NEW ISSUE – BOOK ENTRY ONLY RATING: Standard & Poor’s “AA”Underlying Rating (S&P): “BBB+”

See: “RATINGS” herein

In the opinion of Ballard Spahr Andrews & Ingersoll, LLP, Bond Counsel, interest on the Bonds is excludable from gross income for federal income tax purposesunder existing laws as presently enacted and construed, upon the conditions and subject to the limitations set forth herein under “TAX MATTERS”. Interest on theBonds will not be a preference item for purposes of determining either individual or corporate federal alternative minimum tax; however, interest paid to certaincorporate holders of the Bonds may be subject to alternative minimum tax and foreign branch profits tax under certain circumstances. Under the laws of theCommonwealth of Pennsylvania, as presently enacted and construed, interest on the Bonds is exempt from Pennsylvania personal income tax and corporate net incometax, and the Bonds are exempt from personal property taxes in Pennsylvania. For a further discussion and other tax aspects see “TAX MATTERS” herein.

$24,195,000PENNSYLVANIA HIGHER EDUCATIONAL FACILITIES AUTHORITY

(Commonwealth of Pennsylvania)Revenue Bonds

(Association of Independent Colleges and Universities of Pennsylvania Financing Program)

Series 2006 FF2(Elizabethtown College Project)

Dated: June 15, 2006 Due: As Shown On Inside Cover

The Pennsylvania Higher Educational Facilities Authority (the “Authority”) will issue the Series 2006 FF2 Bonds (the “Bonds”) in denominations of$5,000 or any whole multiple thereof. The Bonds will be registered in the name of Cede & Co. as the registered owner and nominee for The Depository TrustCompany (“DTC”), New York, New York.

The principal of and premium, if any, on the Bonds will be payable to the registered owner at the designated corporate trust agency office of FultonFinancial Advisors, National Association, Lancaster, Pennsylvania, as trustee (the “Trustee”) for the Bonds, or the designated corporate trust office of anysuccessor Trustee. The Bonds will bear interest at the rates shown on the inside cover hereof. Interest on the Bonds will be payable semiannually on June 15and December 15, commencing December 15, 2006, in each case by the Trustee to the registered owners by check, or by wire transfer at the request of holdersof at least $1,000,000 aggregate principal amount of such Bonds.

The Bonds are payable solely from, and are secured by an assignment and a pledge of, payments and other revenues to be received by the Authorityunder a Loan Agreement between the Authority and Elizabethtown College (the “Borrower”), and from Bond proceeds and other moneys pledged thereforunder a Trust Indenture between the Authority and the Trustee pursuant to which the Bonds are issued and secured.

Payment of principal of and interest on the Bonds will be insured in accordance with the terms of a financial guaranty insurance policy to beissued simultaneously with the delivery of the Bonds by Radian Asset Assurance Inc.

THE BONDS ARE LIMITED OBLIGATIONS OF THE AUTHORITY AND ARE PAYABLE SOLELY FROM THE SOURCES REFERREDTO IN THE TRUST INDENTURE PURSUANT TO WHICH SUCH BONDS ARE ISSUED AND SECURED, AND THE BONDS SHALL NOT BEOR BE DEEMED A GENERAL OBLIGATION OF THE AUTHORITY OR AN OBLIGATION OF THE COMMONWEALTH OF PENNSYLVANIAOR ANY POLITICAL SUBDIVISION THEREOF. NEITHER THE COMMONWEALTH OF PENNSYLVANIA NOR ANY POLITICALSUBDIVISION THEREOF IS OR SHALL BE OBLIGATED TO PAY THE PRINCIPAL OF OR PREMIUM, IF ANY, OR INTEREST ONTHE BONDS, AND NEITHER THE GENERAL CREDIT OF THE AUTHORITY NOR THE FAITH AND CREDIT OR TAXING POWER OFTHE COMMONWEALTH OF PENNSYLVANIA OR ANY POLITICAL SUBDIVISION THEREOF IS PLEDGED TO SUCH PAYMENT. THEAUTHORITY HAS NO TAXING POWER.

The Bonds are subject to optional, mandatory and extraordinary optional redemption prior to maturity as described herein.

The Bonds are offered when, as and if issued by the Authority, subject to prior sale, withdrawal or modification of the offer without any notice andto the approving opinion of Ballard Spahr Andrews & Ingersoll, LLP, Philadelphia, Pennsylvania, Bond Counsel. Certain legal matters will be passedupon for the Underwriter by its counsel, Morgan, Lewis & Bockius LLP, Philadelphia, Pennsylvania. Certain legal matters will be passed upon for theBorrower by its counsel, McNees Wallace & Nurick LLC, Harrisburg, Pennsylvania. Certain legal matters will be passed upon for the Authority by itscounsel, Buchanan Ingersoll PC, Pittsburgh, Pennsylvania. It is expected that Bonds in definitive form will be delivered to DTC in New York, New York,on or about June 29, 2006.

NatCity® Investments, Inc.An Affiliate of National City® Corporation

The date of this Official Statement is June 22, 2006.

MATURITY SCHEDULE

$11,075,000 Serial Bonds

Due Principal Interest(December 15) Amount Rate Yield Price CUSIP

2015 $1,355,000 5.000% 4.430% 104.364% 70917R GK 52016 1,425,000 5.000 4.530* 103.732 70917R GL 32017 1,495,000 5.000 4.550* 103.570 70917R GM 12018 1,575,000 5.000 4.600* 103.165 70917R GN 92019 1,655,000 5.000 4.640* 102.843 70917R GP 42020 1,740,000 5.000 4.680* 102.522 70917R GQ 22021 1,830,000 5.000 4.710* 102.282 70917R GR 0

$13,120,000 Term Bonds

$6,070,000 5.00% Term Bonds, Due December 15, 2024; yield: 4.770%*; Price: 101.804%; CUSIP: 70917R GS 8

$7,050,000 5.00% Term Bonds, Due December 15, 2027; yield: 4.870%*; Price: 101.014%; CUSIP: 70917R GT 6

(Accrued interest to be added)

* Priced to call date.

PENNSYLVANIA HIGHER EDUCATIONAL FACILITIES AUTHORITY (Commonwealth of Pennsylvania)

1035 Mumma Road Wormleysburg, Pennsylvania 17043

MEMBERS OF THE AUTHORITY

Honorable Edward G. Rendell Governor of the Commonwealth of Pennsylvania

President

Honorable James J. Rhoades Designated by the President Pro Tempore of the Senate

Vice President

Honorable Robert J. Mellow Minority Leader of the Senate

Vice President

Honorable Craig A. Dally Designated by the Speaker of the House of Representatives

Vice President

Honorable Robert P. Casey, Jr. State Treasurer

Treasurer

Honorable James P. Creedon Secretary of General Services

Secretary

Honorable Jack E. Wagner Auditor General

Member

Honorable Frank LaGrotta Designated by the Democratic Leader of the House of Representatives

Member

Honorable Gerald L. Zahorchak Secretary of Education

Member

EXECUTIVE DIRECTOR William C. Bostic

AUTHORITY COUNSEL

[Appointed by the Office of General Counsel] Buchanan Ingersoll PC

Pittsburgh, Pennsylvania

PROGRAM SPONSOR Association of Independent Colleges and Universities

of Pennsylvania

BOND COUNSEL [Appointed by the Office of General Counsel]

Ballard Spahr Andrews & Ingersoll, LLP Philadelphia, Pennsylvania

BOND TRUSTEE

Fulton Financial Advisors, National Association Lancaster, Pennsylvania

INVESTMENT BANKER NatCity Investments, Inc. Pittsburgh, Pennsylvania

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF THE BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME WITHOUT PRIOR NOTICE.

__________________________________________

No dealer, broker, salesperson or other person has been authorized by the Authority, the Borrower, the Program Sponsor or the Underwriter to give any information or to make any representations with respect to the Bonds other than those in this Official Statement, and if given or made, such other information or representations must not be relied upon as having been authorized by any of the foregoing. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy, and there shall not be a sale of the Bonds by any person in any jurisdiction in which it is unlawful for such person to make such offer, solicitation or sale. Except for the information concerning the Authority, the information contained herein is not to be construed as a representation by the Authority. The Underwriter has reviewed the information in this Official Statement in accordance with, and as part of, its responsibility 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 information and expressions of opinion herein are subject to change without notice, and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the Authority, or of the Borrower, or in any other matter described herein, since the date hereof or the dates of the information contained herein.

OTHER THAN WITH RESPECT TO INFORMATION CONCERNING RADIAN ASSET ASSURANCE INC. CONTAINED UNDER THE CAPTION “FINANCIAL GUARANTY INSURANCE” HEREIN AND IN APPENDIX C HERETO, NONE OF THE INFORMATION IN THIS OFFICIAL STATEMENT HAS BEEN SUPPLIED OR VERIFIED BY RADIAN ASSET ASSURANCE INC., AND RADIAN ASSET ASSURANCE INC. MAKES NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO: (I) THE ACCURACY OR COMPLETENESS OF SUCH INFORMATION; (II) THE VALIDITY OF THE BONDS; OR (III) THE TAX STATUS OF THE INTEREST ON THE BONDS.

The order and placement of materials in this Official Statement, including the Appendices hereto, are not to be deemed a determination of relevance, materiality or importance, and this Official Statement, including the Appendices hereto, must be considered in its entirety.

__________________________________________

THE BONDS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 NOR HAS THE INDENTURE BEEN QUALIFIED UNDER THE TRUST INDENTURE ACT OF 1939, AS AMENDED, IN RELIANCE UPON EXEMPTIONS CONTAINED IN SUCH ACTS. THE REGISTRATION OR QUALIFICATION OF THE BONDS IN ACCORDANCE WITH APPLICABLE PROVISIONS OF SECURITIES LAWS OF THE STATES IN WHICH THE BONDS HAVE BEEN REGISTERED OR QUALIFIED AND THE EXEMPTION FROM REGISTRATION OR QUALIFICATION IN THE OTHER STATES CANNOT BE REGARDED AS A RECOMMENDATION THEREOF. NEITHER THESE STATES NOR ANY OF THEIR AGENCIES HAVE PASSED UPON THE MERITS OF THE BONDS OR THE ACCURACY OR COMPLETENESS OF THIS OFFICIAL STATEMENT.

TABLE OF CONTENTS Page

OFFICIAL STATEMENT SUMMARY.......................................................................................................................................... i The Authority................................................................................................................................................................... i The Program Sponsor....................................................................................................................................................... i The Borrower ................................................................................................................................................................... i The Trustee ...................................................................................................................................................................... i The Insurer ....................................................................................................................................................................... i The Project ....................................................................................................................................................................... i Authorized Denominations; Book-Entry Only................................................................................................................. i Security for Bonds........................................................................................................................................................... ii Redemption Provisions ................................................................................................................................................... ii

INTRODUCTORY STATEMENT................................................................................................................................................. 1 THE AUTHORITY......................................................................................................................................................................... 2 THE PROGRAM SPONSOR ......................................................................................................................................................... 4 THE BONDS .................................................................................................................................................................................. 4

General ............................................................................................................................................................................ 4 Book Entry Only System................................................................................................................................................. 4 Redemption Prior to Maturity ......................................................................................................................................... 7

Optional Redemption....................................................................................................................................... 7 Mandatory Sinking Fund Redemption............................................................................................................. 7 Extraordinary Optional Redemption................................................................................................................ 7

Procedure for and Notice of Redemption ........................................................................................................................ 7 FINANCIAL GUARANTY INSURANCE .................................................................................................................................... 8 APPLICATION OF BOND PROCEEDS..................................................................................................................................... 10 SECURITY AND SOURCES OF PAYMENT FOR BONDS ..................................................................................................... 10 DEFINITIONS OF CERTAIN TERMS ....................................................................................................................................... 13 THE LOAN AGREEMENT ......................................................................................................................................................... 22

General .......................................................................................................................................................................... 22 Loan Payments .............................................................................................................................................................. 23 Pledge of Revenues ....................................................................................................................................................... 23 Maintenance of Existence ............................................................................................................................................. 23 Compliance with Laws; Commencement and Continuation of Operations at Project Facilities; No Sale,

Removal or Demolition of Project Facilities ..................................................................................................... 23 Lease by Borrower ........................................................................................................................................................ 24 Taxes, Other Governmental Charges and Utility Charges............................................................................................. 24 Insurance ....................................................................................................................................................................... 24 Damage to or Condemnation of Project Facilities......................................................................................................... 25 Rate Covenant ............................................................................................................................................................... 25 Incurrence of Additional Indebtedness.......................................................................................................................... 26 Security for Indebtedness .............................................................................................................................................. 27 Student Loan Guarantees............................................................................................................................................... 27 No Liens or Encumbrances ........................................................................................................................................... 28 Disposition of Assets..................................................................................................................................................... 28 Tax Covenants of Borrower and Authority ................................................................................................................... 28 Environmental Matters.................................................................................................................................................. 29 Borrower’s Use of the Project Facilities........................................................................................................................ 29 Events of Default........................................................................................................................................................... 30 Remedies....................................................................................................................................................................... 30 Insurer is Party in Interest ............................................................................................................................................. 31 Amendments ................................................................................................................................................................. 31 Assignment.................................................................................................................................................................... 32

THE INDENTURE....................................................................................................................................................................... 32 Pledge of Trust Estate ................................................................................................................................................... 32 Bond Fund..................................................................................................................................................................... 32 Debt Service Reserve Fund ........................................................................................................................................... 32 Investments ................................................................................................................................................................... 33 Defaults ......................................................................................................................................................................... 33 Remedies....................................................................................................................................................................... 34 Modifications and Amendments.................................................................................................................................... 35 Discharge of Indenture .................................................................................................................................................. 36 Rights of Insurer............................................................................................................................................................ 36

BONDHOLDERS’ RISKS ........................................................................................................................................................... 37 General .......................................................................................................................................................................... 37 Covenant to Maintain Tax-Exempt Status of the Bonds ............................................................................................... 37 Enforceability of Remedies ........................................................................................................................................... 37 State and Federal Legislation ........................................................................................................................................ 37

TABLE OF CONTENTS Page

Other Risk Factors......................................................................................................................................................... 37 LITIGATION................................................................................................................................................................................ 38 CONTINUING DISCLOSURE .................................................................................................................................................... 38 TAX MATTERS........................................................................................................................................................................... 40 LEGAL MATTERS...................................................................................................................................................................... 41 CERTAIN RELATIONSHIPS...................................................................................................................................................... 41 RATINGS ..................................................................................................................................................................................... 41 LEGALITY FOR INVESTMENT................................................................................................................................................ 42 VERIFICATION OF CERTAIN MATHEMATICAL COMPUTATIONS.................................................................................. 42 UNDERWRITING........................................................................................................................................................................ 42 OTHER MATTERS...................................................................................................................................................................... 42 APPENDIX A – Information Regarding the Borrower, the Project and the Bonds..............................................................A-1 APPENDIX B – Additional Information Respecting the Borrower, Including Certain Financial Statements ............................ B-1 APPENDIX C – Specimen Financial Guaranty Insurance Policy........................................................................ ……………...C-1

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OFFICIAL STATEMENT SUMMARY

The following is a summary of certain information contained in this Official Statement, to which reference should be made for a complete statement thereof. The Bonds are offered to potential investors only by means of the entire Official Statement, which includes the cover page and reverse thereof, this Summary, and the Appendices hereto. No person is authorized to detach this Summary from the Official Statement or otherwise use it without the entire Official Statement, including the cover page and reverse thereof, this Summary, and the Appendices hereto.

The Authority

Pennsylvania Higher Educational Facilities Authority (the “Authority”) was created by The Pennsylvania Higher Educational Facilities Authority Act of 1967, as amended (the “Act”). The Authority is authorized under the Act, among other things, to issue bonds or other obligations to finance projects for “colleges” (as defined in the Act).

The Program Sponsor

The financing program pursuant to which the Bonds will be issued is sponsored by the Association of Independent Colleges and Universities of Pennsylvania, a nonprofit corporation located in Harrisburg, Pennsylvania, currently providing services and programs to 84 institutions of higher education in Pennsylvania. See “THE PROGRAM SPONSOR” herein.

The Borrower

Elizabethtown College (the “Borrower”) is a Pennsylvania nonprofit corporation and an organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended. The Borrower is located in Elizabethtown, Pennsylvania. For more information regarding the Borrower, see Appendix B hereto.

The Trustee

The Authority has appointed Fulton Financial Advisors, National Association, Lancaster, Pennsylvania, to serve as the Trustee under the Trust Indenture.

The Insurer

Radian Asset Assurance Inc. (the “Insurer”) will issue a financial guaranty insurance policy with respect to the Bonds (the “Policy”) simultaneously with the issuance and delivery of the Bonds. See “FINANCIAL GUARANTY INSURANCE” herein.

The Project

The proceeds of the sale of the Bonds will be used to refund certain bonds previously issued to finance certain capital projects of the Borrower (further described in Appendix A hereto), to fund a debt service reserve fund for the Bonds, and to finance costs of issuance of the Bonds (collectively, the “Project”).

Authorized Denominations; Book-Entry Only

The Depository Trust Company (“DTC”), New York, New York, will act as securities depository for the Bonds, and the Bonds will be registered in the name of Cede & Co., as registered owner and nominee for DTC. Individual purchases of Bonds will be made in book-entry form, in the authorized denomination of $5,000 or any whole multiple thereof. So long as Cede & Co. or any successor nominee of DTC is the registered owner of the Bonds, references herein to the Bondholders, Holders, holders, owners or registered owners shall mean Cede & Co., or such successor nominee, and shall not mean the Beneficial Owners (hereinafter defined) of the Bonds. Principal and interest on the Bonds are payable by the Trustee to Cede & Co., as nominee for DTC, which will, in turn, remit

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such principal and interest to the DTC Participants for subsequent disbursement to the Beneficial Owners. (See “THE BONDS -- Book Entry Only System” herein).

Security for Bonds

The Bonds are limited obligations of the Authority payable solely from pledged revenues and other moneys held for that purpose under the Trust Indenture and from amounts payable under the Policy issued by the Insurer with respect to the Bonds. (See “SECURITY AND SOURCES OF PAYMENT FOR BONDS” and “FINANCIAL GUARANTY INSURANCE” herein.)

THE BONDS ARE LIMITED OBLIGATIONS OF THE AUTHORITY AND ARE PAYABLE SOLELY FROM THE SOURCES REFERRED TO IN THE TRUST INDENTURE PURSUANT TO WHICH SUCH BONDS ARE ISSUED AND SECURED, AND THE BONDS SHALL NOT BE OR BE DEEMED GENERAL OBLIGATIONS OF THE AUTHORITY OR OBLIGATIONS OF THE COMMONWEALTH OF PENNSYLVANIA OR ANY POLITICAL SUBDIVISION THEREOF. NEITHER THE COMMONWEALTH OF PENNSYLVANIA NOR ANY POLITICAL SUBDIVISION THEREOF IS OR SHALL BE OBLIGATED TO PAY THE PRINCIPAL OF OR PREMIUM, IF ANY, OR INTEREST ON THE BONDS, AND NEITHER THE GENERAL CREDIT OF THE AUTHORITY NOR THE FAITH AND CREDIT OR TAXING POWER OF THE COMMONWEALTH OF PENNSYLVANIA OR ANY POLITICAL SUBDIVISION THEREOF IS PLEDGED TO SUCH PAYMENT. THE AUTHORITY HAS NO TAXING POWER.

Redemption Provisions

The Bonds are subject to optional, mandatory and extraordinary optional redemption as set forth herein. (See “THE BONDS -- Redemption Prior to Maturity,” herein.)

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OFFICIAL STATEMENT

$24,195,000 PENNSYLVANIA HIGHER EDUCATIONAL FACILITIES AUTHORITY

(COMMONWEALTH OF PENNSYLVANIA) REVENUE BONDS

(ASSOCIATION OF INDEPENDENT COLLEGES AND UNIVERSITIES OF PENNSYLVANIA FINANCING PROGRAM)

SERIES 2006 FF2 (ELIZABETHTOWN COLLEGE PROJECT)

INTRODUCTORY STATEMENT

This Official Statement, including the cover page and reverse thereof, the table of contents page, the Official Statement Summary, and the Appendices hereto, is provided to furnish information with respect to the $24,195,000 aggregate principal amount of Revenue Bonds (Association of Independent Colleges and Universities of Pennsylvania Financing Program), Series 2006 FF2 (the “Bonds”) being issued by the Pennsylvania Higher Educational Facilities Authority (the “Authority”) under a Trust Indenture, dated as of June 1, 2006 (the “Indenture”), between the Authority and Fulton Financial Advisors, National Association, a national banking association, Lancaster, Pennsylvania, as trustee (the “Trustee”). The Bonds will be dated June 15, 2006, will mature on the dates set forth on the inside cover hereof and will be subject to redemption prior to maturity as described herein under “THE BONDS -- Redemption Prior to Maturity.”

The Authority will loan the proceeds of the Bonds to Elizabethtown College, a Pennsylvania nonprofit corporation (the “Borrower”), pursuant to a Loan Agreement dated as of June 1, 2006 between the Authority and the Borrower (the “Loan Agreement”). The Borrower is a private institution of higher education located in the Commonwealth of Pennsylvania, which is exempt from federal income tax under Section 501(c)(3) of the Internal Revenue Code of 1986, as amended. Additional information respecting the Borrower, including certain financial statements, is set forth in Appendix B to this Official Statement.

The proceeds of the sale of the Bonds will be used to provide funds to refund certain bonds previously issued to finance certain capital projects of the Borrower (further described in Appendix A hereto), to fund a debt service reserve fund for the Bonds, and to finance costs of issuance thereof (collectively, the “Project”).

The Bonds are limited obligations of the Authority, and the principal thereof and premium, if any, and interest thereon will be payable solely from the revenues and other moneys assigned and pledged under the Indenture to secure such payment, including (i) the loan payments required to be made by the Borrower under the Loan Agreement and (ii) moneys and obligations held by the Trustee in certain funds established under the Indenture. (See “SECURITY AND SOURCES OF PAYMENT FOR BONDS” herein.)

Radian Asset Assurance Inc. (the “Insurer”) will issue a financial guaranty insurance policy relating to the Bonds (the “Policy”) simultaneously with the issuance and delivery of the Bonds. The Policy is noncancelable during its term and provides for the prompt payment of principal of and interest on the Bonds to the extent that the Trustee has not received sufficient funds from the Authority for payment of such Bonds on the “due date” (as defined in the Policy). See “FINANCIAL GUARANTY INSURANCE” herein for certain information concerning Radian Asset Assurance Inc. and the Policy. See Appendix C hereto for a specimen of the Policy.

There follow herein brief descriptions of the Authority, the Program Sponsor, the Insurer, the Policy and the Bonds, together with summaries of the Loan Agreement and the Indenture. Certain information regarding the Borrower, the Project, the use of proceeds of the Bonds, the security for the Bonds, and the maturity schedule for the Bonds, is included in Appendix A hereto. Additional information with respect to the Borrower, including certain financial statements, is set forth in Appendix B hereto. A specimen of the Policy is set forth in Appendix C hereto.

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The description and summaries of the Policy, the Loan Agreement, the Indenture and other documents contained herein do not purport to be comprehensive and are qualified in their entirety by reference to such documents, and all references to the Bonds are qualified in their entirety by the definitive form thereof included in the Indenture. Words and terms defined in such documents and not defined herein shall have the meanings set forth in such documents. Copies of such documents will be available for inspection during the initial offering period at the offices of NatCity Investments, Inc. (the “Underwriter”), 20 Stanwix Street, Pittsburgh, Pennsylvania 15222, and, thereafter will be available for inspection at the corporate trust office of the Trustee in Philadelphia, Pennsylvania or at the designated corporate trust office of any successor Trustee.

THE AUTHORITY

General

The Authority is a body corporate and politic, constituting a public corporation and governmental instrumentality of the Commonwealth of Pennsylvania (the “Commonwealth”), created by The Pennsylvania Higher Educational Facilities Authority Act of 1967 (Act No. 318 of the General Assembly of the Commonwealth of Pennsylvania, approved December 6, 1967, as amended) (the “Act”).

The Authority is authorized under the Act, among other things, to acquire, construct, finance, improve, hold and use any property and any educational facility (as therein defined) and, with respect to a college, to finance projects by making loans, to lease as lessor or lessee, to transfer or sell any educational facility or property, to charge and collect amounts for the payment of expenses of the Authority and for payment of the principal of and interest on its obligations, to issue bonds and other obligations for the purpose of paying the cost of projects, to issue refunding bonds and to pledge all or any of the revenues of the Authority for all or any of such obligations, and to enter into trust indentures providing for the issuance of such obligations and for their payment and security.

Under the Act, the Authority consists of the Governor of the Commonwealth, the State Treasurer, the Auditor General, the Secretary of the Department of Education, the Secretary of the Department of General Services, the President Pro Tempore of the Senate, the Speaker of the House of Representatives, the Minority Leader of the House of Representatives and the Minority Leader of the Senate. Pursuant to the Act, the President Pro Tempore of the Senate, the Speaker of the House of Representatives, the Minority Leader of the Senate and the Minority Leader of the House of Representatives may designate a member of their respective legislative bodies to act as a member of the Authority in their stead. The members of the Authority serve without compensation but are entitled to reimbursement for all necessary expenses incurred in connection with the performance of their duties as members. The powers of the Authority are exercised by a governing body consisting of the members of the Authority acting as a board.

The following are key staff members of the Authority who are involved in the administration of the financing and projects:

William C. Bostic Executive Director

Mr. Bostic has served as the Executive Director of both the Pennsylvania Higher Educational Facilities Authority (PHEFA) and the State Public School Building Authority (SPSBA) since July 1, 2003. He is a graduate of Tennessee State University with a bachelor’s degree in political science, and holds a master’s degree in urban and regional planning from the Graduate School of Public and International Affairs at the University of Pittsburgh. Prior to his present post, Mr. Bostic was the Executive Director of the Pennsylvania Housing Finance Agency, having previously served as the Agency’s Chairman while serving as the cabinet Secretary of the Pennsylvania Department of Community Affairs. Mr. Bostic’s thirty-eight year professional career has included public service at the local, metropolitan, state, and national levels in executive, administrative management, and public policy positions.

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Robert Baccon Assistant Executive Director

Mr. Baccon has served as the Assistant Executive Director of both the Pennsylvania Higher Educational Facilities Authority (PHEFA) and the State Public School Building Authority (SPSBA) since 1984. He is a graduate of St. John’s University with a bachelor’s degree in management, and holds a master’s degree in international business from the Columbia University Graduate School of Business. Prior to his present post, Mr. Baccon held financial management positions with multinational U.S. corporations and was Vice President - Finance for a major highway construction contractor.

E. Raymond Dumas Comptroller & Director of Financial Management

Mr. Dumas has served as the Comptroller & Director of Financial Management of both the Pennsylvania Higher Educational Facilities Authority (PHEFA) and the State Public School Building Authority (SPSBA) since 1988. He is a graduate of Elizabethtown College with a bachelor’s degree in accounting, and holds a master’s degree in government administration from the University of Pennsylvania. Prior to his present employment, Mr. Dumas served in various capacities in Pennsylvania state government, including Finance Officer for the State Lottery and Fiscal Officer for the Commerce Department.

Beverly M. Nawa Administrative Officer

Mrs. Nawa has served as the Administrative Officer of both the Pennsylvania Higher Educational Facilities Authority (PHEFA) and the State Public School Building Authority (SPSBA) since August 2004. She is a graduate of Alvernia College with a bachelor’s degree in business administration. Prior to her present employment, Mrs. Nawa served as an Audit Senior and an Accounting Systems Analyst with the Department of the Auditor General.

Other Debt of the Authority

The Authority has issued from time to time other series of revenue bonds and notes for the purpose of financing projects for higher educational institutions in the Commonwealth. None of the revenues of the Authority with respect to any of such revenue bonds and notes are pledged as security for the Bonds and, conversely, such revenue bonds and notes above are not payable from or secured by the revenues of the Authority or other moneys securing the Bonds.

The Authority may in the future issue other series of bonds for the purpose of financing projects for educational institutions in the Commonwealth. Each such series of bonds will be secured by instruments separate and apart from the Indenture securing the Bonds.

On May 1, 1991, the Authority was unable to make payments to bondholders with respect to a series of revenue bonds issued by the Authority because of defaults on payment obligations related to such series of revenue bonds by a college. The Florida Department of Banking and Finance, Division of Securities and Investor Protection, generally requires disclosure by any issuer of securities sold in Florida of defaults on any other obligations of such issuer. Because these defaulted bonds were special obligations payable only from revenues received from the particular college or from other limited sources, but not from revenues pledged to pay the Bonds, and the full faith and credit of the Authority was not pledged to secure the payment of such bonds, such default is not material with respect to the offering and sale of the Bonds, and further details with respect thereto are not being provided.

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THE PROGRAM SPONSOR

The Association of Independent Colleges and Universities of Pennsylvania (the “Program Sponsor”) is a nonprofit corporation located in Harrisburg, Pennsylvania. The Program Sponsor sponsors and administers services and programs for its membership, which currently is comprised of 84 institutions of higher education in the Commonwealth. The current members of AICUP are listed on the inside back cover of this Official Statement.

The Program Sponsor is sponsoring this bond financing program (the “Program”), pursuant to which the Bonds and other series of bonds are being issued, in order to provide both an efficient and cost effective source of funding for capital projects of its members or their supporting organizations. In connection with the Program, the Program Sponsor, among other things, will monitor the participation of individual members in the Program. The Program Sponsor will be paid a fee from bond proceeds in connection with the Program activities. Neither the Program Sponsor nor any member of AICUP (other than any AICUP member in its individual capacity as a borrower of proceeds of a particular series of bonds) has any liability for the repayment of any series of bonds, or the loan of bond proceeds to any entity, including the Borrower.

THE BONDS

General

The Bonds will be dated, and will bear interest from, June 15, 2006. The Bonds will mature, unless previously called for redemption, on the dates and in the amounts set forth on the inside cover hereof, and will bear interest at the rates set forth on the inside cover hereof. Interest will be payable on June 15 and December 15 of each year (each, an “Interest Payment Date”), commencing December 15, 2006. The Bonds will be issued as fully registered Bonds without coupons and will be in the denomination of $5,000 or any whole multiple thereof.

The principal or redemption price of the Bonds will be payable upon surrender of the Bonds at the designated corporate trust agency office of the initial Trustee or any successor Trustee and interest on the Bonds will be paid on the applicable Interest Payment Date by check mailed to the owners of Bonds shown as the registered owners on the registration books maintained by the Trustee as registrar at the close of business on the last day of the calendar month next preceding an Interest Payment Date. The interest and the principal or redemption price becoming due on the Bonds shall, at the written request of the registered owner of at least $1,000,000 aggregate principal amount of the Bonds received by the Trustee at least two Business Days before the corresponding Regular Record Date or maturity or redemption date, be paid by wire transfer within the continental United States in immediately available funds to the bank account number of the registered owner specified in such request and entered by the Trustee on the Register, but, in the case of principal or redemption price, only upon presentation and surrender of such Bonds at a designated corporate trust agency office of the Trustee. (See “THE BONDS -- Book Entry Only System” below.)

Fulton Financial Advisors, National Association has been appointed as Trustee under the Indenture and has a corporate trust office in Philadelphia, Pennsylvania. The Trustee shall act as registrar, paying agent and transfer agent for the Bonds.

As used herein, “Business Day” means any day other than a Saturday or Sunday or a day on which banks located in Philadelphia and Lancaster, Pennsylvania, New York, New York, or any other city in which the Payment Office of the Trustee is located, are authorized or required by law or executive order to close or on which The New York Stock Exchange is closed.

Book Entry Only System

The information in this section has been provided by The Depository Trust Company, New York, New York (“DTC”) and is not deemed to be a representation of the Authority, the Underwriter or the Borrower. DTC will act as the initial securities depository for the Bonds. The Bonds will be issued as fully-registered bonds 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 Bond certificate will be issued for each maturity of the

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Bonds in the aggregate principal amount of such maturity, and all certificates will be deposited with DTC or pursuant to its instructions.

DTC, the world’s largest depository, is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934, as amended. 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 book-entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC, in turn, is owned by a number of Direct Participants of DTC and Members of the National Securities Clearing Corporation, Fixed Income Clearing Corporation, and Emerging Markets Clearing Corporation (NSCC, FICC and EMCC, also subsidiaries of DTCC), as well as by the New York Stock Exchange, Inc., the American Stock Exchange LLC, and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”). DTC has Standard & Poor’s highest rating: AAA. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com and www.dtc.org.

Purchases of Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for such Bonds on DTC’s records. The ownership interest of each actual purchaser of each 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 purchases. 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 Participants through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in 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 Bonds, except in the event that use of the book-entry system for the Bonds is discontinued.

To facilitate subsequent transfers, all 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 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 Bonds; DTC’s records reflect only the identity of the Direct Participants to whose accounts such 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 Bonds may wish to take certain steps to augment transmission to them of notices of significant events with respect to the Bonds, such as redemptions, tenders, defaults, and proposed amendments to the bond documents. For example, Beneficial Owners of Bonds may wish to ascertain that the nominee holding the 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 by the Trustee to DTC. If less than all of the Bonds are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in the Bonds to be redeemed.

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Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to 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 or the Trustee as soon as possible after the record date with respect to any request for consent or vote. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose account the respective Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).

Payments of principal, redemption price and interest on the 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 Trustee, on each 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 Participants and not of DTC, the Trustee, the Authority or the Borrower, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal, redemption price and interest to Cede & Co. (or to 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 is the responsibility of Direct and Indirect Participants.

IT IS THE DUTY OF EACH BENEFICIAL OWNER TO MAKE ARRANGEMENTS WITH THE APPLICABLE DIRECT PARTICIPANT OR INDIRECT PARTICIPANT TO RECEIVE FROM SUCH PARTICIPANT NOTICES OF PAYMENTS OF PRINCIPAL, PREMIUM (IF ANY) AND INTEREST, AND ALL OTHER PAYMENTS AND COMMUNICATIONS WHICH THE DIRECT PARTICIPANT RECEIVES FROM DTC. NEITHER THE AUTHORITY NOR THE TRUSTEE HAS ANY DIRECT OBLIGATION OR RESPONSIBILITY TO DIRECT PARTICIPANTS, INDIRECT PARTICIPANTS OR BENEFICIAL OWNERS.

For every transfer and exchange of ownership interests in Bonds, the Beneficial Owners may be charged a sum sufficient to cover any tax, fee or other governmental charge that may be imposed in relation thereto.

DTC may discontinue providing its services as securities depository with respect to the Bonds at any time by giving reasonable notice to the Authority or the Trustee. Under such circumstances, in the event that a successor securities depository is not obtained, Bond certificates are required to be printed and delivered.

THE AUTHORITY, THE TRUSTEE AND THE BORROWER CANNOT AND DO NOT GIVE ANY ASSURANCES THAT DTC, THE DIRECT PARTICIPANTS OR THE INDIRECT PARTICIPANTS WILL DISTRIBUTE TO THE BENEFICIAL OWNERS OF THE BONDS (1) PAYMENTS OF PRINCIPAL OF, REDEMPTION PREMIUM, IF ANY, OR INTEREST ON THE BONDS, (2) CONFIRMATION OF BENEFICIAL OWNERSHIP INTEREST IN THE BONDS, OR (3) REDEMPTION OR OTHER NOTICES SENT TO DTC OR CEDE & CO., ITS NOMINEE, AS THE REGISTERED OWNER OF THE BONDS, OR THAT THEY WILL DO SO ON A TIMELY BASIS, OR THAT DTC, DIRECT PARTICIPANTS OR INDIRECT PARTICIPANTS WILL SERVE AND ACT IN THE MANNER DESCRIBED IN THIS OFFICIAL STATEMENT. THE CURRENT “RULES” APPLICABLE TO DTC ARE ON FILE WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE CURRENT “PROCEDURES” OF DTC TO BE FOLLOWED IN DEALING WITH DIRECT PARTICIPANTS ARE ON FILE WITH DTC.

NEITHER THE AUTHORITY, THE TRUSTEE, NOR THE BORROWER SHALL HAVE ANY RESPONSIBILITY OR OBLIGATION TO ANY DIRECT PARTICIPANT, INDIRECT PARTICIPANT OR ANY BENEFICIAL OWNER OR ANY OTHER PERSON NOT SHOWN ON THE REGISTRATION BOOKS OF THE BOND TRUSTEE AS BEING A BONDHOLDER WITH RESPECT TO (1) THE BONDS; (2) THE ACCURACY OF ANY RECORDS MAINTAINED BY DTC OR ANY DIRECT PARTICIPANT OR INDIRECT PARTICIPANT; (3) THE PAYMENT BY DTC OR ANY DIRECT PARTICIPANT OR INDIRECT PARTICIPANT OF ANY AMOUNT DUE TO ANY BENEFICIAL OWNER IN RESPECT OF THE PRINCIPAL OR REDEMPTION PRICE OF OR INTEREST ON THE BONDS; (4) THE DELIVERY BY DTC OR ANY DIRECT PARTICIPANT OR INDIRECT PARTICIPANT OF ANY NOTICE TO ANY BENEFICIAL OWNER WHICH IS REQUIRED OR PERMITTED UNDER THE TERMS OF THE INDENTURE TO BE GIVEN TO

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BONDHOLDERS; (5) THE SELECTION OF THE BENEFICIAL OWNERS TO RECEIVE PAYMENT IN THE EVENT OF ANY PARTIAL REDEMPTION OF THE BONDS; OR (6) ANY CONSENT GIVEN OR OTHER ACTION TAKEN BY DTC AS REGISTERED OWNER OF THE BONDS.

The Authority may determine to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository). In that event, Bond certificates will be printed and delivered as described in the Indenture.

So long as Cede & Co. is the registered owner of the Bonds as nominee of DTC, references herein to the Holders, holders, owners or registered owners of such Bonds shall mean Cede & Co. and shall not mean the Beneficial Owners of the Bonds.

Redemption Prior to Maturity

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

Optional Redemption. The Bonds are subject to optional redemption prior to maturity by the Authority, at the direction of the Borrower, on or after June 15, 2016, in whole or in part at any time. Any such redemption shall be made at a redemption price equal to 100% of the stated principal amount of the Bonds to be redeemed, plus accrued interest to the redemption date.

Mandatory Sinking Fund Redemption. The Bonds are subject to mandatory sinking fund redemption, in part, from mandatory sinking fund redemption payments at a redemption price equal to 100% of the principal amount to be redeemed, plus accrued interest to the redemption date. See Appendix A for the mandatory sinking fund redemption schedule established for the Bonds. In the event that any Bonds are redeemed (other than through mandatory sinking fund redemption pursuant to the Indenture) and are canceled by the Trustee, the Trustee shall cause the Authority to receive a credit against its mandatory sinking fund redemption obligations in the aggregate principal amount of the Bonds so redeemed, such credits to be given in such order of maturity as may be directed in writing by the Borrower. Also, at its option, the Borrower may deliver to the Trustee for cancellation Bonds purchased by the Borrower pursuant to the Indenture. The Bonds so purchased, delivered and canceled shall be credited by the Trustee at 100% of the principal amount thereof against the sinking fund redemption obligations of the Authority in such order of maturity as may be directed in writing by the Borrower.

Extraordinary Optional Redemption. The Bonds are subject to redemption prior to maturity in whole or in part at the option of the Authority, at the written direction of the Borrower, on any date prior to maturity, at a redemption price of 100% of the principal amount thereof, plus accrued interest to the redemption date, in the event of condemnation, damage or destruction of all or a significant part of the Borrower’s Project Facilities, out of the proceeds of insurance, condemnation awards and the proceeds of conveyances in lieu of condemnations deposited with or held by the Trustee for such purpose.

Procedure for and Notice of Redemption

The Trustee is required to cause notice of the call for redemption, identifying the Bonds or portions thereof to be redeemed, to be sent by first class mail, not more than 60 days and not less than 30 days prior to the date set for redemption of all or part of such Bonds, to the registered owner of each Bond to be redeemed at such owner’s registered address. So long as the Bonds or any portion thereof are held by DTC, the Trustee shall send each notice of redemption of such Bonds to DTC. Failure to mail any such notice or defect in the mailing thereof in respect of any Bond shall not affect the validity of the redemption of any other Bond with respect to which notice is properly given.

If at the time of mailing of notice of any optional redemption or extraordinary optional redemption there shall not have been deposited with the Trustee under the Indenture moneys sufficient to redeem all the Bonds called for redemption, such notice may state that it is conditional in that it is subject to the deposit of such redemption moneys with the Trustee not later than the opening of business on the redemption date, in which case such notice shall be of no effect unless moneys are so deposited.

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If less than all Bonds are to be redeemed, the particular Bonds to be called for redemption shall be selected from the maturities designated by the Borrower and within a maturity by any method determined by the Trustee to be fair and reasonable; provided that if any Bond is to be redeemed in part, the principal portion to remain outstanding must be in an authorized denomination. In the case of a partial redemption of Bonds, when Bonds of denominations greater than $5,000 are then Outstanding, each $5,000 unit of face value of principal thereof shall be treated as if it were a separate Bond of the denomination of $5,000.

FINANCIAL GUARANTY INSURANCE

Description of Financial Guaranty Insurance Policy

A financial guaranty insurance policy (the “Policy”) will be issued by Radian Asset Assurance Inc. (the “Insurer”) simultaneously with the issuance and delivery of the Bonds. The Policy is noncancelable during its term and provides for the prompt payment of principal of and interest on the Bonds to the extent that the Trustee has not received sufficient funds from the Authority for payment of the Bonds on the “due date.” The Insurer is obligated to make the required payment on the later of the due date or the first business day after which the Insurer has received notice from The Bank of New York, as Insurance Trustee (the “Insurance Trustee”), that the Authority has failed to pay amounts due on the Bonds. Under the Policy, the “due date” of the Bonds, when referring to the payment of principal, means the stated maturity date thereof or the date on which payment of principal is due by reason of mandatory sinking fund payments and does not mean any earlier date on which payment is due by reason of any call for redemption, acceleration, or other advancement of maturity, other than in the discretion of the Insurer. With respect to interest on the Bonds, the “due date” means the stated date for payment of such interest. The Policy guarantees reimbursement of any recovery of any such payment from a Holder or the Trustee pursuant to a final judgment by any court of competent jurisdiction holding that such payment constituted a voidable preference within the meaning of any applicable bankruptcy law.

Upon the occurrence and continuance of an Event of Default, the Insurer, may, in its discretion, direct the acceleration of the Bonds at a price equal to the principal amount thereof plus accrued interest, or the Insurer may elect to continue to pay principal and interest on the originally scheduled due dates of the Bonds. For specific information on the coverage provided, reference should be made to the Policy that has been reproduced in specimen form in Appendix C hereto. The Policy does not insure against nonpayment of principal or interest on the Bonds due to the insolvency, misconduct or negligence of the Trustee. The Policy does not insure the payment of any redemption premium.

Description of Insurer

Radian Asset Assurance Inc. (the “Insurer”) is a monoline financial guaranty insurance company, regulated by the Insurance Department of the State of New York and licensed to do business in all 50 states, the District of Columbia, Guam and the United States Virgin Islands. As of March 31, 2006, the Insurer had total shareholders’ equity of approximately $1,487,077,000 and total assets of approximately $2,440,939,000.

The financial information relating to the Insurer presented in this Official Statement was prepared internally by the Insurer, based on accounting principles generally accepted in the United States of America (“GAAP”), and has not been audited by independent auditors. The address of the Insurer’s administrative office is 335 Madison Avenue, New York, New York 10017, and its telephone number is 212-983-5859.

On March 2, 2006, the Insurer entered into a settlement agreement with respect to two financial guaranty contracts insured by the Insurer on a direct basis. Under this agreement, the Insurer paid $68.0 million to its counterparty in consideration for its counterparty’s terminating one of these transactions, a synthetic collateralized debt obligation representing $247.5 million in exposure, and amending the other transaction to add certain structural changes that the Insurer believes will improve its overall risk profile. Additional information regarding this settlement may be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations—Financial Guaranty—Year Ended December 31, 2005 Compared to Year Ended December 31, 2004—Provision for Losses” in Item 7 of Part II of the Annual Report on Form 10-K filed by the Insurer’s ultimate corporate parent, Radian Group Inc. (“Radian”) with the Securities and Exchange Commission.

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The Insurer has filed the information contained in (i) - (ii) below with entities designated as Nationally Recognized Municipal Securities Information Repositories (“NRMSIRs”) pursuant to Rule 15c2-12 of the Securities Exchange Act of 1934, and such financial information is available through such NRMSIRs:

(i) the Insurer’s audited consolidated financial statements as of December 31, 2005 and 2004, and for each of the three years in the period ended December 31, 2005, prepared in accordance with GAAP, together with the accompanying report of the Insurer’s independent registered public accounting firm, which expresses an unqualified opinion (the “Radian Financial Statements”).

(ii) the Insurer’s quarterly unaudited consolidated balance sheet as of March 31, 2006 and unaudited consolidated statement of operations for the three-month period then ended, prepared in accordance with GAAP.

Additional information regarding the Insurer can be found in the following documents filed by Radian with the Securities and Exchange Commission: (a) Annual Report on Form 10-K for the year ended December 31, 2005 and the Quarterly Report on Form 10-Q for the period ended March 31, 2006, under the headings: (i) “Safe Harbor Statement” (but only insofar as it relates to the financial guaranty insurance businesses); (ii) 10-K only, Item 1. Business: “Financial Guaranty Business,” “Defaults and Claims - Financial Guaranty,” “Loss Mitigation - Financial Guaranty,” “Reserve for Losses - Financial Guaranty,” “Risk Management - Financial Guaranty,” “Risk in Force - Financial Guaranty Business,” “Customers - Financial Guaranty Business,” “Sales and Marketing - Financial Guaranty Business,” “Competition - Financial Guaranty Business,” “Ratings” (but only insofar as it relates to the Insurer or Radian Reinsurance Inc.), and “Regulation - Direct Regulation” (but only insofar as it relates to the financial guaranty business); (iii) 10-K only, “Item 1A - Risk Factors” “- Risks Affecting Our Company” (but only insofar as it relates to the Insurer) and “- Risks Particular to our Financial Guaranty Business; (iv) 10-K Only “Item 6 - Selected Financial Data,” “Selected Ratios - Financial Guaranty” and “Other Data - Financial Guaranty,” (v) 10-K only, Item 7 Managements’ Discussion and Analysis of Financial Condition and Results of Operations “Financial Guaranty Results of Operations” and “Liquidity and Capital Resources” (but only to the extent it relates to the Insurer or Radian Reinsurance Inc.), and “Critical Accounting Policies” (but only to the extent it relates to Financial Guaranty); and (vi) 10-Q only, Item 2 - Managements’ Discussion and Analysis of Financial Condition and Results of Operations, “Overview,” “Business Summary - Financial Guaranty,” “Results of Operations - Financial Guaranty,” “Liquidity and Capital Resources” (but only to the extent it relates to the Insurer) and Critical Accounting Policies” (but only to the extent it relates to Financial Guaranty) and (b) the Reports on Form 8-K dated January 19, 2006, February 13, 2006, March 15, 2006, April 20, 2006 and May 12, 2006.

A complete copy of the Radian Financial Statements is available from the Insurer upon written request. Prior year amounts included in the Radian Financial Statements have been restated to reflect the combined balances and results of operations of the Insurer and Radian Reinsurance Inc.

The Insurer is an indirect, wholly-owned subsidiary of Radian, a publicly owned corporation with its shares listed on the New York Stock Exchange (symbol “RDN”). Radian is a leading credit enhancement provider to the global financial and capital markets, headquartered in Philadelphia, Pennsylvania. Radian’s subsidiaries provide products and services through three business lines: financial guaranty, mortgage insurance and financial services. None of Radian, Radian’s other subsidiaries or any of Radian’s investors is obligated to pay the debts of or claims against the Insurer.

The Insurer has a financial strength rating of “AA” (outlook: negative) from Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc. (“S&P”), an insurance financial strength rating of “Aa3” (outlook: stable) from Moody’s Investors Service, Inc. (“Moody’s”) and a claims paying ability rating of “AA” (outlook: negative) by Fitch Ratings Services (“Fitch”). On April 27, 2005, Fitch affirmed the “AA” insurer financial strength rating of the Insurer, but revised its rating outlook for the Insurer from “stable” to “negative.” None of the Insurer’s customers have the right to recapture business in connection with such ratings action. The ratings from the applicable rating agency reflect only the views of S&P, Moody’s and Fitch, respectively, do not constitute a recommendation to buy, sell or hold securities and are subject to revision or withdrawal at any time by such rating agencies. Any further explanation of any rating may be obtained only from the applicable rating agency. Any downward revision or withdrawal of any of the above ratings may have an adverse effect on the market price of the Bonds. The Insurer does not guarantee the market price or investment value of the Bonds nor does it guarantee that the ratings on the Bonds will not be revised or withdrawn.

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The Insurer is licensed and subject to regulation as a financial guaranty insurance corporation under the laws of the State of New York, its state of domicile. In addition, Radian and its insurance subsidiaries are subject to regulation by insurance laws of the various other jurisdictions in which they are licensed to do business. As a financial guaranty insurance corporation licensed to do business in the State of New York, the Insurer is subject to Article 69 of the New York Insurance Law which, among other things, limits the business of each financial guaranty insurer to financial guaranty insurance and related business lines, requires that each financial guaranty insurer maintain a minimum surplus to policyholders, establishes contingency, loss and unearned premium reserve requirements for each financial guaranty insurer, and limits the size of individual transactions and the volume of transactions that may be underwritten by each financial guaranty insurer. Other provisions of the New York Insurance Law, applicable to non-life insurance companies such as the Insurer regulate, among other things, permitted investments, payment of dividends, transactions with affiliates, mergers, consolidations, acquisitions or sales of assets and incurrence of liability for borrowings.

Neither the Insurer nor any of its affiliates accepts any responsibility for the accuracy or completeness of, nor have they participated in the preparation of, this Official Statement or any information or disclosure that is provided to potential purchasers of the Bonds, or omitted from such disclosure, other than with respect to the accuracy of information presented under the heading “FINANCIAL GUARANTY INSURANCE” and as set forth in Appendix C of this Official Statement. The Insurer’s role is limited to providing the coverage set forth in the Policy. In addition, the Insurer makes no representation regarding the Bonds or the advisability of purchasing the Bonds.

APPLICATION OF BOND PROCEEDS

The net proceeds of the sale of the Bonds shall, upon the delivery thereof to the purchaser or purchasers thereof against payment therefor, be deposited by the Authority with the Trustee and shall be deposited in the Project Fund established under the Indenture for application to costs of the Project. See Appendix A for a further description of the Project.

SECURITY AND SOURCES OF PAYMENT FOR BONDS

General

The Bonds will constitute limited obligations of the Authority payable solely from, and secured by, the revenues and other moneys pledged and assigned by the Indenture to secure that payment. Those revenues and other moneys include the payments required to be made by the Borrower under the Loan Agreement (other than certain fees and indemnification payments required to be made to the Authority); all other moneys receivable by the Authority, or by the Trustee for the account of the Authority, in respect of repayment of the loan of the proceeds of the Bonds; all Funds and Accounts held under the Indenture (excluding the Rebate Fund) until disbursed in accordance therewith, and the investments and investment earnings of those moneys other than excess earnings which are to be deposited in the Rebate Fund; and moneys derived by the Trustee from payments under the Policy (collectively, the “Revenues”).

THE BONDS ARE LIMITED OBLIGATIONS OF THE AUTHORITY AND ARE PAYABLE SOLELY FROM THE SOURCES REFERRED TO IN THE TRUST INDENTURE PURSUANT TO WHICH SUCH BONDS ARE ISSUED AND SECURED, AND THE BONDS SHALL NOT BE OR BE DEEMED GENERAL OBLIGATIONS OF THE AUTHORITY OR OBLIGATIONS OF THE COMMONWEALTH OF PENNSYLVANIA OR ANY POLITICAL SUBDIVISION THEREOF. NEITHER THE COMMONWEALTH OF PENNSYLVANIA NOR ANY POLITICAL SUBDIVISION THEREOF IS OR SHALL BE OBLIGATED TO PAY THE PRINCIPAL OF OR PREMIUM, IF ANY, OR INTEREST ON THE BONDS, AND NEITHER THE GENERAL CREDIT OF THE AUTHORITY NOR THE FAITH AND CREDIT NOR THE TAXING POWER OF THE COMMONWEALTH OF PENNSYLVANIA OR ANY POLITICAL SUBDIVISION THEREOF IS PLEDGED TO SUCH PAYMENT. THE AUTHORITY HAS NO TAXING POWER.

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The Indenture

The Bonds will be issued under and secured by the Indenture. The Indenture provides that all Bonds issued thereunder will be limited obligations of the Authority, payable solely from the sources identified therein, which include: (i) payments required to be made by the Borrower under the Loan Agreement (other than certain fees and indemnification payments required to be paid to the Authority or to the Trustee), and (ii) certain moneys and securities held by the Trustee under the Indenture, including those held in the Debt Service Reserve Fund discussed below (but excluding the Rebate Fund). See “THE INDENTURE” below for a summary of certain provisions of the Indenture.

Debt Service Reserve Fund

Concurrently with the issuance of the Bonds, the Trustee will deposit to the Debt Service Reserve Fund established under the Indenture (the “Debt Service Reserve Fund”) funds in an amount equal to the Debt Service Reserve Requirement for the Bonds.

If, on the date of any permitted or required payment of principal of or interest on the Bonds, available moneys in the Bond Fund established under the Indenture are insufficient to make such payment, moneys in the Debt Service Reserve Fund shall be withdrawn and applied to cure the deficiency. The amount of any such withdrawal shall be restored to such Fund in twelve (12) substantially equal monthly deposits from payments required to be made by the Borrower for such purpose under the Loan Agreement.

For further discussion of the Debt Service Reserve Fund, see “THE INDENTURE - Debt Service Reserve Fund” below.

The Loan Agreement

Under the Loan Agreement, the Borrower will be obligated to make loan payments in amounts necessary to provide for the payment as and when due of the principal or redemption price of, and interest on, the Bonds, any amounts that may be required to make up any deficiency that may occur in the Debt Service Reserve Fund or any other funds and accounts established under the Indenture, and to provide for certain other payments required by the Indenture. The Authority will assign the Loan Agreement, including its right to receive loan payments thereunder (other than certain fees, expenses and indemnification payments required to be paid to the Authority or to the Trustee) to the Trustee as security for the Bonds.

The Loan Agreement is the general obligation of the Borrower and the full faith and credit of the Borrower is pledged to secure the payments required thereunder. The Borrower’s obligations under the Loan Agreement are secured by a pledge of the Pledged Revenues of the Borrower (as further described under “Pledged Revenues” below). For a summary of certain provisions of the Loan Agreement, see “THE LOAN AGREEMENT” herein.

Pledged Revenues

To secure its obligations under the Loan Agreement, the Borrower will grant to the Trustee (as the assignee of the Authority) a lien on and security interest in its Pledged Revenues. The term “Pledged Revenues” is defined in Appendix A hereto. The lien on and security interest in the Pledged Revenues will be granted to the Trustee (as assignee of the Authority) pursuant to the Loan Agreement. Such lien and security interest will be on a parity with (i) the liens on and security interests in certain revenues of the Borrower heretofore granted by the Borrower to secure certain outstanding Indebtedness incurred by or for the benefit of the Borrower (“Outstanding Parity Indebtedness”), and (ii) any liens on and security interests in the Pledged Revenues of the Borrower hereafter granted by the Borrower to secure additional indebtedness incurred by or for the benefit of the Borrower (“Additional Parity Indebtedness”). The Outstanding Parity Indebtedness and any Additional Parity Indebtedness are collectively referred to herein as “Parity Indebtedness.” See Appendix A hereto for a description of the Outstanding Parity Indebtedness of the Borrower. The existence of such liens and security interests in the Pledged Revenues of the Borrower will not prevent the Borrower from expending, depositing or commingling such funds so long as the Borrower is not in default under the Loan Agreement and any applicable provisions of agreements pertaining to any Parity Indebtedness.

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To the extent that a security interest can be perfected in the Pledged Revenues of the Borrower by filing of financing statements, such action will be taken. The security interest in the Pledged Revenues of the Borrower may not be enforceable against third parties unless such Pledged Revenues of the Borrower are actually transferred to the Trustee or are subject to exceptions under the Uniform Commercial Code (the “UCC”) as enacted in the Commonwealth of Pennsylvania. Under current law, such security interest may be further limited by the following: (1) statutory liens; (2) rights arising in favor of the United States of America or any agency thereof; (3) present or future prohibitions against assignment contained in any Commonwealth of Pennsylvania or Federal statutes or regulations; (4) constructive trusts, equitable liens or other rights impressed or conferred by any Commonwealth of Pennsylvania or Federal court in the exercise of its equitable jurisdiction; (5) Federal bankruptcy laws; and (6) the filing of appropriate continuation statements pursuant to UCC provisions as from time to time in effect.

Outstanding Parity Indebtedness

See Appendix A hereto for a description of certain indebtedness heretofore issued by or on behalf of the Borrower, that is secured by a lien on and security interest in revenues of the Borrower on a parity with the lien on and security interest in such Pledged Revenues that will be granted by the Borrower to secure its obligations under the Loan Agreement.

Intercreditor Agreement

The Borrower, the Authority, the Trustee and the trustees for or holders of the Outstanding Parity Indebtedness will enter into an Intercreditor Agreement to ensure that certain amounts received by the Trustee, or by a trustee or holder of any Outstanding Parity Indebtedness are distributed by the receiving party for the benefit of the holders of the Bonds and any Outstanding Parity Indebtedness according to a pro rata formula described in the Intercreditor Agreement.

In the Intercreditor Agreement, the Borrower will covenant not to incur additional Parity Indebtedness unless the holders of such new indebtedness agree to execute an addendum to the Intercreditor Agreement (or a new agreement satisfactory to the parties to the Intercreditor Agreement and the holders of the new indebtedness) under which such holders agree to be bound by the provisions of the Intercreditor Agreement.

Rate Covenant

Under the Loan Agreement, the Borrower covenants that it will establish, charge and collect tuition, student fees and charges for services provided by the Borrower such that Net Revenues Available for Debt Service (defined under “LOAN AGREEMENT” below), will equal or exceed, in each fiscal year, 110% of the Debt Service Requirement for such fiscal year. See “THE LOAN AGREEMENT – Rate Covenant” below and the “Rate Covenant” section in Appendix A hereto.

Liens on Pledged Revenues and Other Properties

Except as described above under “Pledged Revenues,” the Borrower has not given or granted a mortgage lien or other security interest or encumbrance upon any property of the Borrower to secure its payment obligations under the Loan Agreement.

The Borrower covenants and agrees that it shall not grant any liens on its Pledged Revenues or any of its other property (whether real or personal, and whether owned as of the date of issuance of the Bonds or acquired thereafter) except for Permitted Encumbrances (defined under “THE LOAN AGREEMENT” below).

Additional Indebtedness

The Borrower may incur, guaranty or assume additional indebtedness upon compliance with specified requirements and limitations contained in the Loan Agreement. Such indebtedness may be secured by liens on and security interests in the Pledged Revenues of the Borrower on a parity with the liens and security interests granted to secure the Bonds and any Outstanding Parity Indebtedness of the Borrower. See “THE LOAN AGREEMENT – “Incurrence of Additional Indebtedness” and “Security for Indebtedness” herein and the “Additional Indebtedness” section in Appendix A hereto for a description of the requirements and limitations relating to the incurrence of and security for additional indebtedness which may be incurred by the Borrower.

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Consents and Direction of Remedies by Insurer

So long as the Policy is in effect with respect to the Bonds and the Insurer is not in default of its payment obligations thereunder, (i) upon the occurrence and continuance of an Event of Default as defined in the Indenture, the Insurer shall be entitled to control and direct the enforcement of all rights and remedies granted to the registered owners or any trustee appointed for the benefit of the registered owners under the Indenture as if the Insurer were the registered owner of the Bonds insured by it and (ii) the Insurer shall be deemed to be the owner of all Bonds for the purpose of any action permitted or required to be taken under the Indenture or the Loan Agreement by the registered owners of the Bonds, including the giving of any consent, waiver or direction; provided that the Insurer shall not be permitted to consent on behalf of the registered owners to any amendment described in the Indenture requiring the unanimous consent of the registered owners of all Bonds then Outstanding. See “THE INDENTURE – Rights of Insurer” herein.

DEFINITIONS OF CERTAIN TERMS

The following are definitions of certain terms used in the summaries of the Loan Agreement and Indenture set forth below. All capitalized terms used herein and not otherwise defined in this Official Statement, shall have the same meanings as set forth in the Indenture or Loan Agreement.

“Available Monies” means any monies on deposit with a trustee for the benefit of Registered Owners which are (i) bond proceeds or refunding bond proceeds, (ii) amounts on deposit for a period of 124 consecutive days during which no petition in bankruptcy under the U.S. Bankruptcy Code has been filed by or against the entity which paid such money, and no similar proceedings have been instituted under state insolvency or other laws affecting creditors’ rights generally, or (iii) any monies with respect to which an unqualified opinion from nationally recognized counsel has been received stating that such payments to Bondholders would not constitute voidable preferences under Section 547 of the U.S. Bankruptcy Code, or similar state or federal laws with voidable preference provisions in the event of the filing of a petition for relief under the U.S. Bankruptcy Code, or similar state or federal laws with voidable preference provisions by or against the entity from which the money is received.

“Balloon Debt” means debt 25% or more of the principal amount of which comes or may come due in any one Fiscal Year by maturity, mandatory sinking fund redemption or optional or mandatory tender by the holder thereof.

“Bond Counsel” means an attorney-at-law or a firm of attorneys of nationally recognized standing in matters pertaining to the exclusion from gross income for federal income tax purposes of interest on bonds 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.

“Bondholder” or “Holder” or “Registered Owner” or “Owner” of Bonds means the registered owner of any Bond.

“Bond Documents” means the Loan Agreement, the Indenture, the Bonds and all other documents executed by the Borrower or the Authority in connection therewith, including but not limited to any Continuing Disclosure Agreement entered into by the Borrower.

“Borrower Facilities” shall mean the buildings, structures, real estate and any appurtenant facilities, equipment and fixtures currently owned or hereafter acquired by the Borrower, used or useful by the Borrower in connection with its functioning as an institution of higher learning.

“Certificate” means a certificate or report, in form and substance reasonably satisfactory to the Authority and the Trustee, executed: (a) in the case of an Authority Certificate, by an Authority Representative; (b) in the case of a Borrower Certificate, by a Borrower Representative; and (c) in the case of a Certificate of any other Person, by such Person, if an individual, and otherwise by an officer, partner or other authorized representative of such Person; provided that in no event shall any individual be permitted to execute any Certificate in more than one capacity.

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“Consultant” shall mean a Person, who shall be Independent, appointed by the Borrower or the Authority, as the case may be, generally recognized as qualified to pass upon the matters under consideration and having a favorable reputation for skill and experience in such matters.

“Debt Service Requirement,” with reference to a specified period, shall mean:

a. interest payable on Long-Term Indebtedness during the period, excluding (i) interest funded from the proceeds thereof and (ii) interest on Long-Term Indebtedness 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 Indebtedness during the period;

c. amounts required to pay the principal of Long-Term Indebtedness 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 Indebtedness in the form of a lease capitalized under GAAP, the lease rentals payable during the period;

provided, however, that (i) in the case of Variable Rate Debt, interest shall be calculated, in any projection of Debt Service Requirement for a future period, (A) if the debt has been outstanding for at least 24 months, at 120% of the average interest rate on such debt during the most recent 24-month period, (B) if such debt has been outstanding for at least 12 months but less than 24 months, at the higher of 120% of the average interest rate on such debt for the most recent 12-month period or the rate in effect on the date of calculation, and (C) if such debt has been outstanding for less than 12 months, at a rate equal to 120% of (1) the average Bond Market Association Swap Index for the preceding 24 months, if such debt is tax-exempt debt, and (2) the average rate for one-month LIBOR for the preceding 24 months, if such debt is taxable debt, (ii) in the case of Balloon Debt, such debt shall be assumed to amortize on a level debt service basis over a period of 20 years or the actual remaining term to maturity, whichever is less, unless a binding commitment to refinance such debt upon maturity has been provided by a financial institution rated at least “Aa” from Moody’s or “AA” from S&P, in which case such debt will be assumed to mature in accordance with the terms of such binding commitment, (iii) interest payable shall be reduced by the amount of any interest subsidy which a Federal, state or local government is irrevocably committed to pay for the period in question, (iv) the Debt Service Requirement on any Long Term Indebtedness in the form of a guaranty of the indebtedness of others shall be deemed equal to (A) 25% of the annual principal and interest requirements on the indebtedness being guaranteed during each Fiscal Year if the guaranteed entity had Net Revenues Available for Debt Service at least equal to 150% of the annual debt service on its long-term debt in its latest fiscal year, (B) 50% of the annual principal and interest requirements on the indebtedness being guaranteed during each Fiscal Year if the guaranteed entity had Net Revenues Available for Debt Service at least equal to 125% but less than 150% of the annual debt service on its long-term debt in its latest fiscal year, (C) 75% of the annual principal and interest requirements on the indebtedness being guaranteed during each Fiscal Year if the guaranteed entity had Net Revenues Available for Debt Service at least equal to 110% but less than 125% of the annual debt service on its long-term debt in its latest fiscal year, and (D) 100% of the annual principal and interest requirements on the indebtedness being guaranteed during each Fiscal Year if the guaranteed entity had Net Revenues Available for Debt Service below 110% of the annual debt service on its long-term debt in its latest fiscal year or if the Borrower has made a payment on the guaranteed entity’s debt during any of the last three Fiscal Years, (v) the Debt Service Requirement on any Long Term Indebtedness shall not include debt service due during the 12 months prior to the final maturity date of such Long Term Indebtedness to the extent that there are funds on deposit in any applicable reserve or sinking fund which are to be applied to the payment of such debt service in accordance with the terms of the governing documents for such Long Term Indebtedness, and (vi) indebtedness with respect to which the Borrower has obtained an Interest Rate Agreement shall be deemed to bear interest for the period of time such Interest Rate Agreement is in effect at a net rate that takes into account the interest payments made by the Borrower on such indebtedness and the payments made or received by the Borrower on such Interest Rate Agreement; provided that the long-term credit rating of the provider of such Interest Rate Agreement (or any guarantor thereof) is in one of the two highest rating categories of any rating agency (without regard to any refinements of gradation of rating category by numerical modifier or otherwise)..

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“Debt Service Reserve Fund Requirement” means, as of any calculation date, an amount equal to the least of (i) the maximum annual debt service on the Bonds, (ii) 125% of the average annual debt service requirement on the Bonds, and (iii) ten percent of the proceeds of the Bonds.

“GAAP” means accounting principles generally accepted in the United States of America, subject to certain provisions in the Loan Agreement.

“Government Obligations” means certificates or interest-bearing notes or obligations of the United States, or those for which the full faith and credit of the United States are pledged for the payment of principal and interest.

“Intercreditor Agreement” means the Intercreditor Agreement dated as of June 1, 2006 among the Trustee, the Borrower, Wachovia Bank, National Association, and Fulton Bank. with the acknowledgement of the Authority, West Cornwall Township Municipal Authority and Elizabethtown Industrial Development Authority.

“Interest Rate Agreement” means an agreement commonly known as an “interest rate swap,” pursuant to which the Borrower agrees with a third party to pay such party interest on a mutually agreed upon principal amount in exchange for such party’s agreement to pay the Borrower interest on such amount, all at such interest rates and over such periods of time as may be mutually agreed upon; provided, however, that no such agreement shall entail any exchange of principal or any assumption of liability for the payment of the principal of or interest on any particular indebtedness of the Borrower or such third party, as the case may be.

“Long-Term Indebtedness” shall mean all obligations for the payment of money (including, without limitation, all Bonds), incurred, assumed or guaranteed by the Borrower, 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 Indebtedness;

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;

d. rentals payable in future years under leases not required to be capitalized under GAAP;

e. Non-Recourse Indebtedness (as described under the heading “THE LOAN AGREEMENTS – Incurrence of Additional Indebtedness”) or any other obligation secured solely by and paid solely from sources other than Pledged Revenues; and

f. Student Loan Guarantees complying with the requirements described under the heading “THE LOAN AGREEMENT – Student Loan Guarantees,” except to the extent includable as Long-Term Indebtedness under the provisions thereof.

“Maximum Annual Debt Service Requirement” shall mean the highest Debt Service Requirement for the then current or any future Fiscal Year during the remaining life of the Bonds, excluding any amount contained in a debt service reserve fund that may be used to satisfy the final principal payment of any related debt.

“Net Revenues Available for Debt Service” shall mean, for any period, the sum of (i) total unrestricted revenues (operating and nonoperating) less total unrestricted expenses (operating and nonoperating), exclusive of unrealized gains and unrealized losses on investments, (ii) all interest expense of the Borrower for such period with respect to Long-Term Indebtedness, (iii) all depreciation and amortization expense for such period, (iv) an amount equal to 4.5% of the value of the Borrower’s endowment as of the last day of the Borrower’s most recent fiscal year, and (v) any payments made or received by the Borrower on any Interest Rate Agreement; provided that no determination of Net Revenues Available for Debt Service shall take into account any disposition of capital assets not in the ordinary course of business to the extent otherwise included in the foregoing calculations of revenue and

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expenses, any other gains or losses resulting from changes in accounting principles not involving the receipt or expenditure of cash, or any other non-operating, non-cash expenses.

“Outstanding” in connection with the Bonds, means, as of the time in question, all Bonds authenticated and delivered under the Indenture, except: (i) bonds cancelled upon surrender, exchange or transfer, or cancelled because of payment or redemption at or prior to that time; (ii) bonds paid pursuant to the Indenture; (iii) bonds, or the portion thereof, which are deemed to have been paid and discharged or caused to have been paid and discharged pursuant to the provisions of the Indenture; and (iv) bonds in substitution for which other Bonds have been authenticated under the Indenture. In determining whether the owners of a requisite aggregate principal amount of Bonds Outstanding have concurred in any request, demand, authorization, direction, notice, consent or waiver under the provisions hereof, Bonds which are held by or on behalf of the Borrower (unless all of the Outstanding Bonds are then owned by the Borrower) shall be disregarded for the purpose of any such determination.

“Permitted Encumbrances” shall mean, with respect to the Pledged Revenues and the Borrower Facilities as of any particular time, (i) liens arising by reason of good faith deposits by the Borrower in connection with leases of real estate, bids or contracts (other than contracts for the payment of money), deposits by the Borrower to secure public or statutory obligations, or to secure, or in lieu of, surety, stay or appeal bonds, and deposits as security for the payment of taxes or assessments or other similar charges; (ii) liens arising by reason of deposits with, or the giving of any form of security to, any governmental agency or any body created or approved by law or governmental regulation for any purpose as required by law or regulation (A) as a condition to the transaction of any business or the exercise of any privilege or license, or (B) to enable to Borrower to maintain self-insurance or to participate in any funds established to cover any insurance risks or in connection with worker’s compensation, unemployment insurance, or pension or profit sharing plans or other social security plans or programs, or to share in the privileges or benefits required for companies participating in such arrangements; (iii) any judgment lien against the Borrower, so long as the finality of such judgment is being contested and execution thereon is stayed and (A) provision for payment of the judgment has been made in accordance with applicable law or by the deposit of cash or investments with a commercial bank or trust company or (B) adequate insurance coverage is available to satisfy such judgment; (iv) such defects, irregularities, encumbrances, utility easements, access and other easements and rights of way, restrictions, exceptions and clouds on title which do not have a material and adverse effect on the interests of the holders of Bonds and do not materially interfere with or impair the operations of the Borrower; (v) any mechanic’s, laborer’s, materialman’s, supplier’s or vendor’s lien or right in respect thereof if payment is not yet due under the contract in question or if such lien is being contested in good faith; (vi) such minor defects and irregularities of title as normally exist with respect to facilities similar in character to the Borrower Facilities and which do not have a material and adverse effect on the value of, or materially impair, the Borrower Facilities affected thereby for the purpose for which they were acquired or are held by the Borrower; (vii) zoning laws and similar restrictions which are not violated by the Borrower Facilities affected thereby; (viii) all right, title and interest of the Commonwealth, municipalities and the public in and to tunnels, bridges and passageways over, under or upon a public way; (ix) liens on property received by the Borrower through gifts, grants or bequests, such liens being due to restrictions on such gifts, grants or bequests or property or income thereon; (x) liens for taxes, special assessments, or other governmental charges not then delinquent or being contested in good faith; (xi) liens and encumbrances permitted as described herein under the heading “THE LOAN AGREEMENT – Security for Indebtedness;” (xii) liens and encumbrances arising under the Indenture or the Loan agreement and those set forth in, and subject to, the Intercreditor Agreement, and (xiii) liens and encumbrances existing on the date of issuance of the Bonds and identified on an Exhibit attached to the Loan Agreement.

“Permitted Investments” means any of the following investments, if and to the extent the same are at the time legal for investment of the funds held under the Indenture:

(i) Certificates or interest-bearing notes or obligations of the United States, or those for which the full faith and credit of the United States are pledged for the payment of principal and interest.

(ii) Investments in any of the following obligations provided such obligations are backed by the full faith and credit of the United States (a) the Export-Import Bank of the United States, (b) the Federal Housing Administration, (c) the Government National Mortgage Association (“GNMA”), (d) the Rural Economic Community Development Administration (formerly known as the Farmers Home Administration), (e) the Federal

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Financing Bank, (f) the Department of Housing and Urban Development, (g) the General Services Administration, (h) the U.S. Maritime Administration or (i) the Small Business Administration.

(iii) Investments in direct obligations in any of the following agencies which obligations are not fully guaranteed by the full faith and credit of the United States (a) senior obligations by the Federal Home Loan Bank System, (b) senior debt obligations and participation certificates (excluding stripped mortgage securities which are purchased at prices exceeding their principal amounts) issued by the Federal Home Loan Mortgage Corporation (“FHLMC”) or senior debt obligations and mortgage-backed securities (excluding stripped mortgage securities which are purchased at prices exceeding their principal amounts) of the Federal National Mortgage Association (“FNMA”) (c) obligations of the Resolution Funding Corporation (“REFCORP”) or (d) senior debt obligations of the Student Loan Marketing Association (“SLMA”) (excluding securities that do not have a fixed par value/or whose terms do not promise a fixed dollar amount at maturity or call date).

(iv) Investments in (a) U.S. dollar denominated deposit accounts, federal funds, bankers acceptances, and certificates of deposit of any bank whose short term debt obligations are rated “A-1+” by S&P and “P-1” by Moody’s and maturing no more than 360 calendar days after the date of purchase (holding company ratings are not considered as rating of the bank) or (b) Certificates of deposit of any bank, which certificates are fully insured by the Federal Deposit Insurance Corporation (“FDIC”).

(v) Investments in money market funds rated “AAAm” or “AAAm-G” by S&P.

(vi) Commercial paper which is rated at the time of purchase in the single highest classification, “P-1” by Moody’s, Inc. and “A-1+” by S&P and which matures not more than 270 calendar days after the date of purchase.

(vii) Pre-refunded municipal obligations defined as follows: any bonds or other obligations rated “AAA” by S&P and “Aaa” by Moody’s (based on an irrevocable escrow account or fund) of any state of the United States of America or any agency, instrumentality or local governmental unit of any such state which are not callable at the option of the obligor prior to maturity or as to which irrevocable instructions have been given by the obligor to call on the date specified in the notice.

(viii) Municipal obligations rated “Aaa/AAA” or general obligations of States with a rating of “A1/A+” or higher by both Moody’s and S&P.

The value of the above investments (paragraphs i-viii) shall be determined as follows:

“Value”, which shall be determined as of the end of each quarter, means that the value of any investments shall be calculated as follows:

(a) for securities:

(1) computed on the basis of the bid price last quoted by the Federal Reserve Bank of New York on the valuation date and printed in the Wall Street Journal or the New York Times; or

(2) a valuation performed by a nationally recognized and accepted pricing service whose valuation method consists of the composite average of various bid price quotes on the valuation date; or

(3) the lower of two dealer bids on the valuation date. The dealer or their parent holding companies must be rated at least investment grade by S&P and Moody’s and must be market makers in the securities being valued.

(b) as to certificates of deposit and banker’s acceptances: the face amount thereof, plus accrued interest.

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(ix) Repurchase agreements with (a) any domestic bank, or domestic branch of a foreign bank, the long term debt which is rated at least “A” by S&P and “A2” by Moody’s; or (b) any broker-dealer with “retail customers” or a related affiliate thereof which broker dealer has, or the parent company (which guarantees the provider) of which has, long term debt rated at least “A” by S&P and “A2” by Moody’s, which broker-dealer falls under the jurisdiction of the Securities Investors Protection Corporation; or (c) any other entity rated at least “A” by S&P and “A2” by Moody’s and acceptable to the Insurer, provided that:

a) the repurchase agreement is collateralized with the obligations described in paragraphs (i) or (ii) above; or with obligations described in paragraph (iii) (a) and (b) above.

b) the trustee will value the collateral securities at least weekly and will liquidate the collateral securities if any deficiency in the required collateral percentage in not restored within (2) business days.

c) the market value of the collateral must be maintained at: 104% of the total principal of the repurchase agreement for obligations described in paragraphs (i) and (ii); 105% of the total principal of the repurchase agreement for obligations described in paragraph (iii) (a) and (b) above.

d) the trustee or a third party acting solely as agent therefore or for the issuer (the “Holder of the Collateral”) has possession of the collateral or the collateral has been transferred to the Holder of the Collateral in accordance with applicable state and federal laws (other than be means of entries on the transferor’s books).

e) the repurchase agreement shall state and an opinion of counsel shall be rendered at the time such collateral is delivered that the Holder of the Collateral has a perfected first priority security interest in the collateral, and substituted collateral and all proceeds thereof.

f) the repurchase agreement shall provide that if during its term the provider’s rating by either Moody’s or S&P is withdrawn or suspended or falls below “A-” by S&P or “A3” by Moody’s, as appropriate, the provider must, at the direction of the issuer or the trustee (who shall give such direction if so directed by the Insurer), within 10 days of receipt of such direction, repurchase all collateral and terminate the agreement, with no penalty or premium to the issuer or trustee.

(x) Investment agreements with (a) a domestic or foreign bank or corporation (other than a life or property casualty insurance company) the long term debt of which, or, in the case of a guaranteed corporation the long term debt is rated at least “AA” by S&P and “Aa2” by Moody’s; or (b) a monoline municipal bond insurance company or a subsidiary thereof whose claims paying ability is rated at least “AA” by S&P and “Aa2” by Moody’s; provided, that in all cases, by the terms of the investment agreement:

a) interest payments are to be made to the Trustee at least one business day prior to debt service payment dates on the Bonds and in such amounts as are necessary to pay debt service (or, if the investment agreement is for the construction fund, construction draws) on the Bonds;

b) the invested funds are available for withdrawal without penalty or premium, at any time upon not more than seven days’ prior notice (which notice may be amended or withdrawn at any time prior to the specified withdrawal date); provided that the Indenture specifically requires the Authority or the Trustee to give notice in accordance with the terms of the investment agreement so as to receive funds thereunder with no penalty or premium paid;

c) the investment agreement shall state that it is the unconditional and general obligation of, and is not subordinated to any other obligation of, the provider thereof;

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d) a fixed guaranteed rate of interest is to be paid on invested funds and all future deposits, if any, required to be made to restore the amount of such funds to the level specified under the Indenture;

e) the term of the investment agreement does not exceed seven years or such longer term as approved by the Insurer. An Insurer approved investment agreement for the Debt Service Reserve Fund may extend until the maturity for the Bonds;

f) the Authority or the Trustee receives the opinion of domestic counsel (which opinion shall be addressed to the Authority and the Insurer) that such investment agreement is legal, valid, binding and enforceable upon the provider in accordance with its terms and of foreign counsel (if applicable) in form and substance acceptable, and addressed to, the Insurer;

g) the Indenture and investment agreement shall provide that if during its term:

(1) the provider’s rating by either S&P or Moody’s falls below “AA-” or “Aa3” respectively, the provider must, at the direction of the Authority or the Trustee (who shall give such direction if, but only if, so directed by the Insurer), within 10 days of receipt of such direction, either (i) collateralize the investment agreement by delivering or transferring in accordance with applicable state and federal laws (other than by means of entries on the provider’s books) to the Authority, the Trustee or a third party acting solely as agent therefor (the “Holder of the Collateral”) Permitted Collateral which are free and clear of any third-party liens or claims at the Collateral Levels set forth below; or (ii) repay the principal of and accrued but unpaid interest on the investment (the choice of (i) or (ii) above shall be that of the Authority or Trustee, as appropriate), and

(2) the provider’s rating by either Moody’s or S&P is withdrawn or suspended or falls below “A-” or “A3” by S&P or Moody’s, as appropriate, the provider must, at the direction of the Issuer or the Trustee (who shall give such direction if, but only if, so directed by the Insurer), within 10 days of receipt of such direction, repay the principal of and accrued but unpaid interest on the investment in either case with no penalty or premium to the Authority or Trustee;

h) The investment agreement shall state and an opinion of counsel shall be rendered that the trustee has a perfected first priority security interest in the Permitted Collateral, any substituted collateral and all proceeds thereof (in the case of bearer securities, this means the trustee is in possession); and

i) the investment agreement must provide that if during its term

(1) the provider shall default in its payment obligations, the provider’s obligations under the investment agreement shall, at the direction of the Authority or the Trustee (who shall give such direction if so directed by the Insurer), be accelerated and amounts invested and accrued but unpaid interest thereon shall be repaid to the Authority or Trustee, as appropriate;

(2) the provider shall become insolvent, not pay its debts as they become due, be declared or petition to be declared bankrupt, etc. (“event of insolvency”), the provider’s obligations shall automatically be accelerated and amounts invested and accrued but unpaid interest thereon shall be repaid to the Authority or Trustee, as appropriate;

(3) the provider fails to perform any of its obligations under the Investment Agreement (other than obligations related to payment or rating) and such breach continues for

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ten (10) Business Days or more after written notice thereof is given by the Trustee to the provider, it shall be an Event of Default; or

(4) a representation or warranty made by the provider proves to have been incorrect or misleading in any material respect when made, it shall be an Event of Default

Permitted Collateral for Investment Agreements (“Permitted Collateral”):

A. U.S. direct Treasury obligations,

B. Senior debt and/or mortgage backed obligations of GNMA, FNMA or FHLMC and other government sponsored agencies backed by the full faith and credit of the U.S. government and approved by the Insurer.

C. Collateral levels must be 104% of the total principal deposited under the investment agreement for U.S. direct Treasury obligations, GNMA obligations and full faith and credit U.S. government obligations and 105% of the total principal deposited under the investment agreement for FNMA and FHLMC.

D. The collateral must be held be a third party, segregated and marked to market at least weekly.

(xi) Forward delivery agreements approved in writing by the Insurer (supported by appropriate opinions of counsel).

(xii) Other forms of investments approved in writing by the Insurer.

“Person” means an individual, a corporation, a partnership, an association, a joint stock company, a joint venture, a trust, an unincorporated organization, a governmental unit or agency, a political subdivision or instrumentality thereof, or any other group or organization of individuals.

“Pledged Revenues” shall mean all receipts, revenues, income and other moneys received by or on behalf of the Borrower from the operation, ownership or leasing of all Borrower Facilities, all gifts, grants, bequests, donations and contributions received by the Borrower, and all rights to receive the same whether in the form of accounts receivable, contract rights, chattel paper, instruments, general intangibles or other rights and the proceeds thereof, including any insurance proceeds and any condemnation awards derived therefrom, whether now existing or hereafter coming into existence and whether now owned or held or hereafter acquired by the Borrower in connection with the Borrower Facilities; provided, however, that there shall be excluded from Pledged Revenues: gifts, grants, bequests, donations and contributions heretofore or hereafter made, the application of the proceeds of which is designated or restricted at the time of making thereof by the donor, payor or maker as being for certain specified purposes inconsistent with the application thereof to the payment of Loan Payments under the Loan Agreement or not subject to pledge, or subsequent to the receipt thereof, so designated or restricted by the Borrower in order to meet the requirements of any challenge grant received by the Borrower, and the income derived therefrom to the extent that it is permanently restricted in or by such designation or restriction or by law.

“Project Costs” means costs of the Project permitted under the Act, including, but not limited to, the following:

(a) Costs incurred in acquisition, construction, renovation, installation, equipment or improvement of the Project Facilities and the other portions of the Project, including costs incurred for preliminary planning and studies; architectural, engineering, accounting, consulting, legal and other professional fees and expenses; labor, services and materials;

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(b) Fees, charges and expenses incurred in connection with the authorization, sale, issuance and delivery of the Bonds, including without limitation bond discount, printing expense, title insurance, recording fees and the initial fees and expenses of the Trustee and the Authority;

(c) Payment of interest on the Bonds and fees and expenses of the Trustee accruing during the period when the Project Facilities are under construction;

(d) Any other costs, expenses, fees and charges properly chargeable to the cost of acquisition, construction, installation, equipment or improvement of the Project; and

(e) Costs and expenses involved in repaying any Person that provided interim financing to the Borrower in order to pay any of the costs described in clauses (a) through (d) above in connection with the Project.

“Project Facilities” means the facilities financed or refinanced with proceeds of the Bonds.

“Refunding Indebtedness” means indebtedness issued for the purpose of refunding other Long-Term Indebtedness.

“Short-Term Indebtedness” shall mean all obligations of the Borrower for the repayment of borrowed money payable upon demand or having a final maturity of less than one year from the date incurred, excluding the current portion of any Long-Term Indebtedness. Such term shall not include debt having a stated maturity in excess of one-year but which is subject to payment upon demand within one year if the payment of such debt is secured by a letter of credit or standby take-out or credit agreement that provides for repayment by the Borrower to the issuer of such facility not less than one year after such facility is drawn upon.

“Student Loan Guarantees” shall mean any guarantees by the Borrower of the primary obligations of students enrolled at the Borrower to repay loans made to them, or any guarantee by the Borrower of obligations incurred by other parties to finance loans to or for the benefit of such students.

“Subordinated Indebtedness” means indebtedness which shall at all times be wholly subordinate and junior in right of payment to any and all indebtedness of the Borrower under the Loan Agreement or with respect to the Bonds (“Superior Indebtedness”) and which shall contain provisions (which shall be binding on all holders of such Subordinated Indebtedness) not more favorable to the holders of such Subordinated Indebtedness than the following:

(i) In the event of any liquidation, dissolution or winding up of the Borrower, or of any execution, sale, receivership, insolvency, bankruptcy, liquidation, readjustment, reorganization, or other similar proceeding relative to the Borrower or its property, all principal and interest owing on all Superior Indebtedness shall first be paid in full before any payment is made upon the Subordinated Indebtedness, provided, however, that, except for Pledged Revenues, this sentence shall not apply to payments made on such Subordinated Indebtedness from the proceeds of collateral specifically securing such Subordinated Indebtedness; and in any such event any payment or distribution of any kind or character from sources other than the proceeds of collateral specifically securing the Subordinated Indebtedness, except for Pledged Revenues, whether in cash, property or securities (other than in securities, including equity securities, or other evidences of indebtedness, the payment of which is subordinated to the payment of all Superior Indebtedness which may at the time be outstanding) which shall be made upon or in respect of the Subordinated Indebtedness shall be paid over to the holders of such Superior Indebtedness, pro rata, for application in payment thereof unless and until such Superior Indebtedness shall have been paid or satisfied in full;

(ii) In the event that the Subordinated Indebtedness is declared or becomes due and payable in full because of the occurrence of any Event of Default under the Loan Agreement or the Indenture or otherwise than at the option of the Borrower, under circumstances when the foregoing clause (i) shall not be applicable, the holders of the Subordinated Indebtedness shall be entitled to payments only after there shall first have been paid in full all Superior Indebtedness outstanding at the time the Subordinated Indebtedness so became due and payable because of any such Event of Default, or payment shall have been

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provided for in a manner satisfactory to the holders of such Superior Indebtedness, provided, however, that except for Pledged Revenues, this sentence shall not apply to payments made on such Subordinated Indebtedness from the proceeds of collateral specifically securing such Subordinated Indebtedness;

(iii) The Borrower agrees, for the benefit of the holders of the Superior Indebtedness, that in the event that any Subordinated Indebtedness is declared due and payable before its expressed maturity because of the occurrence of a default under the Loan Agreement, (A) the Borrower will give prompt notice in writing of such happening to the holders of Superior Indebtedness and (B) all Superior Indebtedness shall forthwith become immediately due and payable upon demand, regardless of the expressed maturity thereof; and

(iv) If the holder of the Subordinated Indebtedness is a commercial bank, savings bank, savings and loan association or other financial institution which is authorized by law to accept and hold deposits of money or issue certificates of deposit, such holder must agree to waive any common law or statutory right of setoff with respect to any deposits of the Borrower maintained with or held by such holder.

“Total Operating Revenues” means the aggregate of all operating revenues of the Borrower less applicable deductions from operating revenues (but before deduction of operating expenses) as determined in accordance with GAAP.

“Trust Estate” shall mean the Loan Agreement, the loan payments, funds, accounts, Revenues and any other revenues, property, contracts or contract rights, accounts, accounts receivable, chattel paper, instruments, general intangibles or other rights and the proceeds thereof, which may, by delivery, assignment or otherwise, be subject to the lien and security interest created by the Indenture and the other right, title and interest thereby assigned, transferred and pledged or agreed or intended so to be to the Trustee and its successors in said trust and to its and their assigns forever.

“Variable Rate Debt” shall mean indebtedness which bears interest at a variable, adjustable, or floating rate.

THE LOAN AGREEMENT

The following description of certain provisions of the Loan Agreement is only a brief outline of some of the provisions thereof and does not purport to summarize or describe all of the provisions thereof. Reference is made to the Loan Agreement, a copy of which is on file at the corporate trust office of the Trustee in Philadelphia, Pennsylvania, for a complete statement of these provisions and other provisions which are not summarized in this Official Statement.

General

The Loan Agreement provides for the financing by the Authority of the Project and a loan of the proceeds of the Bonds from the Authority to the Borrower. Under the Loan Agreement, the Authority, at the request of the Borrower, will obtain funds necessary to finance the Project through the issuance and sale of the Bonds and concurrently therewith, the proceeds shall be deposited in the Project Fund and applied to the costs of the Project. The Borrower agrees to repay the loan in installments corresponding to the principal or redemption price of and interest on the Bonds.

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Loan Payments

To provide funds to pay the principal or redemption price of and interest on the Bonds when due, the Borrower will make loan payments to the Trustee corresponding, as to amounts, to the principal or redemption price of and interest on the Bonds, such payments to be made at least 20 days before the corresponding dates for payments on the Bonds. The Borrower will also make payments to the Trustee in the amounts and on the dates necessary to restore any withdrawal from the Debt Service Reserve Fund in accordance with the terms of the Indenture and will pay the administrative fees and expenses of the Authority and the Trustee as provided in the Loan Agreement.

Pledge of Revenues

As security for the Borrower’s obligation to make payments required under the Loan Agreement and to make all other payments due and perform all other obligations under the Loan Agreement, the Borrower pledges, assigns and grants to the Trustee, as assignee of the Authority, a lien on and a security interest in its Pledged Revenues. The existence of such pledge and security interest will not prevent the expenditure, deposit or commingling of the Pledged Revenues by the Borrower so long as all required payments under the Loan Agreement are made when due. If any required payment is not made when due or an Event of Default shall have occurred under the Loan Agreement, any Pledged Revenues subject to such security interest which are then on hand and not yet commingled with other funds of the Borrower, and any such Pledged Revenues thereafter received, shall not be commingled or deposited but shall immediately be paid over to the Trustee.

Maintenance of Existence

The Borrower 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 (i) dissolve or otherwise sell, transfer or dispose of all, or substantially all, of its assets or (ii) consolidate with or merge into any other entity; provided that, subject to certain provisions of the Loan Agreement relating to the tax-exempt status of the Borrower and the Bonds, the preceding restrictions shall not apply to a transaction to which the Authority and the Insurer consent in writing if the transferee or the surviving or resulting entity, if other than the Borrower, 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 Borrower under the Loan Agreement and the provisions of the Loan Agreement described below under the heading “Assignment” are satisfied.

The Borrower 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 of Pennsylvania within the meaning of the Act.

Compliance with Laws; Commencement and Continuation of Operations at Project Facilities; No Sale, Removal or Demolition of Project Facilities

The Borrower will operate and maintain the Project Facilities in such manner as to comply with the Act and all applicable requirements of federal, state and local laws and the regulations, rules and orders of any federal, state or local agency, board, commission or court having jurisdiction over the Project Facilities or the operation thereof, including without limitation applicable zoning, planning, building and environmental laws, regulations, rules and orders; provided that the Borrower shall be deemed in compliance with this covenant so long as it is contesting in good faith any such requirement by appropriate legal proceedings. The Borrower will not sell, assign or otherwise dispose of (whether in one transaction or in a series of transactions) its interest in the Project Facilities or any material portion thereof (other than as described above under the heading “Maintenance of Existence” and other than leases permitted as described below under the heading “Lease by Borrower”) or undertake or permit the demolition or removal of the Project Facilities or any material portion thereof without the prior written consent of the Authority; provided that the Borrower shall be permitted to sell, transfer, assign or otherwise dispose of or remove any portion of the Project Facilities which is retired or replaced in the ordinary course of business.

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Lease by Borrower

The Borrower may, subject to certain provisions of the Loan Agreement, including provisions relating to the tax-exempt status of the Borrower and the Bonds, lease the Project Facilities, in whole or in part, to one or more other Persons, provided that: (a) no such lease shall relieve the Borrower from its obligations under the Loan Agreement; (b) in connection with any such lease the Borrower shall retain such rights and interests as will permit it to comply with its obligations under the Loan Agreement; (c) no such lease shall impair materially the accomplishment of the purposes of the Act to be accomplished by operation of the Project Facilities as herein provided; (d) any such lease shall require the lessee to operate the Project Facilities as a “project” under the Act as long as the Bonds are outstanding; (e) in the case of a lease to a new lessee or an assignment of an existing lease to a new lessee of substantially all of the Project Facilities, such new lessee shall have been approved by the Authority (such approval not to be unreasonably withheld); and (f) the lessees under any such leases, including any leases in force on the date of issuance of the Bonds, shall be subject to certain terms and conditions of the Loan Agreement relating to the tax-exempt status of the Borrower and the Bonds.

Taxes, Other Governmental Charges and Utility Charges

The Borrower shall pay, or cause to be paid before the same become delinquent, all taxes, assessments, whether general or special, and governmental charges of any kind whatsoever that may at any time be lawfully assessed or levied against or with respect to the Project Facilities, including any equipment or related property installed or bought by the Borrower therein or thereon, and all utility and other charges incurred in the operation, maintenance, use, occupancy and upkeep of the Project Facilities. With respect to special assessments or other governmental charges that lawfully may be paid in installments over a period of years, the Borrower shall be obligated to pay only such installments as are required to be paid during the term of the Loan Agreement. The Borrower may, at its expense, in good faith contest any such taxes, assessments and other charges and, in the event of any such contest, may permit the taxes, assessments or other charges so contested to remain unpaid during the period of such contest and any appeal therefrom, unless the Authority or the Trustee shall notify the Borrower that, in the opinion of counsel selected by the Authority or the Trustee, by nonpayment of any such items the Project Facilities or any part thereof will be subject to loss or forfeiture, in which event such taxes, assessments or charges shall be paid promptly. The Borrower shall also comply at its own cost and expense with all notices received from public authorities with respect to the Project.

Insurance

The Borrower covenants and agrees that it will: (i) continuously maintain insurance on its properties and against such risks (including casualty, accident and worker’s compensation) in such amounts and with such deductibles, as are consistent with customary coverage, as from time to time in effect, in connection with the operation of properties of type and size comparable to properties as maintained by entities similar to the Borrower; provided, that property and casualty coverage shall at all times be maintained in an amount at least equal to the outstanding principal amount of the Bonds; (ii) cause an independent insurance consultant (which shall include the insurance agent engaged by the Borrower as of the date hereof) to annually review and make recommendations with respect to the Borrower’s insurance coverage; and (iii) comply with the recommendations of such insurance consultant.

In the event the property and liability insurance required by the preceding paragraph is not commercially available at a reasonable cost or has been otherwise provided, the Borrower may accept such substituted coverage, including coverage from a captive insurance company or a consortium, as is recommended by an independent insurance consultant, provided, however, that no Event of Default shall occur under the Loan Agreement if such substitute coverage is unavailable, and the Borrower makes a continuing good faith effort to secure the insurance or such substitute coverage, including self-insurance. For purposes of the Loan Agreement, “independent insurance consultant” means a nationally recognized firm of insurance agents, brokers or consultants with experience and expertise in assessing the property and casualty and liability risks of the Borrower and, if applicable, assessing the risks associated with such substitute insurance coverage, and if the Borrower has coverage through a captive insurance company or a consortium, includes an independent insurance consultant retained by such captive insurance company or consortium.

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The Borrower may self-insure without the prior written consent of the Insurer solely for professional liability, employee health insurance, workers compensation insurance, unemployment insurance, commercial general liability insurance, automobile insurance, student health and accident insurance, directors and officers insurance, travel insurance, broadcasters liability insurance, publishers liability insurance, and excess liability insurance, so long as the Borrower’s self-insurance plan provides for (i) the establishment by the Borrower of a separate segregated self-insurance fund funded in an amount confirmed as to sufficiency through the annual auditing process by an independent auditor or an independent insurance consultant or nationally recognized independent actuarial consultant employing accepted actuarial techniques, and (ii) the establishment and maintenance of a claims processing and risk management program. If the Borrower elects to self-insure for professional liability, the Borrower shall within 150 days after the end of each Fiscal Year cause an independent insurance consultant or nationally recognized independent actuarial consultant to submit a report to the Trustee and the Insurer to the effect that such self-insurance plan maintains adequate reserves and has been adequately funded.

Damage to or Condemnation of Project Facilities

In the event of damage, destruction or condemnation of part or all of the Project Facilities, the Borrower will either: (i) restore the Project Facilities or (ii) if permitted by the terms of the Bonds, direct the Authority to call the Bonds for extraordinary optional redemption pursuant to the Indenture. Damage to, destruction of or condemnation of all or a portion of the Project Facilities shall not terminate the Loan Agreement or cause any abatement of or reduction in the payments to be made by the Borrower under the Loan Agreement.

Rate Covenant

The Borrower covenants that it will establish, charge and collect tuition, student fees and charges for services provided by the Borrower such that Net Revenues Available for Debt Service will equal or exceed, in each Fiscal Year, 110% of the Debt Service Requirement for such Fiscal Year.

If, in any Fiscal Year, the Borrower fails to meet the foregoing covenant, it shall immediately retain a Consultant to make a report and recommendation with respect to such tuition, student fees and other charges, and with regard to operations of the Borrower. The Borrower further covenants that upon receipt of such report and recommendation from the Consultant, the Borrower shall cause copies thereof to be filed with the Trustee and the Insurer, and the Borrower shall within 60 days of the receipt of such report and recommendation describe in writing to the Trustee and the Insurer what action, if any, the Borrower shall take upon the report and recommendation of the Consultant. So long as the amount described in the preceding paragraph is equal to at least 100% of the Debt Service Requirement for the Fiscal Year in question, and provided that the Borrower does not fail to meet the foregoing rate covenant for two consecutive Fiscal Years, no Event of Default shall be deemed to have occurred under the Loan Agreement unless the Borrower shall have failed to take the foregoing steps.

Incurrence of Additional Indebtedness

The Borrower covenants that it will not incur or assume additional Long-Term Indebtedness unless there is no Event of Default under the Loan Agreement or under the Indenture that has occurred and is continuing, and the Borrower delivers to the Trustee and the Insurer prior to such incurrence a Borrower Certificate demonstrating that either (i) for each of the two most recent Fiscal Years for which Audited Financial Statements are available, Net Revenues Available for Debt Service equaled or exceeded 125% of the Maximum Annual Debt Service Requirement for all Long-Term Indebtedness outstanding during such Fiscal Years and the Long-Term Indebtedness proposed to be incurred, or (ii) (A) for the most recent Fiscal Year for which Audited Financial Statements are available, Net Revenues Available for Debt Service equaled or exceeded 125% of the Maximum Annual Debt Service Requirement for all Long-Term Indebtedness outstanding during such Fiscal Year and the Long-Term Indebtedness proposed to be incurred, and (B) for each of the two Fiscal Years immediately following the completion of any construction to be financed through the incurrence of the proposed Long-Term Indebtedness, or the two Fiscal Years immediately following the incurrence of the proposed Long-Term Indebtedness if no such construction is to be financed, Net Revenues Available for Debt Service are projected to be at least equal to 150% of the Maximum Annual Debt Service Requirement for all Long-Term Indebtedness.

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The Borrower may not incur Balloon Debt in an amount greater than $1,000,000 (when aggregated with any Balloon Indebtedness then outstanding) without the written consent of the Insurer.

The Borrower may enter into an Interest Rate Agreement with the consent of the Insurer if the following conditions are met: (i) the Interest Rate Agreement may not provide for immediate termination for credit events related to the Borrower (other than a ratings downgrade of the Borrower) unless such events would be an Event of Default under the Loan Agreement; and (ii) no settlement amount may be collateralized and all settlement amounts payable under the Interest Rate Agreement shall be subordinated to the payment of the Bonds.

Except as otherwise provided in the Loan Agreement, all additional Long-Term Indebtedness bearing interest at a fixed rate shall have the same principal and interest payment dates as the Bonds. Additional Long-Term Indebtedness bearing interest at a variable rate may have interest payable on a periodic basis other than that required for the payment of interest on the Bonds but shall have the same principal payment dates as the Bonds.

Notwithstanding the foregoing, the following types of indebtedness may be incurred without meeting the foregoing requirements:

Refunding Debt. Refunding Indebtedness may be incurred without limitation provided that prior to such incurrence, the Borrower shall deliver to the Trustee and the Insurer a Borrower Certificate in form satisfactory to the Insurer demonstrating that the Maximum Annual Debt Service Requirement immediately following the incurrence of such Refunding Indebtedness is not more than 110% of the Maximum Annual Debt Service Requirement immediately prior to the incurrence of such Refunding Indebtedness.

Short-Term Indebtedness. The Borrower may, from time to time, incur or assume Short-Term Indebtedness in the ordinary course of business in any amount up to 15% of Total Operating Revenues for the preceding Fiscal Year, less any Short-Term Indebtedness then outstanding; provided, however, that no Short-Term Indebtedness shall be outstanding for a period of at least seven consecutive calendar days in each Fiscal Year.

Student Loan Guarantees. The Borrower may incur indebtedness in the form of Student Loan Guarantees as described below under the heading “Student Loan Guarantees.”

Non-Recourse Indebtedness. The Borrower may, from time to time, incur debt which is (i) incurred to finance additional capital projects; (ii) is nonrecourse debt secured solely by a lien on and security interest in the property financed by such debt and/or the revenues therefrom; and (iii) is in a principal amount which, when added to the total principal amount of non-recourse indebtedness incurred pursuant to this paragraph and outstanding immediately after the incurrence of the new debt, is less than or equal to 20% of the Total Operating Revenues for the most recent Fiscal Year.

Purchase Money Financings. The Borrower may, from time to time, incur debt without complying with the debt incurrence tests described above if such debt (i) is issued to finance the acquisition of machinery or equipment; (ii) is unsecured or secured solely by a purchase money security interest in the acquired machinery or equipment; and (iii) is in a principal amount which, when added to the total amount of indebtedness incurred pursuant to this paragraph and outstanding immediately after the incurrence of the new debt, is less than or equal to 15% of the Total Operating Revenues for the then most recent Fiscal Year.

Subordinated Indebtedness. Subordinated Indebtedness may be incurred without limitation provided that such Subordinated Indebtedness has the same payment dates as the Bonds and provides that it may not be accelerated without the prior consent of the Insurer.

Security for Indebtedness

Any Long-Term Indebtedness or Short-Term Indebtedness hereafter incurred or assumed as described above under the caption “Incurrence of Additional Indebtedness” may be secured only as follows:

(i) In the case of debt to be secured on a parity with the Bonds: (a) by a lien on and security interest in the Pledged Revenues ranking on a parity with the lien and security interest granted under the

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Loan Agreement; or (b) by a lien or mortgage on and/or security interest in Borrower Facilities, provided that, if the Borrower grants a mortgage on or security interest in any part of the Borrower Facilities, the Borrower shall grant to the Trustee a mortgage of equal priority on and/or security interest in the same property to secure the Loan Agreement.

(ii) In the case of nonrecourse debt, solely by a lien on and/or security interest in the property financed with such debt and/or the revenues therefrom.

(iii) In the case of purchase money financings, solely by a purchase money security interest in machinery or equipment.

(iv) In the case of Student Loan Guarantees, solely by a lien or pledge upon Pledged Revenues subordinate and junior to the pledge of Pledged Revenues under the Loan Agreement.

(v) In the case of other Long-Term Indebtedness:

(A) by a purchase money security interest in any real property, fixtures, machinery and equipment made part of the Borrower Facilities and revenues therefrom; or

(B) by a lien on and security interest in the Pledged Revenues subordinate to the lien and security interest granted under the Loan Agreement; 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.

(vi) Any Short-Term Indebtedness incurred pursuant to the Loan Agreement may be secured solely:

(A) by a purchase money security interest in personal property acquired with the proceeds thereof; or

(B) by a lien on and security interest in the Pledged Revenues ranking on a parity with or subordinate to that granted under the Loan Agreement; provided, however, that no such permitted indebtedness shall be secured by the moneys and investments in any Funds held by the Trustee under the Indenture.

Student Loan Guarantees

The Borrower may incur obligations in the form of Student Loan Guarantees which meet the following criteria upon compliance with the following requirements:

(i) The loans to students shall be made pursuant to a program, whether governmental or privately sponsored, for the purpose of providing aid to students for tuition, room and/or board, or other expenses associated with the attendance by the student at the Borrower’s institution and which program shall require that the Borrower execute its Student Loan Guarantee.

(ii) In the case of a program which is fully funded, no part of the obligations guaranteed by the Borrower shall constitute Long-Term Indebtedness of the Borrower. A program shall be deemed to be “fully-funded” if the assets of the program are at least equal to its liabilities, without regard to the guarantee by the Borrower. In determining the assets of the program, full effect must be given to estimated anticipated losses on student repayments to the extent not insured and due provision shall have been made to cover any shortfall between the principal amount of the obligations and the proceeds thereof (i.e., “nonasset bonds”). The plan may be made fully-funded by deposits, bank letters of credit or other credit support facilities provided by the Borrower or others.

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(iii) To the extent that a program is not fully funded as provided above, the amount by which the liabilities exceed the assets shall be determined and such amount shall constitute Long-Term Indebtedness of the Borrower for all purposes of the Loan Agreement and the proportionate part of the debt service requirements on such obligations represented by such deficiency shall be deemed to be part of the Debt Service Requirement. A program which at its commencement is not fully funded may nonetheless be demonstrated to have become fully funded at a later date at which time there shall cease to be any Long-Term Indebtedness attributable to such Student Loan Guarantees so long as it continues to be fully-funded.

(iv) The fully funded status of a program or the extent to which a program is not fully funded shall be determined by a Certificate of the Pennsylvania Higher Education Assistance Authority or other issuing governmental authority if such Certificate be obtainable, or in the alternative, shall be certified to by a Consultant, which may be the Certified Public Accountant regularly retained by the Borrower, which Certificate in any case shall set forth in full the basis of its determination.

(v) If a Consultant’s Certificate or Certificate of the issuing agency is not available, as provided above, the extent to which the principal amount of the Student Loan Guarantees shall be considered Long-Term Indebtedness shall be determined by multiplying the principal amount of such Student Loan Guarantees by the average default ratio, during the three Fiscal Years preceding such Student Loan Guarantees, for university students participating in United States Government guaranteed student loans programs.

(vi) The guarantee by the Borrower may be secured only by a lien or pledge upon Pledged Revenues subordinate and junior to the pledge of Pledged Revenues under the Loan Agreement.

No Liens or Encumbrances

The Borrower covenants and agrees that it will not grant any liens on the Pledged Revenues or the Borrower Facilities (whether real or personal, and whether owned as of the date of the Loan Agreement or acquired thereafter) except for Permitted Encumbrances.

Disposition of Assets

The Borrower covenants and agrees that it shall not transfer, sell or otherwise dispose of any of the Project Facilities or any other assets having a net book value of more than 5% of the Borrower’s total unrestricted assets as shown on the most recent Audited Financial Statements, unless such transfer, sale or other disposition is made in the ordinary course of business.

Tax Covenants of Borrower and Authority

The Borrower covenants in the Loan Agreement that it will at all times do and perform all acts and things necessary or desirable and within its reasonable control in order to assure that interest paid on the Bonds shall be excludable from the gross income of the Holders thereof for federal income tax purposes and that it shall not take or omit to take, or permit to be taken on its behalf, any actions which, if taken or omitted, would adversely affect the excludability from the gross income of the Holders of interest paid on the Bonds for federal income tax purposes.

The Authority and the Borrower mutually covenant for the benefit of the Holders of the Bonds that they will not use the proceeds of the Bonds, any moneys derived, directly or indirectly, from the use or investment thereof or any other moneys on deposit in any fund or account maintained in respect of the Bonds in a manner which would cause such Bonds to be treated as “arbitrage bonds” within the meaning of Section 148 of the Code or would otherwise violate the provisions of the Indenture relating to arbitrage.

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The Borrower has covenanted that it will comply with various requirements of the Code pertaining to the excludability of interest on the Bonds from gross income of Holders thereof for federal income tax purposes, including, without limitation, that:

(a) it will take whatever actions are necessary for it to continue to be organized and operated in a manner which will preserve and maintain its status as an organization which is described in Section 501(c)(3) of the Code, exempt from federal income taxes under Section 501(a) of the Code and not a private foundation under Section 509(a) of the Code (or corresponding provisions of prior law), and it will not perform any acts nor enter into any agreements which would cause any revocation or adverse modification of such federal income tax status;

(b) no more than five percent of the net proceeds of the Bonds (less Bond proceeds used for costs of issuance) will be used to finance costs of the Project used or to be used in unrelated trades or businesses (within the meaning of Section 513(a) of the Code) of an organization described in Section 501(c)(3) of the Code, or in the trade or business of a person other than an organization described in Section 501(c)(3) of the Code or a governmental entity;

(c) so long as the Bonds are Outstanding, the Project Facilities will be owned by the Borrower, any other organization permitted under the Loan Agreement to own the Project Facilities that is exempt from federal income taxes under Section 501(a) of the Code and described in Section 501(c)(3) of the Code, or a governmental entity; and

(d) the Borrower will make such payments to the Trustee as are required of it under the Indenture in connection with the requirements of Section 148 of the Code concerning arbitrage bonds including Section 148(f), which requires generally rebate payments to the United States of arbitrage profits, and to pay the costs and expenses of any Financial Consultant engaged in accordance with the Indenture to assist in calculating the amount of such rebate payments, if any.

Environmental Matters

The Borrower covenants to comply in all material respects with all applicable federal, state and local laws, ordinances, rules and regulations pertaining to the environment (collectively, “Environmental Laws”), including, without limitation, those regulating hazardous or toxic wastes and substances (as such phrases may be defined in any Environmental Law), and to give prompt written notice to the Trustee and the Authority of any material violation or alleged material violation of any Environmental Law with respect to the Borrower’s property. The Borrower will indemnify and defend the Trustee and its directors, officers, employees and agents (the “Indemnified Parties”), and hold the Indemnified Parties harmless from, any loss, liability, damage, claim, fine, penalty, action or cause of action, including, without limitation, out-of-pocket and incidental expenses and court costs and reasonable attorney’s fees and expenses and the allocated costs of in-house counsel and legal staff, consultants’ fees and any clean-up or remediation costs, arising from any violation or alleged violation by the Borrower of any Environmental Law with respect to the Borrower’s property.

Borrower’s Use of the Project Facilities

The Borrower will use the Project Facilities only in furtherance of the lawful purposes of the Borrower.

The Borrower further agrees that it will use the Project Facilities for secular instruction and will not use the Project as a facility used primarily in connection with any part of a program of a school or department of divinity for any religious denomination for the training of ministers, priests, rabbis or other similar persons in the field of religion or in a manner which would violate the First Amendment to the Constitution of the United States of America, including the decisions of the United States Supreme Court interpreting the same, or any comparable provisions of the Constitution of the Commonwealth, including the decisions of the Supreme Court of the Commonwealth interpreting the same. Notwithstanding the termination of the Loan Agreement, the Borrower agrees that it will continue to comply with the restriction stated in the preceding sentence on the sectarian use of the Project Facilities. To the extent required by law, the Borrower will permit the Authority to inspect the Project Facilities solely in order to determine whether the Borrower has complied with the provisions of this paragraph and such right of inspection shall survive the termination of the Loan Agreement.

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The Borrower further agrees that it will not use the Project Facilities, or permit the Project Facilities to be used, in such manner as would result in the loss of any exemption from federal income taxation to which interest on the Bonds would otherwise be entitled.

Events of Default

Each of the following shall constitute an Event of Default under the Loan Agreement:

(a) if the Borrower fails to make payments under the Loan Agreement with respect to the principal or redemption price of and interest on the Bonds or the replenishment of the Debt Service Reserve Fund in the event of a deficiency in such Fund when the same shall become due and payable thereunder; or

(b) if the Borrower fails to make any other payment or deposit required under the Loan Agreement within thirty (30) days of the due date thereof; or

(c) if the Borrower fails to perform any of its other covenants, conditions or provisions under the Loan Agreement and such failure continues for thirty (30) days after the Authority or the Trustee gives the Borrower written notice thereof; provided, however, that if such performance requires work to be done, actions to be taken, or conditions to be remedied, which by their nature cannot reasonably be done, taken or remedied, as the case may be, within such thirty (30) day period, then, with the prior written consent of the Insurer, no Event of Default shall be deemed to have occurred or to exist if, and so long as, the Borrower shall commence such performance within such thirty (30) day period and shall diligently and continuously prosecute the same to completion; or

(d) if the Borrower admits in writing its inability to pay its debts generally as they become due, or proposes or makes an assignment for the benefit of creditors or a composition agreement with all or a material part of its creditors, or a trustee, receiver, executor, conservator, liquidator, sequestrator or other judicial representative, similar or dissimilar, is appointed for the Borrower or any of its assets or revenues, or there is commenced any proceeding in liquidation, bankruptcy, reorganization, arrangements of debts, debtor rehabilitation, creditor adjustment or insolvency, local, state or federal, by or against the Borrower and if such is not vacated, dismissed or stayed on appeal within sixty (60) days; or

(e) if for any reason any of the Bonds shall be declared due and payable by acceleration in accordance with the terms of the Indenture; or

(f) the Borrower shall (i) default in the payment of any indebtedness (other than amounts due under the Loan Agreement) secured by a parity lien on the Pledged Revenues, and any period of grace with respect thereto shall have expired, or (ii) incur any Subordinated Indebtedness which does not conform to the terms and conditions set forth in the definition of Subordinated Indebtedness set forth herein under the heading “DEFINITIONS OF CERTAIN TERMS.”

Remedies

If acceleration of the principal amount of the 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. In addition, if an Event of Default under the Loan Agreement has occurred and is continuing, the Authority (or the Trustee as its assignee) shall, at the direction of the Insurer, in addition to its other rights and remedies as may be provided in the Loan Agreement or may exist at the time at law or in equity, exercise any one or more of the following remedies:

(a) by mandamus, or other suit, action or proceeding at law or in equity, enforce all rights of the Authority, and require the Borrower to carry out any agreements with or for the benefit of the Bondholders and to perform its duties under the Act or the Loan Agreement; or

(b) by action or suit in equity require the Borrower to account as if it were the trustee of an express trust for the Authority; or

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(c) by action or suit in equity enjoin any acts or things which may be unlawful or in violation of the rights of the Authority; or

(d) upon the filing of a suit or other commencement of judicial proceedings to enforce the rights of the Trustee and the Bondholders, have appointed a receiver or receivers of the Trust Estate, with such powers as the court making such appointment shall confer; or

(e) upon notice to the Borrower, accelerate the due dates of all sums due or to become due under the Loan Agreement.

In order to entitle the Authority or the Trustee to exercise any remedy reserved to it in Loan Agreement concerning Events of Default and remedies, it shall not be necessary to give any notice, other than such notice as may be therein expressly required. Such rights and remedies as are given the Authority thereunder shall also extend to the Trustee. For so long as any Bonds remain Outstanding under the Indenture, and except with respect to the Borrower’s obligations in respect of the Authority’s rights to notices, payments of fees and expenses and indemnification rights and the Borrower’s obligations to comply with the Act, the Trustee, as the assignee of the Authority, shall have the sole right to exercise rights and remedies against the Borrower at the direction of the Insurer upon the occurrence of any Event of Default under the Loan Agreement, and the exercise by the Trustee of such rights and remedies shall be subject to all applicable provisions of the Indenture, the Loan Agreement and the Act. To the extent necessary or appropriate and requested by the Trustee, the Authority shall cooperate with the Trustee in connection with the exercise by the Trustee of such rights and remedies against the Borrower.

Insurer is Party in Interest

The Insurer shall be included as a party in interest (third party beneficiary) with respect to the Loan Agreement and as a party entitled to (i) notify the Trustee of the occurrence of an Event of Default, and (ii) request the Trustee to intervene in judicial proceedings that affect the Bonds or the security therefore.

Amendments

The Authority and the Borrower may enter into any amendments and supplements to the Loan Agreement without the consent of Bondholders, but with prior notice to the Trustee, for the following purposes:

(a) to cure any ambiguity, inconsistency, defect or omission in the Loan Agreement or in any amendment thereto;

(b) to modify, eliminate or add to the provisions of the Loan Agreement to such extent as shall be necessary to obtain, maintain or improve a rating of the Bonds;

(c) to add covenants of the Borrower or surrender rights or powers of the Borrower;

(d) to make such additions, deletions or modifications as may be necessary in the case of any Bonds to assure compliance with Section 148(f) of the Code relating to the required rebate of certain investment earnings to the United States government or otherwise as may be necessary to assure exemption from federal income taxation of interest on the Bonds; or

(e) in connection with any other change in the Loan Agreement if in the judgment of the Trustee in reliance on an opinion of Counsel (which may be Bond Counsel), the proposed change does not materially adversely affect the rights of the Holders of any Bonds.

Except for amendments, changes or modifications as provided in clauses (a) through (e) above, neither the Authority nor the Trustee shall consent to any amendment, change or modification of the Loan Agreement or waive any obligation or duty of the Borrower under the Loan Agreement without the written consent of the holders of not less than a majority in aggregate principal amount of the Outstanding Bonds affected thereby; provided, however, that no such waiver, amendment, change or modification shall permit termination or cancellation of the Loan Agreement or any reduction of the amounts payable under the Loan Agreement with respect to debt service on the Bonds or change the date when such payments are due without the consent of the Holders of all the Bonds then Outstanding who are adversely affected thereby.

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Assignment

The Borrower will not assign the Loan Agreement or any interest of the Borrower therein, either in whole or in part, without the prior written consent of the Trustee, which consent shall be given if the following conditions are fulfilled: (i) the assignee assumes in writing all of the obligations of the Borrower under the Loan Agreement; (ii) in the opinion of Borrower’s counsel, neither the validity nor the enforceability of the Loan Agreement will be adversely affected by such assignment; (iii) the Project shall continue in the opinion of Bond Counsel to be a “project” as such term is defined in the Act after such assignment; (iv) such assignment will not, in the opinion of Bond Counsel, have an adverse effect on the exclusion from gross income for federal income tax purposes of interest on the Bonds; (v) the assignee shall not be a Disqualified Contractor and the assignee shall deliver a certificate to such effect; (vi) consent by the Authority, which consent shall not be unreasonably withheld, and (vii) consent by the Insurer.

THE INDENTURE

The following description of certain provisions of the Indenture is only a brief outline of some of the provisions thereof, and does not purport to summarize or describe all of the provisions thereof. Reference is made to the Indenture, a copy of which is on file at the corporate trust office of the Trustee in Philadelphia, Pennsylvania, for a complete statement of these provisions and other provisions which are not summarized in this Official Statement.

Pledge of Trust Estate

Pursuant to the Indenture (i) all right, title and interest (but not the obligations) of the Authority in, under and pursuant to the Loan Agreement, all loan payments and all other payments, revenues and receipts receivable by the Authority thereunder (except for certain rights related to indemnification and the payment of certain fees and expenses), and (ii) all of the right, title and interest of the Authority in all Funds and Accounts established under the Indenture (other than the Rebate Fund), and any other revenues, property, contracts or contract rights, accounts receivable, chattel paper, instruments, general intangibles or other rights and the proceeds thereof, which may, by delivery, assignment or otherwise, be subject to the lien and security interest created by the Indenture, as established under the Indenture, are assigned and pledged to the Trustee to secure the payment of the principal or redemption price of and interest on the Bonds.

Bond Fund

A Bond Fund will be established and maintained with the Trustee under the Indenture. The amounts with respect to the payment of principal of or redemption price and interest on the Bonds derived under the Loan Agreement and certain other amounts specified in the Indenture will be deposited in the Bond Fund. Moneys in the Bond Fund will be used to pay (i) the principal or redemption price of Bonds as they mature or become due, upon redemption or acceleration, or otherwise upon surrender thereof, and (ii) the interest on Bonds as it becomes payable whether at maturity, upon redemption or acceleration or otherwise.

Debt Service Reserve Fund

A Debt Service Reserve Fund will be established with the Trustee for the sole benefit and security of the holders of the Bonds and moneys or Permitted Investments shall be deposited therein as provided in the Indenture. An amount equal to the Debt Service Reserve Fund Requirement will be deposited into the Debt Service Reserve Fund upon the issuance of the Bonds. The moneys in the Debt Service Reserve Fund and any investments held as a part of such Fund shall be held in trust separate and apart from all other funds or deposits and, except as otherwise provided in the Indenture, shall be applied by the Trustee solely to the payment of the principal of and interest on the Bonds.

Any moneys from time to time on deposit in the Debt Service Reserve Fund shall be applied as follows:

(i) on the date of each permitted or required payment from the Bond Fund to pay principal of or interest on the Bonds by reason of stated maturity or earlier redemption or declaration of acceleration, moneys in the Debt Service Reserve Fund shall be applied by the Trustee to make up the difference

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between (A) the amount necessary to pay principal and/or interest due on such Bonds, and (B) the amount then on deposit in the Bond Fund allocable to the payment of principal and/or interest on the Bonds;

(ii) any amount in the Debt Service Reserve Fund in excess of the Debt Service Reserve Fund Requirement on any valuation date, or any amount in the Debt Service Reserve Fund in excess of the Debt Service Reserve Fund Requirement in the event the Debt Service Reserve Fund Requirement is reduced as a result of any purchase, redemption or prepayment of the Bonds, shall be transferred to the Bond Fund for application as a credit against the Borrower’s payments under the Loan Agreement next becoming due; and

(iii) during the last twelve months preceding the final maturity of the Bonds, any moneys then held in the Debt Service Reserve Fund shall be credited against the Borrower’s payments otherwise payable under the Loan Agreement in respect of principal of and interest on the Bonds, and shall be transferred to the Bond Fund for the payment of the principal of and interest on such Bonds; provided, however, that no such credit shall be given and no such transfer shall be made if and to the extent that, immediately prior to such crediting and transfer, there has then occurred and is continuing an Event of Default under the Indenture.

The amount of any withdrawal from the Debt Service Reserve Fund for the purpose of clause (i) above shall be restored in no more than twelve (12) equal, consecutive, monthly installments, each payable on the last business day of each month, commencing with the month next following the month in which the withdrawal is made. The amount of any deficiency in the Debt Service Reserve Fund due to a decline in the market value of the investments therein shall be restored in three equal, consecutive monthly installments payable on the first day of the month, commencing with the month following the month during which the valuation showing such deficiency is made.

Investments

Any moneys held as a part of the Funds established under the Indenture shall be invested by the Trustee in Permitted Investments as provided in the Indenture. Any such investments shall mature or be subject to redemption by the holder at not less than the principal amount thereof, and all deposits in time accounts shall be subject to withdrawal without penalty, not later than the date when the amounts will foreseeably be needed for purposes of the Indenture.

Defaults

The Indenture provides that each of the following events will constitute an “Event of Default” thereunder:

(a) failure to pay the principal or redemption price of any Bond when such principal or redemption price shall become due and payable, whether at a stated maturity, by redemption, by acceleration or otherwise;

(b) failure to pay any interest on any Bond when such interest shall become due and payable;

(c) failure by the Authority to comply with the provisions of the Act relating to the Bonds or the Project 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 60 days after written notice, by registered or certified mail, to the Authority and the Borrower 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 Holders of not less than 25% in aggregate principal amount of Bonds outstanding; or

(d) the occurrence and continuance of an Event of Default under the Loan Agreement.

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Remedies

The Indenture provides that if an Event of Default occurs, the Trustee may and shall upon the written request of the Insurer or the Owners of 25% in principal amount of all Bonds then outstanding (100% in principal amount of all Bonds then outstanding in the case of an Event of Default described in clause (c) above), declare the principal of all Bonds then outstanding to be immediately due and payable and upon such declaration such principal, together with interest accrued thereon, shall become immediately due and payable to the Owners; provided that if the Insurance Policy is in effect and the Insurer is not then in default of its payment obligations thereunder, the Trustee may not, without the prior written consent of the Insurer, declare the principal of the Bonds to be immediately due and payable. The Insurer may, in its sole discretion, either direct the acceleration of payment of the Bonds following an Event of Default or continue to pay principal of and interest on the Bonds when due. Upon the declaration of any such acceleration, the Trustee shall immediately exercise such rights as it may have as the assignee of the Loan Agreement to declare all payments under the Loan Agreement to be due and payable immediately.

Within five calendar days of the occurrence of any such acceleration, the Trustee shall notify, by first class mail, postage prepaid, the owners of all Bonds then outstanding of the occurrence of such acceleration, the date through which interest has accrued and the time and place of payment.

In addition, upon the occurrence and continuation of an Event of Default under the Indenture, the Trustee (with the written consent of the Insurer) may pursue any available remedy at law or in equity by suit, action, mandamus or other proceeding to enforce the payment of principal or redemption price of and interest on the Bonds.

The provisions described above are subject to the condition that if, after the principal of all Bonds has been so declared to be due and payable, all arrears of interest on the Bonds are paid by the Authority, and the Authority performs all other things in respect to which it may have been in default under the Indenture and pays the reasonable charges of the Trustee and of the Owners of the Bonds, including reasonable attorneys’ fees, then Owners of a majority in principal amount of the Bonds then outstanding, by notice to the Authority and to the Trustee, may annul such declaration and its consequences.

Except as otherwise described below under the heading “Rights of Insurer,” the Owners of a majority in principal of the Bonds then Outstanding will have the right, after furnishing indemnity satisfactory to the Trustee, to direct the method and place of conducting all remedial proceedings by the Trustee under the Indenture, except that such direction may not be (i) in conflict with the provisions of law and of the Indenture, (ii) unduly prejudice the rights of minority Owners or (iii) involve the Trustee in personal liability against which indemnity would not be satisfactory.

No Bondholder shall have any right to pursue any remedy under the Indenture or the Loan Agreement unless: (i) the Trustee shall have been given written notice of an Event of Default, (ii) the Holders of at least 25% in principal amount of all Bonds then Outstanding or the Insurer shall have requested the Trustee, in writing, to exercise the powers granted in the Indenture or to pursue such remedy in its or their name or names, (iii) the Trustee shall have been offered indemnity satisfactory to it against costs, expenses and liabilities, and (iv) the Trustee shall have failed to comply with such request within a reasonable time.

Notwithstanding the foregoing provisions or any other provision of the Indenture, the obligation of the Authority shall be absolute and unconditional to pay or cause to be paid, but solely from the revenues and other funds pledged under the Indenture, the principal or redemption price of and interest on, the Bonds to the respective Holders thereof on the respective due dates thereof, and nothing in the Indenture shall affect or impair the right of action, which is absolute and unconditional, of such holders to enforce such payment.

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Modifications and Amendments

The Indenture provides that it may be amended or supplemented at any time without notice to or the consent of any of the Owners of the Bonds, by a supplemental indenture consented to by the Borrower, authorized by the Authority and filed with the Trustee for any one or more of the following purposes:

(a) to add additional covenants of the Authority or to surrender any right or power conferred upon the Authority in the Indenture;

(b) for any purpose not inconsistent with the terms of the Indenture or to cure any ambiguity or to correct or supplement any provision of the Indenture or in any supplemental indenture which may be defective or inconsistent with any other provision in the Indenture or in any supplemental indenture, or to make such other provisions in regard to matters or questions arising under the Indenture which shall not be inconsistent with the provisions of the Indenture and which shall not adversely affect the interests of the holders of the Bonds, including the appointment and duties of a bond registrar or authenticating agent;

(c) to modify, eliminate or add to the provisions of the Indenture to such extent as shall be necessary to effect the qualification of the Indenture under the Trust Indenture Act of 1939 or under any similar Federal statute hereafter enacted, and to add to the Indenture such other provisions as may be expressly permitted by the Trust Indenture Act of 1939, as from time to time amended;

(d) to modify, eliminate or add to the provisions of the Indenture to such extent as shall be necessary to obtain, maintain or improve a rating of the Bonds;

(e) to grant to or confer or impose upon the Trustee for the benefit of the Owners of the Bonds any additional rights, remedies, powers, authority, security, liabilities or duties which may lawfully be granted, conferred or imposed and which are not contrary to or inconsistent with the Indenture as theretofore in effect;

(f) to permit the Bonds to be converted to, or from, certificateless securities or securities represented by a master certificate held in trust, ownership of which, in either case, is evidenced by book entries on the books of the Securities Depository, for any period of time;

(g) to permit the appointment of a co-trustee under the Indenture;

(h) to authorize different authorized denominations of the Bonds and to make correlative amendments and modifications to the Indenture regarding exchangeability of Bonds of different authorized denominations, redemption of portions of Bonds of particular authorized denominations and similar amendments and modifications of a technical nature;

(i) to modify, alter, supplement or amend the Indenture to comply with changes in the Code affecting the status of interest on the Bonds as excluded from gross income for federal income tax purposes or the obligations of the Authority or the Borrower in respect of Section 148 of the Code; and

(j) to modify, alter, amend or supplement the Indenture in any other respect which is not materially adverse to the Owners of the Bonds.

The Indenture may be amended from time to time, except with respect to (a) the principal or interest payable upon any of the Bonds, (b) the Interest Payment Dates, the dates of maturity or the redemption provisions of any of the Bonds, and (c) the provisions relating to amendments of the Indenture and the Loan Agreement by a supplemental indenture consented to by the Borrower, and approved by the Owners of at least a majority in aggregate principal amount of the Bonds then outstanding which would be affected by the action proposed to be taken. The Indenture may be amended with respect to the matters enumerated in clauses (a) through (c) above with the unanimous consent of all Owners and the Borrower.

Notwithstanding any contrary provision of the Indenture, so long as the Insurance Policy is in effect and the Insurer is not then in default of its payment obligations thereunder, neither the Indenture nor the Loan Agreement shall be amended or supplemented without the prior written consent of the Insurer.

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Discharge of Indenture

When interest on, and principal or redemption price (as the case may be) of, all Bonds issued under the Indenture have been paid, or there shall have been deposited with the Trustee an amount of (i) cash constituting Available Monies in an amount sufficient to pay in full the principal or redemption price of and interest on the Bonds, and all other sums payable under the Indenture by the Authority, (ii) noncallable Government Obligations purchased with Available Monies, the principal of and interest on which, when due, will provide sufficient moneys without reinvestment to pay in full the principal or redemption price of and interest on the Bonds, as well as all other sums payable under the Indenture by the Authority, or (iii) any combination of the foregoing, then upon receipt by the Trustee of (a) all of its necessary and proper fees, compensation and expenses, (b) an opinion of Bond Counsel (which shall also be addressed to the Insurer) that all conditions precedent to the defeasance of the lien of the Indenture have been complied with, (c) a verification report in form and substance satisfactory to the Insurer from an accountant or consultant acceptable to the Insurer to the effect that the cash and Government Obligations delivered will be sufficient to provide for the payment of the Bonds as aforesaid, and (d) other assurances from the Authority that the Trustee may deem necessary or appropriate, the right, title and interest of the Trustee in the Loan Agreement and the Trust Estate shall thereupon cease and the Trustee, on demand of the Authority or the Borrower, shall release the Loan Agreement and the Trust Estate from the lien and security interest created by the Indenture and shall execute such documents to evidence such release as may be reasonably required by the Authority or the Borrower and shall turn over to the Borrower or to such Person as may be entitled to receive the same, as it shall be directed in writing by the Borrower all balances remaining in any funds under the Indenture and the Trustee’s right, title and interest to and under the Loan Agreement.

The foregoing requirements may also be met with respect to any portion of the Bonds, as designated by the Borrower, by depositing with the Trustee cash constituting Available Monies, noncallable Government Obligations purchased with Available Monies, or any combination thereof sufficient to pay or provide for the payment of such Bonds, as described in the preceding paragraph. Upon such deposit, the Bonds for which such deposit has been made shall no longer be deemed Outstanding under the Indenture.

Rights of Insurer

Anything in the Indenture to the contrary notwithstanding, so long as the Insurance Policy insures the Bonds and the Insurer is not then in default of its payment obligations thereunder, (i) upon the occurrence and continuance of an Event of Default under the Indenture, the Insurer shall be entitled to control and direct the enforcement of all rights and remedies granted to the Registered Owners or any trustee appointed for the benefit of the Registered Owners under the Indenture as if the Insurer were the Registered Owner of the Bonds insured by it, (ii) no waiver shall be granted by the Trustee or the Authority unless the Insurer has consented in writing thereto, (iii) no action requiring approval or consent of the Registered Owners of the Bonds may be taken without the prior written consent of the Insurer, (iv) the Insurer shall receive notice of any proposed meetings of Bondholders held under the Indenture and shall be given the opportunity to attend and participate in any such meetings, (v) any legal opinions rendered to any party to the Indenture or the Loan Agreement as to compliance with or interpretation of, the provisions thereof, shall also be provided to the Insurer, and (vi) the Insurer shall be entitled to give any direction or grant any consent permitted or required to be given or granted under the Indenture or under the Loan Agreement by the Registered Owners of the Bonds, and any such direction or consent given or granted by the Insurer shall have the same effect as if given or granted by the Registered Owners of the Bonds.

So long as the Insurance Policy is in effect and the Insurer is not then in default of its payment obligations thereunder, the Insurer shall be deemed to be the owner of all Bonds for the purpose of any action permitted or required to be taken under the Bond Documents by the Registered Owners of the Bonds, including the giving of any consent, waiver or direction, provided that the Insurer shall not be permitted to consent on behalf of the Registered Owners to any amendment requiring the unanimous consent of Registered Owner of all Bonds then Outstanding. The Insurer shall have no obligation to grant consent in connection with any provision of the Bond Documents requiring the Insurer’s consent. The granting of any such consent is in the sole discretion of the Insurer.

The Insurer is recognized as a third party beneficiary with respect to the Indenture, and the Insurer is hereby recognized as a party entitled to notify the Trustee of the occurrence of an Event of Default and request the Trustee to intervene at the Insurer’s expense in judicial proceedings that affect the Bonds or the security therefor.

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BONDHOLDERS’ RISKS

General

The Bonds are limited obligations of the Authority and are payable solely from payments made pursuant to the Loan Agreement, from payments made under the Policy, and from certain funds held by the Trustee under the Indenture. No representation or assurance can be given that the Borrower will generate sufficient revenues to meet the Borrower’s payment obligations under the Loan Agreement. Future legislation, regulatory actions, economic conditions, changes in the number of students in attendance at the Borrower, or other factors could adversely affect the Borrower’s ability to generate such revenues. Neither the Underwriter nor the Authority has made any independent investigation of the extent to which any such factors will have an adverse impact on the revenues of the Borrower.

Covenant to Maintain Tax-Exempt Status of the Bonds

The tax-exempt status of the Bonds is based on the continued compliance by the Authority and the Borrower with certain covenants contained in the Indenture, the Loan Agreement and the other documents executed by the Authority, the Borrower and the Trustee. These covenants relate generally to restrictions on use of facilities financed with proceeds of the Bonds, arbitrage limitations, rebate of certain excess investment earnings to the federal government and restrictions on the amount of issuance costs financed with the proceeds of the Bonds. Failure by the Authority and/or the Borrower to comply with such covenants could cause interest on the Bonds to become subject to federal income taxation retroactive to the date of issuance of the Bonds.

Enforceability of Remedies

The remedies available to Bondholders upon an Event of Default under the Indenture or the Loan Agreement are in many respects dependent upon judicial action, which is subject to discretion or delay. Under existing law and judicial decisions, including specifically the Bankruptcy Code, the remedies specified in the Indenture and the Loan Agreement may not be readily available or may be limited. A court may decide not to order specific performance.

The various legal opinions to be delivered concurrently with the original delivery of the Bonds will be qualified as to enforceability of the various legal instruments by limitations imposed by bankruptcy, reorganization, insolvency or other similar laws or legal or equitable principles affecting creditors’ rights.

State and Federal Legislation

Legislation has been proposed in the past, and may be proposed again in the future, to eliminate the tax-exempt status of bonds issued to finance educational facilities or to limit the use of tax-exempt bonds. Any such limitation could reduce the ability of the Borrower to finance its future capital needs. The effect on the Borrower of proposed laws and regulations and of future changes in federal and state laws and policies cannot be fully or accurately determined at this time.

Other Risk Factors

In the future, the following factors, among others, may adversely affect the operations of the Borrower to an extent that cannot be determined at this time:

(1) Employee strikes and other adverse labor actions that could result in a substantial reduction in revenues without corresponding decreases in costs.

(2) Increased costs and decreased availability of public liability or other types of insurance.

(3) Changes in the demand for higher education in general or for programs offered by the Borrower in particular.

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(4) Cost and availability of energy.

(5) High interest rates, which could strain cash flow or prevent borrowing for needed capital expenditures.

(6) A decrease in student loan funds or other aid that permits many students the opportunity to pursue

higher education. (7) An increase in the costs of health care benefits, retirement plans, or other benefit packages offered

by the Borrower to its employees.

(8) Withdrawal of any current exemptions from local real estate taxes, business privilege taxes and similar impositions.

(9) Losses in investments held by the Borrower.

(10) Reduced future Borrower revenues as a result of a need to increase tuition discounting to attract students.

(11) Increased competition from other institutions of higher learning which may offer similar academic programs or may recruit similar students, and that may result in reduced enrollments and reduced Borrower revenues.

(12) Reduced ability to attract future annual or capital campaign contributions, that may limit future projects and/or the ability to address deferred maintenance.

(13) Reduced availability of qualified faculty to teach the programs offered by the Borrower.

(14) An inability to retain students, resulting in enrollment losses and reduced revenues.

(15) Future deficits as a result of increased future expenses.

LITIGATION

As of the date hereof, there is no litigation of any nature pending or, to the Authority’s or the Borrower’s knowledge, threatened against the Authority or the Borrower to restrain or enjoin the issuance, sale, execution or delivery of the Bonds or the application of the proceeds thereof as herein described, or in any way contesting or affecting the validity of the Bonds or any proceedings of the Authority taken with respect to the issuance or sale thereof, the pledge or application of any monies or security for the Bonds or the existence or powers of the Authority.

As of the date hereof, to the knowledge of the Borrower, there is no litigation pending or threatened against the Borrower wherein an unfavorable decision would adversely affect the ability of the Borrower to carry out its obligations under the Indenture or the Loan Agreement, or would have a material adverse impact on the financial position or operations of the Borrower.

CONTINUING DISCLOSURE

The Borrower has entered into a Continuing Disclosure Agreement (the “Continuing Disclosure Agreement”) with the Authority and the Trustee for the benefit of the holders of the Bonds, pursuant to Securities and Exchange Commission Rule 15c2-12 (the “Rule”). The provisions of the Continuing Disclosure Agreement are for the benefit of the beneficial owners of the Bonds and each beneficial owner is a beneficiary of the provisions of the Continuing Disclosure Agreement with the right to enforce such provisions directly against the Borrower. However, breach of the provisions of the Continuing Disclosure Agreement will not be considered an Event of Default under the Indenture or the Loan Agreement and none of the rights and remedies provided under the Indenture or the Loan Agreement upon an Event of Default (other than specific performance) will be available to the

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beneficial owners in the event of such breach. Unless otherwise required by law, no beneficial owner is entitled to damages for the Borrower’s noncompliance with its obligations under the Continuing Disclosure Agreement.

Pursuant to the Continuing Disclosure Agreement, the Borrower has undertaken to provide the following information:

(1) Annual financial information of the Borrower (“Annual Financial Information”) including:

(a) An update of certain financial information and operating data relating to the Borrower in Appendix B hereto; and

(b) Audited financial statements of the Borrower.

(2) Notice of the occurrence of any of the following events, if material (a “Material Event”):

(a) Principal and interest payment delinquencies;

(b) Non-payment related defaults;

(c) Unscheduled draws on debt service reserves reflecting financial difficulties;

(d) Unscheduled draws on credit enhancements reflecting financial difficulties;

(e) Substitution of credit or liquidity providers, or their failure to perform;

(f) Adverse tax opinions or events affecting the tax-exempt status of the Bonds;

(g) Modifications to rights of registered owners or beneficial owners;

(h) Bond calls (other than mandatory sinking fund redemptions);

(i) Defeasances;

(j) Release, substitution or sale of the property, if any, securing repayment of the Bonds; or

(k) Rating changes.

Pursuant to the Continuing Disclosure Agreement, the Borrower has covenanted that so long as any of the Bonds are outstanding, the Borrower shall provide the Annual Financial Information to each nationally recognized municipal securities information repository (“NRMSIR”) and to the appropriate State Information Depository (“SID”), if any, within 120 days after the end of each fiscal year of the Borrower, commencing with the fiscal year ending June 30, 2006. It shall be sufficient if the Borrower provides to each NRMSIR and SID the Annual Financial Information by specific reference to documents previously provided to each such repository, or filed with the Securities and Exchange Commission and, if such a document is a final official statement within the meaning of the Rule, available from the Municipal Securities Rulemaking Board.

If a Material Event occurs while the Bonds are outstanding, the Borrower shall provide notice of such Material Event to the NRMSIRs (or the MSRB) and SIDs in a timely manner. Each Material Event shall be so captioned and shall prominently state the date, title and CUSIP numbers of the Bonds.

If the Trustee is unable to verify from the Borrower that the Annual Financial Information respecting the Borrower has been provided to the repositories in accordance with the Continuing Disclosure Agreement, the Trustee shall so notify the NRMSIRs and SIDs.

The Borrower reserves the right, and agrees that the Dissemination Agent shall have the right, to forward Annual Financial Information and notices of Material Events to such electronic filing systems and entities as are

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approved by the SEC by interpretative letter or “no action” letter for receipt of this type of information in order for “participating underwriters” (as defined in the Rule) to be in compliance with the continuing disclosure requirements of the Rule (any such SEC approved filing entity is referred to as a “Central Post Office”). Filing of such information with a Central Post Office shall be in lieu of a filing with each National Repository and the State Repository, if any, on the part of the Borrower or the Dissemination Agent and shall relieve the Borrower and the Dissemination Agent of such obligation. As of the date of this Official Statement, the only Central Post Office recognized by the SEC is Disclosure USA whose website address is www.disclosureusa.org.

The continuing obligation of the Borrower to provide Annual Financial Information and notices of Material Events, and the Trustee’s obligations under the provisions of the Continuing Disclosure Agreement shall terminate immediately upon the legal defeasance, prior redemption or payment in full of the Bonds. The provisions of the Continuing Disclosure Agreement may be waived or amended without the consent of the beneficial owners of the Bonds, but only upon the Borrower’s delivery to the Trustee and the Authority of an opinion of counsel expert in federal securities laws to the effect that such amendment or waiver would not, in and of itself, violate the Rule.

Neither the Authority nor the Trustee shall have any obligation to examine or review the Annual Financial Information respecting the Borrower, nor shall the Authority or the Trustee have any duty to verify the accuracy or completeness of any Annual Financial Information.

TAX MATTERS

In the opinion of Ballard Spahr Andrews & Ingersoll, LLP, Bond Counsel, assuming the accuracy of the certifications of the Authority and the Borrower and continuing compliance by the Authority and the Borrower with the requirements of the Internal Revenue Code of 1986, as amended, and the regulations thereunder (the “Code”), interest on the Bonds is excludable from gross income for purposes of federal income tax under existing laws as enacted and construed on the date of original issuance of the Bonds. Interest on the Bonds will not be an item of tax preference for purposes of either individual or corporate federal alternative minimum tax; however, interest on a 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 federal alternative minimum tax because of its inclusion in the adjusted current earnings of the corporate holder. Interest on Bonds held by foreign corporations may be subject to the branch profits tax imposed by the Code.

The Bonds are offered at a premium (“original issue premium”) over their principal amount. For federal tax purposes, original issue premium is amortizable periodically over the term of a Bond through reductions in the holder’s tax basis for the Bond for determining taxable gain or loss from sale or from redemption prior to maturity. Amortizable premium is accounted for as reducing the tax-exempt interest on the Bond rather than creating a deductible expense or loss. Holders should consult their tax advisers for an explanation of the amortization rules.

Ownership of the Bonds may result in collateral federal income tax consequences to certain taxpayers, including, without limitation, financial institutions, property and casualty insurance companies, individual recipients of Social Security or Railroad Retirement benefits, certain S corporations and taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry the Bonds. Bond Counsel expresses no opinion regarding such collateral consequences. Prospective purchasers of the Bonds should consult with their tax advisors as to applicability of any such collateral consequences.

The Authority and the Borrower are certifying to their expectations as to the investment and use of Bond proceeds. The exclusion from gross income for federal income tax purposes of the interest on the Bonds depends on and is subject to the accuracy of the certifications by the Authority and the Borrower and continuing compliance with the applicable requirements of the Code. A failure to comply with these requirements could cause interest on the Bonds not to be excludable from gross income for federal income tax purposes as of the date of issuance of the Bonds or as of some later date.

In the opinion of Bond Counsel, under the laws of the Commonwealth of Pennsylvania as enacted and construed on the date of original issuance of the Bonds, interest on the Bonds is exempt from Pennsylvania personal income tax and corporate net income tax, and the Bonds are exempt from personal property taxes in Pennsylvania.

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LEGAL MATTERS

Legal matters incident to the authorization, issuance and sale of the Bonds are subject to the approval of Ballard Spahr Andrews & Ingersoll, LLP, Philadelphia, Pennsylvania, Bond Counsel. A signed copy of their opinion, dated and premised on facts existing and law in effect as of the date of original issuance and delivery of the Bonds, will be delivered to the Trustee at the time of such original issuance, and a copy of that opinion will be printed on or attached to the Bonds.

Certain legal matters will be passed upon for the Authority by its counsel, Buchanan Ingersoll PC, Pittsburgh, Pennsylvania. Certain legal matters will be passed upon for the Underwriter by its counsel, Morgan, Lewis & Bockius LLP, Philadelphia, Pennsylvania. Certain legal matters will be passed upon for the Borrower by its counsel, McNees Wallace & Nurick LLC, Harrisburg, Pennsylvania.

CERTAIN RELATIONSHIPS

James E. Shreiner, who is an Executive Vice President of Fulton Bank, and Linda Ruoss Schroeder, who is a Vice President and Controller of Fulton Financial Corporation, are both members of the Board of Trustees of the Borrower. Fulton Financial Advisors, National Association, an affiliate of Fulton Bank and Fulton Financial Corporation, will act as the Trustee for the Bonds and also is the trustee for the Elizabethtown Industrial Development Authority Variable Rate College Revenue Bonds (Elizabethtown College Project), Series of 2006 (the “IDA Bonds”). Fulton Bank also provides a letter of credit in connection with the IDA Bonds, and is the holder of two revenue notes issued in 2002 by the West Cornwall Township Municipal Authority and the Elizabethtown Industrial Development Authority in connection with financings for the benefit of the Borrower.

Grant Thornton LLP, which is acting as the verification agent in connection with the Bonds, has been engaged as the Borrower’s auditor in connection with the Borrower’s fiscal year 2006 audit.

RATINGS

Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc. (the “Rating Service”) has assigned its municipal bond rating of “AA” to the Bonds with the understanding that upon delivery of the Bonds a policy insuring the payment when due of the principal of and interest on the Bonds will be issued by the Insurer. The Rating Service has assigned an underlying rating of “BBB+” to the Bonds (the “SPUR”). The SPUR is a rating opinion of the stand-alone capacity of an issuer to pay debt service on a credit-enhanced debt issue, without giving effect to the enhancement that applies to it. These ratings are published only at the request of the debt issuer/obligor with the designation of SPUR to distinguish them from the credit-enhanced rating that applies to the debt issue. As long as the SPUR is outstanding, the Rating Service will surveil the issue.

Certain information and materials not included in this Official Statement was furnished to the Rating Service. Generally, such Rating Service bases its ratings on information and materials so furnished and on investigations, studies and assumptions by such Rating Service. The rating assigned to the Bonds reflects only the views of such Rating Service at the time such rating was issued, and an explanation of the significance of such rating may be obtained only from such Rating Service. Such rating is not a recommendation to buy, sell or hold the Bonds. There is no assurance that any such rating will continue for any given period of time or that it will not be lowered or withdrawn entirely by such Rating Service if, in its judgment, circumstances so warrant. Any such downward revision or withdrawal of such rating may have an adverse effect on the market price of the Bonds.

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LEGALITY FOR INVESTMENT

Under the Act, the 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 loan 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 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 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.

VERIFICATION OF CERTAIN MATHEMATICAL COMPUTATIONS

The accuracy of the mathematical computations of (i) the adequacy of the maturing principal of and interest earned on the escrow securities together with other available funds held in the escrow account, to provide for the payment of the bonds to be refunded; and (ii) the “yield” on the escrow securities and on the Bonds, prepared by the Underwriter, will be verified by Grant Thornton LLP, a firm of independent certified public accountants.

These computations will be based upon information and assumptions supplied by the Underwriter on behalf of the Borrower. Grant Thornton LLP has restricted its procedures to recalculating the computations provided by the Underwriter and has not evaluated or examined the assumptions or information used in the computations.

UNDERWRITING

The Bonds are being purchased by NatCity Investments, Inc. (the “Underwriter”). The Underwriter has agreed to purchase the Bonds at an aggregate purchase price of $24,559,692.30 (which includes an original issue premium of $529,218.30), plus accrued interest. The purchase contract by and among the Underwriter, the Authority and the Borrower (the “Purchase Contract”) provides that the Underwriter will purchase all of the Bonds, if any Bonds are purchased, and contains the agreement of the Borrower to indemnify the Underwriter and the Authority against losses, claims, damages and liabilities to third parties arising out of any materially incorrect or incomplete statements of information contained in this Official Statement pertaining to the Borrower or the Project.

OTHER MATTERS

Any statements herein involving matters of opinion, whether or not expressly so stated, are intended as such and not as representations of fact.

The foregoing references to and summaries or descriptions of provisions of the Bonds, the Insurer, the Policy, the Loan Agreement and the Indenture, and all references to other materials not stated to be quoted in full are only brief outlines of some of the provisions thereof and do not purport to summarize or describe all of the provisions thereof. Copies of the Loan Agreement and the Indenture may be obtained from the Underwriter as set forth herein under “INTRODUCTORY STATEMENT.”

Included in Appendix A to this Official Statement, is a brief description of the Borrower, a description of the Project, the name of the Borrower’s counsel, the estimated uses of the proceeds of the Bonds, a maturity schedule and a mandatory redemption schedule for the Bonds, and other information respecting the security for the Bonds. Additional information respecting the Borrower, including certain financial statements, is set forth in Appendix B hereto. The financial statements as of June 30, 2005 and 2004, and for the years then ended, included in this Official Statement, have been audited by PricewaterhouseCoopers LLP, independent auditors, as stated in their report appearing herein.

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The information set forth in this Official Statement, and in the Appendices hereto, should not be construed as representing all of the conditions affecting the Authority, the Borrower, or the Bonds. The distribution of this Official Statement has been duly authorized by the Authority and the Borrower. The Authority has not assisted in the preparation of this Official Statement, except for the statements pertaining to the Authority under the captions “THE AUTHORITY” and “LITIGATION” herein and, except as aforesaid, the Authority is not responsible for any statements made in this Official Statement. Except for the execution and delivery of documents required to effect the issuance of the Bonds, the Authority has not otherwise assisted in the public offer, sale or distribution of the Bonds. Accordingly, except as aforesaid, the Authority assumes no responsibility for the disclosures set forth in this Official Statement.

PENNSYLVANIA HIGHER EDUCATIONAL FACILITIES AUTHORITY

By: /s/ William C. Bostic William C. Bostic Executive Director

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APPENDIX A

INFORMATION REGARDING THE BORROWER, THE PROJECT AND THE BONDS

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$24,195,000 Pennsylvania Higher Educational Facilities Authority

Revenue Bonds (Association of Independent Colleges and Universities of Pennsylvania

Financing Program – Elizabethtown College Project) Series 2006 FF2

_________________________ 1. Borrower.

Elizabethtown College is located in Elizabethtown, Pennsylvania, ten minutes from Hershey and 90 minutes from Philadelphia and Baltimore. The College’s main campus is comprised of 25 major buildings set on 192 landscaped acres, including 23 acres of athletic fields.

Elizabethtown College is a comprehensive institution, offering a mix of liberal arts and professional studies with 20 departments that offer 45 majors and more than 60 minors/concentrations. The student body stands at nearly 1,800, with a full-time faculty of 125 men and women. More than 90% of the tenured or tenure track faculty hold a Ph.D. or other terminal degree.

Founded in 1899, Elizabethtown College is a centennial college, one of dozens founded in the 19th century by churches or church members for the educational advancement of their denominations. During its first two decades, the College functioned both as a college and an academy for high school-age students to bolster its program in teacher training. By 1948, the College’s advancement was recognized by accreditation in the Middle States Association and, in the following year, by acceptance in the American Council of Education.

Additional information respecting Elizabethtown College, including certain financial statements, is set forth in Appendix B to this Official Statement.

2. Counsel to the Borrower.

McNees Wallace & Nurick LLC 100 Pine Street Harrisburg, PA 17108-1166 3. Description of Project.

The project will consist of: (i) the advance refunding of the West Cornwall Township Municipal Authority College Revenue Bonds (Elizabethtown College Project), Series 2001, the proceeds of which were used to finance the design, acquisition, construction, improvement, renovation, installation and equipping of residence hall facilities, academic facilities, athletic facilities and fields and parking facilities all located on the campus of the College; (ii) the funding of a debt service reserve fund; and (iii) the payment of certain costs of issuing and insuring the Bonds.

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4. Estimated Sources and Uses of Funds.

Source of Funds Par Amount of Bonds $24,195,000.00 Reoffering Premium 529,218.30 Accrued Interest 47,045.83 Series 2001 Debt Service Reserve Fund 2,272,000.00 $27,043,264.13 Uses of Funds Refunding Project $23,902,451.33 Deposit to Debt Service Fund 47,045.83 Deposit to Debt Service Reserve Fund 2,419,500.00 Costs of Issuance1 674,266.97 TOTAL $27,043,264.13

5. Maturity Schedule. Total Par: $24,195,000

$11,075,000 Serial Bonds

Due (December 15)

Principal Amount

Interest Rate

Yield

2015 $1,355,000 5.000% 4.430% 2016 1,425,000 5.000 4.530 2017 1,495,000 5.000 4.550 2018 1,575,000 5.000 4.600 2019 1,655,000 5.000 4.640 2020 1,740,000 5.000 4.680 2021 1,830,000 5.000 4.710

$13,120,000 Term Bonds

$6,070,000 5.00% Term Bonds, Due December 15, 2024; yield: 4.770%

$7,050,000 5.00% Term Bonds, Due December 15, 2027; yield: 4.870%

(Accrued interest to be added)

1 Includes fees of the Issuer, Bond Counsel and Underwriter’s counsel, the bond insurance premium, the Underwriter’s discount, printing costs, and rating agency fees, as well as other fees.

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6. Optional Redemption.

The Bonds are subject to optional redemption prior to maturity by the Authority, at the direction of the Borrower, on or after June 15, 2016, in whole or in part at any time. Any such redemption shall be made at a redemption price equal to 100% of the stated principal amount of the Bonds to be redeemed, plus accrued interest to the redemption date.

7. Mandatory Sinking Fund Schedule.

December 15 of each of the following years

Principal Amount

2022 $1,925,000 2023 2,020,000 2024 2,125,000 (final maturity) 2025 2,235,000 2026 2,350,000 2027 2,465,000 (final maturity)

8. Pledged Revenues.

The Borrower’s obligations under its Loan Agreement will be secured by a lien on and security interest in the “Pledged Revenues” of the Borrower, on a parity with the lien on and security interest in revenues of the Borrower previously granted to secure the Borrower’s obligations respecting certain Parity Indebtedness (further described under the caption “Parity Indebtedness” below).

The term “Pledged Revenues” means and includes all receipts, revenues, income and other moneys received by or on behalf of the Borrower from the operation, ownership or leasing of all Borrower Facilities, all gifts, grants, bequests, donations and contributions received by the Borrower, and all rights to receive the same whether in the form of accounts receivable, contract rights, chattel paper, instruments, general intangibles or other rights and the proceeds thereof, including any insurance proceeds and any condemnation awards derived therefrom, whether now existing or hereafter coming into existence and whether now owned or held or hereafter acquired by the Borrower in connection with the Borrower Facilities; provided, however, that there shall be excluded from Pledged Revenues: gifts, grants, bequests, donations and contributions heretofore or hereafter made, the application of the proceeds of which is designated or restricted at the time of making thereof by the donor, payor or maker as being for certain specified purposes inconsistent with the application thereof to the payment of Loan Payments under the Loan Agreement or not subject to pledge, or subsequent to the receipt thereof, so designated or restricted by the Borrower in order to meet the requirements of any challenge grant received by the Borrower, and the income derived therefrom to the extent that it is permanently restricted in or by such designation or restriction or by law. (Capitalized terms not otherwise defined in this definition of “Pledged Revenues” have the meanings assigned to such terms under the caption “DEFINITIONS OF CERTAIN TERMS” in the forepart to this Official Statement.)

9. Outstanding Parity Indebtedness.

“Outstanding Parity Indebtedness,” with respect to the Borrower, means the obligations of the Borrower under each of the following: (i) Loan Agreement, dated January 15, 2002, between West Cornwall Township Municipal Authority and the Borrower, (ii) Loan Agreement, dated November 7, 2002, between Elizabethtown Industrial Development Authority and the Borrower,

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(iii) Reimbursement Agreement, dated March 9, 2006, between the Borrower and Fulton Bank, (iv) Swap Agreement Revenue Note Series 2004 from the Borrower to Wachovia Bank, National Association dated June 15, 2004, and (v) Swap Agreement Revenue Note Series 2005 from the Borrower to Wachovia Bank, National Association dated March 10, 2005. The documents described in clauses (i) through (v) above are collectively referred to herein as the “Parity Debt Documents.”

The Parity Debt Documents contain various covenants and agreements, solely for the benefit of the West Cornwall Township Municipal Authority, the Elizabethtown Industrial Development Authority, Fulton Bank, Wachovia Bank, National Association, the Authority and their respective assignees, that will be in effect so long as any of the Outstanding Parity Indebtedness is outstanding. A default by the Borrower in its obligations under the Parity Debt Documents could result in a default under the Indenture that secures the Series 2006 FF2 Bonds. Prior to the closing for the issuance of the Series 2006 FF2 Bonds, copies of the Parity Debt Documents may be obtained upon request to the Underwriter.

10. Additional Indebtedness.

The Borrower may incur additional indebtedness upon compliance with certain conditions set forth in the Loan Agreement and the Parity Debt Documents. To the extent permitted under the Loan Agreement and the Parity Debt Documents, such additional indebtedness may be secured by liens on and security interests in property of the Borrower, including a lien on and security interest in the Pledged Revenues on a parity with the lien on and security interest in the Pledged Revenues granted to secure the Series 2006 FF2 Bonds and the Outstanding Parity Indebtedness described in Paragraph 9 above. See “THE LOAN AGREEMENT – Incurrence of Additional Indebtedness” and “Security for Indebtedness” in the forepart to this Official Statement for a more detailed description of certain provisions of the Loan Agreement relating to the incurrence of, and security for, additional indebtedness of the Borrower.

11. Rate Covenant.

Under the Loan Agreement, the Borrower covenants that it will establish, charge and collect tuition, student fees and charges for services provided by the Borrower such that Net Revenues Available for Debt Service will equal or exceed, in each fiscal year, 110% of the Debt Service Requirement for such fiscal year.

* * * * * * * THE INFORMATION SET FORTH HEREIN AND IN APPENDIX B HERETO WITH RESPECT TO THE BORROWER IS PROVIDED FOR GENERAL INFORMATIONAL PURPOSES AND MAY NOT INCLUDE ALL INFORMATION, FINANCIAL OR OTHERWISE, WITH RESPECT TO THE BORROWER WHICH A POTENTIAL PURCHASER OF THE BONDS MIGHT DETERMINE RELEVANT IN DECIDING WHETHER TO PURCHASE ANY BONDS.

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APPENDIX B

ADDITIONAL INFORMATION RESPECTING THE BORROWER, INCLUDING CERTAIN FINANCIAL STATEMENTS

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ELIZABETHTOWN COLLEGE Elizabethtown PA 17022

Introduction and History Founded in 1899, Elizabethtown College (the “College”) is a centennial college, one of dozens founded in the 19th century by churches or church members for the educational advancement of their denominations. Elizabethtown’s heritage lies with the Church of the Brethren, one of three historic peace churches, along with the Quakers and Mennonites. During its first two decades, the College functioned both as a college and an academy for high-school-age students to bolster its program in teacher training. By the end of the 1920s, Elizabethtown enrolled 180 full-time students and 300 part-time students in 11 major programs: history, English, modern languages, business, mathematics, education, sociology, biology, chemistry, music, and Bible studies. Student life outside the classroom soon blossomed: a literary society was formed in 1920; the Alma Mater was composed by Jennie Via for a quartet of her music students; the Etonian yearbook was first published in 1922; the men’s and women’s intercollegiate debating society began in 1925; a small student orchestra appeared in 1927; men’s and women’s basketball and men’s baseball teams began competing toward the end of the decade; and the Sock & Buskin drama club’s first performance was produced in 1930. By 1948, the College’s advancement was recognized by accreditation in the Middle States Association and, in the following year, by acceptance in the American Council of Education. In 1950, Elizabethtown embarked on an ambitious fund-raising program to increase the endowment and build much-needed facilities to accommodate a rapidly expanding student body, which by 1958, had grown to almost 800. The library was moved from the first floor of Rider Hall to Zug Memorial Library, which was completed in 1950. In the following two decades, the College dedicated 10 new buildings, including several residence halls, Baugher Student Center, Nicarry Hall, and Thompson Gymnasium. In the past five decades, Elizabethtown College has continued its spectacular growth. Today, the College offers not only 43 major programs of study, but also more than 60 minors. The student body stands at nearly 1,800 with a full-time faculty of 125 men and women. Location and Facilities Elizabethtown College, located in Elizabethtown, Pennsylvania, is 10 minutes from Hershey and 90 minutes from Philadelphia and Baltimore. The College's main campus is comprised of 25 major buildings set on 192 landscaped acres, including 23 acres of athletic fields. The appearance of the campus has vastly changed throughout its history. In 1989, the Rufus P. Bucher Meetinghouse and Young Center for Anabaptist and Pietist Groups, an internationally renowned center for scholarly research, was opened on the shores of Lake Placida. The High

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Library opened in 1990, allowing Zug Memorial Hall to be transformed into a performing and fine arts teaching center. The Schreiber Quadrangle, built in 1992, provides opportunities for 120 seniors to experience independent living. A two-building, garden-style apartment complex for students, named after the late professor and Dean of Women, Vera Hackman ’25, was completed in July 2002. Leffler Chapel and Performance Center, built for concerts, lectures, religious services, conferences, and dramatic presentations, was completed in 1995. The Brossman Commons, a $12 -million expansion of student-centered facilities, conjoining the Baugher Student Center and the Annenberg Center, was completed and dedicated in 2002. Ground was broken in 2005 for the James B. Hoover Business Center, which will house the Department of Business, Family Business Center and Center for Continuing Education and Distance Learning. The Center is expected to be completed by Fall 2006. The Kevin Scott Boyd ’98 Baseball Stadium opened in 2004 and an expansion of the Thompson Gymnasium facility followed. Ground was broken in 2006 for the Masters Science, Math & Engineering Center, funded by both gifts and a portion of the proceeds of a prior issuance of debt. Accreditation and Memberships Middle States Association of Colleges and Secondary Schools Association of Collegiate Business Schools and Programs American Chemical Society, Committee on Professional Training Commonwealth of PA, Department of Education, Bureau of Teacher Certification & Preparation National Association of Schools of Music Accreditation Council for Occupational Therapy Education Council on Social Work Education, Commission on Accreditation Association of Governing Boards Council of Independent Colleges National Association of Independent Colleges & Universities Association of Independent Colleges & Universities of Pennsylvania Governance The Board of Trustees is comprised of up to 42 members. Each trustee holds office for a term of three (3) years, commencing on the first day of July following election and continuing until he/she is reelected or a successor is elected. At least eight (8) members of the Board of Trustees are required to be members of the Church of the Brethren, including at least two (2) each from the Atlantic Northeast and Southern Pennsylvania Districts, Church of the Brethren. In addition, at least eight (8) members of the Board of Trustees shall be graduates of Elizabethtown College. Officers of the Board are elected annually and there are no term limits for Board members. Overall, there are seven active committees of the Board with three subcommittees. The President of the College, who serves at the pleasure of the Board of Trustees, along with the General Secretary of the Church of the Brethren, and the District Executives of the Atlantic Northeast District and Southern District of Pennsylvania Church of the Brethren, are ex-officio members of the Board of Trustees with voice but no vote.

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Board Members Chair David E. Hosler '72 Vice President, Corporate Affairs Murray Insurance Associates Lancaster, PA Vice Chair & Treasurer Richard E. Jordan II '70 Chairman and CEO Smith Land and Improvement Corporation Camp Hill, PA Secretary Janice L. Ruhl '54, honorary degree 1998 President Ruhl Insurance Manheim, PA Assistant Secretary Linda L. Castagna '67, honorary degree 2003 Lancaster, PA Members Kyoko Utsumi Akanoma '67 Civic Leader Tokyo, Japan Kenneth L. Bowers '59, honorary degree 1999 Vice President, Corporate Communications (retired) Hershey Foods Corp. Hershey, PA Richard Brezovec '70 Partner Ernst & Young New York, NY James S Clemens '70 President, CEO and Chairman Clemens Family Markets Kulpsville, PA

Rev. Joe Detrick (ex officio) District Executive Church of the Brethren New Oxford, PA John W. Espenshade '71 Attorney Stevens & Lee Lancaster, PA Steven Falk '76 Publisher and President San Francisco Chroncile San Francisco, PA Dr. Roberta L. Gartside '76 Plastic Surgeon New Image Plastic Surgery Assoc., PLC McLean, VA Dr. William R. Hartman Jr. '69 Superintendent York Suburban School District York, PA Dr. Robert A. Hess '50 Professor of History and African Studies Messiah College Grantham, PA Terry G. Koons '70 Co-owner and Manager The Butcher Shoppe Chambersburg, PA Karl A. Lehman '74 Partner Rager, Lehman and Houck, P.C. Hanover, PA

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Dr. Theodore E. Long (ex officio) President Elizabethtown College Elizabethtown, PA Mark S. McNaughton '85 State Representative 104th District Pennsylvania House of Representatives Harrisburg, PA Dr. Philip P. Metzger '68 Surgeon Mayo Clinic Jacksonville Jacksonville, FL Edward R. Murphy Facility Manager (retired) West Publishing Company East Stroudsburg, PA Carl H. Myers '63 Vice President and General Manager UGI Energy Services, Inc. Wyomissing, PA Stan Noffsinger (ex officio) General Secretary Church of the Brethren General Board Elgin, IL Dusty Putnam '72 Vice President Fenimore Asset Management Cobleskill, NY Dr. Thomas A. Risser '68 Cardiologist, Instructor in Medicine Harvard Cambridge Health Alliance Cambridge, MA

Linda Ruoss Schroeder '77 Vice President and Bank Controller Fulton Financial Corporation Lancaster, PA James E. Shreiner '73 Executive Vice President Fulton Bank Lancaster, PA Rev. Craig H. Smith (ex officio) District Executive Church of the Brethren Elizabethtown, PA Anne B. Sweigart, honorary degree 2000 Chairman, President and CEO D&E Communications Ephrata, PA Patricia A. Warehime '76 LIU Preschool Program New Oxford, PA Dr. Jane Idell Wenger '65 Lancaster, PA Dr. Edward E. White Jr. Owner, Dentist Elizabethtown Dental Associates Elizabethtown, PA T. Albert Yamada '62 President Masaoka & Associates Washington, DC

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Principal Officers Dr. Theodore E. Long, President

• Assumed presidency September 1996 • Served as provost and vice president for academic affairs at Merrimack College, North

Andover, Massachusetts • Taught sociology at George Washington University, Hollins College, and Washington &

Jefferson College • Bachelors degree from Capital University • Masters degree in sociology from Duke University • Doctorate in sociology from University of Virginia • Published articles and reviews in Sociological Theory, Journal for the Scientific Study of

Religion, Sociology of Religion, Sociological Focus, and Contemporary Sociology • Served as president of the Association for the Sociology of Religion • Member of the Board of Trustees at Capital University, the Economic Development

Corporation of Lancaster County, the Lancaster Chamber of Commerce and Industry, and the historic Fulton Opera House in Lancaster

David L. Parkyn, Provost & Senior Vice President

• Professor of Religious Studies • Served as faculty member at Endicott College & Messiah College • Served as the director of general education and assessment, vice president for planning

and senior vice president for Messiah College • Bachelors degree from Messiah College • Masters degree from Gordon Conwell Seminary • Doctorate from Boston College • On July 1, 2006, Dr. Parkyn will assume the Presidency of North Park University in

Illinois David C. Beidleman, Vice President for Institutional Advancement

• Served as assistant and associate director of alumni programs at Lehigh University • Worked in areas of major gifts, corporate gifts, and as director of regional campaigns at

Lafayette College • Served as director of major gifts, director of development and associate vice president for

college advancement at Franklin & Marshall College • Bachelors and Masters degrees from Lehigh University

Paul M. Cramer, Vice President for Enrollment

• Previously served as Director of Admissions at Ursinus College • Bachelors degree in psychology and business administration from Albright College

David B. Dentler, Vice President for Administration

• Secretary to the College’s Board of Trustees • Served in the human resources and business offices at Temple University Harrisburg

Center and Harrisburg Area Community College • Bachelors degree from Indiana University of Pennsylvania • Masters degree from Temple University

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Randolph L. Trostle, Vice President for Finance

• Served as chair of the Department of Business, Acting Dean of the Faculty, and Interim Treasurer

• Bachelors degree from Elizabethtown College • Masters degrees in business administration and education from Shippensburg University • Doctorate in finance and economics from Lehigh University • Serves as chair of the Lancaster County Hospital Authority

Academic Programs Profile Elizabethtown College is a comprehensive institution offering mix of liberal arts and professional studies with 20 departments offering 45 majors, and more than 60 minors/concentrations. Core curriculum emphasizing arts, humanities and sciences develops interpersonal communication, writing, creative thinking, decision-making, problem-solving skills, and internship and externship programs. Majors Accounting Actuarial Science Art Biochemistry Biology Biotechnology Business Administration Chemistry Communications Computer Engineering Computer Science Criminal Justice Economics Elementary Education Engineering (dual degree program) Engineering Physics English Environmental Science French German Health and Occupation

History Industrial Engineering Information Systems International Business Mathematics Music Music Education Music Therapy Occupational Therapy Philosophy Physics Political Philosophy and Legal Studies Political Science Psychology Religious Studies Secondary Education Social Work Sociology-Anthropology Spanish Theatre

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Minors Anthropology Art: History Art: Studio Biochemistry Biology Chemistry Communications Computer Science Economics English Literature French German History Information Systems

Japanese Mathematics Music Philosophy Physics Political Science Professional Writing Psychology: Child Psychology: General Religious Studies Sociology Spanish Theatre

Interdisciplinary Programs Biology/Allied Health Doctor of Osteopathic Medicine Forestry and Environmental Management Cardiovascular Invasive Specialty Political Philosophy/Legal Studies Pre-Law Program

Premedical and Other Health Professions Primary Care Pre-Admissions Premedical Primary Care Citizenship Education Certification General Science Certification Social Sciences Certification

Interdisciplinary Minors Peace and Conflict Studies General Science Anabaptist and Pietist Studies

International Studies Human Services Women and Gender Studies

Faculty And Staff Profile The College employs 400 employees, including faculty, administrators, staff support, custodial and maintenance crews. The faculty of Elizabethtown College consist of 125 full-time faculty; more than 90% of the tenured or tenure track faculty hold a Ph.D. or other terminal degree in their respective fields. The student to faculty teaching ratio is approximately 13:1.

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Elizabethtown College awards tenure only after a thorough review and with primary consideration given to teaching skills and commitment to students. Approximately 49% of the faculty is tenured. The faculty is highly credentialed with 80% of the faculty holding doctorates or terminal degrees in their field, as indicated in the following table:

Total Doctorate Master Bachelor Full Professor 22.0 Associate Professors 54.5 Assistant Professors 37.0 Lecturers 11.0 Total 124.5 100.0 24.5 Total Percentage 100% 80% 20% Tenured 61 The College faculty is responsible for establishing courses of study and requirements for graduation. Faculty representatives sit on most of the standing committees of the Board of Trustees and the Chair of the Faculty attends Board meetings. Employee Relations None of the College's faculty or staff is represented by a collective bargaining unit. Student Profile In the fall of 2005, 2,206 full and part-time students attended Elizabethtown College (or 2,032 FTE students). As a traditional residential college, 1,525 of the students live on campus while 681 commute. The following table breaks down student population by gender over the past five years: Fall 2005 Fall 2004 Fall 2003 Fall 2002 Fall 2001

Men 754 732 691 680 714 Women 1,452 1,393 1,297 1,221 1,174 Total 2,206 2,125 1,988 1,901 1,888

The following table details the geographical distribution of the College's non-foreign students: Pennsylvania 70% Middle Atlantic 23% New England 5% Midwest, South and West 2%

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Student Housing Number of students living on Campus:

2000–2001 1,455 2001–2002 1,461 2002-2003 1,492 2003-2004 1,535 2004-2005 1,525

Admissions and Enrollment The following table sets forth applications, acceptances, enrollment, and freshman average SAT scores for the current and past six academic years:

2006-07* 2005-2006 2004-2005 2003-2004 2002-2003 2001-2002 2000-2001 Applications 3,535 2,809 2,810 3,157 2,727 2,686 2,982 Freshmen 3,369 2,688 2,688 2,904 2,539 2,504 2,763 Transfers 166 121 122 253 188 182 219 Accepted 1,968 1,744 1,743 1,915 1,860 1,736 1,956 Percentage 56% 62% 62% 61% 68% 65% 66% Enrolled 585 566 548 581 539 504 550 Freshmen 557 521 508 536 496 462 518 Transfers 28 45 40 45 43 42 32

*as of May 22, 2006 Average SAT scores of Elizabethtown College freshmen:

2000–2001 1120 2001–2002 1110 2002-2003 1110 2003-2004 1130 2004-2005 1110 2005-2006 1114 2006-2007 1115

Total Enrollment:

2000–2001 1,817 2001–2002 1,888 2002-2003 1,901 2003-2004 1,988 2004-2005 2,125 2005-2006 2,206 2006-2007 2,206 (estimated)

B-10

Tuition and Fees The following table details tuition and room and board charges for each of the last five fiscal years: Percentage Year Tuition Room and Board Total Increase 2001-2002 $20,200 $5,800 $26,000 5.3% 2002-2003 $21,350 $6,000 $27,350 5.2% 2003-2004 $22,500 $6,300 $28,800 5.3% 2004-2005 $23,710 $6,600 $30,310 5.2% 2005-2006 $25,200 $6,900 $32,100 5.9% 2006-2007 $26,950 $7,300 $34,250 6.7% Student Financial Aid The percentage of full-time students receiving financial aid for the fall 2005 semester was approximately 96%. Assistance supplements the contribution that a student and his or her family make toward the educational fees. Financial aid packages consist of federal and state grants and loans, institutional grants and scholarships, work-study opportunities, and outside grants and scholarships. In addition, the College offers a deferred tuition payment plan administered by a third party along with private loans. Financial aid is awarded on a need basis, utilizing federal guidelines. The composition of each financial aid package varies according to financial need. In the 2005-2006 academic year Elizabethtown College students received $19,283,000 in financial aid provided by the College. State and federal aid programs and other outside sources provided the remaining support. Competition (2005 – 2006) The following table lists (in alphabetical order) the regional colleges and universities that, in the view of the College, primarily competed with the College for qualified students for the 2005-2006 academic year:

B-11

Institution Tuition Room & Board Location Albright College $26,032 $7,888 PA Delaware Valley College 21,814 8,130 PA Elizabethtown College 25,200 6,900 PA Gettysburg College 31,750 7,794 PA Juniata College 25,890 7,240 PA King’s College 21,220 8,590 PA Lebanon Valley College 24,860 6,840 PA Lycoming College 24,155 6,542 PA Messiah College 22,110 6,800 PA Moravian College 25,263 7,530 PA Susquehanna University 26,265 7,200 PA University of Scranton 24,010 9,904 PA Widener University 24,920 8,520 PA Wilkes University 21,646 9,240 PA Litigation The College, like other similar institutions, is subject to a variety of suits and proceedings arising in the ordinary course of business. In the opinion of the College there is no litigation of any nature pending or threatened wherein an unfavorable decision would have a material adverse impact on the financial condition of the College. Accounting Matters Potential purchasers of the College's Bonds should read the College's audited financial statements for the year ended June 30, 2005, in their entirety for more complete information regarding the College's financial position. The financial statements as of June 30, 2005, and the related notes to the same are included at the end of this description of the College. The College has engaged new auditors for the fiscal year ended June 30, 2006. This engagement does not reflect any disagreement with respect to the application of generally accepted accounting principles. In the opinion of the administration of the College, there has been no material adverse change in the financial condition of the College since June 30, 2005, the most recent date for which audited financial statements are published. Investment Policy The investment policies and objectives applied to the College Endowment and Investment Pool are the responsibility of the Investment Committee, a sub-committee of the Finance Committee of the Board of Trustees. An Investment Office Manager and professional investment management firms (selected on the basis of performance, reputation and investment philosophy) manage the funds. The Committee also employs the services of an investment consulting firm (CRA RogersCasey) to assist in asset allocation and in evaluating the performance of investment

B-12

management firms. The performance of management firms is measured against appropriate benchmarks. The Committee has approved a spending policy which states that the annual distribution amount will be the lesser of $2,000,000 minus $50,000 per year or 6% of the trailing 12 quarters’ average market value. Once the Endowment’s market value has increased to the point that 4% of the trailing 12 quarters’ average market value exceeds that year’s calculated annual distribution amount, the spending rate policy from that point forward will be calculated at 4% of the trailing 12 quarters’ average market value. The percentage expended for the years ended June 20, 2005 and 2004 were 5.15% and 5.52% respectively. Fund-Raising Activities Voluntary financial support for the College continues to be strong. The last comprehensive campaign (1994-1999) exceeded expectations by raising over $25 million. Starting in 2000, the College initiated a $35 million campaign, To Serve Tomorrow, which was designed to raise funds for facilities and endowment. The College met the original $35 million goal more than a year ahead of schedule in January 2006. At that time the Board of Trustees raised the Campaign goal to $40 million. As of May 23, 2006, the College has raised over $37.8 million. As part of this Campaign the College has met a Kresge Foundation Challenge and is well on the way toward meeting a National Endowment for Humanities $2 million challenge grant, having raised $1.3 million to date. This Campaign will significantly add to the College’s physical plant and endowment resources. The number of new capital donors to the College with multi-year pledges has increased significantly as a result of the Campaign effort. Donors continue to be supportive of the College’s needs when those needs are effectively articulated. The Annual Fund remains the foundation for all giving. By engaging ever increasing donor support through the Annual Fund, the College believes its donors will be more likely to support future endowment and capital project needs. Since the beginning of the current Campaign the Annual Fund continues to grow at a steady pace. For example, the unrestricted Annual Fund has grown by 15% since FY 2001 reaching $771,000 in FY 2005. In addition, the College has increased its total donors by over 6% over this same time-period. Total giving to the College last year achieved steady growth with $3.8 million raised. This year, $11.6 million has already been raised in cash and deferred gifts. This total includes a $4 million cash contribution that is the largest cash gift in the College’s history. The total number of donors to the College increased as well, with donors continuing to provide support for scholarships, facilities, academic programs and general operating expenses. The number of major donor prospects has increased to 855 from 496 over the last two years. College management believes this strong pattern of giving will continue. A comprehensive three-year plan for Institutional Advancement was approved this Spring by the Board of Trustees and supports the current budget model. This plan outlines growth opportunities in each of the functional areas of fundraising with particular emphasis on the Annual Fund and Major Gifts. To support the increased growth in current contributions, the College has allowed the Office of Institutional Advancement to hire additional staff and has allocated additional budgetary resources to the department.

B-13

Management Discussion Enrollment has shown both growth and stability over the past ten years, rising from 1,753 students in the Fall of 1995 to 2,206 in the Fall of 2005. Retention has also been very good as evidenced by a Freshman to Sophomore return rate of 86.2% for the 2005-06 academic year. The College’s increasing enrollment has in part resulted from an expansion of its geographic draw, with recruiting activities in the Baltimore, Washington, D.C. and northern Virginia regions. The College will open the new Hoover Business Center in the Fall 2006 semester. This state-of-the-art, 30,000 square-foot facility will house the Department of Business, the Family Business Center and the Center for Continuing Education and Distance Learning. In addition, the College recently broke ground for the new Biology wing of the Masters’ Science, Math and Engineering Center. The new, 33,000 square-foot Biology wing will house new laboratories and faculty offices allowing students and faculty to better collaborate in research and learning activities. The College has been served by a strong senior administration. The President has been at Elizabethtown for 10 years and the Vice President for Administration for nine years. Recent hires include a Dean of Students, a Dean of the Faculty, and a Vice President for Finance who plans to join the College in August of 2006. These additions will support and enhance the management of the College in the future and support the efforts of the College’s Strategic Vision.

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APPENDIX C

SPECIMEN FINANCIAL GUARANTY INSURANCE POLICY

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Form FMLI-0101 (rev. 8/02)

Page 1 of 2

FINANCIAL GUARANTY INSURANCE POLICY

Obligor: Bonds: Bond Trustee: Insurance Trustee: Policy Number: Premium: Radian Asset Assurance Inc. ("Insurer"), a corporation organized under the laws of the State of New York, in consideration of the payment of the premium and subject to the terms of this Policy, hereby unconditionally and irrevocably guarantees the payment of the Obligation (hereinafter defined) to the Insurance Trustee for the benefit of the Holders (hereinafter defined) from time to time of the Bonds. This Policy does not insure against any risk other than nonpayment of the Obligation by or on behalf of the Obligor or any other obligor to the Bond Trustee. Nonpayment includes recovery from a Holder of Bonds or the Bond Trustee of any portion of the Obligation pursuant to a final judgment by any court of competent jurisdiction holding that such payment constituted a voidable preference within the meaning of any applicable bankruptcy law. Upon receipt by the Insurer of telephonic or telegraphic notice, such notice subsequently confirmed to the Insurer in writing by registered or certified mail, from the Insurance Trustee that the Obligor (or other obligor responsible for payment of the Obligation) has failed to provide the Bond Trustee with sufficient funds for payment of the Obligation on the Due Date (hereinafter defined), the Insurer shall, not later than such Due Date or the first business day after receipt of such notice, whichever is later, pay to the Insurance Trustee for the benefit of the Holders of the Bonds an amount which shall be sufficient to pay the Obligation, but only upon receipt by the Insurer, in a form reasonably satisfactory to it, of (a) evidence of the Holder's right to receive such payment and (b) evidence, including any appropriate instruments of assignment, that all the Holder's rights with respect to such payment shall thereupon vest in the Insurer. "Due Date" means, when referring to the principal of the Obligation, the stated maturity date thereof or the date on which the same shall have been duly called for mandatory sinking fund prepayment and does not refer to any earlier date on which payment is due by reason of any other call for redemption, acceleration or other advancement of maturity unless the Insurer shall elect, in its sole discretion, to pay such principal due upon such redemption, acceleration or other advancement of maturity together with any accrued interest to the date of redemption, acceleration or other advancement of maturity. Tendering of payment, to the Bond Trustee, of such principal due upon such redemption, acceleration or other advancement of maturity, together with any accrued interest to the date of such redemption, acceleration or other advancement of maturity, shall satisfy the Insurer's obligations under this Policy, in full. When referring to interest on the Obligation, "Due Date" means the stated date for payment of interest.

Form FMLI-0101 (rev. 8/02)

Page 2 of 2

The Insurer shall, to the extent of any payment made by it pursuant to this Policy, be deemed to have acquired and become the Holder of the Bonds or portions thereof or interest thereon paid from such payment and shall be fully subrogated to all rights to payment thereof. As used herein, the term “Holder” or "Holders" means the registered owners of the Bonds as indicated in the registration books maintained by the Bond Trustee for such purpose at the time of nonpayment of the Obligation. The terms “Holder” or “Holders” shall not include the Obligor or any person or entity whose direct or indirect obligation constitutes the underlying security for the Obligation. As used herein, the term "Bond Trustee" means the Bond Trustee above named and any successor trustee duly appointed. As used herein, the term "Insurance Trustee" means the Insurance Trustee above named and any successor insurance trustee duly appointed. As used herein, the term "Obligation" means the payment of principal and interest regularly scheduled to be paid on the Bonds, which shall have become due for payment but shall be unpaid on the Due Date, but does not include any premium payable with respect to the Bonds, nor any redemption (except mandatory sinking fund redemption), acceleration or other advancement of maturity. This Policy is non-cancelable for any reason. Premiums paid on this Policy are not refundable for any reason including without limitation the payment prior to maturity of the Bonds. IN WITNESS WHEREOF, the Insurer has caused this Policy to be issued to the Insurance Trustee for the benefit of the Holders from time to time of the Bonds and to be executed and delivered by its duly authorized officer to become effective and binding upon the Insurer by virtue of the execution and delivery thereof on this [DATE].

RADIAN ASSET ASSSURANCE INC.

By: _______________________ Name: [ANALYST] Title: [TITLE]

INSURANCE GUARANTY FUND NOTICES Connecticut In the event the Company becomes insolvent, any claims arising under this Policy

are excluded from coverage by the Connecticut Insurance Guaranty Association. Florida The insurance provided by this Policy is not covered by the Florida Insurance

Guaranty Association created under part II of chapter 631 of the Florida Insurance Code.

New York This Policy is not covered by the Property/Casualty Insurance Security Fund established by Article 76 of the New York Insurance Law.

Texas In the event the insurer is unable to fulfill its contractual obligation under this Policy, the policyholder is not protected by the Texas Property and Casualty Insurance Guaranty Act.

THE ASSOCIATION OF INDEPENDENT COLLEGES AND UNIVERSITIES OF PENNSYLVANIA*

Albright College La Salle UniversityAllegheny College Lebanon Valley CollegeAlvernia College Lehigh UniversityAmerican College Lycoming CollegeArcadia University Manor CollegeBaptist Bible College Marywood UniversityBryn Athyn College of the New Church Mercyhurst CollegeBryn Mawr College Messiah CollegeBucknell University Moore College of Art and DesignCabrini College Moravian CollegeCarlow University Mount Aloysius CollegeCarnegie Mellon University Muhlenberg CollegeCedar Crest College Neumann CollegeChatham College Peirce CollegeChestnut Hill College Pennsylvania College of Art and DesignCollege Misericordia Pennsylvania Institute of TechnologyDelaware Valley College Philadelphia Biblical UniversityDeSales University Philadelphia College of Osteopathic MedicineDickinson College Philadelphia UniversityDrexel University Point Park UniversityDuquesne University Robert Morris UniversityEastern University Rosemont CollegeElizabethtown College Saint Francis UniversityFranklin & Marshall College Saint Joseph’s UniversityGannon University Saint Vincent CollegeGeneva College Seton Hill UniversityGettysburg College Susquehanna UniversityGratz College Swarthmore CollegeGrove City College Thiel CollegeGwynedd-Mercy College University of the ArtsHarcum College University of the Sciences in PhiladelphiaHaverford College University of ScrantonHoly Family University Ursinus CollegeImmaculata University Valley Forge Military CollegeJuniata College Villanova UniversityKeystone College Washington and Jefferson CollegeKing’s College Waynesburg CollegeLackawanna College Westminster CollegeLafayette College Widener UniversityLake Erie College of Osteopathic Medicine Wilkes UniversityLancaster Bible College Wilson CollegeLa Roche College York College of Pennsylvania

* Neither AICUP nor any AICUP member (other than any AICUP member in its individual capacity as the Borrowerof proceeds of a particular Series of Bonds) has any liability for the repayment of any Series of Bonds, or the loanof Bond proceeds to the Borrower.