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HomeMy WebLinkAboutResolution - 6286 - Approving Issuance Of Bonds - LEFA Inc - LCU - 04/22/1999w V, Resolution No. 6286 Item No. 35 April 22, 1999 A RESOLUTION APPROVING THE ISSUANCE OF BONDS BY LUBBOCK EDUCATIONAL FACILITIES AUTHORITY, INC. TO ASSIST LUBBOCK CHRISTIAN UNIVERSITY AND CONTAINING OTHER PROVISIONS RELATING TO THE SUBJECT. WHEREAS, Section 53.35(b) of the Texas Education Code, as amended, authorizes the creation and organization of nonprofit educational facility corporations to act as duly constituted authorities and instrumentalities of cities for the purpose of aiding institutions of higher education, secondary schools, and primary schools in providing educational facilities and housing facilities and facilities incidental, subordinate or related thereto or appropriate in connection therewith; and WHEREAS, the Higher Education Authority Act, Chapter 53, Texas Education Code (the "Act"), authorizes such nonprofit educational facilities corporations to issue revenue bonds and notes and to utilize the proceeds from the sale of such obligations to pay all or a part of the cost of one or more projects pursuant to the provision of the Act; and WHEREAS, in order to promote and carry out the public purposes set forth in the Act, the City Council (the "Governing Body") of the City of Lubbock, Texas (the "City'), has approved the creation of a nonprofit corporation under the Act to be designated and known as Lubbock Educational Facilities Authority, Inc. (the "Corporation"), WHEREAS, pursuant to Section 147(f) of the Internal Revenue Code of 1986, as amended (the "Code"), the Corporation conducted a public hearing on March 25, 1999 at 5:30 p.m., following reasonable public notice, with respect to the issuance of bonds by the Corporation in an amount not to exceed $12,000,000 to assist Lubbock Christian University (the "Bonds"); WHEREAS, in order to satisfy requirements of the Code, it is necessary for the City, by and through its applicable elected representative, as defined in the Code, to approve the issuance of the Bonds following the holding of a public hearing; Resolution - Lubbock Educational Facilities Authority, Inc. Page 1 WHEREAS, pursuant to Section 1.3 of the Corporation's by-laws, no issue of bonds shall be sold and delivered by the Corporation without a written ordinance or resolution of the Governing Body approving the issuance of the bonds; NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF LUBBOCK THAT: Section 1. In compliance with Section 147(f) of the Code and Section 1.3 of the by-laws of the Corporation, the Governing Body of the City hereby approves the issuance of revenue bonds by the Corporation in an amount not to exceed $12,000,000 to (1) obtain funds for Lubbock Christian University to finance or refinance the cost of constructing, renovating, acquiring, and equipping educational facilities, housing facilities, and facilities incidental, subordinate, or related thereto or appropriate in connection therewith, including: renovation of three existing residence halls, construction of new student residence facilities, construction of a multi -use center to be known as Rip Griffin Center, and refinancing of existing debt used to acquire, construct and improve existing educational and housing facilities on the Lubbock Christian University campus, (2) set aside certain funds for the payment and security of the Bonds, and (3) pay certain expenses in connection with issuance of the bonds. Section 2. The Governing Body of the City hereby finds, determines, recites and declares that the obligations of the Corporation shall not be deemed an indebtedness, liability, general, special or moral obligation or pledge or loan of the faith or credit or taxing power of the State of Texas, the City or any other political subdivision or governmental unit, nor shall such obligations constitute an indebtedness within the meaning of any constitutional or statutory debt limitation or restriction, or an agreement, obligation or indebtedness of the City or the State of Texas within the meaning of any constitutional or statutory provision whatsoever. Resolution - Lubbock Educational Facilities Authority, Inc. Page 2 Section 3. By the adoption of this Resolution, the City assumes no responsibility for any costs or expenses incurred in connection with the issuance of any obligations by the Corporation to finance and/or operate its program. Section 4. The Governing Body of the City has considered evidence of the posting of notice of this meeting and officially finds, determines, recites and declares that a sufficient written notice of the date, place, and hour of this meeting and of the subject of this resolution was posted for at least seventy-two (72) hours before this meeting was convened; that such notice was posted on a bulletin board located at a place convenient to the general public in the City Hall of the City of Lubbock, Texas; that such place was readily accessible to the general public at all times from the time of each such posting until this meeting was convened; and that this meeting has been open to the public at all times during which this resolution and the subject matter thereof has been discussed, considered and formally acted upon; all as required by the Open Meetings Act, Chapter 552, Texas Government Code, as amended. The Governing Body of the City further ratifies, approves and confirms such written notice and the contents and posting thereof. Section 5. Should any portion or part of this resolution be held for any reason to be invalid or unenforceable, the same shall not be construed to affect any other valid portion hereof, but all valid portions hereof shall remain in full force and effect and to this end all provisions of this resolution are hereby declared to be severable. Section 6. This resolution shall be passed finally on the date of its introduction and shall take effect immediately upon its passage. Resolution - Lubbock Educational Facilities Authority, Inc. Page 3 02-x( PASSED AND ADOPTED this 22nd day of April _ , 1999. CITY OF LUBBOCK, TEXAS Mayor ATTEST: L Lt-'�Lo�- City APPROVED AS TO CONTENT: 4" A�_C� Betsy Bucy, Director of Fina ce APP OVED AS TO FORM: v Anita Burgess, City Attorney (CITY SEAL) MALF,FA\Crf Y-RES.007 April 15, 1499 Resolution - Lubbock Educational Facilities Authority, Inc. Page 4 RECEIPT The undersigned, on behalf of the City of Lubbock, Texas, acknowledges receipt of the Notice to the City of Lubbock executed by the President of Lubbock Educational Facilities Authority, Inc. and the attachments thereto. Dated: April 22, 1999 CITY OF LUBBOCK. TEXAS M. LEFX CITY3NOT April 15. 1999 Notice to City of Lubbock Resolution No. 6286 Item No. 35 April 22, 1999 A RESOLUTION APPROVING THE ISSUANCE OF BONDS BY LUBBOCK EDUCATIONAL FACILITIES AUTHORITY,' INC. TO ASSIST LUBBOCK CHRISTIAN UNIVERSITY AND CONTAINING OTHER PROVISIONS RELATING TO THE SUBJECT. WHEREAS, Section 53.35(b) of the Texas Education Code, as amended, authorizes the creation and organization of nonprofit educational facility corporations to act as duly constituted authorities and instrumentalities of cities for the purpose of aiding institutions of higher education, secondary schools, and priman- schools in providing educational facilities and housing facilities and facilities incidental, subordinate or related thereto or appropriate in connection therewith; and WHEREAS, the Higher Education Authority Act, Chapter 53, Texas Education Code (the "Act'), authorizes such nonprofit educational facilities corporations to issue revenue bonds and notes and to utilize the proceeds from the sale of such obligations to pay all or a part of the cost of one or more projects pursuant to the provision of the Act; and WHEREAS, in order to promote and carry out the public purposes set forth in the Act, the City Council (the -Governing Body") of the City of Lubbock. Texas (the "City-), has approved the creation of a nonprofit corporation under the Act to be designated and known as Lubbock Educational Facilities Authority, Inc. (the "Corporation"); WHEREAS, pursuant to Section 147(f) of the Internal Revenue Code of 1986, as amended (the "Code"), the Corporation conducted a public hearing on March 25, 1999 at 5:30 p.m., following reasonable public notice, with respect to the issuance of bonds by the Corporation in an amount not to exceed $12,000.000 to assist Lubbock Christian University (the "Bonds"); WHEREAS, in order to satisfy requirements of the Code. it is necessary for the City. by and through its applicable elected representative, as defused in the Code, to approve the issuance of the Bonds following the holding of a public hearing; Resolution - Lubbock Educational Facilities Authority, Inc. Page 1 WHEREAS, pursuant to Section 1.3 of the Corporation's by-laws, no issue of bonds shall be sold and delivered by the Corporation without a written ordinance or resolution of the Governing Bode approving the issuance of the bonds; NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF LUBBOCK THAT: Section 1. In compliance with Section 147(f) of the Code and Section 1.3 of the by-laws of the Corporation, the Governing Body of the City hereby approves the issuance of revenue bonds by the Corporation in an amount not to exceed $12.000,000 to (1) obtain funds for Lubbock Christian University to finance or refinance the cost of constructing, renovating, acquiring, and equipping educational facilities, housing facilities. and facilities incidental, subordinate. or related thereto or appropriate in connection therewith, including: renovation of three existing residence halls, construction of new student residence facilities, construction of a multi -use center to be known as Rip Griffin Center. and refinancing of existing debt used to acquire, construct and improve existing educational and housing facilities on the Lubbock Christian University campus, (2) set aside certain funds for the payment and security of the Bonds, and (3) pay certain expenses in connection with issuance of the bonds. Section 2. The Governing Body of the City hereby finds, determines, recites and declares that the obligations of the Corporation shall not be deemed an indebtedness, liability, general. special or moral obligation or pledge or loan of the faith or credit or taxing power of the State of Texas, the City or any other political subdivision or governmental unit, nor shall such obligations constitute an indebtedness within the meaning of an". constitutional or statutory debt limitation or restriction, or an agreement, obligation or indebtedness of the City or the State of Texas within the meaning of any constitutional or statutory provision whatsoever. Resolution - Lubbock Educational Facilities Authority, Inc. Page 2 Section 3. By the adoption of this Resolution, the Cite assumes no responsibility for any costs or expenses incurred in connection with the issuance of any obligations by the Corporation to finance and/or operate its program. Section 4. The Governing Body of the City has considered evidence of the posting of notice of this meeting and officially finds, determines, recites and declares that a sufficient written notice of the date, place, and hour of this meeting and of the subject of this resolution was posted for at least seventy-two (72) hours before this meeting was convened; that such notice was posted on a bulletin board located at a place convenient to the general public in the City Hall of the City of Lubbock, Texas; that such place was readily accessible to the general public at all times from the time of each such posting until this meeting was convened; and that this meeting has been open to the public at all times during which this resolution and the subject matter thereof has been discussed, considered and formally acted upon. all as required by the Open Meetings Act, Chapter 552, Texas Government Code, as amended. The Governing Body- of the City further ratifies, approves and confirms such written notice and the contents and posting thereof. Section 5. Should any portion or part of this resolution be held for any reason to be invalid or unenforceable, the same shall not be construed to affect any other valid portion hereof, but all valid portions hereof shall remain in full force and effect and to this end all provisions of this resolution are hereby declared to be severable. Section 6. This resolution shall be passed finally on the date c,f its introduction and shall take effect immediately upon its passage. Resolution - Lubbock Educational Facilities Authority, Inc. Page 3 PASSED AND ADOPTED this 22nd day of April = . 1999. CITY OF LI_'BP CK. TEXAS MaycV ATTEST: &IIAk, City etary APPROVED AS TO CONTENT: A!!:A2 A�C_� Betsy Bucy. Director of FinaNce APPROVED AS TO FORM: r Anita Burgess, City Attomey (CITY SEAL) W `LEFAWIiY•RES.00? April 15. 19'99 Resolution - Lubbock Educational Facilities Authority, Inc. Page 4 NOTICE TO THE CITY OF LUBBOCK Lubbock Educational Facilities Authority, Inc. (the `°Issuer") hereby notifies the City of Lubbock that it intends to issue limited obligation revenue bonds in the maximum principal amount of $12,000,000 (the "Bonds"). Proceeds of the Bonds will be used to (1) obtain funds for Lubbock Christian University to finance or refinance the cost of constructing, renovating, acquiring, and equipping educational facilities, housing facilities, and facilities incidental, subordinate, or related thereto or appropriate in connection therewith, including: (a) renovation of three existing residence halls, (b) construction of new student residence facilities, (c) construction of a multi -use center to be known as Rip Griffin Center, and (d) refinancing of existing debt used to acquire, construct and improve existing educational and housing facilities on the Lubbock Christian University campus; (2) set aside certain funds for the payment and security of the Bonds, and (3) pay certain expenses in connection with issuance of the Bonds. The user of the facilities to be financed or refinanced is Lubbock Christian University, 5601 19`t' Street, Lubbock, Texas 79407, which has advised the Issuer of the necessity of such facilities and has requested that the Issuer issue the Bonds. The facilities are located on the Lubbock Christian University, which is located south of 19'h Street/Levelland Highway, west of Chicago Avenue, north of 34" Street, and east of Frankford. The Bonds will be limited non-recourse obligations of the Issuer payable solely from the repayment by Lubbock Christian University of the loan to it of the proceeds of the Bonds and would not constitute a debt or obligation of the City of Lubbock or any other public body or be in any way payable from taxes or other public funds. A draft Official Statement is attached hereto. This document explains in fuller detail the facilities to be financed, the costs of the facilities, and the obligations to be issued. The Issuer requests that the City approve the issuance of the Bonds in accordance with Section 1.03 of the bylaws of the Issuer. LUBBOCK EDUCATIONAL FACILITIES AUTHORITY, INC. By: nt Dated: Notice to City of Lubbock 4", I41*til The undersigned, on behalf of the City of Lubbock, Texas, acknowledges receipt of the Notice to the City of Lubbock executed by the President of Lubbock Educational Facilities Authority, Inc. and the attachments thereto. Dated: April 22, 1999 CITY OF LUBBOCK. TEXAS M. LEMCIT'YINOT April l5, 1999 Notice to City of Lubbock c By: I'A� M. LEMCIT'YINOT April l5, 1999 Notice to City of Lubbock CERTIFICATE OF PUBLIC HEARING 1, the undersigned, hereby certify in connection with the issuance by the Lubbock Educational Facilities Authority, Inc. (the "Issuer") of its Variable Rate Demand Revenue Bonds (Lubbock Christian University) Series 1999 (the "Bonds") in principal amount not to exceed $12,000,000, as follows: 1. I am Louis Murfee, Jr. and I have been duly authorized to conduct a public hearing on the issuance of the Bonds to finance certain educational and housing facilities and for expenditures related thereto, and pay the costs of issuance of the Bonds. 2. Such hearing was conducted by me in accordance with published notice commencing at 5:30 p.m. on March 25, 1999 at the chambers of the City Council, City Hall, 1625 13`x' Street, Lubbock, Texas 79401, which offices were open to the public for purposes of the hearing. 3. At the time for the commencement of the hearing, I explained the nature of the hearing, the purpose of the financing, and publicly requested comments on the various uses of the proceeds of the Bonds and on the issuance of such Bonds. 4. At the hearing no members of the public attended or presented comments orally_ or in writing. No comments in writing were received either before or after the hearing. 5. I imposed no time limitations on any public comments. IN WITNESS WHEREOF, I have hereunto set my hand this 15th day of April. 1999. ou s Murf , Jr. WLEFA'HR-REP.00I April 15, 1999 Gilmore & Bell, P.C. - I1 X10"26lPOSS (April t9, 19") NEW ISSUE/Book Entry Only Moody's Ratings (Expected): A23NMIG 1) See "RATINGS" ereein: In the opinion of Fulbright & Jaworski L.L.P.1" , assuming compliance with the tar Ll covenants described herein, interest on the Bonds is excluded pursuant to Section 103(6) of the internal Revenue i 3de of 1936, as amended, from the grass income of the owners thereof for federal income tax purposes and is not an item ofpreference for purposes of the federal alternative minimum tax. See "TAX AM TTERS." $11,600,000 [LOGO] LUBBOCK EDUCATIONAL FACILITIES AUTHORITY, INC. VARIABLE RATE DEMAND REVENUE BONDS (LUBBOCK CHRISTIAN UNIVERSITY) SERIES 1999 Dated: Date of Issuance Initial Interest Rate Mode: Weekly Due: March 1, 2029 Price: 100% The Bonds are issuable as fully -registered bonds registered in the name of a nominee of The Depository Trust Company ("DTC"), which will act as securities depository for the Bonds. Purchases of the Bonds may be made in book -entry form only, in denominations of 5100,000 or any integral multiple thereof, through brokers and dealers who are, or who act through, DTC Participants. Beneficial owners of the Bonds will not receive physical delivery of bond certificates. Payments of principal of and interest on the Bonds will be made to DTC by Bank One Trust Company, N.A., as trustee (the "Trustee"). Disbursement of payments to DTC Participants is the responsibility of DTC and disbursement of payments to the beneficial owners is the responsibility of DTC Participants. See "BOOK -ENTRY ONLY SYSTEM." The Bonds will initially be executed and delivered in the Weekly Mode. The Bonds may be converted to bear interest at a Daily Rate, a Weekly Rate, a Three Month Rate, a Six Month Rate, an Annual Rate, a Multiannual Rate or a Fixed Rate as described herein.. While in the Weekly Mode, the interest rate with respect to the Bonds will be determined by CBC Oppenheimer Corp., as Remarketing Agent, on the Wednesday (or the next preceding Business Day) immediately preceding the commencement date of the Weekly Rate Period to which it relates. The initial Weekly Rate shall be set forth in the confirmations delivered to the initial purchasers of the Bonds by the Underwriter. Weekly Rate Periods will commence on Thursday of each week and end on Wednesday of the following week,: except with respect to the initial and final Weekly Rate Periods. Interest with respect to the Bonds in the Weekly Mode will be payable on the first Business Day of each month, commencing [�' I June I. 1999. The Bonds are subject to redemption prior to maturity, to mandatory purchase under certain circumstances, and under certain circumstances will be purchased on demand of the Bondholders, as described herein. The Lubbock Educational Facilities Authority, Inc. (the "Authority") will loan the proceeds of the Bonds to Lubbock Christian University (the "University"), pursuant to the Loan Agreement described herein. The University will use the funds to acquire, construct, renovate, remodel and equip certain educational and housing facilities of the University, to refinance indebtedness of the University, to pay capitalized interest, to provide a debt service reserve and to pay costs oFissutng the Bonds, all as more fully described herein. The Bonds are payable by the Trustee from the funds pledged under the Indenture described herein, including payments required to be made by the University under the Loan Agreement described herein. Payment of principal and interest on the Bonds and the purchase price of the Bonds will be secured by an irrevocable direct -pay letter of credit (the "Letter of Credit") to be issued simultaneously with the delivery of the Bonds by: BANQUE NATIONALE DE PARIS ,acting through its San Francisco Branch. The Letter of Credit will be initially issued in an amount equal to the principal amount of the Bonds plus 54 days interest thereon calculated at the rate of 12% per annum. The Letter of Credit, unless extended, will initially expire on j1 May 4, 2004, unless the expiration date is extended by Banque Nationale de Paris in its sole discretion, and will permit the Trustee to draw thereunder amounis sufficient to pay (i) the principal of the Bonds when due at maturity, upon earlier redemption or upon acceleration, (ii) regularly scheduled interest on the Bonds, and (iii) the purchase price of Bonds tendered and not remarketed. THE BONDS WILL BE LIMITED OBLIGATIONS OF THE AUTHORITY PAYABLE SOLELY FROM THE FUNDS PROVIDED THEREFOR UNDER THE LOAN AGREEMENT AND THE INDENTURE. THE BONDS DO NOT CONSTITUTE A DEBT OR LIABILITY OF THE CITY OF LUBBOCK, THE STATE OF TEXAS OR OF ANY POLITICAL SUBDIVISION THEREOF. NEITHER THE CITY OF LUBBOCK, THE STATE OF TEXAS OR ANY POLITICAL SUBDIVISION SHALL BE OBLIGATED TO PAY THE PRINCIPAL OF OR PREMIUM, IF ANY, OR INTEREST ON THE BONDS AND NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE CITY OF LUBBOCK, THE STATE OF TEXAS OR ANY POLITICAL SUBDIVISION THEREOF IS PLEDGED TO THE PAYMENT OF THE PRINCIPAL OF OR PREMIUM, IF ANY, OR INTEREST ON THE BONDS. THE ISSUANCE OF THE BONDS SHALL NOT DIRECTLY OR INDIRECTLY OR CONTINGENTLY OBLIGATE THE CITY OF LUBBOCK, THE STATE OF TEXAS OR ANY POLITICAL SUBDIVISION THEREOF TO LEVY OR PLEDGE ANY FORM OF TAXATION WHATSOEVER THEREFOR OR TO MAKE ANY APPROPRIATION FOR THEIR PAYMENT. THE AUTHORITY HAS NO TAXING POWER. Investment in the Bonds is subject to certain risks. See "BONDOWNERS' RISKS." This cover page contains certain information for quick reference only. It is not a summary of this issue. Investors must read the entire Official Statement to obtain information essential to the making of an informed decision. The Bonds are offered by the Underwriter, when, as and if issued by the Authority and accepted by the Underwriter, subject to approval of legality by Fulbright & Jaworski L.L.P., Houston, Texas, Bond Counsel. Certain legal matters will be passed upon for the Authority by L"L Boerner & Dennis, Lubbock, Texas, for the University by Damon Richards, Lubbock, Texas, for the Underwriter by Gilmore & Bell, P.C., Kansas qty, R tI ssouri, and for Banque Nationale de Paris by Heenan Blaikie, a California Professional Corporation, Beverly Hills, California (and as to matters of French law by De Pardieu Brocas Maffei & Associes, Paris, France). It is expected that the Bards in definitive form will be available for delivery through the facilities of DTC in New York, New York, on or about (^J Mav 4, 1999. [CIBC OPPENHEIMER LOGO] The date of this Official Statement is April _, 1999. This Official Statement does not constitute an offer to sell the Bonds in any jurisdiction in which or to any person to whom it is unlawful to make such an offer. No dealer, salesperson or other person has been authorized by the Lubbock Educational Facilities Authority, Inc. (the "Authority"), Lubbock Christian University (the "University") or CIBC Oppenheimer Corp. (the "Underwriter") to give any information or to make any representations, other than those contained herein, in connection with the offering of the Bonds and, if given or made, such information or representations must not be relied upon. The information set forth herein under the caption "THE AUTHORITY" and 111 "LITIGATION — The Authority" has been obtained from the Authority. All other information set forth herein has been obtained from the University, Banque Nationale de Paris (the "Credit Provider") and other sources which are believed to be current and reliable, but the accuracy or completeness of such information is not guaranteed by, and is not to be construed as a representation by, the Authority or the Underwriter. Estimates and opinions are included and should not be interpreted as statements of fact. Summaries of documents do not purport to be complete statements of their provisions. 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, the Credit Provider or the University since the date hereof. IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER, MAY OVERALLOT OR EFFECT TRANSACTIONS THAT STABELIZE OR MAINTAIN THE MARKET PRICE OF THE BONDS AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. THE BONDS HAVE NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, 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 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. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. TABLE OF CONTENTS Page INTRODUCTION........................................................ l Purpose of the Official Statement .......................... l TheAuthority........................................................1 DTC and Its Participants................................i^1 The University....................................................... I The Bonds........................................................L^j I Security for the Bonds ....................................... .2 The Remarketing Agent.........................................3 Voting............................................................121 Financial Statements........................................1�J 3 Bondowners' Risks ............................................ .4 Continuing Disclosure...........................................4 Definitions and Summaries of Legal Documents..4 THE BONDS................................................................4 1^j 14 General..................................................................4 Other Factors Affecting the Financial Determination of Interest Rates .............................5 General............................................................ .14 Adjustments Between Modes...............................6 Letter of Credit....................................................15 Fixed Rate Conversion.........................................7 Loan Agreement..................................................16 Tenders and Purchase of Bonds ............................8 Indenture.............................................................. Redemption Provisions.......................................10 Deed of Trust on Mortgaged Property: Security R Registration, Transfer and Exchange...................12 THE CREDIT PROVIDER.......................................16 CUSIP Numbers..................................................12 BOOK -ENTRY ONLY SYSTEM .......................1^1 13 General..........................................................El 12 DTC and Its Participants................................i^1 12 Purchase of Ownership Interests ......................... T-3 Transfers ........................................................121 13 Notices ................... _ Voting............................................................121 13 Payments of Principal and Interest ................ J^1 13 Effecting Tenders of Bonds Through DTC ..... .14 Discontinuation of Book -Entry Only System 1^j 14 SECURITY AND SOURCE OF PAYMENT Other Factors Affecting the Financial FOR THE BONDS1.^J L4 General............................................................ .14 Reserve Account..................................................15 Letter of Credit....................................................15 DOCUMENTS Loan Agreement..................................................16 1^l' Indenture.............................................................. 16 Deed of Trust on Mortgaged Property: Security R Interest in Gross Revenues .............................16 THE CREDIT PROVIDER.......................................16 Continuing Disclosure Obligation .................1^12. THE LETTER OF CREDIT LL THE REIMBURSEMENT AGREEMENT Ll AND THE DEED OF TRUST...............................................17 Letter of Credit .............................................121 17 Reimbursement Agreement ............................ .17 Deed of Trust ....................................................... 18 Alternate Credit Facility ............................... 1^_J 19 PLAN OF FINANCE ..... _._ .................................1^1 19 Generally.......................................................1^1 19 Page TheProject..........................................................19 The Refinancing..................... ........ Lo 121 Estimated Sources and Uses of Funds .......... 21 u THE AUTHORITY ............................................. 21 11HE UNIVERSITY...................................................21 BONDOWNERS' RISKS...........................................2.1 General.......................................................... f ^122 Bankruptcy or Insolvency of the The University Credit Provider..................................................2`' UNDERWRITING Mandatory Tenders for Purchase of the FINANCIAL STATEMENTS ............................ Bonds N: Redemption Provisions ................... 23 Acceleration of the Bonds ............................. JL�1 ?9 Enrollment ................... f ^] 23 Financial Aid ................................................. 23 Tuition and Fees .............................................. 23 Gifts, Grants and Bequests .................................. 23 Other Factors Affecting the Financial STATEMENTS Performance of the University ^ '-t Tax -Exempt Status of the University DOCUMENTS and the Bonds ................. 1^l' Amendment of the Indenture and Loan OPINION OF BOND COUNSEL Agreement......................................................... 24 1.�J Factors Relating to 1^l Security for the Bonds24 Marketability ................................................. j^j 25 Continuing Disclosure Obligation .................1^12. Year 2000 Compliance ................ — TAX MATTERS .................................................1^126 APPROVAL OF LEGAL PROCEEDINGS ....... L1.27. 2: ABSENCE OF LITIGATION Ll 27 The Authority................................................12127 The University in — UNDERWRITING L^1= FINANCIAL STATEMENTS ............................ j^l L8 RATINGS............................................................ El 28 MISCELLANEOUS ............................................ �. 29 APPENDIX A – LUBBOCK CHRISTIAN — UNIVERSITY APPENDIX B – LUBBOCK CHRISTIAN UNIVERSITY - AUDITED FINANCIAL STATEMENTS APPENDIX C – SUMMARY OF PRINCIPAL DOCUMENTS APPENDIX D – PROPOSED FORM OF OPINION OF BOND COUNSEL OFFICIAL" STATEMENT S11,600,000 Lubbock Educational Facilities Authority, Inc. Variable Rate Demand Revenue Bonds (Lubbock Christian University) Series 1999 INTRODUCTION The following introductory statement is subject in all respects to more complete information contained elsewhere in this Official Statement. The order and placement of materials in this Official Statement, including the Appendices, are not to be deemed to be a determination of relevance, materiality or relative importance, and this Official Statement, including the Cover Page and Appendices, must be considered in its entirety. All capitalised terms used in this Official Statement that are not otherwise defined herein shall have the meanings ascribed to them in Appendix C. Purpose of the Official Statement The purpose of this Official Statement, including the Cover Page hereof and the Appendices hereto, is to furnish certain information relating to (1) the Lubbock Educational Facilities Authority, Inc. (the "Authority"), (2) the Authority's $11,600,000 principal amount of Variable Rate Demand Revenue Bonds (Lubbock Christian University), Series 1999 (the "Bonds"), (3) Lubbock Christian University, a Texas nonprofit corporation (the "University"), (4) the facilities of the University described herein that are being financed with the proceeds of the Bonds (the "Project"), and (5) Banque Nationale de Paris (the "Credit Provider" ). The Authority The Lubbock Educational Facilities Authority, Inc. is a nonprofit corporation and instrumentality of the City of Lubbock, Texas, created pursuant to the Higher Education Authority Act, Chapter 53, Texas Education Code (the "Act"). See "THE AUTHORITY." The University The University is a nonprofit corporation, organized and existing under the laws of the State of Texas, that owns and operates a private four-year coeducational university offering 39 fields of undergraduate study and pre -professional programs through the College of Professional Studies, the College of Liberal Arts and the College of Education. In addition, four master's degrees are offeredu. The University's fall 1998 enrollment was j�_J 1,044 full-time and 309 part-time students[I. The University is located on a 75 -acre campus on the western side of Lubbock, Texas. The University is accredited by the Commission on Colleges of The Southern Association of Colleges and Schools, the Texas Education Agency, the Council on Social Work Education and the National League of Nursing. See "THE UNIVERSITY" and "APPENDIX A: LUBBOCK CHRISTIAN UNIVERSITY - ORGANIZATION AND OPERATIONS." The Bonds The Bonds are being issued pursuant to an Indenture dated as of April 1, 1999 (the "Indenture"), between the Authority and Bank One Trust Company, N.A.. Tulsa, Oklahoma, as trustee (the "Trustee"), for the purpose of providing funds to make a loan to the University pursuant to a Loan Agreement dated as of April 1, 1999 (the "Loan Agreement"), between the Authority and the University. The proceeds of such loan will be used: (i) to finance the acquisition, construction and equipping of a =00 -bed apartment -style student residential facility (the "New Residential Facility") and a multi-purpose facilitN to be known as the Rip Griffin Center and renovations to existing residential facilities (all of the foregoing being referred to herein as the "Project"); (ii) to refinance existing indebtedness of the University, (iii) to pay capitalized interest; (iv) to provide a debt service reserve; and (v) to pay certain costs of issuance of the Bonds. A description of the Bonds is contained in this Official Statement under "THE BONDS." All references to the Bonds are qualified in their entirety by the definitive form thereof and the provisions with respect thereto included in the Indenture and the Loan Agreement. A description of the Project and a description of the estimated sources and uses of funds are contained in this Official Statement under "PLAN OF FINANCE." Security for the Bonds L1 To provide for the payment of the principal of, interest on the Bonds and the purchase price of the Bonds, the University will cause to be delivered to the Trustee an irrevocable direct -pay letter of credit with respect to the Bonds (the "Letter of Credit") issued by Banque Nationale de Paris, acting through its San Francisco Branch (the "Credit Provider"). The Letter of Credit will be initially issued in an amount equal to the principal amount of the Bonds plus 54 days interest thereon calculated at the rate of 12% per annum. The Letter of Credit, unless extended, will initially expire on f11 May 4, 2004 (the "Letter of Credit Expiration Date"), unless the Letter of Credit Expiration Date is extended by the Credit Provider in its sole discretion, and will permit the Trustee to draw thereunder amounts sufficient to pay (i) the principal of the Bonds when due at maturity upon earlier redemption or upon acceleration, (ii) regularly scheduled interest on the Bonds, and (iii) the purchase price of Bonds tendered but not remarketed. Under certain circumstances, the University is permitted under the Indenture to replace the Letter of Credit. See "THE LETTER OF CREDIT AND THE REIMBURSEMENT AGREEMENT -Alternate Credit Facility." The Letter of Credit will be issued under a Reimbursement Agreement dated as of April 1, 1999 (the "Reimbursement Agreement"), by and between the Credit Provider and the University. The University will be required to reimburse the Credit Provider for draws on the Letter of Credit and to nav other fees and charges Pursuant to the nrovisi account of the A rroviuer for amounts aavancea to nav, the princiDae of ana Dremium. it anv. ano interest on the tronas. gee I:l The University will enter into a Construction Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing dated as of April 1, 1999 (the "Deed of Trust"), granting a deed of trust lien on the Rip Griffin Center, the New Residential Facility, Katie Rogers Hall (one of the dormitories being renovated as a part of the Project) and the Katie Rogers Courtyard (a six -unit, 48 -bed student residential L1 Fo,-:1:t-,"_A rrrn.-.f— n --4- :-+---.-• :- :..- rte, - o.,.,......,... f-- A -r.. ..F ..-A-. ?7CU`TMT-rV • XTY% cnrTnrc Ut'' YAYME;N t' VOR THE: BONDS" to the Trustee and the (credit Provider to secure the payment of the Reimbursement Obligations and vavment and performance of j� the University's obligations under the Loan Agreement ll. See "SECURITY AND SOURCE OF PAYMENT FOR THE BONDS." The property to be covered by the lien of the Deed of Trust is referred to herein as the "Mortgaged Property." Li THE BONDS WILL BE LIMITED OBLIGATIONS OF THE AUTHORITY PAYABLE SOLELY FROM THE FUNDS PROVIDED THEREFOR UNDER THE LOAN AGREEMENT AND THE INDENTURE. THE BONDS DO NOT CONSTITUTE A DEBT OR LIABILITY OF THE CITY OF LUBBOCK, THE STATE OF TEXAS OR OF ANY POLITICAL SUBDIVISION THEREOF. NEITHER THE CITY OF LUBBOCK, THE STATE OF TEXAS OR ANY POLITICAL -2- SUBDIVISION SHALL BE OBLIGATED TO PAY THE PRINCIPAL OF OR PREMIUM, IF ANY, OR INTEREST ON THE BONDS AND NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE CITY OF LUBBOCK, THE STATE OF TEXAS OR ANY POLITICAL SUBDIVISION THEREOF IS PLEDGED TO THE PAYMENT OF THE PRINCIPAL OF OR PREMIUM, IF ANY, OR INTEREST ON THE BONDS. THE ISSUANCE OF THE BONDS SHALL NOT DIRECTLY OR INDIRECTLY OR CONTINGENTLY OBLIGATE THE CITY OF LUBBOCK, THE STATE OF TEXAS OR ANY POLITICAL SUBDIVISION THEREOF TO LEVY OR PLEDGE ANY FORM OF TAXATION WHATSOEVER THEREFOR OR TO MAKE ANY APPROPRIATION FOR THEIR PAYMENT. THE AUTHORITY HAS NO TAXIING POWER. The Remarketing Agent The Authority has appointed CIBC Oppenheimer Corp. as Remarketing Agent (the "Remarketing Agent") for the Bonds. The principal office of the Remarketing Agent is located at World Financial Center, New York, New York 10281. The Remarketing Agent may be removed or replaced at any time with respect to the Bonds, subject to the terms and conditions of the Indenture and the Remarketing Agreement between the University and the Remarketing Agent. Financial Statements Audited financial statements of the University, as of and for the fiscal year ended June 30, 1998, with comparative financial statements for fiscal year ended June 30, 1997, are included in APPENDIX B to this Official Statement. The audited financial statements have been audited by Gary. Bowers & Miller, Lubbock, Texas, certified public accountants, to the extent and for the periods indicated in their report, which is also included in APPENDIX B. See "FINANCIAL STATEMENT'S." Bondowners' Risks Investment in the Bonds is subject to certain risks, See "BONDOWNERS' RISKS." Continuing Disclosure The University has agreed under the Loan Agreement to provide its annual financial statements to the Trustee within 150 days after the end of each fiscal year of the University. Except for the provision of its audited financial statements to the Trustee, the University is not obligated under the financing documents to make any other periodic disclosure of financial information or to give notices of the occurrence of material events to the Bondowners or to any national information repositories. The University has agreed, however, under the Loan Agreement to take any actions necessary to comply with the continuing disclosure -3- requirements of SEC Rule I5c2-12 if the Bonds are converted to bear interest at an Annual Rate, a Multiannual Rate or a Fixed Rate, Definitions and Summaries of Legal Documents Definitions of certain words and terms used in this Official Statement and summaries of the Indenture and the Loan Agreement are included in this Official Statement in APPENDIX C. The definitions and summaries do not purport to be comprehensive or definitive. All references herein to the specified documents are qualified in their entirety by reference to the definitive forms of those documents, copies of which may be viewed during the offering period for the Bonds at the office of CIBC Oppenheimer Corp., One Federal Street, 22°a Floor, Boston, Massachusetts 02110, Attention: Public Finance Department (telephone: 617-428-5514) or will be provided during the offering period to any prospective purchaser requesting the same, upon payment by such prospective purchaser of the cost of complying with such request. TME BONDS General The Bonds will be dated the delivery date and interest thereon will accrue from such date. The Bonds will mature on March 1. 2029. The Bonds M will bear interest at the rates determined pursuant to the Indenture (as described below under "Determination of Interest Rates"), payable on each Interest Payment Date, for the immediately preceding Interest Payment Period. The amount of interest so payable on an}. Interest Payment Date 1!11 will be computed (i) on the basis of a 365- or 366 -day year, as applicable, for the number of days actually elapsed during Daily, Weekly, Three Month and Six Month Rate Periods, as appropriate. and (ii) on the basis of a 360 - day year consisting of twelve 30 -day months during Annual and Multiannual Rate Periods and on and after the Fixed Rate Date, as applicable. The Bonds will be delivered and ownership interests in the Bonds may be purchased in book -entry form only. When delivered the Bonds will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York ("DTC"). DTC will act as securities depository for the Bonds. So long as DTC or its nominee is the registered owner of the Bonds, debt service payments will be made, notices will be given and transfers will be effected as described in "BOOK -ENTRY ONLY SYSTEM." The Bonds will initially be u delivered in the Weekly Mode in denominations of $100,000 or any integral multiple thereof. 1^1 The Initial Weekly Rate Period will commence on the date of issuance of the Bonds and 1^1 end on the following Wednesday. The initial Weekly Rate 1^1 will be set forth in the confirmations delivered to the initial purchasers of the Bonds. u While the Bonds are in the Weekly Mode, the Interest Payment Dates will be the first Business Day of each month, commencing 1�Ll June 1, 1999. Determination of Interest Rates General. The Bonds may bear interest at a Daily, Weekly, Three Month, Six Month, Annual, Multiannual or Fixed Rate, at the option of the University. 1^1 Bonds purchased by the Credit Provider pursuant to a required draw on the Letter of Credit are considered "Bank Bonds." and the terms of the Bank Bonds will be set forth in the Reimbursement Agreement. The interest rate to be determined with respect to Bonds (other than Bank Bonds) bearing interest at a Daily, Weekly, Three Month, Six Month, Annual or Multiannual Rate (collectively, the "Variable Rate Bonds") u will be the lowest rate of interest not in excess of 1^1 12% per annum that, in the judgment of the Remarketing Agent, would cause the Bonds to have a market value equal to the principal amount thereof, plus accrued interest thereon, if applicable. under prevailing market conditions as of the Rate Determination Date. in no event will the agureQate of the ls! State of Texas and the United States of America ever exceed a_ net effective interest rate (as that term is defined in Texas statutes) of 15%. Weekly Rate. On their date of issuance, the Bonds will bear interest at the Weekly Rate and will continue to do so unless the interest rate on the Bonds is changed to a different Mode. The interest rate on the Bonds during each Weekly Rate Period, during which the Bonds bear interest at the Weekly Rate, will be determined on each Rate Determination Date, which determination will be made by 5:00 p.m., New York City time, on the Business Day prior to the Rate Change Date. The Rate Change Date for the Bonds will initially be the date the Bonds are issued (or subsequently the date the Bonds are converted to bear interest at a Weekly Rate) and every Thursday thereafter. Weekly Rate Periods will commence on Thursday of each week and end on Wednesday of the following week; provided that (i) in the case of an adjustment for the Bonds to a Weekly Mode from a different Mode, the initial Weekly Rate Period 1^1 will commence on the Interest Payment Date for the Mode from which the Bonds are being converted and end on the next succeeding Wednesday and (ii) in the case of an adjustment from a Weekly Mode to a different Mode (including the Fixed Rate Mode), the last Weekly Rate Period prior to adjustment u will end on the last day immediately preceding the next Interest Payment Date. Baily Rate. The interest rate on the Bonds during each Daily Rate Period, during which the Bonds bear interest at the Daily Rate, will be determined on each Rate Determination Date, which determination will be made between 8:30 a.m. and 9:30 a.m., New York City time, on each Business Day. Daily Rate Periods will commence on a Business Day and remain in effect to but not including the next succeeding Business Day. Three Month Rate. The interest rate on the Bonds during each Three Month Rate Period, during which the Bonds bear interest at the Three Month Rate, will be determined on each Rate Determination Date, which determination will be made by 5:00 p.m., New York City time, on the Business Day prior to the Rate Change Date. The Rate Change Date will initially be the Interest Payment Date for the Mode from which the Bonds are being converted and thereafter on every third Interest Payment Date. Three Month Rate Periods will commence on the Interest Payment Date for the Mode from which the Bonds are converted and thereafter on each Rate Change Date and end on the day immediately prior to the next Rate Change Date. Six Month Rate. The interest rate on the Bonds during each Six Month Rate Period, during which the Bonds bear interest at the Six Month Rate, will be determined on each Rate Determination Date, which determination will be made by 5:00 p.m.. New York City time, on the Business Day prior to the Rate Change Date. The Rate Change Date will initially be the Interest Payment Date for the Mode from which the Bonds are being converted and thereafter on each Interest Payment Date. Six Month Rate Periods will commence on the Interest Payment Date for the Mode from which the Bonds are converted and thereafter on each Rate Change Date and end on the day immediately prior to the next Rate Change Date. Annual Rate. The interest rate on the Bonds during each Annual Rate Period, during which the Bonds bear interest at the Annual Rate, will be determined on each Rate Determination Date, which determination will be made by 5:00 p.m., New York City time, on the Business Day prior to the Rate Change Date. The Rate Change Date will initially be the Interest Payment Date for the Mode from which the Bonds are being converted and thereafter on the first Business Day of every twelfth succeeding calendar month. Annual Rate Periods will commence on the Interest Payment Date for the Mode from which the Bonds are converted and thereafter on each Rate Change Date and end on the day immediately prior to the next Rate Change Date. Multiannual Rate. The interest rate on the Bonds during each Multiannual Rate Period, during which the Bonds bear interest at the Multiannual Rate, will be determined on each Rate Determination Date, which determination will be made by 5:00 p.m., New York City time, on the Business Day prior to the Rate Change Date. The Rate Change Date will initially be the Interest Payment Date for the Mode from which the Bonds are being converted LKa "Multiannual Adjustment Date") and thereafter the first Business Day of a calendar month which is an integral multiple of 12 months, 24 in number or greater, after the Multiannual Adjustment Date selected by the University and the first Business Day of each successive calendar month which is an integral multiple of 12 months, 24 in number or greater, selected by the University. Multiannual Rate Periods will commence on each Rate Change Date and end on the day immediately prior to the next Rate Change Date; provided that in the case of an adjustment to a Multiannual Mode from a different Mode the initial Multiannual Rate Period will commence on the Interest Payment Date for the Mode from which the Bonds are converted. -5- Adjustments Between Modes At the option of the University, after the initial Weekly Rate Period, the Bonds may be adjusted from one Mode to another in accordance with the Indenture. In any such case, the Adjustment Date u will be the Interest Payment Date for the Mode from which the interest rate on the Bonds are to be adjusted and interest Ll will accrue on the Bonds at the new interest rate commencing on such day. The University J�J will give written notice of its intent to exercise 1_l the option to effect any such adjustment to the Remarke ing Agent, the Tender Agent, the Credit Provider—ani—the Trustee not fewer than 35 nor more than 45 days prior to the proposed Adjustment Date. Such notice u will specify certain information as specified in the Indenture, including the proposed Adjustment Date and the Mode to which the adjustment will be made. If the University does not elect L^1 a new Mode for the Bonds in a timely fashion, the Mode then in effect J^I will be deemed to continue until changed by timely notice. In the event the University has elected to change the Mode, the Trustee will mail by first-class mail not fewer than 34 days prior to the proposed Adjustment Date a notice of mandatory tender for the Bonds. See "Tenders and Purchase of Bonds - Mandatory Tender." The Indenture provides that notwithstanding the University's delivery of notice of the exercise of its option to effect an adjustment for the Bonds, adjustment to another Mode u will not take effect if: (1) the University withdraws u the notice M exercising its option to effect adjustment not later than the third Business Day preceding the Adjustment Date for such Mode or the Rate Determination Date for such Multiannual Rate Period; (2) the Remarketing Agent fails to determine the interest rate applicable to the initial Rate Period for such Mode; (3) the notice to Bondholders required by the Indenture is not given when required; (4) if the adjustment is from an Annual Mode, Multiannual Mode or Fixed Mode to any other Mode or to an Annual Mode, Multiannual Mode or Fixed Mode from any other Mode, the Trustee and the Authority have not been provided, no later than one day before the Adjustment Date, with an Opinion of Bond Counsel to the effect that the adjustment is authorized or permitted by the Indenture and that the adjustment will not adversely affect the exclusion of interest on any Bonds from gross income of the owners thereof for federal income tax purposes; (5) if the adjustment is to a Six Month Mode, Annual Mode, Multiannual Mode or Fixed Mode, the Trustee has not received from the University evidence of the written consent of the Credit Provider to such adjustment; or (b) if the conversion is to a Three Month Mode, Six Month Mode, Annual Mode or Multiannual Mode either (i) the number of days of interest on the Bonds which may be drawn under the Letter of Credit after such conversion is less than the number of days in the longest interest period for the Bonds in such interest rate mode plus 15 days, or (ii) the Letter of Credit does not extend beyond the initial Rate Period for such interest rate mode. In any of such events, the interest rate on the Bonds u will remain in the last effective Variable Mode; provided, however, that any mandatory tender for purchase 1 will nevertheless be carried out if notice of the adjustment has been given to the Bondholders. No cancellation of an adjustment pursuant to the provisions of the Indenture described in this paragraph will constitute an Event of Default under the Indenture. Fixed Rate Conversion In accordance with the Indenture, at the option of the University with the consent of the Authority, after the initial Weekly Rate Period, Variable Rate Bonds may be converted to bear interest at a Fixed Rate to their final maturity or earlier redemption. Any such conversion u will be made in accordance with the Indenture, including the following provisions: (i) The Fixed Rate Date L^1 will be an Interest Payment Date on which interest is payable for the Bonds to be converted. (ii) Upon conversion to a Fixed Rate, the Bonds to be converted u will be subject to mandatory sinking fund redemption through and including the maturity thereof cn December 1 of each year, commencing on the first December I occurring at least six months after the Fixed Rate Adjustment Date, through and including the date of maturity of the Bonds as described under "Redemption Provisions — Mandatory Sinking Fund Redemption." (iii) The University 1^1 will give written notice of any such conversion to the Trustee, the Remarketing Agent, the Credit Provider and the Tender Agent not fewer than 45 days prior to the Proposed Fixed Rate Date. Such notice u will specify the Proposed Fixed Rate Date. IIIA (iv) Notice of conversion and mandatory tender 111 will be given not less than 30 days prior to the Proposed Fixed Rate Date, by first class mail, by the Trustee to the Holders of all outstanding Bonds to be converted 1.�J at their addresses appearing on the registration books of the Trustee on the date the Trustee receives the notice referred to in clause (iii) above. The notice of conversion mailed to Bondholders lLI will set forth the information required by the Indenture with respect to a notice of mandatory tender. (v) Not later than 3:30 p.m., New York City time, on a Business Day that is at least 7 and not more than 20 Business Days prior to the Proposed Fixed Rate Date, the Remarketing Agent j!�J will determine the Fixed Rate for the Bonds to be converted. The Fixed Rate 1N will be the rate of interest on the Bonds on and after the Fixed Rate Date and ll will be the lowest rate of interest that, in the judgment of the Remarketing Agent as of the date if determination and under prevailing market conditions, would cause the Bonds to have a market value equal to the principal amount thereof. The Indenture provides that notwithstanding the University's delivery of notice 1.�J exercising its option to effect a Fixed Rate conversion as described above, conversion to a Fixed Rate JAI will not take eTfeet if: (1) the University withdraws such notice of conversion not later than the Rate Determination Date for such Mode; (2) the Remarketing Agent fails to determine the Fixed Rate; (3) the notice to Bondholders of the proposed conversion required by the Indenture is not given when required; or (4) the Trustee and the Authority have not been provided, no later than one day before the Adjustment Date, with an Opinion of Bond Counsel to the effect that the adjustment is authorized or permitted by the Indenture, and that the adjustment will not adversely affect the exclusion of interest on any Bonds from gross income of the owners thereof for federal income tax purposes. In any of such events, the interest rate on the Bonds 1:11 will become payable at a Weekly Rate commencing on the failed Proposed Fixed Rate Date; provided that the mandatory tender for purchase u will nevertheless be carried out if notice of conversion to the Fixed Rate has been given to the Bondholders. Pio cancellation of conversion to the Fixed Rate pursuant to the provisions of the Indenture described in this paragraph 1^I will constitute an Event of Default under the Indenture. Tenders and Purchase of Bonds So long as the Bonds are held in the book -entry system maintained by DTC, all tenders of beneficial interests in the Bonds may only be effected in accordance with the procedures prescribed from time to time by DTC. See "Book -Entry Only System — Effecting Tenders of Bonds through DTC." So long as DTC is the registered Holder of the Bonds, physical delivery of Bonds in connection with the tenders discussed below will be deemed to be satisfied when the ownership rights in the Bonds are transferred as described thereunder. Optional Tender, The Holders of Variable Rate Bonds (excepting any Bonds with interest payable at a Multiannual Rate) may elect to have their Bonds, or portions thereof so long as the amount tendered and the amount retained are Authorized Denominations, purchased at a purchase price equal to 100% of the principal amount of such Bonds (or portions thereof), plus any interest accrued and unpaid as of the purchase date, payable in immediately available funds, upon delivery of such Bonds or provision of transfer instructions to DTC (See "BOOK -ENTRY ONLY SYSTEM -- Effecting Tender of Bonds through DTC"), on the following purchase dates (each an "Optional Tender Date") upon the giving of the notices described below: (i) Variable Rate Bonds with interest payable at a Daily Rate may be tendered for purchase on any Business Day on or prior to adjustment from a Daily Mode to a different Mode, upon telecopy or written notice of tender to the Tender Agent and the Remarketing Agent for the Bonds being tendered not later than 8:30 a.m., New York City time, on the designated purchase date. (ii) Variable Rate Bonds with interest payable at a Weekly Rate may be tendered for purchase on any Business Day on or prior to adjustment from a Weekly Mode to a different Mode upon delivery of a written notice of tender to the Tender Agent and the Remarketing Agent for the Bonds being tendered not later than 12:00 noon, New York City time, on a Business Day not fewer than seven days prior to the designated purchase date. -7- (iii) Variable Rate Bonds with interest payable at a Three Month Rate, a Six Month Rate or an Annual Rate may be tendered for purchase on any Rate Change Date upon delivery of a written notice of tender to the Tender Agent and the Remarketing Agent for the Bonds being tendered not later than 12:00 noon, New York City time, on a Business Day not fewer than 15 days prior to such Rate Change Date. Each notice of tender: (i) 1^1 will, in the case of a written notice, be delivered to the Tender Agent and the Remarketing Agent at its corporate office and be in form satisfactory to the Tender Agent and that Remarketing Agent; (ii) j^l will state (a) the principal amount and bond number of the Bond to which the notice relates and the CUSIP number of such Bond, (b) that the Holder irrevocably demands purchase of such Bond or an authorized specified portion thereof, (c) the date on which such Bond or portion is to be purchased, and (d) payment instructions with respect to the purchase price; and (iii) j.�_J will automatically constitute (a) an irrevocable offer to sell the Bond (or portion thereof) to which such notice relates on the purchase date to any purchaser selected by the Remarketing Agent for the Bonds being tendered, at a price equal to the principal amount of such Bond (or portion thereof) plus any interest thereon accrued and unpaid as of the purchase date, (b) an irrevocable authorization and instruction to the Tender Agent to effect transfer of such Bond (or portion thereof) upon payment of such purchase price to the Tender Agent on the purchase date, (c) an irrevocable authorization and instruction to the Tender Agent to effect the exchange of the Bond to be purchased in whole or in part for other Bonds in an equal aggregate principal amount so as to facilitate the sale of such Bond (or portion thereof to be purchased), and (d) an acknowledgment that such Holder will have no further rights with respect to such Bond (or portion thereof) upon deposit of an amount equal to the purchase price thereof with the Tender Agent on the purchase date, except for the right of such Holder to receive such purchase price upon surrender of such Bond to the Tender Agent. The determination of the Tender Agent and the Remarketing Agent for the Bonds being tendered as to whether a notice of tender has been properly delivered u will be conclusive and binding upon the Holder. The Tender Agent or IL the Remarketing Agent may waive any irregularity or nonconformity in any tender. Mandatory Tender. The Bonds L"1 will be subject to mandatory tender by Bondholders for purchase at a purchase price equal to the principal amount thereof, plus accrued interest, if any, on the following dates (each a "Mandatory Tender Date"): (i) on any Adjustment Date for the Bonds; (ii) on any Rate Change Date for the Bonds while the Bonds are in a Multiannual Mode; (iii) on the Proposed Fixed Rate Date for the Bonds; (iv) at least five days, but not more than 30 days, prior to the Letter of Credit Expiration Date unless the University has elected to have the Bonds redeemed (see "Redemption Provisions — Optional Redemption"); (v) on the date of substitution of an Altemate Credit Facility for the then existing Letter of Credit relating to the Bonds (except for any Bond whose owner elects to retain that Bond); and (vi) upon receipt by the Trustee of written notice from the Credit Provider (A) stating that f j an event of default has occurred and is continuing under the Reimbursement Agreement [Al and directing th-e Trustee to perform a special mandatory purchase of the Bonds n or (B)_received by the Trustee within ten days after timely pavment by the Bank of an interest pavment draft under the Letter of Credit JAI. stating- that an event of default has occurred and is continuing under the Reimbursement Agreement and the stated interest amount under the Letter of Credit 1^1 will not be reinstated on the l0 day after such payment. In no event will the purchase date for a mandatory due to an event described in clause (vi) of the preceding sentence be later than ten days from the date of receipt of such notice by the Trustee. Each notice of mandatory tender u will: (i) specify the proposed Mandatory Tender Date; (ii) state that the Bonds n will be subject to mandatary tender for purchase on the Mandatory Tender Date; (iii) state that if the interest rate on the Bonds is not adjusted on the proposed Adjustment Date or converted to a Fixed Rate on the Proposed Fixed Rate Date for one of the reasons set forth in the Indenture and described under the captions "Adjustments Between Modes" and "Fixed Rate Conversion, then all Bonds JAI will nonetheless be subject to mandatory tender on such proposed Adjustment Date or Proposed Fixed Rate ©ate; (iv) state that all Bonds j^1 will be required to be delivered to the principal corporate office of the Tender Agent at or before 8:30 a.m., New York City time, on the Mandatory Tender Date; (v) state that if the Holder of any Bond (or portion thereof) fails to deliver such Bond to the Tender Agent or fails to provide DTC with transfer instructions for purchase on the Mandatory Tender Date, and if the Tender Agent is in receipt of the purchase price therefor, such Bond (or portion thereof) ll will nevertheless be deemed purchased on the Mandatory Tender Date and ownership of such Bond (or portion thereof) JAI will be transferred to the purchaser thereof, (vi) state that any Holder who fails to deliver such Bond for purchase or fails to provide DTC with transfer -8- instructions 1^1 will have no further rights thereunder except the right to receive the purchase price thereof upon presentation aand surrender of said Bond to the Tender Agent and that the Trustee will place a stop transfer against said Bond registered'in the name of such Holder(s) on the Bond registration books; and (vii) state that if the proposed conversion of the interest rate on the Bonds does not occur for one of the reasons set forth in the Indenture and described under the caption "Adjustments Between Modes" and "Fixed Rate Conversion," the interest rate on the Bonds on and after the Mandatory Tender Date (a) in the case of a failed adjustment to a different Mode or to a different Multiannual Rate within a Multiannual Mode, L^1 will continue to be payable at the last effective Variable Rate and (b) in the ease of a failed conversion to a Fixed Rate, L^1 will be payable at a Weekly Rate. Notwithstanding the foregoing, if the mandatory tender is due to the substitution of an Alternate Credit Facility, such notice u will state that each owner of any affected Bond may elect to retain that Bond by giving the Trustee, the Tender Agent and the Remarketing Agent for the Bonds being tendered written notice of such election as specified in such notice, in which event that Bond L^1 will not be subject to mandatory tender or the provisions of clauses (ii), (iii) (iv), (v) or (vi) of the preceding sentence. For so long as DTC is effecting book -entry transfers of the Bonds, the Trustee will provide the mandatory tender notice described above to DTC. It is expected that DTC will, in turn, notify its participants and that the participants, in turn, will notify or cause to be notified the beneficial owners of the Bonds. The Authority, the Trustee and the University will have no responsibility or liability in connection with any failure on the part of DTC or a participantL^j to notify the beneficial owner of the Bond so affected, and such failure shall not affect the validity of a mandatory tender for such Bond. See "BOOK -ENTRY ONLY SYSTEM - Notices." At or before 2:00 p.m., New York City time, on the date set for purchase of tendered Bonds and upon receipt by the Tender Agent of 100% of the aggregate purchase price of the tendered Bonds, the Tender Agent M will pay the purchase price of such Bonds from amounts on deposit in the Purchase Fund to the Holders UTe-reof at the principal corporate office of the Tender Agent or by bank wire transfer. Such payments L^1 will be made in immediately available funds to an account within the United States. If the funds available for purchases of Bonds pursuant to the Indenture, including funds available from a draw under the Letter of Credit, are inadequate for the purchase of all Bonds tendered on any purchase date, no purchase JAI will be consummated and the Tender Agent 1^1 will return all tendered Bonds to the Holders thereof. Redemption Provisions Optional Redemption. While any Daily, Weekly, Three Month, Six Month or Annual Rate is in effect for the Bonds, the Bonds are subject to optional redemption prior to their stated maturity, as a whole or in part (by lot(^], provided that Bank Bonds will be redeemed prior to any other Bonds) on any Business Day from N prepayments from Available Moneys made by or on behalf of the University to the Trustee and deposited in the Optional Redemption Account 1^1, at a Redemption Price equal to 100% of the principal amount thereof, plus accrued interest to the redemption date, without premium. In the Reimbursement Agreement, the University will agree with the Credit Provider to redeem Bonds pursuant to the foregoing optional redemption provisions on March l of various years during the term of the Reimbursement Agreement in accordance with the redemption L� schedule set forth therein, but that agreement can be modified by the University and the Credit Provider at any time and there is no assurance that any such redemption will occur or that Bonds will not be redeemed in accordance with a different schedule. While any Multiannual Rate for the Bonds is in effect and also after the Fixed Rate Date for the Bonds, the Bonds are subject to optional redemption prior to their stated maturity, as a whole or in part (by lot["], provided that Bank Bonds will be redeemed prior to any other Bonds) on any Business Day from Ll prepayments made L1 from Available Moneys by or on behalf of the University to the Trustee and deposited in the Optional Redemption Account, at the Redemption Prices (expressed as percentages of the principal amount of the Bonds to be redeemed) set forth below, declining by 112 of 1% on every second Interest Payment Date after the initial redemption date until the Redemption Price equals 100%, plus accrued interest to the redemption date: Initial Redemption Length of Multiannual Rate Period in Dates (anniversary of Initial 92 Years, or Years Remaining to Maturity as of Fixed Rate Date Equal to or greater than 12 years Equal to or greater than 8 years but less than 12 years Less than 8 years Rate Change Date or Redemption Fixed Rate Date) Prices 7th anniversary 102% 5th anniversary 100% Anniversary corresponding 100% With next Rate Change Date The Bonds are also subject to optional redemption prior to their stated maturity, as a whole on any Business Day from L1 a draw on the Letter of Credit reimbursed by prepayments by or on behalf of the University to the Trustee and deposited in the Optional Redemption Account, at a redemption price equal to 100% of the principal amount thereof, plus accrued interest to the redemption date, without premium, at least five days, but not more than 30 days, prior to the Letter of Credit Expiration Date. Re Mandatory Sinbng Fund Redemption. (a) Prior to Fired Rate Conversion. Prior to any conversion of the Bonds to a Fixed Rate, the Bonds are not subject to mandatory sinking fund redemption. However, in the Reimbursement Agreement the University will agree with the Credit Provider to redeem Bonds pursuant to the foregoing optional redemption provisions on March 1 of various years during the term of the Reimbursement Agreement in accordance with the redemption schedule set forth therein, but that agreement can be modified by the University and the Credit Provider at any time and there is no assurance that any such redemption will occur or that Bonds will not be redeemed in accordance with a different schedule. (b) After Fixed Rate Conversion. Upon conversion of Bonds to a Fixed Rate, the Bonds 1�11 Evill be subject to redemption prior to their stated maturity, in part, by lot, from mandatory sinking fund payments deposited in the Bond Fund pursuant to the Indenture on December I of each year, commencing on the first December 1 occurring at least six months after the Fixed Rate Adjustment Date, through and including the date of maturity of the Bonds. The sinking fund payments fAt ELbe set to achieve annual level debt service (including both principal and interest) as nearly as practicable far all remaining Bond Years, commencing with the first Bond Year commencing at least six months after the Fixed Rate Adjustment Date. Extraordinary Redemption. The Bonds are subject to redemption prior to their stated maturity, at the option of the Authority (which option shall be exercised as directed by the University) as a whole, or in part (by lot(^], provided that Bank Bonds will be redeemed prior to any other Bonds) on any Business Day from hazard insurance or condemnation proceeds received with respect to the Facilities and deposited in the Optional Redemption Account, at a Redemption Price equal to 100% of the principal amount thereof, plus accrued interest to the redemption date, without premium. Notice and Effect of Redemption. Notice of redemption I'] will be mailed by first-class mail, postage prepaid, to Bondholders not less than 30 days or more than 60 days prior to the date fixed for redemption, except in the case of redemptions of the Bonds that bear interest at a Daily, Weekly or Three Month Rate. in which case not less than 25 days or more than 45 days prior to the date fixed for redemption. Notice of redemption 1^1 will be given by the Trustee to the respective Holders of any Bonds designated for redemption at their addresses appearing on the Bond registration books of the Trustee, and to the information services and the securities depositories specified in the Indenture. For so long as DTC is effecting book -entry transfers of the Bonds, the Trustee will provide redemption notice described above to DTC. It is expected that DTC will, in turn, notify its participants and that the participants, in turn, will notify or cause to be notified the beneficial owners of the Bonds to be redeemed. The Authority, the Trustee and the University will have no responsibility or liability in connection with any failure on the part of DTC or a participantl^l to notify the beneficial owner of the Bond so affected, -10- and such failure 1.�j will not affect the validity of the redemption of such Bond. See "BOOK -ENTRY ONLY SYSTEM - Notices." Interest on the Bonds called for redemption will cease to accrue from and after the redemption date. Such Bonds (or portions thereof) will then cease to be entitled to any benefit or security under the Indenture, and the owners of said Bonds will have no rights in respect thereof except to receive payment of the Redemption Price and accrued interest to the redemption date. In the event of an optional redemption or extraordinary redemption, mandatory sinking fund payments will be reduced in the order specified by the University. Registration, Transfer and Exchange So long as DTC or its nominee is the registered owner of the Bonds, transfers and exchanges of beneficial ownership interests in the Bonds will be available only through DTC participants, as described below. See "BOOK -ENTRY ONLY FORM." CUSIP Numbers It is anticipated that CUSIP identification numbers will be printed on the Bonds, but neither the failure to print such numbers on any Bonds, nor any error in the printing of such numbers, M will constitute cause for a failure or refusal by the purchaser thereof to accept delivery of and pay for any Bonds. BOOK -ENTRY ONLY SYSTEM The information provided below concerning DTC and the Book -Entry Only System, as it currently exists, has been obtained from DTC and is not guaranteed as to accuracy or completeness by, and is not to be construed as a representation by, the Underovriter, the authority or the University. General When the Bonds are issued, ownership interests will be available to purchasers only through a book - entry only system (the "Book -Entry Only System") maintained by DTC. DTC will act as securities depository for the Bonds. initially, the Bonds will be issued as one fully -registered 1� Bond, registered in the name of Cede & Co. (DTC's partnership nominee) and will be deposited with DTC.. The following discussion will not apply to any Bonds issued in certificate form due to the discontinuance of the DTC Book -Entry Only System, as described below. DTC and its Participants DTC 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. DTC holds securities that its participants ("Participants") deposit with DTC. DTC also facilitates the settlement among Participants of securities transactions such as transfers and pledges, in deposited securities through electronic computerized book -entry changes in Participants' accounts, thereby eliminating the need for physical movement of securities certificates. Direct Participants include securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is owned by a number of its Direct Participants and by the New York Stock Exchange, Inc., the American Stock Exchange, Inc., and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others such as securities brokers and dealers, banks, and trust companies that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). The Rules applicable to DTC and its Participants are on file with the Securities and Exchange Commission. Purchase of Ownership Interests Purchases of the Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC's records. The ownership interest of each actual purchaser of the Bonds ("Beneficial Owner') is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchase, but Beneficial Owners are expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries made on the books of Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the Bonds, except in the event that use of the book -entry system for the Bonds is discontinued. So long as Cede & Co., as nominee of DTC, is the registered owner of any of the Bonds, the Beneficial Owners of such Bonds will not receive or have the right to receive physical delivery of the Bonds, and references herein to the Bondholders or registered owners of such Bonds shall mean Cede & Co. and shall not mean the Beneficial Owners of such Bonds. Transfers To facilitate subsequent transfers, all securities deposited by Participants with DTC are registered in the name of DTC's partnership nominee, Cede & Co. The deposit of the Bonds with DTC and their registration in the name of Cede & Co. effect no 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 the Bonds are credited, which may or may not be the Beneficial O.vners. The Participants will remain responsible for keeping account of their holdings on behalf of their customers. Notices Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Redemption notices shall be sent to Cede & Co. 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 such issue to be redeemed. Voting Neither DTC nor Cede & Co. will consent or vote with respect to the Bonds. Under its usual procedures, DTC will mail an Omnibus Proxy to the Authority as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts the Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). Payments of Principal and Interest So long as any Bonds are registered in the name of DTC's nominee, all payments of principal of, premium, if any, and interest on such Bonds will be made to DTC. DTC's practice is to credit Direct Participants' accounts on any payment dates in accordance with their respective holdings shown on DTC's records unless DTC has reason to believe that it will not receive payment on the payment date. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name, and will be the responsibility of such Participant and not of DTC, the Trustee or the Authority, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal of, premium, if any, and interest to DTC is the responsibility of the Trustee, disbursement of such payments to Direct Participants shall be the responsibility of DTC, and the disbursement of such payments to the Beneficial Owners shall be the responsibility of Direct and Indirect Participants. Effecting Tenders of Bonds Through DTC -12- A Beneficial Owner must give notice to elect to have its Bonds purchased or tendered (when such election is available), through its Participant, to the Tender Agent, and must effect delivery of such Bonds by causing the Direct Participant to transfer the Participant's interest in the Bonds, on DTC's records, to the Tender Agent. The requirement for physical delivery of Bonds in connection with a demand for purchase or a mandatory purchase will be deemed satisfied when the ownership rights in the Bonds are transferred by Direct Participants on DTC's records. Discontinuation of Book -Entry Only System 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, the Bonds are required to be printed and delivered a described in the Indenture. The use of the system of book -entry transfers through DTC (or a successor securities depository) may be discontinued as described in the Indenture. In that event, the Bonds will be printed and delivered as described in the Indenture. None of the Authority, the Underwriter, the Trustee, the Credit Provider nor the University will have any responsibility or obligations to any Direct Participants or Indirect Participants or the persons for whom they act with respect to (i) the accuracy of any records maintained by DTC or any such Direct Participant or Indirect Participant; (ii) the payment by any Participant of any amount due to any Beneficial Owner in respect of the principal of, premium, if any, or interest on the Bonds; (iii) the delivery by any such Direct Participant or Indirect Participant of any notice to any Beneficial Owner that is required or permitted under the terms of the Indenture to be given to Bondholders; (iv) the selection of the Beneficial Owners to receive payment in the event of any partial redemption of the Bonds; or (v) any consent given or other action taken by DTC as Bondholder. SECURITY AND SOURCE OF PAYMENT FOR THE BONDS General Ll THE BONDS WILL BE LIMITED OBLIGATIONS OF THE AUTHORITY PAYABLE SOLELY FROM THE FUNDS PROVIDED THEREFOR UNDER THE LOAN AGREEMENT AND THE INDENTURE. THE BONDS DO NOT CONSTITUTE A DEBT OR LIABILITY OF THE CITY OF LUBBOCK, THE STATE OF TEXAS OR OF ANY POLITICAL SUBDIVISION THEREOF. NEITHER THE CITY OF LUBBOCK, THE STATE OF TEXAS OR ANY POLITICAL SUBDIVISION SHALL BE OBLIGATED TO PAY THE PRINCIPAL OF OR PREMIUM, IF ANY, OR INTEREST ON THE BONDS AND NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE CITY OF LUBBOCK, THE STATE OF TEXAS OR ANY POLITICAL SUBDIVISION THEREOF IS PLEDGED TO THE PAYMENT OF THE PRINCIPAL OF OR PREMIUM, IF ANY, OR INTEREST ON THE BONDS. THE ISSUANCE OF THE BONDS SHALL NOT DIRECTLY OR INDIRECTLY OR CONTINGENTLY OBLIGATE THE CITY OF LUBBOCK, THE STATE OF TEXAS OR ANY POLITICAL SUBDIVISION THEREOF TO LEVY OR PLEDGE ANY FORM OF TAXATION WHATSOEVER THEREFOR OR TO MAKE ANY APPROPRIATION FOR THEIR PAYMENT. THE AUTHORITY HAS NO TAXING POWER. ALL FINDINGS AND DETERMINATIONS MADE BY THE CITY OF LUBBOCK OR THE -13- Reserve Account The Indenture creates the Reserve Account as a separate account in the Bond Fund to be held by the Trustee as additional security for the Bonds. The Reserve Account will initially be funded with the proceeds of the Bonds in an amount equal to the Required Reserve Amount, which is the M least of L1 10% of the principal amount of the Bonds outstanding, (2) maximum annual debt service for that or any subsequent calendar year for the Bonds remaining outstanding, or (3) 125% of average annual debt service for u that and every subsequent calendar year on and for so long as there shall be outstanding Bonds (initially $ ). Moneys in the Reserve Account 1^1 will be used to pay (or to reimburse the Credit Provider for payment off principal of, redemption premium, if any, and interest on the Bonds as the same 1� becomes due and pavable, in the event there are insufficient funds to do so on deposit in the Bond Fund. The Reserve Account 1�1 will be maintained until all of the Bonds have been fully paid and discharged in accordance with the Indenture r until the amounts on deposit in the Bond Fund, including amounts on deposit in the Reserve Account, equal the aggregate principal of and interest on the Bonds then Outstanding at their final maturities. Investments in the Reserve Account 1�1 will be valued as of the last day of each Fiscal Year at market value. If the amount held in the Reserve AcCo-dr—less than the Required Reserve Amoum then the Trustee will transfer the shortfall for the Required Reserve Amount 1^1 to the Reserve Account of the Bond Fund from amounts held in the Project Fund, and if 1� the amounts in the Project Fund are insufficient to replace such Ll shortfall. If the amount held in the Reserve Account exceeds the Required Reserve Amount, then the excess will be transferred to the Bond Fund and used to pay (or to reimburse the Credit Provider for payment of) principal or premium of or interest on the Bonds on the next Interest Payment Date. See "SUMMARY OF PRINCIPAL DOCUMENTS - THE INDENTURE - Reserve Account" in Appendix C hereto. Letter of Credit To M provide for the payment of the principal of and interest on the Bonds and the purchase price of the Bonds, the University will cause the Letter of Credit to be delivered to the Trustee. See "THE CREDIT PROVIDER" and "THE LETTER OF CREDIT AND THE REIMBURSEMENT AGREEMENT." Loan Agreement Pavments mium, it an Indenture to make Base Deed of Trust on Mortgaged Property; Security Interest in Gross Revenues -14- The University will enter into the Deed of Trust granting a deed of trust lien on the Rip Griffin Center, the New Residential Facility, Katie Rogers Hall (one of the dormitories being renovated as a part of the Project) and the Katie Rogers Courtyard (a six -unit, 48 -bed student residential facility) and grantiniz a secqdty interest in its Gross Revenues to the Trustee and the Credit Provider to secure the payment ll o igations. The property to be covered by the deed of trust lien of the Deed of Trust is referred to herein as the "Mortgaged Property." See "THE LETTER OF CREDIT THE REIMBURSEMENT AGREEMENT AND THE DEED OF TRUST - Deed of Trust.1^1 "Gross Revenues" means all tuition, fees and similar charges received by or on behalf of the University from students and other users of j^1 its educational and ousinfacilities. See "BONDOWNERS' RISKS — Factors relating to Security for the Series 1999 Bonds" for a discussion of factors affecting the security afforded by the lien on the Mortgaged Property and the security interest in Gross Revenues. THE CREDIT PROVIDER The following information concerning the Credit Provider has been provided by representatives of the Credit Provider and has not been independently confirmed or verified by the Underwriter, the Authority or the University. No representation is made herein as to the accuracy or adequacy of such information or as to the absence of material adverse changes in such information subsequent to the date hereof, or that the information given below or incorporated herein by reference is correct as of any time subsequent to its date. The financial information contained herein relates to and has been provided by Banque Nationale de Paris for inclusion in this Official Statement. No other party has independently verified or assumes any responsibility for such information, and neither the District nor the Underwriter make any representation as to the accuracy or completeness of such information. The delivery of the Official Statement shall not create any implication that there has been no change in the affairs of the Bank since the date hereof, or that the information contained or incorporated by reference herein is correct as of any time subsequent to its date. Banque Nationale de Paris ("BNP") is the third largest commercial bank in France with consolidated assets of approximately $384.3 billion (Euros $325 billion) as of December 31, 1998. Like the other major international banks, BNP engages in both its home country and throughout the world in deposit taking. credit extension, and the other activities which constitute full-service commercial banking. BNP and its subsidiaries have a worldwide branch network of approximately 2,600 offices in over 81 countries. The San Francisco Branch (the "Branch") of BNP has been licensed by the California State Banking Department to conduct the business of making loans, issuing letters of credit and various other kinds of financing. The Branch is subject to periodic examination by the Superintendent of the California State Banking Department and the Federal Reserve Bank of San Francisco. In addition, the Branch is required to file financial reports with the Federal Reserve Bank of San Francisco. BNP will provide any person, upon written request, a copy of the Bank's most recent annual report. Written requests should be directed to Banque Nationale de Paris, Business Development Desk. 180 Montgomery Street, San Francisco, California 94104. THE LETTER OF CREDIT L^h THE REIMBURSEMENT AGREEMENT AND THE DEED OF TRUST Letter of Credit The Letter of Credit will be an obligation of the Credit Provider to pay to the Trustee, upon request made with respect to the Bonds and in accordance with the terms thereof, up to: (i) an amount sufficient (a) to pay principal of such Bonds when due, whether upon maturity, redemption or acceleration or (b) to pay that portion of the purchase price of Bonds delivered for purchase and not remarketed equal to the principal amount of such Bonds; plus (ii) an amount equal to 54 days interest accrued on the Bonds calculated at the rate of 12% -15- per annum (a) to pay accrued interest on the Bonds when due or (b) to pay the accrued interest portion of the purchase price of Bonds delivered for purchase and not remarketed, The Letter of Credit shall terminate upon the earliest of (i) u May 4, 2004 (the "Letter of Credit Expiration Date"), unless the Letter of Credit Expiration Date is extended by the Credit Provider in its sole discretion, (ii) the date that is five days after the date on which the Credit Provider receives written notice from the Trustee that an Alternate Credit Facility has been substituted for the Letter of Credit in accordance with the Indenture, (iii) the date on which the Credit Provider honors payment of a final drawing to pay or redeem all outstanding Bonds, (iv) five Business Days after the Fixed Rate Date, or (v) the date that the Credit Provider receives notice from the Trustee that there are no longer any Bonds outstanding. While in effect, the Letter of Credit entitles the Trustee to draw upon the Letter of Credit (i) on any interest or principal payment date or any date on which Bonds are to be redeemed, in an amount sufficient to make such payment, or (ii) on the Business Day on which Bonds are to be purchased, in an amount sufficient to purchase such Bonds to the extent funds are not otherwise available from the remarketing of such Bonds by the Remarketing Agent for such Bonds. Notwithstanding the foregoing, in no event shall the Trustee draw under the Letter of Credit to pay the principal of or interest on Bonds registered in the name of the University or held by the Trustee for the account of the University. The obligation of the Credit Provider under the Letter of Credit will be reduced to the extent of any drawing with respect to the principal of the Bonds. With respect to a drawing by the Trustee to pay the portion of the purchase price of Bonds delivered for purchase equal to the principal amount of such Bonds, such Bonds in an aggregate principal amount equal to the amount representing principal of each drawing shall be delivered to the Trustee on behalf of the Credit Provider. Upon the remarketing of those Bonds and receipt by the Credit Provider of payment therefor, the Letter of Credit will be reinstated in an amount equal to the principal amount of Bonds remarketed, and the 54 days interest thereon at the rate of 12% per annum, so that the Trustee will be entitled again to draw under that Letter of Credit for payment of those Bonds. With respect to a drawing by the Trustee to pay interest on Bonds, the Letter of Credit will be reinstated 10 days after such drawing to an amount equal to 54 days interest on those Bonds at the rate of 12% per annum, unless the Credit Provider notifies the Trustee that an event of default has occurred and is continuing under the Reimbursement Agreement and that the Credit Provider has elected not to reinstate that amount. Reimbursement Agreement The Credit Provider [^] will enter into J�i the Reimbursement Agreement with the University LLl providing for, among other things, the University's reimbursement to the Credit Provider of all amounts drawn upon under the Letter of Credit. Upon the occurrence of an event of default under the Reimbursement Agreement, the Credit Provider may direct the Trustee to draw on the Letter of Credit to fund a mandatory purchase of the Bonds. The Trustee shall give notice of such mandatory purchase in accordance with the Indenture. Events of default under the Reimbursement Agreement include the following events: (a) failure by the University to pay when due certain obligations under the Reimbursement Agreement 1"1: (b) anv representation or_warranty made by the University in the Reimbursement Agreement or certain other agreements related to the financing shall be false in any material respect on the date on which it is made: c) failure of the University to comply with certain other provisions and covenants contained in the Reimbursement Agreement, which failure is not remedied within the applicable grace period, if any; 111(d) a default shall occur and be continuing beyond any applicable grace and cure period under the Loan Agreement. the Indenture or certain other agreements securing the University's obligations under the Reimbursement Agreement, the Deed of Trust or otherwise relating to the financing; ^ e the University fails to make any payment of principal of or interest on any indebtedness after giving effect to any applicable grace period; 1^lff) the University fails to observe or perform any material covenant or agreement contained in any agreement or instrument relating to any indebtedness of the University in excess of 5250,000 in the aggregate alker the expiration of any applicable grace period, or any other material default occurs thereunder, or any such indebtedness is required to be prepaid (other than by a regularly scheduled required payment) in whole or in part prior to its stated maturity; certain events of bankru tcv or insolvency with respect to the University; (h) a judgment or order for the payment of money in excess of $250,000 is rendered against the 1M University and either (i) enforcement proceedings have been commenced by any creditor upon such judgment or order, or (ii) there is any period of ten consecutive days during which a stay of enforcement of such judgment or order is not in effect;l^T (i) any material provision of the Reimbursement Agreement or certain other agreements related to the financing shall cease to be valid, binding and enforceable or shall be declared void or the University so asserts in writing; I^I{i) a moratorium is declared with respect to any indebtedness of the University; or k the occurrence of anv final administrative or iudicial determination that the interest on Deed of Trust Alternate Credit Facility The University may, at its option, at any time provide for the delivery to the Trustee of an Alternate Credit Facility under the Indenture. The Indenture provides that an Alternate Credit Facility shall be an irrevocable letter of credit or other irrevocable credit facility (including a bond insurance policy), other than the letter of Credit issued by the Credit Provider, issued by a commercial bank or other financial institution or bond insurer, the terns of which shall in all material respects be the same as the letter of Credit; provided that the expiration date of such Alternate Credit Facility shall be a date not earlier than one year from its date of issuance, subject to earlier termination upon the issuance or execution and delivery, as the case may be, of a subsequent Alternate Credit Facility or upon payment of all Bonds secured by the Indenture in full or provision for such payment in accordance with the defeasance provisions of the Indenture. On or prior to the date of the delivery of an Alternate Credit Facility to the Trustee, the University shall furnish to the Trustee (i) an Opinion of Counsel stating that the delivery of such Alternate Credit Facility to the Trustee is authorized under dhe Indenture and complies with the terms thereof, and (ii) an Opinion of Counsel stating that the deliver: of such -17- Alternate Credit Facility will not adversely affect the exemption of the Bonds from registration under the Securities Act of 1933, as amended, or that the Bonds have been so registered. PLAN OF FINANCE Generally The Bonds are being issued to (i) to finance the acquisition, construction, renovation, remodeling and equipping of the Project; (ii) to refinance existing indebtedness of the University, (iii) to pay capitalized interest; (iv) to provide a debt service reserve, and (v) to pay certain costs of issuance of the Bonds. 1�2 The Project Description of the Project. A portion of the proceeds of the Bonds will be deposited in the Project Fund and used to pay costs of the Project. The Project consists of construction of the Rip Griffin Center, construction of the New Residential Facility and renovation of existing residence halls. The Rip Griffin Center will be a multi-purpose facility with seating for 1� 2,674 that will house University athletics and host commencement ceremonies and other University functions involving the entire student body. The New Residential Facility will be a multi -story apartment style housing facility containing 200 beds in 88 one-, two- and four-bedroom units for single and married students. The New Residential Facility will be located near existing student housing on the campus and will bring total housing capability to over 600 beds. The renovations will be to Katie Rogers Hall and Johnson Hall, facilities built in the 1960's that have over 111 300 beds. These renovations will primarily involve replacement of the HVAC systems, bathrooms and carpet in each of these facilities and will also reduce the number of rooms and beds in Katie Rogers Hall by eight to ten rooms. In addition, the I'] Mabee Living Center, a five -story dormitory with 48 suites, will receive new carpet and paint. Construction of the Project. The University has engaged MWM Architects, Inc., Lubbock, Texas, as the architect for the Rip Griffin Center and expects to enter into a construction contract with Lee Lewis Construction, Lubbock, Texas, for the construction of the Rip Griffin Center. The University expects construction of the Rip Griffin Center to begin in May, 1999, and to be completed by September, 2000, under its current construction schedule, but actual dates for these events may vary materially. The University is working with Asset Campus Housing, Inc., Austin, Texas, as the project coordinator for the construction of the 1�l New Residential Facility and the renovation of Katie Rogers Hail and Johnson Hall, and has engaged Griffin Architects, Austin, Texas, as the architect for these portions of the Project. The University expects to enter into construction contracts with G. Greenstreet 1.:�J Inc.. Lubbock, Texas, by May,. 1999, for the construction of the New Residential Facility and the renovation o�ogers Hall, with construction to begin in May, 1999, and with the Katie Rogers Hall renovation scheduled to be completed by August, 1999, and the New Residential Facility scheduled to be completed by IJ November, 1999, under the current construction schedule. The University expects that the renovation of Johnson Hall will also be performed by G. Greenstreet 1^1 Inc.. Lubbock, Texas, but will not begin until May, 2000, with anticipated completion by September, 2000 under the current construction schedule. Actual dates for these events may vary materially from those mentioned above. The proposed budget for the Project includes $4.2 million for the Rip Griffin Center, $3 million for the New Residential Facility, and over $1 million for the renovation of Katie Rogers Hall, Johnson Hall and the M Mabee Living Center, but actual costs may vary materially. The costs of the Project are based upon current estimates by the University's architects in the case of the Rip Griffin Center and New Residential Facility and by the University for the renovation of Katie Rogers Hall, Johnson Hall and the 1�Ll Mabee Living Center. The University has received gifts and pledges of $3,000,000 for the Project. If the proceeds of the -18- Bonds and gifts for the Project are insufficient to complete the Project, the University expects to complete the Project with its own funds. Environmental Matters. j^I tmental site assessment of the site for the Mortgaged Property, which inc Center and the New Residential Facilitv as well as Katie Rogers Hall_ but include Johnson hall or the Mabee Living Center. The environmental site assessment 12.[ includes investigating whether the site is impaired by environmental hazards including an information review, site inspection and analysis resulting in evaluations and recommendations based on the data accumulated.fThe assessment identified no material environmental hazards.l [To be Updatedl No environmental assessment of Johnson Hall or the Mabee Living Center has been conducted. While the University cannot assure that no environmental hazards exist, the University is not aware of the existence of any environmental hazards at Johnson Hall or the Mabee Living Center. The Refinancing A portion of the proceeds of the Bonds will be used to refinance outstanding indebtedness of the University currently outstanding in the principal amount of approximately $3,400,000, which was incurred to finance or refinance capital projects. Estimated Sources and Uses of Funds Sources: Principal Amount of the Bonds................................................................................$11,600,000 Pledges and gifts..........................................................................................................2 6555.000 TotalSources.....................................................................................................$14.255.000 Uses: Construction of Rip Griffin Center............................................................................$4,200,000 Construction of New Residential Facility ....................................... ...........3,000,000 Renovation of Residence Halls....................................................................................2,000,000 Refinancing of Existing Indebtedness..........................................................................3,400,000 Debt Service Reserve Fund.............................................................................................726,950 CapitalizedInterest ................................................ ......................................................... 478,657 Costs of Issuance and Credit Provider Fees{" ......................................... .449.393 Total Uses...................................................................................$14.255.000 Includes Underwriter's discount, a portion of the other costs incurred in connection with the issuance and delivery of the Bonds and the Credit Provider's JAI initial letter of credit fee 1�.J. THE AUTHORITY The Authority is the Lubbock Educational Facilities Authority, Inc., which is a non-profit corporation created at the request of the City Council of the City of Lubbock, Texas (the "City"). The corporation operates as an instrumentality of the City for the purpose of aiding institutions of higher education, secondary schools. and primary schools in providing educational facilities and housing facilities and facilities incidental. subordinate or related thereto or appropriate in connection therewith. The Authority is governed by a Board of Directors consisting of seven members appointed by the City Council of the City. Pursuant to a resolution adopted by the Board of Directors of the Authority on 1:11 A ril 19, 1999, the Authority is authorized to issue the Bonds and to enter into the Indenture and the Loan Agreement. THE UNIVERSITY The University is a nonprofit corporation, organized and existing under the laws of the State of Texas. that owns and operates a private four-year coeducational university offering 39 fields of undergraduate study and pre -professional programs through the College of Professional Studies, the College of Liberal Arts and the W College of Education. In addition, four master's degrees are offered, two in the field of Biblical studies and two in the College of Education. The University's fall 1998 enrollment was u 1.044 full-time and 309 part- time studentsf ^l. The University is located on a 75 -acre campus on the western side of Lubbock, Texas. The University is accredited by the Commission on Colleges of The Southern Association of Colleges and Schools, the Texas Education Agency, the Council on Social Work Education and the National League of Nursing. See "APPENDIX A: LUBBOCK CHRISTIAN UNIVERSITY - ORGANIZATION AND OPERATIONS." BONDOWNERS' RISKS The following is a discussion of certain risks that could affect payments to be made by the University with respect to the Bonds. Such discussion is not, and is not intended to be, exhaustive and should be read in conjunction with all other parts of this Official Statement and should not be considered as a complete description of all risks that could affect such payments. Prospective purchasers of the Bonds should analyze carefully the information contained in this Official Statement, including the Appendices hereto, and additional information in the form of the complete documents summarized herein and in Appendix C, copies of which are available as described herein. General 1^1 No representation or assurance can be given that the University will realize revenues in amounts sufficient to make payments under the Loan Agreement. The realization of future revenues is dependent upon, among other things, government regulations, the capabilities of the management of the University, gifts, grants and bequests and future changes in economic and other conditions that are unpredictable and cannot be determined at this time. THE BONDS WILL BE LIMITED OBLIGATIONS OF THE AUTHORITY PAYABLE SOLELY FROM THE FUNDS PROVIDED THEREFOR UNDER THE LOAN AGREEMENT AND THE INDENTURE. THE BONDS DO NOT CONSTITUTE A DEBT OR LIABILITY OF THE CITY OF LUBBOCK, THE STATE OF TEXAS OR OF ANY POLITICAL SUBDIVISION THEREOF. NEITHER THE CITY OF LUBBOCK, THE STATE OF TEXAS OR ANY POLITICAL SUBDIVISION SHALL BE OBLIGATED TO PAY THE PRINCIPAL OF OR PREMIUM, IF ANY, OR INTEREST ON THE BONDS AND NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE CITY OF LUBBOCK, THE STATE OF TEXAS OR ANY POLITICAL SUBDIVISION THEREOF IS PLEDGED TO THE PAYMENT OF THE PRINCIPAL OF OR PREMIUM, IF ANY, OR INTEREST ON THE BONDS. THE ISSUANCE OF THE BONDS SHALL NOT DIRECTLY OR INDIRECTLY OR CONTINGENTLY OBLIGATE THE CITY OF LUBBOCK, THE STATE OF TEXAS OR ANY POLITICAL SUBDIVISION THEREOF TO LEVY OR PLEDGE ANY FORM OF TAXATION WHATSOEVER THEREFOR OR TO MAKE ANY APPROPRIATION FOR THEIR PAYMENT. THE AUTHORITY HAS NO TAXING POWER. -20- BOCK Bankruptcy or Insolvency of the Credit Provider The obligations of the Credit Provider under the Letter of Credit are general obligations of the Credit Provider and rank equally in priority of payment and in all other respects with all other unsecured obligations of the Credit Provider. In the event of a bankruptcy or insolvency or if for any other reason the Trustee fails or is unable to draw on the Letter of Credit, each Bondowner would have to depend entirely on the ability of the University to pay the principal of, purchase price and interest on the Bonds. Mandatory Tenders for Purchase of the Bonds; Redemption of Bonds The Bonds f.L1 will be subject to mandatory tender j�J by B 'HE BONDS - Tender and Purchase of Bonds - Mandatnry Tenni ions. Acceleration of the Bonds The occurrence of an event of default under the Indenture See in Appendix C) may cause the Bonds to be declared to be due and payable. In such event, Bondowners may not have the opportunity to hold f�J their Bonds for a time period consistent with their original investment instructions. Enrollment The University believes that the strength of its academic programs, faculty and facilities and its location will cause the demand for its educational programs to remain stable; however, no assurance can be given that it will do so. A significant decrease in the University's enrollment could adversely affect the University's financial position and results of operations. Financial Aid A significant percentage of the University's undergraduate and graduate students receive financial support in the form of loans, scholarships and grants. There can be no assurance that the amount of loans or other financial aid will remain stable or increase in the future. If the amount of federally supported loans or other financial aid from sources other than the University decreases in the future, there can be no assurance that the University will be able to increase the amount of financial aid provided by it. Any change in the availability of financial aid could adversely affect the University's enrollment. Any significant decrease in enrollment could adversely affect the University's financial position and results of operations. Tuition and Fees A significant portion of the University's operating revenues is provided through tuition and related fees. Although the University in the past has been able to raise tuition and related fees without adversely affecting enrollment, there can be no assurance that it will continue to be able to do so. Future tuition increases could adversely affect enrollment, which could adversely affect the University's financial position and results of operations. Gifts, Grants and Bequests The University annually solicits and receives gifts and bequests for both current operating purposes and other needs. In addition, the University receives various grants from private foundations and from agencies of the federal government. These gifts, grants and bequests have varied substantially from year to year and supply a significant portion of the University's annual revenues. See APPENDIX A: -21- "OPERATIONS — Summary Statement of Revenues and Expenses." There can be no assurance that the amount of gifts, grants and bequests received by the University will remain stable or increase in the future. Other Factors Affecting the Financial Performance of the University One or more of the following factors or events, or the occurrence of other unanticipated factors or events, could adversely affect the University's operations and financial performance to an extent that cannot be determined at this time: 1. Changes in Management. Changes in key management personnel could affect the capability of management of the University. 2. Organized Labor Efforts. Efforts to organize employees of the University into collective bargaining units could result in adverse labor actions or increased labor costs. 3. Environmental Matters. Legislative, regulatory, administrative or enforcement action involving environmental controls could adversely affect the operation of the facilities of the University. For example, if property of the University is determined to be contaminated by hazardous materials, the University could be liable for significant clean up costs even if it were not responsible for the contamination, 4. Natural Disasters. The occurrence of natural disasters, such as earthquakes, floods or droughts, could damage the facilities of the University, interrupt services or otherwise impair operations and the ability of the University to produce revenues.j�J 5. Investment Ratings. The lowering or withdrawal of the investment ratings initially assigned to the Bonds, which could adversely affect the market price and the market for the Bonds. Tax -Exempt Status of the University and the Bonds The Internal Revenue Service ("IRS") has determined that the University is an organization described in Section 501(c)(3) of the Code and therefore is exempt from federal income taxation. As a charitable organization, it is subject to a number of requirements affecting its operations. The failure of the University to remain qualified as a tax-exempt organization could affect the amount of funds available to pay debt service on the Bonds. Such failure, as well as failure to comply with certain legal requirements (see "TAX MATTERS"), could result in the inclusion of interest on the Bonds in gross income for federal income tax purposes retroactive to the date of issuance of the Bonds. In such event, the maturity of the Bonds may be accelerated, in the discretion of the Trustee with the consent of the Credit Provider. The Indenture does not provide for the payment of any additional interest or penalty in the event of the taxability of the interest on the Bonds. The possible modification or repeal of certain existing federal income tax laws or property tax laws or other loss by the University of the present advantages of such laws, or any legislation imposing additional conditions on tax-exempt organizations, could adversely impact the University's financial position. Amendment of the Indenture and Loan Agreement Amendments to the Indenture and the Loan Agreement may be made with the consent of the Credit Provider without the consent of the owners of any outstanding Bonds. See "SUMMARY OF THE INDENTURE — Supplemental Indentures" and "- Amendment to Loan Agreement" in Appendix C hereto. Factors relating to Security for the j.�_J Bonds Enforcement of Remedies. The remedies available upon a default under the Indenture, the Loan Agreement, the Deed of Trust or the Letter of Credit will, in many respects, be dependent upon judicial actions, which are often subject to discretion and delay. Under existing constitutional and statutory law and judicial decisions, including the United States Bankruptcy Code and state laws concerning the use of assets of charitable organizations, the remedies specified in the Indenture, the Loan Agreement, the Deed of Trust and the Letter of Credit may not be readily available or may be limited. The various legal opinions to be delivered in connection sN ith the issuance of the Bonds will be expressly subject to the qualification that the -22- enforceability of the Indenture, the Loan Agreement, the Deed of Trust, the Letter of Credit and other legal documents is limited by bankruptcy, reorganization, insolvency, moratorium and other similar laws affecting the rights of creditors and by the exercise of judicial discretion in appropriate cases. Limited !Value of Mortgaged Property. The Mortgaged Property is not comprised of general purpose buildings and would be of limited utility and would not generally be suitable for industrial or commercial use. As a result, in the event of a default by the University and foreclosure on the Mortgaged Property, the Trustee's remedies and the number of entities which might purchase or 1^1 lease the Mortgaged Property would be limited, and the sale price or rentals generated by the Mortgaged Property might be of less than full value and likely would not be sufficient to repay the outstanding 1^1 Bonds. Gross Revenues. The effectiveness of the security interest in the Gross Revenues of the University granted pursuant to the 1.�J Deed of Trust may be limited by a number of factors, including for example: (i) certain judicial decisions which cast doubt upon the right of the Trustee, in the event of the bankruptcy of the University, to collect and retain grants due the University from governmental programs; (ii) commingling of Gross Revenues of the University with other moneys of the University not so pledged under the 1_^1 Deed of Trust; (iii) state and federal laws giving super priority to certain kinds of statutory liens such as tax liens; (iv) rights arising in favor of the United States of America or any agency thereof; (v) constructive trusts, equitable or other rights impressed or conferred by a federal or state court in the exercise of its equitable jurisdiction; (vi) federal bankruptcy laws which may affect the enforceability of the security interest in Gross Revenues which are earned by the University within 90 days preceding and after any effectual institution of bankruptcy proceedings by or against the University; (vii) rights of third parties in Gross Revenues converted to cash and not in the possession of the Trustee; (viii) claims that might arise if appropriate financing or continuation statements are not filed in accordance with the Uniform Commercial Code of Texas (or other applicable jurisdiction) as from time to time in effect; and (ix) state laws affecting perfection and priority of security interests in proceeds of collateral and of security interests in cash, cash equivalents and other items that cannot be perfected by filing. Marketability The Underwriter may engage in secondary market transactions with respect to the Bonds but 1^1 it is under no obligation to do so. There is no assurance that a secondary market for the Bonds will develop. i Continuing, Disclosure Obligation The University has agreed under the Loan Agreement to provide its audited financial statements to the Trustee within 150 days after the end of each fiscal year of the University, Except for the provision of its audited financial statements to the Trustee, the University is not obligated under the financing documents to make any other periodic disclosure of financial information or to give notices of the occurrence of material events to the Bondowners or to any national information repositories, The absence of such an undertaking could adversely affect the trading in the Bonds in the secondary market. The University has agreed, however, under the Loan Agreement to take any actions necessary to comply with the continuing disclosure requirements of SEC Rule 15c2-12 if the Bonds are converted to bear interest at an Annual Rate, a Multiannual Rate or a Fixed Rate. Year 2000 Compliance General. The operations of the University, the Trustee and the Credit Provider, like those of many other business entities, may be impacted by the inability of certain computer programs and electronic systems with imbedded microprocessor chips to recognize calendar dates beyond the year 1999. Unless such programs or microprocessors are modified or replaced prior to the year 2000, they may not function properly after 1999. The following information concerning year 2000 compliance describes the actions by and expectations of the University, the Trustee and the Credit Provider. There can be no assurance that the expectations of the University, the Trustee, the Credit Provider or others regarding compliance of relevant computer programs and microprocessors will be achieved with the anticipated results, and variations from those anticipated could differ materially, Specific factors that might cause such material differences include, but are not limited to, the availability and cost of personnel trained in this area, the ability to locate and -23- correct all relevant computer codes and similar uncertainties and the actions of vendors responsible for relevant systems. The University, the Trustee and the Credit Provider may also be vulnerable to failure of their significant suppliers and business partners to remedy their own Year 2000 issues. There is no guarantee that the systems of other business partners on which their systems rely will be timely converted and will not have an adverse effect on their systems. The University. The University has purchased a new administrative information hardware and software system for its financial and student records that is expected to be fully operational by July, 1999. in addition, the University plans to replace most of its older stand-alone personal computers by January 1, 2000. The University may have some of these computers that will not be replaced by that date, but does not expect them to have a material effect on its operations. The University has received assurances from its vendors regarding the ability of its fire alarm, elevator and telephone systems to function after January 1, 2000. The Trustee. The Trustee has committed financial and human resources to evaluate, fix and test software applications, telecommunication systems, security systems, data centers, desktop personal computers, servers and office equipment. As of December 31, 1998, 84% of all software applications had been tested and returned to production. The Trustee expects all applications, systems and equipment to be Year 2000 ready by June 30, 1999. The Credit Provider. [To be provided by the Credit Provider) TAX MATTERS The Internal Revenue Code of 1986, as amended (the "Code"), imposes certain requirements that must be met subsequent to the issuance and delivery of the Bonds for interest thereon to be and remain excluded pursuant to Section 103 (a) of the Code from the gross income of the owners thereof for federal income tax purposes. Noncompliance with such requirements could cause the interest on the Bonds to be included in 0Toss income for federal income tax purposes retroactive to the date of issue of the Bonds. The Authorit}- has covenanted in the Indenture, and the University has covenanted in the Loan Agreement, to comply with each applicable requirement of the Code necessary to maintain the exclusion pursuant to Section 103(a) of the Code of the interest on the Bonds from the gross income of the owners thereof for federal income tax purposes. In the opinion of Fulbright & Jaworski L.L.P., Bond Counsel, under existing law, assuming compliance with the aforementioned covenant, interest on the Bonds is excluded pursuant to Section 103(a) of the Code from the gross income of the owners thereof for federal income tax purposes. Bond Counsel is also of the opinion that, assuming compliance with the aforementioned covenant, the Bonds are not "specified private activity bonds" within the meaning of Section 57 (a) (5) of the Code and, therefore, the interest on the Bonds will not be treated as an item of tax preference for purposes of computing the alternative minimum tax imposed by Section 55 of the Code. Receipt or accrual of interest on the Bonds owned by a corporation may affect the computation of the alternative minimum taxable income, upon which the alternative minimum tax is imposed, to the extent that such interest is taken into account in determining the adjusted current earnings of that corporation (75 percent of the excess, if any, of such adjusted current earnings over the alternative minimum taxable income being an adjustment to alternative minimum taxable income (determined without regard to such adjustment or to the alternative tax net operating loss deduction)). Bond Counsel has not undertaken to advise in the future whether any events after the date of issuance of the Bonds may affect the tax status of interest on the Bonds or the tax consequences of the ownership of the Bonds. No assurance can be given that future legislation, or amendments to the Code, if enacted into lava, will not contain provisions that could directly or indirectly eliminate, or reduce the, benefit of, the exclusion of the interest on the Bonds from gross income for federal income tax purposes. Furthermore, Bond Counsel expresses no opinion as to any federal, state or local tax law consequences with respect to the Bonds, or the interest thereon, if any action is taken with respect to the Bonds or the proceeds thereof predicated or permitted -24- upon the advice or approval of Bond Counsel if such advice or approval is given by counsel other than Bond Counsel. Although Bond Counsel is of the opinion that interest on the Bonds is excluded from the gross income of the owners thereof for federal j^J income tax purposes, an owner's federal, state or local tax liability may otherwise be affected by the ownership or disposition of the Bonds. The nature and extent of these other tax consequences will depend upon the owner's other items of income or deduction. Without limiting the generality of the foregoing, prospective purchasers of the Bonds should be aware that (i) Section 265 of the Code denies a deduction for interest on indebtedness incurred or continued to purchase or carry the Bonds or, in the case of a financial institution, that portion of an owner's interest expense allocated to interest on the Bonds, (ii) with respect to insurance companies subject to the tax imposed by Section 831 of the Code. Section 832(b)(5)(B)(i) reduces the deduction for loss reserves by 15 percent of the sum of certain items, including interest on the Bonds, (iii) interest on the Bonds earned by certain foreign corporations doing business in the United States could be subject to a branch profits tax imposed by Section 884 of the Code, (iv) passive investment income, including interest on the Bonds, may be subject to federal income taxation under Section 1375 of the Code for Subchapter S corporations that have Subchapter C earnings and profits at the close of the taxable year if greater than 25% of the gross receipts of such Subchapter S corporation is passive investment income, (v) Section 86 of the Code requires recipients of certain Social Security and certain Railroad Retirement benefits to take into account, in determining the taxability of such benefits, receipts or accruals of interest on the Bonds, and (vi) under Section 32(i) of the Code, receipt of investment income, including interest on the Bonds, may disqualify the recipient thereof from obtaining the earned income credit. Bond Counsel has expressed no opinion regarding any such other tax consequences. APPROVAL OF LEGAL PROCEEDINGS The validity of the issuance of the Bonds under Texas law is subject to the approval of Fulbright & Jaworski L.L.P., Houston, Texas, acting as Bond Counsel. The proposed form of the legal opinion of Bond Counsel is attached hereto as APPENDIX D and will be delivered with the Bonds. Certain legal matters will be passed upon for the Authority by f_�J Boemer & Dennis, Lubbock, Texas, for the University by Damon Richards, Lubbock, Texas, for the Underwriter by Gilmore & Bell, P.C., Kansas City, Missouri, and for the Credit Provider by Heenan Blaikie, a California Professional Corporation, Beverly Hills, California (and as to matters of french law by De Pardieu Brocas Maffei & Associes, Paris. France). ABSENCE OF LITIGATION The Authority There is not now pending or, to the knowledge of the Authority, threatened any litigation against the Authority seeking to restrain or enjoin the issuance or delivery of the Bonds, or questioning or affecting the validity of the Bonds or the proceedings or authority under which they are to be issued, or which in any manner questions the right of the Authority to enter into the Indenture or the Loan Agreement or to secure the Bonds in the manner provided in the Indenture or the Act. The University No litigation, proceedings or investigations are pending or, to the knowledge of management of the University, threatened against the University, except litigation, proceedings or investigations in which the probable ultimate recoveries and the estimated costs and expenses of defense will be entirely within applicable self-insurance and insurance policy limits (including primary and excess insurance policies and subject to applicable deductibles and self-insured retentions), or will not have a material adverse effect on the operations or condition, financial or otherwise, of the University. In addition, no litigation, proceedings or investigations are now pending or, to the knowledge of the management of the University, threatened against the University that would in any manner challenge or adversely affect the corporate existence of the University or the power of the University to enter into and carry out the transactions described in or contemplated by, or the execution, -25- delivery, validity or performance by the University of, the Loan Agreement or the status of the University as a tax-exempt organization. UNDERWRITING The Authority has entered into a purchase contract with CIBC Oppenheimer Corp. (the "Underwriter"), pursuant to which the Underwriter has agreed, subject to certain conditions, to purchase the Bonds from the Authority at a purchase price of 1^1 $11.440.500 (which takes into account an underwriters discount of 1^1 $159.500}. The Underwriter is obligated to purchase all Bonds if any are purchased. The Bonds may be offered and sold by the Underwriter to certain dealers and others at prices lower than such public offering prices, and such public offering prices may be changed, from time to time, by the Underwriter. FINANCIAL STATEMENTS Audited financial statements of the University, as of and for the fiscal year ended June 30, 1998, with comparative financial statements for fiscal year ended June 30, 1997, are included in APPENDIX B to this Official Statement. The audited financial statements have been audited by Gary, Bowers & Miller, Lubbock, Texas, certified public accountants, to the extent and for the periods indicated in their report, which is also included in APPENDIX B. RATINGS The Universitv expects Moody's Investor Service Inc. ("Moody's") 1.�J to assign its municipal bond ratings to the Bonds as shown on the Cover Page hereof. Such ratings will reflect only the views of Moody's at the time such ratings are given, and the Authority, the Underwriter. the Credit Provider and the University make no representation as to the appropriateness of such ratings. An explanation of the significance of such ratings may be obtained only from such rating agency. The University and the Credit Provider have furnished Moody's with certain information and materials relating to the Bonds, the University and the Credit Provider that have not been included in this Official Statement. Generally, rating agencies base their ratings on the information and materials so furnished and on investigations, studies and assumptions by the rating agencies. The ratings are not a recommendation to buy, sell or hold the Bonds and there is no assurance that the ratings will be maintained for any given period of time or that they will not be lowered or withdrawn entirely if, in the judgment of the agency originally establishing such rating, circumstances so warrant. None of the Authority, the Underwriter, the University or the Credit Provider have undertaken any responsibility to bring to the attention of the holders of the Bonds any proposed revision or withdrawal of the ratings of the Bonds or to oppose any such proposed revision or withdrawal. Any such revision or withdrawal of such ratings could have an adverse effect on the market price and marketability of the Bonds. MISCELLANEOUS All quotations from and summaries and explanations of the Act, 1.�_J the Indenture, the Loan Agreement, the Letter of Credit, the Reimbursement Agreement, the Deed of Trust and other statutes and documents contained herein and in the Appendices hereto do not purport to be complete, and reference is made to said documents and statutes for full and complete statements of their provisions. Copies in reasonable quantity of the Indenture, the Loan Agreement, the Letter of Credit, the Reimbursement Agreement and the Deed of Trust may be obtained upon request directed to the Underwriter during the offering period for the Bonds or to the University. The agreements of the Authority with the owners of the Bonds are fully set forth in the Indenture, and neither any advertisement of the Bonds nor this Official Statement is to be construed as constituting an agreement with the purchasers of the Bonds. Statements made in this Official Statement involving estimates, projections or matters of opinion. whether or not expressly so stated, are intended merely as such and not as representations of fact. -26- APPENDIX A and APPENDIX B contain certain information with respect to the University. The information contained in APPENDIX A and APPENDIX B has been furnished by the University and officers and officials of the University, and the Authority makes no representations or warranties whatsoever with respect to the information contained in such Appendices. The execution and delivery of this Official Statement have been duly authorized by the Authority and the University. LUBBOCK EDUCATIONAL FACILITIES AUTHORITY, INC. By Title: LUBBOCK CHRISTIAN UNIVERSITY By _ Title: -27- APPENDIX A TABLE OF CONTENTS HISTORY AND BACKGROUND.......................................................................... CORPORATE STRUCTURE AND GOVERNANCE ............................................ Boardof Trustees................................................................•....................... ADMINISTRATION........................................................................................................................................ A -i FACILITIES.. .......... ........................................................................................................................................ A-2 TheUniversity Campus...................................................................................................................... A-2 LubbockChristian Schools................................................................................................................. A-2 PineSprings Camp.. ............................................................................................................................ A-3 TheProject........................................................................................................,................................. A-3 FutureExpansion Plans....................................................................................................................... A-3 OPERATIONS................................................................................................................................................. A-3 AcademicPrograms............................................................................................................................A-3 StudentEnrollment . ...................... .......... ............................................................................................ A-4 Tuition................................................................................................................................................. A-4 ResidenceFacilities............................................................................................................................. A-5 Faculty................................................................................................................................................ A-5 Employees........................................................................................................................................... A-6 Accreditations..................................................................................................................................... A-6 ReligiousAffiliation........................................................................................................... ................ A-6 Risk Management and Insurance........................................................................................................A-6 Environmental Matters........................................................................................................................ A-6 OtherOperations................................................................................................................................. A-7 RESULTS OF OPERATIONS......................................................................................................................... A-7 FinancialRecords................................................................................................................................ A-7 Budget................................................................................................................................................. A-7 FundRaising....................................................................................................................................... A-7 Summary Statement of Revenues and Expenses.................................................................................A-7 Management's Discussion and Analysis of Results of Operation....................................................... A-9 Outstanding and Proposed Debt.....................................................................................................A-10 PensionLiabilities ................................. ............................................................................................ A-10 Affiliates and Related Corporations..................................................................................................A-10 APPENDIX A LUBBOCK CHRISTIAN UNIVERSITY - ORGANIZATION AND OPERATIONS HISTORY AND BACKGROUND Lubbock Christian University (the "University") is a nonprofit corporation, organized and existing under the laws of the State of Texas, and is a tax-exempt charitable organization under Section 501(c)(3) of the Internal Revenue Code of 1986, as amended, exempt from federal income taxation under Section 501(a) of the Code. The University was established as a junior college in 1957 by members of the Churches of Christ. The University was accredited as a four-year college in 1972 and advanced to university status in 1987. The University owns and operates a private four-year coeducational university offering 39 fields of undergraduate study and pre -professional programs through the College of Professional Studies, the Eileen Hancock College of Liberal Arts and the College of Education. In addition, four master's degrees are offered, two in the field of Biblical studies and two in the College of Education. The University's fall 1998 enrollment was j�l 1.044 full- time and 309 part-time studentsf 1. The University is located on a 75 -acre campus on the western side of Lubbock, Texas. The University is accredited by the Commission on Colleges of The Southern Association of Colleges and Schools, the Texas Education Agency, the Council on Social Work Education and the National League of Nursing. CORPORATE STRUCTURE AND GOVERNANCE Board of Trustees The University is governed by a Board of Trustees (the "Board"). The Board of Trustees consists of no fewer than five and no more than 45 persons plus the President of the University. Trustees are elected by the Board, with one-third of the Board being elected annually. Trustees must be members in good standing of the Church of Christ. The Board meets quarterly each year on dates fixed by the Chairman of the Board. Under the bylaws, the Board manages the affairs and business of the University. The Executive Committee is comprised of the Chairman, Vice Chairman and Secretary of the Board and eleven other Trustees appointed by the Board. The Executive Committee exercises powers of the Board referred to it by the Board and all other matters that require action between meetings of the Board. ADMINISTRATION Management and daily operations of the administrative staff of the University. The President nominated by the President and approved by the Board. staff are as follows: University are handled by the President and the is employed by the Board. The Vice Presidents are The President and principal members of the executive Dr. L. Ken ,Zones — President. The President is the chief executive officer of the University. He supervises all aspects of the University, including the educational, fiscal and physical aspects of its operation. Dr. Jones has served as President of the University since 1993. Dr. Jones received his Ph. D. in agricultural engineering at Oklahoma State University. Prior to his appointment as President, Dr. Jones served as the pulpit minister at Sunset Church of Christ for five years. Dr. Jones is 47 years old. Dr. Dan Hardin — Vice President for Academic Affairs. Dr. Hardin is responsible for all academic aspects of the University. Dr. Hardin received his Ed. D. degree in Higher Education Administration from A-1 Oklahoma State Universitv and has masters degrees in the following areas: Bible. Missions, and Korean Language. Prior to assuming this current position in 1996, Dr. Hardin served as a faculty member in the Bible department. Dr. Hardin is 66 years old and has served the University for 23 years. Dr. Hardin has announced that he will retire at the end of the current academic year. The University is currently interviewing candidates to succeed him. Mr. Kevin Elmore — Vice President of Finance and Technology. Mr. Elmore is the chief administration and financial officer of the University. He received his MBA from Texas Tech University. Prior to assuming this position in January, 1999, Mr. Elmore served as the Assistant to the President for Technology. Mr. Elmore is 34 years old and has served the University for 4 years. Mr. Bill Phillips — Vice President of Facilities. Mr. Phillips is responsible for all University facilities. Mr. Phillips served as Vice President for Administration from 1979 — 1999. Mr. Phillips received his Bachelor of Arts degree from Lubbock Christian College. Mr. Phillips is 60 years old and has served the University for 23 years. Mr. John King — vice President of Deti•elopment. Mr. King is responsible for the areas of development, alumni and university marketing and communications. Mr. King received his M.S. degree from Texas Tech University. Mr. King is 50 years old and has served the University for 25 years. Mr. Randv Sellers — Vice President of Enrollment Management. Mr. Sellers is responsible for overseeing student recruiting, admissions, and financial assistance at the University. Mr. Sellers holds an M.S. in Business Management and an M.S. in Human Resourses Management. Prior to working at the University, Mr. Sellers served as Site Manager, UNC Aviation Services, Reese Air Force Base. Mr. Sellers is 45 years old and has served the University for almost 3 years. Dr. Joyce Hardin — Dean of the Department of Education. Dr. Hardin manages one of the largest academic departments of the University. Dr. Hardin received her M.E. at Eastern New Mexico, and Ed.D at Oklahoma State University. Dr. Hardin has served as Dean since the inception of the department in 1996. Dr. Hardin is 63 years old and has served the University for 23 years. Dr. E. Don Williams — Dean of the JE. and Eileen Hancock College of Liberal Arts. Dr. Williams oversees four different departments: Bible, communication and fine arts, humanities, and behavioral sciences. Dr. Williams received his M.A. and Ph.D in fine arts from Texas Tech University. Dr. Williams has served the University since 1969. Dr. Williams is 57 years old and has served the University for 30 years. Dr. Gary Estep — Dean of the College of Professional Studies. Dr. Estep oversees five departments: organizational management, business administration, natural sciences, nursing, and physical sciences. Dr. Estep received his Ph. D. and Master of Science degrees from Texas A&M University. Dr. Estep is 58 years old and has served the University for 28 years. FACILITIES The University Campus The University is located at 5601 19'h Street, Lubbock. Texas. The University (then Lubbock Christian College) opened on September 24, 1957, on 20 acres of land donated to the College and used surplus military barracks for residence and classroom space. From this beginning, the University has grown to a 75 - acre campus containing 18 major buildings. Lubbock Christian Schools The University operates a Kindergarten through 12'h grade school known as Lubbock Christian Schools. Lubbock Christian Schools was formed in 1954 on land joining the University's campus. A-2 Pine Springs Camp In 1997 the University received Pine Springs Camp as a gift. This facility is a 40 -acre camp nestled in the mountains of Sacramento, New Mexico, next to Lincoln National Forest. The camp has 16 total buildings. a trout pond and natural spring. Each summer the camp handles approximately 850 students of various ages. The Project See "PLAN OF FINANCING — The Project" in this Official Statement. Future Expansion Plans The University does not have any future building plans at the current time. OPERATIONS Academic Programs The academic programs of the University are organized into one undergraduate program (J.E. and Eileen Hancock College of Liberal Arts, The College of Professional Studies, and The College of Education). and two graduate programs (Bible and Education). The College of Liberal Arts is made up of four departments: Bible, communication and fine arts, humanities, and behavioral sciences. Degrees are awarded in Bible, communication, English, liberal arts, music, psychology, social work, and visual communication. Associated with the College of Liberal Arts are various teaching fields: art, communication. English, foreign language, history, music, social studies„ and theater arts. The College of Professional Studies has four departments: business administration, natural sciences, nursing, physical sciences, and an organizational management program. The College of Professional Studies offers the following degrees: accounting, agriculture, agriculture business, agriculture missions, biology, business administration, business administration CIS, business communication, chemistry, engineering, environmental science, finance, mathematics, medical technology, and nursing. Teaching fields offered include the following: biology, business administration, chemistry, composite science, computer information services, and mathematics. Pre -professional programs offered include law (business), nursing, pharmacy, and physical therapy. Other pre -professional offerings include a veterinary program, a dental program, and a medical program. The College of Education has three departments: elementary education, secondary education, and kinesiology. Degrees offered in the College of Education include interdisciplinary studies (elementary), interdisciplinary studies (secondary), and kinesiology. Teaching fields not under one of the other colleges include generic special education and kinesiology. The Graduate Bible program began in 1994 and offers a M.A. in Biblical Interpretation, and a M.S. in Bible and Ministry. The Graduate Education program began in 1997 and offers an M.E. degree with an emphasis in one of the following: administration, elementary education, or secondary education. A-3 Student Enrollment The following tables set forth enrollment and degree information for the University: Application and New Enrollment Tables (Total students, not full —time equivalents) Freshmen Fall # of Offered New Semester Apps. Admission Enrollments 1994 355 349 278 1995 410 401 306 1996 379 365 200 1997 404 386 236 1998 591 532 335 Undergraduate Transfer # of Offered New Apps. Admission Enrollments 136 135 112 138 132 121 124 122 95 142 139 118 244 237 187 Graduate Frotyram Fall Freshmen and Undergraduate Transfers (Combined) Semester Fall # of Offered Selectivity New Semester AUU.s. Admission Ratio Enrollments 1994 491 484 .98 390 1995 548 533 .97 427 1996 503 487 .96 295 1997 546 525 .96 354 1998 835 769 .92 522 Graduate Frotyram Fall New Semester Enrollments 1994 21 1995 20 1996 19 1997 53 1998 75 Total Enrollment (Full -Time Equivalent) LI Fall Undergraduate Graduate Total 1^1 Semester FTE FTE FTE 1994 1003 18 1021 1995 1047 12 1059 1996 964 111 975 1997 1020 45 1065 1998 1140 62 1202 L^_1 Degrees Awarded Academic Year Bachelor Graduate Total 1994-95 201 6 207 1995-96 177 2 179 1996-97 194 6 200 1997-98 166 3 169 A-4 Tuition The University meets the costs of its educational programs primarily through tuition, fees, gifts, and grants. The following table sets forth the base tuition charged to a full-time student of the University for the current academic year and the past three academic years based on full-time status each year. Tuition Residence Facilities The University currently has four different housing facilities on campus. Johnson Hall is a two-story, multi -wing facility with 112 rooms. The Mabee Living Center is a five -story facility with 48 rooms. Katie Rogers Hall is a two-story, multi -wing facility with 137 rooms. The Courtyard Apartments are single story residential style units that contain 48 rooms. University housing is within 2000 feet of the campus core. All single students under 21 years of age having less than 90 credit hours are required to live in University residence facilities unless they are living at home with familN members. The Project being financed with the proceeds of the Bonds includes a 200 -bed new residential facility and renovations of Katie Rogers Hall and Johnson Hall (which will reduce the number of rooms and capacity of Katie Rogers Hall by eight to ten rooms). The following table sets forth the capacity and occupancy statistics for the University's _residential facilities for the last four fall semesters: Base Tuition Base Tuition Base Tuition Academic (undergraduate) (Graduate Bible) (Graduate Education) Year Year Per Hour Per Hour 1995-96 $7,448 $160 N/A 1996-97 7,750 220 N/A 1997-98 8,022 228 $115 1998-99 8,504 228 1.15 Residence Facilities The University currently has four different housing facilities on campus. Johnson Hall is a two-story, multi -wing facility with 112 rooms. The Mabee Living Center is a five -story facility with 48 rooms. Katie Rogers Hall is a two-story, multi -wing facility with 137 rooms. The Courtyard Apartments are single story residential style units that contain 48 rooms. University housing is within 2000 feet of the campus core. All single students under 21 years of age having less than 90 credit hours are required to live in University residence facilities unless they are living at home with familN members. The Project being financed with the proceeds of the Bonds includes a 200 -bed new residential facility and renovations of Katie Rogers Hall and Johnson Hall (which will reduce the number of rooms and capacity of Katie Rogers Hall by eight to ten rooms). The following table sets forth the capacity and occupancy statistics for the University's _residential facilities for the last four fall semesters: The following table sets forth room and board rates for shared rooms for the current academic year and the past 1.�I two academic years, which include 19 meals per week: Residence Facilities Capacitv and Occupancy Fall Semester Bed Capacity Student Occupancy Occupancv Percentage 1995 j!�I 493 363 74% 1996 I.L1 493 371 75% 1997 u 493 376 76% 1998 L"1 493 395 80%o%o The following table sets forth room and board rates for shared rooms for the current academic year and the past 1.�I two academic years, which include 19 meals per week: Faculty A-5 Room and Board (Shared Rooms) Academic Year Freshmen Sophomore Junior Senior ^ 1996-97 $1,693 $1,693 $1,524 $1,35D 1997-98 1,562 1,562 _1_,419 1,250 1998-99 1,610 1,610 1,467 1,298 Faculty A-5 The following table sets forth the number of University faculty members for the current academic year and the preceding academic year: Faculty Summary (Full Time E4uivalents) Academic Tenured Other Part -Time Total Year Full -Time Full -Time FTE FTE. 1997-98 37 26 34 97 1998-99 37 27 37 104 Employees The University currently employs approximately 115 hourly and salaried employees including custodial and maintenance departments. Pay increases for employees of the University has ranged from 1.5% to 3% per year over the last three years. The University provides a variety of benefits to its employees, including a medical cafeteria plan, heath insurance, life insurance, tuition reimbursement, and customary vacation, holiday and sick days. At present, none of the University's employees are represented by a union or other collective bargaining representative and management is not aware of any organizing activity or of any work disruption involving its employees. Accreditations The University is accredited by the Commission on Colleges of the Southern Association of Colleges and Schools (1866 Southern Lane, Decatur, Georgia 30033-4097: Telephone number 404-679-4501) to award Bachelor's degrees, Level II, and Masters's Degrees, Level 111. The University is also departmentally accredited by the Texas Education Agency, Council on Social Work Education, and the National League of Nursing. Religious Affiliation The University is church related, but is not sponsored by Churches of Christ or any particular Church of Christ. All full-time faculty and members of the Board of Trustees must be members in good standing of the Church of Christ. The University is open to all persons regardless of race, color, gender, age, religion, national origin, or disabled condition who are otherwise eligible for admission as students. Risk Management and Insurance The University works with its agent, The Talbot Insurance Agency, to conduct periodic assessments of all programs of the University and their risks, and to annually adjust coverage in property and liability coverage based on this review. The Vice President for Finance and Technology also conducts periodic reviews to identify potential new hazards and risks. The University currently carries property and liability insurance and will continue to carry amounts that its management believes is similar to other private universities of similar size and nature in the state of Texas. Environmental Matters The University's management is not aware of any environmental problems on its properties, but has generally not conducted environmental assessments of its property. u Grimes and Associates Cons ultin Engineers, Texas has conducted a Phase I environmental assessment of the Morteaged Pronertv A-6 which includes most. but not all, of the Project. u See "PLAN OF ect - Environmental M� Other Operations The University operates Lubbock Christian Schools on land adjoining the University's campus and also operates Pine Springs Camp in Sacramento, New Mexico. See "FACILITIES — Lubbock Christian Schools" and "- Pine Springs Camp." RESULTS OF OPERATIONS Financial Records The University maintains its financial records on the basis of a fiscal year ending June 30 and follows the accrual basis of accounting. Audited financial statements of the University, as of and for the fiscal year ended June 30, 1998, with comparative financial statements for fiscal year ended June 30, 1997, are included in Appendix B to this Official Statement. The audited financial statements have been audited by Gary, Bowers & Miller, Lubbock, Texas, certified public accountants, to the extent and for the periods indicated in their report, which is also included in Appendix B. Budget The University establishes the annual operating budget primarily through work performed by the Comptroller and the Vice President for Finance in conjunction with the Finance Leadership Team (FLT). The FLT is comprised of faculty and staff to allow a representation of University constituencies in the budget preparation process. The University budget process begins by considering anticipated revenues for the coming year, taking into account projected increases in students as well as proposed tuition and fee increases. The administration and FLT present this information to the Board of Trustees for approval of any price increases and proposed salary adjustments. This process normally occurs in December, but depends on the dates when the Board meets. Adjustments are made to the wage component of the budget and requests for budget changes are sent out to all departments. Program additions or changes are requested by March and worked into the overall budget in subsequent months. Capital budgets are reviewed and updated if these types of projects are active. In May, the full budget is presented to the Board of Trustees for final review and approval. Fund Raising The University derives a sizable portion of the annual revenues from gifts, grants and other types of bequests. See "Summary Statement of Revenues and Expenses." The University is continuously raising funds through a planned giving program, monthly contributions from alumni and other donors, grants, and special project campaigns as needed. The University also seeks deferred gifts in the form of trusts, insurance policies, and wills. The University has recently sought and received gifts and pledges totaling approximately $3,000,000 for the Project. Summary Statement of Revenues and Expenses The table below presents a summary of historical statements of revenues and expenses of the University for the last three fiscal years. This information has been derived from financial statements of the University audited by Gary, Bowersf ^j & Miller, independent auditors, and with respect to the fiscal years ended June 30, 1997, and 1998, should be read in conjunction with the audited financial statements of the University, including the notes thereto, contained in Appendix B of this Official Statement. A-7 Comparative Summary of Statement of Activities Revenues Tuition and Fees Gifts Federal Contributions Spendable Return from Endowment Investment and Other Income Auxiliary Enterprises Income Other Income Net Assets released from temporary Restrictions Net Assets Released from Permanent Restrictions Total Revenues Expenses Educational and General Instructional Public Service Academic Support Student Services Institutional Support Operation and Maintenance Scholarships Depreciation Fixed Asset Disposals Interest on Indebtedness Auxiliary Enterprises Total Expenses Extraordinary Event Insurance Proceeds Expended Increase (Decrease) in Unrestricted Net Assets Fiscal Years Ended June 30 1998 1997 1996 $8,146,274 $7,532,982 $7,447,515 1,162,411 4,619,386 1,417,562 987,688 900,838 934,340 233,595 240,531 167,014 641,398 550,298 579,828 3,224,514 3,295,888 2,864,804 148,500 166,758 167,005 299,878 244,440 275,498 11,534 14.$44 259 17.551.121 13.865.096 3,157,994 3,036,718 2.949,727 133,935 133,103 184,195 924,312 923,939 941,196 1,137,534 1,254,869 1,139,259 1,487,421 1,540,552 1,071,336 895,878 771,566 570,071 3,025,828 3,021,582 2,614,817 783,482 627,631 604,049 1,796 5,427 25,001 715,125 663,968 552,923 3,040,472 2,863,083 2,861,193 15.303.777 14,842.438 13.513.767 0 619,905 469,007 45( 9,518) 3.328.588 797.713 A-8 Transfers "Temporarily Restricted Restricted Gifts and Donations for Specific Purposes Investment Income Increase in Fair Market Value of Life Income Funds Distributions to Life Income Beneficiaries Life Income Management Fees Actuarial Loss on Annuity Obligations Reclassification of Net Assets Released from Restrictions Increase (Decrease) in Temporarily Restricted Net Assets Permanently Restricted Institutional Contribution to Perkins Loan Fund Gifts and Donations for Endowment Funds Permanently Restricted Student Loan Earnings Permanently Restricted Endowment Earnings Administrative Costs Loan Cancellations and Bad Debts Increase (Decrease) in Permanently Restricted Net Assets TOTAL INCREASE (DECREASE) IN NET ASSETS Fiscal Years Ended June 30 1998 1997 1996 2,826,045 1,582,574 249,055 268,526 115,028 122,333 62,043 189,733 (142,659) (77,518) (22,113) (16,972) (67,974) (78,581) (299,878) (244,440) 2.623,990 1.469.824 4,836 309,548 156,141 83,883 70,975 3,079 9,604 (1,101) (5,303) (48,373) (37,602) 347,036 198,651 2,511,508 4,997,063 NET ASSETS Beginning of Year 18,498,531 13,501,468 End of Year 21,010,039 18,498,531 Management's Discussion and Analysis of Results of Operations 75,983 (78,451) (15,967) (83,195) (275,498) (5.470) 7,300 87,615 101,790 7,823 (31,786) (66,427) 94,781 887,024 12,614,444 13,501,468 Financial Management Policies and Procedures. For the past several years the University has been working to identify financial areas that are weak and need to be improved. This was done most recently in conjunction with the University's ten-year accreditation review with the Southern Association of Colleges and Schools conducted in 1998. Several areas have been identified and personnel and monetary resources have been devoted to improving them. The University has taken the following actions: (1) The University has reorganized at the vice presidential level. The position of executive vice president was eliminated so that all vice presidents had direct contact with the president. A vice president for enrollment management position was created to improve recruiting and admissions. (2) The University has recognized costs associated with traditional methods of purchasing supplies and services that can be reduced with more centralized planning and purchasing, and implemented plans to incorporate these ideas as appropriate during the next fiscal year. (3) The University has purchased integrated administrative and financial software to tie all departments together through better communication of information and to improve the financial information available for administrative decision-making. (4) The University has worked to predict cash flow needs more aggressively and tie projections to future budgetary periods. (5) The University has become more aggressive in analyzing A-9 student accounts and requiring payment earlier during the semester. The University has implemented a tuition payment plan with Tuition Management Senices that allows students to pay the annual cost of tuition and fees over a 10 to 12 month period. This has helped to level cash flow and to reduce the burden and cost of billing and collecting from students. (6) The University has developed tighter departmental budgets and strengthened purchasing control. Financial Performance 1997 vs. 1996 'Revenues for fiscal year 1997 increased ["126% over fiscal year 1996, primarily due to an increase in unrestricted gifts to $4,619,386 versus $1,417,562 in fiscal year 1997. This increase in gifts was IL the result of a fund-raising campaign conducted by the University. In addition, temporarily restricted gi tFss and donations or specific purposes increased to $1,582,574 in 1997 versus $249,055 in fiscal year 1996, primarily due to gifts and pledges received for the Project. Expenses for fiscal year 1997 increased [A] 10% over fiscal year 1996, primarily due to [A] increased costs associated with institutional support, operation and maintenance. and increased institutional scholarships. Financial Performance 1998 vs. 1997. Revenues in fiscal year 1997 decreased by J�l 150/a versus fiscal year 1998 although revenues from tuition and fees increased u 8% from $7,532,982 in fiscal year 1997 to $8,146,274 in fiscal year 1998. This decrease is primarily due to as decrease in unrestricted gifts from $4,619,386 in fiscal year 1997 (see 1997 vs. 1996) to $1,162,411 in fiscal year 1998. Temporarily restricted gifts and donations for specific purposes were $2,826,045 in fiscal year 1998 versus $1,582,574 in fiscal year 1997, with most of these gifts and donations in both years attributable to gifts and pledges received for the Project. Expenses increased JAI 3% in fiscal year 1998 from fiscal year 1997 primarily due to 1.�J increased salaries for faculty, operation asd maintenance increases, and increased expenses from auxiliary enterprises. Outstanding and Proposed Debt Approximately $3,400,000 of the proceeds of the Bonds will be used to refinance existing indebtedness of the University. After the refinancing, in addition to the Bonds, the University will have approximately $1,500,000 principal amount of other long-term indebtedness outstanding. In addition, the Univesity has a line of credit for $400,000, under which indebtedness of approximately $100,000 is currently outstanding. The University does not plan to incur additional indebtedness in the foreseeable future. Pension Liabilities The University matches employee contributions on all full-time employees up to four percent of their gross pay. The University currently owes approximately $100,000 of employee and employer contributions to plan trustees for recent months. Total University payments to plans were $112,392 for the year ended June 30, 1998. Affiliates and Related Corporations The University is related to a separately incorporated entity, Lubbock Christian College Investment Corporation ("LCCIC"), through interlocking directors. In past years LCCIC made annual gifts to the University from revenues from farm property owned by LCCIC, which have averaged $237,000 annually for the last three years. LCCIC is in the process of negotiating the sale of its farm property, with the intent of donating the proceeds to the University. A-10 CERTIFICATE OF CITY SECRETARY THE STATE OF TEXAS § COUNTY OF LUBBOCK § CITY OF LUBBOCK § I, the undersigned, City Secretary of the City of Lubbock, Texas, DO HEREBY CERTIFY as follows: 1. On the 22"d day of April, 1999, a regular meeting of the City Council of the City of Lubbock, Texas, was held at a meeting place within the City; the duly constituted members of the Council being as follows: WINDY SITTON MAYOR MAX IINcE ) MAYOR PRO TEM VICTOR HERNANDEZ ) T. J. PATTERSON ) DAVID NELSON } COUNCILMEMBERS ALEX "TY" COOKS MARC McDOUGAL ) and all of said persons were present at said meeting, except the following: T j. Pattercnn and victor Hernandez Among other business considered at said meeting, the attached resolution entitled: A RESOLUTION APPROVING THE ISSUANCE OF BONDS BY LUBBOCK EDUCATIONAL FACILITIES AUTHORITY, INC. TO ASSIST LUBBOCK CHRISTIAN UNIVERSITY AND CONTAINING OTHER PROVISIONS RELATING TO THE SUBJECT was introduced and submitted to the Council for passage and adoption. After presentation and due consideration of the resolution, and upon a motion being made by Alex "Ty" Cooke and seconded by Hag Ince , the resolution was finally passed and adopted by the Council to be effective immediately by the following vote: 5 voted "For" o voted "Against" O abstained all as shown in the official Minutes of the Council for the meeting held on the aforesaid date. 2. The attached resolution is a true and correct copy of the original on file in the official records of the City; the duly qualified and acting members of the City Council of said City on 5222865.1 1 the date of the aforesaid meeting are those persons shown above and, according to the records of my office, advance notice of the time, place and purpose of the meeting was given to each member of the Council; and that said meeting and the deliberation of the aforesaid public business was open to the public and written notice of said meeting, including the subject of the above entitled resolution, was posted and given in advance thereof in compliance with the provisions of V.T.C.A., Government Code, Chapter 551, as amended. IN WITNESS WHEREOF, I have hereunto signed my name officially and affixed the seal of said City, this the 22nd day of April , 1999. Citycretary, City of Lubbock, Texas (City Seal) 5222865.1 APPROVAL CERTIFICATE I, Windy Sitton, am the duly elected Mayor of the City of Lubbock, Texas (the "City"), and as such am the applicable elected representative of the City pursuant to Section 147(0(2)(B) of the Internal Revenue Code of 1986, as amended. On March 25, 1999, a public hearing was conducted regarding the issuance of bonds by the Lubbock Educational Facilities Authority, Inc. (the "Bonds') and the utilization of substantially all of the proceeds of such Bonds for the purposes of (1) obtaining funds for Lubbock Christian University to finance or refinance the cost of constructing, renovating, acquiring, and equipping educational facilities, housing facilities, and facilities incidental, subordinate, or related thereto or appropriate in connection therewith, including: renovation of three existing residence halls, construction of new student residence facilities, construction of a multi -use center to be known as Rip Griffin Center, and refinancing of existing debt used to acquire, construct and improve existing educational and housing facilities on the Lubbock Christian University campus, (2) setting aside certain funds for the payment and security of the Bonds, and (3) paying certain expenses in connection with issuance of the bonds. As the applicable elected representative of the City, I hereby specifically approve the Bonds described above and the use of the proceeds of such Bonds for the purposes stated above. SIGNED AND SEALED THIS 22nd day of ` April , --1999. Mayor ATTEST: City Sec(TkY CITY OF LUBBOCK, TEXAS April 15, 1999 Re: Lubbock Educational Facilities Authority, Inc. Variable Rate Demand Revenue Bonds (Lubbock Christian University Series 1999) Attorney General of Texas Price Daniel Building 209 W, 14'h Street, 6's Floor Austin, Texas 78701 Attention: Public Finance Division Dear Sirs: We enclose one signed but undated copy of a Certificate. Upon approval of such transcript, the Attorney General is authorized to insert the date of the approval in such Certificate. If any litigation should develop, or if any other event should occur which would make such Certificate inaccurate before the Attorney General approves the Bonds, we will notify the Attorney General at once by both telephone and facsimile transmission. With this assurance, the Attorney General can rely on the accuracy of such Certificate at the time the Attorney General approves the Bonds, unless we advise the Attorney General otherwise. Thank you for your assistance in this matter Very truly yours, CITY OF LUBBOCK, TEXAS By: 1�4 L 04Jecretary CERTIFICATE OF CITY SECRETARY THE STATE OF TEXAS § COUNTY OF LUBBOCK § CITY OF LUBBOCK § I, the undersigned, City Secretary of the City of Lubbock, Texas, DO HEREBY CERTIFY as follows: 1. On the 250' day of February, 1999, a regular meeting of the City Council of the City of Lubbock, Texas, was held at a meeting place within the City; the duly constituted members of the Council being as follows: WINDY SITTON MAYOR MAX INCE } MAYOR PRO TEM VICTOR HERNANDEZ ) T. J. PATTERSON ) DAVID NELSON ) COUNCILMEMBERS ALEX "TV COOKE ) MARC McDOUGAL ) and all of said persons were present at said meeting, except the following: All were in attendance Among other business considered at said meeting, the attached resolution entitled: A RESOLUTION APPROVING THE CREATION OF LUBBOCK EDUCATIONAL FACILITIES AUTHORITY, INC.; APPROVING THE ARTICLES OF INCORPORATION AND BYLAWS THEREOF; APPOINTING DIRECTORS TO THE CORPORATION; APROVING THE ISSUANCE OF BONDS BY SUCH CORPORATION TO ASSIST LUBBOCK CHRISTIAN UNIVERSITY; AND CONTAINING OTHER PROVISIONS RELATING TO THE SUBJECT was introduced and submitted to the Council for passage and adoption. After presentation and due consideration of the resolution, and upon a motion being made by T. J. Patterson and seconded by Dart McDougal , the resolution was finally passed and adopted by the Council to be effective immediately by the following vote: 7 voted "For" 0 voted "Against" 0 abstained all as shown in the official Minutes of the Council for the meeting held on the aforesaid date. 5222865.1 1 2. The attached resolution is a true and correct copy of the original on file in the official records of the City; the duly qualified and acting members of the City Council of said City on the date of the aforesaid meeting are those persons shown above and, according to the records of my office, advance notice of the time, place and purpose of the meeting was given to each member of the Council; and that said meeting and the deliberation of the aforesaid public business was open to the public and written notice of said meeting, including the subject of the above entitled resolution, was posted and given in advance thereof in compliance with the provisions of V.T.C.A., Government Code, Chapter 551, as amended. IN WITNESS WHEREOF, I have hereunto signed my name officially and affixed the seal of said City, this the 25' day of February, 1999. City cretary, City of Lubbock, Texas (City Seal) 5222865.1 GENERAL CERTIFICATE OF THE CITY OF LUBBOCK, TEXAS THE STATE OF TEXAS § COUNTY OF LUBBOCK § I, the undersigned, City Secretary of the City of Lubbock, Texas (the "City"), do hereby certify as follows: 1. This Certificate is executed with reference to the series of bonds styled "Lubbock Educational Facilities Authority, Inc. Variable Rate Demand Revenue Bonds (Lubbock Christian University) Series 1999" (the "Bonds"). 2. The City is incorporated under the general laws of the State of Texas, and is operating under the Home Rule Amendment to the Texas Constitution, Section 5, Article XI, as amended in 1912. The City Charter was originally adopted at an election held on. December 27, 1917, and said Charter has not been amended or revised in any respect since January 18, 1992, the date of the last Charter Amendment Election. 3. The Lubbock Educational Facilities Authority, Inc. (the "Issuer") was authorized to act on behalf of the City and the Articles of Incorporation and Bylaws of the Issuer were approved by City of Lubbock Resolution No. 6224, dated February 25, 1999. 4. Except as described below, on February 25, 1999, and at all times since that date, the following persons have duly constituted the members of the City Council of the City. Name Office Windy Sitton Mayor MAX INCE Mayor Pro Tem Victor Hernandez Councilmember T. J. Patterson Councilmember David Nelson Councilmember ALEX "TY" COOKE Councilmember Marc McDougal Councilmember Kaythie Darnell is City Secretary. 5. The records of the Governing Body indicate that on February 25, 1999, and at all times since that date, the following persons have been the duly appointed directors of the Issuer: Neriman Guven Joe H. Mayes Walker Metcalf Dr. James Moms Louis Murfee, Jr. Michael Ward The records of the Governing Body indicate that on March 11, 1999, and at all times since that date, Dee Silva has been a duly appointed director of the Issuer, 6. The City, by written resolution dated February 25, 1999, a true and correct copy of which is attached hereto as Exhibit A, has specifically approved the issuance of the Bonds, and such resolution has not been amended, annulled, rescinded, or revoked and remains in full force and effect on the date hereof, 7. All actions of the City Council taken in connection with the creation of the Issuer described in paragraph 3 and the adoption of the resolution described in paragraph 6 were taken in compliance with chapter 551, Texas Government Code, as amended. SIGNED AND SEALED this (SEAL) (�d L- "tt - Kayt a Parnell, City Secretary City of -Lubbock, Texas