MERCHANT CAPITAL, L.L.C.

Transcription

1 This Preliminary Official Statement and the information contained herein are subject to completion and amendment without notice. The Series 2007 Bonds may not be sold nor may offers to buy be accepted prior to the time the Official Statement is delivered in final form. Under no circumstances shall this Preliminary Official Statement constitute an offer to sell or a solicitation of an offer to buy, nor shall there be any sale of the Series 2007 Bonds in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. NEW ISSUE BOOK-ENTRY ONLY RATING: S&P: AAA (CIFG Insured) UNDERLYING RATING: A+ (See MISCELLANEOUS Ratings herein) In the opinion of Bond Counsel, subject to the limitations and conditions described herein, (i) interest on the A Bonds and the C Bonds is exempt from present State of Georgia income taxation, is excludable from gross income for federal income tax purposes, and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations; however, such interest is taken into account in determining adjusted current earnings for the purpose of computing the alternative minimum tax imposed on certain corporations, and (ii) interest on the Series 2007 Bonds is exempt from present State of Georgia income taxation. See Tax Exemption herein. $29,445,000 * Downtown Development Authority of the City of Dahlonega Revenue Bonds (North Georgia Parking & Recreation Center, LLC Project), Series 2007A $945,000 * Downtown Development Authority of the City of Dahlonega Taxable Revenue Bonds (North Georgia Parking & Recreation Center, LLC Project), Series 2007B $15,790,000 * Downtown Development Authority of the City of Dahlonega Revenue Bonds (North Georgia Student Housing, L.L.C. Project), Series 2007C Dated: February 1, 2007 Due: July 1, as Shown on the Inside Cover The Downtown Development Authority of the City of Dahlonega (the Issuer ) is offering (i) $29,445,000 * in aggregate principal amount of its Revenue Bonds (North Georgia Parking & Recreation Center, LLC Project), Series 2007A (the A Bonds ), (ii) $945,000 * in aggregate principal amount of its Taxable Revenue Bonds (North Georgia Parking & Recreation Center, LLC Project), Series 2007B (the B Bonds ) and (iii) $15,790,000 * in aggregate principal amount of its Revenue Bonds (North Georgia Student Housing, L.L.C. Project), Series 2007C (the C Bonds, and together with the A Bonds and the B Bonds, the Series 2007 Bonds ). The proceeds of the sale of the A and B Bonds will be loaned to North Georgia Parking & Recreation Center, LLC, a Georgia limited liability company (the A and B Company ), the sole member of which is The North Georgia College & State University Foundation, Inc., a Georgia nonprofit corporation (the Foundation ), pursuant to the terms and provisions of a Loan Agreement and Assignment of Gross Revenues and Certain Agreements and Accounts, dated as of February 1, 2007 (the A and B Loan Agreement ), between the Issuer and the A and B Company. The proceeds of the sale of the C Bonds will be loaned to North Georgia Student Housing, L.L.C., a Georgia limited liability company (the C Company ), the sole member of which is the Foundation, pursuant to the terms of a Loan Agreement and Assignment of Gross Revenues and Certain Agreements and Accounts, dated as of February 1, 2007 (the C Loan Agreement ), between the Issuer and the C Company. Proceeds of the A and B Bonds will be used by the A and B Company to (i) finance or refinance the costs of the acquisition, construction and equipping of a recreation center, street improvements and parking deck (the Recreation Project ) located on the campus of North Georgia College & State University (the University ), a unit of the University System of Georgia; (ii) finance or refinance the costs of the acquisition, renovation and improvement of an existing office building to be used in part by the University (the Office Project ), (iii) fund capitalized interest on the A and B Bonds; (iv) fund a debt service reserve fund for the A and B Bonds; and (v) pay costs of issuance of the A and B Bonds, including the premium for the municipal bond insurance policy (the A and B Policy ) to be issued by CIFG Assurance North America, Inc. (the Bond Insurer or CIFG ). See PLAN OF FINANCING herein. Proceeds of the C Bonds will be used by the C Company to (i) refund all of the Issuer s outstanding Student Housing Revenue Bonds (North Georgia Student Housing, L.L.C. Project), Series 2001A, the proceeds of which were used to finance the cost of the acquisition, construction and equipping of a 315-bed student housing facility and related parking (the Housing Project ) located on the campus of the University; (ii) retire debt used to finance the cost of acquisition of land which is the proposed site of future student housing; (iii) finance or refinance the cost of the acquisition and construction of a street, sidewalks, walking trails and infrastructure (the Infrastructure Project, and together with the Recreation Project, the Office Project and the Housing Project, the Projects ); (iv) fund capitalized interest on the C Bonds; (v) fund a debt service reserve fund for the C Bonds; and (vi) pay costs of issuance of the C Bonds, including the premium for the municipal bond insurance policy (the C Policy, and together with the A and B Policy, the Policies ) to be issued by the Bond Insurer. See PLAN OF FINANCING herein. The real property upon which the Recreation Project is located is owned by the Board of Regents of the University System of Georgia (the Board of Regents ) and will be leased by the Board of Regents to the A and B Company pursuant to a Ground Lease. The A and B Company owns the Office Project. Pursuant to two Rental Agreements, the A and B Company will rent the completed Recreation Project and a portion of the Office Project to the Board of Regents on an annually-renewable basis for use by the University. The remaining portion of the Office Project will be leased by the A and B Company to Branch Banking and Trust Company ( BB&T ). The Board of Regents will make fixed rental payments for the use and occupancy of the completed Recreation Project and a portion of the Office Project in amounts that, together with payments from BB&T, the A and B Company estimates will be sufficient to pay, among other things, debt service on the A and B Bonds. See SECURITY FOR THE SERIES 2007 BONDS herein. The real property upon which the Housing Project and Infrastructure Project are located is owned by the Board of Regents of the University System of Georgia (the Board of Regents ) and, the real property upon which the Housing Project is located will be leased by the Board of Regents to the C Company pursuant to a Ground Lease. Pursuant to a Rental Agreement, the C Company will rent the Housing Project to the Board of Regents on an annually-renewable basis for use by the University. The Board of Regents will make fixed rental payments for the use and occupancy of the Housing Project in amounts that the C Company estimates will be sufficient to pay, among other things, debt service on the C Bonds. See SECURITY FOR THE SERIES 2007 BONDS herein. The A and B Bonds are being issued pursuant to a Trust Indenture, dated as of February 1, 2007 (the A and B Indenture ), between the Issuer and U.S. Bank National Association, as trustee (the Trustee ). The C Bonds are being issued pursuant to a Trust Indenture, dated as of February 1, 2007 (the C Indenture, and together with the A and B Indenture, the Indentures ), between the Issuer and the Trustee. Interest on the Series 2007 Bonds will be payable on January 1 and July 1 of each year, commencing July 1, The Series 2007 Bonds are issuable in the form of fully registered bonds in the denomination of $5,000 or any integral multiple thereof. The Series 2007 Bonds, when issued, will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York ( DTC ). Purchases will be made in book-entry only form and no physical delivery of the Series 2007 Bonds will be made to Beneficial Owners (as herein defined). Payment of principal of, interest and premium, if any, on the Series 2007 Bonds will be made by the Trustee to Cede & Co., as nominee of DTC, and will subsequently be disbursed to Direct Participants (as herein defined) and thereafter to Beneficial Owners (as herein defined). See THE SERIES 2007 BONDS herein. The A and B Bonds and any Additional Bonds issued under the A and B Indenture (as herein defined) are payable solely from all rights, title and interest of the Issuer in and to (a) the A and B Loan Agreement (except for the Issuer s rights to payment of fees and expenses and to indemnification pursuant to the terms thereof); (b) the Leasehold and Fee Deed to Secure Debt, Security Agreement and Assignment of Rents and Leases, dated February 1, 2007, from the A and B Company in favor of the Issuer; (c) the Construction Documents (as defined in the A and B Indenture); (d) the A and B Gross Revenues (as herein defined); (e) moneys and securities held in any and all funds created under the A and B Indenture; and (f) any and all other property from time to time by delivery or by writing conveyed, mortgaged, pledged, assigned or transferred as and for additional security under the A and B Indenture by the Issuer or by anyone on its behalf or with its written consent to the Trustee, which is under the A and B Indenture authorized to receive any and all such property at any and all times and to hold and apply the same subject to the terms of the A and B Indenture (collectively, the A and B Trust Estate ). THE A AND B TRUST ESTATE SECURES ONLY THE A AND B BONDS AND DOES NOT SECURE THE C BONDS. See SECURITY FOR THE SERIES 2007 BONDS herein. The C Bonds and any Additional Bonds issued under the C Indenture (as herein defined) are payable solely from all rights, title and interest of the Issuer in and to (a) the C Loan Agreement (except for the Issuer s rights to payment of fees and expenses and to indemnification pursuant to the terms thereof); (b) the Leasehold and Fee Deed to Secure Debt, Security Agreement and Assignment of Rents and Leases, dated February 1, 2007, from the C Company in favor of the Issuer; (c) the C Gross Revenues (as herein defined); (d) moneys and securities held in any and all funds created under the C Indenture; and (e) any and all other property from time to time by delivery or by writing conveyed, mortgaged, pledged, assigned or transferred as and for additional security under the C Indenture by the Issuer or by anyone on its behalf or with its written consent to the Trustee, which is under the C Indenture authorized to receive any and all such property at any and all times and to hold and apply the same subject to the terms of the C Indenture (collectively, the C Trust Estate, and together with the A and B Trust Estate, the Trust Estates ). THE C TRUST ESTATE SECURES ONLY THE C BONDS AND DOES NOT SECURE THE A AND B BONDS. See SECURITY FOR THE SERIES 2007 BONDS herein. The Series 2007 Bonds are subject to optional, mandatory sinking fund and extraordinary redemption prior to maturity under certain circumstances described herein and as set forth in the respective Indentures. See THE SERIES 2007 BONDS herein. The scheduled payments due of principal of and interest on the Series 2007 Bonds will be insured by the respective Policies issued by CIFG. For a description of the Policies and the Bond Insurer, see BOND INSURANCE herein. For a form of the Policies, see Appendix H. THE A AND B POLICY DOES NOT SECURE THE C BONDS, AND THE C POLICY DOES NOT SECURE THE A AND B BONDS. THE SERIES 2007 BONDS DO NOT CONSTITUTE AN INDEBTEDNESS OR OBLIGATION OF THE BOARD OF REGENTS, THE UNIVERSITY, THE FOUNDATION, THE STATE OF GEORGIA (THE STATE ) OR ANY MUNICIPALITY OR POLITICAL SUBDIVISION THEREOF, INCLUDING DAHLONEGA, GEORGIA (THE CITY ). THE SERIES 2007 BONDS ARE PAYABLE BY THE ISSUER SOLELY FROM THE RESPECTIVE TRUST ESTATES PLEDGED TO THE PAYMENT THEREOF UNDER THE RESPECTIVE INDENTURES. NO OWNER OF THE SERIES 2007 BONDS SHALL EVER HAVE THE RIGHT TO COMPEL THE EXERCISE OF THE TAXING POWER OF THE STATE OR ANY MUNICIPALITY OR POLITICAL SUBDIVISION THEREOF, INCLUDING THE CITY, TO PAY THE SERIES 2007 BONDS OR THE INTEREST OR PREMIUM THEREON OR ANY OTHER COST RELATING THERETO OR TO ENFORCE PAYMENT THEREOF AGAINST ANY PROPERTY OF THE STATE OR ANY MUNICIPALITY OR POLITICAL SUBDIVISION THEREOF, INCLUDING THE CITY. THE ISSUER HAS NO TAXING POWER. The Series 2007 Bonds are offered when, as, and if issued by the Issuer and accepted by Merchant Capital, L.L.C. (the Underwriter ), subject to prior sale and to withdrawal or modification of the offer without notice and the approval of legality by Alston & Bird LLP, Atlanta, Georgia, Bond Counsel. Certain legal matters will be passed on for the Issuer by its counsel, J. Douglas Parks P.C., Dahlonega, Georgia; for the A and B Company, the C Company and the Foundation by their counsel, Carey, Jarrard & Walker, L.L.P., Gainesville, Georgia; for the A and B Company and the C Company by their special counsel, Strickland Brockington Lewis LLP, Atlanta, Georgia; and for the Underwriter by its counsel, Murray Barnes Finister LLP, Atlanta, Georgia. Delivery of the Series 2007 Bonds to DTC in New York, New York, is expected on or about February 27, Dated:, 2007 * Preliminary, subject to change. PRELIMINARY OFFICIAL STATEMENT DATED FEBRUARY 5, 2007 MERCHANT CAPITAL, L.L.C.

2 MATURITIES, PRINCIPAL AMOUNTS, INTEREST RATES AND YIELDS * SERIES 2007A $5,815,000 Serial Bonds Maturity Principal Interest July 1 Amount Rate Yield 2008 $ 40, , , , , , , , , , , , , , ,000 $5,620,000 % Term Bonds, Due July 1, 2027, Priced to Yield % $7,670,000 % Term Bonds, Due July 1, 2032, Priced to Yield % $10,340,000 % Term Bonds, Due July 1, 2037, Priced to Yield % SERIES 2007B $400,000 % Term Bonds, Due July 1, 2012, Priced to Yield % $545,000 % Term Bonds, Due July 1, 2017, Priced to Yield % SERIES 2007C $6,620,000 Serial Bonds Maturity Principal Interest Maturity Principal Interest July 1 Amount Rate Yield July 1 Amount Rate Yield 2007 $ 50, $460, , , , , , , , , , , , , ,000 $3,020,000 % Term Bonds, Due July 1, 2024, Priced to Yield % $6,150,000 % Term Bonds, Due July 1, 2028, Priced to Yield %

3 No dealer, broker, salesman or other person has been authorized to give any information or to make any representations, other than those contained in this Official Statement in connection with the offering contained herein, and if given or made, such other information or representations must not be relied upon. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the Series 2007 Bonds by any person in any jurisdiction in which it is unlawful for such person to make such offer, solicitation or sale. The information contained in this Official Statement has been obtained from representatives of the University, the Company, the Bond Insurer, public documents, records and other sources considered to be reliable. THE UNDERWRITER HAS PROVIDED THE FOLLOWING SENTENCE FOR INCLUSION IN THIS OFFICIAL STATEMENT. THE UNDERWRITER HAS REVIEWED THE INFORMATION IN THIS OFFICIAL STATEMENT IN ACCORDANCE WITH, AND AS A PART OF, ITS RESPONSIBILITIES UNDER THE FEDERAL SECURITIES LAWS AS APPLIED TO THE FACTS AND CIRCUMSTANCES OF THIS TRANSACTION, BUT THE UNDERWRITER DOES NOT GUARANTY THE ACCURACY OR COMPLETENESS OF SUCH INFORMATION. The delivery of this Official Statement at any time does not imply that any information herein is correct as of any time subsequent to its date. Any statements in this Official Statement involving estimates, assumptions and matters of opinion, whether or not so expressly stated, are intended as such and not representations of fact. NO REGISTRATION STATEMENT RELATING TO THE SERIES 2007 BONDS HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ( SEC ) OR ANY STATE SECURITIES AGENCY. THE SERIES 2007 BONDS HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SEC OR ANY STATE SECURITIES AGENCY, NOR HAS THE SEC OR ANY STATE SECURITIES AGENCY PASSED UPON THE ACCURACY OR ADEQUACY OF THIS OFFICIAL STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. In making an investment decision, investors must rely on their own examination of the University and the Company and the terms of the offering, including the merits and risks involved. The Series 2007 Bonds have not been recommended by any federal or state securities commission or regulatory authority. Furthermore, the foregoing authorities have not confirmed the accuracy or determined the adequacy of this Official Statement. Any representation to the contrary is a criminal offense.

4 TABLE OF CONTENTS INTRODUCTION...1 General...1 Purpose...2 The Issuer...2 The Board of Regents...2 The A and B Company...3 The C Company...3 The University...3 Trustee...3 The Projects...3 Security...3 Description of the Series 2007 Bonds...5 Tax Exemption...6 Professionals Involved in the Offering...6 Offering and Delivery of the Series 2007 Bonds...7 Continuing Disclosure...7 Bondholders Risks...7 Other Information...7 THE ISSUER...8 THE SERIES 2007 BONDS...8 General...8 Dates, Denominations and Payment Information...8 Limited Obligations...9 Optional Redemption of Bonds *...9 Extraordinary Mandatory Redemption of Series 2007 Bonds...9 Mandatory Sinking Fund Redemption *...10 Selection of Bonds to be Redeemed...11 Partially Redeemed Bonds...11 Notice of Redemption...11 Effect of Redemption Call...11 Cancellation and Destruction of Bonds...11 Issuance of Additional Bonds...11 Book-Entry Only System...12 SECURITY FOR THE SERIES 2007 BONDS...14 A and B Bonds...14 C Bonds...15 The Rental Agreements...16 Sources of Funds to Make Rental Payments...17 Proforma Cash Flow Analyses...18 BOND INSURANCE...18 CIFG Assurance North America, Inc General...18 The Bond Insurer s Rights Under the Bond Documents...20 PLAN OF FINANCING *...20 A and B Bonds...20 C Bonds...20 i

5 THE PROJECTS AND REFUNDING...21 The Recreation Project...21 The Office Project...21 The Housing Project and Refunding of the Prior Bonds...21 PROJECT DEVELOPMENT...22 Program Manager...22 Program Management Agreement...22 Architect...22 Architect Agreement...23 Construction Manager...23 Construction Management Agreement...24 ANNUAL DEBT SERVICE REQUIREMENTS *...25 THE COMPANIES AND THE FOUNDATION...26 The A and B Company...26 The C Company...26 The Foundation...26 THE UNIVERSITY...27 General...27 Administration...27 Facilities...29 Enrollment...29 Admissions...29 Retention Rate...30 Average Composite...30 Tuition, Fees and Charges...30 State Financial Aid...31 Limited Audit Procedures of Financial Statements...31 Financial Information...32 BOARD OF REGENTS...33 General...33 Members and Chancellor...33 THE STATE...34 CERTAIN BONDHOLDERS RISKS...35 Limitations on Board of Regents Obligations Under Rental Agreements; Risk of Non-Renewal...35 Reimbursement Obligations of Companies...36 Condemnation/Casualty Risk...37 No Operating History...37 Limited Assets of the Company...37 Enforceability of Remedies...37 Limited Obligations...38 Construction Risks...38 Environmental Issues...39 Ad Valorem Property Taxes...39 Limited Protection Against Loss of Tax Exemption...39 Liquidation of Security May Not Be Sufficient in the Event of a Default...40 Normal Risks Attending Any Investment in Real Estate...40 ii

6 LITIGATION...40 The Issuer...40 The Companies...40 Validation Proceedings...40 Closing Certificates...41 TAX EXEMPTION...41 Opinion of Bond Counsel...41 MISCELLANEOUS...42 Underwriting...42 Ratings...42 Experts...42 CERTIFICATION...43 Appendix A Definitions and Summaries of Principal Documents Appendix B Financial Statements of the University for the Fiscal Year Ended June 30, 2006 Appendix C Forms of Bond Counsel Opinions Appendix D Forms of Disclosure Certificates Appendix E Forms of Rental Agreements Appendix F Forms of Ground Leases Appendix G Proforma Revenue and Expense Statements Appendix H Form of the Policies iii

7 OFFICIAL STATEMENT $29,445,000 DOWNTOWN DEVELOPMENT AUTHORITY OF THE CITY OF DAHLONEGA REVENUE BONDS (NORTH GEORGIA PARKING & RECREATION CENTER, LLC PROJECT), SERIES 2007A AND $945,000 * DOWNTOWN DEVELOPMENT AUTHORITY OF THE CITY OF DAHLONEGA TAXABLE REVENUE BONDS (NORTH GEORGIA PARKING & RECREATION CENTER, LLC PROJECT), SERIES 2007B AND $15,790,000 * DOWNTOWN DEVELOPMENT AUTHORITY OF THE CITY OF DAHLONEGA REVENUE BONDS (NORTH GEORGIA STUDENT HOUSING, L.L.C. PROJECT), SERIES 2007C INTRODUCTION General This Official Statement, including the cover page and the Appendices hereto, is provided to furnish certain information in connection with the sale by the Downtown Development Authority of the City of Dahlonega, a public body corporate and politic and instrumentality of the State of Georgia (the Issuer ), of (i) $29,445,000 * in aggregate principal amount of its Revenue Bonds (North Georgia Parking & Recreation Center, LLC Project), Series 2007A (the A Bonds ), (ii) $945,000 * in aggregate principal amount of its Taxable Revenue Bonds (North Georgia Parking & Recreation Center, LLC Project), Series 2007B (the B Bonds ) and (iii) $15,790,000 * in aggregate principal amount of its Revenue Bonds (North Georgia Student Housing, L.L.C. Project), Series 2007C (the C Bonds, and together with the A Bonds and the B Bonds, the Series 2007 Bonds ). Definitions of certain capitalized words used in this Official Statement are set forth in Appendix A Definitions and Summaries of Principal Documents hereto. This Introduction is not a summary of this Official Statement and is intended only for quick reference. It is only a brief description of and guide to, and is qualified in its entirety by reference to, more complete and detailed information contained in the entire Official Statement, including the cover page and the Appendices, and the documents summarized or described herein. Investors should fully review the entire Official Statement. The offering of the Series 2007 Bonds to potential investors is made only by means of the entire Official Statement, including the Appendices hereto. No person is authorized to detach this Introduction from the Official Statement or otherwise to use it without the entire Official Statement. Throughout this Preliminary Official Statement, an asterisk indicates that the information is preliminary and subject to change.

8 Purpose A and B Bonds. The A and B Bonds are being issued pursuant to a Trust Indenture, dated as of February 1, 2007 (the A and B Indenture ), between the Issuer and U.S. Bank National Association, as trustee (the Trustee ). The proceeds of the sale of the A and B Bonds will be loaned to North Georgia Parking & Recreation Center, LLC, a Georgia limited liability company (the A and B Company ), the sole member of which is The North Georgia College & State University Foundation, Inc., a Georgia nonprofit corporation (the Foundation ), pursuant to the terms and provisions of a Loan Agreement and Assignment of Gross Revenues and Certain Agreements and Accounts, dated as of February 1, 2007 (the A and B Loan Agreement ), between the Issuer and the A and B Company. Proceeds of the A and B Bonds will be used by the A and B Company to (i) finance or refinance the costs of the acquisition, construction and equipping of a recreation center, street improvements and parking deck (the Recreation Project ) located on the campus of North Georgia College & State University (the University ), a unit of the University System of Georgia; (ii) finance or refinance the costs of the acquisition, renovation and improvement of an existing office building to be used in part by the University (the Office Project ), (iii) fund capitalized interest on the A and B Bonds; (iv) fund a debt service reserve fund for the A and B Bonds; and (v) pay costs of issuance of the A and B Bonds, including the premium for the municipal bond insurance policy (the A and B Policy ) to be issued by CIFG Assurance North America, Inc. (the Bond Insurer or CIFG ). See PLAN OF FINANCING herein. C Bonds. The C Bonds are being issued pursuant to a Trust Indenture, dated as of February 1, 2007 (the C Indenture, and together with the A and B Indenture, the Indentures ), between the Issuer and the Trustee. The proceeds of the sale of the C Bonds will be loaned to North Georgia Student Housing, L.L.C., a Georgia limited liability company (the C Company, and together with the A and B Company, the Companies ), the sole member of which is the Foundation, pursuant to the terms and provisions of a Loan Agreement and Assignment of Gross Revenues and Certain Agreements and Accounts, dated as of February 1, 2007 (the C Loan Agreement, and together with the A and B Loan Agreement, the Loan Agreements ), between the Issuer and the C Company. Proceeds of the C Bonds will be used by the C Company to (i) refund all of the Issuer s outstanding Student Housing Revenue Bonds (North Georgia Student Housing, L.L.C. Project), Series 2001A (the Prior Bonds ), the proceeds of which were used to finance the acquisition, construction and equipping of a 315-bed student housing facility and related parking (the Housing Project ) located on the campus of the University; (ii) retire debt used to finance the cost of acquisition of land which is the proposed site of future student housing; (iii) finance or refinance the cost of the acquisition and construction of a street, sidewalks, walking trails and infrastructure (the Infrastructure Project, and together with the Recreation Project, the Office Project and the Housing Project, the Projects ); (iv) fund capitalized interest on the C Bonds; (v) fund a debt service reserve fund for the C Bonds; and (vi) pay costs of issuance of the C Bonds, including the premium for the municipal bond insurance policy (the C Policy, and together with the A and B Policy, the Policies ) to be issued by the Bond Insurer. See PLAN OF FINANCING herein. The Issuer The Issuer is a public body corporate and politic created and existing under the laws of the State of Georgia (the State ), including an act entitled the Downtown Development Authorities Law codified at O.C.G.A et seq., as amended (the Act ). See THE ISSUER herein. The Board of Regents The Board of Regents of the University System of Georgia (the Board of Regents ) is a constitutional body of the State that governs, controls and manages the University System and all of the 35 colleges and universities in the University System, including the University. See THE BOARD OF REGENTS and THE STATE herein. 2

9 The A and B Company The A and B Company was formed for the sole purpose of constructing the Recreation Project, renovating the Office Project and leasing the Recreation Project and a portion of the Office Project to the Board of Regents. The real property upon which the Recreation Project will be located is owned by the Board of Regents and will be leased to the A and B Company pursuant to a Ground Lease (the A and B Ground Lease ), between the Board of Regents and the A and B Company. The A and B Company owns the Office Project. Pursuant to two Rental Agreements, the A and B Company will rent the completed Recreation Project and a portion of the Office Project to the Board of Regents on an annually-renewable basis for use by the University (collectively, the A and B Rental Agreements ). Pursuant to a Rental Agreement, the A and B Company will lease the remaining portion of the Office Project to Branch Banking and Trust Company ( BB&T ) for an initial term of five years (the BB&T Rental Agreement ). See THE COMPANIES AND THE FOUNDATION herein. The C Company The C Company was formed for the sole purpose of constructing the Housing Project and the Infrastructure Project and leasing the Housing Project to the Board of Regents. The real property upon which the Housing Project is located is owned by the Board of Regents and will be leased to the C Company pursuant to a Ground Lease (the C Ground Lease ), between the Board of Regents and the C Company. Pursuant to a Rental Agreement, the C Company will rent the Housing Project to the Board of Regents on an annually-renewable basis for use by the University (the C Rental Agreement ). See THE COMPANY AND THE FOUNDATION herein. The University The University is a four-year coeducational, residential member of the University System with an enrollment of 4,922 students for fall semester It is located in the City of Dahlonega, Georgia, on a 112-acre campus. See THE UNIVERSITY herein. Trustee U.S. Bank National Association has been designated as Trustee for the Series 2007 Bonds. The principal corporate trust office of the Trustee is 1349 West Peachtree Street, Suite 1050, Atlanta, Georgia 30309, Attention: Corporate Trust Services. The Projects The Projects consist of financing or refinancing the Recreation Project and the Office Project, refunding the Prior Bonds and financing or refinancing the Housing Project. See THE PROJECTS AND REFUNDING herein. Security A and B Bonds. The A and B Bonds are payable solely from the Issuer s right, title and interest in and to (a) the A and B Loan Agreement (except for the Issuer s rights to payment of fees and expenses and to indemnification pursuant to the terms thereof); (b) the Leasehold and Fee Deed to Secure Debt, Security Agreement and Assignment of Rents and Leases, dated February 1, 2007, from the A and B Company in favor of the Issuer (the A and B Deed ); (c) the Construction Documents (as defined in the A and B Indenture); (d) the A and B Gross Revenues (as herein defined); (e) moneys and securities held in any and all funds created under the A and B Indenture; and (f) any and all other property from time to time by delivery or by writing conveyed, mortgaged, pledged, assigned or transferred as and for additional security under the A and B Indenture by the Issuer or by anyone on its behalf or with its written consent to the Trustee, which is under the A and B Indenture authorized to receive any and all such property at any and all times and to hold and apply the same subject to the terms of the A and B Indenture (collectively, the A and B Trust Estate ). THE A AND B TRUST ESTATE SECURES ONLY THE A AND B BONDS AND DOES NOT SECURE THE C BONDS. See SECURITY FOR THE SERIES 2007 BONDS herein. 3

10 The Board of Regents will lease to the A and B Company the real property upon which the Recreation Project is located pursuant to the A and B Ground Lease for a term ending on June 30, See Appendix F Forms of Ground Leases hereto. The A and B Company owns the Office Project. Under the terms of the A and B Rental Agreements, the A and B Company will rent the completed Recreation Project and a portion of the Office Project to the Board of Regents on an annually-renewable basis for use by the University. The remaining portion of the Office Project will be leased by the A and B Company to BB&T. The Board of Regents will make fixed rental payments for the use and occupancy of the completed Recreation Project and a portion of the Office Project in amounts that, together with the payments from BB&T, the A and B Company estimates will be sufficient to enable the A and B Company to pay, among other things, the principal of and interest on the A and B Bonds when the same become due and payable. The Board of Regents obligation to pay rent under the A and B Rental Agreements with respect to the Recreation Project (the Recreation Rental Agreement ) will commence on the first day of the month following the issuance and delivery of a certificate of occupancy for the Recreation Project but in no event prior to August 1, The initial term of the Recreation Rental Agreement will expire on June 30, 2008, but is renewable by the Board of Regents on a year-to-year basis for 29 consecutive years. The Board of Regents obligation to pay rent under the Rental Agreement with respect to a portion of the Office Project (the Office Rental Agreement ) will commence on March 1, The initial term of the Office Rental Agreement will expire on June 30, 2007, but is renewable by the Board of Regents on a year-to-year basis for 29 consecutive years. BB&T s obligation to pay rent under the BB&T Rental Agreement will commence on the date of issuance of the Bonds and is renewable by BB&T for five successive five-year periods. The Board of Regents is obligated to lease the portion of the Office Project occupied by BB&T under the A and B Rental Agreements at a rental rate sufficient to pay debt service on the B Bonds in the event that BB&T elects not to renew the BB&T Rental Agreement or if the BB&T Rental Agreement expires or is terminated. The A and B Company must give the Board of Regents 30 days notice of the future availability of the space occupied by BB&T. The LLC has established a rent escrow fund (the Rent Escrow Fund ) in an amount equal to three months of rent payable by BB&T ($26,142) (the Rent Escrow Amount ) to be held by the Trustee and applied to debt service on the B Bonds in the event BB&T fails to pay rent for any reason that results in the A and B Company being unable to pay any portion of debt service on the B Bonds. The A and B Company has covenanted to (a) use all diligent efforts to take action to evict BB&T in the event BB&T fails to pay any rent due under the BB&T Rental Agreement, (b) notify the Board of Regents of the future availability of space occupied by BB&T, (c) make the space available for occupancy by the Board of Regents, and (d) direct the Trustee to use any portion of the Rent Escrow Amount on deposit in the Rent Escrow Fund to pay debt service on the B Bonds. If the Board of Regents elects not to renew the Recreation Rental Agreement or the Office Rental Agreement, the A and B Company may not be able to rent the Recreation Project or the Office Project to another tenant for an amount sufficient to enable the A and B Company to make its payments due under the A and B Loan Agreement. See SECURITY FOR THE SERIES 2007 BONDS herein and Appendix E Forms of Rental Agreements hereto THE BOARD OF REGENTS HAS NOT PARTICIPATED IN THE ISSUANCE OF THE SERIES 2007 BONDS AND HAS NO MORAL OBLIGATION WITH RESPECT TO THE SERIES 2007 BONDS OR TO CONTINUE TO RENT THE RECREATION PROJECT OR THE OFFICE PROJECT IN A MANNER SUPPORTIVE OF THE CREDITWORTHINESS OF THE SERIES 2007 BONDS. The Board of Regents may elect to renew one or more of the Rental Agreements with no obligation to renew all of the Rental Agreements. The Rental Agreements are not cross-collateralized. 4

11 The scheduled payments due of principal of and interest on the A and B Bonds will be insured by the A and B Policy issued by CIFG. For a description of the A and B Policy and the Bond Insurer, see BOND INSURANCE herein. For a form of the Policies, see Appendix H. C Bonds. The C Bonds are payable solely from the Issuer s right, title and interest in and to (a) the C Loan Agreement (except for the Issuer s rights to payment of fees and expenses and to indemnification pursuant to the terms thereof); (b) the Leasehold and Fee Deed to Secure Debt, Security Agreement and Assignment of Rents and Leases, dated February 1, 2007, from the C Company in favor of the Issuer (the C Deed ); (c) the C Gross Revenues (as defined in the C Indenture); (d) moneys and securities held in any and all funds created under the C Indenture; and (e) any and all other property from time to time by delivery or by writing conveyed, mortgaged, pledged, assigned or transferred as and for additional security under the C Indenture by the Issuer or by anyone on its behalf or with its written consent to the Trustee, which is under the C Indenture authorized to receive any and all such property at any and all times and to hold and apply the same subject to the terms of the C Indenture (collectively, the C Trust Estate ). THE C TRUST ESTATE SECURES ONLY THE C BONDS AND DOES NOT SECURE THE A AND B BONDS. See SECURITY FOR THE SERIES 2007 BONDS herein. The Board of Regents will lease to the C Company the real property upon which the Housing Project is located pursuant to the C Ground Lease for a term ending on December 31, See Appendix F Forms of Ground Leases hereto. Under the terms of a Rental Agreement with respect to the Housing Project (the Housing Rental Agreement, and together with the Recreation Rental Agreement and the Office Rental Agreement, the Rental Agreements ), the Company will rent the Housing Project to the Board of Regents on an annually-renewable basis for use by the University. The Board of Regents will make fixed rental payments for the use and occupancy of the Housing Project in amounts that the C Company estimates will be sufficient to enable the C Company to pay, among other things, the principal of and interest on the C Bonds when the same become due and payable. The Board of Regents obligation to pay rent under the Housing Rental Agreement will commence upon the issuance of the C Bonds. The initial term of the Housing Rental Agreement expires on June 30, 2007, but is renewable by the Board of Regents on a year-to-year basis for 21 consecutive years; provided that the last renewal shall not extend beyond June 1, If the Board of Regents elects not to renew the Housing Rental Agreement, the C Company may not be able to rent the Housing Project to another tenant for an amount sufficient to enable the C Company to make its payments due under the C Loan Agreement. See SECURITY FOR THE SERIES 2007 BONDS herein and Appendix E Forms of Rental Agreements hereto THE BOARD OF REGENTS HAS NOT PARTICIPATED IN THE ISSUANCE OF THE SERIES 2007 BONDS AND HAS NO MORAL OBLIGATION WITH RESPECT TO THE SERIES 2007 BONDS OR TO CONTINUE TO RENT THE HOUSING PROJECT IN A MANNER SUPPORTIVE OF THE CREDITWORTHINESS OF THE SERIES 2007 BONDS. The Board of Regents may elect to renew one or more of the Rental Agreements with no obligation to renew all of the Rental Agreements. The Rental Agreements are not cross-collateralized. The scheduled payments due of principal of and interest on the C Bonds will be insured by the C Policy issued by CIFG. For a description of the C Policy and the Bond Insurer, see BOND INSURANCE herein. For a form of the Policies, see Appendix H. Description of the Series 2007 Bonds Redemption. The Series 2007 Bonds are subject to optional, mandatory sinking fund and extraordinary redemption prior to their stated maturity. See THE SERIES 2007 BONDS Redemption Provisions herein. 5

12 Denominations. The Series 2007 Bonds are issuable in denominations of $5,000 or any integral multiple thereof. See THE SERIES 2007 BONDS Date, Denominations and Payment Information herein. Registration, Transfers and Exchanges. The Series 2007 Bonds will be issued in fully registered form. When in book-entry form, ownership of Series 2007 Bonds held by The Depository Trust Company ( DTC ) or its nominee, Cede & Co., on behalf of the beneficial owners thereof (the Beneficial Owners ), may be registered as transferred upon delivery to DTC (or its nominee, Cede & Co.) of an assignment duly executed by the Beneficial Owner or his duly authorized attorney or legal representative. When not in book-entry form, ownership of Series 2007 Bonds may be registered as transferred upon registration of surrender of such Series 2007 Bond to the Trustee, together with an assignment duly executed by the registered owner or his attorney or legal representative. When not in book-entry form, the Series 2007 Bonds are exchangeable for a like aggregate principal amount of Series 2007 Bonds of the same maturity in denominations of $5,000 or any integral multiple thereof. See THE SERIES 2007 BONDS Date, Denominations and Payment Information herein. Payments. Interest on the Series 2007 Bonds is payable on January 1 and July 1 of each year (each such date, an Interest Payment Date ), commencing July 1, Payment of the principal of and interest on Series 2007 Bonds will be made by the Trustee directly to Cede & Co., as nominee of DTC, and will subsequently be disbursed to DTC Participants (as herein defined) and thereafter to Beneficial Owners of the Series 2007 Bonds. When not in book-entry form, interest on the Series 2007 Bonds is payable by check or draft mailed by first class mail on the date due to the owners thereof as shown on the books and records of the Trustee on the 15 th day of the calendar month immediately preceding each Interest Payment Date (the Record Date ). When not in book-entry form, interest on the Series 2007 Bonds is payable to any registered owner of more than $1,000,000 in aggregate principal amount of the Series 2007 Bonds by wire transfer to such registered owner if written notice is given to the Trustee prior to the Record Date. When not in book-entry form, principal of and premium, if any, on the Series 2007 Bonds are payable upon surrender thereof at the corporate trust office of the Trustee. See THE SERIES 2007 BONDS Book-Entry Only System herein. Tax Exemption For a more complete description of the Series 2007 Bonds, see THE SERIES 2007 BONDS herein. In the opinion of Bond Counsel, subject to the limitations and conditions described herein, (i) interest on the A Bonds and the C Bonds is exempt from present State of Georgia income taxation, is excludable from gross income for federal income tax purposes, and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations; however, such interest is taken into account in determining adjusted current earnings for the purpose of computing the alternative minimum tax imposed on certain corporations, and (ii) interest on the Series 2007 Bonds is exempt from present State of Georgia income taxation. Professionals Involved in the Offering Certain legal matters pertaining to the issuance of the Series 2007 Bonds are subject to the approving opinion of Alston & Bird LLP, Atlanta, Georgia, Bond Counsel. Certain legal matters will be passed on for the Issuer by its counsel, J. Douglas Parks P.C., Dahlonega, Georgia; for the A and B Company, the C Company and the Foundation by their counsel, Carey, Jarrard & Walker, L.L.P., Gainesville, Georgia; for the A and B Company and the C Company by their special counsel, Strickland Brockington Lewis LLP, Atlanta, Georgia; and for Merchant Capital, L.L.C. (the Underwriter ) by its counsel, Murray Barnes Finister LLP, Atlanta, Georgia. The Department of Audits and Accounts has performed certain audit procedures with respect to the financial statements of the University as of and for the fiscal year ended June 30, 2006 and has issued a Management Report. The financial statements of the University as of and for the fiscal year ended June 30, 2006 are attached hereto as Appendix B. See THE UNIVERSITY Limited Audit Procedures of Financial Statements and MISCELLANEOUS Experts herein. 6

13 Offering and Delivery of the Series 2007 Bonds The Series 2007 Bonds are offered when, as and if issued by the Issuer and accepted by the Underwriter, subject to prior sale and to withdrawal or modification of the offer without notice. The Series 2007 Bonds in definitive form are expected to be delivered through The Depository Trust Company in New York, New York, on or about February 27, Continuing Disclosure A and B Bonds. The A and B Company has covenanted in a Continuing Disclosure Certificate (the A and B Disclosure Certificate ) for the benefit of Bondholders to provide certain financial information and operating data (the Operating and Financial Data ), and to provide notices of the occurrence of certain enumerated events, if deemed by the A and B Company to be material (the Material Events Notices ). The Operating and Financial Data will be filed annually by the A and B Company with each Nationally Recognized Municipal Securities Information Repository ( NRMSIR ) and the state information repository, if any (the SID ). The Material Events Notices will be filed by the A and B Company with each NRMSIR or the Municipal Securities Rulemaking Board and the SID, if any. A form of the A and B Disclosure Certificate is attached hereto as Appendix D. The covenants have been made in order to assist the Underwriter in complying with Securities and Exchange Commission Rule 15c2-12(b)(5) (the Rule ). The A and B Company has never been obligated to comply with any undertaking with respect to the Rule. As of the date of this Official Statement, there is no SID in the State. C Bonds. The C Company has covenanted in a Continuing Disclosure Certificate (the C Disclosure Certificate ) for the benefit of Bondholders to provide certain financial information and operating data (the Operating and Financial Data ), and to provide notices of the occurrence of certain enumerated events, if deemed by the C Company to be material (the Material Events Notices ). The Operating and Financial Data will be filed annually by the C Company with each Nationally Recognized Municipal Securities Information Repository ( NRMSIR ) and the state information repository, if any (the SID ). The Material Events Notices will be filed by the C Company with each NRMSIR or the Municipal Securities Rulemaking Board and the SID, if any. A form of the C Disclosure Certificate is attached hereto as Appendix D. The covenants have been made in order to assist the Underwriter in complying with Securities and Exchange Commission Rule 15c2-12(b)(5) (the Rule ). The C Company has never been obligated to comply with any undertaking with respect to the Rule. As of the date of this Official Statement, there is no SID in the State. Bondholders Risks There are certain considerations and risks relating to an investment in the Series 2007 Bonds, which are set forth in this Official Statement under the caption CERTAIN BONDHOLDERS RISKS and which should be carefully reviewed by prospective purchasers of the Series 2007 Bonds. See CERTAIN BONDHOLDERS RISKS herein. Other Information This Official Statement speaks only as of its date, and the information contained herein is subject to change without notice. This Official Statement and the Appendices hereto contain brief descriptions of, among other matters, the Issuer, the A and B Company, the C Company, the Board of Regents, the Series 2007 Bonds, the Projects, the Indentures, the Agreements, the Deeds, the Rental Agreements, the Ground Leases, the Construction Documents, the Disclosure Certificates and the security and sources of payment for the Series 2007 Bonds. Such descriptions and information do not purport to be comprehensive or definitive. The summaries of various constitutional provisions and statutes, such contracts, and other documents are intended as summaries only and are qualified in their entirety by reference to such laws and documents, and references herein to the Series 2007 Bonds are qualified in their entirety to the form thereof included in the Indenture. Copies of such contracts and other documents and information are available, upon request and upon payment to the Trustee of a charge for copying, mailing and handling, from the Trustee at 25 Park Place, 24 th Floor, Atlanta, Georgia 30303, Attention: Corporate Trust Group. During the period of offering of the Series 2007 Bonds copies of such documents are available, upon request and 7

14 upon payment to the Underwriter of a charge for copying, mailing and handling, from the Underwriter at 3060 Peachtree Road, NW, Suite 1700, Atlanta, Georgia THE ISSUER The Issuer is a public body corporate and politic and was created pursuant to the laws of the State of Georgia, including the Act. The affairs of the Issuer are conducted by seven members who are appointed pursuant to the provisions of the Act. The Issuer is authorized to issue its revenue bonds and lend the proceeds of such revenue bonds for the purpose of developing commercial facilities and promoting and expanding industry and trade. Information concerning the members of the Issuer is set forth below: Name and Office Expiration of Term Gail Jones, Chairman 10/22/2010 Angela Antonia 10/22/2008 Denson Martin 10/22/2010 F. Mac McConnell 10/22/2010 Glen Melvin 10/22/2008 Chris Welch 10/22/2010 Hal Williams 10/22/2008 Dale Steenbergen (1) Runs with Office Bill Lewis (1) Runs with Office Gary McCullough (1) Runs with Office (1) Ex-officio. THE SERIES 2007 BONDS General The Series 2007 Bonds will be dated February 1, 2007, and will mature as described on the inside cover hereof, subject to the mandatory redemption provisions of the respective Indenture. Each series of the Series 2007 Bonds bear interest from their date of issuance and delivery at the rates shown on the inside cover page of this Official Statement, payable on each Interest Payment Date until paid. The Series 2007 Bonds will be issued in book-entry form and registered in the name of Cede & Co., a nominee of The Depository Trust Company, New York, New York ( DTC ). Dates, Denominations and Payment Information Each series of the Series 2007 Bonds shall be issuable in fully registered form in the denomination of $5,000 or any integral multiple thereof. The Series 2007 Bonds will bear interest at the rates set forth on the inside cover hereof (computed on the basis of a 360-day year composed of twelve 30-day months), payable on each Interest Payment Date as described above, from the Interest Payment Date next preceding the date of authentication of such Bond to which interest has been paid or provided for, unless the date of authentication of such Bond is an Interest Payment Date to which interest has been paid or provided for, then from the date of authentication thereof, or unless no interest has been paid on such Bond, in which case from the dated date of such Bond or unless such authentication date shall be after any Record Date and before the next succeeding Interest Payment Date in which case interest shall be paid from the next succeeding Interest Payment Date. Payment of principal and interest on the Series 2007 Bonds will be made as described below under Book-Entry Only System. However, in the event the book-entry system shall be discontinued, the following provisions shall pertain. Interest on each Bond shall be payable on each Interest Payment Date by check or draft 8

15 mailed by first class mail on the date on which due to the person in whose name such Bond is registered on the registration books of the Issuer maintained by the Trustee at the close of business on the Record Date, except that any interest not so timely paid or duly provided for shall cease to be payable to the person who is the registered owner of such Bond as of the Record Date, and shall be payable to the person who is the registered owner of such Bond at the close of business on a special record date for the payment of such defaulted interest. Such special record date shall be fixed by the Trustee whenever moneys become available for the payment of such defaulted interest, and notice of the special record date shall be given by first class mail by the Trustee or by or on behalf of the Issuer to the registered owner thereof not less than 15 days prior thereto. Such interest shall be mailed to the registered owner at his or her address as shown on the bond register maintained by the Trustee on the Record Date. In the event that any owner of Series 2007 Bonds in an aggregate principal amount of at least $1,000,000 shall provide the Trustee on or prior to any Record Date with written wire transfer instructions, the interest on subsequent Interest Payment Dates shall be paid in accordance with such instructions, or to such securities depository, as the case may be, until the Trustee receives written notice to the contrary. The principal of and interest and redemption premium (if any) on the Series 2007 Bonds shall be payable in any coin or currency of the United States of America which at the time of payment is legal tender for payment of public and private debts. The principal of and redemption premium (if any) on the Series 2007 Bonds are payable only upon presentation and surrender thereof at the designated office of the Trustee. Limited Obligations THE SERIES 2007 BONDS DO NOT CONSTITUTE AN INDEBTEDNESS OR OBLIGATION OF THE BOARD OF REGENTS, THE UNIVERSITY, THE FOUNDATION, THE STATE, OR ANY MUNICIPALITY OR POLITICAL SUBDIVISION THEREOF, INCLUDING THE CITY OF DAHLONEGA, GEORGIA (THE CITY ). THE SERIES 2007 BONDS ARE PAYABLE BY THE ISSUER SOLELY FROM THE RESPECTIVE TRUST ESTATE PLEDGED TO THE PAYMENT THEREOF UNDER THE RESPECTIVE INDENTURE. NO OWNER OF THE SERIES 2007 BONDS SHALL EVER HAVE THE RIGHT TO COMPEL THE EXERCISE OF THE TAXING POWER OF THE STATE OR ANY MUNICIPALITY OR POLITICAL SUBDIVISION THEREOF, INCLUDING THE CITY, TO PAY THE SERIES 2007 BONDS OR THE INTEREST OR PREMIUM THEREON OR ANY OTHER COST RELATING THERETO OR TO ENFORCE PAYMENT THEREOF AGAINST ANY PROPERTY OF THE STATE OR ANY MUNICIPALITY OR POLITICAL SUBDIVISION THEREOF, INCLUDING THE CITY. THE ISSUER HAS NO TAXING POWER. Optional Redemption of Bonds * A and B Bonds. The A and B Bonds maturing on or after July 1,, may be redeemed prior to their respective maturities, either in whole or in part, (but if in part, the maturities to be redeemed to be selected by the A and B Company, or, if not selected by the A and B Company, then in inverse order of maturities) on or after July 1,, at the redemption price of par. C Bonds. The C Bonds maturing on or after July 1,, may be redeemed prior to their respective maturities, either in whole or in part, (but if in part, the maturities to be redeemed to be selected by the C Company, or, if not selected by the C Company, then in inverse order of maturities) on or after July 1,, at the redemption price of par. Extraordinary Mandatory Redemption of Series 2007 Bonds The Series 2007 Bonds are subject to redemption in whole or in part at the written direction of the Company (pro rata among the maturities then outstanding at a redemption price equal to the principal amount of each such Series 2007 Bond to be redeemed plus accrued interest thereon to the redemption date on the earliest possible date after giving the required notice of redemption) in the event of any damage to, destruction, failure of title or condemnation of, any part of the respective Projects to the extent that the Net Proceeds relating thereto are not applied to the repair, reconstruction or restoration of the respective Projects in accordance with Article VI of the respective Agreements. 9

16 Mandatory Sinking Fund Redemption * A Bonds. The A Bonds maturing on July 1, are subject to mandatory sinking fund redemption on July 1, and on each July 1 thereafter, in accordance with the A and B Indenture, at a redemption price equal to the principal amount of each A Bond (or portion thereof) to be redeemed plus accrued interest to the date fixed for redemption, in the following principal amounts and on the dates set forth below (the final amount to be paid rather than redeemed on July 1, ): July 1 of the Year Principal Amount B Bonds. The B Bonds maturing on July 1, are subject to mandatory sinking fund redemption on July 1, and on each July 1 thereafter, in accordance with the A and B Indenture, at a redemption price equal to the principal amount of each B Bond (or portion thereof) to be redeemed plus accrued interest to the date fixed for redemption, in the following principal amounts and on the dates set forth below (the final amount to be paid rather than redeemed on July 1, ): July 1 of the Year Principal Amount C Bonds. The C Bonds maturing on July 1, are subject to mandatory sinking fund redemption on July 1, and on each July 1 thereafter, in accordance with the C Indenture, at a redemption price equal to the principal amount of each C Bond (or portion thereof) to be redeemed plus accrued interest to the date fixed for redemption, in the following principal amounts and on the dates set forth below (the final amount to be paid rather than redeemed on July 1, ): July 1 of the Year Principal Amount At its option, to be exercised on or before the 45th day next preceding any sinking fund redemption date, the A and B Company or the C Company, as the case may be, may deliver to the Trustee for cancellation Series 2007 Bonds of the appropriate maturity in any aggregate principal amount desired. Each Series 2007 Bond so delivered or previously redeemed shall be credited by the Trustee at 100% of the principal amount thereof on the obligation of the A and B Company or the C Company, as the case may be, on such sinking fund redemption date and any excess shall be credited on future sinking fund redemption obligations in such order as may be specified by the A and B Company or the C Company, as the case may be, and the principal amount of such Series 2007 Bonds to be redeemed by operation of the sinking fund shall be accordingly reduced. 10

17 Selection of Bonds to be Redeemed If less than all of a series of the Series 2007 Bonds of a single maturity are to be redeemed, any Series 2007 Bond of such series and maturity Outstanding in a denomination of greater than $5,000 may be called for partial redemption in the principal amount of $5,000 or any integral multiple thereof, and for the purpose of determining the Series 2007 Bonds to be redeemed or the amount of any such Series 2007 Bond in a principal amount in excess of $5,000 to be partially redeemed, the Trustee shall treat the entire principal amount of the Series 2007 Bonds of such series and maturity then Outstanding as if the same were separate Series 2007 Bonds of $5,000 each and shall assign separate numbers to each for the purpose of determining the particular Series 2007 Bonds or the principal amount of any such Series 2007 Bond in a denomination greater than $5,000 to be redeemed by lot. Partially Redeemed Bonds In case any Series 2007 Bond shall be redeemed in part only, upon the surrender of such Series 2007 Bond for partial redemption, the Trustee shall authenticate and shall deliver or cause to be delivered to or upon the written order of the owner thereof a Series 2007 Bond or Series 2007 Bonds of the same maturity, series and interest rate, in any authorized denominations, for the unredeemed portion of such partially-redeemed Series 2007 Bond. Any Series 2007 Bond, a portion of which has been redeemed as described in this paragraph, shall be considered to be Outstanding only in an amount reduced by the portion thereof so redeemed whether or not it has been surrendered as aforesaid. Notice of Redemption Notice of the call for redemption shall be given by the Trustee by first class mail, postage prepaid, mailed not less than 30 nor more than 60 days prior to the redemption date to the Owners of Series 2007 Bonds to be redeemed at the addresses appearing in the registration books maintained by the Trustee. Provided that notice is mailed as described herein, neither failure of any Owner of a Series 2007 Bond to receive such notice, nor any defect therein, shall affect the validity of the proceedings to redeem any Series 2007 Bond as to which proper notice was mailed. Notwithstanding the foregoing, upon the written direction of an Authorized Company Representative, the notice of redemption for optional redemption may contain a statement to the effect that the redemption of the Series 2007 Bonds is conditioned upon the receipt by the Trustee, prior to the date fixed for such redemption, of amounts equal to the redemption price of the Series 2007 Bonds to be redeemed, and that if such moneys shall not have been so received, the notice will be of no force and effect and the Issuer shall not be required to redeem such Series 2007 Bonds and such Series 2007 Bonds shall not become due and payable. Effect of Redemption Call Notice having been given in the manner and under the conditions hereinabove provided, and moneys for the payment of the redemption price being held by the Trustee, all as provided in the respective Indentures, the Series 2007 Bonds so called for redemption shall, on the redemption date designated in such notice, become and be due and payable at the redemption price provided for redemption of such Series 2007 Bonds on such date, interest on the Series 2007 Bonds so called for redemption shall cease to accrue, such Series 2007 Bonds shall cease to be entitled to any lien, benefit or security under the respective Indentures, and the Owners of such Series 2007 Bonds shall have no rights in respect thereof except to receive payment of the redemption price thereof. Cancellation and Destruction of Bonds All Series 2007 Bonds paid, redeemed or purchased, either at or before maturity, when such payment, redemption or purchase is made, shall thereupon be canceled, cremated, or otherwise destroyed by the Trustee and shall not be reissued but shall thereupon be destroyed by the Trustee and a record thereof furnished periodically to the Issuer and the A and B Company or the C Company, as the case may be. Issuance of Additional Bonds Additional Bonds may be authenticated and delivered from time to time to the extent permitted by law and 11

18 as provided by a supplemental indenture ranking on a parity as to lien with the A Bonds and the B Bonds or the C Bonds, as the case may be. The Authority shall not issue Additional Bonds unless there has been delivered to the Trustee a written certificate of an Authorized Company Representative that: (a) the proposed Additional Bonds are either (i) refunding debt to be applied to refund or refinance Bonds (as defined in the A and B Indenture or C Indenture, as the case may be) previously issued and after such refunding or refinancing has been accomplished, the Maximum Annual Debt Service Requirement shall decrease, (ii) financing, in whole or in part, the completion of the Recreation and Office Project or the Housing Project, as the case may be, (iii) financing, in whole or in part, additions, extensions and improvements to the Recreation and Office Project or the Housing Project, as the case may be, or (iv) financing Costs of Issuance, a debt service reserve fund, Capitalized Interest or such other costs reasonably related to (i), (ii), (iii) or (iv) herein; and (b) (i) the Debt Service Coverage Ratio with respect to the A Bonds and the B Bonds or the C Bonds, as the case may be, for the Fiscal Year immediately preceding the Fiscal Year during which such Additional Bonds will become outstanding shall have been at least equal to the Minimum Coverage Ratio as certified to the Trustee in writing by an Authorized Company Representative, and (ii) in the case of Additional Bonds financing, in whole or in part, additions, extensions and improvements to the Recreation and Office Project or the Housing Project, as the case may be, the projected Debt Service Coverage Ratio with respect to the A Bonds and the B Bonds or the C Bonds, as the case may be, and all proposed Additional Bonds for each of the three Fiscal Years subsequent to the completion of the additions, extensions and improvements to the Recreation and Office Project or the Housing Project, as the case may be, to be financed with the Additional Bonds shall be at least equal to the Minimum Coverage Ratio, as certified in writing to the A and B Company or the C Company, as the case may be, by a Consultant and (iii) the A and B Company or the C Company, as the case may be, shall have satisfied the rate covenant set forth in Section 4.15(a) of the A and B Loan Agreement or the C Loan Agreement, as the case may be, requiring that the Debt Service Coverage Ratio be maintained at a level at least equal to the Minimum Coverage Ratio for the two Fiscal Years immediately preceding the Fiscal Year during which such Additional Bonds will become outstanding, as certified to the A and B Company or the C Company, as the case may be, in writing by a Consultant; and (c) none of the A and B Bonds or the C Bonds, as the case may be, or any Additional Bonds then Outstanding are in default; and (d) the Bond Fund and the Debt Service Reserve Fund (as described in the A and B Indenture or the C Indenture, as the case may be) must be at their proper respective balances as required under the A and B Indenture or the C Indenture, as the case may be; and (e) the Debt Service Reserve Fund shall be funded in an amount sufficient to equal the Debt Service Reserve Requirement for the A and B Bonds or the C Bonds, as the case may be and the Additional Bonds; and (f) the items set forth in Section 211 of the A and B Indenture or the C Indenture, as the case may be, have been delivered. Book-Entry Only System The Depository Trust Company ( DTC ), New York, NY, will act as securities depository for the Series 2007 Bonds. The Series 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 fully-registered Series 2007 Bond certificate will be issued for each maturity of the Series 2007 Bonds, each in the aggregate principal amount of such maturity, and will be deposited with DTC. DTC, the world s largest depository, is a limited-purpose trust company organized under the New York Banking Law, a banking organization within the meaning of the New York Banking Law, a member of the Federal Reserve System, a clearing corporation within the meaning of the New York Uniform Commercial Code, 12

19 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, corporate and municipal debt issues, and money market instrument from over 100 countries that DTC s participants ( Direct Participants ) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities through electronic computerized book-entry transfers and pledges between Direct Participants accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-u.s. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ( DTCC ). DTCC, in turn, is owned by a number of Direct Participants of DTC and Members of the National Securities Clearing Corporation, Fixed Income Clearing Corporation, and Emerging Markets Clearing Corporation (NSCC, FICC, and EMCC, also subsidiaries of DTCC), as well as by the New York Stock Exchange, Inc., the American Stock Exchange LLC, and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others such as both U.S. and non-u.s. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ( Indirect Participants ). DTC has Standard & Poor s highest rating: AAA. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at and Purchases of Series 2007 Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Series 2007 Bonds on DTC s records. The ownership interest of each actual purchaser of each Series 2007 Bond ( Beneficial Owner ) is in turn to be recorded on the Direct and Indirect Participants records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Series 2007 Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Series 2007 Bonds, except in the event that use of the book-entry system for the Series 2007 Bonds is discontinued. To facilitate subsequent transfers, all Series 2007 Bonds deposited by Participants with DTC are registered in the name of DTC s partnership nominee, Cede & Co. or such other name as may be requested by an authorized representative of DTC. The deposit of Series 2007 Bonds with DTC and their registration in the name of Cede & Co. or such other nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Series 2007 Bonds; DTC s records reflect only the identity of the Direct Participants to whose accounts such Series 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. Beneficial Owners of Series 2007 Bonds may wish to take certain steps to augment transmission to them of notices of significant events with respect to the Series 2007 Bonds, such as redemptions, tenders, defaults, and proposed amendments to the security documents. For example, Beneficial Owners of Series 2007 Bonds may wish to ascertain that the nominee holding the Series 2007 Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners, in the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of the notices be provided directly to them. Redemption notices shall be sent to Cede & Co. If less than all of the Series 2007 Bonds within a maturity 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 such other DTC nominee) will consent or vote with respect to Series 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 Issuer as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co. s consenting or voting rights to those Direct Participants to whose accounts the Series 2007 Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). 13

20 Redemption proceeds, distributions, and dividend payments on the Series 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 Issuer 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 Issuer, 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 Issuer 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 securities depository with respect to the Series 2007 Bonds at any time by giving reasonable notice to the Issuer or the Trustee. Under such circumstances, in the event that a successor securities depository is not obtained, Series 2007 Bonds certificates are required to be printed and delivered. The Issuer may decide to discontinue use of the system of book-entry only transfers through DTC (or a successor securities depository). In that event, Series 2007 Bonds 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 Issuer believes to be reliable, but the Issuer takes no responsibility for the accuracy thereof. A and B Bonds SECURITY FOR THE SERIES 2007 BONDS Trust Estate. The A and B Bonds are payable solely from the A and B Trust Estate. THE A AND B TRUST ESTATE SECURES ONLY THE A AND B BONDS AND DOES NOT SECURE THE C BONDS. See SECURITY FOR THE SERIES 2007 BONDS herein. The Board of Regents will lease to the A and B Company the real property upon which the Recreation Project is located pursuant to the A and B Ground Lease for a term ending on June 30, 2037 and commencing upon the first day of the first month after the issuance of a certificate of occupancy for the Recreation Project but in no event prior to August 1, See Appendix F Forms of Ground Leases hereto. The A and B Company owns the Office Project. Under the terms of the A and B Rental Agreements, the Company will rent the completed Recreation Project and a portion of the Office Project to the Board of Regents on an annually-renewable basis for use by the University. The remaining portion of the Office Project will be leased by the A and B Company to BB&T. BB&T s obligation to pay rent under the BB&T Rental Agreement will commence on the date of issuance of the Bonds and is renewable by BB&T for five successive five-year periods. The Board of Regents is obligated to lease the portion of the Office Project occupied by BB&T under the A and B Rental Agreements at a rental rate sufficient to pay debt service on the B Bonds in the event that BB&T elects not to renew the BB&T Rental Agreement or if the BB&T Rental Agreement expires or is terminated. The A and B Company must give the Board of Regents 30 days notice of the future availability of the space occupied by BB&T. The LLC has established the Rent Escrow Fund in the Rent Escrow Amount to be held by the Trustee and applied to debt service on the B Bonds in the event BB&T fails to pay rent for any reason that results in the A and B Company being unable to pay any portion of debt service on the B Bonds. 14