Supplement to the Preliminary Limited Offering Memorandum … · 2011. 1. 31. · initially equal...

Supplement to the Preliminary Limited Offering Memorandum Dated January 12, 2011

Relating to

$73,630,000* California Municipal Finance Authority

Refunding Revenue Bonds (Azusa Pacific University Project)

Series 2011B

This Supplement to Preliminary Limited Offering Memorandum, dated January 31, 2011 (the “Supplement”) supplements the Preliminary Limited Offering Memorandum, dated January 12, 2011 (the “Preliminary Limited Offering Memorandum”), with respect to the above-referenced Bonds. This Supplement constitutes an integral part of the Preliminary Limited Offering Memorandum. Capitalized terms used in this Supplement not otherwise defined shall have the meanings set forth in Preliminary Limited Offering Memorandum

The following paragraph replaces in full the first paragraph under “PLAN OF FINANCING – Swap Contracts”:

The Borrower has also entered into interest rate swap transactions with Wells Fargo Bank, National Association (the “Swap Provider”) pursuant to that certain ISDA Master Agreement (including the Schedule thereto), and the related ISDA Confirmation No. ______, each dated as of February __, 2011 (as such agreements may be amended, restated, modified and/or supplemented from time to time, including, without limitation, by additional Confirmations reflecting transactions between the Swap Provider and the Borrower, collectively, each a “Swap Contract”). Copies of the proposed form of Swap Contract may be obtained from the Underwriter upon request. It is anticipated that the Swap Contract will be in a notional amount initially equal to $70,000,000, the initial principal amount of the Series 2011A Bonds. A second Swap Contract in the approximate amount of $67,215,000 (the “Orphan Swap Contract”) may be entered into with the Swap Provider; however, on January 21, 2011, the Board of Directors of the Borrower (the “Board”) adopted a resolution authorizing the Borrower’s Chief Financial Offer to negotiate the termination of an existing swap contract in the approximate amount of $67,215,000 and make a termination payment at the mid-market value or a value within parameters set by the Board. The mid-market termination cost of this existing swap contract as of January 24, 2011 was estimated to be $8.3 million. If this termination is not completed, the Borrower will not enter into the Orphan Swap Contract. The Swap Contract will replace the existing swap contracts in place with Allied Irish Banks, p.l.c. regarding the Series 2007 Bonds.

* Preliminary, subject to change.

NEW ISSUE - BOOK ENTRY ONLY NOT RATED

In the opinion of Patton Boggs LLP, Washington, D.C., Bond Counsel, under existing laws, regulations, rulings and court decisions, assuming compliance with certain covenants described herein, interest on the Series 2011B Bonds is excludable from gross income for federal income tax purposes and is not treated as a specific item of tax preference for purposes of the alternative minimum tax imposed on individuals and corporations under the Internal Revenue Code of 1986, as amended or under the laws of the state of California. Interest on the Series 2011B Bonds will be excludable from gross income for purposes of the California personal and corporate income taxes. The interest may be subject to certain federal or California state taxes imposed only on certain corporations, including the corporate alternative minimum tax on a portion of that interest. (See “TAX MATTERS” herein.)

$73,630,000*

California Municipal Finance Authority Refunding Revenue Bonds

(Azusa Pacific University Project) Series 2011B

Dated: Date of Initial Delivery Due: April 1, 2041

The California Municipal Finance Authority (the “Authority”) is issuing its Refunding Revenue Bonds, (Azusa Pacific University Project), Series 2011B (the “Series 2011B Bonds”) pursuant to an Indenture of Trust, dated as of February 1, 2011 (the “Indenture” or the “Series 2011B Indenture”), by and between the Authority and U.S. Bank National Association, as trustee (the “Trustee”). The Authority will lend the proceeds of the Series 2011B Bonds to Azusa Pacific University pursuant to a Loan Agreement, dated as of February 1, 2011 (the “Loan Agreement” or the “Series 2011B Loan Agreement”), by and between the Authority and the University. The Series 2011B Bonds are limited obligations of the Authority payable solely from and secured by certain revenues pledged under the Indenture, other amounts held in certain funds established by the Indenture and a pledge of Gross Revenues and certain collateral provided pursuant to a Security Agreement dated as of February __, 2011 (the “Security Agreement”) which Collateral and Gross Revenues (as defined in the Security Agreement) are pledged on a pro rata basis to the secured creditors of the Borrower, including the Trustee and the Bank, as defined below, pursuant to an Intercreditor and Collateral Agency Agreement dated as of February __, 2011 (the “Intercreditor Agreement”). The Series 2011B Bonds are payable from payments made under the Loan Agreement by

The proceeds of the Series 2011B Bonds will be used to (i) currently refund a portion of certain outstanding obligations of the University, (ii) fund a reserve fund for the Series 2011B Bonds and (iii) pay certain costs related to the issuance of the Series 2011B Bonds.

In order to pay the balance of the costs of the refunding, the Authority has authorized the issuance pursuant to an Indenture of Trust, dated as of February 1, 2011 (the “Series 2011A Indenture”), between the Issuer and the Trustee, of its Variable Rate Demand Refunding Revenue Bonds (Azusa Pacific University Project) Series 2011A, in an aggregate principle amount of $70,000,000 (the “Series 2011A Bonds”). The Series 2011A Bonds will be secured on a parity with the Series 2011B Bonds and will be purchased by Wells Fargo Bank, National Association (the “Bank”) pursuant to a Bond Purchase Agreement, dated as of February ____, 2011 (the “Series 2011A Bond Purchase Agreement”), among the Authority, the Borrower and the Bank. The Series 2011A Bonds are not being offered hereunder and are being directly

purchased by Wells Fargo Bank, N.A.

The Series 2011B Bonds will be issued in fully registered form only and, when issued, 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 Series 2011B Bonds. Individual purchases will be made in book-entry form only. The Series 2011B Bonds will have denominations of $250,000 or any integral multiple of $5,000 in excess thereof. Principal of and premium, if any, on the Series 2011B Bonds will be payable to the registered owner (DTC), upon presentation and surrender at the designated corporate trust office of the Trustee, and interest will be transmitted by the Trustee on each interest payment date beginning April 1, 2011, and semiannually on each April 1 and October 1 thereafter, to the registered owner (DTC), all as more fully described in this Limited Offering Memorandum. It is intended that the Series 2011B Bonds are to be offered and sold only to persons

reasonably believed to qualify as a “Qualified Buyer.” See “APPENDIX C” hereto.

Term Series 2011B Bonds* Due

April 1 Principal Amount

Interest Rate

Price

CUSIP† No.

2015 2020 2030 2041

The Series 2011B Bonds are subject to mandatory, extraordinary optional and optional redemption and purchase in lieu of redemption prior to

maturity as described herein.

NONE OF THE AUTHORITY, ANY AUTHORITY MEMBER OR ANY PERSON EXECUTING THE SERIES 2011B BONDS IS LIABLE PERSONALLY ON THE SERIES 2011B BONDS OR SUBJECT TO ANY PERSONAL LIABILITY OR ACCOUNTABILITY BY REASON OF THEIR ISSUANCE. THE SERIES 2011B BONDS ARE LIMITED OBLIGATIONS OF THE AUTHORITY, PAYABLE SOLELY FROM AND SECURED BY THE PLEDGE OF REVENUES UNDER THE INDENTURE. NEITHER THE AUTHORITY, ITS MEMBERS, THE STATE OF CALIFORNIA, NOR ANY OF ITS POLITICAL SUBDIVISIONS SHALL BE DIRECTLY, INDIRECTLY, CONTINGENTLY OR MORALLY OBLIGATED TO USE ANY OTHER MONEYS OR ASSETS TO PAY ALL OR ANY PORTION OF THE DEBT SERVICE DUE ON THE SERIES 2011B BONDS, TO LEVY OR TO PLEDGE ANY FORM OF TAXATION WHATEVER THEREFOR OR TO MAKE ANY APPROPRIATION FOR THEIR PAYMENT. THE SERIES 2011B BONDS ARE NOT A PLEDGE OF THE FAITH AND CREDIT OF THE AUTHORITY, ITS MEMBERS, THE STATE OF CALIFORNIA OR ANY OF ITS POLITICAL SUBDIVISIONS, NOR DO THEY CONSTITUTE INDEBTEDNESS WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMITATION. THE AUTHORITY HAS NO TAXING POWER.

This cover page contains certain information for general reference only. It is not intended to be a summary of the security or terms of this issue. Potential investors are advised to read the entire Limited Offering Memorandum to obtain information essential to the making of an informed investment decision. Capitalized terms used on this cover page not otherwise defined shall have the meanings set forth herein.

The Series 2011B Bonds are offered, subject to prior sale, when, as and if issued by the Authority and received by George K. Baum & Company (the “Underwriter”), for sale to Qualified Buyers as defined herein, subject to approval of legality and certain other legal matters by Patton Boggs LLP, Washington, D.C., as Bond Counsel, and subject to certain other conditions. Certain legal matters will be passed upon for the Authority by Fulbright & Jaworski L.L.P., as counsel to the Authority; by Manatt, Phelps & Phillips, LLP, Los Angeles, California, as counsel to the University; and for the Underwriter by Squire, Sanders & Dempsey (US) LLP, Los Angeles, California. It is expected that the Series 2011B Bonds will be available for delivery through the facilities of DTC, on or about February __, 2011, against payment therefor.

George K. Baum & Company

The information contained in this Limited Offering Memorandum speaks only as of its dated date, February ___, 2011.

† Copyright, American Bankers Association. CUSIP data herein is provided by Standard & Poor's CUSIP Service Bureau, a division of The McGraw-Hill Companies, Inc. CUSIP data herein are set forth herein for

convenience of reference only. None of the Authority, the University or the Underwriter assumes responsibility for the accuracy of such information.

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PRELIMINARY LIMITED OFFERING MEMORANDUM DATED JANUARY 12, 2011

(i)

REGARDING USE OF THIS LIMITED OFFERING MEMORANDUM

This Limited Offering Memorandum does not constitute an offering of any security, other than the original offering by the Authority of the Series 2011B Bonds specifically offered hereby. No dealer, broker, salesman or other person has been authorized to give any information or to make any representation with respect to the Series 2011B Bonds other than those contained in this Limited Offering Memorandum and, if given or made, such other information or representation not so authorized must not be relied upon as having been authorized. This Limited Offering Memorandum does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of, the Series 2011B Bonds by any person in any jurisdiction in which it is unlawful for such person to make such offer, solicitation or sale. This Limited Offering Memorandum is not to be construed as a contract with the purchasers of the Series 2011B Bonds.

The information set forth herein relating to the Authority under the headings “THE AUTHORITY” and “LITIGATION – The Authority” has been obtained from the Authority, and all other information herein (except under the caption “UNDERWRITING” and the price reflected on the cover hereof) has been obtained by the Underwriter from the University and other sources deemed by the Underwriter to be reliable, but is not to be construed as a representation by, the Authority or the Underwriter. The Authority has not reviewed or approved any information in this Limited Offering Memorandum except information relating to the Authority under the headings “THE AUTHORITY” and “LITIGATION – The Authority”. The information herein is subject to change without notice, and neither the delivery of this Limited Offering Memorandum nor any sale made hereunder shall under any circumstances create any implication that there has been no change in the affairs of the Authority or the University since the date hereof.

Except for the information contained in “THE AUTHORITY” and “LITIGATION – The Authority”, the Authority neither has nor will assume any responsibility as the accuracy or completeness of the information in this Limited Offering Memorandum. The Underwriter has provided the following sentence for inclusion in this Limited Offering Memorandum: The Underwriter has reviewed the information in this Limited Offering Memorandum in accordance with and as part of its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information.

The information and descriptions in this Limited Offering Memorandum do not purport to be comprehensive or definitive. Statements regarding specific documents (including the Series 2011B Bonds), instruments and statutes are descriptions of selected provisions of and subject to the detailed provisions of such documents, instruments and statutes, respectively, and are qualified in their entirety by reference to the full text of each such document, instrument or statute. This Limited Offering Memorandum has been approved by the University, and its use and distribution for the purposes set forth above have been authorized by the University and the Authority.

Upon issuance, the Series 2011B Bonds will not be registered under the Securities Act of 1933, as amended, or any state securities law, and will not be listed on any stock or other securities exchange. Neither the Securities and Exchange Commission nor any other Federal, state, municipal or other governmental entity or agency will have passed upon the accuracy or adequacy of this Limited Offering Memorandum nor, except the Authority (to the extent described herein), approved the Series 2011B Bonds for sale.

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVERALLOT OR EFFECT TRANSACTIONS THAT STABILIZE OR MAINTAIN THE

(ii)

MARKET PRICE OF THE SERIES 2011B BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

THIS LIMITED OFFERING MEMORANDUM AND THE INFORMATION AND DOCUMENTS ATTACHED HERETO ARE BEING PROVIDED ON A CONFIDENTIAL BASIS TO QUALIFIED BUYERS FOR INFORMATIONAL USE SOLELY IN CONNECTION WITH THE CONSIDERATION OF THE PURCHASE OF THE SERIES 2011B BONDS. THE USE OF SUCH INFORMATION FOR ANY OTHER PURPOSE IS NOT AUTHORIZED. IT MAY NOT BE COPIED OR REPRODUCED IN WHOLE OR IN PART, NOR MAY IT BE DISTRIBUTED OR ANY OF ITS CONTENTS BE DISCLOSED TO ANYONE OTHER THAN THE PROSPECTIVE INVESTORS TO WHOM IT IS BEING PROVIDED. BY ACCEPTING RECEIPT HEREOF, EACH PROSPECTIVE PURCHASER OF THE SERIES 2011B BONDS AGREES TO BE BOUND BY THE FOREGOING RESTRICTIONS.

NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, IS MADE BY THE UNDERWRITER AS TO THE ACCURACY OR COMPLETENESS OF THE INFORMATION CONTAINED HEREIN, AND NOTHING CONTAINED IN THIS LIMITED OFFERING MEMORANDUM IS, OR SHALL BE RELIED ON AS, A PROMISE OR REPRESENTATION BY THE UNDERWRITER AS TO THE PAST OR THE FUTURE. THE UNDERWRITER DOES NOT ASSUME ANY RESPONSIBILITY FOR THE ACCURACY OR COMPLETENESS OF SUCH INFORMATION. IN MAKING AN INVESTMENT DECISION, PROSPECTIVE INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF THE AUTHORITY AND THE UNIVERSITY, THE SECURITY FOR THE SERIES 2011B BONDS AND THE TRANSACTIONS DESCRIBED HEREIN AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED. THE CONTENTS OF THIS LIMITED OFFERING MEMORANDUM ARE NOT TO BE CONSTRUED AS LEGAL, BUSINESS OR TAX ADVICE. EACH PROSPECTIVE INVESTOR SHOULD CONSULT ITS OWN ATTORNEY, BUSINESS ADVISOR AND TAX ADVISOR AS TO LEGAL, BUSINESS OR TAX ADVICE. PROSPECTIVE INVESTORS MAY OBTAIN UPON REQUEST FROM THE UNDERWRITER OR THE AUTHORITY, SUCH ADDITIONAL INFORMATION AS THEY MAY REASONABLY REQUIRE IN CONNECTION WITH THE DECISION TO PURCHASE ANY OF THE BONDS.

THE SERIES 2011B BONDS ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE INDENTURE. PROSPECTIVE INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. EACH PURCHASER OF SERIES 2011B BONDS OFFERED HEREBY WILL BE DEEMED TO HAVE MADE CERTAIN ACKNOWLEDGMENTS, REPRESENTATIONS AND AGREEMENTS AS SET FORTH UNDER “NOTICE TO INVESTORS.”

EACH PROSPECTIVE PURCHASER OF THE SERIES 2011B BONDS MUST COMPLY WITH ALL LAWS AND REGULATIONS APPLICABLE TO IT IN FORCE IN ANY JURISDICTION IN WHICH IT PURCHASES, OFFERS OR SELLS THE SERIES 2011B BONDS OR POSSESSES OR DISTRIBUTES THIS LIMITED OFFERING MEMORANDUM AND MUST OBTAIN ANY CONSENT, APPROVAL OR PERMISSION

(iii)

REQUIRED TO BE OBTAINED BY IT FOR THE PURCHASE, OFFER OR SALE BY IT OF THE BONDS UNDER THE LAWS AND REGULATIONS APPLICABLE TO IT IN FORCE IN ANY JURISDICTION TO WHICH IT IS SUBJECT OR IN WHICH IT MAKES SUCH PURCHASES, OFFERS OR SALES, AND NEITHER THE AUTHORITY NOR THE UNDERWRITER SHALL HAVE ANY RESPONSIBILITY THEREFOR.

THE INFORMATION IN THIS LIMITED OFFERING MEMORANDUM IS SUBJECT TO CHANGE WITHOUT NOTICE, AND NEITHER THE DELIVERY OF THIS LIMITED OFFERING MEMORANDUM NOR ANY SALE MADE HEREUNDER WILL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF PERSONS DESCRIBED HEREIN SINCE THE DATE HEREOF. THE INFORMATION SET FORTH HEREIN HAS BEEN OBTAINED FROM SOURCES WHICH ARE BELIEVED TO BE RELIABLE, BUT IT IS NOT GUARANTEED AS TO ACCURACY OR COMPLETENESS BY, AND IS NOT TO BE CONSTRUED AS A REPRESENTATION BY, THE UNDERWRITER.

CUSIP numbers are provided for convenience of reference only. None of the Authority, the University or the Underwriter assumes any responsibility for the accuracy of such numbers. CUSIP Copyright 2011, American Bankers Association. CUSIP data herein is provided by Standard & Poor’s CUSIP Service Bureau, a division of The McGraw-Hill Companies, Inc.

CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS IN THIS LIMITED OFFERING MEMORANDUM.

Certain statements included or incorporated by reference in this Limited Offering Memorandum constitute “forward-looking statements.” Such statements are generally identifiable by the terminology used such as “plan,” “expect,” “estimate,” “project,” “budget” or other similar words. Such forward-looking statements include, but are not limited to, certain statements contained in the information in APPENDIX A – “INFORMATION REGARDING AZUSA PACIFIC UNIVERSITY.”

THE ACHIEVEMENT OF CERTAIN RESULTS OR OTHER EXPECTATIONS CONTAINED IN SUCH FORWARD-LOOKING STATEMENTS INVOLVES KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS DESCRIBED TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. NEITHER THE AUTHORITY, THE UNIVERSITY NOR THE UNDERWRITER PLANS TO ISSUE ANY UPDATES OR REVISIONS TO THOSE FORWARD-LOOKING STATEMENTS IF OR WHEN ITS EXPECTATIONS, OR EVENTS, CONDITIONS OR CIRCUMSTANCES ON WHICH SUCH STATEMENTS ARE BASED OCCUR.

NOTICE TO INVESTORS

It is intended that the Bonds are to be offered and sold only to persons reasonably believed to qualify as “Qualified Buyers” as described in APPENDIX C. Each initial investor will be required to execute the form of Investor Letter set forth in APPENDIX C.

TABLE OF CONTENTS Page

INTRODUCTION ......................................................................................................................... 1 Generally............................................................................................................................ 1 The University ................................................................................................................... 2 Purpose............................................................................................................................... 2 Source of Payment and Security for the Series 2011B Bonds........................................... 2 Redemption ........................................................................................................................ 3 Continuing Disclosure ....................................................................................................... 3 Miscellaneous .................................................................................................................... 4

THE AUTHORITY ....................................................................................................................... 5

AZUSA PACIFIC UNIVERSITY................................................................................................. 5

PLAN OF FINANCING................................................................................................................ 5 Series 2011 Bonds.............................................................................................................. 5 Swap Contracts .................................................................................................................. 6 Wells Fargo Agreements.................................................................................................... 7 Coverage Analysis ............................................................................................................. 8

ESTIMATED DEBT SERVICE SCHEDULE.............................................................................. 9

ESTIMATED USES OF PROCEEDS......................................................................................... 10

DESCRIPTION OF THE SERIES 2011B BONDS .................................................................... 10 General............................................................................................................................. 10 Denomination; Payment................................................................................................... 11 Redemption Prior to Maturity.......................................................................................... 11 Purchase in Lieu of Redemption...................................................................................... 14 Nonpresentment of Series 2011B Bonds ......................................................................... 14

SECURITY AND SOURCES OF PAYMENT........................................................................... 14 General............................................................................................................................. 14 Revenues and Repayment Installments ........................................................................... 15 Series 2011B Debt Service Reserve Fund ....................................................................... 16 Assignment ...................................................................................................................... 16 Security Agreement and Pledge of Gross Revenues........................................................ 17 Intercreditor Agreement................................................................................................... 17 Certain Covenants With Respect to the Series 2011B Bonds.......................................... 18

BONDHOLDERS’ RISKS .......................................................................................................... 19 General............................................................................................................................. 19 Inability to Remarket the Series 2011A Bonds................................................................ 20 Intercreditor and Collateral Agent Agreement ................................................................ 20 Limitations on Security.................................................................................................... 21 Bankruptcy....................................................................................................................... 21 Tax-Exempt Status of the University............................................................................... 22 Certain Matters Relating to Enforceability ...................................................................... 23 Seismic Matters................................................................................................................ 23 Additional Bonds ............................................................................................................. 23

TAX MATTERS.......................................................................................................................... 23

LITIGATION............................................................................................................................... 27 The Authority................................................................................................................... 27 The University ................................................................................................................. 27

APPROVAL OF LEGAL PROCEEDINGS................................................................................ 27

FINANCIAL STATEMENTS..................................................................................................... 28

TRANSCRIPT AND CLOSING DOCUMENTS ....................................................................... 28

NO RATING................................................................................................................................ 28

ENFORCEABILITY OF RIGHTS AND REMEDIES ............................................................... 28

UNDERWRITING ...................................................................................................................... 28

CONTINUING DISCLOSURE AGREEMENT .......................................................................... 29

APPENDIX A – INFORMATION REGARDING AZUSA PACIFIC UNIVERSITY

APPENDIX B – AUDITED FINANCIAL STATEMENTS OF THE UNIVERSITY FOR FISCAL YEARS ENDING JUNE 30, 2009 AND 2010

APPENDIX C – INITIAL INVESTOR LETTER

APPENDIX D – PROPOSED FORM OF BOND COUNSEL OPINION

APPENDIX E – BOOK-ENTRY ONLY SYSTEM

APPENDIX F – PROPOSED FORM OF CONTINUING DISCLOSURE AGREEMENT

APPENDIX G – PROPOSED FORM OF SERIES 2011B INDENTURE

APPENDIX H– PROPOSED FORM OF SERIES 2011B LOAN AGREEMENT

APPENDIX I – PROPOSED FORM OF SECURITY AGREEMENT

APPENDIX J – PROPOSED FORM OF INTERCREDITOR AND COLLATERAL AGENCY AGREEMENT

APPENDIX K – PROPOSED FORM OF CONTINUING COVENANT AGREEMENT

1

LIMITED OFFERING MEMORANDUM

$73,630,000* CALIFORNIA MUNICIPAL FINANCE AUTHORITY


Series 2011B

INTRODUCTION

This Introduction contains only a brief summary of certain of the terms of the Series 2011B Bonds being offered and a full review should he made of the entire Limited Offering Memorandum, including the cover page and the Appendices. All statements contained in this Introduction are qualified in their entirety by reference to the entire Limited Offering Memorandum. References to, and summaries of provisions of the laws of the State of California or any documents referred to herein do not purport to be complete and such references are qualified in their entirety by reference to the complete provisions thereof.

Generally

This Limited Offering Memorandum, including the cover page and the Appendices hereto, sets forth certain information concerning the $73,630,000* California Municipal Finance Authority, Refunding Revenue Bonds (Azusa Pacific University Project), Series 2011B (the “Series 2011B Bonds”). The Series 2011B Bonds will be issued pursuant to the Indenture of Trust, dated as of February 1, 2011 (the “Indenture”), between the California Municipal Finance Authority (the “Authority”) and U.S. Bank, National Association, as trustee (the “Trustee”).

The proceeds of the Series 2011B Bonds will be used to currently refund certain outstanding obligations of the University, fund a reserve fund for the Series 2011B Bonds and pay certain costs of issuance of the Series 2011B Bonds.

In order to pay the balance of the costs of the refunding, the Authority has authorized the issuance pursuant to an Indenture of Trust, dated as of February 1, 2011 (the “Series 2011A Indenture”), between the Issuer and the Trustee, of its Variable Rate Demand Refunding Revenue Bonds (Azusa Pacific University Project) Series 2011A, in an aggregate principal amount of $70,000,000 (the “Series 2011A Bonds”). The Series 2011A Bonds will be purchased by Wells Fargo Bank, National Association (the “Bank”) pursuant to a Bond Purchase Agreement, dated as of February __, 2011 (the “Series 2011A Bond Purchase Agreement”), among the Authority, the Borrower and the Bank. The Series 2011A Bonds are not being offered hereunder.

It is intended that the Series 2011B Bonds are to be offered and sold only to persons reasonably believed to qualify as a “Qualified Buyer”. Each initial investor will be required to execute the form of Investor Letter set forth in APPENDIX C hereto.

Capitalized terms used but not otherwise defined herein have the meanings given to them in the Indenture attached hereto as APPENDIX G, except that the common meaning of a term should be given effect if the context of the use of that term clearly requires such meaning.


2

The University

Azusa Pacific University (the “University”), is located in the City of Azusa, California, and is a co-educational nonprofit university organized under the California nonprofit religious corporation law. See “AZUSA PACIFIC UNIVERSITY” herein and “APPENDIX A” hereto.

Purpose

The Authority will loan the proceeds of the Series 2011B Bonds to the University pursuant to the terms of a Loan Agreement dated as of February 1, 2011 (the “Loan Agreement”), between the Authority and the University. The University will use the proceeds of the loan (a) to refund a portion of the outstanding California Statewide Communities Development Authority Variable Rate Demand Revenue Bonds (Azusa Pacific University Project), Series 2007 originally issued in the aggregate principal amount of $140,340,000 (the “Refunded Bonds” or the “Series 2007 Bonds”) which were issued (i) to refund the University’s Taxable Variable Rate Demand Revenue Bonds, Series 2003 originally issued to finance the construction, installation, furnishing and equipping of a residence facility, a dining facility, a mail center and related facilities, (ii) finance, refinance and reimburse the University for all or a portion of the costs of the acquisition, construction, improvement and equipping of new science education facility located on the University’s campus (Segerstrom Science Center) and acquisition of student housing facilities (University Village) and (iii) pay costs of issuance thereof, (b) fund the Series 2011B Debt Service Reserve Fund, and (c) certain costs of issuing the Series 2011B Bonds. See “ESTIMATED USES OF PROCEEDS” herein.

The remaining outstanding Series 2007 Bonds will be retired with the proceeds of the Series 2011A Bonds simultaneously with the closing of the Series 2011B Bonds.

Source of Payment and Security for the Series 2011B Bonds

Under the Loan Agreement, the University has an absolute and unconditional general obligation to pay the principal of, premium, if any, and interest on the Series 2011B Bonds. The Series 2011B Bonds will be secured on a parity basis with the Secured Creditors (as defined in the Intercreditor Agreement which includes the Series 2011A Bondholders) by (i) a pledge of the University’s Gross Revenues (as defined in the Security Agreement); and (ii) a security interest in certain Collateral (as defined in the Security Agreement). The Series 2011B Bonds will also be secured by the Series 2011B Debt Service Reserve Fund in the amount of the Reserve Requirement, pursuant to which a portion of the proceeds of the Series 2011B Bonds will provide security for the Series 2011B Bonds as further provided in the Indenture. See “SOURCES OF PAYMENT OF AND SECURITY FOR THE SERIES 2011B BONDS” herein.

The Loan Agreement also contains certain covenants for the protection of the Authority and the Holders of the Series 2011B Bonds. The Indenture and the Loan Agreement also permit additional debt to be issued by or for the benefit of the University subject to certain conditions. See “SOURCES OF PAYMENT OF AND SECURITY FOR THE SERIES 2011B BONDS” herein.

Pursuant to the Indenture, the Authority will pledge to the Trustee for the benefit of the Holders of the Series 2011A Bonds, the Series 2011B Bonds and any additional Series of Bonds equally and ratably, the Trust Estate.

Neither the Series 2011A Bonds nor the Series 2011B Bonds are secured by a mortgage lien on any real property assets of the University.

3

The Loan Agreement sets forth the University’s covenants for the benefit of the Series 2011B Bondholders including a covenant not to permit any liens on its real property except for Permitted Encumbrances.


The Authority is obligated to pay the Series 2011B Bonds solely from the Trust Estate, which include amounts received from the University under the Loan Agreement, and the other funds available therefor under the Indenture.

Redemption

The Series 2011B Bonds are subject to optional and mandatory redemption, and purchase in lieu of redemption as described under “DESCRIPTION OF THE SERIES 2011B BONDS – Redemption Prior to Maturity”.

Continuing Disclosure

The University will undertake in a continuing disclosure agreement, dated the date of issuance of the Series 2011B Bonds, for the benefit of the Holders of the Series 2011B Bonds, to provide to the Trustee, acting as Dissemination Agent, certain annual information and notices required to be provided by Rule 15c2-12 promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended (the “Rule”). References to the continuing disclosure agreement are qualified by reference to the form thereof. See “CONTINUING DISCLOSURE AGREEMENT” herein and “APPENDIX F – PROPOSED FORM OF CONTINUING DISCLOSURE AGREEMENT”.

The Authority has determined that no financial or operating data concerning the Authority is material to an evaluation of the offering of the Series 2011B Bonds or to any decision to purchase, hold or sell Series 2011B Bonds and the Authority will not provide any such information. The Authority shall have no liability to the Holders of the Series 2011B Bonds or any other person with respect to the Rule.

Bondholder’s Risks

An investment in the Series 2011B Bonds involves various risks that any investor should consider prior to purchasing any Series 2011B Bond. A description of certain risk factors that should be considered by potential investors in the Bonds is included under the caption “BOND

4

HOLDERS’ RISKS” in this Limited Offering Memorandum. Such factors relate to the events or circumstances listed below, among others. The discussion of such risks herein is not intended to present a comprehensive list of all risks associated with an investment in the Bonds. The occurrence of one or more of the events or circumstances identified herein could materially and adversely affect the payment of the principal of and interest on the Series 2011B Bonds.

o Inability to Remarket the Series 2011A Bonds on the Mandatory Tender Date

o Intercreditor and Collateral Agent Agreement

o Limitations on Security

o Bankruptcy

o Tax-Exempt Status of the University

o Certain Matters Relating to Enforceability

o Additional Bonds These risks involve conditions or events that could adversely affect the security for the

payment of the Series 2011B Bonds or the timeliness of the payments of the principal of or interest with respect to the Series 2011B Bonds. Potential investors in the Series 2011B Bonds should review this Private Placement Memorandum in its entirety, as well as the complete terms of various contracts and documents attached hereto, and should consider the risks of investment in the Series 2011B Bonds identified herein. See “BONDHOLDERS’ RISKS” herein. The discussion of such risks herein is not intended to present a comprehensive list of all risks associated with an investment in the Series 2011B Bonds. In making any investment decision concerning the Series 2011B Bonds, prospective investors in the Series 2011B Bonds shall rely on their own examination of the Series 2011B Bonds, the security therefor and the merits and risks of investment therein. The contents of this Limited Offering Memorandum should not be construed as legal, business or tax advice, and each prospective investor should consult its own attorney, business advisor and tax consultant before making any investment decision concerning the Series 2011B Bonds.

Miscellaneous

The descriptions herein of the Indenture, the Loan Agreement, the Tax Agreement and other agreements relating to the Series 2011B Bonds are qualified in their entirety by reference to such documents, and the description herein of the Series 2011B Bonds is qualified in its entirety by the forms thereof and the information with respect thereto included in such documents. All descriptions are further qualified in their entirety by reference to laws relating to or affecting the enforcement of creditors’ rights. The agreements of the Authority with the Bondholders are fully set forth in the Indenture and neither any advertisement of the Series 2011B Bonds nor this Limited Offering Memorandum is to be construed as constituting an agreement with the purchasers of the Series 2011B Bonds.

Copies of the Indenture, the Loan Agreement and other agreements relating to the Series 2011B Bonds are attached hereto.

Insofar as any statements made in this Limited Offering Memorandum involve matters of opinion, regardless of whether expressly so stated, they are intended merely as such and not as representations of fact. The information and expressions of opinion herein speak only as of their date and are subject to change without notice. Neither the delivery of this Limited Offering Memorandum nor the consummation of any sale made hereunder nor any future use of this

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Limited Offering Memorandum shall, under any circumstances, create any implication that there has been no change in the affairs of the Authority or the University.

THE AUTHORITY

Under Title 1, Division 7, Chapter 5 of the California Government Code (the “JPA Act”), certain California cities, counties and special districts have entered into a joint exercise of powers agreement (the “JPA Agreement”) forming the Authority for the purpose of exercising to powers common to the members and exercising the additional powers granted to the Authority by the JPA Act and any other applicable provisions of California law. Under the JPA Agreement, the Authority may issue Series 2011B Bonds, notes or any other evidence of indebtedness, for any purpose or activity permitted under the JPA Act or any other applicable law.

The Authority may sell and deliver obligations other than the Series 2011B Bonds. These obligations will be secured by instruments separate and apart from the Indenture and Loan Agreement, and the holders of such other obligations of the Authority will have no claim on the security for the Series 2011B Bonds. Likewise, the Holders of the Series 2011B Bonds will have no claim on the security for such other obligations that may be issued by the Authority.

Neither the Authority nor its independent contractors has furnished, reviewed, investigated or verified the information contained in this Limited Offering Memorandum other than the information contained in this section and the section entitled LITIGATION – The Authority. The Authority does not and will not in the future monitor the financial condition of the University or otherwise monitor payment of the Series 2011B Bonds or compliance with the documents relating thereto. Any commitment or obligation for continuing disclosure with respect to the Series 2011B Bonds or the University has been undertaken solely by the University. See “INTRODUCTION – Continuing Disclosure” and “CONTINUING DISCLOSURE AGREEMENT” herein.

AZUSA PACIFIC UNIVERSITY

Azusa Pacific University is a California nonprofit, religious corporation operating as an institution of higher education whose main campus is located in Azusa, California. The University is an evangelical Christian university. The issuance of the Series 2011B Bonds by the Authority does not constitute an endorsement of the religious principles or practices of the University. Additional information describing the University is included in APPENDIX A hereto.

PLAN OF FINANCING

Series 2011 Bonds

The net proceeds of the Series 2011B Bonds and the Series 2011A Bonds will be applied, in part, to currently refund and effect the defeasance of the California Statewide Communities Development Authority Variable Rate Demand Refunding Revenue Bonds (Azusa Pacific University Project) Series 2007 (the “Series 2007 Bonds”) in the aggregate outstanding principal amount of $134,220,000, which bonds were used to finance and refinance the University’s Series 2003 Bonds and to pay for the acquisition, construction, expansion, replacement, renovation, improvement and/or equipping of certain educational facilities of the University. The following improvements were funded with the proceeds of the Series 2007 Bonds:

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(1) The University’s new Segerstrom Science Center was completed in Fall 2009; and

(2) A 960 bed apartment project, formerly known as the Crestview Apartments, now called University Village was acquired for additional student housing. University Village is now 100% filled with University students.

From and after the date on which the Series 2011B Bonds are delivered, the aggregate outstanding principal amount of bonds of the Authority issued on behalf of the University will be approximately $142,000,000*, which includes the Series 2011A Bonds and Series 2011B Bonds.

In connection with the purchase of the Series 2011A Bonds by Wells Fargo Bank, National Association (the “Bank”), the Borrower and the Bank have entered into that certain Continuing Covenant Agreement, dated as of February 1, 2011, with respect to the Series 2011A Bonds (the “Continuing Covenant Agreement”). See “APPENDIX K” hereto.

Swap Contracts

The Borrower has also entered into interest rate swap transactions with Wells Fargo Bank, National Association (the “Swap Provider”) pursuant to that certain ISDA Master Agreement (including the Schedule thereto), and the related ISDA Confirmation No. ______, each dated as of February __, 2011 (as such agreements may be amended, restated, modified and/or supplemented from time to time, including, without limitation, by additional Confirmations reflecting transactions between the Swap Provider and the Borrower, collectively, the “Swap Contracts”). It is anticipated that one Swap Contract will be in a notional amount initially equal to $70,000,000, the initial principal amount of the Series 2011A Bonds, while the second Swap Contract will be in the approximate amount of $67,215,000 (the “Orphan Swap Contract”). The Swap Contracts will replace the three existing swap contracts in place with Allied Irish Bank regarding the Series 2007 Bonds.

Under the terms of the Swap Contracts, the Borrower is required to make payments to the Swap Provider based on a fixed rate of interest of ____% and will receive floating rate payments from the Swap Provider calculated at 67% of 1-month LIBOR. Such payments will accrue beginning on March 1, 2011* and will terminate on April 1, 2039.

The Swap Contracts are subject to early termination, including, without limitation, upon the occurrence of certain customary termination events and events of default which may be outside the control of the Borrower. The Swap Contracts are also subject to termination by the Swap Provider if after the Continuing Covenant Agreement has been repaid, ceases to be in effect or Wells Fargo is no longer obligated thereunder for any reason, the University fails to provide an acceptable Credit Support Annex providing for the collateralization of the Swap Contracts’ mark-to-market exposure in excess of $10 million or to otherwise collateralize or secure the swap obligations in a manner that is acceptable to the Swap Provider. Additionally, the Swap Contracts are cross-defaulted to the University’s various credit agreements with Wells Fargo including the Series 2011A Loan Agreement and the Continuing Covenant Agreement. The Orphan Swap Contract is also subject to termination by the Swap Provider if the swap termination value is $2,500,000 or less in mark-to-market value in favor of the Swap Provider.

If an early termination occurs, a payment by the Borrower to the Swap Provider may be required, and the amount of any such termination payment could be substantial. Under certain circumstances, pursuant to the provisions of the Swap Contract, the Borrower will be required,


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from time to time, to post collateral, which posting of collateral is required based upon the value of the Swap Contract at the time of calculation.

Regularly scheduled payments under the Swap Contracts and any early termination payments under the Swap Contracts will be secured on a parity basis pursuant to the Security Agreement with the Series 2011A and Series 2011B Bonds. See “SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2011B BONDS”. In addition, the University’s obligations under the Swap Contracts will be secured by a first lien on the University’s real property known as “University Village” and the “Promenade Shopping Center”.

Wells Fargo Agreements

The Borrower has entered into a Credit Agreement dated as of February __, 2011, between the Borrower and the Bank, pursuant to which the Bank may from time to time extend credit or otherwise make financial accommodations available to the Borrower in an amount up to $5,000,000 (as the same may further be amended, modified or restated in accordance with the terms thereof, the “Credit Agreement”).

The Series 2011A Bond Trustee, the Series 2011B Bond Trustee and Wells Fargo Bank, National Association in its capacity as Purchaser, Swap Provider and Bank (collectively, the “Secured Creditors” and individually each a “Secured Creditor”) have entered into that certain Intercreditor and Collateral Agency Agreement dated as of February __, 2011 (the “Intercreditor Agreement”), pursuant to which the Secured Creditors have appointed U.S. Bank National Association as collateral agent (the “Collateral Agent”) as their agent with respect to the Collateral.

As a condition to purchasing the Series 2011A Bonds and extending credit to the University and making other financial accommodations to the University, the University and certain subsidiaries and affiliates are required to grant to the Collateral Agent, for the benefit of the Secured Creditors, a security interest in certain personal property subject to the terms and conditions of the Security Agreement.

The respective amounts owed by the University to the Secured Creditors at the time of issuance of the Series 2011B Bonds are as follows:

• Series 2011A Trustee for the benefit of the Bank $70,000,000

• Series 2011B Trustee for the Benefit of the Series 2011B Bondholders $73,630,000∗

• Wells Fargo Bank, N.A. as Swap Provider Fluctuating Value

• Wells Fargo Bank, N.A. as Creditor Provider $0.00 out of a commitment of $5,000,000

The Series 2011 A Bonds are subject to mandatory tender to the University on February, __ 2016, but not before such date and may be converted to a one year term loan if not remarketed. The University’s coverage analysis assumes the Series 2011A Bonds will be successfully remarketed upon the conclusion of the Term Rate Period of the Series 2011A Bonds on February __, 2016.

∗ Preliminary, subject to change.

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Coverage Analysis

The University has estimated the average annual net debt service on the Series 2011A and Series 2011B Bonds as well as the estimated “worst case” net costs of carrying the Swap Contracts.1 Based on such estimates and its three-year forecast of revenues and expenses, the University projects a debt service coverage ratio of 1.51, 1.41 and 1.40 for the fiscal years 2010-11, 2011-12 and 2012-13. See “APPENDIX A –INFORMATION REGARDING AZUSA PACIFIC UNIVERSITY -Forecast of Revenues and Expenditures.”

1 This calculation is based on the University paying the fixed swap rate of 4.05% (subject to change) and currently receiving only 17 basis points on the floating 67% of 1 Month LIBOR rate for a negative carry of 3.88% (on the Orphan Swap notional amount).

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ESTIMATED DEBT SERVICE SCHEDULE* The following is the annual estimated debt service schedule for the Series 2011A and

Series 2011B Bonds, assuming that no Series 2011A or Series 2011B Bonds are redeemed prior to maturity except from mandatory sinking fund redemption. In addition to the estimated debt service shown below, the University will be required to make additional annual payments on the Swap Contracts. The University estimates that as of December 3, 2010 such “worst case” net swap payments would be an additional $2.6 million of annual payments. 1

April 1 Series 2011A

Principal Interest Series 2011B

Principal2 Interest3 Total Debt

Service 2011 $ 865,000 $ 652,915 $ 785,000 $ 900,229 $ 3,203,144 2012 920,000 3,917,491 820,000 5,401,375 11,058,866 2013 970,000 3,863,487 855,000 5,364,475 11,052,962 2014 1,030,000 3,806,548 895,000 5,326,000 11,057,548 2015 1,090,000 3,746,087 935,000 5,285,725 11,056,812 2016 1,155,000 3,682,104 980,000 5,243,650 11,060,754 2017 1,220,000 3,614,305 1,040,000 5,182,400 11,056,705 2018 1,290,000 3,545,375 1,105,000 5,117,400 11,057,775 2019 1,365,000 3,472,490 1,175,000 5,048,338 11,060,828 2020 1,440,000 3,395,368 1,250,000 4,974,900 11,060,268 2021 1,525,000 3,314,008 1,325,000 4,896,775 11,060,783 2022 1,610,000 3,227,845 1,425,000 4,797,400 11,060,245 2023 1,700,000 3,136,880 1,535,000 4,690,525 11,062,405 2024 1,800,000 3,040,830 1,650,000 4,575,400 11,066,230 2025 1,900,000 2,939,130 1,770,000 4,451,650 11,060,780 2026 2,005,000 2,831,780 1,905,000 4,318,900 11,060,680 2027 2,120,000 2,718,498 2,050,000 4,176,025 11,064,523 2028 2,240,000 2,598,718 2,205,000 4,022,275 11,065,993 2029 2,365,000 2,472,158 2,370,000 3,856,900 11,064,058 2030 2,500,000 2,338,535 2,545,000 3,679,150 11,062,685 2031 2,645,000 2,197,285 2,740,000 3,488,275 11,070,560 2032 2,795,000 2,047,843 2,950,000 3,275,925 11,068,768 2033 2,950,000 1,889,925 3,180,000 3,047,300 11,067,225 2034 3,120,000 1,723,250 3,425,000 2,800,850 11,069,100 2035 3,295,000 1,546,970 3,695,000 2,535,413 11,072,383 2036 3,480,000 1,360,803 3,980,000 2,249,050 11,069,853 2037 3,680,000 1,164,183 4,290,000 1,940,600 11,074,783 2038 3,890,000 956,263 4,620,000 1,608,125 11,074,388 2039 4,110,000 736,478 4,980,000 1,250,075 11,076,553 2040 4,340,000 504,263 5,365,000 864,125 11,073,388 2041 4,585,000 259,053 5,785,000 448,338 11,077,390

Total $70,000,000 $76,700,860 $73,630,000 $114,817,567 $335,148,426

* Preliminary, subject to change. 1 This calculation is based on the University paying the fixed swap rate of 4.05% (subject to change) and currently receiving only 17 basis points on the floating 67% of 1 Month LIBOR rate for a negative carry of 3.88% (on the Orphan Swap notional amount). 2 Including scheduled mandatory sinking fund redemption for Series 2011B Bonds. 3 Based on an estimated average interest rate of 8.025%.

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ESTIMATED USES OF PROCEEDS

The proceeds received from the sale of the Series 2011A and Series 2011B Bonds are estimated by the University to be applied as follows:

Estimated Sources of Funds:∗ Principal Amount of Series 2011A Bonds $70,000,000.00 Principal Amount of Series 2011B Bonds 73,630,000.00 Net Original Issue (Discount)/Premium (1,750,144.70) Total Sources $141,879,855.30 Estimated Uses of Funds:* Amount to Refund Series 2007 Bonds(1) $134,220,000.00 Series 2011B Debt Service Reserve Fund 6,233,337.50 Costs of Issuance(2) 1,426,517.80 Total Uses $141,879,855.30

____________________ (1) This amount represents the amount necessary to currently refund the Series 2007

Bonds in full. (2) Includes Underwriter’s discount, expenses of legal counsel, fees and expenses of

the Authority, the Trustee, the rating agency, printing costs and other fees and expenses associated with the issuance and sale of the Series 2011A and Series 2011B Bonds. See “UNDERWRITING” herein.

DESCRIPTION OF THE SERIES 2011B BONDS

General

The Series 2011B Bonds will be dated their date of issuance, will bear interest payable semiannually on April 1 and October 1 of each year (each an “Interest Payment Date”), commencing April 1, 2011, and will bear interest from the most recent date to which interest has been paid or duly provided for or, if no interest has been paid or duly provided for, from their dated date. The Series 2011B Bonds will mature, subject to prior redemption and purchase in lieu of redemption as hereinafter described, in the amounts and on the dates and will bear interest at the respective rates all as shown on the cover page. The Series 2011B Bonds will be authorized and issued by the Authority under the provisions of the Act and the JPA Agreement pursuant to a resolution adopted by the Authority.

∗ Preliminary, subject to change.

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Denomination; Payment

The Series 2011B Bonds are being issued as fully registered Series 2011B Bonds in the denomination of $250,000 or any integral multiples of $5,000 in excess thereof. Interest is to be mailed to the person in whose name that Bond is registered (the “Holder” or “Bondholder”) on the registration books (the “Register”) maintained by the Trustee as registrar (the “Registrar”) at the close of business on the fifteenth day of the calendar month next preceding each Interest Payment Date (the “Regular Record Date”). Principal of and premium, if any, on the Series 2011B Bonds will be payable when due upon presentation and surrender of the Series 2011B Bonds at the designated corporate trust office of the Trustee. See “APPENDIX E – BOOK-ENTRY ONLY SYSTEM”.

If interest on the Bonds is in default, Bonds issued in exchange for Bonds surrendered for registration of transfer or exchange will bear interest from the last date to which interest has been paid or duly provided for on the Bonds or, if no interest has been paid or duly provided for on the Bonds, from the Dated Date. See APPENDIX G – “PROPOSED FORM OF SERIES 2011B INDENTURE.”

Redemption Prior to Maturity*

Mandatory Sinking Fund Redemption. The Series 2011B Bonds maturing on April 1, 2015 are subject to mandatory redemption prior to maturity at a redemption price of 100% of the principal amount redeemed plus interest accrued to the redemption date, on April 1 in the following principal amounts in the years specified:

Mandatory Redemption

Date (April 1)

Amount


Date (April 1)

Amount

2011 $_______ 2014 $_______ 2012 _______ 2015† _______ 2013 _______

___________________

(†) Payment at maturity.

The Series 2011B Bonds maturing on April 1, 2020 are subject to mandatory redemption prior to maturity at a redemption price of 100% of the principal amount redeemed plus interest accrued to the redemption date, on April 1 in the following principal amounts in the years specified:


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Date (April 1)

Amount


Date (April 1)

Amount

2016 $_______ 2019 $_______ 2017 _______ 2020† _______ 2018 _______

___________________




Date (April 1)

Amount


Date (April 1)

Amount

2021 $_______ 2026 $_______ 2022 _______ 2027 _______ 2023 _______ 2028 _______ 2024 _______ 2029 _______ 2025 _______ 2030† _______

___________________




Date (April 1)

Amount


Date (April 1)

Amount

2031 $_______ 2037 $_______ 2032 _______ 2038 _______ 2033 _______ 2039 _______ 2034 _______ 2040 _______ 2035 _______ 2041† _______ 2036 _______

___________________


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Extraordinary Optional Redemption. The Series 2011B Bonds are subject to redemption in whole, at the direction of the University, on behalf of the Authority, at a redemption price equal to 100% of the principal amount of the Series 2011B Bonds to be redeemed plus accrued interest thereon to, but not including, the redemption date, on any date for which the requisite notice of redemption can be given, within one hundred eighty (180) days of the occurrence of any of the following events:

(i) the Facilities shall have been damaged or destroyed to such an extent that in the judgment of the University (A) it cannot reasonably be restored within a period of three (3) consecutive months to the condition thereof immediately preceding such damage or destruction, (B) the University is thereby prevented from carrying on its normal operations at the Facilities for a period of three (3) consecutive months, or (C) it would not be economically feasible for the University to replace, repair, rebuild or restore the same;

(ii) title in and to, or the temporary use of, all or substantially all of the Facilities shall have been taken under the exercise of the power of eminent domain by any governmental authority or any Person acting under governmental authority (including such a taking as, in the judgment of the University, results in the University being prevented thereby from carrying on its normal operations at the Facilities for a period of three (3) consecutive months);

(iii) as a result of any changes in the Constitution of the State, or the Constitution of the United States of America or by legislative or administrative action (whether state or federal) or by final decree, judgment, decision or order of any court or administrative body (whether state or federal), the Loan Agreement shall have become void or unenforceable or impossible of performance in accordance with the intent and purpose of the parties as expressed therein; or

(iv) the Loan Agreement is terminated prior to its expiration for any reason other than the occurrence of an Event of Default under the Loan Agreement.

Optional Redemption. Unless previously redeemed, the Series 2011B Bonds maturing on or after April 1, 2021, are also subject to redemption by and at the option of the Authority, at the direction of the University, prior to stated maturity in whole or in part on any date, on or after April 1, 2020, at a redemption price of 100% of the principal amount to be redeemed plus accrued interest to the redemption date.

Partial Redemption. If fewer than all of the outstanding Series 2011B Bonds that are stated to mature on different dates are called for redemption at one time, the principal maturities of the Series 2011B Bonds to be called will be designated by the University. If fewer than all of the outstanding Series 2011B Bonds of one maturity are called for redemption, the selection of Series 2011B Bonds to be redeemed, or portions thereof in amounts of $5,000 or any integral multiple thereof, will be determined by DTC following receipt of notice of redemption from the Trustee (see “Notice Of Call For Redemption; Effect” below; provided that in the event of a partial redemption of a Bond subject to mandatory sinking fund redemption the schedule of mandatory sinking fund payments shall be revised as designated by the University). For purposes of the Indenture, Series 2011B Bonds maturing on the same dates at different interest rates shall be considered separate maturities.

Notice of Call for Redemption; Effect. The Trustee is to cause notice of the call for redemption, identifying the Series 2011B Bonds or portions of Series 2011B Bonds to be redeemed, to be sent by first class mail at least 30 days prior to the date set for redemption, to the registered owner of each Bond to be redeemed at the address shown on the Register on the

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fifteenth day preceding that mailing. Any defect in the notice or any failure to receive notice by mailing will not affect the validity of any proceedings for the redemption of Series 2011B Bonds.

On the date designated for redemption, Series 2011B Bonds or portions of Series 2011B Bonds called for redemption will become due and payable. If the Trustee or any paying agent then holds sufficient money for payment of debt service and any applicable premium payable on that redemption date, interest on each Bond (or portion of a Bond) so called for redemption will cease to accrue on that date.

The notice of optional redemption will include a description of any conditions to such redemption and the circumstances pursuant to which the notice may be revoked.

So long as all Series 2011B Bonds are held under a Book Entry System by a securities Depository (such as DTC), call notice is sent by the Trustee only to the Depository or its nominee. Selection of book entry interests in the Series 2011B Bonds called, and giving notice of the call to the owners of those interests called, is the sole responsibility of the Depository and of its Participants and Indirect Participants. Any failure of the Depository to advise any Participant, or of any Participant or any Indirect Participant to notify the book entry interest owners, of any such notice and its content or effect will not affect the validity of any proceedings for the redemption of any Series 2011B Bonds or portions of Series 2011B Bonds (see “APPENDIX E – BOOK-ENTRY ONLY SYSTEM”).

Purchase in Lieu of Redemption

The Trustee, upon the written request of the University, may purchase Series 2011B Bonds as specified by the University from Bondholders at a price not exceeding a price set by the University; provided that any offer by the University to purchase Series 2011B Bonds shall be made initially to all Bondholders on a pro-rata basis. Such purchase of Series 2011B Bonds shall be made with funds provided by the University and not with any portion of the Trust Estate or any Defeasance Obligations. Upon purchase by the Trustee, such Series 2011B Bonds shall be treated as delivered for cancellation pursuant to the Indenture. The principal amount of Series 2011B Bonds to be redeemed by optional or mandatory sinking fund redemption under the Indenture may be reduced by the principal amount of Series 2011B Bonds purchased by the Borrower or the Issuer, at the request of the University, and delivered to the Trustee for cancellation at least forty-five (45) days prior to the redemption date.

Nonpresentment of Series 2011B Bonds

If any Series 2011B Bonds are not presented for payment at the date fixed for their redemption or when due, or if a check or draft for interest is uncashed, and if funds sufficient for such redemption or payment are held by the Trustee, then the Trustee will, subject to applicable escheat laws, thereafter hold such funds in the Bond Fund without liability for interest and the registered owners of such Series 2011B Bonds will thereafter be restricted exclusively to such funds for the satisfaction of any claim relating to such Series 2011B Bonds.

SECURITY AND SOURCES OF PAYMENT

General

The principal, premium, if any, and interest on the Series 2011B Bonds are payable solely from the Loan Repayments received by the Authority from the University pursuant to the Loan Agreement and the other amounts available to the Trustee therefor under the Indenture.

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Revenues and Repayment Installments

The Authority is obligated to pay the principal of, premium, if any, and interest on the Series 2011B Bonds solely from the Loan Repayments received from the University under the Loan Agreement and the other funds available therefor under the Indenture. Pursuant to the Indenture, the Authority has pledged to the Trustee for the benefit of the Bondholders the Trust Estate. The Trust Estate means all of the Trustee’s right, title and interest in, to and under all collateral pledged or hypothecated under the Indenture, all products and proceeds thereof, and all cash, funds and other property (real and personal) realized, collected or obtained upon the exercise of the Trustee’s rights and remedies under the Indenture, and all right, title and interest of the Authority, as assigned to the Trustee under the Indenture, in and to the following, subject to the limitations and requirements of the Intercreditor and Collateral Agency Agreement:

(a) all Repayments received by the Authority under the Loan Agreement, which Repayments are to be paid directly by the Borrower to the Trustee and deposited in the Bond Fund in accordance with the Indenture;

(b) all moneys in the Series 2011B Debt Service Reserve Fund, the Refunding Escrow Fund and the Bond Fund, including proceeds of the Bonds pending disbursement thereof; provided, however, that amounts on deposit in the Refunding Escrow Fund shall be held by the Trustee solely for the benefit of the Series 2007 LOC Bank for so long as any amounts are owed to the Series 2007 LOC Bank under the Series 2007 Indenture or the documents related thereto and provided further, however, that all amounts on deposit in the Series 2011B Debt Service Reserve Fund shall be held solely for the benefit of the Series 2011B Bonds;

(c) all of the Authority’s rights, title and interest in the Loan Agreement, except Reserved Rights;

(d) all other rights and interests granted to the Authority in connection with the Loan Agreement (except Reserved Rights) as set forth or granted directly to the Trustee as provided in the Indenture;

(e) all of the proceeds of the foregoing (except the amounts payable to or on behalf of the Authority on account of its Reserved Rights), including without limitation investments thereof; and

(f) all other property of every name and nature from time to time by delivery or by writing mortgaged, pledged, delivered or hypothecated as and for additional security under the Indenture by the Authority or by anyone on its behalf or with its written consent in favor of the Trustee.

Except as described above and in “SOURCES OF PAYMENT OF AND SECURITY FOR THE SERIES 2011B BONDS” herein, the Series 2011B Bonds are not secured by any other funds or assets of the University.

Neither the Series 2011A Bonds nor the Series 2011B Bonds are secured by a mortgage lien on any real property assets of the University.

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Under the Loan Agreement, the obligation of the University to make payments thereunder, including Loan Repayments, is a general obligation of the University secured by a security interest in certain personal property assets of the University and the University’s Gross Revenues as defined in the Security Agreement. The Repayment Installments are due in amounts and at the times necessary to pay the principal of, and premium, if any, and interest on the Series 2011B Bonds when due.

See APPENDICES F and G herein for copies of the Indenture and the Loan Agreement.


Series 2011B Debt Service Reserve Fund

As security for the payment of the debt service on the Series 2011B Bonds, the Authority, in the Indenture, will create a Series 2011B Debt Service Reserve Fund and assign and pledge that Fund and the money and investments therein for such purpose. The Series 2011B Debt Service Reserve Fund is to be used solely for the payment, to the extent that the Bond Fund is insufficient, of the debt service on the Series 2011B Bonds. The Series 2011B Debt Service Reserve Fund will be fully funded on the date of the original delivery of the Series 2011B Bonds from proceeds of the sale of the Series 2011B Bonds. The University agrees in the Loan Agreement to maintain an amount of money and obligations in the Debt Service Reserve Fund at least equal to the Debt Service Reserve Requirement. In the event that the amount on deposit in the Series 2011B Debt Service Reserve Fund is at any time less than the Series 2011B Reserve Fund Requirement, the University is required to make additional deposits into the Series 2011B Debt Service Reserve Fund in substantially equal quarterly payments such that the amount on deposit in the Series 2011B Debt Service Reserve Fund shall equal the Series 2011B Reserve Fund Requirement by a date not later than twelve months subsequent to the date on which such deficiency in the Series 2011B Debt Service Reserve Fund was determined to arise. (See “APPENDIX F – THE SERIES 2011B INDENTURE – Debt Service Reserve Fund” herein.) The Permitted Investments on deposit in the Debt Service Reserve Fund will be valued semiannually by the Trustee to determine that at least the minimum required amount is on deposit in that Fund. There is no debt service reserve fund for the Series 2011A Bonds.

Assignment

Pursuant to the Indenture, the Authority transfers in trust, grants a security interest in and assigns to the Trustee, for the benefit of the Holders from time to time of the Series 2011B Bonds, and to the Bank, all of the Trust Estate and other amounts pledged under such Indenture

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and including all of the right, title and interest of the Authority in the Loan Agreement (except with respect to the Series 2011B Bonds for any deposits to the Rebate Fund, and except for Reserved Rights including the right to receive any administrative fees and expenses payable to the Authority, the right of the Authority to receive any indemnification, and the right to receive any notices and reports). Under the Indenture, the Trustee is entitled to and is required to collect and receive all of the Repayments, and any Repayments collected or received by the Authority will be deemed to be held, and to have been collected or received, by the Authority as the agent of the Trustee and is required to forthwith be paid by the Authority to the Trustee without any set-off whatsoever.

Security Agreement and Pledge of Gross Revenues

The Security Agreement provides a security interest in certain personal property and intangibles of the University and certain of its subsidiaries and affiliates (each, as defined therein, a “Debtor”) for the benefit of the Secured Creditors. The Security Agreement also provides a security interest in the Gross Revenues of the University.

Gross Revenues are defined as of any date, to mean all moneys, fees and tuition (net of institutional financial aid and other discounts or waivers), rates, receipts, rentals, licensing fees, charges, issues and income received or derived by any Debtor, the operation of any Debtor, or its facilities or any other source whatsoever, including, without limitation, gifts, bequests, grants, devises, contributions, moneys received from the operation of the Debtor’s business or the possession of its properties, insurance proceeds or condemnation awards, and all rights to receive the same, whether in the form of Accounts, General Intangibles, Instruments, Promissory Notes, Receivables, contract rights, payment or other rights, and the Proceeds of the same whether now owned or held or hereafter coming into being, but excluding gifts, grants, devises, bequests and contributions designated by the maker to a specific purpose inconsistent with their use for payment of principal of, premium, if any, and interests on Indebtedness, all computed in accordance with GAAP in a manner consistently applied.

In the Event of Default (as defined in the Security Agreement), subject to the provisions of the Intercreditor Agreement, the Trustee as Collateral Agent may be directed to exercise its rights with respect to the pledge of the University’s Gross Revenues.

Such rights allows the Trustee, for the equal and ratable benefit of the Series 2011A Bondholders and the Series 2011B Bondholders and other Secured Creditors pursuant to the Intercreditor Agreement to access all the University’s operating funds and accounts and apply such amounts to the payments on the Secured Obligations including the Series 2011B Bonds then due on a pari passu basis prior to making any other payments necessary for the operation of the University.

Intercreditor Agreement

Pursuant to the Intercreditor Agreement, the Secured Creditors will agree, notwithstanding any provision to the contrary in the Security Agreement or the other Collateral Documents (as defined in the Intercreditor Agreement), that (i) except as otherwise expressly provided in the Intercreditor Agreement, the Collateral Agent shall act solely at and in accordance with the written direction of the Required Secured Creditors (as defined in the Intercreditor Agreement) subject to the immediately following clauses (ii), (iii) and (iv), (ii) the Collateral Agent shall not, without the written consent of all of the Secured Creditors, amend, supplement or modify any Collateral Document, or request or agree to any consent or waiver under, or effect or permit the cancellation, acceleration or termination of any of the Collateral Documents, unless such amendment, supplement or modification could not reasonably be

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expected to have a material adverse effect on the rights or interests of any Secured Creditor, (iii) the Collateral Agent shall not, without the written consent of the Required Secured Creditors and the Swap Provider, release or terminate by affirmative action or consent any lien upon or security interest in any Collateral granted under any Collateral Documents, and (iv) the Collateral Agent shall not accept any Indebtedness (as defined in the Intercreditor Agreement) in whole or partial consideration for the disposition of any Collateral without the written consent of the Required Secured Creditors and the Swap Provider.

Nothing contained in the Intercreditor Agreement will (i) prevent any Secured Creditor from imposing a default rate of interest in accordance with the Indenture, the Loan Agreement, the Continuing Covenant Agreement, the Swap Contract and the Credit Agreement (the “Transaction Documents”), as applicable, or prevent a Secured Creditor from raising any defenses in any action in which it has been made a party defendant or has been joined as a third party, except that the Collateral Agent may direct and control any defense directly relating to the Collateral or any one or more of the Collateral Documents as directed by the Secured Creditors, which shall be governed by the provisions of the Intercreditor Agreement, or (ii) affect or impair the right any Secured Creditor may have under the terms and conditions governing the Indebtedness (as defined in the Intercreditor Agreement) to accelerate and demand repayment of such Indebtedness. Subject only to the express limitations set forth in the Intercreditor Agreement, the Continuing Covenant Agreement, the Swap Contract, the Credit Agreement and the other Transaction Documents, each Secured Creditor retains the right to freely exercise its rights and remedies as a general creditor of the University in accordance with applicable law and agreements with the University, including without limitation the right to file a lawsuit and obtain a judgment therein against the University and to enforce such judgment against any assets of the University other than the Collateral. See “BONDHOLDERS’ RISKS – Intercreditor and Collateral Agent Agreement” herein.

See “APPENDIX J – PROPOSED FORM OF INTERCREDITOR AND COLLATERAL AGENCY AGREEMENT.”

Certain Covenants With Respect to the Series 2011B Bonds

For so long as the Series 2011B Bonds shall remain Outstanding, the University provides certain covenants in the Series 2011B Loan Agreement for the benefit of the holders of the Series 2011B Bonds. The financial covenants in the Series 2011B Loan Agreement are intended to conform to such covenants for the Series 2011A Bonds. Certain of these covenants are as follows:

(a) Liquidity Requirement. The University must maintain, or cause to be maintained, Unrestricted and Temporarily Restricted Cash and Unrestricted and Temporarily Restricted Marketable Securities in an amount not less than (i) $45,000,000 on June 30, 2011 and $45,000,000 on December 31, 2011 and (ii) $50,000,000 on June 30, 2012 and each December 31 and June 30 thereafter.

(b) No Liens other than permitted encumbrances. The University may not create or allow any Lien upon its real property other than encumbrances permitted pursuant to the Loan Agreement.

(c) The University must maintain a Debt Service Coverage Ratio of not less than 1.20 to 1.0, measured on a semi-annual basis on each June 30 and December 31, for the 12-month period then ended.

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(d) Permitted Parity Debt. No bonds (other than the Series 2011A Bonds) or other obligations may be issued under the Indenture, nor may the University incur any Debt having a claim on revenues of the University on a parity with the Series 2011B Bonds, unless (i) the University shall deliver to the Trustee a certificate of the Chief Financial Officer of the University demonstrating a projected Debt Service Coverage Ratio for the Series 2011B Bonds and Debt proposed to be issued or incurred (collectively, “Permitted Parity Debt”) of at least 120% based on the maximum annual scheduled Debt Service in each year for the Series 2011B Bonds, the Series 2011A Bonds and Debt proposed to be issued or incurred and (ii) if the Permitted Parity Debt shall be issued under the Series 2011B Indenture or the Series 2011A Indenture, the applicable Indenture shall permit such issuance. In addition, so long as the Series 2011A Bonds are outstanding, any Additional Bond or Additional Parity Obligation issuance requires consent of the Bank so long as the Bank is a Secured Creditor.

See “APPENDIX H” hereto for a complete list of the covenants applicable to the University in the Loan Agreement.

BONDHOLDERS’ RISKS

The following is a discussion of certain risks that could affect payments to be made with respect to the Series 2011B Bonds. Such discussion is not, and is not intended to be, exhaustive and should be read in conjunction with all other parts of this Limited Offering Memorandum and should not be considered as a complete description of all risks that could affect such payments. Prospective purchasers of the Series 2011B Bonds should analyze carefully the information contained in this Limited Offering Memorandum, including the Appendices hereto, and additional information in the form of the complete documents, copies of which are attached hereto.

General

The Series 2011B Bonds are special, limited obligations of the Authority, payable solely from payments to be made by the University under the Loan Agreement and certain other funds held by the Trustee under the Indenture. No representation or assurance can be given that the University will realize revenues in amounts sufficient to make such payments with respect to the Series 2011B Bonds and to pay other expenses and obligations of the University. The realization of future revenues is dependent upon, among other things, the capabilities of the management of the University and future changes in economic and other conditions that are unpredictable and cannot be determined at this time.

The University is subject to the same competitive pressures that affect other private universities. Changing demographics may mean a smaller pool of university-bound persons from which to draw entering classes. Greater competition for students together with rising tuition may mean that the University will need to increase its financial aid packages to attract and retain students or that it may face fewer students and decreased revenues. Attracting and keeping qualified administrators and faculty may mean higher expenditures for salaries and administrative costs. Each of these factors can have an impact on the revenues of the University. Factors that may also adversely affect the operations of the University, although the extent cannot be presently determined, include, among others: (1) employee strikes and other labor actions that could result in a substantial reduction in revenues without corresponding decreases in costs; (2) increased costs and decreased availability of public liability insurance; (3) changes in the demand for higher education in general or for programs offered by the University in particular; (4) cost and availability of energy; (5) high interest rates, which could strain cash flow or prevent borrowing for needed capital expenditures; (6) a decrease in availability of student

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loan funds or other aid; (7) an increase in the costs of health care benefits, retirement plan or other benefit packages offered by the University to its employees and retirees; (8) a significant decline in the University’s investments based on market or other external factors; (9) litigation; (10) reductions in funding support from donors or other external sources; and (11) natural disasters, which might damage the University’s facilities, interrupt service to its facilities or otherwise impair the operation of the facilities. Neither the Underwriter nor the Authority has made any independent investigation of the extent to which any such factors will have an adverse impact on the revenues of the University.

Inability to Remarket the Series 2011A Bonds

The Series 2011A Bonds are subject to mandatory tender by the holder thereof to the University for purchase at par plus accrued interest thereon to the mandatory tender date which shall be five years from the issuance date of the Series 2011A Bonds. The mandatory tender date is expected to be February ___, 2016.

So long as no Event of Default shall have occurred and is continuing and all representations and warranties are true and correct, any principal amount of the Series 2011A Bonds that is not repaid on the Mandatory Tender Date (“Unremarketed Bonds”) shall be repaid in full by the earlier of: (i) the first anniversary of the Mandatory Tender Date, (ii) the date on which the Series 2011A Bonds mature or are redeemed, repaid, prepaid or canceled pursuant to the terms of the Financing Documents or (iii) the date on which the Series 2011A Bonds are remarketed.

Any principal amount of Unremarketed Series 2011A Bonds not repaid on the Mandatory Tender Date will amortize in equal payments payable quarterly. Unremarketed Series 2011A Bonds shall be redeemed in four (4) equal quarterly installments commencing on the first Business Day of the third full month immediately succeeding the Mandatory Tender Date. Any amount of principal of Unremarketed Bonds may be prepaid at any time without penalty.

So long as no Event of Default has occurred and is continuing, interest on Unremarketed Bonds from the Mandatory Tender Date shall accrue at the Bank Rate and is payable monthly in arrears on the first business day of each month.

There can be no assurance that the University will be able to obtain sufficient credit support to remarket the Series 2011A Bonds on the mandatory tender date or that the University will have sufficient funds to retire the Unremarketed Bonds on the required dates. Failure to do so could cause the default of the Series 2011B Bonds.

Intercreditor and Collateral Agent Agreement

Upon a default, the Trustee is required to obtain the consent of the Required Secured Creditors before it may proceed to enforce the rights of the Secured Creditors in the Collateral. The Required Secured Creditors include the holders of more than 66 2/3% of the aggregate sum of the Series 2011A and Series 2011B Bonds outstanding on such date plus the used and unused amount of the Line of Credit on such date (and after an Enforcement, only the used amount of the Line of Credit).

The security interests and liens granted to the Trustee, as Collateral Agent, secure the University’s indebtedness on a pari passu basis for the benefit of the Secured Creditors and the Collateral Agent.

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The Swap Provider has additional real property security which it may independently proceed against to satisfy any amounts due to it under the Swap Contracts. Such additional security may permit the Swap Provider to obtain satisfaction in advance of the holders of Series 2011B Bonds; however, once all amounts due the Swap Provider are paid, any additional proceeds of such real property collateral will be available to be disbursed pursuant to the Intercreditor Agreement.

Limitations on Security

The Series 2011B Bonds are secured by payments to be made by the University under the Loan Agreement. The obligation to make such payments is an absolute and unconditional obligation of the University secured by the Security Agreement and a pledge of Gross Revenues. Covenants and negative assurances have been included in the Loan Agreement to provide certain ratios and to ensure that tuition revenues and certain property of the University, as described in the Loan Agreement would not be pledged to others, except as otherwise permitted by the Loan Agreement. In addition, certain endowment funds are restricted by donors for specific purposes. Neither principal of nor income from funds restricted to purposes other than general purposes may be used to make payments on the Series 2011B Bonds or to meet claims of general creditors. There is no assurance that the security will be adequate to ensure full payment of the Series 2011 Bonds in the event of a default.

The value of the security interest in the Gross Revenues could be diluted by the incurrence of Additional Indebtedness secured equally and ratably with the Series 2011B Bonds as to the security interest in the Gross Revenues.

The University may seek to liquidate certain assets to make mandatory tender payments or other payments required for the Series 2011A or Series 2011B Bonds. Such assets may prove illiquid at such time or may not realize amounts necessary to pay amounts then due.

Bankruptcy

In the event of bankruptcy of the University, the rights and remedies of the Bondholders are subject to various provisions of the federal Bankruptcy Code. If the University were to file a petition in bankruptcy, payments made by the University during the 90-day (or perhaps one-year) period immediately preceding the filing of such petition may be avoidable as preferential transfers to the extent such payments allow the recipients thereof to receive more than they would have received in the event of the University’s liquidation. Such a bankruptcy filing would operate as an automatic stay of the commencement or continuation of any judicial or other proceeding against the University, as applicable, and its property, and as an automatic stay of any act or proceeding to enforce a lien upon or to otherwise exercise control over its property as well as various other actions to enforce, maintain or enhance the rights of the Trustee. If the bankruptcy court so ordered, the property of the University, including accounts receivable and proceeds thereof, could be used for the financial rehabilitation of the University.

The University could file a plan for the adjustment of its debts in any such proceeding which could include provisions modifying or altering the rights of creditors generally, or any class of them, secured or unsecured. The plan, when confirmed by a court, binds all creditors who had notice or knowledge of the plan and, with certain exceptions, discharges all claims against the debtor to the extent provided for in the plan. No plan may be confirmed unless certain conditions are met, among which conditions are that the plan be feasible and that it shall have been accepted by each class of claims impaired thereunder. Each class of claims has accepted the plan if at least two-thirds in dollar amount and more than one-half in number of the class cast votes in its favor. Even if the plan is not so accepted, it may be confirmed if the court

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finds that the plan is fair and equitable with respect to each class of non-accepting creditors impaired thereunder and does not discriminate unfairly.

Tax-Exempt Status of the University

Tax-exempt Status of Interest on the Series 2011B Bonds. The Code imposes a number of requirements that must be satisfied for interest on state and local obligations, such as the Series 2011B Bonds, to be excludable from gross income for federal income tax purposes. These requirements include limitations on the use of bond proceeds, limitations on the investment earnings of bond proceeds prior to expenditure, a requirement that certain investment earnings on bond proceeds be paid periodically to the United States, and a requirement that the Authority file an information report with the IRS. The Authority and the University have covenanted in certain of the documents referred to herein that they will comply with such requirements. Future failure by the University to comply with the requirements stated in the Code and related regulations, rulings and policies may result in the treatment of interest on the Series 2011B Bonds as taxable, possibly from the original date of issuance.

Tax-exempt Status of the University. The tax-exempt status of the Series 2011B Bonds presently depends upon the University’s maintenance of its status as an organization described in Section 501(c)(3) of the Code. The maintenance of such status is contingent on compliance with general rules promulgated in the Code and related regulations regarding the organization and operation of entities that seek to obtain and retain tax-exempt status under Section 501(c)(3) of the Code.

Currently, the primary penalty available to the IRS under the Code for violation of requirements applicable to organizations described in Section 501(c)(3) is the revocation of tax-exempt status. Loss of tax-exempt status by the University could potentially result in loss of tax exemption of the Series 2011B Bonds and of other tax-exempt debt of the University, if any, and defaults in covenants regarding the Series 2011B Bonds and other related tax-exempt debt, if any, would likely be triggered. Loss of tax-exempt status could also result in substantial tax liabilities on income of the University. For these reasons, loss of tax-exempt status of the University could have material adverse consequences on the financial condition of the University.

Bond Audit. The IRS has an ongoing program of examining tax-exempt obligations to determine whether, in the view of the IRS, interest on such obligations is properly excluded from gross income for federal income tax purposes, and it is possible that the Series 2011B Bonds may be selected for examination under such program. If an examination is commenced, under current procedures, the IRS will treat the Authority as the relevant taxpayer under the Code, and the holders of the Series 2011B Bonds may have no right to participate.

The University has not sought to obtain a private letter ruling from the IRS with respect to the Series 2011B Bonds, and the opinion of Bond Counsel as to the tax-exempt status of the Series 2011B Bonds (see “TAX MATTERS” herein) is not binding on the IRS. An IRS examination of the Series 2011B Bonds could adversely affect the market value and liquidity of the Series 2011B Bonds or result in the loss of the tax-exempt status of the Series 2011B Bonds.

Unrelated Business Income. In recent years, the IRS and state, county and local taxing authorities have been undertaking audits and reviews of the operations of tax-exempt organizations with respect to their exempt activities and the generation of unrelated business taxable income (“UBTI”). The University has not historically generated any significant amount of UBTI. The University may participate in activities which generate UBTI in the future. Management believes it has properly accounted for and reported UBTI; nevertheless, an

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investigation or audit could lead to a challenge which could result in taxes, interest and penalties with respect to unreported UBTI and in some cases could ultimately affect the tax-exempt status of the University as well as the exclusion from gross income for federal income tax purposes of the interest on the Series 2011B Bonds and other future tax-exempt debt of the University, if any.

State Income Tax Exemption. The State of California has not been as active as the IRS in scrutinizing the income tax exemption of organizations. However, it is likely that the loss by the University of federal tax exemption would also trigger a challenge to the State tax exemption of the University. Depending on the circumstances, such an event could be adverse and material.

Exemption from Property Taxes. In recent years, State, county and local taxing authorities have been undertaking audits and reviews of the operations of tax-exempt Universities with respect to their real property tax exemptions. The management of the University believes that its real property and the planned improvements thereon are and will continue to be exempt from California real property taxation.

Certain Matters Relating to Enforceability

The remedies available upon a default under the Indenture or the Loan Agreement 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 and the Loan Agreement may not be readily available or may be limited. The various legal opinions to be delivered in connection with the issuance of the Series 2011B Bonds will be expressly subject to the qualification that the enforceability of the Indenture, the Loan Agreement 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 and, with respect to the University, will be further qualified with respect to the ability to enforce payment from moneys or assets with are donor-restricted or subject to an express, constructive or charitable trust.

Seismic Matters

Generally, throughout the State, some level of seismic activity occurs on a regular basis. Periodically, the magnitude of a single seismic event can cause significant ground shaking and potential for damage to property located at or near the center of such seismic activity. The Loan Agreement does not require earthquake insurance and the University does not maintain earthquake insurance coverage.

Additional Bonds

The Indenture permits the issuance of additional Bonds on a parity with the Series 2011B Bonds. The issuance of additional Bonds could increase the debt service requirements of the University and could adversely affect debt service coverage on the Series 2011B Bonds. See “SECURITY AND SOURCES OF PAYMENT -- Covenants With Respect to the Series 2011B Bonds.”

TAX MATTERS

In the opinion of Patton Boggs LLP, Washington, D.C., Bond Counsel, under existing law: (i) interest on the Series 2011B Bonds is excludable from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986, as amended (the “Code”),

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and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations and (ii) interest on the Series 2011B Bonds is excludable from gross income for purposes of the State of California personal and corporate income taxes and is not an item of tax preference for purposes of the California alternative minimum tax. Bond Counsel expresses no opinion as to any other tax consequences regarding the Series 2011B Bonds.

The opinion on tax matters will be based on and will assume the accuracy of certain representations and certifications, and continuing compliance with certain covenants of the Authority and the University contained in the transcript of proceedings and that are intended to evidence and assure the foregoing, including that the Series 2011B Bonds are and will remain obligations the interest on which is excluded from gross income for federal income tax purposes. In addition, Bond Counsel has relied on, among other things, the opinion of Manatt, Phelps & Phillips, LLP, counsel to the University, regarding the current status of the University as an organization described in Section 501(c)(3) of the Code and the activities expected to be undertaken as not constituting unrelated trade or business activity, which opinion is subject to a number of qualifications and limitations. Bond Counsel also has relied upon representations of the University concerning the University's “unrelated trade or business” activities as defined in Section 513(a) of the Code. Bond Counsel has not given any opinion or assurance concerning Section 513(a) of the Code or the effect of any future activities of the Authority or the University. Failure of the University to maintain its status as an organization described in Section 501(c)(3) of the Code, or to operate the facilities financed by the Series 2011B Bonds in a manner that is substantially related to the University's charitable purpose under Section 513(a) of the Code, may cause interest on the Series 2011B Bonds to be included in gross income retroactively to the date of the issuance of the Series 2011B Bonds. Bond Counsel will not independently verify the accuracy of the Authority's and the University's certifications and representations or the continuing compliance with the Authority's and the University's covenants and will not independently verify the accuracy of the opinion of the University's counsel.

The opinion of Bond Counsel is based on current legal authority and covers certain matters not directly addressed by such authority. It represents Bond Counsel's legal judgment as to exclusion of interest on the Series 2011B Bonds from gross income for federal and California income tax purposes but is not a guaranty of that conclusion. The opinion is not binding on the Internal Revenue Service (“IRS”) or any court. Bond Counsel expresses no opinion about (i) the effect of future changes in the Code and the applicable regulations under the Code or (ii) the interpretation and the enforcement of the Code or those regulations by the IRS.

The Code prescribes a number of qualifications and conditions for the interest on state and local government obligations to be and to remain excluded from gross income for federal income tax purposes, some of which require future or continued compliance after issuance of the obligations. Noncompliance with these requirements by the Authority or the University may cause loss of such status and result in the interest on the Series 2011B Bonds being included in gross income for federal income tax purposes retroactively to the date of issuance of the Series 2011B Bonds. The University and, subject to certain limitations, the Authority have each covenanted to take the actions required of it for the interest on the Series 2011B Bonds to be and to remain excluded from gross income for federal income tax purposes, and not to take any actions that would adversely affect that exclusion. After the date of issuance of the Series 2011B Bonds, Bond Counsel will not undertake to determine (or to so inform any person) whether any actions taken or not taken, or any events occurring or not occurring, or any other matters coming to Bond Counsel's attention, may adversely affect the exclusion from gross income for federal income tax purposes of interest on the Series 2011B Bonds or the market prices of the Series 2011B Bonds.

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A portion of the interest on the Series 2011B Bonds earned by certain corporations may be subject to a corporate alternative minimum tax by reason of being included in “adjusted current earnings.” Interest on the Series 2011B Bonds may be subject to a federal branch profits tax imposed on certain foreign corporations doing business in the United States and to a federal tax imposed on excess net passive income of certain S corporations. Under the Code, the interest excluded from gross income for federal income tax purposes may affect items of income, deduction or credit for certain taxpayers, including financial institutions, certain insurance companies, recipients of Social Security and Railroad Retirement benefits, those that are deemed to incur or continue indebtedness to acquire or carry tax-exempt obligations, and individuals otherwise eligible for the earned income tax credit, resulting in greater tax liability of the taxpayer. Interest on the Series 2011B Bonds may be included in a corporation’s tax base for purposes of the California franchise tax. The applicability and extent of these and other tax consequences will depend upon the particular tax status or other tax items of the owner of the Series 2011B Bonds. Bond Counsel will express no opinion regarding those consequences.

Legislation directly or indirectly affecting tax-exempt obligations is regularly considered by the United States Congress. There can be no assurance that legislation enacted or proposed after the date of issuance of the Series 2011B Bonds will not have an adverse effect on the tax status of interest on the Series 2011B Bonds or the market prices of the Series 2011B Bonds.

Prospective purchasers of the Series 2011B Bonds should consult their own tax advisors regarding pending or proposed federal tax legislation, and prospective purchasers of the Series 2011B Bonds at other than their original issuance at par should also consult their own tax advisors regarding other tax considerations such as the consequences of market discount, as to all of which Bond Counsel expresses no opinion.

Bond Counsel expresses no opinion on the tax treatment of interest on the Series 2011B Bonds under the laws of any state other than California. Some states do not permit residents to exclude from income, interest on out-of-state federally tax-exempt bonds. A challenge to Kentucky’s discriminatory treatment of out-of-state federally tax-exempt bonds was addressed by the United States Supreme Court in a 2008 ruling. The Supreme Court upheld Kentucky’s right to exempt interest on its own tax-exempt bonds while taxing residents on interest earned on tax-exempt bonds issued by other states.

Bond Counsel’s engagement with respect to the Series 2011B Bonds ends with the issuance of the Series 2011B Bonds, and, unless separately engaged, Bond Counsel is not obligated to defend the Authority, the University or the beneficial owners regarding the tax status of interest on the Series 2011B Bonds in the event of an audit or other examination by the IRS. The IRS has a program to audit tax-exempt obligations to determine whether the interest thereon is includible in gross income for federal income tax purposes. If the IRS does audit the Series 2011B Bonds, under current IRS procedures, the IRS will treat the Authority as the taxpayer and the beneficial owners of the Series 2011B Bonds will have only limited rights, if any, to obtain information about or to participate in such audit. Any action of the IRS, including but not limited to selection of the Series 2011B Bonds for audit, or the course or result of such audit, or an audit of other obligations presenting similar tax issues, may affect the market prices for the Series 2011B Bonds.

Payments of interest on, and proceeds of the sale, redemption or maturity of, tax-exempt obligations, including the Series 2011B Bonds, are in certain cases required to be reported to the IRS. Backup withholding may apply to any such payments to any Holder who fails to provide an accurate Form W-9 Request for Taxpayer Identification Number (or a substantially identical form) or to any Holder who is notified by the IRS of a failure to report any interest or dividends required to be shown on his/her/its federal income tax return. The reporting and backup

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withholding requirements do not affect the excludability of such interest from gross income for federal tax purposes.

The issue price (the “Issue Price”) for the Series 2011B Bonds is the price at which a substantial amount of the Series 2011B Bonds is first sold to the public. The Issue Price of the Series 2011B Bonds may be different from the price set forth, or the price corresponding to the yield set forth, on the cover page hereof.

If the Issue Price of the Series 2011B Bonds is less than the principal amount payable at maturity, the difference between the Issue Price of the Series 2011B Bonds (the “OID Series 2011B Bonds”) and the principal amount payable at maturity is original issue discount (“OID”).

For an investor who purchases a Bond with OID in the initial public offering at the Issue Price and who holds such OID Bond to its stated maturity, subject to the condition that the University and the Authority comply with the qualifications and requirements discussed above, (a) the full amount of OID with respect to such OID will be interest which is excludable from the gross income of the Holder for federal income tax purposes; (b) such Holder will not realize taxable capital gain or market discount upon payment of such Bond with OID at its stated maturity; (c) such OID is not included as an item of tax preference in computing the alternative minimum tax for individuals and corporations under the Code, but is taken into account in computing an adjustment used in determining the alternative minimum tax for certain corporations under the Code, as described above; and (d) the accretion of OID in each year may result in an alternative minimum tax liability for corporations or certain other collateral federal income tax consequences in each year even though a corresponding cash payment may not be received until a later year. Holders of Series 2011B Bonds with OID should consult their own tax advisors with respect to the state and local tax consequences of OID on such Series 2011B Bonds.

Holders who dispose of Series 2011B Bonds prior to the stated maturity (whether by sale, redemption or otherwise), purchase Series 2011B Bonds in the initial public offering, but at a price different from the Issue Price, or purchase Series 2011B Bonds subsequent to the initial public offering, should consult their own tax advisors.

If a Bond is purchased at any time for a price that is less than the Bond’s stated redemption price at maturity or, in the case of a Bond issued with OID, the Holder will be treated as having purchased a Bond with market discount subject to the market discount rules of the Code (unless a statutory de minimis rule applies). Accrued market discount is treated as taxable ordinary income and is recognized when a Bond is disposed of (to the extent such accrued discount does not exceed the gain realized on such disposition) or, at the Holder’s election, as it accrues. Such treatment would apply to any Holder who purchases aSeries 2001B Bond with OID for a price that is less than its Issue Price plus accreted OID. The applicability of the market discount rules may adversely affect the liquidity or secondary market price of the Series 2011B Bonds. Holders should consult their own tax advisors regarding the potential implications of market discount with respect to the Series 2011B Bonds.

A Holder also may purchase a Series 2001B Bond at a price in excess of its stated principal amount. Such excess is characterized for federal income tax purposes as “bond premium” and must be amortized by a Holder on a constant yield basis over the remaining term of the Bond in a manner that takes into account potential call dates and call prices. A Holder cannot deduct amortized bond premium relating to a tax-exempt bond. The amortized bond premium is treated as a reduction in the tax-exempt interest received.

As bond premium is amortized, it reduces the Holder’s tax basis in the Bond. Holders who purchase a Bond at a premium should consult their own tax advisors regarding the

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amortization of bond premium and its effect on the Bond’s tax basis for purposes of computing gain or loss in connection with the sale, exchange, redemption or early retirement of the Bond..

A copy of the proposed form of opinion of Bond Counsel is attached hereto as APPENDIX D.

LITIGATION

The Authority

To the knowledge of the Authority, there is no material litigation pending or threatened against the Authority concerning the validity of the Series 2011B Bonds or any proceedings of the Authority taken with respect to the issuance thereof.

The University

The University represents that there is no litigation of any nature now pending or, to the knowledge of the University, threatened, seeking to restrain or enjoin the issuance, sale, execution, or delivery of the Series 2011B Bonds, or in any way contesting or affecting the validity of the Series 2011B Bonds, or any proceedings of the University with respect to the Series 2011B Bonds or the power of the University to enter into the Loan Agreement or other documents relating to the Series 2011B Bonds. The University has no knowledge of any legal actions, other proceedings, investigations, or inquiries pending, threatened or contemplated or any basis therefor, to which the University is or may become a party or of which any property of the University is or may become subject wherein it is likely or probable that an unfavorable decision, ruling or finding would be rendered, or if rendered, would have a material adverse effect on the business or finances of the University (other than litigation incident to the kind of business conducted by the University for which there is adequate insurance or loss reserves).

APPROVAL OF LEGAL PROCEEDINGS

Legal matters incident to the issuance of the Series 2011B Bonds and with regard to the tax-exempt status of the interest thereon (see “TAX MATTERS”) are subject to the legal opinion of Patton Boggs LLP, Bond Counsel. A signed copy of that opinion, dated and speaking only as of the date of the original delivery of the Series 2011B Bonds, will be delivered to the Underwriter.

The proposed text of the legal opinion of Bond Counsel is set forth as APPENDIX D hereto. The legal opinion to be delivered may vary from that text if necessary to reflect facts and law on the date of delivery. The opinion will speak only as of its date, and subsequent distribution of it by recirculation of the Limited Offering Memorandum or otherwise shall create no implication that Bond Counsel has reviewed or expresses any opinion concerning any of the matters referred to in the opinion subsequent to its date.

Certain legal matters will be passed upon for the Authority by Fulbright & Jaworski L.L.P., as counsel to the Authority; by Manatt, Phelps & Phillips, LLP, Los Angeles, California, as counsel to the University; and for the Underwriter by Squire, Sanders & Dempsey (US) LLP, Los Angeles, California.

In addition to rendering the legal opinion, Bond Counsel will assist in the preparation of and advise the Authority and the University concerning documents for the bond transcript.

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FINANCIAL STATEMENTS

The financial statements of the University as of and for the years ended June 30, 2009 and June 30, 2010, included in this Limited Offering Memorandum have been audited by Capin Crouse LLP independent auditors, as stated in their report appearing in APPENDIX B hereto. No bring-down procedures have been undertaken by Capin Crouse LLP since the date of the audit report.

TRANSCRIPT AND CLOSING DOCUMENTS

A complete transcript of proceedings will be delivered by the University when the Series 2011B Bonds are delivered by the University to the Underwriter. The University at that time will also provide to the Underwriter a certificate, signed by the University officials who sign this Limited Offering Memorandum and addressed to the Underwriter, relating to the accuracy and completeness of the Limited Offering Memorandum and to its being a “final Limited Offering Memorandum” in the judgment of the University for purposes of SEC Rule 15c2-12(b)(3).

NO RATING

No rating is pending for or issued by any national rating agency with respect to the Bonds and neither the Authority, the University, the Underwriter nor any other person has any obligation to apply for such rating in the future. No assurance exists that any rating agency would be willing to issue a rating with respect to the Series 2011B Bonds.

ENFORCEABILITY OF RIGHTS AND REMEDIES

The enforceability of the rights and remedies of the Trustee or the registered owners of the Series 2011B Bonds under the Indenture and the availability of remedies to any party seeking to enforce the lien on the Trust Estate are in many respects dependent upon judicial actions that are often subject to discretion and delay. Under existing constitutional and statutory law and judicial decisions, including specifically Title 11 of the United States Code (the federal bankruptcy code), the enforceability of the rights and remedies under the Indenture and the availability of remedies to any party seeking to enforce the lien on the Trust Estate may be limited.

The various legal opinions to be delivered concurrently with the delivery of the Series 2011B Bonds will be qualified as to the enforceability of the various legal instruments by limitations imposed by the valid exercise of the constitutional powers of the State of California and the United States of America and bankruptcy, reorganization, insolvency or other similar laws affecting the rights of creditors generally, and by general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). These exceptions would encompass any exercise of federal, state or local police powers in a manner consistent with the public health and welfare. The enforceability of the Indentures and the availability of remedies to a party seeking to enforce the lien on the Trust Estate in a situation where such enforcement or availability may adversely affect public health and welfare may be subject to these police powers.

UNDERWRITING

The Bonds will be purchased from the Authority by George K. Baum & Company, as Underwriter, pursuant to a purchase contract. The Underwriter has agreed to purchase the Bonds from the Authority at a purchase price equal to the principal amount of the Bonds less an

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Underwriter's discount of $_________. The purchase contract provides that the Underwriter will purchase all of the Bonds if any Bonds are issued and delivered.

The initial offering prices set forth on the cover page of this Limited Offering Memorandum may be changed by the Underwriter from time to time without notice.

The Corporation has agreed to indemnify the Authority, the Underwriter and certain other parties against certain liabilities relating to this Limited Offering Memorandum.

CONTINUING DISCLOSURE AGREEMENT

The Authority has determined that no financial or operating data concerning the Authority is material to an evaluation of the offering of the Series 2011 Bonds or to any decision to purchase, hold or sell the Series 2011 Bonds, and the Authority will not provide any such information. The University, as the only Obligated Person under Securities and Exchange Commission Rule 15c2-12 (the “Rule”), has undertaken all responsibilities for any continuing disclosure to bondholders as described below. The Authority will have no obligation to the bondholders or any other person with respect to the Rule. In accordance with the Rule, the University has covenanted in a Continuing Disclosure Agreement for the benefit of the holders and beneficial owners of the Series 2011B Bonds, to provide certain annual and quarterly financial information by the Filing Date defined below commencing with fiscal year 2011, and the University’s audited financial statements when available and to provide notices of the occurrence of certain events as specified by the Rule.

“Filing Date” means: (i) with respect to Annual Information described in the Continuing Disclosure Agreement the last day of the ninth month following the end of each Fiscal Year (or the next preceding Business Day if that day is not a Business Day), beginning June 30, 2011, provided that the Filing Date for submission of Audited Financial Statements shall be each December 1 immediately succeeding a June 30; and (ii) with respect to Quarterly Information described in the Continuing Disclosure Agreement, the sixtieth day following each March 31, June 30, September 30 and December 31, as applicable (or the next preceding business day if that day is not a business day, beginning with the quarter ended March 31, 2011).

The type of the information to be contained in the Annual Filing and Quarterly Filings and the notices of specified events is set forth in “APPENDIX F — FORM OF CONTINUING DISCLOSURE AGREEMENT”.

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This Limited Offering Memorandum has been reviewed and approved by the University.


By: Chief Financial Officer/Treasurer

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APPENDIX A

INFORMATION REGARDING AZUSA PACIFIC UNIVERSITY

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Table of Contents

INTRODUCTION ..................................................................................................................... A-3

MISSION AND HISTORY ....................................................................................................... A-4

GOVERNANCE........................................................................................................................ A-5 The Executive Committee of the Board......................................................................... A-6

ADMINISTRATION................................................................................................................. A-7

CURRICULUM....................................................................................................................... A-10 Bachelor’s Degrees ...................................................................................................... A-10 Master’s Degrees ......................................................................................................... A-10 Doctoral Degrees ......................................................................................................... A-11 Study Abroad ............................................................................................................... A-11 School of Education and School of Behavioral and Applied Sciences ....................... A-11 Athletics ....................................................................................................................... A-11

STUDENT ENROLLMENT ................................................................................................... A-11

STUDENT APPLICATIONS, ACCEPTANCES, AND MATRICULATIONS .................... A-12 Undergraduate Schools ................................................................................................ A-12 Graduate Schools ......................................................................................................... A-13 Tuition .......................................................................................................................... A-13

FACULTY AND STAFF ........................................................................................................ A-15 Pension Plan................................................................................................................. A-16

ACCREDITATION, MEMBERSHIPS, AND AFFILIATIONS ............................................ A-16

FINANCIAL MATTERS ........................................................................................................ A-16 Accounting Matters...................................................................................................... A-16 Property, Buildings and Equipment............................................................................. A-18 Facilities....................................................................................................................... A-18 Budget Procedures ....................................................................................................... A-21 Cash and Investments .................................................................................................. A-21 Outstanding Indebtedness ............................................................................................ A-22 Endowment .................................................................................................................. A-23 University’s Development Program ............................................................................ A-24 Student Financial Aid .................................................................................................. A-25

INSURANCE........................................................................................................................... A-25

LITIGATION........................................................................................................................... A-26

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INTRODUCTION

Azusa Pacific University (the “university,” “Azusa Pacific,” or “APU”) is an evangelical, Christian university committed to God First and excellence in higher education. Founded in 1899, the university’s main 121-acre campus is located 26 miles northeast of Los Angeles in the San Gabriel Valley city of Azusa. With 53 undergraduate majors, 37 master’s degrees, 21 credentials, 7 doctoral programs, and 5 certificates, the university offers its more than 9,200 students a quality education on campus, online, and at seven regional centers throughout Southern California. Six new online programs are scheduled to launch in the 2010-2011 academic year. APU is accredited by the Western Association of Schools and Colleges and 14 other professional/specialized accrediting bodies, including the California Commission on Teacher Credentialing and Licensing. The university is a California nonprofit religious corporation and an exempt organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended.

The university is an independent, church-related university affiliated with five Christian religious organizations. As an evangelical Christian community of disciples and scholars, Azusa Pacific seeks to advance the work of God in the world through academic excellence in liberal arts and professional programs of higher education that encourage students to develop a Christian perspective of truth and life. The university’s student body is comprised of students from more than forty different religious denominations.

For the 2010-11 academic year, the university enrolled 5,137 full-time equivalent undergraduate students and 2,755 full-time equivalent graduate students. The university’s total full-time equivalent enrollment has increased by 90 percent since 1997-98.

The university maintains and enforces a policy of equal educational opportunity. The university does not discriminate in its admissions or hiring policies or practices on the basis of race, color, national origin, gender, age, disability, or status as a veteran.

The university administration believes the following characteristics continue to strengthen the university’s competitive position.

• APU moved up from the third tier to the first tier in U.S.News & World Report’s American’s Best Colleges rankings, tied at 167th with the University of Rhode Island and Virginia Commonwealth University. U.S. News & Worlds Report also recognized APU as one of 23 colleges nationwide for best first-year experience.

• For the fourth consecutive year, APU was recognized by Learn and Serve America on the President’s Higher Education Community Service Honor Roll. APU is one of only 14 schools across the nation to have served “with distinction” for all four years since the Honor Roll’s founding.

• In the 2009-10 academic year, athletics led APU to a sixth Directors’ Cup, making APU the first school in NAIA history to win six consecutive cups.

• Students build on 40 years of cooperation with Mexican churches in painting schools, erecting churches, and leading Vacation Bible Schools in neighborhoods throughout Mexicali and Ensenada, Mexico.

• Through Focus International, APU students serve in India, Kenya, Thailand, and other ministry sites around the globe.

• During the 2009-10 academic year, 400 APU students served, ministered, or studied in 52 countries.

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• In fall 2009, APU acquired a significant collection of rare antiquities, including five fragments of the Dead Sea Scrolls, which brought nearly 18,000 guests to campus.

MISSION AND HISTORY

Azusa Pacific University began in 1899 as the Training School for Christian Workers, the first Bible college on the West Coast geared toward training students for ministry and service. After mergers with three Southern California colleges, the university has resided in the city of Azusa since 1949. Cornelius P. Haggard, Th.D., emerged as the right choice to lead the school in 1939. Haggard’s early years as president were fraught with adversity—enrollment was down and donations from the prior year totaled only $27. Among his many accomplishments, Haggard launched a variety of innovative fundraising efforts, including the annual Dinner Rally that continues today. He traveled around the United States to raise resources for the school, always trusting God would provide a miracle to meet the university’s needs. Haggard served for the next 36 years, achieving many significant milestones along the way. Haggard’s death in 1975 brought Paul E. Sago, Ph.D., to the helm. During his tenure, Sago encouraged the development of off-site regional centers throughout Southern California, and presided over the addition of master’s degree programs and the development of schools within the university. Richard E. Felix, Ph.D., became president in 1990. Felix played an instrumental role in initiating the university’s first doctoral programs. He also reframed the university’s values as Four Cornerstones—Christ, Scholarship, Community, and Service—and oversaw the construction of seven new buildings, a doubling of student enrollment, and the quadrupling of graduate programs. In November 2000, Jon R. Wallace, DBA, an Azusa Pacific alumnus and former student body president, assumed the role of university president. Known for his entrepreneurial approach to management, program development, and transformational scholarship, Wallace has overseen completion of the Duke Academic Complex, Trinity Hall, and the $54 million Segerstrom Science Center, the most fiscally significant project ever undertaken by the university. Under Wallace’s leadership, study abroad programs have grown, including the South Africa Semester and more than 40 other national and international study opportunities. New programs under his tenure include the Master of Fine Arts, Master of Social Work, and Ph.D. in Nursing. He also commissioned Vision 2014, the blueprint for a 10-year path for academic accomplishment. Today, APU offers 53 undergraduate majors, 37 master’s degrees, 21 credentials, 7 doctoral programs, and 5 certificates to a total enrollment of more than 9,200 students. The university is accredited by the Western Association of Schools and Colleges, and receives 14 other specialized accreditations. Currently, Azusa Pacific’s award-winning intercollegiate athletic program consists of 17 teams. Beginning in 2005, the athletics program has won an unprecedented six consecutive National Association of Intercollegiate Athletics (NAIA) Directors’ Cup awards. APU also belongs to the Golden State Athletic Conference (GSAC).

More than a century after its founding, APU still serves as an evangelical Christian university dedicated to God-honoring excellence in higher education and equipping disciples and scholars to advance the work of God in the world.

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The Board of Trustees has adopted the following statement of mission and purpose for Azusa Pacific University:

“Azusa Pacific University is an evangelical Christian community of disciples and scholars who seek to advance the work of God in the world through academic excellence in liberal arts and professional programs of higher education that encourage students to develop a Christian perspective of truth and life.”

GOVERNANCE

The university is governed by a self-perpetuating Board of Trustees (the “board”). The board is comprised of 27 elected members (“trustees”). Trustees may serve a maximum of three consecutive three-year terms. Individual trustees who have served on the board for this nine-year maximum nine years are eligible to return to the board after a one-year break in service. The president of the university serves as a member of the board with full voting rights for the duration of his or her employment contract. Trustees do not receive compensation for their services.

The board holds one annual required meeting and two regular meetings each year and such special meetings as may be called. The presence of a majority of the elected trustees is required for a quorum at any meeting of the board. Actions of the board require the vote of a majority of the trustees present at a meeting at which a quorum is present. Between meetings of the board, the Executive Committee, consisting of ten members, has full power and authority to take most actions that the board is empowered to take. The other standing committees of the board include the Financial Affairs, Academic Affairs, Student Life, Trusteeship, Advancement, Property Development, Organizational Development, Investment, Audit and Budget Committees.

Annually each trustee and executive officer completes a conflict of interest questionnaire identifying any potential conflicts of interest. The conflict of interest policy states “a conflict of interest may arise when a member has the opportunity to influence the university’s business, administrative, academic or other decisions in ways that could lead to personal gain or advantage of any kind”. It is expected that the trustees and executive officers will evaluate and arrange their external interest and commitments in order to avoid compromising their ability to carry out their primary obligations to the university.

The following is a list of the members of the board for academic year 2010-11, the year of initial appointment, and the principal business or professional affiliation of each member.

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Board of Trustees

Trustee

Year of Initial Appointment

Principal Business Affiliation

Larry Acosta 2009 President, Founder of Urban Youth Workers Institute

David Axene 2005 President, Axene Health Partners, LLC Peggy Campbell* 2007 President, Ambassador Advertising Agency Sally Colace* 2003 Home Maker/Christian Ministries Evan R. Collins* 2003 President, Butterfield Memorial Foundation Dave Dias* 2005 Principal, InterWest Insurance Services Robyn Dillon 2005 Registered Nurse Gregory Dixon, Ph.D. 2000 Senior Pastor, First Church of God Dan Fachner 2009 President, ICEE Company William K. Hooper 2007 Director, Borland Software Corporation Ray Johnston 2005 Senior Pastor, Bayside Church/President,

Developing Effective Leaders David Le Shana, Ph.D* 2003 Retired President, Seattle Pacific, George Fox,

and Western Evangelical Seminary Michael Lizarraga 1994 President/CEO, TELACU Industries Elizabeth V. Maring 2009 General Counsel, ADW Group, LLC Donald Marshburn 1981 Past President/Co-owner, now consultant,

Champion Seed Company Marc K. McBride* 2007 CEO, McBride Electric Service Company Ken Ogden 1980 Retired, Christian Ministries Jeannie Pascale 2002 Educator/Missionary Sheryl Patton* 1994 CEO, Pacific West Communications, Inc. David S. Poole 2009 Partner, Poole & Shaffery, LLP Earl Schamehorn, D.D.* 1990 Associate Pastor for Administration, Riverside

Free Methodist Church Tim Stripe* 2007 Co-owner, Grand Pacific Resorts Nick Vande Steeg 2003 Retired President & COO, Parker Hannifin

Corp. Paul Szeto, D.Miss 2000 President/General Director, Evangelize China

Fellowship Barney D. Visser 2009 Co-founder, Furniture Row Companies Jon R. Wallace, DBA* 2000 President, Azusa Pacific University Raleigh Washington, D.D. 2002 President, Promise Keepers

_______________ *Member of Executive Committee The Executive Committee of the Board

The Executive Committee of the board is composed of the chair of the board, the vice-chair, the Secretary, the president of the university, the chair of the Academic Affairs Committee, the chair of the Committee on Trusteeship, the chair of the Financial Affairs Committee, the chair of the Student Life Committee, plus one additional member elected from the board to be an at-large member. Between the regular meetings of the board, the Executive Committee has full power and authority to take most actions that the board is empowered to take. Six members of the Executive Committee constitute a quorum.

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Most committees of the board meet on a regular basis just prior to full board meetings. The standing committees of the board and their respective chairs are:

Committee Chair Executive Committee David La Shana Academic Affairs Committee Earl Schamehorn Trusteeship Committee Dave Dias Advancement Committee Marc McBride Student Life Committee Peggy Campbell Financial Affairs Committee Tim Stripe Organizational Development

Committee Nick Vande Steeg

ADMINISTRATION

The university is administered on a daily basis by the office of the president, which is comprised of the president, two executive vice presidents, the provost, the vice president for legal and community relations, the vice president for business affairs and chief financial officer, the senior vice president for people and organizational development, the senior vice president for student life and the vice provost for faculty support and special assistant to the president. The president is appointed by and serves at the pleasure of the board; the executive officers serve at the pleasure of the president. The following is a list of the executive officers of the university. A brief description of each executive officer’s background follows the table.

Administration

Name Position Year of

Appointment Jon R. Wallace, DBA President 2000 David E. Bixby, Ed.D. Executive Vice President 2006 John Reynolds, N.Dip, M.Dip Executive Vice President 2005 Mark E. Stanton, Ph.D. Acting Provost 2010 Kimberly B.W. Denu, Ph.D.

Vice Provost for Faculty Support, Special Assistant to the President 2008

Terry A. Franson, Ph.D. Senior Vice President for Student Life and Dean of Students 2003

Deana Porterfield, M.A.

Senior Vice President for People and Organizational Development 2009

Mark S. Dickerson, Ph.D. J.D. Vice President for Legal Affairs and Community Relations 2002

Bob Johansen, CPA Vice President for Business Affairs and Chief Financial Officer 2008

Jon R. Wallace, DBA, was appointed president of the university on November 27, 2000.

Prior to his appointment, he served as executive vice president and chief operating officer of the university since October 1997. Wallace earned a B.A. from the university in 1976, an MBA from the university in 1979, a DBA from United States International University in 1989 and has studied at the post-graduate level at Harvard University. His educational administrative background includes senior vice president, Azusa Pacific University (July 1995-October 1997); pastor of adult ministries, small groups, and strategic planning, Willow Creek Community Church (two-year sabbatical leave from Azusa Pacific University), South Barrington, Illinois (October 1993-June 1995); vice president for student life, Azusa Pacific University (1991-1993);

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dean of students, Azusa Pacific University (1981-1991); associate dean of students, Azusa Pacific University (1979-1981); director of auxiliary services, Azusa Pacific University (1978-1979); and director of security and housing, Azusa Pacific University (1976-1978). Wallace’s professional affiliations include: Association of Christians in Student Development; National Association of Student Personnel Administrators; American Association of Higher Education; Coalition for Christian Colleges and Universities; and Licensed Minister, Horizons Community Church. He has served on the National Institute for Youth Ministries Board; International Teams Board; and World Impact, the Oaks Advisory Board.

David E. Bixby, Ed.D., has served as executive vice president of the university since 2004. Prior to that appointment, he served as senior vice president from 2000-2004 and vice president for university advancement from 1991-2001. Bixby earned a B.A. from the university in 1978, an M.A. from the university in 1982 and an Ed.D. from Pepperdine University in 2000. Bixby’s administrative background includes director of development, Fuller Theological Seminary, Pasadena, California (1985-1991); executive director of development, Azusa Pacific University (1984-1985); and dean of admissions, Azusa Pacific University (1981-1984). As executive vice president, Bixby oversees domestic and international undergraduate enrollment (including student financial services, registrar, financial aid, and admissions), university relations (marketing and branding), development, student life, alumni relations, and manages the Board of Trustees and special projects as assigned by the president. He represents Azusa Pacific University nationally and internationally and serves as acting president in the president’s absence.

John Reynolds, N.Dip. (EDP), H.Dip. (MIS), serves as executive vice president at the university, where he provides leadership for the administration of the university, nontraditional education, and the university’s international strategic initiatives. He was appointed to this position in 2005. Reynolds earned his undergraduate and graduate degrees in computer science and information systems in South Africa, and is currently a candidate for the Ph.D. in Higher Educational leadership at the university. Reynolds also teaches as an adjunct professor in his research interests of leadership, organizational effectiveness, change management, and strategic thinking. In addition to his several years of experience in higher education, Reynolds has leadership experience as an IT executive in the mining industry and as the global CIO for World Vision International, a large private international relief organization (1991-2000). Reynolds is a regular speaker at national conferences throughout the world. He is a specialist in applied organizational effectiveness and has consulted, coached, and advised NGO leaders in more than 40 countries. He serves on several nonprofit and educational boards, including African Enterprise (USA), Christian Leadership Alliance, LCC International University (Lithuania), Azusa Pacific International (South Africa), Open Doors (USA), and LCC Charity (USA). Reynolds also serves as an elder at Glenkirk Presbyterian Church in Glendora, California.

Mark E. Stanton, Ph.D., ABPP, assumed the position of acting provost at the university in 2010. He was the 2005 president of the Society of Family Psychology of the American Psychological Association and the editor of The Family Psychologist (2002-2007). He is a licensed psychologist in the state of California, board certified in couple and family psychology with the American Board of Professional Psychology. He was recently elected to serve as president of the American Board of Couple and Family Psychology (2011-2013), a constituent board of the American Board of Professional Psychology. He was recognized as the Family Psychologist of the Year in 2007 by the Society of Family Psychology. He received his Ph.D. from the Graduate School of Psychology at Fuller Theological Seminary, his Master in Divinity from the Graduate School of Theology at Fuller Theological Seminary, and his Bachelor of Arts at Hope International University.

Kimberly B.W. Denu, Ph.D., serves as the vice provost for faculty support and as special assistant to the president. She was appointed to those positions in 2008. She is a Fulbright

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alumna to South Africa. She has published works in the areas of African-American issues, women and family matters, welfare reform, and international relations. Denu, an ordained minister, continues to speak and do ministry in the greater Los Angeles area, as well as participate in ongoing ministry throughout the world. Denu earned a B.A. from Vanguard University in 1989, an M.S.W. from Temple University in 1991 and a Ph.D from the University of Florida in 1997., Her teaching areas include grant and proposal writing, research, policy, and a variety of sociology topics. In addition, Denu continues to teach for the university’s Operation Impact Program which allows her the opportunity to teach and train leaders who are working on graduate degrees throughout the world.

Terry A. Franson, Ph.D., became vice president for student life in 1997 and dean of students in 2003. Franson earned a B.S. from California State University in 1974, an M.A. from California State University in 1977, and a Ph.D. from the University of Southern California in 1986. His administrative background includes dean of students, Azusa Pacific University (1996-1997); professor of physical education and athletic director, Azusa Pacific University (1993-1997); associate athletic director, Azusa Pacific University (1988-1993); head track coach, Azusa Pacific University (1980-1995); assistant track coach (1978-1980) and assistant football coach at Azusa Pacific University (1979-1983), special education instructor, junior varsity head football coach, and assistant track coach, Willows High School, Willows, California (1974-1978); and part-time instructor in recreation and physical education, Butte Junior College (1975-1978). Some of Franson’s recent professional, athletic, and administrative honors include: chair of the Spiritual Life Task Force, Azusa Pacific University (1994); Chase Sawtell Most Inspirational Faculty Award, Azusa Pacific University (1990); National Association of Intercollegiate Athletics (NAIA) Track and Field National Coach of the Year (10 consecutive years: 1982-1991); NAIA Track and Field National Champions head coach, Azusa Pacific University (1983-1989, 1991-1992, 1994-1995); Olympic coach (1984, 1988, 1992); and president of the NAIA Track Coaches Association (1993-1995). Franson has participated in international coaching, has been a keynote speaker for many organizations, and is very much involved in his community of La Verne, California.

Deana L. Porterfield, M.A., is senior vice president for people and organizational development, providing the leadership, vision, and strategic perspective necessary for the implementation of all human resources and organizational development initiatives at the university. She was appointed to this position in 2009. Because APU is one of the largest employers in the greater Azusa area with more than 1,200 employees, Porterfield’s leadership and guidance enables the university to continue to be recognized as an employer of choice with an outstanding work environment while furthering the personal, professional, and spiritual growth of its employees. After earning a Bachelor of Arts in Music Education from APU in 1988, Porterfield began work as an admissions counselor. Two years later, she moved to senior admissions counselor and, soon after, associate director of undergraduate admissions. In 1993, she was named director of undergraduate admissions. In this capacity, she oversaw new student enrollment and managed the undergraduate admissions budget. After earning a Master of Arts in Organizational Management from APU, she served a four-year term as dean of enrollment, two of those years also acting as interim director of the Graduate Center, until her appointment as vice president for enrollment management.

Mark S. Dickerson, Ph.D., J.D., assumed the position of vice president for legal affairs and community relations in 2002. Mark S. Dickerson has been practicing law since 1976 and has served in private practice, as general counsel for a multi-national corporation listed on the New York Stock Exchange and as a member of a crisis management team addressing the legal and financial issues facing a large charitable organization involved in one of the largest charitable bankruptcy proceedings in U.S. history. Dickerson received his Ph.D. and Master of Arts in Human and Organizational Systems at Fielding Graduate University. He also received

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his Master of Arts in Theology at Fuller Theological Seminary. He earned his Juris Doctor at Harvard Law School and Bachelor of Science in Mathematics at Grand Canyon University.

Bob Johansen, CPA, joined the university’s staff as vice president for business affairs and chief financial officer in January 2008. From 1980-99, Johansen held various management positions with The Capital Group, Inc., an investment firm in Los Angeles. Subsequently, he worked for Russ Reid Company serving as their chief financial officer for eight years. Johansen also chairs APU’s Budget Committee, serves on the President’s Council and Space Committee, and represents management on the Board of Trustees’ Financial Affairs, Audit, and Investment Committees. Johansen earned his bachelor’s degree in 1977 from California State Polytechnic University and is currently in the process of completing his master’s degree in leadership at APU. He passed the CPA exam in 1980.

CURRICULUM

The university is organized into seven schools: School of Education, School of Behavioral and Applied Sciences, School of Business and Management, School of Nursing, School of Music, School of Theology (including the C.P Haggard Graduate School of Theology), and the College of Liberal Arts and Sciences. Each offers undergraduate and first professional degree programs. Internships are available or required in nursing, business, social work, and education.

Bachelor’s Degrees

The following degrees are awarded at the baccalaureate level: arts, fine art, music, science, and social work. Minors are offered in art, art history, athletic coaching, biblical languages, biblical studies, biology, business administration, chemistry, Christian ministries, communication studies, computer science, critical studies (film), economics, English, ethnic studies, finance, French, global studies, graphic design, Greek, history, humanities, international relations, journalism, leadership, liberal studies, marketing, mathematics, music, philosophy, physics, political science, prelaw, psychology, religion, religion and culture, screenwriting, sociology, Spanish, sports ministry, teaching English to speakers of other languages, theater arts, theology, and youth ministry. Accelerated degree programs offered include the Bachelor of Science in Management/Computer Information Sciences, Bachelor of Science in Organizational Leadership, Registered Nurse to Bachelor of Science in Nursing, Bachelor of Arts in Human Development, and Bachelor of Science in Christian Leadership. The total number of bachelor degrees conferred during the 2009-10 academic year was 1,186.

Master’s Degrees

The university offers the following master’s degrees: Master of Arts, Master of Business Administration, Master of Divinity, Master of Education, Master of Fine Arts, Master of Music, Master of Science, and Master of Social Work. A full list of all master’s programs is available at www.apu.edu/programs/. The total number of master’s degrees conferred in the 2009-10 academic year was 1,247.

Doctoral Degrees

The university offers the following doctoral programs: Doctor of Education in Higher Educational Leadership, Doctor of Philosophy in Higher Education, Doctor of Psychology in Clinical Psychology, Doctor of Physical Therapy, Doctor of Education in Educational Leadership, Doctor of Philosophy in Nursing, and a Doctor of Ministry. Seventy six doctoral degrees were conferred during 2009-10.

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Study Abroad

Undergraduate study abroad programs are available through the university’s own Azusa Oxford Semester, South Africa Semester, which includes both the traditional and nursing tracks, and the Global Learning Term. The Center for Global Learning & Engagement also operates the High Sierra Semester and the L.A. Term off-campus programs. Eleven other study abroad programs are made possible through the Council of Christian Colleges & Universities (CCCU), and seven through its affiliates. More than 100 programs are offered through additional approved program providers.

School of Education and School of Behavioral and Applied Sciences

The School of Education is comprised of 7 departments and more than 40 programs within the departments. The professional preparation programs that offer credentials in K–12 areas of specialization are accredited by the California Commission on Teacher Credentialing (CTC) and the National Council for Accreditation of Teacher Education. The School of Education is approved by the CTC to recommend that the CTC award credentials in single subject teacher education and multiple subject teacher education, preliminary administrative services, professional administrative services, pupil personnel services, school psychology, special education, and language development. The number of credentials recommended in the 2009-10 academic year was 1,543.

The School of Behavioral and Applied Sciences (BAS) comprises 16 programs within 6 departments. The graduate departments include the: Department of Graduate Psychology, Department of leadership and College Student Development, Department of Doctoral Higher Education, Department of Physical Therapy, and Department of Social Work. Professional programs in the School of Behavioral and Applied Sciences have earned the following accreditations: The APU Psy.D. Program is accredited by the American Psychological Association (APA) Committee on Accreditation. APA accreditation recognizes that the program meets the standards for quality programs in psychology as stated in the APA Guidelines and Principles for Accreditation of Programs in Professional Psychology. The DPT Program is accredited by the Commission on Accreditation in Physical Therapy Education. The BSW is accredited by the Council on Social Work Education and the MSW Program has obtained Candidacy Status with the Council on Social Work Education. The Athletic Training Program is accredited by the Commission on Accreditation of Athletic Training Education. The number of post-baccalaureate certificates granted by the School of Behavioral and Applied Sciences at APU in 2009-10 was 23.

Athletics

Azusa Pacific University has diversified intercollegiate athletic programs for men and women. Women compete in basketball, volleyball, soccer, track and field, cross-country, tennis, swimming and diving, water polo, acrobatics & tumbling, and softball as members of the National Association of Intercollegiate Athletics (NAIA). Men also hold membership in the NAIA and compete in football, cross-country, soccer, basketball, baseball, tennis, and track and field. Azusa Pacific belongs to the Golden State Athletic Conference (GSAC). The 14-sport program is nationally-honored, dual-gender athletics involving nearly 300 student-athletes each year. Azusa Pacific is one of two schools to have finished in the top 10 in each year of the Directors’ Cup since its inception on the NAIA level in 1996. Azusa Pacific now ranks third among active NAIA institutions with 27 national championships and second with 55 top-2 finishes. Additionally, Azusa Pacific has claimed a conference-leading 90 GSAC championships.

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STUDENT ENROLLMENT

The following table lists the university’s total enrollment and full-time equivalent enrollment for the most recent five academic years.

Azusa Pacific University Enrollment

Undergraduate Graduate Total Academic Year Headcount FTE Headcount FTE Headcount FTE

2006-2007 4,722 4,524 3,406 2,100 8,128 6,624 2007-2008 4,615 4,404 3,469 2,181 8,084 6,585 2008-2009 4,858 4,639 3,690 2,303 8,548 6,942 2009-2010 4,874 4,679 3,665 2,928 8,539 7,607 2010-2011 5,341 5,137 3,530 2,755 8,871 7,892

APU’s six-year graduation rate for the class graduating June 2010 was 67 percent.

The university’s administration anticipates strong enrollment numbers in the next two years due to the weakness in the California state budget. The University of California system and California State University system are financially unable to provide the amount of student enrollment and classes to accommodate expected qualifying graduating high school seniors. APU is well positioned to take advantage of this new market as reflected in the size and academic profile of the APU fall 2010 incoming class.

STUDENT APPLICATIONS, ACCEPTANCES, AND MATRICULATIONS

The university has generally enjoyed strong enrollment demand. Between academic years 2006-07 and 2010-11, applications increased 74 percent at the graduate schools and 145 percent for the undergraduate programs (including transfer applications).

Undergraduate Schools

During academic years 2006-07 through 2010-11, the acceptance rate for new undergraduate applicants at the university decreased from a high of 74 percent in 2006-07 to 51 percent in 2010-11. At the same time the number of applications to the university increased by approximately 145 percent. From fall 2009 to fall 2010, the university maintained an 86 percent freshmen retention rate. For fall 2010, 66 percent of university undergraduates were female. The following table highlights the university’s freshman application, acceptance, and enrollment statistics.

Freshman Applications, Acceptances, and Enrollments

2006-07 2007-08 2008-09 2009-10 2010-11 Applications 3,106 3,100 4,355 5,177 7,623 Acceptances 2,309 2,282 2,741 3,029 3,858 Acceptances as % of

Applications 74% 74% 63% 59% 51%

Enrollments 859 836 1,059 1,005 1,203 Enrollments as % of

Acceptances 37% 37% 39% 33% 31%

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The average high school grade point average for 2010 incoming freshmen was 3.62. The following table shows the university’s mean SAT scores for undergraduate admissions and national average scores for the most recent five academic years.

Mean SAT Scores of Matriculated Freshmen

2006-07 2007-08 2008-09 2009-10 2010-11

Verbal SAT Score 546 536 541 543 544 Math SAT Score 543 534 542 540 541 Combined 1,089 1,070 1,083 1,083 1,085 National Average 1,021 1,017 1,017 1,016 1,017 % of national average 107% 105% 106% 107% 107%

Graduate Schools

The following table highlights the university’s graduate school applications and acceptance statistics. APU’s graduate enrollment is rolling; the university does not compile matriculation data.

Graduate Applications, Acceptances, and Enrollments

2006-07 2007-08 2008-09 2009-10 2010-11* Applications 2,262 2,499 2,746 3,170 3,954 Acceptances 2,159 2,404 2,673 2,847 2,692 Acceptances as % of Applications

95% 96% 97% 90% 68%

_______________ *Preliminary as of September, 2010.

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Tuition

The following table shows tuition and fee charges per student for the most recent five years.

Student Tuition and Fees

2006-07 2007-08 2008-09 2009-10 2010-11

Undergraduate tuition and fees $30,780 $32,350 $33,956 $35,326 $35,882Undergraduate % increase 5% 4% 3% 1.55%Graduate tuition and fees $8,460 $8,640 $9,234 $9,666 $9,828Graduate % increase 2% 6% 4% 2%

For 2009-10, despite a higher discount factor and lower net tuition increase, APU was

able to increase its net tuition revenue. The following table breaks out APU’s total tuition and fees/revenue for the past five complete fiscal years.

Total Tuition and Fees

Unrestricted Tuition and

Fees Financial Aid Net Tuition

Revenue Discount

Factor

Net Tuition

Increases

2005-06 $132,692,159 $17,668,774 $115,023,385 13.3% N/A 2006-07 141,477,455 20,399,919 121,077,536 14.4% 5.3% 2007-08 149,834,846 22,172,916 127,661,930 14.8% 5.4% 2008-09 161,240,715 26,687,735 134,552,980 16.6% 5.4% 2009-10 172,957,787 32,813,119 140,144,668 19.0% 4.2%

The average tuition and fees for academic year 2010-11 for those schools that the

university considers its major competitors for undergraduate students are as follows:

Southern California Private Colleges & Universities 2010-11 Undergraduate Tuition & Fee Data

Institution Tuition Tuition & Fees Westmont $34,460 $45,420 Biola University 28,852 37,572 Azusa Pacific University 28,000 35,882 Point Loma Nazarene University 26,500 35,100 Vanguard University 26,342 34,761 La Sierra University 24,840 33,231 California Baptist University 22,854 31,914 San Diego Christian College 21,610 30,852 Hope International University 22,890 30,690

The university draws its student body primarily from California as shown by the

following tabulation of the geographic distribution of students for the most recent five academic years.

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Geographic Distribution of Students by States

2006-07 2007-08 2008-09 2009-10 2010-11 Total States 48 48 47 49 50 Top Five States:

California 6,980 6,980 7,443 7,125 7,863 Washington 172 172 163 169 201 Colorado 146 146 137 150 164 Arizona 103 103 99 108 122 Oregon 129 129 114 104 103

APU enrolls students from over 72 countries as shown by the following tabulation of the

geographic distribution of students for the most recent five academic years.

Geographic Distribution of Students by Countries

2006-07 2007-08 2008-09 2009-10 2010-11 Total Countries 71 83 84 84 72 Top Eight Countries:

United States 7,639 7,581 8,008 7,779 8,526 South Korea 111 105 141 125 133 Vanuatu - - - 49 36 Taiwan 57 49 37 28 31 Mexico 36 30 30 26 18 Philippines 30 30 26 23 Japan 29 26 27 - 17 Canada 28 - - - 23

FACULTY AND STAFF

The university has 433 full-time faculty. In addition, the university employs 33 part-time faculty members and offers several flexible contracts (per the table below). Seventy-three percent (73%) of the faculty (excluding administrators with faculty rank) hold a doctoral degree for fall 2010. The number of full-time, part-time, and faculty with flexible contracts for the most recent five academic years is shown in the following table:

Full-Time, Part-Time and Flexible Contract Faculty

2006-07 2007-08 2008-09 2009-10 2010-11

Full-Time Faculty 351 376 379 401 433 Part-Time Faculty 39 32 38 36 33 Total Faculty 390 408 417 437 466 Flexible Contract Faculty One-Year Contract 233 239 183 213 231 Three-Year Contract 63 63 76 77 82 Five -Year Contract 55 74 120 111 120 % with Flexible Contracts 41% 36% 52% 47% 47%

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The student-to-faculty ratio for fall 2010 was 12:1

The university adopted the flexible contract system for its faculty in 1984 as an alternative to tenure. The university has not offered tenure since the inception of the flexible contract system. Flexible faculty contracts can be offered for terms of one, three, and five years. If the contract is for one year, it is referred to as a “Notice of Appointment.” If the contract is for more than one year it is referred to as an “Extended Contract.” Renewal of a faculty contract is contingent upon satisfactory completion of the Summative Evaluation Process, during which individual faculty members are evaluated based upon several factors, such as teaching ability, scholarly pursuit, research, professional activities, general contribution to the total program of the university, and commitment to the university’s mission.

The university has never experienced a strike or labor stoppage. The university believes its relationship with its employees is good.

Pension Plan

Ninety-three percent (93%) of the university’s full-time employees participate in a 403(b) retirement plan. Most of the investment options for contributions to the Plan are provided by TIAA-CREF (Teachers Insurance and Annuity Association and College Retirement Equities Fund) and participants decide which options are appropriate for their contributions. Participation is voluntary. Employees are eligible to participate after 12 months of employment and a minimum of 1,000 hours worked. Eligible employees contribute a minimum of three percent gross base earnings after which the university contributes eight percent. For the 2008-09 and 2009-10 fiscal years, university contributions totaled $4,457,000 and $4,575,000, respectively.

ACCREDITATION, MEMBERSHIPS, AND AFFILIATIONS

The university is an accredited member of the Western Association of Schools and Colleges (WASC), the National League of Nursing, the Board of Registered Nursing, the Council on Social Work Education, and the Association of Theological Schools in the United States and Canada. The university is a candidate for accreditation from the American Assembly of Collegiate Schools of Business, the Commission on the Accreditation of Physical Therapy Education, the Committee for Accreditation of Allied Health Professions, and the Joint Review Committee for Athletic Training. In addition, the following university programs or departments have been separately approved by the California Commission on Teacher Credentialing & Licensing: Science, Math, Spanish, Social Science, English, Liberal Studies, Physical Education, Music, Art, Business, and Human Development.

The university is a member of many associations, including: the Council of Graduate Schools, the Coalition of Christian Colleges and Universities, and the Council of Independent Colleges.

The university maintains sister school affiliations with several institutions in Taiwan, France, Indonesia, China, Japan, Malaysia, Hong Kong, and Mexico.

FINANCIAL MATTERS

The following summaries and discussions of financial matters should be read in conjunction with the financial statements of the university, related notes, and the independent auditors’ report included as Appendix B to the Official Statement. The financial statements have been audited by Capin Crouse LLP, Independent Auditors.

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Accounting Matters

The university operates on a fiscal year ending June 30. The following table summarizes the Statement of Unrestricted Activities for the years ended June 30, 2006, 2007, 2008, 2009, and 2010.

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Statement of Unrestricted Activities (Fiscal Year Ended June 30)

2006 2007 2008 2009 2010 Operating revenue and support

Tuition and fees, net of discounts * $115,023,385 $121,077,536 $127,661,930 $134,552,980 $140,138,228 Auxiliary enterprises 22,933,709 23,645,642 27,348,547 28,288,308 29,298,797 Government grants and contracts 2,461,740 2,400,727 2,751,581 1,540,624 523,732 Private gifts, grants, and contracts 4,271,973 5,996,465 4,454,593 3,171,402 6,335,588 Pledge income - - - 44,748 251,665 Investment income 3,043,622 5,280,485 8,932,002 6,043,186 3,935,073 Net gain (loss) on investments - 2,876,297 (2,475,606) (5,265,420) 2,121,112 Net unrealized gain (loss) on investments 1,120,912 - - - - Net realized (loss) gain on sale of Investments

(47,634) - - - -

Outreach ministries 1,395,080 1,306,851 1,152,849 766,662 924,520 Other Income 3,800,228 3,749,583 3,291,044 4,223,853 4,043,871

Total revenue and support 154,003,015 166,333,586 173,116,940 173,366,343 187,572,586

Net assets released from restrictions & Redesignations

1,793,066 1,443,528 929,277 4,494,340 5,229,267

Total revenue, support, and net assets released from restrictions 155,796,081 167,777,114 174,046,217 177,860,683 192,801,853

Operating expenses

Instruction 54,987,823 58,851,297 67,172,621 71,428,078 75,009,899 Auxiliary enterprises 13,715,840 14,499,962 14,743,454 16,693,306 15,176,062 Academic support 9,660,567 11,045,192 12,031,720 17,783,855 18,256,664 Student Services 18,170,706 19,519,036 20,688,659 23,159,429 24,035,703 Institutional support 25,092,350 28,363,562 31,343,199 32,393,422 31,971,734 Fund-raising 3,360,481 3,142,829 3,855,303 3,686,065 3,907,290 Operation and maintenance of plant 6,455,451 6,836,258 9,056,207 9,139,988 9,506,990 Depreciation 5,626,777 6,135,192 7,732,075 7,614,617 11,404,355 Amortization 17,236 17,236 61,217 66,782 66,782 Interest on indebtedness 1,730,570 2,482,693 7,160,444 7,846,637 5,820,249 Loss on early extinguishment of debt 361,965 - - Net realized loss on disposal of fixed assets 141,405 115,747 173,971 - -

Total expenses 138,959,206 151,009,004 174,380,835 189,812,179 195,155,728

Change in unrestricted net assets from Operations

16,836,875 16,768,110 (334,618) (11,951,496) (2,353,875)

Other changes in unrestricted net assets

Accretion for asset retirement obligation (62,124) (62,464) (61,152) (65,949) (62,561) Change in value of split-interest agreements 788,700 (119,868) 383,555 (62,179) 81,174 Unrealized loss on interest rate swap 1,790,468 (135,698) (8,941,608) (10,319,490) (7,657,209) Settlement - (975,840) 2,248,549 - 800,000 Return of endowment funds - (295,394) - - - Effect of change in accounting (1,027,047) - - (951,989) -

Change in unrestricted net assets 18,326,872 15,178,846 (6,705,274) (23,351,103) (9,192,471)

Unrestricted net assets, beginning of year 123,391,092 141,717,964 156,896,810 150,191,536 127,062,384

Unrestricted net assets, end of year $141,717,964 $156,896,810 $150,191,536 $126,840,4331 $117,869,913

* Net discount in 2006 = $17,658,774; 2007 = $20,399,919; 2008 = $22,172,916; 2009 = $26,687,735; 2010 = $32,819,319 _______ 1 Subsequent to the 2009 audit, the auditors reclassified certain unrestricted net assets so that the actual unrestricted net

assets for such year are $127,062,384.00.

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The university’s net assets as of June 30, 2006, 2007, 2008, 2009, and 2010 were as follows:

Net Assets 2006 2007 2008 2009 2010 Net assets:

Unrestricted: $141,717,964 $156,896,810 $150,191,536 $127,062,384 $117,869,913Temporarily restricted 14,791,147 22,213,547 22,308,858 31,850,816 29,761,063Permanently restricted 17,361,565 18,602,003 20,529,640 19,474,750 19,416,958

Total net assets $173,870,676 $197,712,360 $193,030,034 $178,387,950 $167,047,934 Property, Buildings and Equipment

As of June 30, 2010, the net book value of the capital assets of the university in its property, buildings and equipment totaled approximately $237.4 million. The net value of the university’s land, buildings and equipment for the last four fiscal years are as follows:

Land, Buildings, and Equipment, Net FY 2007 FY 2008 FY 2009 FY 2010 Land and improvements $ 23,867,538 $ 55,875,289 $ 55,875,289 $ 55,875,289Buildings and improvements 117,872,188 156,267,311 158,409,271 212,715,260Equipment and vehicles 16,140,846 17,024,128 18,574,359 31,492,306Library books 4,978,722 5,388,224 5,398,216 5,454,868Subtotal 162,859,294 234,554,952 238,257,135 305,537,723Less accumulated depreciation (44,041,349) (51,503,395) (59,168,856) (70,573,211)

Subtotal 118,817,945 183,051,557 179,088,279 234,964,512Construction in progress 3,085,906 20,889,113 57,912,707Special collections, works of art and historical items - - - 2,478,500Land, Buildings, and Equipment, Net $121,903,851 $203,940,670 $237,000,986 $237,443,012

Facilities

The university’s main 121-acre campus is located 26 miles northeast of Los Angeles in the San Gabriel Valley community of Azusa. There are also seven off-site regional centers serving the High Desert, Inland Empire, Los Angeles, Murrieta, Orange County, San Diego, and Ventura.

Budget Procedures

The university’s annual budget is based on revenue estimates of student tuition and fees, gifts, grants, auxiliary enterprise revenues, and other miscellaneous revenues, and on expenditure estimates submitted by the academic and administrative centers of the university. The initial revenue and expenditure estimates are reviewed and approved by the Budget Committee. The

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Budget Committee’s recommendations are then approved by the Office of the President. Final findings and recommendations are submitted to the Financial Affairs Committee of the board and, upon their acceptance, are presented to the board at its January meeting for consideration and approval.

Budgetary control is the responsibility of the vice president of Business Affairs and Chief Financial Officer. Actual performance to budget is monitored on a monthly basis through the use of a fund accounting system designed exclusively for colleges and universities.

Cash and Investments

Of APU’s approximately $70.8 million in investments outstanding on June 30, 2010, over one-third could be liquidated in three days or less. The following table shows university cash and investment values for the past five fiscal years.

Total Cash and Investments

2005-06 2006-07 2007-08 2008-09 2009-10 Cash and cash equivalents $29,585,664 $49,762,287 $44,021,487 $18,834,756 $16,682,756Investments at fair value 56,485,215 64,801,650 59,324,916 69,663,780 70,793,984Total Cash and Investments $86,070,879 $114,563,937 $103,346,403 $88,498,536 $87,476,740

The university has no current or pending exposure to capital calls.

APU anticipates a $19 million average monthly operating cash balance over the next six months. The following table shows the university’s historical and projected monthly cash balances. The university anticipates entering into a $5 million line of credit with Wells Fargo Bank National Association to provide additional operating liquidity

Actual

2009-10 Forecast 2010-11

July $12,618,400 $10,951,000August 6,696,750 6,773,000September 15,032,235 20,333,000October 9,907,423 16,303,000November 5,767,541 10,656,000December 368,964 9,337,000January 26,122,357 33,342,000February 28,190,768 35,138,000March 21,941,901 28,394,000April 17,040,236 24,172,000May 22,303,499 19,562,000June 19,030,345 18,351,000

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Endowment

The purpose of the endowment is to provide a perpetual source of operating support to the university’s endowed programs. Over the past three years, APU has maintained an endowment balance of approximately $37 million.

APU’s endowment as of June 30, 2008, 2009, and 2010 was comprised of the following:

Total Endowment

FY2008 FY2009 FY2010

Value % of

Portfolio Value % of

Portfolio Value % of

Portfolio Equities $16,435,311 42.90% $16,711,747 44.80% 15,478,979 39.05%Fixed Income 7,241,423 18.90% 3,492,379 9.40% 8,083,849 20.39%Cash Equivalents 1,038,020 2.70% 807,302 2.20% 1,659,469 4.17%Total Investments $24,714,753 $21,011,428 $25,222,297Real estate/other 13,603,250 36% 16,283,671 43.60% 14,418,008 36.39% Total Endowment $38,318,003 100% 37,259,099 100% 39,640,305 100%

The university’s Investment Committee determines the method to be used to appropriate

endowment funds for expenditure. The university has adopted an investment and spending policy that attempts to provide a predictable stream of funding to programs supported by its endowment while seeking to maintain the purchasing power of endowment assets. Under this policy, endowment assets are invested in a manner that is intended to yield a long-term rate of return. The endowment spending rate is set to a maximum of five percent of the average of the trailing twelve quarters of net assets.

University’s Development Program

The Office of University Advancement is responsible for building relationships between the university and its community, including donors, alumni, parents, and other APU friends, as well as the task of seeking funding to support building projects, endowed chairs, and scholarships.

The university is not currently in a capital campaign.

The university’s total philanthropic support from outright cash, stock and gifts-in-kind for the period 2006 to 2011 fiscal year-to-date exceeds $58 million. The following table indicates this support for the five fiscal years ended June 30, 2006-2010 and year-to-date (as of November, 2010 for the current fiscal year which will end June 30, 2011. This summary information reflects actual cash and pledge payments, and does not reflect new pledges.

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Historical Philanthropic Support

2006 2007 2008 2009 2010 YTD 2011 Types of Gifts Cash $6,965,172 $9,352,576 $7,753,081 $9,725,116 $8,690,271 $2,500,411 Stock/ property 2,644,537 1,350,583 2,791,559 2,448,008 3,509,448 - Gift-in-kind 371,245 319,238 137,370 148,281 1,384,800 - Total $9,980,954 $11,022,397 $10,682,010 $12,321,405 $13,584,519 $2,500,411 Gift Restrictions Unrestricted cash $1,642,991 $1,756,135 $1,343,433 $1,403,722 $1,869,434 $552,423 Unrestricted non-cash 466,830 312,847 109,327 155,188 76,799 - Restricted 7,871,133 8,953,415 9,229,250 10,762,495 11,638,286 1,947,988 Total $9,980,954 $11,022,397 $10,682,010 $12,321,405 $13,584,519 $2,500,411 Sources of Philanthropic Support Foundation $2,318,579 $3,862,467 $2,380,089 $6,527,389 $4,246,328 $1,224,188 Corporation 574,420 1,084,216 907,985 543,280 343,396 162,303 School/nonprofit/church 279,693 880,440 444,685 259,930 4,487,742 19,660 Individual 6,808,262 5,195,274 6,949,251 4,990,806 4,507,052 1,094,411 Total $9,980,954 $11,022,397 $10,682,010 $12,321,405 $13,584,518 $2,500,411

In fiscal year 2010-11, as of November 30, 2010, 546 alumni (representing

approximately 3.92 percent of APU’s alumni base) gave $622,057 in philanthropic support to APU.

Historically donations peak at calendar year end and again at fiscal year end. Based upon good faith projections, APU anticipates this trend to continue. There are also a number of donations expected by mid-February 2011.

APU has received gift commitments for its Segerstrom Science Center totaling $14.7 million with $12.0 million received to date and $2.7 million in outstanding pledge payments. An additional $2 million in new pledges for the Segerstrom Science Center are anticipated for fiscal year 2010-11.

APU recently received a pledge for what is the largest academic gift in the university’s history, $7.2 million, to create a signature accounting department in the School of Business and Management.

Outstanding Indebtedness

Currently, the university’s outstanding indebtedness is as follows:

1. California Statewide Communities Development Authority, Azusa Pacific University Series 2007. The Series 2007 Bonds were issued in July 2007 in the aggregate principal amount of $140,340,000 and a final maturity date of April 1, 2039. There is currently $134,220,000 aggregate principal amount of the Series 2007 Bonds outstanding. The proceeds from the Series 2007 bonds were used to fund the following projects: construction of new Segerstrom Science Center Building ($54,360,000), acquisition of the Crestview Apartments ($71,235,000), and refunding of APU’s outstanding Taxable Variable Rate Demand Revenue Series 2003 Bonds, issued by

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Colorado Educational and Cultural Facilities Authority (“CECFA”) ($14,475,000). The bonds are secured by a direct-pay letter of credit through Allied Irish Bank (“AIB”), , which expires July 23, 2012. In conjunction with the Series 2007 bond issue, APU executed three 67% of 1-month LIBOR-based interest rate swaps through maturity. APU swaps variable rate for fixed rate payment obligations through a swap agreement with AIB. The first swap was executed in February 2007 to take advantage of historically low swap rates. APU swapped the Segerstrom Science Center and refunding portions of the anticipated Series 2007 issue at 3.624% with a maturity date of March 2, 2037. The remaining Crestview student housing portion of the Series 2007 bonds was swapped at bond closing with two swaps at 3.890% (70% of the remaining un-hedged bonds) and 3.83% (30% of the remaining un-hedged bonds). Both of these swaps mature on March 1, 2039. The Series 2007 Bonds will be refunded with proceeds of the Series 2011 Bonds. The university will terminate its swaps with AIB in connection with the refunding.

2. Department of Housing and Urban Development, collateralized by Smith Hall Dormitory, due 2015, interest payable semiannually and principal payable in increasing annual installments and currently outstanding in the aggregate principal amount of $80,000.

3. Department of Housing and Urban Development, collateralized by the Turner Campus Center and Adams Hall Dormitory, due 2017, interest payable semiannually and principal payable in increasing annual installments and currently outstanding in the aggregate principal amount of $353,000.

Student Financial Aid

Approximately 90% of undergraduate APU students receive some form of student financial assistance. The following table shows the financial aid assistance provided to APU students from fiscal years 2006-07 through 2009-10.

Financial Aid Assistance

2006-07 2007-08 2008-09 2009-10 Scholarships/Grants Federal $ 2,865,034 $ 3,120,355 $ 11,438,352 $ 5,987,619State 6,661,717 6,328,141 7,047,055 7,498,084Institutional 16,267,998 17,775,808 23,840,613 32,579,005Other external scholarships/grants 1,611,831 1,982,450 2,812,476 2,868,977Total Scholarships/Grants $ 27,406,580 $ 29,215,754 $ 45,138,496 $ 42,946,066 Self Help Student Loans $ 8,026,076 $ 9,274,475 $ 20,906,165 $ 27,950,572Federal Work Study 2,594,944 903,469 1,005,226 1,190,096Total Self-Help $ 10,621,020 $ 10,507,944 $ 21,911,391 $ 29,140,668 Parent Loans $ 12,077,978 $ 11,902,383 $ 15,770,438 $ 13,468,511Tuition waivers 2,209,496 2,218,915 2,800,978 3,093,410Athletic awards 2,319,349 2,528,459 2,872,433 3,037,986

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Forecast of Revenues and Expenditures

The University has prepared this forecast of its anticipated revenues and expenditures for fiscal years 2010-11, 2011-12 and 2012-13 in order to determine its expected ability to meet the debt service coverage requirements of the financing documents for the Series 2011A and Series 2011B Bond transactions.

Azusa Pacific University Three-Year Forecast

FY10-11 through FY12-13 FY10-11 FY11-12 FY12-13 Budget Projected Budget Forecast REVENUE Undergraduate Tuition $129,594,000 $139,805,000 $146,914,500 Graduate Tuition 47,709,412 52,338,211 53,384,975 CAPS Tuition 9,500,000 11,085,485 11,307,195 Supporting Services 29,681,500 29,935,000 30,021,125 Fees, Gifts, Grants, and Other 15,017,000 14,382,031 14,443,441 REVENUE TOTAL 231,501,912 247,545,727 256,071,236

EXPENSE Salaries/Taxes/Benefits 113,538,818 122,281,575 125,550,183 Scholarships 39,174,188 43,712,869 47,383,811 Marketing 4,261,405 4,474,475 4,563,965 Technology 3,053,741 3,140,670 3,203,483 Cost of Sales 9,334,100 8,755,600 8,930,712 Debt Service 9,960,000 11,000,000 11,000,000 Net Payments on Orphan Swap* 2,600,000 2,600,000 2,600,000 Utilities, Insurance, Other 13,449,236 14,562,118 15,406,502 Operating Budgets 25,842,604 28,851,903 29,428,941 Contingency 3,887,820 2,542,688 2,509,294 Fiscal Reserve 6,400,000 5,623,829 5,494,345 EXPENSE TOTAL 231,501,912 247,545,727 256,071,236

NET BALANCE 0 0 0 Debt Service Coverage Ratio** 1.51 1.41 1.40 Budget & Forecast Assumptions • Enrollment for fall 2010 and spring 2011 is budgeted at 4,650 FTE and 4,450 FTE, respectively. Projected enrollment for fall 2011 and spring 2012 is 4,850 FTE and 4,650 FTE, respectively, and for fall 2012 and spring 2013 is 4,950 FTE and 4,750 FTE, respectively • The 2011 budget assumes a 3.9% increase in tuition. Tuition is projected to increase 3.2% for fiscal year 2012 and 3.0% for fiscal year 2013 • During the 2012 fiscal year six staff and 10 faculty will be added and in 2013 fiscal years, five staff and two faculty positions will be added • For fiscal years 2012 and 2013, salaries are projected to increase 2.0% annually and medical insurance benefits are projected to increase 12.5% in 2012 and 10.0% annually in 2013 ___________________ * Estimate based on market conditions on December 3, 2010 ** Includes estimated net payments on Orphan Swap

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Covenant Analysis

The University has prepared the following analysis of its ability to comply with the liquidity covenants under the Series 2011B Loan Agreement. The University must maintain or cause to be maintained Unrestricted and Temporarily Restricted Cash and Unrestricted and Temporarily Restricted Marketable Securities in an amount not less than (i) $45,000,000 on June 30, 2011 and $45,000,000 on December 31, 2011, and (ii) $50,000,000 on June 30, 2012 and each December 31 and June 30 thereafter. See “APPENDIX H–PROPOSED FORM OF SERIES 2011B LOAN AGREEMENT.” As of December 31, 2010, the University’s total Unrestricted and Temporarily Restricted Cash and Marketable Securities was $62.339 million.

Unrestricted and Temporarily Restricted Cash and Marketable Securities December 31, 2010

(in $ millions) Unrestricted and Temporarily Restricted Cash & Cash Equivalents $ 18.406 Unrestricted and Temporarily Restricted Certificates of Deposit 14.118 Unrestricted and Temporarily Restricted Common Fund 1.811 Unrestricted and Temporarily Restricted Marketable Securities 28.004

Total Unrestricted and Temporarily Restricted Cash and Marketable Securities $ 62.339

INSURANCE

The university carries standard industry insurance policies, including general comprehensive liability, educator’s legal liability, workers’ compensation and employer’s liability, as well as international liability, umbrella liability, and athletic insurance. The university maintains comprehensive insurance coverage on its assets. Buildings, other real property and equipment are insured on a replacement value basis. For the 2010-11 policy year, campus properties, content and equipment are insured for a blanket, agreed amount of $369 million.

Business interruption insurance is carried that protects the university against loss of income up to $20 million resulting from damage to real property and equipment per occurrence.

Personal injury and property damage liability coverage is provided under a comprehensive general liability policy with loss limits of $ 1 million per occurrence and $3 million in aggregate and umbrella policies, with aggregate single-loss limits of $25 million. These policies are considered by the university to be similar to those carried by similar universities and businesses.

Directors and Officers insurance, including legal liability and comprehensive crime coverage is also carried in an aggregate amount of $5 million per occurrence.

LITIGATION

The university is not aware of any litigation pending or threatened wherein an unfavorable decision would adversely affect its ability to enter into the Loan Agreements and carry out its obligations hereunder or would have a material adverse impact on the financial condition of the university.

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APPENDIX B

AUDITED FINANCIAL STATEMENTS OF THE UNIVERSITY FOR FISCAL YEARS ENDING JUNE 30, 2009 AND 2010

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APPENDIX C

INITIAL INVESTOR LETTER

February __, 2011

California Municipal Finance George K. Baum & Company Authority Patton Boggs LLP Squire Sanders & Dempsey LLP

California Municipal Finance Authority


Series 2011B

Ladies and Gentlemen:

In connection with the limited public offering of California Municipal Finance Authority (the “Authority”) Refunding Revenue Bonds (Azusa Pacific University Project) Series 2011B (the “Series 2011B Bonds”), the undersigned purchaser of $__________ principal amount of such Series 2011B Bonds hereby makes the following representations, warranties and covenants on the express understanding that this letter will be relied upon by you:

1. We have received and read the Preliminary Limited Offering Memorandum dated January __, 2011 (the “Preliminary Limited Offering Memorandum”), and have been afforded the opportunity to ask such questions of representatives of Azusa Pacific University (the “Borrower”) as we have deemed necessary in making our investment decisions including the opportunity to request a site visit; and we have based our decision to invest in the Series 2011B Bonds on the Preliminary Limited Offering Memorandum, our own investigation, including, without limitation, our, review of such documents, records, reports, financial statements and other information concerning the Borrower and discussions with representatives of the Borrower and the Underwriter, as we have deemed necessary in making our investment decisions. We understand we will receive the final Limited Offering Memorandum (the “Limited Offering Memorandum”) at or near the time of closing of the Series 2011B Bonds, and we agree to read the Limited Offering Memorandum upon receipt.

2. We have the knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of an investment in the Series 2011B Bonds.

3. We acknowledge and understand that repayment of the Series 2011B Bonds is subject to a high degree of investment risk, and represent that we are capable of suffering a loss of its entire investment in the Series 2011B Bonds. We acknowledge and understand that we may have to bear the economic risk of the investment in the Series 2011B Bonds for an indefinite period of time.

4. We are a “Qualified Buyer” within the meaning of that term as follows: “Qualified Buyer” means (1) a “Qualified Institutional Buyer” as defined in Rule 144A promulgated under the Securities Act of 1933, as in effect on the date hereof (the “Securities Act”); (2) an entity that is directly or indirectly wholly owned or controlled by the purchaser/bondholder representative (being a financial institution described in (1) above); (3) an entity all of the investors in which are described in (1) or (2) above; (4) a custodian or trustee for

a party described in (1) or (2) above and (5) only in connection with an initial investment in the Series 2011B Bonds and not as any subsequent transferee, an individual investor described in Rule 501(a)(5) of the Securities and Exchange Commission either directly or through an entity controlled by such investor.

5. The Series 2011B Bonds have been purchased for our own account for investment and not with a view to the distribution, transfer or resale thereof in the capacity of a bond house, broker or other intermediary, nor with the intention to distribute or resell the Series 2011B Bonds, provided, however, that we reserve the right to dispose of all or any part of the Series 2011B Bonds if in the future we decide to do so in our sole discretion; provided, however, such sale is to only a Qualified Buyer in minimum denominations of $250,000 or any multiple of $5,000 in excess thereof unless the Series 2011B Bonds (without credit enhancement, unless such credit enhancement extends to the maturity or redemption of the Series 2011B Bonds) are rated “A3,” “A-,” “A-” or higher by Moody’s, S&P or Fitch, respectively, or any other nationally recognized rating agency approved by the Authority.

6. We are not relying upon the Underwriter for advice as to the merits and risks of an investment in the Series 2011B Bonds. The undersigned has sought such accounting, legal and tax advice as it has considered necessary to make an informed investment decision.

7. The undersigned is duly authorized to make the representations, warranties and covenants set forth in this letter on behalf of the Investor, and the foregoing representations, warranties and covenants shall survive the execution and delivery to us of the Series 2011B Bonds and the instruments and documents contemplated thereby.

The foregoing representations shall survive the execution and delivery to us of the Series 2011B Bonds and the instruments and documents contemplated thereby.

Very truly yours, [INSERT NAME OF INVESTOR] By: ____________________________ Name: _______________________

Title: _______________________ SUMMARY OF INVESTMENT Name of Fund: ________________________ ______________________ Principal Amount: $_____________________ $_____________________ CUSIP Number: _______________________ ______________________

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APPENDIX D

PROPOSED FORM OF BOND COUNSEL OPINION

U.S. Bank, National Association Los Angeles, California California Municipal Finance Authority Carlsbad, California $__________

California Municipal Finance Authority Refunding Revenue Bonds

(Azusa Pacific University Project) Series 2011B


We have acted as bond counsel in connection with the issuance by the California Municipal Finance Authority (the “Authority”) of $____________ aggregate principal amount of California Municipal Finance Authority, Refunding Revenue Bonds (Azusa Pacific University Project) Series 2011B (the “Series 2011B Bonds”), issued pursuant to the provisions of Chapter 5 (commencing with Section 6500) of Division 7 of Title 1 of the Government Code of the State of California) (the “Act”) and an Indenture of Trust, dated as of February 1, 2011 (the “Indenture”), between the Authority and U.S. Bank National Association, as trustee (the “Trustee”). The Indenture provides that the Series 2011B Bonds are issued for the purpose of making a loan of the proceeds thereof to Azusa Pacific University (the “Borrower”) pursuant to a Loan Agreement, dated as of February 1, 2011 (the “Loan Agreement”), between the Authority and the Borrower. Proceeds of the Series 2011B Bonds are required to be used primarily for the purpose of refinancing and refunding certain obligations (the “Prior Bonds”) described in the Indenture. Capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Indenture.

In such connection, we have reviewed the Indenture, the Loan Agreement, the Tax Certificate and Agreement, dated the date hereof (the “Tax Certificate”), between the Authority and the Borrower, opinions of counsel to the Trustee and the Borrower, certificates of the Authority, the Trustee, the Borrower and others, and such other documents, opinions and matters to the extent we deemed necessary to render the opinions set forth herein.

We have relied on the opinion of Manatt, Phelps & Phillips LLP, New York, New York, special counsel to the Borrower, regarding the current qualification of the Borrower as an organization described in Section 501(c)(3) of the Internal Revenue Code of 1986 (the “Code”) and the use of the facilities financed with the proceeds of the Prior Bonds in activities that are not considered unrelated trade or business activities of the Borrower within the meaning of Section 513 of the Code. Failure of the

U.S. Bank National Association California Municipal Finance Authority [Closing Date] Page 2

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Borrower to be organized and operated in accordance with the Internal Revenue Service’s requirements for the maintenance of the Borrower’s status as an organization described in Section 501(c)(3) of the Code, or the use of the Bond-financed facilities in activities that are considered unrelated trade or business activities of the Borrower within the meaning of Section 513 of the Code, may result in interest on the Series 2011B Bonds being included in gross income for federal income tax purposes, possibly from the date of issuance of the Series 2011B Bonds.

The opinions expressed herein are based on an analysis of existing laws, regulations, rulings and court decisions and cover certain matters not directly addressed by such authorities. Such opinions may be affected by actions taken or omitted or events occurring after the date hereof. We have not undertaken to determine, or to inform any person, whether any such actions are taken or omitted or events do occur or any other matters come to our attention after the date hereof. Our engagement with respect to the Series 2011B Bonds has concluded with their issuance, and we disclaim any obligation to update this letter.

We have assumed the genuineness of all documents and signatures presented to us (whether as originals or as copies) and the due and legal execution and delivery thereof by, and validity against, any parties other than the Authority. We have assumed, without undertaking to verify, the accuracy of the factual matters represented, warranted or certified in the documents, and of the legal conclusions contained in the opinions, referred to in the second and third paragraphs hereof. Furthermore, we have assumed compliance with all covenants and agreements contained in the Indenture, the Loan Agreement and the Tax Certificate, including (without limitation) covenants and agreements compliance with which is necessary to assure that future actions, omissions or events will not cause interest on the Series 2011B Bonds to be included in gross income for federal income tax purposes.

We call attention to the fact that the rights and obligations under the Series 2011B Bonds, the Indenture, the Loan Agreement and the Tax Certificate and their enforceability may be subject to bankruptcy, insolvency, reorganization, arrangement, fraudulent conveyance, moratorium and other laws elating to or affecting creditors’ rights, to the application of equitable principles, to the exercise of judicial discretion in appropriate cases and to the limitations on legal remedies against public authorities of the State of California. We express no opinion with respect to any indemnification, contribution, penalty, choice of law, choice of forum, waiver or severability provisions contained in the foregoing documents, nor do we express any opinion with respect to the state or quality of title to or interest in any of the real or personal property described in or as subject to the lien of the Indenture or the Loan Agreement or the accuracy or sufficiency of the description contained therein of, or the remedies available to enforce liens on, any such property.

Based on and subject to the foregoing, and in reliance thereon, as of the date hereof, we are of the following opinions:

1. The Series 2011B Bonds have been duly authorized, executed and delivered and constitute the valid, binding and enforceable limited obligations of the Authority.

2. The Indenture has been duly authorized, executed and delivered by, and constitutes the valid, binding and enforceable obligation of, the Authority. The Indenture creates a valid pledge, to secure the payment of the principal of and interest on the Series 2011B Bonds, of the Revenues and any

U.S. Bank National Association California Municipal Finance Authority [Closing Date] Page 3

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other amounts (including proceeds of the sale of the Series 2011B Bonds) held by the Trustee in any fund or account established pursuant to the Indenture, except the Rebate Fund, subject to the provisions of the Indenture permitting the application thereof for the purposes and on the terms and conditions set forth in the Indenture. The Indenture also creates a valid assignment to the Trustee, for the benefit of the holders from time to time of the Series 2011B Bonds, of the right, title and interest of the Authority in the Loan Agreement (to the extent more particularly described in the Indenture).

3. The Loan Agreement has been duly authorized, executed and delivered by, and constitutes a valid, binding and enforceable agreement of, the Authority.

4. The Series 2011B Bonds are not a lien or charge upon the funds or property of the Authority except to the extent of the aforementioned pledge and assignment. Neither the faith and credit nor the taxing power of the State of California or of any political subdivision thereof is pledged to the payment of the principal of or interest on the Series 2011B Bonds. The Series 2011B Bonds are not a debt of the State of California, and said State is not liable for the payment thereof.

5. Under existing laws, regulations, rulings and court decisions, assuming compliance with certain covenants described herein, interest on the Series 2011B Bonds is excludable from gross income for federal income tax purposes and is not treated as a specific item of tax preference for purposes of the alternative minimum tax imposed on individuals and corporations under the Internal Revenue Code of 1986, as amended or under the laws of the state of California. Interest on the Series 2011B Bonds will be excludable from gross income for purposes of the California personal and corporate income taxes. The interest may be subject to certain federal or California state taxes imposed only on certain corporations, including the corporate alternative minimum tax on a portion of that interest.

We express no opinion regarding other tax consequences related to the ownership or disposition of, or the accrual or receipt of interest on, the Series 2011B Bonds.

We assume no obligation to advise you of any changes in the foregoing subsequent to the delivery of this opinion.

Respectfully,

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APPENDIX E

BOOK-ENTRY ONLY SYSTEM

The information in this Appendix E concerning The Depository Trust Company, New York, New York (“DTC”) and DTC’s book-entry system has been obtained from DTC and the University, the Authority and the Underwriter take no responsibility for the accuracy thereof. The University, the Authority and the Underwriter cannot and do not give any assurances that DTC, Direct Participants or Indirect Participants will distribute to the Beneficial Owners (all as defined below): (a) payments of principal of, premium if any, and interest on (“Debt Service”) the Series 2011B Bonds; (b) confirmations of ownership interest in the Series 2011B Bonds; or (c) notices sent to DTC or Cede & Co., its nominee, as the registered owner of the Series 2011B Bonds, or that they will so do on a timely basis or that DTC, Direct Participants or Indirect Participants will act in the manner described in this Limited Offering Memorandum. The current “Rules” applicable to DTC are on file with the Securities and Exchange Commission and the current “Procedures” of DTC to be followed in dealing with DTC Participants are on file with DTC.

Neither the University, the Authority, the Underwriters nor the Trustee will have any responsibility or obligations to DTC, the Direct Participants, the Indirect Participants of DTC or the Beneficial Owners with respect to: (1) the accuracy of any records maintained by DTC or any Direct Participants or Indirect Participants of DTC; (2) the payment by DTC or any Direct Participants or Indirect Participants of DTC of any amount due to any Beneficial Owner in respect of the Debt Service on the Series 2011B Bonds; (3) the delivery by DTC or any Direct Participants or Indirect Participants of DTC of any notice to any Beneficial Owner that is required or permitted to be given to owners under the terms of the Indenture; or (4) any consent given or other action taken by DTC as registered owner of the Series 2011B Bonds.

1. DTC will act as securities depository for the Series 2011B Bonds (herein, the “Securities”). The Securities will be issued as fully-registered securities registered in the name of Cede & Co. (OTC’s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully registered Security certificate will be issued for each maturity of the Securities, each in the aggregate principal amount of such maturity, and will be deposited with DTC.

2. DTC, the world’s largest depository, is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 2.2 million issues of U.S. and non-U.S. equity, corporate and municipal debt issues, and money market instrument from over 100 countries that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities through electronic computerized book-entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC, in turn, is owned by a number of Direct Participants of DTC and Members of the National Securities Clearing Corporation, Fixed Income Clearing Corporation, and Emerging Markets Clearing Corporation (NSCC, FICC, and EMCC, also subsidiaries of DTCC), as well as by the New York Stock Exchange, Inc., the American Stock Exchange LLC, and the National Association of Securities

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Dealers, Inc. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”). DTC has Standard & Poor’s highest rating: AAA. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com and www.dtc.org.

3. Purchases of Securities under the DTC system must be made by or through Direct Participants, which will receive a credit for the Securities on DTC’s records. The ownership interest of each actual purchaser of each Security (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Securities are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Securities, except in the event that use of the book-entry system for the Securities is discontinued.

4. To facilitate subsequent transfers, all Securities deposited by Direct Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co. or such other name as may be requested by an authorized representative of DTC. The deposit of Securities with DTC and their registration in the name of Cede & Co. or such other nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Securities; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Securities are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers.

5. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Securities may wish to take certain steps to augment transmission to them of notices of significant events with respect to the Securities, such as redemptions, tenders, defaults, and proposed amendments to the security documents. For example, Beneficial Owners of Securities may wish to ascertain that the nominee holding the Securities for their benefit has agreed to obtain and transmit notices to Beneficial Owners, in the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of the notices be provided directly to them.

6. Redemption notices shall be sent to DTC. If less than all of the Securities within an issue are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed.

7. Neither DTC nor Cede & Co. (nor such other DTC nominee) will consent or vote with respect to the Securities unless authorized by a Direct Participant in accordance with DTC’s Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to Issuer as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts the Securities are credited on the record date (identified in a listing attached to the Omnibus Proxy).

8. Redemption proceeds, distributions, and dividend payments on the Securities will be made to Cede & Co., or such other nominee as may be requested by an authorized

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representative of DTC. DTC’s practice is to credit Direct Participants’ accounts, upon DTC’s receipt of funds and corresponding detail information from Issuer or Agent on payable date in accordance with their respective holdings shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts or customers in bearer form or registered in “street name,” and will be the responsibility of such Participant and not of DTC nor its nominee, Agent, or Issuer, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of Issuer or Agent, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants.

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

10. The University may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event, Security certificates will be printed and delivered to DTC.

Discontinuation of Book-Entry Only System; Payment to Beneficial Owners

In the event that the book-entry system described above is no longer used with respect to the Series 2011B Bonds, the provisions of the Indenture relating to place of payment, transfer and exchange of the Series 2011B Bonds, regulations with respect to exchanges and transfers, bond register, Series 2011B Bonds mutilated, destroyed or stolen, and evidence of signatures of Bond Owners and ownership of Series 2011B Bonds will govern the payment, registration, transfer, exchange and replacement of the Series 2011B Bonds.

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APPENDIX F

PROPOSED FORM OF CONTINUING DISCLOSURE AGREEMENT

APPENDIX F

PROPOSED FORM OF

CONTINUING DISCLOSURE AGREEMENT

THIS CONTINUING DISCLOSURE AGREEMENT, dated as of __________, 2011 (the “Agreement”), is made by and between Azusa Pacific University, a nonprofit religious corporation duly organized and validly existing under the laws of the State of California and qualified to do business in the State of California (together with its lawful successors and permitted assigns, the “University”), and U.S. Bank National Association, a national banking association duly organized and validly existing under the laws of the United States of America, with its place of business located in Los Angeles, California, as Trustee, for the benefit of the Holders and Beneficial Owners from time to time of the Californian Municipal Finance Authority Refunding Revenue Bonds (Azusa Pacific University Project) Series 2011B (the “Bonds”), authorized by Resolution No. __________ adopted by the California Municipal Finance Authority (the “Authority”) on _______________, 2011 (the “Bond Resolution”), under the circumstances set forth in the following recitals (with each capitalized term used but not otherwise defined herein having the meaning assigned to it in Section 1):

A. The Bonds are being issued by the Authority pursuant to an Indenture of Trust dated as of February 1, 2011 relating to the Bonds (the “Indenture”), between the Authority and the Trustee.

B. Pursuant to a Loan Agreement dated as of February 1, 2011 relating to the Bonds (the “Loan Agreement”), between the Authority and the University, the Authority will loan the proceeds derived from the sale of the Bonds to the University to refund certain outstanding bonds previously issued by the California Statewide Communities Development Authority to finance educational facilities for the University.

C. The University is required under the terms of the Loan Agreement to make payments to the Trustee for the account of the Authority in amounts and at times sufficient to pay the principal of, redemption premium (if any) and interest on the Bonds.

D. The Underwriter is required under the Rule not to purchase or sell the Bonds in a primary offering unless the Underwriter has reasonably determined that the University has undertaken in this Agreement to provide certain information in accordance with the provisions of the Rule.

NOW, THEREFORE, in consideration of the recitals and the mutual representations and agreements hereinafter contained, the University and the Trustee agree, in accordance with the provisions of the Rule, for the benefit of the Holders and Beneficial Owners from time to time of the Bonds, as set forth in this Agreement:

Section 1. Definitions and Interpretation. In addition to the words and terms defined elsewhere in this Agreement or in the Indenture, the following capitalized terms shall have the following meanings unless the context or use clearly indicates otherwise.

“Accounting Principles” means the accounting principles applied from time to time in the preparation of the University’s Audited Financial Statements.

“Annual Filing” means any Annual Information Filing provided by the University pursuant to, and as described in, Sections 2 and 3.

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“Audited Financial Statements” means the audited basic financial statements of the University, prepared in conformity with the Accounting Principles.

“Authorized Disclosure Representative” means the Chief Financial Officer of the University or an alternate or alternates, each of whom shall be designated by the University in a certificate to the Trustee, substantially in the form of Exhibit D, and have the same authority, duties and powers as such Authorized Disclosure Representative.

“Beneficial Owner” means any person that (a) has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Bonds (including persons holding Bonds through nominees, depositories or other intermediaries), or (b) is treated as the owner of any Bonds for federal income tax purposes.

“EMMA” means the Electronic Municipal Market Access system of the MSRB.

“Filing Date” means: (i) with respect to Annual Information described in Section 4 the last day of the ninth month following the end of each Fiscal Year (or the next preceding Business Day if that day is not a Business Day), beginning June 30, 2011, provided that the Filing Date for submission of Audited Financial Statements shall be each December 1 immediately succeeding a June 30; and (ii) with respect to Quarterly Information described in Section 4, the sixtieth day following each March 31, June 30, September 30 and December 31, as applicable (or the next preceding business day if that day is not a business day, beginning with the quarter ended March 31, 2011).

“Fiscal Year” means the fiscal year of the University, presently a 12-month period ending June 30, which may be changed by the University from time to time.

“Holder” means, with respect to the Bonds, the person in whose name a Bond is registered in accordance with the Indenture.

“Limited Offering Memorandum” means the Limited Offering Memorandum for the Bonds dated _____________, 2011.

“MSRB” means the Municipal Securities Rulemaking Board.

“Notice Address” means:

(a) as to the Trustee: U.S. Bank National Association 633 West Fifth Street, 24th Floor Los Angeles, California __________

Attention: Corporate Trust Department Telephone No. (213) 615-6002 Facsimile No. (213) _______

(b) as to the University: Azusa Pacific University 901 East Alosta Avenue Azusa, California 91702-7000

Attention: Chief Financial Officer Telephone No. (626) 815-4691 Facsimile No. (626) ______

or a different address as to which notice is given pursuant to the Loan Agreement or the Indenture.

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“Obligated Person” means, any person, including the issuer of municipal securities (such as the Bonds), who is generally or through an enterprise, fund or account of such person committed by contract or other arrangement to support payment of all or part of the obligations on the municipal securities being sold in an offering document (such as the Limited Offering Memorandum); the University is the only Obligated Person for the Bonds.

“Quarterly Filing” means any Quarterly Information Filing provided by the University pursuant to, and as described in, Sections 2 and 3.

“Rule” means Rule 15c2-12 prescribed by the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended.

“Specified Events” means the occurrence of any of the events, with respect to the Bonds, as set forth in Section 6.

“Underwriter” means George K. Baum & Company, the Original Purchaser of the Bonds and a “Participating Underwriter” with respect to the Bonds under the Rule.

The captions and headings in this Agreement are solely for convenience of reference and in no way define, limit or describe the scope or intent of any Sections, subsections, paragraphs, subparagraphs or clauses hereof. Reference to a Section means a section of this Agreement and to an Exhibit means an exhibit to this Agreement, unless otherwise indicated.

Section 2. Purpose of this Continuing Disclosure Agreement. Pursuant to the Loan Agreement, this Agreement is being signed and delivered by the University and the Trustee, for the benefit of the Owners and Beneficial Owners of the Bonds and in order to assist the Participating Underwriter in complying with the Rule. The University and the Trustee acknowledge that the Authority has undertaken no responsibility with respect to any Annual Filings, Quarterly Filings, reports, notices or disclosures provided or required under this Agreement, and has no liability to any Person, including any Owner or Beneficial Owner of the Bonds, with respect to the Rule.

Section 3. Provision of Annual and Quarterly Information; Audited Financial Statements.

(a) The University shall provide or cause to be provided not later than each applicable Filing Date to the MSRB Annual Filings and Quarterly Filings that are consistent with the requirements of Section 4. The Annual Filings and Quarterly Filings shall be submitted through the EMMA system and to the Trustee in an electronic format and contain such identifying information as is prescribed by the MSRB, and may be submitted as a single document or as separate documents comprising a package, and may cross-reference other information as provided in Section 4; provided that the Audited Financial Statements of the University may be submitted separately from the balance of the Annual Filing and shall not be submitted later than the December 1 immediately succeeding the end of the preceding fiscal year. If the University’s Fiscal Year changes, (i) it shall give notice of such change in the same manner as for a Specified Event under Section 6 and (ii) Audited Financial Statements shall thereafter be filed no later than 150 days following the end of each adjusted Fiscal Year.

(b) If the University is unable to provide to the MSRB an Annual Filing or Quarterly filing by the applicable Filing Date, the University shall, in a timely manner, send a notice to the MSRB in an electronic format as prescribed by the MSRB.

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Section 4. Content of Annual Information and Quarterly Financial Information.

(a) The University’s Annual Filing shall contain or include by reference the following: (i) Financial information and operating data of the type included in Appendix A to the Limited Offering Memorandum under the captions: “STUDENT ENROLLMENT,” “STUDENT APPLICATIONS, ACCEPTANCES, AND MATRICULATIONS,” “FINANCIAL MATTERS,” “Cash and Investments,” “Outstanding Indebtedness,” “Endowment,” “University’s Development Program,” and “Student Financial Aid,” and (ii) the Audited Financial Statements of the University utilizing Accounting Principles applicable to institutions of higher education as described in the Limited Offering Memorandum, except as may be modified from time to time and described in such financial statements

(b) Each Quarterly Filing shall contain or include by reference the following: (i) unaudited quarterly financial information for the preceding quarter of the type included in Appendix A to the Limited Offering Memorandum under the captions “FINANCIAL MATTERS,” “Cash and Investments,” “Outstanding Indebtedness” and “Endowment,” and (ii) copies of unaudited quarterly budgets prepared by the University for that quarter.

The foregoing shall not obligate the University to otherwise prepare or update projections of any financial information or operating data.

Any or all of the items listed above may be included by specific reference to other documents, including offering documents debt issues of the University, which have been submitted to the MSRB or the Securities and Exchange Commission. The University shall clearly identify each such other document so included by reference.

Section 5. Role of Trustee.

(a) Upon receipt of any Quarterly Filing or Annual Filing, including Audited Financial Statements, and from the University, the Trustee shall be entitled to assume that the University has provided, as applicable, the Annual Filing or Quarterly Filing to the MSRB. The Trustee shall have no responsibility for providing any Quarterly Filing or Annual Filing (including Audited Financial Statements) unless directed to do so by the University.

(b) If the Trustee has not received the Annual Filing for a Fiscal Year by its close of business on the fifteenth Business Day preceding the applicable Filing Date (whether a Filing Date in respect of Audited Financial Statements or a Filing Date in respect of other financial and operating data) for that Fiscal Year, the Trustee shall provide a notice to the Authorized Disclosure Representative, not later than its close of business on the next Business Day, substantially in the form of Exhibit A, by facsimile transmission (or other means similarly prompt) and by certified or registered mail, postage prepaid, return receipt requested. If the Trustee has not received that Annual Filing or Quarterly Filing, as applicable, by its close of business on the Filing Date, the Trustee shall provide a notice to the Authorized Disclosure Representative, not later than its close of business on the next Business Day, substantially in the form of Exhibit B, by facsimile transmission (or other means similarly prompt). The University shall be entitled to provide written evidence of the submission of the Annual Filing or Quarterly Filing in accordance with Section 3, including a certificate of the Authorized Disclosure Representative as to the relevant facts, and, if applicable, a written statement in an electronic format and containing such identifying information as prescribed by the MSRB regarding any failure to comply with Section 3. The Trustee shall be entitled to rely conclusively upon any written evidence provided by the University regarding the provision of that information to the MSRB. If, in any instance, the required information was not timely filed or the University fails to provide evidence, by 4:00 p.m., California time, on the second Business Day following the Filing Date, of its timely filing with MSRB, the Trustee shall send

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or cause to be sent promptly, but in any event not later than its close of business on the third Business Day following the Filing Date, a notice substantially in the form of Exhibit C, modified to reflect the pertinent facts, to the MSRB in an electronic format and containing such identifying information as prescribed by the MSRB. The Trustee shall promptly provide a copy of such notice to the University.

Section 6. Notice of Specified Events; Changes in Accounting Principles or Fiscal Year.

(a) The University agrees to provide or cause to be provided to the MSRB and to the Trustee in an electronic format and containing such identifying information as prescribed by the MSRB, in a timely manner but not later than ten business days after the occurrence of the event, notice of any of the following events with respect to the Bonds, as specified by the Rule:

(1) Principal and interest payment delinquencies;

(2) Non-payment related defaults, if material;

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

(4) Unscheduled draws on credit enhancements reflecting financial difficulties; (a)

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

(6) (Issuance of) Adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the security (i.e., the Bonds), or other material events affecting the tax status of the security;

(7) Modifications to rights of security holders, if material;

(8) Bond calls, if material, and tender offers; (b)

(9) Defeasances;

(10) Release, substitution, or sale of property securing repayment of the securities, if material; (c)

(11) Rating changes;

(12) Bankruptcy, insolvency, receivership or similar event of the Obligated Person; Note: For the purposes of the event identified in this subparagraph, the event is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent or similar officer for an Obligated Person in a proceeding under the U.S. Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the Obligated Person, or if such jurisdiction has been assumed by leaving the existing governmental body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement or liquidation by a court or

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governmental authority having supervision or jurisdiction over substantially all of the assets or business of the Obligated Person.

(13) The consummation of a merger, consolidation, or acquisition involving an Obligated Person or the sale of all or substantially all of the assets of the Obligated Person, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material; and

(14) Appointment of a successor or additional trustee or the change of name of a trustee, if material.

Note: (a) The University has not obtained or provided, and does not expect to obtain or provide, any credit

enhancements or credit or liquidity providers for the Bonds. (b) Any scheduled redemption of Bonds pursuant to mandatory sinking fund redemption requirements

does not constitute a specified event within the meaning of the Rule. (c) Repayment of the Bonds is not secured by a lien on any property capable of release or sale or for

which other property may be substituted

For the Specified Events described in Section 6(a) (2), (6, as applicable), (7), (8, as applicable), (10), (13) and (14), the University, as the Obilgated Person with respect to the Bonds, acknowledges that it must make a determination whether such Specified Event is material under applicable federal securities laws in order to determine whether a filing is required.

(b) The Trustee shall promptly notify the Authorized Disclosure Representative upon obtaining actual knowledge of the occurrence of any Specified Event (other than a nonpayment related default, the giving of a notice of optional redemption of any Bonds or defeasance of the Bonds or any provision thereof). The Trustee shall have no responsibility to file any notice of such Specified Events unless directed to do so by the University.

Section 7. Additional Information. Nothing in this Agreement shall be deemed to prevent the University from disseminating any other information, using the means of dissemination set forth in this Agreement or providing any other means of communication, or including any other information in any Annual Filing or Quarterly Filing or providing notice of the occurrence of an event, in addition to that which is required by this Agreement. If the University chooses to include any information in any document or notice of occurrence of an event in addition to that which is specifically required by this Agreement, the University shall have no obligation under this Agreement to update such information or include it in any future Annual Filing, Quarterly Filing or notice of occurrence of a Specified Event.

Section 8. Amendment. This Agreement may be amended, and noncompliance by the University with any provision of this Agreement may be waived, as may be necessary or appropriate to achieve its compliance with any applicable federal securities law or rule, to cure any ambiguity, inconsistency or formal defect or omission, and to address any change in circumstances arising from a change in legal requirements, change in law or change in the identity, nature or status of the University, or type of business conducted by the University. Any such amendment or waiver shall not be effective unless the University shall have received a written opinion of qualified independent special counsel selected by the University that this Agreement (as amended or taking into account such waiver) would have complied with the requirements of the Rule at the time of the primary offering of the Bonds, after taking into account any applicable amendments to or official interpretations of the Rule, as well as any

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change in circumstances. An Annual Filing or Quarterly filing containing any amended operating data or financial information shall explain, in narrative form, the reasons for any such amendment and the impact of the change on the type of operating data or financial information being provided.

Section 9. Term. The obligations of the University under this Agreement shall remain in effect only for such period that (a) the Bonds are outstanding in accordance with their terms and (b) the University remains an Obligated Person with respect to the Bonds within the meaning of the Rule, subject to the survival of certain provisions to the extent expressly provided in Section 12. The obligation of the University to provide Annual Filings and Quarterly Filings and notices of Specified Events set forth in Section 6 shall terminate, if and when the University no longer remains an Obligated Person with respect to the Bonds, provided that the University shall provide notice of such termination to the MSRB.

Section 10. University; Dissemination Agent. The University represents that it will be the only Obligated Person with respect to the Bonds at the time the Bonds are delivered by the Commission to the Underwriter. Either the University or the Trustee may, from time to time, appoint or engage an agent to act on its behalf in performing its obligations under this Agreement and may discharge any such agent, with or without appointing a successor; provided that neither the University nor the Trustee shall be relieved in any respect by appointment of an agent from primary liability for the performance of its obligations under this Agreement. An agent may resign by providing 30 days’ written notice to the University and the Trustee.

Section 11. Remedy for Breach. This Agreement shall be solely for the benefit of the Holders and Beneficial Owners from time to time of the Bonds. The exclusive remedy for any breach of this Agreement by the University shall be limited, to the extent permitted by law and as hereinafter provided, to a right of Holders and Beneficial Owners, or the Trustee, to cause proceedings in law or in equity to be instituted and maintained to obtain the specific performance by the University of its obligations hereunder in a court in _______ County, California. Any individual Holder or Beneficial Owner may institute and maintain, or cause to be instituted and maintained, such proceedings to require the University to provide or cause to be provided a pertinent filing if such a filing is due and has not been made. Any such proceedings to require the University to perform any other obligation under the Agreement (including any proceedings that contest the sufficiency of any pertinent filing) may be instituted and maintained only by the Trustee, which may institute and maintain any such proceedings in its discretion and shall do so, subject to the same conditions, protections, limitations and procedures that would apply under the Indenture if the breach were an Event of Default under the Indenture, at the direction of Holders of at least 25% in aggregate principal amount of the Bonds then outstanding. Any failure of the University to comply with the provisions of this Agreement shall not be a default or failure, or an Event of Default, under the Loan Agreement or the Indenture. No Person or entity shall be entitled to recover monetary damages under this Agreement.

Section 12. Performance by the Trustee; Compensation.

(a) Solely for the purpose of (i) defining the standards of care and performance applicable to the Trustee in the performance of its obligations under this Agreement, (ii) the manner of execution by the Trustee of those obligations, (iii) defining the manner in which, and the conditions under which, the Trustee may be required to take any action at the direction of Holders, including the condition that indemnification be provided, and (iv) matters of removal, resignation and succession of the Trustee under this Agreement, Article VII of the Indenture is hereby made applicable to this Agreement as if this Agreement were contained in the Indenture; provided that the Trustee shall have only such duties under this Agreement as are specifically set forth in this Agreement, and the University agrees to indemnify and hold harmless the Trustee, its officers, directors, employees and agents, from and against any loss,

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cost, expense or liability that it may incur arising out of or in the exercise or performance of its obligations under this Agreement, including any costs and expenses (including the reasonable compensation and the expenses and disbursements of its counsel and of all agents and other persons regularly in its employ) of defending any claim of liability, but excluding liabilities due to the negligence or bad faith of the Trustee. For purposes of this Agreement, the Trustee shall not be deemed to have actual knowledge of any event or occurrence unless an officer or other authorized person in the Trustee’s Corporate Trust Group shall have actual knowledge of that event or occurrence.

(b) The University agrees to pay to the Trustee from time to time reasonable compensation for services provided by the Trustee under this Agreement and to pay or reimburse the Trustee upon request for all reasonable expenses, disbursements and advances incurred or made in accordance with this Agreement or as a result of the University’s failure to perform its obligations hereunder (including the reasonable compensation and the expenses and disbursements of its counsel and of all agents and other persons regularly in its employ), except to the extent that any such expense, disbursement or advance is due to the negligence or bad faith of the Trustee.

(c) The obligations of the University under this Section shall survive resignation or removal of the Trustee and termination of other provisions of this Agreement pursuant to Section 9.

(d) The Trustee is a party to this Agreement for and on behalf of the Holders and Beneficial Owners of the Bonds and shall not be considered to be the agent of the University when performing any actions required to be taken by the Trustee under this Agreement.

(e) The Trustee shall not have any obligation under this Agreement to investigate or determine whether any filing or notice made under this Agreement complies with federal securities laws or rules.

Section 13. Notices. Except as otherwise expressly provided in this Agreement, it shall be sufficient service or giving of any notice to the parties hereto, if that notice is either mailed by first class mail, postage prepaid, addressed to the relevant party at its Notice Address, or transmitted by facsimile transmission addressed to the relevant party at its number for receipt of facsimile transmissions set forth in its Notice Address. The University and the Trustee may designate from time to time, by notice given hereunder, any further or different addresses (including facsimile transmission numbers) to which any subsequent notice shall be sent.

Section 14. Recordkeeping. The University shall maintain records of all Annual Filings, Quarterly Filings and notices of Specified Events and other events including the content of such disclosure, the names of the entities with whom such disclosures were filed and the date of filing such disclosure.

Section 15. Assignment. The University may assign its obligations under this Agreement only in connection with the assignment of its obligations under and in accordance with the provisions of any contractual commitment or other arrangement to support payment of all or any part of the Bonds, including without limitation the Loan Agreement; provided that the University shall not assign its obligations under this Agreement so long as it remains an Obligated Person with respect to the Bonds and except to the assignee of its obligations under any such contractual commitment or other arrangement to support payment of the Bonds. The University may assign its obligations under any such contractual commitment or other arrangement, without remaining primarily liable for the performance of those obligations, only if the assignee of the University assumes its obligations under this Agreement. Any assignment by the University of its obligations under this Agreement shall not be effective unless and until the

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assignee of the University shall have expressly assumed in writing, for the benefit of the Holders and Beneficial Owners from time to time of the Bonds, by an instrument in form and substance satisfactory to the Trustee, the obligations of the University under this Agreement or enters into a new agreement for purposes of the Rule that is substantially similar to the undertaking of the University under this Agreement.

Section 16. Beneficiaries. This Agreement shall inure solely to the benefit of the Authority, the University, the Trustee and the Holders and Beneficial Owners from time to time of the Bonds, and any official, employee or agent thereof acting for and on its behalf, and shall not create any rights in any other person or entity.

Section 17. Severability. In case any section or provision of this Agreement, or any covenant, stipulation, obligation, agreement, act or action, or part thereof made, assumed, entered into, or taken thereunder or any application thereof, is for any reason held to be illegal or invalid, such illegality or invalidity shall not affect the remainder thereof or any other section or provision thereof or any other covenant, stipulation, obligation, agreement, act or action, or part thereof made, assumed, entered into, or taken thereunder (except to the extent that such remainder or section or provision or other covenant, stipulation, obligation, agreement, act or action, or part thereof is wholly dependent for its operation on the provision determined to be invalid), which shall be construed and enforced as if such illegal or invalid portion were not contained therein, nor shall such illegality or invalidity of any application thereof affect any legal and valid application thereof, and each such section, provision, covenant, stipulation, obligation, agreement, act or action, or part thereof shall be deemed to be effective, operative, made, entered into or taken in the manner and to the full extent permitted by law.

Section 18. Counterparts. This Agreement may be signed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument.

Section 19. Governing Law. This Agreement shall be deemed to be an agreement made under the laws of the State of California and for all purposes shall be governed by and construed in accordance with the laws of the State of California.

(Remainder of Page Intentionally Left Blank)

S-1

IN WITNESS WHEREOF, the University and the Trustee have caused this Agreement to be duly signed in their respective names, all as of the date set forth above.


By: Chief Financial Officer

U.S. BANK NATIONAL ASSOCIATION, as Trustee

By: Authorized Signer

EXHIBIT A

$[Series 2011B Par Amount] California Municipal Finance Authority,


Series 2011B

NOTICE TO UNIVERSITY OF FAILURE TO FILE ANNUAL INFORMATION

TO: Azusa Pacific University 901 East Alosta Avenue Azusa, California 91702-7000 Attention: Chief financial Officer

The undersigned, as the trustee under the Indenture of Trust, dated as of February 1, 2011, securing the captioned bonds (the “Bonds”), and as a party to the Continuing Disclosure Agreement, dated as of February 1, 2011 (the “Agreement”), between the undersigned and Azusa Pacific University, a California nonprofit religious corporation (the “University”), hereby notifies you (with each capitalized term used but not defined herein having the meaning assigned to it in the Agreement) that the University, as of the date of this notice, has not provided or caused to be provided to the undersigned the Annual Filing that is required under the Agreement to be so provided not later than ____________________. The Annual Filing is required under the Agreement to be provided or caused to be provided both to the undersigned and to the MSRB not later than that date.

Dated: ____________________, 20___ U.S. Bank National Association

By: Title:

EXHIBIT B



Series 2011B

[SECOND] NOTICE TO UNIVERSITY OF FAILURE TO FILE [ANNUAL/QUARTERLY] INFORMATION

TO: Azusa Pacific University 901 East Alosta Avenue Azusa, California 91702-7000 Attention: Chief Financial Officer

The undersigned, as the trustee under the Indenture of Trust, dated as of February 1, 2011, securing the captioned bonds (the “Bonds”), and as a party to the Continuing Disclosure Agreement dated as of February 1, 2011 (the “Agreement”), between the undersigned and Azusa Pacific University, a California nonprofit religious corporation (the “University”), hereby notifies you (with each capitalized term used but not defined herein having the meaning assigned to it in the Agreement) that the University, as of the date of this notice, has not provided or caused to be provided to the undersigned the [Annual Information/Quarterly] that is required under the Agreement to be so provided not later than ____________________.

Please provide the required [Annual Filing/Quarterly] to the undersigned, together with written evidence as to whether that information has been provided to the MSRB and, if so, when it was provided. If, in any instance, the [Annual Filing/Quarterly Filing] will not be timely provided to the MSRB in accordance with Section 3 of the Agreement, you may submit a written statement in an electronic format and containing such identifying information as prescribed by the MSRB regarding the University’s failure to comply that would be provided to the MSRB with the notice that the undersigned must give of that failure to comply under Section 4 of the Agreement. Any such written evidence or statement must be received by the undersigned not later than 4:00 p.m., ___________, California time, on _______________, 20___. If the undersigned has not received written evidence by that time that a timely filing was made, a notice will be filed promptly thereafter with the MSRB, substantially in the form attached as Exhibit C to the Agreement.


By: Title:

EXHIBIT C



Series 2011B

NOTICE TO MSRB OF FAILURE TO TIMELY FILE [ANNUAL/QUARTERLY] INFORMATION

TO: MSRB

The undersigned, as the trustee under the Indenture of Trust, dated as of February 1, 2011, securing the captioned bonds (the “Bonds”), and as a party to the Continuing Disclosure Agreement, dated as of _______________, 20__ (the “Agreement”), between the undersigned and Azusa Pacific University, a California nonprofit corporation (the “University”), hereby notifies you (with each capitalized term used but not defined herein having the meaning assigned to it in the Agreement) that:

[1. The University, as of the date of this notice, has not provided or caused to be provided to the Trustee the [Annual Information for its Fiscal Year that ended June 30/Quarterly Information for its Quarter that ended [March 31/June 30/September 31/December 31]] and has not provided any written evidence to the Trustee concerning the timeliness of its [Annual/Quarterly] Filing with the MSRB. That [Annual/Quarterly] Filing was required under the Agreement to be provided to the Trustee and the MSRB not later than _______________]

[1. The University provided or caused to be provided the [Annual/Quarterly] Filing that was required to be provided to the MSRB not later than _______________, 20__, to the MSRB on ______________, 20__.]

[2. The University has provided the attached statement concerning its failure to provide or cause to be provided the [Annual/Quarterly] Filing in accordance with the Agreement. The Trustee does not assume any responsibility for the accuracy or completeness of that statement and has not undertaken, and will not undertake, any investigation to determine its accuracy or completeness.]


By: Title: cc:

EXHIBIT D



Series 2011B

DESIGNATION OF AUTHORIZED DISCLOSURE REPRESENTATIVE

To: U.S. Bank National Association 633 West Fifth Street, 24th Floor Los Angeles, California __________ Attention: Corporate Trust Department

The undersigned hereby designates, pursuant to the Continuing Disclosure Agreement dated as of February 1, 2011, the individuals listed below as Authorized Disclosure Representative and Alternate[s], respectively, and certifies that the signatures opposite the name of each individual is the true signature of that individual.

Authorized Disclosure Representative Signature

Alternate

_________________________________ Name and Title

Alternate

_________________________________ Name and Title


Dated:___________________, 20__ By: Chief Financial Officer

G-1

APPENDIX G

PROPOSED FORM OF SERIES 2011B INDENTURE

INDENTURE OF TRUST

by and between

CALIFORNIA MUNICIPAL FINANCE AUTHORITY

and

U.S. BANK NATIONAL ASSOCIATION,

as Trustee

Dated as of February 1, 2011

Relating to the Issuance of

$[PAR] CALIFORNIA MUNICIPAL FINANCE AUTHORITY

REFUNDING REVENUE BONDS (AZUSA PACIFIC UNIVERSITY PROJECT)

SERIES 2011B

TABLE OF CONTENTS

Page

ARTICLE I DEFINITIONS 4

Section 1.01. Defined Terms.................................................................................................. 4 Section 1.02. Rules of Construction.................................................................................... 15

ARTICLE II THE BONDS 15

Section 2.01. Authorized Amount of Bonds....................................................................... 15 Section 2.02. Issuance of Bonds .......................................................................................... 15 Section 2.03. Interest Rates on Bonds ................................................................................ 16 Section 2.04. Execution; Limited Obligation..................................................................... 17 Section 2.05. Certificate of Authentication ........................................................................ 18 Section 2.06. Form of Bonds................................................................................................ 18 Section 2.07. Delivery of Bonds........................................................................................... 18 Section 2.08. Mutilated, Lost, Stolen or Destroyed Bonds ............................................... 19 Section 2.09. Exchangeability and Transfer of Bonds; Persons Treated as

Owners .......................................................................................................... 19 Section 2.10. Cancellation.................................................................................................... 21 Section 2.11. Ratably Secured............................................................................................. 21 Section 2.12. Redemption of Bonds; Partial Redemption of Bonds. ............................... 21 Section 2.13. 21 Section 2.14. 21 Section 2.13 Notice of Redemption..................................................................................... 24 Section 2.14. Book Entry System........................................................................................ 25

ARTICLE III SECURITY 26

Section 3.01. Security........................................................................................................... 26 Section 3.02. Payment of Bonds and Performance of Covenants .................................... 26 Section 3.03. Authority ........................................................................................................ 26 Section 3.04. Power to Issue Bonds and make Pledge and Assignment .......................... 27 Section 3.05. No Litigation .................................................................................................. 27 Section 3.06. Further Assurances ....................................................................................... 27 Section 3.07. No Other Encumbrances .............................................................................. 27 Section 3.08. No Personal Liability..................................................................................... 28

ARTICLE IV FUNDS 28

Section 4.01. Establishment and Use of Bond Fund ......................................................... 28 Section 4.02. Establishment and Use of the Costs of Issuance Fund and the

Refunding Escrow Fund.............................................................................. 29 Section 4.03. Establishment and Use of Series 2011B Debt Service Reserve Fund ....... 29 Section 4.04. Deposit of Bond Proceeds ............................................................................. 29 Section 4.05. Records ........................................................................................................... 30 Section 4.06. Investment of Refunding Escrow Fund, Series 2011B Debt Service

Reserve Fund and Bond Fund .................................................................... 30

TABLE OF CONTENTS

Page

ii

Section 4.07. Arbitrage; Rebate Fund................................................................................ 31 Section 4.08. Non-presentment of Bonds ........................................................................... 31 Section 4.09. Additional Payments ..................................................................................... 32

ARTICLE V DISCHARGE OF LIEN 32

Section 5.01. Discharge of Lien and Security Interest...................................................... 32 Section 5.02. Provision for Payment of Bonds................................................................... 32 Section 5.03. Discharge of this Indenture .......................................................................... 33

ARTICLE VI DEFAULT PROVISIONS AND REMEDIES 34

Section 6.01. Events of Default............................................................................................ 34 Section 6.02. Acceleration.................................................................................................... 34 Section 6.03. Other Remedies; Rights of Holders ............................................................. 35 Section 6.04. Right of Holders to Direct Proceedings ....................................................... 35 Section 6.05. Waiver ............................................................................................................ 36 Section 6.06. Application of Monies ................................................................................... 36

ARTICLE VII THE TRUSTEE; THE PAYING AGENT AND THE REGISTRAR 38

Section 7.01. Appointment of Trustee ................................................................................ 38 Section 7.02. Compensation and Indemnification of Trustee, Paying Agent and

Registrar; Trustee’s Prior Claim ............................................................... 42 Section 7.03. Intervention in Litigation.............................................................................. 43 Section 7.04. Resignation; Successor Trustees .................................................................. 43 Section 7.05. Removal of Trustee........................................................................................ 43 Section 7.06. Paying Agent .................................................................................................. 44 Section 7.07. Qualifications of Paying Agent..................................................................... 44 Section 7.08. Resignation of Paying Agent; Removal; Successors................................... 45 Section 7.09. Instruments of Holders ................................................................................. 45 Section 7.10. Power to Appoint Co-Trustees ..................................................................... 46 Section 7.11. [INTENTIONALLY OMITTED] ................................................................ 48 Section 7.12. Several Capacities.......................................................................................... 48 Section 7.13. Trustee Not Responsible for Duties of Registrar and Paying Agent ........ 48 Section 7.14. Cooperation of the Issuer.............................................................................. 48 Section 7.15. Cooperation of the Trustee, the Registrar and the Paying Agent............. 48

ARTICLE VIII AMENDMENTS, SUPPLEMENTAL INDENTURES 48

Section 8.01. Supplemental Indentures.............................................................................. 48 Section 8.02. Amendments to Indenture; Consent of Holders the Borrower................. 50 Section 8.03. Amendments to the Agreement Not Requiring Consent of Holders ........ 50 Section 8.04. Amendments to the Loan Agreement Requiring Consent of Holders...... 51

TABLE OF CONTENTS

Page

iii

Section 8.05. Notice to and Consent of Holders................................................................. 51 Section 8.06. Approving Opinion Required....................................................................... 52

ARTICLE IX MISCELLANEOUS 52

Section 9.01. Right of Trustee to Pay Taxes and Other Charges .................................... 52 Section 9.02. Limitation of Rights ...................................................................................... 52 Section 9.03. Severability..................................................................................................... 52 Section 9.04. Notices............................................................................................................. 52 Section 9.05. Payments Due on Non-Business Days.......................................................... 53 Section 9.06. Binding Effect ................................................................................................ 54 Section 9.07. Captions.......................................................................................................... 54 Section 9.08. Governing Law .............................................................................................. 54 Section 9.09. Limited Liability of Issuer ............................................................................ 54 Section 9.10. Notices to Rating Agency .............................................................................. 54 Section 9.11. Execution in Counterparts............................................................................ 55 Section 9.12. Attorney's Fees............................................................................................... 55 Section 9.13. Patriot Act Compliance................................................................................. 55

EXHIBIT A Form of Bond EXHIBIT B Form of Investor Letter A-1

INDENTURE OF TRUST

THIS INDENTURE OF TRUST (the “Indenture”), dated as of February 1, 2011, is made and entered into by and between CALIFORNIA MUNICIPAL FINANCE AUTHORITY, a public entity of the State of California (the “Issuer”), and U.S. BANK NATIONAL ASSOCIATION, as trustee, and its successors and assignees in trust (the “Trustee”).

W I T N E S S E T H:

WHEREAS, pursuant Chapter 5 of Division 7 of Title 1 of the Government Code of the State of California (the “Act”), certain public agencies (the “Members”) have entered into a Joint Exercise of Powers Agreement Relating to the California Municipal Finance Authority, dated as of January 1, 2004 (the “Joint Powers Agreement”), in order to form the Issuer for the purpose of promoting economic, cultural and community development, and in order to exercise any powers common to the Members, including the issuance of bonds, notes or other evidences of indebtedness; and

WHEREAS, the City of Azusa (the “City”), has become a Member of the Issuer in order to facilitate the promotion of economic, cultural and community development activities in the City, including the financing of projects by the Issuer; and

WHEREAS, Azusa Pacific University, a California nonprofit religious corporation (the “Borrower’) owns and operates an institution for higher education in the City; and

WHEREAS, there have been previously issued by the California Statewide Communities Development Authority (“CSCDA”) certain bonds for the benefit of the Borrower designated as Variable Rate Demand Refunding Revenue Bonds (Azusa Pacific University Project) Series 2007, in an aggregate principal amount of $140,340,000 (the “Series 2007 Bonds”), pursuant to an Indenture of Trust, dated as of July 1, 2007 (the “2007 Indenture”) between the CSCDA and U.S. Bank National Association, as trustee for the Series 2007 Bonds (the “2007 Trustee”); and

WHEREAS, the Borrower has applied for the assistance of the Issuer in redeeming and refunding the Series 2007 Bonds in full (the “Refunding Project”) in order to reduce interest rates and achieve improved economics for the benefit of the Borrower and its operations; and

WHEREAS, the facilities financed with the Series 2007 Bonds are located within the territorial limits of the City; and

WHEREAS, the Issuer has determined that the Refunding Project is permitted under the Joint Powers Agreement, will achieve the objects and purposes for which the Issuer was created and has further determined to undertake the Refunding Project; and

WHEREAS, in order to pay a portion of the costs of the Refunding Project, the Issuer has authorized the issuance pursuant to this Indenture of its Refunding Revenue Bonds (Azusa

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Pacific University Project) Series 2011B, in an aggregate principal amount of $______ (the “Series 2011B Bonds” and collectively, with any Additional Bonds issued under this Indenture, the “Bonds”); and

WHEREAS, the Series 2011B Bonds will be purchased for resale by George K Baum & Company (the “Underwriter”) pursuant to a Bond Purchase Agreement, dated as of January __, 2011 (the “Bond Purchase Agreement”) among the Issuer, the Borrower and the Underwriter; and

WHEREAS, in order to pay the balance of the costs of the Refunding Project, the Issuer has authorized the issuance pursuant to an Indenture of Trust, dated as of February 1, 2011 (the “Series 2011A Indenture”), between the Issuer and the Trustee, of its Variable Rate Demand Refunding Revenue Bonds (Azusa Pacific University Project) Series 2011A, in an aggregate principal amount of $70,000,000 (the “Series 2011A Bonds”); and

WHEREAS, the Series 2011A Bonds will be purchased by Wells Fargo, Bank National Association (the “Bank”) pursuant to a Bond Purchase Agreement, dated as of January __, 2011 (the “Series 2011A Bond Purchase Agreement”), among the Issuer, the Borrower and the Bank; and

WHEREAS, the Issuer has undertaken to finance and refinance a portion of the Costs of

the Refunding Project by making the loan of the proceeds derived from the sale of the Series 2011B Bonds to the Borrower pursuant to a Loan Agreement, of even date herewith (the “Loan Agreement”), between the Issuer and the Borrower; and

WHEREAS, the Issuer has undertaken to finance and refinance the balance of the Costs of the Refunding Project by making the loan of the proceeds derived from the sale of the Series 2011A Bonds to the Borrower pursuant to a Loan Agreement, of even date herewith (the “Series 2011A Loan Agreement”), between the Issuer and the Borrower; and

WHEREAS, the Borrower’s obligations to repay the loan are evidenced by the Loan Agreement under which the Borrower is required to make Repayment Installments sufficient to pay when due the principal of, premium, if any, and interest on, the Bonds; and

WHEREAS, it has been determined that the estimated amount necessary to finance the a portion of the cost of the Refunding Project, including necessary expenses incidental to the issuance of the Series 2011B Bonds, will require the issuance, sale and delivery of Series 2011B Bonds in the aggregate principal amount of $__________, as hereinafter provided; and

WHEREAS, all things necessary to make the Bonds when authenticated by the Trustee and issued as in this Indenture provided, the valid, binding and legal obligations of the Issuer according to the import thereof, and to constitute this Indenture a valid assignment and pledge of

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the payments under the Loan Agreement (except for “Reserved Rights” as hereinafter defined) for payment of the principal of, premium, if any, and interest on the Bonds, and to constitute this Indenture a valid assignment of the rights of the Issuer under the Loan Agreement except as otherwise stated herein, have been done and performed, and the creation, execution and delivery of this Indenture, and the issuance of the Bonds, subject to the terms hereof, have in all respects been duly authorized; and

WHEREAS, all acts and proceedings required by law necessary to make the Bonds, when executed by the Issuer, authenticated and delivered by the Trustee and duly issued, the valid, binding and legal limited obligations of the Issuer, and to constitute this Indenture a valid and binding agreement for the uses and purposes herein set forth in accordance with its terms, have been done and taken, and the execution and delivery of the Indenture have been in all respects duly authorized.

NOW, THEREFORE, THIS INDENTURE WITNESSETH, that to secure the payment of principal of, redemption premium, if any, and interest on the Bonds and any other cost or pecuniary liability of the Issuer relating to the Bonds or any proceeding, document or certification incidental to the issuance of the Bonds according to their true intent and meaning, and all other amounts due from time to time under this Indenture, including those due to the Trustee, to secure the performance and observance of all of the covenants, agreements, obligations and conditions contained in the Bonds and in this Indenture, and to declare the terms and conditions upon and subject to which the Bonds are and are intended to be issued, held, secured and enforced, and as collateral trustee for each payee and obligee thereunder to secure the payment of all amounts due from time to time by the Borrower under any other Bond Document, and in consideration of the premises and the acceptance by the Trustee of the trusts created herein and of the purchase and acceptance of the Bonds by the Holders and for other good and valuable consideration, the receipt of which is acknowledged, the Issuer has executed and delivered this Indenture and absolutely and irrevocably pledges and assigns to the Trustee and to its successors in trust, and grants an security interest in, on the basis set forth herein, and its and their assigns, all right, title and interest of the Issuer in and to the Trust Estate as defined in Section 1.01;

TO HAVE AND TO HOLD unto the Trustee and its successors in trust and its and their assigns forever;

BUT IN TRUST, NEVERTHELESS, and subject to the provisions hereof,

(a) for the equal and proportionate benefit, security and protection of all Bonds,

(b) for the enforcement of the payment of the principal of, redemption premium, if any, and interest on the Bonds, and all other amounts due from time to time

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under this Indenture, including those due to the Trustee, when payable, according to the true intent and meaning thereof and of this Indenture, and

(c) to secure the performance and observance of and compliance with the covenants, agreements, obligations, terms and conditions of this Indenture and the other Bond Documents; provided, however, that payments required to be made

in each case, without preference, priority or distinction, as to lien or otherwise except as provided herein, of any one Bond over any other by reason of designation, number, date of the Bonds or of authorization, issuance, sale, execution, authentication, delivery or maturity thereof, or otherwise, so that each Bond and all Bonds shall have the same right, lien and privilege under this Indenture and shall be secured equally and proportionately by this Indenture, it being intended that the lien and security of this Indenture shall take effect from the date hereof, without regard to the date of the actual issue, sale or disposition of the Bonds, as though upon that date all of the Bonds were actually issued, sold and delivered to purchasers for value; provided, however, that, upon satisfaction of and in accordance with the provisions of Article V, the rights assigned hereby shall cease, determine and be void to the extent described therein; otherwise, such rights shall be and remain in full force and effect;

IT IS DECLARED that all Bonds issued under and secured by this Indenture are to be issued, authenticated and delivered, and that all moneys assigned or pledged hereby are to be dealt with and disposed of under, upon and subject to, the terms, conditions, stipulations, covenants, agreements, obligations, trusts, uses and purposes provided in this Indenture; and the Issuer has agreed and covenanted, and agrees and covenants with the Trustee and with each and all Holders, as follows:

ARTICLE I

DEFINITIONS

Section 1.01. Defined Terms. In addition to terms defined elsewhere in this Indenture, the following words and terms as used in this Indenture and the preambles hereto shall have the following meanings unless the context or use clearly indicates another or different meaning or intent.

“Act” means the Joint Exercise of Powers Act, constituting Chapter 5 of Division 7 of Title 1 (commencing with Section 6500) of the California Government Code.

“Act of Bankruptcy” means any of the following events:

(i) The Borrower (or any other Person obligated, as guarantor or otherwise, to make payments on the Bonds or under the Loan Agreement or the Reimbursement Agreement or an “affiliate” of the Borrower as defined in

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Bankruptcy Code § 101(2)) or the Issuer shall (1) apply for or consent to the appointment of, or the taking of possession by, a receiver, custodian, trustee, liquidator or the like of the Borrower (or such other Person) or the Issuer or of all or any substantial part of their respective property, (2) commence a voluntary case under the Bankruptcy Code, (3) file a petition seeking to take advantage of any other law relating to bankruptcy, insolvency, reorganization, winding-up or composition or adjustment of debts; or

(ii) A proceeding or case shall be commenced, without the application or consent of the Borrower (or any other Person obligated, as guarantor or otherwise, to make payments on the Bonds or under the Loan Agreement or the Reimbursement Agreement or an “affiliate” of the Borrower as defined in Bankruptcy Code § 101(2)) or the Issuer in any court of competent jurisdiction, seeking (1) the liquidation, reorganization, dissolution, winding-up, or composition or adjustment of debts, of the Borrower (or any such other Person) or the Issuer, (2) the appointment of a trustee, receiver, custodian, liquidator or the like of the Borrower (or any such other Person), the Issuer or of all or any substantial part of their respective property, or (3) similar relief in respect of the Borrower (or any such other Person) or the Issuer under any law relating to bankruptcy, insolvency, reorganization, winding-up or composition or adjustment of debts.

“Additional Bonds” means Bonds issued under Section 2.01 of this Indenture and Section 8.15 of the Loan Agreement in addition to the Series 2011B Bonds.

“Approving Opinion” shall mean, with respect to any action relating to the Bonds, the occurrence of which requires an Opinion of Counsel, delivered by Bond Counsel, to the effect that such action (a) is permitted by this Indenture and the Act and (b) will not adversely affect the exclusion of interest on the Bonds from gross income of the Holders for purposes of federal income taxation.

“Authorized Denomination” means (a) a minimum principal amount of $250,000, and any integrals of $5,000 in excess thereof unless the Series 2011B Bonds (without credit enhancement, unless such credit enhancement extends to the maturity or redemption of the Series 2011B Bonds) are rated “A3,” “A-,” “A-” or higher by Moody’s, S&P or Fitch, respectively, or any other nationally recognized rating agency approved by the Authority and (b) if so rated, the principal amount of $5,000 and any integrals of $5,000 in excess thereof

“Bank” has the meaning given to such term in the Series 2011A Indenture.

“Bankruptcy Code” means Title 11 of the United States Code, as amended, and any successor statute or statutes having substantially the same function.

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“Beneficial Owner” means the Person in whose name a Bond is recorded as beneficial owner of such Bond by the Securities Depository or a Participant or an Indirect Participant on the records of such Securities Depository, Participant or Indirect Participant, as the case may be, or such Person’s subrogee.

“Bond” or “Bonds” means the Series 2011B Bonds and any Additional Bonds issued under this Indenture.

“Bond Counsel” means an attorney, or firm of attorneys, nationally recognized and experienced in legal work relating to the financing of facilities through the issuance of tax-exempt bonds.

“Bond Documents” means collectively this Indenture, the Loan Agreement, the Series 2011B Bond Purchase Agreement, the Security Agreement, the Intercreditor Agreement, the Bonds, the Series 2011A Bonds, the Series 2011A Indenture, the Series 2011A Loan Agreement, the Continuing Covenant Agreement, the Tax Certificate and, if any Series 2011A Bonds are issued with a Credit Facility for the benefit of such Series 2011A Bonds, the Reimbursement Agreement for such Credit Facility, and any and all future renewals and extensions or restatements of, or amendments or supplements to, any of the foregoing.

“Bond Fund” means the fund of that name created pursuant to Section 4.01.

“Bond Proceeds” has the meaning ascribed to such term in the Loan Agreement.

“Book Entry System” means a book entry system established and operated for the recordation of Beneficial Owners of the Bonds pursuant to Section 2.14.

“Borrower” means Azusa Pacific University, a California nonprofit religious corporation and its successors and assigns.

“Borrower Agent” has the meaning set forth in Section 7.02.

“Borrower Representative” has the meaning ascribed to such term in the Loan Agreement.

“Business Day” means any day on which (a) the offices of the Trustee, the Paying Agent, the Registrar, are each open for business, (b) the Federal Reserve System is operation, (c) the New York Stock Exchange is not closed and (d) banks in California and in New York are open for business.

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“Code” means the Internal Revenue Code of 1986, as amended, and the rulings and regulations (including temporary and proposed regulations) promulgated thereunder or under the Internal Revenue Code of 1954, as amended.

“Continuing Covenant Agreement” means, during the Initial Period, the Continuing Covenant Agreement dated as of February 1, 2011 between the Borrower and the Bank, as the same may be amended from time to time, and during any Index Interest Rate Period (as such term is defined in the Series 2011A Indenture) other than the Initial Period (as such term is defined in the Series 2011A Indenture), means any agreement between the Borrower and the Bank which may be designated as the Continuing Covenant Agreement.

“Costs of Issuance Fund” means the fund of that name created pursuant to Section 4.02.

“Costs of the Refunding Project” has the meaning ascribed to such term in the Loan Agreement.

“Counsel” means an attorney, or firm of attorneys, admitted to practice law before the highest court of any state in the United States of America or the District of Columbia, including any Bond Counsel.

“CSCDA” means the California Statewide Communities Development Authority as issuer of the Series 2007 Bonds.

“Dated Date” means February 1, 2011.

“Eligible Account” means an account that is either (a) maintained with a federal or state-chartered depository institution or trust company that has a short-term debt rating issued by S&P of at least “A-2” (or, if no short-term debt rating, a long-term debt rating of at least “BBB+”; or (b) maintained with the corporate trust department of a federal depository institution or state-chartered depository institution subject to regulations regarding fiduciary funds on deposit, which, in either case, has corporate trust powers and is acting in its fiduciary capacity.

“Event of Default” means any of the events specified in Section 6.01.

“Facilities” means the improvements of the Borrower financed with the proceeds of the Series 2007 Bonds.

“Fitch” means Fitch, Inc., a corporation organized and existing under the laws of the State of Delaware, its successors and assigns and, if such corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, “Fitch” shall be deemed to refer to any other nationally recognized securities rating agency designated by the Borrower by notice to the Issuer and the Trustee.

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“Government Obligations” means (i) direct obligations of the United States of America for the full and timely payment of which the full faith and credit of the United States of America is pledged, and (ii) obligations issued by a Person controlled or supervised by and acting as an instrumentality of the United States of America, the full and timely payment of the principal of, premium, if any, and interest on which is fully guaranteed as a full faith and credit obligation of the United States of America (including any securities described in (i) or (ii) issued or held in book-entry form on the books of the Department of the Treasury of the United States of America), which obligations, in either case, are not subject to redemption prior to maturity.

“Holder” means the Person who shall be the registered owner of any Bond.

“Indenture” means this Indenture of Trust, as the same may be amended or supplemented from time to time as permitted hereby.

“Indirect Participant” means a broker-dealer, bank or other financial institution for which the Securities Depository holds Bonds as a securities depository through a Participant.

“Intercreditor Agreement” means the Intercreditor and Collateral Agency Agreement, dated as of February , 2011, among U.S. Bank National Association, as Collateral Agent, the Trustee, the Series 2011A Trustee, the Bank, the Lender and the Swap Provider, regarding the Collateral, as the same may be amended, supplemented and modified from time to time.

“Interest Payment Date” means each Semiannual Interest Payment Date.

“Issue Date” means the date on which the Bonds are delivered to the purchaser or purchasers thereof upon original issuance.

“Issuer” means the California Municipal Finance Authority, or its successors and assigns, a joint exercise of powers authority formed by the Joint Exercise of Powers Agreement pursuant to the provisions of the Act.

“Issuer Issuance Fee” means a combined Issuer Issuance Fee for the Series 2011A Bonds and the Series 2011B Bonds equal to $100,000 in the aggregate, allocated between the Series 2011A Bonds and the Series 2011B Bonds based on the relative aggregate principal amount of each Series.

“Issuer Annual Fee” means 1.5 basis points times the aggregate principal amount of the Bonds Outstanding from time to time.

“Issuer Representative” has the meaning assigned to such term in the Loan Agreement.

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“Lender” means Wells Fargo Bank, National Association in its capacity as lender under that certain Credit Agreement between the Borrower and Wells Fargo Bank, National Association.

“Loan Agreement” means the Loan Agreement dated as of February 1, 2011, between the Issuer and the Borrower, and any modifications, amendments and supplements thereto permitted hereunder.

“Local Time” means Eastern Time (daylight or standard, as applicable) in New York, New York.

“Maturity Date” means the scheduled maturity date of any Bond.

“Moody’s” means Moody’s Investors Service, Inc., a corporation organized and existing under the laws of the State of Delaware, its successors and assigns and, if such corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, “Moody’s” shall be deemed to refer to any other nationally recognized securities rating agency designated by the Borrower by notice to the Issuer and the Trustee.

“Opinion of Counsel” means any opinion of Counsel delivered pursuant to this Indenture. Each such opinion shall be addressed to the Trustee, the Borrower, the Issuer and the Paying Agent.

“Outstanding” means, when used with reference to the Bonds at any date as of which the amount of outstanding Bonds is to be determined, all Bonds that have been authenticated and delivered by the Trustee hereunder, except:

(a) Bonds cancelled or delivered for cancellation at or prior to such date;

(b) Bonds deemed to be paid in accordance with Section 5.02;

(c) Bonds in lieu of which others have been authenticated under Sections 2.08, 2.09 and 2.10; and

(d) For purposes of any consent, request, demand, authorization, direction, notice, waiver or other action to be taken by the Holders of a specified percentage of Outstanding Bonds hereunder, all Bonds held by or for the account of the Issuer, the Borrower or any affiliate of the Borrower; provided, however, that for purposes of any such consent, request, demand, authorization, direction, notice, waiver or action the Trustee shall be obligated to consider as not being outstanding only Bonds known by the Trustee by actual notice thereof to be so held; provided, further, that if all of the Bonds are at any time held by or for the account of the Borrower or any affiliate of the

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Borrower, then such Bonds shall be deemed to be Outstanding at such time for the purposes of this subparagraph (d).

“Participant” means a broker-dealer, bank or other financial institution for which the Securities Depository holds Bonds as a securities depository.

“Paying Agent” means U.S. Bank National Association, and its successors appointed and serving under this Indenture.

“Permitted Investments” means any of the following which at the time of investment are legal investments under the laws of the State for the monies proposed to be invested therein:

(a) bonds or obligations of the State, or of any county, municipality or political subdivision of the State;

(b) bonds or other obligations of the United States or subsidiary corporations of the United States government which are fully guaranteed by such government;

(c) obligations of agencies of the United States government issued by the Federal National Mortgage Association, Federal Home Loan Mortgage Association, Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank and the Central Bank for Cooperatives;

(d) bonds or other obligations issued by any public housing agency or municipality in the United States, which such bonds or obligations are fully secured as to the payment of both principal and interest by a pledge of annual contributions under an annual contributions contract or contracts with the United States government, or project notes issued by any public housing agency, urban renewal agency, or municipality in the United States and secured as to payment of both principal and interest by a requisition, loan, or payment agreement with the United States government;

(e) U.S. dollar denominated deposit accounts, federal funds and broker’s acceptances with domestic commercial banks (including the Trustee and its affiliates) which have a rating on their short term certificates of deposit on the date of purchase of “P-1” by Moody’s and “A-1” or “A-1 Plus” by S&P and maturing no more than 360 days after the date of purchase; provided that ratings on holding companies are not considered as the rating of the bank;

(f) investments in a money market fund rated “AAAm” or “AAAm-G” or better by S&P, including any such money market fund from which the Trustee or its affiliates receive fees for services to such fund;

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(g) Investment agreements with providers having a rating, or guaranteed by an entity having a rating, of at least A plus by S&P or A1 by Moody’s at the time the investment agreement is executed;

(h) Repurchase agreements secured by obligations listed in (a) through (d) above with providers having a rating of at lease “A” by two of the three following nationally recognized rating agencies: S&P, Moody’s or Fitch.

(i) any other investments to the extent at the time permitted by then applicable law for the investment of public funds.

“Person” means any natural person, firm, partnership, association, corporation, limited liability company or public body.

“Principal Amount” means the outstanding principal amount of the Bonds.

“Qualified Buyer” means (1) a “Qualified Institutional Buyer” as defined in Rule 144A promulgated under the Securities Act of 1933, as in effect on the date hereof (the “Securities Act”); (2) an entity that is directly or indirectly wholly owned or controlled by the purchaser/bondholder representative (being a financial institution described in (1) above); (3) an entity all of the investors in which are described in (1) or (2) above; (4) a custodian or trustee for a party described in (1) or (2) above and (5) only in connection with an initial investment in the Series 2011B Bonds and not as any subsequent transferee, an individual investor described in Rule 501(a)(5) of the Securities and Exchange Commission either directly or through an entity controlled by such investor.

“Rating Agency” means Fitch when the Bonds are rated by Fitch, Moody’s when the Bonds are rated by Moody’s and S&P when the Bonds are rated by S&P.

“Rebate Amount” has the meaning set forth in Section 4.07.

“Rebate Fund” means the fund of that name created pursuant to Section 4.07.

“Record Date” means the Trustee’s close of business on the fifteenth (15th) day of the calendar month next preceding the calendar month during which such Interest Payment Date occurs, regardless of whether such day is a Business Day.

“Refunding Project” has the meaning ascribed to such term in the Loan Agreement.

“Refunding Escrow Fund” means the fund of that name created pursuant to Section 4.02.

“Register” means the register of the record owners of Bonds maintained by the Registrar.

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“Registrar” means the Trustee.

“Repayments” means all amounts required to be paid by or on behalf of the Borrower to the Issuer (and the Trustee, as the assignee of the Issuer) pursuant to Section 5.02 of the Loan Agreement.

“Reserved Rights” has the meaning ascribed to such term in the Loan Agreement means the rights of the Issuer pursuant to the Sections of the Loan Agreement providing that notices, reports and other statements be given to the Issuer and that consents be obtained from the Issuer and also reserving its rights to reimbursement and payment of costs and expenses under Sections 5.02, 5.03, 5.04, 10.05, its right of access under Section 8.01, and its rights to indemnification and non-liability under Sections 8.06, 8.07, 12.06, 12.07 and 12.08, all of the Loan Agreement.

“S&P” means Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc., a corporation organized and existing under the laws of the State of New York, its successors and their assigns and, if such corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, “S&P” shall be deemed to refer to any other nationally recognized securities rating agency designated by the Borrower by notice to the Issuer and the Trustee.

“Securities Depository” means The Depository Trust Company and any substitute for or successor to such securities depository that shall maintain a Book Entry System with respect to the Bonds.

“Securities Depository Nominee” means the Securities Depository or the nominee of such Securities Depository in whose name there shall be registered on the Register the Bonds to be delivered to such Securities Depository during the continuation with such Securities Depository of participation in its Book Entry System.

“Security Agreement” means that certain Security Agreement , dated as of February __, 2011, among certain of the Loan Parties and the Collateral Agent, as the same may be amended, supplemented or modified from time to time.

“Semiannual Interest Payment Date” means each April 1 and October 1 of each year, commencing April 1, 2011.

“Series 2007 Bonds” means the Variable Rate Demand Refunding Revenue Bonds (Azusa Pacific University Project) Series 2007, issued by the California Statewide Communities Development Authority in an aggregate principal amount of $140,340,000.

“Series 2007 Indenture” means the Indenture of Trust, dated as of July 1, 2007 between the CSCDA and the Series 2007 Trustee.

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“Series 2007 LOC” means the letter of credit issued by the Series 2007 LOC Bank with respect to the Series 2007 Bonds.

“Series 2007 LOC Bank” means Allied Irish Banks, p.l.c., acting by and through its New York Branch.

“Series 2007 Trustee” means U.S. Bank National Association, acting in the capacity as trustee for the Series 2007 Bonds under the Series 2007 Indenture.

“Series 2011A Bond Purchase Agreement” means Bond Purchase Agreement, dated as of January __, 2011, among the Issuer, the Borrower and the Bank concerning the Series 2011A Bonds.

“Series 2011A Bonds” means the Variable Rate Demand Refunding Revenue Bonds (Azusa Pacific University Project) Series 2011A, in an aggregate principal amount of $70,000,000, being issued under the Series 2011A Indenture.

“Series 2011A Indenture” means the Indenture of Trust, dated as of February 1, 2011, between the Issuer and the Series 2011A Trustee with respect to the Series 2011A Bonds.

“Series 2011A Loan Agreement” means the Loan Agreement, dated as of February 1, 2011, between the Issuer and the Borrower with respect to the Series 2011A Bonds.

“Series 2011A Trustee” means U.S. Bank National Association as trustee under the Series 2011A Indenture.

“Series 2011B Bond Purchase Agreement” means Bond Purchase Agreement, dated as of January __, 2011, among the Issuer, the Borrower and George K. Baum & Company concerning the Series 2011B Bonds.

“Series 2011B Bonds” means the Refunding Revenue Bonds (Azusa Pacific University Project) Series 2011B in an aggregate principal amount of $______being issued under this Indenture.

“Series 2011B Debt Service Reserve Fund” means the fund of that name created pursuant to Section 4.03.

“Series 2011B Debt Service Reserve Fund Requirement” means an amount equal to one-half of the maximum annual debt service requirement on the Series 2011B Bonds.

“State” means the State of California.

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“Swap Provider” means Wells Fargo Bank National Association as provider of certain interest rate swaps to the Borrower.

“Tax Certificate” means the tax certificate of the Borrower dated the Issue Date.

“Trustee” means U.S. Bank National Association, as trustee hereunder, and any successor trustee appointed under this Indenture.

“Trust Estate” means all of the Trustee’s right, title and interest in, to and under all collateral pledged or hypothecated hereunder, all products and proceeds thereof, and all cash, funds and other property (real and personal) realized, collected or obtained upon the exercise of the Trustee’s rights and remedies hereunder, and all right, title and interest of the Issuer, as assigned to the Trustee hereunder, in and to the following, subject to the limitations and requirements of the Intercreditor and Collateral Agency Agreement:

(a) all Repayments received by the Issuer under the Loan Agreement, which Repayments are to be paid directly by the Borrower to the Trustee and deposited in the Bond Fund in accordance with this Indenture;

(b) all moneys in the Series 2011B Debt Service Reserve Fund, the Refunding Escrow Fund and the Bond Fund, including proceeds of the Bonds pending disbursement thereof; provided, however, that amounts on deposit in the Refunding Escrow Fund shall be held by the Trustee solely for the benefit of the Series 2007 LOC Bank for so long as any amounts are owed to the Series 2007 LOC Bank under the Series 2007 Indenture or the documents related thereto and provided further, however, that all amounts on deposit in the Series 2011B Debt Service Reserve Fund shall be held solely for the benefit of the Series 2011B Bonds;

(c) all of the Issuer’s rights, title and interest in the Loan Agreement, except Reserved Rights;

(d) all other rights and interests granted to the Issuer in connection with the Loan Agreement (except Reserved Rights) as set forth herein or granted directly to the Trustee as provided herein;

(e) all of the proceeds of the foregoing (except the amounts payable to or on behalf of the Issuer on account of its Reserved Rights), including without limitation investments thereof; and

(f) all other property of every name and nature from time to time hereafter by delivery or by writing mortgaged, pledged, delivered or hypothecated as and for additional security under this Indenture by the Issuer or by anyone on its behalf or with its written consent in favor of the Trustee.

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“U.C.C.” means the Uniform Commercial Code of the State as now in effect or hereafter amended.

“Underwriter” means George K Baum & Company as underwriter of the Series 2011B Bonds.

Section 1.02. Rules of Construction. Unless the context clearly indicates to the contrary, the following rules shall apply to the construction of this Indenture:

(a) All terms defined in the Loan Agreement and not defined herein shall have the meaning ascribed thereto in the Loan Agreement.

(b) Words importing the singular number shall include the plural number and vice versa.

(c) The table of contents, captions, and headings herein are for convenience of reference only and shall not constitute a part of this Indenture nor shall they affect its meaning, construction or effect.

(d) Words of the masculine gender shall be deemed and construed to include correlative words of the feminine and neuter genders, and words of the neuter gender shall be deemed and construed to include correlative words of the masculine and feminine genders.

(e) All references in this Indenture to particular Articles or Sections are references to Articles or Sections of this Indenture, unless otherwise indicated.

ARTICLE II

THE BONDS

Section 2.01. Authorized Amount of Bonds. No Bonds may be issued under the provisions of this Indenture except in accordance with this Article. Additional Bonds may be issued subject to the requirements of Section 8.13 of the Loan Agreement.

The Series 2011B Bonds shall be designated as follows: Refunding Revenue Bonds (Azusa Pacific University Project) Series 2011B in an aggregate principal amount of $______.

The Bonds shall be in substantially the form of Exhibit A.

Section 2.02. Issuance of Bonds. The Bonds shall bear interest from the Dated Date, until paid, at the rates set forth below computed on the basis of a 360-day year of twelve 30-day

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months and shall mature, unless sooner paid, as described below on which date all unpaid principal, redemption premium, if any, and interest on the Bonds shall be due and payable.

The Series 2011B Bonds shall mature on the dates and in the principal amounts and bear interest at the rates per annum set forth below:

Maturity Date (April 1) Principal Amount Interest Rate

[INSERT MATURITY AND INTEREST RATE SCHEDULE FOR BONDS]

The Bonds shall be issued as fully registered bonds without coupons in Authorized Denominations. The Bonds each Series shall be numbered from R-1 upwards for such Series bearing numbers not then contemporaneously outstanding (in order of issuance) according to the records of the Registrar.

The Bonds shall be dated as of the Dated Date. Interest on the Bonds shall be computed from the Interest Payment Date to which interest has been paid or duly provided for next preceding the date of authentication thereof, unless (a) such date of authentication shall be prior to the first Interest Payment Date, in which case interest shall be computed from the Dated Date, or (b) such date of authentication shall be an Interest Payment Date to which interest on the Bonds has been paid in full or duly provided for, in which case interest shall be computed from such date of authentication; provided, however, that if interest on the Bonds shall be in default, Bonds issued in exchange for Bonds surrendered for registration of transfer or exchange shall bear interest from the last date to which interest has been paid or duly provided for on the Bonds or, if no interest has been paid or duly provided for on the Bonds, from the Dated Date.

The principal of, redemption premium, if any, and the interest on the Bonds shall be payable in lawful currency of the United States. The principal of and redemption premium, if any, on the Bonds shall be payable at the principal office of the Paying Agent upon presentation and surrender of the Bonds. Payments of interest on the Bonds will be mailed to the persons in whose names the Bonds are registered on the Register at the close of business on the Record Date next preceding each Interest Payment Date; provided that, any Holder of a Bond or Bonds in an aggregate principal amount of not less than $1,000,000 may, by prior written instructions filed with the Paying Agent (which instructions shall remain in effect until revoked by subsequent written instructions), instruct that interest payments for any period be made by wire transfer to an account in the continental United States or other means acceptable to the Paying Agent.

Section 2.03. Interest Rates on Bonds.

(a) Initial Rate - General. The Bonds shall bear interest as provided herein from the Dated Date to the date of payment in full of the Bonds. Interest accrued on the

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Bonds shall be paid on each Interest Payment Date (or, if such day is not a Business Day, the next succeeding Business Day) commencing on the first Interest Payment Date following the Dated Date.

(b) Compliance with Rule 15c2-12. The Borrower shall provide to the Trustee and the Issuer a copy of a continuing disclosure agreement imposing obligations upon the Borrower, the Trustee or any other responsible party to comply with the requirements of Rule 15c2-12 under the Securities Exchange Act of 1934, as amended (the “Rule”), with respect to the Bonds of the applicable Series, together with such disclosure documents as the Trustee shall require in order to comply with the Rule.

Section 2.04. Execution; Limited Obligation. The Bonds shall be executed on behalf of the Issuer by the manual or facsimile signature of the Chair or Vice Chair of the Commission of the Issuer and attested by the manual or facsimile signature of the Secretary of the Issuer and shall have impressed or imprinted thereon the seal (or a facsimile thereof), if any, of the Issuer.

In case any officer whose manual or facsimile signature shall appear on the Bonds shall cease to be such officer before the delivery of such Bonds, such manual or facsimile signatures shall nevertheless be valid and sufficient for all purposes.

The Bonds shall be limited obligations of the Issuer. The Bonds and the interest thereon, and redemption premium, if any, shall not be deemed to constitute or create an indebtedness, liability or obligation of the Issuer the State or any political subdivision or agency thereof within the meaning of any State constitutional provision or statutory limitation or a pledge of the faith and credit or the taxing power of the State or any such political subdivision or agency, including the Issuer and the State. The Issuer has no taxing power. The Bonds and interest thereon are payable solely from and secured by the Trust Estate, all as described in and subject to limitations set forth in this Indenture, for the equal and ratable benefit of the Holders, from time to time, of the Bonds.

THE ISSUANCE OF THE BONDS WILL NOT CONSTITUTE A DEBT OR A PLEDGE OF THE FAITH AND CREDIT OF THE ISSUER OR THE STATE, AND NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE STATE OR ANY POLITICAL SUBDIVISION THEREOF WILL BE PLEDGED TO THE PAYMENT OF THE BONDS. THE ISSUER HAS NO TAXING POWER. NEITHER THE ISSUER, THE STATE, NOR ANY POLITICAL SUBDIVISION OF THE STATE SHALL IN ANY EVENT BE LIABLE FOR THE PAYMENT OF THE PRINCIPAL OF, PREMIUM, IF ANY, OR INTEREST ON ANY OF THE BONDS OR FOR THE PERFORMANCE OF ANY PLEDGE, OBLIGATION OR AGREEMENT UNDERTAKEN BY THE ISSUER EXCEPT TO THE EXTENT THAT THE MONEYS PLEDGED HEREIN ARE SUFFICIENT THEREFOR. NO OWNER OF ANY BONDS HAS THE RIGHT TO COMPEL ANY EXERCISE OF TAXING POWER OF THE STATE OR ANY POLITICAL SUBDIVISION THEREOF TO PAY THE

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BONDS OR THE INTEREST THEREON, AND THE BONDS DO NOT CONSTITUTE AN INDEBTEDNESS OF THE ISSUER, THE STATE OR ANY POLITICAL SUBDIVISION OF THE STATE, OR A LOAN OF CREDIT OF ANY OF THE FOREGOING WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY PROVISION. THE ISSUER HAS NO TAXING POWER.

Section 2.05. Certificate of Authentication. No Bonds shall be secured hereby or entitled to the benefit hereof or shall be or become valid or obligatory for any purpose unless there shall be endorsed thereon a certificate of authentication, substantially in the form as set forth in the form of Bond attached hereto as Exhibit A executed by an authorized representative of the Trustee; and such certificate on any Bond issued by the Issuer shall be conclusive evidence and the only competent evidence that it has been duly authenticated and delivered hereunder.

Section 2.06. Form of Bonds.

(a) The Bonds, the Trustee’s certificate of authentication and the form of assignment shall be in substantially the forms set forth as Exhibit A with such appropriate variations, omissions, substitutions and insertions as are permitted or required hereby or are required by law and may have such letters, numbers or other marks of identification and such legends and endorsements placed thereon as may be required to comply with any applicable laws or rules or regulations.

(b) The Bonds shall be in either typewritten or printed form, as the Borrower shall direct, on behalf of the Issuer, with approval of the Trustee; provided that any expenses, including but not limited to expenses of printing, incurred in connection therewith shall be paid by the Borrower.

Section 2.07. Delivery of Bonds. Upon the execution and delivery hereof, the Issuer shall execute the Bonds and deliver them to the Trustee, and the Trustee shall authenticate the Bonds and deliver them to such purchaser or purchasers as shall be directed in writing by the Issuer as hereinafter provided in this Section.

Prior to the authentication of and delivery by the Trustee of any of the Bonds, there shall be filed with the Trustee:

(a) A certified copy of all resolutions adopted and proceedings had by the Issuer authorizing execution of the Indenture and the Loan Agreement and the issuance of the Bonds;

(b) Original executed counterparts of this Indenture and the other Bond Documents;

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(c) An Opinion of Counsel to the Issuer to the effect that this Indenture and the Loan Agreement have been duly authorized, executed and delivered by the Issuer and are legal, valid and binding agreements of the Issuer; and

(d) An Opinion of Counsel given by Bond Counsel to the effect that the Bonds have been duly authorized and validly issued, that the Indenture creates a valid lien on the Trust Estate and that interest on the Bonds will not be included in gross income of the Holders thereof for federal tax purposes;

(e) An opinion of Counsel for the Borrower to the effect that the Loan Agreement and the other Bond Documents to which the Borrower is a party have been duly authorized, executed and delivered by the Borrower and are legal, valid and binding agreements of the Borrower enforceable against the Borrower in accordance with their terms; and

(f) A request and authorization to the Trustee on behalf of the Issuer and signed by a duly authorized officer of the Issuer directing the Trustee to authenticate and deliver the Bonds in such specified denominations as permitted herein to the initial purchaser or purchasers upon payment to the Trustee, but for the account of the Issuer, of a specified sum of money.

Upon receipt of the foregoing, the Trustee shall authenticate and deliver the Bonds as provided above.

Section 2.08. Mutilated, Lost, Stolen or Destroyed Bonds. If any Bond is mutilated, lost, stolen or destroyed, the Issuer may execute and the Trustee may authenticate and deliver a new Bond of the same series, maturity, interest rate, principal amount and tenor in lieu of and in substitution for the Bond mutilated, lost, stolen or destroyed; provided, that there shall be first furnished to the Trustee evidence satisfactory to it and the Issuer of the ownership of such Bond and of such loss, theft or destruction (or, in the case of a mutilated Bond, such mutilated Bond shall first be surrendered to the Trustee), together with indemnity satisfactory to the Trustee and the Issuer and compliance with such other reasonable regulations as the Issuer and the Trustee may prescribe. If any such Bond shall have matured or a redemption date pertaining thereto shall have passed, instead of issuing a new Bond the Issuer may pay the same without surrender thereof, upon receipt of such evidence, indemnification and payment of fees and expenses as described herein. The Issuer and the Trustee may charge the Holder of such Bond with their reasonable fees and expenses in connection with this Section.

Section 2.09. Exchangeability and Transfer of Bonds; Persons Treated as Owners. Books for the registration of the Bonds and for the registration of transfer of the Bonds as provided herein shall be kept by the Registrar.

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Any Holder of a Bond, in person or by such Holder’s duly authorized attorney, may transfer title to such Holder’s Bond on the Register upon surrender thereof at the principal office of the Trustee, and by providing the Registrar with a written instrument of transfer (in substantially the form of assignment attached to the Bond) executed by the Holder or such Holder’s duly authorized attorney, and thereupon, the Issuer shall execute and the Trustee shall authenticate and deliver in the name of the transferee or transferees a new Bond or Bonds of the same Series and the same aggregate principal amount tenor as the Bond surrendered (or for which transfer of registration has been effected) and of any Authorized Denomination or Authorized Denominations.

Bonds may be exchanged upon surrender thereof at the principal office of the Registrar with a written instrument of transfer satisfactory to the Registrar executed by the Holder or such Holder’s attorney duly authorized in writing, for an equal aggregate principal amount of Bonds of the same tenor as the Bonds being exchanged and of any Authorized Denomination or Authorized Denominations. The Issuer shall execute and the Trustee shall authenticate and deliver Bonds that the Holder making the exchange is entitled to receive, bearing numbers not contemporaneously then outstanding.

Such registrations of transfer or exchanges of Bonds shall be without charge to the Holders of such Bonds, but any taxes or other governmental charges required to be paid with respect to the same shall be paid by the Holder of the Bond requesting such registration of transfer or exchange as a condition precedent to the exercise of such privilege. Any service charge made by the Registrar for any such registration of transfer or exchange and all reasonable expenses of the Issuer and the Trustee shall be paid by the Borrower.

The Registrar shall not register any transfer of any Bond after notice calling such Bond (or portion thereof) for redemption has been given and prior to such redemption, except in the case of any Bond to be redeemed in part, the portion thereof not to be redeemed. The person in whose name any Bond shall be registered shall be deemed and regarded as the absolute owner thereof for all purposes, and payment of or on account of either principal or interest shall be made only to or upon the order of the registered owner thereof or such Holder’s duly authorized attorney, but such registration may be changed as hereinabove provided. All such payments shall be valid and effectual to satisfy and discharge the liability upon such Bond to the extent of the sum or sums so paid.

All Bonds issued upon any registration of transfer or exchange of Bonds shall be legal, valid and binding limited obligations of the Issuer, evidencing the same debt, and entitled to the same security and benefits under this Indenture, as the Bonds surrendered upon such registration of transfer or exchange.

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Notwithstanding the foregoing, for so long as the Bonds are held under the Book Entry System, transfers of beneficial ownership will be effected pursuant to rules and procedures established by the Securities Depository.

Notwithstanding any other provision herein, no Bond shall be transferred except to (a) a Qualified Buyer as provided in this subsection in minimum denominations of $250,000 or any multiple of $5,000 in excess thereof unless the Series 2011B Bonds (without credit enhancement, unless such credit enhancement extends to the maturity or redemption of the Series 2011B Bonds) are rated “A3,” “A-,” “A-” or higher by Moody’s, S&P or Fitch, respectively, or any other nationally recognized rating agency approved by the Authority, or (b) to the Underwriter for redelivery to a Qualified Buyer. Each Bond shall carry a prominent legend providing that it shall not be transferred or registered in the name of any entity or person other than a Qualified Buyer. Each registered owner or beneficial owner of a Bond agrees by purchase of the Bond to abide by these limitations. Failure to comply with the requirements of this paragraph shall cause any purported transfer to be null and void.

Section 2.10. Cancellation. All Bonds that have been surrendered to the Registrar pursuant to Sections 2.08 and 2.09 of this Indenture, or for payment upon maturity or redemption prior to maturity, shall be cancelled and destroyed by the Registrar and a certificate of destruction shall be delivered to the Issuer and the Borrower.

Section 2.11. Ratably Secured. All Bonds issued hereunder are and are to be, to the extent provided in this Indenture, equally and ratably secured by this Indenture without preference, priority or distinction on account of the actual time or times of the authentication, delivery or maturity of the Bonds so that subject as aforesaid, all Bonds at any time Outstanding shall have the same right, lien and preference under and by virtue of this Indenture and shall all be equally and ratably secured hereby with like effect as if they had all been executed, authenticated and delivered simultaneously on the date hereof, whether the same, or any of them, shall actually be disposed of at such date, or whether they, or any of them, shall be disposed of at some future date.

Section 2.12. Redemption of Bonds; Partial Redemption of Bonds.

Optional Redemption. Unless previously redeemed, the Series 2011B Bonds maturing on or after April 1, 2021, are also subject to redemption by and at the option of the Authority, at the direction of the University, prior to stated maturity in whole or in part on any date, on or after April 1, 2020, at a redemption price of 100% of the principal amount to be redeemed plus accrued interest to the redemption date.

(a) Extraordinary Optional Redemption. The Bonds are subject to redemption in whole, at the direction of the Borrower, on behalf of the Issuer, at a

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redemption price equal to 100% of the principal amount of the Bonds to be redeemed plus accrued interest thereon to, but not including, the redemption date, on any date for which the requisite notice of redemption can be given, within one hundred eighty (180) days of the occurrence of any of the following events:

(i) the Facilities shall have been damaged or destroyed to such an extent that in the judgment of the Borrower (A) it cannot reasonably be restored within a period of three (3) consecutive months to the condition thereof immediately preceding such damage or destruction, (B) the Borrower is thereby prevented from carrying on its normal operations at the Facilities for a period of three (3) consecutive months, or (C) it would not be economically feasible for the Borrower to replace, repair, rebuild or restore the same;

(ii) title in and to, or the temporary use of, all or substantially all of the Facilities shall have been taken under the exercise of the power of eminent domain by any governmental authority or any Person acting under governmental authority (including such a taking as, in the judgment of the Borrower, results in the Borrower being prevented thereby from carrying on its normal operations at the Facilities for a period of three (3) consecutive months); or

(iii) as a result of any changes in the Constitution of the State, or the Constitution of the United States of America or by legislative or administrative action (whether state or federal) or by final decree, judgment, decision or order of any court or administrative body (whether state or federal), the Loan Agreement shall have become void or unenforceable or impossible of performance in accordance with the intent and purpose of the parties as expressed therein.

(iv) the Loan Agreement is terminated prior to its expiration for any reason other than the occurrence of an Event of Default under the Loan Agreement.

.

(b) Mandatory Sinking Fund Redemptions. The Series 2011B Bonds shall be subject to mandatory sinking fund redemptions at a redemption price equal to the principal amount thereof with interest to, but not including, the redemption date in whole or in part, without premium, on the dates and in the amounts as set forth below:

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Date

Redemption Amount

Date

Redemption Amount

Date

Redemption Amount

Leaving $________ in principal amount of the Series 2011B Bonds to be paid at maturity

on [DATE].

(c) Adjustment of Sinking Fund Redemptions. The mandatory sinking fund redemption amounts set forth in subsection (c) of this Section 2.12 shall be reduced in connection with any optional or extraordinary redemption of the Bonds of the applicable Series. The principal amount of such optional or extraordinary redemptions (the “Unscheduled Redemptions”) shall be credited against such concurrent or future sinking fund redemption requirements for Bonds of the applicable Series in such order and in such amounts and years as is specified by the Borrower in writing to the Trustee.

(d) Selection of Bonds to be Redeemed. If less than all the Outstanding Bonds of any Series shall be called for redemption, the Registrar or, if the Bonds of any Series are held in the Book Entry System, the Securities Depository shall select or

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arrange for the selection, in such manner as it shall deem fair and equitable and pursuant to its rules and procedures, the Bonds of the applicable Series and maturity, in Authorized Denominations, provided that any Bond or portion thereof remaining Outstanding shall be in an Authorized Denomination. If there shall be called for redemption less than the principal amount of a Bond, the Issuer shall execute and the Trustee shall authenticate and deliver, upon surrender of such Bond, without charge to the Holder thereof in exchange for the unredeemed principal amount of such Bond at the option of such Holder, Bonds in any of the Authorized Denominations or, if the Bonds are held in the Book Entry System, the Securities Depository shall, acting pursuant to its rules and procedures, reflect in said system the partial redemption and the Trustee shall (i) either exchange the Bond or Bonds held by the Securities Depository for a new Bond or Bonds of the same Series and maturity and in the appropriate principal amount, if such Bond is presented to the Trustee by the Securities Depository, or (ii) obtain from the Securities Depository a written confirmation of the reduction in the principal amount of the Bonds held by such Securities Depository.

(f) Purchase at Any Time. The Trustee, upon the written request of the Borrower, may purchase Bonds as specified by the Borrower from Bondholders at a price not exceeding a price set by Borrower; provided that any offer by the Borrower to purchase Bonds shall be made initially to all Bondholders on a pro-rata basis. Such purchase of Bonds shall be made with funds provided by the Borrower and not with any portion of the Trust Estate or any Defeasance Obligations. Upon purchase by the Trustee, such Bonds shall be treated as delivered for cancellation pursuant to the Indenture. The principal amount of Bonds to be redeemed by optional or mandatory sinking fund redemption under the Indenture may be reduced by the principal amount of Bonds purchased by the Borrower or the Issuer, at the request of the Borrower, and delivered to the Trustee for cancellation at least forty-five (45) days prior to the redemption date.

Section 2.13 Notice of Redemption. The Borrower shall exercise its option to prepay Repayments (and thereby cause a redemption of Bonds) by giving written notice to the Issuer, the Trustee and the Paying Agent, not less than forty-five (45) days prior to the date selected for redemption; provided, however, that, if such redemption is pursuant to Section 2.12(b), the Borrower shall also deliver a certificate of a Borrower Representative certifying that the conditions precedent to such redemption have been met.

Notice of redemption shall be mailed by the Trustee by first-class mail, postage prepaid, at least thirty (30) days before the redemption date to each Holder of the Bonds to be redeemed in whole or in part at such Holder’s last address appearing on the Register, but no defect in or failure to give such notice of redemption shall affect the redemption of the validity of the proceedings for the redemption of the Bonds. A notice of optional redemption shall describe whether and the conditions under which the call for redemption shall be revoked. All Bonds

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properly called for redemption will cease to bear interest on the date fixed for redemption moneys and, thereafter, the Holders of such Bonds called for redemption shall have no rights in respect thereof except to receive payment of the redemption price from the Trustee and a new Bond for any portion not redeemed.

On a date no later than the date fixed for redemption in such notice, the Borrower shall pay moneys in an amount sufficient to redeem the Bonds at the redemption price set forth above.

Section 2.14. Book Entry System. Upon the initial issuance of the Bonds, the Trustee shall authenticate and deliver the Series 2011B Bonds to or upon the order of the Underwriter.

The Series 2011B Bonds will be issued pursuant to a Book Entry System administered by the Securities Depository. Bonds issued pursuant to a Book Entry System administered by the Securities Depository shall not be available for physical distribution involving Bond certificates except as provided in this Section.

Any provision of this Indenture or the Bonds requiring physical delivery of the Bonds shall, with respect to any Bonds held under the Book Entry System, be deemed to be satisfied by a notation on the Register maintained by the Registrar that such Bonds are subject to the Book Entry System.

So long as a Book Entry System is being used, one Bond for Bonds of the applicable Series in the aggregate principal amount of the Bonds of such Series and registered in the name of the Securities Depository Nominee will be issued and deposited with the Securities Depository and held in its custody. The Book Entry System will be maintained by the Securities Depository and the Participants and Indirect Participants and will evidence beneficial ownership of the Bonds in Authorized Denominations, with registration of transfers of ownership effected on the records of the Securities Depository, the Participants and the Indirect Participants pursuant to rules and procedures established by the Securities Depository, the Participants and the Indirect Participants. So long as a Book Entry System is being used for any Series of Bonds, the principal of, interest and any premium on each Bond of such Series shall be payable to the Securities Depository Nominee or any other person appearing on the Register as the registered Holder of such Bond or such Holder’s registered assigns or legal representative at the principal office of the Registrar. So long as the Book Entry System is in effect for the Bonds of any Series, the Securities Depository will be recognized as the Holder of the Bonds of such Series for all purposes. Transfer of principal, interest and any premium payments or notices to Participants and Indirect Participants will be the responsibility of the Securities Depository, and transfer of principal, interest and any premium payments or notices to Beneficial Owners will be the responsibility of the Participants and the Indirect Participants. No other party will be responsible or liable for such transfers of payments or notices or for maintaining, supervising or reviewing such records maintained by the Securities Depository, the Participants or the Indirect Participants. While the Securities Depository Nominee or the Securities Depository, as the case

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may be, is the registered owner of the Bonds, notwithstanding any other provisions set forth herein, payments of principal of, redemption premium, if any, and interest on the Bonds shall be made to the Securities Depository Nominee or the Securities Depository, as the case may be, by wire transfer in immediately available funds to the account of said Holder as may be specified in the Register maintained by the Registrar or by such other method of payment as the Trustee may determine to be necessary or advisable with the concurrence of the Securities Depository.

So long as the outstanding Bonds of any Series are registered in the name of Cede & Co. or its registered assigns, the Issuer and the Trustee shall cooperate with Cede & Co., as sole registered Owner, and its registered assigns in effecting payment of the principal of, redemption premium and interest on the Bonds of such Series by arranging for payment in such manner that funds for such payments are properly identified and are made immediately available on the date they are due. Payments shall be made by the Borrower to the Trustee in immediately available funds not later than 1:00 PM Eastern Time on the date they are due to Cede & Co.

If the Securities Depository determines not to continue to administer a Book Entry System for the Bonds, then the Borrower may appoint a new Securities Depository.

ARTICLE III

SECURITY

Section 3.01. Security. The Bonds and the interest and any premium thereon shall be a limited obligation of the Issuer as provided in Section 2.04, and shall be secured by and payable from the Trust Estate.

Section 3.02. Payment of Bonds and Performance of Covenants. The Issuer shall promptly pay, but only out of the Trust Estate, the principal of, premium, if any, and interest on the Bonds at the place, on the dates and in the manner provided in the Bonds. The Issuer shall promptly perform and observe all covenants, undertakings and obligations set forth herein, in the Loan Agreement or the Bonds on its part to be performed or observed. The Issuer shall fully cooperate with the Trustee in the enforcement by the Trustee of any such rights granted to the Issuer under the Loan Agreement.

Section 3.03. Authority. The Issuer represents and warrants that (i) it is duly authorized under the Constitution and laws of the State to issue the Bonds, and to execute, deliver and perform the terms of the Loan Agreement and this Indenture; (ii) all action on its part for the issuance of the Bonds and execution and delivery of the Loan Agreement and this Indenture has been duly taken; (iii) the Bonds, upon issuance and authentication, and the Loan Agreement and this Indenture upon delivery, assuming that they are the respective legal, valid, binding and enforceable obligations of the other parties thereto, shall be valid and enforceable obligations of the Issuer in accordance with their terms, except as enforceability may be limited by bankruptcy, insolvency or other similar laws affecting the enforcement of creditors’ rights generally and

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general equitable principles; (iv) it has not heretofore conveyed, assigned, pledged, granted a security interest in or otherwise disposed of the Trust Estate; (v) it has not received any payments under the Loan Agreement; (vi) without making any independent investigation, it has no knowledge of any right of set-off, defense or counterclaim to payment or performance of the terms or conditions of the Loan Agreement; and (vii) the execution, delivery and performance of the Loan Agreement and this Indenture and issuance of the Bonds are not in contravention of law or any agreement, instrument, indenture or other undertaking to which it is a party or by which it is bound and no other approval, consent or notice from any governmental agency is required on the part of the Issuer.

Section 3.04. Power to Issue Bonds and make Pledge and Assignment. The Issuer is duly authorized pursuant to law to issue the Bonds and to enter into this Indenture and to pledge and assign the Revenues and other assets purported to be pledged and assigned under this Indenture in the manner and to the extent provided in this Indenture. The Issuer has duly authorized the execution and delivery of the Bonds and the Indenture under the terms and provisions of the Act and a resolution adopted by its Board of Directors and further represents, covenants and warrants that all requirements have been met and procedures have occurred in order to ensure the enforceability against the Issuer of the Bonds and the Indenture. The Issuer has taken all necessary action and has complied with all provisions of the Act required to make the Bonds and the Indenture the valid, legal and binding limited obligations of the Issuer.

Section 3.05. No Litigation. The Issuer represents and warrants that there is no action, suit, proceeding, inquiry or investigation at law or in equity or before or by any court, public board or body pending, or, to the best knowledge of the Issuer, threatened against or affecting the Issuer wherein an unfavorable decision, ruling or finding would adversely affect (i) the transactions contemplated by, or the validity or enforceability of, the Bonds, this Indenture or the Loan Agreement or (ii) the tax-exempt status of interest on the Bonds.

Section 3.06. Further Assurances. The Issuer covenants that it will cooperate to the extent necessary with the Borrower and the Trustee in their defenses of the Trust Estate against the claims and demands of all Persons and, upon payment or provision for payment of the fees and expenses to be incurred by the Issuer in connection therewith, will do, execute, acknowledge and deliver or cause to be done, executed, acknowledged and delivered such indentures supplemental hereto and such further acts, instruments and transfers as the Trustee may reasonably require for the better pledging of the Trust Estate. The Issuer shall not cause or permit to exist any amendment, modification, supplement, waiver or consent with respect to the Loan Agreement without the prior written consent of the Trustee, which consent shall be governed by Article VIII.

Section 3.07. No Other Encumbrances. The Issuer covenants that, except as otherwise provided herein and in the Loan Agreement, it will not sell, convey, mortgage, encumber or otherwise dispose of any portion of the Trust Estate.

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Section 3.08. No Personal Liability. No recourse shall be had for the enforcement of any obligation, promise or agreement of the Issuer contained herein or in the Bonds or the other Bond Documents to which the Issuer is a party or for any claim based hereon or thereon or otherwise in respect hereof or thereof against any director, member, officer, agent, attorney or employee, as such, in his or her individual capacity, past, present or future, of the Issuer or of any successor entity, either directly or through the Issuer or any successor entity whether by virtue of any constitutional provision, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise. No personal liability whatsoever shall attach to, or be incurred by, any director, member, officer, agent, attorney or employee as such, past, present or future, of the Issuer or of any successor entity, either directly or through the Issuer or any successor entity, under or by reason of any of the obligations, promises or agreements entered into in the Bonds or between the Issuer and the Trustee, whether herein contained or to be implied herefrom as being supplemental hereto; and all personal liability of that character against every such director, member, officer, agent, attorney and employee is, by the execution of this Indenture and as a condition of, and as part of the consideration for, the execution of this Indenture, expressly waived and released.

ARTICLE IV

FUNDS

Section 4.01. Establishment and Use of Bond Fund. There is hereby created and established with the Trustee the Bond Fund. There shall be deposited in the Bond Fund (a) all Repayments specified in the Loan Agreement to be deposited in the Bond Fund, including all proceeds resulting from the enforcement of the Trust Estate or its realization as collateral, and (b) all other moneys received by the Trustee under the Loan Agreement for deposit by it in the Bond Fund.

Moneys in the Bond Fund shall be held in trust for the Holders and, except as otherwise expressly provided herein, shall be used solely for the payment of the interest on the Bonds and for the payment of principal of and premium, if any, on the Bonds upon maturity, whether stated or accelerated, or upon mandatory or optional redemption.

The Issuer hereby authorizes and directs the Trustee, and the Trustee hereby agrees, to withdraw and make available at the principal office of the Paying Agent sufficient funds from the Bond Fund to pay the principal of, premium, if any, and interest on the Bonds as the same become due and payable, but only in the following order of priority:

FIRST: Any other amounts in the Bond Fund; and

SECOND: For the payment solely of the Series 2011B Bonds, any amounts on deposit in the Series 2011B Debt Service Reserve Fund.

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After payment in full of the Bonds, or provision for the payment of the Bonds having been made pursuant to Section 5.02, and the payment of all other amounts owing hereunder, any amounts remaining in the Bond Fund shall be paid to the Borrower.

Section 4.02. Establishment and Use of the Costs of Issuance Fund and the Refunding Escrow Fund. There is hereby created and established with the Trustee the Costs of Issuance Fund and the Refunding Escrow Fund. The proceeds of the Bonds shall be delivered to the Trustee for deposit into the Costs of Issuance Fund and the Refunding Escrow Fund as directed by the Issuer. In addition, there shall be deposited in the Refunding Escrow Fund by the Borrower, an amount equal to $__________constituting proceeds of the Series 2007 Bonds.

The Trustee is hereby authorized and directed to use moneys in the Costs of Issuance Fund for payment or reimbursement to the Borrower of the Costs of Issuance in accordance with the provisions of the Loan Agreement.

Amounts on deposit in the Refunding Escrow Fund shall be used by the Trustee on the Issue Date for the purpose of accomplishing the Refunding Project and the defeasance and retirement of all Series 2007 Bonds outstanding under the Series 2007 Indenture. The Trustee is hereby authorized and directed by the Issuer and the Borrower to transfer to the Series 2007 Trustee the amount necessary to fully reimburse the Series 2007 LOC Provider for a drawing under the Series 2007 Letter of Credit to defease and retire a portion of Series 2007 Bonds outstanding in the aggregate principal amount of $________. Any amounts remaining on deposit in the Refunding Escrow Account shall be transferred to the Bond Fund.

Section 4.03. Establishment and Use of Series 2011B Debt Service Reserve Fund. There is hereby established and created with the Trustee the Series 2011B Debt Service Reserve Fund. The Trustee shall deposit Bond Proceeds in the Series 2011B Debt Service Reserve Fund on the Issue Date in an amount equal to the Series 2011B Debt Service Reserve Fund Requirement. Amounts on deposit in the Series 2011B Debt Service Reserve Fund shall be used solely for the purpose of paying principal and interest on the Series 2011B Bonds in the event of any deficiency in the Bond Fund for such purpose.

Section 4.04. Deposit of Bond Proceeds. The Bond Proceeds shall be deposited in the following funds and accounts on the Issue Date:

(a) in the Costs of Issuance Fund, the amount of $_________;

(b) in the Refunding Escrow Fund, the amount of $ ________, together with proceeds of the Series 2007 Bonds in the amount of $____________;

(c) in the Series 2011B Debt Service Reserve Fund, the amount of the Series 2011B Debt Service Reserve Requirement

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Section 4.05. Records. The Trustee shall cause to be kept and maintained records pertaining to the Refunding Escrow Fund, the Series 2011B Debt Service Reserve Fund, the Bond Fund and all disbursements therefrom and shall periodically deliver to the Borrower statements of activity and statements indicating the investments, if applicable, made with moneys in all such funds during the applicable period. Upon written request, the Trustee shall provide the Borrower, within a reasonable period of time, with a report stating the principal amount of Bonds outstanding and a list of the registered owners of the Bonds as of the date specified by the Borrower in its request.

The Trustee shall provide the Borrower with a written report, on a monthly basis through the calendar month in which the last obligation of the Bonds is retired, identifying the Permitted Investments in which the moneys held as part of the Refunding Escrow Fund, the Series 2011B Debt Service Reserve Fund and the Bond Fund were invested during the preceding period and the dates of such investments, together with such other information as the Trustee ordinarily provides to Persons such as the Borrower in its regular monthly investment reports.

Section 4.06. Investment of Refunding Escrow Fund, Series 2011B Debt Service Reserve Fund and Bond Fund. Monies held by the Trustee as part of the Refunding Escrow Fund shall not be invested by the Trustee. Moneys held by the Trustee as part of the Series 2011B Debt Service Reserve Fund and the Bond Fund shall be invested and reinvested in Permitted Investments as instructed by a Borrower Representative. All Permitted Investments shall be held by or under the control of the Trustee and shall be deemed at all times to be a part of the fund and account which was used to purchase the same. All interest accruing thereon and any profit realized from Permitted Investments shall be credited to the respective fund or account and any loss resulting from Permitted Investments shall be similarly charged. The Trustee is authorized to cause to be sold and reduced to cash a sufficient amount of Permitted Investments whenever the cash balance in any fund or account hereunder is or will be insufficient to make a requested or required disbursement. The Trustee shall not be responsible for any depreciation in the value of any Permitted Investment or for any loss resulting from such sale, so long as the Trustee performs its obligations hereunder in accordance with the provisions of Section 7.01(e). Absent specific instructions from the Borrower to invest cash balances in Permitted Investments hereunder, the Trustee shall invest in Permitted Investments constituting obligations of the U.S. Treasury or its agencies having a term to maturity of not more than 30 days or any money market fund or similar investment fund that purchases and holds exclusively obligations of the United States of America or its agencies that have a term to maturity of not more than 30 days. The Issuer acknowledges that, to the extent that the regulations of the Comptroller of the Currency or other applicable regulatory agency grant the Issuer the right to receive brokerage confirmations on security transactions as they occur, the Issuer specifically waives receipt of such confirmations to the extent permitted by law. The Trustee shall furnish to the Issuer and the Borrower periodic cash transaction statements which shall include details of all investment transactions made by the Trustee hereunder.

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Section 4.07. Arbitrage; Rebate Fund. The Issuer recognizes that investment of the Bond proceeds will be at the written direction of the Borrower but agrees that it will commit no act, or omit any action, that would cause the Bonds to be “arbitrage bonds” within the meaning of Section 148 of the Code and the applicable regulations thereunder. There is hereby established with the Trustee an Arbitrage Rebate Fund (the “Rebate Fund”). Any provisions in this Indenture to the contrary notwithstanding, amounts credited to the Rebate Fund shall be free and clear of any lien hereunder.

The Trustee shall deposit in the Rebate Fund the amount paid to the Trustee by the Borrower pursuant to Section 5.04(e) of the Loan Agreement. Within 60 days after each date on which rebate is required to be computed by the Code, the Trustee, acting on behalf of the Issuer, shall pay to the United States in accordance with Section 148(f) of the Code from the moneys then on deposit in the Rebate Fund an amount equal to 90% (or such greater percentage not in excess of 100% as the Borrower may direct the Trustee to pay) of the amount certified by the Borrower to be the required rebate to the United States as calculated under Section 148(f)(2) of the Code (hereinafter called the “Rebate Amount”). Within 60 days after the payment in full of all outstanding Bonds, the Trustee, upon written direction of the Borrower, shall pay to the United States in accordance with Section 148(f) of the Code from the moneys then on deposit in the Rebate Fund an amount equal to 100% of the Rebate Amount and any moneys remaining in the Rebate Fund following such payment shall be paid to the Borrower.

The Trustee shall be entitled to rely on the calculations made pursuant to this Section and neither the Issuer nor the Trustee shall be responsible for any loss or damage resulting from any good faith action taken or omitted to be taken in reliance upon such calculations.

The Trustee shall keep those records of the computations made pursuant to this Section that are furnished by the Borrower or the Issuer to the Trustee as required under Section 148(f) of the Code, provided that nothing in this Indenture shall impose any obligation on the Trustee with respect to requesting, preparing, obtaining or verifying any such records or any computations therein.

Moneys in the Rebate Fund may be invested as provided in Section 4.06 for the investment of the Series 2011B Debt Service Reserve Fund and the Bond Fund.

The covenants of the Issuer in this Section 4.07 are made solely in reliance on the representations and covenants of the Borrower set forth in the Loan Agreement and the Tax Agreement.

Section 4.08. Non-presentment of Bonds. In the event any Bond shall not be presented for payment when the principal thereof becomes due, either at maturity or at the date fixed for redemption thereof or otherwise, if funds sufficient to pay the principal of, premium (if any) and interest on such Bond shall have been made available to the Trustee for the benefit of the Holder or Holders thereof, payment of such Bond or portion thereof as the case may be, shall forthwith

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cease, terminate and be completely discharged, and thereupon it shall be the duty of the Trustee, subject to any applicable escheat laws, to hold such fund or funds uninvested in the Bond Fund, without liability to the Holder of such Bond for interest thereon, for the benefit of the Holder of such Bond, who shall thereafter be restricted exclusively to such fund or funds, for any claim of whatever nature on his/her part on, or with respect to, said Bond, or portion thereof, or premium, if any.

Section 4.09. Additional Payments. The Trustee shall transfer the Additional Payments constituting the Issuer Annual Fee to or at the direction of the Issuer when due, to the extent of amounts received from the Borrower therefor.

ARTICLE V

DISCHARGE OF LIEN

Section 5.01. Discharge of Lien and Security Interest. Upon payment in full of all of the Bonds, these presents shall cease, determine and be discharged, and thereupon the Trustee, upon receipt by the Trustee of an Opinion of Counsel stating that all conditions precedent to the satisfaction and discharge of this Indenture have been complied with shall (a) cancel and discharge this Indenture, the lien upon the Trust Estate; (b) execute and deliver to the Issuer and the Borrower, at the Borrower’s expense, such instruments in writing as shall be required to cancel and discharge this Indenture and reconvey to the Issuer and the Borrower the Trust Estate, and assign and deliver to the Issuer and the Borrower so much of the Trust Estate as may be in its possession or subject to its control, except for moneys and Government Obligations held in the Bond Fund for the purpose of paying Bonds; provided, however, that the cancellation and discharge of this Indenture pursuant to this Section 5.01, (i) shall be subject to and qualified by the provisions of Section 5.03, (ii) shall not terminate the powers and rights granted to the Trustee, the Registrar and the Paying Agent with respect to the payment, registration of transfer and exchange of the Bonds and (iii) shall not impair or limit the rights of the Issuer, the Trustee, the Registrar and the Paying Agent to indemnity, non-liability and payment of all reasonable fees and expenses, which rights shall survive the cancellation and discharge of this Indenture pursuant to this Section or Section 5.02. If the Bonds are rated by a Rating Agency, notice of payment in full of the Bonds shall be furnished by the Trustee to such Rating Agency.

Section 5.02. Provision for Payment of Bonds. Bonds shall be deemed to have been paid within the meaning of Section 5.01 if:

(a) there shall have been irrevocably deposited in the Bond Fund:

(i) Either (1) sufficient moneys, or (2) Government Obligations purchased with moneys of such maturities and interest payment dates and bearing such interest as will, in the opinion of a nationally recognized firm of certified public accountants, without further investment or reinvestment of either the

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principal amount thereof or the interest earnings thereon (said earnings also to be held in trust), be sufficient together with any moneys referred to in paragraph (a)(i)(1) above,

for the payment at their respective maturities or redemption dates prior to maturity of the principal thereof and the redemption premium, if any, and interest to accrue thereon at such maturity or redemption, as the case may be;

(b) there shall have been paid or provision duly made for the payment of all fees and expenses of the Issuer, the Trustee, the Registrar and the Paying Agent due or to become due; and

(c) if any Bonds are to be redeemed on any date prior to their maturity, the Trustee shall have received in form satisfactory to it irrevocable instructions from a Borrower Representative to redeem such Bonds on such date and either evidence satisfactory to the Trustee that all redemption notices required by this Indenture have been given or irrevocable power authorizing the Trustee to give such redemption notices has been granted to the Trustee.

Limitations set forth elsewhere herein regarding the investment of moneys held by the Trustee in the Bond Fund shall not be construed to prevent the depositing and holding in the Bond Fund of the obligations described in paragraph (a)(i) of this Section for the purpose of defeasing the lien of this Indenture as to Bonds which have not yet become due and payable. Notwithstanding any other provision of this Indenture to the contrary, all moneys deposited with the Trustee as provided in this Section may be invested and reinvested, at the direction of the Borrower, in Government Obligations (or, in the case of a deposit under paragraph (a)(i) of this Section, in a money market fund that invests solely in Government Obligations and is rated in the highest category by one of Fitch, Moody’s or S&P and, if more than one of such rating agencies then rates such money market fund, is rated no less than the highest rating category by each of such rating agencies then rating such money market fund) maturing in the amounts and times as hereinbefore set forth, and all income from all Government Obligations (or money market fund) in the hands of the Trustee pursuant to this Section which is not required for the payment of the Bonds and interest and redemption premium, if any, thereon with respect to which such moneys shall have been so deposited shall be deposited in the Bond Fund as and when realized and collected for use and application as are other moneys deposited in the Bond Fund. Notwithstanding the foregoing provisions of this paragraph, if the Bonds are rated by S&P at the time a deposit is made under paragraph (a)(i) of this Section, such moneys may be invested solely in Government Obligations maturing or to be available to be withdrawn at par no later than the earlier of the Maturity Date or redemption date.

Section 5.03. Discharge of this Indenture. This Indenture, the lien upon the Trust Estate and the rights granted and duties imposed hereby, shall continue and subsist after payment

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in full of the Bonds under Section 5.01 or the deemed payment in full of the Bonds in accordance with Section 5.02 until the Trustee shall have returned to the Borrower, all funds held by the Trustee the Borrower, is entitled to receive pursuant to this Indenture or the other Bond Documents after all Bonds have been paid at maturity or redeemed.

ARTICLE VI

DEFAULT PROVISIONS AND REMEDIES

Section 6.01. Events of Default. Any one of the following shall constitute an Event of Default hereunder:

(a) Failure to pay interest on any Bond when and as the same shall have become due;

(b) Failure to pay the principal of or any premium on any Bond when and as the same shall become due, whether at the stated maturity or redemption date thereof or by acceleration;

(c) Failure to observe or perform any other of the covenants, agreements or conditions on the part of the Issuer included in this Indenture or in the Bonds and the continuance thereof for a period of thirty (30) days after written notice to the Issuer and the Borrower has been given by the Trustee;

(d) The occurrence of an Event of Default under the Loan Agreement or any Bond Document; and

(e) The occurrence of an Event of Default under the Series 2011A Loan Agreement or the Series 2011A Indenture; provided, however, that an Event of Default under either the Series 2011A Loan Agreement or the Series 2011A Indenture occurring solely by reason of the failure of the Borrower to maintain the minimum liquidity requirements set forth in Section [____] of the Continuing Commitment Agreement entered into in connection with the Series 2011A Bonds shall not constitute an Event of Default for purposes of this Indenture or the Loan Agreement.

Section 6.02. Acceleration. Upon the occurrence of an Event of Default, the Trustee may, or upon the written direction of the Holders of not less than a majority in principal amount of the Bonds then Outstanding, the Trustee immediately shall, by notice in writing sent to the Issuer, the Borrower and the Paying Agent, declare the principal of all Bonds then Outstanding (if not then due and payable) and the interest accrued thereon to be due and payable immediately, and, upon said declaration, such principal and interest shall become and be immediately due and payable. Upon any declaration of acceleration hereunder, the Trustee shall immediately exercise

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such rights as it may have under the Loan Agreement to declare all payments thereunder to be immediately due and.

Immediately following any such declaration of acceleration, the Trustee shall cause to be mailed notice of such declaration by first-class mail, postage prepaid, to each Holder of a Bond at his/her last address appearing on the Register. Any defect in or failure to give such notice of such declaration shall not affect the validity of such declaration.

Section 6.03. Other Remedies; Rights of Holders. Upon the happening and continuance of an Event of Default hereunder the Trustee may pursue any available remedy to enforce the performance of or compliance with any other obligation or requirement of this Indenture or the Loan Agreement.

If requested to do so by the Holders of at least a majority in aggregate principal amount of Bonds then Outstanding and if the Trustee is indemnified as provided in Section 7.01(h), the Trustee shall exercise such of the rights and powers conferred by this Section and by Section 6.02 as the Trustee, being advised by Counsel, shall deem most effective to enforce and protect the interests of the Holders.

No remedy by the terms of this Indenture conferred upon or reserved to the Trustee (or to the Holders) is intended to be exclusive of any other remedy, but each and every such remedy shall be cumulative and shall be in addition to any other remedy given to the Trustee or to the Holders hereunder or now or hereafter existing.

No delay or omission to exercise any right or power accruing upon any default or Event of Default shall impair any such right or power or shall be construed to be a waiver of any such default or Event of Default or acquiescence therein and every such right and power may be exercised from time to time and as often as may be deemed expedient.

No waiver of any default or Event of Default hereunder, whether by the Trustee or by the Holders, shall extend to or shall affect any subsequent default or Event of Default or shall impair any rights or remedies consequent thereon.

The Trustee, as the assignee of substantially all right, title and interest of the Issuer in and to the Loan Agreement, shall be empowered to enforce each and every right granted to the Issuer under the Loan Agreement other than Reserved Rights.

Section 6.04. Right of Holders to Direct Proceedings. The Holders of a majority in aggregate principal amount of Bonds then Outstanding shall have the right at any time, by an instrument or instruments in writing executed and delivered to the Trustee, to direct the method and place of conducting all proceedings to be taken in connection with the enforcement of the terms and conditions of this Indenture, or any other proceedings hereunder; provided that such direction shall not be otherwise than in accordance with the provisions of law and this Indenture,

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and provided that the Trustee shall be indemnified to its satisfaction and the Trustee may take any other action deemed proper by the Trustee that is not inconsistent with such direction.

No Holder shall have the right to institute any proceeding for the enforcement of this Indenture unless such Holder has given the Trustee and the Borrower written notice of an Event of Default, the Holders of a majority in aggregate principal amount of the Bonds then Outstanding shall have requested the Trustee in writing to institute such proceeding, the Trustee shall have been afforded a reasonable opportunity to exercise its powers or to institute such proceeding, there shall have been offered to the Trustee indemnity satisfactory to it against the cost, expense and liability to be incurred in connection with such request and the Trustee shall have thereafter failed or refused to exercise such powers or to institute such proceeding within sixty (60) days after receipt of notice with no inconsistent direction given during such sixty (60) days by the Holders of a majority in aggregate principal amount of the Bonds then Outstanding. Nothing in this Indenture shall affect or impair any right of enforcement conferred on any Holder by the Act to enforce (i) the payment of the principal of and premium, if any, and interest on Bonds at and after the maturity thereof, or (ii) the obligation of the Issuer to pay the principal of, premium, if any, and interest on Bonds to such Holder at the time, place, from the sources and in the manner as provided in this Indenture.

In case the Trustee shall have proceeded to enforce any right under this Indenture by the appointment of a receiver or otherwise, and such proceedings shall have been discontinued or abandoned for any reason, or shall have been determined adversely, then and in every such case the Issuer and the Trustee shall be restored to their former positions and rights hereunder and all rights, remedies and powers of the Issuer and the Trustee shall continue as if no such proceedings had been taken subject to the limits of any adverse determination.

Section 6.05. Waiver. The Trustee may waive any default or Event of Default hereunder and its consequences and rescind any declaration of acceleration of maturity of principal, and shall do so upon the written request of the Holders of a majority in aggregate principal amount of the Bonds then Outstanding; provided, however, that the Trustee shall not cause such a waiver or rescission unless and until all principal, premium, if any, and interest on the Bonds in arrears, together with interest thereon (to the extent permitted by law) at the applicable rate of interest borne by the Bonds and all fees and expenses of the Trustee and the Issuer shall have been paid or provided for.

Section 6.06. Application of Monies. All moneys received by the Trustee pursuant to any right given or action taken under the provisions of this Article, including any proceeding at law or in equity to enforce the provisions of and foreclose, levy or execute upon all items of collateral thereunder, shall be deposited in the Bond Fund and, after payment of (i) the cost and expenses of the proceedings resulting in the collection of such moneys and of the expenses, liabilities and advances incurred or made by the Trustee, including reasonable attorneys’ fees, and all other outstanding fees and expenses of the Trustee, and thereafter any fees, expenses,

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liabilities and advances due to, or incurred or made by, the Paying Agent and the Registrar and (ii) any sums due to the Issuer under the Loan Agreement (other than Repayments), such moneys shall be applied in the order set forth below:

(a) Unless the principal of all Bonds shall have become or been declared due and payable, all such moneys shall be applied:

First: To the payment of all installments of interest then due on the Bonds in order of priority first to installments past due for the greatest period, and, if the amount available shall not be sufficient to pay in full any particular installment, then to the ratable payment of the amounts so due; provided, however, that amounts on deposit in the Series 2011B Debt Service Reserve Fund shall be used solely to pay interest on the Series 2011B Bonds; and

Second: Pari passu with the succeeding paragraph, to the payment of the unpaid principal of and premium, if any, of the Bonds which shall have become due (other than Bonds called for redemption for the payment of which moneys are held pursuant to the provisions of this Indenture), with interest on such Bonds from the respective dates upon which they became due (at the rate borne by the Bonds, to the extent permitted by law), and if the amount available shall not be sufficient to pay in full Bonds due on any particular date, together with such premium,, then to the ratable payment of the amounts due on such date; provided, however, that amounts on deposit in the Series 2011B Debt Service Reserve Fund shall be used solely to pay principal on the Series 2011B Bonds; and

(b) If the principal of all the Bonds shall have become or been declared due and payable, all such moneys shall be applied:

First: Pari passu with the succeeding paragraph, to the payment of the principal, premium, if any, and interest then due and unpaid upon the Bonds, without preference or priority as between principal, premium, interest, installments of interest or Bonds, ratably according to the amounts due to the persons entitled thereto, provided, however, that amounts on deposit in the Series 2011B Debt Service Reserve Fund shall be used solely to pay principal and interest on the Series 2011B Bonds; and

(c) If the principal on all Bonds shall have been declared due and payable, and if such declaration shall thereafter have been rescinded under this Article then, subject to paragraph (b) of this Section in the event that the principal of all the Bonds shall again become or be declared due and payable, the moneys shall be applied in accordance with paragraph (a) of this Section.

Whenever moneys are to be applied pursuant to this Section, the Trustee shall fix the date which shall be not more than seven calendar days after such acceleration upon which such

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application is to be made and upon such date interest on the principal amount of Bonds to be paid on such dates shall cease to accrue. The Trustee shall give such notice as it may deem appropriate of the deposit with it of any such moneys and of the fixing of any such date.

ARTICLE VII

THE TRUSTEE; THE PAYING AGENT AND THE REGISTRAR

Section 7.01. Appointment of Trustee. The Trustee is hereby appointed and does hereby agree to act in such capacity, and to perform the duties of the Trustee under this Indenture, but only upon and subject to the following express terms and conditions (and no implied covenants or other obligations shall be read into this Indenture against the Trustee):

(a) The Trustee may execute any of its trusts or powers hereunder and perform any of its duties by or through attorneys, agents, receivers or employees and shall not be held liable for their actions if such agents are selected with reasonable care. The Trustee shall be entitled to advice of Counsel concerning all matters hereunder, and may in all cases pay such reasonable compensation to all such attorneys, agents, receivers and employees. The Trustee may act upon the opinion or advice of Counsel, accountants, engineers or surveyors selected by it in the exercise of reasonable care. The Trustee shall not be responsible for any loss or damage resulting from any action or non-action in good faith in reliance upon such opinion or advice.

(b) The Trustee shall not be responsible for any recital herein or in the Bonds, or for the recording, re-recording, filing or re-filing of this Indenture or for insuring the Trust Estate or the Facilities or collecting any insurance moneys, or for the validity of this Indenture or of any supplements hereto or instruments of further assurance, or for the sufficiency of the security for the Bonds issued hereunder or intended to be secured hereby, or for the value of or title to the Facilities or otherwise as to the maintenance of the Trust Estate. The Trustee shall have no obligation to perform any of the duties of the Issuer under the Loan Agreement. The Trustee shall not be liable to the Borrower, any Holder, any Beneficial Owner or any other Person for any loss suffered in connection with any investment of funds made by it in accordance with Section 4.06. The Trustee shall not be liable to the Borrower for any loss suffered as a result of or in connection with any investment of funds made by the Trustee in good faith as instructed by or approved by a Borrower Representative. The Trustee shall have no duty or responsibility to examine or review and shall have no liability for the contents of any documents submitted to or delivered to any Holder in the nature of a preliminary or final placement memorandum, official statement, offering circular or similar disclosure document.

(c) The Trustee shall not be accountable for the use of any Bonds authenticated or delivered hereunder after such Bonds shall have been delivered in

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accordance with instructions of the Issuer or for the use by the Borrower of the proceeds of the Bonds. or for the use or application of any moneys received by the Paying Agent. The Trustee may become the owner of Bonds secured hereby with the same rights as any other Holder.

(d) The Trustee shall be protected in acting upon opinions of Counsel and upon any notice, request, consent, certificate, order, affidavit, letter, telegram or other paper or document believed to be genuine and correct and to have been signed or sent by the proper person or persons. Any action taken by the Trustee pursuant to this Indenture upon the request or authority or consent of any person who at the time of making such request or giving such authority or consent is the Holder of any Bond shall be conclusive and binding upon all future Holders of the same Bond and upon Bonds issued in exchange therefor or in place thereof.

(e) The permissive right of the Trustee to do things enumerated in this Indenture or the Loan Agreement shall not be construed as duties. The Trustee shall only be responsible for the performance of the duties expressly set forth herein and shall not be answerable for other than its gross negligence or bad faith in the performance of those express duties.

(f) The Trustee shall not be personally liable for any debts contracted or for damages to persons or to personal property injured or damaged, or for salaries or non-fulfillment of contracts, relating to the Facilities.

(g) The Trustee shall not be required to give any bond or surety in respect of the execution of the said trust and powers or otherwise in respect of this Indenture.

(h) Before taking any action requested hereunder by the Holders, the Trustee may require satisfactory security or indemnity bond for the reimbursement of all expenses to which it may be put and to protect it against all liability, except liability which is adjudicated to have resulted from its own gross negligence or bad faith by reason of any action so taken.

(i) All moneys received by the Trustee or the Paying Agent, until used or applied or invested as herein provided, shall be held as special trust funds for the purposes specified in this Indenture and for the benefit and security of the Holders of the Bonds as herein provided. Such moneys need not be segregated from other funds except to the extent required by law or herein provided, and neither the Trustee nor the Paying Agent shall otherwise be under any liability for interest on any moneys received hereunder except such as may be agreed upon.

(j) The Trustee shall not be bound to ascertain or inquire as to the performance of the obligations of the Borrower or the Issuer under the Loan Agreement

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or this Indenture, and shall not be deemed to have, or be required to take, notice of default under this Indenture (other than in the event of an insufficient amount in the Bond Fund (or any account therein) to make a principal or interest or premium, if any, payment on the Bonds, or written notification of such default by any Holder). The Trustee may nevertheless require the Issuer and the Borrower to furnish information regarding performance of their obligations under the Loan Agreement and this Indenture, but is not obligated to do so.

(k) The Trustee shall, prior to any Event of Default and after the curing or waiver of all Events of Default which may have occurred, perform such duties and only such duties of the Trustee as are specifically set forth in this Indenture. The Trustee shall, during the existence of any Event of Default which has not been cured or waived, exercise such of the rights and powers vested in it by this Indenture and use the same degree of care and skill in their exercise as a prudent person would exercise or use under the circumstances in the conduct of his/her own affairs. The foregoing shall not limit the Trustee’s obligations under Section 6.02.

(l) The Paying Agent and the Registrar shall each be entitled to the same rights and immunities with respect to their respective duties under this Indenture as the Trustee is under this Section 7.01 with respect to its duties hereunder.

(m) In addition to the Trustee’s other duties hereunder, the Trustee shall authenticate and cancel Bonds as provided herein, keep such books and records relating to such duties as shall be consistent with prudent industry practice and make such books and records available for inspection by the Issuer and the Borrower at all reasonable times. All Bonds shall be made available for authentication, exchange and registration of transfer at the principal corporate trust office of the Trustee.

(n) The Trustee shall have no duty to verify the truthfulness or accuracy of the certifications made by the Borrower with respect to the Trustee’s disbursements for Costs of the Refunding Project in accordance with the Bond Documents.

(o) Without limiting the duties of the Trustee expressly set forth herein, the Trustee shall have no obligation or responsibility whatsoever in connection with (i) any federal or state tax-exempt status of the Bonds or the interest thereon; (ii) the consequences of the investment or non investment of any funds or accounts relating to the Bonds or the Credit Facility under Section 148 of the Code, or (iii) the calculation of any amount required to be rebated to the United States under Section 148 of the Code.

(p) No provision of this Indenture, the Loan Agreement or the Bonds shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers.

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(q) Whenever in the administration of this Indenture the Trustee deems it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee may, in the absence of bad faith on its part, rely upon a written certificate of a Borrower Representative or an Issuer Representative.

(r) Except as provided in Section 7.09, in the event that the Trustee receives inconsistent or conflicting requests and indemnity from two or more groups of Holders of the Bonds, each representing less than a majority in aggregate principal amount of the Bonds Outstanding, pursuant to the provisions of this Indenture, then the Trustee, in its sole discretion, may determine what action or actions, if any, shall be taken or not taken.

(s) The Trustee’s immunities and protections from liability and its rights to indemnification in connection with the performance of its duties under this Indenture shall likewise extend to the Trustee’s officers, directors, agents, attorneys and employees. Such immunities and protections and rights to indemnification, together with the Trustee’s rights to compensation, shall survive the Trustee’s resignation or removal, the discharge of this Indenture and the final payment of the Bonds.

(t) The Trustee, in its commercial banking or in any other capacity, may in good faith buy, sell, own, hold or deal in any of the Bonds and may join in any action that any Holder may be entitled to take with like effect as if it were not the Trustee. The Trustee, in its commercial banking or in any other capacity, may also engage in or be interested in any financial or other transaction with the Borrower and may act as depository, trustee or agent for any committee of Holders secured hereby or other obligations of the Borrower, as freely as if it were not the Trustee hereunder. The provisions of this paragraph shall extend to the affiliates of the Trustee.

(u) The Trustee shall have no responsibility or obligation to Participants, to Indirect Participants, or to the Persons for whom they act as nominees with respect to the Bonds, or to any Beneficial Owner of Bonds in respect of the accuracy of any records maintained by the Securities Depository, the Securities Depository Nominee or any Participant or Indirect Participant, the payment by the Securities Depository, the Securities Depository Nominee or any Participant or Indirect Participant of any amount in respect of the principal or interest on the Bonds, any notice which is permitted or required to be given under this Indenture, the selection by the Securities Depository, the Securities Depository Nominee or any Participant or Indirect Participant of any Person to receive payment in the event of a partial redemption of the Bonds, or any consent given or other action taken by the Securities Depository or the Securities Depository Nominee as Holder.

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(v) Whether or not expressly so provided, each and every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee is subject to the provisions of this Section 7.01.

Section 7.02. Compensation and Indemnification of Trustee, Paying Agent and Registrar; Trustee’s Prior Claim. The Agreement provides that the Borrower will pay the reasonable fees and expenses of the Issuer, the Trustee, the Paying Agent and the Registrar under this Indenture and all other amounts which may be payable to the Trustee, Paying Agent or Registrar under this Section, such fees and expenses to be paid when due and payable by the Borrower directly to the Trustee, Paying Agent, and Registrar, respectively, for their own account.

The Borrower shall (a) pay the Trustee from time to time, and the Trustee shall be entitled to, reasonable compensation (which shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust), (b) pay the Paying Agent and the Registrar and any other agent of the Issuer or the Borrower acting hereunder or under the Loan Agreement (the Paying Agent and the Registrar and any other agent of the Issuer being herein referred to as a “Borrower Agent”) reasonable compensation, (c) pay or reimburse each of the Trustee and any Borrower Agent upon request for all reasonable expenses, disbursements and advances incurred or made, in accordance with any of the provisions of this Indenture and the Loan Agreement (including the reasonable compensation and the reasonable expenses and disbursements of its Counsel and of all agents and other persons not regularly in its employ), except to the extent that any such expense, disbursement or advance is due to its own gross negligence or bad faith, and (d) indemnify each of the Trustee and any Borrower Agent for, and to hold it harmless against, any loss, liability or expense incurred by it, arising out of or in connection with the acceptance or administration of this Indenture or the trusts hereunder or the performance of its duties hereunder or under the Loan Agreement, including the reasonable costs and expenses of defending itself against or investigating any claim of liability in the premises, except to the extent that any such loss, liability or expense was due to its own gross negligence or bad faith. The obligations of the Borrower under the Loan Agreement referred to in this Section shall constitute additional indebtedness hereunder and shall survive the satisfaction and discharge of this Indenture. Such additional indebtedness shall be a senior claim to that of the Bonds upon all property and funds held or collected by the Trustee as such, except funds held with respect to unredeemed Bonds for which notice of redemption has been given, and except for any arbitrage rebate fund or account established pursuant hereto or pursuant to any arbitrage regulatory agreement. “Trustee”, “Borrower Agent”, “Paying Agent” and “Registrar” for purposes of this Section shall include any predecessor Trustee, Borrower Agent, Paying Agent and Registrar but the gross negligence or bad faith of any Trustee, Borrower Agent, Paying Agent or Registrar shall not affect the indemnification of any other Person. The obligations of the Borrower under this Section shall survive the termination of this Indenture and the resignation or removal of the Trustee.

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Section 7.03. Intervention in Litigation. In any judicial proceedings to which the Issuer is a party, the Trustee may intervene on behalf of Holders, and shall intervene if requested in writing by the Holders of at least twenty-five percent (25%) in aggregate principal amount of Bonds then Outstanding and indemnified as provided in Section 7.01(h).

Section 7.04. Resignation; Successor Trustees. The Trustee and any successor Trustee may resign only upon giving sixty (60) days prior written notice to the Issuer, the Borrower and each Holder of Bonds then Outstanding as shown on the Register. Such resignation shall take effect only upon the appointment of a successor Trustee by the Issuer with the written consent of the Borrower and the acceptance of such appointment by the successor Trustee. If no successor is appointed within sixty (60) days after the notice of resignation, the resigning party may appoint a successor or petition any court of competent jurisdiction to appoint a successor. Upon appointment of a successor Trustee, the resigning Trustee shall assign all of its right, title and interest in this Indenture and the Trust Estate to the successor Trustee. The successor Trustee shall be a bank or trust company with trust powers organized under the laws of the United States of America or any state of the United States, or the District of Columbia, having a combined capital stock, surplus and undivided profits aggregating at least $50,000,000. Any successor Trustee shall accept in writing its duties and responsibilities hereunder and such writing shall be filed with the Issuer and the Borrower

Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or any material part of the corporate trust business of the Trustee that includes this Indenture, shall be the successor of the Trustee hereunder, without the execution or filing of any instrument or any further act on the part of any Person, anything herein to the contrary notwithstanding, provided that such successor Trustee shall be eligible to serve as Trustee under the provisions of this Indenture. If the Trustee is not the successor corporation in any such merger or consolidation, the Trustee shall give notice of such event to the Borrower and shall take such action as may be required to effect a transfer of the trust included in this Indenture to such successor corporation.

Section 7.05. Removal of Trustee. The Trustee may be removed at any time, by an instrument or concurrent instruments in writing delivered to the Trustee, the Issuer and the Borrower and signed by the Holders of a majority in aggregate principal amount of Bonds then Outstanding. During such time that no Event of Default has occurred and is continuing under this Indenture, the Trustee may also be removed by an instrument in writing delivered to the Trustee, the Issuer and signed by a Borrower Representative. Such removal shall take effect only upon the appointment of a successor Trustee by the Issuer with the written consent of the Borrower and the acceptance of such appointment by the successor Trustee. Upon such removal, the Trustee shall assign to the successor Trustee all of its right, title and interest in this Indenture and the Trust Estate in the same manner as provided in Section 7.04. If the Bonds are rated by a

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Rating Agency, notice concerning any change in the Trustee shall be furnished by the successor Trustee to such Rating Agency.

Section 7.06. Paying Agent. The Trustee is hereby appointed by the Issuer as the initial Paying Agent. The Issuer, at the direction of the Borrower, shall appoint any successor Paying Agent for the Bonds, subject to the conditions set forth in Section 7.07. The Paying Agent shall designate to the Issuer and the Trustee its principal office for all purposes hereof and signify its acceptance of the duties imposed upon it hereunder by a written instrument of acceptance delivered to the Issuer and the Trustee under which the Paying Agent shall agree, particularly:

(i) to hold all sums held by it for the payment of the principal and premium, if any, or interest on the Bonds in trust for the benefit of the Holders of the Bonds until such sums shall be paid to such Holders of the Bonds or otherwise disposed of as herein provided;

(ii) to perform its obligations under this Indenture; and

(iii) to keep such books and records relating to its duties as Paying Agent as shall be consistent with prudent industry practice and to make such books and records available for inspection by the Issuer, the Trustee and the Borrower at all reasonable times.

The Issuer shall cooperate with the Trustee, the Paying Agent and the Borrower to cause the necessary arrangements to be made and to be thereafter continued whereby:

(a) funds derived from the sources specified in this Indenture will be made available at the principal office of the Paying Agent for the timely payment of principal of, premium, if any, and interest on the Bonds; and

(b) the Paying Agent shall be furnished such records and other information, at such times, as shall be required to enable the Paying Agent to perform the duties and obligations imposed upon it hereunder.

In carrying out its responsibilities hereunder the Paying Agent will act for the benefit of the Holders.

No delivery of Bonds to the Trustee shall constitute a redemption of Bonds or any extinguishment of the debt represented thereby or constitute the Trustee the owner of such Bonds for any purpose whatsoever unless the Trustee has purchased such Bonds for its own account.

Section 7.07. Qualifications of Paying Agent. The Paying Agent shall be a bank or trust company with trust powers duly organized under the laws of the United States of America or any state or territory thereof, having a combined capital stock, surplus and undivided profits of

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at least $15,000,000 and authorized by law to perform all the duties imposed upon it by this Indenture. The principal office of the Paying Agent for all purposes hereof shall be the office of the Paying Agent at which all deliveries to it hereunder shall be made and any and all notices and other communications in connection herewith shall be delivered. The Paying Agent may at any time resign and be discharged of its duties and obligations created by this Indenture by giving at least sixty (60) days’ notice to the Issuer, the Borrower and the Trustee. The Paying Agent may be removed at any time, at the direction of the Borrower, by an instrument, signed by the Issuer, filed with such Paying Agent and with the Trustee.

Section 7.08. Resignation of Paying Agent; Removal; Successors.

(a) In the event of the resignation or removal of the Paying Agent, the Paying Agent shall deliver any moneys and any related books and records held by it in such capacity to its successor or, if there be no successor, to the Trustee.

(b) In the event that the Paying Agent shall resign or be removed, or be dissolved, or if the property or affairs of the Paying Agent shall be taken under the control of any state or federal court or administrative body because of bankruptcy or insolvency, or for any other reason, and the Issuer shall not have appointed a successor Paying Agent (any appointment by the Issuer shall be with the prior written consent of the Borrower), the Trustee shall ipso facto be deemed to be the Paying Agent for all purposes of this Indenture until the appointment by the Issuer and acceptance of a successor Paying Agent.

Section 7.09. Instruments of Holders. Any instrument required by this Indenture to be executed by Holders may be in any number of writings of similar tenor and may be executed by Holders in person or by agent appointed in writing. Proof of the execution of any such instrument or of the writing appointing any such agent and of the ownership of Bonds given in any of the following forms shall be sufficient for any of the purposes of this Indenture:

(i) A certificate of any officer in any jurisdiction who by law has power to take acknowledgments within such jurisdiction that the person signing such writing acknowledged before him/her the execution thereof;

(ii) A certificate executed by any trust company or bank stating that at the date thereof the party named therein did exhibit to an officer of such trust company or bank, as the property of such party, the Bonds therein mentioned.

The Trustee may rely on such an instrument of Holders unless and until the Trustee receives notice in the form specified in (i) or (ii) above that the original such instrument is no longer reliable. In the event that the Trustee shall receive conflicting directions from two or more groups of Holders, each with combined holdings of not less than twenty-five percent (25%) of the principal amount of Outstanding Bonds, the directions given by the group of Holders

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which holds the largest percentage of Bonds shall be controlling and the Trustee shall follow such directions to the extent required herein.

Section 7.10. Power to Appoint Co-Trustees. At any time or times, for the purpose of meeting any legal requirements of any jurisdiction in which any part of the Facilities may at the time be located, the Issuer and the Trustee shall have power to appoint and, upon the request of the Trustee or of the Holders of a majority of the aggregate principal amount of the Bonds then Outstanding, the Issuer shall for such purpose join with the Trustee in the execution, delivery and performance of all instruments and agreements necessary or proper to appoint, one or more persons approved by the Trustee and the Borrower either to act as co-trustee or co-trustees, jointly with the Trustee of all or any part of the Facilities, or to act as separate trustee or separate co-trustees of all or any part of the Facilities, and to vest in such person or persons, in such capacity, such title to the Facilities or any part thereof, and such rights, powers, duties, trusts or obligations as the Issuer and the Trustee may consider necessary or desirable, subject to the remaining provisions of this Section.

Any co-trustee or separate trustee shall be a bank or trust company with trust powers organized under the laws of the United States of America or any state of the United States or the District of Columbia, having a combined capital stock, surplus and undivided profits aggregating at least $50,000,000.

The Trustee and co-trustee, if any, may by written instrument between them designate and assign either the Trustee or the co-trustee or both of them to perform all or any part of the responsibilities and duties of the Trustee under this Indenture.

If the Issuer shall not have joined in such appointment within thirty (30) days after the receipt by it of a written request to do so, or in case an Event of Default shall have occurred and be continuing, the Trustee and the Borrower shall have the power to make such appointment.

The Issuer shall execute, acknowledge and deliver all such instruments as may be required by any such co-trustee or separate trustee for more fully confirming such title, rights, powers, trusts, duties and obligations to such co-trustee or separate trustee.

Every co-trustee or separate trustee appointed pursuant to this Section, to the extent permitted by law or any applicable contract, shall be subject to the following terms, namely:

(a) This Indenture shall become effective at the time the Bonds shall be authenticated and delivered, and thereupon such co-trustee or separate trustee shall have all rights, powers, trusts, duties and obligations by this Indenture conferred upon the Trustee in respect of the custody, control or management of moneys, papers, securities and other personal property.

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(b) All rights, powers, trusts, duties and obligations conferred or imposed upon the trustees shall be conferred or imposed upon and exercised or performed by the Trustee, or by the Trustee and such co-trustee or co-trustees, or separate trustee or separate trustees, as shall be provided in the instrument appointing such co-trustee or co-trustees or separate trustee or separate trustees, except to the extent that, under the law of any jurisdiction in which any particular act or acts are to be performed, the Trustee shall be incompetent or unqualified to perform such act or acts, in which event such act or acts shall be performed by such co-trustee or co-trustees or separate trustee or separate trustees.

(c) Any request in writing by the Trustee to any co-trustee or separate trustee to take or to refrain from taking any action hereunder shall be sufficient warrant for the taking, or the refraining from taking, of such action by such co-trustee or separate trustee.

(d) Any co-trustee or separate trustee, to the extent permitted by law, may delegate to the Trustee the exercise of any right, power, trust, duty or obligation, discretionary or otherwise.

(e) The Trustee at any time, by an instrument in writing, with the concurrence of the Borrower and the Issuer evidenced by a resolution, may accept the resignation of any co-trustee or separate trustee appointed under this Section, and, in case an Event of Default shall have occurred and be continuing, the Trustee shall have power to accept the resignation of, or remove, any such co-trustee or separate trustee without the concurrence of the Issuer and the Borrower. Upon the request of the Trustee, the Issuer and the Borrower shall join with the Trustee in the execution, delivery and performance of all instruments and agreements necessary or proper to effectuate such resignation or removal. A successor to any co-trustee or separate trustee so resigned or removed may be appointed in the manner provided in this Section.

(f) No co-trustee or separate trustee hereunder shall be personally liable by reason of any act or omission of any other trustee hereunder.

(g) Any moneys, paper, securities or other items of personal property received by any such co-trustee or separate trustee hereunder shall forthwith, so far as may be permitted by law, be turned over to the Trustee.

Upon the acceptance in writing of such appointment by any such co-trustee or separate trustee, it or he shall be vested with the security interest in the Trust Estate and with such rights, powers, duties, trusts or obligations, as shall be specified in the instrument of appointment jointly with the Trustee (except insofar as applicable law makes it necessary for any such co-trustee or separate trustee to act alone) subject to all the terms of this Indenture. Every such acceptance shall be filed with the Trustee.

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In case any co-trustee or separate trustee shall die, become incapable of acting, resign or be removed, the security interest in the Trust Estate and all rights, powers, trusts, duties and obligations of said co-trustee or separate trustee shall, so far as permitted by law, vest in and be exercised by the Trustee unless and until a successor co-trustee or separate trustee shall be appointed in the same manner as provided for with respect to the appointment of a successor Trustee pursuant to Section 7.04 hereof.

Section 7.11. [INTENTIONALLY OMITTED].

Section 7.12. Several Capacities. Anything in this Indenture to the contrary notwithstanding, the same entity may serve hereunder as the Trustee, the Paying Agent and the Registrar and in any other combination of such capacities, to the extent permitted by law.

Section 7.13. Trustee Not Responsible for Duties of Registrar and Paying Agent. Notwithstanding anything to the contrary in this Indenture, the Trustee shall not be liable or responsible for any of the duties or obligations of the Registrar or the Paying Agent under this Indenture (or be liable or responsible for the acts or omissions of the Paying Agent, the Registrar or any action taken by the Trustee or failure to act in reasonable reliance upon any action or failure to act by the Paying Agent or the Registrar) except for the duties imposed upon, or the acts and omissions of, the Trustee while deemed to be the Paying Agent pursuant to Section 7.08(b) because a successor Paying Agent has not been appointed by the Issuer. The Trustee shall not be bound to ascertain or inquire as to the truth or accuracy of any information provided to it by the Paying Agent or the Registrar but may for any purpose conclusively rely upon any information given to the Trustee by the Paying Agent or the Registrar.

Section 7.14. Cooperation of the Issuer. The Issuer shall cooperate with the Trustee, the Paying Agent, the Registrar and the Borrower, if requested to do so by the Trustee or the Borrower and to the extent it may lawfully do so, in the enforcement of the provisions of this Indenture. .

Section 7.15. Cooperation of the Trustee, the Registrar and the Paying Agent. The Trustee, the Registrar and the Paying Agent shall cooperate in all respects and shall provide to the other in a timely fashion the information and knowledge each possesses so that the Trustee and each of such parties may faithfully exercise their respective obligations hereunder.

ARTICLE VIII

AMENDMENTS, SUPPLEMENTAL INDENTURES

Section 8.01. Supplemental Indentures. The Issuer and the Trustee, but with notice to any Holders may enter into an indenture or indentures supplemental to this Indenture that do not materially adversely affect the interest of the Holders for one or more of the following purposes:

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(a) to grant to or confer upon the Trustee for the benefit of the Holders any additional rights, remedies, powers or authority that may lawfully be granted to or conferred upon the Holders or the Trustee;

(b) to grant or pledge to the Trustee for the benefit of Holders any additional security other than that granted or pledged under this Indenture;

(c) to modify, amend or supplement this Indenture or any indenture supplemental hereto in such manner as to permit the qualification thereof under the Trust Indenture Act of 1939 or any similar federal statute then in effect or to permit the qualification of the Bonds for sale under the securities laws of any of the states of the United States;

(d) to appoint a successor Trustee, separate trustees or co-trustees in the manner provided in Article VII hereof;

(e) to modify, amend or supplement this Indenture for the purpose of obtaining or retaining a rating on the Bonds from a Rating Agency;

(f) to modify, amend or supplement this Indenture to permit a transfer of Bonds from one Securities Depository to another or the discontinuance of the Book Entry System;

(g) to cure any ambiguity or to correct or supplement any provision contained herein or in any supplemental indenture that may be defective or inconsistent with any provision contained herein or in any supplemental indenture, or to make such other provisions in regard to matters or questions arising under this Indenture which shall not materially adversely affect the interest of the Holders;

(h) to modify, amend or supplement this Indenture to permit the Paying Agent or the Registrar to assume any administrative duties of the Trustee hereunder or for the Trustee to assume any administrative duties of the Paying Agent or the Registrar hereunder;

(i) to make any change herein necessary, in the opinion of Bond Counsel, to maintain the exclusion of the interest on any Outstanding Bonds from gross income of the Holders thereof for federal income tax purposes.

When requested by the Issuer, and if all conditions precedent under this Indenture have been met, the Trustee shall join the Issuer in the execution of any such supplemental indenture unless it imposes additional obligations on the Trustee or adversely affects the Trustee’s rights and immunities under this Indenture or otherwise. A copy of all such supplemental indentures

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shall be promptly furnished to the Holders and the Paying Agent, and the Registrar shall be promptly advised of any modifications of its rights, duties and obligations hereunder.

The Trustee shall file copies of all such supplemental indentures with the Borrower and, if the Bonds are rated by a Rating Agency, shall forward copies of all such supplemental indentures to such Rating Agency.

Section 8.02. Amendments to Indenture; Consent of Holders the Borrower. Exclusive of supplemental indentures covered by Section 8.01 and subject to the terms and provisions contained in this Section, and not otherwise, the Holders of a majority in aggregate principal amount of the Bonds then Outstanding and affected by such indenture or indentures supplemental hereto shall have the right, from time to time, anything contained in this Indenture to the contrary notwithstanding, to consent to and direct the execution by the Trustee of such other indenture or indentures supplemental hereto as shall be consented to by the Issuer in its sole discretion for the purpose of modifying, altering, amending, adding to or rescinding, in any particular, any of the terms or provisions contained in this Indenture or in any supplemental indenture; provided, however, that nothing contained in this Section shall permit, or be construed as permitting, without the consent of the Holders of all Outstanding Bonds, (a) an extension of the maturity of the principal of, or the mandatory redemption date of, or interest on, any Bond, or (b) a reduction in the principal amount of, or the premium or the rate of interest on, any Bond, (c) a preference or priority of any Bond or Bonds over any other Bond or Bonds, (d) the creation of a lien on the Trust Estate prior to or on parity with the lien of this Indenture, or (e) a reduction in the aggregate principal amount of the Bonds required for any consent to any supplemental indenture; provided further, however, that without the written consent of the Trustee, the Trustee shall not be required to join in the execution of any supplemental indenture that affects the rights, duties, obligations or immunities of the Trustee or that imposes additional obligations on the Trustee. The giving of notice to and consent of the Holders to any such proposed supplemental indenture shall be obtained pursuant to Section 8.05.

Anything herein to the contrary notwithstanding, a supplemental indenture, amendment or other document described under this Article that affects any rights or obligations of the Borrower shall not become effective unless and until the Borrower shall have consented to the execution of such supplemental indenture, amendment or other document.

The Trustee shall file copies of all such supplemental indentures with the Borrower and, if the Bonds are rated by a Rating Agency, shall furnish copies of all such supplemental indentures to such Rating Agency.

Section 8.03. Amendments to the Agreement Not Requiring Consent of Holders. Neither the Issuer nor the Trustee shall cause or permit to exist any amendment, modification, supplement, waiver or consent with respect to any of the Loan Agreement but with notice to the Holders. The Issuer and the Trustee, as the case may be, may enter into or permit (and the

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Trustee shall consent to) any amendment of the Loan Agreement acceptable to the Borrower as may be required (i) for the purpose of curing any ambiguity or formal defect or omission that shall not adversely affect the interest of the Holders (ii) to grant or pledge to the Issuer or Trustee, for the benefit of the Holders any additional security, (iii) to modify, amend or supplement the Loan Agreement for the purpose of obtaining or retaining a rating on the Bonds from a Rating Agency, (iv) to make any change therein necessary, in the opinion of Bond Counsel, to maintain the exclusion of interest on any Outstanding Bonds from gross income of the Holders thereof for federal income tax purposes or (v) in connection with any other change therein which, based upon an opinion of Counsel, is not materially prejudicial to the interests of the Trustee and the Holders of the Bonds; provided, however, that without the written consent of the Trustee, the Trustee shall not be required to join in the execution of any such amendment that affects the rights, duties, obligations or immunities of the Trustee or that imposes additional obligations on the Trustee.

The Borrower shall file copies of any such amendments to the Loan Agreement with the Issuer, the Trustee and, if the Bonds are rated by a Rating Agency, the Trustee shall furnish copies of such amendments to such Rating Agency.

Section 8.04. Amendments to the Loan Agreement Requiring Consent of Holders. Except as provided in Section 8.03 hereof, the Issuer and the Trustee shall not enter into, and the Trustee shall not consent to, any other modification or amendment of the Loan Agreement, nor shall any such modification or amendment become effective, without the consent of the Holders of a majority in aggregate principal amount of the Bonds at the time Outstanding, such consent to be obtained in accordance with Section 8.05. No such amendment may, without the consent of the Holders of all the Outstanding Bonds, reduce the amounts or delay the times of payment of Repayments under the Loan Agreement.

The Borrower shall file copies of all such amendments to the Loan Agreement with the Issuer, the Trustee and, if the Bonds are rated by a Rating Agency, the Trustee shall furnish copies of such amendments to such Rating Agency.

Section 8.05. Notice to and Consent of Holders. If consent of the Holders is required under the terms of this Indenture for the amendment of this Indenture, the Loan Agreement or for any other similar purpose, the Trustee shall cause notice of the proposed execution of the amendment or supplemental indenture to be given by first-class mail, postage prepaid, to the Holders of the Outstanding Bonds then shown on the Register. Such notice shall briefly set forth the nature of the proposed amendment, supplemental indenture or other action and shall state that copies of any such amendment, supplemental indenture or other document are on file at the principal office of the Trustee for inspection by all Holders. If, within sixty (60) days or such longer period as shall be prescribed by the Trustee following the mailing of such notice, the Holders of a majority or all, as the case may be, of the principal amount of the Bonds Outstanding by instruments filed with the Trustee shall have consented to the amendment,

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supplemental indenture or other proposed action, then the Trustee may execute such amendment, supplemental indenture or other document or take such proposed action and the consent of the Holders shall thereby be conclusively presumed.

Section 8.06. Approving Opinion Required. No indenture supplemental or amendment to this Indenture shall become effective without the delivery of an Approving Opinion.

ARTICLE IX

MISCELLANEOUS

Section 9.01. Right of Trustee to Pay Taxes and Other Charges. If any tax, assessment or governmental or other charge upon any part of the Facilities is not paid as required, the Trustee may, subject to any indemnity required pursuant to Section 7.01(h) of this Indenture, pay such tax, assessment or governmental or other charge, without prejudice, however, to any rights of the Trustee hereunder arising in consequence of such failure; and any amount at any time so paid under this Section, with interest thereon from the date of payment until paid at the greater of the rate of interest borne by the Bonds or the per annum rate of interest announced from time to time by the bank serving as Trustee as its “prime rate” shall become so much additional indebtedness secured by this Indenture, shall be given a preference in payment over the Bonds, and shall be paid out of the Trust Estate.

Section 9.02. Limitation of Rights. With the exception of rights herein expressly conferred, nothing expressed or mentioned in or to be implied from this Indenture or the Bonds is intended or shall be construed to give to any Person other than the parties hereto, the Holders, the Paying Agent and the Borrower any legal or equitable right, remedy or claim under or in respect to this Indenture or any covenants, conditions and provisions herein contained; this Indenture and all of the covenants, conditions and provisions herein being intended to be and being for the sole and exclusive benefit of the parties hereto, the Holders, the Paying Agent and the Borrower as herein provided.

Section 9.03. Severability. If any provision of this Indenture is held to be in conflict with any applicable statute or rule of law or is otherwise held to be unenforceable for any reason whatsoever, such circumstances shall not have the effect of rendering the other provision or provisions herein contained invalid, inoperative, or unenforceable to any extent whatsoever.

The invalidity of any one or more phrases, sentences, clauses or Sections of this Indenture, shall not affect the remaining portions of this Indenture or any part thereof.

Section 9.04. Notices. Except as otherwise provided herein, all notices, approvals, consents, requests, and other communications hereunder shall be in writing and shall be deemed to have been given when the writing is delivered if given or delivered by hand, overnight

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delivery service or facsimile transmitter (with confirmed receipt) to the address or facsimile number set forth below and shall be deemed to have been given on the date deposited in the mail, if mailed, by first-class, registered or certified mail, postage prepaid, addressed as set forth below. Where required herein, notice shall be given by telephone, and promptly confirmed in writing, and shall be deemed given when given by telephone to the telephone numbers set forth below. The Issuer, the Borrower, the Trustee and the Paying Agent may, by written notice given hereunder, designate any different addresses, phone numbers and facsimile numbers to which subsequent notices, certificates, approvals, consents, requests or other communications shall be sent.

To the Issuer: CALIFORNIA MUNICIPAL FINANCE AUTHORITY 2111 Palomar Airport Road Suite 320 Carlsbad, California 92011

Attention: John P. Stoecker Telephone: (760) 930-1221 Facsimile: [________]

To the Trustee: U.S. BANK NATIONAL ASSOCIATION 633 West Fifth Street, 24th Floor Los Angeles, California Attention: Corporate Trust Services Telephone: (213) 615-6002 Facsimile: [________]

To the Borrower: AZUSA PACIFIC UNIVERSITY 901 East Alosta Avenue

P.O. Box 7000 Azusa, California 91702-7000 Attention: Chief Financial Officer Telephone: (626) 815-4691

Facsimile: [________]

Section 9.05. Payments Due on Non-Business Days. In any case where the date of maturity of interest on or premium, if any, or principal of the Bonds or the date fixed for redemption of any Bonds shall not be a Business Day, then payment of such interest, premium or principal need not be made on such date but shall be made on the next succeeding Business Day, with the same force and effect as if made on the date of maturity or the date fixed for redemption, and, in the case of such payment, no interest shall accrue for the period from and after such date.

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Section 9.06. Binding Effect. This instrument shall inure to the benefit of and shall be binding upon the Issuer and the Trustee and their respective successors and assigns, subject, however, to the limitations contained in this Indenture.

Section 9.07. Captions. The captions or headings in this Indenture are for convenience only and in no way define, limit or describe the scope or intent of any provisions or Sections of this Indenture.

Section 9.08. Governing Law. This Indenture and the Bonds are contracts made under the laws of the State of California and shall be governed by and construed in accordance with the Constitution and laws applicable to contracts made and performed in the State of California. This Indenture shall be enforceable in the State of California, and any action arising out of this Indenture shall be filed and maintained in San Diego County, California, unless the Issuer waives this requirement.

Section 9.09. Limited Liability of Issuer. None of the Issuer, any Authority member or any person executing the Bonds is liable personally on the Bonds or subject to any personal liability or accountability by reason of their issuance. The Bonds are limited obligations of the Issuer, payable solely from and secured by the pledge of certain revenues hereunder. Neither the Issuer, its members, the State of California, nor any of its political subdivisions shall be directly, indirectly, contingently or morally obligated to use any other moneys or assets to pay all or any portion of the debt service due on the Bonds, to levy or to pledge any form of taxation whatever therefor or to make any appropriation for their payment. The Bonds are not a pledge of the faith and credit of the Issuer, its members, the State of California or any of its political subdivisions nor do they constitute indebtedness within the meaning of any constitutional or statutory debt limitation. The Issuer has no taxing power.

The Issuer shall not be liable for payment of the principal of, redemption price or interest on the Bonds or any other costs, expenses, losses, damages, claims or actions of any conceivable kind on any conceivable theory, under or by reason of or in connection with this Indenture, the Bonds or any other documents, except only to the extent amounts are received for the payment thereof from the Borrower under the Loan Agreement.

Notwithstanding anything to the contrary, any liability for payment of money and any other liability or obligation which the Issuer may incur under the Bonds, this Indenture or the Loan Agreement shall not constitute a general obligation of the Issuer but shall constitute limited obligations of the Issuer payable solely from and enforced only against the Trust Estate.

Section 9.10. Notices to Rating Agency. If the Bonds are rated by a Rating Agency, the Trustee shall provide written notice to such Rating Agency with respect to (i) the appointment of any successor Trustee or Paying Agent, (ii) the appointment of any agent by the Trustee to perform any material duties of the Trustee under this Indenture, (iii) any amendment or supplement to this Indenture and (iv) the payment in full of all of the Bonds (whether at stated

55

maturity or upon redemption, acceleration or defeasance). Failure of the Trustee to provide any such notice shall not have any effect on the occurrence of such event.

Section 9.11. Execution in Counterparts. This Indenture may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument.

Section 9.12. Attorney's Fees. Except as may be otherwise set forth herein, attorney's fees shall not necessarily be recoverable by the prevailing party in the event this Indenture is subject to litigation.

Section 9.13. Patriot Act Compliance. To help the government fight the funding of terrorism and money laundering activities, Federal law requires all financial institutions to obtain, verify and record information that identifies each person who opens an account. For a non-individual person such as a business entity, a charity, a Trust or other legal entity the Trustee will ask for documentation to verify its formation and existence as a legal entity. The Trustee may also ask to see financial statements, licenses, identification, and authorization documents from individuals claiming authority to represent the entity or other relevant documentation.

.

[The remainder of this page is left blank intentionally.]

541712.01

IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be executed, sealed and delivered in their names and on their behalf by their respective duly authorized representatives, all as of the day and year first above written.


By:_____________________________________ Name: __________________________________ Title: ____________________________________

(SEAL) ATTEST: _______________________ [______]


By:_____________________________________ Name: __________________________________ Title: ____________________________________

[Signature Page to Indenture]

541712.01

1

EXHIBIT A

FORM OF BOND

[FOR BOOK-ENTRY BONDS: Unless this Bond is presented by an authorized representative of DTC to the Trustee for registration of transfer, exchange, or payment, with respect to any Bond issued that is registered in the name of CEDE & Co. or in such other name as is requested by an authorized representative of DTC (and any payment is made to CEDE & Co. or to such other entity as is requested by an authorized representative of DTC), any transfer, pledge, or other use hereof for value or otherwise by or to any person is wrongful inasmuch as the registered Holder hereof, CEDE & Co., has an interest herein.]

FORM OF BOND

THIS BOND HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AS AMENDED, OR UNDER THE SECURITIES LAWS OF ANY STATE OR JURISDICTION, THIS BOND IS SUBJECT TO CERTAIN TRANSFER RESTRICTIONS AS PROVIDED IN THE INDENTURE OF

TRUST DESCRIBED BELOW AND MAY NOT BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT TO A “QUALIFIED BUYER” AS DEFINED

IN THE INDNETURE REFERRED TO BELOW.

UNITED STATES OF AMERICA STATE OF CALIFORNIA

CALIFORNIA MUNICIPAL FINANCE AUTHORITY REFUNDING REVENUE BOND

(AZUSA PACIFIC UNIVERSITY PROJECT), SERIES 2011B

CUSIP: ________; Interest Rate: _____

No. R-1 Dated Date: February 1, 2011

FOR VALUE RECEIVED, the CALIFORNIA MUNICIPAL FINANCE AUTHORITY (the “Issuer”), a public entity, duly created under Chapter 5 of Division 7 of Title 1 of the Government Code of the State of California as amended (the “Act”), hereby promises to pay to ______________________, the registered Holder hereof,

4816-1843-0470.5 541712.01

A-2

___________________________________ ($_____________) on [DATE], solely from the special fund hereinafter described and from no other source, and to pay solely from said special fund, interest thereon as provided in this Bond, from the interest payment date next preceding the date of authentication hereof, or if this Bond is authenticated on an interest payment date, from the date of authentication hereof, but if this Bond is authenticated prior to [DATE], from the Dated Date (provided, however, that if on the date of authentication hereof, interest on the hereinafter defined Bonds is in default, any Bond issued in exchange for this Bond surrendered for registration of transfer or exchange shall bear interest from the last day to which interest has been paid or duly provided for on this Bond, or if no interest has been paid or duly provided for on this Bond, from the Dated Date as provided in the Indenture.

This Bond is one of an authorized issue of Bonds issued in an aggregate principal amount of [AMOUNT]. The Bonds are being issued under and secured by an Indenture of Trust, dated as of February 1, 2011, between the Issuer and U.S. BANK NATIONAL ASSOCIATION as Trustee, Paying Agent and Registrar (the “Trustee”) (as amended and supplemented from time to time in accordance with the terms thereof, collectively, the “Indenture”). The Bonds shall mature on [DATE], and are of like tenor except as to number, interest rate and amounts. The Bonds are issued by the Issuer for the purpose of refunding certain bonds issued by the California Statewide Community Development Authority for the benefit of the Borrower.

This Bond is issued under the Indenture and pursuant to the Constitution and laws of the State of California, including particularly the Act. Prior to the issuance hereof, the Issuer entered into a Loan Agreement, dated as of February 1, 2011 (as amended and supplemented from time to time in accordance with the terms thereof, the “Agreement”), between the Issuer and the Borrower, pursuant to the terms of which the Borrower must pay to the Issuer certain loan payments which are committed and will be fully sufficient to pay the principal of and the interest on the Bonds as the same become due. As security for the payment of the Bonds, all right, title and interest of the Issuer in the payments, revenues and earnings to be received under the terms of the Loan Agreement (excepting only certain Reserved Rights (as defined in the Loan Agreement) generally relating to indemnification payments and payments to the Issuer for its fees and certain expenses incurred in connection therewith) have been assigned and pledged for the benefit of the Holders of the Bonds.

This Bond shall not be payable from or charged upon any funds other than the revenue pledged to the payment hereof, nor shall the Issuer be subject to any pecuniary liability hereon. No holder of this Bond shall ever have the right to compel any exercise of the taxing power of the Issuer to pay this Bond or the interest hereon, nor to enforce payment thereof against any property of the Issuer; nor shall the Bond constitute a charge, lien or encumbrance, legal or equitable, upon any property of the Issuer. No recourse shall be had for the payment of the principal of or interest on this Bond against any officer, employee, director or member of the Issuer. This Bond and the redemption premium, if any, and interest hereon shall not be deemed to constitute a debt of the Issuer, the State of California, or any other political subdivision thereof, or a pledge of the faith and credit of the State of California, or of any other political

4816-1843-0470.5 541712.01

A-3

subdivision thereof, but shall be payable solely from the Bond Fund provided for under the terms of the Indenture. The issuance of this Bond shall not directly, indirectly or contingently obligate the Issuer, the State of California, or any other political subdivision, to levy or pledge any form of taxation whatever therefor or to make any appropriation for the payment hereof. The Issuer has no taxing power. This Bond is a limited obligation of the Issuer and is payable solely from the loan payments to be received under the terms of the Loan Agreement and any other amounts pledged under the Indenture.

None of the Issuer, any Authority member or any person executing the Bonds is liable personally on the Bonds or subject to any personal liability or accountability by reason of their issuance. Neither the Issuer, its members, the State of California, nor any of its political subdivisions shall be directly, indirectly, contingently or morally obligated to use any other moneys or assets to pay all or any portion of the debt service due on the Bonds, to levy or to pledge any form of taxation whatever therefor or to make any appropriation for their payment. The Bonds are not a pledge of the faith and credit of the Issuer, its members, the State of California or any of its political subdivisions nor do they constitute indebtedness within the meaning of any constitutional or statutory debt limitation. The Issuer has no taxing power. The Issuer shall not be liable for payment of the principal of, redemption price or interest on the Bonds or any other costs, expenses, losses, damages, claims or actions of any conceivable kind on any conceivable theory, under or by reason of or in connection with the Indenture, the Bonds or any other documents, except only to the extent amounts are received for the payment thereof from the Borrower under the Loan Agreement.

Reference to the Indenture is hereby made for a description of the aforesaid Bond Fund, the nature and extent of the security, rights, duties and obligations of the Issuer, the Borrower, the Paying Agent, the Registrar and the Trustee, the rights of the Holders of the Bonds, the terms and conditions under and upon the occurrence of which the Indenture, the Loan Agreement may be modified, and the terms and conditions under and upon the occurrence of which the lien of the Indenture may be defeased as to this Bond prior to the maturity or redemption date hereof, to all of the provisions of which the Holder hereof, by the acceptance of this Bond, assents. All capitalized terms not defined herein shall have the meanings set forth in the Indenture.

Interest will accrue at the Interest Rate stated above on the unpaid portion of the principal of this Bond from the last date to which interest was paid or duly provided for or, if no interest has been paid or duly provided for, from the Dated Date of the Bonds, until the entire principal amount of this Bond is paid or duly provided for.

The Trustee will be the Registrar and Paying Agent for the Bonds. Holders must surrender Bonds to the Trustee to collect principal and premium, if any, at maturity or upon redemption. Interest on the Bonds will be paid to the registered Holder hereof as of the Record Date by check mailed by first-class mail on the Interest Payment Date to such Holder's registered address; provided, however, the Holder of a Bond or Bonds (other than Bonds bearing interest at a Fixed Rate) in an aggregate principal amount of not less than $1,000,000 may receive such

4816-1843-0470.5 541712.01

A-4

payment by wire transfer to an account in the continental United States, if the Holder provides the Registrar with a written request therefor and the account address. Notices requesting wire transfers will remain in effect for later interest payments until changed or revoked by another written notice. The principal of, redemption premium, if any, and interest on the Bonds will be payable in lawful currency of the United States. If any payment on the Bonds is due on a non-Business Day, such payment will be made on the next Business Day, and no additional interest will accrue as a result.

The Bonds are subject to optional, extraordinary and mandatory sinking fund redemption prior to their stated maturity in accordance with and subject to the terms and conditions set forth in the Indenture. When Bonds are called for redemption as aforesaid, notice thereof identifying the Bonds to be redeemed shall be given by mailing a copy of the redemption notice by first class mail, postage prepaid, to the registered Holder of each such Bond to be redeemed at the address shown on the registration books at least thirty (30) days prior to the redemption date; but no defect or failure to give any such notice of redemption to any such registered Holder shall affect the redemption or the validity of the proceedings for the redemption of Bonds. Any notice of optional redemption shall describe whether, and the conditions under which, the call for redemption shall be revoked. All Bonds called for redemption shall cease to bear interest on the specified redemption date provided sufficient monies for their redemption are on deposit at the designated place of payment at that time, and such Bonds shall no longer be secured by the lien of the Indenture and shall not be deemed to be outstanding under the provisions of the Indenture.

Failure to mail such notice or any defect therein shall not affect the rights or obligations of the registered Holders of the Bonds.

The transfer of this Bond is registerable by the registered Holder hereof in person or by his attorney duly authorized in writing at the corporate trust office of the Registrar, but only in the manner, subject to the limitations, and upon payment of the charges provided in the Indenture, and upon surrender and cancellation of this Bond. Upon such registration of transfer a new Bond or Bonds of the same series and the same maturity for the same aggregate principal amount will be issued to the transferee in exchange therefor. The Issuer, the Trustee, the Registrar and any Paying Agent may deem and treat the registered Holder hereof as the absolute Holder hereof (whether or not this Bond shall be overdue) for the purpose of receiving payment of or on account of principal hereof and interest due hereon and for all other purposes, and neither the Issuer nor the Registrar shall be affected by any notice to the contrary.

This Bond is issued with the intent that the laws of the State of California shall govern its construction.

In certain events, on the conditions, in the manner, and with the effect set forth in the Indenture, the principal of all of the Bonds may become or may be declared due and payable before the stated maturity thereof, together with interest accrued thereon. Modifications or alterations of the Indenture, the Loan Agreement or the other Bond Documents, or of any

4816-1843-0470.5 541712.01

A-5

supplements thereto, may be made to the extent and in the circumstances permitted by the Indenture. All capitalized terms used herein and not otherwise defined shall have the respective meanings given such terms in the Indenture.

It is hereby certified and recited that all acts, conditions and things required by the Constitution and laws of the State of California to happen, exist, and be performed precedent to and in the issuance of this Bond and the execution of the Indenture by the Issuer, have happened, exist and have been performed.

This Bond shall not become valid or obligatory for any purpose or be entitled to any security or benefit under the Indenture until the certificate of authentication hereon shall have been manually signed by the Trustee.

[Remainder of page intentionally left blank]

4816-1843-0470.5 541712.01

A-6

IN WITNESS WHEREOF, the Issuer has caused this Bond to be executed in its name by the manual or facsimile signature of its Chairman, and its corporate seal to be hereunto affixed or imprinted or otherwise reproduced hereon and attested by the manual or facsimile signature of its Assistant Secretary.


By:_____________________________________ Name: __________________________________ Title: ____________________________________

Attest:

By:_____________________________________ Name: __________________________________ Title: ____________________________________

(SEAL)

4816-1843-0470.5 541712.01

A-7

* * * * * * * * * *

AUTHENTICATION CERTIFICATE

This Bond is one of the Bonds described in the within-mentioned Indenture and is hereby authenticated.


By:_____________________________________ Name: __________________________________ Title: ____________________________________

Date of Authentication: ____________ ___, 2011

* * * * * * * * * *

4816-1843-0470.5 541712.01

A-8

FORM FOR TRANSFER

FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers unto ______________________________ (Tax Identification or Social Security No. __________) the within bond and all rights thereunder, and hereby irrevocably constitutes and appoints ______________________________ attorney to transfer the within bond on the books kept for registration thereof, with full power of substitution in the premises.

Dated: _________________ _____________________________

NOTICE: The signature to this assignment must correspond with the name as it appears upon the face of the within bond in every particular, without alteration or enlargement or any change whatever.

Signature Guaranteed: ____________________

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A-9

[End of Form of Series 2011B Bond]

541712.01

B-1

APPENDIX B

INVESTOR LETTER

February __, 2011

California Municipal Finance George K. Baum & Company Authority Patton Boggs LLP Squire Sanders & Dempsey LLP

California Municipal Finance Authority


Series 2011B


In connection with the limited public offering of California Municipal Finance Authority (the “Authority”) Refunding Revenue Bonds (Azusa Pacific University Project) Series 2011B (the “Series 2011B Bonds”), the undersigned purchaser of $__________ principal amount of such Series 2011B Bonds hereby makes the following representations, warranties and covenants on the express understanding that this letter will be relied upon by you:

1. We have received and read the Preliminary Limited Offering Memorandum dated January __, 2011 (the “Preliminary Limited Offering Memorandum”), and have been afforded the opportunity to ask such questions of representatives of Azusa Pacific University (the “Borrower”) as we have deemed necessary in making our investment decisions including the opportunity to request a site visit; and we have based our decision to invest in the Series 2011B Bonds on the Preliminary Limited Offering Memorandum, our own investigation, including, without limitation, our, review of such documents, records, reports, financial statements and other information concerning the Borrower and discussions with representatives of the Borrower and the Underwriter, as we have deemed necessary in making our investment decisions. We understand we will receive the final Limited Offering Memorandum (the “Limited Offering Memorandum”) at or near the time of closing of the Series 2011B Bonds, and we agree to read the Limited Offering Memorandum upon receipt.

2. We have the knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of an investment in the Series 2011B Bonds.

3. We acknowledge and understand that repayment of the Series 2011B Bonds is subject to a high degree of investment risk, and represent that we are capable of suffering a loss of its entire investment in the Series 2011B Bonds. We acknowledge and understand that we may have to bear the economic risk of the investment in the Series 2011B Bonds for an indefinite period of time.

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F-2

4. We are a “Qualified Buyer” within the meaning of that term as follows: “Qualified Buyer” means (1) a “Qualified Institutional Buyer” as defined in Rule 144A promulgated under the Securities Act of 1933, as in effect on the date hereof (the “Securities Act”); (2) an entity that is directly or indirectly wholly owned or controlled by the purchaser/bondholder representative (being a financial institution described in (1) above); (3) an entity all of the investors in which are described in (1) or (2) above; (4) a custodian or trustee for a party described in (1) or (2) above and (5) only in connection with an initial investment in the Series 2011B Bonds and not as any subsequent transferee, an individual investor described in Rule 501(a)(5) of the Securities and Exchange Commission either directly or through an entity controlled by such investor.

5. The Series 2011B Bonds have been purchased for our own account for investment and not with a view to the distribution, transfer or resale thereof in the capacity of a bond house, broker or other intermediary, nor with the intention to distribute or resell the Series 2011B Bonds, provided, however, that we reserve the right to dispose of all or any part of the Series 2011B Bonds if in the future we decide to do so in our sole discretion; provided, however, such sale is to only a Qualified Buyer in minimum denominations of $250,000 or any multiple of $5,000 in excess thereof unless the Series 2011B Bonds (without credit enhancement, unless such credit enhancement extends to the maturity or redemption of the Series 2011B Bonds) are rated “A3,” “A-,” “A-” or higher by Moody’s, S&P or Fitch, respectively, or any other nationally recognized rating agency approved by the Authority.

6. We are not relying upon the Underwriter for advice as to the merits and risks of an investment in the Series 2011B Bonds. The undersigned has sought such accounting, legal and tax advice as it has considered necessary to make an informed investment decision.

7. The undersigned is duly authorized to make the representations, warranties and covenants set forth in this letter on behalf of the Investor, and the foregoing representations, warranties and covenants shall survive the execution and delivery to us of the Series 2011B Bonds and the instruments and documents contemplated thereby.

The foregoing representations shall survive the execution and delivery to us of the Series 2011B Bonds and the instruments and documents contemplated thereby.

Very truly yours,

[INSERT NAME OF INVESTOR] By: ____________________________ Name: _______________________

Title: _______________________ SUMMARY OF INVESTMENT Name of Fund: ________________________ ______________________ Principal Amount: $_____________________ $_____________________ CUSIP Number: _______________________ ______________________

H-1

APPENDIX H

PROPOSED FORM OF SERIES 2011B LOAN AGREEMENT

______________________________________________________________________________ ______________________________________________________________________________

LOAN AGREEMENT

between


And


Dated as of February 1, 2011

Relating to

$[PAR] CALIFORNIA MUNICIPAL FINANCE AUTHORITY

REFUNDING REVENUE BONDS (AZUSA PACIFIC UNIVERSITY PROJECT)

SERIES 2011B

______________________________________________________________________________ ______________________________________________________________________________

CERTAIN RIGHTS OF THE ISSUER UNDER THIS LOAN AGREEMENT HAVE BEEN ASSIGNED TO, AND ARE SUBJECT TO A SECURITY INTEREST IN FAVOR OF TRUSTEE, AS TRUSTEE UNDER AN INDENTURE OF TRUST, DATED AS OF THE DATE FIRST ABOVE WRITTEN, AS AMENDED OR SUPPLEMENTED FROM TIME TO TIME. INFORMATION CONCERNING SUCH SECURITY INTEREST MAY BE OBTAINED FROM THE TRUSTEE AT: U.S. BANK NATIONAL ASSOCIATION, 633 WEST FIFTH STREET, 24th FLOOR, LOS ANGELES, CALIFORNIA 90071. .

i

TABLE OF CONTENTS Page

ARTICLE I DEFINITIONS AND RULES OF CONSTRUCTION ............................................... 3

Section 1.01. Definitions ............................................................................................................ 3 Section 1.02. Rules of Construction ......................................................................................... 12 Section 1.03. Accounting Terms and Determinations .............................................................. 13 Section 1.04. Relation to Other Documents; Acknowledgment of Different

Provisions of Bond Documents; Incorporation by Reference ......................... 13

ARTICLE II REPRESENTATIONS............................................................................................. 14

Section 2.01. Representations by the Issuer ............................................................................. 14 Section 2.02. Representations by the Borrower........................................................................ 15

ARTICLE III THE REFUNDING PROJECT............................................................................... 19

Section 3.01. Disbursement of Bond Proceeds......................................................................... 19 Section 3.02. Borrower Required to Pay Costs in Event Refunding Escrow Fund

Insufficient ....................................................................................................... 19 Section 3.03. Borrower and Issuer Representatives and Successors ........................................ 19 Section 3.04. Investment of Moneys in Funds.......................................................................... 20

ARTICLE IV ISSUANCE OF THE BONDS ............................................................................... 21

Section 4.01. Agreement to Issue the Bonds ............................................................................ 21 Section 4.02. No Third-Party Beneficiary ................................................................................ 21

ARTICLE V LOAN; PAYMENT PROVISIONS......................................................................... 21

Section 5.01. Loan of Proceeds ................................................................................................ 21 Section 5.02. Amounts Payable ................................................................................................ 21 Section 5.03. Expenses ............................................................................................................. 22 Section 5.04. Additional Payments........................................................................................... 23 Section 5.05. Unconditional Obligations.................................................................................. 24 Section 5.06. Prepayments........................................................................................................ 24 Section 5.07. Credits Against Payments................................................................................... 24

ARTICLE VI MAINTENANCE AND TAXES............................................................................ 25

Section 6.01. Borrower’s Obligations to Maintain and Repair................................................. 25 Section 6.02. Taxes and Other Charges .................................................................................... 25

ARTICLE VII INSURANCE, EMINENT DOMAIN AND DAMAGE AND DESTRUCTION.............................................................................................. 25

Section 7.01. Insurance............................................................................................................. 25

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ii

Section 7.02. Provisions Respecting Eminent Domain ............................................................ 25 Section 7.03. Damage and Destruction..................................................................................... 25

ARTICLE VIII SPECIAL COVENANTS .................................................................................... 26

Section 8.01. Access to the Property and Inspection................................................................ 26 Section 8.02. Financial Statements ........................................................................................... 26 Section 8.03. Recording and Filing; Other Instruments ........................................................... 28 Section 8.04. Exclusion from Gross Income for Federal Income Tax Purposes of

Interest on the Bonds ....................................................................................... 29 Section 8.05. Issuer Indemnification ........................................................................................ 29 Section 8.06. Compliance with Laws ....................................................................................... 30 Section 8.07. Non-Arbitrage Covenant..................................................................................... 30 Section 8.08. Notice of Determination of Taxability................................................................ 31 Section 8.09. Maintenance of Existence................................................................................... 31 Section 8.10. Borrower Approval of Indenture ........................................................................ 31 Section 8.11. Duties and Obligations........................................................................................ 32 Section 8.12. Continuing Disclosure ........................................................................................ 32 Section 8.13. Compliance and Insurance.................................................................................. 32 Section 8.14. Inspection and Field Audit.................................................................................. 32 Section 8.15. Debt..................................................................................................................... 33 Section 8.16. Liens.................................................................................................................... 33 Section 8.17. Investments, Acquisitions, Loans and Advances................................................ 35 Section 8.18. Leases.................................................................................................................. 35 Section 8.19. Sale, Lease or Other Disposition of Assets......................................................... 35 Section 8.20. Mergers ............................................................................................................... 35 Section 8.21. Burdensome Contracts With Affiliates............................................................... 36 Section 8.22. No Changes in Fiscal Year ................................................................................. 36 Section 8.23. Formation of Subsidiaries ................................................................................... 36 Section 8.24. Bond Documents................................................................................................. 36 Section 8.25. Further Assurances ............................................................................................. 37 Section 8.26. Minimum Unrestricted and Temporarily Restricted Cash and

Unrestricted and Temporarily Restricted Marketable Securities..................... 37 Section 8.27. Minimum Debt Service Coverage Ratio............................................................. 37 Section 8.28. Compliance with ERISA .................................................................................... 37 Section 8.29. Compliance with other Covenants ...................................................................... 37 Section 8.30. Investment Policy ............................................................................................... 38 Section 8.31. Swap Agreement................................................................................................. 38 Section 8.32. Environmental Laws ........................................................................................... 38 Section 8.33. Guaranties ........................................................................................................... 38

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iii

ARTICLE IX ASSIGNMENT, LEASE AND SALE.................................................................... 39

Section 9.01. Restrictions on Transfer of Issuer’s Rights......................................................... 39 Section 9.02. Assignment by the Issuer .................................................................................... 39 Section 9.03. Assignment of Agreement by the Borrower or Lease or Sale of

Facilities........................................................................................................... 39 Section 9.04. Assumption of Agreement by Purchaser of Facilities Upon

Foreclosure....................................................................................................... 40

ARTICLE X EVENTS OF DEFAULT AND REMEDIES .......................................................... 40

Section 10.01. Events of Default Defined ................................................................................ 40 Section 10.02. Remedies on Default......................................................................................... 42 Section 10.03. Application of Amounts Realized in Enforcement of Remedies...................... 44 Section 10.04. No Remedy Exclusive ...................................................................................... 44 Section 10.05. Agreement to Pay Attorneys’ Fees and Expenses ............................................ 44 Section 10.06. Issuer and Borrower to Give Notice of Default ................................................ 44 Section 10.07. Waivers or Omissions....................................................................................... 44 Section 10.08. Discontinuance of Proceedings......................................................................... 44 Section 10.09. Injunctive Relief ............................................................................................... 45

ARTICLE XI PREPAYMENTS.................................................................................................... 45

Section 11.01. Optional Prepayments....................................................................................... 45 Section 11.02. Prepayment to Include Fees and Expenses ....................................................... 46

ARTICLE XII MISCELLANEOUS.............................................................................................. 46

Section 12.01. Amounts Remaining in Funds .......................................................................... 46 Section 12.02. No Implied Waiver ........................................................................................... 46 Section 12.03. Issuer Representative ........................................................................................ 46 Section 12.04. Borrower Representative .................................................................................. 46 Section 12.05. Notices .............................................................................................................. 46 Section 12.06. Issuer, Governing Body, Members, Commissioners, Directors,

Officers, Agents and Employees of Issuer and Governing Body Not Liable ........................................................................................................ 47

Section 12.07. No Liability of Issuer; No Charge Against Issuer’s Credit .............................. 47 Section 12.08. Non-Liability of Issuer...................................................................................... 48 Section 12.09. If Performance Date Not a Business Day ......................................................... 48 Section 12.10. Binding Effect................................................................................................... 48 Section 12.11. Severability ....................................................................................................... 48 Section 12.12. Amendments, Changes and Modifications ....................................................... 48 Section 12.13. Execution in Counterparts ................................................................................ 49

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Section 12.14. Applicable Law................................................................................................. 49 Section 12.15. Prior Understandings ........................................................................................ 49 Section 12.16. Duration ............................................................................................................ 49

1

LOAN AGREEMENT

THIS LOAN AGREEMENT, dated as of February 1, 2011 (this “Loan Agreement”), is made and entered into by and between the CALIFORNIA MUNICIPAL FINANCE AUTHORITY (the “Issuer”), a public entity duly organized and existing under the Constitution and laws of the State of California (the “State”), and AZUSA PACIFIC UNIVERSITY (the “Borrower”), a California nonprofit religious corporation;


WHEREAS, pursuant Chapter 5 of Division 7 of Title 1 of the Government Code of the State of California (the “Act”), certain public agencies (the “Members”) have entered into a Joint Exercise of Powers Agreement Relating to the California Municipal Finance Authority, dated as of January 1, 2004 (the “Joint Powers Agreement”), in order to form the Issuer for the purpose of promoting economic, cultural and community development, and in order to exercise any powers common to the Members, including the issuance of bonds, notes or other evidences of indebtedness; and

WHEREAS, the City of Azusa (the “City”), has become a Member of the Issuer in order to facilitate the promotion of economic, cultural and community development activities in the City, including the financing of projects by the Issuer; and

WHEREAS, Azusa Pacific University, a California nonprofit religious corporation (the “Borrower’), owns and operates an institution for higher education in the City; and

WHEREAS, there have been previously issued by the California Statewide Communities Development Authority (“CSCDA”) certain bonds for the benefit of the Borrower designated as “California Statewide Communities Development Authority, Variable Rate Demand Refunding Revenue Bonds (Azusa Pacific University Project) Series 2007”, in an aggregate principal amount of $140,340,000 (the Series 2007 Bonds”), pursuant to an Indenture of Trust, dated as of July 1, 2007 (the “2007 Indenture”) between the CSCDA and U.S. Bank National Association, as trustee for the Series 2007 Bonds (the “2007 Trustee”); and

WHEREAS, the Borrower has applied for the assistance of the Issuer in redeeming and refunding the Series 2007 Bonds in full (the “Refunding Project”) in order to reduce interest rates and achieve improved economics for the benefit of the Borrower and its operations; and

WHEREAS, the facilities financed with the Series 2007 Bonds are located within the territorial limits of the City; and

WHEREAS, the Issuer has determined that the Refunding Project is permitted under the Joint Powers Agreement, will achieve the objects and purposes for which the Issuer was created and has further determined to undertake the Refunding Project; and

2

WHEREAS, in order to pay a portion of the costs of the Refunding Project, the Issuer has authorized the issuance pursuant to an Indenture of Trust, dated as of February 1, 2011 (the “Indenture”) of its Refunding Revenue Bonds (Azusa Pacific University Project) Series 2011B, in an aggregate principal amount of $______ (the “Series 2011B Bonds” and collectively with any Additional Bonds issued under the Indenture, the “Bonds”); and

WHEREAS, the Series 2011B Bonds will be purchased for resale by George K Baum & Company (the “Underwriter”) pursuant to a Bond Purchase Agreement, dated as of January __, 2011B (the “Bond Purchase Agreement”), among the Issuer, the Borrower and the Underwriter; and

WHEREAS, in order to pay the balance of the costs of the Refunding Project, the Issuer has authorized the issuance pursuant to an Indenture of Trust, dated as of February 1, 2011 (the “Series 2011A Indenture”), between the Issuer and the Trustee, of its Variable Rate Demand Refunding Revenue Bonds (Azusa Pacific University Project) Series 2011A, in an aggregate principal amount of $70,000,000 (the “Series 2011A Bonds”); and

WHEREAS, the Series 2011A Bonds will be purchased by Wells Fargo Bank National Association (the “Bank”) pursuant to a Bond Purchase Agreement, dated as of January __, 2011 (the “Series 2011A Bond Purchase Agreement”) among the Issuer, the Borrower and the Bank; and

WHEREAS, the Issuer has undertaken to finance a portion of the Costs of the Refunding Project by making the loan of the proceeds derived from the sale of the Series 2011B Bonds to the Borrower pursuant to this Loan Agreement; and

WHEREAS, the Borrower’s obligations to repay the loan are evidenced by this Loan Agreement under which the Borrower is required to make Repayment Installments sufficient to pay when due the principal of, premium, if any, and interest on, the Bonds; and

WHEREAS, it has been determined that the estimated amount necessary to finance a portion of the cost of the Refunding Project, including necessary expenses incidental to the issuance of the Series 2011B Bonds, will require the issuance, sale and delivery of the Series 2011B Bonds in the aggregate principal amount of $__________, as provided in the Indenture; and

WHEREAS, the Issuer proposes to loan the proceeds from the sale of the Series 2011B Bonds to the Borrower to pay a portion of the Cost of the Refunding Project upon the terms and conditions hereinafter set forth.

NOW, THEREFORE, in consideration of the premises and the mutual covenants hereinafter contained, the parties hereto covenant, agree and bind themselves as follows;

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ARTICLE I

DEFINITIONS AND RULES OF CONSTRUCTION

Section 1.01. Definitions. In addition to the words and terms elsewhere defined in this Loan Agreement, the following words and terms as used herein shall have the following meanings unless the context or use clearly indicates another or different meaning or intent, and any other words and terms defined in the Indenture shall have the same meanings when used herein as assigned in the Indenture unless the context or use clearly indicates another or different meaning or intent:

“Additional Payments” means the payments required to be made by the Borrower under Section 5.04 of this Loan Agreement.

“Affiliate” means a corporation, partnership, association, joint venture, business trust or similar entity organized under the Laws of any state that directly, or indirectly through one (1) or more intermediaries, Controls or is Controlled by, or is under common Control with, the Borrower.

“Alternate Credit Facility” has the meaning assigned to such term in the Indenture.

“Applicable Law” means all applicable provisions of all constitutions, statutes, rules, regulations and orders of all governmental bodies, all Governmental Approvals and all orders, judgments and decrees of all courts and arbitrators.

“Bank” means, initially, Wells Fargo Bank, National Association, a national banking association, and its successors and assigns.

“Bond Proceeds” means the principal of the Bonds and any investment earnings thereon.

“Borrower” means Azusa Pacific University, a California nonprofit religious corporation organized and existing under the laws of the State of California, and any permitted successor or assign thereof hereunder.

“Borrower Representative” means any one of the persons at the time designated to act on behalf of the Borrower by written certificate furnished to the Issuer and the Trustee containing the specimen signatures of such persons and signed on behalf of the Borrower by the Secretary of the Borrower.

“Business Day” has the meaning assigned to such term in the Indenture.

“Capital Lease” means any lease of Property which in accordance with GAAP would be required to be capitalized on the balance sheet of the lessee.

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“Christian Leadership Alliance” means Christian Leadership Alliance, a California nonprofit religious corporation organized and existing under the laws of the State of California, and any permitted successor and assign thereof

“Closing Date” means the date of execution of this Agreement.

“Collateral” has the meaning assigned to such term in the Collateral Agreement.

“Collateral Agent” means the collateral agent appointed pursuant to the terms of the Intercreditor Agreement, which shall initially be U.S. Bank National Association, in its capacity as Trustee.

“Compliance Certificate” means a certificate substantially in the form of Exhibit C hereto.

“Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. The terms “Controlling” and “Controlled” have meanings correlative thereto. Without limiting the generality of the foregoing, a Person shall be deemed to be Controlled by another Person if such other Person possesses, directly or indirectly, the power to vote 5% or more of the securities having ordinary voting power for the election of directors, managing general partners or the equivalent.

“Controlled Group” means all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control which, together with the Borrower or any subsidiary or affiliate, are treated as a single employer under Section 414 of the Code.

“Cost(s) of Issuance” means all costs and expenses which the Issuer or the Borrower may properly pay or accrue in connection with the issuance of the Bonds under applicable provisions of the Code, including (without limitation) the following costs:

(a) any fees and expenses of the Issuer or the Trustee incurred or imposed in connection with the issuance of the Bonds and the accomplishment of the transactions related thereto;

(b) and any fees and expenses incurred in connection with preparing, recording or filing such documents, instruments or financing statements as either the Borrower or the Issuer may deem desirable to perfect or protect the rights of the Issuer or the Trustee under the Bond Documents;

(c) any legal, accounting or financial advisory fees and expenses, including, without limitation, fees and expenses of Bond Counsel and counsel to the Issuer, the Borrower, or the Trustee, any fees and expenses of the Issuer, Trustee, Paying Agent or any rating agency, filing fees, and printing and engraving costs, incurred in connection

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with the authorization, issuance, sale and purchase of the Bonds, and the preparation of the Bond Documents and all other documents in connection with the authorization, issuance and sale of the Bonds or the accomplishment of the Refunding Project and not otherwise paid or provided for from amounts on deposit in the Refunding Escrow Fund;

“Costs of the Refunding Project” means the amount necessary to retire all outstanding Series 2007 Bonds in accordance with the Series 2007 Indenture, including the payment of all costs and expenses in connection therewith.

“Credit Agreement” means that certain Credit Agreement dated as of January ___, 2011, between the Borrower and the Bank.

“Debt” of any Person means at any date, without duplication, (a) all obligations of such Person for borrowed money and reimbursement obligations which are not contingent; (b) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments; (c) all obligations of such Person under any Swap Agreement, (it being understood that the indicative “Settlement Amount” shall not be considered “Debt” for purposes of this definition until the related Swap Agreement terminates and any such “Settlement Amount” remains unpaid); (d) all obligations of such Person to pay the deferred purchase price of property or services, except trade accounts payable arising in the ordinary course of business; (e) all obligations of such Person as lessee under Capital Leases; (f) all Debt of others secured by a lien on any asset of such Person, whether or not such Debt is assumed by such Person and (g) all guarantees by such Person of Debt of other Persons.

“Debt Service” for any period means, collectively for the Loan Parties, without duplication, the sum of the amounts required for such period to pay scheduled principal of, to fund any sinking fund requirements for, and to pay interest on Debt, Letter of Credit Fees, mandatory principal payments and other Remarketing Fees; provided, however, there shall be excluded from such definition interest on Debt to the extent such amount has been funded and escrowed in a segregated account for such purpose.

“Debt Service Coverage Ratio” means, for any period of time, the ratio determined by dividing (i) the Income Available for Debt Service for such period by (ii) the Debt Service for such period, with the Debt Service on the Series 2011A Bonds and the Series 2011B Bonds for each six month calculation period to be based on all of the interest coming due during such six month period and one-half of the principal coming due during the then current Bond Year.

“Default” means any event or condition which with notice, passage of time or any combination of the foregoing, would constitute an Event of Default.

“Eminent Domain” means the taking of title to, or the temporary use of, the Facilities or any part thereof pursuant to eminent domain or condemnation proceedings, or by any settlement or compromise of such proceedings, or any voluntary conveyance of the Facilities or any part thereof during the pendency of, or as a result of a threat of, such proceedings.

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“Environmental Event” means (i) the presence, release, generation, handling, storage, disposal, removal, transportation or treatment of hazardous materials or hazardous substances (as defined in any applicable Environmental Laws, and including asbestos and materials containing asbestos and mold) in, under, on, at or from any real property owned, occupied or operated by the Borrower, or on any real property adjoining or in the vicinity of real property owned by, leased or operated by the Borrower as a result of migration of hazardous substances from the Borrower’s real property under circumstances where the Borrower’s real property was the source thereof; provided, that in each case the same has resulted in a violation of Environmental Laws the liability of which could reasonably be expected to exceed $100,000 or an impairment to property which materially reduces its value by an amount which could reasonably be expected to exceed $100,000 or materially restricts its use for any lawful purpose or creates a threat to public or worker health or safety or constitutes waste; or (ii) the receipt by the Borrower of any written notice or claim of any violation of any Environmental Law or permit, nuisance, negligence or other tort or other theory alleging liability or responsibility in an amount in excess of $100,000 on the basis of any of the facts, conditions or circumstances described in the foregoing item (i).

“Environmental Laws” means any and all federal, state, local and foreign statutes, laws, regulations, ordinances, rules, judgments, orders, decrees, permits, concessions, grants, franchises, licenses, agreements or other governmental restrictions relating to the environment or to emissions, discharges or releases of pollutants, contaminants, petroleum or petroleum products, chemicals or industrial, toxic or hazardous substances or wastes into the environment including, without limitation, ambient air, surface water, ground water, or land, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of pollutants, contaminants, petroleum or petroleum products, chemicals or industrial, toxic or hazardous substances or wastes or the clean up or other remediation thereof.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and any successor statute of similar import, and regulations thereunder, in each case as in effect from time to time. References to Sections of ERISA shall be construed also to refer to any successor Sections.

“Event of Default” with respect to this Agreement has the meaning assigned to that term in this Agreement and, with respect to any Bond Document, has the meaning assigned therein.

“Excepted Affiliates” means __________.

“Excepted Loan Parties” means Christian Leadership Alliance and ______.

“Excepted Subsidiaries” means Christian Leadership Alliance and _____.

“Existing Debt” shall mean, collectively, (i) the Azusa College Dormitory and Student Union Bonds of 1967, Series A and Series B issued pursuant to the Trust Indenture, dated as of April 1, 1967, by and between Azusa College and Crocker-Citizens National Bank, as trustee and (ii) the obligations under the Existing Swap Agreements.

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“Existing Swap Agreements” means those certain interest rate swap transactions with the Bank pursuant to that certain ISDA Master Agreement (including the Schedule thereto), dated as of January ___, 2011, between the Borrower and the Bank, and the related Confirmation No. ____________ and Confirmation No. ________, between the Borrower and the Bank, as such agreements may be amended, restated, modified and/or supplemented from time to time including, without limitation, any additional confirmations reflecting transactions between the Bank and the Borrower.

“Fiscal Year” means the period of twelve (12) consecutive calendar months for which financial statements of the respective entity have been examined by its independent certified public accountants; currently for the Borrower, a year ending on June 30.

“Generally Accepted Accounting Principles” or “GAAP” means generally accepted accounting principles in effect from time to time in the United States and applicable to entities such as the Borrower.

“Governing Body” means the board, commission, council or other body in which the general legislative powers of the Issuer are vested.

“Governmental Approval” means an authorization, consent, approval, license, or exemption of, registration or filing with, or report to any Governmental Authority.

“Governmental Authority” means any federal, state or local government (whether domestic or foreign), any political subdivision thereof or any other governmental, quasi-governmental, judicial, public or statutory instrumentality, authority, body, agency, bureau or entity (including any zoning authority, the Federal Deposit Insurance Corporation or the Federal Reserve Board, any central bank or any comparable authority), or any arbitrator with authority to bind a party at law.

“Gross Revenues” has the meaning assigned to such term in the Security Agreement.

“Guarantor” and “Guarantors” have the meanings set forth in Section 8.33 hereof.

“Guaranty” and “Guaranties” have the meanings set forth in Section 8.33 hereof.

“Holder” has the meaning assigned to such term in the Indenture.

“Income Available for Debt Service” means, collectively for the Loan Parties, for the period of determination, the increase in Net Assets for such period determined in accordance with GAAP, plus depreciation, amortization, interest expenses, Letter of Credit Fees, Remarketing Fees, and excluding (i) any gain or loss resulting from either the extinguishment of Debt, the sale, exchange or other disposition of capital assets not in the ordinary course of business, (ii) earnings resulting from any reappraisal, revaluation or write-up of fixed or capital assets, (iii) any realized losses on the sale of investments or derivative instruments, (iv) any unrealized appreciation or depreciation of the carrying value of investments or derivative

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instruments, (v) other extraordinary items and the proceeds of insurance other than business interruption insurance, and (vi) any permanently restricted gifts, donations, grants, pledges, devises, legacies, bequests or contributions that are unavailable to fund Debt Service or operating expenses. “Income Available for Debt Service” will also be adjusted to exclude unrestricted and temporarily restricted capital campaign pledges and to include unrestricted and temporarily restricted capital campaign receipts to the extent that these cash receipts are available to fund Debt Service or operating expenses.

“Intercreditor Agreement” means that certain Intercreditor and Collateral Agency Agreement dated as of January ___, 2011, among the Secured Creditors and the Collateral Agent, regarding the Collateral, as the same may be amended, supplemented and modified from time to time.

“Investment Policy” means, initially, the investment policy of the Borrower delivered to the Trustee on or prior to the Closing Date, and thereafter, the most recent investment policies of the Borrower.

“Issuer” means the California Municipal Finance Authority, or its successors and assigns, a joint exercise of powers authority formed by the Joint Exercise of Powers Agreement pursuant to the provisions of the Act.

“Issuer Issuance Fee” means a combined Issuer Issuance Fee for the Series 2011A Bonds and the Series 2011B Bonds equal to $100,000 in the aggregate, allocated between the Series 2011A Bonds and the Series 2011B Bonds based on the relative aggregate principal amount of each Series.

“Issuer Annual Fee” means 1.5 basis points times the aggregate principal amount of the Bonds Outstanding from time to time.

“Issuer Representative” means with respect to the Issuer, any member of the Board of Directors of the Issuer (the “Board”), or any other person designated as an Issuer Representative by a certificate signed by a member of the Board and filed with the Trustee.

“Laws” means federal, state and local laws, statutes, rules, ordinances, regulations, codes, licenses, authorizations, decisions, injunctions, interpretations, orders or decrees of any court or other Governmental Authority having jurisdiction as may be in effect from time to time.

“Letter of Credit Fees” means all facility fees or commitment fees payable to a provider or an issuer of an agreement providing credit enhancement or liquidity support to any Debt of the Borrower including, without limitation, the Bonds.

“Lien” means any lien, security interest or other charge or encumbrance of any kind, or any other type of preferential arrangement, including without limitation the lien or retained security title of a conditional vendor and any easement, right of way, Capital Lease or other encumbrance on title to the Property.

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“Line of Credit Note” means that certain promissory note issued in favor of the Bank pursuant to the Credit Agreement evidencing and securing the obligations owed to the Bank.

“Loan Agreement” means this Loan Agreement between the Issuer and the Borrower and any modifications, amendments and supplements hereto made in accordance with the provisions hereof and of the Indenture.

“Loan Parties” means, collectively, the Borrower and each direct and indirect Subsidiary of the Borrower.

“Loan Repayments” means the amounts required to be paid by the Borrower under this Loan Agreement.

“Net Proceeds” means, when used with respect to any proceeds of insurance or proceeds resulting from Eminent Domain, the gross proceeds therefrom less all expenses (including attorneys’ fees) incurred in the realization thereof.

“Margin Stock” has the meaning assigned to such term in Regulation U promulgated by the Board of Directors of the Federal Reserve System, as now and hereafter from time to time in effect.

“Material Adverse Change” means a material adverse effect on (i) the business, operations, results of operations, assets, liabilities or condition (financial or otherwise) of the Borrower and its Subsidiaries taken as a whole or (ii) the value of the assets and property of the Borrower and its Subsidiaries, taken as a whole. For purposes of this definition, the term “material” means any action, transaction, event or occurrence, or a series of actions, transactions, events or occurrences taken cumulatively, which results in a reduction of the Net Assets of the Loan Parties by ten percent (10%) or more, measured as of the date of any action, transaction, event or occurrence on a pro forma basis, based on the total Net Assets of the Loan Parties for the immediately preceding four fiscal quarters.

“Material Adverse Effect” means any material adverse change in or effect on: (a) the business, assets, operations, prospects or financial or other condition of the Loan Parties; (b) the ability or authority of any Loan Party to pay the Obligations or to perform their respective obligations in accordance with the terms of this Agreement, any Guaranty or any of the Bond Documents and to avoid an Event of Default under this Agreement or any Bond Document; or (c) the legality, validity, binding effect or enforceability of this Agreement or any Bond Document.

“Material Plan” has the meaning assigned to such term in Section 10.01(l) hereof.

“Net Assets” means the amount so designated as the net assets on the most recent consolidated balance sheet of the Loan Parties prepared in accordance with GAAP.

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“Net Assets to Total Funded Debt Ratio” means, as of the date of determination thereof, the ratio of Net Assets to Total Funded Debt as of such date.

“No Default Certificate” means a certificate substantially in the form of Exhibit A hereto.

“Non-Core Asset” means any tangible personal property that, in the reasonable business judgment of the applicable Loan Party, has become obsolete or worn out, or which is not used or useful in the essential functions of the applicable Loan Party.

“Obligations” means all amounts payable by the Borrower, arising under or pursuant to the Bond Documents (including any amounts to reimburse the Bank and the Trustee for any advances or expenditures by either under any of such documents).

“PBGC” means the Pension Benefit Guaranty Corporation or any successor thereto.

“Person” means an individual, partnership, corporation (including a business trust), limited liability company, trust, unincorporated association, joint venture or other entity.

“Plan” means, with respect to the Borrower at any time, an employee pension benefit plan which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Code and either (i) is maintained by a member of the Controlled Group for employees of a member of the Controlled Group of which the Borrower is a part, (ii) is maintained pursuant to a collective bargaining agreement or any other arrangement under which more than one employer makes contributions and to which a member of the Controlled Group of which the Borrower is a part is then making or accruing an obligation to make contributions or has within the preceding five plan years made contributions.

“Pricing Certificate” means a certificate substantially in the form of Exhibit B hereto.

“Property” means any interest in any kind of property or asset, whether real, personal or mixed, or tangible or intangible, whether now owned or hereafter acquired.

“Responsible Officer” means: (a) with respect to the Borrower in connection with any Compliance Certificate or any other certificate or notice pertaining to any financial information required to be delivered by the Borrower hereunder, the chief financial officer, treasurer or executive director of finance of the Borrower; and (b) otherwise, with respect to the Borrower, the chief executive officer, president, chief financial officer, treasurer or controller of the Borrower.

“S&P” means Standard & Poor’s Ratings Services, a Division of The McGraw-Hill Companies, Inc., or any successor thereto.

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“Series 2011A Bonds” means the California Municipal Finance Authority Refunding Revenue Bonds (Azusa Pacific University Project) Series 2011A issued by the Issuer pursuant to the Indenture.


“Subsidiary” means, as to the Borrower, (i) with respect to any for profit corporation, any corporation or other entity of which more than 50% of the outstanding stock or comparable equity interests entitled to vote in the election of the board of directors or similar governing body of such entity is directly or indirectly owned by the Borrower, by one or more Subsidiaries or by the Borrower and one or more Subsidiaries, and (ii) with respect to any not for profit corporation, any corporation or other entity which is controlled, directly or indirectly, by the Borrower or any Subsidiary.

“Swap Agreement” means (a) any and all rate swap transactions, basis swaps, credit derivative transactions, forward rate transactions, commodity swaps, commodity options, forward commodity contracts, equity or equity index swaps or options, bond or bond price or bond index swaps or options or forward bond or forward bond price or forward bond index transactions, interest rate options, forward foreign exchange transactions, cap transactions, floor transactions, collar transactions, currency swap transactions, cross-currency rate swap transactions, currency options, spot contracts, or any other similar transactions or any combination of any of the foregoing (including any options to enter into any of the foregoing), whether or not any such transaction is governed by or subject to any master agreement, and (b) any and all transactions of any kind, and the related confirmations, which are subject to the terms and conditions of, or governed by, any form of master agreement published by the International Swaps and Derivatives Association, Inc., any International Foreign Exchange Master Agreement, or any other master agreement (any such master agreement, together with any related schedules, a “Master Agreement”), including any such obligations or liabilities under any Master Agreement.

“Tax Certificate” means the tax certificate of the Borrower dated the Closing Date.

“Tax-Exempt Organization” means a Person organized under the laws of the United States of America or any state thereof which is an organization described in Section 501(c)(3) of the Code, which is exempt from federal income taxes under Section 501(a) of the Code, which is not a “private foundation” within the meaning of Section 509(a) of the Code, or corresponding provisions of federal income tax laws from time to time in effect.

“Total Funded Debt” means, at any time the same is to be determined, the aggregate of all Debt of the Loan Parties at such time determined on a consolidated basis in accordance with GAAP.

“Trust Estate” has the meaning assigned to such term in the Indenture.

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“Unrestricted and Temporarily Restricted Cash” means, at any point in time, all cash or cash equivalents acceptable to the Bank, if the Bank shall at the time be the owner of the Series 2011A Bonds, held by the Loan Parties and treated by the applicable Loan Party as unrestricted and available for use for the payment of principal and premium, if any, and interest on Debt or for the payment of operating expenses of such Loan Party or which is temporarily restricted by the donor thereof or by the Board of Trustees (or similar body) of such Loan Party to a use which is not inconsistent with such uses, but which will be unrestricted and available for use not later than the end of the immediately succeeding Fiscal Year.

“Unrestricted and Temporarily Restricted Marketable Securities” means marketable securities acceptable to the Bank, if the Bank shall at the time be the owner of the Series 2011A Bonds, but only to the extent that such marketable securities (a) are held by the Loan Parties and treated by the applicable Loan Party as unrestricted and available for use for the payment of principal and premium, if any, and interest on Debt or for the payment of operating expenses of such Loan Party or which is temporarily restricted by the donor thereof or by the Board of Trustees (or similar body) of such Loan Party to a use which is inconsistent with such uses, but which will be unrestricted and available for use not later than the end of the immediately succeeding Fiscal Year and (b) have a maturity of less than one year.

“Unfunded Vested Liabilities” means, with respect to any Plan at any time, the amount (if any) by which (i) the present value of all vested nonforfeitable accrued benefits under such Plan exceeds (ii) the fair market value of all Plan assets allocable to such benefits, all determined as of the then most recent valuation date for such Plan, but only to the extent that such excess represents a potential liability of a member of the Controlled Group to the PBGC or such Plan under Title IV of ERISA.

“Welfare Plan” means a “welfare plan,” as such term is defined in Section 3(1) of ERISA.

Section 1.02. Rules of Construction. Unless the context clearly indicates to the contrary, the following rules shall apply to the construction of this Loan Agreement:

(a) Words importing the singular number shall include the plural number and vice versa.

(b) The table of contents, captions and headings herein are solely for convenience of reference only and shall not constitute a part of this Loan Agreement nor shall they affect its meaning, construction or effect.

(c) Words of the masculine gender shall be deemed and construed to include correlative words of the feminine and neuter genders, and words of the neuter gender shall be deemed and construed to include correlative words of the masculine and feminine genders.

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(d) All references in this Loan Agreement to particular Articles or Sections are references to Articles and Sections of this Loan Agreement, unless otherwise indicated.

Section 1.03. Accounting Terms and Determinations. Unless otherwise specified herein, all accounting terms used herein shall be interpreted, all accounting determinations hereunder shall be made, and all financial statements required to be delivered hereunder shall be prepared, in accordance with GAAP. In the event of changes to GAAP which become effective after the Closing Date, this Agreement shall be revised to reflect any changes in the Continuing Covenant Agreement between the Borrower and the Bank.

Section 1.04. Relation to Other Documents; Acknowledgment of Different Provisions of Bond Documents; Incorporation by Reference.

(a) Nothing in this Agreement shall be deemed to amend, or relieve the Borrower of its obligations under, any Bond Document to which it is a party. Conversely, to the extent that the provisions of any Bond Document allow the Borrower to take certain actions, or not to take certain actions, with regard for example to Permitted Encumbrances, incurrence of Debt, transfers of assets, maintenance of financial ratios and similar matters, the Borrower nevertheless shall be fully bound by the provisions of this Agreement.

(b) Except as provided in subsection (c) of this Section 1.04, all references to other documents shall be deemed to include all amendments, modifications and supplements thereto to the extent such amendment, modification or supplement is made in accordance with the provisions of such document and this Agreement.

(c) All provisions of this Agreement making reference to specific Sections of any Bond Document shall be deemed to incorporate such Sections into this Agreement by reference as though specifically set forth herein (with such changes and modifications as may be herein provided) and shall continue in full force and effect with respect to this Agreement notwithstanding payment of all amounts due under or secured by the Bond Documents, the termination or defeasance thereof or any amendment thereto or any waiver given in connection therewith, so long as this Agreement is in effect and until all Obligations are paid in full. No amendment, modification, consent, waiver or termination with respect to any of such Sections shall be effective as to this Agreement until specifically agreed to in writing by the parties hereto with specific reference to this Agreement.

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ARTICLE II

REPRESENTATIONS

Section 2.01. Representations by the Issuer. The Issuer makes the following representations and warranties:

(a) The Issuer is a joint exercise of powers agency duly organized and existing under the laws of the State and is duly authorized to issue the Bonds and to perform its obligations under this Loan Agreement. The Issuer has all requisite power, authority and legal right to execute and deliver the Bond Documents to which it is a party and all other instruments and documents to be executed and delivered by the Issuer pursuant thereto, to perform and observe the provisions thereof and to carry out the transactions contemplated by the Bond Documents. All corporate action on the part of the Issuer which is required for the execution, delivery, performance and observance by the Issuer of the Bond Documents has been duly authorized and effectively taken, and such execution, delivery, performance and observation by the Issuer do not contravene applicable law or any contractual restriction binding on or affecting the Issuer.

(b) The Issuer has duly approved the issuance of the Bonds and the loan of the proceeds thereof to the Borrower for the accomplishment of the Refunding Project; no other authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required as a condition to the performance by the Issuer of its obligations under any Bond Documents.

(c) This Loan Agreement is, and each other Bond Document to which the Issuer is a party when delivered will be, legal, valid and binding special obligations of the Issuer enforceable against the Issuer in accordance with its terms except as the enforceability thereof may be limited by bankruptcy, insolvency or similar laws affecting the enforcement of creditors’ rights generally.

(d) There is no default of the Issuer in the payment of the principal of or interest on any of its indebtedness for borrowed money or under any instrument or instruments or agreements under and subject to which any indebtedness for borrowed money has been incurred which does or could affect the validity and enforceability of the Bond Documents or the ability of the Issuer to perform its obligations thereunder, and no event has occurred and is continuing under the provisions of any such instrument or agreement which constitutes or, with the lapse of time or the giving of notice, or both, would constitute such a default.

(e) With respect to the Bonds, there are no other obligations of the Issuer that have been, are being or will be (i) sold at substantially the same time, (ii) sold pursuant to the same plan of financing, and (iii) reasonably expected to be paid from substantially the same source of funds.

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(f) To the best knowledge of the Issuer, there is no action, suit, proceeding, inquiry or investigation at law or in equity or before or by any court, public board or body pending, or, to the best knowledge of the Issuer, threatened against or affecting the Issuer wherein an unfavorable decision, ruling or finding would adversely affect (i) the transactions contemplated by, or the validity or enforceability of, the Bonds, the Indenture or this Loan Agreement or (ii) the tax-exempt status of interest on the Bonds.

(g) In connection with the authorization, issuance and sale of the Bonds, the Issuer has complied with all provisions of the Constitution and laws of the State, including the Act.

(h) The Issuer has not assigned or pledged and will not assign or pledge its interest in this Loan Agreement for any purpose other than to secure the Bonds under the Indenture. The Bonds constitute the only bonds or other obligations of the Issuer in any manner payable from the revenues to be derived from this Loan Agreement, and except for the Bonds, no bonds or other obligations have been or will be issued on the basis of this Loan Agreement.

(i) The Issuer is not in default under any of the provisions of the laws of the State, where any such default would affect the issuance, validity or enforceability of the Bonds or the transactions contemplated by this Loan Agreement or the Indenture.

(j) No representation is made herein as to compliance with the securities or “blue sky” laws of any jurisdiction. The Issuer shall not be required to consent to service of process in any jurisdiction or be required to submit to the general jurisdiction of any state.

Section 2.02. Representations by the Borrower. The Borrower represents and warrants as follows:

(a) The Borrower (i) is a nonprofit religious corporation duly organized and existing under the laws of the State of California, (ii) has organizational and other legal power and authority to enter into and to perform the agreements and covenants on its part contained in the Bond Documents to which it is a party, (iii) has duly authorized the execution, delivery and performance of the Bond Documents to which it is a party and has duly approved the Bond Documents, (iv) is an organization described in Section 501(c)(3) of the Code, (v) is exempt from federal income tax under Section 501(a) of the Code except for taxes imposed on unrelated business income pursuant to Section 511 of the Code and is an organization described in Section 170(b)(1)(A) of the Code, (vi) is not a “private foundation” as defined by Section 509(a) of the Code, (vii) has not received any notice from the Internal Revenue Service that its respective returns are being audited or its respective status as an organization described in Section 501(c)(3) of the Code is being investigated or challenged, and (viii) is in continuing compliance with its status described in the foregoing clauses (iv), (v) and(vi).

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(b) This Loan Agreement has been duly authorized, executed and delivered by the Borrower.

(c) This Loan Agreement when assigned to the Trustee pursuant to the Indenture and the other Bond Documents will constitute the legal, valid and binding agreements of the Borrower enforceable against the Borrower by the Trustee in accordance with their terms for the benefit of the Holders of the Bonds, and any rights of the Issuer and obligations of the Borrower not so assigned to the Trustee constitute the legal, valid, and binding agreements of the Borrower enforceable against the Borrower by the Issuer in accordance with their terms; except in each case as enforcement may be limited by bankruptcy, insolvency or other laws affecting the enforcement of creditors’ rights generally, by the application of equitable principles regardless of whether enforcement is sought in a proceeding at law or in equity and by public policy.

(d) The execution and delivery by the Borrower of the Bond Documents to which it is a party and the performance by the Borrower of its obligations thereunder (i) do not violate provisions of statutory laws or regulations applicable to the Borrower, (ii) do not violate its articles of incorporation or bylaws, (iii) do not breach or result in a default under any other agreement to which it is a party, and (iv) do not violate the terms of any judicial or administrative judgment, order, decree or arbitral decision that names the Borrower and is specifically directed to it or its properties.

(e) The execution and delivery of this Loan Agreement and the other Bond Documents to which the Borrower is a party, the consummation of the transactions herein and therein contemplated and the fulfillment of or compliance with the terms and conditions hereof and thereof, will not conflict with or constitute a violation or breach of or default (with due notice or the passage of time or both) under the articles of incorporation or bylaws of the Borrower, any applicable law or administrative rule or regulation, or any applicable court or administrative decree or order, or any indenture, mortgage, deed of trust, loan agreement, lease, contract or other agreement or instrument to which the Borrower is a party or by which it or its properties are otherwise subject or bound, or result in the creation or imposition of any lien, charge or encumbrance of any nature whatsoever upon any of the property or assets of the Borrower, which conflict, violation, breach, default, lien, charge or encumbrance might have consequences that would materially and adversely affect the consummation of the transactions contemplated by the Bond Documents, or the financial condition, assets, properties or operations of the Borrower.

(f) No consent or approval of any trustee or holder of any indebtedness of the Borrower or any guarantor of indebtedness of or other provider of credit or liquidity to the Borrower, and no consent, permission, authorization, order or license of, or filing or registration with, any governmental authority (except with respect to any state securities or “blue sky” laws) is necessary in connection with the execution and delivery of the Bond Documents, or the consummation of any transaction herein or therein

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contemplated, or the fulfillment of or compliance with the terms and conditions hereof or thereof, except as have been obtained or made and as are in full force and effect.

(g) There is no action, suit, proceeding, inquiry or investigation at law or in equity or before or by any court, public board or body pending, or, to the best knowledge of the Borrower, threatened against or affecting the Borrower wherein an unfavorable decision, ruling or finding would materially and adversely affect (i) the transactions contemplated by, or the validity or enforceability of, the Bond Documents, (ii) the financial condition, assets, properties or operations of the Borrower or (ii) the tax-exempt status of interest on the Bonds.

(h) No written information, exhibit or report furnished to the Issuer by the Borrower in connection with the negotiation of the Bond Documents, and no official statement or other offering document in connection with the issuance of the Bonds, if any, as of its date or as of the date hereof, contains any untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading.

(i) All financial statements and information heretofore delivered to the Issuer by Borrower, including without limitation, information relating to the financial condition of Borrower, fairly and accurately present the financial position thereof and have been prepared (except where specifically noted therein) in accordance with generally accepted accounting principles consistently applied. Since the date of such statements, there has been no material adverse change in the financial condition or results of operations of the Borrower.

(j) The Borrower is not in default (and no event has occurred and is continuing which with the giving of notice or the passage of time or both could constitute a default) (1) under the Bond Documents, or (2) with respect to any order or decree of any court or any order, regulation or demand of any federal, state, municipal or other governmental authority, which default could reasonably be expected to have consequences that would materially and adversely affect the consummation of the transactions contemplated by the Bond Documents, or the financial condition, assets, properties or operations of the Borrower.

(k) The Borrower acknowledges, represents and warrants that it understands the nature and structure of the transactions relating to the Refunding Project; that it is familiar with the provisions of all of the documents and instruments relating to such financing to which the Borrower is a party or of which it is a beneficiary, including the Indenture; that it understands the risks inherent in such transactions; and that it has not relied on the Issuer for any guidance or expertise in analyzing the financial or other consequences of the transactions contemplated by the Bond Documents and the Indenture or otherwise relied on the Issuer for any advice.

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(l) No portion of the Project financed with the proceeds of the Series 2007 Bonds which are being refunded by the Bonds includes any property used or to be used for sectarian instruction or study, as a place for devotional activities or religious worship, or primarily in connection with any part of the program of a school or department of divinity for any religious denomination.

(m) No further authorizations, consents or approvals of governmental bodies or agencies are required in connection with the execution and delivery by the Borrower of this Loan Agreement or the other Bond Documents to which the Borrower is a party or in connection with the carrying out by the Borrower of its obligations under this Loan Agreement or the other Bond Documents to which the Borrower is a party.

(n) The financing of the Refunding Project as provided under this Loan Agreement, and commitments therefor made by the Issuer will be an inducement to the Borrower to continue to locate its operations in the jurisdiction of the Issuer.

(o) The Borrower will operate the Facilities as a “project” within the meaning of the Act until the Bonds have been paid in full.

(p) The Refunding Project is of the type authorized and permitted by the Act, and the Refunding Project is substantially the same in all material respects to that described in the notice of public hearing published on October 11, 2010.

(q) The Facilities have been acquired, constructed and installed and are being operated by the Borrower in such manner as to conform in all material respects with all applicable zoning, planning, building, environmental and other regulations of the governmental authorities having jurisdiction over the Facilities.

(r) The Borrower will cause all of the proceeds of the Bonds to be applied solely to the payment of Costs of Issuance, Costs of the Refunding Project and funding the Series 2011B Debt Service Reserve Fund in the amount of the Series 2011B Debt Service Reserve Fund Requirement, and no portion of the Facilities shall be used in any “unrelated trade or business” of the Borrower within the meaning of Section 513(a) of the Code.

(s) The Borrower has taken no action, and has not omitted to take any action, which action or omission to take action would in any way affect or impair the excludability of interest on the Bonds from gross income of the Holders thereof for federal income tax purposes.

(t) All of the representations and warranties of the Borrower contained in the Tax Certificate are hereby reaffirmed and incorporated herein by reference.

(u) The Borrower shall comply with its obligations under the Tax Certificate.

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(v) The Facilities are located wholly within the City of Azusa, California.

(w) All of the representations and warranties in the Continuing Commitment Agreement are and shall remain true and correct.

All of the above representations and warranties shall survive the execution of this Loan Agreement.

ARTICLE III

THE REFUNDING PROJECT

Section 3.01. Disbursement of Bond Proceeds. The Borrower covenants and agrees that the proceeds of the Bonds, together with proceeds of the Series 2007 Bonds in the amount provided in the Indenture, will be deposited and applied in accordance with the Indenture and the Refunding Project will be completed as required by the Indenture.

Section 3.02. Borrower Required to Pay Costs in Event Refunding Escrow Fund Insufficient. If the moneys in the Refunding Escrow Fund available for payment of the Costs of the Refunding Project should not be sufficient to make such payments in full, the Borrower agrees to pay directly (or to deposit moneys in the Refunding Escrow Fund for the payment of) such costs of completing the Refunding Project as may be in excess of the moneys available therefor in the Refunding Escrow Fund. THE ISSUER DOES NOT MAKE ANY WARRANTY OR REPRESENTATION (EITHER EXPRESS OR IMPLIED) THAT THE MONEYS DEPOSITED INTO THE REFUNDING ESCROW FUND AND AVAILABLE FOR PAYMENT OF THE COSTS OF THE REFUNDING PROJECT, UNDER THE PROVISIONS OF THIS LOAN AGREEMENT, WILL BE SUFFICIENT TO PAY ALL OF THE COSTS OF THE REFUNDING PROJECT. If, after exhausting the moneys in the Refunding Escrow Fund for any reason (including, without limitation, losses on investments made by the Trustee under the Indenture), the Borrower pays, or deposits moneys in the Refunding Escrow Fund for the payment of, any portion of the Costs of the Refunding Project pursuant to the provisions of this Section 3.02, the Borrower shall not be entitled to any reimbursement therefor from the Issuer or from the Trustee, nor shall it be entitled to any diminution of the amounts payable under Section 5.02.

Section 3.03. Borrower and Issuer Representatives and Successors. At or prior to the initial sale of the Bonds, the Borrower and the Issuer shall appoint a Borrower Representative and an Issuer Representative, respectively, for the purpose of taking all actions and delivering all certificates required to be taken and delivered by the Borrower Representative and the Issuer Representative under the provisions of this Loan Agreement. The Borrower and the Issuer, respectively, may appoint alternate Borrower Representatives and alternate Issuer Representatives to take any such action or make any such certificate if the same is not taken or made by the Borrower Representative or the Issuer Representative. In the event any of such persons, or any successor appointed pursuant to the provisions of this Section 3.03, should resign

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or become unavailable or unable to take any action or deliver any certificate provided for in this Loan Agreement, another Borrower Representative or alternate Borrower Representative, or another Issuer Representative or alternate Issuer Representative, shall thereupon be appointed by the Borrower or the Issuer, respectively. If the Borrower or the Issuer fails to make such designation within ten (10) days following the date when the then incumbent Borrower Representative or Issuer Representative resigns or becomes unavailable or unable to take any such actions, the President or General Counsel of the Borrower, or the Chairman or the Vice Chairman of the Issuer, shall serve as the Borrower Representative or the Issuer Representative, respectively.

Whenever the provisions of this Loan Agreement require the Borrower’s approval or require the Issuer or the Trustee to take some action at the request or direction of the Borrower, the Borrower Representative shall make such approval or such request or direction in writing unless otherwise specified in this Loan Agreement. Any action so taken with the written approval of or at the written direction of the Borrower Representative shall be binding upon the Borrower.

Section 3.04. Investment of Moneys in Funds. The Trustee may invest or reinvest any moneys held pursuant to the Indenture to the extent permitted by Section 4.06 of the Indenture and by law (but subject to the provisions of Section 8.08 hereof), in Permitted Investments, as defined in the Indenture, as directed by a Borrower Representative.

Any such securities may be purchased at the offering or market price thereof at the time of such purchase.

The Trustee may make any and all such investments through its own bond department or trust investments department. The Trustee shall not be liable for any loss resulting from any such investments, provided the Trustee has performed its respective obligations under Section 4.06 of the Indenture in accordance with Section 7.01(e) of the Indenture. For the purposes of this Section 3.04, any interest-bearing deposits, including certificates of deposit, issued by or on deposit with the Trustee shall be deemed to be investments and not deposits. The Issuer shall not be liable for any loss resulting from any such investments.

ARTICLE IV

ISSUANCE OF THE BONDS

Section 4.01. Agreement to Issue the Bonds. To provide funds for the Refunding Project, the Issuer agrees that it will sell, issue and deliver the Bonds in the aggregate principal amount provided for in the Indenture to the initial purchasers thereof and will cause the proceeds of the Bonds to be applied as provided in Section 4.04 of the Indenture.

Section 4.02. No Third-Party Beneficiary. It is specifically agreed between the parties executing this Loan Agreement that it is not intended by any of the provisions of any part of this

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Loan Agreement to establish in favor of the public or any member thereof, other than as expressly provided herein or as contemplated in the Indenture, the rights of a third-party beneficiary hereunder, or to authorize anyone not a party to this Loan Agreement to maintain a suit for personal injuries or property damage pursuant to the terms or provisions of this Loan Agreement. The duties, obligations and responsibilities of the parties to this Loan Agreement with respect to third parties shall remain as imposed by law.

ARTICLE V

LOAN; PAYMENT PROVISIONS

Section 5.01. Loan of Proceeds. The Issuer agrees, upon the terms and conditions contained in this Loan Agreement and the Indenture, to lend to the Borrower, the proceeds received by the Issuer from the sale of the Bonds. The loan shall be made by depositing the proceeds from the initial sale of the Bonds into the Refunding Escrow Fund in accordance with Section 4.04 of the Indenture. Such proceeds shall be disbursed to or on behalf of the Borrower as proided in Section 3.01.

Section 5.02. Amounts Payable. The Borrower hereby agrees to repay the loan made pursuant to this Loan Agreement by making the following payments:

(a) The Borrower shall pay or cause to be paid to the Trustee in immediately available funds for the account of the Issuer for deposit into the Bond Fund on or before any Interest Payment Date for the Bonds or any other date that any payment of interest, premium, if any, or principal is required to be made in respect of the Bonds pursuant to the Indenture, until the principal of, premium, if any, and interest on the Bonds shall have been fully paid or provision for the payment thereof shall have been made in accordance with the Indenture, a sum which, together with any moneys available for such payment in the Bond Fund, will enable the Trustee to pay the amount payable on such date as principal of (whether at maturity or upon redemption or acceleration or otherwise), premium, if any, and interest on the Bonds as provided in the Indenture. The Borrower agrees to pay to the Trustee for deposit in the Bond Fund on or before the first day of each month commencing on [DATE] an amount equal to [one-sixth (1/6th)] of the principal of the Bonds subject to mandatory sinking fund redemption pursuant to Section 2.12(c) of the Indenture on the immediately succeeding [DATE] redemption date.

It is understood and agreed that all payments payable by the Borrower under this subsection are assigned by the Issuer to the Trustee for the benefit of the Holders. The Borrower assents to such assignment. The Issuer hereby directs the Borrower and the Borrower hereby agrees to pay to the Trustee at the principal corporate trust office of the Trustee all payments payable by the Borrower pursuant to this subsection.

(b) The Borrower also shall pay or cause to be paid the reasonable fees and expenses of the Issuer, the Trustee, the Paying Agent and the Registrar under the

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Indenture and all other amounts which may be payable to the Trustee, Paying Agent or Registrar under Section 7.02 of the Indenture, such fees and expenses to be paid when due and payable by the Borrower directly to the Issuer, Trustee, Paying Agent and Registrar, respectively, for their own account.

(c) The Borrower shall pay or cause to be paid when due and payable the fees and expenses of the Issuer related to the Refunding Project and the issuance of the Bonds as described in Section 5.03 and Section 5.04 of this Loan Agreement.

(d) In the event that the amount on deposit in the Series 2011B Reserve Fund shall at any time be less than the Series 2011B Reserve Fund Requirement, the Borrower shall make additional deposits into the Series 2011B Reserve Fund in substantially equal quarterly payments such that the amount on deposit in the Series 2011B Reserve Fund shall equal the Series 2011B Reserve Fund Requirement by a date not later than twelve months subsequent to the date on which such deficiency in the Series 2011B Reserve Fund shall be determined to arise.

(e) In the event that the Borrower shall fail to make any of the payments required in this Section 5.02, Section 5.03 or Section 5.04 of this Loan Agreement, the item or installment so in default shall continue as an obligation of the Borrower until the amount in default shall have been fully paid.

Section 5.03. Expenses. The Borrower shall pay and indemnify the Issuer and the Trustee against all reasonable fees, costs and charges, including reasonable fees and expenses of attorneys, accountants, consultants and other experts, incurred in good faith (and with respect to the Trustee, without negligence) and arising out of or in connection with the Bond Documents, the Bonds or the Indenture. These obligations and the obligations of the Borrower to provide indemnification of the Issuer under this Loan Agreement shall remain valid and in effect notwithstanding repayment of the loan hereunder or the Bonds or termination of this Loan Agreement or the Indenture. In addition, the Borrower shall pay the following:

(a) The Borrower also shall pay or cause to be paid when due and payable the reasonable fees and expenses of the Issuer related to the Refunding Project and the issuance of the Bonds, including without limitation, attorneys’ fees and expenses.

(b) In the event the Borrower shall fail to make any of the payments required in this Section 5.03, the item or installment so in default shall continue as an obligation of the Borrower until the amount in default shall have been fully paid.

Section 5.04. Additional Payments. As part of its obligation to make the Loan Repayments, the Borrower shall also pay to the Issuer or to the Trustee, as the case may be, “Additional Payments,” as follows:

(a) All taxes and assessments of any type or character charged to the Issuer or to the Trustee affecting the amount available to the Issuer or the Trustee from payments

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to be received hereunder or in any way arising due to the transactions contemplated hereby (including taxes and assessments assessed or levied by any public agency or governmental authority of whatsoever character having power to levy taxes or assessments) but excluding franchise taxes based upon the capital and/or income of the Trustee and taxes based upon or measured by the net income of the Trustee; provided, however, that the Borrower shall have the right to protest any such taxes or assessments and to require the Issuer or the Trustee, at the Borrower’s expense, to protest and contest any such taxes or assessments levied upon them and that the Borrower shall have the right to withhold payment of any such taxes or assessments pending disposition of any such protest or contest unless such withholding, protest or contest would adversely affect the rights or interests of the Issuer or the Trustee;

(b) All reasonable fees, charges and expenses of the Trustee for services rendered under the Indenture, as and when the same become due and payable;

(c) The reasonable fees and expenses of such accountants, consultants, attorneys and other experts as may be engaged by the Issuer or the Trustee to prepare audits, financial statements, reports, opinions or provide such other services required under the Bond Documents or the Indenture; and

(d) The Issuer Issuance Fee, the Issuer Annual Fee and the reasonable fees and expenses of the Issuer or any agent or attorney selected by the Issuer to act on its behalf in connection with the Bond Documents, the Bonds or the Indenture, including, without limitation, any and all reasonable expenses incurred in connection with the authorization, issuance, sale and delivery of any such Bonds or in connection with any litigation, investigation or other proceeding which may at any time be instituted involving this Loan Agreement, the Bond Documents, the Bonds or the Indenture or any of the other documents contemplated thereby, or in connection with the reasonable supervision or inspection of the Borrower, its properties, assets or operations or otherwise in connection with the administration of the Bond Documents.

(e) Any amounts due and payable by the Borrower as arbitrage rebate under Section 148 of the Code, pursuant to Borrower’s covenants and agreements with respect thereto in the Tax Certificate and this Loan Agreement.

Such Additional Payments shall be billed to the Borrower by the Issuer or the Trustee from time to time, together with a statement certifying that the amount billed has been incurred or paid by the Issuer or the Trustee for one or more of the above items. After such a demand, amounts so billed shall be paid by the Borrower within thirty (30) days after the date of invoice. Notwithstanding the foregoing, the Issuer shall not be required to submit a bill to the Borrower for payment of the Issuer Annual Fee or any amounts due with respect to arbitrage rebate under Section 148 of the Code, the calculation and payment for which is the responsibility of the Borrower.

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The Issuer Issuance Fee and the initial Issuer Annual Fee shall be paid to the Issuer by the Borrower on the Closing Date. Thereafter, the Issuer Annual Fee shall be due and payable by the Borrower in advance on or prior to February 1 of each year commencing with the first such date following the Closing Date. The Borrower’s obligation to pay the Issuer Issuance Fee and the Issuer Annual Fee shall in no way limit amounts payable by the Borrower to the Issuer under the Bond Documents, including for the enforcement thereof.

Section 5.05. Unconditional Obligations. The obligation of the Borrower to make the payments required by Section 5.02 shall be absolute and unconditional. The Borrower shall pay all such amounts without abatement, diminution or deduction (whether for taxes or otherwise) regardless of any cause or circumstance whatsoever including, without limitation, any defense, set-off, recoupment or counterclaim that the Borrower may have or assert against the Issuer, the Trustee, the Paying Agent, the Bank or any other Person.

Section 5.06. Prepayments. The Borrower may prepay all or any part of the amounts required to be paid by it under Section 5.02, at the times and in the amounts provided in Article XI for redemption of the Bonds, and in the case of mandatory redemptions of the Bonds, the Borrower shall cause to be furnished to the Issuer such amounts on or prior to the applicable redemption dates. Prepayment of amounts due hereunder pursuant to this Section 5.06 shall be deposited in the Bond Fund.

Section 5.07. Credits Against Payments If the principal of, premium, if any, and interest on the Bonds shall have been paid sufficiently that payment of the Bonds shall have occurred in accordance with Article V of the Indenture, then the obligations of the Borrower pursuant to Section 5.02, ipso facto, shall be deemed to have been paid in full, and the Borrower’s obligations under Section 5.02 and this Loan Agreement shall be discharged.

ARTICLE VI

MAINTENANCE AND TAXES

Section 6.01. Borrower’s Obligations to Maintain and Repair. Each Loan Party will, in all material respects, maintain, preserve and keep its Property in good repair, working order and condition (ordinary wear and tear excepted).

Section 6.02. Taxes and Other Charges. The Borrower will promptly pay and discharge or cause to be promptly paid and discharged, as the same become due, all taxes, assessments, governmental charges or levies and all utility and other charges incurred in the operation, maintenance, use, occupancy and upkeep of the Facilities imposed upon it or in respect of the Facilities before the same shall become in default, as well as all lawful claims which, if unpaid, might become a lien or charge upon such property and assets or any part thereof, except such that are contested in good faith by the Borrower.

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ARTICLE VII

INSURANCE, EMINENT DOMAIN AND DAMAGE AND DESTRUCTION

Section 7.01. Insurance. The Borrower will during the term of this Loan Agreement and at all times while any Bonds are outstanding continuously insure or self-insure the Facilities against such risks as are customarily insured against by universities of like size and type, paying as the same become due all premiums in respect thereof. In addition the Borrower shall comply, or cause compliance, with applicable worker’s compensation laws of the State.

Section 7.02. Provisions Respecting Eminent Domain. In case of a taking or proposed taking of all or any part of the Facilities or any right therein by Eminent Domain, the party hereto upon which notice of such taking is served shall give prompt written notice to the other party and to the Trustee. Each such notice shall describe generally the nature and extent of such damage, destruction, taking, loss, proceedings or negotiations.

Section 7.03. Damage and Destruction. If at any time while any of the Bonds are Outstanding, the Facilities, or any portion thereof, shall be damaged or destroyed by fire, flood, windstorm or other casualty, or title to, or the temporary use of, the Facilities, or any portion thereof, shall have been taken by the power of Eminent Domain, the Borrower (unless it shall have exercised its option to prepay all of the Bonds) shall cause the Net Proceeds from insurance or condemnation or an amount equal thereto to be used for the repair, reconstruction, restoration or improvement of the Facilities or the redemption of the Bonds, or any combination thereof. In case of any damage to or destruction of all or any part of the Facilities exceeding $50,000, the Borrower shall give prompt written notice thereof to the Issuer and the Trustee.

ARTICLE VIII

SPECIAL COVENANTS

Section 8.01. Access to the Property and Inspection. The Issuer and the Trustee, and their respective agents and employees, shall have the right, but not any duty, at all reasonable times during normal business hours of the Borrower upon the furnishing of reasonable notice to the Borrower under the circumstances, to enter upon and examine and inspect the Facilities and to examine and copy the books and records of the Borrower insofar as such books and records relate to Facilities costs or the Bond Documents.

Section 8.02. Financial Statements. Each Loan Party will maintain a standard system of accounting in accordance with GAAP and will furnish to the Trustee such information respecting the business and financial condition of such Loan Party as the Trustee may reasonably request; and without any request, will furnish to the Trustee:

(a) as soon as available, and in any event within sixty (60) days after the close of each quarterly fiscal period of the Borrower, a copy of the consolidated and

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consolidating statements of financial position as of the close of such period and statements of activities of the Loan Parties for such period, all in reasonable detail showing in comparative form the figures for the corresponding date and period in the previous fiscal year together with a comparison of the Loan Parties’ budgeted compared to actual financial results through the end of such fiscal quarter, prepared by the Borrower in accordance with GAAP but without notes and subject to ordinary year-end adjustments and certified to by the chief financial officer of the Borrower;

(b) as soon as available, and in any event within sixty (60) days after the close of each quarterly fiscal period of the Borrower, summaries of the investment performance and portfolio allocation of the Loan Parties’ investments including, without limitation, the endowment, from the applicable portfolio managers, prepared by the Borrower in form and substance satisfactory to the Trustee;

(c) as soon as available, and in any event within one hundred fifty (150) days after the close of each Fiscal Year of the Borrower, a copy of the consolidated and consolidating statements of financial position of the Loan Parties as of the close of such fiscal year and statements of activities and changes in net assets and statements of cash flows of the Loan Parties for such period, and accompanying notes thereto, all prepared in accordance with GAAP and in reasonable detail showing in comparative form the figures for the previous fiscal year (unless unavailable due to a switch in independent public accountants during the relevant period), accompanied by an unqualified opinion with respect thereto of CapinCrouse or another firm of independent public accountants of recognized regional standing, selected by the Borrower and reasonably satisfactory to the Bank and the Trustee, to the effect that the financial statements described herein have been prepared in accordance with GAAP and present fairly in accordance with GAAP the financial condition of the Loan Parties in all material respects as of the close of such fiscal year and the results of its operations and cash flows for the fiscal year then ended and that an examination of such accountants in connection with such financial statements has been made in accordance with generally accepted auditing standards and, accordingly, such examination included such tests of the accounting records and such other auditing procedures as were considered necessary in the circumstances;

(d) (i) within sixty (60) days after the close of each quarterly fiscal period of the Borrower, a No Default Certificate certified to by the chief financial officer of the Borrower, certifying that such officer has no knowledge of any Default or Event of Default or, if any such Default or Event of Default has occurred during such period, setting forth a description of such Default or Event of Default and specifying the action or proposed action, if any, taken by the Borrower to remedy the same, (ii) within sixty (60) days after the close of each quarterly fiscal period of the Borrower, a Pricing Certificate certified to by the chief financial officer of the Borrower, setting forth the calculations demonstrating the Borrower’s Net Assets to Total Funded Debt Ratio and the corresponding amount of Downgrade Pricing Adjustment, and (iii) within sixty (60) days after the close of each fiscal quarter ending June 30 and December 31, a Compliance

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Certificate certified to by the chief financial officer of the Borrower, setting forth the calculations demonstrating the Borrower’s compliance, as of each such fiscal quarter, with the covenants set forth in Section 8.26 and 8.27 hereof;

(e) within the period provided in subsection (c) above, to the extent that such independent public accounting firm is permitted to deliver such a statement under the then current recommendations of the American Institute of Certified Public Accounts, the written statement of the accountants who certified the audit report thereby required that in the course of their audit they have obtained no knowledge of any Default or Event of Default, or, if such accountants have obtained knowledge of any such Default or Event of Default, they shall disclose in such statement the nature and period of the existence thereof;

(f) promptly after receipt thereof, any additional written reports, management letters or other detailed information contained in writing concerning significant aspects of the Loan Parties’ operations and financial affairs given to them by their independent public accountants;

(g) promptly after knowledge thereof shall have come to the attention of any responsible officer of any Loan Party, written notice (i) of any threatened or pending litigation or governmental proceeding against any Loan Party which, if adversely determined, could reasonably be expected to have a Material Adverse Effect, (ii) of the occurrence of any Default or Event of Default hereunder or (iii) of any fact, event or circumstance, to the extent of which, individually or in aggregate, could reasonably be expected to have a Material Adverse Effect;

(h) within fifteen (15) days after the close of each Fiscal Year of the Borrower, a copy of any update or change to the Borrower’s Investment Policy and information on the assets within its investment portfolio;

(i) within fifteen (15) days after the close of each Fiscal Year of the Borrower, a copy of each Loan Party’s annual budget for the following Fiscal Year, such budget to be in reasonable detail and in form reasonably satisfactory to the Trustee; and

(j) promptly after knowledge thereof shall have come to the attention of any responsible officer of any Loan Party, written notice to the Bank and the Trustee of (i) the occurrence of any reportable event (as defined in ERISA) with respect to a Plan, (ii) receipt of any notice from the PBGC of its intention to seek termination of any Plan or appointment of a trustee therefor, (iii) its intention to terminate or withdraw from any Plan, and (iv) the incurrence of any event with respect to any Plan which would result in the incurrence by any Loan Party of any material liability, fine or penalty, or any material increase in the contingent liability of any Loan Party with respect to any post-retirement Welfare Plan benefit.

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Section 8.03. Recording and Filing; Other Instruments. The Borrower covenants that it will cause continuation statements to be filed as required by law in order fully to preserve and to protect the rights of the Trustee or the Issuer in the assignment of certain rights of the Issuer under this Loan Agreement and otherwise under the Indenture. The Borrower and the Issuer shall execute and deliver all instruments and shall furnish all information and evidence deemed necessary or advisable in order to enable the Borrower to fulfill its obligations as provided in this Section 8.03. The Borrower shall file and re-file and record and re-record or shall cause to be filed and re-filed and recorded and re-recorded all instruments required to be filed and re-filed and recorded or re-recorded and shall continue or cause to be continued the lien of such instruments for so long as any of the Bonds shall be Outstanding.

Section 8.04. Exclusion from Gross Income for Federal Income Tax Purposes of Interest on the Bonds. The Borrower covenants and agrees that it has not taken and will not take or cause to be taken, and has not omitted and will not omit or cause to be omitted, any action which will result in interest paid on the Bonds being included in gross income of the Holders of the Bonds for the purposes of federal income taxation.

The Borrower covenants and agrees that it will take or cause to be taken all required actions necessary to preserve the exclusion from gross income for federal income tax purposes of interest on the Bonds; and the Issuer covenants and agrees that it will take or cause to be taken all required actions to preserve the exclusion from gross income for federal income tax purposes of interest on the Bonds.

Section 8.05. Issuer Indemnification.

(a) To the fullest extent permitted by law, the Borrower agrees to indemnify, hold harmless and defend the Issuer, the Trustee, and each of its respective past, present and future officers, members, directors, officials, employees, attorneys and agents (collectively, the “Indemnified Parties”), against any and all losses, damages, claims, actions, liabilities, costs and expenses of any conceivable nature, kind or character (including, without limitation, reasonable attorneys’ fees, litigation and court costs, amounts paid in settlement and amounts paid to discharge judgments) to which the Indemnified Parties, or any of them, may become subject under or any statutory law (including federal or state securities laws) or at common law or otherwise, arising out of or based upon or in any way relating to:

(i) the Bonds, the Indenture, the Bond Documents or the Tax Certificate or the execution or amendment hereof or thereof or in connection with transactions contemplated hereby or thereby, including the issuance, sale or resale of the Bonds;

(ii) any act or omission of the Borrower or any of its agents, contractors, servants, employees, tenants) or licensees in connection with the Refunding Project or the Facilities, the operation of the Facilities, or the

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condition, environmental or otherwise, occupancy, use, possession, conduct or management of work done in or about, or from the planning, design, acquisition, installation or construction of the Facilities or any part thereof;

(iii) any lien or charge upon payments by the Borrower to the Issuer and the Trustee hereunder, or any taxes (including, without limitation, all ad valorem taxes and sales taxes), assessments, impositions and other charges imposed on the Issuer or any of its officers, members, directors, officials, employees, attorneys and agents, except to the extent such damages are caused by the willful misconduct of such Indemnified Party. In the event that any action or proceeding is brought against any Indemnified Party with respect to which indemnity may be sought hereunder, the Borrower, upon written notice from the Indemnified Party, shall assume the investigation and defense thereof, including the employment of counsel selected by the Indemnified Party, and shall assume the payment of all expenses related thereto, with full power to litigate, compromise or settle the same in its sole discretion; provided that the Indemnified Party shall have the right to review and approve or disapprove any such compromise or settlement. Each Indemnified Party shall have the right to employ separate counsel in any such action or proceeding and participate in the investigation and defense thereof, and the Borrower shall pay the reasonable fees and expenses of such separate counsel; provided, however, that such Indemnified Party may only employ separate counsel at the expense of the Borrower if in the judgment of such Indemnified Party a conflict of interest exists by reason of common representation or if all parties commonly represented do not agree as to the action (or inaction) of counsel.

(b) The rights of any persons to indemnity under this Loan Agreement, and rights to payment of fees and reimbursement of expenses pursuant to this Loan Agreement, shall survive the final payment or defeasance of the Bonds and the termination of this Loan Agreement, and in the case of the Trustee, any resignation or removal of the Trustee under the Indenture; provided, however, that no Indemnified Person shall be entitled to indemnity hereunder to the extent that such Person’s gross negligence or willful misconduct caused or contributed to the occurrence or circumstance for which such indemnification would otherwise be available.

Section 8.06. Compliance with Laws. The Borrower agrees to comply in all material respects with all applicable zoning, planning, building, environmental and other regulations of the governmental authorities having jurisdiction over the Facilities during the Borrower’s operation of the Facilities.

Section 8.07. Non-Arbitrage Covenant. The Borrower and the Issuer covenant that they will (i) not take, or fail to take, any action or make any investment or use of the proceeds of the Bonds that would cause the Bonds to be “arbitrage bonds” within the meaning of Section 148 of the Code and (ii) comply with the requirements of Section 148 of the Code.

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In the event that all of the proceeds of the Bonds, including the investment proceeds thereof, are not expended by the date which is six (6) months following the Issue Date, or if for any other reason a rebate is payable to the United States pursuant to Section 148 of the Code, the Borrower shall calculate, or cause to be calculated, the Rebate Amount. The Borrower agrees to pay the amount so calculated, together with supporting documentation, to the Trustee so as to permit the Trustee to pay such rebate to the United States at the times required by the Code. The amount paid by the Borrower to the Trustee shall be deposited into the Rebate Fund. The Borrower shall maintain or cause to be maintained records of the determinations of the rebate, if any, until six (6) years after the retirement of the Bonds. This paragraph shall be construed in accordance with Section 148(f) of the Code, including, without limitation, any applicable tax regulations promulgated under the Code. Nothing contained in this Loan Agreement or in the Indenture shall be interpreted or construed to require the Issuer to pay any applicable rebate, such obligation being the sole responsibility of the Borrower. The Borrower shall pay all fees, costs and expenses associated with calculation of the Rebate Amount and upon request from the Issuer provide the Issuer with a copy of such calculation. The Issuer covenants that, if so requested by the Borrower, it shall execute any form required to be signed by an issuer of tax-exempt bonds in connection with the payment of any rebate or the recovery of overpayment of any rebate amount under the Code (including Internal Revenue Service Form 8038-T and Internal Revenue Form 8038-R). The Borrower shall supply all information required to be stated in such form and shall prepare such form. Except for the execution and delivery of such form upon timely presentation by the Borrower, the Issuer shall have no responsibility for such form or the information stated thereon.

Section 8.08. Notice of Determination of Taxability. Promptly after the Borrower first becomes aware of the occurrence of a Taxable Date or an event that could trigger the occurrence of a Taxable Date, the Borrower shall give written notice thereof to the Issuer and the Trustee.

Section 8.09. Maintenance of Existence. Each Loan Party will maintain its existence under its jurisdiction of organization and, with respect to the Borrower and each other Loan Party that uses proceeds of the Bonds, shall take no action to alter, change or destroy its status as a Tax-Exempt Organization. The Borrower will preserve and keep in force and effect its accreditation by Western Association of Schools and Colleges and the California State Department of Education (Commission on Teaching Credentialing), and all licenses, permits, franchises and qualifications necessary to the proper conduct of its business.

Section 8.10. Borrower Approval of Indenture. The Borrower understands that the Issuer will, pursuant to the Indenture and as security for the payment of the principal of, premium, if any, and the interest on the Bonds, assign and pledge to the Trustee, and create a security interest in favor of the Trustee in certain of its rights, title and interest in and to this Loan Agreement (including all payments hereunder) reserving, however, the Reserved Rights; and the Borrower hereby agrees and consents to such assignment and pledge. The Borrower acknowledges that it has received a copy of the Indenture for its examination and review. By its execution of this Loan Agreement, the Borrower acknowledges that it has approved, has agreed to and is bound by the provisions of the Indenture. The Borrower agrees that the Trustee shall be

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entitled to enforce and to benefit from the terms and conditions of this Loan Agreement that relate to it notwithstanding the fact that it is not a signatory hereto.

Section 8.11. Duties and Obligations. The Borrower covenants and agrees that it will fully and faithfully perform all the duties and obligations that the Issuer has covenanted and agreed in the Indenture to cause the Borrower to perform and any duties and obligations that the Borrower is required in the Indenture to perform. The foregoing shall not apply to any duty or undertaking of the Issuer that by its nature cannot be delegated or assigned.

Section 8.12. Continuing Disclosure. The Borrower hereby covenants and agrees that it will provide to the Issuer and the Trustee a copy of a continuing disclosure agreement imposing obligations upon the Borrower, the Trustee or any other responsible party to comply with the requirements of Rule 15c2-12 under the Securities Exchange Act of 1934, as amended (the “Rule”), with respect to the Bonds, together with such disclosure documents as may be required in order to comply with the Rule, if the Rule will be applicable upon such conversion. Such disclosure requirements shall include, but not be limited to, an unaudited quarterly financial report to be delivered within 60 days of the end of each calendar quarter and the annual operating and capital budgets for the Borrower to be delivered within 60 days of the date of approval of such budgets.

Section 8.13. Compliance and Insurance. Each Loan Party will comply with all applicable laws, rules, regulations and orders applicable to it and its Property, except where non-compliance could not reasonably be expected to materially and adversely affect the financial condition, Property, business or operations of such Loan Party, such compliance to include, without limitation, paying all taxes, assessments and governmental charges imposed upon it or its Property before the same become delinquent, unless and to the extent that the same are being contested in good faith and by appropriate proceedings and reserves are provided therefor that in the opinion of such Loan Party are adequate.

Each Loan Party will maintain insurance with reputable insurance companies or associations believed by such Loan Party at the time of purchase of such insurance to be financially sound and in such amounts and covering such risks as are usually carried by organizations engaged in the same or a similar business and similarly situated, which insurance may provide for reasonable deductibles from coverage. Each Loan Party will upon request of the Bank or the Trustee furnish a certificate setting forth in summary form the nature and extent of the insurance maintained pursuant to this Section 8.13.

Section 8.14. Inspection and Field Audit. Each Loan Party will permit the Trustee and its respective duly authorized representatives and agents to visit and inspect any of the Properties, corporate books and financial records of such Loan Party, to examine and make copies of the books of accounts and other financial records of such Loan Party, and to discuss the affairs, finances and accounts of such Loan Party with, and to be advised as to the same by, its officers and independent public accountants (and by this provision each Loan Party authorizes

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such accountants to discuss with the Trustee the finances and affairs of each Loan Party) at such reasonable times and reasonable intervals as the Trustee may designate.

Section 8.15. Debt. No bonds (other than the Bonds) or other obligations may be issued under the Indenture, nor may the Borrower incur any Debt having a claim on revenues of the Borrower on a parity with the Bonds, unless (i) the Borrower shall deliver to the Trustee a certificate of the Chief Financial Officer of the Borrower demonstrating a projected Debt Service Coverage Ratio for the Bonds and Debt proposed to be issued or incurred (collectively, “Permitted Parity Debt”) of at least 120% based on the maximum annual scheduled Debt Service in each year for the Bonds and Debt proposed to be issued or incurred and (ii) if the Permitted Parity Debt shall be issued under the Indenture or the Series 2011A Indenture, the applicable Indenture shall permit such issuance.

Section 8.16. Liens. The Borrower will not, nor permit any Subsidiary to, create, incur or permit to exist any Lien of any kind on any Property owned by the Borrower or any Subsidiary; provided, however, that this Section shall not operate to prevent:

(a) Liens in favor of the Bank and other Liens granted by the Bond Documents (as in effect on the date hereof);

(b) Liens for taxes and assessments and other governmental charges and levies which are not due or which are being contested in good faith by appropriate proceedings which prevent enforcement of such Lien and for which adequate reserves are maintained;

(c) Liens imposed by law, such as mechanics’, materialmen’s, landlords’, warehousemen’s and carriers’ and other similar Liens, securing obligations incurred in the ordinary course of business which are not past due or which are being contested in good faith by appropriate proceedings which prevent enforcement of such Lien and for which adequate reserves are maintained;

(d) Liens under workers’ compensation, unemployment insurance, Social Security and similar legislation;

(e) Liens to secure the performance of bids, tenders, contracts (other than contracts for the payment of money), leases (permitted under the terms of this Agreement), and public and statutory obligations arising in the ordinary course of business;

(f) purchase money Liens securing Debt by the vendor in respect of Property now owned or hereafter acquired by the Borrower or any Subsidiary (not extending to any other Property), provided that the principal amount of indebtedness secured by any such Lien shall not exceed 100% of the cost of the Property covered by such Lien at the time of the creation thereof or the acquisition of such Property;

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(g) Liens on Property pledged, granted, bequeathed or devised to the Borrower by the owner thereof existing at the time of such pledge, grant, bequest or devise, provided, that (i) such Liens consist solely of restrictions on the use thereof or the income therefrom, or (ii) such Liens attach solely to the Property which is the subject of such gift, grant, bequest or devise to the Borrower existing prior to the date such pledge was made;

(h) easements, rights-of-way, restrictions, encroachments and other minor defects or irregularities in, and other encumbrances and clouds on, title, in each case which do not and will not interfere in any material respect with the ordinary conduct of the business of the Borrower;

(i) purported Liens evidenced by the filing of precautionary UCC financing statements (or similar filings under applicable law) relating solely to equipment leases entered into in the ordinary course of business and in compliance with Section 8.16(f) hereof;

(j) licenses of, and trademarks and other intellectual property rights granted by, the Borrower in the ordinary course of business and not interfering in any material respect with the ordinary conduct of the business of the Borrower;

(k) judgment Liens arising after the Closing Date which do not otherwise result in an Event of Default;

(l) any encumbrances and other exceptions to title that are expressly set forth in or insured by the Title Policy issued by [First American Title Insurance Company], with respect to the Deed of Trust;

(m) any Lien securing the Existing Debt;

(n) normal and customary rights of setoff with respect to deposits of cash in favor of banks or other depository institutions; and

(o) attachments remaining undischarged for not longer than 60 days from the making thereof, so long as they are contested in good faith by appropriate proceedings which are being diligently pursued.

Section 8.17. Investments, Acquisitions, Loans and Advances. Other than in accordance the Investment Policy, neither the Borrower nor any Loan Party will directly or indirectly, make, retain or have outstanding any investments (whether through purchase of stock or obligations or otherwise) in, or loans or advances to, any other Person, or acquire all or any substantial part of the assets or business of any other Person, or subordinate any claim or demand it may have to the claim or demand of any other Person; provided, however, that the foregoing shall not operate to prevent the Borrower from making loans or advances to the provost, the

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president, any vice president or any other key employee in an amount not to exceed $1,000,000 in the aggregate at any one time outstanding.

Section 8.18. Leases. No Loan Party shall, except as permitted under Section 8.16(f) hereof and real property leases in the ordinary course of business, acquire the use or possession of any Property under a lease or similar arrangement, whether or not such Loan Party has the express or implied right to acquire title to or purchase such Property at any time.

Section 8.19. Sale, Lease or Other Disposition of Assets. No Loan Party shall sell, lease or otherwise dispose of (whether voluntarily, involuntarily or by operation of law) any now-owned or hereafter-acquired Property; provided, however, that the foregoing shall not operate to prevent the disposition of Property:

(a) in the ordinary course of business;

(b) which is replaced within ninety (90) days with Property of equal or greater value or usefulness;

(c) which constitutes a Non-Core Asset, provided that the fair value of all Non-Core Assets disposed of pursuant to this clause (iii) shall not exceed (x) $10,000,000 in any Fiscal Year and (y) $25,000,000 in the aggregate; and

(d) if prior to such disposition there is delivered to the Bank and the Trustee a certificate of the chief financial officer of the Borrower stating that, to the best knowledge of the signer, such Property has, or within the next succeeding twelve (12) calendar months is reasonably expected to become, inadequate, obsolete, worn out, unsuitable, unprofitable, undesirable or unnecessary and the sale, lease, removal or other disposition thereof will not impair the structural soundness, efficiency or economic value of the remaining Property of the Borrower.

Section 8.20. Mergers. No Loan Party shall be a party to any merger or consolidation other than

(a) any merger or consolidation approved by the Bank in accordance with the Bond Documents if at the time the Bank shall be an owner of the Series 2011A Bonds; or

(b) the merger or consolidation of any Loan Party with and into any other Loan Party; provided, that, in the case of any merger involving the Borrower, the Borrower is the Loan Party surviving the merger or consolidation; and

(c) the merger or consolidation of the Borrower with and into any other Person, provided that (i) the Borrower is the Person surviving the merger or consolidation and (ii) such merger if consummated does not, and will not, constitute a Default or an Event of Default under any Bond Document

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Section 8.21. Burdensome Contracts With Affiliates. No Loan Party shall enter into any contract, agreement or business arrangement with any of its Affiliates or with Christian Leadership Alliance, other than Excepted Affiliates, on terms and conditions which are less favorable to such Loan Party than would be usual and customary in similar contracts, agreements or business arrangements between Persons not affiliated with each other.

Section 8.22. No Changes in Fiscal Year. No Loan Party shall change its Fiscal Year from its present basis without the prior written consent of the Bank if the Bank shall at the time be the owner of the Series 2011A Bonds, and otherwise with the prior written consent of the Trustee.

Section 8.23. Formation of Subsidiaries. The Borrower will not, and will not permit any of its Subsidiaries to, form or acquire any Subsidiary without the prior written consent of the Bank, if the Bank at the time shall be the owner of the Series 2011A Bonds and otherwise without the prior written consent of the Trustee; provided that any Subsidiary permitted by the Bank or the Trustee, as the case may be, to be formed or acquired shall become a Guarantor pursuant to Section 8.33 hereof and provided further; that any Subsidiary permitted by the Bank or the Trustee to be formed or acquired shall become a party to the Security Agreement by executing and delivering to the Collateral Agent an agreement substantially in the form of Schedule H to the Security Agreement and such other control agreements, instruments, documents and certificates as the Bank or the Trustee may require.

Section 8.24. Bond Documents. No Loan Party shall modify, amend or consent to any modification, amendment or waiver in any material respect of any Bond Document without the prior written consent of the holders of the Bonds if required under the Indenture.

Section 8.25. Further Assurances. From time to time hereafter, each Loan Party will execute and deliver such additional instruments, certificates or documents, and will take all such actions as the Trustee may reasonably request for the purposes of implementing or effectuating the provisions of the Bond Documents and this Agreement or for the purpose of more fully perfecting or renewing the rights of the Trustee with respect to the rights, properties or assets subject to such documents (or with respect to any additions thereto or replacements or proceeds thereof or with respect to any other property or assets hereafter acquired by the Borrower which may be deemed to be a part thereof). Upon the exercise by the Trustee of any power, right, privilege or remedy pursuant to the Bond Documents or this Agreement which requires any consent, approval, registration, qualification or authorization of any governmental authority or instrumentality, each Loan Party will, execute and deliver all necessary applications, certifications, instruments and other documents and papers that the Trustee may be required to obtain for such governmental consent, approval, registration, qualification or authorization.

Section 8.26. Minimum Unrestricted and Temporarily Restricted Cash and Unrestricted and Temporarily Restricted Marketable Securities. The Borrower shall maintain, or caused to be maintained, Unrestricted and Temporarily Restricted Cash and Unrestricted and Temporarily Restricted Marketable Securities in an amount not less than

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(i) $45,000,000 on June 30, 2011 and $45,000,000 on December 31, 2011 and (ii) $50,000,000 on June 30, 2012 and each December 31 and June 30 thereafter.

Section 8.27. Minimum Debt Service Coverage Ratio. The Borrower shall maintain a Debt Service Coverage Ratio of not less than 1.20 to 1.0, measured on a semi-annual basis on each June 30 and December 31, for the 12-month period then ended.

Section 8.28. Compliance with ERISA. Each Loan Party shall (i) remain at all times in compliance with any Applicable Law (including any legally available grace periods) with respect to any Plan of the Borrower or each Subsidiary, (ii) at no time maintain any Unfunded Vested Liabilities, and (iii) maintain each Plan as to which it may have any liability and compliance in all material respects with the applicable provisions of ERISA and the regulations and published interpretations thereunder, the failure to comply with which could subject any Loan Party to any tax or penalty which tax or penalty, taken together with all other taxes and penalties which could be assessed against any Loan Party by reason of all other non-compliances, would have a Materially Adverse Effect any Loan Party; provided, however, that the foregoing shall not constitute an Event of Default if the Borrower is contesting any such tax or penalty in good faith by appropriate proceedings and reserves are provided for such purpose that in the opinion of the Borrower are adequate.

Section 8.29. Compliance with other Covenants. From and after the date hereof and so long as this Agreement is in effect, except to the extent compliance in any case or cases is waived in writing by the Bank and the Trustee, each Loan Party agrees that it will, for the benefit of the Trustee, comply with, abide by, and be restricted by all the agreements, covenants, obligations and undertakings contained in the Bond Documents to which it is a party, subject in each case to the cure periods, materiality standards and exceptions set forth therein, so long as any Obligations remain outstanding hereunder, which agreements, covenants, obligations and undertakings together with the related definitions, exhibits and ancillary provisions and cure provisions, materiality standards and exceptions applicable thereto, are incorporated herein by reference, mutatis mutandis, and made a part hereof to the same extent and with the same force and effect as if the same had been herein set forth in their entirety; provided, however, that the foregoing shall not apply to agreements, covenants, obligations and undertakings contained in the Bond Documents which expressly relate solely to the Series 2010B Bonds.

Section 8.30. Investment Policy. The Borrower will promptly notify the Trustee of any material change to its respective Investment Policy.

Section 8.31. Swap Agreement. No Loan Party shall (i) agree to provide any collateral to support the obligations of any Loan Party under any Swap Agreement, except as provided with respect to the Existing Swap Agreements or (ii) enter into a Swap Agreement with any counterparty without the prior written consent of the Bank if the Bank shall at the time be an owner of the Series 2011A Bonds or otherwise with the consent of the Trustee.

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Section 8.32. Environmental Laws. Each Loan Party shall comply with all applicable Environmental Laws, cure any Environmental Event (or cause other Persons to effect any such cure) to the extent necessary to bring such real property owned, occupied or operated by the Loan Parties back into compliance with Environmental Laws and to comply with any cleanup orders issued by a Governmental Authority having jurisdiction thereover. Each Loan Party shall at all times use commercially reasonable efforts to render or maintain any real property owned, occupied or operated by the Loan Parties safe and fit for its intended uses. Each Loan Party shall also immediately notify the Trustee of any actual or alleged material failure to so comply with or perform, or any material breach, violation or default under any such Environmental Law or the occurrence of any material Environmental Event.

Section 8.33. Guaranties. The payment of the Obligations shall at all times be guaranteed by each Loan Party, other than the Excepted Subsidiaries, pursuant to one or more guaranty agreements in form and substance acceptable to the Trustee, as the same may be amended, modified or supplemented from time to time (individually a “Guaranty” and collectively the “Guaranties” and each such Subsidiary executing and delivering a Guaranty being referred to herein as a “Guarantor” and collectively the “Guarantors”).

ARTICLE IX

ASSIGNMENT, LEASE AND SALE

Section 9.01. Restrictions on Transfer of Issuer’s Rights. The Issuer agrees that, except for the assignment of certain of its rights, title and interests under this Loan Agreement to the Trustee pursuant to the Indenture, it will not during the term of this Loan Agreement sell, assign, transfer or convey its rights, title and interests in this Loan Agreement except as provided in Section 9.02.

Section 9.02. Assignment by the Issuer. It is understood, agreed and acknowledged that the Issuer, as security for payment of the principal of and premium, if any, and interest on the Bonds, will assign to the Trustee pursuant to the Indenture, among other things, certain of its rights, title and interests in and to this Loan Agreement (reserving its rights, however, pursuant to Sections of this Loan Agreement providing that notices, reports and other statements be given to the Issuer and that consents be obtained from the Issuer and also reserving its rights to reimbursement and payment of costs and expenses under Sections 5.02, 5.03, 5.04 10.05, its right of access under Section 8.01, and its rights to indemnification and non-liability under Sections 8.06, 8.07, 12.06 and 12.07, all of this Loan Agreement). The Borrower consents to such assignment and agrees that the Trustee shall be entitled to enforce this Loan Agreement directly against the Borrower as a third party beneficiary hereof.

Section 9.03. Assignment of Agreement by the Borrower or Lease or Sale of Facilities. All or a portion of the rights, duties and obligations of the Borrower under this Loan Agreement may be assigned by the Borrower and the Facilities may be leased or sold as a whole or in part by the Borrower, without having to obtain the consent of the Issuer or the Trustee,

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provided that unless permitted in the immediately succeeding sentence, the Borrower shall not be released from its obligations hereunder in connection with any such assignment, lease or sale. Upon the assignment of all of the Borrower’s rights, duties and obligations under this Loan Agreement or the lease or sale of the Facilities as a whole, the Trustee may execute a release of the Borrower from its obligations hereunder and all references to the “Borrower” in this Loan Agreement, the Indenture and the Bonds shall mean the assignee, lessee or purchaser if (i) such assignee, lessee or purchaser assumes the Borrower’s obligations hereunder in writing, (ii) such assignee, lessee or purchaser has a consolidated tangible net worth (after giving effect to such assignment, lease or sale) of not less than the consolidated tangible net worth of the Borrower and its consolidated subsidiaries immediately prior to such assignment, lease or sale; and (iii) no Event of Default has occurred and is continuing hereunder and no Material Adverse Effect shall arise from any such transfer. Prior to any assignment, lease or sale pursuant to this Section, the Borrower shall have caused to be delivered to the Issuer and the Trustee, an Opinion of Counsel issued by Bond Counsel, satisfactory in form and substance to each of them, to the effect that such assignment, lease or sale (and release, if applicable) will not cause interest on the Bonds to be includable in the gross income of the Holders thereof for purposes of federal income taxation.

Section 9.04. Assumption of Agreement by Purchaser of Facilities Upon Foreclosure. With the prior written consent of the Issuer and the Trustee, any Person who purchases the Facilities upon foreclosure may assume the Borrower’s rights, duties and obligations hereunder by delivering to the Issuer, the Bank and the Trustee, (a) a written assumption of such rights, duties and obligations satisfactory in form and substance to the Issuer, the Bank and the Trustee, and (b) an opinion of Bond Counsel, satisfactory in form and substance to the Issuer, the Bank and the Trustee, to the effect that such assumption will not cause interest on the Bonds to be includable in the gross income of the Holders thereof for purposes of federal income taxation. From and after the date of such assumption, the Borrower shall be deemed to be released from its rights, duties and obligations hereunder and all references to the “Borrower” in this Loan Agreement, the Indenture, the Security Agreement and the Bonds shall mean the Person who purchased the Facilities upon foreclosure.

ARTICLE X

EVENTS OF DEFAULT AND REMEDIES

Section 10.01. Events of Default Defined. The term “Event of Default” shall mean any one or more of the following events:

(a) any representation or warranty made by any Loan Party in this Agreement or in any of the other Bond Documents or in any certificate, document, instrument, opinion or financial or other statement contemplated by or made or delivered pursuant to or in connection with this Agreement or with any of the other Bond Documents, shall prove to have been incorrect, incomplete or misleading in any material respect when made;

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(b) any “event of default” shall have occurred under the Credit Agreement or any of the other Bond Documents (as defined respectively therein);

(c) failure to pay (i) any amount of principal of or interest on the Bonds when the same shall become and due and payable or (ii) any other Obligation when the same shall become due and payable and such failure shall continue for a period of five (5) days after written notice thereof;

(d) default in the due observance or performance of any covenant set forth in Article VIII of this Agreement, other than any covenants and obligations incorporated by Article VIII into this Agreement;

(e) default in the due observance or performance of any other term, covenant or agreement set forth in this Agreement and the continuance of such default for 30 days after the occurrence thereof;

(f) any material provision of this Agreement or any of the Bond Documents shall cease to be valid and binding, or any Loan Party shall contest any such provision in writing, or any Loan Party or any agent or trustee on behalf of any Loan Party shall deny in writing that it has any or further liability under this Agreement or any of the Bond Documents;

(g) any Loan Party shall (i) have entered involuntarily against it an order for relief under the United States Bankruptcy Code, as amended, (ii) not pay, or admit in writing its inability to pay, its debts generally as they become due, (iii) make an assignment for the benefit of creditors, (iv) apply for, seek, consent to, or acquiesce in, the appointment of a receiver, custodian, trustee, examiner, liquidator or similar official for it or any substantial part of its Property, (v) institute any proceeding seeking to have entered against it an order for relief under the United States Bankruptcy Code, as amended, to adjudicate it insolvent, or seeking dissolution, winding up, liquidation, reorganization, arrangement, marshalling of assets, adjustment or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors or fail to file an answer or other pleading denying the material allegations of any such proceeding filed against it, (vi) take any corporate action in furtherance of any matter described in parts (i) through (v) above, or (vii) fail to contest in good faith any appointment or proceeding described in Section 10.01(h) of this Agreement;

(h) a custodian, receiver, trustee, examiner, liquidator or similar official shall be appointed for any Loan Party or any substantial part of its Property, or a proceeding described in Section 10.01(g)(v) shall be instituted against any Loan Party and such appointment continues undischarged or any such proceeding continues undismissed or unstayed for a period of sixty (60) or more days;

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(i) dissolution or termination of the existence of (i) the Borrower or (ii) any other Loan Party and such dissolution or termination of such Loan Party could reasonably be expected to have a Material Adverse Effect;

(j) the failure of the Loan Parties to perform any obligation under any indenture, agreement or other instrument under which any Debt of any Loan Party, in an aggregate principal amount in excess of $1,500,000, has been issued and such failure shall continue for a period of time sufficient to permit the acceleration of the maturity of any such Debt (whether or not such maturity is in fact accelerated) or the Loan Parties shall fail to pay any such Debt when and as due (whether by lapse of time, acceleration or otherwise), except any such failure, if any, which is being actively contested by the applicable Loan Parties in good faith, has been paid or adequate reserves have been made for payment thereof, which reserves, if any, are reflected in the financial statements of the Loan Parties;

(k) any judgment or judgments, writ or writs or warrant or warrants of attachment, or any similar process or processes, which are not covered in full by insurance, with written acknowledgement of such coverage having been provided by the provider of such insurance coverage to the Trustee, in an aggregate amount in excess of $1,500,000 shall be entered or filed against any Loan Party or against any of their Property and remain unvacated, unbonded or unstayed for a period of thirty (30) days;

(l) any Loan Party or any member of its Controlled Group shall fail to pay when due an amount or amounts aggregating in excess of $1,000,000 which it shall have become liable to pay to the PBGC or to a Plan under Title IV of ERISA; or notice of intent to terminate a Plan or Plans having aggregate Unfunded Vested Liabilities in excess of $1,000,000 (collectively, a “Material Plan”) shall be filed under Title IV of ERISA by any Loan Party or any other member of its Controlled Group, any plan administrator or any combination of the foregoing; or the PBGC shall institute proceedings under Title IV of ERISA to terminate or to cause a trustee to be appointed to administer any Material Plan or a proceeding shall be instituted by a fiduciary of any Material Plan against any Loan Party or any member of its Controlled Group to enforce Section 515 or 4219(c)(5) of ERISA and such proceeding shall not have been dismissed within thirty (30) days thereafter; or a condition shall exist by reason of which the PBGC would be entitled to obtain a decree adjudicating that any Material Plan must be terminated;

(m) a default shall occur and be continuing under any agreement between any Loan Party and the Trustee other than this Agreement or under any obligation owed by any Loan Party to the Trustee;

(n) a debt moratorium, debt restructuring, debt adjustment or comparable restriction is imposed on the repayment when due and payable of the principal of or

41

interest on any Debt of any Loan Party by any Governmental Authority with appropriate jurisdiction; or

(o) there occurs any event or circumstance that results or which would reasonably be expected to result in a Material Adverse Change.

Section 10.02. Remedies on Default. Upon the occurrence of an Event of Default under this Loan Agreement, the Trustee may, as assignee of the Issuer, and shall, if directed by the owners of a majority in aggregate principal amount of the Bonds at the time Outstanding, take any one or more of the following remedial steps:

(a) by notice to the Borrower, declare the outstanding amount of the Obligations under this Agreement to be immediately due and payable without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived, and an action therefor shall immediately accrue, provided that, if any Event of Default described in Section 10.01(g) or 10.01(h) hereof shall occur, the Obligations under this Agreement shall be automatically mature and be due and payable on the date of the occurrence of such Event of Default without presentment, demand, protest, notice of intention to accelerate, notice of acceleration or other notice of any kind to the Borrower or any other Person, all of which are hereby expressly waived;

(b) either personally or by attorney or agent without bringing any action or proceeding, or by a receiver to be appointed by a court in any appropriate action or proceeding, take whatever action at law or in equity may appear necessary or desirable to collect the amounts due and payable under the Bond Documents or to enforce performance or observance of any obligation, agreement or covenant of the Loan Parties under the Bond Documents, whether for specific performance of any agreement or covenant of the Loan Parties or in aid of the execution of any power granted to the Trustee in the Bond Documents;

(c) deliver a notice to the Trustee and the Borrower that an Event of Default has occurred and is continuing and directing the Trustee to take such remedial action as is provided for in the Indenture;

(d) cure any Default, Event of Default or event of nonperformance hereunder or under any Bond Document; provided, however, that the Trustee shall have no obligation to effect such a cure; and

(e) exercise, or cause to be exercised, any and all remedies as it may have under the Bond Documents and as otherwise available at law and at equity.

In the enforcement of the remedies provided in this Section 10.02, the Issuer and the Trustee may treat all reasonable expenses of enforcement, including, without limitation, legal, accounting and advertising fees and expenses, as additional amounts payable by the Borrower then due and owing.

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To the extent permitted by, and subject to the mandatory requirements of, applicable Law, each and every right, power and remedy herein specifically given to the Trustee in the Bond Documents shall be cumulative, concurrent and nonexclusive and shall be in addition to every other right, power and remedy herein specifically given or now or hereafter existing at law, in equity or by statute, and each and every right, power and remedy (whether specifically herein given or otherwise existing) may be exercised from time to time and as often and in such order as may be deemed expedient by the Trustee, and the exercise or the beginning of the exercise of any power or remedy shall not be construed to be a waiver of the right to exercise at the same time or thereafter any other right, power or remedy.

Section 10.03. Application of Amounts Realized in Enforcement of Remedies. Any amounts collected pursuant to action taken under Section 10.02 shall be paid to the Trustee and applied in accordance with Section 6.06 of the Indenture.

Section 10.04. No Remedy Exclusive. No remedy herein conferred upon or reserved to the Issuer is intended to be exclusive of any other available remedy or remedies, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given under this Loan Agreement or now or hereafter existing at law or in equity or by statute. No delay or omission to exercise any right or power accruing upon an Event of Default under this Loan Agreement shall impair any such right or power or shall be construed to be a waiver thereof, but any such right and power may be exercised from time to time and as often as may be deemed expedient.

Section 10.05. Agreement to Pay Attorneys’ Fees and Expenses. Upon the occurrence of an Event of Default under this Loan Agreement, if the Issuer or the Trustee employs attorneys or incurs other expenses for the collection of amounts payable hereunder or for the enforcement of the performance or observance of any covenants or agreements on the part of the Borrower herein contained, whether or not suit is commenced, the Borrower agrees that it will on demand therefor pay to the Issuer or the Trustee or any combination thereof, as the case may be, the reasonable fees of such attorneys and such other reasonable expenses so incurred by the Issuer or the Trustee.

Section 10.06. Issuer and Borrower to Give Notice of Default. The Issuer and the Borrower severally covenant that they will, at the expense of the Borrower, promptly give to the Trustee, the Paying Agent, and to each other, written notice of any Event of Default under this Loan Agreement of which they shall have actual knowledge or written notice, but the Issuer shall not be liable for failing to give such notice.

Section 10.07. Waivers or Omissions. No delay or omission by the Trustee in the exercise of any right, remedy or power or in the pursuit of any remedy shall impair any such right remedy or power or be construed to be a waiver of any default on the part of the Trustee or to be acquiescence therein. No express or implied waiver by the Trustee of any Event of Default shall in any way be a waiver of any future or subsequent Event of Default.

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Section 10.08. Discontinuance of Proceedings. In case the Trustee shall proceed to invoke any right, remedy or recourse permitted hereunder or under the Bond Documents and shall thereafter elect to discontinue or abandon the same for any reason, the Trustee shall have the unqualified right so to do and, in such event, the Borrower and the Trustee shall be restored to their former positions with respect to the Obligations, the Bond Documents and otherwise, and the rights, remedies, recourse and powers of the Trustee hereunder shall continue as if the same had never been invoked.

Section 10.09. Injunctive Relief. The Borrower recognizes that in the event an Event of Default occurs, any remedy of law may prove to be inadequate relief to the Trustee; therefore, the Borrower agrees that the Trustee, if the Trustee so requests, shall be entitled to temporary and permanent relief in any such case.

ARTICLE XI

PREPAYMENTS

Section 11.01. Optional Prepayments.

(a) The Borrower shall have, and is hereby granted, the option to prepay the unpaid principal amount hereunder in whole, together with interest thereon to the date of redemption of the Bonds and any premium required by the Indenture, at any time by taking, or causing the Issuer to take, the actions required by the Indenture for the redemption of all Bonds then outstanding, upon the occurrence of any of the events set forth in Section 2.12(b) of the Indenture.

(b) The Borrower shall have, and is hereby granted, the option to prepay all or any portion of the unpaid balance hereunder, together with interest thereon to the date of redemption of the Bonds and any premium required by the Indenture, at any time by taking, or causing the Issuer to take, the actions required by the Indenture (i) to discharge the lien thereof through the redemption, or provision for payment of redemption of all Bonds then outstanding or (ii) to effect the redemption, or provision for payment or redemption, of less than all Bonds then outstanding, pursuant to Section 2.12(a) of the Indenture.

(c) To make a prepayment pursuant to this Section 11.01, the Borrower shall give written notice not less than 45 days from the date any Bonds are to be redeemed from such prepayment to the Issuer, the Trustee, the Registrar, which shall specify therein the principal amount to be prepaid and the date or dates on which the prepayment is to occur. All such prepayments shall be in the amount of the unpaid amount hereunder if made pursuant to Section 11.01(a) and in the amount of an Authorized Denomination if less than all of the Bonds of any Series are to be redeemed and the Borrower shall furnish additional funds, if necessary, to make such prepayments in such amounts. In addition,

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the Borrower shall make such additional payments as shall be necessary to pay any redemption premium on the Bonds in connection with such redemption.»

Section 11.02. Prepayment to Include Fees and Expenses. Any prepayment under this Article shall also include any expenses of prepayment, as well as all expenses and costs provided for herein.

ARTICLE XII

MISCELLANEOUS

Section 12.01. Amounts Remaining in Funds. Subject to the provisions of Article V of the Indenture and as provided in Article IV of the Indenture, it is agreed by the parties hereto that amounts remaining in the Bond Fund, the Refunding Escrow Fund, the Series 2011B Debt Service Reserve Fund, the Costs of Issuance Fund or the Surplus Fund upon expiration or earlier termination of this Loan Agreement, as provided in this Loan Agreement, after payment in full of the Bonds (or provision for payment thereof having been made in accordance with the provisions of the Indenture) and all other amounts owing hereunder under the Indenture, shall be paid to the Borrower by the Trustee.

Section 12.02. No Implied Waiver. In the event any provision of this Loan Agreement should be breached by either party and thereafter waived by the other party, such waiver shall be limited to the particular breach so waived and shall not be deemed to waive any other breach thereunder or hereunder.

Section 12.03. Issuer Representative. Whenever under the provisions of this Loan Agreement the approval of the Issuer is required or the Issuer is required to take some action at the request of the Borrower, such approval shall be made or such action shall be taken by the Issuer Representative; and the Borrower and the Trustee shall be authorized to rely on any such approval or action.

Section 12.04. Borrower Representative. Whenever under the provisions of this Loan Agreement the approval of the Borrower is required or the Borrower is required to take some action at the request of the Issuer, such approval shall be made or such action shall be taken by the Borrower Representative; and the Issuer, the Paying Agent and the Trustee shall be authorized to rely on any such approval or action.

Section 12.05. Notices. Notice under this Loan Agreement shall be given in accordance with Section 9.04 of the Indenture.

Section 12.06. Issuer, Governing Body, Members, Commissioners, Directors, Officers, Agents and Employees of Issuer and Governing Body Not Liable. No director, member, officer, agent or employee of the Issuer or any director, officer, agent or employee of the Borrower shall be individually or personally liable for the payment of any principal, redemption premium or interest on the Bonds or any other sum hereunder or be subject to any

45

personal liability or accountability by reason of the execution and delivery of this Loan Agreement, but nothing herein contained shall relieve any such member, director, officer, agent or employee from the performance of any official duty provided by law or by this Loan Agreement.

To the extent permitted by law, no recourse shall be had for the enforcement of any obligation, promise or agreement of the Issuer contained herein or in the other Bond Documents to which the Issuer is a party or for any claim based hereon or thereon or otherwise in respect hereof or thereof against the Issuer, the Governing Body, any member, commissioner, director, officer, agent or employee, as such, in his/her individual capacity, past, present or future, of the Issuer, the Governing Body, or of any successor entity, either directly or through the Issuer, the Governing Body or any successor entity, whether by virtue of any constitutional provision, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise. No personal liability whatsoever shall attach to, or be incurred by, any member, commissioner, director, officer, agent or employee, as such, in his/her individual capacity, past, present or future, of the Issuer, the Governing Body, or of any successor entity, either directly or through the Issuer, the Governing Body or any successor entity, under or by reason of any of the obligations, promises or agreements entered into between the Issuer and the Borrower, whether herein contained or to be implied herefrom as being supplemental hereto; and all personal liability of that character against every such member, commissioner, director, officer, agent or employee is, by the execution of this Loan Agreement and as a condition of, and as part of the consideration for, the execution of this Loan Agreement, expressly waived and released.

Notwithstanding any other provision of this Loan Agreement, the Issuer shall not be liable to the Borrower or the Trustee or any other person for any failure of the Issuer to take action under this Loan Agreement unless the Issuer (a) is requested in writing by an appropriate person to take such action, (b) is assured of payment of, or reimbursement for, any reasonable expenses in such action, and (c) is afforded, under the existing circumstances, a reasonable period to take such action. In acting under this Loan Agreement, or in refraining from acting under this Loan Agreement, the Issuer may conclusively rely on the advice of its counsel.

Section 12.07. No Liability of Issuer; No Charge Against Issuer’s Credit. Any obligation of the Issuer created by, arising out of, or entered into in contemplation of this Loan Agreement, including the Bonds, shall not impose a debt or pecuniary liability upon the Issuer, the State or any political subdivision thereof or constitute a charge upon the general credit or taxing powers of any of the foregoing. The Issuer has no taxing power. Any such obligation shall be payable solely out of the Trust Estate, including revenues and any other moneys derived hereunder and under the Indenture, except (as provided in the Indenture and in this Loan Agreement) to the extent it shall be paid out of moneys attributable to the proceeds of the Bonds or the income from the temporary investment thereof.

Section 12.08. Non-Liability of Issuer. The Issuer shall not be obligated to pay the principal or redemption premium of or interest on the Bonds, except from revenues and other moneys and assets received by the Trustee pursuant to this Loan Agreement or the other Bond

46

Documents. Neither the faith and credit nor the taxing power of the State or any political subdivision thereof, nor the faith and credit of the Issuer or any member is pledged to the payment of the principal, redemption premium or interest on the Bonds. Neither the Issuer nor its members, officers, directors, agents or employees or their successors and assigns shall be liable for any costs, expenses, losses, damages, claims or actions, of any conceivable kind on any conceivable theory, under, by reason of or in connection with this Loan Agreement, the Bonds, the Indenture or the other Bond Documents, except only to the extent amounts are received for the payment thereof from the Borrower under this Loan Agreement or the other Bond Documents. The Borrower hereby acknowledges that the Issuer’s sole source of moneys to repay the Bonds will be provided by payments made by the Borrower to the Trustee pursuant to this Loan Agreement and the other Bond Documents.

Section 12.09. If Performance Date Not a Business Day. If the last date for performance of any act or the exercising of any right, as provided in this Loan Agreement, shall not be a Business Day, such payment may be made or act performed or right exercised on the next succeeding Business Day.

Section 12.10. Binding Effect. This Loan Agreement shall inure to the benefit of and shall be binding upon the Issuer, the Borrower, and their respective successors and assigns. No assignment of this Loan Agreement by the Borrower shall relieve the Borrower of its obligations hereunder except in accordance with Section 9.03 or 9.04 of this Loan Agreement.

Section 12.11. Severability. In the event any provision of this Loan Agreement shall be held invalid or unenforceable by any court of competent jurisdiction, such holding shall not invalidate or render unenforceable any other provision hereof.

Section 12.12. Amendments, Changes and Modifications. Subsequent to the issuance of the Bonds and prior to payment of the Bonds, this Loan Agreement may not be effectively amended, changed, modified, altered or terminated except in accordance with the Indenture.

Section 12.13. Execution in Counterparts. This Loan Agreement may be executed in several counterparts, each of which, taken together, shall be an original and all of which shall constitute but one and the same instrument.

Section 12.14. Applicable Law. This Loan Agreement is a contract made under the laws of, and shall be governed by and construed in accordance with, the Constitution and laws applicable to contracts made and performed in the State. This Loan Agreement shall be enforceable in the State, and any action arising out of this Loan Agreement shall be filed and maintained in San Diego County, California, unless the Issuer waives this requirement.

(a) To the extent permitted by law, each of the Borrower and the Trustee irrevocably waives any and all right to trial by jury in any legal proceeding arising out of or relating to legal claims based on the Borrower’s or the Trustee’s performance of its obligations under this Agreement or any other Bond Document. If and to the extent that

47

the foregoing waiver of the right to a jury trial is unenforceable for any reason in such forum, the Borrower and the Trustee hereby consent to the adjudication of any and all claims pursuant to judicial reference as provided in California Code of Civil Procedure Section 638, and the judicial referee shall be empowered to hear and determine any and all issues in such reference whether fact or law. The Borrower and the Trustee represent that each has reviewed this waiver and consent and each knowingly and voluntarily waives its jury trial rights and consents to judicial reference following the opportunity to consult with legal counsel of its choice on such matters. In the event of litigation, a copy of this Agreement may be filed as a written consent to a trial by the court or to judicial reference under California Code of Civil Procedure Section 638 as provided herein.

(b) The covenants and waivers made pursuant to this Section 12.14 shall be irrevocable and unmodifiable, whether in writing or orally, and shall be applicable to any subsequent amendments, renewals, supplements or modifications of this Agreement. In the event of litigation, this Agreement may be filed as a written consent to a trial by the court.

Section 12.15. Prior Understandings. This Agreement and the other Bond Documents supersede all other prior understandings and agreements, whether written or oral, among the parties hereto relating to the transactions provided for herein and therein.

Section 12.16. Duration. All representations and warranties of the Borrower contained herein or made in connection herewith shall survive the making of and shall not be waived by the execution and delivery of this Agreement or the other Bond Documents or any investigation by the Borrower. All covenants and agreements of the Borrower contained herein shall continue in full force and effect from and after the date hereof until the Obligations have been fully discharged.

[Remainder of page intentionally left blank]

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IN WITNESS WHEREOF, the Issuer and the Borrower have caused this Loan Agreement to be executed in their respective legal names and their respective corporate seals to be hereunto affixed, and the signatures of duly authorized persons to be attested, all as of the date first above written.

CALIFORNIA MUNICIPAL FINANCE AUTHORITY By Name Title [SEAL] ATTEST: By: Name Title AZUSA PACIFIC UNIVERSITY By Name Title [SEAL] ATTEST: By: Name: Title:

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EXHIBIT A

FORM OF NO DEFAULT CERTIFICATE

This No Default Certificate (this “Certificate”) is furnished to U.S Bank National Association (the “Trustee”) pursuant to that certain Loan Agreement, dated as of February 1, 2011, between the California Municipal Finance Authority (the “Issuer”) and Azusa Pacific University (the “Borrower”). Unless otherwise defined herein, the terms used in this Certificate shall have the meanings assigned thereto in the Agreement.

THE UNDERSIGNED HEREBY CERTIFIES THAT:

1. I am the duly elected chief financial officer of the Borrower;

2. I have reviewed the terms of the Agreement and I have made, or have caused to be made under my supervision, a detailed review of the transactions and conditions of the Loan Parties during the accounting period covered by the attached financial statements;

3. The examinations described in paragraph 2 did not disclose, and I have no knowledge of, the existence of any condition or the occurrence of any event which constitutes a Default or Event of Default during or at the end of the accounting period covered by the attached financial statements or as of the date of this Certificate, except as set forth below;

4. To the best of my knowledge the financial statements required by Section 8.02 of the Agreement and being furnished to you concurrently with this certificate fairly represent the consolidated condition of the Loan Parties in accordance with GAAP as of the dates and for the periods covered thereby; and

Described below are the exceptions, if any, to paragraph 3 by listing, in detail, the nature of the condition or event, the period during which it has existed and the action which the Borrower has taken, is taking, or proposes to take with respect to each such condition or event:

______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________

The foregoing certifications and the financial statements delivered with this Certificate in support hereof, are made and delivered this _________ day of _______________, 20__.

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AZUSA PACIFIC UNIVERSITY, a California nonprofit religious corporation

By:____________________________________ Name: ______________________________ Title: _______________________________

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EXHIBIT B

FORM OF PRICING CERTIFICATE

This Pricing Certificate (this “Certificate”) is furnished to U.S Bank National Association (the “Trustee”) pursuant to that certain Loan Agreement, dated as of February 1, 2011, between the California Municipal Finance Authority (the “Issuer”) and Azusa Pacific University (the “Borrower”). Unless otherwise defined herein, the terms used in this Certificate shall have the meanings assigned thereto in the Agreement.



2. I have made, or have caused to be made under my supervision, a detailed review of the transactions and conditions of the Loan Parties during the accounting period covered by the financial statements delivered to the Bank concurrently herewith; and

3. To the best of my knowledge as of the end of the most recent fiscal quarter of the Borrower, the Loan Parties had Net Assets in an amount equal to $_______________ and Total Funded Debt in an amount equal to $_______________, resulting in a Net Assets to Total Funded Debt Ratio of _____ to 1.0.

This Certificate is made and delivered this _________ day of _______________, 20__.


By:____________________________________ Name: ______________________________ Title: _______________________________

541711.01

EXHIBIT C

FORM OF COMPLIANCE CERTIFICATE

COMPLIANCE CALCULATIONS FOR SERIES B LOAN AGREEMENT Dated as of February 1, 2011

Calculations as of _____________, 20___

541711.01

SCHEDULE 1

EXISTING DEBT

1. The Azusa College Dormitory and Student Union Bonds of 1967, Series A and Series B issued pursuant to the Trust Indenture, dated as of April 1, 1967, by and between Azusa College and Crocker-Citizens National Bank, as trustee

2. The Existing Swap Agreements

541711.01

SCHEDULE 2

SUBSIDIARIES

NAME JURISDICTION OF ORGANIZATION

PERCENTAGE OWNERSHIP OWNER

541711.01

SCHEDULE 3

TRANSACTIONS WITH AFFILIATES

1. [To be provided by APU]

2.

I-1

APPENDIX I

PROPOSED FORM OF SECURITY AGREEMENT

DRAFT OF JANUARY 1, 2011

SECURITY AGREEMENT

This Security Agreement (the “Agreement”) is dated as of February __, 2011, among Azusa Pacific University, a California non-profit religious corporation the “Borrower”), and the other parties executing this Agreement under the heading “Debtors” (the Borrower and such other parties, along with any parties who execute and deliver to the Collateral Agent referred to herein an agreement attached hereto as Schedule H, being hereinafter referred to collectively as the “Debtors” and individually as a “Debtor”), each with its mailing address as set forth in Section 12(b) hereof, and U.S. Bank, National Association, a national banking association (as collateral agent for the Secured Creditors hereinafter defined, the “Collateral Agent”), with its mailing address as set forth in Section 12(b) hereof. The term “Debtor” and “Debtors” as used herein shall mean and include the Debtors collectively and also each individually, with all grants, representations, warranties and covenants of and by the Debtors, or any of them, herein contained to constitute joint and several grants, representations, warranties and covenants of and by the Debtors; provided, however, that unless the context in which the same is used shall otherwise require, any grant, representation, warranty or covenant contained herein related to the Collateral (as hereinafter defined) shall be made by each Debtor only with respect to the Collateral owned by it or in which such Debtor has rights or the power to transfer rights to a secured party or represented by such Debtor as being owned by it or as being an asset in which such Debtor has rights or the power to transfer rights to a secured party.

PRELIMINARY STATEMENT

A. The California Municipal Finance Authority (the “Issuer”) is issuing its California Municipal Finance Authority Variable Rate Demand Refunding Revenue Bonds (Azusa Pacific University Project) Series 2011A in the aggregate principal amount of $70,000,000 (the “Series A Bonds”) pursuant to an Indenture of Trust dated as of February 1, 2011, by and between the Issuer and U.S. Bank National Association, as trustee (in such capacity, the “Series A Trustee”) (said Indenture of Trust, as the same may be further amended, modified or restated in accordance with the terms thereof, the “Series A Indenture”) and its California Municipal Finance Authority Refunding Revenue Bonds (Azusa Pacific University Project) Series 2011B in the aggregate principal amount of $73,630,000 (the “Series B Bonds” and, together with the Series A Bonds, the “Bonds”) pursuant to an Indenture of Trust dated as of February 1, 2011, by and between the Issuer and the U.S. Bank National Association, as trustee (in such capacity, the “Series B Trustee”) (said Indenture of Trust, as the same may be further amended, modified or restated in accordance with the terms thereof, the “Series B Indenture” and, together with the Series A Indenture, the “Indenture”).

B. The Issuer has loaned the proceeds of the Series A Bonds to the Borrower pursuant to a Loan Agreement dated as of February 1, 2011, between the Issuer and the Borrower (said Loan Agreement, as the same may further be amended, modified or restated in accordance with the terms thereof, the “Series A Loan Agreement”) and has loaned the proceeds of the Series B Bonds to the Borrower pursuant to a Loan Agreement dated as of February 1, 2011, between the Issuer and the Borrower (said Loan Agreement, as the same may be further amended, modified

or restated in accordance with the terms thereof, the “Series B Loan Agreement” and, together with the Series B Loan Agreement, the “Loan Agreement”). As security for the payment of the Bonds, the Issuer has assigned to the Collateral Agent certain of the Issuer’s rights (but not its obligations) under the Loan Agreement and the Indenture, including the right to collect and receive directly all of the revenues of the Debtor, and to enforce any security for the Bonds.

C. In connection with the purchase of the Series A Bonds by Wells Fargo Bank, National Association (in such capacity, the “Purchaser”) on the date hereof, the Borrower and the Bank have entered into that certain Continuing Covenant Agreement, dated as of the date hereof, with respect to the Series A Bonds (as the same may further be amended, modified or restated in accordance with the terms thereof, the “Continuing Covenant Agreement”).

D. The Borrower has entered into interest rate swap transactions with Wells Fargo Bank, National Association (in such capacity, the “Swap Provider”) pursuant to that certain ISDA Master Agreement (including the Schedule thereto), and the related ISDA Confirmation No. __________, each dated as of February __, 2011 (as such agreements may be amended, restated, modified and/or supplemented from time to time, including, without limitation, by additional confirmations reflecting transactions between the Swap Provider and the Borrower, collectively, the “Swap Contract”).

E. The Borrower has entered into that certain Credit Agreement dated as of February __, 2011, between the Borrower and Wells Fargo Bank, National Association (in such capacity, the “Bank”), pursuant to which the Bank may from time to time extend credit or otherwise make financial accommodations available to the Borrower (as the same may further be amended, modified or restated in accordance with the terms thereof, the “Credit Agreement”).

F. The Series A Trustee, the Series B Trustee, the Purchaser, the Swap Provider, the Bank and the Collateral Agent (collectively, the “Secured Creditors” and individually each a “Secured Creditor”) have entered into that certain Intercreditor and Collateral Agency Agreement dated as of the date hereof (the “Intercreditor Agreement”), pursuant to which the Secured Creditors have appointed the Collateral Agent as their agent with respect to the Collateral.

G. The Debtors (other than the Borrower) are subsidiaries or affiliates of the Borrower.

H. The Borrower provides each of the other Debtors with financial, management, administrative, and technical support which enables each of them to conduct its respective business and activities in an orderly and efficient manner in the ordinary course.

I. The interdependent nature of the business and activities of the Debtors is such that the orderly, effective and efficient operation of each Debtor is dependent upon the continued viability and success of the other Debtors and, upon the continuation of such Debtor’s business relationships with the other Debtors, and the Borrower’s placement of bonded indebtedness with, and access to credit and other financial accommodations from the Secured Creditors is in furtherance of, and benefits the operations and activities of each Debtor.

J. As a condition to purchasing such bonded indebtedness of the Borrower, extending credit to the Borrower and making other financial accommodations to the Borrower, the Secured Creditors require, among other things, that each Debtor grant to the Collateral Agent, for the benefit of the Secured Creditors, a security interest in each Debtor’s personal property described herein subject to the terms and conditions hereof.

NOW, THEREFORE, in consideration of the benefits accruing to the Debtors, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

Section 1. Definitions and Rules of Interpretation. All terms which are used in this Agreement which are defined in the Uniform Commercial Code of the State of California as in effect from time to time (“UCC”) shall have the same meanings herein as such terms are defined in the UCC, unless this Agreement shall otherwise specifically provide. Capitalized terms used and not defined herein shall have the meaning set forth in the Continuing Covenant Agreement. The following terms shall have the meaning specified.


“Gross Revenues” means, as of any date, all moneys, fees and tuition (net of institutional financial aid and other discounts or waivers), rates, receipts, rentals, licensing fees, charges, issues and income received or derived by any Debtor, the operation of any Debtor, or its facilities or any other source whatsoever, including, without limitation, gifts, bequests, grants, devises, contributions, moneys received from the operation of the Debtor’s business or the possession of its properties, insurance proceeds or condemnation awards, and all rights to receive the same, whether in the form of Accounts, General Intangibles, Instruments, Promissory Notes, Receivables, contract rights, payment or other rights, and the Proceeds of the same whether now owned or held or hereafter coming into being, but excluding gifts, grants, devises, bequests and contributions designated by the maker to a specific purpose inconsistent with their use for payment of principal of, premium, if any, and interest on Indebtedness, all computed in accordance with GAAP in a manner consistently applied.

“Indebtedness” means any and all indebtedness, obligations and liabilities of whatsoever kind and nature, including advances, representations, warranties, covenants of the Borrower or any Debtor, to the Secured Creditors (whether arising before of after the filing of a petition in bankruptcy) heretofore, now or hereafter made, incurred or created, whether voluntary or involuntary and however arising, whether due or not due, absolute or contingent, liquidated or unliquidated, determined or undetermined, including under any swap, derivative, foreign exchange, hedge, deposit, treasury management or other similar transaction or arrangement, and whether the Debtor may be liable individually or jointly with others, or whether recovery upon such Indebtedness may be or hereafter becomes unenforceable, and shall be interpreted in its most comprehensive sense.

“Receivables” means all rights to the payment of a monetary obligation, whether or not earned by performance, and whether evidenced by an Account, Chattel Paper, Instrument, General Intangible, or otherwise.

“Required Secured Creditors” has the meaning set forth in the Intercreditor Agreement.

“Transaction Document” means this Agreement, the Indenture, the Loan Agreement, the Continuing Covenant Agreement, the Swap Contract and the Credit Agreement and any and all future renewals and extensions or restatements of, or amendments or supplements to, any of the foregoing.

Section 2. Grant of Security Interest. Each Debtor hereby grants to the Collateral Agent, for the benefit of the Secured Creditors, a lien on and security interest in, and acknowledges and agrees that the Collateral Agent, for the benefit of the Secured Creditors, has and shall continue to have a continuing lien on and security interest in, all right, title, and interest of each Debtor, whether now owned or existing or hereafter created, acquired or arising, in and to all of the following:

(a) Accounts;

(b) Chattel Paper;

(c) Gross Revenues;

(d) Instruments (including Promissory Notes);

(e) Documents;

(f) General Intangibles (including Payment Intangibles and Software, patents, trademarks, tradestyles, copyrights, and all other intellectual property rights, including all applications, registration, and licenses therefor, and all goodwill of the business connected therewith or represented thereby);

(h) Letter-of-Credit Rights;

(i) Supporting Obligations;

(j) Deposit Accounts;

(k) Investment Property (including certificated and uncertificated Securities, Securities Accounts, Security Entitlements, Commodity Accounts, and Commodity Contracts);

(l) Inventory;

(m) Equipment (including all software, whether or not the same constitutes embedded software, used in the operation thereof);

(n) Fixtures;

(o) Commercial Tort Claims (as described on Schedule F hereto or on one or more supplements to this Agreement);

(p) Rights to merchandise and other Goods (including rights to returned or repossessed Goods and rights of stoppage in transit) which is represented by, arises from, or relates to any of the foregoing;

(q) Monies, personal property, and interests in personal property of such Debtor of any kind or description now held by the Secured Creditors or at any time hereafter transferred or delivered to, or coming into the possession, custody, or control of, the Secured Creditors, or any agent or affiliate of the Secured Creditors, whether expressly as collateral security or for any other purpose (whether for safekeeping, custody, collection or otherwise), and all dividends and distributions on or other rights in connection with any such property;

(r) Supporting evidence and documents relating to any of the above-described property, including, without limitation, computer programs, disks, tapes and related electronic data processing media, and all rights of such Debtor to retrieve the same from third parties, written applications, credit information, account cards, payment records, correspondence, delivery and installation certificates, invoice copies, delivery receipts, notes, and other evidences of indebtedness, insurance certificates and the like, together with all books of account, ledgers, and cabinets in which the same are reflected or maintained;

(s) Accessions and additions to, and substitutions and replacements of, any and all of the foregoing; and

(t) Proceeds and products of the foregoing, and all insurance of the foregoing and proceeds thereof;

but excluding, in each case, gifts, grants, devises, bequests and contributions designated by the maker to a specific purpose inconsistent with their use for payment of principal of, premium, if any, and interest on Indebtedness (all of the foregoing, being herein sometimes referred to as the “Collateral”).

Section 2. Secured Obligations. The lien and security interest herein granted and provided for is made and given to secure, and shall secure, the payment and performance of (a) any and all Indebtedness of the Debtors, or any of them, to the Secured Creditors (whether arising before or after the filing of a petition in bankruptcy), howsoever held, evidenced, or acquired, and whether several, joint, or joint and several, including without limitation, (i) all Indebtedness of the Debtors under the Loan Agreement, (ii) all Indebtedness of the Debtors under the Continuing Covenant Agreement, (iii) all Indebtedness of the Debtors under the Swap Contract and (iv) all Indebtedness of the Debtors under the Credit Agreement; and (b) any and all expenses and charges, legal or otherwise, suffered or incurred by the Collateral Agent or any Secured Creditors, in collecting or enforcing any of such indebtedness, obligations, or liabilities or in realizing on or protecting or preserving any security therefor, including, without limitation,

the lien and security interest granted hereby (all of the foregoing being hereinafter referred to as the “Secured Obligations”). Notwithstanding anything in this Agreement to the contrary, the right of recovery against any Debtor (other than the Borrower to which this limitation shall not apply) under this Agreement shall not exceed the largest amount that would not render such Debtor’s obligations hereunder subject to avoidance under Section 548 of the Bankruptcy Reform Act, Title 11 of the United States Code, as amended or recodified from time to time, or comparable provisions of any other applicable Federal or state law (including, without limitation, the California Uniform Fraudulent Transfer Act).

Section 3. Covenants, Agreements, Representations and Warranties. The Debtors hereby covenant and agree with, and represents and warrants to, the Collateral Agent, for the benefit of the Secured Creditors, that:

(a) Each Debtor is duly organized and validly existing in good standing under the laws of the jurisdiction of its organization. Each Debtor is the sole and lawful owner of its Collateral, and has full right, power, and authority to enter into this Agreement and to perform each and all of the matters and things herein provided for. The execution and delivery of this Agreement, and the observance and performance of each of the matters and things herein set forth, will not (i) contravene or constitute a default under any provision of law or any judgment, injunction, order, or decree binding upon any Debtor or any provision of any Debtor’s organizational documents (e.g., charter, articles or certificate of incorporation and by-laws, articles or certificate of formation and limited liability company operating agreement, partnership agreement, or other similar organizational documents) or any covenant, indenture, or agreement of or affecting any Debtor or any of its property or (ii) result in the creation or imposition of any lien or encumbrance on any property of any Debtor except for the lien and security interest granted to the Collateral Agent, for the benefit of the Secured Creditors, hereunder. Each Debtor’s organizational registration number (if any) is set forth under its name under Column 1 on Schedule A.

(b) Each Debtor’s respective chief executive office is at the location listed under Column 2 on Schedule A attached hereto opposite such Debtor’s name; and such Debtor has no other executive offices or places of business other than those listed under Column 3 on Schedule A attached hereto opposite such Debtor’s name. The Collateral owned or leased by each Debtor is and shall remain in such Debtor’s possession or control at the locations listed under Columns 2 and 3 on Schedule A attached hereto opposite such Debtor’s name (collectively for each Debtor, as such locations may be amended or supplemented from time to time with written notice to the Collateral Agent as provided below, the “Permitted Collateral Locations”). If for any reason any Collateral is at any time kept or located at a location other than a Permitted Collateral Location, the Collateral Agent, for the benefit of the Secured Creditors, shall nevertheless have and retain a lien on and security interest therein. The Debtors own and shall at all times own all Permitted Collateral Locations, except to the extent otherwise disclosed under Columns 2 and 3 on Schedule A. No Debtor shall change its jurisdiction of organization without the Collateral Agent’s prior written consent and having taken all action reasonably requested by the Collateral Agent to maintain the lien and security interest of the Collateral Agent, for the benefit of the Secured Creditors, in the Collateral at all times fully perfected and in full force and effect. No Debtor shall move its chief executive office or maintain a place of business at a location other

than those specified under Columns 2 or 3 on Schedule A or permit the Collateral to be located at a location other than those specified under Columns 2 or 3 on Schedule A, in each case without first providing the Collateral Agent and the Secured Creditors 30 days’ prior written notice of such Debtor’s intent to do so (at which time Schedule A will be deemed amended or supplemented with such additional or modified locations); provided that each Debtor shall at all times maintain its chief executive office and Permitted Collateral Locations (unless otherwise specifically agreed to in writing by the Collateral Agent) in the United States of America and, with respect to any new chief executive office or place of business or location of Collateral, such Debtor shall have taken all action reasonably requested by the Collateral Agent to maintain the lien and security interest of the Collateral Agent, for the benefit of the Secured Creditors, in the Collateral at all times fully perfected and in full force and effect.

(c) Each Debtor’s legal name and jurisdiction of organization is correctly set forth under Column 1 on Schedule A of this Agreement. No Debtor has transacted business at any time during the immediately preceding five-year period, and does not currently transact business, under any other legal names or trade names other than the prior legal names and trade names (if any) set forth on Schedule B attached hereto. No Debtor shall change its legal name or transact business under any other trade name without first giving 30 days’ prior written notice of its intent to do so to the Collateral Agent and having taken all action reasonably requested by the Collateral Agent to maintain the lien and security interest of the Collateral Agent, for the benefit of the Secured Creditors, in the Collateral at all times fully perfected and in full force and effect.

(d) The Collateral and every part thereof is and shall be free and clear of all security interests, liens (including, without limitation, mechanics’, laborers’ and statutory liens), attachments, levies, and encumbrances of every kind, nature and description, whether voluntary or involuntary, except for the lien and security interest of the Collateral Agent, for the benefit of the Secured Creditors, therein and as otherwise permitted by Section 5.08 of the Continuing Covenant Agreement. Each Debtor shall warrant and defend the Collateral against any claims and demands of all persons at any time claiming the same or any interest in the Collateral adverse to the Collateral Agent or the Secured Creditors.

(e) Each Debtor shall promptly pay when due all taxes, assessments, and governmental charges and levies upon or against such Debtor or any of its Collateral, in each case before the same become delinquent and before penalties accrue thereon, unless and to the extent that the same are being contested in good faith by appropriate proceedings which prevent foreclosure or other realization upon any of the Collateral and preclude interference with the operation of such Debtor’s business in the ordinary course, and such Debtor shall have established adequate reserves therefor.

(f) No Debtor shall use, manufacture, sell, or distribute any Collateral in violation of any statute, ordinance, or other governmental requirement. No Debtor shall waste or destroy the Collateral or any part thereof or be negligent in the care or use of any Collateral. Each Debtor shall perform in all material respects its obligations under any contract or other agreement constituting part of the Collateral, it being understood and agreed that the Collateral Agent and the Secured Creditors have no responsibility to perform such obligations.

(g) Subject to Sections 4(b), 6(b), 6(c), and 7(c) hereof and the terms of the Continuing Covenant Agreement (including, without limitation, Section 5.11 thereof), no Debtor shall, without the Collateral Agent’s prior written consent, sell, assign, mortgage, lease, or otherwise dispose of the Collateral or any interest therein.

(h) The Debtors shall at all times insure the Collateral consisting of tangible personal property against such risks and hazards as other persons similarly situated insure against, and including in any event loss or damage by fire, theft, burglary, pilferage, loss in transit and such other hazards as the Collateral Agent may reasonably specify. All insurance required hereby shall be maintained in amounts and under policies and with insurers reasonably acceptable to the Collateral Agent and all such policies shall contain loss payable clauses naming the Collateral Agent as loss payee as its interest may appear (and, if the Required Secured Creditors requests, naming the Collateral Agent as an additional insured therein) in a form reasonably acceptable to the Collateral Agent. All premiums on such insurance shall be paid by the Debtors. Certificates of insurance evidencing compliance with the foregoing, and at the Collateral Agent’s request the insurance policies, shall be delivered by the Debtors to the Collateral Agent. All insurance required hereby shall provide that any loss shall be payable to the Collateral Agent notwithstanding any act or negligence of any Debtor, shall provide that no cancellation thereof shall be effective until at least 30 days after receipt by the relevant Debtor and the Collateral Agent of written notice thereof, and shall be reasonably satisfactory to the Collateral Agent in all other respects. The Collateral Agent shall promptly provide each Secured Creditor with a copy of each written notice so received. In case of any material loss, damage to or destruction of the Collateral or any part thereof, the relevant Debtor shall promptly give written notice thereof to the Collateral Agent and the Secured Creditors generally describing the nature and extent of such damage or destruction. In case of any loss, damage to or destruction of the Collateral or any part thereof, the relevant Debtor, whether or not the insurance proceeds, if any, received on account of such damage or destruction shall be sufficient for that purpose, at such Debtor’s cost and expense, shall promptly repair or replace the Collateral so lost, damaged, or destroyed, except to the extent such Collateral, prior to its loss, damage, or destruction, had become uneconomical, obsolete, or worn out and is not necessary for or of importance to the proper conduct of such Debtor’s business in the ordinary course. In the event any Debtor shall receive any proceeds of such insurance, such Debtor shall immediately pay over such proceeds to the Collateral Agent, for the benefit of the Secured Creditors. Each Debtor hereby authorizes the Collateral Agent to adjust, compromise, and settle any losses under any insurance afforded at any time during the existence of any Event of Default or any other event or condition which with the lapse of time or the giving of notice, or both, would constitute an Event of Default, and each Debtor does hereby irrevocably constitute the Collateral Agent, and each of its nominees, officers, agents, attorneys, and any other person whom the Collateral Agent may designate, as such Debtor’s attorneys-in-fact, with full power and authority to effect such adjustment, compromise, and/or settlement and to endorse any drafts drawn by an insurer of the Collateral or any part thereof and to do everything necessary to carry out such purposes and to receive and receipt for any unearned premiums due under policies of such insurance. Unless the Collateral Agent elects to adjust, compromise, or settle losses as aforesaid, any adjustment, compromise, and/or settlement of any losses under any insurance shall be made by the relevant Debtor subject to final approval of the Collateral Agent (regardless of whether or not an Event of Default shall have occurred) in the case of losses exceeding $10,000. Net insurance proceeds received by the Collateral Agent

under the provisions hereof or under any policy of insurance covering the Collateral or any part thereof shall be applied to the reduction of the Secured Obligations (whether or not then due) as contemplated by the Intercreditor Agreement. All insurance proceeds shall be subject to the lien and security interest of the Collateral Agent, for the benefit of the Secured Creditors hereunder.

UNLESS THE DEBTORS PROVIDE THE COLLATERAL AGENT WITH EVIDENCE OF THE INSURANCE COVERAGE REQUIRED BY THIS AGREEMENT, THE COLLATERAL AGENT MAY PURCHASE INSURANCE AT THE DEBTORS’ EXPENSE TO PROTECT THE SECURED CREDITORS’ INTERESTS IN THE COLLATERAL. THIS INSURANCE MAY, BUT NEED NOT, PROTECT THE DEBTORS’ INTERESTS IN THE COLLATERAL. THE COVERAGE PURCHASED BY THE COLLATERAL AGENT MAY NOT PAY ANY CLAIMS THAT ANY DEBTOR MAKES OR ANY CLAIM THAT IS MADE AGAINST ANY DEBTOR IN CONNECTION WITH THE COLLATERAL. THE RELEVANT DEBTOR MAY LATER CANCEL ANY SUCH INSURANCE PURCHASED BY THE COLLATERAL AGENT, BUT ONLY AFTER PROVIDING THE COLLATERAL AGENT WITH EVIDENCE THAT SUCH DEBTOR HAS OBTAINED INSURANCE AS REQUIRED BY THIS AGREEMENT. IF THE COLLATERAL AGENT PURCHASES INSURANCE FOR THE COLLATERAL, THE DEBTORS WILL BE RESPONSIBLE FOR THE COSTS OF THAT INSURANCE, INCLUDING INTEREST AND ANY OTHER CHARGES THAT THE COLLATERAL AGENT MAY IMPOSE IN CONNECTION WITH THE PLACEMENT OF THE INSURANCE, UNTIL THE EFFECTIVE DATE OF THE CANCELLATION OR EXPIRATION OF THE INSURANCE. THE COSTS OF THE INSURANCE MAY BE ADDED TO THE SECURED OBLIGATIONS SECURED HEREBY. THE COSTS OF THE INSURANCE MAY BE MORE THAN THE COST OF INSURANCE THE DEBTORS MAY BE ABLE TO OBTAIN ON ITS OWN.

(i) Each Debtor shall at all times allow the Collateral Agent, any Secured Creditor and their representatives free access to and right of inspection of the Collateral; provided that, unless the Collateral Agent or such Secured Creditor believes in good faith an Event of Default, or any other event or condition which with the lapse of time or the giving of notice, or both, would constitute an Event of Default, exists, any such access or inspection shall only be required during the relevant Debtor’s normal business hours.

(j) If any Collateral is in the possession or control of any of any Debtor’s agents or processors and the Collateral Agent so requests, such Debtor agrees to notify such agents or processors in writing of the Collateral Agent’s security interest therein and instruct them to hold all such Collateral for the Collateral Agent’s account and subject to the Collateral Agent’s instructions. Each Debtor shall, upon the request of the Collateral Agent, authorize and instruct all bailees and other parties, if any, at any time processing, labeling, packaging, holding, storing, shipping, or transferring all or any part of the Collateral to permit the Collateral Agent and its representatives (including, without limitation, any Secured Creditor) to examine and inspect any of the Collateral then in such party’s possession and to verify from such party’s own books and records any information concerning the Collateral or any part thereof which the Collateral Agent or its representatives (including, without limitation, any Secured Creditor) may seek to verify. As to any premises not owned by a Debtor wherein any of the Collateral is located, the relevant Debtor shall, at the Collateral Agent’s request, cause each party having any right, title or interest in, or lien on, any of such premises to enter into an agreement (any such agreement to contain a legal description of such premises) whereby such party disclaims any right, title and interest in, and lien on, the Collateral and allows the removal of such Collateral by the Collateral Agent and

is otherwise in form and substance reasonably acceptable to the Collateral Agent; provided, however, that no such agreement need be obtained with respect to any one location wherein the value of the Collateral as to which such agreement has not been obtained aggregates less than $10,000 at any one time.

(k) Each Debtor agrees from time to time to deliver to the Collateral Agent and the Secured Creditors such evidence of the existence, identity, and location of its Collateral and of its availability as collateral security pursuant hereto (including, without limitation, schedules describing all Receivables created or acquired by such Debtor, copies of customer invoices or the equivalent, and original shipping or delivery receipts for all merchandise and other goods sold or leased or services rendered, together with such Debtor’s warranty of the genuineness thereof, and reports stating the book value of Inventory and Equipment by major category and location), in each case as the Collateral Agent may reasonably request. The Collateral Agent shall have the right to verify all or any part of the Collateral in any manner, and through any medium, which the Collateral Agent considers appropriate (including, without limitation, the verification of Collateral by use of a fictitious name), and each Debtor agrees to furnish all assistance and information, and perform any acts, which the Collateral Agent may reasonably require in connection therewith. Each Debtor shall promptly notify the Collateral Agent of any Collateral that such Debtor has determined to have been rendered obsolete, stating the prior book value of such Collateral, its type and location.

(l) Each Debtor shall comply in all material respects with the terms and conditions of all leases, easements, right-of-way agreements, and other similar agreements binding upon such Debtor or affecting the Collateral or any part thereof, and all orders, ordinances, laws, and statutes of any city, state, or other governmental entity, department, or agency having jurisdiction with respect to the premises wherein such Collateral is located or the conduct of business thereon.

(m) Schedule C attached hereto contains a true, complete, and current listing of all patents, trademarks, tradestyles, copyrights, and other intellectual property rights (including all registrations and applications therefor) owned by the Debtors as of the date hereof that are registered with any governmental authority. The Debtors shall promptly notify the Collateral Agent and the Secured Creditors in writing of any additional intellectual property rights acquired or arising after the date hereof, and shall submit to the Collateral Agent a supplement to Schedule C to reflect such additional rights (provided any Debtor’s failure to do so shall not impair the Collateral Agent’s security interest therein). Each Debtor owns or possesses rights to use all franchises, licenses, patents, trademarks, trade names, tradestyles, copyrights, and rights with respect to the foregoing which are required to conduct its business. No event has occurred which permits, or after notice or lapse of time or both would permit, the revocation or termination of any such rights, and the Debtors are not liable to any person for infringement under applicable law with respect to any such rights as a result of its business operations.

(n) Schedule F attached hereto contains a true, complete and current listing of all Commercial Tort Claims held by the Debtors as of the date hereof, each described by reference to the specific incident giving rise to the claim. Each Debtor agrees to execute and deliver to the Collateral Agent a supplement to this Agreement in the form attached hereto as Schedule G, or in

such other form acceptable to the Collateral Agent, promptly upon becoming aware of any other Commercial Tort Claim held or maintained by such Debtor arising after the date hereof (provided such Debtor’s failure to do so shall not impair the Collateral Agent’s security interest therein).

(o) Each Debtor agrees to execute and deliver to the Collateral Agent such further agreements, assignments, instruments, and documents and to do all such other things as the Collateral Agent may reasonably deem necessary or appropriate to assure the Collateral Agent its lien and security interest hereunder, including, without limitation, (i) such financing statements, and amendments thereof or supplements thereto, and such other instruments and documents as the Collateral Agent may from time to time reasonably require in order to comply with the UCC and any other applicable law, (ii) such agreements with respect to patents, trademarks, copyrights, and similar intellectual property rights as the Collateral Agent may from time to time reasonably require to comply with the filing requirements of the United States Patent and Trademark Office and the United States Copyright Office, and (iii) such control agreements with respect to all Deposit Accounts, Investment Property, Letter-of-Credit Rights, and electronic Chattel Paper, and to cause the relevant depository institutions, financial intermediaries, and issuers to execute and deliver such control agreements, as the Collateral Agent may from time to time reasonably require. Each Debtor hereby agrees that a carbon, photographic, or other reproduction of this Agreement or any such financing statement is sufficient for filing as a financing statement by the Collateral Agent without notice thereof to such Debtor wherever the Collateral Agent in its sole discretion desires to file the same. Each Debtor hereby authorizes the Collateral Agent to file any and all financing statements covering the Collateral or any part thereof as the Collateral Agent may require, including financing statements describing the Collateral as “all assets” or “all personal property” or words of like meaning. The Collateral Agent or any Secured Creditor may order lien searches from time to time against each Debtor and the Collateral, and the Debtor shall promptly reimburse the Collateral Agent or such Secured Creditor for all reasonable costs and expenses incurred in connection with such lien searches. In the event for any reason the law of any jurisdiction other than California becomes or is applicable to the Collateral or any part thereof, or to any of the Secured Obligations, each Debtor agrees to execute and deliver all such instruments and documents and to do all such other things as the Collateral Agent in its sole discretion deems necessary or appropriate to preserve, protect, and enforce the lien and security interest of the Collateral Agent, for the benefit of the Secured Creditors, under the law of such other jurisdiction. Each Debtor agrees to mark its books and records to reflect the lien and security interest of the Collateral Agent in the Collateral.

(p) On failure of any Debtor to perform any of the covenants and agreements herein contained, the Collateral Agent may at its option, perform the same and in so doing may expend such sums as necessary, convenient or advisable in the performance thereof, including, without limitation, the payment of any insurance premiums, the payment of any taxes, liens, and encumbrances, expenditures made in defending against any adverse claims, and any and all other expenditures which may be compelled by operation of law or otherwise for the protection of the security hereof. All such sums and amounts so expended shall be repayable by the relevant Debtor immediately without notice or demand, shall constitute additional Secured Obligations secured hereunder and shall bear interest from the date said amounts are expended at the Default

Rate (as defined in the Continuing Covenant Agreement). No such performance of any covenant or agreement by the Collateral Agent or any Secured Creditor on behalf of any Debtor, and no such advancement or expenditure therefor, shall relieve the Debtor of any default under the terms of this Agreement or any other Transaction Document or in any way obligate the Collateral Agent or such Secured Creditor to take any further or future action with respect thereto. The Collateral Agent or any Secured Creditor, in making any payment hereby authorized, may do so according to any bill, statement, or estimate procured from the appropriate public office or holder of the claim to be discharged without inquiry into the accuracy of such bill, statement, or estimate or into the validity of any tax assessment, sale, forfeiture, tax lien, or title or claim. The Collateral Agent or any Secured Creditor, in performing any act hereunder, shall be the sole judge of whether any Debtor is required to perform same under the terms of this Agreement. Each Secured Creditor is hereby authorized to charge any account of the relevant Debtor maintained with such Secured Creditor for the amount of such sums and amounts so expended, subject in each case, to the terms of the Intercreditor Agreement.

Section 4. Special Provisions Re: Receivables.

(a) As of the time any Receivable owned by a Debtor becomes subject to the security interest provided for hereby, and at all times thereafter, such Debtor shall be deemed to have warranted as to each and all of such Receivables that all warranties of such Debtor set forth in this Agreement are true and correct with respect to each such Receivable; that each Receivable and all papers and documents relating thereto are genuine and in all respects what they purport to be; that each Receivable is valid and subsisting; that no such Receivable is evidenced by any Instrument or Chattel Paper unless such Instrument or Chattel Paper has theretofore been endorsed by such Debtor and delivered to the Collateral Agent (except that, prior to the occurrence of an Event of Default and thereafter until otherwise notified by the Collateral Agent, such Debtor will not be required to endorse and deliver to the Collateral Agent any such Instrument or Chattel Paper if and only so long as the aggregate outstanding balance of all such Instruments and Chattel Paper not so endorsed and delivered to the Collateral Agent hereunder is less than $10,000 at any one time outstanding); that no surety bond was required or given in connection with such Receivable or the contracts or purchase orders out of which the same arose; that the amount of the Receivable represented as owing is the correct amount actually and unconditionally owing, except for normal cash discounts on normal trade terms in the ordinary course of business; and that the amount of such Receivable represented as owing is not disputed and is not subject to any set-offs, credits, deductions, or countercharges other than those arising in the ordinary course of such Debtor’s business which are disclosed to the Collateral Agent in writing promptly upon such Debtor becoming aware thereof. Without limiting the foregoing, if any Receivable arises out of a contract with the United States of America, or any state or political subdivision thereof, or any department, agency, or instrumentality of any of the foregoing, each Debtor agrees to notify the Collateral Agent and, at the Collateral Agent’s request, execute whatever instruments and documents are required by the Collateral Agent in order that such Receivable shall be assigned to the Collateral Agent and that proper notice of such assignment shall be given under the federal Assignment of Claims Act (or any successor statute) or any similar state or local statute, as the case may be.

(b) Unless and until an Event of Default occurs, any merchandise or other goods which are returned by a customer or account debtor or otherwise recovered may be resold by a Debtor in the ordinary course of its business as presently conducted in accordance with Section 6(b) hereof; and, during the existence of any Event of Default, such merchandise and other goods shall be set aside at the request of the Collateral Agent and held by the relevant Debtor as trustee for the Collateral Agent, for the benefit of the Secured Creditors, and shall remain part of the Collateral Agent’s Collateral. Unless and until an Event of Default occurs, the Debtors may settle and adjust disputes and claims with its customers and account debtors, handle returns and recoveries, and grant discounts, credits, and allowances in the ordinary course of its business as presently conducted for amounts and on terms which the relevant Debtor in good faith considers advisable; and, during the existence of any Event of Default, at the request of the Collateral Agent, the Debtors shall notify the Collateral Agent and the Secured Creditors promptly of all returns and recoveries and, on the Collateral Agent’s request, deliver any such merchandise or other goods to the Collateral Agent. During the existence of any Event of Default, at the request of the Collateral Agent, the Debtor shall also notify the Collateral Agent and the Secured Creditors promptly of all disputes and claims and settle or adjust them at no expense to the Collateral Agent or Secured Creditors, but no discount, credit, or allowance other than on normal trade terms in the ordinary course of business as presently conducted shall be granted to any customer or account debtor and no returns of merchandise or other goods shall be accepted by any Debtor without the consent of the Collateral Agent. The Collateral Agent may at all times during the existence of any Event of Default, settle or adjust disputes and claims directly with customers or account debtors for amounts and upon terms the Collateral Agent deems advisable.

(c) Unless delivered to the Collateral Agent or its agent, all tangible Chattel Paper and Instruments shall contain a legend indicating that such Chattel Paper or Instrument is subject to the security interest of the Collateral Agent contemplated by this Agreement.

Section 5. Collection of Receivables.

(a) Except as otherwise provided in this Agreement, each Debtor shall make collection of all its Receivables and may use the same to carry on its business in accordance with sound business practice and otherwise subject to the terms hereof.

(b) Upon the occurrence of any Event of Default or of any event or condition which with the lapse of time or the giving of notice, or both, would constitute an Event of Default, whether or not the Collateral Agent has exercised any or all of its rights under other provisions of this Section 5, in the event the Collateral Agent requests any Debtor to do so:

(i) all Instruments and Chattel Paper at any time constituting part of the Receivables or any other Collateral (including any postdated checks) shall, upon receipt by such Debtor, be immediately endorsed to and deposited with the Collateral Agent, for the benefit of the Secured Creditors; and/or

(ii) such Debtor shall instruct all customers and account debtors to remit all payments in respect of Receivables or any other Collateral to a lockbox or lockboxes

under the sole custody and control of the Collateral Agent [and which are maintained at post office(s) in Los Angeles, California, selected by the Collateral Agent].

(c) Upon the occurrence of any Event of Default or of any event or condition which with the lapse of time or the giving of notice, or both, would constitute an Event of Default, whether or not the Collateral Agent has exercised any or all of its rights under other provisions of this Section 5, the Collateral Agent or its designee may notify the Debtors’ customers and account debtors at any time that Receivables or any other Collateral have been assigned to the Collateral Agent or of the Collateral Agent’s security interest therein, and either in its own name, or the relevant Debtor’s name, or both, demand, collect (including, without limitation, through a lockbox analogous to that described in Section 5(b)(ii) hereof), receive, receipt for, sue for, compound, and give acquittance for any or all amounts due or to become due on Receivables or any other Collateral, and in the discretion of the Collateral Agent file any claim or take any other action or proceeding reasonably necessary, convenient or appropriate to protect or realize upon the security interest of the Collateral Agent in the Receivables or any other Collateral.

(d) Any proceeds of Receivables or other Collateral transmitted to or otherwise received by the Collateral Agent pursuant to any of the provisions of Sections 5(b) or 5(c) hereof may be handled and administered by the Collateral Agent in and through a remittance account at the Collateral Agent or any Secured Creditor, and the Debtors acknowledge that the maintenance of such remittance account by the Collateral Agent is solely for the convenience of the Collateral Agent and the Secured Creditors and that the Debtors do not have any right, title, or interest in such remittance account. After the occurrence and during the continuation of any Event of Default or of any event or condition which with the lapse of time or the giving of notice, or both, would constitute an Event of Default, the Collateral Agent may apply all or any part of any proceeds of Receivables or other Collateral received by it from any source to the payment of the Secured Obligations (whether or not then due and payable), such applications to be made in such amounts, in such manner and order and at such intervals as the Collateral Agent may from time to time determine, subject in each case to the terms and requirements of the Intercreditor Agreement. The Collateral Agent need not apply or give credit for any item included in proceeds of Receivables or other Collateral until the Collateral Agent has received final payment therefor at its office in cash or final solvent credits current in Los Angeles, California, acceptable to the Collateral Agent as such. However, if the Collateral Agent does give credit for any item prior to receiving final payment therefor and the Collateral Agent fails to receive such final payment or an item is charged back to the Collateral Agent for any reason, the Collateral Agent may at its election in either instance charge the amount of such item back against the remittance account or any account of the relevant Debtor maintained with the Collateral Agent, together with interest thereon at the Default Rate. Concurrently with each transmission of any proceeds of Receivables or other Collateral to the remittance account, each Debtor shall furnish the Collateral Agent with a report in such form as the Collateral Agent shall reasonably require identifying the particular Receivable or other Collateral from which the same arises or relates. Unless and until an Event of Default or an event or condition which with the lapse of time or the giving of notice, or both, would constitute an Event of Default shall have occurred and be continuing, the Collateral Agent will release proceeds of Collateral which the Collateral Agent has not applied to the Secured Obligations as provided above from the remittance account from time to time promptly after receipt thereof. Each Debtor hereby indemnifies the Collateral Agent

and each Secured Creditor from and against all liabilities, damages, losses, actions, claims, judgments, costs, expenses, charges and attorneys’ fees suffered or incurred by the Collateral Agent and each Secured Creditor because of the maintenance of the foregoing arrangements; provided, however, that no Debtor shall be required to indemnify the Collateral Agent or any Secured Creditor for any of the foregoing to the extent they arise solely from the gross negligence or willful misconduct of the party seeking the indemnity. The Collateral Agent shall not have any liability or responsibility to any Debtor for accepting any check, draft or other order for payment of money bearing the legend “payment in full” or words of similar import or any other restrictive legend or endorsement whatsoever or be responsible for determining the correctness of any remittance.

Section 6. Special Provisions Re: Inventory and Equipment.

(a) Each Debtor shall at its own cost and expense maintain, keep and preserve the Inventory in good and merchantable condition and keep and preserve the Equipment in good repair, working order and condition, ordinary wear and tear excepted, and, without limiting the foregoing, make all necessary and proper repairs, replacements and additions to the Equipment so that the efficiency thereof shall be fully preserved and maintained.

(b) Each Debtor may, until an Event of Default has occurred and is continuing and thereafter until otherwise notified by the Collateral Agent, use, consume and sell the Inventory in the ordinary course of its business, but a sale in the ordinary course of business shall not under any circumstance include any transfer or sale in satisfaction, partial or complete, of a debt owing by such Debtor.

(c) Each Debtor may, until an Event of Default has occurred and is continuing and thereafter until otherwise notified by the Collateral Agent, sell or otherwise dispose of Equipment to the extent permitted by Section 5.11 of the Continuing Covenant Agreement.

(d) As of the time any Inventory or Equipment becomes subject to the security interest provided for hereby and at all times thereafter, the relevant Debtor shall be deemed to have warranted as to any and all of such Inventory and Equipment that all warranties of such Debtor set forth in this Agreement are true and correct with respect to such Inventory and Equipment; that all of such Inventory and Equipment is located at a location set forth pursuant to Section 3(b) hereof; and that, in the case of Inventory, such Inventory is new and unused and in good and merchantable condition. Each Debtor warrants and agrees that no Inventory owned by it is or will be consigned to any other person without the Collateral Agent’s prior written consent.

(e) Upon the request of the Collateral Agent, each Debtor shall at its own cost and expense cause the lien of the Collateral Agent in and to any portion of the Collateral subject to a certificate of title law to be duly noted on such certificate of title or to be otherwise filed in such manner as is prescribed by law in order to perfect such lien and shall cause all such certificates of title and evidences of lien to be deposited with the Collateral Agent.

(f) Except for Equipment from time to time located on the real estate described on Schedule D attached hereto and as otherwise disclosed to the Collateral Agent in writing, none of the Equipment is or will be attached to real estate in such a manner that the same may become a fixture.

(g) If any of the Inventory is at any time evidenced by a document of title, such document shall be promptly delivered by the relevant Debtor to the Collateral Agent except to the extent the Collateral Agent specifically request such Debtor not to do so with respect to any such document.

Section 7. Special Provisions Re: Investment Property and Deposit Accounts.

(a) Unless and until an Event of Default has occurred and is continuing and thereafter until notified to the contrary by the Collateral Agent pursuant to Section 9(d) hereof:

(i) the Debtors shall be entitled to exercise all voting and/or consensual powers pertaining to the Investment Property or any part thereof, for all purposes not inconsistent with the terms of this Agreement or any other document evidencing or otherwise relating to any Secured Obligations; and

(ii) the Debtors shall be entitled to receive and retain all cash dividends paid upon or in respect of the Investment Property.

(b) All Investment Property (including all securities, certificated or uncertificated, securities accounts, and commodity accounts) of the Debtors on the date hereof is listed and identified on Schedule E attached hereto and made a part hereof. Each Debtor shall promptly notify the Collateral Agent of any other Investment Property acquired or maintained by such Debtor after the date hereof, and shall submit to the Collateral Agent a supplement to Schedule E to reflect such additional rights (provided such Debtor’s failure to do so shall not impair the Collateral Agent’s security interest therein). Certificates for all certificated securities now or at any time constituting Investment Property shall be promptly delivered by the Debtors to the Collateral Agent duly endorsed in blank for transfer or accompanied by an appropriate assignment or assignments or an appropriate undated stock power or powers, in every case sufficient to transfer title thereto, including, without limitation, all stock received in respect of a stock dividend or resulting from a split-up, revision, or reclassification of the Investment Property or any part thereof or received in addition to, in substitution of, or in exchange for the Investment Property or any part thereof as a result of a merger, consolidation, or otherwise. With respect to any uncertificated securities or any Investment Property held by a securities intermediary, commodity intermediary, or other financial intermediary of any kind, at the request of the Collateral Agent, the Debtors shall execute and deliver, and shall cause any such issuer of uncertificated securities or such intermediary to execute and deliver, an agreement among the relevant Debtor, the Collateral Agent and such issuer or intermediary in form and substance reasonably satisfactory to the Collateral Agent which provides, among other things, for the issuer’s or intermediary’s agreement that it shall comply with entitlement orders, and apply any value distributed on account of any such Investment Property, as directed by the Collateral Agent without further consent by any Debtor. The Collateral Agent may at any time, after the

occurrence of an Event of Default or an event or condition which with the lapse of time or the giving of notice, or both, would constitute an Event of Default, cause to be transferred into its name or the name of its nominee or nominees all or any part of the Investment Property hereunder.

(c) Unless and until an Event of Default, or an event or condition which with the lapse of time or the giving of notice, or both, would constitute an Event of Default, has occurred and is continuing, the Debtors may sell or otherwise dispose of any Investment Property to the extent permitted by the Continuing Covenant Agreement. After the occurrence and during the continuation of any Event of Default or of any event or condition which with the lapse of time or the giving of notice, or both, would constitute an Event of Default, no Debtor shall sell all or any part of the Investment Property without the prior written consent of the Collateral Agent.

(d) The Debtors represent that on the date of this Agreement, none of the Investment Property consists of margin stock (as such term is defined in Regulation U of the Board of Governors of the Federal Reserve System) except to the extent the Debtors have delivered to the Collateral Agent a duly executed and completed Form U-1 with respect to such stock. If at any time the Investment Property or any part thereof consists of margin stock, the Debtors shall promptly so notify the Collateral Agent and deliver to the Collateral Agent a duly executed and completed Form U-1 and such other instruments and documents reasonably requested by the Collateral Agent in form and substance reasonably satisfactory to the Collateral Agent.

(e) All Deposit Accounts of the Debtors on the date hereof are listed and identified (by account number and depository institution) on Schedule E attached hereto and made a part hereof. Each Debtor shall promptly notify the Collateral Agent and the Secured Creditors of any other Deposit Account opened or maintained by such Debtor after the date hereof, and shall submit to the Collateral Agent and the Secured Creditors a supplement to Schedule E to reflect such additional accounts (provided such Debtor’s failure to do so shall not impair the Collateral Agent’s security interest therein). With respect to any Deposit Account maintained by a depository institution other than the Collateral Agent, and as a condition to the establishment and maintenance of any such Deposit Account except as otherwise agreed to in writing by the Collateral Agent, such Debtor, the depository institution, and the Collateral Agent, on behalf of the Secured Creditors, shall execute and deliver an account control agreement in form and substance reasonably satisfactory to the Collateral Agent which provides, among other things, for the depository institution’s agreement that it will comply with instructions originated by the Collateral Agent, on behalf of the Secured Creditors, directing the disposition of the funds in the Deposit Account without further consent by such Debtor.

Section 8. Power of Attorney. In addition to any other powers of attorney contained herein, each Debtor hereby appoints the Collateral Agent, its nominee, and any other person whom the Collateral Agent may designate, as such Debtor’s attorney-in-fact, with full power and authority upon the occurrence and during the continuation of any Event of Default to sign such Debtor’s name on verifications of Receivables and other Collateral; to send requests for verification of Collateral to such Debtor’s customers, account debtors, and other obligors; to endorse such Debtor’s name on any checks, notes, acceptances, money orders, drafts, and any other forms of payment or security that may come into the Collateral Agent’s possession or on

any assignments, stock powers, or other instruments of transfer relating to the Collateral or any part thereof; to sign such Debtor’s name on any invoice or bill of lading relating to any Collateral, on claims to enforce collection of any Collateral, on notices to and drafts against customers and account debtors and other obligors, on schedules and assignments of Collateral, on notices of assignment and on public records; to notify the post office authorities to change the address for delivery of such Debtor’s mail to an address designated by the Collateral Agent; to receive, open and dispose of all mail addressed to such Debtor; and to do all things necessary to carry out this Agreement. Each Debtor hereby ratifies and approves all acts of any such attorney and agrees that neither the Collateral Agent nor any such attorney or any Secured Party will be liable for any acts or omissions or for any error of judgment or mistake of fact or law other than such person’s gross negligence or willful misconduct. The Collateral Agent may file one or more financing statements disclosing its security interest in any or all of the Collateral without the relevant Debtor’s signature appearing thereon. Each Debtor also hereby grants the Collateral Agent a power of attorney to execute any such financing statements, or amendments and supplements to financing statements, on behalf of such Debtor without notice thereof to such Debtor. The foregoing powers of attorney, being coupled with an interest, are irrevocable until the Secured Obligations have been fully paid and satisfied and all agreements of any Secured Creditor to extend credit to or for the account of the Borrower or to make other financial accommodations to the Borrower have expired or otherwise have been terminated.

Section 9. Defaults and Remedies.

(a) The occurrence of any one or more of the following events shall constitute an “Event of Default” hereunder: any event shall occur or condition shall exist which is specified as an “Event of Default” under the Continuing Covenant Agreement, the Credit Agreement or any other Transaction Document, regardless of whether or not such Transaction Document remains in effect, or any other default shall occur in the observance or performance of any terms or provisions of any instrument or document evidencing or securing any Secured Obligations or setting forth terms and conditions applicable thereto or otherwise relating thereto, or this Agreement shall for any reason not be or shall cease to be in full force and effect or is declared to be null and void.

(b) Upon the occurrence and during the continuation of any Event of Default, the Collateral Agent shall have, in addition to all other rights provided herein or by law, the rights and remedies of a secured party under the UCC (regardless of whether the UCC is the law of the jurisdiction where the rights or remedies are asserted and regardless of whether the UCC applies to the affected Collateral), and further the Collateral Agent may, without demand and without advertisement, notice, hearing, or process of law, all of which the Debtors hereby waive, at any time or times, sell and deliver all or any part of the Collateral (and any other property of the Debtors attached thereto or found therein) held by or for it at public or private sale, for cash, upon credit, or otherwise, at such prices and upon such terms as the Collateral Agent deems advisable, in its sole discretion and subject to the terms of the Intercreditor Agreement. In addition to all other sums due the Collateral Agent, on behalf of the Secured Creditors, hereunder, the Debtors shall pay the Collateral Agent, for the benefit of the Collateral Agent and the applicable Secured Creditors, all costs and expenses incurred by the Collateral Agent or any Secured Creditor, including attorneys’ fees and court costs, in obtaining, liquidating or enforcing

payment of Collateral or the Secured Obligations, any indemnity required to be provided by a Secured Creditor to the Collateral Agent, or in the prosecution or defense of any action or proceeding by or against the Collateral Agent, the Secured Creditors or any Debtor concerning any matter arising out of or connected with this Agreement or the Collateral or the Secured Obligations, including, without limitation, any of the foregoing arising in, arising under or related to a case under the United States Bankruptcy Code (or any successor statute). Any requirement of reasonable notice shall be met if such notice is personally served on or mailed, postage prepaid, to each Debtor in accordance with Section 12(b) hereof at least 10 days before the time of sale or other event giving rise to the requirement of such notice; provided however, no notification need be given to any Debtor if such Debtor has signed, after an Event of Default has occurred, a statement renouncing any right to notification of sale or other intended disposition. The Collateral Agent shall not be obligated to make any sale or other disposition of the Collateral regardless of notice having been given. The Collateral Agent or any Secured Creditor may be the purchaser at any such sale. Each Debtor hereby waives all of its rights of redemption from any such sale. The Collateral Agent may postpone or cause the postponement of the sale of all or any portion of the Collateral by announcement at the time and place of such sale, and such sale may, without further notice, be made at the time and place to which the sale was postponed or the Collateral Agent may further postpone such sale by announcement made at such time and place. Neither the Collateral Agent nor any Secured Creditor has any obligation to prepare the Collateral for sale. The Collateral Agent may sell or otherwise dispose of the Collateral without giving any warranties as to the Collateral or any part thereof, including disclaimers of any warranties of title or the like, and each Debtor acknowledges and agrees that the absence of such warranties shall not render the disposition commercially unreasonable.

(c) Without in any way limiting the foregoing, upon the occurrence and during the continuation of any Event of Default, the Collateral Agent, for the benefit of the Secured Creditors, shall have the right, in addition to all other rights provided herein or by law, to take physical possession of any and all of the Collateral and anything found therein, the right for that purpose to enter without legal process any premises where the Collateral may be found (provided such entry be done lawfully), and the right to maintain such possession on the relevant Debtor’s premises (each Debtor hereby agreeing to lease such premises without cost or expense to the Collateral Agent or its designee if the Collateral Agent so requests) or to remove the Collateral or any part thereof to such other places as the Collateral Agent may desire. Upon the occurrence and during the continuation of any Event of Default, the Collateral Agent shall have the right to exercise any and all rights with respect to all Deposit Accounts of each Debtor including, without limitation, the right to direct the disposition of the funds in each Deposit Account and to collect, withdraw, and receive all amounts due or to become due or payable under each such Deposit Account. Upon the occurrence and during the continuation of any Event of Default, each Debtor shall, upon the Collateral Agent’s demand, promptly assemble the Collateral and make it available to the Collateral Agent at a place designated by the Collateral Agent. If the Collateral Agent exercises its right to take possession of the Collateral, the relevant Debtor shall also at its expense perform any and all other steps requested by the Collateral Agent to preserve and protect the security interest hereby granted in the Collateral, such as placing and maintaining signs indicating the security interest of the Collateral Agent, appointing overseers for the Collateral, and maintaining Collateral records.

(d) Without in any way limiting the foregoing, upon the occurrence and during the continuation of any Event of Default, all rights of each Debtor to exercise the voting and/or consensual powers which it is entitled to exercise pursuant to Section 7(a)(i) hereof and/or to receive and retain the distributions which it is entitled to receive and retain pursuant to Section 7(a)(ii) hereof, shall, at the option of the Collateral Agent, cease and thereupon become vested in the Collateral Agent, which, in addition to all other rights provided herein or by law, shall then be entitled solely and exclusively to exercise all voting and other consensual powers pertaining to the Investment Property (including, without limitation, the right to deliver notice of control with respect to any Investment Property held in a securities account or commodity account and deliver all entitlement orders with respect thereto) and/or to receive and retain the distributions which any Debtor would otherwise have been authorized to retain pursuant to Section 7(a)(ii) hereof and shall then be entitled solely and exclusively to exercise any and all rights of conversion, exchange, or subscription or any other rights, privileges, or options pertaining to any Investment Property as if the Collateral Agent were the absolute owner thereof. Without limiting the foregoing, the Collateral Agent shall have the right to exchange any and all of the Investment Property upon the merger, consolidation, reorganization, recapitalization, or other readjustment of the respective issuer thereof or upon the exercise by or on behalf of any such issuer or the Collateral Agent of any right, privilege, or option pertaining to any Investment Property and, in connection therewith, to deposit and deliver any and all of the Investment Property with any committee, depositary, transfer agent, registrar, or other designated agency upon such terms and conditions as the Collateral Agent may determine. In the event the Collateral Agent in good faith believes any of the Collateral constitutes restricted securities within the meaning of any applicable securities laws, any disposition thereof in compliance with such laws shall not render the disposition commercially unreasonable.

(e) Without in any way limiting the foregoing, each Debtor hereby grants to the Collateral Agent a royalty-free irrevocable license and right to use all of such Debtor’s patents, patent applications, patent licenses, trademarks, trademark registrations, trademark licenses, trade names, trade styles, copyrights, copyright applications, copyright licenses, and similar intangibles in connection with any foreclosure or other realization by the Collateral Agent on all or any part of the Collateral. The license and right granted the Collateral Agent hereby shall be without any royalty or fee or charge whatsoever.

(f) The powers conferred upon the Collateral Agent hereunder are solely to protect its interest in the Collateral and shall not impose on it any duty to exercise such powers. The Collateral Agent shall be deemed to have exercised reasonable care in the custody and preservation of the Collateral in its possession or control if such Collateral is accorded treatment substantially equivalent to that which the Collateral Agent accords its own property, consisting of similar type assets, it being understood, however, that the Collateral Agent shall have no responsibility for ascertaining or taking any action with respect to calls, conversions, exchanges, maturities, tenders, or other matters relating to any such Collateral, whether or not the Collateral Agent has or is deemed to have knowledge of such matters. This Agreement constitutes an assignment of rights only and not an assignment of any duties or obligations of the Debtors, or any of them, in any way related to the Collateral, and the Collateral Agent shall have no duty or obligation to discharge any such duty or obligation. The Collateral Agent shall have no responsibility for taking any necessary steps to preserve rights against any parties with respect to

any Collateral or initiating any action to protect the Collateral against the possibility of a decline in market value. Neither the Collateral Agent nor any party acting as attorney for the Collateral Agent shall be liable for any acts or omissions or for any error of judgment or mistake of fact or law other than their gross negligence or willful misconduct.

(g) Failure by the Collateral Agent or any Secured Creditor, to exercise any right, remedy, or option under this Agreement or any other agreement between the Debtors, or any of them, and the Collateral Agent or any Secured Creditor, or provided by law, or delay by the Collateral Agent or any Secured Creditor, in exercising the same, shall not operate as a waiver; and no waiver by the Collateral Agent or any Secured Creditor shall be effective unless it is in writing and then only to the extent specifically stated. The rights and remedies of the Collateral Agent under this Agreement shall be cumulative and not exclusive of any other right or remedy which the Collateral Agent may have. For purposes of this Agreement, an Event of Default shall be construed as continuing after its occurrence until waived in writing by the Collateral Agent.

Section 10. Application of Proceeds. The proceeds and avails of the Collateral at any time received by the Collateral Agent after the occurrence and during the continuation of any Event of Default shall, when received by the Collateral Agent in cash or its equivalent, be applied as specified in the Intercreditor Agreement.

Section 11. Continuing Agreement. This Agreement shall be a continuing agreement in every respect and shall remain in full force and effect until all of the Secured Obligations, both for principal and interest, have been fully paid and satisfied and all agreements of the Secured Creditors to extend credit to or for the account of the Borrower have expired or otherwise have been terminated. Upon such termination of this Agreement, the Collateral Agent, on behalf of the Secured Creditors, shall, upon the request and at the expense of the Debtors, forthwith release its security interest hereunder.

Section 12. Miscellaneous.

(a) This Agreement cannot be changed or terminated orally. All of the rights, privileges, remedies, and options given to the Collateral Agent and the Secured Creditors hereunder shall inure to the benefit of their respective successors and assigns, and all the terms, conditions, covenants, agreements, representations, and warranties of and in this Agreement shall bind the Debtors and their legal representatives, successors and assigns; provided that no Debtor may assign its rights or delegate its duties hereunder without the Collateral Agent’s prior written consent. Notwithstanding anything herein to the contrary, the relative rights, privileges, obligations and immunities as between the Collateral Agent and each Secured Creditor are as set forth in the Intercreditor Agreement, and any provision herein that gives the Collateral Agent any right or privilege to take action or make any determination “in its discretion” or words of similar import, shall mean the Collateral Agent taking such action or determination as provided in the Intercreditor Agreement.

(b) All notices, requests, demands, directions and other communications (collectively “notices”) under the provisions of this Agreement shall be in writing (including facsimile communication), unless otherwise expressly permitted hereunder, and shall be sent by

first-class mail or overnight delivery and shall be deemed received as follows: (i) if by first class mail, five (5) days after mailing; (ii) if by overnight delivery, on the next Business Day; (iii) if by telephone, when given to a person who confirms such receipt; and (iv) if by facsimile, when confirmation of receipt is obtained. All notices shall be sent to the applicable party at the following address or in accordance with the last unrevoked written direction from such party to the other parties hereto:

to the Debtors:

Azusa Pacific University 901 East Alosta Avenue Azusa, California 91702 Attention: Chief Financial Officer Facsimile: (626) 815-4522 Telephone: (626) 815-4537

to the Collateral Agent:

U.S. Bank National Association 633 West Fifth Street, 24th Floor Los Angeles, California 90071 Attention: Corporate Trust Services Facsimile: (___) ___-____ Telephone: (213) 615-6002

The Collateral Agent may rely on any notice (including telephone communication) purportedly made by or on behalf of the Debtors, and shall have no duty to verify the identity or authority of the person giving such notice, unless such actions or omissions would amount to gross negligence or intentional misconduct.

(c) The provisions of this Agreement are intended to be severable. If any provision of this Agreement shall be held invalid or unenforceable in whole or in part in any jurisdiction, such provision shall, as to such jurisdiction, be ineffective to the extent of such invalidity or unenforceability without in any manner affecting the validity or enforceability thereof in any other jurisdiction or the remaining provisions hereof in any jurisdiction.

(d) The lien and security interest herein created and provided for stand as direct and primary security for the Secured Obligations of the Borrower arising under or otherwise relating to the Loan Agreement, the Continuing Covenant Agreement, the Swap Contract and the Credit Agreement as well as for any of the other Secured Obligations secured hereby. No application of any sums received by the Collateral Agent or any Secured Creditor in respect of the Collateral or any disposition thereof to the reduction of the Secured Obligations or any part thereof shall in any manner entitle any Debtor to any right, title or interest in or to the Secured Obligations or any collateral or security therefor, whether by subrogation or otherwise, unless and until all Secured Obligations have been fully paid and satisfied and all agreements of the Secured Creditors to extend credit to or for the account of each Debtor or to make other financial accommodations to the Debtors have expired or otherwise have been terminated. Each Debtor acknowledges that the lien and security interest hereby created and provided are absolute and unconditional and shall not in any manner be affected or impaired by any acts of omissions whatsoever of the Collateral Agent, any Secured Creditor or any other holder of any Secured Obligations, and without limiting the generality of the foregoing, the lien and security interest hereof shall not be impaired by any acceptance by the Collateral Agent, any Secured Creditor or any other holder of any Secured Obligations of any other security for or guarantors upon any of the Secured Obligations or by any failure, neglect or omission on the part of the Collateral Agent, any Secured Creditor or any other holder of any Secured Obligations to realize upon or

protect any of the Secured Obligations or any collateral or security therefor. The lien and security interest hereof shall not in any manner be impaired or affected by (and the Collateral Agent, without notice to anyone, is hereby authorized to make from time to time) any sale, pledge, surrender, compromise, settlement, release, renewal, extension, indulgence, alteration, substitution, exchange, change in, modification or disposition of any of the Secured Obligations or of any collateral or security therefor, or of any guaranty thereof, or of any instrument or agreement setting forth the terms and conditions pertaining to any of the foregoing. The Collateral Agent and each other Secured Creditor may at its discretion at any time grant credit to any Debtor without notice to the other Debtors in such amounts and on such terms as the Collateral Agent or such Secured Creditor may elect (all of such to constitute additional Secured Obligations hereby secured) without in any manner impairing the lien and security interest created and provided for herein. In order to realize hereon and to exercise the rights granted the Collateral Agent hereunder and under applicable law, there shall be no obligation on the part of the Collateral Agent, any Secured Creditor or any other holder of any Secured Obligations at any time to first resort for payment to any one or more Debtors or to any guaranty of the Secured Obligations or any portion thereof or to resort to any other collateral, security, property, liens or any other rights or remedies whatsoever, and the Collateral Agent shall have the right to enforce this Agreement against any Debtor or any of its Collateral irrespective of whether or not other proceedings or steps seeking resort to or realization upon or from any of the foregoing are pending.

(e) In the event the Collateral Agent shall at any time in its discretion permit a substitution of Debtors hereunder or a party shall wish to become a Debtor hereunder, such substituted or additional Debtor shall, upon executing an agreement in the form attached hereto as Schedule H, become a party hereto and be bound by all the terms and conditions hereof to the same extent as though such Debtor had originally executed this Agreement and, in the case of a substitution, in lieu of the Debtor being replaced. Any such agreement shall contain information as to such Debtor necessary to update Schedule A, B, C, D, E, and F hereto with respect to it. No such substitution shall be effective absent the written consent of the Collateral Agent nor shall it in any manner affect the obligations of the other Debtors hereunder.

(f) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF CALIFORNIA WITHOUT GIVING EFFECT TO CONFLICT OF LAW PRINCIPLES.

(g) EACH OF THE PARTIES HERETO HEREBY SUBMITS TO THE EXCLUSIVE JURISDICTION OF ANY FEDERAL OR STATE COURT OF COMPETENT JURISDICTION IN THE STATE OF CALIFORNIA FOR THE PURPOSE OF ANY SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT; SERVICE OF PROCESS MAY BE ACCOMPLISHED BY REGISTERED MAIL, RETURN RECEIPT REQUESTED TO EACH OF THE PARTIES AT THE ADDRESS LISTED FOR NOTICE IN SECTION 12(B) HEREOF.

(h) TO THE EXTENT PERMITTED BY LAW, EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO LEGAL CLAIMS BASED ON ANY SUCH PARTY’S PERFORMANCE OF ITS OBLIGATIONS UNDER THIS AGREEMENT. IF AND TO THE EXTENT THAT THE FOREGOING

WAIVER OF THE RIGHT TO A JURY TRIAL IS UNENFORCEABLE FOR ANY REASON IN SUCH FORUM, THE PARTIES HERETO HEREBY CONSENT TO THE ADJUDICATION OF ANY AND ALL CLAIMS PURSUANT TO JUDICIAL REFERENCE AS PROVIDED IN CALIFORNIA CODE OF CIVIL PROCEDURE SECTION 638, AND THE JUDICIAL REFEREE SHALL BE EMPOWERED TO HEAR AND DETERMINE ANY AND ALL ISSUES IN SUCH REFERENCE WHETHER FACT OR LAW. EACH PARTY HERETO REPRESENT THAT IT HAS REVIEWED THIS WAIVER AND CONSENT AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS AND CONSENTS TO JUDICIAL REFERENCE FOLLOWING THE OPPORTUNITY TO CONSULT WITH LEGAL COUNSEL OF ITS CHOICE ON SUCH MATTERS. IN THE EVENT OF LITIGATION, A COPY OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT OR TO JUDICIAL REFERENCE UNDER CALIFORNIA CODE OF CIVIL PROCEDURE SECTION 638 AS PROVIDED HEREIN.

(i) This Agreement may be executed in any number of counterparts and by different parties hereto on separate counterpart signature pages, each constituting an original, but all together one and the same instrument.

(j) Section headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose.

(k) Each Debtor acknowledges that this Agreement is and shall be effective upon its execution and delivery by such Debtor to the Collateral Agent, and it shall not be necessary for the Collateral Agent to execute this Agreement or any other acceptance hereof or otherwise to signify or express its acceptance hereof.

[SIGNATURE PAGE TO FOLLOW]

[Signature Page to Security Agreement]

IN WITNESS WHEREOF, the Debtors have caused this Security Agreement to be duly executed and delivered as of the date and year first above written.


By ____________________________________ Name ________________________________ Title _________________________________

[INSERT NAME OF THE OTHER DEBTORS]

By ____________________________________ Name ________________________________ Title _________________________________

Accepted and agreed to in Los Angeles, California, as of the date and year first above written.

WELLS FARGO BANK, NATIONAL ASSOCIATION, as Collateral Agent

By ____________________________________ Name ________________________________ Title _________________________________

SCHEDULE A

LOCATIONS

COLUMN 1 COLUMN 2 COLUMN 3

NAME OF DEBTOR (AND STATE OF ORGANIZATION

AND ORGANIZATIONAL REGISTRATION NUMBER)

CHIEF EXECUTIVE OFFICE (AND NAME OF RECORD

OWNER OF SUCH LOCATION)

ADDITIONAL PLACES OF BUSINESS AND COLLATERAL LOCATIONS (AND NAME OF RECORD OWNER OF SUCH

LOCATIONS)

SCHEDULE B

OTHER NAMES

A. PRIOR LEGAL NAMES

B. TRADE NAMES

SCHEDULE C

INTELLECTUAL PROPERTY RIGHTS

SCHEDULE D

REAL ESTATE LEGAL DESCRIPTIONS

SCHEDULE E

INVESTMENT PROPERTY AND DEPOSIT ACCOUNTS

A. INVESTMENT PROPERTY

B. DEPOSIT ACCOUNTS

SCHEDULE F

COMMERCIAL TORT CLAIMS

SCHEDULE G

SUPPLEMENT TO SECURITY AGREEMENT

THIS SUPPLEMENT TO SECURITY AGREEMENT (the "Supplement") is dated as of this _____ day of _____________, 20__, from _________________________, a(n) _____________ corporation/limited liability company/partnership (the “Debtor”), to _______________ (the “Collateral Agent”).

P R E L I M I N A R Y S T A T E M E N T S

A. The Debtor and certain affiliates of the Debtor and the Collateral Agent are parties to that certain Security Agreement dated as of February __, 2011 (such Security Agreement, as the same may from time to time be amended, modified or restated, being hereinafter referred to as the “Security Agreement”). All capitalized terms used herein without definition shall have the same meanings herein as such terms are defined in the Security Agreement.

B. Pursuant to the Security Agreement, the Debtor granted to the Collateral Agent, among other things, a continuing security interest in all Commercial Tort Claims.

C. The Debtor has acquired a Commercial Tort Claim, and executes and delivers this Supplement to confirm and assure the Collateral Agent’s security interest therein.

NOW, THEREFORE, in consideration of the benefits accruing to the Debtor, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

1. In order to secure payment of the Secured Obligations, whether now existing or hereafter arising, the Debtor does hereby grant to the Collateral Agent a continuing lien on and security interest in the Commercial Tort Claim described below:

____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

2. Schedule F (Commercial Tort Claims) to the Security Agreement is hereby amended to include reference to the Commercial Tort Claim referred to in Section 1 above. The Commercial Tort Claim described herein is in addition to, and not in substitution or replacement for, the Commercial Tort Claims heretofore described in and subject to the Security Agreement, and nothing contained herein shall in any manner impair the priority of the liens and security interests heretofore granted by the Debtor in favor of the Collateral Agent under the Security Agreement.

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3. The Debtor agrees to execute and deliver such further instruments and documents and do such further acts and things as the Collateral Agent may deem necessary or proper to carry out more effectively the purposes of this Supplement.

4. No reference to this Supplement need be made in the Security Agreement or in any other document or instrument making reference to the Security Agreement, any reference to the Security Agreement in any of such items to be deemed a reference to the Security Agreement as supplemented hereby. The Debtor acknowledges that this Supplement shall be effective upon its execution and delivery by the Debtor to the Collateral Agent, and it shall not be necessary for the Collateral Agent to execute this Supplement or any other acceptance hereof or otherwise to signify or express its acceptance hereof.

5. This Agreement shall be governed by and construed in accordance with the laws of the State of California (without regard to principles of conflicts of law).

[INSERT NAME OF DEBTOR]

By ____________________________________ Name ________________________________ Title _________________________________

SCHEDULE H

ASSUMPTION AND SUPPLEMENTAL SECURITY AGREEMENT

THIS AGREEMENT dated as of this _____ day of ______________, 20___ from [new debtor], a __________ corporation/limited liability company/partnership (the “New Debtor”), to ____________________________ (the “Collateral Agent”).

W I T N E S S E T H T H A T:

WHEREAS, Azusa Pacific University (the “Borrower”) and certain other parties have executed and delivered to the Collateral Agent that certain Security Agreement dated as of February __, 2011, (such Security Agreement, as the same may from time to time be modified or amended, including supplements thereto which add additional parties as Debtors thereunder, being hereinafter referred to as the “Security Agreement”), pursuant to which such parties (the “Existing Debtors”) have granted to the Collateral Agent, on behalf of the Secured Creditors, a lien on and security interest in each such Existing Debtor’s Collateral (as such term is defined in the Security Agreement) to secure the Secured Obligations (as such term is defined in the Security Agreement); and

WHEREAS, the Borrower provides the New Debtor with substantial financial, managerial, administrative, technical and other support and the New Debtor will directly and substantially benefit from credit and other financial accommodations extended and to be extended by the Secured Creditors (as defined in the Security Agreement) to the Borrower;

NOW, THEREFORE, FOR VALUE RECEIVED, and in consideration of advances made or to be made, or other financial accommodations given or to be given, to the Borrower by the Secured Creditors from time to time, the New Debtor hereby agrees as follows:

1. The New Debtor acknowledges and agrees that it shall become a “Debtor” party to the Security Agreement effective upon the date the New Debtor’s execution of this Agreement and the delivery of this Agreement to the Collateral Agent, and that upon such execution and delivery, all references in the Security Agreement to the terms “Debtor” or “Debtors” shall be deemed to include the New Debtor. Without limiting the generality of the foregoing, the New Debtor hereby repeats and reaffirms all grants (including the grant of a lien and security interest), covenants, agreements, representations and warranties contained in the Security Agreement as amended hereby, each and all of which are and shall remain applicable to the Collateral from time to time owned by the New Debtor or in which the New Debtor from time to time has any rights. Without limiting the foregoing, in order to secure payment of the Secured Obligations, whether now existing or hereafter arising, the New Debtor does hereby grant to the Collateral Agent, and hereby agrees that the Collateral Agent, on behalf of the Secured Creditors, has and shall continue to have a continuing lien on and security interest in, among other things, all of the New Debtor’s Collateral (as such term is defined in the Security Agreement), including, without limitation, all of the New Debtor’s Accounts, Chattel Paper, Instruments, Documents, General

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Intangibles, Letter-of-Credit Rights, Supporting Obligations, Deposit Accounts, Investment Property, Inventory, Equipment, Fixtures, Commercial Tort Claims, and all Proceeds thereof and all of the other Collateral described in the granting clauses of the Security Agreement, each and all of such granting clauses being incorporated herein by reference with the same force and effect as if set forth in their entirety except that all references in such clauses to the Existing Debtors or any of them shall be deemed to include references to the New Debtor. Nothing contained herein shall in any manner impair the priority of the liens and security interests heretofore granted in favor of the Collateral Agent under the Security Agreement.

2. Schedules A (Locations), Schedule B (Other Names), Schedule C (Intellectual Property Rights), Schedule D (Real Estate), Schedule E (Investment Property and Deposits), and Schedule F (Commercial Tort Claims) to the Security Agreement shall be supplemented by the information stated below with respect to the New Debtor:

SUPPLEMENT TO SCHEDULE A

NAME OF DEBTOR (AND STATE OF ORGANIZATION

AND ORGANIZATIONAL REGISTRATION NUMBER)

CHIEF EXECUTIVE OFFICE (AND NAME OF RECORD OWNER OF

SUCH LOCATION)

ADDITIONAL PLACES OF BUSINESS AND COLLATERAL LOCATIONS (AND NAME OF RECORD OWNER OF SUCH

LOCATIONS)

______________________ _________________________ _______________________

______________________ _________________________ _______________________

SUPPLEMENT TO SCHEDULE B

NAME OF DEBTOR PRIOR LEGAL NAMES AND TRADE NAMES OF SUCH DEBTOR

____________________________________ _________________________________

SUPPLEMENT TO SCHEDULE C

INTELLECTUAL PROPERTY RIGHTS

__________________________________

__________________________________

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SUPPLEMENT TO SCHEDULE D

REAL ESTATE LEGAL DESCRIPTIONS

__________________________________

__________________________________

SUPPLEMENT TO SCHEDULE E

INVESTMENT PROPERTY AND DEPOSITS

_________________________

_________________________

SUPPLEMENT TO SCHEDULE F

COMMERCIAL TORT CLAIMS

_________________________

_________________________

3. The New Debtor hereby acknowledges and agrees that the Secured Obligations are secured by all of the Collateral according to, and otherwise on and subject to, the terms and conditions of the Security Agreement to the same extent and with the same force and effect as if the New Debtor had originally been one of the Existing Debtors under the Security Agreement and had originally executed the same as such an Existing Debtor.

4. All capitalized terms used in this Agreement without definition shall have the same meaning herein as such terms have in the Security Agreement, except that any reference to the term “Debtor” or “Debtors” and any provision of the Security Agreement providing meaning to such term shall be deemed a reference to the Existing Debtors and the New Debtor. Except as specifically modified hereby, all of the terms and conditions of the Security Agreement shall stand and remain unchanged and in full force and effect.

5. The New Debtor agrees to execute and deliver such further instruments and documents and do such further acts and things as the Collateral Agent may reasonably deem necessary or proper to carry out more effectively the purposes of this Agreement.

6. No reference to this Agreement need be made in the Security Agreement or in any other document or instrument making reference to the Security Agreement, any reference to the Security Agreement in any of such to be deemed a reference to the Security Agreement as modified hereby.

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7. This Agreement shall be governed by and construed in accordance with the laws of the State of California without giving effect to conflict of law principles.

[INSERT NAME OF NEW DEBTOR]

By ____________________________________ Name ________________________________ Title _________________________________

Accepted and agreed to as of the date first above written.

WELLS FARGO BANK, NATIONAL ASSOCIATION, as Collateral Agent

By ____________________________________ Name ________________________________ Title _________________________________

J-1

APPENDIX J

PROPOSED FORM OF INTERCREDITOR AND COLLATERAL AGENCY AGREEMENT


INTERCREDITOR AND COLLATERAL AGENCY AGREEMENT

This INTERCREDITOR AND COLLATERAL AGENCY AGREEMENT (this “Agreement”) dated as of February __, 2011, is among U.S. BANK NATIONAL ASSOCIATION, in its capacity as Series A Trustee (as defined herein) and as Series B Trustee (as defined herein), WELLS FARGO BANK, NATIONAL ASSOCIATION, in its capacity as Purchaser (as defined herein), as Swap Provider (as defined herein) and as Bank (as defined herein) and U.S. BANK NATIONAL ASSOCIATION, in its capacity as Collateral Agent (as defined herein), and is acknowledged by AZUSA PACIFIC UNIVERSITY, a California nonprofit religious corporation (the “Borrower”). All terms used herein which are defined in Section 1 or in the text of any other Section hereof shall have the meanings given therein.


WHEREAS, the California Municipal Finance Authority (the “Issuer”) is issuing its California Municipal Finance Authority Variable Rate Demand Refunding Revenue Bonds (Azusa Pacific University Project) Series 2011A in the aggregate principal amount of $70,000,000 (the “Series A Bonds”) pursuant to an Indenture of Trust dated as of February 1, 2011, by and between the Issuer and U.S. Bank National Association, as trustee (in such capacity, the “Series A Trustee”) (said Indenture of Trust, as the same may be further amended, modified or restated in accordance with the terms thereof, the “Series A Indenture”) and its California Municipal Finance Authority Refunding Revenue Bonds (Azusa Pacific University Project) Series 2011B in the aggregate principal amount of $73,630,000 (the “Series B Bonds” and, together with the Series A Bonds, the “Bonds”) pursuant to an Indenture of Trust dated as of February 1, 2011, by and between the Issuer and the U.S. Bank National Association, as trustee (in such capacity, the “Series B Trustee” and, together with the Series A Trustee, the “Trustee”) (said Indenture of Trust, as the same may be further amended, modified or restated in accordance with the terms thereof, the “Series B Indenture” and, together with the Series A Indenture, the “Indenture”);

WHEREAS, the Issuer has loaned the proceeds of the Series A Bonds to the Borrower pursuant to a Loan Agreement dated as of February 1, 2011, between the Issuer and the Borrower (said Loan Agreement, as the same may further be amended, modified or restated in accordance with the terms thereof, the “Series A Loan Agreement”) and has loaned the proceeds of the Series B Bonds to the Borrower pursuant to a Loan Agreement dated as of February 1, 2011, between the Issuer and the Borrower (said Loan Agreement, as the same may be further amended, modified or restated in accordance with the terms thereof, the “Series B Loan Agreement” and, together with the Series B Loan Agreement, the “Loan Agreement”). As security for the payment of the Bonds, the Issuer has assigned to the Trustee certain of the Issuer’s rights (but not its obligations) under the Loan Agreement and the Indenture, including the right to collect and receive directly all of the revenues of the Debtor, and to enforce any security for the Bonds;

WHEREAS, in connection with the purchase of the Series A Bonds by Wells Fargo Bank, National Association (in such capacity, the “Purchaser”) on the date hereof, the Borrower and the Purchaser have entered into that certain Continuing Covenant Agreement, dated as of the date hereof, with respect to the Series A Bonds (as the same may further be amended, modified or restated in accordance with the terms thereof, the “Continuing Covenant Agreement”);

WHEREAS, the Borrower has entered into an interest rate swap transactions with Wells Fargo Bank, National Association (in such capacity, the “Swap Provider”) pursuant to that certain ISDA Master Agreement (including the Schedule thereto), and the related Confirmation No. __________ and Confirmation No. __________, each dated as of February __, 2011 (as such agreements may be amended, restated, modified and/or supplemented from time to time, including, without limitation, by additional confirmations reflecting transactions between the Swap Provider and the Borrower, collectively, the “Swap Contract”);

WHEREAS, the Borrower has entered into that certain Credit Agreement dated as of February __, 2011, between the Borrower and Wells Fargo Bank, National Association (in such capacity, the “Bank”), pursuant to which the Bank may from time to time extend credit or otherwise make financial accommodations available to the Borrower (as the same may further be amended, modified or restated in accordance with the terms thereof, the “Credit Agreement”);

WHEREAS, pursuant to that certain Security Agreement dated as of February __, 2011 (as such agreement may be amended, restated, modified and/or supplemented from time to time, the “Security Agreement”), the Debtors (as defined herein) have granted to the Collateral Agent for the benefit of the Secured Creditors (as defined herein) a lien upon and security interest in the Collateral (as defined herein) to secure the Secured Obligations (as defined herein);

WHEREAS, the Secured Creditors desire to appoint the Collateral Agent as their agent with respect to the Collateral and for all other purposes specifically provided for herein; and

WHEREAS, the Secured Creditors and the Collateral Agent desire to agree upon the priorities for the application of any proceeds of the Collateral and certain payments by the Borrower and to agree upon various other matters with respect to their respective agreements with the Borrower and their rights thereunder;

NOW, THEREFORE, for the above reasons, in consideration of the mutual covenants herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

SECTION 1. DEFINITIONS.

For the purposes of this Agreement, the following terms shall have the meanings specified with respect thereto below. Any plural term that is used herein in the singular shall be taken to mean each entity or item of the defined class and any singular term that is used herein in the plural shall be taken to mean all of the entities or items of the defined class, collectively. Terms defined herein, directly or indirectly, by reference to another agreement or instrument shall not be deemed to be amended in the event of any amendment or modification of such other

agreement or instrument unless each of the parties hereto have consented to such amendment or modification.

“Bank” has the meaning set forth in the Recitals.

“Bonds” has the meaning set forth in the Recitals.

“Borrower” has the meaning set forth in the Recitals.

“Business Day” has the meaning set forth in the Indenture.

“Collateral” has the meaning set forth in the Security Agreement.

“Collateral Agent” means U.S. Bank National Association, in its capacity as collateral agent for the Secured Creditors, together with any successor or replacement collateral agent which may be appointed pursuant to this Agreement.

“Collateral Agent Expenses” means, without limitation, all reasonable costs and expenses incurred by the Collateral Agent in connection with the performance of its duties under this Agreement, including the realization upon or protection of the Collateral or enforcing or defending any lien upon or security interest in the Collateral or any other action taken in accordance with the provisions of this Agreement, expenses incurred for legal counsel in connection with the foregoing, and any other costs, expenses or liabilities incurred by the Collateral Agent for which the Collateral Agent is entitled to be reimbursed or indemnified by the Debtors pursuant to the Security Agreement or the Secured Creditors pursuant to this Agreement.

“Collateral Agent Obligations” means all obligations of the Debtors or any Secured Creditor to pay, reimburse or indemnify the Collateral Agent for any Collateral Agent Expenses.

“Collateral Documents” means, collectively, the Security Agreement, the Control Agreement, and any other agreement, document or instrument in effect on the date hereof, executed by the Borrower after the date hereof or executed by the Borrower with the written consent of the Secured Creditors after the date hereof under which the Borrower has granted a lien upon or security interest in any property or assets to the Collateral Agent, for the benefit of the Secured Creditors, to secure all or any part of the Indebtedness, all financing statements, certificates, documents and instruments relating thereto or executed or provided in connection therewith, each as amended, restated, supplemented or otherwise modified from time to time.

“Collateral Obligations” means the obligations of the Borrower to repay the Trustee, as assignee of the rights of the Issuer under the Loan Agreement, with respect to the loan made by the Issuer under the Loan Agreement to the Borrower and the obligations of the Borrower to pay the principal of and interest on the Bonds under the Indenture.

“Continuing Covenant Agreement” has the meaning set forth in the Recitals.

“Continuing Covenant Agreement Obligations” means the obligations of the Borrower to pay to the Purchaser all amounts owed by the Borrower under the Continuing Covenant Agreement.

“Control Agreements” means each deposit account or securities account control agreement entered into from time to time to perfect the Collateral Agent’s rights with respect to any deposit account or securities account that is part of the Collateral.

“Credit Agreement” has the meaning set forth in the Recitals.

“Credit Agreement Obligations” means the obligations of the Borrower to pay to the Bank all amounts owed by the Borrower under the Credit Agreement.

“Debtors” has the meaning set forth in the Security Agreement.

“Enforcement” means (a) for the Swap Provider, the occurrence of an Event of Default under the Swap Contract, (b) for the Purchaser, to make demand for payment of or accelerate the time for payment prior to the scheduled payment date of the obligations of the Borrower under the Continuing Covenant Agreement following the occurrence of an Event of Default thereunder; (c) for the Bank, to make demand for payment of or accelerate the time for payment prior to the scheduled payment date of the obligations of the Borrower under the Credit Agreement following the occurrence of an Event of Default under the Credit Agreement; (d) for the Series A Trustee, to accelerate the time for payment of the Series A Bonds under the Series A Indenture following the occurrence of an Event of Default under the Series A Indenture; (e) for the Series B Trustee, to accelerate the time for payment of the Series B Bonds under the Series B Indenture following the occurrence of an Event of Default under the Series B Indenture; (f) for the Swap Provider, the Purchaser or the Bank, to setoff against Collateral or appropriate any balances held by it (to the extent of the Collateral) for the account of the Borrower or any other property (to the extent of Collateral) at any time held or owing by it to or for the credit or for the account of the Borrower as a result of the occurrence of an Event of Default, (g) for the Collateral Agent, at the direction of the Secured Creditors, to commence the enforcement of any rights or remedies under any Collateral Document (other than an action solely for the purpose of establishing or defending the lien or security interest intended to be created by any Collateral Document upon or in any Collateral as against or from claims of third parties on or in such Collateral), to setoff, freeze or otherwise appropriate any balances held by it for the account of the Borrower or any other property at any time held or owing by it to or for the credit or for the account of the Borrower or to otherwise take any action to realize upon the Collateral, or (h) the commencement by, against or with respect to the Borrower of any proceeding under any bankruptcy, reorganization, compromise, arrangement, insolvency, readjustment of debt, dissolution or liquidation or similar law or for the appointment of a receiver for the Borrower or its assets.

“Event of Default” means, as the context requires, an “Event of Default” as defined in the Continuing Covenant Agreement, the Credit Agreement, any Collateral Document and/or any Transaction Document or, with respect to the Swap Contract, either (i) the failure by the Borrower to pay any Settlement Amount within the time such amount is required to be paid, or (ii) if an Event of Default under the Continuing Covenant Agreement would result from the

payment by the Borrower of any Settlement Amount due to the Swap Provider under the Swap Contract.

“Gross Revenues” has the meaning set forth in the Security Agreement.

“Holder” has the meaning set forth in the Indenture.

“Indebtedness” means the Collateral Agent Obligations, the Swap Obligations, the Collateral Obligations, the Continuing Covenant Agreement Obligations, the Credit Agreement Obligations and all of the other present or future indebtedness, liabilities and obligations of the Borrower now or hereafter owed to any or all of the Secured Creditors whether such indebtedness, liabilities and obligations are direct or indirect, joint, several or joint and several, or now exist or hereafter arise, and all renewals and extensions thereof and, to the extent not included in the foregoing, all Secured Obligations and (ii) any future indebtedness of the Borrower secured by a “parity lien” on the Collateral in compliance with the terms of the Continuing Covenant Agreement and the Transaction Documents. The term “Indebtedness” shall include all of foregoing indebtedness, liabilities and obligations whether or not allowed as a claim in any bankruptcy, insolvency, receivership or similar proceeding.

“Indemnitee” has the meaning given in Section 2(j) hereof.

“Indenture” has the meaning set forth in the Recitals.

“Issuer” means the California Municipal Finance Authority.

“Line of Credit” has the meaning set forth in the Credit Agreement.

“Loan Agreement” has the meaning set forth in the Recitals.

“Pro Rata Expenses Share” with respect to any Secured Creditor means its respective percentage from time to time of the obligations owed by the Borrower to the Secured Creditors; provided that with respect to the Swap Provider such obligations shall equal the Settlement Amount (if positive) that would be due to the Swap Provider, as determined by the Swap Provider, if an Early Termination Date (as defined in the Swap Contract) were to occur on the date of the related determination under Section 2(j).

“Purchaser” has the meaning set forth in the Recitals.

“Required Secured Creditors” means, (i) as of any date of determination prior to an Enforcement, the Holders of, and the Bank extending, as applicable, more than sixty-six and two-thirds percent (66 2/3%) in the aggregate of the sum of the principal amount of the Bonds outstanding on such date plus the used and unused amount of the Line of Credit on such date and (ii) as of any date of determination after an Enforcement, the Holders of, and the Bank extending, as applicable, more than sixty-six and two-thirds percent (66 2/3%) in the aggregate of the sum of the principal amount of the Bonds outstanding on such date plus the used amount of the Line of Credit on such date.

“Secured Creditors” means, collectively, the Series A Trustee, the Series B Trustee, the Purchaser, the Bank, the Swap Provider and the Collateral Agent.

“Secured Obligations” has the meaning set forth in the Security Agreement.

“Security Agreement” has the meaning set forth in the Recitals.

“Series A Bonds” has the meaning set forth in the Recitals.

“Series B Bonds” has the meaning set forth in the Recitals.

“Series A Indenture” has the meaning set forth in the Recitals.

“Series B Indenture” has the meaning set forth in the Recitals.

“Series A Loan Agreement” has the meaning set forth in the Recitals.

“Series B Loan Agreement” has the meaning set forth in the Recitals.

“Series A Trustee” has the meaning set forth in the Recitals.

“Series B Trustee” has the meaning set forth in the Recitals.

“Settlement Amounts” means the amount of any payments owed to the Swap Provider following the early termination of the Swap Contract.

“Shared Payments” means and includes:

(i) all cash Collateral (to the extent that a Secured Creditor is secured thereby) and any and all proceeds of any and all Collateral whether derived, directly or indirectly, by any sale, transfer or other disposition of any Collateral including, without limitation, in connection with any transfer or disposition of any kind, provided, however, that Shared Payments shall not include proceeds of Collateral received prior to an Enforcement; and

(ii) all payments made after an Enforcement made on account of Indebtedness.

“Swap Contract” has the meaning set forth in the Recitals hereto.

“Swap Obligations” means the payment obligations of the Borrower under the Swap Contract, including any Settlement Amounts thereunder.

“Swap Provider” has the meaning set forth in the Recitals hereto.

“Transaction Documents” means the Indenture, the Loan Agreement, the Continuing Covenant Agreement, the Swap Contract and the Credit Agreement and any and all future renewals and extensions or restatements of, or amendments or supplements to, any of the foregoing.

“Trustee” has the meaning set forth in the Recitals hereto.

SECTION 2. APPOINTMENT OF U.S. BANK NATIONAL ASSOCIATION AS COLLATERAL AGENT FOR THE SECURED CREDITORS.

(a) Appointment of Collateral Agent. Subject in all respects to the terms and provisions of this Agreement, the Secured Parties hereby appoint U.S. Bank National Association to act as agent for the benefit of the Secured Parties with respect to the liens upon and the security interests in the Collateral and the rights and remedies granted under and pursuant to the Collateral Documents and with respect to the other obligations expressly provided for herein, and U.S. Bank National Association hereby accepts such appointment and agrees to act as such agent. The appointment of the Collateral Agent pursuant to this Agreement shall be effective with respect to all financing statements filed in any filing office with respect to the Debtors prior to the date of this Agreement on and as of the date such financing statements were signed. Except as otherwise provided herein, the agency created hereby shall in no way impair or affect any of the rights and powers of, or impart any duties or obligations upon, U.S. Bank National Association in its capacity as the Trustee. Each of the Secured Creditors authorizes and directs the Collateral Agent to enter into the Collateral Documents.

(b) Duties of Collateral Agent. Subject to the Collateral Agent having been directed to take such action in accordance with the terms of this Agreement, each Secured Creditor hereby irrevocably authorizes the Collateral Agent to take such action on its behalf under the provisions of the Collateral Documents and any other instruments, documents and agreements referred to therein and to exercise such powers thereunder as are specifically delegated to the Collateral Agent by the terms thereof and such other powers as are reasonably incidental thereto. Subject to the provisions of Section 11 hereof, the Collateral Agent is hereby irrevocably authorized to take all actions on behalf of the Secured Creditors to enforce the rights and remedies of the Collateral Agent and the Secured Creditors provided for in the Collateral Documents or by applicable law with respect to the liens upon and security interests in the Collateral granted to secure the Secured Obligations (including but not limited to, the right to execute and deliver all such documents and instruments and do all such other acts and things as may be necessary or reasonably required to enable the Collateral Agent to exercise and enforce its rights and the rights of the Secured Creditors under the Collateral Documents and to realize thereon, and record and file and re-record and re-file all such documents and instruments, at such time or times, in such manner and at such place or places, all as may be necessary or reasonably required by the Collateral Agent to validate, preserve and protect the position of the Collateral Agent and the Secured Parties under the Collateral Documents); provided, however, that, notwithstanding any provision to the contrary in any Collateral Documents, (i) except as otherwise expressly provided herein, the Collateral Agent shall act solely at and in accordance with the written direction of the Required Secured Creditors subject to the immediately following clauses (ii), (iii) and (iv), (ii) the Collateral Agent shall not, without the written consent of all of the Secured Creditors,

amend, supplement or modify any Collateral Document, or request or agree to any consent or waiver under, or effect or permit the cancellation, acceleration or termination of any of the Collateral Documents, unless such amendment, supplement or modification could not reasonably be expected to have a material adverse effect on the rights or interests of any Secured Creditor, (iii) the Collateral Agent shall not, without the written consent of the Required Secured Creditors and the Swap Provider, release or terminate by affirmative action or consent any lien upon or security interest in any Collateral granted under any Collateral Documents, and (iv) the Collateral Agent shall not accept any Indebtedness in whole or partial consideration for the disposition of any Collateral without the written consent of the Required Secured Creditors and the Swap Provider. The Collateral Agent agrees to make such demands and give such notices under the Collateral Documents as may be requested by, and to take such action to enforce the Collateral Documents and to foreclose upon, collect and dispose of the Collateral or any portion thereof as may be directed by, the Required Secured Creditors and the Swap Provider; provided, however, that the Collateral Agent shall not be required to take any action that is contrary to law or the terms of the Collateral Documents or this Agreement. Once a direction to take any action has been given to the Collateral Agent in accordance with the terms of this Agreement, and subject to any other directions which may be given from time to time in accordance with this Agreement, decisions regarding the manner in which any such action is to be implemented and conducted (with the exception of any decision to settle, compromise or dismiss any legal proceeding, with or without prejudice) shall be made by the Collateral Agent, with the assistance and upon the advice of its counsel. The Collateral Agent shall be entitled to assume that no Event of Default or Enforcement exists until either notice has been given to the Collateral Agent of such Event of Default or Enforcement by the Borrower or a Secured Creditor, or the Collateral Agent shall have actual knowledge that an Event of Default or Enforcement has occurred (and for this purpose the actual knowledge of the Collateral Agent shall include any actual knowledge which the Collateral Agent may have in its capacity as Trustee).

(c) Requesting Instructions. Subject to Section 3 hereof, the Collateral Agent may at any time request direction from the Secured Creditors as to any course of action or other matter relating to the performance of its duties under this Agreement and the Collateral Documents and the Secured Creditors shall undertake to respond to such request in a reasonably prompt manner.

(d) Emergency Actions. If the Collateral Agent has requested direction from the Secured Creditors for instructions following the receipt of any notice of an Event of Default and the Secured Creditors have not responded to such request or have not agreed as to the action to be taken within ten (10) days, the Collateral Agent shall be authorized, but shall have no duty, to take such actions with regard to such Event of Default which the Collateral Agent, in good faith, believes to be reasonably required to protect the Collateral from loss; provided, however, that (i) prior to the expiration of such ten (10) day period the Collateral Agent shall be authorized, but shall have no duty, to take such actions with regard to such Event of Default which the Collateral Agent, in good faith, believes to be reasonably required to prevent irreparable loss to the Collateral which might result from a delay, and (ii) once instructions have been received from the Secured Creditors, the actions of the Collateral Agent shall be governed thereby and the Collateral Agent shall not take any further action which would be contrary thereto.

(e) Document Amendments. Any amendment, supplement, modification, restatement or waiver of any provision of any Collateral Document, any consent to any departure by the Borrower or any Debtor therefrom, or the execution or acceptance by the Collateral Agent of any Collateral Document not in effect on the date hereof shall be effective if, and only if, consented to in writing by the Required Secured Creditors; provided, however, that, (i) no such amendment, supplement, modification, restatement, waiver, consent or such Collateral Document not in effect on the date hereof which imposes any additional responsibilities upon the Collateral Agent shall be effective without the written consent of the Collateral Agent, and (ii) no such amendment, supplement, modification, waiver or consent shall release any Collateral from the lien or security interest created by any Collateral Document not subject to the exceptions in Section 2(b)(ii), (iii) and (iv) hereof or narrow the scope of the property or assets in which a lien or security interest is granted pursuant to any Collateral Document without the written consent of all of the Secured Creditors secured thereby (except with respect to property which, by the terms of the Collateral Documents, is not required to be, or to remain, pledged to the Collateral Agent).

(f) Administrative Actions. The Collateral Agent shall have the right, but not the obligation, at the direction of any Secured Creditor to take such actions hereunder and under the Collateral Documents, not inconsistent with the instructions of the Required Secured Creditors or the terms of the Collateral Documents and this Agreement, as the Collateral Agent deems necessary or appropriate to perfect or continue the perfection of the liens on the Collateral for the benefit of the Secured Creditors.

(g) Collateral Agent Acting Through Others. The Collateral Agent may perform any of its duties under this Agreement and the Collateral Documents by or through attorneys (which attorneys may be the same attorneys who represent any Secured Creditor), agents or other persons reasonably deemed appropriate by the Collateral Agent. The Collateral Agent shall not be liable to the Secured Creditors for the misconduct of any such attorneys, agents or other persons selected by the Collateral Agent with reasonable care. In addition, the Collateral Agent may act in good faith reliance upon the opinion or advice of attorneys selected by the Collateral Agent. In all cases the Collateral Agent may pay customary and reasonable compensation to all such attorneys, agents or other persons as may be employed in connection with the performance of its duties under this Agreement and the Collateral Documents and the same shall constitute Collateral Agent Expenses for purposes hereof.

(h) Resignation and Removal of Collateral Agent. (i) The Collateral Agent (A) may resign at any time upon notice to the Secured Creditors, and (B) may be removed for cause upon the written request of any Secured Creditor.

(ii) If the Collateral Agent shall resign or be removed, the Required Secured Creditors shall have the right to select a replacement Collateral Agent, reasonably acceptable to the Swap Provider, by notice to the Collateral Agent.

(iii) Upon any replacement of the Collateral Agent, the Collateral Agent shall assign all of the liens upon and security interests in all Collateral under the Collateral Documents, and all right, title and interest of the Collateral Agent under all the Collateral

Documents, to the replacement Collateral Agent, without recourse to the Collateral Agent or any Secured Creditor and at the expense of the Borrower.

(iv) No resignation or removal of the Collateral Agent shall become effective until a replacement Collateral Agent shall have been selected as provided herein and shall have assumed in writing the obligations of the Collateral Agent hereunder and under the Collateral Documents. In the event that a replacement Collateral Agent shall not have been selected as provided herein or shall not have assumed such obligations within ninety (90) days after the resignation or removal of the Collateral Agent, then the Collateral Agent may appoint a Secured Creditor as the replacement Collateral Agent.

(v) Any replacement Collateral Agent shall be a bank, trust company, or insurance company having capital, surplus and undivided profits of at least $250,000,000.

(i) Indemnification of Collateral Agent. The Borrower, by its consent hereto, hereby agrees to indemnify and hold the Collateral Agent, its officers, directors, employees and agents (including, but not limited to, any attorneys acting at the direction or on behalf of the Collateral Agent) harmless against any and all costs, claims, damages, penalties, liabilities, losses and expenses (including, but not limited to, court costs and attorneys’ fees and disbursements) which may be incurred by or asserted against the Collateral Agent or any such officers, directors, employees and agents by reason of its status as agent hereunder or which pertain, whether directly or indirectly, to this Agreement or the Collateral Documents, or to any action or failure to act by the Collateral Agent as agent hereunder, except to the extent any such action or failure to act by the Collateral Agent constitutes gross negligence or willful misconduct. The obligations of the Borrower under this Section 2(i) shall survive the payment in full of the Indebtedness and the termination of this Agreement.

(j) Liability of Collateral Agent. In absence of gross negligence, willful misconduct or a breach of this Agreement (excluding any breach with respect to which the Collateral Agent has acted in good faith or has reasonably disagreed as to its obligations hereunder), the Collateral Agent will not be liable to any Secured Creditor for any action or failure to act or any error of judgment, negligence, mistake or oversight on its part or on the part of any of its officers, directors, employees or agents. To the extent not paid by the Borrower, each Secured Creditor hereby severally, and not jointly, agrees to indemnify and hold the Collateral Agent and each of its officers, directors, employees and agents (collectively, “Indemnitees”) harmless from and against any and all liabilities, costs, claims, damages, penalties, losses and actions of any kind or nature whatsoever (including, without limitation, the fees and disbursements of counsel for any Indemnitee) incurred by or asserted against any Indemnitee arising out of or in relation to this Agreement or the Collateral Documents, or its status as agent hereunder or any action taken or omitted to be taken by any Indemnitee pursuant to and in accordance with this Agreement or any Collateral Document, except to the extent arising from the gross negligence or willful misconduct of such Indemnitee, with each Secured Creditor being liable only for its Pro Rata Expenses Share of any such indemnification liability. The obligations of the Secured Creditors under this Section 2(j) shall survive the payment in full of the Indebtedness and the termination of this Agreement.

No provision of this Agreement or any other document related hereto shall require the Collateral Agent to risk or advance its own funds or otherwise incur any financial liability in the performance of its duties or the exercise of its rights hereunder.

Before taking any action under this Agreement the Collateral Agent may require indemnity satisfactory to the Collateral Agent be furnished for any expenses and to protect it against any liability it may incur hereunder.

The immunities extended to the Collateral Agent also extend to its directors, officers, employees and agents.

The Collateral Agent shall not be liable for any action taken or not taken by it in accordance with the direction as provided under this Agreement relating to the exercise of any right, power or remedy available to the Collateral Agent.

(k) No Reliance on Collateral Agent. Neither the Collateral Agent nor any of its officers, directors, employees or agents (including, but not limited to, any attorneys acting at the direction or on behalf of the Collateral Agent) shall be deemed to have made any representations or warranties, express or implied, with respect to, nor shall the Collateral Agent or any such officer, director, employee or agent be liable to any Secured Creditor be responsible for (i) any warranties or recitals made by the Borrower or any Debtor in the Collateral Documents or any other agreement, certificate, instrument or document executed by the Borrower or any Debtor in connection therewith, (ii) the due or proper execution or authorization of this Agreement or any Collateral Documents by any party other than the Collateral Agent, or the effectiveness, enforceability, validity, genuineness or collectibility as against the Borrower or any Debtor of any Collateral Document or any other agreement, certificate, instrument or document executed by the Borrower or any Debtor in connection therewith, (iii) the present or future solvency or financial worth of the Borrower or any Debtor, or (iv) the value, condition, existence or ownership of any of the Collateral or the perfection of any lien upon or security interest in the Collateral (whether now or hereafter held or granted) or the sufficiency of any action, filing, notice or other procedure taken or to be taken to perfect, attach or vest any lien or security interest in the Collateral. Except as may be required by Section 2(b) hereof, the Collateral Agent shall not be required, either initially or on a continuing basis, to (A) make any inquiry, investigation, evaluation or appraisal respecting, or enforce performance by the Borrower or any Debtor of, any of the covenants, agreements or obligations of the Borrower or any Debtor under any Collateral Document, or (B) undertake any other actions (other than actions expressly required to be taken by it under this Agreement). Nothing in any of the Collateral Documents, expressed or implied, is intended to or shall be so construed as to impose upon the Collateral Agent any obligations, duties or responsibilities except as set forth in this Agreement and therein. The Collateral Agent shall be protected in acting upon any notice, request, consent, certificate, order, affidavit, letter, telecopy or other paper or document given to it by any person reasonably and in good faith believed by it to be genuine and correct and to have been signed or sent by such person. The Collateral Agent shall have no duty to inquire as to the performance or observance by the Borrower or any Debtor of any of the terms, covenants or conditions of the Continuing Covenant Agreement, the Credit Agreement, the Swap Contract, any Collateral Documents, or any other Transaction Documents to which it is a party. Except upon the direction of the

Secured Creditors pursuant to Section 2(b) of this Agreement, the Collateral Agent will not be required to inspect the properties or books and records of the Borrower or any Debtor for any purpose, including to determine compliance by the Borrower or any Debtor with its covenants respecting the perfection of security interests.

(l) Limited Agency. The Collateral Agent and the Secured Creditors agree that it is the intent of the Secured Creditors to limit the scope of the powers of the Collateral Agent to the specific powers delegated hereunder, together with such powers as are reasonably incidental thereto, and the Collateral Agent does not and shall not have any right or authority to bind any Secured Creditor in any other manner or thing whatsoever.

SECTION 3. RIGHTS OF THE SECURED CREDITORS TO DIRECT THE COLLATERAL AGENT.

Each Secured Creditor hereby agrees that no such Secured Creditor shall have the right to direct the Collateral Agent to take any action required to be taken in accordance with the terms of this Agreement without the written consent of the Required Secured Creditors (excluding any Secured Creditor to the extent that such action would not affect the Collateral securing such Secured Creditor). Nothing in this Section 3 shall limit the provisions of Section 17 hereof.

SECTION 4. PRIORITIES.

The parties hereto expressly agree that all Shared Payments and the security interests and liens granted to the Collateral Agent shall secure the Indebtedness on a pari passu basis for the benefit of the Collateral Agent and the Secured Creditors secured thereby and that, notwithstanding the relative priority or the time of grant, creation, attachment or perfection under applicable law of any security interests and liens, if any, of any of the Collateral Agent or any Secured Creditor upon or in any of the Collateral to secure any Indebtedness, whether such security interests and liens are now existing or hereafter acquired or arising and whether such security interests and liens are in or upon now existing or hereafter arising Collateral, such security interests and liens shall be first and prior security interests and liens in favor of the Collateral Agent to secure the Indebtedness on a pari passu basis for the benefit of the Collateral Agent and the Secured Creditors secured thereby.

SECTION 5. CERTAIN NOTICES.

The Collateral Agent and each Secured Creditor agrees to use its reasonable efforts to give to the others (a) copies of any notice of the occurrence or existence of an Event of Default sent to the Borrower, simultaneously with the sending of such notice to the Borrower, and (b) notice of an Enforcement by such party, prior to commencing such Enforcement, but the failure to give any of the foregoing notices shall not affect the validity of such notice of an Event of Default given to the Borrower or create a cause of action against or cause a forfeiture of any rights of the party failing to give such notice or create any claim or right on behalf of any third party.

SECTION 6. SHARING OF PAYMENTS AND PROCEEDS AFTER ENFORCEMENT.

(a) All Shared Payments held or received by the Collateral Agent or any Secured Creditor including, without limitation, any amount of any balances held by the Collateral Agent or any Secured Creditor for the account of the Borrower or any other property (to the extent of Collateral) held or owing by it to or for the credit or for the account of the Borrower to the extent setoff against Collateral or appropriated by it shall be delivered to the Collateral Agent and distributed as follows:

(i) First, to the Collateral Agent in the amount of any unpaid Collateral Agent Obligations;

(ii) Next, to the extent proceeds remain, to the Secured Creditors in the amount of any unreimbursed amounts paid by the Secured Creditors to any Indemnitee pursuant to Section 2(j) hereof, pro rata in proportion to the respective unreimbursed amounts thereof paid by each Secured Creditor;

(iii) Next, to the extent that proceeds remain, to the Secured Creditors in the amount of any unpaid Credit Agreement Obligations, Collateral Obligations, Continuing Covenant Agreement Obligations and Swap Obligations, pro rata in proportion to the respective amounts thereof owed to such Secured Creditor; and

(iv) Next, to the extent proceeds remain, to the Secured Creditors in the amount of any other unpaid Indebtedness, pro rata in proportion to the respective amounts thereof owed to each Secured Creditor.

After all the Indebtedness has been finally paid in full in cash, the balance of proceeds of the Collateral, if any, shall be paid to the Borrower, or as otherwise required by law.

(b) The distribution provisions of this Section 6 are for the purpose of determining the relative amounts of payments to be distributed to the Secured Creditors and not for the purpose of creating an agreement among the parties as to the manner in which any proceeds or other payments distributed to them are actually to be applied to pay the Indebtedness. Each Secured Creditor shall be free, each in its own discretion, to apply any proceeds or other payments distributed to it hereunder to the Indebtedness held by each in such order as it may determine. The Borrower by its consent hereto, agrees that in the event any payment is made with respect to any Indebtedness, as between the Borrower and each Secured Creditor, the Indebtedness discharged by such payment shall be the amount or amounts of the Indebtedness to which such Secured Creditor applies the portion of such payment distributed to it under this Section 6 as provided in the preceding sentence. Notwithstanding the foregoing, for all purposes of this Agreement the Indebtedness shall be deemed paid to the same extent that proceeds and other payments are distributed with respect to it pursuant to Section 6(a) notwithstanding the actual application thereof.

SECTION 7. ACTIONS RELATED TO COLLATERAL AGREEMENTS; OTHER LIENS AND SECURITY INTERESTS.

(a) Each Secured Creditor agrees to use its reasonable efforts to give a notice to each other Secured Creditor of any proposed intentional waiver of or consent to a violation by the Borrower or any Debtor of, or any proposed amendment, modification, supplement or restatement of, the Continuing Covenant Agreement, the Credit Agreement, the Swap Contract, any Collateral Document or any other Transaction Document to be given or entered into by such Secured Creditor reasonably in advance of the time the same is given or entered into, but failure to give any such notice shall not create a cause of action against or cause a forfeiture of any rights of the party failing to give such notice or create any claim or right on behalf of any third party. Nothing in this paragraph (a) shall be deemed to constitute a consent by any Secured Creditor to any violation by the Borrower or any Debtor of any provision of the Continuing Covenant Agreement, the Credit Agreement, the Swap Contract, any Transaction Document, any Collateral Document or any other Transaction Agreement.

(b) Each Secured Creditor agrees that it will have recourse to the Collateral only through the Collateral Agent to the extent it is secured thereby, that it shall have no independent recourse thereto and that it shall refrain from exercising any rights or remedies under the Collateral Documents which have or may have arisen or which may arise as a result of an Event of Default or an acceleration of the Indebtedness, except that any Secured Creditor may setoff against any Collateral any amount of any balances held by it for the account of the Borrower or any Debtor or any other property held or owing by it to or for the credit or for the account of the Borrower or any Debtor to the extent permitted under the Continuing Covenant Agreement, the Swap Contract, the Credit Agreement and the other Transaction Documents; provided that the amount setoff is delivered to the Collateral Agent for application pursuant to Section 6 hereof. For the purpose of perfecting any setoff rights which may be available under applicable law, any balances (to the extent of the Collateral) held by the Collateral Agent or any Secured Creditor for the account of the Borrower or any Debtor or any other property held or owing by the Collateral Agent or any Secured Creditor to or for the credit or account of the Borrower or any Debtor shall be deemed to be held as agent for all Secured Creditors.

(c) Nothing contained in this Agreement shall (i) prevent any Secured Creditor from imposing a default rate of interest in accordance with the Continuing Covenant Agreement, the Swap Contract, the Credit Agreement or any other Transaction Document, as applicable, or prevent a Secured Creditor from raising any defenses in any action in which it has been made a party defendant or has been joined as a third party, except that the Collateral Agent may direct and control any defense directly relating to the Collateral or any one or more of the Collateral Documents as directed by the Secured Creditors, which shall be governed by the provisions of this Agreement, or (ii) affect or impair the right any Secured Creditor may have under the terms and conditions governing the Indebtedness to accelerate and demand repayment of such Indebtedness. Subject only to the express limitations set forth in this Agreement, the Continuing Covenant Agreement, the Swap Contract, the Credit Agreement and the other Transaction Documents, each Secured Creditor retains the right to freely exercise its rights and remedies as a general creditor of the Borrower in accordance with applicable law and agreements with the Borrower, including without limitation the right to file a lawsuit and obtain a judgment therein

against the Borrower and to enforce such judgment against any assets of the Borrower other than the Collateral.

(d) Subject to the provisions set forth in this Agreement, the Continuing Covenant Agreement, the Credit Agreement, the Swap Contract and the other Transaction Documents, each Secured Creditor and its affiliates may (without having to account therefor to any Secured Creditor) own, sell, acquire and hold debt securities of the Borrower and any Debtor and lend money to and generally engage in any kind of business with the Borrower and any Debtor (as if, in the case of U.S. Bank National Association, it was not acting as Collateral Agent), and subject to the provisions of this Agreement, the Secured Creditors and their affiliates may accept interest, principal payments, fees and other consideration from the Borrower and any Debtor for services in connection with this Agreement or otherwise without having to account of the same to the other Secured Creditors, provided that any such amounts which constitute Indebtedness are permitted by the Continuing Covenant Agreement, the Credit Agreement, the Swap Contract and the other Transaction Documents.

SECTION 8. ACCOUNTING; ADJUSTMENTS.

(a) The Collateral Agent and each Secured Creditor agrees to render an accounting to any of the others of the amounts of the outstanding Indebtedness, receipts of payments from the Borrower or from the Collateral and of other items relevant to the provisions of this Agreement upon the reasonable request from one of the others as soon as reasonably practicable after such request, giving effect to the application of payments and the proceeds of Collateral as herein before provided in this Agreement.

(b) Each party hereto agrees that to the extent any payment of any Indebtedness made to it hereunder is in excess of the amount due to be paid to it hereunder, then it shall pay to the other parties hereto such amounts so that, after giving effect to such payments, the amounts received by all parties are equal to the amounts to be paid to them hereunder. Each party hereto further agrees that, in the event any payment of any Indebtedness made to any party hereto is subsequently invalidated, declared fraudulent or preferential, set aside or required to be paid to a trustee, receiver, or any other party under any bankruptcy act, state or federal law, common law or equitable cause (“Avoided Payments”), the other parties shall pay to such party such amounts so that, after giving effect to such payments by all such other parties, the amounts received by all parties are not in excess of the amounts to be paid to them hereunder as though such Avoided Payments had not been made.

SECTION 9. NOTICES.

All notices, requests, demands, directions and other communications (collectively “notices”) under the provisions of this Agreement shall be in writing (including facsimile communication), unless otherwise expressly permitted hereunder, and shall be sent by first-class mail or overnight delivery and shall be deemed received as follows: (i) if by first class mail, five (5) days after mailing; (ii) if by overnight delivery, on the next Business Day; (iii) if by telephone, when given to a person who confirms such receipt; and (iv) if by facsimile, when confirmation of receipt is obtained. All notices shall be sent to the applicable party at the

following address or in accordance with the last unrevoked written direction from such party to the other parties hereto:

to the Borrower:

Azusa Pacific University 901 East Alosta Avenue Azusa, California 91702 Attention: Chief Financial Officer Facsimile: (626) 815-4522 Telephone: (626) 815-4537

to the Collateral Agent or the Trustee:

U.S. Bank National Association 633 West Fifth Street, 24th Floor Los Angeles, California 90071 Attention: Corporate Trust Services Facsimile: (___) ___-____ Telephone: (213) 615-6002

to the Purchaser or the Bank:

Wells Fargo Bank, National Association 707 Wilshire Boulevard, 17th Floor MAC E2818-117 Los Angeles, California 90071 Attention: Education and Non-Profit Banking Division – c/o Terri Wesolik Facsimile: (877) 302-0908 Telephone: (213) 614-3327

to the Swap Provider

Wells Fargo Bank, National Association ____________________________ ____________________________ Attention: ________________ Facsimile: (___) ___-____ Telephone: (___) ___-____

The Collateral Agent and the Secured Creditors may rely on any notice (including telephone communication) purportedly made by or on behalf of the Debtors, and shall have no duty to verify the identity or authority of the person giving such notice, unless such actions or omissions would amount to gross negligence or intentional misconduct.

SECTION 10. CONTESTING LIENS OR SECURITY INTERESTS; NO PARTITIONING OR MARSHALLING OF COLLATERAL; CONTESTING INDEBTEDNESS.

(a) Neither the Collateral Agent nor any Secured Creditor shall contest the validity, perfection, priority or enforceability of, or seek to avoid, have declared fraudulent or have put aside any lien or security interest granted to the Collateral Agent, and each party hereby agrees to cooperate in the defense of any action contesting the validity, perfection, priority or enforceability of such liens or security interests. Each party shall also use its best efforts to notify the other parties of any change in depositary institutions or other parties holding the “primary operating account” of the Borrower or the business operations of the Borrower or any Debtor or of any change in law which would make it necessary or advisable to file additional financing statements in another location as against the Borrower or any Debtor or effect account control agreements with any depositary institution or other party holding the “primary operating account” of the Borrower with respect to the liens and security interests intended to be created by the Collateral Documents, but the failure to do so shall not create a cause of action against the party failing to give such notice or create any claim or right on behalf of any other party hereto and any third party.

(b) Notwithstanding anything to the contrary in this Agreement or in any Collateral Document, no Secured Creditor shall have the right to have any of the Collateral, or any security interest or other property being held as security for all or any part of the Indebtedness by the Collateral Agent, partitioned, or to file a complaint or institute any proceeding at law or in equity to have any of the Collateral or any such security interest or other property partitioned, and each Secured Creditor hereby waives any such right. The Collateral Agent and each Secured Creditor hereby waive any and all rights to have the Collateral, or any part thereof, marshalled upon any foreclosure of any of the liens or security interests securing the Indebtedness.

(c) Neither the Collateral Agent nor any Secured Creditor shall contest the validity or enforceability of or seek to avoid, have declared fraudulent or have set aside any Indebtedness.

SECTION 11. BANKRUPTCY PROCEEDINGS.

Nothing contained herein shall limit or restrict the independent right of any Secured Creditor to initiate an action or actions in any bankruptcy, reorganization, compromise, arrangement, insolvency, readjustment of debt, dissolution or liquidation or similar proceeding in its individual capacity and to appear or be heard on any matter before the bankruptcy or other applicable court in any such proceeding, including, without limitation, with respect to any question concerning the post-petition usage of Collateral and post-petition financing arrangements. The Collateral Agent (in its capacity as Collateral Agent) is not entitled to initiate such actions on behalf of any Secured Creditor or to appear and be heard on any matter before the bankruptcy or other applicable court in any such proceeding as the representative of any Secured Creditor. The Collateral Agent (in its capacity as Collateral Agent) is not authorized in any such proceeding to enter into any agreement for, or give any authorization or consent with respect to, the post-petition usage of Collateral, unless such agreement, authorization or consent has been approved in writing by the Secured Creditors. This Agreement shall survive the commencement of any such bankruptcy, reorganization, compromise, arrangement, insolvency, readjustment of debt, dissolution or liquidation or similar proceeding.

SECTION 12. INDEPENDENT CREDIT INVESTIGATION.

None of the Collateral Agent or any Secured Creditor, nor any of their respective directors, officers, agents or employees, shall be responsible to any of the others for the solvency or financial condition of the Borrower or the ability of the Borrower to repay any of the Indebtedness, or for the value, sufficiency, existence or ownership of any of the Collateral, the perfection or vesting of any lien or security interest, or the statements of the Borrower or any Debtor, oral or written, or for the validity, sufficiency or enforceability of any of the Indebtedness, the Continuing Covenant Agreement, the Credit Agreement, the Swap Contract, any Collateral Document, any other Transaction Document or any document or agreement executed or delivered in connection with or pursuant to any of the foregoing, or the liens or security interests granted by the Borrower and each Debtor to the Collateral Agent in connection therewith. The Collateral Agent and each Secured Creditor has entered into its respective financial agreements with the Borrower and the Debtors based upon their own independent investigation, and makes no warranty or representation to the other, nor does it rely upon any

representation by any of the others, with respect to the matters identified or referred to in this Section.

SECTION 13. SUPERVISION OF OBLIGATIONS.

Except to the extent otherwise expressly provided herein, each Secured Creditor shall be entitled to manage and supervise the obligations of the Borrower to it in accordance with applicable law and such Secured Creditor’s practices in effect from time to time without regard to the existence of any other Secured Creditor.

SECTION 14. TURNOVER OF COLLATERAL.

If any Secured Creditor acquires custody, control or possession of any Collateral or any proceeds thereof other than pursuant to the terms of this Agreement, such Secured Creditor, as the case may be, shall promptly cause such Collateral or the proceeds thereof to be delivered to or put in the custody, possession or control of the Collateral Agent for disposition and distribution in accordance with the provisions of Section 6 of this Agreement. Until such time as such Secured Creditor, as the case may be, shall have complied with the provisions of the immediately preceding sentence, such Secured Creditor, as the case may be, shall be deemed to hold such Collateral and the proceeds thereof in trust for the parties entitled thereto under this Agreement.

SECTION 15. AMENDMENT.

This Agreement and the provisions hereof may be amended, modified or waived only by a writing signed by the Collateral Agent and all of the Secured Creditors.

SECTION 16. SUCCESSORS AND ASSIGNS.

This Agreement shall be binding upon and inure to the benefit of the respective successors and assigns of each of the parties hereof, provided that (a) neither the Collateral Agent nor any Secured Creditor shall assign or transfer any interest in any Indebtedness unless such transferee or assignee is made a party to this Agreement, and prior to the Collateral Agent receiving any notice of any such transfer or assignment, such transfer or assignment shall be invalid with respect to the Collateral Agent, and (b) the appointment of any replacement Collateral Agent shall be subject to the provisions of Section 2(h) hereof.

SECTION 17. LIMITATION RELATIVE TO OTHER AGREEMENTS.

Nothing contained in this Agreement is intended to impair (a) as between the Series A Trustee and the Borrower, the rights of the Series A Trustee and the obligations of the Borrower under the Series A Indenture and the Series A Loan Agreement, (b) as between the Series B Trustee and the Borrower, the rights of the Series A Trustee and the obligations of the Borrower under the Series B Indenture and the Series B Loan Agreement, (c) as between the Purchaser and the Borrower, the rights of the Purchaser and the obligations of the Borrower under the

Continuing Covenant Agreement and (d) as between the Swap Provider and the Borrower, the rights of the Swap Provider and the obligations of the Borrower under the Swap Contract.

SECTION 18. TERMINATION.

This Agreement shall remain in full force and effect until all of the obligations of the Borrower to the Secured Creditors have been fully paid and satisfied. Each Secured Creditor shall execute such documents as are reasonably requested by the Collateral Agent or the Borrower or any other Debtor in connection with any termination of such Secured Creditor’s rights hereunder and under the Collateral Documents.

SECTION 19. COUNTERPARTS.

This Agreement may be executed in several counterparts and by each party on a separate counterpart, each of which, when so executed and delivered, shall be an original, but all of which together shall constitute but one and the same instrument. In proving this Agreement, it shall not be necessary to produce or account for more than one such counterpart signed by the party against whom enforcement is sought.

SECTION 20. GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL.

(a) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF CALIFORNIA WITHOUT GIVING EFFECT TO CONFLICT OF LAW PRINCIPLES.

(b) EACH OF THE PARTIES HERETO HEREBY SUBMITS TO THE EXCLUSIVE JURISDICTION OF ANY FEDERAL OR STATE COURT OF COMPETENT JURISDICTION IN THE STATE OF CALIFORNIA FOR THE PURPOSE OF ANY SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT; SERVICE OF PROCESS MAY BE ACCOMPLISHED BY REGISTERED MAIL, RETURN RECEIPT REQUESTED TO EACH OF THE PARTIES AT THE ADDRESS LISTED FOR NOTICE IN SECTION 9 HEREOF.

(c) TO THE EXTENT PERMITTED BY LAW, EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO LEGAL CLAIMS BASED ON SUCH PARTIES’ PERFORMANCE OF ITS OBLIGATIONS UNDER THIS AGREEMENT. IF AND TO THE EXTENT THAT THE FOREGOING WAIVER OF THE RIGHT TO A JURY TRIAL IS UNENFORCEABLE FOR ANY REASON IN SUCH FORUM, THE PARTIES HERETO HEREBY CONSENT TO THE ADJUDICATION OF ANY AND ALL CLAIMS PURSUANT TO JUDICIAL REFERENCE AS PROVIDED IN CALIFORNIA CODE OF CIVIL PROCEDURE SECTION 638, AND THE JUDICIAL REFEREE SHALL BE EMPOWERED TO HEAR AND DETERMINE ANY AND ALL ISSUES IN SUCH REFERENCE WHETHER FACT OR LAW. EACH OF THE PARTIES HERETO REPRESENT THAT EACH HAS REVIEWED THIS WAIVER AND CONSENT AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS AND CONSENTS TO JUDICIAL REFERENCE FOLLOWING THE OPPORTUNITY TO CONSULT WITH LEGAL COUNSEL OF ITS CHOICE ON SUCH MATTERS. IN THE EVENT OF LITIGATION, A COPY OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT OR TO JUDICIAL REFERENCE UNDER CALIFORNIA CODE OF CIVIL PROCEDURE SECTION 638 AS PROVIDED HEREIN.

[SIGNATURE PAGES TO FOLLOW]

[SIGNATURE PAGE TO INTERCREDITOR AND COLLATERAL AGENCY AGREEMENT]

IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first written above.

U.S BANK NATIONAL ASSOCIATION, in its capacity as Collateral Agent, Series A Trustee and Series B Trustee

By ____________________________________ Name: ______________________________ Title: _______________________________

WELLS FARGO BANK, NATIONAL ASSOCIATION, as Purchaser and Bank

By ____________________________________ Name: ______________________________ Title: _______________________________

WELLS FARGO BANK, NATIONAL ASSOCIATION, as Swap Provider

By ____________________________________ Name: ______________________________ Title: _______________________________

[SIGNATURE PAGE TO INTERCREDITOR AND COLLATERAL AGENCY AGREEMENT]

ACKNOWLEDGED AND CONSENTED TO BY:

AZUSA PACIFIC UNIVERSITY, as Borrower

By ____________________________________ Name: ______________________________ Title: _______________________________

K-1

APPENDIX K

PROPOSED FORM OF CONTINUING COVENANT AGREEMENT


CONTINUING COVENANT AGREEMENT

dated as of February ___, 2011,

between


and

WELLS FARGO BANK, NATIONAL ASSOCIATION

Relating to

$70,000,000 CALIFORNIA MUNICIPAL FINANCE AUTHORITY

VARIABLE RATE DEMAND REFUNDING REVENUE BONDS (AZUSA PACIFIC UNIVERSITY PROJECT)

SERIES 2011A

TABLE OF CONTENTS

SECTION HEADING PAGE

ARTICLE I DEFINITIONS .................................................................................................1

Section 1.01. Certain Defined Terms...........................................................................1 Section 1.02. Computation of Time Periods..............................................................15 Section 1.03. Construction.........................................................................................15 Section 1.04. Incorporation of Certain Definitions by Reference .............................15 Section 1.05. Accounting Terms and Determinations ...............................................15 Section 1.06. Relation to Other Documents; Acknowledgment of

Different Provisions of Bond Documents; Incorporation by Reference ........................................................................................15

ARTICLE II THE BORROWER’S OBLIGATIONS................................................................16

Section 2.01. Payment Obligations............................................................................16 Section 2.02. Increased Payments..............................................................................17 Section 2.03. Obligations Absolute ...........................................................................20 Section 2.04. Funding Indemnity...............................................................................20

ARTICLE III CONDITIONS PRECEDENT TO PURCHASE OF BONDS ....................................20

Section 3.01. Documentary Requirements.................................................................20 Section 3.02. Credit Requirements ............................................................................23 Section 3.03. Litigation..............................................................................................23 Section 3.04. Security ................................................................................................23 Section 3.05. Other Matters .......................................................................................23 Section 3.06. Payment of Fees and Expenses ............................................................23

ARTICLE IV REPRESENTATIONS AND WARRANTIES........................................................23

Section 4.01. Organization and Qualification............................................................23 Section 4.02. Binding Effect......................................................................................24 Section 4.03. Compliance with Laws and Contracts .................................................24 Section 4.04. Subsidiaries ..........................................................................................24 Section 4.05. Margin Stock........................................................................................24 Section 4.06. Financial Reports .................................................................................24 Section 4.07. Correct Information .............................................................................25 Section 4.08. Litigation..............................................................................................25 Section 4.09. Taxes ....................................................................................................25 Section 4.10. Approvals.............................................................................................26 Section 4.11. Affiliates ..............................................................................................26 Section 4.12. ERISA..................................................................................................26 Section 4.13. Environmental Matters.........................................................................26 Section 4.14. Casualty................................................................................................27 Section 4.15. Investment Company ...........................................................................27

Section 4.16. Holding Company................................................................................27 Section 4.17. No Defaults ..........................................................................................27 Section 4.18. Incorporation of Representations and Warranties by

Reference .............................................................................................27 Section 4.19. Immunity..............................................................................................27 Section 4.20. No Proposed Legal Changes................................................................27 Section 4.21. Tax-Exempt Organization....................................................................27 Section 4.22. Liens.....................................................................................................28 Section 4.23. Insurance ..............................................................................................28 Section 4.24. Tax-Exempt Status of Bonds ...............................................................28 Section 4.25. No Material Adverse Facts ..................................................................28 Section 4.26. No Material Loss..................................................................................28 Section 4.27. Security ................................................................................................28

ARTICLE V COVENANTS................................................................................................29

Section 5.01. Existence, Etc.......................................................................................29 Section 5.02. Maintenance of Properties ...................................................................29 Section 5.03. Compliance with Laws; Taxes and Assessments.................................29 Section 5.04. Insurance ..............................................................................................29 Section 5.05. Reports .................................................................................................30 Section 5.06. Inspection and Field Audit...................................................................32 Section 5.07. Debt......................................................................................................32 Section 5.08. Liens.....................................................................................................32 Section 5.09. Investments, Acquisitions, Loans and Advances.................................33 Section 5.10. Leases...................................................................................................34 Section 5.11. Sale, Lease or Other Disposition of Assets..........................................34 Section 5.12. Mergers ................................................................................................34 Section 5.13. Burdensome Contracts With Affiliates................................................34 Section 5.14. No Changes in Fiscal Year ..................................................................35 Section 5.15. Formation of Subsidiaries ....................................................................35 Section 5.16. Bond Documents..................................................................................35 Section 5.17. Conversions and Redemptions.............................................................35 Section 5.18. Disclosure to Participants ....................................................................35 Section 5.19. Other Agreements ................................................................................35 Section 5.20. No Immunity........................................................................................36 Section 5.21. Further Assurances...............................................................................36 Section 5.22. Maintenance of Tax-Exempt Status of Bonds .....................................36 Section 5.23. Minimum Unrestricted and Temporarily Restricted Cash

and Unrestricted and Temporarily Restricted Marketable Securities..............................................................................................36

Section 5.24. Minimum Debt Service Coverage Ratio..............................................36 Section 5.25. Compliance with ERISA......................................................................36 Section 5.26. Compliance with other Covenants .......................................................37 Section 5.27. Investment Policy.................................................................................37 Section 5.28. Swap Agreement..................................................................................37

Section 5.29. Banking Relationship...........................................................................37 Section 5.30. Environmental Laws ............................................................................37 Section 5.31. Redemption of Bonds ..........................................................................38 Section 5.32. Guaranties ............................................................................................38

ARTICLE VI EVENTS OF DEFAULT ..................................................................................38

Section 6.01. Events of Default .................................................................................38 Section 6.02. Consequences of an Event of Default ..................................................40 Section 6.03. Remedies Cumulative; Solely for the Benefit of Bank........................41 Section 6.04. Waivers or Omissions ..........................................................................41 Section 6.05. Discontinuance of Proceedings............................................................41 Section 6.06. Injunctive Relief...................................................................................42

ARTICLE VII INDEMNIFICATION.......................................................................................42

Section 7.01. Indemnification ....................................................................................42 Section 7.02. Survival ................................................................................................42

ARTICLE VIII MISCELLANEOUS ........................................................................................42

Section 8.01. Patriot Act Notice ................................................................................42 Section 8.02. Further Assurances...............................................................................43 Section 8.03. Amendments and Waivers; Enforcement ............................................43 Section 8.04. No Implied Waiver; Cumulative Remedies.........................................43 Section 8.05. Notices .................................................................................................43 Section 8.06. Right of Setoff......................................................................................44 Section 8.07. No Third-Party Rights..........................................................................45 Section 8.08. Severability ..........................................................................................45 Section 8.09. Governing Law; Submission to Jurisdiction; Waiver of

Jury Trial..............................................................................................45 Section 8.10. Prior Understandings ...........................................................................46 Section 8.11. Duration ...............................................................................................46 Section 8.12. Counterparts.........................................................................................46 Section 8.13. Successors and Assigns........................................................................46 Section 8.14. Assignability ........................................................................................46 Section 8.15. Headings ..............................................................................................47 Section 8.16. Electronic Signatures ...........................................................................47 Section 8.17. Acknowledge and Appointment as the Calculation Agent. .................48 Section 8.18. Student Loan Referrals ........................................................................48 Section 8.19. Purchase of Bonds................................................................................48 Section 8.20. Construction.........................................................................................48

EXHIBITS

EXHIBIT A – Form of No Default Certificate EXHIBIT B – Form of Pricing Certificate EXHIBIT C – Form of Compliance Certificate

SCHEDULES

Schedule 1 – Existing Debt Schedule 2 – Subsidiaries Schedule 3 – Transactions with Affiliates

CONTINUING COVENANT AGREEMENT

THIS CONTINUING COVENANT AGREEMENT, dated as of February ___, 2011 (this “Agreement”), between AZUSA PACIFIC UNIVERSITY, a California nonprofit religious corporation (the “Borrower”) and WELLS FARGO BANK, NATIONAL ASSOCIATION, a national banking association (the “Bank”).

RECITALS

WHEREAS, the California Municipal Finance Authority (the “Issuer”) intends to issue its California Municipal Finance Authority Variable Rate Demand Refunding Revenue Bonds (Azusa Pacific University Project) Series 2011A in the aggregate principal amount of $70,000,000 (the “Bond” or “Bonds”) pursuant to an Indenture of Trust, dated as of February 1, 2011 (as the same may be further amended, modified or restated in accordance with the terms thereof and hereof, the “Indenture”), by and between the Issuer and U.S. Bank National Association, as trustee (said trustee, together with any successor trustee, hereafter referred to as the “Trustee”); and

WHEREAS, the Issuer intends to loan the proceeds of the Bonds to the Borrower pursuant to a Loan Agreement, dated as of February 1, 2011 (as the same may be further amended, modified or restated in accordance with the terms thereof and hereof, the “Loan Agreement”), between the Issuer and the Borrower; and

WHEREAS, the Borrower intends to use the proceeds of the Bonds to (i) refinance and refund bonds issued to finance certain educational facilities for the benefit of the Borrower, and (ii) the payment of costs and expenses in connection therewith; and

WHEREAS, the Bank has agreed to purchase the Bonds, and as a condition to such purchase, the Bank has required the Borrower to enter into this Agreement.

NOW, THEREFORE, to induce the Bank to purchase the Bonds, and for other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the Borrower and the Bank hereby agree as follows:

ARTICLE I

DEFINITIONS

Section 1.01. Certain Defined Terms. In addition to the terms defined in the recitals and elsewhere in this Agreement, the Indenture and the Loan Agreement, the following terms shall have the following meanings:

“AIB” means Allied Irish Banks, p.l.c.

“AIB Swap Agreements” means collectively (a) the International Swap Dealers Association Master Agreement and any amendments, modifications, supplements or confirmations thereto pursuant to which the Borrower pays a fixed rate of 3.624% on an initial notional amount of $68,200,000 to AIB in return for receiving payments based on 67% of the One-Month London Interbank Offered Rate, as the same may be amended, restated, supplemented or otherwise modified from time to time in accordance with its terms, (b) the International Swap Dealers Association Master Agreement and any amendments, modifications, supplements or confirmations thereto pursuant to which the Borrower pays a fixed rate of 3.890% on an initial notional amount of $50,000,000 to AIB in return for receiving payments based on 67% of the One-Month London Interbank Offered Rate, as the same may be amended, restated, supplemented or otherwise modified from time to time in accordance with its terms, and (c) the International Swap Dealers Association Master Agreement and any amendments, modifications, supplements or confirmations thereto pursuant to which the Borrower pays a fixed rate of 3.830% on an initial notional amount of $21,235,000 to AIB in return for receiving payments based on 67% of the One-Month London Interbank Offered Rate, as the same may be amended, restated, supplemented or otherwise modified from time to time in accordance with its terms.

“Affiliate” means a corporation, partnership, association, joint venture, business trust or similar entity organized under the Laws of any state that directly, or indirectly through one (1) or more intermediaries, Controls or is Controlled by, or is under common Control with, the Borrower or the Bank, as may be applicable.

“Alternate Credit Facility” has the meaning assigned to such term in the Indenture.

“Amortization End Date” means the earlier to occur of (a) the first (1st) anniversary of the Mandatory Tender Date, (b) the date on which the interest rate on all the Bonds has been converted to an interest rate other than the Index Interest Rate and (c) the date on which all Bonds are redeemed, repaid, prepaid or cancelled in accordance with the terms of the Indenture.

“Amortization Payment Date” means (a) the Initial Amortization Payment Date and the first Business Day of each third (3rd) calendar month occurring thereafter which occurs prior to the related Amortization End Date and (b) the related Amortization End Date.

“Amortization Payments” has the meaning assigned to such term in Section 2.01(b) hereof.

“Amortization Period” has the meaning assigned to such term in Section 2.01(b) hereof.

“Applicable Law” means all applicable provisions of all constitutions, statutes, rules, regulations and orders of all governmental bodies, all Governmental Approvals and all orders, judgments and decrees of all courts and arbitrators.

“Applicable Spread” has the meaning assigned to such term in the Indenture.

“Bank” means, initially, Wells Fargo Bank, National Association, a national banking association, and its successors and assigns, and upon the receipt from time to time by the Trustee and the Borrower of a notice described in Section 8.15(a) from time to time means the Person designated in such notice as the Bank, as more fully provided in Section 8.15(a) hereof.

“Bank Rate” means, for any day and with respect to any Unremarketed Bonds, the rate of interest per annum equal to the Base Rate from time to time in effect plus one percent (1.0%); provided that immediately and automatically upon the occurrence of an Event of Default (and without any notice given with respect thereto) and during the continuance of such Event of Default, “Bank Rate” shall mean the Default Rate.

“Base Rate” means, for any day, a fluctuating rate of interest per annum equal to the highest of: (a) the Prime Rate in effect at such time plus one percent (1.0%); (b) the Federal Funds Rate in effect at such time plus two percent (2.0%); and (c) seven percent (7.0%).

“Beneficial Owner” has the meaning assigned to such term in the Indenture, provided, however, that as used herein the term “Beneficial Owner” shall refer exclusively to a Beneficial Owner of the Bonds.

“Bond Documents” means this Agreement, the Indenture, the Bond Purchase Agreement, the Bonds, the Loan Agreement, the Existing Swap Agreements, the Security Agreement, the Control Agreement, the Credit Agreement, the Line of Credit Note, the Intercreditor Agreement, the Tax Certificate, the Guaranties, and any other documents related to any of the foregoing or executed in connection therewith, and any and all future renewals and extensions or restatements of, or amendments or supplements to, any of the foregoing.

“Bond Purchase Agreement” means that Bond Purchase Agreement dated as of February ___, 2011, among the Borrower, the Issuer and the Bank with respect to the Bonds.

“Bonds” has the meaning assigned to such term in the first recital to this Agreement.

“Borrower” means Azusa Pacific University, a California nonprofit religious corporation organized and existing under the laws of the State of California, and any permitted successor or assign thereof hereunder.


“Calculation Agent” has the meaning assigned to such term in the Indenture.

“Capital Lease” means any lease of Property which in accordance with GAAP would be required to be capitalized on the balance sheet of the lessee.

“Christian Leadership Alliance” means Christian Leadership Alliance, a California nonprofit religious corporation organized and existing under the laws of the State of California, and any permitted successor and assign thereof hereunder.

“Closing Date” means the date of execution of this Agreement.

“Code” means the Internal Revenue Code of 1986, as amended from time to time.

“Collateral” has the meaning assigned to such term in Section 3.04 hereof.

“Collateral Agent” means the collateral agent appointed pursuant to the terms of the Intercreditor Agreement, which shall initially be U.S. Bank National Association, in its capacity as Trustee.

“Compliance Certificate” means a certificate substantially in the form of Exhibit C hereto.

“Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. The terms “Controlling” and “Controlled” have meanings correlative thereto. Without limiting the generality of the foregoing, a Person shall be deemed to be Controlled by another Person if such other Person possesses, directly or indirectly, the power to vote 5% or more of the securities having ordinary voting power for the election of directors, managing general partners or the equivalent.

“Control Agreement” means, collectively, [insert description of deposit account and securities account control agreements].

“Controlled Group” means all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control which, together with the Borrower or any subsidiary or affiliate, are treated as a single employer under Section 414 of the Code.

“Credit Agreement” means that certain Credit Agreement dated as of February ___, 2011, between the Borrower and the Bank, as the same may be amended, modified or restated in accordance with its terms.

“Credit Protection Provider” means, collectively, (i) any party, including a Beneficial Owner, who provides credit protection with respect to the Bonds and (ii) any party that participates in any such credit protection.

“Debt” of any Person means at any date, without duplication: (a) all obligations of such Person for borrowed money and reimbursement obligations which are not contingent; (b) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments; (c) all obligations of such Person under any Swap Agreement, (it being understood that the indicative “Settlement Amount” shall not be considered “Debt” for purposes of this definition until the related Swap Agreement terminates and any such “Settlement Amount” remains unpaid); (d) all obligations of such Person to pay the deferred purchase price of property or services, except trade accounts payable arising in the ordinary course of business; (e) all obligations of such Person as lessee under Capital Leases; (f) all Debt of others secured by a lien

on any asset of such Person, whether or not such Debt is assumed by such Person; and (g) all guarantees by such Person of Debt of other Persons.

“Debt Service” for any period means, collectively for the Loan Parties, without duplication, the sum of the amounts required for such period to pay scheduled principal of, to fund any sinking fund requirements for, and to pay interest on Debt, Letter of Credit Fees, mandatory principal payments and other Remarketing Fees; provided, however, there shall be excluded from such definition interest on Debt to the extent such amount has been funded and escrowed in a segregated account for such purpose.

“Debt Service Coverage Ratio” means, for any period of time, the ratio determined by dividing (i) the Income Available for Debt Service for such period by (ii) the Debt Service for such period.

“Deed of Trust” means that certain Deed of Trust, Assignment of Rents and Leases, Security Agreement and Fixture Filing dated as of February ___, 2011, by the Borrower to Wells Fargo Bank, National Association, in its capacity as swap provider, relating to the real property described on Exhibit A thereto.

“Default” means any event or condition which with notice, passage of time or any combination of the foregoing, would constitute an Event of Default.

“Default Rate” means, for any day, a rate of interest per annum equal to the sum of the Base Rate in effect on such day plus three percent (3.0%).

“Determination of Taxability” means and shall be deemed to have occurred on the first to occur of the following:

(i) on that date when the Borrower files any statement, supplemental statement or other tax schedule, return or document which discloses that an Event of Taxability shall have in fact occurred;

(ii) on the date when the Holder or any former Holder notifies the Issuer and the Borrower that it has received a written opinion by an attorney or firm of attorneys of recognized standing on the subject of tax-exempt municipal finance to the effect that an Event of Taxability shall have occurred unless, within 180 days after receipt by the Borrower of such notification from the Holder or any former Holder, the Borrower shall deliver to the Holder and any former Holder a ruling or determination letter issued to or on behalf of the Issuer or the Borrower by the Commissioner or any District Director of the Internal Revenue Service (or any other governmental official exercising the same or a substantially similar function from time to time) to the effect that, after taking into consideration such facts as form the basis for the opinion that an Event of Taxability has occurred, an Event of Taxability shall not have occurred;

(iii) on the date when the Issuer or the Borrower shall be advised in writing by the Commissioner or any District Director of the Internal Revenue Service (or any other

government official or agent exercising the same or a substantially similar function from time to time) that, based upon filings of the Borrower, or upon any review or audit of the Borrower or upon any other ground whatsoever, an Event of Taxability shall have occurred; or

(iv) on that date when the Borrower shall receive notice from the Holder or any former Holder that the Internal Revenue Service (or any other government official or agency exercising the same or a substantially similar function from time to time) has assessed as includable in the gross income of such Holder or such former Holder the interest on the Bonds due to the occurrence of an Event of Taxability;

provided, however, no Determination of Taxability shall occur under subparagraph (iii) or (iv) hereunder unless the Borrower has been afforded the opportunity, at its expense, to contest any such assessment, and, further, no Determination of Taxability shall occur until such contest, if made, has been finally determined; provided further, however, that upon demand from the Holder or former Holder, the Issuer shall promptly reimburse, but solely from payments made by the Borrower, such Holder or former Holder for any payments, including any taxes, interest, penalties or other charges, such Holder (or former Holder) shall be obligated to make as a result of the Determination of Taxability.

“Downgrade Pricing Adjustment” means, as of the Closing Date and until the first Pricing Date, the rate per annum shown opposite Level I below, and thereafter from one Pricing Date to the next, the Downgrade Pricing Adjustment means the rate per annum determined in accordance with the following matrix:

LEVEL

NET ASSETS TO TOTAL FUNDED DEBT RATIO FOR

THE RELATED FISCAL QUARTER

DOWNGRADE PRICING

ADJUSTMENT:

I Greater than 1.20 to 1.0 0.00%

II Less than or equal to 1.20 to 1.0, but greater than 1.15 to 1.0

0.10%

III Less than or equal to 1.15 to 1.0, but greater than 1.10 to 1.0

0.25%

IV Less than or equal to 1.10 to 1.0, but greater than 1.05 to 1.0

0.50%

V Less than or equal to 1.05 to 1.0 1.00%

For purposes hereof, the term “Pricing Date” means, for any fiscal quarter of the Borrower ending on or after March 31, 2011, the date on which the Bank is in receipt of the Loan Parties’ most recent financial statements and related Pricing Certificate for the fiscal quarter then ended, pursuant to Section 5.05. The Downgrade Pricing Adjustment shall be established based on the Net Assets to Total Funded Debt Ratio for the most recently completed fiscal quarter and the Downgrade Pricing Adjustment established on a Pricing Date shall remain in effect until the next Pricing Date. If the Borrower has not delivered its financial statements and Pricing Certificate

by the date such financial statements and Pricing Certificate are required to be delivered under Section 5.05, until such financial statements and Pricing Certificate are delivered, the Downgrade Pricing Adjustment shall be the highest Downgrade Pricing Adjustment (i.e., the Net Assets to Total Funded Debt Ratio shall be deemed to be less than or equal to 1.05 to 1.0). If the Borrower subsequently delivers such financial statements before the next Pricing Date, the Downgrade Pricing Adjustment established by such late delivered financial statements and Pricing Certificate shall take effect from the date of delivery until the next Pricing Date. In all other circumstances, the Downgrade Pricing Adjustment established by such financial statements and Pricing Certificate shall be in effect from the Pricing Date that occurs immediately after the end of the fiscal quarter covered by such financial statements until the next Pricing Date. Each determination of the Downgrade Pricing Adjustment made by the Bank in accordance with the foregoing shall be conclusive and binding on the Borrower absent manifest error.

“Environmental Event” means (i) the presence, release, generation, handling, storage, disposal, removal, transportation or treatment of hazardous materials or hazardous substances (as defined in any applicable Environmental Laws, and including asbestos and materials containing asbestos and mold) in, under, on, at or from any real property owned, occupied or operated by the Borrower, or on any real property adjoining or in the vicinity of real property owned by, leased or operated by the Borrower as a result of migration of hazardous substances from the Borrower’s real property under circumstances where the Borrower’s real property was the source thereof; provided, that in each case the same has resulted in a violation of Environmental Laws the liability of which could reasonably be expected to exceed $100,000 or an impairment to property which materially reduces its value by an amount which could reasonably be expected to exceed $100,000 or materially restricts its use for any lawful purpose or creates a threat to public or worker health or safety or constitutes waste; or (ii) the receipt by the Borrower of any written notice or claim of any violation of any Environmental Law or permit, nuisance, negligence or other tort or other theory alleging liability or responsibility in an amount in excess of $100,000 on the basis of any of the facts, conditions or circumstances described in the foregoing item (i).

“Environmental Laws” means any and all federal, state, local and foreign statutes, laws, regulations, ordinances, rules, judgments, orders, decrees, permits, concessions, grants, franchises, licenses, agreements or other governmental restrictions relating to the environment or to emissions, discharges or releases of pollutants, contaminants, petroleum or petroleum products, chemicals or industrial, toxic or hazardous substances or wastes into the environment including, without limitation, ambient air, surface water, ground water, or land, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of pollutants, contaminants, petroleum or petroleum products, chemicals or industrial, toxic or hazardous substances or wastes or the clean up or other remediation thereof.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and any successor statute of similar import, and regulations thereunder, in each case as in effect from time to time. References to Sections of ERISA shall be construed also to refer to any successor Sections.

“Event of Default” with respect to this Agreement has the meaning assigned to that term in Section 6.01 of this Agreement and, with respect to any Bond Document, has the meaning assigned therein.

“Event of Taxability” means a change in Law or fact or the interpretation thereof, or the occurrence or existence of any fact, event or circumstance (including, without limitation, the taking of any action by the Borrower, or the failure to take any action by the Borrower, or the making by the Borrower of any misrepresentation herein or in any certificate required to be given in connection with the issuance, sale or delivery of the Bonds) which has the effect of causing interest paid or payable on the Bonds to become includable, in whole or in part, in the gross income of the Holder or any former Holder for federal income tax purposes.

“Excepted Affiliates” means [Insert the names of each Affiliate which will not have to be kept at arms-length, including but not limited to the Mexican Subsidiary and the South African Subsidiary.]

“Excepted Loan Parties” means Christian Leadership Alliance [Insert the names of each other Loan Party which will not be a party to the Security Agreement, including but not limited to the Mexican Subsidiary and the South African Subsidiary].

“Excepted Subsidiaries” means Christian Leadership Alliance [Insert the names of each other Subsidiary which will not be a party to a Guaranty].

“Excess Interest Amount” has the meaning assigned to that term in Section 2.02(d) hereof.

[“Existing Debt” shall mean, collectively, (i) the Azusa College Dormitory and Student Union Bonds of 1967, Series A and Series B issued pursuant to the Trust Indenture, dated as of April 1, 1967, by and between Azusa College and Crocker-Citizens National Bank, as trustee and (ii) the obligations under the Existing Swap Agreements.]1

“Existing Swap Agreements” means those certain interest rate swap transactions with the Bank pursuant to that certain ISDA Master Agreement (including the Schedule thereto), dated as of February ___, 2011, between the Borrower and the Bank, and the related Confirmation No. ____________ and Confirmation No. ________________, each between the Borrower and the Bank, as such agreements may be amended, restated, modified and/or supplemented from time to time including, without limitation, any additional confirmations reflecting transactions between the Bank and the Borrower.

“Federal Funds Rate” means, for any day, the rate per annum equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day; provided that: (a) if

1 To be conformed to APU’s balance sheet

such day is not a Business Day, then the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day; and (b) if no such rate is so published on such next succeeding Business Day, then the Federal Funds Rate for such day shall be the average rate (rounded upward, if necessary, to a whole multiple of one-hundredth of one percent) charged to the Bank on such day on such transactions as determined by the Bank.

“Fiscal Year” means the period of twelve (12) consecutive calendar months for which financial statements of the respective entity have been examined by its independent certified public accountants; currently for the Borrower, a year ending on June 30.

“Generally Accepted Accounting Principles” or “GAAP” means generally accepted accounting principles in effect from time to time in the United States and applicable to entities such as the Borrower.

“Governmental Approval” means an authorization, consent, approval, license, or exemption of, registration or filing with, or report to any Governmental Authority.

“Governmental Authority” means any federal, state or local government (whether domestic or foreign), any political subdivision thereof or any other governmental, quasi-governmental, judicial, public or statutory instrumentality, authority, body, agency, bureau or entity (including any zoning authority, the Federal Deposit Insurance Corporation or the Federal Reserve Board, any central bank or any comparable authority), or any arbitrator with authority to bind a party at law.

“Gross Revenues” has the meaning assigned to such term in the Security Agreement.

“Guarantor” and “Guarantors” have the meanings set forth in Section 5.32 hereof.

“Guaranty” and “Guaranties” have the meanings set forth in Section 5.32 hereof.

“Holder” has the meaning assigned to such term in the Indenture.

“Income Available for Debt Service” means, collectively for the Loan Parties, for the period of determination, the increase in Net Assets for such period determined in accordance with GAAP, plus depreciation, amortization, interest expenses, Letter of Credit Fees, Remarketing Fees, and excluding (i) any gain or loss resulting from either the extinguishment of Debt, the sale, exchange or other disposition of capital assets not in the ordinary course of business, (ii) earnings resulting from any reappraisal, revaluation or write-up of fixed or capital assets, (iii) any realized losses on the sale of investments or derivative instruments, (iv) any appreciation or depreciation of the carrying value of investments or derivative instruments, (v) other extraordinary items and the proceeds of insurance other than business interruption insurance, and (vi) any permanently restricted gifts, donations, grants, pledges, devises, legacies, bequests or contributions that are unavailable to fund Debt Service or operating expenses. “Income Available for Debt Service” will also be adjusted to exclude unrestricted and temporarily restricted capital campaign pledges and to include unrestricted and temporarily

restricted capital campaign receipts to the extent that these cash receipts are available to fund Debt Service or operating expenses.

“Indenture” has the meaning assigned to such term in the recitals.

“Index Interest Rate” has the meaning assigned to such term in the Indenture.

“Index Interest Rate Period” has the meaning assigned to such term in the Indenture.

“Initial Amortization Payment Date” means the first Business Day of the third (3rd) full calendar month following the Mandatory Tender Date.

“Initial Period” has the meaning assigned to such term in the Indenture.

“Intercreditor Agreement” means that certain Intercreditor and Collateral Agency Agreement dated as of February ___, 2011, among the Secured Creditors and the Collateral Agent, regarding the Collateral, as the same may be amended, supplemented and modified from time to time.

“Interest Payment Date” shall mean with respect to the Bonds, the first Business Day of each calendar month.

“Investment Policy” means, initially, the investment policy of the Borrower delivered to the Bank on or prior to the Closing Date, pursuant to Section 3.01(a)(v) hereof, and thereafter, the most recent investment policies of the Borrower delivered to the Bank pursuant to Section 5.05(h) hereof.

“Issuer” has the meaning assigned to such term in the recitals.

“Laws” means federal, state and local laws, statutes, rules, ordinances, regulations, codes, licenses, authorizations, decisions, injunctions, interpretations, orders or decrees of any court or other Governmental Authority having jurisdiction as may be in effect from time to time.

“Letter of Credit Fees” means all facility fees or commitment fees payable to a provider or an issuer of an agreement providing credit enhancement or liquidity support to any Debt of the Borrower including, without limitation, the Bonds.

“Lien” means any lien, security interest or other charge or encumbrance of any kind, or any other type of preferential arrangement, including without limitation the lien or retained security title of a conditional vendor and any easement, right of way, Capital Lease or other encumbrance on title to the Property.

“Line of Credit Note” means that certain promissory note issued in favor of the Bank pursuant to the Credit Agreement evidencing and securing the obligations owed to the Bank.

“Loan Agreement” has the meaning assigned to such term in the recitals.

“Loan Parties” means, collectively, the Borrower and each direct and indirect Subsidiary of the Borrower.

“Majority Holder” means the owner or owners of a majority of the aggregate principal amount of Bonds from time to time. As of the Closing Date, Wells Fargo Bank, National Association is the Majority Holder.

“Mandatory Tender Date” means the date on which the Bonds are subject to mandatory tender for purchase on the last day of the Initial Period pursuant to Section 2.05(e) of the Indenture.

“Mandatory Tender Purchase Price” means an amount equal to 100% of the principal amount of the Bonds subject to mandatory tender for purchase on the Mandatory Tender Date.

“Margin Stock” has the meaning assigned to such term in Regulation U promulgated by the Board of Directors of the Federal Reserve System, as now and hereafter from time to time in effect.

“Material Adverse Change” means a material adverse effect on (i) the business, operations, results of operations, assets, liabilities or condition (financial or otherwise) of the Borrower and its Subsidiaries taken as a whole or (ii) the value of the assets and property of the Borrower and its Subsidiaries, taken as a whole. For purposes of this definition, the term “material” means any action, transaction, event or occurrence, or a series of actions, transactions, events or occurrences taken cumulatively, which results in a reduction of the Net Assets of the Loan Parties by ten percent (10%) or more, measured as of the date of any action, transaction, event or occurrence on a pro forma basis, based on the total Net Assets of the Loan Parties for the immediately preceding four fiscal quarters.

“Material Adverse Effect” means any material adverse change in or effect on: (a) the business, assets, operations, prospects or financial or other condition of the Loan Parties; (b) the ability or authority of any Loan Party to pay the Obligations or perform their respective obligations in accordance with the terms of this Agreement, any Guaranty or any of the Bond Documents and to avoid an Event of Default under this Agreement or any Bond Document; or (c) the legality, validity, binding effect or enforceability of this Agreement or any Bond Document.

“Material Plan” has the meaning assigned to such term in Section 6.01(l) hereof.

“Net Assets” means the amount so designated as the net assets on the most recent consolidated balance sheet of the Loan Parties prepared in accordance with GAAP.

“Net Assets to Total Funded Debt Ratio” means, as of the date of determination thereof, the ratio of Net Assets to Total Funded Debt as of such date.

“No Default Certificate” means a certificate substantially in the form of Exhibit A hereto.

“Non-Core Asset” means any tangible personal property that, in the reasonable business judgment of the applicable Loan Party, has become obsolete or worn out, or which is not used or useful in the essential functions of the applicable Loan Party.

“Obligations” means all amounts payable by the Borrower, arising under or pursuant to this Agreement and the other Bond Documents (including any amounts to reimburse the Bank for any advances or expenditures by it under any of such documents).

“Patriot Act” means the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Title III of Pub. L. 107-56 (signed into law October 26, 2001).

“PBGC” means the Pension Benefit Guaranty Corporation or any successor thereto.

“Person” means an individual, partnership, corporation (including a business trust), limited liability company, trust, unincorporated association, joint venture or other entity.

“Plan” means, with respect to the Borrower at any time, an employee pension benefit plan which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Code and either (i) is maintained by a member of the Controlled Group for employees of a member of the Controlled Group of which the Borrower is a part, (ii) is maintained pursuant to a collective bargaining agreement or any other arrangement under which more than one employer makes contributions and to which a member of the Controlled Group of which the Borrower is a part is then making or accruing an obligation to make contributions or has within the preceding five plan years made contributions.

“Pricing Certificate” means a certificate substantially in the form of Exhibit B hereto.

“Prime Rate” means on any day, the rate of interest per annum then most recently established by the Bank as its “prime rate.” Any such rate is a general reference rate of interest, may not be related to any other rate, and may not be the lowest or best rate actually charged by the Bank to any customer or a favored rate and may not correspond with future increases or decreases in interest rates charged by other lenders or market rates in general, and that the Bank may make various business or other loans at rates of interest having no relationship to such rate. If the Bank ceases to exist or to establish or publish a prime rate from which the Prime Rate is then determined, the applicable variable rate from which the Prime Rate is determined thereafter shall be instead the prime rate reported in The Wall Street Journal (or the average prime rate if a high and a low prime rate are therein reported), and the Prime Rate shall change without notice with each change in such prime rate as of the date such change is reported.

“Property” means any interest in any kind of property or asset, whether real, personal or mixed, or tangible or intangible, whether now owned or hereafter acquired.

“Remarketing Fees” means all fees payable to a broker-dealer, commercial bank or other entity serving as a remarketing agent for Debt of the Borrower consisting of variable rate bonds or commercial paper.

“Responsible Officer” means: (a) with respect to the Borrower in connection with any Compliance Certificate or any other certificate or notice pertaining to any financial information required to be delivered by the Borrower hereunder, the chief financial officer, treasurer or executive director of finance of the Borrower; and (b) otherwise, with respect to the Borrower, the chief executive officer, president, chief financial officer, treasurer or controller of the Borrower.

“S&P” means Standard & Poor’s Ratings Services, a Division of The McGraw-Hill Companies, Inc., or any successor thereto.

“Security Agreement” means that certain Security Agreement dated as of February ___, 2011, among the Loan Parties (other than the Excepted Loan Parties) and the Collateral Agent, as the same may be amended, supplemented or modified from time to time.

“Series 2010B Bonds” means the California Municipal Finance Authority Refunding Revenue Bonds (Azusa Pacific University Project) Series 2010B issued by the Issuer pursuant to the Indenture.


“Submitted Financial Statements” has the meaning assigned to such term in Section 4.06.

“Subsidiary” means, as to the Borrower, (i) with respect to any for profit corporation, any corporation or other entity of which more than 50% of the outstanding stock or comparable equity interests entitled to vote in the election of the board of directors or similar governing body of such entity is directly or indirectly owned by the Borrower, by one or more Subsidiaries or by the Borrower and one or more Subsidiaries, and (ii) with respect to any not for profit corporation, any corporation or other entity which is controlled, directly or indirectly, by the Borrower or any Subsidiary.

“Swap Agreement” means (a) any and all rate swap transactions, basis swaps, credit derivative transactions, forward rate transactions, commodity swaps, commodity options, forward commodity contracts, equity or equity index swaps or options, bond or bond price or bond index swaps or options or forward bond or forward bond price or forward bond index transactions, interest rate options, forward foreign exchange transactions, cap transactions, floor transactions, collar transactions, currency swap transactions, cross-currency rate swap transactions, currency options, spot contracts, or any other similar transactions or any combination of any of the foregoing (including any options to enter into any of the foregoing), whether or not any such transaction is governed by or subject to any master agreement, and (b) any and all transactions of any kind, and the related confirmations, which are subject to the terms and conditions of, or governed by, any form of master agreement published by the International Swaps and Derivatives Association, Inc., any International Foreign Exchange Master Agreement, or any other master agreement (any such master agreement, together with any related schedules, a “Master Agreement”), including any such obligations or liabilities under any Master Agreement.

“Tax Certificate” means the tax certificate of the Borrower dated the Closing Date.

“Tax Event” means a Determination of Taxability.

“Tax-Exempt Organization” means a Person organized under the laws of the United States of America or any state thereof which is an organization described in Section 501(c)(3) of the Code, which is exempt from federal income taxes under Section 501(a) of the Code, which is not a “private foundation” within the meaning of Section 509(a) of the Code, or corresponding provisions of federal income tax laws from time to time in effect.

“Taxable Date” means the date of occurrence of a Tax Event.

“Taxable Period” has the meaning assigned to such term in Section 2.02(b) hereof.

“Taxable Rate” means, with respect to a Taxable Period, the product of (i) the average interest rate on the Bonds during such period and (ii) 1.54.

“Total Funded Debt” means, at any time the same is to be determined, the aggregate of all Debt of the Loan Parties at such time determined on a consolidated basis in accordance with GAAP.

“Trust Estate” has the meaning assigned to such term in the Indenture.

“Unrestricted and Temporarily Restricted Cash” means, at any point in time, all cash or cash equivalents acceptable to the Bank held by the Loan Parties and treated by the applicable Loan Party as unrestricted and available for use for the payment of principal and premium, if any, and interest on Debt or for the payment of operating expenses of such Loan Party or which is temporarily restricted by the donor thereof or by the Board of Trustees (or similar body) of such Loan Party to a use which is not inconsistent with such uses, but which will be unrestricted and available for use not later than the end of the immediately succeeding Fiscal Year.

“Unrestricted and Temporarily Restricted Marketable Securities” means marketable securities acceptable to the Bank, but only to the extent that such marketable securities (a) are held by the Loan Parties and treated by the applicable Loan Party as unrestricted and available for use for the payment of principal and premium, if any, and interest on Debt or for the payment of operating expenses of such Loan Party or which is temporarily restricted by the donor thereof or by the Board of Trustees (or similar body) of such Loan Party to a use which is inconsistent with such uses, but which will be unrestricted and available for use not later than the end of the immediately succeeding Fiscal Year and (b) have a maturity of less than one year.

“Unfunded Vested Liabilities” means, with respect to any Plan at any time, the amount (if any) by which (i) the present value of all vested nonforfeitable accrued benefits under such Plan exceeds (ii) the fair market value of all Plan assets allocable to such benefits, all determined as of the then most recent valuation date for such Plan, but only to the extent that such excess represents a potential liability of a member of the Controlled Group to the PBGC or such Plan under Title IV of ERISA.

“Unremarketed Bonds” means Bonds with respect to which the Bank has not received payment of the Mandatory Tender Purchase Price, if any, on the Mandatory Tender Date.

“Welfare Plan” means a “welfare plan,” as such term is defined in Section 3(1) of ERISA.

Section 1.02. Computation of Time Periods. In this Agreement, in the computation of a period of time from a specified date to a later specified date, the word “from” means “from and including” and the words “to” and “until” each mean “to but excluding.”

Section 1.03. Construction. Unless the context of this Agreement otherwise clearly requires, references to the plural include the singular, to the singular include the plural and to the part include the whole. The word “including” shall be deemed to mean “including but not limited to,” and “or” has the inclusive meaning represented by the phrase “and/or.” The words “hereof,” “herein,” “hereunder” and similar terms in this Agreement refer to this Agreement as a whole and not to any particular provision of this Agreement. The Section headings contained in this Agreement and the table of contents preceding this Agreement are for reference purposes only and shall not control or affect the construction of this Agreement or the interpretation thereof in any respect. Section, subsection and exhibit references are to this Agreement unless otherwise specified.

Section 1.04. Incorporation of Certain Definitions by Reference. Any capitalized term used herein and not otherwise defined herein shall have the meaning provided therefor in the Indenture or the Loan Agreement.

Section 1.05. Accounting Terms and Determinations. Unless otherwise specified herein, all accounting terms used herein shall be interpreted, all accounting determinations hereunder shall be made, and all financial statements required to be delivered hereunder shall be prepared, in accordance with GAAP. In the event of changes to GAAP which become effective after the Closing Date, the Borrower and the Bank agree to negotiate in good faith appropriate revisions of this Agreement so as to perpetuate the meaning and effect of such provisions as originally negotiated and agreed upon.

Section 1.06. Relation to Other Documents; Acknowledgment of Different Provisions of Bond Documents; Incorporation by Reference. (a) Nothing in this Agreement shall be deemed to amend, or relieve the Borrower of its obligations under, any Bond Document to which it is a party. Conversely, to the extent that the provisions of any Bond Document allow the Borrower to take certain actions, or not to take certain actions, with regard for example to Permitted Encumbrances, incurrence of Debt, transfers of assets, maintenance of financial ratios and similar matters, the Borrower nevertheless shall be fully bound by the provisions of this Agreement.

(b) Except as provided in subsection (c) of this Section 1.06, all references to other documents shall be deemed to include all amendments, modifications and supplements thereto to the extent such amendment, modification or supplement is made in accordance with the provisions of such document and this Agreement.

(c) All provisions of this Agreement making reference to specific Sections of any Bond Document shall be deemed to incorporate such Sections into this Agreement by reference as though specifically set forth herein (with such changes and modifications as may be herein provided) and shall continue in full force and effect with respect to this Agreement notwithstanding payment of all amounts due under or secured by the Bond Documents, the termination or defeasance thereof or any amendment thereto or any waiver given in connection therewith, so long as this Agreement is in effect and until all Obligations are paid in full. No amendment, modification, consent, waiver or termination with respect to any of such Sections shall be effective as to this Agreement until specifically agreed to in writing by the parties hereto with specific reference to this Agreement.

ARTICLE II

THE BORROWER’S OBLIGATIONS

Section 2.01. Payment Obligations. (a) The Borrower hereby unconditionally, irrevocably and absolutely agrees to make prompt and full payment of all payment obligations owed to the Bank under the Bond Documents and to pay any other Obligations owing to the Bank whether now existing or hereafter arising, irrespective of their nature, whether direct or indirect, absolute or contingent, with interest thereon at the rate or rates provided in such Bond Documents and under such Obligations.

(b) In the event the Bank has not received the Mandatory Tender Purchase Price on the Mandatory Tender Date, the Borrower shall cause the Unremarketed Bonds to be redeemed on the Mandatory Tender Date; provided that, if the Borrower is required to redeem Unremarketed Bonds as set forth above and (i) no Default or Event of Default shall have occurred and be continuing and (ii) the representations and warranties set forth in Article IV shall be true and correct in all material respects on the Mandatory Tender Date, then the Borrower shall cause such Bonds to be redeemed in installments payable on each Amortization Payment Date (each such payment, an “Amortization Payment”), with the final installment in an amount equal to the entire then-outstanding principal amount of such Bonds to be redeemed on the Amortization End Date (the period commencing on the Mandatory Tender Date and ending on the Amortization End Date is herein referred to as the “Amortization Period”). Each Amortization Payment shall be that amount of principal which will result in equal (as nearly as possible) aggregate Amortization Payments over the Amortization Period.

(c) In the event the Bonds are redeemed in whole or in part, or the interest rate on the Bonds is converted to a rate of interest other than the Index Interest Rate, prior to the third (3rd) anniversary of the Closing Date, the Borrower shall pay to the Bank a termination fee equal to the product of (i) the Applicable Spread in effect on the date of such redemption or conversion, (ii) the principal amount of Bonds so redeemed or converted and (iii) a fraction, the numerator of which is the number of days from and including the date of redemption or conversion to and including such third (3rd) anniversary, and the denominator of which is three hundred sixty-five (365).

(d) The Borrower shall pay within thirty (30) days after demand:

(i) if an Event of Default shall have occurred, all reasonable costs and expenses of the Bank in connection with the enforcement (whether by means of legal proceedings or otherwise) of any of its rights under this Agreement, the other Bond Documents and such other documents which may be delivered in connection therewith;

(ii) a fee for each amendment of any Bond Document, consent by the Bank or waiver by the Bank under any Bond Document, in each case in a minimum amount of $2,500, which fee may be waived by the Bank at its discretion;

(iii) the reasonable fees and out-of-pocket expenses for outside counsel or other reasonably required consultants to the Bank in connection with advising the Bank as to its rights and responsibilities under this Agreement and the other Bond Documents or in connection with responding to requests from the Borrower for approvals, consents and waivers; and

(iv) any amounts advanced by or on behalf of the Bank to the extent required to cure any Default, Event of Default or event of nonperformance hereunder or any Bond Document, together with interest at the Default Rate.

In addition, if at any time any Governmental Authority shall require revenue or other documentary stamps or any other tax in connection with the execution or delivery of this Agreement or other Bond Documents, then, if the Borrower lawfully may pay for such stamps, taxes or fees, the Borrower shall pay, when due and payable, for all such stamps, taxes and fees, including interest and penalties thereon, and the Borrower agrees to save the Bank harmless from and against any and all liabilities with respect to or resulting from any delay of Borrower in paying, or omission of Borrower to pay, such stamps, taxes and fees hereunder.

Section 2.02. Increased Payments. (a) If any Beneficial Owner or Credit Protection Provider shall determine that any Law or governmental guideline or governmental interpretation or application thereof by any Governmental Authority charged with the interpretation or administration thereof or compliance with any request or directive of any Governmental Authority now existing or hereafter adopted:

(i) subjects the Beneficial Owner or Credit Protection Provider to taxation (except for taxes on the overall net income or share capital of such Beneficial Owner or Credit Protection Provider) with respect to this Agreement, the other Bond Documents, the Bonds or payment by the Borrower of principal, interest and fees or other amounts due from the Borrower hereunder,

(ii) imposes, modifies or deems applicable any reserve, special deposit or similar requirement against credits or commitments to extend credit extended by, assets (funded or contingent) of, deposits with or for the account of, or other acquisitions of funds by such Beneficial Owner or Credit Protection Provider,

(iii) imposes, modifies or deems applicable any capital adequacy or similar requirement (1) against assets (funded or contingent) of, or credits or commitments to extend credit extended by, such Beneficial Owner or Credit Protection Provider, or (2) otherwise applicable to the obligations of such Beneficial Owner or Credit Protection Provider under this Agreement, or

(iv) imposes upon such Beneficial Owner or Credit Protection Provider any other condition or expense with respect to this Agreement, the Bonds or its making, maintenance or funding of any loan or any security therefor; and the result of any of the foregoing is to increase the cost to, reduce the income receivable by, or impose any expense (including loss of margin) upon such Beneficial Owner or Credit Protection Provider with respect to this Agreement, the Bonds, or the making, maintenance or funding of any loan (or in the case of any capital adequacy or similar requirement, to have the effect of reducing the rate of return on such Beneficial Owner’s or Credit Protection Provider’s capital, taking into consideration such Beneficial Owner’s or Credit Protection Provider’s policies with respect to capital adequacy) by an amount which such Beneficial Owner or Credit Protection Provider deems to be material to it (except for taxes on the overall net income or share capital of such Beneficial Owner or Credit Protection Provider,

then such Beneficial Owner or Credit Protection Provider shall from time to time notify, or cause to be notified, the Borrower of the amount determined in good faith (using any reasonable averaging and attribution methods) by such Beneficial Owner or Credit Protection Provider (which determination shall be conclusive absent manifest error) to be necessary to compensate such Beneficial Owner or Credit Protection Provider for such increase, reduction or imposition. Such amount shall be due and payable by the Borrower to such Beneficial Owner or Credit Protection Provider on the thirtieth (30th) day after demand. A certificate by such Beneficial Owner or Credit Protection Provider as to the amount due and payable under this Section 2.02 from time to time and the method of calculating such amount shall be conclusive absent manifest error and shall be provided to the Borrower with the notice described above. In determining any such amount, a Beneficial Owner or Credit Protection Provider may use any reasonable averaging and attribution methods.

(b) (i) In the event a Taxable Date occurs, in addition to the amounts required to be paid by the Issuer under the Indenture and the Bonds, the Borrower hereby agrees to pay to each Beneficial Owner on demand therefor (1) an amount equal to the difference between (A) the amount of interest that would have been paid to such Beneficial Owner on the Bonds during the period for which interest on the Bonds is includable in the gross income of such Beneficial Owner if the Bonds had borne interest at the Taxable Rate, beginning on the Taxable Date (the “Taxable Period”), and (B) the amount of interest actually paid to the Beneficial Owner during the Taxable Period, and (2) an amount equal to any interest, penalties or charges owed by such Beneficial Owner as a result of interest on the Bonds becoming includable in the gross income of such Beneficial Owner, together with any and all attorneys’ fees, court costs, or other out-of-pocket costs incurred by such Beneficial Owner in connection therewith.

(ii) Subject to the provisions of clauses (iii) and (iv) below, such Beneficial Owner shall afford the Borrower the opportunity, at the Borrower’s sole cost and expense, to contest (1) the validity of any amendment to the Code which causes the interest on the Bonds to be includable in the gross income of such Beneficial Owner or (2) any challenge to the validity of the tax exemption with respect to the interest on the Bonds, including the right to direct the necessary litigation contesting such challenge (including administrative audit appeals).

(iii) The following shall constitute conditions precedent to the exercise by the Borrower of its right to contest set forth in clause (ii) above, the Borrower shall, on demand, immediately reimburse such Beneficial Owner for any and all expenses (including reasonable outside attorneys’ fees for services that may be required or desirable, as determined by such Beneficial Owner in its sole discretion) that may be incurred by the Bank in connection with any such contest, and shall, on demand, immediately reimburse the Bank for any and all penalties or other charges payable by such Beneficial Owner for failure to include such interest in its gross income; and

(iv) The obligations of the Borrower under this Section 2.02(b) shall survive the termination of this Agreement, the termination of the Loan Agreement, and the redemption or other payment in full of the Bonds.

(c) Upon the occurrence of an Event of Default, the Obligations shall bear interest at the Default Rate and which shall be payable by the Borrower to each Beneficial Owner upon demand therefor.

(d) (i) If the amount of interest payable for any period in accordance with the terms hereof or the Bonds exceeds the amount of interest that would be payable for such period had interest for such period been calculated at the maximum interest rate permitted by applicable Law, then interest for such period shall be payable in an amount calculated at the maximum interest rate permitted by applicable Law.

(ii) Any interest that would have been due and payable for any period but for the operation of the immediately preceding subclause (i) shall accrue and be payable as provided in this subclause (ii) and shall, less interest actually paid to the Bank for such period, constitute the “Excess Interest Amount.” If there is any accrued and unpaid Excess Interest Amount as of any date, then the principal amount with respect to which interest is payable shall bear interest at the maximum interest rate permitted by applicable Law until payment to each Beneficial Owner of the entire Excess Interest Amount.

(iii) Notwithstanding the foregoing, on the date on which no principal amount hereunder remains unpaid, the Borrower shall pay to each Beneficial Owner a fee equal to any accrued and unpaid Excess Interest Amount.

Section 2.03. Obligations Absolute. The payment obligations of the Borrower under this Agreement shall be unconditional and irrevocable and shall be paid strictly in accordance with the terms of this Agreement under all circumstances, including without limitation the following:

(a) any lack of validity or enforceability of this Agreement, the Bonds or any of the other Bond Documents;

(b) any amendment or waiver of or any consent to departure from all or any of the Bond Documents;

(c) the existence of any claim, set-off, defense or other right which the Borrower may have at any time against the Bank, any other Beneficial Owner or any other person or entity, whether in connection with this Agreement, the other Bond Documents, the transactions contemplated herein or therein or any unrelated transaction; or

(d) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing.

Notwithstanding this Section, the Bank acknowledges the Borrower may have the right to bring a collateral action with respect to one or more of the foregoing circumstances. The Borrower’s payment obligations shall remain in full force and effect pending the final disposition of any such action. All fees payable pursuant to this Agreement shall be deemed to be fully earned when due and non-refundable when paid.

Section 2.04. Funding Indemnity. In the event the Bank shall incur any loss, cost, or expense (including, without limitation, any loss, cost, or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired or contracted to be acquired by the Bank to purchase or hold the Bonds or the relending or reinvesting of such deposits or other funds or amounts paid or prepaid to the Bank) as a result of any redemption of the Bonds on a date other than an Interest Payment Date for any reason, whether before or after default, and whether or not such payment is required by any provision of this Agreement or the Indenture, then upon the demand of the Bank, the Borrower shall pay to the Bank a redemption premium in such amount as will reimburse the Bank for such loss, cost, or expense. If the Bank requests such redemption premium, it shall provide to the Borrower a certificate setting forth the computation of the loss, cost, or expense giving rise to the request for such redemption premium in reasonable detail and such certificate shall be conclusive if reasonably determined.

ARTICLE III

CONDITIONS PRECEDENT TO PURCHASE OF BONDS

Section 3.01. Documentary Requirements. The obligation of the Bank to purchase the Bonds is subject to the conditions precedent that the Bank shall have received, on or before the Closing Date, the items listed below in this Section, each dated and in form and substance as is satisfactory to the Bank. However, should the Bank purchase the Bonds prior to its receipt and

approval of any of the following items, such purchase shall not be deemed to be a waiver of any documentary requirement.

(a) The following organizational documents:

(i) copies of the resolutions (or similar instrument) of the governing body of each Loan Party approving the execution and delivery of the Bond Documents to which it is a party, approving the form of the Bond Documents to which it is not a party and the other matters contemplated hereby, certified by the Secretary or an Assistant Secretary of each such Loan Party as being true and complete and in full force and effect on the Closing Date;

(ii) the Articles of Incorporation and by-laws (or comparable instruments) of each Loan Party, certified to be in full force and effect as of a date not more than thirty (30) days preceding the Closing Date by an appropriate official of the applicable jurisdiction of organization and certified by the Secretary or Assistant Secretary of each such Loan Party to be in full force and effect on the Closing Date, along with copies of the Submitted Financial Statements;

(iii) certificates of existence or good standing for each Loan Party issued by an appropriate official of the applicable jurisdiction of organization, issued no more than thirty (30) days preceding the Closing Date;

(iv) a certificate of the Secretary or an Assistant Secretary of each Loan Party certifying the names and signatures of the persons authorized to sign, on behalf of each such Loan Party, the Bond Documents to which it is a party and the other documents to be delivered by it hereunder or thereunder; and

(v) a copy of the Investment Policy.

(b) The following financing documents:

(i) an executed original or certified copy, as applicable, of each Bond Document;

(ii) a specimen of the Bond deposited with The Depository Trust Company;

(iii) written evidence satisfactory to the Bank of the termination of the AIB Swap Agreements and the effectiveness of the Existing Swap Agreement; and

(iv) written evidence satisfactory to the Bank that the Series 2010B Bonds have been issued and have such terms as are acceptable to the Bank, including, without limitation, the maturity, amortization and interest rate thereof.

(c) The following opinions, addressed to the Bank or on which the Bank is otherwise expressly authorized to rely:

(i) from counsel to the Loan Parties, opinions as to the due execution and delivery of the Bond Documents, the enforceability of each Bond Document to which any Loan Party is a party and such other customary matters as the Bank may reasonably request;

(ii) from counsel to the Issuer, opinions as to the due execution and delivery of the Bond Documents, the enforceability of each Bond Document to which the Issuer is a party and such other customary matters as the Bank may reasonably request; and

(iii) from Bond Counsel to the Issuer, an Approving Opinion (as such term is defined in the Indenture).

(d) True and correct copies of all approvals of any Governmental Authority, if any, necessary for the Loan Parties to enter into this Agreement, the Bond Documents to which they are party and the transactions contemplated thereby.

(e) A certificate signed by a Responsible Officer of the Borrower dated the Closing Date stating that:

(i) the representations and warranties contained in Article IV of this Agreement are true and correct on and as of the Closing Date as though made on such date, unless such representation and warranty only relates to an earlier date;

(ii) no Event of Default or Default has occurred and is continuing, or would result from the execution and delivery of this Agreement or any Bond Document to which the Borrower is a party; and

(iii) there has been no event or circumstance since the date of the financial statements dated June 30, 2010, that has had or could be reasonably expected to have, either individually or in the aggregate, a Material Adverse Effect.

(f) A certificate signed by the chief financial officer of the Borrower dated the Closing Date stating that:

(i) the pro forma Debt Service Coverage Ratio is not less than 1.40 to 1.0;

(ii) the total Debt of the Borrower is not greater than $142,500,000; and

(iii) the aggregate of Unrestricted and Temporarily Restricted Cash and Unrestricted and Temporarily Restricted Marketable Securities is not less than $50,000,000.

Section 3.02. Credit Requirements. Prior to the Closing Date, the Bank shall have determined, in its sole discretion, based in part upon the information and reports submitted by the Borrower, that the Loan Parties meet the Bank’s credit requirements.

Section 3.03. Litigation. The Bank shall have received a written description of all actions, suits or proceedings pending or, to the Borrower’s knowledge, threatened against any Loan Party or any of their respective Affiliates in any court or before any arbitrator of any kind or before or by any governmental or non-governmental body, if any, and such other statements, certificates, agreements, documents and information with respect thereto as the Bank may reasonably request.

Section 3.04. Security. All Obligations of the Loan Parties shall be secured by the following (collectively, the “Collateral”): (a) a perfected first priority Lien on and security interest in all personal property (including without limitation the Gross Revenues) of the Loan Parties, other than the Excepted Loan Parties, in favor of the Bank as set forth in the Security Agreement and the Control Agreement; (b) a perfected Lien on and security interest in the Trust Estate and other amounts pledged under the Indenture and (c) all proceeds of or substitutes or replacements for any of the foregoing Collateral.

Section 3.05. Other Matters. All other legal matters pertaining to the execution and delivery of this Agreement and the Bond Documents shall be satisfactory to the Bank and its counsel, and the Bank shall have received such other statements, certificates, agreements, documents and information with respect to the Loan Parties, the Issuer and the other parties to the Bond Documents and matters contemplated by this Agreement as the Bank may reasonably request.

Section 3.06. Payment of Fees and Expenses. On or prior to the Closing Date, the Bank shall have received (i) a closing fee in an amount equal to $125,000 and (ii) reimbursement of the Bank’s fees and expenses (including, without limitation, the fees and expenses of counsel to the Bank), and any other fees incurred in connection with the transaction contemplated by the Bond Documents.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES

Section 4.01. Organization and Qualification. Each Loan Party is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, has full and adequate power to own its Property and conduct its business as now conducted, and is duly licensed or qualified and in good standing in each jurisdiction in which the nature of the business conducted by it or the nature of the Property owned or leased by it requires such licensing or qualifying except where the failure to be so qualified would not have a Material Adverse Effect. Each Loan Party has full right and authority to enter into the Bond Documents to which it is a party and to perform each and all of the matters and things therein provided for. The Bond Documents to which the Loan Parties are a party do not, nor does the performance or observance by any Loan Party of any of the matters or things therein provided for, contravene

any provision of law or any charter, articles of incorporation or by-law (or similar instrument) provision of any Loan Party or any covenant, indenture or agreement of or affecting any Loan Party or any of its respective Property; except in each instance where such failure would not have a Material Adverse Effect.

Section 4.02. Binding Effect. This Agreement and the Bond Documents to which the Loan Parties are a party constitute the legal, valid and binding obligations of the Loan Parties enforceable against the Loan Parties in accordance with their respective terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium, or other laws or equitable principles relating to or limiting creditor’s rights with respect to non-profit entities generally.

Section 4.03. Compliance with Laws and Contracts. Neither the execution and delivery by the Loan Parties of the Bond Documents to which they are a party, nor the consummation of the transactions herein or therein contemplated, nor compliance with the provisions hereof or thereof will violate any law, rule, regulation, order, writ, judgment, injunction, decree or award binding on it, its organizational documents or the provisions of any indenture relating to borrowed money, material instrument or material agreement to which any Loan Party is a party or is subject, or by which it or its Property is bound, or conflict with or constitute a default under or result in the creation or imposition of any Lien upon the Property of any Loan Party pursuant to the terms of any such indenture, instrument or agreement (other than as expressly created or permitted pursuant to the Bond Documents), the violation of or conflict with or default under which could reasonably be expected to have a Material Adverse Effect. The obligations, duties and liabilities of the Borrower hereunder do not contravene or violate any provisions of the Loan Agreement, the Indenture or any other Bond Document to which it is a party, except to the extent that any such contravention or violation could not reasonably be expected to have a Material Adverse Effect.

Section 4.04. Subsidiaries. Schedule 2 correctly sets forth each Subsidiary of the Borrower and its respective jurisdiction of organization.

Section 4.05. Margin Stock. No Loan Party is engaged in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulation U of the Board of Governors of the Federal Reserve System), and no part of the proceeds of the Bonds will be used to purchase or carry any such margin stock or extend credit to others for the purpose of purchasing or carrying any such margin stock.

Section 4.06. Financial Reports. The consolidated statements of financial position of the Loan Parties as at June 30, 2010, and consolidated statements of activities and changes in net assets and consolidated statements of cash flows for the fiscal year then ended, and accompanying notes thereto, which financial statements are accompanied by the audit report of CapinCrouse, independent public accountants, heretofore furnished to the Bank (the “Submitted Financial Statements”), which are consistent in all material respects with the audited financial statements of the Loan Parties for the fiscal year ended June 30, 2009, fairly present the financial condition of the Loan Parties in all material respects as of such dates and the results of its operations for the periods then ended in conformity with GAAP. As of the date hereof, no Loan

Party has any contingent liabilities which are material to it other than as indicated on (or in the notes to) such financial statements. Since June 30, 2010, there have been no material adverse changes in the condition (financial or otherwise) of the Loan Parties taken as a whole.

Section 4.07. Correct Information. All information, reports and other papers and data with respect to Loan Parties furnished by the Loan Parties to the Bank were, at the time the same were so furnished, correct in all material respects. Any financial, budget and other projections furnished by the Loan Parties to the Bank were prepared in good faith on the basis of the assumptions stated therein, which assumptions were fair and reasonable in light of conditions existing at the time of delivery of such financial, budget or other projections, and represented, and as of the date of this representation, represent (subject to the updating or supplementation of any such financial, budget or other projections by any additional information provided to the Bank in writing, the representations contained in this Agreement being limited to financial, budget or other projections as so updated or supplemented), in the judgment of the Borrower, a reasonable, good faith estimate of the information purported to be set forth, it being understood that uncertainty is inherent in any projections and that no assurance can be given that the results set forth in the projections will actually be obtained. No fact is known to any Loan Party that materially and adversely affects or in the future may (as far as it can reasonably foresee) materially and adversely affect the security for any of the Bonds, or the ability of any Loan Party to repay when due the obligations of the Borrower under this Agreement and the other Bond Documents to which it is a party, that has not been set forth in the financial statements and other documents referred to in this Section 4.07 or in such information, reports, papers and data or otherwise disclosed in writing to the Bank. The documents furnished and statements made by the Loan Parties in connection with the negotiation, preparation or execution of this Agreement and the Bond Documents do not, taken as a whole, contain untrue statements of material facts or omit to state material facts necessary to make the statements contained therein, in light of the circumstances under which they were made, not misleading.

Section 4.08. Litigation. Other than as previously disclosed in writing to the Bank, there is no action, suit or proceeding, or, after reasonable investigation, actual knowledge of the Borrower, any inquiry or investigation at law or in equity or before or by any court, public board or body pending or, to their knowledge, threatened against or affecting any Loan Party (a) wherein an unfavorable decision, ruling or finding could reasonably be expected to have a Material Adverse Effect.

Section 4.09. Taxes. Each Loan Party has filed or caused to be filed all tax returns required by law to be filed and has paid or caused to be paid all taxes, assessments and other governmental charges levied upon or in respect of any of its properties, assets or franchises which are material to it, other than taxes the validity or amount of which are being contested in good faith by such Loan Party by appropriate proceedings and for which such Loan Party shall have set aside on its books adequate reserves in accordance with GAAP. The charges, accruals and reserves on the books of each Loan Party in respect of taxes for all fiscal periods are adequate, and there is no unpaid assessment for additional taxes for any fiscal period or any basis therefor.

Section 4.10. Approvals. Each authorization, consent, approval, license or formal exemption from or filing, declaration or registration with, any court, governmental agency or regulatory authority (Federal, state or local), required in connection with the execution and delivery or adoption of, as the case may be by each Loan Party and its reasonable performance under the Bond Documents to which it is a party, has been obtained or made and is in full force and effect; provided that no representation is made as to compliance with state “blue sky” or qualified investment laws.

Section 4.11. Affiliates. Except as previously disclosed in writing to the Bank or described on Schedule 3 hereto, no Loan Party is a party to any contracts or agreements with any of its Affiliates on terms and conditions which are less favorable to such Loan Party than would be usual and customary in similar contracts or agreements between Persons not affiliated with each other.

Section 4.12. ERISA. Each Loan Party is in compliance in all material respects with ERISA to the extent applicable to it and has received no notice to the contrary from the PBGC or any other Governmental Authority. No Loan Party has any Unfunded Vested Liabilities. No condition exists or event or transaction has occurred with respect to any Plan which could reasonably be expected to result in the incurrence by any Loan Party of any material liability, fine or penalty. No Loan Party has any contingent liability with respect to any post-retirement benefits under a Welfare Plan, other than liability for continuation of coverage described in Part 6 of Title I of ERISA.

Section 4.13. Environmental Matters. (i) To each Loan Party’s knowledge, no real property owned, occupied or operated by the Loan Parties or operations thereon is in violation of any Environmental Law. To each Loan Party’s knowledge, no Environmental Event has occurred and is continuing on any real property owned, occupied or operated by the Loan Parties or with respect to operations thereon. Neither the Loan Parties nor any real property owned, occupied or operated by the Loan Parties has been identified in any litigation, third party claim or administrative proceedings or, to the Loan Parties’ knowledge, any investigation, as a responsible party for any liability under any Environmental Laws.

(ii) Each Loan Party has received all permits and filed all notifications necessary to carry on its business in compliance with all applicable Environmental Laws. No Loan Party has knowledge of, or has given any written or oral notice to any federal, state or local agency regarding any actual or imminently threatened Environmental Event. No Loan Party has knowledge of, or has received any notice that it is potentially responsible for costs of clean-up in connection with any Environmental Event.

(iii) Upon request by the Bank following notice from any Governmental Authority or any other Person, or at any time the Bank has a good faith belief, that any real property owned, occupied or operated by the Loan Parties or operations thereon is not in compliance with any Environmental Law or that any real property owned, occupied or operated by the Loan Parties or operations thereon is unsafe or unfit for its intended uses, the Borrower shall provide to the Bank the details of such issue, event or circumstance and the action that the Borrower proposes to take with respect thereto in compliance with the provisions of Section 5.30 hereof.

Section 4.14. Casualty. Neither the business nor the Property of the Loan Parties is currently affected by any fire, explosion, accident, strike, lockout or other labor dispute, drought, storm, hail, earthquake, embargo, act of God or of the public enemy or other casualty (whether or not covered by insurance), materially and adversely affecting the business, Properties or operations of the Borrower.

Section 4.15. Investment Company. No Loan Party is an “investment company” or a company “controlled” by an “investment company,” within the meaning of the Investment Company Act of 1940, as amended.

Section 4.16. Holding Company. No Loan Party is a “holding company,” or a “subsidiary company” of a “holding company,” or an “affiliate” of a “holding company” or a “subsidiary company” of a “holding company,” within the meaning of the Public Utility Holding Company Act of 1935, as amended.

Section 4.17. No Defaults. No Default or Event of Default has occurred and is continuing. No Loan Party is in default under the terms of any covenant, indenture or agreement of or affecting it or any of its Property, which default could reasonably be expected to have a Material Adverse Effect.

Section 4.18. Incorporation of Representations and Warranties by Reference. Except with respect to representations and warranties which expressly relate solely to the Series 2010B Bonds, each Loan Party hereby makes to the Bank the same representations and warranties as are set forth by it in each Bond Document to which it is a party, which representations and warranties, as well as the related defined terms contained therein, are hereby incorporated herein by reference, mutatis mutandis, for the benefit of the Bank with the same effect as if each and every such representation and warranty and defined term were set forth herein in its entirety and were made as of the date hereof. No amendment to any representation and warranty or related defined terms contained therein made pursuant to any Bond Document (excluding any representation and warranty and related defined terms which expressly relate solely to the Series 2010B Bonds) shall be effective to amend such representations and warranties and defined terms as incorporated by reference herein without the prior written consent of the Bank.

Section 4.19. Immunity. No Loan Party is immune from any legal proceeding brought by the Bank to enforce the obligations of the Loan Parties under the Bond Document to which they are a party.

Section 4.20. No Proposed Legal Changes. To the knowledge of the Loan Parties, there is no law or any legislation that has passed either house of the legislative branch of the State of California or any published judicial decision interpreting any of the foregoing, the effect of which could reasonably be expected to have a Material Adverse Effect.

Section 4.21. Tax-Exempt Organization. The Borrower and each other Loan Party that uses proceeds of the Bonds is a Tax-Exempt Organization.

Section 4.22. Liens. There are no Liens on any of the Property of the Loan Parties, except those which are permitted by Section 5.08 hereof.

Section 4.23. Insurance. Each Loan Party currently maintains insurance coverage with insurance companies believed by them to be capable of performing their obligations under the respective insurance policies issued by such insurance companies to such Loan Parties (as determined in their reasonable discretion) and in full compliance with Section 7.01 of the Loan Agreement and Section 5.04 hereof.

Section 4.24. Tax-Exempt Status of Bonds. No Loan Party has taken any action or omitted to take any action, and knows of no action taken or omitted to be taken by any other person or entity, which action, if taken or omitted, would cause interest on the Bonds to be subject to federal income taxes or to personal income taxes levied by the State of California.

Section 4.25. No Material Adverse Facts. There are no facts that have not been disclosed to the Bank that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect or, as far as any Loan Party can reasonably foresee, could reasonably be expected to have a Material Adverse Effect.

Section 4.26. No Material Loss. The Loan Parties have not, since the date of the most recent financial statements of the Loan Parties delivered to the Bank hereunder, sustained any material loss or interference with its business from fire, explosion, flood, or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, order, or decree, other than as set forth in the most recent financial statements of the Loan Parties delivered to the Bank hereunder. Since such date, and except as otherwise set forth in the financial statements (i) there has not been any change in the capital structure, or material increase in the long-term debt, of the Loan Parties; (ii) no event has occurred that would result in a material write-down of assets of the Loan Parties; (iii) the Loan Parties have not incurred any material liability or obligation, direct or contingent, or entered into any material transaction, other than those in the ordinary course of business, which, if entered into after the date of this Agreement would result in a Default or an Event of Default; (iv) there has not been any material interruption in the availability of materials, supplies, or equipment necessary for the conduct of the business of the Loan Parties; and (v) there has not otherwise been any material adverse change in the assets, contingent liabilities indicated in the notes to the Loan Parties’ financial statements, activities (including prospects), operations, Property or financial condition of the Loan Parties taken as a whole.

Section 4.27. Security. The Bond Documents have created valid, legal, binding and enforceable Liens in favor of the Collateral Agent or the Trustee, as applicable, in the Collateral, and such Liens are duly perfected with the priority required hereunder and are in full force and effect and are prior to the rights of any third party, except as permitted under Section 5.08 hereof. All documents or instruments required to be filed or recorded in any public office, and all notifications required to be given to any Person, in order to provide notice of such Liens to present and future creditors and otherwise protect such Liens in favor of the Collateral Agent on the one hand or the Trustee on the other hand, as applicable, have been filed, recorded or given,

as the case may be. All such recording fees and other expenses in connection with each such action have been or will be paid by the Borrower.

ARTICLE V

COVENANTS

Each Loan Party covenants and agrees, until the full and final payment and satisfaction of all of the Obligations, except in any instance in which the Bank specially agrees in writing to any performance or noncompliance, that:

Section 5.01. Existence, Etc. Each Loan Party will maintain its existence under its jurisdiction of organization and, with respect to the Borrower and each other Loan Party that uses proceeds of the Bonds, shall take no action to alter, change or destroy its status as a Tax-Exempt Organization. The Borrower will preserve and keep in force and effect its accreditation by Western Association of Schools and Colleges and the California State Department of Education (Commission on Teaching Credentialing), and all licenses, permits, franchises and qualifications necessary to the proper conduct of its business.

Section 5.02. Maintenance of Properties. Each Loan Party will, in all material respects, maintain, preserve and keep its Property in good repair, working order and condition (ordinary wear and tear excepted).

Section 5.03. Compliance with Laws; Taxes and Assessments. Each Loan Party will comply with all applicable laws, rules, regulations and orders applicable to it and its Property, except where non-compliance could not reasonably be expected to materially and adversely affect the financial condition, Property, business or operations of such Loan Party, such compliance to include, without limitation, paying all taxes, assessments and governmental charges imposed upon it or its Property before the same become delinquent, unless and to the extent that the same are being contested in good faith and by appropriate proceedings and reserves are provided therefor that in the opinion of such Loan Party are adequate.

Section 5.04. Insurance. Each Loan Party will maintain insurance with reputable insurance companies or associations believed by such Loan Party at the time of purchase of such insurance to be financially sound and in such amounts and covering such risks as are usually carried by organizations engaged in the same or a similar business and similarly situated, which insurance may provide for reasonable deductibles from coverage. Each Loan Party will upon request of the Bank furnish a certificate setting forth in summary form the nature and extent of the insurance maintained pursuant to this Section 5.04.

Section 5.05. Reports. Each Loan Party will maintain a standard system of accounting in accordance with GAAP and will furnish to the Bank such information respecting the business and financial condition of such Loan Party as the Bank may reasonably request; and without any request, will furnish to the Bank:

(a) as soon as available, and in any event within sixty (60) days after the close of each quarterly fiscal period of the Borrower, a copy of the consolidated and consolidating statements of financial position as of the close of such period and statements of activities of the Loan Parties for such period, all in reasonable detail showing in comparative form the figures for the corresponding date and period in the previous fiscal year together with a comparison of the Loan Parties’ budgeted compared to actual financial results through the end of such fiscal quarter, prepared by the Borrower in accordance with GAAP but without notes and subject to ordinary year-end adjustments and certified to by the chief financial officer of the Borrower;

(b) as soon as available, and in any event within sixty (60) days after the close of each quarterly fiscal period of the Borrower, summaries of the investment performance and portfolio allocation of the Loan Parties’ investments including, without limitation, the endowment, from the applicable portfolio managers, prepared by the Borrower in form and substance satisfactory to the Bank;

(c) as soon as available, and in any event within one hundred fifty (150) days after the close of each Fiscal Year of the Borrower, a copy of the consolidated and consolidating statements of financial position of the Loan Parties as of the close of such fiscal year and statements of activities and changes in net assets and statements of cash flows of the Loan Parties for such period, and accompanying notes thereto, all prepared in accordance with GAAP and in reasonable detail showing in comparative form the figures for the previous fiscal year (unless unavailable due to a switch in independent public accountants during the relevant period), accompanied by an unqualified opinion with respect thereto of CapinCrouse or another firm of independent public accountants of recognized regional standing, selected by the Borrower and reasonably satisfactory to the Bank, to the effect that the financial statements described herein have been prepared in accordance with GAAP and present fairly in accordance with GAAP the financial condition of the Loan Parties in all material respects as of the close of such fiscal year and the results of its operations and cash flows for the fiscal year then ended and that an examination of such accountants in connection with such financial statements has been made in accordance with generally accepted auditing standards and, accordingly, such examination included such tests of the accounting records and such other auditing procedures as were considered necessary in the circumstances;

(d) (i) within sixty (60) days after the close of each quarterly fiscal period of the Borrower, a No Default Certificate certified to by the chief financial officer of the Borrower, certifying that such officer has no knowledge of any Default or Event of Default or, if any such Default or Event of Default has occurred during such period, setting forth a description of such Default or Event of Default and specifying the action or proposed action, if any, taken by the Borrower to remedy the same, (ii) within sixty

(60) days after the close of each quarterly fiscal period of the Borrower, a Pricing Certificate certified to by the chief financial officer of the Borrower, setting forth the calculations demonstrating the Borrower’s Net Assets to Total Funded Debt Ratio, and (iii) within sixty (60) days after the close of each fiscal quarter ending June 30 and December 31, a Compliance Certificate certified to by the chief financial officer of the Borrower, setting forth the calculations demonstrating the Borrower’s compliance, as of each such fiscal quarter, with the covenants set forth in Section 5.23 and 5.24 hereof;

(e) within the period provided in subsection (c) above, to the extent that such independent public accounting firm is permitted to deliver such a statement under the then current recommendations of the American Institute of Certified Public Accounts, the written statement of the accountants who certified the audit report thereby required that in the course of their audit they have obtained no knowledge of any Default or Event of Default, or, if such accountants have obtained knowledge of any such Default or Event of Default, they shall disclose in such statement the nature and period of the existence thereof;

(f) promptly after receipt thereof, any additional written reports, management letters or other detailed information contained in writing concerning significant aspects of the Loan Parties’ operations and financial affairs given to them by their independent public accountants;

(g) promptly after knowledge thereof shall have come to the attention of any responsible officer of any Loan Party, written notice (i) of any threatened or pending litigation or governmental proceeding against any Loan Party which, if adversely determined, could reasonably be expected to have a Material Adverse Effect, (ii) of the occurrence of any Default or Event of Default hereunder or (iii) of any fact, event or circumstance, to the extent of which, individually or in aggregate, could reasonably be expected to have a Material Adverse Effect;

(h) within fifteen (15) days after the close of each Fiscal Year of the Borrower, a copy of any update or change to the Borrower’s Investment Policy and information on the assets within its investment portfolio;

(i) within fifteen (15) days after the close of each Fiscal Year of the Borrower, a copy of each Loan Party’s annual budget for the following Fiscal Year, such budget to be in reasonable detail and in form reasonably satisfactory to the Bank; and

(j) promptly after knowledge thereof shall have come to the attention of any responsible officer of any Loan Party, written notice to the Bank of (i) the occurrence of any reportable event (as defined in ERISA) with respect to a Plan, (ii) receipt of any notice from the PBGC of its intention to seek termination of any Plan or appointment of a trustee therefor, (iii) its intention to terminate or withdraw from any Plan, and (iv) the incurrence of any event with respect to any Plan which would result in the incurrence by any Loan Party of any material liability, fine or penalty, or any material increase in the

contingent liability of any Loan Party with respect to any post-retirement Welfare Plan benefit.

Section 5.06. Inspection and Field Audit. Each Loan Party will permit the Bank and its respective duly authorized representatives and agents to visit and inspect any of the Properties, corporate books and financial records of such Loan Party, to examine and make copies of the books of accounts and other financial records of such Loan Party, and to discuss the affairs, finances and accounts of such Loan Party with, and to be advised as to the same by, its officers and independent public accountants (and by this provision each Loan Party authorizes such accountants to discuss with the Bank the finances and affairs of each Loan Party) at such reasonable times and reasonable intervals as the Bank may designate.

Section 5.07. Debt. The Borrower will not, nor permit any Subsidiary to, issue, incur, assume, create or otherwise become liable for any additional Debt without the prior written consent of the Bank, other than (i) Debt to the Bank and (ii) Debt arising under the Bond Documents.

Section 5.08. Liens. The Borrower will not, nor permit any Subsidiary to, create, incur or permit to exist any Lien of any kind on any Property owned by the Borrower or any Subsidiary; provided, however, that this Section shall not operate to prevent:

(a) Liens in favor of the Bank and other Liens granted by the Bond Documents (as in effect on the date hereof);

(b) Liens for taxes and assessments and other governmental charges and levies which are not due or which are being contested in good faith by appropriate proceedings which prevent enforcement of such Lien and for which adequate reserves are maintained;

(c) Liens imposed by law, such as mechanics’, materialmen’s, landlords’, warehousemen’s and carriers’ and other similar Liens, securing obligations incurred in the ordinary course of business which are not past due or which are being contested in good faith by appropriate proceedings which prevent enforcement of such Lien and for which adequate reserves are maintained;

(d) Liens under workers’ compensation, unemployment insurance, Social Security and similar legislation;

(e) Liens to secure the performance of bids, tenders, contracts (other than contracts for the payment of money), leases (permitted under the terms of this Agreement), and public and statutory obligations arising in the ordinary course of business;

(f) purchase money Liens securing Debt by the vendor in respect of Property now owned or hereafter acquired by the Borrower or any Subsidiary (not extending to any other Property), provided that the principal amount of indebtedness secured by any

such Lien shall not exceed 100% of the cost of the Property covered by such Lien at the time of the creation thereof or the acquisition of such Property;

(g) Liens on Property pledged, granted, bequeathed or devised to the Borrower by the owner thereof existing at the time of such pledge, grant, bequest or devise, provided, that (i) such Liens consist solely of restrictions on the use thereof or the income therefrom, or (ii) such Liens attach solely to the Property which is the subject of such gift, grant, bequest or devise to the Borrower existing prior to the date such pledge was made;

(h) easements, rights-of-way, restrictions, encroachments and other minor defects or irregularities in, and other encumbrances and clouds on, title, in each case which do not and will not interfere in any material respect with the ordinary conduct of the business of the Borrower;

(i) purported Liens evidenced by the filing of precautionary UCC financing statements (or similar filings under applicable law) relating solely to equipment leases entered into in the ordinary course of business and in compliance with Section 5.08(f) hereof;

(j) licenses of, and trademarks and other intellectual property rights granted by, the Borrower in the ordinary course of business and not interfering in any material respect with the ordinary conduct of the business of the Borrower;

(k) judgment Liens arising after the Closing Date which do not otherwise result in an Event of Default;

(l) any encumbrances and other exceptions to title that are expressly set forth in or insured by the Title Policy issued by [First American Title Insurance Company], with respect to the Deed of Trust;

(m) any Lien securing the Existing Debt;

(n) normal and customary rights of setoff with respect to deposits of cash in favor of banks or other depository institutions; and

(o) attachments remaining undischarged for not longer than 60 days from the making thereof, so long as they are contested in good faith by appropriate proceedings which are being diligently pursued.

Section 5.09. Investments, Acquisitions, Loans and Advances. Other than in accordance with the Investment Policy, neither the Borrower nor any Loan Party will directly or indirectly, make, retain or have outstanding any investments (whether through purchase of stock or obligations or otherwise) in, or loans or advances to, any other Person, or acquire all or any substantial part of the assets or business of any other Person, or subordinate any claim or demand it may have to the claim or demand of any other Person; provided, however, that the foregoing

shall not operate to prevent the Borrower from making loans or advances to the provost, the president, any vice president or any other key employee in an amount not to exceed $1,000,000 in the aggregate at any one time outstanding.

Section 5.10. Leases. No Loan Party shall, except as permitted under Section 5.08(f) hereof and real property leases in the ordinary course of business, acquire the use or possession of any Property under a lease or similar arrangement, whether or not such Loan Party has the express or implied right to acquire title to or purchase such Property at any time.

Section 5.11. Sale, Lease or Other Disposition of Assets. No Loan Party shall sell, lease or otherwise dispose of (whether voluntarily, involuntarily or by operation of law) any now-owned or hereafter-acquired Property; provided, however, that the foregoing shall not operate to prevent the disposition of Property:

(a) in the ordinary course of business;

(b) which is replaced within ninety (90) days with Property of equal or greater value or usefulness;

(c) which constitutes a Non-Core Asset, provided that the fair value of all Non-Core Assets disposed of pursuant to this clause (iii) shall not exceed (x) $10,000,000 in any Fiscal Year and (y) $25,000,000 in the aggregate; and

(d) if prior to such disposition there is delivered to the Bank a certificate of the chief financial officer of the Borrower stating that, to the best knowledge of the signer, such Property has, or within the next succeeding twelve (12) calendar months is reasonably expected to become, inadequate, obsolete, worn out, unsuitable, unprofitable, undesirable or unnecessary and the sale, lease, removal or other disposition thereof will not impair the structural soundness, efficiency or economic value of the remaining Property of the Borrower.

Section 5.12. Mergers. No Loan Party shall be a party to any merger or consolidation without the prior written consent of the Bank; provided, however, that the foregoing shall not operate to prevent:

(a) the merger of any Loan Party with and into any other Loan Party, provided that, in the case of any merger involving the Borrower, the Borrower is the Loan Party surviving the merger; and

(b) the merger of the Borrower with and into any other Person, provided that, (i) the Borrower is the Person surviving the merger and (ii) such merger if consummated does not, and will not, constitute a Default or an Event of Default hereunder.

Section 5.13. Burdensome Contracts With Affiliates. No Loan Party shall enter into any contract, agreement or business arrangement with any of its Affiliates or with Christian Leadership Alliance, other than the Excepted Affiliates, on terms and conditions which are less

favorable to such Loan Party than would be usual and customary in similar contracts, agreements or business arrangements between Persons not affiliated with each other.

Section 5.14. No Changes in Fiscal Year. No Loan Party shall change its Fiscal Year from its present basis without the prior written consent of the Bank.

Section 5.15. Formation of Subsidiaries. The Borrower will not, and will not permit any of its Subsidiaries to, form or acquire any Subsidiary without the prior written consent of the Bank; provided that any Subsidiary permitted by the Bank to be formed or acquired shall become a Guarantor pursuant to Section 5.32 hereof; provided further, that any Subsidiary permitted by the Bank to be formed or acquired shall become a party to the Security Agreement by executing and delivering to the Collateral Agent an agreement substantially in the form of Schedule H to the Security Agreement and such other control agreements, instruments, documents and certificates as the Bank may required.

Section 5.16. Bond Documents. No Loan Party shall modify, amend or consent to any modification, amendment or waiver in any material respect of any Bond Document without the prior written consent of the Bank.

Section 5.17. Conversions and Redemptions. The Borrower shall provide to the Bank written notice sixty (60) days prior to the date of any proposed conversion of the interest rate on the Bonds to a rate of interest other than the Index Interest Rate or any proposed redemption of Bonds pursuant to the Indenture.

Section 5.18. Disclosure to Participants. Each Loan Party shall permit the Bank to disclose the financial information received by it pursuant to this Agreement to any participants of the Bank in this Agreement, subject to confidentiality restrictions and use restrictions customary for financial institutions.

Section 5.19. Other Agreements. In the event that any Loan Party shall, directly or indirectly, enter into or otherwise consent to any credit agreement, bond purchase agreement, liquidity agreement or other agreement or instrument (or any amendment, supplement or modification thereto) under which, directly or indirectly, any Person or Persons undertakes to make payment of, or to purchase or provide credit enhancement for bonds or notes in a principal amount not less than $3,000,000 of, any Loan Party, which such agreement (or amendment thereto) provides such Person with different or more restrictive covenants, different or more restrictive events of default and/or, greater rights and remedies than are provided to the Bank in this Agreement, the applicable Loan Party shall provide the Bank with a copy of each such agreement (or amendment thereto) and such different or more restrictive covenants, different or more restrictive events of default and/or, greater rights and remedies shall automatically be deemed to be incorporated into this Agreement and the Bank shall have the benefits of such different or more restrictive covenants, different or more restrictive events of default and/or, such greater rights and remedies as if specifically set forth herein. The Borrower shall promptly enter into an amendment to this Agreement to include such different or more restrictive covenants, different or more restrictive events of default and/or, greater rights or remedies; provided that the Bank shall have and maintain the benefit of such different or more restrictive covenants,

different or more restrictive events of default and/or, greater rights and remedies even if the Borrower fails to provide such amendment.

Section 5.20. No Immunity. Each Loan Party agrees that to the extent it has or hereafter may acquire under any applicable Law any right to immunity from set-off or legal proceedings on the grounds of sovereignty or otherwise, each Loan Party hereby irrevocably waives, to the extent permitted by Law, such rights to immunity for itself in respect of its obligations arising under or related to this Agreement or any other Bond Document to which it is a party.

Section 5.21. Further Assurances. From time to time hereafter, each Loan Party will execute and deliver such additional instruments, certificates or documents, and will take all such actions as the Bank may reasonably request for the purposes of implementing or effectuating the provisions of the Bond Documents and this Agreement or for the purpose of more fully perfecting or renewing the rights of the Bank with respect to the rights, properties or assets subject to such documents (or with respect to any additions thereto or replacements or proceeds thereof or with respect to any other property or assets hereafter acquired by the Borrower which may be deemed to be a part thereof). Upon the exercise by the Bank of any power, right, privilege or remedy pursuant to the Bond Documents or this Agreement which requires any consent, approval, registration, qualification or authorization of any governmental authority or instrumentality, each Loan Party will, execute and deliver all necessary applications, certifications, instruments and other documents and papers that the Bank may be required to obtain for such governmental consent, approval, registration, qualification or authorization.

Section 5.22. Maintenance of Tax-Exempt Status of Bonds. No Loan Party shall take any action or omit to take any action which, if taken or omitted, would adversely affect the exclusion of interest on any Bonds under the Indenture from gross income for purposes of federal income taxation.

Section 5.23. Minimum Unrestricted and Temporarily Restricted Cash and Unrestricted and Temporarily Restricted Marketable Securities. The Borrower shall maintain, or caused to be maintained, Unrestricted and Temporarily Restricted Cash and Unrestricted and Temporarily Restricted Marketable Securities in an amount not less than (i) $45,000,000 on June 30, 2011 and $45,000,000 on December 31, 2011 and (ii) $50,000,000 on June 30, 2012 and each December 31 and June 30 thereafter.

Section 5.24. Minimum Debt Service Coverage Ratio. The Borrower shall maintain a Debt Service Coverage Ratio of not less than 1.20 to 1.0, measured on a semi-annual basis on each June 30 and December 31, for the 12-month period then ended.

Section 5.25. Compliance with ERISA. Each Loan Party shall (i) remain at all times in compliance with any Applicable Law (including any legally available grace periods) with respect to any Plan of the Borrower or each Subsidiary, (ii) at no time maintain any Unfunded Vested Liabilities, and (iii) maintain each Plan as to which it may have any liability and compliance in all material respects with the applicable provisions of ERISA and the regulations and published interpretations thereunder, the failure to comply with which could subject any Loan Party to any tax or penalty which tax or penalty, taken together with all other taxes and penalties which could

be assessed against any Loan Party by reason of all other non-compliances, would have a Materially Adverse Effect any Loan Party; provided, however, that the foregoing shall not constitute an Event of Default if the Borrower is contesting any such tax or penalty in good faith by appropriate proceedings and reserves are provided for such purpose that in the opinion of the Borrower are adequate.

Section 5.26. Compliance with other Covenants. From and after the date hereof and so long as this Agreement is in effect, except to the extent compliance in any case or cases is waived in writing by the Bank, each Loan Party agrees that it will, for the benefit of the Bank, comply with, abide by, and be restricted by all the agreements, covenants, obligations and undertakings contained in the Bond Documents to which it is a party, subject in each case to the cure periods, materiality standards and exceptions set forth therein, so long as any Obligations remain outstanding hereunder, which agreements, covenants, obligations and undertakings together with the related definitions, exhibits and ancillary provisions and cure provisions, materiality standards and exceptions applicable thereto, are incorporated herein by reference, mutatis mutandis, and made a part hereof to the same extent and with the same force and effect as if the same had been herein set forth in their entirety; provided, however, that the foregoing shall not apply to agreements, covenants, obligations and undertakings contained in the Bond Documents which expressly relate solely to the Series 2010B Bonds. No amendment to such agreements, covenants, obligations, undertakings or definitions shall be effective to amend the same as incorporated by reference herein without the prior written consent of the Bank; provided, however, that the foregoing shall not apply to agreements, covenants, obligations and undertakings contained in the Bond Documents which expressly relate solely to the Series 2010B Bonds.

Section 5.27. Investment Policy. The Borrower will promptly notify the Bank of any material change to its Investment Policy.

Section 5.28. Swap Agreement. No Loan Party shall (i) agree to provide any collateral to support the obligations of any Loan Party under any Swap Agreement, except as provided with respect to the Existing Swap Agreements or (ii) enter into a Swap Agreement with any counterparty without the prior written consent of the Bank.

Section 5.29. Banking Relationship. The Borrower shall maintain its primary depository and operating accounts, cash management and treasury services at the Bank with an aggregate average minimum monthly balance of $10,000,000.

Section 5.30. Environmental Laws. Each Loan Party shall comply with all applicable Environmental Laws, cure any Environmental Event (or cause other Persons to effect any such cure) to the extent necessary to bring such real property owned, occupied or operated by the Loan Parties back into compliance with Environmental Laws and to comply with any cleanup orders issued by a Governmental Authority having jurisdiction thereover. Each Loan Party shall at all times use commercially reasonable efforts to render or maintain any real property owned, occupied or operated by the Loan Parties safe and fit for its intended uses. Each Loan Party shall also immediately notify the Bank of any actual or alleged material failure to so comply with or

perform, or any material breach, violation or default under any such Environmental Law or the occurrence of any material Environmental Event.

Section 5.31. Redemption of Bonds. Without the Bank’s prior written consent, the Borrower shall not optionally redeem any Series 2010B Bonds.

Section 5.32. Guaranties. The payment of the Obligations shall at all times be guaranteed by each Loan Party, other than the Excepted Subsidiaries, pursuant to one or more guaranty agreements in form and substance acceptable to the Bank, as the same may be amended, modified or supplemented from time to time (individually a “Guaranty” and collectively the “Guaranties” and each such Subsidiary executing and delivering a Guaranty being referred to herein as a “Guarantor” and collectively the “Guarantors”).

ARTICLE VI

EVENTS OF DEFAULT

Section 6.01. Events of Default. The occurrence of any of the following events (whatever the reason for such event and whether voluntary, involuntary, or effected by operation of law) shall be an “Event of Default” hereunder, unless waived in writing by the Bank:

(a) any representation or warranty made by any Loan Party in this Agreement or in any of the other Bond Documents or in any certificate, document, instrument, opinion or financial or other statement contemplated by or made or delivered pursuant to or in connection with this Agreement or with any of the other Bond Documents, shall prove to have been incorrect, incomplete or misleading in any material respect when made;

(b) any “event of default” shall have occurred under the Credit Agreement or any of the other Bond Documents (as defined respectively therein);

(c) the failure to pay (i) any amount of principal of or interest on the Bonds when the same shall become due and payable or (ii) any other Obligation when the same shall become due and payable and such failure shall continue for a period of five (5) days after written notice thereof;

(d) default in the due observance or performance of any covenant set forth in Article V of this Agreement, other than any covenants and obligations incorporated by Article V into this Agreement;

(e) default in the due observance or performance of any other term, covenant or agreement set forth in this Agreement and the continuance of such default for 30 days after the occurrence thereof;

(f) any material provision of this Agreement or any of the Bond Documents shall cease to be valid and binding, or any Loan Party shall contest any such provision in

writing, or any Loan Party or any agent or trustee on behalf of any Loan Party shall deny in writing that it has any or further liability under this Agreement or any of the Bond Documents;

(g) any Loan Party shall (i) have entered involuntarily against it an order for relief under the United States Bankruptcy Code, as amended, (ii) not pay, or admit in writing its inability to pay, its debts generally as they become due, (iii) make an assignment for the benefit of creditors, (iv) apply for, seek, consent to, or acquiesce in, the appointment of a receiver, custodian, trustee, examiner, liquidator or similar official for it or any substantial part of its Property, (v) institute any proceeding seeking to have entered against it an order for relief under the United States Bankruptcy Code, as amended, to adjudicate it insolvent, or seeking dissolution, winding up, liquidation, reorganization, arrangement, marshalling of assets, adjustment or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors or fail to file an answer or other pleading denying the material allegations of any such proceeding filed against it, (vi) take any corporate action in furtherance of any matter described in parts (i) through (v) above, or (vii) fail to contest in good faith any appointment or proceeding described in Section 6.01(h) of this Agreement;

(h) a custodian, receiver, trustee, examiner, liquidator or similar official shall be appointed for any Loan Party or any substantial part of its Property, or a proceeding described in Section 6.01(g)(v) shall be instituted against any Loan Party and such appointment continues undischarged or any such proceeding continues undismissed or unstayed for a period of sixty (60) or more days;

(i) dissolution or termination of the existence of (i) the Borrower or (ii) of any other Loan Party and such dissolution or termination of such Loan Party could reasonably be expected to have a Material Adverse Effect;

(j) the failure of the Loan Parties to perform any obligation under any indenture, agreement or other instrument under which any Debt of any Loan Party, in an aggregate principal amount of not less than $1,500,000, has been issued, and such failure shall continue for a period of time sufficient to permit the acceleration of the maturity of any such Debt (whether or not such maturity is in fact accelerated) or the Loan Parties shall fail to pay any such Debt when and as due (whether by lapse of time, acceleration or otherwise), except any such failure, if any, which is being actively contested by the applicable Loan Parties in good faith, has been paid or adequate reserves have been made for payment thereof, which reserves, if any, are reflected in the financial statements of the Loan Parties;

(k) any judgment or judgments, writ or writs or warrant or warrants of attachment, or any similar process or processes, which are not covered in full by insurance, with written acknowledgement of such coverage having been provided by the provider of such insurance coverage to the Bank, in an aggregate amount in excess of $1,500,000 shall be entered or filed against any Loan Party or against any of their Property and remain unvacated, unbonded or unstayed for a period of thirty (30) days;

(l) any Loan Party or any member of its Controlled Group shall fail to pay when due an amount or amounts aggregating in excess of $1,000,000 which it shall have become liable to pay to the PBGC or to a Plan under Title IV of ERISA; or notice of intent to terminate a Plan or Plans having aggregate Unfunded Vested Liabilities in excess of $1,000,000 (collectively, a “Material Plan”) shall be filed under Title IV of ERISA by any Loan Party or any other member of its Controlled Group, any plan administrator or any combination of the foregoing; or the PBGC shall institute proceedings under Title IV of ERISA to terminate or to cause a trustee to be appointed to administer any Material Plan or a proceeding shall be instituted by a fiduciary of any Material Plan against any Loan Party or any member of its Controlled Group to enforce Section 515 or 4219(c)(5) of ERISA and such proceeding shall not have been dismissed within thirty (30) days thereafter; or a condition shall exist by reason of which the PBGC would be entitled to obtain a decree adjudicating that any Material Plan must be terminated;

(m) a default shall occur and be continuing under any agreement between any Loan Party and the Bank other than this Agreement or under any obligation owed by any Loan Party to the Bank;

(n) a debt moratorium, debt restructuring, debt adjustment or comparable restriction is imposed on the repayment when due and payable of the principal of or interest on any Debt of any Loan Party by any Governmental Authority with appropriate jurisdiction; or

(o) there occurs any event or circumstance that results or which would reasonably be expected to result in a Material Adverse Change.

Section 6.02. Consequences of an Event of Default. If an Event of Default specified in Section 6.01 hereof shall occur and be continuing, the Bank may:

(a) by notice to the Borrower, declare the outstanding amount of the Obligations under this Agreement to be immediately due and payable without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived, and an action therefor shall immediately accrue, provided that, if any Event of Default described in Section 6.01(g) or 6.01(h) hereof shall occur, the Obligations under this Agreement shall be automatically mature and be due and payable on the date of the occurrence of such Event of Default without presentment, demand, protest, notice of intention to accelerate, notice of acceleration or other notice of any kind to the Borrower or any other Person, all of which are hereby expressly waived;

(b) either personally or by attorney or agent without bringing any action or proceeding, or by a receiver to be appointed by a court in any appropriate action or proceeding, take whatever action at law or in equity may appear necessary or desirable to collect the amounts due and payable under the Bond Documents or to enforce performance or observance of any obligation, agreement or covenant of the Loan Parties under the Bond Documents, whether for specific performance of any agreement or

covenant of the Loan Parties or in aid of the execution of any power granted to the Bank in the Bond Documents;

(c) deliver a notice to the Trustee and the Borrower that an Event of Default has occurred and is continuing and directing the Trustee to take such remedial action as is provided for in the Indenture;

(d) cure any Default, Event of Default or event of nonperformance hereunder or under any Bond Document; provided, however, that the Bank shall have no obligation to effect such a cure; and

(e) exercise, or cause to be exercised, any and all remedies as it may have under the Bond Documents and as otherwise available at law and at equity.

Section 6.03. Remedies Cumulative; Solely for the Benefit of Bank. To the extent permitted by, and subject to the mandatory requirements of, applicable Law, each and every right, power and remedy herein specifically given to the Bank in the Bond Documents shall be cumulative, concurrent and nonexclusive and shall be in addition to every other right, power and remedy herein specifically given or now or hereafter existing at law, in equity or by statute, and each and every right, power and remedy (whether specifically herein given or otherwise existing) may be exercised from time to time and as often and in such order as may be deemed expedient by the Bank, and the exercise or the beginning of the exercise of any power or remedy shall not be construed to be a waiver of the right to exercise at the same time or thereafter any other right, power or remedy.

The rights and remedies of the Bank specified herein are for the sole and exclusive benefit, use and protection of the Bank, and the Bank is entitled, but shall have no duty or obligation to the Borrower, the Trustee or any other Person or otherwise, to exercise or to refrain from exercising any right or remedy reserved to the Bank hereunder or under any of the other Bond Documents.

Section 6.04. Waivers or Omissions. No delay or omission by the Bank in the exercise of any right, remedy or power or in the pursuit of any remedy shall impair any such right remedy or power or be construed to be a waiver of any default on the part of the Bank or to be acquiescence therein. No express or implied waiver by the Bank of any Event of Default shall in any way be a waiver of any future or subsequent Event of Default.

Section 6.05. Discontinuance of Proceedings. In case the Bank shall proceed to invoke any right, remedy or recourse permitted hereunder or under the Bond Documents and shall thereafter elect to discontinue or abandon the same for any reason, the Bank shall have the unqualified right so to do and, in such event, the Borrower and the Bank shall be restored to their former positions with respect to the Obligations, the Bond Documents and otherwise, and the rights, remedies, recourse and powers of the Bank hereunder shall continue as if the same had never been invoked.

Section 6.06. Injunctive Relief. The Borrower recognizes that in the event an Event of Default occurs, any remedy of law may prove to be inadequate relief to the Bank; therefore, the Borrower agrees that the Bank, if the Bank so requests, shall be entitled to temporary and permanent relief in any such case.

ARTICLE VII

INDEMNIFICATION

Section 7.01. Indemnification. In addition to any and all rights of reimbursement, indemnification, subrogation or any other rights pursuant hereto or under law or equity, the Borrower hereby agrees (to the extent permitted by law) to indemnify and hold harmless each Beneficial Owner or Credit Protection Provider and its officers, directors and agents (each, an “Indemnitee”) from and against any and all claims, damages, losses, liabilities, reasonable costs or expenses whatsoever (including reasonable attorneys’ fees) which may incur or which may be claimed against an Indemnitee by any Person or entity whatsoever by reason of or in connection with (a) the execution and delivery or transfer of, or payment or failure to pay under, any Bond Document; (b) the issuance and sale of the Bonds; and (c) the use of the proceeds of the Bonds; provided that the Borrower shall not be required to indemnify an Indemnitee for any claims, damages, losses, liabilities, costs or expenses to the extent, but only to the extent, caused the willful misconduct or gross negligence of such Indemnitee. If any proceeding shall be brought or threatened against an Indemnitee by reason of or in connection with the events described in clause (a), (b) or (c) as a condition of indemnity hereunder each Indemnitee shall promptly notify the Borrower in writing and the Borrower shall assume the defense thereof, including the employment of counsel satisfactory to such Indemnitee and the payment of all reasonable costs of litigation. Notwithstanding the preceding sentence, each Indemnitee shall have the right to employ its own counsel and to determine its own defense of such action in any such case, but the fees and expenses of such counsel shall be at the expense of such Indemnitee unless (i) the employment of such counsel shall have been authorized in writing by the Borrower, or (ii) the Borrower, after due notice of the action, shall not have employed counsel satisfactory to such Indemnitee to have charge of such defense, in either of which events the reasonable fees and expenses of counsel for such Indemnitee shall be borne by the Borrower. The Borrower shall not be liable for any settlement of any such action effected without its consent. Nothing under this Section 7.01 is intended to limit the Borrower’s payment of the Obligations.

Section 7.02. Survival. The obligations of the Borrower under this Article VII shall survive the payment of the Bonds and the termination of this Agreement.

ARTICLE VIII

MISCELLANEOUS

Section 8.01. Patriot Act Notice. The Bank hereby notifies the Borrower that pursuant to the requirements of the Patriot Act it is required to obtain, verify and record information that identifies the Borrower, which information includes the name and address of the Borrower and

other information that will allow the Bank to identify the Borrower in accordance with the Patriot Act. The Borrower hereby agrees that it shall promptly provide such information upon request by the Bank.

Section 8.02. Further Assurances. From time to time upon the request of either party hereto, the other shall promptly and duly execute, acknowledge and deliver any and all such further instruments and documents as the requesting party may in its reasonable discretion deem necessary or desirable to confirm this Agreement, and the other Bond Documents, to carry out the purpose and intent hereof and thereof or to enable the requesting party to enforce any of its rights hereunder or thereunder. At any time, and from time to time, upon request by the Bank, the Borrower will, at the Borrower’s expense, correct any defect, error or omission which may be discovered in the form or content of any of the Bond Documents. Upon any failure by the Borrower to do so, the Bank or the Trustee may make, execute and record any and all such instruments, certificates and other documents for and in the name of the Borrower, all at the sole expense of the Borrower, and the Borrower hereby appoints the Bank and the Trustee as the agent and attorney-in-fact of the Borrower to do so, this appointment being coupled with an interest and being irrevocable. In addition, at any time, and from time to time, upon request by the Bank or the Trustee, the Borrower will, at the Borrower’s expense, provide any and all further instruments, certificates and other documents as may, in the opinion of the Bank or the Trustee, be necessary or desirable in order to verify the Borrower’s identity and background in a manner satisfactory to the Bank or the Trustee.

Section 8.03. Amendments and Waivers; Enforcement. The Bank and the Borrower may from time to time enter into agreements amending, modifying or supplementing this Agreement or the other Bond Documents or changing the rights of the Bank or the Borrower hereunder or thereunder, and the Bank may from time to time grant waivers or consents to a departure from the due performance of the obligations of the Borrower hereunder or thereunder. Any such agreement, waiver or consent must be in writing and shall be effective only to the extent specifically set forth in such writing. In the case of any such waiver or consent relating to any provision hereof, any Default or Event of Default so waived or consented to shall be deemed to be cured and not continuing, but no such waiver or consent shall extend to any other or subsequent Default or Event of Default or impair any right consequent thereto.

Section 8.04. No Implied Waiver; Cumulative Remedies. No course of dealing and no delay or failure of the Bank in exercising any right, power or privilege under this Agreement or the other Bond Documents shall affect any other or future exercise thereof or exercise of any right, power or privilege; nor shall any single or partial exercise of any such right, power or privilege or any abandonment or discontinuance of steps to enforce such a right, power or privilege preclude any further exercise thereof or of any other right, power or privilege. The rights and remedies of the Bank under this Agreement are cumulative and not exclusive of any rights or remedies which the Bank would otherwise have under any Bond Document, at law or in equity.

Section 8.05. Notices. All notices, requests, demands, directions and other communications (collectively “notices”) under the provisions of this Agreement shall be in writing (including facsimile communication), unless otherwise expressly permitted hereunder,

and shall be sent by first-class mail or overnight delivery and shall be deemed received as follows: (i) if by first class mail, five (5) days after mailing; (ii) if by overnight delivery, on the next Business Day; (iii) if by telephone, when given to a person who confirms such receipt; and (iv) if by facsimile, when confirmation of receipt is obtained. All notices shall be sent to the applicable party at the following address or in accordance with the last unrevoked written direction from such party to the other parties hereto:

The Borrower: Azusa Pacific University 901 East Alosta Avenue P.O. Box 7000 Azusa, California 91702 Attention: Chief Financial Officer Facsimile: (626) 334-6486 Telephone: (626) 815-4691

With a copy to: Manatt, Phelps & Phillips, LLP 11355 W. Olympic Boulevard Los Angeles, California 90064 Attention: Rob Sherman Facsimile: (310) 312-4224 Telephone: (310) 312-4177

The Bank: Wells Fargo Bank, National Association 707 Wilshire Boulevard, 17th Floor MAC E2818-117 Los Angeles, California 90017 Attention: Education and Non-Profit Banking

Division — c/o Terri Wesolik Facsimile: (877) 302-0908 Telephone: (213) 614-3327

The Trustee: U.S. Bank National Association 633 West Fifth Street, 24th Floor Los Angeles, California 90071 Attention: Corporate Trust Services Facsimile: (___) ___-____ Telephone: (213) 615-6002

The Bank may rely on any notice (including telephone communication) purportedly made by or on behalf of the other, and shall have no duty to verify the identity or authority of the Person giving such notice, unless such actions or omissions would amount to gross negligence or intentional misconduct.

Section 8.06. Right of Setoff. (a) Upon the occurrence of an Event of Default, a Beneficial Owner may, at any time and from time to time, without notice to the Borrower or any other person (any such notice being expressly waived), set off and appropriate and apply against

and on account of any Obligations under this Agreement, without regard to whether or not such Beneficial Owner shall have made any demand therefor, and although such Obligations may be contingent or unmatured, any and all deposits (general or special, including but not limited to deposits made pursuant to this Agreement and Debt evidenced by certificates of deposit, whether matured or unmatured, but not including trust accounts, such as restricted donor accounts) and any other Debt at any time held or owing by such Beneficial Owner to or for the credit or the account of any or all of the Borrower.

(b) Each Beneficial Owner agrees promptly to notify the Borrower after any such set-off and application referred to in subsection (a) above, provided that the failure to give such notice shall not affect the validity of such set-off and application. Subject to the provisions of subsection (a) above, the rights of a Beneficial Owner under this Section 8.06 are in addition to other rights and remedies (including, without limitation, other rights of set-off) which such Beneficial Owner may have.

Section 8.07. No Third-Party Rights. Nothing in this Agreement, whether express or implied, shall be construed to give to any Person other than the parties hereto and the Beneficial Owners any legal or equitable right, remedy or claim under or in respect of this Agreement, which is intended for the sole and exclusive benefit of the parties hereto.

Section 8.08. Severability. The provisions of this Agreement are intended to be severable. If any provision of this Agreement shall be held invalid or unenforceable in whole or in part in any jurisdiction, such provision shall, as to such jurisdiction, be ineffective to the extent of such invalidity or unenforceability without in any manner affecting the validity or enforceability thereof in any other jurisdiction or the remaining provisions hereof in any jurisdiction.

Section 8.09. Governing Law; Submission to Jurisdiction; Waiver of Jury Trial. (a) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF CALIFORNIA WITHOUT GIVING EFFECT TO CONFLICT OF LAW PRINCIPLES.

(b) EACH OF THE PARTIES HERETO HEREBY SUBMITS TO THE EXCLUSIVE JURISDICTION OF ANY FEDERAL OR STATE COURT OF COMPETENT JURISDICTION IN THE STATE OF CALIFORNIA FOR THE PURPOSE OF ANY SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT; SERVICE OF PROCESS MAY BE ACCOMPLISHED BY REGISTERED MAIL, RETURN RECEIPT REQUESTED TO EACH OF THE PARTIES AT THE ADDRESS LISTED FOR NOTICE IN SECTION 8.05 HEREOF.

(c) TO THE EXTENT PERMITTED BY LAW, EACH OF THE BORROWER AND THE BANK IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO LEGAL CLAIMS BASED ON THE BORROWER’S OR THE BANK’S PERFORMANCE OF ITS OBLIGATIONS UNDER THIS AGREEMENT OR ANY OTHER BOND DOCUMENT. IF AND TO THE EXTENT THAT THE FOREGOING WAIVER OF THE RIGHT TO A JURY TRIAL IS UNENFORCEABLE FOR ANY REASON IN SUCH FORUM, THE BORROWER AND THE BANK HEREBY CONSENT TO THE ADJUDICATION OF ANY AND ALL CLAIMS PURSUANT TO JUDICIAL REFERENCE AS PROVIDED IN CALIFORNIA CODE OF CIVIL PROCEDURE SECTION 638, AND THE JUDICIAL REFEREE

SHALL BE EMPOWERED TO HEAR AND DETERMINE ANY AND ALL ISSUES IN SUCH REFERENCE WHETHER FACT OR LAW. THE BORROWER AND THE BANK REPRESENT THAT EACH HAS REVIEWED THIS WAIVER AND CONSENT AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS AND CONSENTS TO JUDICIAL REFERENCE FOLLOWING THE OPPORTUNITY TO CONSULT WITH LEGAL COUNSEL OF ITS CHOICE ON SUCH MATTERS. IN THE EVENT OF LITIGATION, A COPY OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT OR TO JUDICIAL REFERENCE UNDER CALIFORNIA CODE OF CIVIL PROCEDURE SECTION 638 AS PROVIDED HEREIN.

(d) The covenants and waivers made pursuant to this Section 8.09 shall be irrevocable and unmodifiable, whether in writing or orally, and shall be applicable to any subsequent amendments, renewals, supplements or modifications of this Agreement. In the event of litigation, this Agreement may be filed as a written consent to a trial by the court.

Section 8.10. Prior Understandings. This Agreement and the other Bond Documents supersede all other prior understandings and agreements, whether written or oral, among the parties hereto relating to the transactions provided for herein and therein.

Section 8.11. Duration. All representations and warranties of the Borrower contained herein or made in connection herewith shall survive the making of and shall not be waived by the execution and delivery of this Agreement or the other Bond Documents or any investigation by the Borrower. All covenants and agreements of the Borrower contained herein shall continue in full force and effect from and after the date hereof until the Obligations have been fully discharged.

Section 8.12. Counterparts. This Agreement may be executed in any number of counterparts and by the different parties hereto on separate counterparts each of which, when so executed, shall be deemed an original, but all such counterparts shall constitute but one and the same instrument.

Section 8.13. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties to this Agreement and their respective successors and permitted assigns. The Borrower may not assign its rights or obligations under this Agreement or the other Bond Documents without the prior consent of the Bank. The Bank may participate a portion of its interest in accordance with Section 8.14 hereof.

Section 8.14. Assignability. (a) Successors and Assigns Generally. This Agreement is a continuing obligation and shall be binding upon the Borrower, its successors and assigns and shall inure to the benefit of the Beneficial Owners and their respective permitted successors, transferees and assigns. The Borrower may not assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of the Bank. The Bank may, in accordance with applicable Law, from time to time assign, sell or transfer in whole or in part, this Agreement, its interest in the Bonds and the Bond Documents in accordance with paragraph (b) of this Section. Wells Fargo Bank, National Association shall be the Bank hereunder until such time as the Majority Holder designates an alternate Person to serve as Bank hereunder by delivery of written notice to the Borrower and the Trustee and such Person accepts and agrees to act as Bank hereunder and under the Bond Documents to which the Bank is a party. The

Majority Holder may so designate an alternate Person to act as Bank from time to time. Upon acceptance and notification thereof to the Borrower and the Trustee, the successor to the Bank for such purposes shall thereupon succeed to and become vested with all of the rights, powers, privileges and responsibilities of the Bank, and Wells Fargo Bank, National Association or any other Person being replaced as Bank shall be discharged from its duties and obligations as Bank hereunder.

(b) Assignments by Beneficial Owner. Without limitation of the foregoing generality:

A Beneficial Owner may at any time sell or otherwise transfer to one or more transferees (each a “Transferee”) all or a portion of the Bonds if (i) written notice of such sale or transfer, together with addresses and related information with respect to the Transferee, shall have been given to the Borrower, the Trustee and the Bank (if different than the Beneficial Owner) by such selling Beneficial Owner and Transferee, and (ii) the Transferee shall have delivered to the Borrower, the Issuer, the Trustee and the Majority Holder, an investment letter in substantially the form attached as Exhibit G to the Indenture (the “Investment Letter”).

From and after the date the Borrower, the Issuer, the Trustee and the Bank have received an executed Investment Letter, (A) the Transferee thereunder shall be a party hereto and shall have the rights and obligations of a Beneficial Owner hereunder and under the other Bond Documents, and this Agreement shall be deemed to be amended to the extent, but only to the extent, necessary to effect the addition of the Transferee, and any reference to the assigning Beneficial Owner hereunder and under the other Bond Documents shall thereafter refer to such transferring Beneficial Owner and to the Transferee to the extent of their respective interests, and (B) if the transferring Beneficial Owner no longer owns any Bonds, then it shall relinquish its rights and be released from its obligations hereunder and under the Bond Documents.

(c) Certain Pledges. The Bank may at any time pledge or grant a security interest in all or any portion of its rights under the Bonds, this Agreement and the Bond Documents to secure obligations of the Bank, including any pledge or assignment to secure obligations to a Federal Reserve Bank; provided that no such pledge or assignment shall release the Bank from any of its obligations hereunder or substitute any such pledgee or assignee for the Bank as a party hereto.

Section 8.15. Headings. Section headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose.

Section 8.16. Electronic Signatures. The parties agree that the electronic signature of a party to this Agreement shall be as valid as an original signature of such party and shall be effective to bind such party to this Agreement. The parties agree that any electronically signed document (including this Agreement) shall be deemed (i) to be “written” or “in writing,” (ii) to have been signed and (iii) to constitute a record established and maintained in the ordinary course of business and an original written record when printed from electronic files. Such paper copies or “printouts,” if introduced as evidence in any judicial, arbitral, mediation or administrative proceeding, will be admissible as between the parties to the same extent and under the same conditions as other original business records created and maintained in documentary

form. Neither party shall contest the admissibility of true and accurate copies of electronically signed documents on the basis of the best evidence rule or as not satisfying the business records exception to the hearsay rule. For purposes hereof, “electronic signature” means a manually-signed original signature that is then transmitted by electronic means; “transmitted by electronic means” means sent in the form of a facsimile or sent via the internet as a “pdf” (portable document format) or other replicating image attached to an e-mail message; and, “electronically signed document” means a document transmitted by electronic means and containing, or to which there is affixed, an electronic signature.

Section 8.17. Acknowledge and Appointment as the Calculation Agent. The Bank hereby acknowledges and accepts its appointment as the Calculation Agent during the initial Index Interest Rate Period pursuant to the Indenture and acknowledges, accepts and agrees to all the duties and obligations of the Calculation Agent set forth in the Indenture.

Section 8.18. Student Loan Referrals. The parties hereto represent and warrant to one another that the terms and conditions for the services provided under this Agreement are unrelated to whether the Borrower refers student loans to the Bank and to the amount of any such referrals.

Section 8.19. Purchase of Bonds. Upon the terms and conditions and based on the representations, warranties and covenants of the Borrower set forth in this Agreement and the Bond Purchase Agreement the Bank hereby agrees to purchase the Bonds from the Issuer.

Section 8.20. Construction. The provisions of this Agreement relating to Subsidiaries shall only apply during such times as the Borrower has one or more Subsidiaries.

[SIGNATURES BEGIN ON THE FOLLOWING PAGE]

Signature Page to Continuing Covenant Agreement

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered as of the date first above written.

WELLS FARGO BANK, NATIONAL ASSOCIATION

By ____________________________________ Name: ______________________________ Title: _______________________________


By ____________________________________ Name: _______________________________ Title: ________________________________

Acknowledged and Agreed

[SUB 1]

By _________________________________ Name____________________________ Title_____________________________

[SUB 1]

By _________________________________ Name____________________________ Title_____________________________

EXHIBIT A

FORM OF NO DEFAULT CERTIFICATE

This No Default Certificate (this “Certificate”) is furnished to Wells Fargo Bank, National Association (the “Bank”) pursuant to that certain Continuing Covenant Agreement dated as of February __, 2011 (the “Agreement”), between Azusa Pacific University (the “Borrower”), and the Bank. Unless otherwise defined herein, the terms used in this Certificate shall have the meanings assigned thereto in the Agreement.



2. I have reviewed the terms of the Agreement and I have made, or have caused to be made under my supervision, a detailed review of the transactions and conditions of the Loan Parties during the accounting period covered by the attached financial statements;

3. The examinations described in paragraph 2 did not disclose, and I have no knowledge of, the existence of any condition or the occurrence of any event which constitutes a Default or Event of Default during or at the end of the accounting period covered by the attached financial statements or as of the date of this Certificate, except as set forth below;

4. To the best of my knowledge the financial statements required by Section 5.05 of the Agreement and being furnished to you concurrently with this certificate fairly represent the consolidated condition of the Loan Parties in accordance with GAAP as of the dates and for the periods covered thereby; and

Described below are the exceptions, if any, to paragraph 3 by listing, in detail, the nature of the condition or event, the period during which it has existed and the action which the Borrower has taken, is taking, or proposes to take with respect to each such condition or event:

______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________

A-2

The foregoing certifications and the financial statements delivered with this Certificate in support hereof, are made and delivered this _________ day of _______________, 20__.


By:____________________________________ Name: ______________________________ Title: _______________________________

EXHIBIT B

FORM OF PRICING CERTIFICATE

This Pricing Certificate (this “Certificate”) is furnished to Wells Fargo Bank, National Association (the “Bank”) pursuant to that certain Continuing Covenant Agreement dated as of February __, 2011 (the “Agreement”), between Azusa Pacific University (the “Borrower”), and the Bank. Unless otherwise defined herein, the terms used in this Certificate shall have the meanings assigned thereto in the Agreement.



2. I have made, or have caused to be made under my supervision, a detailed review of the transactions and conditions of the Loan Parties during the accounting period covered by the financial statements delivered to the Bank concurrently herewith; and

3. To the best of my knowledge as of the end of the most recent fiscal quarter of the Borrower, the Loan Parties had Net Assets in an amount equal to $_______________ and Total Funded Debt in an amount equal to $_______________, resulting in a Net Assets to Total Funded Debt Ratio of _____ to 1.0.

This Certificate is made and delivered this _________ day of _______________, 20__.


By:____________________________________ Name: ______________________________ Title: _______________________________

EXHIBIT C

FORM OF COMPLIANCE CERTIFICATE

COMPLIANCE CALCULATIONS FOR CONTINUING COVENANT AGREEMENT Dated as of February __, 2011

Calculations as of _____________, 20___

SCHEDULE 1

EXISTING DEBT

1. The Azusa College Dormitory and Student Union Bonds of 1967, Series A and Series B issued pursuant to the Trust Indenture, dated as of April 1, 1967, by and between Azusa College and Crocker-Citizens National Bank, as trustee

2. The Existing Swap Agreements

SCHEDULE 2

SUBSIDIARIES

NAME JURISDICTION OF ORGANIZATION

PERCENTAGE OWNERSHIP OWNER

SCHEDULE 3

TRANSACTIONS WITH AFFILIATES

1. [To be provided by APU]

2.

Supplement to the Preliminary Limited Offering Memorandum … · 2011. 1. 31. · initially equal...

Documents

Transcript of Supplement to the Preliminary Limited Offering Memorandum … · 2011. 1. 31. · initially equal...