "Letter of Credit ). 1. All terms defined in the Letter of Credit are used herein with the same meanings. 2. The Trustee is the Trustee under the Trust Indenture, dated as of January 1, The Trustee hereby requests termination of the Letter of Credit submitted herewith for the following reason [state one of the following]: (a) The draft or demand accompanying this Certificate is the final non-reinstateable draft or demand to be drawn under the Letter of Credit and, upon the honoring of such draft or demand, the Trustee will surrender the Letter of Credit to the Bank for cancellation; (b) The conditions precedent to the acceptance of a Substitute Letter of Credit have been satisfied and the Trustee has accepted the Substitute Letter of Credit; or (c) No Bonds remain Outstanding (as defined in the Indenture). Dated:, COMMERCE BANK, NATIONAL ASSOCIATION, Trustee By: Title: 6

189 EXHIBIT C REDUCTION CERTIFICATE Commerce Bank/Harrisburg, National Association 3801 Paxton Street Harrisburg, PA Attention: Melissa Williams Re: Standby Letter of Credit No.1719 The undersigned, a duly authorized officer of Commerce Bank, National Association (the Trustee ), hereby certifies as follows to Commerce Bank/Harrisburg, National Association as issuer of the above-referenced letter of credit (the Letter of Credit ). 1. All terms defined in the Letter of Credit are used herein with the same meanings. 2. The Trustee is the Trustee under the Trust Indenture, dated as of January 1, The Trustee hereby notifies you that on or prior to the date hereof Series B Bonds in a principal amount of Dollars ($ ) have been redeemed or defeased, and are deemed paid, pursuant to the Indenture. 4. The Trustee hereby consents to a reduction in the Stated Amount by Dollars ($ ), representing the sum of the aggregate principal amount of the Series B Bonds referred to in the preceding paragraph hereof and interest thereon in the amount of Dollars ($ ). Dated:, Commerce Bank, National Association By: Title:

190 EXHIBIT D TRANSFER CERTIFICATE (Date] Commerce Bank/Harrisburg, National Association Loan Processing Department 3801 Paxton Street Harrisburg, PA Attn: Melissa Wilson Re: Standby Letter of Credit No.1719 Gentlemen: Reference is made to (i) the above-referenced letter of credit (the "Old Letter of Credit") and (ii) the Trust Indenture dated as of January 1, 2007 (the "Indenture") between The Harrisburg Authority and us. [Name and address of successor trustee] (the "Successor Trustee") has been properly appointed and qualified as successor trustee under the terms of Article of the Indenture. You are hereby requested to issue, in accordance with the terms of the Old Letter of Credit, a new letter of credit to the Successor Trustee having the same terms and providing for the same Stated Amount as the Old Letter of Credit. We submit herewith for cancellation the original of the Old Letter of Credit. The individual signing below on our behalf hereby represents that he or she is duly authorized to so sign on our behalf. Very truly yours, COMMERCE BANK, NATIONAL ASSOCIATION By: Title: v1

191 APPENDIX G-3 FORM OF REIMBURSEMENT AGREEMENT RELATING TO THE BANK'S STANDBY LETTER OF CREDIT FOR THE BENEFIT OF A PORTION OF THE SERIES B BONDS

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193 REIMBURSEMENT AGREEMENT THIS REIMBURSEMENT AGREEMENT (this "Agreement"), dated as of January 1, 2007, is made by and between THE HARRISBURG UNIVERSITY OF SCIENCE AND TECHNOLOGY, a Pennsylvania not-for-profit corporation (the "Borrower and COMMERCE BANK/HARRISBURG, NATIONAL ASSOCIATION, (the "Bank"). RECITALS WHEREAS, the Borrower has requested the Bank provide to it a Standby Letter of Credit facility in the amount of $3,300,000 for an initial term of five years (the Letter of Credit Facility ) to support the University Revenue Bonds, Series B of 2007 (Harrisburg University Project) in the aggregate principal amount of $60,225,000 (the Bonds) issued under and pursuant to a certain Trust Indenture dated as of January 1, 2007 (the Indenture ), from the Harrisburg Authority (the Authority ) to Commerce Bank, National Association, the Trustee, to finance the construction of a sixteen-story building on a site located on approximately 0.82 acres of land in the City of Harrisburg, Pennsylvania, consisting of seven floors of academic and university office space (the University Facility ), and further consisting of a nine-floor structured parking facility to allow parking on site to accommodate approximately 392 cars; and WHEREAS, the proceeds of the Bonds will be loaned to the Borrower to be applied by the Borrower to the 2007 Project (as such term is defined in the Indenture) by the Authority under and pursuant to a certain Loan Agreement, dated as of January 1, 2007 which provides for the repayment of such loan, and the pledge of the Borrower s Unrestricted University Revenues (as such term is defined in the Indenture) as security therefore: and WHEREAS, the Bank is wiling to provide to the Borrower the Standby Letter of Credit Facility on the terms and the conditions set forth herein; NOW, THEREFORE, intending to be legally bound, the Borrower and the Bank hereby agree as follows: SECTION 1. DEFINITIONS General Provisions. Unless expressly provided otherwise in this Agreement or in the Reimbursement Documents, or unless the context requires otherwise:

194 (a) all terms used herein and in the Reimbursement Documents that are defined in the Pennsylvania Uniform Commercial Code, as amended from time to time, shall have the meanings set forth therein; (b) all capitalized terms defined in this Agreement shall have the defined meanings when used in the Reimbursement Documents, the Indenture, the Loan Agreement and in any other documents made or delivered pursuant to this Agreement; (d) the singular shall mean the plural, the plural shall mean the singular, and the use of any gender shall include all genders; (e) all references to any particular party defined herein shall be deemed to refer to each and every Person defined herein as such party individually, and to all of them collectively, jointly and severally, as though each were named wherever the applicable defined term is used; (f) all references to "Sections," "Subsections," "Paragraphs," and "Sub-paragraphs," shall refer to provisions of this Agreement; (g) all references to time herein shall mean Eastern Standard Time or Eastern Daylight Time, as then in effect; (h) all references to sections, subsections, paragraphs or other provisions of statutes or regulations shall be deemed to include successor, amended, renumbered and replacement provisions; and (i) the use of the words "include" or "including" shall be construed as words of illustration only, and not as words of limitation Defined Terms. As used herein, the following terms shall have the meanings indicated, unless the context otherwise requires: "Accumulated Funding Deficiency" shall mean any accumulated funding deficiency as defined in ERISA 302(a). "Act" means the Pennsylvania Municipality Authorities Act (Ch. 45, 53 Pa.Cons.Stat ), as amended or supplemented. "Affiliate" shall mean any Person directly or indirectly controlling, controlled by or under common control with the Borrower as certified to the Trustee by an Authorized Representative of the Borrower. In addition, the term "Affiliate" shall also include any Person who has guaranteed the payment of the Borrower's obligations under the Loan Agreement or this Agreement. 2

195 "Agreement" shall mean this Reimbursement Agreement and any future amendments, restatements, modifications or supplements hereof or hereto. "Annual Fee" shall have the meaning given to that term in Section 2.02(b). "Assignment of Agreements Affecting Real Estate" or "Assignment" shall mean the Assignment of Agreements Affecting Real Estate dated as of the date hereof executed by the Borrower in favor of the Bank, pursuant to which the Borrower, as security for the Obligations, has assigned to the Bank all of its right, title, and interest (but none of its duties, obligations, or liabilities) in and to all assignable licenses, permits, contracts and commitments described therein relating to the Property, together with any future amendments, restatements, modifications, or supplements thereof or thereto. "Authority" shall mean The Harrisburg Authority, created pursuant to, and as defined, in the Act and its successor(s). "Authorized Representative" means with respect to the Borrower, the Executive Director of the Borrower, or any other person designated as an Authorized Representative of the Borrower by a Certificate of the Borrower signed by the Secretary or Assistant Secretary of the Borrower and filed with the Trustee. Bank" shall mean Commerce Bank/Harrisburg, National Association, and its successor(s). "Bankruptcy Code" shall mean the United States Bankruptcy Code, Title 11 of the United States Code, as amended, or any successor law thereto, and any rules promulgated in connection therewith. "Bond Documents" shall have the meaning given to that term in the Indenture. "Bonds" shall mean The Harrisburg Authority, University Revenue Bonds, Series B of 2007 (Harrisburg University Project) authorized to be issued under the Indenture in the aggregate principal amount of $60,225,000. "Borrower" shall mean The Harrisburg University of Science and Technology, a Pennsylvania not-for-profit corporation. "Business Day" shall mean any day other than (i) a Saturday or Sunday, or (ii) a legal holiday on which banking institutions in the State of 3

196 New York, the Commonwealth of Pennsylvania, the City of New York, New York, the city in which the principal corporate trust office of the Trustee is located, the city in which the delivery office of the Tender Agent is located or the city in which the principal office of the Bank is located are authorized or required by law to close, or (iii) a day on which the New York Stock Exchange is closed. Capital Additions shall mean all new or additional land and buildings, structures or other permanent improvements to land which the Borrower or the Authority has authority to construct or acquire in connection with the University Facility and other ancillary projects, which new or additional property and permanent improvements, replacements, additions, extensions or betterments shall be hereafter constructed or otherwise acquired by the University or the Authority. "Closing Date" shall mean the date on which the Bonds are issued. "COBRA Continuation Coverage" shall mean those provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, found in Code 4980B(f), which impose certain continuation coverage requirements upon group health plans in order for such plans to retain certain tax advantages. "Code" shall mean the federal Internal Revenue Code of 1986, as amended, and regulations promulgated thereunder. "Collateral" shall mean, collectively, (i) the Property and any and all other property mortgaged pursuant to and in accordance with the Open- End Mortgage and Security Agreement or in which a lien or security interest is created pursuant to the Open-End Mortgage and Security Agreement, (ii) the rights and interests assigned to the Bank pursuant to the Assignment, and (iii) any other real or personal property, rights and interests now or hereafter pledged, mortgaged, or assigned to the Bank, or in which the Bank has or is granted a security interest, to secure any of the Obligations. "Collateral Documents" means the Open-End Mortgage and Security Agreement, the Assignment, the Financing Statements, and any other instruments delivered to the Bank from time to time to guarantee and/or secure obligations of the Borrower under this Agreement or the Letter of Credit Note. "Contamination" shall mean the presence of any Hazardous Substance which may require Remedial Actions under applicable law. "Controlled Group Member" shall mean: 4

197 (a) any corporation included with Borrower in a controlled group of corporations within the meaning of Code 414(b); (b) any trade or business (whether or not incorporated) which is under common control with Borrower within the meaning of Code 414(c); and (c) any member of an affiliated service group of which Borrower is a member with in the meaning of Code 414(m). "Debt" of any Person means (a) all obligations of such Person for borrowed money, (b) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, (c) all obligations of such Person upon which interest charges are customarily paid, (d) all obligations of such Person under conditional sale or other title retention agreements relating to property or assets purchased by such Person, (e) all obligations of such Person issued or assumed as deferred construction price for completed work or deferred purchase price of property or services (other than trade payables incurred in the ordinary course of business but only if and so long as the same are payable on customary trade terms), (f) all guarantees by such Person of Debt of others, (g) all capital lease obligations of such Person, (h) all obligations for unfunded pension liabilities to the extent that the projected benefit obligations of all employee pension plans maintained by such Person or any ERISA Affiliate exceeds the fair value of the plan assets of such plans, as determined in accordance with GAAP, and (i) all reimbursement obligations of such Person in respect of letters of credit and similar instruments. "Default" or "default" shall mean one or more of the conditions described in Section 7.01, unless the context clearly requires otherwise. "Default Rate" shall mean an annual rate per annum equal to (i) two percent (2%) plus (ii) the Prime Rate (as in effect from time to time) but not more than the highest rate permitted by law.. "DEP" shall mean the Pennsylvania Department of Environmental Protection, or any successor agency. "Employee Pension Plan" shall mean any pension plan which (i) is maintained by Borrower or any Controlled Group Member, and (ii) is qualified under Code 401. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended, and any regulations issued thereunder by the United States Department of labor or the PBGC. 5

198 "ERISA Affiliate" shall have the meaning ascribed to such term in Section "Event of Default" or "event of default" shall mean one or more of the events described in Section 7.01, unless the context clearly requires otherwise. Expendable Funds shall mean Unrestricted Net Assets (as such term is defined in the Loan Agreement) plus Temporarily Restricted Net Assets(as such term is defined in the Loan Agreement); minus Net Investment in Plant (as such term is defined in the Loan Agreement). F F & E shall mean all of Borrower s furniture, fixtures and equipment, including all accessories, additions to, replacement for and substitutions of any of the foregoing. "Fees" shall mean, collectively, the Annual Fee, and any and all other fees due and payable by the Borrower to Bank in connection with the transactions contemplated hereby. "Financing Statements" shall mean, collectively, any and all financing statements and other security instruments creating or perfecting or continuing the creation or perfection of liens on or in any of the Collateral, as Bank may reasonably require pursuant to the terms and conditions of this Agreement. "Fiscal Year means the period of twelve (12) consecutive months beginning January 1 of each year, or such other period of twelve consecutive months established by the Borrower as its new Fiscal Year. "GAAP" means generally accepted accounting principles consistently applied. "Hazardous Substances" means (a) "hazardous substances" as defined in or pursuant to the Comprehensive Environmental Response, Compensation and liability Act (42 U.S.C (14)), as amended from time to time, and the regulations promulgated thereunder; (b) "regulated substances" within the meaning of subtitle I of the Resource Conservation and Recovery Act (42 U.S.C (2)), as amended from time to time, and the regulations promulgated thereunder; (c) "contaminants" or "hazardous substances" as defined in or pursuant to the Pennsylvania Hazardous Sites Cleanup Act (35 P.S et seq.), as amended from time to time, and the regulations promulgated thereunder; (d) "hazardous wastes" as defined pursuant to the Pennsylvania Solid Waste Management Act (35 P.S et seq.), as amended from time to 6

199 time, and the regulations promulgated thereunder; (e) any other substances which may be the subject of liability pursuant to Sections 316 or 401 of the Pennsylvania Clean Streams Law (35 P.S et seq.), as amended from time to time, and the regulations promulgated thereunder; (f) any "hazardous substances", "hazardous wastes", "hazardous materials", "medical wastes" or other substances as defined in or prohibited by or regulated pursuant to any federal, state or local law relating to environmental matters, as amended from time to time, and regulations promulgated thereunder; (g) any substance the presence of which on the applicable property is prohibited by or regulated ) pursuant to law similar to those set forth in this definition; and (h) any other substance which by law requires special handling in its collection, storage, treatment or disposal. "Indenture" shall mean the Trust Indenture dated as of January 1, 2007, by and between the Authority and the Trustee, pursuant to which the Bonds are issued and secured, and any future amendments, restatements, modifications or supplements thereof or thereto. "Interest Payment Date" shall have the meaning given to that term in the Indenture. Intercreditor Agreement shall mean the Intercreditor Agreement dated as of January 1, 2007, by and between the Bank and the Commerce Bank, National Association, the Trustee, as such term is thereafter defined. "Investment" shall mean, with regard to any Person, the following: (a) any loan or advance by that Person to or guaranty or other contingent liability with regard to the capital stock, debt or other obligations of, and any contributions to the capital of, the other Person; (b) any ownership, purchase or other acquisition by that Person of any interest in any capital or other securities of any other Person; and (c) any sale or transfer of property by that Person to any other Person, except upon full cash payment of not less than the greater of the full sale price or the fair market value of that property. "Letter of Credit" shall mean the standby letter of credit issued by the Bank to the Trustee in the initial stated amount of Three Million Three Hundred Thousand Dollars ($3,300,000.00), and any replacement letter of credit issued pursuant to the terms and conditions of this Agreement. 7

200 "Letter of Credit Note" or Note shall mean that certain promissory note dated as of the date hereof executed and delivered by the Borrower to the Bank in the principal amount of Three Million Three Hundred Thousand ($3,300,000.00), with respect to amounts due and owing to the Bank by reason of, among other things, a draw under or in connection with the Letter of Credit, and any future amendments, modifications or supplements thereto or restatements thereof. "Loan Account" shall mean, collectively, the account or accounts of the Borrower on the books of Bank in which are recorded the Letter of Credit Note and the payments of principal and interest made by the Borrower to Bank thereon. "Loan Agreement" shall mean the Loan Agreement dated the date hereof between the Authority and the Borrower pursuant to which the Authority agreed to loan all Bond Advances to the Borrower for and in connection with the Project, on the terms and subject to the conditions set forth therein. "Multiemployer Plan" shall mean a multiemployer pension plan as defined in ERISA 3(37) to which Borrower or any Controlled Group Member is or has been required to contribute subsequent to September 25, "Obligations" shall mean, collectively, all liabilities, duties and obligations of the Borrower to the Bank with respect to any covenants, representations or warranties herein or in the Reimbursement Documents, with respect to the principal of and interest on the Letter of Credit Note and all other present and future fixed and/or contingent obligations of the Borrower to the Bank hereunder or under the Reimbursement Documents, including without limitation, obligations with respect to interest accruing (or which would accrue but for 502 of the Bankruptcy Code) after the date of any filing by Borrower of any petition in bankruptcy, insolvency or similar proceedings with respect to Borrower. "Open-End Mortgage and Security Agreement" shall mean the Open-End Mortgage and Security Agreement dated the date hereof from the Borrower as mortgagor, to the Bank, as mortgagee, covering the Property and certain other property described therein, which Open-End Mortgage and Security Agreement (i) secures the Obligations and (ii) is intended to be forthwith recorded in the Dauphin County Recorder of Deeds office, (iii) shall be subordinate to the mortgage granted to the Trustee for the benefit of the holders of the Bonds, and (iv) any future amendments, restatements, modifications or supplements thereof or thereto. 8

201 "Payment Date" shall have the meaning given to that term in Section 2.3. "PBGC" shall mean the Pension Benefit Guaranty Corporation. Person" shall mean an individual, a corporation, a partnership, an association, a joint stock company, a joint venture, a trust, an unincorporated organization, an authority or similar body or a government or a political subdivision or agency thereof, or any other entity. "Prime Rate" shall mean the New York Prime. New York Prime means the base rate on corporate loans at large U. S. Money Center Commercial Banks as published in the Money Rates Column of the Wall Street Journal, Eastern Edition or its successor publication. If the base rate is designated as more than one rate or is published as a range of rates, New York Prime Rate shall mean the average of the rates published. If the Wall Street Journal or it successor publication ceases to publish a rate or rates of interest as the Base Rate, Prime Rate shall mean the rate which the Bank establishes as its prime rate whether or not published. If the Bank has more than one prime rate in effect simultaneously, the prime rate shall mean the highest of such prime rates then simultaneously in effect. The Applicable Rate of Interest shall mean the rate which Bank establishes as its prime rate, whether or not published (hereinafter the Commerce Prime Rate ). "Project" means the construction of a 191,000 gross square foot sixteen (16) story building on a site located on approximately 0.82 acres of land in the City of Harrisburg, Pennsylvania consisting of seven (7) floors of academic and university office space (the University Facility ) and further consisting of a nine (9) floor structured parking facility (the Parking Garage ) to allow parking on the site for approximately 392 cars. "Project Facilities" shall mean, collectively, the Borrower's property located at 326 Market Street, Harrisburg, Dauphin County, Pennsylvania and the buildings, fixtures, equipment, machinery and other facilities located or to be located on and used in or to be used in connection therewith, which are purchased, financed or refinanced, in whole or in part, with the proceeds of the Bonds. "Property" shall mean, 326 Market Street, Harrisburg, Dauphin County, Pennsylvania, as more fully described in the Open-End Mortgage and Security Agreement and the Collateral Documents. "Reimbursement Documents" shall mean, collectively, this Agreement, the Letter of Credit, the Letter of Credit Note, the Collateral Documents, and all other existing and future agreements, pledges, 9

202 instruments, documents, assignments, guarantees and contracts (including any modifications, supplements and amendments to or restatements of those documents) delivered by or on behalf of the Borrower to the Bank in connection with this Agreement; all of which shall be satisfactory, in form and substance, to the Bank and its counsel. "Release" shall mean any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching or dumping. "Remedial Actions" shall mean: (a) clean-up or removal of Hazardous Substances; (b) such actions as may be necessary to monitor, assess, or evaluate the Release or threatened Release of Hazardous Substances; (c) proper disposal or removal of Hazardous Substances; (d) the taking of such other actions as may be necessary to prevent, minimize, or mitigate the damages caused by a Release or threatened Release of Hazardous Substances to the public health or welfare or to the environment; and (e) the providing of emergency assistance after a Release. Remedial Actions include, but are not limited to, such actions at the location of a Release as: storage; confinement; perimeter protection using dikes, trenches, or ditches; clay cover; neutralization; clean-up of Hazardous Substances or contaminated materials; recycling or reuse; diversion; destruction; segregation of reactive wastes; dredging or excavations; repair or replacement of leaking containers; collection of leachate and runoff; on-site treatment or incineration; providing alternative water supplies; and any monitoring reasonably required to assure that such actions protect the public health and welfare and the environment. "Reorganization" shall mean reorganization as defined in ERISA 4241 (a). "Reportable Event" shall mean with respect to any Employee Pension Plan, an event described in ERISA 4043(b). "Stated Amount" shall have the meaning given to that term in the Letter of Credit. "Trustee" shall mean Commerce Bank, National Association, in its capacity as trustee for the holders of the Bonds under the Indenture, and its successor(s) and any corporation or association resulting from or 10

203 surviving any consolidation or merger to which it or its successors may be a party or any corporation or association to which it may sell all or substantially all of its corporate trust business and any successor trustee at the time serving as successor trustee under the Indenture. Unrestricted University Revenues shall mean such revenues, income and other moneys (both operating and non-operating) received by the Borrower that would properly be recorded as additions to Unrestricted Net Assets (as such term is defined in the Indenture) during the period being measured; provided that; for purposes of this definition, in each context involving measuring coverage for purposes of a financial covenant, an amount equal to the budgeted unrestricted investment earnings (realized and unrealized gains and income) of the Borrower pursuant to the Borrower s endowment spending formula as determined by the Board of Trustees of the Borrower for such fiscal year shall be included and the balance of realized and unrealized gains or losses and any income earned on such investments shall be excluded; or the equivalent as estimated by the Borrower if the Borrower s accounting presentation format changes materially in the future. "Withdrawal Liability" shall mean any withdrawal liability as defined in ERISA SECTION 2. AMOUNT AND TERMS OF LETTER OF CREDIT Issuance of Letter of Credit; Term. (a) The Bank agrees, on and subject to the terms and conditions of this Agreement, to issue the Letter of Credit in the initial Stated Amount of $3,300,000.00, to and for the benefit of the Trustee and for the account of the Borrower on the Closing Date. (b) As provided more fully in the Letter of Credit, such Letter of Credit shall automatically expire on the earliest of the following: (i) The honoring by the Bank of the final nonreinstateable draft or drawing under the Letter of Credit; (ii) The receipt by the Bank of a certificate of the Trustee stating that a substitute letter of credit has been delivered to and accepted by the Trustee; (iii) The receipt by the Bank of a certificate of the Trustee stating that there are no longer any Bonds "Outstanding" under the Indenture; or 11

204 (iv) September 1, 2011 the stated Expiration Date (subject to the Bank's right, in its sole discretion, to grant one or more one (1) year extension(s) of such expiration date upon the prior written request of the Borrower). (c) If the Borrower desires the Bank to consider an extension of the expiration date of the Letter of Credit, the Borrower shall request such extension in writing by delivering such written request to the Bank with a copy to the Trustee, not less than 180 days nor more than 210 days before the expiration date or within such other time as may be agreed to by the Bank. The Bank may or may not, in its sole discretion, extend the expiration date of the Letter of Credit. In the event the Bank elects to extend the expiration date of the Letter of Credit, the Bank shall give notice of such election to the Borrower and the Trustee not less than 120 days before the expiration date. If the Borrower does not timely request an extension of the Letter of Credit, as set forth in this Section 2.01 (c), then (i) the Letter of Credit shall automatically terminate, in accordance with its terms, unless otherwise extended in the sole discretion of the Bank, and (ii) the Bank shall not be obligated to consider such request for extension Reimbursement and Other Payments. (a) Subject to the Intercreditor Agreement, the Borrower shall pay to the Bank, after the honoring by the Bank of a draw under the Letter of Credit and without any further notice, demand or declaration hereunder, (1) a sum (and interest on such sum as provided in clause (3) below) equal to the amount so drawn under the Letter of Credit; (2) any and all reasonable charges and expenses that the Bank may pay or incur relating to the Letter of Credit; and (3) interest on any and all amounts unpaid by the Borrower when due hereunder from the date such amounts become due until payment in full, payable in twelve (12) consecutive monthly installments of principal and interest, calculated in accordance with the provisions of the Letter of Credit Note and Section 2.03 below. (b) Subject to the Intercreditor Agreement, the Borrower shall pay to the Bank an annual fee (computed on the basis of the actual number of days in the calendar year divided by 360) at the rate of two (2%) percent per annum of the Stated Amount of the Letter of Credit (the "Annual Fee"). The Annual Fee for the period beginning on the date of issuance of the Letter of Credit and ending on December 31, 2007, shall be $66,000.00, and shall be payable on the date of issuance of the Letter of Credit. Thereafter, so long as the Letter of Credit remains outstanding, the Annual Fee shall be calculated on each December 15 th (based on the Stated Amount on such day) and shall be payable in advance on each January 1st. The existence of any amount in any fund under the Indenture shall not serve to reduce the amount of the Annual Fee, and no portion of the Annual Fee shall be refunded regardless of the date on which the Bonds are repaid, except as otherwise hereinafter set forth in this Section 2.02(b). The amount of the Annual Fee shall not be reduced, and no portion of the Annual Fee shall be refunded, in the event the Letter of Credit expires or is drawn upon, reduced, terminated, or otherwise modified after the date on which the Annual Fee is due and payable; provided, however, the Bank agrees to refund to Borrower the 12

205 unearned portion of any Annual Fee paid by Borrower to the Bank in the manner required under this Section 2.02(b) in the event that the Letter of Credit is, subsequent to the payment of such Annual Fee, cancelled and the Bank's contingent liability is eliminated by reason of a prepayment by Borrower of all of the Bonds so long as no Default or Event of Default has occurred prior to such prepayment and exists as of the date on which such prepayment is made. In the event that any Annual Fee payable under the terms hereof is not paid within ten (10) days after the date it is due and payable (as reflected on the invoice presented by the Bank in connection therewith), the payment of such Annual Fee shall be accompanied by interest thereon, at the rate provided in Section 2.03(a), from the date of such payment becomes due until paid in full. (c) The Borrower shall pay to the Bank upon each transfer of the Letter of Credit in accordance with its terms, all of Bank's customary and reasonable transfer fees, as then in effect, and all reasonable costs and expenses of Bank incurred in connection with such transfer, which payment shall be due and payable immediately upon receipt of notice from the Bank of the amount of such expenses. (d) The obligations of Borrower to make all payments of principal and interest and all other amounts payable to or for the account of the Bank hereunder shall be evidenced by the Letter of Credit Note Interest. (a) All amounts due or to become due to the Bank under this Agreement shall be accompanied by interest thereon, from the date such amounts become due until paid in full at an annual rate (before and after judgment) equal to the Bank's Prime Rate plus one percent (1.00%); subject, however, to the provisions of paragraph (b) below of this Section Interest shall be computed on the basis of the actual number of days in the calendar year divided by 360, and the rate of interest shall change automatically and simultaneously as of the date of each change in the Bank's Prime Rate. (b) Upon the occurrence and during the continuance of any Event of Default interest shall accrue on amounts due under this Agreement at an annual rate (before and after judgment) equal to the Default Rate Letter of Credit Note. The obligation of the Borrower to make payments under this Agreement with respect to amounts due and owing to the Bank by reason of, among other things, a drawing under the Letter of Credit, shall be evidenced by a promissory note, dated the date of this Agreement and in form and substance satisfactory to the Bank, executed and delivered by the Borrower to the Bank in the principal amount of $3,300, (the "Letter of Credit Note"). 13

206 2.05 Payments. All payments (including prepayments) hereunder shall be made at any office of the Bank, or such other place(s) as the Bank may direct, prior to 10:00 A.M. on the date of payment, in lawful money of the United States of America, and in immediately available funds Late Payment Charges. If any installment of principal and/or interest under this Note or any other sum due under any other Letter of Credit Document is not paid within ten (10) days of its due date or if the Maker fails to pay the entire principal balance, together with interest accrued thereon, and all other sums due under this Letter of Credit Note or any other Letter of Credit Document on the Maturity Date, interest on the amounts due shall be increased from its due date to the date upon which is paid to the Default Rate. In the event any payments of interest and/or principal remain unpaid ten (10) days after such payments are due, Maker shall pay a delinquency charge of five percent (5%) of the amount so overdue to cover the extra expense involved in handling delinquent payments. Provisions for the delinquency charge shall not be construed to permit Maker to make any payment after its due date, obligate Bank to accept any overdue installment, or affect Bank s rights and remedies upon default Collateral. (a) As security for the payment, performance and discharge of all liabilities and obligations of the Borrower under this Agreement or the other Reimbursement Documents, or otherwise arising in connection with the Letter of Credit: (i) Borrower hereby assigns, transfers and pledges, in accordance with the Intercreditor Agreement, all of the Borrower s Unrestricted University Revenues in parity with the pledge of such revenues and amounts payable by the Borrower to the Trustee for the benefit of the holders of the Bonds and the Authority consents to such parity pledge in favor of the Bank; (ii) the Borrower shall execute and deliver to Bank, contemporaneously with the execution and delivery of this Agreement in form and substance satisfactory to Bank, the Open-End Mortgage and Security Agreement on and covering the Property and certain other property described therein; (iii) the Borrower shall assign to the Bank all of its right, title, and interest in and to all assignable licenses, permits, approvals, contracts and agreements relating to the Property, as more fully described in, and under the terms and conditions of the Assignment of Agreements Affecting Real Estate dated the date of this Agreement from the Borrower to the Bank; and (iv) the Borrower shall grant to the Bank a security interest in and lien upon, in parity with the security interest and lien of granted by the Borrower to the Trustee, and right of set-off against, all funds or other assets of the Borrower now or at any time hereafter on deposit with or in the possession of the Bank or owing by the Bank to the Borrower, and in the FF & E, money, safe deposit box contents, and other property of Maker of whatever kind or nature which may now or hereafter be deposited with or in the possession or control of Bank as well as all assets 14

207 of the Borrower in which the Bank now has or at any time hereafter may obtain a lien, mortgage, or security interest, for any reason. (b) The Borrower shall execute and deliver to the Bank from time to time such financing statements and such additional instruments or documents as the Bank may deem reasonably necessary to perfect, protect, maintain or enforce its security interests in or other rights or claims to the Collateral, and shall pay the costs of filing or recording the same in such offices as the Bank may designate Increased Costs. If, after the Date of Issuance, any enactment, promulgation or adoption of or change in any applicable foreign or domestic law, regulation or rule or in the interpretation or administration thereof by any court, administrative or governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by the Bank (or any controlling affiliate) with any guideline, request or directive issued after the date hereof (whether or not having the force of law) of any such authority, central bank or comparable agency, shall either (i) impose, modify or deem applicable any reserve, special deposit, insurance assessment or similar requirement (including without limitation a guideline, request or directive) which affects the manner in which the Bank allocates capital resources to its commitments and/or risks, including its obligations and/or risks under this Agreement or the Note, (ii) affect the amount of capital required or expected to be maintained the Bank (or any controlling affiliate) with respect to the Letter of Credit, (iii) subject the Bank to any tax, levy, impost, duty, deduction, withholding or other charge or change the basis of taxation of the Bank (other than a change in a rate of tax based on income of the Bank), or (iv) impose on the Bank any other condition regarding this Agreement, the Note or the Security Documents and the result of any event referred to in clause (i), (ii), (iii) or (iv) of this sentence shall be to increase the direct or indirect cost to the Bank of entering into or maintaining the Letter of Credit, of agreeing to make, making or maintaining the loan(s) evidenced by the Note or of funding or maintaining the obligations and/or risks of the Bank under this Agreement or the Note or to reduce the amounts receivable by the Bank hereunder or under the Note or to reduce the rate of return on the capital of the Bank (or any controlling affiliate) in connection with this Agreement or the Note (which increase in cost, reduction in amounts receivable or reduction in rate of return shall be determined by the Bank's reasonable allocation of such cost increase, reduction in amounts receivable or reduction in rate of return resulting from such event), then within 15 Business Days after demand by the Bank accompanied by the related certificate described in the last sentence of this Section, the Borrower shall pay to the Bank, from time to time as specified by the Bank, additional amounts that in the aggregate shall be sufficient to compensate the Bank for such increased cost, reduction in amounts receivable or reduction in rate of return. A certificate as to such increased cost, reduction in amounts receivable or reduction in rate of return submitted by the Bank to the Borrower containing an explanation of such increased cost, reduction in amounts receivable or reduction in rate of return and the manner of calculation thereof shall, in absence of demonstrable error, be conclusive and binding for all purposes. 15

208 2.09 Obligations Absolute. The obligations of the Borrower under this Agreement shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Agreement, under all circumstances whatsoever, including without limitation the following circumstances: (i) any lack of validity or enforceability of the Letter of Credit, the Bond Documents or any other agreement or document relating thereto; (ii) any amendment or waiver of or any consent to or departure from the Letter of Credit, the Bond Documents or any document relating thereto; (iii) the existence of any claim, set-off, defense or other right which the Borrower may have at any time against the Trustee (or any persons or entities for whom the Trustee may be acting), the Remarketing Agent, the Bank or any other person or entity, whether in connection with this Agreement, the transactions described herein or any unrelated transaction (which are not hereby waived and can be asserted or prosecuted in an appropriate action); or (iv) any of the circumstances contemplated in clauses (1) through (6), inclusive, of Section Indemnification. In addition to any and all rights of the Bank to reimbursement, indemnification or subrogation or any other rights of the Bank at law or in equity, to the extent permitted by applicable law, the Borrower hereby indemnifies and holds harmless the Bank (and its directors, officers, employees and agents) from and against any and all claims, damages, losses, liabilities, costs or expenses (including interest, penalties and reasonable attorneys' fees for counsel of the Bank's choice) whatsoever which the Bank may incur (or which may be claimed against the Bank by any person or entity whatsoever) by reason of or in connection with (a) the issuance or a transfer of, or payment or failure to pay under, the Letter of Credit, (b) any breach by the Borrower or the Issuer of any representation, warranty, covenant, term or condition in, or the occurrence of any default under, this Agreement, the Collateral Documents or the Bond Documents, including all reasonable fees or expenses resulting from the settlement or defense of any claims or liabilities arising as a result of any such breach or default, and (c) involvement of the Bank in any legal suit, investigation, proceeding, inquiry or action as a consequence, direct or indirect, of the Bank's entering into this Agreement or any other event or transaction contemplated by any of the foregoing; provided the Borrower shall not be required to indemnify the Bank for any claims, damages, losses, liabilities, costs or expenses to the extent, but only to the extent, caused by the willful misconduct or negligence of the Bank. The obligations of the Borrower under this Section shall survive the termination of this Agreement Liability of Bank. (a) As between the Borrower and the Bank, the Borrower assumes all risks of the acts or omissions of the Trustee. Neither the Bank nor any of its officers or directors shall be liable or responsible for: (1) the use which may be made of the Letter of Credit or for any acts or omissions of the Trustee; (2) the form, validity, sufficiency, accuracy or genuineness of any documents submitted by the Trustee (including without limitation any documents presented under the Letter of Credit) or of any statement therein or endorsement thereon, even if any such documents, statements or endorsements should in fact prove to be in any or all respects invalid, insufficient, 16

209 fraudulent, forged, inaccurate or untrue; (3) the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign the Letter of Credit or the rights or benefit thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or ineffective for any reason; (4) errors, omissions, interruptions, losses or delays In transmission or delivery of any messages by mall, cable, telegraph, telex, telephone or otherwise; (5) any loss or delay in the transmission or delivery of any document or draft required in order to effect a drawing under the Letter of Credit; or (6) any other circumstances whatsoever in making or failing to make payment under the Letter of Credit other than wrongful dishonor of a draft thereunder by the Bank; except only that the Borrower shall have a claim against the Bank, and the Bank shall be liable to the Borrower, to the extent, but only to the extent, of any direct, as opposed to consequential; damages suffered by the Borrower which the Borrower proves were caused by the Bank's willful misconduct or negligence. (b) The Bank shall have no liability to the Borrower or any other person as a result of any reduction of the credit rating of the Bank or any deterioration in the Bank's financial condition. No reduction of the credit rating of the Bank or any deterioration in the Bank's financial condition shall reduce or in any way diminish the obligations of the Borrower to the Bank under this Agreement. SECTION 3. REPRESENTATIONS AND WARRANTIES In order to induce the Bank to enter into this Agreement and to issue the Letter of Credit, the Borrower represents and warrants to Bank as follows: 3.01 Existence. The Borrower is a not-for-profit corporation duly organized, validly existing and in good standing under the laws of the Commonwealth of Pennsylvania empowered to provide a program of education beyond the high school level, and recognized by the Pennsylvania Board of Education as an institution of higher education. The Borrower is an organization described in Section 501 (c)(3) of the Code, is exempt from federal income tax under Section 501 (a) of the Code and is not a "private foundation" as defined in Section 509(a) of the Code Power, Authorization and No Conflicts. The Borrower has all requisite power and authority and the legal right to own and operate its properties, to lease the properties it operates under lease, and to carry on its business as it is now being conducted, and is duly qualified to transact business as a not-for-profit corporation in good standing under the laws of each state where its ownership, lease or operation of property or the conduct of its business requires such qualification, except to the extent that failure to qualify to transact business would not have a material adverse affect on the financial condition or operations of the Borrower and could not materially adversely affect the Borrower's ability to perform its obligations under the Reimbursement Documents and Bond Documents to which it is a party. The execution, delivery and performance by the Borrower of the Reimbursement Documents and the Bond Documents to which it is a party (i) are within its power and authority, (ii) have been duly authorized by all necessary action of the Borrower, and (iii) do not conflict with, violate 17

210 or constitute a default under the articles of incorporation or the bylaws of the Borrower or any law, rule, regulation, decree, order or judgment applicable to the Borrower or any indenture, mortgage, agreement, instrument, contract or other restriction binding on or affecting the Borrower or any of its properties, or result in the creation of any mortgage, pledge, lien or encumbrance upon any of its properties other than as provided by the terms thereof Governmental Authorizations; Permits, Licenses and Other Approvals. The Borrower has all licenses, permits, approvals, qualifications, consents and other authorizations necessary for the lawful conduct of its business and operations wherever now conducted, pursuant to all applicable statutes, laws, ordinances, rules and regulations of all governmental authorities having, asserting or claiming jurisdiction over the Borrower or over any part of its operations, except to the extent that failure to have the same would not have a material adverse effect on the financial condition or operations of the Borrower. Copies of all such licenses, permits, approvals, qualifications, consents and other authorizations shall be provided to the Bank upon request in writing. The Borrower is not in default under any of such license, permit, approval, consent, qualification or authorization and no event has occurred, and no condition exists, which, with the giving of notice or the passage of time or both, would constitute a default thereunder or would result in the suspension, revocation, impairment, forfeiture or non-renewal of any such license, permit, approval, qualification, consent or authorization, except to the extent that the same would not have a material adverse effect on the financial condition or operations of the Borrower. The continuation, validity and effectiveness of all such licenses, permits, approvals, consents, qualifications and authorizations will not be adversely affected by the transactions contemplated in this Agreement. No authorization, approval or other action by, and no notice to or filing with, any governmental authority, regulatory body or court is required for the due execution, delivery and performance by the Borrower of the Reimbursement Documents and the Bond Documents to which the Borrower is a party, except such as have been obtained Valid and Binding Effect. The Reimbursement Documents and the Bond Documents to which the Borrower is a party are the legal, valid and binding obligations of the Borrower, enforceable against the Borrower in accordance with their terms, subject to the application by a court of general principles of equity and to the effect of any applicable bankruptcy, insolvency, reorganization, moratorium or similar law affecting creditors' rights generally No Litigation. Except as disclosed on Schedule 3.05, there is no pending action or proceeding before any court, governmental agency or arbitrator against or involving the Borrower and, to the best knowledge of the Borrower, there is no threatened action or proceeding affecting the Borrower before any court, governmental agency or arbitrator which, in any case, might materially and adversely affect the financial condition or operations of the Borrower, or the validity or enforceability of the Reimbursement Documents or the Bond Documents, or the construction, acquisition, equipping or operation of the Project. 18

211 3.06 No Violations. The Borrower is not in any material way in breach of or in default under (a) any applicable law, rule or regulation of any local government, the Commonwealth of Pennsylvania or the United States or any applicable judgment or decree or (b) any material loan agreement, indenture, lease, sublease, bond, note, resolution, agreement or other instrument to which it is a party or otherwise subject, and no event has occurred and is continuing which, with the passage of time or the giving of notice or both, would constitute a material event of default under any such instrument, except for violations, if any, which the Borrower has disclosed to the Bank in writing and is proceeding in good faith to remove or correct. The Borrower has no knowledge of any violation, nor is there any notice or other record of any violation, of any zoning, subdivision, environmental, building, fire, safety, health or other statute, ordinance, regulation, restrictive covenant or other restriction applicable to the Property or the Project Facilities, except for violations, if any, which the Borrower has disclosed to the Bank in writing and is proceeding in good faith to remove or correct Compliance Matters. The use of the Property for the purpose contemplated hereby and the operation of the Property do and shall, in all respects, comply with, and are lawful, permitted and conforming uses under, all applicable building, fire, safety, subdivision, zoning, sewer, environmental, securities, health, insurance and other laws, ordinances, rules, regulations and plan approval conditions of any governmental or public body or authority, and the Borrower has obtained all permits, licenses or approvals from such governmental or public bodies or authorities which are a necessary precondition to the ownership and operation of the Property and the ownership, operation, acquisition, construction and/or equipping of the Project Facilities No Liens. There exist no liens, encumbrances or charges against the Property (including statutory and other liens of mechanics, workmen, contractors, subcontractors, suppliers, taxing authorities and others), except liens in favor of the Trustee for the benefit of the holders of the Bonds, liens, encumbrances and charges created hereunder and those additional liens, encumbrances and charges disclosed in the title search identifying the lien of the Open-End Mortgage and Security Agreement (the "Permitted Liens) Utilities and Access. All utility services necessary for operation of the Property and the Project Facilities, including water supply, storm and sanitary sewer facilities, gas, electricity and telephone facilities are available within the boundaries of the Property; and all roads necessary for the full utilization of the Property and the Project Facilities for their intended purposes either have been completed or the necessary rights-of-way therefor have been acquired by the appropriate governmental authority or others or have been dedicated to public use and accepted by such governmental authority Taxes. The Borrower has filed all tax returns which were required to be filed in any jurisdiction, and has paid all taxes shown thereon to be due or otherwise due 19

212 upon the Borrower or any of its properties, income or franchises, including interest, assessments, fees and penalties, or has provided adequate reserves for the payment thereof. To the best knowledge of the Borrower, no claims are threatened, pending or being asserted with respect to, or in connection with, any return referred to in this Section, which, if adversely determined, would have a material adverse effect on the financial condition or operations of the Borrower, or would affect the Borrower's ability to perform its obligations under the Reimbursement Documents and the Bond Documents ERISA Representations. The fair value of the plan assets of all employee pension plans maintained by the Borrower or its ERISA Affiliates exceed the projected benefit obligations of such plans for service rendered to the close of the most recent complete plan year of such plans, as determined in accordance with GAAP. No employee pension plan maintained by the Borrower or any ERISA Affiliate which is subject to Part 3 of Title I of the Employee Retirement Income Security Act of 1974, as amended ("ERISA") has an accumulated funding deficiency (as defined in Section 302(a) of ERISA), no reportable event (as defined in Section 4043 of ERISA) has occurred with respect to any employee pension plan maintained for employees of the Borrower or any ERISA Affiliate and covered by Title IV of ERISA, no liability has been asserted against the Borrower or any ERISA Affiliate by the Pension Benefit Guaranty Corporation ("PBGC") or by a trustee appointed pursuant to Section 4042(b) or (c) of ERISA, and no lien has been attached and no Person has threatened to attach a lien to any of the Borrower's or any ERISA Affiliate's property as a result of failure to comply with ERISA or as a result of the termination of any employee pension plan covered by Title IV of ERISA. Each employee pension plan (as defined in Section 3(2) of ERISA) maintained for employees of the Borrower or any ERISA Affiliate which is intended to be qualified under Section 401 (a) of the Code, including all amendments to such plan or to any trust agreement, group annuity or insurance contract or other governing instrument, is the subject of a favorable determination by the Internal Revenue Service with respect to its qualification under Section 401 (a) of the Code or, as to those amendments not yet subject to such a determination, such amendments meet the requirements of Section 401 (a) of the Code in all respects or, if they do not, the Borrower will take all necessary action to conform such nonconforming amendments to the requirements of Section 401 (a) of the Code and the Borrower will exercise its best efforts to obtain such a favorable determination letter within a reasonable period of time. With respect to any multiemployer pension plan (as defined in Section 3(37) of ERISA) to which the Borrower or any ERISA Affiliate is or has been required to contribute, (i) no material withdrawal liability (within the meaning of Section 4201 of ERISA) has been incurred by the Borrower or any ERISA Affiliate, (ii) no material withdrawal liability has been asserted against the Borrower or any ERISA Affiliate by a sponsor or an agent of a sponsor of any such multiemployer plan, (iii) no such multiemployer pension plan is in reorganization (as defined in Section 4241 (a) of ERISA), and (iv) neither the Borrower nor any ERISA Affiliate has any unfilled obligation to contribute to any such multiemployer pension plan. As used in this Agreement, "ERISA Affiliate" means (i) any corporation included with the Borrower in a controlled group of corporations within the meaning of Section 414(b) of the Code, (ii) any trade or business (whether or not incorporated or for-profit) which is under common control with the Borrower within the 20

213 meaning of Section 414(c) of the Code, (iii) any member of an affiliated service group of which the Borrower is a member within the meaning of Section 414(m) of the Code, and (iv) any other entity treated as being under common control with the Borrower under Section 414(o) of the Code Environmental Representations. The Borrower has conducted all appropriate inquiries and, except as disclosed on Schedule 3.12, the Borrower has no knowledge of (a) any activity at the Property or at the sites of the Project Facilities or any storage, treatment or disposal of any Hazardous Substance or solid waste connected with any activity at the Property or at the sites of the Property or the sites of the Project Facilities, which has been conducted, or is being conducted, in violation of any Environmental Law; (b) any of the following present at the Property or at the sites of the Project Facilities, which could give rise to material liabilities, material costs for remediation or a material adverse change in the financial condition or operations of the Borrower: (i) Contamination, (ii) polychlorinated biphenyls, (iii) asbestos or materials containing asbestos, (iv) urea formaldehyde foam insulation, or (v) tanks presently or formerly used for the storage of any liquid or gas; (c) any investigation or findings pertaining to the Property or the sites of the Project Facilities, regarding the presence of radon gas or radioactive decay products of radon at the Property or the sites of the Project Facilities in a concentration materially in excess of either the concentrations disclosed in any investigation; or (d) any tanks presently or formerly used for the storage of any liquid or gas below ground at the Property or the sites of the Project Facilities. Except as set forth on Schedule 3.12, (1) all notices, permits, licenses or similar authorizations, if any, required to be obtained or filed by the Borrower relating to Hazardous Substances or solid waste in connection with the Property or the sites of the Project Facilities, including without limitation past or present treatment, storage, disposal or release of any Hazardous Substances or solid waste into the environment, have been obtained or filed; (2) all Hazardous Substances and solid waste generated by the Borrower have in the past been, to the best of the Borrower's knowledge, transported, treated and disposed of only by carriers maintaining valid permits under all applicable Environmental Laws and only at treatment, storage and disposal facilities maintaining valid permits under applicable Environmental Laws, which carriers and facilities have been and are, to the best of the Borrower's knowledge, operating in compliance with such permits; and (3) the Borrower has no material contingent liability in connection with any release of any Hazardous Substance or solid waste into the environment Financial Condition. All balance sheets, profit and loss statements, and other financial statements of the Borrower, which have heretofore been delivered to the Bank, and all financial statements and data of the Borrower which will hereafter be furnished to the Bank, are or will be (when furnished) true and correct and do or will (when furnished) present fairly, accurately and completely the financial position of the Borrower and the results of its operations as of the dates and for the periods for which the same are furnished. All such financial statements have been prepared in accordance with GAAP applied on a consistent basis (except as otherwise provided therein with respect to financial statements heretofore provided and except as otherwise 21

214 contemplated by Section 5.09 with respect to financial statements furnished after the date hereof). The Borrower does not possess any "loss contingency" (as that term is defined in Financial Accounting Standards Board, Statement of Financial Accounting Standards No.5 - "FASB 5") which is not disclosed in the footnotes to such balance sheet. There has been no material adverse change in the business, properties, operations since the date of the financial statements which were most recently furnished by Borrower to Bank. No event has occurred that could reasonably be expected to interfere substantially with the normal business operations of the Borrower Disclosure. No representation or warranty made by the Borrower in this Agreement or the other Reimbursement Documents is knowingly false or misleading in any material respect or omits to state any material fact necessary in order to make the statements by the Borrower in this Agreement or the other Reimbursement Documents, in light of the circumstances under which they are made and the nature of the writing itself, not misleading Perfection of Liens. Upon the filing or recording of the Open-End Mortgage and Security Agreement, financing statements and other documents or lien instruments in all places in Pennsylvania and elsewhere as in the opinion of counsel for the Borrower are necessary to perfect the security interests, liens, and other encumbrances created or granted by this Agreement or the Collateral Documents, no further action (including the filing or recording of any documents or instrument) is or will be necessary in order to establish, perfect or maintain the security interests, liens, and other encumbrances created or granted by this Agreement or the Collateral Documents Other Agreements. Other than the Bond Documents, the Borrower is not a party to any indenture, loan or credit agreement, or to any lease of other agreement or instrument, or subject to any charter or corporate restriction, which could have a material adverse effect on its operations, properties, assets, or condition, financial or otherwise, or its ability to perform its obligations under the Reimbursement Documents or the Bond Documents to which it is a party Labor Disputes and Casualties. The Borrower is not affected by any fire, explosion, accident, strike, lockout, or other labor dispute, drought, storm, hail, earthquake, embargo, act of public enemy, or other casualty (whether or not covered by insurance) which materially and adversely affect its operations, properties, assets, or condition, financial or otherwise, or its ability to perform its obligations under the Reimbursement Documents or the Bond Documents to which it is a party Representations in Other Documents. The Borrower hereby makes to and for the benefit of the Bank each of the representations and warranties of the Borrower contained in the Bond Documents and the other documents delivered by the Borrower in connection therewith. 22

215 SECTION 4. CONDITIONS PRECEDENT 4.01 Bond Advances. The obligation of the Bank to issue the Letter of Credit is subject to the conditions set forth in this Section (a) Representations; No Default. The representations and warranties of the Borrower contained in Section 3 shall be true and correct on and as of the date of closing with the same effect as if made on and as of such date, and no Default or Event of Default shall be in existence on the date of closing. (b) Zoning. Borrower shall have submitted to the Bank evidence satisfactory to the Bank that all required zoning approvals or variances necessary for the use, and occupancy of the Property have been obtained. (c) Permits; Approvals. (i) Borrower shall have submitted to the Bank evidence satisfactory to Bank that the Property and the use thereof comply with all applicable laws and that Borrower has validly and irremovably obtained without qualification all required permits, licenses, consents, certificates and approvals for the occupancy of the Improvements, including, without limitation, (A) permits required by DEP, and (B) those permits, licenses, consents, and approvals required under all applicable building and zoning codes, subdivision regulations and other land use requirements, and all other governmental regulations, statutes or ordinances. Such permits, licenses, consents and approvals shall be final, nonappealable and in full force and effect prior to the Closing Date. (ii) Borrower shall have submitted to the Bank evidence satisfactory to Bank that no payments to public authorities are required which have not been made or appropriately provided for and that no construction of any facilities or items of any kind is required as a condition of obtaining any necessary permit, license, consent or approval which has not been made or appropriately provided for. (d) Legal Opinion. The Borrower shall cause to be submitted to the Bank an opinion of its counsel, with respect to the Borrower, the Reimbursement Documents, and the Project, which is reasonably satisfactory, in form and substance, to the Bank. (e) Reimbursement Documents, Collateral, Etc. (i) The Borrower shall have delivered, or caused to be delivered, to Bank duly executed original counterparts of each of the Reimbursement Documents; (ii) Financing Statements describing the Collateral shall have been filed in each such jurisdiction and in each such office as shall have been required by the Bank; (iii) the Open-End Mortgage and Security Agreement 23

216 and the Assignments shall have been recorded with the Dauphin County Recorder of Deeds; and (iv) all other Reimbursement Documents shall have been executed and delivered to the Bank. (f) Appraisals. Borrower shall have furnished to the Bank a written appraisal of the Property, performed by an MAl appraiser and in a manner satisfactory to the Bank, the results of which shall be reasonably satisfactory to Bank. If the result is unsatisfactory to Bank. Bank: (g) Corporate Authorizations. Borrower shall have delivered to the (i) a copy, certified by the Secretary of Borrower of the resolutions of the Board of Directors of Borrower, authorizing and approving (i) its execution and delivery of and performance under this Agreement and the other Reimbursement Documents to which it is a party, (ii) the Obligations incurred hereunder, and (iii) the creation of the collateral security interests for which the Security Documents provide; (ii) the articles or certificate of incorporation of Borrower, certified by the Secretary of the Commonwealth of Pennsylvania; (iii) a good standing or subsistence certificate with respect to Borrower certified by the Secretary of the Commonwealth of Pennsylvania as of a recent date; (iv) a copy of the By-Laws of Borrower as currently in effect, certified by the Secretary of Borrower; and (v) the President and Secretary of Borrower shall have duly executed and delivered to the Bank an incumbency certificate, in form and substance satisfactory to the Bank, with respect to those officers of Borrower who have executed the Reimbursement Documents to which it is a party. (h) Insurance. The Borrower shall have satisfied all insurance requirements described herein. (i) Title Search; Lien Searches. The Bank shall have received an acceptable title search demonstrating that the Open-End Mortgage and Security Agreement as a lien on and against the Property subject only to an existing mortgage in favor of Trustee, as mortgagor on the University Facility and which shall be in form, substance and as to exceptions, satisfactory to the Bank and its counsel. The Bank shall have also received current lien, secured transaction, judgment and docket 24

217 searches, with respect to the Borrower, the results of which shall be satisfactory, in form and substance, to the Bank. (j) Details, Proceedings and Documents. All legal details and proceedings in connection with the transactions contemplated by this Agreement shall be satisfactory to the Bank and the Bank shall have received all such counterpart originals or certified or other copies of such documents and proceedings in connection with such transactions, in form and substance satisfactory to the Bank, as the Bank may from time to time request. SECTION 5. GENERAL COVENANTS So long as any amount is available under the Letter of Credit or any amount is due and owing to the Bank hereunder, the Borrower covenants and agrees that, except to the extent the Bank shall otherwise consent in writing, each of the following covenants shall be performed and complied with by the Borrower as indicated: 5.01 Maintenance of Existence; Mergers. The Borrower will maintain its existence, rights and privileges and its qualification to do business in the Commonwealth of Pennsylvania, will not dissolve or otherwise dispose of all or substantially all of its assets, will not consolidate with or merge into another entity or permit one or more other entities to consolidate with or merge into it, will not acquire all or any portion(s) of the assets of another entity, and will not make or permit any change(s) in ownership without the Bank's prior written consent, which will not be unreasonably withheld Compliance with Laws. The Borrower will comply in all material respects with all applicable laws, rules, regulations and orders of any governmental authority the noncompliance with which could materially and adversely affect its operations or financial condition, except for any such laws, rules, regulations and orders which the Borrower is contesting in good faith by appropriate proceedings and the noncompliance with which during such contest would not materially and adversely affect the Borrower's operations or financial condition if the result of such contest were adverse to the Borrower Maintenance of Governmental Authorizations. The Borrower will obtain and maintain in full force and effect all governmental and other authorizations, approvals, consents, permits, licenses, certifications and qualifications necessary for the conduct and operation of its business and for the operation of the Project Facilities Insurance. (a) The Borrower shall maintain or cause to be maintained insurance (including fire insurance, flood insurance, if required, workmen's compensation insurance in the statutory amount, and general liability insurance) with respect to its business and assets in such amounts, against such hazards, and with such companies 25

218 as may be satisfactory to the Bank, it being understood that insurance comparable to insurance customarily maintained by companies conducting similar operations as the Borrower shall be satisfactory. All policies of insurance covering the Collateral shall insure the Bank as its interest may appear, and shall bear a lender's loss payable as its interest may appear, and shall bear a lender's loss payable and thirty (30) day notice of cancellation or material change endorsements in favor of the Bank. (b) Without limiting the generality of paragraph (a), above, of this Section 5.02, the Borrower shall maintain a policy of "all risks" fire insurance with extended coverage, with a non-contributory mortgage clause in favor of the Bank. The policy of fire insurance shall be in such amount as the Bank may require from time to time, shall provide that it may not be canceled or materially changed without thirty (30) days' prior written notice to the Bank, and shall at all times be in such form and issued by such company (authorized to do business in the Commonwealth of Pennsylvania) as may be satisfactory to the Bank Compliance with Bond Documents and Other Contracts. The Borrower will comply with all of its covenants and agreements under the Bond Documents, as the same may hereafter be amended or supplemented from time to time, and comply with, or cause to be complied with, all material requirements and conditions of all contracts and insurance policies which relate to the Borrower or the Project Facilities Maintenance of Properties. The Borrower will maintain and preserve all of its properties (including the Property) in good working order and condition, ordinary wear and tear excepted; not permit, commit or suffer any waste of any of its properties; not use or permit the use of any of its properties for any unlawful purpose or permit any nuisance to exist thereon; and not sell, lease, transfer or otherwise dispose of any substantial part of its properties, except in the ordinary course of its operations Visitation Rights. The Borrower will, at any reasonable time and from time to time during normal business hours, permit the Bank or its agents or representatives to examine and make copies of and abstracts from the records and books of account of, and visit the properties of, the Borrower, and to discuss the affairs, finances and accounts of the Borrower with the officers, directors and accountants of the Borrower Keeping of Books. The Borrower will keep proper books of record and account, in which full and correct entries shall be made of financial transactions and the assets and operations of the Borrower in accordance with GAAP, and have a complete audit of such books of record and account made by certified public accountants reasonably acceptable to the Bank for each Fiscal Year Reporting Requirements. The Borrower will furnish or cause to be furnished to the Bank the following (in such number of copies as the Bank may reasonably request for itself and the Participating Banks as hereinafter defined): 26

219 (a) As soon as available and in any event within forty-five (45) days after the close of each six-month period of each Fiscal Year of the Borrower, unaudited financial statements for the Borrower, including a balance sheet and related statement of income as of the end of such six-month period and for such six-month period and the current Fiscal Year to the end of such six-month period, which shall be internally prepared and presented on a consistent basis and in accordance with GAAP (subject to normal year- end adjustments) and, if requested by the Bank, an aging(s) of accounts receivable; (b) As soon as available and in any event within one hundred fifty (150) days after the close of each Fiscal Year of the Borrower, audited financial statements for the Borrower, including a balance sheet and related statements of income and changes in financial position as of the end of such Fiscal Year and for such Fiscal Year, which shall be pre- pared in accordance with GAAP, and shall fairly present the financial condition of the Borrower as at the end of such Fiscal Year and annual projections or operating budgets; (c) As soon as available and in any event within thirty (30) days after the close of each fiscal quarter, a report(s) of any capital campaign and the status of the construction projects; (d) As soon as available and in any event within thirty (30) days after the close of each fiscal quarter, a cash flow projection for the next succeeding twelve (12) calendar months; (e) Upon receipt thereof by the Borrower, copies of any letter or report with respect to the management, operations or properties of the Borrower submitted to the Borrower by its accountants in connection with any annual audit of the Borrower's accounts, and a copy of any written response of the Borrower to any such letter or report; (f) As soon as possible and in any event within 45 days after receipt of notice thereof, (1) notice of any pending or threatened litigation, investigation or other proceeding involving the Project or the Borrower (i) which could have a material adverse effect on the Project or the operations or financial condition of the Borrower or (ii) wherein the potential damages, in the reasonable judgment of the Borrower based upon the advice of counsel experienced in such matters, are not fully covered by the insurance policies maintained by the Borrower (except for the deductible amounts applicable to such policies) and such non-covered amount would meet the conditions of the clause(i), and (2) any and all information with respect to such litigation, investigation or proceeding as the Bank may reasonably request; (g) As soon as possible, notice of any material adverse change in the operations, financial condition or prospects of the Borrower; 27

220 (h) As soon as possible and in any event within 15 days after the occurrence of each Default and each Event of Default, a statement of an officer of the Borrower setting forth the details of such Default or Event of Default and the action which the Borrower proposes to take with respect thereto; (i) Such other information respecting the operations and properties, financial or otherwise, of the Borrower as the Bank may from time to time reasonably request Payment of Debt. The Borrower will make full and timely payment of the principal of and interest on each outstanding Debt of the Borrower, whether now existing or hereafter arising, and comply in all material respects with all covenants and agreements set forth in instruments evidencing, securing or governing such Debt Payment of Taxes. The Borrower will file all required tax or tax reporting returns, as applicable. The Borrower will pay before the same shall become delinquent and before penalties have accrued thereon, all taxes, assessments and governmental charges or levies, if any, imposed on the income, profits, franchises, property or business of the Borrower, as the case maybe, except to the extent and so long as (a) the same are being contested in good faith by appropriate proceedings and (b) adequate reserves in conformity with GAAP with respect thereto have been provided on the books of the Borrower. Upon request, the Borrower will provide to the Bank copies of such returns and receipts for payment of such taxes Consents Under Bond Documents. The Borrower will obtain the consent of the Bank, which consent shall not be unreasonably withheld, whenever the consent of the Authority or the Trustee is required to be obtained under the Bond Documents with respect to matters which affect the payment of the principal or interest on the Bonds Amendments to Bond Documents. Without the prior written consent of the Bank, which consent shall not be unreasonably withheld, the Borrower will not consent to or enter into any amendment of or supplement to the Bond Documents which could reasonably be likely to have a material adverse effect on the Bank or the Bank s Collateral Additional Debt. The Borrower will not create or incur any additional Debt (i) except as permitted under the Loan Agreement or (ii) as may otherwise be approved in writing by the Bank, which approval will not be arbitrarily withheld Leases. The Borrower hereby represents that there are no leases or agreements to lease all or any part of the Property or the Project Facilities now in effect except as disclosed on Schedule The Borrower agrees not to enter into any leases or agreements to lease all or any part of the Project Facilities, unless (i) the Borrower shall have obtained the prior written approval thereof and of the respective tenant by the Bank and (ii) the Borrower shall have fully complied with the provisions of 28

221 the Loan Agreement with respect thereto. Each such lease shall be on a form of lease approved by the Bank. All leases shall be net leases and shall include subordination and attornment provisions satisfactory to the Bank ERISA. The Borrower will at all times maintain the fair value of the plan assets of all employee pension plans and life, accident and health plans maintained by the Borrower or any ERISA Affiliate at a level equal to or greater than the projected benefit obligations of such plans for service rendered to the close of the most recent complete plan year of such plans, as determined in accordance with GAAP. Neither the Borrower nor any ERISA Affiliate will (i) voluntarily terminate any employee pension plan covered by Title IV of ERISA, so as to cause material liability of the Borrower to PBGC or to a trustee appointed pursuant to Section 4042(b) or (c) of ERISA; (ii) permit to exist any Prohibited Transaction (as defined in Section 4975 of the Code or in Section 406 of ERISA) involving an employee benefit plan within the meaning of Section 3(3) of ERISA which may result directly or indirectly in material liability of the Borrower to the Internal Revenue Service or the United States Department of Labor; (iii) cause the occurrence of any Reportable Event (as defined in Title IV of ERISA) which may result in material liability of the Borrower to the Internal Revenue Service or the United States Department of Labor; (iv) permit the occurrence of any event or the existence of any condition which may result in material withdrawal liability (within the meaning of Section 4201 of ERISA) of the Borrower or any ERISA Affiliate to any multiemployer pension plan (as defined in Section 3(37) of ERISA); or (v) allow or suffer to exist any other event or condition known to the Borrower or any ERISA Affiliate with respect to an employee benefit plan within the meaning of Section 3(3) of ERISA which may result in material liability of the Borrower to PBGC, the Internal Revenue Service or the United States Department of Labor. The Borrower will give prompt written notice to the Bank of (1) each failure to comply with the provisions of this Section, (2) any notification of assessment of withdrawal liability (within the meaning of Section 4201 of ERISA) received by the Borrower or any ERISA Affiliate from any multiemployer pension plan (as defined in Section 3(37) of ERISA), and (3) any lien arising under Section 302(f) of ERISA in favor of any employee pension plan maintained for employees of the Borrower or any ERISA Affiliate which is subject to Part 3 of Title I of ERISA. For purposes of this Section and Section 3.11, material liability and material withdrawal liability shall include any liability which individually, or when aggregated with other liabilities referred to in such Sections, exceeds $5, Environmental Covenants. (a) The Borrower will cause all activities at the Property and the sites of the Project Facilities, and all storage, transportation, treatment and disposal of any Hazardous Substances or solid waste connected with any activity at the Property and the sites of the Project Facilities, to be conducted in compliance with all Environmental Laws. The Borrower will cause all permits, licenses or approvals to be obtained, and will cause all notifications to be made, with respect to the Project Facilities, as required by Environmental Laws, and will, at all times, cause compliance with the terms and conditions of any such approvals or notifications. If requested by the Bank, the Borrower 29

222 will provide to the Bank with respect to the Property and the sites of the Project Facilities copies of (i) applications or other materials submitted to any governmental agency in compliance with Environmental Laws, (ii) any notifications submitted to any Person pursuant to Environmental Laws, (iii) any permit, license, approval, amendment or modification thereto granted pursuant to Environmental Laws, (iv) any record or manifest required to be maintained pursuant to Environmental Laws, and (v) any correspondence, notice of violation, summons, order, complaint or other document received by the Borrower, its lessees, sublessees or assigns, pertaining to compliance with any Environmental Laws. (b) The Borrower will not cause, contribute to or permit any Contamination during the term of this Agreement. The Borrower will, at all times during the term of this Agreement, cause Hazardous Substances created, used or otherwise present at the Property or the sites of the Project Facilities to be handled in a manner which will not cause an undue risk of Contamination. (c) Upon the occurrence and during the continuance of an Event of Default, the Bank may, at its discretion, commission an investigation at the Borrower's expense of (i) compliance at the Property or the sites of the Project Facilities with Environmental Laws, (ii) the presence of Hazardous Substances or Contamination at the Property or at sites of the Project Facilities, (iii) the presence at the Property or the sites of the Project Facilities of materials which are described in clause (b) of Section 3.12, (iv) the presence at the Property or the sites of the Project Facilities of environmentally sensitive areas, (v) the presence at the Property or the sites of the Project Facilities of radon products, or (vi) the presence at the Property or the sites of the Project of tanks of the type described in clause (d) of Section In connection with any investigation pursuant to this paragraph, the Borrower, and its lessees, sublessees and assigns, will comply with any reasonable request for information made by the Bank or its agents in connection with any such investigation. Any response to any such request for information will be full and complete. The Borrower will assist the Bank and its agents to obtain any records pertaining to the Project Facilities or its site or to the Borrower and the lessees, sublessees or assigns of the Borrower in connection with an investigation pursuant to this paragraph. The Borrower will accord the Bank and its agents access to all areas of the Property or the sites of the Project Facilities at reasonable times and in reasonable manners in connection with any investigation pursuant to this paragraph. No investigation commissioned pursuant to this paragraph shall relieve the Borrower from any responsibility for its representations and warranties under Section (d) The Borrower hereby agrees to indemnify and to hold harmless the Bank of, from and against any and all expense, loss or liability suffered by the Bank by reason of the Borrower's breach of any of the provisions of Section 3.12 or this Section including (but not limited to) (1) any and all expense that the Bank may incur in complying with any Environmental Laws; (2) any and all reasonable costs that the Bank may incur in studying or remedying any Contamination; (3) any and all fines, penalties or other sanctions assessed upon the Bank by reason of a failure of the Borrower to 30

223 have complied with Environmental Laws; (4) any and all loss of value of the Property by reason of (i) failure to comply with Environmental Laws, (ii) the presence at the site of the Property of any. Hazardous Substances, (iii) the presence at the. site of the Property of any materials which are described In clause (b) Section 3.12, (iv) the presence at the site of the Property of any environmentally sensitive areas, (v) the presence at the site of the Property of radon or radon products in concentrations not disclosed pursuant to Section 3.12, or (vi) the presence at the Property of any tank below ground undisclosed pursuant to Section 3.12; and (5) reasonable legal and professional fees and costs incurred by the Bank in connection with the foregoing Account(s). At all times prior to the Expiration Date of the Letter of Credit the Borrower will maintain its operating account(s) with the Bank 5.20 Executive Management. The Borrower will advise the Bank of any change(s) in executive management or Board of Directors composition Liquidity Covenant. Commencing in the Borrower s fiscal year ending June 30, 2009 and as of December 31 and June 30 of each fiscal year thereafter, the Borrower covenants that it shall maintain Expendable Funds in the minimum amount of $5,000,000. The Borrower covenants that it shall maintain as of December 31 and June 30 or each of the fiscal years as set forth below a ratio of Expendable Funds to Long Term Debt Outstanding (as such term is defined in the Indenture), as follows: Ratio of Expendable Funds to Fiscal Year Long Term Debt Outstanding % % % % 2018 and thereafter 30% The Borrower covenants that it shall not use Expendable Funds to construct or acquire Capital Additions in any fiscal year if (i) the Borrower fails as of June 30 of the immediately preceding fiscal year to meet the liquidity covenant set forth above or if the University fails as of December 31 or June 30 of the immediately preceding Fiscal year to meet the liquidity covenant set forth above; and (ii) the Expendable Funds as of June 30 of the immediately preceding Fiscal Year is in an amount less than $10,000,000. The Borrower may use Expendable Funds to acquire or construct Capital Additions only with Expendable Funds in excess of $10,000, Parity Obligation. The obligation(s) of the Borrower under this Agreement is a Parity Obligation(s) (as such term is defined in the Loan Agreement) and is secured on a parity basis with the 2007 Bonds by a security interest in the Unrestricted University Revenues. 31

224 5.23 Further Assurances. The Borrower will execute and deliver from time to time such further instruments and take such further actions as may be required to carry out the purposes and provisions of this Agreement and to assure the Bank of the subrogation and security rights in favor of the Bank contemplated by Section 2.08(b) and by the Indenture. SECTION 6. DEFAULT 6.01 Events of Default. The occurrence of anyone or more of the following events shall constitute an "Event of Default" under this Agreement: (a) Failure by the Borrower to pay any principal, interest, or other amount due under this Agreement or the other Reimbursement Documents, when and in the manner due; or (b) Failure by the Borrower to observe or perform any other agreements, conditions, undertakings or covenants in this Agreement or the other Reimbursement Documents to be observed or performed by the Borrower and such failure is not cured within (30) days of receipt of written notice of such failure from the Bank, provided that if any failure is not capable of cure within thirty (30) days, the Borrower shall have additional time so long as it has commenced curing such failure within such thirty (30) day period and is diligently pursing the same; or (c) Any material representation or warranty made in this Agreement or the other Reimbursement Documents, or furnished by the Borrower in connection with making this Agreement or the other Reimbursement Documents or in compliance with their provisions, proves to have been false or erroneous in any material respect when made; or (d) The Borrower becomes insolvent or unable to pay its debts as they mature, or files a voluntary petition or suffers any involuntary petition to be filed against it under any provision of any state or federal bankruptcy or insolvency statute, or makes an assignment for the benefit of its creditors, or applies for or consents to the appointment of a receiver or custodian for its assets, and with respect to the filing of an involuntary petition, such petition is not dismissed within sixty (60) days after the filing thereof; or (e) Any attachment or garnishment is initiated or filed against the Borrower or its properties or assets and such attachment or garnishment continues in effect and is not stayed for a period of thirty (30) days, or one or more judgments, decrees or orders for the payment of money in excess of $100,000 in the aggregate are rendered against the Borrower and such judgments, decrees, or orders continue in effect and are not vacated discharged, or stayed for a period of thirty (30) days; or (f) The Borrower (i) fails to pay any Obligation owing by the Borrower, or any interest or premium thereon, when due (whether such Obligation has become 32

225 due by scheduled maturity, by required prepayment, by acceleration, by demand or otherwise) and such failure continues after any applicable grace period specified in any agreement or instrument relating to the Obligation, or (ii) fails to perform any term, covenant or agreement on its part to be performed under any agreement or instrument relating to any Obligation, to the Bank other than those covered in Sections 6.01 (a) or (b) when required to be performed and such failure continues after any applicable grace period specified in such agreement or instrument, if the effect of such failure to perform is to accelerate, or to permit the acceleration of, with the giving of notice, if required, the maturity of such Obligation; or (g) Any of the following events occurs or exists with respect to either the Borrower or any ERISA Affiliate: (1) any Prohibited Transaction involving any Plan; (ii) any Reportable Event with respect to any Plan; (iii) the filing under Section 4041 of ERISA of a notice of intent to terminate any Plan or the termination of any Plan; (iv) any event or circumstance that might constitute grounds entitling the PBGC to institute proceedings under Section 4042 of ERISA for the termination of, or for the appointment of a trustee to administer, any Plan, or the institution by the PBGC of any proceedings; (v) complete or partial withdrawal under Section 4201 or 4202 of ERISA from a Multiemployer Plan or the reorganization, insolvency, or termination of any Multiemployer Plan; and in each case above, such event or condition, together with all other events or conditions, if any, could in the opinion of the Bank subject the Borrower to any tax, penalty, or other liability to a Plan, a Multiemployer Plan, the PBGC or otherwise (or any combination thereof) which in the aggregate would have a material adverse effect on the financial connection, properties, or operations of the Borrower; or (h) The Collateral Documents or the Open-End Mortgage and Security Agreement at any time and for any reason cease (i) to create valid and perfected security interest, liens and encumbrances in and to the Collateral or the Mortgaged Property, in accordance with the lien priority specified in Section 4.01(j) of this Agreement, or (ii) to be in full force and effect or are declared null and void,; or (i) Anyone or more of the Reimbursement Documents at any time and for any reason cease to be in full force and effect or are declared null and void,; or (j) A default or event of default otherwise occurs under the other Reimbursement Documents after giving effect to any notice or right to cure provisions; or (k) An "Event of Default" occurs under the Indenture (as those terms are defined in the Indenture) or a default or event of default otherwise occurs under any other Bond Documents (subject to any applicable notice and cure provisions contained in the Bond Documents); or (l) A default or event of default otherwise occurs with respect to any other portion of any Debt in excess of $100,000 or under any other agreement, 33

226 document, or instrument now or hereafter evidencing or securing or otherwise related to any other portion of the Debt Remedies Upon Default. (a) Upon the occurrence of any Event of Default, the Bank, in addition to the rights specifically granted this Agreement, may at its election exercise the rights and remedies under the other Reimbursement Documents, in accordance with their respective provisions, and the rights and remedies now or hereafter existing in equity, at law, by virtue of statute or otherwise. (b) Upon the occurrence of any Event of Default other than an Event of Default referred to in paragraph (d) of Section 6.01, the Bank may, by written notice to the Borrower and to the Trustee within four (4) Business Days after a drawing under the Letter of Credit, refuse to reinstate the Letter of Credit; or (c) Upon the occurrence of any Event of Default, and upon notice by the Bank, the Borrower shall immediately deposit cash or its equivalent with the Bank in an amount equal to the aggregate contingent liability of the Bank under the Letter of Credit, and the Bank shall hold all monies so delivered to it in a cash collateral account under its sole control as collateral security for the liabilities and obligations of the Borrower under the Reimbursement Documents, and shall apply those monies as necessary to reimburse the Bank after the Bank has honored any drawing under the Letter of Credit. (d) Upon the occurrence of any Event of Default, the Bank may declare the Letter of Credit Note to be immediately due and payable, whereupon the principal amount of the Letter of Credit Note and all accrued interest thereon shall become immediately due and payable, without presentment, demand, protest, or other notice of any kind, all of which are expressly waived by the Borrower. (e) Upon the occurrence of any Event of Default, the Bank may exercise, or cause to be exercised, any and all rights and remedies as the Bank may have under the Reimbursement Documents or at law, in equity, by virtue of statute, or otherwise. SECTION 7. MISCELLANEOUS 7.01 No Waiver: Cumulative Remedies. No course of delaying and no failure or delay of the Bank in exercising any right, power or remedy under this Agreement shall operate as a waiver thereof or shall affect any other or future exercise thereof or the exercise of any other right, power or remedy nor shall any single or partial exercise of any such right, power or remedy or any abandonment or discontinuance of such exercise preclude any other or further exercise thereof or of any other right, power or remedy under this Agreement. The rights, powers and remedies of the Bank in this 34

227 Agreement are cumulative and not exclusive of any rights, powers, or remedies which the Bank may otherwise have Marshalling. The Bank shall not be required to marshal any present or future security for, or guaranties or guaranty or surety in any particular order, and the Borrower waives, to the fullest extent that it lawfully may, (i) any right it may have to require the Bank to pursue any particular remedy before proceeding against the Borrower and (ii) any right to the benefit of, or to direct the application of the proceeds of the Collateral or the Mortgaged Property until the Indebtedness has been paid in full Amendments and Waivers. The provisions of this Agreement may be modified or amended only by a written agreement entered into by the Borrower and the Bank, and may be waived only by a written waiver signed by the Bank. No waiver, modification or amendment shall extend to or affect any obligation not expressly waived, modified or amended, or impair any right of the Bank related to such obligation Notices. (a) All notices, requests, demands and other communications that this Agreement requires or permits shall be in writing, and shall be sent or given by hand delivery, or by overnight courier, or by certified mail, return receipt requested, or by telecopy, addressed as follows: To Borrower: With a Copy To: To Bank: With a Copy To: Harrisburg University of Science and Technology 215 Market Street Harrisburg, PA Fax: (717) Attn: Mel Schiavelli McNees, Wallace & Nurick LLC 100 Pine Street P.O. Box 1160 Harrisburg, PA Telecopier No. (717) Attn: Diane M. Tokarsky, Esquire Commerce Bank/Harrisburg, National Association 3801 Paxton Street Harrisburg, PA Telecopier No. (717) Attn: Loan Servicing Department Mette, Evans & Woodside 3401 North Front Street P.O. Box 5950 Harrisburg, PA Telecopier No. (717) Attn: Thomas F. Smida, Esquire 35

228 To Trustee: Commerce Bank, National Association 101 North Second Street Harrisburg, PA Telecopier No. (717) Attn: Marybeth Phillips (b) All notices, requests, demands and other communications provided in accordance with the provisions of this Agreement shall be effective: (i) if given by hand delivery, when delivered; (ii) if sent by overnight courier or telecopier, when received; and (iii) if sent by certified mail, return receipt requested, the third day after sending Costs and Expenses. The Borrower agrees to pay on demand (a) all reasonable costs and expenses of the Bank in connection with the preparation, execution, delivery and administration of this Agreement and the other Reimbursement Documents, and all other instruments and documents to be delivered under or in connection with this Agreement, and any waivers or supplements or amendments hereto, including the reasonable fees and expenses of counsel, fees and expenses of appraisers, accountants, and other professionals, and costs of property and lien searches; and (b) all reasonable costs and expenses of the Bank in connection with the enforcement of this Agreement and the other Reimbursement Documents, and all other instruments and documents to be delivered under or in connection with this Agreement, including the reasonable fees and expenses of counsel and the reasonable fees and expenses of appraisers, accountants, and other professionals. Such costs and expenses shall include all reasonable costs and expenses (including the reasonable fees and expenses of counsel for the Bank) incurred in connection with: (A) the protection, exercise or enforcement of the Bank's rights with respect to the Collateral or the Mortgaged Property; and (B) the assertion, protection, exercise or enforcement of the Bank's rights in any proceeding under the United States Bankruptcy Code, including without limitation the preparation, filing and prosecution of (i) proofs of claim, (ii) motions for relief from the automatic stay, (iii) motions for adequate protection and (iv) complaints, answers and other pleadings in adversary proceedings by or against the Bank or relating in any way to any of the Collateral. Such costs and expenses also shall include the reasonable fees and expenses of counsel for the Bank in advising the Bank as to its rights and responsibilities under this Agreement or the other Reimbursement Documents or under the Letter of Credit and in representing the Bank in any legal proceeding in which the Trustee seeks to enforce payment by the Bank under the Letter of Credit or the Borrower seeks to restrain the Bank from making payment under the Letter of Credit Miscellaneous Payment Provisions. (a) All payments to be made by the Borrower under this Agreement or the other Reimbursement Documents shall be made to the Bank in immediately 36

229 available funds, without set-off, counterclaim, deduction or withholding, at the offices of the Bank or at such other place as may be directed by the Bank. (b) Whenever any payment to be made by the Borrower under this Agreement or the other Reimbursement Documents is stated to be due on a day that is not a Business Day, such payment shall be made on the next day that is a Business Day, and such extension of time shall not be involved in the computation of interest and fees due from the Borrower. (c) If at any time any payment made by the Borrower under this Agreement or the other Reimbursement Documents is rescinded or must otherwise be returned by the Bank for any reason, including, but not limited to, the insolvency, bankruptcy, or reorganization of the Borrower, the security interest and liens granted to the Bank and the rights of the Bank shall be reinstated as though payment had not been made Participation. The Bank may grant participations to one or more banks (the Participating Banks ) in the Letter of Credit and the Reimbursement Documents and, to the extent of any such participation, unless otherwise stated therein, the assignee and participant shall have the same rights and benefits under this Agreement and the other Reimbursement Documents as it would have if it were the Bank under this Agreement and the other Reimbursement Documents Governing Law. This Agreement shall be governed in all respects by the laws in effect in the Commonwealth of Pennsylvania (without regard to the principles of conflicts of law) and for all purposes shall be construed in accordance with such laws Headings and Table of Contents. The headings and tables of contents in this Agreement are for convenience of reference only, and shall not affect the construction or interpretations of this Agreement or constitute a part of this Agreement Continuing Representations. All agreements, representations, warranties and covenants made by the Borrower in this Agreement or the other Reimbursement Documents or in any certificate or other document delivered to the Bank in connection with this Agreement, shall be continuing as long as any liabilities and obligations of the Borrower under this Agreement or the other Reimbursement Documents shall remain outstanding and unpaid; provided, however, that the covenants set forth in Sections 7.05 and 7.13 through 7.17 shall survive the payment of such liabilities and obligation Binding Effect. This Agreement shall be binding upon and operate for the benefit of the Borrower and the Bank, and their respective successors and assigns; provided, however, that the Borrower may not assign, transfer or delegate any of its rights or obligations without the prior written consent of the Bank Records. The amounts due and owing under this Agreement and the other Reimbursement Documents and the unpaid interest and fees accrued thereon or in 37

230 connection therewith shall at all times be ascertained from the records of the Bank, which shall be conclusive evidence of such amounts, absent manifest error Waiver of Jury Trial. THE BORROWER WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT, OR THE OTHER REIMBURSEMENT DOCUMENTS, OR ANY PROCEEDING IN ANY WAY ARISING OUT OF OR RELATED TO ANY OF THE FOREGOING, AND THE BORROWER AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY Consent to Jurisdiction. THE BORROWER SUBMITS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE COMMONWEALTH OF PENNSYLVANIA FOR THE DETERMINATION OF ANY CONTROVERSY ARISING UNDER OR IN CONNECTION WITH THIS AGREEMENT, OR THE OTHER REIMBURSEMENT DOCUMENTS, AND THE BORROWER WAIVES PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT, OR OTHER PROCESS IN AN ACTION IN ANY STATE OR FEDERAL COURT LOCATED WITHIN THE COMMONWEALTH OF PENNSYLVANIA AND AGREES THAT ALL SERVICE THEREOF MAY BE MADE BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED Liability of Bank. The Borrower agrees that the Bank shall not have any liability (in tort or otherwise) for any lost profits or other consequential damage sustained by the Borrower as a result of any action taken or omitted by the Bank or any of its officers, agents, or employees in connection with the administration or enforcement of this Agreement or the other Reimbursement Documents Interpretation. This Agreement and the other Reimbursement Documents shall be construed as one agreement and shall be interpreted so as to expand, rather than contract, the rights of the Bank; provided, however, that in the event of inconsistency, the provisions of this Agreement shall supersede and control the provisions of the other Reimbursement Documents Integration. This Agreement and the other Reimbursement Documents constitute the entire agreement and understanding between the Borrower and the Bank related to the issuance of the Letter of Credit. The Borrower acknowledges that, in entering into this Agreement, it is not relying on any statement, representation, warranty, covenant, or agreement of any kind made by the Bank or any employee or agent of the Bank, other than the agreements of the Bank set forth in this Agreement Confession of Judgment. UPON THE OCCURRENCE AND DURING THE CONTINUANCE OF ANY EVENT OF DEFAULT, THE BORROWER IRREVOCABLY AUTHORIZES THE PROTHONOTARY OR ANY ATTORNEY OF ANY COURT OF RECORD IN PENNSYLVANIA OR ELSEWHERE TO APPEAR FOR AND CONFESS JUDGMENT AGAINST THE BORROWER FOR ANY AND ALL AMOUNTS 38

231 UNPAID UNDER THIS AGREEMENT, INCLUDING INTEREST THEREON TO DATE OF PAYMENT (SUCH AMOUNTS AND THE OCCURRENCE OF SUCH EVENT OF DEFAULT TO BE EVIDENCED BY A COMPLAINT OR AN AFFIDAVIT SIGNED BY AN OFFICER OF THE BANK) TOGETHER WITH FEES OF COUNSEL, DISBURSEMENTS AND COSTS OF SUIT, RELEASING ALL ERRORS AND WAIVING RIGHTS OF APPEAL. IF A COPY OF THIS AGREEMENT, VERIFIED BY AFFIDAVIT, SHALL HAVE BEEN FILED IN SUCH PROCEEDING, IT SHALL NOT BE NECESSARY TO FILE THE ORIGINAL AS A WARRANT OF ATTORNEY. THE BORROWER WAIVES THE RIGHT TO ANY STAY OF EXECUTION AND THE BENEFIT OF ALL EXEMPTION LAWS NOW OR HEREAFTER IN EFFECT. NO SINGLE EXERCISE OF THIS WARRANT AND POWER TO CONFESS JUDGMENT SHALL BE DEEMED TO EXHAUST THIS POWER, WHETHER OR NOT ANY SUCH EXERCISE SHALL BE HELD BY ANY COURT TO BE INVALID, VOIDABLE OR VOID, BUT THIS POWER SHALL CONTINUE UNDIMINISHED AND MAY BE EXERCISED FROM TIME TO TIME AS OFTEN AS THE BANK SHALL ELECT UNTIL ALL AMOUNTS DUE UNDER THIS AGREEMENT SHALL HAVE BEEN PAID IN FULL. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their duly authorized officers as of the day and year first above written. ATTEST: Title: THE HARRISBURG UNIVERSITY OF SCIENCE AND TECHNOLOGY By: Title: WITNESS/ATTEST: COMMERCE BANK/ HARRISBURG, NATIONAL ASSOCIATION Title: By: Title: 39

232 SCHEDULE 3.05 LITIGATION 40

233 SCHEDULE 3.12 ENVIRONMENTAL MATTERS

234 SCHEDULE 5.16 LEASES 42

235 ACKNOWLEDGMENT AND CONSENT To secure the Harrisburg University of Science and Technology s (the Borrower ) obligations to the Commerce Bank/Harrisburg, National Association (the Bank ) under a certain Reimbursement Agreement dated as of January 1, 2007 or the other Reimbursement Documents, or otherwise, the Borrower has pledged to the Bank and has granted to the Bank a security interest in, all of the Borrower's right, title and interest in and to all (i) funds and investments thereof now or hereafter held by the Trustee under a certain Trust Indenture dated as of January 1, 2007 (the Indenture ), from the Harrisburg Authority (the Authority ) to Commerce Bank, National Association, the Trustee, as security for the payment of the Authority s University Revenue Bonds, Series B of 2007 ( Harrisburg University Project) in the aggregate principal amount of $ 60,225,000 (the Bonds ), securities and other instruments comprising investments thereof and interest and other income derived therefrom held as security for the payment of the Bonds, such pledge, assignment and grant being under and subject only to the rights of the Trustee under the Indenture and the (ii) the Borrower s Unrestricted University Revenues and the Authority does hereby acknowledge and consent to such pledge, assignment and grant in favor of the Bank. IN WITNESS WHEREOF, the Authority has caused this Acknowledgment and Consent to be duly executed, as of the 1 st day of January, THE HARRISBURG AUTHORITY Attest: Secretary By Chairman v1 43

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237 APPENDIX H INFORMATION CONCERNING THE COUNTY OF DAUPHIN, PENNSYLVANIA, INCLUDING THE FORMS OF DOCUMENTS RELATING TO THE COUNTY'S LIMITED GUARANTY OF A PORTION OF THE SERIES B BONDS

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