30035000 Athletic Facilities Revenue Bonds

NEW ISSUE See “RATINGS” herein BOOK ENTRY ONLY In the opinion of Gilmore & Bell, P.C., Bond Counsel, under existing law and assuming continued compliance with certain requirements of the Internal Revenue Code of 1986, as amended (the “Code”), (1) the interest on the Series 2012B-1 Bonds (including any original issue discount properly allocable to an owner thereof) is excludable from gross income for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations, (2) the interest on the Series 2012B-2 Bonds is included in gross income for federal income tax purposes in accordance with the owner’s normal method of accounting, (3) the interest on the Series 2012 Bonds is exempt from all Kansas state, county and municipal taxes, including income, inheritance and property taxes (provided, however, that no opinion is expressed with respect to the applicability of the privilege tax imposed on banking institutions pursuant to K.S.A. 79-1107 and 79-1108), and (4) the Series 2012B-1 Bonds have not been designated as “qualified tax-exempt obligations” within the meaning of Section 265(b)(3) of the Code. See the caption “TAX MATTERS” herein. $30,035,000 $23,640,000 KANSAS DEVELOPMENT FINANCE AUTHORITY KANSAS DEVELOPMENT FINANCE AUTHORITY Athletic Facilities Revenue Bonds Taxable Athletic Facilities Revenue Bonds (K-State Athletics, Incorporated Project) (K-State Athletics, Incorporated Project) Series 2012B-1 Series 2012B-2

Dated: Date of Delivery Due: July 1, as shown herein The Series 2012B-1 Bonds referenced above (the “Series 2012B-1 Bonds”) and the Series 2012B-2 Bonds referenced above (the “Series 2012B-2 Bonds,” and together with the Series 2012B-1 Bonds, the “Series 2012 Bonds”) will be issued by the Kansas Development Finance Authority (the “Authority”) pursuant to a Trust Indenture, dated as of December 1, 1998, as amended and supplemented, including by a Third Supplemental Trust Indenture, dated as of March 1, 2012 (collectively, the “Indenture”) between the Authority and UMB Bank, N.A., Kansas City, Missouri, as trustee (the “Trustee”). The Series 2012 Bonds will consist of fully registered bonds without coupons in denominations of $5,000 or integral multiples thereof. The Depository Trust Company (“DTC”) will act as securities depository for the Series 2012 Bonds. Purchases of Series 2012 Bonds will be made in book-entry form. See the caption “THE SERIES 2012 BONDS—Book-Entry Only System” herein. The Series 2012 Bonds shall be dated as of the date of delivery and shall become due on July 1, as set forth on the inside cover page hereof. Principal and premium, if any, shall be payable upon the presentation and surrender of the Series 2012 Bonds at the principal corporate trust office of the Trustee. Interest on the Series 2012 Bonds will be payable on July 1 and January 1, beginning July 1, 2012, as more fully described herein. MATURITY SCHEDULE—INSIDE COVER PAGE The Series 2012 Bonds are payable solely from payments to be made under a Loan Agreement, dated as of December 1, 1998, as amended and supplemented, including by the Third Supplemental Loan Agreement, dated as of March 1, 2012 (collectively, the “Loan Agreement”) between the Authority and K-State Athletics, Incorporated (the “Corporation”), which are pledged and assigned to the Trustee for payment of the Series 2012 Bonds in accordance with the Indenture. Pursuant to the Loan Agreement, and as security for the obligations of the Corporation thereunder, the Corporation has pledged and assigned to the Authority its unrestricted gross revenues and certain funds held by the Trustee under the Indenture, as more fully described herein, on a parity of lien basis with the Authority’s hereinafter defined Series 2002 Bonds and Series 2011 Bonds. Under the Indenture, Additional Bonds may be issued by the Authority on a parity with the Series 2002 Bonds, Series 2011 Bonds and the Series 2012 Bonds (such Additional Bonds, together with the Series 2002 Bonds, Series 2011 Bonds and Series 2012 Bonds being collectively referred to herein as the “Bonds”). The Series 2012 Bonds shall be special, limited obligations of the Authority payable (except to the extent paid out of Series 2012 Bond proceeds or the income from the temporary investment thereof and under certain circumstances from insurance proceeds and condemnation awards) solely from certain payments derived by the Authority under the Loan Agreement. The Bonds are secured by a transfer, pledge and assignment of and a grant of a security interest in the Trust Estate (as defined in the Indenture) to the Trustee and in favor of the owners of the Bonds, as provided in the Indenture. Neither the Corporation nor the Authority has any power to tax. The Bonds are not an obligation of Kansas State University (the “University”), the Kansas Board of Regents, or the Kansas State University Foundation. See the caption “SECURITY FOR THE BONDS” herein. THE SERIES 2012 BONDS SHALL NOT BE DEEMED TO CONSTITUTE A DEBT OR LIABILITY OF THE STATE OF KANSAS OR OF ANY POLITICAL SUBDIVISION THEREOF WITHIN THE MEANING OF ANY STATE CONSTITUTIONAL PROVISION OR STATUTORY LIMITATION AND SHALL NOT CONSTITUTE A PLEDGE OF THE FULL FAITH AND CREDIT OF THE STATE OF KANSAS OR OF ANY POLITICAL SUBDIVISION THEREOF, BUT SHALL BE PAYABLE SOLELY FROM THE FUNDS PROVIDED FOR IN THE LOAN AGREEMENT AND IN THE INDENTURE. THE ISSUANCE OF THE SERIES 2012 BONDS SHALL NOT, DIRECTLY, INDIRECTLY OR CONTINGENTLY, OBLIGATE THE STATE OF KANSAS OR ANY POLITICAL SUBDIVISION THEREOF TO LEVY ANY FORM OF TAXATION THEREFOR OR TO MAKE ANY APPROPRIATION FOR THEIR PAYMENT. THE STATE OF KANSAS SHALL NOT IN ANY EVENT BE LIABLE FOR THE PAYMENT OF THE SERIES 2012 BONDS OR FOR THE PERFORMANCE OF ANY PLEDGE, OBLIGATION OR AGREEMENT OF ANY KIND WHATSOEVER WHICH MAY BE UNDERTAKEN BY THE CORPORATION OR THE AUTHORITY. NO BREACH BY THE CORPORATION OR THE AUTHORITY OF ANY SUCH PLEDGE, OBLIGATION OR AGREEMENT MAY IMPOSE ANY LIABILITY, PECUNIARY OR OTHERWISE, UPON THE STATE OF KANSAS OR ANY CHARGE UPON ITS GENERAL CREDIT OR AGAINST ITS TAXING POWER. The Series 2012 Bonds are subject to redemption prior to maturity and to certain redemption risks as described under the caption “THE SERIES 2012 BONDS—Redemption of Series 2012 Bonds” herein. The Series 2012 Bonds are offered when, as and if issued by the Authority subject to the receipt of the approving legal opinion of Gilmore & Bell, P.C., Bond Counsel. Certain legal matters will be passed upon for the Authority by its special counsel and disclosure counsel, Kutak Rock LLP, for the Underwriters by their counsel, Chapman and Cutler LLP, for the Corporation by its counsel, Peter Paukstelis, Esq., Associate General Counsel for Kansas State University, and for the University by its General Counsel, Cheryl Strecker, Esq. It is expected that the Series 2012 Bonds will be available for delivery to DTC in New York, New York on or about March 1, 2012. BofA Merrill Lynch J.P. Morgan Morgan Keegan The date of this Official Statement is February 16, 2012.

MATURITY SCHEDULE

$30,035,000 Athletic Facilities Revenue Bonds (K-State Athletics, Incorporated Project) Series 2012B-1

Maturity Date Principal Interest (July 1) Amount Rate Yield Price CUSIP(1)

2025 $ 510,000 3.000% 3.150% 98.374% 485429 LL6 2026 3,420,000 5.000% 3.120%(2) 109.166% 485429 LM4 2027 3,595,000 5.000% 3.210%(2) 108.705% 485429 LN2 2028 3,790,000 5.250% 3.250%(2) 109.716% 485429 LP7 2029 3,985,000 5.000% 3.390%(2) 107.790% 485429 LQ5 2030 4,190,000 5.000% 3.490%(2) 107.285% 485429 LR3 2031 4,410,000 5.000% 3.580%(2) 106.833% 485429 LS1 2032 6,135,000 5.000% 3.680%(2) 106.334% 485429 LT9

(1)The Authority shall not be responsible for the use of the CUSIP numbers, nor is any representation made as to their correctness. They are included solely for the convenience of readers of this Official Statement. (2) Yield calculated to the first optional redemption date of July 1, 2017.

MATURITY SCHEDULE

$23,640,000 Taxable Athletic Facilities Revenue Bonds (K-State Athletics, Incorporated Project) Series 2012B-2

Maturity Date Principal Interest (July 1) Amount Rate Yield Price CUSIP(1)

2013 $ 320,000 1.088% 1.088% 100.000% 485429 LU6 2014 625,000 1.416% 1.416% 100.000% 485429 LV4 2015 775,000 1.708% 1.708% 100.000% 485429 LW2 2016 1,040,000 2.043% 2.043% 100.000% 485429 LX0 2017 1,050,000 2.343% 2.343% 100.000% 485429 LY8 2018 1,075,000 2.587% 2.587% 100.000% 485429 LZ5 2019 1,430,000 2.837% 2.837% 100.000% 485429 MA9 2020 2,705,000 3.233% 3.233% 100.000% 485429 MB7 2021 2,800,000 3.483% 3.483% 100.000% 485429 MC5 2022 2,905,000 3.733% 3.733% 100.000% 485429 MD3 2023 3,015,000 3.933% 3.933% 100.000% 485429 ME1 2024 3,140,000 4.083% 4.083% 100.000% 485429 MF8 2025 2,760,000 4.233% 4.233% 100.000% 485429 MG6

KANSAS DEVELOPMENT FINANCE AUTHORITY

Donald Linville, Chair Audrey H. Langworthy, Vice Chair Suresh Kumar, Member Patti Petersen-Klein, Member Suchitra Padmanabhan, Member Timothy M. Shallenburger, President Rebecca E. Floyd, Executive Vice President and General Counsel Jim MacMurray, Vice President of Finance Linda Clark, Chief Fiscal Officer

______

K-STATE ATHLETICS, INCORPORATED

John Currie, CEO and Chairperson, Director of Athletics Bruce Shubert, Vice Chair, Secretary/Treasurer, Vice President, Administration and Finance Dr. Pat Bosco, Vice President, Student Life, Dean of Students Dr. Jackie Hartman, Chief of Staff, Director of Community Relations Dr. April Mason, Senior Vice President and Provost Dr. Be Stoney, Faculty Athletics Representative

______

KANSAS STATE UNIVERSITY ADMINISTRATION

Dr. Kirk H. Schulz, President Bruce Shubert, Vice President for Administration and Finance Fran Willbrant, Assistant Vice President – Financial Services

______

PROFESSIONAL SERVICES

Bond Counsel, Gilmore & Bell, P.C. Disclosure Counsel, Kutak Rock LLP Underwriters’ Counsel, Chapman and Cutler LLP Financial Advisor, Columbia Capital Management, LLC Trustee, UMB Bank, N.A.

No dealer, broker, salesman or other person has been authorized by the Authority or the Corporation to give any information or to make any representations other than those contained herein and, if given or made, such other information or representations must not be relied upon as having been authorized by the Authority or the Corporation.

The Underwriters have provided the following sentence for inclusion in this Official Statement: The Underwriters have reviewed the information in this Official Statement in accordance with, and as part of their respective responsibilities to investors under the securities laws as applied to the facts and circumstances of this transaction, but the Underwriters do not guarantee the accuracy or completeness of such information.

FORWARD-LOOKING STATEMENTS

This Official Statement, including the section under the captions “PLAN OF FINANCE—Fundraising Campaigns” and “INVESTMENT CONSIDERATIONS” and in Appendix A to this Official Statement, including under the caption “DEBT SERVICE COVERAGE” in Appendix A, contains forward-looking statements. These statements relate to future events or future financial performance and involve known and unknown risks, uncertainties and other factors that may cause actual results, levels of activity, performance or achievements to differ materially from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. You can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “projects,” “potential,” “continues” or the negative of these terms or other comparable terminology. Although the Authority and the Corporation believe the expectations reflected in the forward-looking statements to be reasonable, neither the Authority nor the Corporation can guarantee future results, levels of activity, performance or achievements. The Authority and the Corporation do not plan to issue any updates of revisions to those forward-looking statements if or when the expectations on which such statements are based occur or fail to occur. Certain risks and other factors with respect to such events include those listed under the captions “PLAN OF FINANCE—Fundraising Campaigns” and “INVESTMENT CONSIDERATIONS” and contained in Appendix A to this Official Statement, including under the caption “DEBT SERVICE COVERAGE” in Appendix A and elsewhere in this Official Statement.

THIS OFFICIAL STATEMENT DOES NOT CONSTITUTE AN OFFER TO SELL OR SOLICITATION OF AN OFFER TO BUY, NOR WILL THERE BE ANY SALE OF THE SERIES 2012 BONDS BY ANY PERSON, IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL FOR SUCH PERSON TO MAKE SUCH OFFER, SOLICITATION OR SALE. THE INFORMATION AND EXPRESSIONS OF OPINION HEREIN ARE SUBJECT TO CHANGE WITHOUT NOTICE, AND NEITHER THE DELIVERY OF THIS OFFICIAL STATEMENT NOR ANY SALE MADE THEREAFTER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE AUTHORITY, THE CORPORATION OR THE UNIVERSITY SINCE THE DATE HEREOF.

THE SERIES 2012 BONDS HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, NOR HAS ANY DOCUMENT BEEN QUALIFIED UNDER THE TRUST INDENTURE ACT OF 1939, AS AMENDED, IN RELIANCE UPON EXEMPTIONS CONTAINED IN SUCH ACTS. IN MAKING AN INVESTMENT DECISION, INVESTORS MUST RELY ON THEIR OWN EXAMINATIONS OF THE TERMS OF THE OFFERING. THE SERIES 2012 BONDS HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS OFFICIAL STATEMENT.

IN CONNECTION WITH THE OFFERING OF THE BONDS, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF SUCH 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 PAGE LEFT BLANK INTENTIONALLY) TABLE OF CONTENTS

Page

INTRODUCTION ...... 1 THE AUTHORITY ...... 3 THE CORPORATION ...... 5 General ...... 5 RELATED PARTIES ...... 5 The University ...... 5 The Kansas Board of Regents...... 6 The Kansas State University Foundation ...... 6 THE SERIES 2012 BONDS...... 6 General ...... 6 Interchangeability and Transfer...... 7 Book-Entry Only System...... 7 Redemption of Series 2012 Bonds ...... 8 Mutilated, Lost, Stolen or Destroyed Bonds ...... 10 Acceleration...... 10 SECURITY FOR THE BONDS...... 10 Limited Obligations ...... 10 Trust Estate ...... 10 Loan Agreement ...... 11 Revenues Pledged Under Loan Agreement ...... 11 Operating Agreement; Restrictive Covenants of the University and the Corporation ...... 11 Debt Service Reserve Fund...... 12 Additional Bonds and Parity Obligations...... 13 PLAN OF FINANCE...... 14 Prior Bonds under the Indenture...... 14 The Series 2012 Bonds ...... 14 The Project...... 15 Fundraising Campaigns ...... 15 ESTIMATED SOURCES AND USES OF FUNDS ...... 17 ANNUAL DEBT SERVICE REQUIREMENTS ON THE BONDS...... 18 INVESTMENT CONSIDERATIONS...... 18 Bondowners’ Risks...... 18 General ...... 18 No Pledge of Real Property ...... 19 Termination of Operating Agreement with the University...... 19 Reliance on Big 12 Conference Revenues...... 19 Uncertainties Associated with Corporation's Right to Big 12 Revenues ...... 20 Changes in Composition of Big 12 Conference ...... 20 Other Factors Affecting the Financial Performance of the Corporation ...... 20 Construction Risks...... 21 Corporation Funds held by the University and the Foundation...... 22 Matters Relating to Security for the Series 2012 Bonds ...... 22 Enforceability of Pledge of the Revenues; Effect of Bankruptcy...... 22 Taxation of Interest on the Series 2012B-1 Bonds...... 23 Debt Service Reserve Fund...... 24 Amendment of the Indenture ...... 24

Secondary Market for the Series 2012 Bonds ...... 24 Tax Legislation and Other Matters...... 24 RATINGS ...... 25 TAX MATTERS ...... 25 Opinion of Bond Counsel Regarding the Series 2012B-1 Bonds...... 25 Other Federal Income Tax Consequences to Owners of the Series 2012B-1 Bonds ...... 26 Federal Income Tax Consequences to Owners of the Series 2012B-2 Bonds...... 27 Opinion of Bond Counsel Regarding the Series 2012B-2 Bonds...... 27 Other Federal Income Tax Consequences Applicable to Owners of the Series 2012B-2 Bonds.27 Other Federal Income Tax Consequences Applicable to Owners of the Series 2012 Bonds...... 28 LEGAL MATTERS...... 29 LITIGATION...... 29 The Authority...... 29 The Corporation...... 29 FINANCIAL ADVISOR ...... 29 UNDERWRITING...... 29 FINANCIAL STATEMENTS ...... 30 CONTINUING DISCLOSURE ...... 30 MISCELLANEOUS ...... 30

APPENDIX A—K-STATE ATHLETICS, INCORPORATED APPENDIX B—AUDITED FINANCIAL STATEMENTS OF THE CORPORATION FOR THE FISCAL YEARS ENDED JUNE 30, 2011 AND 2010 APPENDIX C—KANSAS STATE UNIVERSITY APPENDIX D—DEFINITIONS AND SUMMARIES OF INDENTURE, LOAN AGREEMENT AND OPERATING AGREEMENT APPENDIX E—FORM OF CONTINUING DISCLOSURE UNDERTAKING APPENDIX F—FORM OF BOND COUNSEL OPINION APPENDIX G—BOOK-ENTRY ONLY SYSTEM

OFFICIAL STATEMENT

$30,035,000 $23,640,000 KANSAS DEVELOPMENT FINANCE AUTHORITY KANSAS DEVELOPMENT FINANCE AUTHORITY Athletic Facilities Revenue Bonds Taxable Athletic Facilities Revenue Bonds (K-State Athletics, Incorporated Project) (K-State Athletics, Incorporated Project) Series 2012B-1 Series 2012B-2

INTRODUCTION

This Official Statement, including the cover pages and the appendices, is furnished in connection with the offering by the Kansas Development Finance Authority (the “Authority”) of its $30,035,000 principal amount of Athletic Facilities Revenue Bonds (K-State Athletics, Incorporated Project), Series 2012B-1 (the “Series 2012B-1 Bonds”) and its $23,640,000 principal amount of Taxable Athletic Facilities Revenue Bonds (K-State Athletics, Incorporated Project), Series 2012B-2 (the “Series 2012B-2 Bonds,” and together with the Series 2012B-1 Bonds, the “Series 2012 Bonds”).

The Authority is a public body, politic and corporate, and an independent instrumentality of the State of Kansas (the “State”) exercising essential public functions, and is authorized by law to issue the Series 2012 Bonds. The Series 2012 Bonds will be issued under and in full compliance with the Constitution and statutes of the State and under and pursuant to a resolution (the “Resolution”) adopted by the Board of Directors of the Authority on February 6, 2012, and a Trust Indenture, dated as of December 1, 1998, as amended and supplemented by a First Supplemental Trust Indenture dated as of March 1, 2002, an Amendatory Supplemental Trust Indenture dated as of January 26, 2011, a Second Supplemental Trust Indenture dated as of March 1, 2011, and a Third Supplemental Trust Indenture dated as of March 1, 2012 (collectively, the “Indenture”), between the Authority and UMB Bank, N.A., Kansas City, Missouri, as trustee (the “Trustee”). The Series 2012 Bonds are being issued for the purpose of: (1) paying the cost of a portion of the football stadium expansion known as the West Stadium Center on the west side of the Bill Snyder Family Stadium/Football Complex (the “Project”) located on the campus of Kansas State University (the “University”); (2) making a deposit to the Debt Service Reserve Fund; and (3) paying certain expenses incurred in connection with the issuance of the Series 2012 Bonds. For a more detailed description of the Project, see the caption “PLAN OF FINANCE—The Project” herein and for a description of related fundraising campaigns, see the caption “PLAN OF FINANCE—Fundraising Campaigns” herein.

Principal of, premium, if any, and interest on the Series 2012 Bonds are special, limited obligations of the Authority payable by the Authority solely from payments to be made by K-State Athletics, Incorporated (formerly known as the Intercollegiate Athletic Council of Kansas State University, Inc.), a Kansas not-for-profit corporation (the “Corporation”), pursuant to a Loan Agreement dated as of December 1, 1998, as amended and supplemented by a First Supplemental Loan Agreement dated as of March 1, 2002, a Second Supplemental Loan Agreement dated as of March 1, 2011 and a Third Supplemental Loan Agreement dated as of March 1, 2012 (collectively, the “Loan Agreement”) between the Authority and the Corporation. Pursuant to the Loan Agreement, and as security for the obligations of the Corporation thereunder, the Corporation has pledged and assigned to the Authority its unrestricted gross revenues and certain funds held by the Trustee under the Indenture, as more fully described herein.

The Corporation is a not-for-profit corporation originally incorporated in 1933 under the laws of the State, and is a tax-exempt charitable organization under Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (the “Code”), exempt from federal income taxation under Section 501(a) of

the Code. The Corporation was organized to promote and support intercollegiate athletics at the University, subject to the University’s regulations and policies. For additional information regarding the Corporation, see Appendix A hereto.

The obligation of the Corporation to make payments of principal, premium, if any, and interest on the Bonds pursuant to the Loan Agreement is a general obligation of the Corporation, secured by the Corporation’s pledge of its Revenues to the Authority. The Series 2002 Bonds, the Series 2011 Bonds, the Series 2012 Bonds and any Additional Bonds hereafter issued under the Indenture will be equally and ratably payable on a parity basis under the Indenture from the Revenues of the Corporation; provided that deposits to the Debt Service Reserve Fund secure separate series of bonds as described below.

The Authority may issue Additional Bonds and the Corporation may issue or incur Additional Notes and Additional Obligations which would be payable from Revenues of the Corporation on a parity with the Series 2002 Bonds, the Series 2011 Bonds and the Series 2012 Bonds. See the caption “SECURITY FOR THE BONDS—Additional Bonds and Parity Obligations” herein. The Series 2002 Bonds, the Series 2011 Bonds, the Series 2012 Bonds and any Additional Bonds which may be issued under the Indenture are collectively referred to herein as the “Bonds.”

A Debt Service Reserve Fund has been established under the Indenture. A debt service reserve account (the “2002 Debt Service Reserve Account”) was established in connection with the issuance of the Series 2002 Bonds. The 2002 Debt Service Reserve Account provides additional security for the Series 2002 Bonds. Two debt service reserve accounts (the “2011A-1 Debt Service Reserve Account” and the “2011A-2 Debt Service Reserve Account” and collectively, the “2011 Debt Service Reserve Accounts”) were established in connection with the issuance of the Series 2011 Bonds. The 2011A-1 Debt Service Reserve Account provides additional security for the Series 2011A-1 Bonds only and the 2011A-2 Debt Service Reserve Account provides additional security for the Series 2011A-2 Bonds only. The Series 2012 Bonds and any Additional Bonds have no claim to the 2002 Debt Service Reserve Account or the 2011 Debt Service Accounts. A debt service reserve account has been established under the Indenture with respect to the Series 2012B-1 Bonds (the “2012B-1 Debt Service Reserve Account”) which will initially be funded by a deposit of proceeds of the Series 2012B-1 Bonds in an amount equal to the Debt Service Reserve Requirement with respect to the Series 2012B-1 Bonds and thereafter is required to be maintained at such level. A debt service reserve account has been established under the Indenture with respect to the Series 2012B-2 Bonds (the “2012B-2 Debt Service Reserve Account”) which will initially be funded by a deposit of proceeds of the Series 2012B-2 Bonds in an amount equal to the Debt Service Reserve Requirement with respect to the Series 2012B-2 Bonds and thereafter is required to be maintained at such level. The Series 2002 Bonds and Series 2011 Bonds have no claim to the 2012B-1 Debt Service Reserve Account or the 2012B-2 Debt Service Reserve Account. See the caption “SECURITY FOR THE BONDS—Debt Service Reserve Fund” herein.

The Series 2012 Bonds are subject to redemption in whole or in part prior to maturity as described under the caption “THE SERIES 2012 BONDS—Redemption of Series 2012 Bonds” herein.

The Series 2012 Bonds shall be special, limited obligations of the Authority payable (except to the extent paid out of Series 2012 Bond proceeds or the income from the temporary investment thereof and under certain circumstances from insurance proceeds and condemnation awards) solely out of the loan payments and other payments derived by the Authority under the Loan Agreement (except for fees and expenses payable to the Authority, the Authority’s right to indemnification as set forth in the Loan Agreement and as otherwise expressly set forth therein), and are secured by a transfer, pledge and assignment of and a grant of a security interest in the Trust Estate to the Trustee and in favor of the owners of the Series 2012 Bonds, as provided in the Indenture. The Series 2012 Bonds are not an

obligation of the University, the Kansas Board of Regents (the “Board of Regents”) or the Kansas State University Foundation (the “Foundation”).

THE SERIES 2012 BONDS SHALL NOT BE DEEMED TO CONSTITUTE A DEBT OR LIABILITY OF THE STATE OF KANSAS OR OF ANY POLITICAL SUBDIVISION THEREOF WITHIN THE MEANING OF ANY STATE CONSTITUTIONAL PROVISION OR STATUTORY LIMITATION AND SHALL NOT CONSTITUTE A PLEDGE OF THE FULL FAITH AND CREDIT OF THE STATE OR OF ANY POLITICAL SUBDIVISION THEREOF, BUT SHALL BE PAYABLE SOLELY FROM THE FUNDS PROVIDED FOR IN THE LOAN AGREEMENT AND IN THE INDENTURE. THE ISSUANCE OF THE SERIES 2012 BONDS SHALL NOT, DIRECTLY, INDIRECTLY OR CONTINGENTLY, OBLIGATE THE STATE OR ANY POLITICAL SUBDIVISION THEREOF TO LEVY ANY FORM OF TAXATION THEREFOR OR TO MAKE ANY APPROPRIATION FOR THEIR PAYMENT. THE STATE OF KANSAS SHALL NOT IN ANY EVENT BE LIABLE FOR THE PAYMENT OF THE SERIES 2012 BONDS OR FOR THE PERFORMANCE OF ANY PLEDGE, MORTGAGE, OBLIGATION OR AGREEMENT OF ANY KIND WHATSOEVER WHICH MAY BE UNDERTAKEN BY THE CORPORATION OR THE AUTHORITY. NO BREACH BY THE CORPORATION OR THE AUTHORITY OF ANY SUCH PLEDGE, MORTGAGE, OBLIGATION OR AGREEMENT MAY IMPOSE ANY LIABILITY, PECUNIARY OR OTHERWISE, UPON THE STATE OR ANY CHARGE UPON ITS GENERAL CREDIT OR AGAINST ITS TAXING POWER. NEITHER THE CORPORATION NOR THE AUTHORITY HAS ANY POWER TO TAX.

The Series 2012 Bonds are also subject to certain risk factors and investment considerations. See the caption “INVESTMENT CONSIDERATIONS” herein.

Definitions of certain terms used in this Official Statement, and summaries of the Indenture and the Loan Agreement are set forth in Appendix D to this Official Statement. This Official Statement contains brief descriptions of, among other things, the Authority, the Corporation, the Series 2012 Bonds, the Indenture, the Loan Agreement, the Continuing Disclosure Undertaking and the Operating Agreement (hereafter defined). Such descriptions do not purport to be comprehensive or definitive. All references in this Official Statement to documents are qualified in their entirety by reference to such documents, and references to the Series 2012 Bonds are qualified in their entirety by reference to the form of the Series 2012 Bonds included in the Indenture.

THE STATEMENTS HEREIN REGARDING CERTAIN RISKS ASSOCIATED WITH THE OFFERING SHOULD NOT BE CONSIDERED AS A COMPLETE DESCRIPTION OF ALL RISKS TO BE CONSIDERED IN THE DECISION TO PURCHASE THE SERIES 2012 BONDS.

Prospective purchasers of the Series 2012 Bonds should analyze carefully the information contained in this Official Statement and additional information in the form of the complete documents summarized herein, copies of which are available from the Authority.

THE AUTHORITY

The Authority is a public body, politic and corporate, and an independent instrumentality of the State exercising essential public functions, created in 1987 by K.S.A. 74-8901 et seq., as amended (the “KDFA Act”). The Authority was created for the primary purposes of enhancing the ability of the State to finance capital improvements and improving access to long-term financing for State agencies, political subdivisions, public and private organizations and businesses.

The powers of the Authority are vested in the Board of Directors, consisting of five public members appointed by the Governor subject to confirmation by the State Senate. The Governor also appoints a President who serves at the pleasure of the Governor. The President is an ex-officio, non-voting member of the Board of Directors. Not less than three members of the Board of Directors must be representative of the general public and not more than three members may be members of the same political party.

The names, offices, principal occupations and places of business of the members of the Authority’s Board of Directors and their terms are as follows:

PRINCIPAL OCCUPATION NAME OFFICE TERM AND PLACE OF BUSINESS

Donald Linville Chair 9/06/11 to 1/15/15 CPA, Lewis, Hooper & Dick, LLC Member 5/02/11 to 1/15/15 (Retired) Garden City, Kansas

Audrey H. Langworthy Vice Chair 6/11/10 to 1/15/13 Community Volunteer Member 1/29/04 to 1/15/13 Prairie Village, Kansas Suresh Kumar Member 1/17/12 to 1/15/15 CPA, MBA, Kumar Consulting, PA Overland Park, Kansas

Patti Petersen-Klein Member 3/17/11 to 1/15/13 Executive Director, Kansas Corporation Commission Topeka, Kansas

Suchitra Padmanabhan Member 2/2/10 to 1/15/13 Partner, BC Capital Topeka, Kansas

Tim Shallenburger Ex-officio 1/10/11 to present President Member Kansas Development Finance Authority Topeka, Kansas

Members of the Board of Directors serve until their successors are appointed by the Governor and confirmed by the State Senate. The Authority’s General Counsel serves as Executive Vice President and Secretary to the Authority.

The Authority has the rights, powers and privileges and is subject to the duties provided by the KDFA Act creating it, including the acquisition and disposal of real and personal property for its corporate purposes; the borrowing of money and issuance of notes, bonds and other obligations; the making of secured or unsecured loans for any of the purposes for which it may issue bonds (except making loans directly to individuals to finance housing developments); the provision of technical assistance and advice to the State or political subdivisions of the State; and entering into contracts with the State or political subdivisions thereof to provide such services.

The Bonds, including the Series 2012 Bonds, the Series 2002 Bonds, the Series 2011 Bonds and any Additional Bonds issued under the Indenture, are separately secured from all other bonds and notes issued by the Authority. In addition, no recourse shall be had for the payment of the principal of, redemption premium, if any, or interest on any of the Series 2012 Bonds or for any claim based thereon

or upon any obligation, covenant or agreement in the Indenture or the Loan Agreement contained against any past, present or future officer, director, member, employees or agent of the Authority or any officer, director, member, trustee, employee or agent of any successor corporation or body politic as such, either directly or through the Authority or any successor corporation or body politic under any rule of law or equity, statute or constitution or by the enforcement of any assessment or penalty or otherwise, and all such liability of any such officers, directors, trustees, members, employees or agents as such, is expressly waived and released as a condition of and consideration of and consideration for the execution of the Indenture and the Loan Agreement and the issuance of any of the Series 2012 Bonds.

Except for information concerning the Authority under the captions “THE AUTHORITY” and “LITIGATION—The Authority” herein, none of the information in this Official Statement has been supplied or verified by the Authority, and the Authority makes no representation or warranty, express or implied, as to the accuracy or completeness of such information.

THE CORPORATION

General

The Corporation is a not-for-profit corporation originally incorporated in 1933 under the laws of the State of Kansas, and is a tax-exempt charitable organization under Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (the “Code”), exempt from federal income taxation under Section 501(a) of the Code. The Corporation was organized to promote and support intercollegiate athletics allowing the University to compete as strongly as possible, within the resources available to the University and the rules and regulations of the National Collegiate Athletic Association (the “NCAA”), the Big 12 Athletic Conference (the “Big 12” or the “Big 12 Conference”) and any other athletic conference with which the University may affiliate. Pursuant to an Operating Agreement between the University and the Corporation, dated as of January 26, 2011 (the “Operating Agreement”), the Corporation operates the varsity intercollegiate athletic program for the students, faculty, alumni, guests and visitors of the University in facilities owned or controlled by the University and subject to the University’s regulations and policies. Additional information concerning the Operating Agreement is contained under the captions “SECURITY FOR THE BONDS—Operating Agreement; Restrictive Covenants of the University and the Corporation” herein, “OPERATIONS—Operating Agreement with the University” in Appendix A hereto and “SUMMARY OF THE OPERATING AGREEMENT” in Appendix D hereto. Information concerning the Corporation is contained in Appendix A hereto and “SUMMARY OF THE OPERATING AGREEMENT” in Appendix D hereto.

RELATED PARTIES

The University

Kansas State University, with a full-time enrollment of over 23,000 total students (approximately 20,700 full-time equivalent students), has its main campus located in northern Manhattan, Kansas, which is approximately one hundred twenty-five miles west of Kansas City, and an auxiliary campus located in Salina, Kansas. The University is a State institution of higher education under the control and supervision of the Board of Regents. Additional information regarding the University is contained in Appendix C hereto.

THE UNIVERSITY IS NOT OBLIGATED WITH RESPECT TO THE PAYMENT OF PRINCIPAL, PREMIUM, IF ANY, OR INTEREST ON THE BONDS.

The Kansas Board of Regents

Together with Emporia State University, Fort Hays State University, Pittsburg State University, Wichita State University, University of Kansas and the University of Kansas Medical Center, the University is controlled and supervised by the Board of Regents.

The Board of Regents was established in 1925, when the State Legislature separated control of the State educational system from that of other State institutions and placed it under the jurisdiction of a separate governing body. The Board of Regents consists of nine regents appointed by the Governor and continued by the State Senate. The term of office for each regent is four years, with appointments staggered. Not more than five regents may be of the same political party. The Board of Regents is a constitutionally established board, responsible for formulating policy under which the State universities operate and for recommending to the State Legislature the amount of State funds to be made available to each institution. The Board has the power to make and execute contracts; acquire property; pledge or assign revenues; issue revenue bonds; construct, acquire or improve properties; fix, charge and collect rents, tuition and other fees; contract for services; and execute all acts necessary to the performance of its duties.

THE BOARD OF REGENTS IS NOT OBLIGATED WITH RESPECT TO THE PAYMENT OF PRINCIPAL, PREMIUM, IF ANY, OR INTEREST ON THE BONDS.

The Kansas State University Foundation

The Foundation was organized in 1944. The Foundation is governed by a Board of Trustees representing geographic and educational constituencies.

The essential purpose of the Foundation is to provide funding unavailable through State appropriations or student fees to support the educational undertakings of the University. To that end, the Foundation encourages donations of and holds in trust any real or personal property contributed for the use of the University, its faculty and its students. The Foundation is charged with investing, managing, controlling and disbursing all such gifts. It currently supports the University with over $38.4 million annually expended for grants, equipment and supplies, professorships and other faculty compensation, research, travel, public relations, construction costs, special projects, student recruitment and transfers to the Department of Intercollegiate Athletics. In addition, scholarships of more than $9 million dollars annually are provided through the Foundation. Additional information regarding the Foundation is contained in Appendix C hereto.

THE FOUNDATION IS NOT OBLIGATED WITH RESPECT TO THE PAYMENT OF PRINCIPAL, PREMIUM, IF ANY, OR INTEREST ON THE BONDS.

THE SERIES 2012 BONDS

General

The Series 2012 Bonds will be issued as fully registered bonds in the denomination of $5,000 each or integral multiples thereof. The Series 2012 Bonds will be dated the date of issuance and shall mature, subject to prior redemption, in the years and principal amounts set forth on the inside cover page to this Official Statement. The principal of, redemption premium, if any, and interest on the Series 2012 Bonds will be payable to the Registered Owner at maturity or upon earlier redemption by (a) check or draft of the Trustee mailed to such Registered Owner, or (b) at the written request addressed to the

Trustee by any Registered Owner of Series 2012 Bonds in the aggregate principal amount of at least $1,000,000 of Series 2012 Bonds, by wire transfer to a financial institution for credit to the account number filed with the Trustee no later than the Business Day preceding the Record Date upon surrender of such Series 2012 Bond at the principal corporate trust office of the Trustee.

The principal of each Series 2012 Bond will be payable at maturity or earlier redemption upon presentation and surrender at the principal office of the Trustee. Interest on the Series 2012 Bonds will be payable on January 1 and July 1 of each year, commencing July 1, 2012 (each, an “Interest Payment Date”), by check or draft of the Trustee mailed to the persons who are the owners of the Series 2012 Bonds as of the close of business on the fifteenth day (whether or not a Business Day) of the calendar month preceding each Interest Payment Date. Interest on each Series 2012 Bond will be payable to the owners of the bonds at the address of each owner shown on the registration records maintained by the Trustee as of the fifteenth day of the calendar month next preceding each Interest Payment Date.

The Series 2012 Bonds will be transferable at the office of the Bond Registrar. The Authority has agreed to pay the fees, charges and expenses of the Bond Registrar, which fees, charges and expenses shall include all costs incurred in connection with the issuance, transfer, exchange, registration, redemption or payment of the Series 2012 Bonds, except (a) the reasonable fees and expenses in connection with the replacement of any Series 2012 Bonds mutilated, stolen, lost or destroyed, or (b) any tax or other governmental charge imposed in relation to the transfer, exchange, registration, redemption or payment of the Bonds. Such additional costs shall be paid by the Registered Owners. The Bond Registrar will not be required (a) to issue, transfer or exchange any Series 2012 Bonds during the period of 15 days immediately preceding any Payment Date; or (b) to issue, transfer or exchange any Series 2012 Bonds after the date specified in any notice of redemption (which shall be not less than 15 calendar days immediately preceding the mailing of the notice of redemption).

Interchangeability and Transfer

The Series 2012 Bonds, upon surrender thereof to the Trustee, as Bond Registrar, with a written instrument of transfer satisfactory to the Trustee, duly executed by the Registered Owner, or his or her duly authorized attorney, may, at the option of the Registered Owner thereof, be exchanged for an equal aggregate principal amount or Maturity Amount, as applicable, of Bonds in registered form of the same series, maturity and of any other authorized denomination.

In all cases in which the privilege of exchanging or transferring the Series 2012 Bonds is exercised, the Authority shall execute and the Trustee shall deliver the Series 2012 Bonds in accordance with the Indenture. For every such exchange or transfer of Series 2012 Bonds, the Trustee shall require the payment by the Registered Owner requesting such transfer or exchange of any tax or other governmental charges payable with respect thereto and may charge a sum not exceeding the actual cost for each new Series 2012 Bond.

No exchange or transfer of any Bond shall be required to be made during the 45 days next preceding the date fixed for the redemption of such Series 2012 Bond.

Book-Entry Only System

The Depository Trust Company (“DTC”), New York, New York, will act as securities depository (the “Securities Depository”) for the Series 2012 Bonds. Information with respect to DTC and the book- entry only system is contained in Appendix G attached hereto.

Redemption of Series 2012 Bonds

Optional Redemption.

Series 2012B-1 Bonds. The Series 2012B-1 Bonds maturing on or after July 1, 2018 are subject to redemption and payment prior to maturity, at the option of the Authority, which shall be exercised upon written direction of the Corporation, on and after July 1, 2017, in whole or in part on any date at a redemption price equal to 100% of the principal amount of the Series 2012B-1 Bonds, plus accrued interest thereon to the redemption date.

Series 2012B-2 Bonds. The Series 2012B-2 Bonds are subject to redemption and payment prior to maturity, at the option of the Authority, which shall be exercised upon written direction of the Corporation, in whole or in part, and if in part in authorized denominations of $5,000 or integral multiples thereof, at a redemption price equal to the Make-Whole Redemption Price. The “Make-Whole Redemption Price” is the greater of (i) 100% of the principal amount of the Series 2012B-2 Bonds to be redeemed or (ii) the sum of the present value of the remaining scheduled payments of principal and interest to the maturity date of the Series 2012B-2 Bonds to be redeemed, not including any portion of those payments of interest accrued and unpaid as of the date on which the Series 2012B-2 Bonds are to be redeemed, discounted to the date on which the Series 2012B-2 Bonds are to be redeemed on a semi-annual basis, assuming a 360-day year consisting of twelve 30-day months, at the Treasury Rate (as defined below) plus 55 basis points, plus, in each case, accrued and unpaid interest on the Series 2012B-2 Bonds to be redeemed on the redemption date. The “Treasury Rate” is, as of any redemption date, the yield to maturity as of such redemption date of United States Treasury securities with a constant maturity (as compiled and published in the most recent Federal Reserve Statistical Release H.15 (519) that has become publicly available at least two Business Days prior to the redemption date (excluding inflation indexed securities) (or, if such statistical release is no longer published, any publicly available source of similar market data)) most nearly equal to the period from the redemption date to the maturity date of the Series 2012B-2 Bonds to be redeemed; provided, however, that if the period from the redemption date to such maturity date is less than one year, the weekly average yield on actually traded United States Treasury securities adjusted to a constant maturity of one year will be used. For purposes of this calculation, a “Business Day” means any day other than (A) a Saturday or Sunday or legal holiday or a day on which banking institutions in the city in which the designated corporate trust office of the Trustee is located are authorized by law or executive order to close or (B) a day on which the New York Stock Exchange is closed.

The Make-Whole Redemption Price will be determined by an independent accounting firm, investment banking firm or financial advisor retained by the Authority at the Authority’s expense to calculate such redemption price (the “Calculation Agent”). The determination by the Calculation Agent of the Make-Whole Redemption Price shall be conclusive and binding on the Trustee, the Authority, the Corporation and the owners of the Series 2012B-2 Bonds.

For a discussion of the Corporation’s fundraising campaign for the Project and the planned application of available funds, see the caption “PLAN OF FINANCE—Fundraising Campaigns” herein.

Extraordinary Optional Redemption. The Series 2012 Bonds are subject to redemption and payment prior to the stated maturity thereof, at the option of the Authority, which shall be exercised upon written direction from the Corporation, in whole or in part from the maturity or maturities selected by the Corporation at any time, at a redemption price equal to 100% of the principal amount of the Series 2012

Bonds, without premium, plus accrued interest thereon to the redemption date, upon the occurrence of any of the following events:

(a) all or a substantial portion of the facilities financed or refinanced with the proceeds of the Series 2012 Bonds are damaged or destroyed by fire or other casualty, or title to, or the temporary use of, all or a substantial portion of such facilities are condemned or taken for any public or quasi-public use (other than use as presently contemplated by the University as Athletic Facilities) by any authority exercising the power of eminent domain or title thereto is found to be deficient; or

(b) as a result of any changes in the Constitution of the State or the Constitution of the United States of America or of legislative or administrative action (whether State or federal) or by final direction, judgment or order of any court or administrative body (whether State or federal) entered after the contest thereof by the Corporation in good faith, the Indenture, the Loan Agreement or the Series 2012 Note (as herein defined) becomes void or unenforceable or impossible of performance.

Selection of Bonds to be Redeemed. The Series 2012 Bonds may be redeemed only in the principal amount of $5,000 or integral multiples thereof. If less than all Series 2012 Bonds are to be redeemed and paid prior to maturity, such bonds shall be redeemed from the maturity or maturities selected by the Corporation. If less than all Series 2012 Bonds of any maturity are to be redeemed, the particular Series 2012 Bonds to be redeemed shall be selected by the Trustee from the Series 2012 Bonds of such maturity which have not previously been called for redemption, by lot or by such method as the Trustee shall deem fair and appropriate.

Notice and Effect of Redemption. Notice of the call for any redemption identifying the Series 2012 Bonds, or portions thereof, to be redeemed shall be given by mailing a copy of the redemption notice by registered or certified mail not more than 60 days and not less than 30 days prior to the date fixed for redemption to the Registered Owner of each Series 2012 Bond to be redeemed at the address shown on the registration books; provided, however, that failure to give such notice by mailing, or any defect therein, shall not affect the validity of any proceedings for the redemption of any such Series 2012 Bonds.

So long as the Securities Depository is effecting book-entry transfers of the Series 2012 Bonds, the Trustee shall provide such redemption notices only to the Securities Depository to the extent such notices are applicable to the Series 2012 Bonds. It is expected that the Securities Depository shall, in turn, notify its Participants and that the Participants, in turn, will notify or cause to be notified the beneficial owners. Any failure on the part of the Securities Depository or a Participant, or failure on the part of a nominee of a beneficial owner of a Series 2012 Bond (having been mailed notice from the Trustee, the Securities Depository, a Participant or otherwise) to notify the beneficial owner of the Series 2012 Bond so affected, shall not affect the validity of the redemption of such Series 2012 Bond.

On and after the redemption date specified in a notice of redemption, such Series 2012 Bonds, or portions thereof, thus called shall not continue to accrue interest, shall no longer be protected by the Indenture and shall not be deemed to be Outstanding under the provisions of the Indenture, and the holders thereof shall have the right only to receive the redemption price thereof.

Mutilated, Lost, Stolen or Destroyed Bonds

In the event any Bond is mutilated, lost, stolen or destroyed, the Authority may execute and the Trustee may authenticate a new Bond of like date, series, maturity and denomination as that mutilated, lost, stolen or destroyed; provided that, in the case of any mutilated Bond, such mutilated Bond shall first be surrendered to the Trustee, and, in the case of any lost, stolen or destroyed Bond, there shall be first furnished to the Trustee evidence of such loss, theft or destruction satisfactory to the Trustee, together with indemnity satisfactory to it. In the event any such Bond shall have matured, instead of issuing a duplicate bond, the Trustee (as paying agent) may pay the same without surrender thereof. The Trustee may charge the holder or owner of such Bond with its reasonable fees and expenses in this connection. Any Series 2012 Bond issued pursuant to this provision of the Indenture shall be deemed part of the original series of Bonds in respect of which it was issued and an original contractual obligation of the Authority.

Acceleration

Upon the happening of any Event of Default specified in the Indenture and the continuance of the same for the period, if any, specified in the Indenture for such Event of Default, the Trustee may, without any action on the part of the Bondholders, and shall upon the written request of the Registered Owners of not less than twenty-five percent (25%) in aggregate principal amount of the Bonds then Outstanding thereunder, and upon being indemnified to its satisfaction, by notice in writing delivered to the Authority, declare the entire principal amount of the Bonds then Outstanding under the Indenture immediately due and payable, and the said entire principal amount shall thereupon become and be immediately due and payable; subject, however, to the right of the Registered Owners of the majority in principal amount of the Bonds then Outstanding, by written notice to the Trustee and to the Authority, to annul such declaration and destroy its effect as provided in the Indenture. See the caption “SUMMARY OF THE INDENTURE—Acceleration of Maturity; Rescission and Annulment” in Appendix D hereto.

SECURITY FOR THE BONDS

Limited Obligations

The Series 2012 Bonds are special, limited obligations of the Authority. The Series 2012 Bonds shall not constitute a debt or liability of the State or of any political subdivision thereof within the meaning of any State constitutional provision or statutory limitation and shall not constitute a pledge of the faith and credit of the State or of any political subdivision thereof. The issuance of the Series 2012 Bonds shall not directly or indirectly obligate the Authority, its officers, directors or employees, the State or any political subdivision thereof to provide any funds for their payment. The issuance of the Series 2012 Bonds shall not, directly, indirectly, or contingently, obligate the State or any political subdivision thereof to levy any form of taxation therefor or to make any appropriation for their payment. The Authority has no taxing power. The Series 2012 Bonds are not an obligation of the University, the Board of Regents or the Foundation.

Trust Estate

The Series 2012 Bonds are equally and ratably secured by the Trust Estate on a parity (except with respect to deposits in the Debt Service Reserve Fund, as described below) with the Series 2002 Bonds, the Series 2011 Bonds and any Additional Bonds hereafter issued under the Indenture, and with any Additional Obligations issued pursuant to the Loan Agreement. See the caption “Additional Bonds and Parity Obligations” below. The Trust Estate pledged by the Authority under the Indenture includes

all rights, title and interest of the Authority in, to and under (a) the Loan Agreement, including all Loan Payments and other payments paid by the Corporation (excluding the Authority’s rights to payment of its fees and expenses and to indemnification), (b) the Notes (hereafter defined), (c) all financing statements or other instruments securing or otherwise relating to the loan of the proceeds of the Bonds, and (d) certain provisions of the Operating Agreement, including certain use restriction provisions and the Authority’s right to prior written consent to the amendment of certain provisions of the Operating Agreement. See the caption “Operating Agreement; Restrictive Covenants of the University and the Corporation” below. The Trust Estate also includes all moneys and securities held by the Trustee under the terms of the Indenture (excluding funds held in the Rebate Fund).

Loan Agreement

The principal of, premium, if any, and interest on the Bonds are payable, except to the extent paid out of moneys attributable to the Bond proceeds or the income from the temporary investment thereof and, under certain circumstances, proceeds from insurance and certain condemnation awards, solely from payments (the “Loan Payments”) derived by the Authority under the Loan Agreement and the related promissory notes of the Corporation with respect to each series of Bonds issued under the Indenture (the “Notes”), including the promissory note of the Corporation dated as of March 1, 2012 (the “Series 2012 Note”). Pursuant to the Loan Agreement, the Corporation agrees to make payments to the Authority in such amounts and at such times so as to provide sufficient funds with which to make full and timely payments of principal of, premium, if any, and interest on the Bonds.

The obligations of the Corporation under the Loan Agreement are general obligations of the Corporation. The Corporation, pursuant to the Loan Agreement, pledges and, to the extent permitted by law, grants a security interest to the Authority in its Revenues. The pledge of the Revenues is on a parity with the pledge of such Revenues to the Series 2002 Bonds, the Series 2011 Bonds, the Series 2012 Bonds and any Additional Bonds from time to time issued under the Indenture.

Revenues Pledged Under Loan Agreement

Revenues, as defined in the Indenture, means for any period of time for which calculated, the total of all operating and non-operating unrestricted gross revenues, gains, and net assets released from restrictions derived by the Corporation during such period, determined in such manner as is reflected in the Corporation's audited financial statements.

The Authority, pursuant to the Indenture, pledges and assigns any such security interest, to the extent permitted by law, together with a security interest in payments and certain funds held by the Trustee under the Indenture, to the Trustee. However, no assurance can be given that such security interest can or will be perfected by the Authority or the Trustee. Bond Counsel and counsel to the Corporation and the Authority are unable to render an opinion that the security interest from the Corporation to the Authority under the Loan Agreement or from the Authority to the Trustee under the Indenture can be or will be perfected under the provisions of the Kansas Uniform Commercial Code. See the caption “INVESTMENT CONSIDERATIONS—Matters Relating to Security for the Series 2012 Bonds” herein.

Operating Agreement; Restrictive Covenants of the University and the Corporation

Pursuant to the Operating Agreement, the University, among other things, agrees to permit the Corporation to operate certain athletic facilities owned or controlled by the University. The Operating

Agreement became effective January 26, 2011 and shall be extended automatically from year-to-year, subject to the right of either party to terminate by giving the other party a one-year written notice. In addition, the Operating Agreement shall be terminated in the event the Corporation is dissolved either by mutual agreement of the Corporation and the University or by order of the President of the University, the Board of Regents or under the command of the laws of the State. Notwithstanding the foregoing, the Operating Agreement shall not terminate for any reason (i) prior to a date when no Bonds are Outstanding, without the prior written consent of the Authority and the Trustee and a written confirmation from each rating agency then maintaining a rating on any of the Bonds that the ratings assigned to the Bonds will not be adversely affected or (ii) prior to a date when no Series 2002 Bonds are Outstanding, without the prior written consent of Ambac Assurance Corporation, the bond insurer with respect to the Series 2002 Bonds (the “Prior Bond Insurer”). See the captions “OPERATIONS— Operating Agreement with the University” in Appendix A hereto and “SUMMARY OF THE OPERATING AGREEMENT” in Appendix D hereto.

The Operating Agreement further provides that upon the occurrence of a default in the payment of any Note(s) of the Corporation when the same becomes due and payable (whether at maturity, upon proceedings for redemption, by acceleration or otherwise) and the continuance of such default for a period of 15 days, the University shall have the right to give the Corporation written notice that all rights of the Corporation to use Bramlage Coliseum or the Bill Snyder Family Stadium/Football Complex on the Manhattan campus of the University for men’s intercollegiate basketball or football games will be terminated on a date not earlier than 30 days after such notice is given, and if such occurrence of a default has not been cured by said date, the University (or the Authority or the Trustee, as assignees of the University’s rights under the Operating Agreement) shall terminate all such uses on said date, and if such right is exercised by the University, the University may not conduct or authorize any other organization to conduct a men’s intercollegiate basketball or football game within fifty miles of the University’s main campus in Manhattan, Kansas, until such payment default on the Note(s) has been cured or no Bonds shall be Outstanding, whichever occurs first.

The certain rights of the University under the Operating Agreement described in the preceding paragraph have been assigned by the University to the Authority and the Trustee pursuant to an Assignment of Rights dated as of January 26, 2011, and the rights so assigned to the Authority have also been assigned by the Authority to the Trustee pursuant to the Indenture.

For a description of the athletic facilities subject to the Operating Agreement, see the caption “ATHLETIC FACILITIES” in Appendix A hereto.

Debt Service Reserve Fund

A Debt Service Reserve Fund has been established under the Indenture. A separate account within the Debt Service Reserve Fund shall be established with respect to each series of Bonds that is entitled to the benefit of the Debt Service Reserve Fund. Funds on deposit in a separate account of the Debt Service Reserve Fund shall be disbursed and expended solely for the payment of the principal of and redemption premium, if any, and interest on the related series of Bonds if sufficient moneys therefore are not available in the Debt Service Fund.

Concurrently with the issuance and delivery of the Series 2012 Bonds, the Trustee will deposit into the 2012B-1 Debt Service Reserve Account and the 2012B-2 Debt Service Reserve Account an amount equal to the Debt Service Reserve Requirement (as defined in the Indenture) with respect to each such series of the Series 2012 Bonds from proceeds of the Series 2012 Bonds to provide additional security for the Series 2012 Bonds. The Debt Service Reserve Requirement with respect to each such

series of the Series 2012 Bonds is an amount equal to the least of (a) 10% of the original principal amount of the respective series of Bonds, (b) the Maximum Annual Debt Service on the respective series of Bonds in the current or any future fiscal year following such date, or (c) 125% of the average future annual debt service on the respective series of Bonds.

The 2002 Debt Service Reserve Account was established in connection with the issuance of the Series 2002 Bonds. The 2002 Debt Service Reserve Account provides additional security for the Series 2002 Bonds only. The 2011 Debt Service Reserve Accounts were established in connection with the issuance of the Series 2011 Bonds. The 2011A-1 Debt Service Reserve Account provides additional security for the Series 2011A-1 Bonds only and the 2011A-2 Debt Service Reserve Account provides additional security for the Series 2011A-2 Bonds only. The Series 2012 Bonds and any Additional Bonds have no claim to the 2002 Debt Service Reserve Account or 2011 Debt Service Reserve Accounts. The Series 2002 Bonds have no claim to the 2012B-1 Debt Service Reserve Account or the 2012B-2 Debt Service Reserve Account. The Series 2011 Bonds have no claim to the 2012B-1 Debt Service Reserve Account or the 2012B-2 Debt Service Reserve Account. Upon the issuance of a series of Additional Bonds that is entitled to the benefit of the Debt Service Reserve Fund, there shall be deposited from either the proceeds of such series of Bonds or other legally available funds of the Corporation in the separate account of the Debt Service Reserve Fund for such series of Bonds an amount equal to the Debt Service Reserve Requirement for such series of Bonds.

The Debt Service Reserve Fund shall be maintained in an amount equal to the Debt Service Reserve Requirement. If the moneys on deposit in any account in the Debt Service Reserve Fund are at any time less than the Debt Service Reserve Requirement as a result of the withdrawal of moneys therefrom, the amount of such shortfall shall be payable by the Corporation in twelve substantially equal monthly installments. Investments in the Debt Service Reserve Fund shall be evaluated by the Trustee each July 1, at the time of any withdrawal from said Fund and at such other times as the Trustee deems appropriate. If on such valuation date, the Value of cash and Permitted Investments on deposit in any account of the Debt Service Reserve Fund shall be less than the applicable Debt Service Reserve Requirement, pursuant to the Loan Agreement, the Corporation shall be required to make up any deficiency in such account of the Debt Service Reserve Fund by making twelve equal monthly installments to the Trustee for deposit into such account, unless a owners of a majority of the Outstanding Bonds approve another schedule of repayments.

Additional Bonds and Parity Obligations

Additional Bonds may be issued by the Authority which would be equally and ratably payable from Revenues of the Corporation on a parity with the Series 2002 Bonds, the Series 2011 Bonds and the Series 2012 Bonds in accordance with the provisions of the Indenture, and the Corporation may issue or incur Additional Obligations which would be payable on a parity with the Series 2002 Bonds, the Series 2011 Bonds and the Series 2012 Bonds in accordance with the provisions of the Loan Agreement. For a description of the requirements under the Indenture for the issuance of Additional Bonds see the caption “SUMMARY OF THE INDENTURE—Authorization of Additional Bonds” in Appendix D hereto. For a description of the requirements under the Loan Agreement for the issuance or incurrence of Additional Obligations see the caption “SUMMARY OF THE LOAN AGREEMENT—Additional Obligations” in Appendix D hereto.

PLAN OF FINANCE

Prior Bonds under the Indenture

Series 2002 Bonds. On March 14, 2002, the Authority issued its $3,495,889 original aggregate principal amount Athletic Facilities Revenue Bonds (The Intercollegiate Athletic Council of Kansas State University, Inc. Project), Series 2002E, currently outstanding in the principal amount of $3,495,889 (the “Series 2002 Bonds”). The Series 2002 Bonds are capital appreciation bonds. The proceeds of the Series 2002 Bonds, were used by the Corporation to: (1) make improvements to certain athletic facilities at the University, including the replacement of the football artificial turf on Wagner Field located at KSU Stadium, install lighting improvements at Frank Myers Field (KSU baseball field), installing a new surface at RV Christian Track (KSU track and field complex) and related drainage improvements; and installing a new indoor track surface in Ahearn Fieldhouse (collectively, the “2002 Project”); (2) make an initial deposit to the 2002 Debt Service Reserve Account; and (3) pay certain expenses incurred in connection with the issuance of the Series 2002 Bonds.

The Series 2002 Bonds will remain outstanding under the Indenture, payable on a parity (except with respect to deposits in the Debt Service Reserve Fund) with the Series 2011 Bonds and the Series 2012 Bonds, as described herein.

Series 2011 Bonds. On March 16, 2011, the Authority issued its $21,790,000 principal amount of Athletic Facilities Revenue Bonds (K-State Athletics, Incorporated Project), Series 2011A-1 (the “Series 2011A-1 Bonds”) and its $3,210,000 principal amount of Taxable Athletic Facilities Revenue Bonds (K-State Athletics, Incorporated Project), Series 2011A-2 (the “Series 2011A-2 Bonds,” and together with the Series 2011A-1 Bonds, the “Series 2011 Bonds”), currently outstanding in the principal amounts of $21,225,000 and $2,485,000 respectively. The proceeds of the Series 2011 Bonds, were used by the Corporation to: (1) pay the cost of making improvements and additions to certain athletic facilities located on the campus of the University, including construction of an indoor basketball training facility adjacent to Bramlage Coliseum and construction of restrooms on the upper deck of the east seating structure of the Bill Snyder Family Stadium/Football Complex (collectively, the “2011 Project”); (2) refund the Authority’s Taxable Athletic Facilities Revenue Bonds (The Intercollegiate Athletic Council of Kansas State University, Inc. Project), Series 1998Q and Series 1998R, issued in the aggregate principal amount of $8,055,000 and then outstanding in the aggregate principal amount of 6,755,000, and issued for the purpose of renovating, expanding and improving KSU Stadium (now known as Bill Snyder Family Stadium/Football Complex); (3) make an initial deposit to the 2011 Debt Service Reserve Accounts; and (4) pay certain expenses incurred in connection with the issuance of the Series 2011 Bonds.

The Series 2011 Bonds will remain outstanding under the Indenture, payable on a parity (except with respect to deposits in the Debt Service Reserve Fund) with the Series 2002 Bonds and the Series 2012 Bonds, as described herein.

The Series 2012 Bonds

Series 2012B-1 Bonds. The proceeds of the Series 2012B-1 Bonds will be used by the Corporation to: (1) pay a portion of the cost of the Project; (2) make an initial deposit to the Series 2012B-1 Debt Service Reserve Account; and (3) pay certain expenses incurred in connection with the issuance of the Series 2012B-1 Bonds.

Series 2012B-2 Bonds. The proceeds of the Series 2012B-2 Bonds will be used by the Corporation to: (1) pay a portion of the cost of the Project; (2) make an initial deposit to the Series 2012B-2 Debt Service Reserve Account; and (3) pay certain expenses incurred in connection with the issuance of the Series 2012B-2 Bonds.

The Project

The Project consists of a portion of the construction of the West Stadium Center, a new five- story addition to the west side of Bill Snyder Family Stadium, the football stadium located on the University’s campus in Manhattan, Kansas, as well as necessary demolition of existing structures and site preparation. The West Stadium Center at Bill Snyder Family Stadium will expand premium seating, significantly update the football stadium facilities and serve as the northwest gateway to the University campus. New concessions, restrooms and ticket offices will replace the current west side facilities, which were originally built in 1968. Additionally, a new retail store and Hall of Honor will be included on the main Concourse Level. The Terrace Level will feature a dining hall to serve the daily dietary needs of all University student-athletes. The second, third and fourth levels of the West Stadium Center will have outdoor Suite, Club and Loge premium seating; lounges will be located behind each seating area. The fifth level of the West Stadium Center will be designated for media and coaches on game-days and will be the new permanent home for the media relations office.

The total cost of the West Stadium Center is estimated at approximately $75,000,000, of which approximately $50,000,000 will be included in the Project financed with proceeds of the Series 2012B Bonds.

The Corporation will coordinate with the State of Kansas Department of Administration, the Division of Facilities Management, and the Kansas Board of Regents for the construction of the West Stadium Center. AECOM, Kansas City, Missouri, and Heery International, Inc., Atlanta, Georgia, have been retained by the Corporation as the project architects, and are responsible for development of schematic design, design, and construction documents. A joint venture of G.E. Johnson Construction Company, Colorado Springs, Colorado, and Mortenson Construction Minneapolis, Minnesota, has been tentatively selected as construction manager at risk, and will be responsible for the staging and construction of the West Stadium Center. At a mutually-agreeable point during the design process, a guaranteed maximum price will be established, which will not exceed a base construction price of $60 million for the core construction components of the total West Stadium Center project. Pre-construction services are expected to begin in March 2012, and construction is expected to commence in the summer of 2012. Construction will continue through the summer of 2013 and is expected to be substantially complete before the beginning of the 2013 football season. See the caption “INVESTMENT CONSIDERATIONS—Construction Risks” herein.

Fundraising Campaigns

In addition to the ongoing charitable fundraising activities of the University, the Foundation and the Corporation, the campaigns described below relate to the projects financed in part by the Series 2011 Bonds and the Series 2012 Bonds.

2011 Project. With respect to the 2011 Project which was financed with proceeds of the Series 2011 Bonds, the Corporation has received and expects to receive charitable contributions designated specifically for such 2011 Project. A private fundraising campaign began in Spring 2010 followed by an ongoing public campaign which began in October 2010 with the goal to receive $17.8 million in charitable contributions (approximately the cost of the 2011 Project, which was below an original $20

million estimate). The Corporation secured pledges for approximately $16.2 million when it ended the campaign. The pledges are to be paid over a five-year period. The Corporation ended the charitable contribution campaign for the 2011 Project in connection with the commencement of the fundraising campaign for the Project described below, in order that there not be two separate athletic facilities fundraising campaigns going on at the same time.

Pursuant to the Corporation’s plan of finance for the 2011 Project, the Corporation intends to apply moneys from the fundraising campaign, if and when available, to redeem Series 2011A-1 Bonds pursuant to the optional redemption provisions of such bonds. However, there can be no assurance that pledges will be collected or that any moneys will be available to redeem the Series 2011A-1 Bonds, and the Corporation is not obligated to redeem the Series 2011A-1 Bonds prior to the scheduled maturities.

2012 Project. With respect to the Project to be financed with proceeds of the Series 2012 Bonds, the Corporation has received and expects to receive revenues from its fundraising campaign. The Corporation began a private fundraising campaign in Fall 2011, which included efforts to achieve subscriptions for the Suite allocations, and an ongoing public campaign began in January 2012. The fundraising campaign includes charitable contributions designated specifically for the Project as well as revenues associated with purchases of premium seating in three seating areas at the West Stadium Center. For each of the Suite, Club and Loge seating areas, contributors are asked to make a one-time construction fund gift, payable over a five-year period, and to make an annual payment which includes an annual Ahearn Fund gift as well as payment for tickets, food and parking, in order to obtain the applicable premium seating. Premium seats will be allocated based on priority orders as of the applicable commitment date. The first Suite allocation and commitment date was December 31, 2011, and the 40 Suites were oversubscribed. The Corporation has now begun an active campaign to achieve subscriptions for the Club and Loge seats. The first Club and Loge allocation and commitment date is June 30, 2012, and the second Suite, Club and Loge allocation and commitment date is December 31, 2012. The goal of the fundraising campaign is to receive $75 million in contributions. As of February 1, 2012, the Corporation had secured pledges for approximately $14.1 million in up-front cash contributions associated with the construction gifts for the premium seating, and of which over $4.5 million had been collected. In addition, the Corporation had secured pledges for over $2.23 million per year in on-going annual contributions for the premium seating.

As of February 1, 2012, the Corporation determined that it had met more than 48%, or $36.2 million, of its $75 million fundraising goal. The Corporation made this determination by application of a formula which adds the amount of the up-front cash contribution pledges and commitments ($14.1 million), plus the amount of the on-going annual contribution pledges and commitments for premium seating ($2.23 million) for a period of ten years. Existing contracts for premium seating include annual contributions for between five and nine years, with the majority being nine-year commitments. In counting ten years of annual contributions for premium seating toward its fundraising goal, the Corporation is assuming that contracts for such seating with terms of less than ten years will be renewed at or above the current annual contribution level through at least ten years.

Pursuant to the Corporation’s plan of finance for the Project, the Corporation intends to apply moneys from the fundraising campaign, if and when available, to redeem Series 2012B Bonds pursuant to the optional redemption provisions described at the caption “THE SERIES 2012 BONDS— Redemption of Series 2012 Bonds—Optional Redemption” herein. However, there can be no assurance that the fundraising goals of the Corporation will be met, that pledges will be collected or that any moneys will be available to redeem the Series 2012B Bonds, and the Corporation is not obligated to redeem the Series 2012B Bonds prior to the scheduled maturities.

ESTIMATED SOURCES AND USES OF FUNDS

The estimated sources and uses of funds relating to the issuance of the Series 2012 Bonds are as follows:

Series 2012B-1 Series 2012B-2 Sources of Funds: Bonds Bonds Total Principal Amount of Bonds $30,035,000.00 $23,640,000.00 $53,675,000.00 Net Original Issue Premium/(Discount) 2,291,964.95 - 2,291,964.95 Total Sources of Funds $32,326,964.95 $23,640,000.00 $55,966,964.95

Uses of Funds: Project Costs 28,967,591.00 21,032,409.00 50,000,000.00 Deposit to Series 2012B-1 Debt Service Reserve Account 3,003,500.00 - 3,003,500.00 Deposit to Series 2012B-2 Debt Service Reserve Account - 2,364,000.00 2,364,000.00 Costs of Issuance 355,873.95 243,591.00 599,464.95 Total Uses of Funds $32,326,964.95 $23,640,000.00 $55,966,964.95

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ANNUAL DEBT SERVICE REQUIREMENTS ON THE BONDS

The following table sets forth the amounts required in each fiscal year for the payment of debt service on the Series 2002 Bonds, Series 2011 Bonds and the Series 2012 Bonds.

Fiscal Year Series 2002 Bonds Series 2011 Bonds Series 2012 Bonds Ending Total Annual June 30 Principal Interest Principal Interest Principal Interest Debt Service

2012 - - $ 1,290,000.00 $ 784,109.54 - - $ 2,074,109.54 2013 - - 1,920,000.00 950,461.26 - $ 1,914,882.42 4,785,343.68 2014 - - 1,985,000.00 879,103.76 $ 320,000.00 2,296,118.10 5,480,221.86 2015 - - 2,580,000.00 791,437.51 625,000.00 2,289,952.30 6,286,389.81 2016 $ 917,851.20 $ 852,148.80 735,000.00 730,143.76 775,000.00 2,278,908.80 6,289,052.56 2017 742,278.50 782,721.50 755,000.00 707,793.76 1,040,000.00 2,261,666.70 6,289,460.46 2018 699,929.30 835,070.70 780,000.00 684,768.76 1,050,000.00 2,238,742.35 6,288,511.11 2019 654,431.90 880,568.10 805,000.00 659,987.51 1,075,000.00 2,212,536.48 6,287,523.99 2020 481,398.50 728,601.50 835,000.00 632,293.76 1,430,000.00 2,178,346.81 6,285,640.57 2021 - - 865,000.00 602,003.13 2,705,000.00 2,114,335.93 6,286,339.06 2022 - - 895,000.00 569,543.75 2,800,000.00 2,021,847.60 6,286,391.35 2023 - - 930,000.00 534,162.50 2,905,000.00 1,918,863.78 6,288,026.28 2024 - - 970,000.00 494,950.00 3,015,000.00 1,805,351.98 6,285,301.98 2025 - - 1,015,000.00 451,500.00 3,140,000.00 1,681,958.90 6,288,458.90 2026 - - 1,060,000.00 403,487.50 3,270,000.00 1,551,790.40 6,285,277.90 2027 - - 1,115,000.00 351,831.25 3,420,000.00 1,400,225.00 6,287,056.25 2028 - - 1,170,000.00 296,831.25 3,595,000.00 1,224,850.00 6,286,681.25 2029 - - 1,225,000.00 237,687.50 3,790,000.00 1,035,487.50 6,288,175.00 2030 - - 1,290,000.00 174,812.50 3,985,000.00 836,375.00 6,286,187.50 2031 - - 1,355,000.00 108,687.50 4,190,000.00 632,000.00 6,285,687.50 2032 - - 1,425,000.00 37,406.25 4,410,000.00 417,000.00 6,289,406.25 2033 - - - - 6,135,000.00 153,375.00 6,288,375.00 TOTAL $3,495,889.40 $4,079,110.60 $25,000,000.00 $11,083,002.75 $53,675,000.00 $34,464,615.05 $131,797,617.80

INVESTMENT CONSIDERATIONS

Bondowners’ Risks

The following is a discussion of certain risks that could affect payments to be made by the Corporation with respect to the Series 2012 Bonds. Such discussion is not, and is not intended to be, exhaustive and should be read in conjunction with all other parts of this Official Statement and should not be considered as a complete description of all risks that could affect such payments. Prospective purchasers of the Series 2012 Bonds should analyze carefully the information contained in this Official Statement, including the Appendices hereto, and additional information in the form of the complete documents summarized herein and in Appendix D, copies of which are available as described herein.

THIS SECTION CONTAINS FORWARD-LOOKING STATEMENTS. SEE THE CAPTION “FORWARD-LOOKING STATEMENTS” ON THE INSIDE COVER PAGES OF THIS OFFICIAL STATEMENT.

General

The payment of the Series 2012 Bonds is subject to certain risks. The Series 2012 Bonds do not constitute an obligation of the University, the Foundation, the Board of Regents or the State, and are

payable solely from the Revenues of the Corporation. In the event that the Trustee is unable to make payments of principal and interest on the Series 2012 Bonds as such payments become due, the Series 2012 Bonds are payable solely from moneys received by the Trustee pursuant to the Indenture. No representation or assurance can be given that the Corporation will realize Revenues in amounts sufficient to make such payments under the Indenture with respect to the Series 2012 Bonds. The realization of future Revenues is dependent upon future changes in economic and other conditions that are unpredictable and cannot be determined at this time.

The ability of the Authority to pay the Series 2012 Bonds depends upon the ability of the Corporation to generate sufficient revenues in excess of its operating expenses to make the required payments under the Loan Agreement. A number of risks which could prevent the Corporation from generating such revenues are outlined below. The future financial condition of the operation could be affected adversely by, among other things, the lack of success of the men’s football and basketball programs at Kansas State University and the availability of other sporting events and other forms of entertainment in and around Manhattan, Kansas. There can be no assurance given that Revenues generated from the use of the Corporation’s athletic facilities will not decrease.

No Pledge of Real Property

The pledge of the Trust Estate with respect to the Bonds does not constitute a pledge of any of the 2002 Project, the 2011 Project, the Project or any real property of the Corporation, the University or any other related party.

Termination of Operating Agreement with the University

Although the Corporation has been involved in the operation and support of intercollegiate athletics at the University since 1933, the Corporation’s agreement with the University provides that either party may terminate the Operating Agreement upon one-year written notice. The termination of the Operating Agreement would result in the loss of essentially all Revenues of the Corporation. Notwithstanding the foregoing, the Operating Agreement shall not terminate for any reason (i) prior to a date when no Bonds are Outstanding, without the prior written consent of the Authority and the Trustee and a written confirmation from each rating agency then maintaining a rating on any of the Bonds that the ratings assigned to the Bonds will not be adversely affected or (ii) prior to a date when no Series 2002 Bonds are Outstanding, without the prior written consent of the Prior Bond Insurer. See the captions “SECURITY FOR THE BONDS—Operating Agreement; Restrictive Covenants of the University and the Corporation” herein, “OPERATIONS—Operating Agreement with the University” in Appendix A hereto and “SUMMARY OF THE OPERATING AGREEMENT” in Appendix D hereto.

Reliance on Big 12 Conference Revenues

The Corporation is highly dependent upon certain revenues received by the University and the Corporation from the Big 12 Conference. In the fiscal year 2011, Big 12 Conference and NCAA-related revenues accounted for approximately 20% of the total revenues of the Corporation. For a discussion of certain revenue-sharing arrangements between the Big 12 Conference and its member institutions, see the caption “THE BIG 12 CONFERENCE—Revenue Distributions” in Appendix A hereto.

The Corporation’s share of conference revenue is based primarily on broadcast and cable television contracts. Each university team belonging to the Big 12 Conference shares equally in the revenues from these contracts. For information regarding these contracts, see the caption “THE BIG 12

CONFERENCE—Television Contracts” in Appendix A hereto. However, the ultimate effect of future changes in Big 12 Conference television contracts upon future revenues of the Corporation cannot be determined at this time.

Uncertainties Associated with Corporation's Right to Big 12 Revenues

While the Corporation is highly dependent upon the revenues received from the Big 12 Conference and has historically received those revenues, the University, and not the Corporation, is the member of the Big 12 Conference. Although the University has acknowledged the right of the Corporation to the revenues from the Big 12 Conference and has further acknowledged the grant of the security interest in such revenues by the Corporation to the Trustee, there can be no assurance that the University, the Big 12 Conference or a creditor of the University may not challenge that assignment or security interest in the future. No legal opinion has been provided by the counsel to the Corporation as to the rights of the Corporation to the Big 12 Conference revenues.

Changes in Composition of Big 12 Conference

Effective June 30, 2011, two institutions that were previously members of the Big 12 Conference, the University of Colorado and the University of Nebraska, departed the Big 12 Conference for other conference affiliations. Following such departures, the Big 12 Conference consisted of ten institutions, rather than twelve.

Effective June 30, 2012, two institutions that are currently members of the Big 12 Conference, Texas A&M University and the University of Missouri, are scheduled to leave the Big 12 Conference for another conference affiliation. In addition, effective July 1, 2012, two institutions, Texas Christian University and West Virginia University are scheduled to leave their existing conference affiliations and join the Big 12 Conference. Following such departures and additions, if completed as described herein, the Big 12 Conference membership will remain at ten institutions.

The effect of such changes in institutional membership, or other future changes in Big 12 Conference membership, on Big 12 Conference revenue distributions to the University and the Corporation cannot be determined at this time.

As described at the caption “Reliance on Big 12 Conference Revenues” above, the Corporation is highly dependent on the revenues from the Big 12 Conference. Any change in the University’s affiliation with the Big 12 Conference may have a material adverse effect on the financial condition of the Corporation.

Other Factors Affecting the Financial Performance of the Corporation

One or more of the following factors or events, or the occurrence of other unanticipated factors or events, could adversely affect the Corporation's operations and financial performance to an extent that cannot be determined at this time.

Changes in Management. Changes in key management personnel of the Corporation, particularly the Athletic Director, could affect the operations and financial results of the Corporation. Such changes have affected financial results in recent years (see the caption “FINANCIAL

INFORMATION” in Appendix A hereto). Key management personnel are retained under employment contracts, typically for initial periods of five years with renewal periods.

Changes in Coaching Personnel. Although management of the Corporation believes the Athletic Department is capable of attracting and retaining qualified replacements, changes in the coaching personnel at the University could adversely affect the success of a particular program, and could affect the operations and financial results of the Corporation. Such changes have affected financial results in recent years (see the caption “FINANCIAL INFORMATION” in Appendix A hereto). Currently, management of the Corporation believes all major sports have stable coaching staffs that are successful both athletically and academically. Bill Snyder, age 72, the head football coach at the University from 1989 and 2005 and rehired in 2008, has had considerable success in the football program which has generated considerable additional revenues for the Corporation. Coach Snyder has a rollover contract that maintains a five-year commitment. Frank Martin, age 45, the head men’s basketball coach at the University, is in his fifth year at that position. In spring 2010 he signed a five-year contract extension through the 2014-15 season.

Lack of Success of Men’s Football Program. The men’s football program is the most significant contributor to the revenues of the Corporation (along with charitable contributions and revenues from the Big 12 Conference), and a decline in the success of this program, or the failure to attain the level of athletic success expected by fans and alumni could adversely affect the Revenues of the Corporation.

Charitable Contributions and Fund Raising. In fiscal year 2011, the Corporation received $26.5 million in charitable contributions. There can be no assurance that the Corporation will continue to receive the same level of charitable support through fund raising activity. Essentially all charitable contributions to the Corporation are made through the Foundation, which is the charitable giving and fund raising arm of the University. The Foundation retains such contributions and makes the same available to the Corporation upon request. Currently, the Foundation holds approximately $3.45 million of the Corporation’s unrestricted funds. The Corporation and representatives of the Foundation work closely in fundraising activities for athletic facilities and programs.

Compliance with NCAA and Big 12 Conference Rules. In the conduct of their athletics programs, the University and the Corporation are required to comply with the rules and regulations of the NCAA and the Big 12 Conference. The University and the Corporation bear the primary responsibility for the administration of rules and regulations, for investigation of known or alleged violations at their institution, and for taking prompt and effective corrective actions where any violations have occurred. In the event that NCAA or Big 12 Conference rules are violated by the University or by the Corporation, the athletic program coaches and staff, or the student-athletes, it is possible that sanctions could be imposed, including sanctions with adverse monetary or other consequences to the athletic programs of the University and the Corporation. Such sanctions could have a material adverse effect on the financial condition of the Corporation.

Construction Risks

No assurance can be given that the construction of the Project will be completed on schedule, within budget, or without material errors and defects. Risks that could affect the timely completion or costs of construction include defaults, bankruptcies or failures in performance of contractors and subcontractors, strikes, shortages or unavailability of materials, adverse weather conditions, delays, inflation, increased and unexpected costs, unknown subsurface conditions such as rock or environmental contaminants, adverse affects on adjacent facilities and other operations and other factors and

contingencies unknown to or beyond the control of the Corporation. There can be no assurance that the contractors under construction contracts will be able to comply with the terms of such contracts or that compliance by the contractors can be enforced without costly or time consuming litigation. Any failure to complete the Project on schedule and within budget could adversely affect the operating results of the Corporation.

For a description of plans for construction of the Project, see the caption “PLAN OF FINANCE—The Project” herein.

Corporation Funds held by the University and the Foundation

Certain funds of the Corporation are held by the University and the Foundation. The revenues generated from the Corporation’s operations or facilities are maintained with the Controller’s Office of the University and are used to defray the cost of operating, constructing, improving and maintaining the intercollegiate athletics program and the facilities for such program. Other revenue and donations that are deposited with the Foundation for the benefit of the intercollegiate athletics program may be used for the Corporation’s expenditures. Pursuant to the Operating Agreement, any other revenues or donations deposited with the Foundation may be drawn upon for the Corporation’s expenditures only upon approval of the President of the University. See the captions “OPERATIONS—Operating Agreement with the University” in Appendix A hereto and “SUMMARY OF THE OPERATING AGREEMENT” in Appendix D hereto. Only the Corporation is obligated to make payments of debt service on the Bonds pursuant to the Loan Agreement. The University and the Foundation are not obligated to make any payment of debt service on the Bonds pursuant to the Loan Agreement or otherwise.

Matters Relating to Security for the Series 2012 Bonds

The remedies available to the Trustee or the Owners of the Series 2012 Bonds upon an Event of Default under the Indenture are in many respects dependent upon State laws concerning the use of assets of charitable corporations and by federal and State laws relating to bankruptcy, fraudulent conveyances, and rights of creditors and by application of general principles of equity applicable to the availability of specific performance, and may be substantially delayed in the event of judicial actions or other litigation or statutory remedy procedures, which are often subject to discretion and delay. Based upon existing constitutional and statutory law and judicial decisions, including specifically the federal Bankruptcy Code, the remedies provided in the Indenture upon a default may not be readily available or may be limited in application. The various legal opinions to be delivered concurrently with the delivery of the Series 2012 Bonds and the delivery of the Loan Agreement and the Indenture will be qualified as to the enforceability of the various legal instruments by limitations imposed by State and federal laws, rulings and decisions affecting remedies, and by general principles of equity and by bankruptcy, reorganization, insolvency or other similar laws affecting the rights of creditors generally.

Enforceability of Pledge of the Revenues; Effect of Bankruptcy

The obligation of the Corporation to make Loan Payments to be used to pay debt service on the Bonds is secured by a lien granted pursuant to the Loan Agreement and the Indenture on the Revenues generated by the Corporation’s operation of the athletic facilities and programs. The effectiveness of the security interest in the Revenues may be limited by a number of factors, including: (i) commingling of proceeds of Revenues with other moneys of the Corporation not subject to the security interest in

Revenues; (ii) statutory liens; (iii) rights arising in favor of the United States of America or any agency thereof; (iv) constructive trusts, equitable or other rights impressed or conferred by a federal or State court in the exercise of its equitable jurisdiction; (v) rights of third parties in Revenues converted to cash and not in the possession of the Trustee; and (vi) claims that might arise if appropriate financing or continuation statements are not filed in accordance with the Kansas Uniform Commercial Code, as from time to time in effect.

In addition, in the event of the bankruptcy of the Corporation pursuant to the United States Bankruptcy Code, any receivables coming into existence and any Revenues received on or after the date which is 90 days (or, in some circumstances, one year) prior to the commencement of the case in bankruptcy court might not be subject to the lien of the pledge of Revenues, and, under certain circumstances, a court of equity may have power to direct the use of Revenues to meet expenses of the bankrupt entity before providing for the Loan Payments to pay debt service on the Bonds. With respect to Revenues not subject to such lien, the Trustee would occupy the position of an unsecured creditor.

Taxation of Interest on the Series 2012B-1 Bonds

An opinion of Bond Counsel will be obtained to the effect that interest earned on the Series 2012B-1 Bonds is excluded from gross income for federal income tax purposes under current provisions of the Code, and applicable rulings and regulations under the Code; however, an application for a ruling has not been made and an opinion of counsel is not binding upon the Internal Revenue Service. There can be no assurance that the present provisions of the Code, or the rules and regulations thereunder, will not be adversely amended or modified, thereby rendering the interest earned on the Series 2012B-1 Bonds includable in gross income for federal income tax purposes.

The Authority and the Corporation have covenanted in the Indenture and in other documents and certificates to be delivered in connection with the issuance of the Series 2012B-1 Bonds, to comply with the provisions of the Code, including those which require the Authority to take or omit to take certain actions after the issuance of the Series 2012B-1 Bonds. In addition, the Corporation has covenanted in the Loan Agreement and in other documents and certificates to be delivered in connection with the issuance of the Series 2012B-1 Bonds, to comply with the provisions of the Code, including those which require the Corporation to take or omit to take certain actions after the issuance of the Series 2012B-1 Bonds. Because the existence and continuation of the excludability of the interest on the Series 2012B-1 Bonds depends upon events occurring after the date of issuance of the Series 2012B-1 Bonds, the opinion of Bond Counsel described under the caption “LEGAL MATTERS” herein assumes the compliance by the Authority and the Corporation with the provisions of the Code described above and the regulations relating thereto. No opinion is expressed by Bond Counsel with respect to the excludability of the interest on the Series 2012B-1 Bonds in the event of noncompliance with such provisions. The failure of the Authority or the Corporation to comply with the provisions described above may cause the interest on the Series 2012B-1 Bonds to become includable in gross income for federal income tax purposes as of the date of issuance.

The exclusion of interest on the Series 2012B-1 Bonds from certain taxes described under the caption “TAX MATTERS” herein is more valuable to high income tax bracket investors than to investors who are in low income tax brackets, and so the value of the interest compensation to any particular investor will vary with income tax rates.

Debt Service Reserve Fund

Pursuant to the Indenture, an amount equal to the Debt Service Reserve Requirement is required to be on deposit in each account of the Debt Service Reserve Fund. Moneys in the Debt Service Reserve Fund may be invested as provided in the Indenture. The moneys in each account, including such investments, may be applied by the Authority to prevent default in the payment of the Bonds to which each account in the Debt Service Reserve Fund relates, in the event funds in the Debt Service Fund is insufficient to provide funds for payments due on the applicable Bonds on any payment date. In the event it is necessary to sell any investments for such purpose, the price realized upon such sale may not equal the value of the applicable investments at the most recent date to which investments are required to be valued. This may result in available funds in an account of the Debt Service Reserve Fund being less than the applicable Debt Service Reserve Requirement. In the event of a default, the Debt Service Reserve Fund may, under certain circumstances and, ordinarily under the supervision of and under order of the courts, be applied for purposes other than payment of the applicable Bonds. Such purposes may include preservation of and security of the Trust Estate and payment of other costs for which the Corporation is obligated under the Loan Agreement.

Amendment of the Indenture

The Corporation and the Trustee may, without the consent of, or notice to, any of the Bondowners, amend or supplement the Indenture for any one or more of the purposes set forth under the caption “SUMMARY OF THE INDENTURE—Supplemental Indentures without Consent of Bondowners” in Appendix D hereto. There can be no assurances that any such amendment will not be adverse to the interests of the Owners of the Series 2012 Bonds.

Certain amendments to the Indenture may be made with the consent of the Owners of a majority in aggregate principal amount or Accreted Value of the Outstanding Bonds. Such amendments may adversely affect the security of the Bondowners, and such percentage may consist wholly or partially of the Bondowners other than the Owners of the Series 2012 Bonds.

Secondary Market for the Series 2012 Bonds

There is no established secondary market for the Series 2012 Bonds, and there is no assurance that a secondary market will develop for the purchase and sale of the Series 2012 Bonds. Prices of bonds traded in the secondary market are subject to adjustment upward and downward in response to changes in the credit markets. From time to time it may be necessary to suspend indefinitely secondary market trading in selected issues of bonds as a result of the financial condition or market position of the broker- dealer, prevailing market conditions, lack of adequate current financial information regarding the Series 2012 Bonds, whether or not the Series 2012 Bonds are in default as to principal and interest payments, and other factors which may give rise to uncertainty concerning prudent secondary market practices. The Authority and the Corporation have agreed to comply with the applicable provisions of Rule 15c2-12 of the Securities and Exchange Commission. If the Authority and the Corporation fail to provide the necessary information to comply with such rule there could be an adverse impact on the ability of an owner to sell Series 2012 Bonds in the secondary market.

Tax Legislation and Other Matters

Tax legislation, administrative actions taken by tax authorities, or court decisions, whether at the federal or state level, may adversely affect the tax-exempt status of interest on the Series 2012B-1 Bonds under federal or state law or otherwise prevent beneficial owners of the Series 2012B-1 Bonds from

realizing the full current benefit of the tax status of such interest. In addition, such legislation or actions (whether currently proposed, proposed in the future, or enacted) and such decisions could affect the market price or marketability of the Series 2012B-1 Bonds.

RATINGS

Moody’s Investors Service has assigned a rating to the Series 2012 Bonds of “A1” with a stable outlook. Standard & Poor’s Rating Services, a division of the McGraw-Hill Companies, Inc. has assigned to the Series 2012 Bonds a rating of “A-” with a negative outlook. A report outlining the basis for the rating by each rating agency will be issued by such rating agency in connection with the issuance of such ratings and a copy may be obtained by contacting the applicable rating agency. Such ratings reflect only the view of such rating agencies, and an explanation of the significance of such ratings may be obtained from the applicable rating agency. The ratings are not a recommendation to buy, sell or hold the Series 2012 Bonds. There is no assurance that a particular rating will remain in effect for any given period of time or that it will not be revised, either downward or upward, or withdrawn entirely, if in the judgment of the agency originally establishing such rating, circumstances so warrant. Any downward revision or withdrawal of any rating may have an adverse affect on the secondary market price and liquidity of the Series 2012 Bonds.

TAX MATTERS

The following is a summary of the material federal and State of Kansas income tax consequences of holding and disposing of the Series 2012 Bonds. This summary is based upon laws, regulations, rulings and judicial decisions now in effect, all of which are subject to change (possibly on a retroactive basis). This summary does not discuss all aspects of federal income taxation that may be relevant to investors in light of their personal investment circumstances or describe the tax consequences to certain types of owners subject to special treatment under the federal income tax laws (for example, dealers in securities or other persons who do not hold the Series 2012 Bonds as a capital asset, tax-exempt organizations, individual retirement accounts and other tax deferred accounts, and foreign taxpayers), and, except for certain tax laws of the State of Kansas, does not discuss the consequences to an owner under any state, local or foreign tax laws. The summary does not deal with the tax treatment of persons who purchase the Series 2012 Bonds in the secondary market at a premium or a discount. Prospective investors are advised to consult their own tax advisors regarding federal, state, local and other tax considerations of holding and disposing of the Series 2012 Bonds.

Opinion of Bond Counsel Regarding the Series 2012B-1 Bonds

In the opinion of Gilmore & Bell, P.C., Bond Counsel, under the law existing as of the issue date of the Series 2012B-1 Bonds:

Federal Tax Exemption. The interest on the Series 2012B-1 Bonds (including any original issue discount properly allocable to an owner thereof) is excludable from gross income for federal income tax purposes.

Alternative Minimum Tax. Interest on the Series 2012B-1 Bonds is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations but is taken into account in determining adjusted current earnings for the purpose of computing the alternative minimum tax imposed on certain corporations.

Kansas Tax Exemption. The stated interest on the Series 2012B-1 Bonds is exempt from all Kansas state, county and municipal taxes, including income, inheritance and property taxes; provided, however, that no opinion is expressed with respect to the applicability of the privilege tax imposed on banking institutions pursuant to K.S.A. 79-1107 and 79-1108.

Bank Qualification. The Series 2012B-1 Bonds have not been designated as “qualified tax- exempt obligations” for purposes of Section 265(b) of the Code.

Form of Opinion of Bond Counsel. The proposed form of the opinion of Bond Counsel is attached as Appendix F hereto.

Bond Counsel’s opinions are provided as of the date of the original issue of the Series 2012B-1 Bonds, subject to the condition that the Authority, the Board and the University comply with all requirements of the Internal Revenue Code of 1986, as amended (the “Code”) that must be satisfied subsequent to the issuance of the Series 2012B-1 Bonds in order that interest thereon be, or continue to be, excludable from gross income for federal income tax purposes. The Authority, the Board and the University have covenanted to comply with all such requirements. Failure to comply with certain of such requirements may cause the inclusion of interest on the Series 2012B-1 Bonds in gross income for federal and Kansas income tax purposes retroactive to the date of issuance of the Series 2012B-1 Bonds. Bond Counsel is expressing no opinion regarding other federal, state or local tax consequences arising with respect to the Series 2012B-1 Bonds, but has reviewed the discussion under the heading “TAX MATTERS—Other Tax Consequences.”

Other Federal Income Tax Consequences to Owners of the Series 2012B-1 Bonds

Series 2012B-1 Bonds Purchased at a Premium. If a Series 2012B-1 Bond is purchased at a price that exceeds the stated redemption price at maturity of the bond, the excess of the purchase price over the stated redemption price at maturity constitutes “premium” on the Series 2012B-1 Bond, and the bond is referred to in this discussion as a “Tax-Exempt Premium Bond.” Under Section 171 of the Code, the purchaser of a Tax-Exempt Premium Bond must amortize the premium over the term of the bond using constant yield principles, based on the purchaser’s yield to maturity. As premium is amortized, the owner’s basis in the Tax-Exempt Premium Bond and the amount of tax-exempt interest received will be reduced by the amount of amortizable premium properly allocable to the owner. This will result in an increase in the gain (or decrease in the loss) to be recognized for federal income tax purposes on sale or disposition of the Tax-Exempt Premium Bond prior to its maturity. Even though the owner’s basis is reduced, no federal income tax deduction is allowed. Prospective investors should consult their own tax advisors concerning the calculation and accrual of bond premium.

Series 2012B-1 Bonds Purchased with Original Issue Discount. For federal income tax purposes, original issue discount (“OID”) is the excess of the stated redemption price at maturity of a Series 2012B-1 Bond over its issue price. The issue price of a Series 2012B-1 Bond is the first price at which a substantial amount of the Series 2012B-1 Bonds of that maturity have been sold (ignoring sales to bond houses, brokers, or similar persons or organizations acting in the capacity of underwriters, placement agents, or wholesalers). Under Section 1288 of the Code, OID on tax-exempt bonds accrues on a compound basis. The amount of OID that accrues to an owner of a Series 2012B-1 Bond during any accrual period generally equals (1) the issue price of that Series 2012B-1 Bond, plus the amount of OID accrued in all prior accrual periods, multiplied by (2) the yield to maturity on that Series 2012B-1 Bond (determined on the basis of compounding at the close of each accrual period and properly adjusted for the length of the accrual period), minus (3) any interest payable on that Series 2012B-1 Bond during that

accrual period. The amount of OID accrued in a particular accrual period will be considered to be received ratably on each day of the accrual period, will be excludable from gross income for federal income tax purposes, and will increase the owner’s tax basis in that Series 2012B-1 Bond. Prospective investors should consult their own tax advisors concerning the calculation and accrual of OID.

Federal Income Tax Consequences to Owners of the Series 2012B-2 Bonds

TO ENSURE COMPLIANCE WITH TREASURY DEPARTMENT CIRCULAR 230, OWNERS OF THE SERIES 2012B-2 BONDS ARE HEREBY NOTIFIED THAT: (A) ANY DISCUSSION OF FEDERAL TAX ISSUES IN THIS OFFICIAL STATEMENT RELATING TO THE SERIES 2012B-2 BONDS IS NOT INTENDED OR WRITTEN TO BE RELIED UPON, AND CANNOT BE RELIED UPON, BY OWNERS OF THE SERIES 2012B-2 BONDS FOR THE PURPOSE OF AVOIDING PENALTIES THAT MAY BE IMPOSED ON THOSE OWNERS UNDER THE CODE; (B) THE DISCUSSION OF FEDERAL TAX ISSUES IN THIS OFFICIAL STATEMENT RELATING TO THE SERIES 2012B-2 BONDS WAS WRITTEN IN CONNECTION WITH THE PROMOTION OR MARKETING OF THOSE SERIES 2012B-2 BONDS; AND (C) OWNERS OF THE SERIES 2012B-2 BONDS SHOULD SEEK ADVICE FROM AN INDEPENDENT TAX ADVISOR BASED ON THEIR PARTICULAR CIRCUMSTANCES.

Opinion of Bond Counsel Regarding the Series 2012B-2 Bonds

In the opinion of Gilmore & Bell, P.C., Bond Counsel, under the law existing as of the issue date of the Series 2012B-2 Bonds:

Kansas Tax Exemption. The stated interest on the Series 2012B-2 Bonds is exempt from all Kansas state, county and municipal taxes, including income, inheritance and property taxes; provided, however, that no opinion is expressed with respect to the applicability of the privilege tax imposed on banking institutions pursuant to K.S.A. 79-1107 and 79-1108.

No Other Opinions. Bond Counsel is expressing no opinion regarding other federal, state or local tax consequences arising with respect to the Series 2012B-2 Bonds. Purchasers of the Series 2012B-2 Bonds should consult their tax advisors as to the applicability of these tax consequences and other federal income tax consequences of the purchase, ownership and disposition of the Series 2012B-2 Bonds, including the possible application of state, local, foreign and other tax laws.

Other Federal Income Tax Consequences Applicable to Owners of the Series 2012B-2 Bonds

Series 2012B-2 Bonds Purchased at a Premium. If a Series 2012B-2 Bond is purchased at a price that exceeds the stated redemption price of the bond at maturity, the excess of the purchase price over the stated redemption price at maturity constitutes premium on the bond, and the bond is referred to in this discussion as a “Taxable Premium Bond.” Under Section 171 of the Code, the purchaser of a Taxable Premium Bond may elect to amortize the premium over the term of the Taxable Premium Bond using constant yield principles, based on the purchaser’s yield to maturity. An owner of a Taxable Premium Bond amortizes bond premium by offsetting the qualified stated interest allocable to an accrual period with the bond premium allocable to that accrual period. This offset occurs when the owner takes the qualified stated interest into income under the owner’s regular method of accounting. If the premium

allocable to an accrual period exceeds the qualified stated interest for that period, the excess is treated by the owner as a deduction under Section 171(a)(1) of the Code. As premium is amortized, the owner’s basis in the Taxable Premium Bond will be reduced by the amount of amortizable premium properly allocable to the owner. Prospective investors should consult their own tax advisors concerning the calculation and accrual of bond premium.

Series 2012B-2 Bonds Purchased with Original Issue Discount. For federal income tax purposes, original issue discount (“OID”) is the excess of the stated redemption price at maturity of a Series 2012B-2 Bond over its “issue price,” defined as the first price at which a substantial amount of the Series 2012B-2 Bonds of that maturity have been sold (ignoring sales to bond houses, brokers, or similar persons or organizations acting in the capacity of underwriters, placement agents, or wholesalers). If the OID on a Series 2012B-2 Bond is more than less than a de minimis amount (generally 1/4% of 1% of the stated redemption price at maturity of the Bond multiplied by the number of complete years to its maturity date), then the Series 2012B-2 Bond will be treated as issued with OID (a “Taxable OID Bond”). The amount of OID that accrues to an owner of a Taxable OID Bond during any accrual period generally equals (1) the issue price of that Taxable OID Bond, plus the amount of OID accrued in all prior accrual periods, multiplied by (2) the yield to maturity on that Taxable OID Bond (determined on the basis of compounding at the close of each accrual period and properly adjusted for the length of the accrual period), minus (3) any interest payable on that Taxable OID Bond during that accrual period. The amount of OID accrued in a particular accrual period will be considered to be received ratably on each day of the accrual period, will be included in gross income for federal income tax purposes, and will increase the owner’s tax basis in that Taxable OID Bond. Prospective investors should consult their own tax advisors concerning the calculation and accrual of OID.

Other Federal Income Tax Consequences Applicable to Owners of the Series 2012 Bonds

Sale or Exchange. Upon the sale, exchange or retirement (including redemption) of a Series 2012 Bond, an owner of the Series 2012 Bond generally will recognize gain or loss in an amount equal to the difference between the amount of cash and the fair market value of any property received on the sale, exchange or retirement of the Series 2012 Bond (other than in respect of accrued and unpaid interest) and the owner’s adjusted tax basis in the Series 2012 Bond. To the extent the Series 2012 Bonds are held as a capital asset, the gain or loss will be capital gain or loss and will be long-term capital gain or loss if the Series 2012 Bond has been held for more than 12 months at the time of sale, exchange or retirement.

Reporting Requirements. In general, information reporting requirements will apply to certain payments of principal, interest and premium paid on the Series 2012 Bonds, and to the proceeds paid on the sale of Bonds, other than certain exempt recipients (such as corporations and foreign entities). A backup withholding tax will apply to these payments if the owner fails to provide a taxpayer identification number or certification of foreign or other exempt status or fails to report in full dividend and interest income. The amount of any backup withholding from a payment to an owner will be allowed as a credit against the owner’s federal income tax liability.

Collateral Federal Income Tax Consequences. Prospective purchasers of the Series 2012 Bonds should be aware that ownership of the Series 2012 Bonds may result in collateral federal income tax consequences to certain taxpayers, including, without limitation, financial institutions, property and casualty insurance companies, individual recipients of Social Security or Railroad Retirement benefits, certain S corporations with “excess net passive income,” foreign corporations subject to the branch profits tax, life insurance companies, and taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry or have paid or incurred certain expenses allocable to the Series 2012

Bonds. Bond Counsel expresses no opinion regarding these tax consequences. Purchasers of Series 2012 Bonds should consult their tax advisors as to the applicability of these tax consequences and other federal income tax consequences of the purchase, ownership and disposition of the Series 2012 Bonds, including the possible application of state, local, foreign and other tax laws.

LEGAL MATTERS

Legal matters incident to the authorization, issuance and sale of the Series 2012 Bonds are subject to the approving opinion of Gilmore & Bell, P.C., Bond Counsel. Certain legal matters will be passed upon for the Authority by its special counsel and disclosure counsel, Kutak Rock LLP, for the Underwriters by their counsel, Chapman and Cutler LLP, for the Corporation by its counsel, Peter Paukstelis, Esq., Associate General Counsel for the University, and for the University by its General Counsel, Cheryl Strecker, Esq.

LITIGATION

The Authority

There is not now pending against the Authority any litigation restraining or enjoining the issuance or delivery of the Series 2012 Bonds or questioning or affecting the validity of the Series 2012 Bonds or any proceedings or authority under which the Series 2012 Bonds are to be issued.

The Corporation

No litigation, proceedings, investigations or claims are pending or, to the knowledge of the Corporation, threatened against the Corporation, except claims which, if adversely determined, will not, in the opinion of the counsel to the Corporation, materially and adversely affect the financial condition of, the operations of, or revenues generated by, the Corporation’s operation of the athletic facilities and programs.

FINANCIAL ADVISOR

Columbia Capital Management, LLC, Overland Park, Kansas has served as financial advisor (“Financial Advisor”) to the Authority. The Financial Advisor has assisted in various matters relating to the planning, structuring and issuance of the Series 2012 Bonds, including advice in the preparation of this Official Statement. The Financial Advisor has not passed on the accuracy or completeness of the factual information contained in this Official Statement. The Financial Advisor has not participated in any underwriting syndicate that will purchase or sell any of the Series 2012 Bonds.

UNDERWRITING

The Underwriters named on the cover page of this Official Statement have agreed, subject to certain customary closing conditions, to purchase the Series 2012 Bonds at an aggregate purchase price of $55,701,000.20 (equal to the principal amount of the Series 2012 Bonds, plus net offering premium of $2,291,964.95, less Underwriters’ discount of $265,964.75) and to make a public offering of the Series 2012 Bonds at not in excess of the public offering prices or less than the yields set forth on the inside cover page of this Official Statement. The Underwriters will be obligated to purchase all such Series 2012 Bonds if any such Series 2012 Bonds are purchased. The Series 2012 Bonds may be offered and sold to certain dealers at prices lower than such public offering prices, and such public offering prices may be changed from time to time by the Underwriters.

J.P. Morgan Securities LLC has entered into negotiated dealer agreements (each, a “Dealer Agreement”) with each of UBS Financial Services Inc. (“UBSFS”) and Charles Schwab & Co., Inc. (“CS&Co.”) for the retail distribution of certain securities offerings, including the Series 2012 Bonds, at the original issue prices. Pursuant to each Dealer Agreement (if applicable to this transaction), each of UBSFS and CS&Co. will purchase Series 2012 Bonds from J.P. Morgan Securities LLC at the original issue price less a negotiated portion of the selling concession applicable to any Series 2012 Bonds that such firm sells.

FINANCIAL STATEMENTS

The financial statements of the Corporation for the fiscal year ended June 30, 2011 and 2010 and the Independent Auditors’ Report prepared by James L. Gordon, C.P.A., P.A., Manhattan, Kansas, are contained in Appendix B hereto. James L. Gordon, C.P.A., P.A. has not participated in the preparation of any other portion of this Official Statement.

CONTINUING DISCLOSURE

The Authority has determined that no financial or operating data concerning the Authority is material to an evaluation of the offering of the Series 2012 Bonds or to any decision to purchase, hold or sell the Series 2012 Bonds, and the Authority will not provide any such information. The Corporation has undertaken all responsibilities for any continuing disclosure to Bondholders as described below, and the Authority shall have no liability to the holders of the Series 2012 Bonds or any other Person with respect to Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934 (the “Rule”).

Pursuant to the Continuing Disclosure Undertaking (the “Continuing Disclosure Undertaking”), the form of which is attached hereto as Exhibit E, the Corporation has covenanted for the benefit of the Beneficial Owners of the Series 2012 Bonds to provide certain financial information and operating data of the Corporation by not later than 180 days following the end of the Corporation’s fiscal year (currently June 30) (the “Annual Report”), commencing with the report for the fiscal year ending June 30, 2012, and to provide notices of the occurrence of certain enumerated events. The Annual Report and any notices of material events will be filed by the Trustee on behalf of the Corporation in an electronic format as prescribed by the Municipal Securities Rulemaking Board (the “MSRB”). The MSRB has initially designated its Electronic Municipal Market Access system, found at http://emma.msrb.org, as the sole national municipal securities information repository for such information. The specific nature of the information to be contained in the Annual Report or the notices of material events is set forth in the Continuing Disclosure Undertaking. These covenants have been made in order to assist the underwriters or original purchasers in complying with the Rule. The Corporation has not failed to comply in all material respects with any previous undertakings with regard to said Rule to provide annual reports or notices of material events.

MISCELLANEOUS

The Corporation has furnished all information in this Official Statement relating to its operations and the Project. Any statements in this Official Statement involving matters of opinion, whether or not expressly so stated, are intended as such and not as representations of fact.

The summaries or descriptions of provisions of the Bonds, the Loan Agreement, the Indenture, the Operating Agreement and the Continuing Disclosure Undertaking, and all references to other materials not purporting to be quoted in full, are only brief outlines of provisions thereof and do not purport to summarize or describe all the provisions thereof. Reference is hereby made to such instruments, documents and other materials for the complete provisions thereof. Until the issuance and delivery of the Series 2012 Bonds, copies of the Indenture and the Loan Agreement and other documents described in this Official Statement may be obtained at the office of the Authority, 555 S. Kansas Avenue, Suite 202, Topeka, Kansas 66603, Attention: Rebecca E. Floyd, Executive Vice President.

For additional information regarding the Series 2012 Bonds, contact the Corporation at Bramlage Coliseum, 1800 College Ave., Manhattan, KS 66502, Attention: Reid Sigmon, Senior Associate Athletics Director, Administration, or Stacy Martin, Assistant Athletics Director for Business.

The execution and delivery of this Official Statement has been duly authorized by the Corporation.

K-STATE ATHLETICS, INCORPORATED

By /s/ John Currie Chairperson

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APPENDIX A

K-STATE ATHLETICS, INCORPORATED

TABLE OF CONTENTS

HISTORY AND BACKGROUND...... A-1 GOVERNANCE...... A-1 Athletics Board ...... A-1 Advisory Committee...... A-2 Management of the Corporation...... A-2 THE BIG 12 CONFERENCE...... A-3 Membership ...... A-3 Competitive Record ...... A-4 Revenue Distributions ...... A-4 Television Contracts ...... A-4 K-STATE ATHLETIC PROGRAM...... A-5 ATHLETIC FACILITIES...... A-6 OPERATIONS...... A-6 General...... A-6 Operating Agreement with the University...... A-7 Employees...... A-8 Contributions and Fund Raising ...... A-8 Risk Management and Insurance...... A-8 Capital Expansion Projects...... A-9 Budget Process...... A-9 FINANCIAL INFORMATION ...... A-9 Financial Records ...... A-9 Summary Statement of Revenues and Operating Expenses ...... A-10 Management Discussion of Financial Results...... A-11 Current Year Budget...... A-13 Website Information ...... A-13 DEBT SERVICE COVERAGE...... A-13 Historical and Projected Debt Service Coverage ...... A-13 Assumptions Underlying Projected Corporation Debt Service Coverage...... A-16

K-STATE ATHLETICS, INCORPORATED

HISTORY AND BACKGROUND

K-State Athletics, Incorporated, f/k/a The Intercollegiate Athletic Council of Kansas State University, Inc. (the “Corporation”), is a not-for-profit corporation originally incorporated in 1933 under the laws of the State of Kansas, and is a tax-exempt charitable organization under Section 501(c)(3) of the Internal Revenue Code of 1986, as amended, exempt from federal income taxation under Section 501(a) of the Code. The Corporation was organized to promote and support intercollegiate athletics, allowing Kansas State University (the “University”) to compete as strongly as possible within the resources available to the University and under the rules and regulations of the National College Athletics Association (the “NCAA”), the Big 12 Conference and any other athletic conference with which the University may affiliate.

The Corporation exists to support and foster as competitive an intercollegiate athletic program as is possible within the means available, all in harmony with and subject to the general educational policy of the University. The Corporation provides management and operational services and collects and disburses the funds related to the operation of an intercollegiate athletics program.

GOVERNANCE

In June 2009, the Bylaws of the Corporation were amended to create a governing board and an athletics advisory committee. The property, business, and affairs of the Corporation are under the care and supervision of an Athletics Board of Directors (the “Athletics Board”), comprised of six (6) voting members. The members of the Athletics Board include the following: (i) the Kansas State University Director of Intercollegiate Athletics; (ii) the Kansas State University Vice President of Administration and Finance; (iii) the Kansas State University Faculty Athletics Representative to the Big 12 Conference (or its successor), appointed by the President; (iv) one (1) Senior University Administrator, appointed by the Kansas State University Provost; (v) one (1) Senior University Administrator, appointed by the President of Kansas State University (“the President”); and (vi) the Kansas State University Vice President of Student Life and Institutional Advancement.

Athletics Board

The Athletics Board acts as the policy-making body for the Corporation, and determines, in general, the method of conducting the Corporation’s business, including making recommendations to the President regarding the Corporation’s annual budget and the compensation to be paid to corporate officers, agents and employees. The Athletics Board has authority to purchase or contract for or to authorize any officer, agent, or employee to purchase or contract for any property or for the performance of any labor or service that the Athletics Board deems expedient, and has the authority to borrow money for the Corporation. The authority of the Athletics Board is subject to the control of the President and the Board of Regents. The Athletics Board has delegated its authority (except for the authority to purchase real property, to borrow money or otherwise incur debt, and except as otherwise specifically provided by law, the Articles of Incorporation or the Bylaws) to the Director of Intercollegiate Athletics for purposes of carrying out the day to day operations of the Corporation.

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As of the date hereof, the members of the Athletics Board are as follows:

Name Office University Position

John Currie Chairperson Director of Athletics Bruce Shubert Vice Chair, Secretary and Treasurer Vice President of Administration and Finance Dr. Pat Bosco Board Member Vice President of Student Life/Dean of Students Dr. April Mason Board Member Senior Vice President and Provost Dr. Be Stoney Board Member Faculty Athletics Representative Dr. Jackie Hartman Board Member Chief of Staff/Director of Community Relations

Advisory Committee

In addition to the Board, a President’s Advisory Committee on Intercollegiate Athletics (the “President’s Advisory Committee”) meets four (4) times per year. Its purpose is to provide advice and recommendations on athletic matters to the Athletics Board and to the President. The President’s Advisory Committee is advisory in nature and does not exercise corporate authority or control and does not have fiduciary responsibility for the operations of the Corporation. All actions of the President’s Advisory Committee are subject to and not binding on the Director of Intercollegiate Athletics, the Athletics Board, and the President. No member of the President’s Advisory Committee has voting authority in the matters of the Corporation, unless a member is also a voting member of the Athletics Board.

Members of the President’s Advisory Committee include: (i) the Kansas State University Director of Intercollegiate Athletics; (ii) the Intercollegiate Athletics Senior Woman Administrator; (iii) four (4) full-time members of the Kansas State University faculty appointed by the Kansas State University President after consultation with the Faculty Senate President and faculty; (iv) two (2) Kansas State University alumni members appointed by the Kansas State University President from nominations submitted by the Kansas State University Alumni Association Board of Directors; (v) two (2) Kansas State University full-time student members appointed by the Kansas State University President from nominations submitted by the Kansas State University Student Body President; (vi) one (1) Kansas State University Alumni Board member appointed by the Kansas State University President from nominations submitted by the Kansas State University Alumni Association President; and (vii) one (1) Kansas State University Foundation member appointed by the Kansas State University President from nominations submitted by the Kansas State University Foundation CEO. The Chairperson is a sitting faculty member of the President’s Advisory Committee and is appointed by the Athletics Board.

Management of the Corporation

The Corporation operates the intercollegiate athletics program as a department of the University and is subject at all times to applicable University regulations and administrative policies, except for those policies and procedures that are unique to the Corporation, passed by the Corporation’s Board of Directors, and approved by the President. According to the Bylaws of the Corporation, the Director of Intercollegiate Athletics of the University serves as the Chief Executive Officer of the Corporation, and the Vice President of Administration and Finance of the University serves as the Secretary and Treasurer.

The Director of Intercollegiate Athletics, as Chief Executive Officer of the Corporation, has the general powers and duties of management generally vested in the office of the president of the corporation and has sole authority and responsibility for the day-to-day operations of the Corporation,

A-2 including employment and termination of personnel. The Director of Intercollegiate Athletics is a member of all committees established by the Athletics Board.

Biographical information of the management of the Corporation follows:

John Currie, Director of Intercollegiate Athletics – Appointed May 18, 2009, Mr. Currie, age 40, serves as the 15th Athletic Director at Kansas State University and Chief Executive Officer of the Corporation. He oversees the operation by the Corporation of the intercollegiate athletics program of Kansas State University. Mr. Currie began his duties at Kansas State University after 10 years at the University of Tennessee, most recently serving as Executive Associate Athletics Director. In 2011, Mr. Currie was one of two intercollegiate athletics directors named to Sports Business Journal’s prestigious “Forty Under 40” list of national sports leaders. Mr. Currie earned a masters degree in sports management from the University of Tennessee in 2003 and is a 1993 Wake Forest graduate.

Reid Sigmon, Senior Associate Athletics Director/Chief Operating Officer – Mr. Sigmon, age 37, serves as the Department CFO and oversees the Business Office, Human Resources, IT, Marketing, Tickets, and the Learfield and NIKE relationships. Additionally, Mr. Sigmon serves as the liaison to the Vice President of Administration and Finance and the University General Counsel and also serves as the sport administrator for football, tennis, and rowing. Prior to joining Kansas State, Mr. Sigmon served as Executive Director of the Tampa Bay Super Bowl Host Committee. The Host Committee was responsible for ensuring the readiness of the Tampa Bay region, coordinating the numerous logistics involved with the event and fulfilling all obligations to the National Football League. Mr. Sigmon graduated Magna Cum Laude from Wake Forest University in 1996 with a bachelor’s degree in politics. In May 2003, he received his Master of Business Administration degree from the University of Florida, where he was President of the MBA Association and a Matherly Scholar.

Stacy Martin, Assistant Athletic Director for Business Operations – Ms. Martin, age 31, is the Assistant Athletic Director for Business Operations. In that role, Ms. Martin oversees the Business Office, Concessions, Licensing, and is the sport administrator for Women’s Basketball. Prior to joining Kansas State, Ms. Martin served as the Senior Associate Athletic Director/Chief Operating Officer at San Jose State University and as the department’s Senior Woman Administrator. Ms. Martin is the president of CABMA (College Athletic Business Management Association) for 2011–12. Ms. Martin obtained her bachelor’s and master’s degrees from San Jose State University. Additionally, Ms. Martin is a graduate of the Sports Management Institute, a collaboration of the Universities of Southern California, Texas, Michigan, Notre Dame and North Carolina.

THE BIG 12 CONFERENCE

Membership

The University is a member of the Big 12 Conference, which also currently includes the following higher education institutions: Baylor University, Iowa State University, University of Kansas, Oklahoma State University, Texas A&M University, Texas Tech University, University of Missouri, University of Oklahoma, and the University of Texas. Texas A&M University and the University of Missouri are scheduled to withdraw from the Big 12 Conference effective June 30, 2012. Effective July 1, 2012, Texas Christian University and West Virginia University are scheduled to join the Big 12 Conference. This will result in the Big 12 Conference consisting of ten member institutions. Prior to joining the Big 12 in 1996, the University was a member of the Big Eight Conference.

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Competitive Record

Big 12 Conference teams have accounted for more than 342 NCAA team titles, while its student- athletes have claimed more than 492 NCAA crowns entering the 2011-2012 academic year. Through its first 15 years, the Big 12 has claimed a team national championship in 16 of the sports it sponsors. The conference tied for a nation’s best seven appearances in the BCS National Championship Game and leads the country with 89 football consensus All-America Selections. Big 12 Conference squads have combined to lead the nation in women’s basketball attendance each of the last 12 years and the Big 12 is the only NCAA conference to surpass the one-million mark in season attendance – doing so six times. In men’s basketball, the conference has sent six different teams to the Elite Eight the past four campaigns, the most of any conference.

Revenue Distributions

In fiscal year 2011, the Big 12 Conference distributed over $136,529,528 million in revenue for its member institutions.

Pursuant to the bylaws of the Big 12 Conference, the board of directors of the Big 12 Conference annually approves the Big 12 Conference operating budget for the next immediate fiscal year during its Spring business meeting, including the amount of revenue to be distributed. Distribution of revenue in excess of the annual budgeted distributable net revenue from additional sources (e.g., second BCS bowl appearance) is to be determined by the board of directors during the annual spring meeting.

Beginning with fiscal year 2012, subject to certain adjustments for broadcast of football games on member institution branded outlets and for NCAA or other penalties that prohibit postseason competition in a particular sport, the revenues received by the Conference are first used to pay the operating and other expenses incurred or fund reserves established by the board of directors of the Big 12 Conference, and thereafter, the remainder (the “Net Distributable Revenues”) are distributed as follows.

(1) Member institution participation subsidies payable by the Big 12 Conference to a member institution in connection with such member's participation in post-season competition in accordance with rules established from time to time by the board of directors of the Big 12 Conference, and revenue received by the Big 12 Conference from the NCAA that is designated by the NCAA to be paid directly to a given Member for items such as NCAA grants-in-aid, academic enhancement payments, and student-athlete welfare payments, shall be paid to such member institution and shall not be distributed as described in (2) below.

(2) All Net Distributable Revenues other than those described in (1) above shall be distributed to each member institution in equal proportions, except that if a given member institution has executed a written agreement with the Big 12 Conference resulting in such member institution receiving a distribution in a given year that is less than the distribution of revenues that such member institution would otherwise have received as described in this paragraph (2), then (i) the amount of Net Distributable Revenue that is distributed to such member institution shall be the lesser agreed-on amount and (ii) the reduction in the amount distributable to such member institution shall be distributable to all other member institutions in equal proportions.

Television Contracts

The Big 12 Conference has one of the most comprehensive regional and national television agreements in the country. Since 1998, the Big 12 Conference has been a party to agreements with Fox Sports Network (“FSN”) for cable television and ABC/ESPN broadcast television to televise certain Big

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12 Conference games. The current Big 12 Conference television packages with ABC (for broadcast television through 2016) and FSN (for cable television through 2024) for football and ESPN (for broadcast television through 2016) for basketball guarantee the Big 12 Conference coverage through the years cited.

The broadcast television and cable television agreements with the Big 12 Conference described in the previous paragraph are commonly referred to as first-tier and second-tier media. The media rights with respect to events that are not covered by Big 12 Conference agreements, but are left to individual member institutions are commonly referred to as third-tier media rights.

K-STATE ATHLETIC PROGRAM

The objective of the Corporation is to promote and support intercollegiate athletics, allowing the University to compete as strongly as possible within the resources available to the University and under the rules and regulations of the NCAA, the Big 12 Conference and any other athletic conference with which the University may affiliate.

The University sponsors sixteen different varsity sports, including: men’s football, women’s volleyball, men’s and women’s cross country, men’s and women’s basketball, men’s and women’s indoor track, men’s baseball, women’s tennis, women’s equestrian, men’s and women’s golf, men’s and women’s outdoor track and women’s rowing. Of the approximately 444 student athletes participating in these intercollegiate varsity sports, approximately 360 receive some amount of financial aid.

The Corporation believes that it is its responsibility to create, through proper leadership and atmosphere, an environment which provides the student-athlete with an opportunity to acquire an education and to achieve at least an undergraduate degree attesting to have successfully attained an education. The Corporation strives to develop intellectual, social, moral, emotional, cultural and vocational growth and development as well as the physical.

The University’s athletic programs had significant achievements in 2011, including: #1 All-Sport Graduation Rate in the Big 12; 102 Academic All-Big 12 Selections; two Academic All Americans; 18 All-Big 12 and 128 All-America Selections; and only one of six schools nationally to have its football team in a bowl game, both basketball teams in the NCAA Tournament, and its baseball team in an NCAA regional. From an individual standpoint, the University had a Big 12 Women’s Tennis Player of the Year and Freshman of the Year, an NCAA National Outdoor High Jump Champion, an NCAA National Outdoor Heptathlon Champion, and an NCAA Elite 88 Award Winner.

The Corporation strives to have all recruited athletes graduate. K-State has had the highest graduation rate in the Big 12 Conference for four of the last five years. The current Student-Athlete Graduation Success Rate as calculated by the NCAA is 78%. The graduation rates for all freshmen entering the University compared to recruited athlete freshmen are as follows:

Graduation During Fiscal Year Ended June 30, All Students Athletes

2008 63% 60% 2009 58% 60% 2010 58% 75% 2011 60% 65%

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ATHLETIC FACILITIES

The Corporation owns no facilities. All athletic facilities are owned by the State of Kansas, through the University, or leased by the Corporation. Pursuant to the Operating Agreement, the Corporation maintains and operates an intercollegiate athletics program located on land and facilities owned or controlled by the University. When the facilities are under the use and control of the Corporation, the Corporation is responsible for such use and control and for any claims arising out of the Corporation’s use and control of the facilities. Pursuant to the Operating Agreement, the State and the University are not required to indemnify the Corporation for any liability or to purchase any insurance against loss or damage to any property. The Corporation owns a limited amount of athletic offices and other miscellaneous equipment but no other personal property, other than cash, investments, accounts receivable and certain contract rights. It is not anticipated that the Corporation will ever acquire any real property.

The athletic facilities subject to the Operating Agreement (described at the caption “OPERATIONS—Operating Agreement with the University” below) are as follows:

Bramlage Coliseum Bramlage Coliseum/Bill Snyder Family Stadium parking lots Indoor Practice Facility Brandeberry Complex Vanier Football Office Complex Bill Snyder Family Stadium/Wagner Field Football Practice Field Breidenthal Team House and Boathouse Tointon Family Stadium/Frank Myers Field Ahearn Fieldhouse/Gymnasium RV Christian Track and Locker Room Equestrian Facility Basketball Training Facility (to be completed in May 2012)

OPERATIONS

General

The Operating Agreement governs the relationship between the University and the Corporation. The Operating Agreement describes the responsibilities assumed by the parties in establishing and operating an intercollegiate athletic program for the students, faculty, alumni, guests and visitors at the University.

For a description of recent historical financial results from key components of the Corporation’s operations, see the caption “FINANCIAL INFORMATION—Management Discussion of Financial Results” in this Appendix A. For a further description of key components of the Corporation’s operations, including certain expectations of management of the Corporation regarding future revenues, see the caption “DEBT SERVICE COVERAGE—Assumptions Underlying Projected Corporation Debt Service Coverage” in this Appendix A.

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Operating Agreement with the University

Pursuant to the Operating Agreement, the University grants the Corporation the right to maintain and operate an intercollegiate athletics program located on land and facilities owned or controlled by the University in accordance with the rules and regulations of the University. The Corporation is operated as a department of the University and is subject to the regulations and administrative policies of the University. The Corporation provides management and operational services for operating an intercollegiate athletic program and collects and disburses the funds from such operations.

All of the Corporation’s revenue generated from its operations or facilities is the property of the Corporation and is maintained in special accounts with the Division of Financial Services of the University, and is be used to defray the cost of operating, improving and maintaining the intercollegiate athletics program of the University, and to defray the cost of operating, constructing, improving, and maintaining the intercollegiate athletics program and facilities for such program. Other revenue and donations that are deposited with the Foundation for the benefit of the intercollegiate athletics program may be drawn upon for expenditures of the Corporation. Any other revenues or donations deposited with the Foundation which were not for the benefit of the athletic program may be drawn upon for the Corporation’s expenditure only upon approval of the President.

The Operating Agreement, the term of which automatically extends from year-to-year, may be terminated upon one-year written notice by either the Corporation or the University, or immediately in the event that the Corporation is dissolved either by mutual agreement of the Corporation and the University or by order of the President of the University, the Board of Regents, or under the command of the laws of the State. Notwithstanding the foregoing, the Operating Agreement shall not terminate for any reason (i) prior to a date when no Bonds are Outstanding, without the prior written consent of the Authority and the Trustee and a written confirmation from each rating agency then maintaining a rating on any of the Bonds that the ratings assigned to the Bonds will not be adversely affected or (ii) prior to a date when no Series 2002 Bonds are Outstanding, without the prior written consent of the Prior Bond Insurer.

The Corporation makes available to the University all books and records of the Corporation and is audited annually by an independent certified public accountant with five copies of each audit furnished to the University’s Internal Audit Department for filing with the Board of Regents, the State Division of Post Audit and appropriate University Offices.

Any employee contract in excess of $100,000 per year, or any contract that creates a financial obligation to an employee or other legal entity for longer than one calendar year, must be submitted to the Board of Directors and the President for approval. With the prior approval of the President, the Corporation may borrow money for the construction or improvement of facilities or for the purchase of equipment or for operational expenses.

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University’s main campus in Manhattan, Kansas, until such payment default on the Note(s) has been cured or no Bonds shall be Outstanding, whichever occurs first.

The Operating Agreement may not be assigned without the prior written consent of the Authority and the Trustee and a written confirmation from each rating agency then maintaining a rating on any of the Bonds that the ratings assigned to the Bonds will not be adversely affected by such assignment. The Operating Agreement may be reviewed for amendment by written request of the Corporation or the University. Notwithstanding the foregoing the Operating Agreement shall not be amended, so long as any Bonds are Outstanding, in a manner that (i) terminates the Corporation’s right to maintain and operate an intercollegiate athletics program or the Corporation’s right to receive the revenues generated from its operations and facilities, or (ii) amends any provision relating to the term, the rights of the University upon default in payment of the Note(s), assignment, amendment or third-party beneficiary rights without the prior written consent of the Authority and the Trustee, a written confirmation from each rating agency then maintaining a rating on any of the Bonds that the ratings assigned to the Bonds will not be adversely affected by such amendment, and, so long as the Series 2002 Bonds are Outstanding, the prior written consent of the Prior Bond Insurer with respect to the Series 2002 Bonds. See the caption “SUMMARY OF THE OPERATING AGREEMENT” in Appendix D.

The certain rights of the University upon the occurrence and continuation of a default in the payment of any Note(s) of the Corporation under the Operating Agreement have been assigned by the University to the Authority and the Trustee pursuant to an Assignment of Rights dated as of January 26, 2011.

Employees

The Corporation has approximately 137 full-time, 248 part-time and 613 student employees, essentially all of whom operate as the Athletic Department of the University. Key employees of the Corporation include Bill Snyder, the head football coach, and Frank Martin, the head men’s basketball coach. The Corporation has no union contracts or collective bargaining units. John Currie, the Athletic Director, is an employee of the University.

Contributions and Fund Raising

In fiscal year 2011, the Corporation received approximately $23 million in charitable contributions. Essentially all charitable contributions to the Corporation are made through the Foundation which is the charitable giving and fund raising entity of the University. The Foundation retains such contributions and makes the same available to the Corporation upon request. The Corporation and representatives of the Foundation work closely in all fundraising activities for athletics.

Risk Management and Insurance

Under the Loan Agreement, the Corporation has agreed to maintain or cause to be maintained insurance with respect to its property covering such risks that are of an insurable nature and of the character customarily insured against by organizations operating similar properties and engaged in similar operations (including but not limited to property and casualty, worker’s compensation, general liability and employee dishonesty) and in such amounts as, in its judgment, are adequate to protect the Corporation and the Property. The Corporation’s current insurance coverages include property and casualty, worker’s compensation, business interruption and general liability.

However, the athletic facilities operated by the Corporation are owned by the State and insured by the University through its participation in an insurance policy procured by all six Kansas public universities. The University’s insurance coverage provides property insurance for the replacement value

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of the buildings, with content coverage set at 10% of the value of the building, and business interruption for the Corporation to a limit of $8.5 million. The current property insurance policy has a $500 million loss limit per occurrence and a deductible of $100,000. Although the University currently carries this insurance, the Operating Agreement provides that neither the State nor the University shall be required to purchase any insurance against loss or damage to any property (including the athletic facilities operated by the Corporation) or for any other subject matter relating to the Operating Agreement.

Pursuant to the Operating Agreement, claims arising out of the use and control of the athletic facilities covered thereby, when such facilities are under the use and control of the University, shall be subject to the provisions of the of the Kansas Tort Claims Act, and the Corporation’s responsibilities shall be limited to any act or omission of the Corporation or its agents and employees. The Operating Agreement also provides that neither the State nor the University shall hold harmless or indemnify the Corporation for any liability whatsoever.

Capital Expansion Projects

The Corporation is currently in the early stages of planning for various potential capital improvement projects that, if pursued, are currently intended by the Corporation to be financed from operations, and not through the incurrence of debt.

Budget Process

The Senior Associate Athletics Director and Assistant Athletics Director for Business Operations meet yearly with each sport and support unit to go over year-end projections and new operating budget requests. Each group is given a template to request their budgets for the following years. The Director of Human Resources creates the compensation budget for the department. The information is compiled by the Assistant Athletics Director for Business Operations. The Senior Associate Athletics Director and Assistant Athletics Director for Business Operations work together to adjust the revenue budget and to evaluate any changes in fixed expenses.

Once a joint document is created, the budget is presented to the Director of Athletics. Changes and adjustments are incorporated into the budget for presentation to the Athletics Board. Final approval has to be granted by the Athletics Board.

See the caption “FINANCIAL INFORMATION—Current Year Budget” below.

FINANCIAL INFORMATION

Financial Records

The Corporation maintains its financial records on the basis of a fiscal year ending June 30 and follows generally accepted accounting principles. The financial statements of the Corporation for the year ended June 30, 2011 (the “Financial Statements”) and the audit report prepared by James L. Gordon, C.P.A., P.A., Manhattan, Kansas (the “Auditors”), are included as Appendix B to this Official Statement. The Auditors have not participated in the preparation of sections of this Official Statement, other than the Financial Statements, and specifically including this Appendix A.

The Corporation’s Board of Directors reviews revenues and expenses of the Corporation throughout the fiscal year. Interim financial statements are not prepared by the Corporation due to the non-linear nature of revenues and expenses and cost benefit of full statement preparation. As a result, no financial information subsequent to June 30, 2011 is available for presentation herein.

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Summary Statement of Revenues and Operating Expenses

The table below presents a summary of historical statements of revenues and expenses of the Corporation for the last three fiscal years. Such information has been derived from the audited financial statements of the Corporation, and with respect to the fiscal year ended June 30, 2011, should be read in conjunction with the audited financial statements of the Corporation, including the notes thereto, contained in Appendix B of the Official Statement.

SUMMARY STATEMENT OF ACTIVITIES (REVENUES AND OPERATING EXPENSES) Fiscal Years Ended June 30, 2007 2008(1) 2009 2010 2011 Revenues: Ticket Sales...... $13,722,943 $13,492,410 $13,290,510 $13,606,197 $14,298,169

Big 12/NCAA 9,248,337 9,641,387 9,795,022 10,568,606 13,714,350 Distributions(2)

Radio/TV Contracts 2,834,159 2,719,000 2,995,619 3,097,000 3,412,000

Guarantees ...... 155,000 1,108,460 230,000 567,653 1,051,450 Student Fees...... 566,752 573,508 566,752 560,695 710,695 Contributions(3) ...... 9,017,710 9,652,422 8,668,689 16,396,560 26,503,775 State Appropriations ...... 1,536,909 1,662,455 1,902,578 1,638,461 1,511,562 Other Revenues...... 9,606,364 9,358,283 9,950,732 5,615,116 6,216,502 Net Unrealized Gain on Asset Transactions ...... 1,655,337 -- -- 350,552 1,456,763

Total ...... $48,343,511 $48,207,925 $47,399,902 $52,400,840 $68,875,266

Operating Expenses: Salaries/Benefits $14,475,871 $18,141,367 $19,859,113 $17,614,608 $20,030,395 Travel...... 4,253,672 3,911,211 3,756,771 3,315,748 3,461,225 Guarantees ...... 1,678,710 1,581,749 2,541,139 1,313,326 1,620,730 Athletic Aid ...... 4,570,999 5,163,649 5,360,359 5,434,689 5,350,093 Recruiting ...... 1,012,123 1,169,836 878,095 608,245 704,504 Other Expenses...... 13,244,024 13,784,512 13,705,801 13,015,128 14,312,911 Net Unrealized Loss on Asset Transactions...... -- 604,925 4,118,619 -- --

Total………… $39,235,399 $44,357,249 $50,219,897 $41,301,744 $45,479,858

Change in Net Assets...... $ 9,108,112 $ 3,850,676 $ (2,819,955) $11,099,096 $23,395,408

(1) Salaries, equipment (included in other expenses) and operational expenses (included in other expenses) for the fiscal year 2008 are presented as restated in the fiscal year 2009 audited financial statements of the Corporation. (2) Includes Big 12 Conference distributions/NCAA surplus and Big 12/NCAA reimbursements. (3) Includes temporarily restricted and permanently restricted contributions.

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Management Discussion of Financial Results

The following is a discussion of the revenues, expenses and financial results for the past four fiscal years ending June 30, 2011. The financial results of the Corporation in prior years is not necessarily indicative of the results to be expected for the current or any future fiscal years. All figures are approximate unless otherwise stated.

Revenues. The Corporation’s cash revenues in the fiscal year 2011 were generated from ticket sales (21%), Big 12/NCAA revenue distributions (20%), radio and TV contracts (5%), guarantees (1.5%), student fees (1%), contributions (38.5%), State appropriations (2%) and other revenue and net unrealized gain on asset transactions (11%). Each of these categories of revenues and the general trends in such categories of revenues, as shown in the table above for the fiscal years 2007 through 2011, is briefly described below.

Ticket Sales: Over the last five years ticket sales fluctuated, primarily due to the number of home games, with slight decreases and increases, including a decrease from fiscal year 2007 to fiscal year 2008 of $230,533 (1.6%), a decrease in fiscal year 2009 of $201,900 (1.5%) an increase in fiscal year 2010 of $315,687 (2.3%), and an increase in fiscal year 2011 of $691,972 (5)%. The increase in 2010 and 2011 was due to coordinated plans to improve fan experience and to aggressively increase ticket sales for all sports. Fan confidence in the Corporation’s sports programs have improved since 2009.

Big 12/NCAA Distributions: Over the last five years, revenue from Big 12/NCAA distributions have increased steadily each year, as a result of ongoing success of the member institution sports programs generally. Big 12 Conference distributions include the Corporation’s share of all revenues collected by the Big 12 Conference on behalf of its member institutions. The majority of NCAA Distributions are through the Big 12 office. A very small portion comes directly come from the NCAA. The Corporation received $14 million in Big 12 Conference revenues in fiscal year 2011. As described at the caption “THE BIG 12 CONFERENCE— Revenue Distributions” in this Appendix A, beginning in fiscal year 2012, the Big 12 Conference shares revenue equally among its member institutions. The Big 12 Conference distributions include revenue from agreements with FSN and ABC/ESPN to televise certain conference football and basketball games, which are commonly referred to as first-tier and second-tier media rights.

Radio and TV Contracts: In fiscal year 2011, the Corporation received about $3.4 million from Learfield Communications, its media-rights contractor, for third-tier local broadcast, advertising, and digital marketing rights. After a small decrease from fiscal year 2007 to fiscal year 2008, the increase in fiscal years 2009, 2010 and 2011 in third-tier radio and TV contract revenues resulted from the Corporation’s renegotiation in 2009 of its Learfield Communications contract, which successfully capitalized on interest in Kansas State sports.

Guarantees: Guarantee revenues result from teams in all sports paying Kansas State to play games away from Manhattan, Kansas. In some cases, multi-year contracts have been agreed to. In those situations, Kansas State pays for a team to play in Manhattan, Kansas in one year and, in another year, receives payment to play away from Manhattan, Kansas.

Student Fees: The Corporation’s revenues from student fees have remained stable from fiscal year 2007 through 2010. Fiscal year 2011 contains a one-time increase for supplemental funds used for the Volleyball Bleacher project.

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Contributions: Contributions have fluctuated over the last four years, with an increase from fiscal year 2007 to fiscal year 2008 of $634,712 (7%), a decrease in 2009 of $983,733 (10%), an increase in 2010 of $7,727,871 (89%), and another increase in 2011 of $10,107,215 (38%). Four factors contribute to the large increase in Contributions from 2009 to 2011. First, the new athletic administration implemented more coordinated and aggressive fund raising plans that increased giving. Second, more targeted and active communication was used to collect pledges in prior years. Third, increased season ticket sales resulted in more seat donations. Fourth, a change recommended by the independent auditor resulted in the recognition of approximately $3,400,000 in suite donations as contributions in fiscal year 2010. Those revenues were categorized as Other Revenue in years prior to fiscal year 2010.

State Appropriations: All units receiving budgeted funds through the University, including the Corporation, received less funding in fiscal years 2010 and 2011. State funding represents approximately 2% of the overall revenue of the Corporation.

Other Revenues: Other revenues have fluctuated over the last four years, with a decrease from fiscal year 2007 to fiscal year 2008 of $248,081 (2.6%), an increase in fiscal year 2009 of $592,449 (6.3%), a decrease in fiscal year 2010 of $4,335,616 (43.6%) and an increase in fiscal year 2011 of $601,386 (10.7%). Other revenues consist of the following: concessions, parking, interest income, and license royalties/ commissions. The decrease in other revenues from 2009 to 2010 consists of the reclassification of annual seat donations for premium seating in the amount of $3,400,000 to contributions. The remaining decrease in 2010 was the result of reduced interest earnings and fluctuations in gifts in kind. The increase in other revenues from 2010 to 2011 is a result of new contracts for concessions, licensing, and the website which all offered higher revenue splits and growth potential.

Operating Expenses. The Corporation’s operating expenses in the fiscal year 2011 were derived from salaries and benefits (44%), travel (7.6%), guarantees (3.6%), athletic aid (11.8%), recruiting (1.5%) and other expenses (31.5%). Each of these categories of operating expenses and the general trends in such categories of operating expenses, as shown in the table above for the fiscal years 2007 through 2011, is briefly described below.

Salaries and Benefits: Salaries and benefits represent the largest expense with an increase from fiscal year 2007 to fiscal year 2008 of $3,665,496 (25%), an increase in fiscal year 2009 of $1,717,746 (9.5%) a decrease in fiscal year 2010 of $2,244,505 (11%), and an increase in fiscal year 2011 of $2,415,787 (13.7%). The large increase in 2009 resulted from recognized expenses payable to a former athletic director. Additionally, the former head football coach received separation pay in fiscal year 2009 and a lawsuit settlement of $1,650,000 in fiscal year 2011. The increase from 2010 to 2011 includes compensation increases for football and men’s and women’s basketball staffs.

Travel: Travel expenses reflect the cost of travel by Corporation management and employees for travel by athletic teams to away games and post-season events. Such expenses have declined during each fiscal year from fiscal year 2007 to fiscal year 2010, as a result of management’s focus on reducing expenses and other normal variation. The increase in fiscal year 2011 was due to football’s participation in the Pinstripe Bowl in New York City.

Guarantees: Guarantee expenses result from Kansas State paying teams to play games in Manhattan, Kansas. In some cases, multi-year contracts are agreed to. In those situations, Kansas State pays for a team to play in Manhattan, Kansas in one year and, in a subsequent year, receives payment to play away from Manhattan, Kansas.

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Athletic Aid: Athletic aid expense reflects the amount paid for tuition, fees, books and housing. It is influenced by tuition and housing rates charged by the University, by the number of student athletes, and the proportion of student athletes categorized as non-resident for tuition purposes. In most years, the expense increase reflected the tuition and housing rate change implemented by the University (4% to 6% in recent years). In some years, a change in the proportion of resident to non-resident students resulted in change.

Recruiting: Expenses for recruiting of student athletes increased from the fiscal year 2007 to the fiscal year 2008 as a result of increased activity in this area of operations. Following 2008, recruiting expenses have decreased considerably—by 25% in fiscal year 2009 and another 31% in fiscal year 2010. The decreases in costs in 2009 and 2010 reflected management’s focus on reducing expenses and other normal variation. Recruiting expenses increased slightly in 2011 due to the scholarship fulfillment needs in football and men’s basketball.

Other Expenses: Other expenses captures a number of categories including maintenance, equipment, depreciation, outside printing, game day services, officials and general operating expenses. For the last four years, other expenses from fiscal year 2007 to fiscal year 2008 increased $540,488 (4%), a decrease in fiscal year 2009 of $78,711 (0.5%), a decrease in fiscal year 2010 of $690,673 (5%), and an increase of $1,297,784 (10%) in 2011 due to the payment of the Ron Prince settlement. The most notable changes from 2009 to 2011 are reductions in maintenance, depreciation and general operational expenses.

Current Year Budget

The Corporation’s budget for the fiscal year ending June 30, 2012, presented on a cash-hybrid basis, provides for approximately $51.5 million in revenues and an equal amount of expenses, which is an increase from the approximately $47 million of budgeted revenues and expenses for the prior fiscal year ended June 30, 2011. See the caption “OPERATIONS—Budget Process” above in this Appendix A. For actual results of the prior fiscal year 2011, see the caption “Summary Statement of Revenues and Operating Expenses” above in this Appendix A.

Website Information

The Corporation maintains a public website on which it posts certain financial and other information. The financial information includes a budget overview, audited financial statements, NCAA Statements of Revenues and Expenses and Federal Form 990 tax returns. Certain of this information is available at www.kstatesports.com/ot/financial-info.html#. None of the information included on this page, or on the Corporation’s website generally, is incorporated by reference into the Official Statement.

DEBT SERVICE COVERAGE

Historical and Projected Debt Service Coverage

Set forth in the table below is the (1) historical coverage of Debt Service Requirements on the Series 1998 Bonds (refunded with proceeds of the Series 2011 Bonds) and the Series 2002 Bonds by the Corporation’s Net Revenues Available for Debt Service for the years ended June 30, 2010 and 2011 and (2) the projected coverage of Debt Service Requirements on the Series 2012 Bonds, the Series 2011 Bonds and the Series 2002 Bonds by the Corporation’s projected Net Revenues Available for Debt Service for the years ending June 30, 2012 through 2016.

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Certain projected financial information, prepared by the Corporation, for the five year period ended June 30, 2016 is also contained in this Appendix A. The financial projections have been prepared by management of the Corporation and are based on certain assumptions concerning future events. Actual future events are likely to vary from assumptions; such variations may be material.

The information in the table below should be read in conjunction with the audited financial statements of the Corporation set forth in Appendix B hereto and the information under the caption “Assumptions Underlying Projected Corporation Debt Service Coverage” below.

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K-State Athletics, Incorporated Historical and Projected Net Revenues Available for Debt Service and Debt Service Coverage

Historical (1) Projected (2) FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016

Revenues (3) $52,050,286 $67,418,503 $63,083,649 $66,724,777 $66,763,778 $66,874,695 $70,174,695

Operating Expenditures (4) 39,356,503 43,351,555 45,937,634 46,054,761 46,493,762 46,954,679 47,554,679

Net Revenues Available for Debt Service 12,693,783 24,066,948 17,146,016 20,670,016 20,270,016 19,920,016 22,620,016

Debt Service Requirements (5) 1,568,800 1,562,800 2,074,110 4,785,344 5,480,222 5,414,796 6,289,053

Projected Debt Service Coverage Ratio (Net Revenues Available 8.09x 15.40x 8.27x 4.32x 3.70x 3.68x 3.60x for Debt Service divided by Debt Service Requirements)

(1) See the audited financial statements of the Corporation in Appendix B to the Official Statement.

(2) See the caption “Assumptions Underlying Projected Corporation Debt Service Coverage” below.

(3) Revenues consist of total revenues excluding net unrealized gain on asset transactions. For fiscal year 2010 and 2011, Revenues include the present value of cash contributions pledged and to be received in future years, as reported in the Corporation's audited financial statements. For fiscal year 2012 and subsequent years, the projected Revenues do not include any such contributions to be received in future years.

(4) Operating expenditures consist of total operating expenses excluding depreciation, interest expenses and net unrealized losses on asset transactions.

(5) Debt Service Requirements for fiscal year 2010 includes actual debt service on the then-outstanding Series 2002 Bonds and Series 1998 Bonds. The Series 1998 Bonds were refunded with proceeds of the Series 2011 Bonds. Debt Service Requirements for fiscal year 2011 includes actual debt service on the Series 2002 Bonds only, as there was no debt service payable on the Series 2011 Bonds until July 1, 2011. Debt Service Requirements projected for fiscal year 2012 through fiscal year 2016 includes the scheduled debt service on the Series 2002 Bonds, the Series 2011 Bonds and the Series 2012 Bonds only, but not any Additional Bonds or other indebtedness of the Corporation. Debt Service Requirements are reduced by the release of any Debt Service Reserve Fund moneys.

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Assumptions Underlying Projected Corporation Debt Service Coverage

The following are assumptions of management of the Corporation used in preparing the foregoing projections of Net Revenues Available for Debt Service. To the extent these assumptions involve future events, variations from such assumptions are likely and such variations may be material to the projections of Net Revenues Available for Debt Service and to the financial results of the Corporation. See the caption “INVESTMENT CONSIDERATIONS” in the Official Statement.

THE FOLLOWING CONTAINS FORWARD-LOOKING STATEMENTS. SEE THE CAPTION “FORWARD LOOKING STATEMENTS” ON THE INSIDE COVER PAGES OF THIS OFFICIAL STATEMENT.

Ticket Sales. This category includes ticket sales at football, men’s and women’s basketball and other sports venues where admission is charged.

The demand for men’s football tickets at Bill Snyder Family Stadium has been constant, resulting in consecutive near sell-outs, dating back to 1994. The demand for men’s basketball tickets has been constant, resulting in a current sell out on a season basis.

The Corporation’s philosophy regarding ticket pricing is to establish fair prices that are competitive within the region (Big 12) but also consider the national scope and status of the programs. In football, the Corporation has followed the current trend of variable pricing; i.e., individual games may be priced differently based on their marketing appeal and national/regional stature of the opposing teams. This has resulted in individual football game ticket prices ranging from $20 to $75 for 2011. In men’s basketball, all ticket prices range from $20 to $125.

Corporation policy established faculty/staff ticket pricing at 80% of the public season price, thus relieving the Corporation of the taxable benefit reporting requirement for such sales. Student tickets are priced in agreement with the Student Government Association each year. These tickets are sold on a combination basis for football and men’s basketball. The Corporation currently prices student season tickets at $150 for football and $235 to $295 for football and men’s basketball. Students are granted complimentary admission to all other sports based on payment of their student activity fee.

Management of the Corporation believes the future of the University athletic program, short term and long term, is very stable. This is reflected in current strong football and basketball season ticket bases, modern facilities and effective top level leadership of the University and the athletic department. This is projected to remain constant. The long term security is based on the strengths of the Athletics Department and Big 12 Conference. Any fluctuation of team success from year to year is not expected to negatively impact these stable streams of revenue. History has shown that public season ticket holders are the most loyal supporters and the Big 12 schools have consistently been ranked as contenders for national championships.

Guarantees. Guarantees represent the contractual obligation for “non-conference games” whereby the “home” team pays the “visiting” team a sum of money in consideration for playing in the event. These payments typically range from $100,000 to $1,000,000 in men’s football and $40,000 to $90,000 in men’s basketball depending on the nature of the contest; i.e., a single event, one of several events, a home and home agreement.

TV Rights. Beginning in the 1998 season, the Big 12 Conference has entered into agreements with FSN and ABC/ESPN to televise certain Big 12 Conference games. Each university team belonging

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to the Conference equally shares in the revenues from these contracts, effective in fiscal year 2012. The Corporation received $14 million in conference revenues in fiscal year 2011. That amount is expected to increase in fiscal year 2012 by $3 million and will increase each fiscal year thereafter, as a result of the new FSN contract renegotiation in 2011. The ABC/ESPN contract will be renegotiated no later than 2015 and is also expected to produce an increase over present revenue from the existing contract.

Additionally, as part of the 2011 FSN renegotiation, the Corporation now retains the TV rights to one home football game per year. Retaining this game allows for some additional future revenue to the Corporation, either through a direct broadcast or sale of rights to that game.

Contributions. Private donations to the Corporation come from a variety of sources. Annual donations are made to the Ahearn Fund for the “general” support of the athletic program. The Foundation also receives bequests, endowments and other contributions for specific projects and capital construction on behalf of the Corporation. Interest earnings on these endowments also accrue to the Corporation. There are a number of booster groups associated with specific sports that raise funds through dues, merchandise sales, etcetera, primarily for the support of that specific sport.

Student Activity Fees. Students currently pay $560,000 for support of athletics as a part of their required fees to attend the University. This fee will remain at this level unless increases are requested by the Corporation and recommended for approval by Student Senate. Final approval must come from the Board of Regents. A one-time increase was granted in 2011 to help offset costs of the volleyball bleacher project.

Royalty Income. The Corporation has a 75% net share in the royalty income generated by the Powercat mark. The University’s licensing office monitors this program and looks for new ways to market the institution’s name and logos. University merchandise sales continue to rise each year, generating more royalties for the University and the Corporation to be used for scholarships for students.

Radio Network. The Corporation receives approximately $3.4 million from Learfield Communications for local broadcast, advertising, and digital marketing rights. The contractual guarantee from Learfield increases each year of the agreement.

Suite and Personal Seat Donation Revenue. This category has been generating revenue from suites available in the West Stadium press box, East Stadium Club and Suites, and from other personal seat licenses throughout Bill Snyder Family Stadium for football and Bramlage Coliseum for basketball.

Concession Revenues. The Corporation has entered into an agreement with Sodexo Sports and Leisure for the sale of food, beverages, and other concessions at the University’s athletic facilities during varsity athletic events. The Corporation receives a percentage of the revenues derived from the concessions agreement.

Sale of Soft Goods. Novelty items are sold at all athletic events. The sales are managed by GTM, Inc. This arrangement was established in the 1998 fiscal year to professionally manage this sales opportunity. Net revenue generated by the agreement is shared by the two organizations, with the Corporation receiving 35% of the net revenue.

Promotional Income. The Corporation sells promotional opportunities at University sporting events. They also coordinate the promotional activities at the Olympic sports venues to generate fan interest in these activities.

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Interest Income and Investment Earnings. Investment earnings accrue on idle funds of the Corporation during the academic year. Moneys are invested conservatively, but with the goal to maximize earnings.

Miscellaneous. The Corporation receives various fee incomes from sales of media guides, game programs, game day parking and revenue from the NCAA for academic enhancement.

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APPENDIX B

AUDITED FINANCIAL STATEMENTS OF THE CORPORATION FOR THE FISCAL YEARS ENDED JUNE 30, 2011 AND 2010

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APPENDIX C

KANSAS STATE UNIVERSITY

History and Academic Development

Founded in 1863, Kansas State University was established under the Morrill Act, which created land grant colleges. In 1991 the Legislature merged the former Kansas College of Technology with the University to establish the Kansas State University Salina College of Technology and Aviation. The K- State Olathe Innovation Campus was established in 2007. The University's full time enrollment for the fall semester 2011 was in excess of 23,863, and the University employed in excess of 5,200 full time equivalent faculty and staff.

Today, the University has a main campus of 664 acres, located in northern Manhattan, Kansas, which is approximately 125 miles west of Kansas City. In 1991, the Kansas Legislature established the Salina campus of the University, through a merger of the former Kansas College of Technology with the University. The University also owns 18,000 acres throughout the State in four branch locations of the Agricultural Experiment Station and 8,600 acres in the Konza Research Prairie, a natural research area leased from Nature Conservancy and the Kansas State University Foundation, dedicated to the natural ecology of the bluestem prairie.

The University currently has nine colleges, including Agriculture, Architecture and Design, Arts and Sciences, Business Administration, Education, Engineering, Human Ecology, Veterinary Medicine Salina Colleges of Technology and Aviation, and the Graduate School. The University offers associate, bachelor, master, doctorate, and professional degrees. It is the only Kansas institution offering graduate degrees in Agriculture, Human Ecology/Home Economics, and Veterinary Medicine. With a total research/scholarly activity funding base of $252 million, of which more than half is competitive extramural awards, Kansas State features a full portfolio of world-class programs. The KSU Salina College of Technology and Aviation delivers programs in engineering technology, related science technology fields and aviation, offering associate and bachelor degrees. The K-State Olathe Innovation Campus is dedicated to application-based integrated research and education for a continuum of learners. K-State Olathe will serve as a portal for the K-State Manhattan campus to reach and engage students and stakeholders in the greater Kansas City area.

External Relationships

The Kansas State University Foundation. The Kansas State University Foundation (the “Foundation”) was organized in 1944. The Foundation is governed by a Board of Trustees representing geographic and educational constituencies.

The essential purpose of the Kansas State University Foundation is to provide funding unavailable through State appropriations or student fees to support the educational undertakings of the University. To that end, the Foundation encourages donations of and holds in trust any real or personal property contributed for the use of the University, its faculty and its students. The Foundation is charged with investing, managing, controlling and disbursing all such gifts. It currently supports the University with over $38.4 million annually expended for grants, equipment and supplies, professorships and other faculty compensation, research, travel, public relations, construction costs, special projects, student recruitment and transfers to the Department of Intercollegiate Athletics. In addition, scholarships of more than $9 million dollars annually are provided through the Foundation.

The Kansas State University Foundation, together with Nature Conservancy, a nonprofit organization dedicated to preservation of the natural environment and ecology, currently leases prairie land to the University for use in its experimental agriculture program.

The Kansas State University Foundation is a separate entity from the University, and results of its financial operations are not included in the financial statements of the University. As of June 30, 2011, balance sheet net assets of the Foundation were in excess of $496 million.

The Kansas State University Alumni Association. The Kansas State University Alumni Association (the “Association”) was chartered in 1874. Its purpose is to provide a lifelong link between the University and its alumni and friends, through programs providing records maintenance, student recruitment, publications, programs throughout the nation, fund-raising activities, volunteer identification and honors for outstanding alumni. At the beginning of each Fiscal Year, the Association is granted an allotment of State funds by the University through a contract which provides the funding for the maintenance of the alumni database.

State Appropriations and the Budget Process

The State of Kansas operates on a fiscal year basis, beginning on July 1 and ending the following June 30, and numbered for the calendar year in which it ends. The Legislature meets annually in early January and typically adjourns in May. The budget process is designed to provide the Legislature with accurate and detailed revenue projections, along with professionally prepared expenditure budgets for each State agency for the current and succeeding fiscal years.

The Higher Education Coordination Act provides that the Kansas Board of Regents shall “serve as the representative of the public postsecondary educational system before the Governor and the Kansas Legislature.” K.S.A. 74-3202c(b)(2). This provision provides the foundation for an approach to state funding that reflects the recurring theme of maintaining a unified state budget request for new resources and a system-wide focus on requesting and advocating for increases in State General Fund appropriations for public postsecondary education.

In September of each year, the Kansas Board of Regents submits the unified budget request to the Department of Administration, Division of Budget, that reflects increases (or decreases) to the budget for operating grants and enhancements for each of the six universities governed by the Board of Regents. In September, the state universities also submit a budget request document for their base budget to the Department of Administration, Division of the Budget, for the succeeding fiscal year. Professional staff at the Division of the Budget analyze and review the budget requests of the universities and other State agencies and presents the budgets to the Governor for preliminary gubernatorial approval. The Governor then presents a complete State budget, with funding recommendations, to the Legislature in January, during the first week of the legislative session.

During the legislative session, both the Senate Ways and Means Committee and the House Appropriations Committee review individual agency budgets, including those of the state universities, making final recommendations for legislative approval. Staff support for the Legislature also includes professional budget analysts who again scrutinize the proposed budgets.

Once the complete, proposed State budget is approved by the Legislature, it is again presented to the Governor for passage into law. The Governor has line-item veto power. The Governor’s veto can only be overridden by a two-thirds majority vote of both the House and Senate. This portion of the budget process is completed prior to the beginning of the succeeding fiscal year.

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The Kansas Constitution mandates that budgeted expenditures are limited to available funds from current revenue, or a combination of current revenue and available reserves. Once the budget is approved by the Legislature and Governor, State agencies, including the universities, have flexibility within their particular budgets to change line item amounts appropriately to compensate for necessary modifications due to internal or external reasons. This flexibility allows State agencies to react appropriately to either revenue variances or changing operational needs.

During the fiscal year for which the budget has been prepared, the Governor and Legislature review the budget in progress and have the ability to make necessary adjustments. Continuous expenditure review is performed by each university and other State agencies, as well as by the Department of Administration. Also, current state general fund revenues are monitored by the Department of Administration, Division of the Budget; Department of Revenue; the Legislative Research Department; the Governor; and three economists from the State’s three largest Board of Regents’ universities, to insure fiscal responsibility. An executive branch allotment system is applicable to reduce expenditures under certain circumstances for any fiscal year in which the resources of the state general fund or any special revenue fund appear likely to be insufficient to cover appropriations. Pursuant to this allotment system, State appropriations to the University were reduced for the fiscal year ending June 30, 2010.

The following table sets forth a comparison of State appropriations to tuition and fees and other revenue for the five most recent fiscal years for the University. Examples of other revenue sources include revenues from auxiliary operations, sponsored research overhead, grants and contracts, and other miscellaneous sales and service activities.

Comparison of State Appropriations to Tuition and Fees and Other Revenue Sources FY 2007 – FY 2011

Revenue (in Millions of Dollars) As a % of Total Revenue Fiscal Year All Ended State Tuition All Other Total State Tuition Other June 30, Appropriations & Fees(1) Sources Revenue Appropriations & Fees Sources 2007 $177.2 $134.1 $234.8 $546.1 32.4% 24.6% 43.0% 2008 181.8 137.0 251.6 570.4 31.9 24.0 44.1 2009 173.3 145.6 305.0 623.9 27.8 23.3 48.9 2010 163.5 157.7 342.6 663.8 24.6 23.8 51.6 2011 164.7 173.3 375.9 713.9 23.0 24.3 52.7

Source: Statement of Revenues, Expenses, and Changes in Net Assets of the Kansas State University Annual Financial Report for the fiscal years stated above. (1) Tuition and Fees are net of scholarship allowances.

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APPENDIX D

DEFINITIONS AND SUMMARIES OF INDENTURE, LOAN AGREEMENT AND OPERATING AGREEMENT

(THIS PAGE LEFT BLANK INTENTIONALLY) APPENDIX D

DEFINITIONS AND SUMMARIES OF INDENTURE, LOAN AGREEMENT AND OPERATING AGREEMENT

The following are summaries of certain provisions of the Indenture, the Loan Agreement and Operating Agreement, as well as certain defined terms used therein and in this Official Statement. The summaries do not purport to be complete, and reference is made to the full text of the Indenture, the Loan Agreement and the Operating Agreement, respectively, for a complete recital of their terms, as well as a complete recital of the defined terms used therein.

DEFINITIONS

In addition to the words and terms defined elsewhere in this Official Statement, the following words and terms shall have the following meanings, unless some other meaning is plainly intended. Unless otherwise provided herein, references to "principal", when used with respect to Bonds, shall be deemed to include "principal or Accreted Value".

"Accreted Value" or "Accreted Value amount" means, with respect to any Series 2002 Bonds, if calculated on a Compounding Date, the accreted value, representing total principal and interest, as set forth in the Supplemental Indenture with respect to such Series 2002 Bonds for such Compounding Date and, if calculated on a date other than a Compounding Date, the accreted value, representing total principal and interest, as set forth in the Supplemental Indenture with respect to such Series 2002 Bonds for the immediately preceding Compounding Date plus interest on such amount from such Compounding Date to the date of calculation (calculated on a straight line basis) at a rate equal to the yield to maturity of such Series 2002 Bonds, as set forth in the Supplemental Indenture.

"Act" means the K.S.A. 74-8901, et seq., as from time to time amended.

"Additional Bonds" means any additional parity Bonds issued by the Authority pursuant to the Indenture that stand on a parity and equality under the Indenture with the Series 2002 Bonds, the Series 2011A Bonds and the Series 2012B Bonds.

"Additional Notes" means any additional parity Notes issued by the Corporation to the Authority, pursuant to the Loan Agreement, in connection with the issuance of Additional Bonds under the Indenture.

"Additional Obligations" means any Indebtedness of the Corporation, other than the Notes, issued or incurred by the Corporation in accordance with the Loan Agreement and secured on a parity with the Notes, which obligations may be issued to any Person including Persons other than the Authority.

"Affiliate" means any Person (whether for-profit or nonprofit), which "controls," or is "controlled" by, or is under common "control" with, the Corporation.

"Amendatory Supplemental Indenture" means the Amendatory Supplemental Trust Indenture dated as of January 26, 2011 between the Authority and the Trustee.

"Athletic Facilities" means educational facilities of Kansas State University used for men's and women's intercollegiate athletics, including all offices, buildings, outdoor stadiums, arenas and other facilities related thereto.

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"Authority" means the Kansas Development Finance Authority created by the Act, and its successors and assigns or any body, agency or instrumentality of the State of Kansas succeeding to or charged with the powers, duties and functions of the Authority.

"Authority Representative" means the Chairman, Vice Chairman or President of the Authority, and any other duly authorized officer of the Authority whose authority to execute any particular instrument or take a particular action under the Indenture or the Loan Agreement shall be evidenced to the satisfaction of the Trustee.

"Balloon Indebtedness" means Long-Term Indebtedness, 25% or more of the original principal of which becomes due and payable (either by maturity or mandatory redemption), or may become due and payable or may be required to be purchased or redeemed upon demand of the holder, during the same fiscal year, if such principal becoming due and payable is not required to be amortized below such percentage by mandatory redemption or prepayment prior to such fiscal year.

"Beneficial owner" means any registered owner of the Bonds and any other person who, directly or indirectly, has investment power with respect to any of the Bonds.

"Bond" or "Bonds" means the Series 2002 Bonds, the Series 2011A Bonds, the Series 2012B Bonds and any Additional Bonds issued pursuant to the Indenture.

"Bond Insurance Policy" means, with respect to the Series 2002 Bonds, the municipal bond insurance policy issued by the Bond Insurer insuring the payment when due of the Accreted Value of the Series 2002 Bonds.

"Bond Insurer" means, with respect to the Series 2002 Bonds, Ambac Assurance Corporation, a Wisconsin-domiciled stock insurance company, and its successor and assigns.

"Bondowner" or "Owner" or "owner" means the person in whose name the Bond is registered on the registration books maintained by the Trustee.

"Book Value" means, when used with respect to Property of the Corporation, the value of such Property, net of accumulated depreciation and amortization, as it is carried on the books of account of the Corporation as reflected in the most recent financial statements of the Corporation.

"Business Day" means a day on which the Trustee or any Paying Agent shall be scheduled in the normal course of its operations to be open to the public for conduct of its banking operations.

"Capitalized Lease" means a lease of real or personal property that is capitalized on the balance sheet of the lessee under generally accepted accounting principles.

"Commitment Indebtedness" means the obligation of the Corporation to repay amounts disbursed pursuant to a binding commitment from a financial institution (including a line of credit, letter of credit, standby bond purchase agreement, reimbursement agreement or similar credit or liquidity facility or arrangement established in connection with the issuance or incurrence of any Indebtedness of the Corporation) to refinance, pay, purchase or redeem when due, tendered or required to be paid, purchased or redeemed, other Indebtedness of the Corporation which was incurred or issued in accordance with the provisions of the Loan Agreement, and the obligation of the Corporation to pay interest payable on amounts disbursed for such purposes, plus any fees payable to such financial institution for such commitment.

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"Completion Indebtedness" means Long-Term Indebtedness of the Corporation incurred for the purpose of financing, without materially changing the scope thereof, (a) the completion of facilities for which Long-Term Indebtedness was previously incurred under the provisions of the Loan Agreement, or (b) the improvement, replacement or substitutions for, or additions to, facilities for which Long-Term Indebtedness was previously incurred, necessitated by faulty design, damage to or destruction of such facilities, or required by enactment of legislation or the promulgation of any ruling by a government agency affecting the operation of the Corporation.

"Continuing Disclosure Undertaking" means Continuing Disclosure Undertaking, dated as of March 1, 2012, between the Authority and UMB Bank, N.A., as dissemination agent, as amended from time to time.

"Corporation" means K-State Athletics, Incorporated, a Kansas not-for-profit corporation, and its successors and assigns and any surviving, resulting or transferee corporation as provided in the Loan Agreement.

"Corporation Representative" means the Chairperson of the governing board of the Corporation or any Vice-Chairperson of the Corporation and any other duly authorized officer of the Corporation whose authority to execute any particular instrument or take a particular action under the Indenture or the Loan Agreement shall be evidenced to the Trustee by a certificate, bearing such authorized officer's signature and signed by the President or the Chairman.

"Costs of Issuance" means issuance costs with respect to the Bonds described in Section 147(g) of the Internal Revenue Code, and any regulations thereunder.

"Costs of Issuance Fund" means the fund by that name created by the Indenture.

"Costs of the Project" means costs permitted under the Act to be paid out of proceeds of Bonds with respect to the 2012B Project, including the total of all reasonable or necessary expenses incidental to the acquisition, construction, reconstruction, repair, alteration, improvement and extension of the 2012B Project, including without limitation: the expenses of studies and surveys, land title and mortgage title policies, architectural and engineering services and the cost of legal, organization or marketing services; financial and underwriting fees and expenses; the cost of acquiring or demolishing existing structures, developing the site of and constructing and equipping a new building constituting a part of the 2012B Project; rehabilitating, reconstructing, repairing or remodeling existing buildings constituting a part of the 2012B Project; and all other necessary and incidental expenses, including interest during construction on Bonds issued to finance the 2012B Project to a date subsequent to the estimated date of completion thereof; repayment of interim indebtedness or reimbursement for expenses incurred to finance a portion of the 2012B Project; and any other costs permitted by the Act.

"Current Value" means the fair market value of such Property, which fair market value shall be evidenced by appraisal or in such other manner satisfactory to the Trustee.

"Debt Service Fund" means the fund by that name created by the Indenture.

"Debt Service Requirements" means, for the period of time for which calculated, the aggregate principal payments (whether at maturity, or upon mandatory sinking fund redemption, mandatory prepayment or otherwise) and interest payments required to be made during such period on Outstanding Long-Term Indebtedness; provided that:

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(a) the amount of such payments for any future period shall be calculated in accordance with the assumptions contained in the Loan Agreement; and

(b) such payments shall be excluded from Debt Service Requirements to the extent that such payments were paid or are payable from Escrow Deposits or from the proceeds of Refunding Indebtedness or other Long-Term Indebtedness (e.g., accrued interest and capitalized interest).

"Debt Service Reserve Fund" means the fund by that name created by the Indenture.

"Debt Service Reserve Requirement" means: (a) with respect to the Series 2002 Bonds, initially, the sum of $349,588.94, and thereafter, an amount equal to the least of (1) 10% of the initial principal amount of the Series 2002 Bonds, (2) the Maximum Annual Debt Service on the Series 2002 Bonds in the current or any future fiscal year following such date, or (3) 125% of the average future annual debt service on the Series 2002 Bonds; (b) with respect to the Series 2011A-1 Bonds, initially, the sum of $2,017,887.15, and thereafter, an amount equal to the least of (1) 10% of the original principal amount of the Series 2011A-1 Bonds, (2) the Maximum Annual Debt Service on the Series 2011A-1 Bonds in the current or any future fiscal year following such date, or (3) 125% of the average future annual debt service on the Series 2011A-1 Bonds; (c) with respect to the Series 2011A-2 Bonds, initially, the sum of $321,000.00, and thereafter, an amount equal to the least of (1) 10% of the original principal amount of the Series 2011A-2 Bonds, (2) the Maximum Annual Debt Service on the Series 2011A-2 Bonds in the current or any future fiscal year following such date, or (3) 125% of the average future annual debt service on the Series 2011A-2 Bonds; (d) with respect to the Series 2012B-1 Bonds, initially, the sum of $3,003,500.00, and thereafter, an amount equal to the least of (1) 10% of the original principal amount of the Series 2012B-1 Bonds, (2) the Maximum Annual Debt Service on the Series 2012B-1 Bonds in the current or any future fiscal year following such date, or (3) 125% of the average future annual debt service on the Series 2012B-1 Bonds; (e) with respect to the Series 2012B-2 Bonds, initially, the sum of $2,364,000.00, and thereafter, an amount equal to the least of (1) 10% of the original principal amount of the Series 2012B-2 Bonds, (2) the Maximum Annual Debt Service on the Series 2012B-2 Bonds in the current or any future fiscal year following such date, or (3) 125% of the average future annual debt service on the Series 2012B-2 Bonds, and (f) with respect to any Additional Bonds that are entitled to the benefit of the Debt Service Reserve Fund, a sum equal to the maximum amount permitted by the Internal Revenue Code to be deposited from the proceeds of such Additional Bonds (whether or not the interest on such Additional Bonds is intended to be excluded from federal gross income) in a debt service reserve fund without being subject to yield restriction under the Internal Revenue Code and without causing the interest on such Additional Bonds to be included in gross income for federal income tax purposes.

"Defeasance Obligations" means:

(a) Government Obligations which are not subject to redemption prior to maturity; or

(b) Cash (insured at all times by the Federal Deposit Insurance Corporation or otherwise collateralized with Government Obligations).

"Escrow Deposits" means cash, including proceeds of Refunding Indebtedness or other Long-Term Indebtedness, or Defeasance Obligations (including, where appropriate, the earnings or other increment to accrue thereon) that are on deposit in an irrevocable escrow or trust account with the Trustee or a third party escrow agent and are required to be applied to pay all or a portion of the principal of and interest on, as the same shall become due, any Bonds or Indebtedness which would otherwise be considered Outstanding and such amounts so required to be applied are sufficient to pay such principal and interest.

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"Expenses" means, for any period of time for which calculated, the total of all operating and non- operating expenses paid from unrestricted revenues and losses incurred during such period by the Corporation, as reflected in the Corporation's Audited Financial Statements, other than (a) interest expense, (b) depreciation and amortization, and (c) extraordinary losses resulting from the early extinguishment of debt, the sale or other disposition of assets not in the ordinary course of business or any reappraisal, revaluation or write-down of assets, and any other extraordinary losses or expenses.

"First Supplemental Indenture" means the First Supplemental Trust Indenture dated as of March 1, 2002 between the Authority and the Trustee.

"First Supplemental Loan Agreement" means the First Supplemental Loan Agreement dated as of March 1, 2002 between the Authority and the Corporation.

"Foundation" means the Kansas State University Foundation, and its successors and assigns.

"Government Obligations" means the following:

(a) bonds, notes, certificates of indebtedness, treasury bills or other securities constituting direct obligations of, or obligations the principal of and interest on which are fully and unconditionally guaranteed by, the United States of America; and

(b) evidences of direct ownership of a proportionate or individual interest in future interest or principal payments on specified direct obligations of, or obligations the payment of the principal of and interest on which are unconditionally guaranteed by, the United States of America, which obligations are held by a bank or trust company organized and existing under the laws of the United States of America or any state thereof in the capacity of custodian in form and substance satisfactory to the Trustee.

"Indenture" means the Trust Indenture dated as of December 1, 1998, as supplemented by the First Supplemental Trust Indenture, dated as of March 1, 2002, the Amendatory Supplemental Indenture, dated as of January 26, 2011, the Second Supplemental Trust Indenture, dated as of March 1, 2011 and the Third Supplemental Trust Indenture, dated as of March 1, 2012, between the Authority and the Trustee, as amended and supplemented from time to time.

"Indebtedness" means all indebtedness or obligations of the Corporation for the repayment of borrowed money (including capital leases, installment purchase contracts and guarantees of indebtedness) shown as liabilities on the balance sheet of the Corporation or which are properly capitalized on the balance sheet of the Corporation in accordance with generally accepted accounting principles.

"Internal Revenue Code" means the Internal Revenue Code of 1986, as amended, and, when appropriate, any statutory predecessor or successor thereto, and all applicable regulations (whether proposed, temporary or final) thereunder and any applicable official rulings, announcements, notices, procedures and judicial determinations relating to the foregoing.

"Loan" means the loan of the proceeds of the Bonds made by the Authority to the Corporation pursuant to the Loan Agreement.

"Loan Agreement" means the Loan Agreement dated as of December 1, 1998, as supplemented by the First Supplemental Loan Agreement dated as of March 1, 2002, the Second Supplemental Loan Agreement

D-5 dated as of March 1, 2011 and the Third Supplemental Loan Agreement, dated as of March 1, 2012, between the Authority and the Corporation, as amended and supplemented from time to time.

"Loan Payments" means the payments of principal and interest on the Loan payable pursuant to the Loan Agreement.

"Long-Term Indebtedness" means (a) Indebtedness having an original stated maturity or term greater than one year, or (b) Indebtedness having an original stated maturity or term equal to or less than one year that is renewable or extendable at the option of the debtor for a period greater than one year from the date of original issuance or incurrence thereof, or with respect to which the Corporation has incurred Commitment Indebtedness that would refinance such Indebtedness for a period extending beyond one year from the date of original issuance or incurrence thereof.

"Maximum Annual Debt Service" means the maximum amount of Debt Service Requirements as computed for the then current or any succeeding fiscal year; provided that the Debt Service Requirements for the fiscal year in which the final maturity of a series of Bonds occurs shall be reduced by the Value of cash and Permitted Investment on deposit in the separate account in the Debt Service Reserve Fund with respect to such series of Bonds, so long as such account in the Debt Service Reserve Fund is maintained in accordance with the Indenture.

"Moody's" means Moody's Investors Service, a Delaware corporation and its successors and assigns, and, if such firm shall be dissolved or liquidated or shall no longer perform the functions of a securities rating service, Moody's shall be deemed to refer to any other nationally recognized securities rating service designated by the Corporation, with notice to Authority and the Trustee.

"Net Proceeds," when used with respect to any damage, destruction, condemnation or loss of title, means the gross proceeds from any insurance (or self-insurance) relating to damage or destruction of any Property of the Corporation, or condemnation award with respect to condemned Property or realization of title insurance with respect to any deficiency or loss of title to any Property, remaining after the payment of all expenses (including attorneys' fees and any expenses of the Authority or the Trustee) incurred in the collection of such gross proceeds.

"Net Revenues Available for Debt Service" means, for any period of calculation, (a) so long as the Series 2002 Bonds are outstanding, Revenues minus Expenses, as shown in the Corporation’s most recent fiscal year-end audited financial statements, provided that (i) such Revenues may be adjusted on a projected basis to reflect any expected changes from Revenues shown in the audited financial statements, as determined in an independent consultant’s report reasonably acceptable to the Bond Insurer, and (ii) such Expenses may be adjusted on a projected basis to reflect expected changes from Expenses shown in the audited financial statements, as determined in an independent consultant’s report reasonably acceptable to the Bond Insurer, and (b) on and after the first date upon which no Series 2002 Bonds are outstanding, projected Revenues for such period minus projected Expenses for such period, determined without regard to the Corporation's Audited Financial Statements.

"Notes" means the Series 2002 Note, the Series 2011A Note, the Series 2012B Note and any Additional Notes.

"Officer's Certificate" means a written certificate of the Corporation signed by the Corporation Representative, which certificate shall be deemed to constitute a representation of, and shall be binding upon, the Corporation with respect to matters set forth therein, and which certificate in each instance, including the scope, form, substance and other aspects thereof, is acceptable to the Trustee.

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"Operating Agreement" means the Operating Agreement Between Kansas State University and K-State Athletics, Incorporated dated as of January 26, 2011 between the University and the Corporation, with respect to the operation of the Athletic Facilities, as amended from time to time.

"Opinion of Bond Counsel" means a written opinion in the form described in the Indenture of any legal counsel acceptable to the Authority and the Trustee who shall be nationally recognized as expert in matters pertaining to the validity of obligations of governmental issuers and the exclusion from gross income for federal income tax purposes of interest on such obligations.

"Opinion of Counsel" means a written opinion in the form described in the Indenture of any legal counsel acceptable to the Corporation and the Trustee and, to the extent the Authority is asked to take action in reliance thereon, the Authority, who may be an employee of or counsel to the Corporation or the Trustee.

"Outstanding" means

(a) when used with respect to Bonds, as of the date of determination, all Bonds theretofore authenticated and delivered under the Indenture, except:

(1) Bonds theretofore cancelled by the Trustee or delivered to the Trustee for cancellation as provided in the Indenture;

(2) Bonds for whose payment or redemption money or Defeasance Obligations in the necessary amount has been deposited with the Trustee or any Paying Agent in trust for the owners of such Bonds as provided in the Indenture, provided that, if such Bonds are to be redeemed, notice of such redemption has been duly given pursuant to the Indenture or provision therefor satisfactory to the Trustee has been made;

(3) Bonds in exchange for or in lieu of which other Bonds have been authenticated and delivered under the Indenture; and

(4) Bonds alleged to have been destroyed, lost or stolen which have been paid as provided in the Indenture; and

(b) when used with respect to other Indebtedness, as of the date of determination, all other Indebtedness theretofore issued or incurred by the Corporation, except Indebtedness that has been discharged in accordance with the terms of the instrument or instruments creating or evidencing such Indebtedness.

"Paying Agent" means the Trustee and any other commercial bank or trust Corporation organized under the laws of any state of the United States of America or any national banking association designated pursuant to the Indenture or any Supplemental Indenture as paying agent for any series of Bonds at which the principal of, redemption premium, if any, and interest on such Bonds shall be payable.

"Permitted Encumbrances" means, with respect to Property of the Corporation as of any particular time, the following:

(a) the lien and security interest of the Loan Agreement and any other liens or security interest in the Property that equally and ratably secure all of the Notes on a parity basis;

D-7 (b) liens for taxes, assessments, and other governmental charges not delinquent, or if delinquent are being contested in good faith by appropriate proceedings and as to which the Corporation shall have set aside on its books adequate reserves with respect thereto;

(c) mechanic's, laborer's, materialman's, supplier's or vendor's liens not filed of record and similar charges not delinquent, or if filed of record are being contested in good faith and have not proceeded to judgment and as to which the Corporation shall have set aside on its books adequate reserves with respect thereto;

(d) liens in respect of judgments or awards with respect to which the Corporation is in good faith currently prosecuting an appeal or proceedings for review, and with respect to which the Corporation shall have secured a stay of execution pending such appeal or proceedings for review, provided the Corporation shall have set aside on its books adequate reserves with respect thereto;

(e) utility, access and other easements and rights-of-way, restrictions, encumbrances and exceptions that do not materially affect the marketability of title to such Property and do not in the aggregate materially impair the use of such Property for the purposes for which it is held by the Corporation;

(f) such minor defects and irregularities of title as normally exist with respect to property similar in character to the Property affected thereby and which do not materially affect the marketability of title to or value of such Property and do not materially impair the use of such Property for the purposes for which it is held by the Corporation;

(g) zoning laws, ordinances or regulations and similar restrictions that are not violated by the Property affected thereby;

(h) statutory liens and rights of setoff granted to banks or other financial Corporations with respect to funds on deposit in the ordinary course of business;

(i) restrictions on Property received by the Corporation through gifts, grants, bequests, contributions or donations imposed by the donor or grantor of such Property and which consist solely of restrictions on the use of such Property or the income therefrom;

(j) liens existing on Property at the time of its acquisition by the Corporation through purchase, lease or otherwise, or liens existing on Property of a Person on the date such Person merges into or consolidates with the Corporation that were not imposed or incurred in contemplation of such Person merging into or consolidating with the Corporation; provided, that no such lien may be increased, extended, renewed, or modified after such date to apply to any Property of the Corporation not subject to such lien on such date unless such lien as so increased, extended, renewed or modified otherwise qualifies as a Permitted Encumbrance;

(k) leases under which the Corporation is lessor entered into in accordance with the disposition of Property provisions in the Loan Agreement;

(l) purchase money mortgages, security interests, and liens securing purchase money indebtedness, placed upon Property that does not constitute real property in order to obtain the use of such Property or to secure a portion of the purchase price thereof;

D-8 (m) liens on Property securing Subordinated Indebtedness, provided that a superior lien on the same Property is granted to the Note;

(n) liens on Property which are existing at the date of the Indenture and the Loan Agreement; provided that no such lien (or the amount of Indebtedness secured thereby) may be increased, extended, renewed or modified to apply to any Property of the Corporation not subject to such lien on such date unless such lien as so increased, extended, renewed or modified otherwise qualifies as a Permitted Encumbrance;

(o) the Use Restriction Agreement;

(p) any other lien or encumbrance created or incurred in the ordinary course of business which does not secure, directly or indirectly, the repayment of borrowed money or the payment of installment sales contracts or capital leases and which, individually or in the aggregate, does not materially impair the value or the utility of the Property subject to such lien or encumbrance; and

(q) any other liens on Property expressly permitted by the Loan Agreement or approved in writing by the owners of all of the Bonds.

"Permitted Investments" means, if and to the extent the same are at the time legal for investment of funds held under the Indenture:

(a) Cash (insured at all times by the Federal Deposit Insurance Corporation or otherwise collateralized with Government Obligations); or

(b) Government Obligations;

(c) obligations of any of the following federal agencies which obligations represent full faith and credit of the United States of America, including:

- Export-Import Bank - Farmers Home Administration - General Services Administration - U.S. Maritime Administration - Small Business Administration - Government National Mortgage Association (GNMA) - U.S. Department of Housing & Urban Development (PHA's) - Federal Housing Administration;

(d) bonds, notes or other evidences of indebtedness rated "AAA" by Standard & Poor's and "Aaa" by Moody's issued by the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation with remaining maturities not exceeding three years;

(e) U.S. dollar denominated deposit accounts, federal funds and banker'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 "A-1" or "A-1+" by Standard & Poor's and "P-1" by Moody's and maturing no more than 360 days after the date of purchase. (Ratings on holding companies are not considered as the rating of the bank);

D-9 (f) commercial paper which is rated at the time of purchase in the single highest classification, "A-1+" by Standard & Poor's and "P-1" by Moody's and which matures not more than 270 days after the date of purchase;

(g) investments in a money market fund rated "AAAm" or "AAAm-G" or better by Standard & Poor's;

(h) pre-refunded Municipal Obligations defined as follows: Any bonds or other obligations of any state of the United States of America or of any agency, instrumentality or local governmental unit of any such state which are not callable at the option of the obligor prior to maturity or as to which irrevocable instructions have been given by the obligor to call on the date specified in the notice; and (A) which are rated, based on an irrevocable escrow account or fund (the "escrow"), in the highest rating category of Standard & Poor's and Moody's or any successors thereto; or (B)(i) which are fully secured as to principal and interest and redemption premium, if any, by an escrow consisting only of cash or obligations described in paragraph (1) above, which escrow may be applied only to the payment of such principal of and interest and redemption premium, if any, on such bonds or other obligations on the maturity date or dates thereof or the specified redemption date or dates pursuant to such irrevocable instructions, as appropriate, and (ii) which escrow is sufficient, as verified by a nationally recognized independent certified public accountant, to pay principal of and interest and redemption premium, if any, on the bonds or other obligations described in this paragraph on the maturity date or dates thereof or on the redemption date or dates specified in the irrevocable instructions referred to above, as appropriate;

(i) investment agreements with entities or entities whose guarantors are rated AA or better by Standard & Poor's; and

(j) other forms of investments approved in writing by Standard & Poor's.

The value of the Permitted Investments shall be determined as follows:

(a) as to Permitted Investments the bid and asked prices of which are published on a regular basis in The Wall Street Journal (or, if not there, then The New York Times): the average of the bid and asked prices for such Permitted Investments so published on or most recently prior to such time of determination;

(b) as to Permitted Investments the bid and asked prices of which are not published on a regular basis in The Wall Street Journal or The New York Times: the average bid price at such time of determination for such Permitted Investments by any two nationally recognized government securities dealers (selected by the Trustee in its absolute discretion) at the time making a market in such Permitted Investments or the bid price published by a nationally recognized pricing service; and

"Person" means any natural person, firm, association, corporation, partnership, limited liability company, joint stock company, a joint venture, trust, unincorporated organization or firm, or a government or any agency or political subdivision thereof or other public body.

D-10 "Prime Rate" means, for any date of determination, the interest rate per annum publicly announced from time to time by the Trustee as its "prime rate."

"Property" means, with respect to the Corporation, any and all rights, titles and interests of the Corporation in and to all revenues from the operation of the Athletic Facilities and any and all other property, whether real or personal, tangible (including cash) or intangible, wherever situated and whether now owned or hereafter acquired.

"Purchase Money Indebtedness" means Indebtedness incurred by the Corporation pursuant to a purchase money contract, conditional sale agreement, installment purchase contract, capitalized lease, or other similar debt or title retention agreement in connection with the acquisition of real or personal property and secured by a purchase money mortgage, security interest or lien with respect to the property acquired by the Corporation, where the lien of the seller or lender under such agreement is limited to such property.

"Rebate Fund" means the fund by that name created by the Indenture.

"Record Date" means the 15th day (whether or not a Business Day) of the calendar month next preceding the month in which an interest payment on any Bond is to be made.

"Refunding Indebtedness" means Long-Term Indebtedness issued for the purpose of refunding other Long-Term Indebtedness (including Long-Term Indebtedness commonly referred to as current refunding indebtedness, advance refunding indebtedness or cross-over refunding indebtedness where the proceeds of such Refunding Indebtedness are deposited in an irrevocable escrow or trust account to secure the payment on the applicable payment dates of the interest and principal on such Refunding Indebtedness and/or the Indebtedness being refunded).

"Revenues" means, for any period of time for which calculated, the total of all operating and non- operating unrestricted gross revenues and gains and net assets released from restrictions derived by the Corporation during such period, as reflected in the Corporation's Audited Financial Statements.

"Resolution" means the Resolution of the Authority authorizing the execution and delivery of the Third Supplemental Indenture and the issuance of the Series 2012B Bonds.

"Second Supplemental Indenture" means the Second Supplemental Trust Indenture dated as of March 1, 2011 entered into between the Authority and the Trustee pursuant to the Indenture.

"Second Supplemental Loan Agreement" means the Second Supplemental Loan Agreement dated March 1, 2011 entered into between the Authority and the Corporation pursuant to the Loan Agreement.

"Series 2002 Bonds" means the series of Athletic Facilities Revenue Bonds (The Intercollegiate Athletic Council of Kansas State University, Inc. Project), Series 2002E, in the original principal amount of $3,495,889.40, issued pursuant to the First Supplemental Indenture.

"Series 2002 Note" means the promissory note that evidences the obligation of the Corporation to repay the loan to the Corporation of the proceeds of the Series 2002 Bonds and that is referred to in the Original Loan Agreement, as amended and supplemented by the First Supplemental Loan Agreement.

"Series 2011A Bonds" means, collectively, the Series 2011A-1 Bonds and the Series 2011A-2 Bonds.

D-11 "Series 2011A-1 Bonds" means the series of Athletic Facilities Revenue Bonds (K-State Athletics, Incorporated Project) Series 2011A-1, in the original principal amount of $21,790,000, issued pursuant to the Second Supplemental Indenture.

"Series 2011A-2 Bonds" means the series of Taxable Athletic Facilities Revenue Bonds (K-State Athletics, Incorporated Project) Series 2011A-2, in the original principal amount of $3,210,000, issued pursuant to the Second Supplemental Indenture.

"Series 2011A Note" means the promissory note that evidences the obligation of the Corporation to repay the loan to the Corporation of the proceeds of the Series 2011A Bonds and that is referred to in the Second Supplemental Loan Agreement.

"Series 2012B Bonds" means, collectively, the Series 2012B-1 Bonds and the Series 2012B-2 Bonds.

"Series 2012B-1 Bonds" means the series of Athletic Facilities Revenue Bonds (K-State Athletics, Incorporated Project) Series 2012B-1, in the original principal amount of $30,035,000, issued pursuant to the Third Supplemental Indenture.

"Series 2012B-2 Bonds" means the series of Taxable Athletic Facilities Revenue Bonds (K-State Athletics, Incorporated Project) Series 2012B-2, in the original principal amount of $23,640,000, issued pursuant to the Third Supplemental Indenture.

"Series 2012B Note" means the promissory note that evidences the obligation of the Corporation to repay the loan to the Corporation of the proceeds of the Series 2012B Bonds and that is referred to in the Third Supplemental Loan Agreement.

"Short-Term Indebtedness" means Indebtedness having an original maturity less than or equal to one year from the date of original incurrence thereof, and not renewable or extendible at the option of the obligor thereon for a term greater than one year beyond the date of original incurrence.

"Standard & Poor's" means Standard & Poor's Ratings Services, a Division of the McGraw-Hill Companies, Inc., and its successors and assigns, and, if such firm shall be dissolved or liquidated or shall no longer perform the functions of a securities rating service, Standard & Poor's shall be deemed to refer to any other nationally recognized securities rating service designated by the Corporation, with notice to Authority and the Trustee.

"Subordinated Indebtedness" means Indebtedness that by the terms thereof is specifically junior and subordinate to the Bonds, the Notes and any Additional Obligations with respect to payment of principal and interest thereon.

"Supplemental Indenture" means any indenture supplemental or amendatory to the Indenture entered into by the Authority and the Trustee pursuant to the Indenture, specifically including the First Supplemental Trust Indenture dated as of the March 1, 2002 relating to the Series 2002 Bonds, the Amendatory Supplemental Trust Indenture dated as of January 26, 2011, the Second Supplemental Trust Indenture dated as of March 1, 2011 relating to the Series 2011A Bonds and the Third Supplemental Trust Indenture dated as of March 1, 2012 relating to the Series 2012B Bonds..

"Supplemental Loan Agreement" means any agreement supplemental or amendatory to the Loan Agreement entered into by the Authority and the Corporation pursuant to the Loan Agreement, specifically including the First Supplemental Loan Agreement dated as of the March 1, 2002 relating to the Series 2002

D-12 Bonds and the Series 2002 Note, the Second Supplemental Loan Agreement dated as of March 1, 2011 relating to the Series 2011A Bonds and the Series 2011A Note, and the Third Supplemental Loan Agreement dated as of March 1, 2012 relating to the Series 2012B Bonds and the Series 2012B Note.

"Tax Compliance Agreement" means the Tax Compliance Agreement dated as of March 1, 2012 relating to the Series 2012B Bonds, among the Authority, the Corporation, and the Trustee, as from time to time amended in accordance with the provisions thereof.

"Tax-Exempt Bonds" means Bonds the interest on which is intended to be excluded from gross income for federal income tax purposes.

"Tax-Exempt Organization" means a nonprofit organization, organized under the laws of the United States of America or any state thereof, that is an organization described in Section 501(c)(3) of the Internal Revenue Code, is exempt from federal income taxes under Section 501(a) of the Internal Revenue Code, and is not a "private foundation" within the meaning of Section 509(a) of the Internal Revenue Code, or corresponding provisions of federal income tax laws from time to time in effect.

"Third Supplemental Indenture" means the Third Supplemental Trust Indenture dated as of March 1, 2012 entered into between the Authority and the Trustee pursuant to the Indenture.

"Third Supplemental Loan Agreement" means the Third Supplemental Loan Agreement dated March 1, 2012 entered into between the Authority and the Corporation pursuant to the Loan Agreement.

"Transaction Documents" means the Indenture, including the Third Supplemental Indenture, the Bonds, the Resolution, the Loan Agreement, including the Third Supplemental Loan Agreement, the Notes, the Bond Purchase Agreement, the Official Statement relating to the Bonds, the Tax Compliance Agreement and any and all other documents or instruments that evidence or are a part of the transactions referred to in the Indenture, the Loan Agreement or the Official Statement or contemplated by the Indenture, the Loan Agreement or the Official Statement; and any and all future renewals and extensions or restatements of, or amendments or supplements to, any of the foregoing.

"Trust Estate" means the Trust Estate described in the Granting Clauses of the Indenture, including:

(a) All rights, title and interest of the Authority (including, but not limited to, the right to enforce any of the terms thereof) in, to and under (1) the Loan Agreement, including, without limitation, all Loan Payments and other payments to be received by the Authority and paid by the Corporation under and pursuant to and subject to the provisions of the Loan Agreement (except the Authority's rights to payment of its fees and expenses and to indemnification as set forth in the Loan Agreement and as otherwise expressly set forth therein), (2) the Notes, (3) the Use Restriction Agreement, and (4) all financing statements or other instruments or documents evidencing, securing or otherwise relating to the loan of the proceeds of the Bonds; and

(b) All moneys and securities (except moneys and securities held in the Rebate Fund) from time to time held by the Trustee under the terms of the Indenture; and

(c) any and all other property (real, personal or mixed) of every kind and nature from time to time, by delivery or by writing of any kind, pledged, assigned or transferred as and for additional security under the Indenture by the Authority or by anyone in its behalf or with its

D-13 written consent, to the Trustee, which is authorized to receive any and all such property at any and all times and to hold and apply the same subject to the terms of the Indenture.

The Trustee shall hold in trust and administer the Trust Estate, upon the terms and conditions set forth in the Indenture for the equal and pro rata benefit and security of each and every owner of Bonds, without preference, priority or distinction as to participation in the lien, benefit and protection of the Indenture of one Bond over or from the others, except as otherwise expressly provided in the Indenture.

"2012B Project" means improvements and additions to certain Athletic Facilities on the Manhattan, Kansas campus of the University, including construction of a stadium expansion on the west side of Bill Snyder Family Stadium, the costs of which will be paid in whole or in part, or for which the Corporation will be reimbursed in whole or in part from the proceeds of the sale of the Series 2012B Bonds or from the proceeds of loans refinanced, in whole or in part, from the proceeds of the sale of the Series 2012B Bonds, and which constitute Athletic Facilities.

"University" means Kansas State University.

"Unrestricted Net Assets" means the portion of expendable resources that is immediately available for Corporation operations, including, but not limited to, contributions whose restrictions lapse, expire or are otherwise met in the same reporting period as the contributions are received.

"Use Restriction Agreement" means those sections of the Operating Agreement relating to the term of the Operating Agreement, the rights of the University upon a payment default under the Loan Agreement, the amendment or assignment of the Operating Agreement and third-party beneficiary rights under the Operating Agreement, certain rights with respect to which have been assigned by the University to the Authority and the Trustee with the consent of the Corporation pursuant to the Assignment of Rights dated as of January 26, 2011 executed and delivered by the University.

"Value", as of any particular time of determination, means, (a) with respect to cash the face value thereof, (b) with respect to any investments, other than those in the Debt Service Reserve Fund, the lower of the cost of the investment or the market price of the investment excluding accrued interest on the date of valuation, (c) with respect to any investments in the Debt Service Reserve Fund, the market price of the investment excluding accrued interest on the date of valuation, and (d) with respect to an insurance policy, letter of credit, or surety bond guaranteeing payments into the Debt Service Reserve Fund, the face value thereof.

SUMMARY OF THE INDENTURE

The following is a summary of certain provisions of the Indenture. This summary does not purport to be complete, and reference is made to the full text of the Indenture for a complete recital of its terms, as well as a complete recital of the defined terms used therein.

Authorization and Amount of Bonds. The Authority may issue Bonds in one or more series from time to time under the Indenture, but subject to the provisions of the Indenture and any Supplemental Indenture authorizing a series of Bonds. The total principal amount of Bonds, the number of Bonds and series of Bonds that may be issued under the Indenture is not limited, except with respect to the Series 2002 Bonds, the Series 2011A Bonds, the Series 2012B Bonds and with respect to Additional Bonds as provided in the Indenture and in the Supplemental Indenture providing for the issuance thereof, and except as may be limited by law.

D-14 Authorization of Additional Bonds. Additional Bonds may be issued under and equally and ratably secured by the Indenture on a parity (except as otherwise provided in the Indenture) with the Series 2002 Bonds, the Series 2011A Bonds, the Series 2012B Bonds and any other Additional Bonds at any time and from time to time, upon compliance with the conditions set forth in the Indenture and the Loan Agreement, for any purpose authorized under the Act.

Except as to any difference in the date, the maturities, the rates of interest or the provisions for redemption, such Additional Bonds shall be on a parity with and shall be entitled to the same benefit and security of the Indenture as the Series 2002 Bonds, the Series 2011A Bonds, the Series 2012B Bonds and any other Additional Bonds, and except that the Authority may issue Additional Bonds that are not entitled to the benefit and security of the Debt Service Reserve Fund or any comparable reserve fund. If such Additional Bonds are secured by the Debt Service Reserve Fund, such Fund shall be fully funded to the Debt Service Reserve Requirement at the time of issuance of such Additional Bonds from the proceeds of the sale of such Additional Bonds or other available moneys.

As a condition precedent to the issuance of Additional Bonds, there shall be filed with the Trustee certain opinions, documents and certificates as described in the Indenture, including (a) an Officer's Certificate (1) stating that no event of default under the Loan Agreement has occurred and is continuing and that no event has occurred and is continuing which with the lapse of time or giving of notice, or both, would constitute such an event of default, and (2) stating the purpose or purposes for which such Additional Bonds or Notes are being issued and the classification of the Indebtedness under the Loan Agreement and accompanied by the certificates, reports or opinions demonstrating compliance with the applicable tests with respect to Indebtedness set forth in the Loan Agreement, and (b) an Opinion of Bond Counsel to the effect that all requirements for the issuance of such Additional Bonds have been met.

Except as provided in the Indenture and in the Loan Agreement, the Authority will not otherwise issue any obligations on a parity with the Bonds, but the Authority may issue other obligations specifically subordinate and junior to the Bonds.

Creation of Funds and Accounts. There are created and ordered to be established in the custody of the Trustee the following special trust funds in the name of the Authority to be designated as follows:

(a) "Kansas Development Finance Authority–The Intercollegiate Athletic Council of Kansas State University, Inc. Project Fund" (the "Project Fund").

(b) "Kansas Development Finance Authority–The Intercollegiate Athletic Council of Kansas State University, Inc. Costs of Issuance Fund" (the "Costs of Issuance Fund").

(c) "Kansas Development Finance Authority–The Intercollegiate Athletic Council of Kansas State University, Inc. Debt Service Fund" (the "Debt Service Fund").

(d) "Kansas Development Finance Authority–The Intercollegiate Athletic Council of Kansas State University, Inc. Debt Service Reserve Fund" (the "Debt Service Reserve Fund").

(e) "Kansas Development Finance Authority–The Intercollegiate Athletic Council of Kansas State University, Inc. Tax-Exempt Bonds Rebate Fund" (the "Rebate Fund")

The Trustee shall establish separate accounts within such funds or otherwise segregate moneys within such funds, on a book-entry basis or in such other manner as the Trustee may deem necessary or convenient, for each separate series of Bonds issued under the Indenture, including the Series 2002 Bonds, the Series

D-15 2011A-1 Bonds, the Series 2011A-2 Bonds, the Series 2012B-1 Bonds and the Series 2012B-2 Bonds; provided, however, that there shall be a single account within the Costs of Issuance Fund for each of the Series 2011A Bonds and the Series 2012B Bonds; provided, further, that no separate accounts shall be created within the Debt Service Fund with respect to each series of Bonds. The Trustee is authorized to establish other separate accounts within such funds or otherwise segregate moneys within such funds, on a book-entry basis or in such other manner as the Trustee may deem necessary or convenient, or as the Trustee shall be instructed by the Authority.

Project Fund. Moneys in the Project Fund shall be used solely for the purpose of paying the Costs of the Project in accordance with the plans and specifications therefor, including any alterations in or amendments to said plans and specifications deemed advisable by the Corporation and approved in accordance with the Loan Agreement.

The Trustee shall disburse moneys on deposit in each account of the Project Fund from time to time for payment or as reimbursement for payments made by the Corporation for the Costs of the Project (other than Costs of Issuance), in each case within two (2) Business Day after receipt by the Trustee of written disbursement requests of the Corporation property completed in all respects and in substantially the form attached to the Indenture, signed by the Corporation Representative or by the Assistant Vice President for Financial Services of Kansas State University or the Director for Financial Operations of Kansas State University, as authorized signatories of the Corporation.

The Trustee may rely upon such written requests and accompanying certificates and statements and shall not be required to make any independent investigation in connection therewith. The Trustee shall keep and maintain adequate records pertaining to each account of the Project Fund and all disbursements therefrom, and shall file periodic statements of activity regarding the Project Fund with the Corporation.

The Corporation, upon completion of the 2012B Project, shall deliver to the Trustee within 90 days thereafter a written certificate of the Corporation Representative:

(a) stating that the 2012B Project has been fully completed substantially in accordance with the plans and specifications for the 2012B Project, as then amended, and the date of completion of the 2012B Project; and

(b) stating that he or she has made such investigation of such sources of information as are deemed by him to be necessary, including pertinent records of the Corporation, and that the Costs of the Project have been fully paid for and no claim or claims exist against the Authority or the Corporation or against the 2012B Project out of which a lien based on furnishing labor or material exists or might ripen; provided, however, there may be excepted from the foregoing statement any claim or claims out of which a lien exists or might ripen in the event that the Corporation intends to contest such claim or claims in accordance with the Loan Agreement, in which event such claim or claims shall be described; provided, further, that it shall be stated that moneys are on deposit in the Project Fund or are available through enumerated bank loans (including letters of credit) or other sources sufficient to make payment of the full amount which might in any event be payable in order to satisfy such claim or claims; and

(c) stating if any item was added to, deleted from or substituted for the 2012B Project and providing any documentation, certificates or opinions required by the Loan Agreement.

D-16 If after payment by the Trustee of all disbursement requests theretofore tendered to the Trustee under the provisions of the Indenture and after receipt by the Trustee of the Officer's Certificate required by the preceding paragraph and after all rebatable earnings have been transferred to the Rebate Fund pursuant to the requirements of the Indenture, there shall remain any moneys in an account of the Project Fund, such moneys shall be deposited and applied in the following order of priority: (1) in the related account of the Debt Service Reserve Fund, to the extent necessary to attain the amount required to be on deposit therein as of the date of such deposit, (2) in the Debt Service Fund and used to redeem the related series of Bonds at the earliest permissible date to the extent permitted under the Indenture, or (3), in the discretion of the Corporation, shall be applied for any other purpose that, based on an Opinion of Bond Counsel, will not cause the interest on the Tax-Exempt Bonds to be includable in gross income for federal income tax purposes.

Debt Service Fund. The Trustee shall deposit and credit to the Debt Service Fund, as and when received, as follows:

(a) All Loan Payments made by the Corporation pursuant to the Third Supplemental Loan Agreement.

(b) Any amount required to be transferred from the Project Fund to the Debt Service Fund upon completion of the 2011B Project and from the Debt Service Reserve Fund and from the Costs of Issuance Fund.

(c) Interest earnings and other income on Permitted Investments required to be deposited in the Debt Service Fund pursuant to the Indenture.

(d) Any amounts required by a Supplemental Indenture authorizing the issuance of Additional Bonds to be deposited in an account of the Debt Service Fund, as specified in such Supplemental Indenture.

(e) All other moneys received by the Trustee under and pursuant to any of the provisions of the Indenture or the Loan Agreement or any other Transaction Document, when accompanied by directions from the person depositing such moneys that such moneys are to be paid into an account of the Debt Service Fund.

Debt Service Reserve Fund. The Trustee shall deposit and credit to the applicable account of the Debt Service Reserve Fund, as and when received, as follows:

(a) The initial deposits from proceeds of a series of Bonds in an amount equal to the Debt Service Reserve Requirements with respect to such series of Bonds.

(b) Amounts on deposit in the separate accounts in the Debt Service Reserve Fund for a series of Bonds that are transferred for deposit in one of the other separate accounts for a series of Bonds at the time that such amounts are released under the Indenture.

(c) Any payments required to be made by the Corporation pursuant to the Loan Agreement to make up a deficiency in an account of the Debt Service Reserve Fund.

(d) Interest earnings and other income on Permitted Investments required to be deposited in an account of the Debt Service Reserve Fund pursuant to the Indenture.

D-17 (e) Any amounts required by a Supplemental Indenture authorizing the issuance of Additional Bonds to be deposited in an account of the Debt Service Reserve Fund, as specified in such Supplemental Indenture.

(f) All other moneys received by the Trustee under and pursuant to any of the provisions of the Loan Agreement or any other Transaction Document, when accompanied by directions from the person depositing such moneys that such moneys are to be paid into an account of the Debt Service Reserve Fund.

Moneys in each separate account of the Debt Service Reserve Fund shall be disbursed and expended by the Trustee solely for the payment of and redemption premium, if any, and interest on the applicable series of Bonds if sufficient moneys therefor are not available in the Debt Service Fund. In the event the balance of moneys in the Debt Service Fund is insufficient to pay the principal of and redemption premium, if any, and interest on a series of Bonds when due and payable, moneys in the applicable account of the Debt Service Reserve Fund shall be transferred into the Debt Service Fund in an amount sufficient to make up such deficiency. The Trustee may use moneys in the applicable account of the Debt Service Reserve Fund for such purpose whether or not the amount in such account of the Debt Service Reserve Fund at that time equals the Debt Service Reserve Requirement. Such moneys shall be used first to make up any deficiency in the payment of interest and then principal. Moneys in each account of the Debt Service Reserve Fund shall also be used to pay the last Bonds of such series becoming due unless such Bonds and all interest thereon be otherwise paid, and thereafter any remaining balance in such account of the Debt Service Reserve Fund shall be paid to the Corporation.

The Trustee shall determine the Value of cash and Permitted Investments in the Debt Service Reserve Fund each July 1 and at the time of any withdrawal from the Debt Service Reserve Fund and at such other times as the Trustee deems appropriate. If on any such valuation date, the Value of cash and Permitted Investments on deposit in the Debt Service Reserve Fund is less than the Debt Service Reserve Requirement, or at any time any amount is withdrawn from the Debt Service Reserve Fund for the purposes described above, the Trustee shall immediately notify the Corporation of such deficiency, and instruct the Corporation to make up such deficiency by making payment of such deficiency in twelve equal monthly installments directly to the Trustee for deposit in the Debt Service Reserve Fund; provided, however, that if the Trustee or the owners of not less than a majority in principal amount of Bonds then Outstanding shall approve another schedule of periodic payments, the amount of such deficiency shall be paid to the Trustee in accordance with such schedule. If at any time of valuation, the Value of cash and Permitted Investments on deposit in the Debt Service Reserve Fund is in excess of the Debt Service Reserve Requirement, the amount of such excess shall be transferred to the Debt Service Fund.

The Debt Service Reserve Requirement may be satisfied by deposits in cash, Permitted Investments, or an insurance policy, letter of credit or surety bond issued by a Qualified Financial Corporation guaranteeing payments into the Debt Service Reserve Fund in the amount of the Debt Service Reserve Requirement, subject to the requirements and conditions specified in the Indenture.

Rebate Fund. There shall be deposited in the Series 2012B-1 Account of the Rebate Fund such amounts as are required to be deposited therein pursuant to the Tax Compliance Agreement. All amounts on deposit at any time in the Series 2012B-1 Account of the Rebate Fund shall be held by the Trustee in trust to the extent required to pay rebatable arbitrage to the United States of America, and neither the Corporation, the Authority nor the owner of any Bonds shall have any rights in or claim to such money.

Costs of Issuance Fund. Moneys in the separate account of the Costs of Issuance Fund with respect to the Series 2012B Bonds shall be disbursed by the Trustee from time to time, upon receipt of written

D-18 disbursement requests of the Corporation pursuant to the Indenture and signed by the Corporation Representative, in amounts equal to the amount of Costs of Issuance certified in such written requests. The Trustee shall be entitled to rely conclusively upon each such written request signed by the Corporation Representative, without inquiry or investigation. At such time as the Trustee is furnished with an Officer's Certificate stating that all Costs of Issuance with respect to the Series 2012B Bonds have been paid, and in any case not later than six months from the date of original issuance of the Series 2012B Bonds, the Trustee shall transfer any moneys remaining in the Costs of Issuance Fund to the Debt Service Fund.

Payments Due on Saturdays, Sundays and Holidays. In any case where the date of maturity of the Bonds or the date fixed for redemption of any Bonds shall be a day other than a Business Day, then payment of the Accreted Value need not be made on such date but may 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 no interest shall accrue for the period after such date.

Nonpresentment of Bonds. In the event any Bond shall not be presented for payment when the Accreted Value thereof becomes due, either at maturity or otherwise, or at the date fixed for redemption thereof, if funds sufficient to pay such Bond shall have been made available to the Trustee, all liability of the Authority to the owner thereof for the payment of such Bond, shall forthwith cease, determine and be completely discharged, and thereupon it shall be the duty of the Trustee to hold such funds in trust in a separate trust account, without liability for interest thereon, for the benefit of the owner of such Bond, who shall thereafter be restricted exclusively to such funds for any claim of whatever nature on his part under the Indenture or on or with respect to said Bond. If any Bond shall not be presented for payment within six years following the date when such Bond becomes due, whether by maturity or otherwise, the Trustee shall repay to the Corporation the funds theretofore held by it for payment of such Bond without liability for interest thereon, and such Bond shall, subject to the defense of any applicable statute of limitation, thereafter be an unsecured obligation of the Corporation, and the owner thereof shall be entitled to look only to the Corporation for payment, and then only to the extent of the amount so repaid, and the Corporation shall not be liable for any interest thereon and shall not be regarded as a trustee of such money.

Records and Reports of Trustee. The Trustee agrees to maintain such records with respect to any and all moneys or investments held by the Trustee pursuant to the provisions of the Indenture as are requested by the Authority. The Trustee shall furnish to the Authority and the Corporation, quarterly on the tenth Business Day after the end of each calendar quarter, a report on the status of each of the funds and accounts established under the Indenture which are held by the Trustee, showing the balance in each such fund or account as of the first day of the preceding month, the total of deposits to and the total of disbursements from each such fund or account, the dates of such deposits and disbursements, and the balance in each such fund or account on the last day of the preceding month. The Trustee shall render an annual accounting for each calendar year ending December 31 to the Authority, the Corporation, and any Bondowner at the expense of such Bondowner requesting the same, showing in reasonable detail all financial transactions relating to the Trust Estate during the accounting period, including investment earnings and the balance in any funds or accounts created by the Indenture as of the beginning and close of such accounting period.

Moneys to be Held in Trust. All moneys deposited with or paid to the Trustee for the funds and accounts held under the Indenture, and all moneys deposited with or paid to any Paying Agent under any provision of the Indenture shall be held by the Trustee or Paying Agent in trust and shall be applied only in accordance with the provisions of the Indenture and the Loan Agreement, and, until used or applied as herein provided, shall (except for moneys in the Rebate Fund) constitute part of the Trust Estate and be subject to the lien, terms and provisions of the Indenture and shall not be commingled with any other funds of the Authority or the Corporation except as otherwise provided in the Indenture for investment purposes. Neither the Trustee

D-19 nor any Paying Agent shall be under any liability for interest on any moneys received hereunder except for accounting for income from Permitted Investments.

Investment of Moneys. Moneys held in each of the funds and accounts under the Indenture shall, pursuant to written directions of the Corporation Representative, be invested and reinvested by the Trustee in accordance with the provisions of the Indenture and the Tax Compliance Agreement in Permitted Investments which mature or are subject to redemption by the owner thereof prior to the date such funds are expected to be needed. In the absence of such written direction, the Trustee shall invest moneys in Permitted Investments of the type descried in clause (g) of the definition thereof. The Trustee may make any investments permitted by the Indenture through its own bond department or short-term investment department or that of any affiliate of the Trustee and may pool moneys for investment purposes, except moneys held in any fund or account that are required to be yield restricted in accordance with the Tax Compliance Agreement, which shall be invested separately. Any such Permitted Investments shall be held by or under the control of the Trustee and shall be deemed at all times a part of the fund or account in which such moneys are originally held. The interest accruing on each fund or account and any profit realized from such Permitted Investments (other than any amounts required to be deposited in the Rebate Fund) shall be credited to such fund or account, and any loss resulting from such investments shall be charged to such fund or account; provided that (i) interest earned on moneys on deposit in the Debt Service Reserve Fund shall be transferred to the Debt Service Fund if amounts on deposit in the Debt Service Reserve Fund equal to the Debt Service Reserve Requirement, provided that moneys may only be transferred from the separate account to Debt Service Reserve Fund with respect to the Series 2002 Bonds on and after July 1, 2015, and (ii) that interest earned on moneys on deposit in the Project Fund shall be transferred to the Debt Service Fund. The Trustee shall sell or present for redemption and reduce to cash a sufficient amount of such Permitted Investments whenever it shall be necessary to provide moneys in any fund or account for the purposes of such fund or account and the Trustee shall not be liable for any loss resulting from such investments.

Inspection of Books. The Authority covenants and agrees that all books and documents in its possession relating to the Bonds, the Indenture and the Loan Agreement, and the transactions relating thereto shall at all reasonable times be open to inspection by such accountants or other agencies as the Trustee may from time to time designate. The Trustee covenants and agrees that all books and documents in its possession relating to the Bonds, the Indenture and the Loan Agreement, and the transactions relating thereto, including financial statements of the Corporation, shall be open to inspection by the Authority during business hours upon reasonable notice.

Enforcement of Rights. The Authority agrees that the Trustee, as assignee, transferee, pledgee, and owner of a security interest under the Indenture in its name or in the name of the Authority may enforce all rights of the Authority and the Trustee and all obligations of the Corporation under and pursuant to the Loan Agreement and any other Transaction Documents for and on behalf of the bondowners, whether or not the Authority is in default under the Indenture. The Loan Agreement and all other Transaction Documents shall be delivered to and held by the Trustee.

Amendments to the Loan Agreement. The Loan Agreement may be supplemented or amended by Supplemental Loan Agreements executed by the Authority and the Corporation as provided in the Loan Agreement; provided that subsequent to the issuance of any Bonds and prior to their payment in full (or provision thereof having been made in accordance with the provisions of the Indenture), the Loan Agreement may not be amended, changed, modified, altered or terminated without the written consent of the Trustee.

Tax Covenants. The Authority (to the extent within its power or direction) shall not use or permit the use of any proceeds of Tax-Exempt Bonds or any other funds of the Authority, directly or indirectly, in any

D-20 manner, and shall not take or permit to be taken any other action or actions, which would cause the interest on any Tax-Exempt Bond to be included in gross income for federal income tax purposes.

The Authority agrees that so long as any of the Bonds remain Outstanding, and to the extent within its power and control, it will comply with the provisions of the Tax Compliance Agreement applicable to the Authority.

The Trustee agrees to comply with the provisions of the Tax Compliance Agreement, and may rely upon the Tax Compliance Agreement and any Opinion of Bond Counsel which sets forth such requirements, to comply with any statute, regulation or ruling that may apply to it as Trustee hereunder and relating to reporting requirements or other requirements necessary to preserve the exclusion from federal gross income of the interest on the Tax-Exempt Bonds. The Trustee from time to time, in its sole discretion, may cause a firm of attorneys, consultants or independent accountants or an investment banking firm to supply the Trustee, on behalf of the Authority, with such information as the Trustee, on behalf of the Authority, may request in order to determine in a manner reasonably satisfactory to the Trustee, on behalf of the Authority, all matters relating to (a) the actuarial yields on the Tax-Exempt Bonds as the same may relate to any data or conclusions necessary to verify that the Tax-Exempt Bonds are not "arbitrage bonds" within the meaning of Section 148 of the Internal Revenue Code, and (b) compliance with rebate requirements of Section 148(f) of the Internal Revenue Code. Payment for fees, charges, costs and expenses incurred in connection with supplying the foregoing information shall be paid by the Corporation.

Events of Default. The term "event of default," wherever used in the Indenture, means any one of the following events (whatever the reason for such event and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body):

(a) default in the payment of any interest on any Bond when such interest becomes due and payable; or

(b) default in the payment of the principal of any Bond when the same becomes due and payable (whether at maturity, upon proceedings for redemption, by acceleration or otherwise); or

(c) default in the performance, or breach, of any covenant or agreement of the Authority in the Indenture (other than a covenant or agreement a default in the performance or breach of which is specifically dealt with elsewhere), and continuance of such default or breach for a period of 60 days after there has been given to the Authority and the Corporation by the Trustee or to the Authority, the Corporation and the Trustee by the owners of at least 10% in principal amount of the Bonds Outstanding, a written notice specifying such default or breach and requiring it to be remedied; provided, that if such default cannot be fully remedied within such 60-day period, but can reasonably be expected to be fully remedied, such default shall not constitute an event of default if the Authority shall immediately upon receipt of such notice commence the curing of such default and shall thereafter prosecute and complete the same with due diligence and dispatch; or

(d) any event of default under the Loan Agreement shall occur and is continuing and has not been waived.

Acceleration of Maturity; Rescission and Annulment. If an event of default occurs and is continuing, the Trustee may, and if requested by the owners of not less than 25% in principal amount of the Bonds Outstanding shall, by written notice to the Authority and the Corporation, declare the principal of all

D-21 Bonds Outstanding and the interest accrued thereon to be due and payable, and upon any such declaration such principal and interest shall become immediately due and payable.

At any time after such a declaration of acceleration has been made, but before any judgment or decree for payment of money due on any Bonds has been obtained by the Trustee, the owners of a majority in principal amount of the Bonds Outstanding may, by written notice to the Authority, the Corporation and the Trustee, rescind and annul such declaration and its consequences if

(a) the Authority has deposited with the Trustee a sum sufficient to pay

(1) all overdue installments of interest on all Bonds,

(2) the principal of (and premium, if any, on) any Bonds which have become due otherwise than by such declaration of acceleration and interest thereon at the rate prescribed therefor in the Bonds,

(3) interest upon overdue installments of interest at the rate prescribed therefor in the Bonds, and

(4) all sums paid or advanced by the Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and

(b) all events of default, other than the non-payment of the principal of Bonds which have become due solely by such declaration of acceleration, have been cured or have been waived as provided in the Indenture.

No such rescission and annulment shall affect any subsequent default or impair any right consequent thereon.

Exercise of Remedies by the Trustee. Upon the occurrence and continuance of any event of default under the Indenture, unless the same is waived as provided in the Indenture, the Trustee shall have the following rights and remedies, in addition to any other rights and remedies provided under the Indenture or by law:

(a) Right to Bring Suit, Etc. The Trustee may pursue any available remedy at law or in equity by suit, action, mandamus or other proceeding to enforce the payment of the principal of, premium, if any, and interest on the Bonds Outstanding, including interest on overdue principal (and premium, if any) and on overdue installments of interest, and any other sums due under the Indenture, to realize on or to foreclose any of its interests or liens under the Indenture or any other Transaction Document, to enforce and compel the performance of the duties and obligations of the Authority as set forth in the Indenture and to enforce or preserve any other rights or interests of the Trustee under the Indenture with respect to any of the Trust Estate or otherwise existing at law or in equity.

(b) Exercise of Remedies at Direction of Bondowners. If requested in writing to do so by the owners of not less than 25% in principal amount of Bonds Outstanding and if indemnified as provided in the Indenture, the Trustee shall be obligated to exercise such one or more of the rights and remedies conferred by the Indenture as the Trustee shall deem most expedient in the interests of the bondowners.

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(c) Appointment of Receiver. Upon the filing of a suit or other commencement of judicial proceedings to enforce the rights of the Trustee and of the bondowners under the Indenture, the Trustee shall be entitled, as a matter of right, to the appointment of a receiver or receivers of the Trust Estate, pending such proceedings, with such powers as the court making such appointment shall confer.

(d) Suits to Protect the Trust Estate. The Trustee shall have power to institute and to maintain such proceedings as it may deem expedient to prevent any impairment of the Trust Estate by any acts which may be unlawful or in violation of the Indenture and to protect its interests and the interests of the bondowners in the Trust Estate, including power to institute and maintain proceedings to restrain the enforcement of or compliance with any governmental enactment, rule or order that may be unconstitutional or otherwise invalid, if the enforcement of or compliance with such enactment, rule or order would impair the security under the Indenture or be prejudicial to the interests of the bondowners or the Trustee, or to intervene (subject to the approval of a court of competent jurisdiction) on behalf of the bondowners in any judicial proceeding to which the Authority or the Corporation is a party and which in the judgment of the Trustee has a substantial bearing on the interests of the bondowners.

(e) Enforcement Without Possession of Bonds. All rights of action under the Indenture or any of the Bonds may be enforced and prosecuted by the Trustee without the possession of any of the Bonds or the production thereof in any suit or other proceeding relating thereto, and any such suit or proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust. Any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and subject to the provisions of the Indenture, be for the equal and ratable benefit of the owners of the Bonds in respect of which such judgment has been recovered.

(f) Restoration of Positions. If the Trustee or any Bondowner has instituted any proceeding to enforce any right or remedy under the Indenture by suit, foreclosure, the appointment of a receiver, or otherwise, and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Bondowner, then and in every case the Authority, the Corporation, the Trustee and the bondowners shall, subject to any determination in such proceeding, be restored to their former positions and rights under the Indenture, and thereafter all rights and remedies of the Trustee and the bondowners shall continue as though no such proceeding had been instituted.

Limitation on Suits by Bondowners. No owner of any Bond shall have any right to institute any proceeding, judicial or otherwise, under or with respect to the Indenture, or for the appointment of a receiver or trustee or for any other remedy under the Indenture, unless

(a) such owner has previously given written notice to the Trustee of a continuing event of default;

(b) the owners of not less than 25% in principal amount of the Bonds Outstanding shall have made written request to the Trustee to institute proceedings in respect of such event of default in its own name as Trustee under the Indenture;

(c) such owner or owners have offered to the Trustee indemnity as provided in the Indenture against the costs, expenses and liabilities to be incurred in compliance with such request;

D-23 (d) the Trustee for 60 days after its receipt of such notice, request and offer of indemnity has failed to institute any such proceeding; and

(e) no direction inconsistent with such written request has been given to the Trustee during such 60-day period by the owners of a majority in principal amount of the Outstanding Bonds; it being understood and intended that no one or more owners of Bonds shall have any right in any manner whatever by virtue of, or by availing of, any provision of the Indenture to affect, disturb or prejudice the lien of the Indenture or the rights of any other owners of Bonds, or to obtain or to seek to obtain priority or preference over any other owners or to enforce any right under the Indenture, except in the manner herein provided and for the equal and ratable benefit of all Outstanding Bonds.

Control of Proceedings by Bondowners. The owners of a majority in principal amount of the Bonds Outstanding shall have the right, during the continuance of an event of default, provided indemnity has been provided to the Trustee in accordance with the Indenture:

(a) to require the Trustee to proceed to enforce the Indenture, either by judicial proceedings for the enforcement of the payment of the Bonds and the foreclosure of the Indenture, or otherwise; and

(b) to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee under the Indenture, provided that

(1) such direction shall not be in conflict with any rule of law or the Indenture,

(2) the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction, and

(3) the Trustee shall not determine that the action so directed would be unjustly prejudicial to the owners not taking part in such direction.

Application of Moneys Collected. Any moneys collected by the Trustee (after the deductions for payment of costs and expenses of proceedings resulting in the collection of such moneys) together with any other sums then held by the Trustee as part of the Trust Estate, shall be applied in the following order, at the date or dates fixed by the Trustee and, in case of the distribution of such money on account of principal (or premium, if any) or interest, upon presentation of the Bonds and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid:

(a) First: To the payment of all undeducted amounts due the Trustee under the Indenture;

(b) Second: To the payment of the whole amount then due and unpaid upon the Outstanding Bonds for principal (and premium, if any) and interest, in respect of which or for the benefit of which such money has been collected, with interest (to the extent that such interest has been collected by the Trustee or a sum sufficient therefor has been so collected and payment thereof is legally enforceable at the respective rate or rates prescribed therefor in the Bonds) on overdue principal (and premium, if any) and on overdue installments of interest; and in case such proceeds shall be insufficient to pay in full the whole amount so due and unpaid upon such Bonds, then to the payment of such principal and interest, without any preference or priority, ratably according to the aggregate amount so due; and

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(c) Third: To the payment of the remainder, if any, to the Authority or to whosoever may be lawfully entitled to receive the same or as a court of competent jurisdiction may direct.

Whenever moneys are to be applied by the Trustee pursuant to the provisions of the Indenture, such moneys shall be applied by it at such times, and from time to time, as the Trustee shall determine, having due regard for the amount of such moneys available for application and the likelihood of additional moneys becoming available for such application in the future. Whenever the Trustee shall apply such moneys, it shall fix the date (which shall be an interest payment date unless it shall deem another date more suitable) upon which such application is to be made and upon such date interest on the amounts of principal to be paid on such date 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, and shall not be required to make payment to the owner of any unpaid Bond until such Bond shall be presented to the Trustee for appropriate endorsement or for cancellation if fully paid.

Rights and Remedies Cumulative. No right or remedy herein conferred upon or reserved to the Trustee or to the bondowners is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy.

Delay or Omission Not Waiver. No delay or omission of the Trustee or of any owner of any Bond to exercise any right or remedy accruing upon an event of default shall impair any such right or remedy or constitute a waiver of any such event of default or an acquiescence therein.

Waiver of Past Defaults. Before any judgment or decree for payment of money due has been obtained by the Trustee, the owners of a majority in principal amount of the Bonds Outstanding may, by written notice delivered to the Trustee and the Authority, on behalf of the owners of all the Bonds waive any past default hereunder and its consequences, except a default

(a) in the payment of the principal of (or premium, if any) or interest on any Bond, or

(b) in respect of a covenant or provision which under the Indenture cannot be modified or amended without the consent of the owner of each Outstanding Bond affected.

Upon any such waiver, such default shall cease to exist, and any event of default arising therefrom shall be deemed to have been cured, for every purpose of the Indenture; but no such waiver shall extend to or affect any subsequent or other default or impair any right or remedy consequent thereon.

Acceptance of Trusts; Certain Duties and Responsibilities. The Trustee accepts and agrees to execute the trusts imposed upon it by the Indenture, but only upon the terms and conditions set forth in the Indenture:

(a) Except during the continuance of an event of default,

(1) the Trustee undertakes to perform such duties and only such duties as are specifically set forth in the Indenture, and no implied covenants or obligations shall be read into the Indenture against the Trustee; and

D-25 (2) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of the Indenture; but in the case of any such certificates or opinions which by any provision thereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of the Indenture.

(b) If an event of default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by the 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 its own affairs.

(c) No provision of the Indenture shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct. The Trustee shall not be liable for any error of judgment made in good faith by an authorized officer of the Trustee, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts. The Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the owners of a majority in principal amount of the Outstanding Bonds relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under the Indenture. No provision of the Indenture 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 under the Indenture, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it.

Indemnification of Trustee. Notwithstanding anything in the Indenture to the contrary, the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by the Indenture whether at the request or direction of any of the bondowners pursuant to the Indenture or otherwise, unless such bondowners or other party shall have offered to the Trustee reasonable security or indemnity against the fees, advances, costs, expenses and liabilities (except as may result from the Trustee's own negligence or willful misconduct) which might be incurred by it in connection with such rights or powers.

Notice of Defaults. The Trustee shall not be required to take notice or be deemed to have notice of any default under the Indenture except failure by the Authority to cause to be made any of the payments to the Trustee required to be made by the Indenture, unless the Trustee shall be specifically notified in writing of such default by the Authority, the Corporation, or the owners of at least 10% in principal amount of all Bonds Outstanding, and in the absence of such notice so delivered, the Trustee may conclusively assume there is no default except as aforesaid. Within 30 days after the Trustee has received notice of any default or the occurrence of any default under the Indenture of which the Trustee is deemed to have notice, the Trustee shall give written notice of such default by first class mail to all owners of Bonds as shown on the bond register maintained by the Trustee, unless such default shall have been cured or waived; provided, however, that, except in the case of a default in the payment of the principal of (or premium, if any) or interest on any Bond, the Trustee shall be protected in withholding such notice if and so long as the Trustee in good faith determines that the withholding of such notice is in the interests of the bondowners. For the purpose of this paragraph, the term "default" means any event which is, or after notice or lapse of time or both would become, an event of default as defined in the Indenture.

D-26 Resignation and Removal of Trustee. The Trustee may resign at any time by giving written notice thereof to the Authority, the Corporation and each owner of Bonds Outstanding as shown by the list of bondowners required by the Indenture to be kept at the office of the Trustee. If an instrument of acceptance by a successor Trustee shall not have been delivered to the Trustee within 30 days after the giving of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee.

If the Trustee has or shall acquire any conflicting interest, it shall, within 90 days after ascertaining that it has a conflicting interest, or within 30 days after receiving written notice from the Authority or the Corporation (so long as the Corporation is not in default under the Indenture) that it has a conflicting interest, either eliminate such conflicting interest or resign in the manner and with the effect specified in the immediately preceding paragraph.

The Trustee may be removed at any time by an instrument or concurrent instruments in writing delivered to the Authority and the Trustee signed by the owners of a majority in principal amount of the Outstanding Bonds, or, so long as the Corporation is not in default and no condition that with the giving of notice or passage of time, or both, would constitute a default under the Loan Agreement, by the Corporation. The Authority, the Corporation or any Bondowner may at any time petition any court of competent jurisdiction for the removal for cause of the Trustee.

If at any time:

(a) the Trustee shall fail to comply with the second paragraph above after written request therefor by the Authority or by any Bondowner, or

(b) the Trustee shall cease to be eligible under the Indenture and shall fail to resign after written request therefor by the Authority or by any such Bondowner, or

(c) the Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent or a receiver of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, then, in any such case, (1) the Authority may remove the Trustee, or (2) the Corporation or any Bondowner may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee.

The Trustee shall give notice at the expense of the Corporation of each resignation and each removal of the Trustee and each appointment of a successor Trustee by mailing written notice of such event by first- class mail, postage prepaid, to the registered owners of Bonds as their names and addresses appear in the bond register maintained by the Trustee. Each notice shall include the name of the successor Trustee and the address of its principal corporate trust office.

No resignation or removal of the Trustee and no appointment of a successor Trustee shall become effective until the acceptance of appointment by the successor Trustee under the Indenture.

Appointment of Successor Trustee. If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any cause, the Authority, with the written consent of the Corporation (which consent shall not be unreasonably withheld) (so long as no event of default under the Indenture or under the Loan Agreement has occurred and is continuing), or the owners of a majority in

D-27 principal amount of Bonds Outstanding (if an event of default hereunder or under the Loan Agreement has occurred and is continuing), by an instrument or concurrent instruments in writing delivered to the Authority and the retiring Trustee, shall promptly appoint a successor Trustee. In case all or substantially all of the Trust Estate shall be in the possession of a receiver or trustee lawfully appointed, such receiver or trustee, by written instrument, may similarly appoint a temporary successor to fill such vacancy until a new Trustee shall be so appointed by the Authority or the bondowners. If, within 30 days after such resignation, removal or incapability or the occurrence of such vacancy, a successor Trustee shall be appointed in the manner provided in the Indenture, the successor Trustee so appointed shall, forthwith upon its acceptance of such appointment, become the successor Trustee and supersede the retiring Trustee and any temporary successor Trustee appointed by such receiver or trustee. If no successor Trustee shall have been so appointed and accepted appointment in the manner provided in the Indenture, any Bondowner may petition any court of competent jurisdiction for the appointment of a successor Trustee, until a successor shall have been appointed as above provided. The successor so appointed by such court shall immediately and without further act be superseded by any successor appointed as above provided. Every such successor Trustee appointed shall be a bank or trust company in good standing under the law of the jurisdiction in which it was created and by which it exists, meeting the eligibility requirements of the Indenture.

Merger, Consolidation and Succession to Business. Any corporation or association into which the Trustee may be merged or with which it may be consolidated, or any corporation or association resulting from any merger or consolidation to which the Trustee shall be a party, or any corporation or association succeeding to all or substantially all of the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided such corporation or association shall be otherwise qualified and eligible under the Indenture, and shall be vested with all of the title to the whole property or Trust Estate and all the trusts, powers, discretion, immunities, privileges and all other matters as was its predecessor, without the execution or filing of any paper or any further act on the part of any of the parties hereto.

Supplemental Indentures without Consent of Bondowners. Without the consent of the owners of any Bonds, the Authority and the Trustee may from time to time enter into one or more Supplemental Indentures for any of the following purposes:

(a) to correct or amplify the description of any property at any time subject to the lien of the Indenture, or better to assure, convey and confirm unto the Trustee any property subject or required to be subjected to the lien of the Indenture, or to subject to the lien of the Indenture additional property; or

(b) to add to the conditions, limitations and restrictions on the authorized amount, terms or purposes of issue, authentication and delivery of Bonds or of any series of Bonds, as set forth in the Indenture, additional conditions, limitations and restrictions thereafter to be observed; or

(d) to evidence the appointment of a separate trustee or the succession of a new trustee under the Indenture; or

(e) to add to the covenants of the Authority or to the rights, powers and remedies of the Trustee for the benefit of the owners of all Bonds or to surrender any right or power therein conferred upon the Authority; or

D-28 (f) to cure any ambiguity, to correct or supplement any provision in the Indenture which may be inconsistent with any other provision in the Indenture or to make any other change, with respect to matters or questions arising under the Indenture, which shall not be inconsistent with the provisions of the Indenture, provided such action shall not materially adversely affect the interests of the owners of the Bonds; or

(g) to modify, eliminate or add to the provisions of the Indenture to such extent as shall be necessary to effect the qualification of the Indenture under the Trust Indenture Act of 1939, as amended, or under any similar federal statute hereafter enacted, or to permit the qualification of the Bonds for sale under the securities laws of the United States or any state of the United States.

Supplemental Indentures with Consent of Bondowners. With the consent of the owners of not less than a majority in principal amount of the Bonds then Outstanding affected by such Supplemental Indenture, the Authority and the Trustee may enter into one or more Supplemental Indentures for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of the Indenture or of modifying in any manner the rights of the owners of the Bonds under the Indenture; provided, however, that no such Supplemental Indenture shall, without the consent of the owner of each Outstanding Bond affected thereby,

(a) change the stated maturity of the principal of, or any installment of interest on, any Bond, or reduce the principal amount or Maturity Amount, as applicable, or the interest thereon or any premium payable upon the redemption thereof, or change any place of payment where, or the coin or currency in which, any Bond, or the interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment on or after the stated maturity thereof (or, in the case of redemption, on or after the redemption date); or

(b) reduce the percentage in principal amount of the Outstanding Bonds, the consent of whose owners is required for any such Supplemental Indenture, or the consent of whose owners is required for any waiver provided for in the Indenture of compliance with certain provisions of the Indenture or certain defaults hereunder and their consequences; or

(d) modify or alter the provisions of the proviso to the definition of the term "Outstanding"; or

(e) modify any of the provisions relating to Supplemental Indentures, except to increase any percentage provided thereby or to provide that certain other provisions of the Indenture cannot be modified or waived without the consent of the owner of each Bond affected thereby; or

(f) permit the creation of any lien ranking prior to or on a parity with the lien of the Indenture with respect to any of the Trust Estate or terminate the lien of the Indenture on any property at any time subject hereto or deprive the owner of any Bond of the security afforded by the lien of the Indenture.

Corporation's Consent to Supplemental Indentures. So long as the Corporation is not in default under the Loan Agreement, a Supplemental Indenture which affects any rights of the Corporation will not become effective unless and until the Corporation consents in writing to the execution and delivery of such

D-29 Supplemental Indenture; provided that receipt by the Trustee of a Supplemental Loan Agreement executed by the Corporation in connection with the issuance of Additional Bonds shall be deemed to be the consent of the Corporation to the execution of the related Supplemental Indenture.

Payment, Discharge and Defeasance of Bonds. Bonds will be deemed to be paid and discharged and no longer Outstanding under the Indenture and will cease to be entitled to any lien, benefit or security of the Indenture if the Authority shall pay or provide for the payment of such Bonds in any one or more of the following ways:

(a) by paying or causing to be paid the principal of (including redemption premium, if any) and interest on such Bonds, as and when the same become due and payable;

(b) by delivering such Bonds to the Trustee for cancellation; or

(c) by depositing in trust with the Trustee or other Paying Agent moneys and Government Obligations in an amount, together with the income or increment to accrue thereon, without consideration of any reinvestment thereof, sufficient to pay or redeem (when redeemable) and discharge the indebtedness on such Bonds at or before their respective maturity or redemption dates (including the payment of the principal of, premium, if any, and interest payable on such Bonds to the maturity or redemption date thereof); provided that, if any such Bonds are to be redeemed prior to the maturity thereof, notice of such redemption is given in accordance with the requirements of the Indenture or provision satisfactory to the Trustee is made for the giving of such notice.

The Bonds may be defeased in advance of their maturity or redemption dates only with cash or Defeasance Obligations pursuant to subsection (c) above, subject to receipt by the Trustee of (1) a verification report in form and substance satisfactory to the Trustee prepared by independent certified public accountants, or other verification agent, satisfactory to the Trustee, and (2) an Opinion of Bond Counsel addressed and delivered to the Trustee in form and substance satisfactory to the Trustee to the effect that the payment of the principal of and redemption premium, if any, and interest on all of the Bonds then Outstanding and any and all other amounts required to be paid under the provisions of the Indenture has been provided for in the manner set forth in the Indenture and to the effect that so providing for the payment of any Bonds will not cause the interest on the Bonds to be included in gross income for federal income tax purposes, notwithstanding the satisfaction and discharge of the Indenture.

The foregoing notwithstanding, the liability of the Authority in respect of such Bonds shall continue, but the owners thereof shall thereafter be entitled to payment only out of the moneys and Defeasance Obligations deposited with the Trustee as aforesaid.

Satisfaction and Discharge of Indenture. The Indenture and the lien, rights and interests created by the Indenture shall cease, determine and become null and void (except as to any surviving rights of transfer or exchange of Bonds therein provided for) if the following conditions are met:

(a) the principal of, premium, if any, and interest on all Bonds has been paid or is deemed to be paid and discharged by meeting the conditions set forth above;

(b) all other sums payable under the Indenture with respect to the Bonds are paid or provision satisfactory to the Trustee is made for such payment;

D-30 (c) the Trustee receives an Opinion of Bond Counsel (which may be based upon a ruling or rulings of the Internal Revenue Service) to the effect that so providing for the payment of any Tax-Exempt Bonds will not cause the interest on the Tax-Exempt Bonds to be included in gross income for federal income tax purposes, notwithstanding the satisfaction and discharge of the Indenture; and

(d) the Trustee receives an Opinion of Counsel to the effect that all conditions precedent to the satisfaction and discharge of the Indenture have been complied with.

Thereupon, the Trustee shall execute and deliver to the Authority a termination statement and such instruments of satisfaction and discharge of the Indenture as may be necessary and shall pay, assign, transfer and deliver to the Authority, or other Persons entitled thereto, all moneys, securities and other property then held by it under the Indenture as a part of the Trust Estate, other than moneys or Defeasance Obligations held in trust by the Trustee as therein provided for the payment of the principal of, premium, if any, and interest on the Bonds.

Consent of the Bond Insurer. Any provision of the Indenture expressly recognizing or granting rights in or to the Bond Insurer may not be amended in any manner which affects the rights of the Bond Insurer hereunder without the prior written consent of the Bond Insurer.

The Bond Insurer's consent shall be required in addition to the consent of the owner of any Series 2002 Bond, when required, for the following purposes: (i) the execution and delivery of any supplemental indenture, or any amendment, supplement or change to or modification of the Loan Agreement, Notes or other documents relating to the security for the Series 2002 Bonds; (ii) removal or substitution of the Trustee or Paying Agent and selection and appointment of any successor trustee or paying agent; or (iii) approval of any action or document requiring approval of the owners of the Series 2002 Bonds.

Control of Remedies Upon an Event of Default and Event of Insolvency. Upon the occurrence and continuance of an Event of Default, the Bond Insurer shall be entitled to control and direct the enforcement of all rights and remedies granted to the registered owners of the Series 2002 Bonds under the Indenture, including, without limitation, (i) the right to accelerate the Accreted Value of the Series 2002 Bonds as described in the Indenture and (ii) the right to annul any declaration of acceleration of the Series 2002 Bonds. Any reorganization or liquidation plan with respect to the Authority or the Corporation must be acceptable to the Bond Insurer. In the event of any reorganization or liquidation, the Bond Insurer shall have the right to vote on behalf of all registered owners who hold the Series 2002 Bonds insured by the Bond Insurer absent a default by the Bond Insurer under the Bond Insurance Policy insuring such Series 2002 Bonds.

SUMMARY OF THE LOAN AGREEMENT

The following is a summary of certain provisions of the Loan Agreement. This summary does not purport to be complete, and reference is made to the full text of the Loan Agreement for a complete recital of its terms.

Use of Proceeds; Completion of the Project. The proceeds of the Series 2012B Bonds loaned to the Corporation shall be deposited with the Trustee and shall be administered, disbursed and applied for the purposes and in the manner as provided in the Indenture and in the Loan Agreement. The Corporation shall cause the Project to be diligently and continuously pursued and to be completed with reasonable dispatch and

D-31 to provide (from its own funds if required) all moneys necessary to complete the Project substantially in accordance with the plans and specifications for the Project.

Loan Payments. The Corporation shall make the following payments ("Loan Payments") in repayment of the loan of proceeds of Bonds to the Corporation and to provide for payment of the interest on and principal of and redemption premium, if any, on the Bonds, directly to the Trustee, for the account of the Authority, for deposit in the Debt Service Fund, on the following dates, and otherwise as set out below:

(a) Debt Service Fund - Interest: On or before the twentieth day preceding the next interest payment date on the Bonds, an amount which is not less than the interest to become due on such interest payment date on the Bonds; provided, however that the Corporation may be entitled to certain credits on such payments as permitted under the Loan Agreement.

(b) Debt Service Fund - Principal: On or before the twentieth day preceding the next installment of principal due on the Bonds, an amount which is not less than the principal to become due on the next principal payment date on the Bonds; provided, however, that the Corporation may be entitled to certain credits on such payments as permitted under the Loan Agreement.

(b) Debt Service Fund - Redemption: On or before the date required by the Loan Agreement or the Indenture, the amount of any Net Proceeds or other moneys received which is intended or required to redeem Bonds then Outstanding if the Corporation exercises its right to redeem Bonds under any provision of the Indenture or if any Bonds are required to be redeemed under any provision of the Indenture.

Notwithstanding any schedule of payments upon the Loan set forth in the Loan Agreement or in the Note, the Corporation shall make payments upon the Loan and shall be liable therefor at the times and in the amounts (including interest, principal, and redemption premium, if any) equal to the amounts to be paid as interest, principal and redemption premium, if any, whether at maturity or by optional or mandatory redemption upon all Bonds from time to time Outstanding under the Indenture.

Any Supplemental Loan Agreement authorizing the issuance of Additional Notes shall provide for similar deposits into the Debt Service Fund of amounts sufficient to insure the prompt payment of the Accreted Value of any Additional Bonds or Additional Notes as the same become due.

Credits on Loan Payments. Notwithstanding any provision contained in the Loan Agreement or in the Indenture to the contrary, in addition to any credits on the Loan resulting from the payment or prepayment of Loan Payments from other sources:

(a) any moneys deposited by the Trustee or the Corporation in the Debt Service Fund as interest (including moneys received as accrued interest from the sale of any series of the Bonds and any initial deposit made from the proceeds of the sale of any series of the Bonds) shall be credited against the obligation of the Corporation to pay interest on the Loan as the same becomes due;

(b) any moneys deposited by the Trustee or the Corporation in the Debt Service Fund as principal shall be credited against the obligation of the Corporation to pay the principal of the Loan as the same becomes due in the order of maturity thereof; and

(c) the amount of any moneys transferred by the Trustee from any other fund held under the Indenture and deposited in the Debt Service Fund as interest or principal shall be credited

D-32 against the obligation of the Corporation to pay interest or principal, as the case may be, as the same become due.

Additional Payments. The Corporation shall make the following additional payments to the following Persons:

(a) Authority Fees. The Corporation shall pay to the Authority upon the initial issuance of any series of Bonds or upon demand, its issuance fee and initial administrative fee. Thereafter, the Corporation shall pay to the Authority an annual administrative fee on or about July 1 of each year as provided in the Third Supplemental Loan Agreement.

(b) Trustee Fees and Professional Fees. The Corporation shall pay to the Trustee and any Paying Agent, registrars, counsel, accountants, engineers and other Persons, when due, all reasonable fees, charges and expenses of such Persons for services rendered under the Indenture and under any of the Transaction Documents and expenses incurred in the performance of such services under the Indenture and any of the Transaction Documents for which such Persons are entitled to payment or reimbursement, including, without limitation, attorneys, accountants and expenses of compliance with the Tax Compliance Agreement.

(c) Advances By Trustee. The Corporation shall pay to the Trustee the amount of all advances of funds made by the Trustee under the provisions of the Loan Agreement or the Indenture, with interest thereon at the prime rate announced from time to time by the Trustee plus 2%.

(d) Arbitrage Rebate Payments. The Corporation shall pay to the Trustee for payment to the United States Government all rebate payments required under Section 148(f) of the Internal Revenue Code.

(e) Debt Service Reserve Fund. The Corporation shall pay to the Trustee for deposit in the Debt Service Reserve Fund the amounts at the times as required by the Indenture. Any Supplemental Loan Agreement authorizing the issuance of Additional Notes shall provide for similar deposits into the Debt Service Reserve Fund of amounts sufficient to increase, if necessary, the deposits to such fund as required by the Indenture.

(f) Costs of Enforcement. In the event the Corporation defaults under any of the provisions of the Loan Agreement and the Trustee or the Authority employ attorneys or incur other expenses for the collection of required payments or the enforcement of performance or observance of any obligation or agreement on the part of the Corporation contained in the Loan Agreement, the Corporation on demand therefor shall pay to the Trustee the reasonable fees of such attorneys and such other expenses so incurred by the Trustee or the Authority. The Corporation also shall pay, and shall indemnify and hold harmless the Authority and the Trustee from and against, all costs, expenses and charges, including, without limitation, reasonable counsel fees, incurred for the collection of payments due or for the enforcement or performance or observance of any covenant or agreement of the Corporation under the Loan Agreement or under the Note, or the Indenture or any other Transaction Document.

(g) Taxes and Assessments. The Corporation also covenants and agrees, at its expense, to pay all taxes and assessments of any type or character charged to the Authority or to the Trustee affecting the amount available to the Authority or the Trustee from payments to be received hereunder or in any way arising due to the transactions contemplated hereby (including property and other taxes and assessments assessed or levied by any public agency or

D-33 governmental authority of whatsoever character having power to levy taxes or assessments) but excluding any taxes based upon the capital and/or income of the Trustee or any other Person other than the Corporation; provided, however, that the Corporation shall have the right to protest any such taxes or assessments and to require the Authority or the Trustee, as the case may be, at the Corporation's expense, to protest and contest any such taxes or assessments assessed or levied upon them and that the Corporation 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 materially adversely affect the rights or interests of the Authority or the Trustee.

(h) Other Amounts Payable. The Corporation shall pay to the Person or Persons entitled thereto, any other amounts which the Corporation has agreed to pay under the Loan Agreement or which the Corporation is required to pay under the Indenture or the other Transaction Documents.

Prepayment of the Loan. The Corporation shall have and is granted the option to prepay from time to time the amounts payable under the Loan Agreement in sums sufficient to redeem or to pay or cause to be paid all or part of the Bonds in accordance with the provisions of the Indenture.

Obligations Absolute and Unconditional; Pledge of Revenues. The obligations of the Corporation under the Loan Agreement are general obligations of the Corporation, and the full faith and credit of the Corporation is pledged to the payment of all sums due and payable by the Corporation under the Loan Agreement. The Corporation agrees to pay all such amounts due and payable under the Loan Agreement using any and all legally available resources of the Corporation, as necessary.

Without limiting the generality of the foregoing, the Corporation pledges, and to the extent permitted by law grants a security interest to the Trustee in, all of the Revenues of the Corporation to secure the payment of and the performance by the Corporation of its other obligations under the Loan Agreement. The Corporation shall pay all Loan Payments and other payments due under the Loan Agreement and perform its obligations, covenants and agreements under the Loan Agreement, without notice or demand, and without abatement, deduction, set-off, counterclaim, recoupment, discrimination or defense or any right of termination or cancellation arising from any circumstances whatsoever, and regardless of the invalidity of any portion of the Loan Agreement, and, to the extent permitted by law, the Corporation waives the provisions of any statute or other law now or hereafter in effect contrary to any of its obligations, covenants or agreements under the Loan Agreement or which releases or purports to release the Corporation therefrom. Nothing in the Loan Agreement shall be construed as a waiver by the Corporation of any rights or claims the Corporation may have against the Authority under the Loan Agreement or otherwise, but any recovery upon such rights or claims shall be had from the Authority separately, it being the intent of the Loan Agreement that the Corporation shall be unconditionally and absolutely obligated to perform fully all of its obligations, agreements and covenants under the Loan Agreement for the benefit of the owners of the Bonds.

Assignment of Authority's Rights. Under the Indenture, the Authority has pledged, assigned, transferred in trust and granted a security interest to the Trustee in all of the Authority's rights, title and interest under the Loan Agreement and the Note accruing to or vested in the Authority (except for the Authority's rights to payment of its fees and expenses and the Authority's right to indemnification in certain circumstances and as otherwise expressly set forth in the Loan Agreement) as security for the Bonds, and such rights, title and interest may be exercised, protected and enforced for or on behalf of the owners of the Bonds in conformity with the Loan Agreement and the Indenture. The Trustee is given the right to enforce, as assignee of the Authority, the performance of the obligations of the Corporation under the Loan Agreement, and the Corporation consents to the same and agrees that the Trustee may enforce such rights as provided in the Loan

D-34 Agreement and in the Indenture. The Loan Agreement recognizes that the Trustee is a third party creditor-beneficiary of the Loan Agreement.

Corporate Existence and Tax-Exempt Status. Except as otherwise expressly provided in the Loan Agreement, the Corporation shall (1) preserve and keep in full force and effect its corporate or other separate legal existence, (2) remain qualified to do business and conduct its affairs in each jurisdiction where ownership of its Property or the conduct of its business or affairs requires such qualification, and (3) maintain its status as a Tax-Exempt Organization.

Maintenance and Use of Property. The Corporation shall cause all of its Property used or useful in the conduct of its business and operations to be maintained, preserved and kept in good repair and working order and condition and in as safe condition as its operations will permit and will make all repairs, renewals, replacements and improvements thereof necessary for the efficient and advantageous conduct of its business and operations and shall, during the term of the Bonds, operate the facilities financed by the Bonds, as educational facilities within the meaning of the Act. Subject to the provisions of the Loan Agreement and the Act, the Corporation shall have the right to use its Property for any purpose allowed by law and contemplated by the Act. Except as provided in the Loan Agreement, the Authority reserves no power or authority with respect to the operation of the Property by the Corporation and activities incident thereto, it being the intention of the parties to the Loan Agreement that so long as the Corporation shall duly and faithfully observe and perform all of the terms, covenants, provisions and agreements of the Loan Agreement, the Corporation shall manage, administer and govern the Property of the Corporation in its activities and affairs on a continuing day-to-day basis. The Corporation agrees that it will not use or permit the use of any of the properties financed or refinanced, or for which it is reimbursed, in whole or in part, out of the proceeds of the Bonds in an unrelated trade or business as defined in Section 513(a) of the Internal Revenue Code, or by any person who is not an organization described in Section 501(c)(3) of the Internal Revenue Code, in either case in such manner or to any extent which could jeopardize the validity of the Bonds or result in the inclusion of interest on the Bonds in gross income for federal income tax purposes.

Payment of Taxes and Other Charges. The Corporation shall pay or cause to be paid as they become due and payable all taxes, assessments and other governmental charges lawfully levied or assessed or imposed upon the Corporation or its Property or any part thereof or upon any income therefrom.

Payment of Obligations. The Corporation shall promptly pay or otherwise satisfy and discharge all of its obligations and Indebtedness and all demands and claims against it as and when the same become due and payable, unless the validity, amount or collectability thereof (excluding the Notes) is being contested in good faith or unless the failure to comply or contest would not materially impair its ability to pay its Indebtedness when due nor subject a material amount of the Property of the Corporation to loss or forfeiture.

Liens and Encumbrances. The Corporation shall not create or incur or permit to be created or incurred or to exist any mortgage, lien, security interest, charge or encumbrance upon its real or personal property except Permitted Encumbrances, and shall promptly discharge or terminate all mortgages, liens, security interests, charges and encumbrances on its real or personal property that are not Permitted Encumbrances.

Licenses and Permits. The Corporation shall procure and maintain all licenses and permits necessary or desirable in the operation of its business and affairs; provided, however, that the Corporation shall not be required to procure or maintain in effect any right, license or accreditation that the governing board of the Corporation shall have determined in good faith, is not in the best interests of the Corporation and is no longer desirable in the conduct of its business and that lack of such compliance will not materially impair the ability of the Corporation to pay or perform its obligations under the Loan Agreement.

D-35

Insurance. The Corporation shall maintain or cause to be maintained insurance with respect to its Property covering such risks that are of an insurable nature and of the character customarily insured against by organizations operating similar properties and engaged in similar operations (including but not limited to property and casualty, worker's compensation, general liability and employee dishonesty) and in such amounts as, in its judgment, are adequate to protect the Corporation and the Property.

Damage, Destruction and Condemnation. In the event of damage to or destruction of any Property of the Corporation resulting from fire or other casualty, or in the event any Property of the Corporation is condemned or taken for any public or quasi-public use or title thereto is found to be deficient, the Net Proceeds of any insurance relating to such damage or destruction, the Net Proceeds of such condemnation or taking or the Net Proceeds of any realization on title insurance shall be paid directly to the Corporation, and the Corporation agrees to promptly notify the Authority and the Trustee of such event. The Corporation agrees that the Corporation shall, within 90 days after such Net Proceeds are received by the Corporation, elect one of the following two options:

(a) Option A -- Replacement, Repair, Reconstruction or Restoration. The Corporation may elect to use all or part of such Net Proceeds to replace, repair, reconstruct or restore the affected Property. In such event the Corporation shall proceed forthwith to replace, repair, reconstruct or restore the affected portion of the Property to substantially the same condition or utility value as existed prior to the event affecting the Property and will apply the Net Proceeds received by the Corporation to the payment or reimbursement of the costs of such replacement, repair, reconstruction or restoration. In the event the Corporation shall elect this Option A, the Corporation shall complete the replacement, repair, reconstruction or restoration of the Property, whether or not such Net Proceeds received by the Corporation for such purposes are sufficient to pay for the same.

(b) Option B -- Prepayment of Note. The Corporation may elect to have all or part of such Net Proceeds applied to the prepayment of the Note. In such event the Corporation shall deposit such Net Proceeds or a specified portion thereof with the Trustee for credit to the Debt Service Fund to be used to pay the next successive principal payments on the Bonds as they become due or to redeem Bonds on the earliest permissible date. If only part of such Net Proceeds is applied to the prepayment of the Bonds, then the remaining part of such Net Proceeds shall be applied as provided under Option A above. Moneys deposited in the Debt Service Fund pursuant to this Option B shall be used to pay scheduled principal payments on the Bonds or to redeem Bonds on the earliest permissible date.

Financial Statements and Other Information. The Corporation shall keep proper books of record and account, in which full and correct entries shall be made of all dealings or transactions of or in relation to the properties, business and affairs of the Corporation. The Corporation shall furnish to the Trustee, as soon as practicable after they are available but in no event more than 180 days after the last day of each fiscal year, the financial statements of the Corporation for such fiscal year audited by the Corporation's independent certified public accountants, covering the operations of the Corporation for such fiscal year and containing a statement of financial position as of the end of such fiscal year and a statement of cash flows and a statement of activities for such fiscal year.

Sale, Lease or Other Disposition of Property. The Corporation shall not in any fiscal year, sell, lease or otherwise transfer or dispose of its Property in an amount which aggregates in excess of 10% of the total value of the Property of the Corporation (calculated on the basis of the Book Value or, if the Corporation so elects, on the basis of Current Value), except for transfers of Property as follows:

D-36

(a) The Corporation may transfer Property to any Person in the ordinary course of business.

(b) The Corporation may transfer Property to any Person for fair and adequate consideration on terms no less favorable to the Corporation than would be obtained in a comparable arm's-length transaction.

(c) The Corporation may transfer Property to any Person, if in the reasonable judgment of the Corporation, such Property has, or within the next succeeding 24 calendar months is reasonably expected to, become inadequate, obsolete or worn out, or otherwise unsuitable, unprofitable, undesirable or unnecessary for the operation of the Corporation's primary business.

(d) The Corporation may transfer Property to any Person, if such Property consists solely of assets which are specifically restricted by the donor or grantor to a particular purpose which is inconsistent with their use for payment on Long-Term Indebtedness of the Corporation.

(e) The Corporation may transfer Property to any Person if the Property to be transferred is not essential to the Corporation's primary business operation, and the proceeds of such transfer are used to acquire additional facilities, to repay the principal of Long-Term Indebtedness of the Corporation, or otherwise used in a productive manner to the benefit of the Corporation's operations.

(f) The Corporation may transfer Property as part of a consolidation, merger, conveyance or transfer permitted by the Loan Agreement.

(g) The Corporation may transfer Property as a loan to any Person provided that such loan is evidenced in writing, such loan bears interest at a reasonable interest rate, and the Trustee receives an Officer's Certificate stating that there is a reasonable expectation that such loan will be repaid in accordance with its terms. The Corporation shall not transfer, loan or otherwise dispose of cash and cash equivalents that would result in a reduction of the level of unrestricted cash and liquid investments of the Corporation below 30 day's operating expenses.

(h) The Corporation may transfer Property that does not constitute real property or cash, cash equivalents or liquid investments to any Person, at any time without restriction.

(i) The Corporation may transfer Property to Kansas State University or the State of Kansas.

Consolidation, Merger, Conveyance or Transfer of Property. The Corporation shall not consolidate with or merge into any other Person or convey or transfer its Property substantially as an entirety to any Person, unless the following conditions are met:

(a) such merger, consolidation, conveyance or transfer is on such terms as shall fully preserve the lien and security of the Indenture and the Loan Agreement and the rights and powers of the Trustee and the owners of the Bonds under the Indenture and the Loan Agreement;

(b) the Person formed by such consolidation or into which the Corporation is merged or the Person which acquires by conveyance or transfer the Corporation's Property substantially as an entirety is a corporation or other legal entity organized and existing under the laws of the

D-37 United States of America or any state thereof, is authorized to conduct business in the State of Kansas, is a Tax-Exempt Organization, and shall execute and deliver to the Trustee a written instrument in form satisfactory to the Trustee, containing an assumption by such successor of the due and punctual payment of the principal of (and premium, if any) and interest on the Loan and the performance and observance of every covenant and condition of the Loan Agreement to be performed or observed by the Corporation;

(c) the Trustee receives an Officer's Certificate stating that, immediately after giving effect to such transaction, (1) no event of default hereunder shall have occurred and be continuing; (2) the successor or transferee shall possess such permits, licenses and accreditations to operate such Property as may be required if it is to operate such Property; and (3) the Unrestricted Net Assets of the Corporation will be equal to at least 90% of the Unrestricted Net Assets of the Corporation immediately prior to such transaction;

(d) the Trustee and the Authority receive an Opinion of Counsel to the effect that (1) such consolidation, merger, conveyance or transfer complies with the Indenture and all conditions precedent provided for relating to such transaction have been complied with; (2) such transaction will not adversely affect the status of the Corporation as a Tax-Exempt Organization; (3) the Person which is the surviving entity is liable on the Loan, as if such Loan were originally made to such Person;

(e) the Trustee and the Authority receives an Opinion of Bond Counsel to the effect that, if all amounts due or to become due on any Tax-Exempt Bonds that bear interest that is not includable in gross income under the Internal Revenue Code have not been fully paid to the owners thereof, under then existing law the consummation of such consolidation, merger, conveyance, or transfer would not cause the interest payable on such Tax-Exempt Bonds to become includable in gross income under the Internal Revenue Code.

Tax Covenants. The Corporation covenants and agrees that it will not take any action or permit any action to be taken that would adversely affect the exclusion from gross income for federal income tax purposes of the interest on the Series 2012B Bonds and will take whatever action, or refrain from whatever action, necessary to comply with the requirements of the Internal Revenue Code to maintain the exclusion from gross income for federal income tax purposes of the interest on the Series 2012B Bonds, and the Corporation shall comply with the Tax Compliance Agreement (defined in the Indenture) and will pay or provide for payment to the United States Government or the Trustee, all rebate payments required under Section 148(f) of the Internal Revenue Code and the Tax Compliance Agreement, to the extent such amounts are not available to the Trustee in the Rebate Fund held under the Indenture. This covenant shall survive payment in full or defeasance of the Series 2012B Bonds.

Continuing Disclosure. The Corporation shall comply with the continuing disclosure obligations set forth in the Continuing Disclosure Undertaking, and any successor continuing disclosure agreement. The Corporation acknowledges that it has undertaken all responsibility for compliance with continuing disclosure requirements with respect to Rule 15c2-12 adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time, and that the Authority shall have no liability to the owners of the Bonds or any other person with respect to such requirements.

Rate Covenant. The Corporation shall set and maintain ticket prices, concession fees, royalties, fees for media coverage rights, and other fees and charges for its facilities and services such that the Corporation will realized Revenues during each Fiscal Year sufficient to (i) make all payments due under the Loan

D-38 Agreement and the Notes and all other Indebtedness of the Corporation and (ii) pay the Expenses of the Corporation.

Additional Bonds and Additional Notes. The Authority from time to time may, in its sole discretion, at the written request of the Corporation, authorize the issuance of Additional Bonds for the purposes and upon the terms and conditions provided in the Indenture; provided that (1) the terms of such Additional Bonds, the purchase price to be paid therefor and the manner in which the proceeds thereof are to be disbursed shall have been approved by resolutions adopted by the Authority and the Corporation; (2) the Authority and the Corporation shall have entered into a Supplemental Loan Agreement to acknowledge that Loan Payments are revised to the extent necessary to provide for the payment of the Accreted Value of the Additional Bonds and to extend the term of the Loan Agreement if the maturity of any of the Additional Bonds would otherwise occur after the expiration of the term of the Loan Agreement; and (3) the Authority and the Corporation shall have otherwise complied with the provisions of the Loan Agreement and the Indenture with respect to the issuance of such Additional Bonds.

Simultaneously with the issuance of any Additional Bonds under the Indenture, the Corporation will issue and deliver to the Authority (but only to the Authority) one or more Additional Notes pursuant to the Loan Agreement, in order to evidence the loan from the Authority to the Corporation of the proceeds of any such Additional Bonds. The principal amount of any Additional Notes shall be equal to the principal amount of the corresponding series of Additional Bonds being issued concurrently with such Additional Notes. The Corporation agrees that the net proceeds from the loan evidenced by such Additional Notes shall be deposited with the Trustee as provided in the Indenture and in the Supplemental Indenture executed in connection with the issuance of such Additional Bonds. Any such Additional Notes may bear interest at any rate lawful at the time of issuance thereof and may mature over any period of time not exceeding the maximum maturity permitted by law, and as may be agreed upon by the Corporation and the Authority. Upon the issuance of any Additional Notes and sale thereof, the same shall together with any other Notes then outstanding, be equally and ratably secured under the Loan Agreement.

Additional Obligations. The Corporation may issue or incur Additional Obligations for any proper corporate purpose if prior to the issuance and delivery of any Additional Obligations, and as a condition precedent thereto, the following documents and showings shall be executed and delivered to the Trustee:

(a) A loan agreement or other debt instrument, executed by the Corporation and the lender, specifying, among other things, the principal amount, rate of interest, maturity, terms of optional prepayment, if any, and form of any Additional Obligations.

(b) An Officer's Certificate (1) stating that no event of default under the Loan Agreement has occurred and is continuing and that no event has occurred and is continuing which with the lapse of time or giving of notice, or both, would constitute such an event of default, and (2) stating the purpose or purposes for which such Additional Obligations are being issued and the classification of the Indebtedness under the Loan Agreement and accompanied by the certificates, reports or opinions demonstrating compliance with the applicable tests set forth in the Loan Agreement, including the tests described in the following Section captioned "Permitted Indebtedness".

(c) Such other certificates, title insurance policies, endorsements or reports, financing statements, financial statements and opinions as the Trustee may reasonably request.

Such Additional Obligations shall have standing on a parity with the security interest granted to the Authority by the Loan Agreement. The owners of such Additional Obligations shall not have a security interest in or other rights to or be entitled to share on a parity with the owners of the Bonds in the Debt Service

D-39 Fund or the Debt Service Reserve Fund. Such Additional Obligations may be further secured in any manner not inconsistent with the provisions and intent of the Indenture or the Loan Agreement.

In the event that the Corporation shall propose to secure any such Additional Obligation by a pledge, lien, mortgage or other security interest as described above, the Authority, the Trustee and the Corporation shall take, or shall cause to be taken, such actions (including entering into a Supplemental Loan Agreement or Supplemental Indenture and execute, deliver, file and record such instruments of security as their respective counsel agree to be necessary or appropriate to grant to and/or otherwise secure for the owner or owners of the Additional Obligation, equivalent to that of the Trustee, and the Corporation shall as a condition of securing such Additional Obligation execute, deliver, file and record, and cause to be executed, delivered, filed and recorded by such owner or owners, such documents as counsel for the Trustee and the Corporation agree to be necessary or appropriate to grant to and/or otherwise secure for the Trustee a pledge of and a security interest in any security granted to the owner or owners of the Additional Obligation and not theretofore granted to the Trustee equivalent to the interest granted to such owner or owners of such Additional Obligation, to the end that all such outstanding secured Additional Obligations and all outstanding Notes shall be of equal rank and be entitled to share pari passu in such security.

Any default under any instrument or agreement providing for repayment of any Additional Obligation secured on a parity with the Notes shall be a default under the Loan Agreement and there shall be included in any instrument or agreement providing for repayment of such Additional Obligation a provision that any default under the Loan Agreement shall be a default under such instrument or agreement. Any action which cures a default under any such instrument or agreement shall also cure such default under the Loan Agreement. Unless otherwise agreed to by the Trustee, the Trustee shall act as trustee under any instrument securing any such Additional Obligation. Any instrument or agreement providing for repayment of such Additional Obligation shall include a provision that, prior to exercising any remedies upon a default by the Corporation under such instrument or agreement, the Trustee (or the owners thereof, if the Trustee otherwise consents) shall consider the interests of the owners of the Additional Obligations and the Bonds and shall proceed such that the interests of such owner or owners of the Additional Obligations and the bondowners shall be equally protected.

Permitted Indebtedness. The Corporation shall not incur any Indebtedness (whether or not incurred or evidenced through the issuance of Notes under the Loan Agreement) other than the following Indebtedness:

(a) Long-Term Indebtedness. The Corporation may incur Long-Term Indebtedness if prior to incurrence thereof or, if such Long-Term Indebtedness was incurred in accordance with another provision of the Loan Agreement and the Corporation desires to have such Indebtedness reclassified as having been issued under this subsection (a), prior to such reclassification, there is delivered to the Trustee an Officer's Certificate stating that, after giving effect to the incurrence of such Long-Term Indebtedness, the Net Revenues Available for Debt Service shall be equal to or greater than 125% of Maximum Annual Debt Service for the then current or any succeeding fiscal year.

(b) Commitment Indebtedness. The Corporation may incur Commitment Indebtedness without limit, if the Indebtedness supported by such Commitment Indebtedness was incurred in accordance with one of the provisions of the Loan Agreement.

(c) Completion Indebtedness. The Corporation may incur Completion Indebtedness in a principal amount not in excess of 10% of the principal amount of the original Long-Term Indebtedness incurred for such facilities, if prior to the incurrence thereof there is delivered to the Trustee an Officer's Certificate stating: (1) that at the time the original Long-Term

D-40 Indebtedness for the facilities to be completed was incurred, the Corporation had reason to believe that the proceeds of such Indebtedness together with other moneys then expected to be available would provide sufficient moneys for the completion of such facilities; (2) the amount estimated to be needed to so complete the facilities; and (3) that the proceeds of such Completion Indebtedness to be applied to the completion of the facilities, together with a reasonable estimate of investment income to be earned on such proceeds and available to pay such costs, the amount of moneys, if any, committed to such completion from available cash or marketable securities and reasonably estimated earnings thereon, enumerated bank loans (including letters or lines of credit) and any other moneys reasonably expected to be available, will be in an amount not less than the estimated amount needed to complete the facilities set forth in such Officer's Certificate.

(d) Indebtedness Assumed In Connection With Gifts. The Corporation may incur Indebtedness assumed in connection with a gift, bequest or devise of Property, if the principal amount of such Indebtedness does not exceed the Current Value of the Corporation's interest in such Property.

(e) Purchase Money Indebtedness. The Corporation may incur Purchase Money Indebtedness if, immediately after entering into such Purchase Money Indebtedness, the aggregate principal amount due on all Purchase Money Indebtedness then Outstanding will not be greater than 20% of the Revenues of the Corporation as shown on the audited financial statements of the Corporation for the most recent fiscal year for which audited financial statements are available.

(f) Refunding Indebtedness. The Corporation may incur Refunding Indebtedness for the purpose of refunding (whether in advance of maturity or otherwise) any Outstanding Long-Term Indebtedness, if the Corporation determines that such refunding is in the best interest of the Corporation.

(g) Short-Term Indebtedness. The Corporation may incur Short-Term Indebtedness if, immediately after the incurrence of such Short-Term Indebtedness, the total principal amount of Outstanding Short-Term Indebtedness of the Corporation incurred under this subsection does not exceed 20% of the Revenues of the Corporation as shown on the audited financial statements of the Corporation for the most recent fiscal year for which audited financial statements are available; provided, however, that for a period of at least 20 consecutive calendar days in each fiscal year the total amount of such Short-Term Indebtedness of the Corporation Outstanding under this subsection shall be not more than 5% of the Revenues of the Corporation for the preceding fiscal year, plus such additional amount as the Corporation certifies in an Officer's Certificate is (1) attributable to Short-Term Indebtedness incurred to offset a temporary delay in the receipt of funds due from third party payors and (2) in the minimum amount reasonably practicable taking into account such delay.

(h) Subordinated Indebtedness. The Corporation may incur Subordinated Indebtedness without limit as to principal amount, provided such Indebtedness is evidenced by an instrument containing provisions for the subordination of such Indebtedness (to which appropriate reference shall be made in the instrument evidencing such Indebtedness) to the Bonds, the Notes and any Additional Obligations with respect to payment out of the Trust Estate, so that if at any time the Corporation shall be in default in paying the Accreted Value of the Bonds, the Notes and Additional Obligations or if the Corporation shall be in default in making any payments required to be made under the provisions of the Loan Agreement, the Corporation

D-41 shall make no payments of either principal of or interest on said Subordinated Indebtedness until said default or defaults be cured.

Calculation of Debt Service Requirements. For purposes of the various calculations under the Loan Agreement, the amount of Long-Term Indebtedness of the Corporation, the amortization schedule of such Indebtedness and the Debt Service Requirements with respect to such Indebtedness shall be calculated in accordance with the actual amortization schedule for such Indebtedness, except as follows:

(a) Balloon Indebtedness. The Debt Service Requirements on Balloon Indebtedness may be deemed to be payable as follows:

(1) If the Corporation has incurred and there is in effect at the time any such Indebtedness is incurred Commitment Indebtedness to provide refinancing sufficient to pay the principal amount of any such Balloon Indebtedness becoming due in each fiscal year in which 25% or more of the original principal amount of such Balloon Indebtedness comes due, such Indebtedness may be deemed to be payable in accordance with the terms of such Commitment Indebtedness; or

(2) If the Corporation delivers an Officer's Certificate to the Trustee that establishes an amortization schedule for any such Indebtedness, which provides for payments of principal and interest for each fiscal year that are sufficient to make any actual payments required to be made in such fiscal year by the terms of such Indebtedness; and the Corporation agrees in such Officer's Certificate that the Corporation will deposit for each fiscal year with a bank or trust company (pursuant to an agreement between the Corporation and such bank or trust company, which agreement shall be satisfactory in form and substance to the Trustee) the amount of principal shown on such amortization schedule net of any amount of principal actually paid on such Indebtedness during such fiscal year (other than from amounts on deposit with such bank or trust company), which deposit shall be made prior to any such required actual payment during such fiscal year if the amounts so on deposit are intended to be the source of such actual payments, then such Indebtedness may be deemed to be payable in accordance with the terms of such amortization schedule and agreement; or

(3) Such Indebtedness, in a principal amount not in excess of 15% of Revenues of the Corporation, may be deemed to be Long-Term Indebtedness payable on a level annual debt service basis over 30% years from the date of issuance or incurrence of such Indebtedness, bearing interest on the unpaid principal balance at the rate equal to the rate set forth in the 30-year Bond Buyer Revenue Bond Index most recently published in The Bond Buyer.

(b) Capital Appreciation Indebtedness. The principal amount of Indebtedness that constitutes "capital appreciation indebtedness" (defined below) shall be deemed to be the "accreted value" (defined below) thereof as of the relevant date. "Capital appreciation indebtedness" means any Long-Term Indebtedness for which interest is payable only at the maturity of such Indebtedness, upon the redemption of such Indebtedness before maturity, or upon the conversion of such Indebtedness to Indebtedness with interest payable periodically in installments prior to maturity or prior to redemption before maturity. "Accreted value" means

D-42 with respect to any capital appreciation indebtedness (a) as of any "valuation date" (defined below), the amount set forth in the Supplemental Loan Agreement authorizing such Indebtedness or in the related Supplemental Bond Indenture as the value of such Indebtedness on such valuation date and (b) as of any date other than a valuation date the sum of (i) the accreted value on the next preceding valuation date and (ii) the product of (A) a fraction, the numerator of which is the number of days having elapsed from the preceding valuation date and the denominator of which is the number of days from such preceding valuation date to the next succeeding valuation date and (B) the difference between the accreted values for such valuation dates. "Valuation date" means with respect to any capital appreciation indebtedness the date or dates set forth in the Supplemental Loan Agreement relating to such Indebtedness or the related Supplemental Bond Indenture on which specific accreted values are assigned to the capital appreciation indebtedness.

(c) Capital Leases. The principal amount of Indebtedness in the form of a "capital lease" (defined below) shall be deemed to be the amount, as of the date of determination, at which the aggregate "net rentals" (defined below) due and to become due under such capital lease would be reflected as a liability on the balance sheet of the lessee, and the Debt Service Requirements on a capital lease for the period of time for which calculated shall be deemed to be the aggregate amount of net rentals to be payable under such Capitalized Lease during such period. "Capital lease" means any lease of real or personal property that is capitalized on the balance sheet of the lessee under generally accepted accounting principles. "Net rentals" means all fixed rents (including as such all payments which the lessee is obligated to make to the lessor on termination of the lease or surrender of the Property other than upon termination of the lease for a default thereunder) payable under such lease excluding any amounts required to be paid by the lessee (whether or not designated as rents or additional rents) on account of maintenance, repairs, insurance, taxes and similar charges. Net rentals for any future period under any so-called "percentage lease" shall be computed on the basis of the amount reasonably estimated to be payable thereunder for such period, but in any event not less than the amount paid or payable thereunder during the immediately preceding period of the same duration as such future period; provided that the amount estimated to be payable under any such percentage lease shall in all cases recognize any change in the applicable percentage called for by the terms of such lease.

(d) Commitment Indebtedness. No debt service shall be deemed payable with respect to Commitment Indebtedness until such time as the obligation to make payments under the commitment actually rises (and only to the extent of advances actually made under such Commitment Indebtedness) except as provided in the Loan Agreement. From and after such funding, the amount of such debt service shall be calculated in accordance with the actual amount required to be repaid on such Commitment Indebtedness and the actual interest rate and amortization schedule applicable thereto. No Indebtedness shall be deemed to arise when any funding occurs under any such commitment if such funding is immediately repaid and such commitment is reinstated in accordance with its terms, or when any such commitment is renewed upon terms which provide for substantially the same terms of repayment of amounts disbursed pursuant to such commitment as existed prior to such renewal.

(e) Long-Term Indebtedness Supported By Commitment Indebtedness. The Debt Service Requirements on Long-Term Indebtedness with respect to which the Corporation has incurred Commitment Indebtedness that would refinance such Indebtedness for a period extending beyond its original maturity date, may be deemed to be payable in accordance with the terms of such Commitment Indebtedness.

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(f) Variable Rate Indebtedness. In determining the Debt Service Requirements on any Indebtedness which provides for interest to be payable thereon at a rate per annum that may vary from time to time over the term thereof in accordance with procedures provided in the instrument creating such Indebtedness and which for any future period of time is not susceptible of precise determination, the interest rate on such Indebtedness for any period prior to the date of calculation or for which the interest rate has been determined shall be the actual interest rate payable during such period, and for each year in which such Indebtedness is Outstanding and for which the actual interest rate cannot be determined, the interest rate on such Indebtedness for the period of determination shall be deemed to be the average annual rate of interest payable on such Indebtedness during the 12 months immediately preceding the date of calculation, or if such Indebtedness is to be incurred (or was incurred less than 12 months preceding such date), the initial rate or the average annual rate of interest payable on such Indebtedness during such period immediately preceding the date of calculation.

(g) Interest Rate Exchange Agreements. In the case of any interest rate exchange agreements or comparable agreements entered into by the Corporation for a term exceeding one year, pursuant to which the Corporation is obligated to make interest-like payments to or on behalf of another Person and that Person in obligated to make similar interest-like payments to or on behalf of the Corporation (based on a different rate of, or formula for, interest), with neither party obligated to repay any principal, the net amount be paid by the Corporation (computed in accordance with this sentence) shall be taken into account in calculating Debt Service Requirements; if such net amount is less than zero, such net amount may be credited against other interest coming due in so calculating Debt Service Requirements so long as the swap counterparty (or any guarantor thereof) is rated at least as high as the then highest rating on the Outstanding Related Bonds.

Events of Default. The term "event of default," wherever used in the Loan Agreement, means any one of the following events (whatever the reason for such event and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body):

(a) default in the payment of any interest on any Note when such interest becomes due and payable and continuance of such default for a period of 15 days; or

(b) default in the payment of the principal of any Note when the same becomes due and payable (whether at maturity, upon proceedings for redemption, by acceleration or otherwise) and continuance of such default for a period of 15 days; or

(c) default in the performance, or breach, of any covenant or agreement of the Corporation in the Loan Agreement (other than a covenant or agreement a default in the performance or breach of which is specifically dealt with elsewhere), and continuance of such default or breach for a period of 60 days after there has been given to the Corporation by the Authority or the Trustee or to the Corporation and the Trustee by the owners of at least 10% in principal amount of the Bonds Outstanding, a written notice specifying such default or breach and requiring it to be remedied; provided, that if such default cannot be fully remedied within such 60-day period, but can reasonably be expected to be fully remedied, such default shall not constitute an event of default if the Corporation shall immediately upon receipt of such notice commence the curing of such default and shall thereafter prosecute and complete the same with due diligence and dispatch; or

D-44

(d) any representation or warranty made by the Corporation in the Loan Agreement or in any written statement or certificate furnished to the Authority or the Trustee or the purchaser of any Bond in connection with the sale of any Bond or furnished by the Corporation pursuant to the Loan Agreement proves untrue in any material respect as of the date of the issuance or making thereof and shall not be corrected or brought into compliance within 60 days after there has been given to the Corporation by the Authority or the Trustee or to the Corporation and the Trustee by the owners of at least 10% in principal amount of the Bonds Outstanding, a written notice specifying such default or breach and requiring it to be remedied; provided, that if such default cannot be fully remedied within such 60-day period, but can reasonably be expected to be fully remedied, such default shall not constitute an event of default if the Corporation shall immediately upon receipt of such notice commence the curing of such default and shall thereafter prosecute and complete the same with due diligence and dispatch; or

(e) default in the payment of the principal of, premium, if any, or interest on any Indebtedness other than a Note when the same becomes due and payable, and any applicable grace period shall have expired, or an event of default as defined in any mortgage, indenture or other instrument under or pursuant to which there was issued or incurred, or by which there is secured, any such Indebtedness; provided, however, that such default shall not constitute an event of default if payment of such Indebtedness has not been accelerated under the terms of payment of such Indebtedness or if within 30 days, or within the time allowed for service of a responsive pleading in any proceeding to enforce payment of the Indebtedness, the Corporation in good faith commences proceedings, or in proceedings against it, to contest the obligation to pay or the existence or payment of such Indebtedness; and provided further, however, that none of the foregoing shall constitute an event of default unless the amount of such unpaid principal of all Indebtedness so in default exceeds $50,000; or

(f) any final judgment, writ, warrant of attachment or any similar process shall be entered or filed against the Corporation or against any Property of the Corporation and remains unvacated, unpaid, unbonded, unstayed or uncontested in good faith for a period of 60 days; provided, however, that none of the foregoing shall constitute an event of default unless the amount of such judgment, writ, warrant of attachment or similar process, together with the amount of all other such judgments, writs, warrants or similar processes so unvacated, unpaid, unbonded, unstayed or uncontested, exceeds $50,000; or

(g) the entry of a decree or order by a court having jurisdiction in the premises for relief in respect of the Corporation, or adjudging the Corporation a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, adjustment or composition of or in respect of the Corporation under the United States Bankruptcy Code or any other applicable federal or state law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of or for the Corporation or any substantial part of its property, or ordering the winding up or liquidation of its affairs, and the continuance of any such decree or order remains unstayed and in effect for a period of 60 consecutive days; or

(h) the commencement by the Corporation of a voluntary case, or the consent by the Corporation of proceedings adjudicating it to be adjudicated a bankrupt or insolvent, or the consent by it to the Corporation of bankruptcy or insolvency proceedings against it, or the filing by it of a petition or answer or consent seeking reorganization, arrangement or relief under the United

D-45 States Bankruptcy Code or any other applicable federal or state law, or the consent or acquiescence by it to the filing of any such petition or the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of the Corporation or any substantial part of its property, or the making by it of an assignment for the benefit of creditors, or the admission by it in writing of its inability or its failure to pay its debts generally as they become due, or the taking of corporate action by the Corporation in furtherance of any such action; or

(i) the occurrence and continuance of any "event of default" specified in the Indenture that has not been waived.

Promptly after any officer of the Corporation obtains knowledge of a default hereunder, the Corporation will deliver to the Trustee a written notice specifying the nature and period of existence thereof and the action the Corporation is taking and proposes to take with respect thereto.

Acceleration of Maturity; Rescission and Annulment. If an event of default under the Loan Agreement occurs and is continuing, the Trustee, as assignee of the Authority, may, and if requested by the owners of not less than 25% in principal amount of the Bonds Outstanding shall, by written notice to the Corporation and the Authority, declare the principal of the Loan and the interest accrued thereon to be due and payable, and upon any such declaration such principal and interest shall become immediately due and payable.

At any time after such a declaration of acceleration has been made, but before any judgment or decree for payment of money due on the Loan has been obtained by the Trustee, the Trustee may, by written notice to the Corporation, rescind and annul such declaration and its consequences if

(a) the Corporation has deposited with the Trustee a sum sufficient to pay

(1) all overdue installments of interest on all Notes,

(2) the Accreted Value of any Notes which have become due otherwise than by such declaration of acceleration and interest thereon at the rate prescribed therefor in such Notes,

(3) interest upon overdue installments of interest at the rate or rates prescribed therefor in the Notes, and

(4) all sums paid or advanced by the Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel plus interest on any advances at the Prime Rate plus 2%; and

(b) all events of default, other than the non-payment of the Accreted Value of the Notes which have become due solely by such declaration of acceleration, have been cured or have been waived as provided in the Loan Agreement.

No such rescission and annulment shall affect any subsequent default or impair any right consequent thereon.

Exercise of Remedies by the Trustee. Upon the occurrence and continuance of any event of default under the Loan Agreement, unless the same is waived as provided in the Loan Agreement, the Trustee, as

D-46 assignee of the Authority, shall have the following rights and remedies, in addition to any other rights and remedies provided under the Loan Agreement or by law:

(a) Right to Bring Suit, Etc. The Trustee may pursue any available remedy at law or in equity by suit, action, mandamus or other proceeding to enforce the payment of the principal of, premium, if any, and interest on the Loan, including interest on overdue principal (and premium, if any) and on overdue installments of interest, and any other sums due under the Loan Agreement, to enforce and compel the performance of the duties and obligations of the Corporation as set forth in the Loan Agreement and the Use Restriction Agreement and to enforce or preserve any other rights or interests of the Trustee under the Loan Agreement and the Use Restriction Agreement existing at law or in equity.

(b) Exercise of Remedies at Direction of Bondowners. If requested in writing to do so by the owners of not less than 25% in principal amount of Bonds Outstanding and if indemnified as provided in the Indenture, the Trustee shall be obligated to exercise such one or more of the rights and remedies conferred by the Loan Agreement as the Trustee shall deem most expedient in the interests of the bondowners.

(c) Appointment of Receiver. Upon the filing of a suit or other commencement of judicial proceedings to enforce the rights of the Trustee under the Loan Agreement, the Trustee shall be entitled, as a matter of right, to the appointment of a receiver or receivers of the Property subject to the lien and security interest of the Loan Agreement pending such proceedings, with such powers as the court making such appointment shall confer.

(d) Restoration of Positions. If the Trustee has instituted any proceeding to enforce any right or remedy under the Loan Agreement by suit, foreclosure, the appointment of a receiver, or otherwise, and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee, then and in every case the Authority, the Corporation and the Trustee shall, subject to any determination in such proceeding, be restored to their former positions and rights hereunder, and thereafter all rights and remedies of the Trustee shall continue as though no such proceeding had been instituted.

Supplemental Loan Agreements without Consent of Bondowners. Without the consent of the owners of any Bonds, the Authority and the Corporation may from time to time enter into one or more Supplemental Loan Agreements, for any of the following purposes:

(a) to correct or amplify the description of any property of the Corporation at any time subject to the Loan Agreement, or to subject to the Loan Agreement additional property or to more precisely identify any project financed or refinanced out of the proceeds of any series of Bonds, or to substitute or add additional property thereto; or

(b) to add to the conditions, limitations and restrictions on the authorized amount, terms or purposes of the Loan, as therein set forth, additional conditions, limitations and restrictions thereafter to be observed; or

(c) to authorize the issuance of any Additional Notes and make such other provisions as provided in the Loan Agreement; or

(d) to modify or eliminate any of the terms of the Loan Agreement; provided, however, that

D-47 (1) such Supplemental Loan Agreement shall expressly provide that any such modifications or eliminations shall become effective only when there is no Bond Outstanding of any series created prior to the execution of such Supplemental Loan Agreement; and

(2) the Trustee may, in its discretion, decline to approve any such Supplemental Loan Agreement which, in its opinion, may not afford adequate protection to the Trustee when the same becomes operative; or

(e) to evidence the succession of another corporation to the Corporation and the assumption by any such successor of the covenants of the Corporation therein contained; or

(f) to add to the covenants of the Corporation or to the rights, powers and remedies of the Trustee for the benefit of the owners of all or any series of Bonds or to surrender any right or power therein conferred upon the Corporation; or

(g) to cure any ambiguity, to correct or supplement any provision therein which may be inconsistent with any other provision therein or to make any other provisions, with respect to matters or questions arising under the Loan Agreement, which shall not be inconsistent with the provisions of the Loan Agreement, provided such action shall not adversely affect the interests of the owners of the Bonds.

Supplemental Loan Agreements with Consent of Bondowners. With the consent of the owners of not less than a majority in principal amount of the Bonds then Outstanding affected by such Supplemental Loan Agreement, the Authority and the Corporation may enter into Supplemental Loan Agreements, in form satisfactory to the Trustee, for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of the Loan Agreement or of modifying in any manner the rights of the Trustee and the owners of the Bonds under the Loan Agreement; provided, however, that no such Supplemental Loan Agreement shall, without the consent of the owner of each Outstanding Bond affected thereby,

(a) change the stated maturity of the principal of, or any installment of interest on, the Loan, or reduce the principal amount thereof or the interest thereon or any premium payable upon the redemption thereof, or change any place of payment where, or the coin or currency in which, the Loan, or the interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment on or after the stated maturity thereof (or, in the case of redemption, on or after the redemption date); or

(b) reduce the percentage in principal amount of the Outstanding Bonds, the consent of whose owners is required for any such Supplemental Loan Agreement, or the consent of whose owners is required for any waiver provided for in the Loan Agreement of compliance with certain provisions of the Loan Agreement or certain defaults hereunder and their consequences; or

(c) modify any of the provisions of the Indenture relating to amendments, except to increase any percentage provided thereby or to provide that certain other provisions of the Loan Agreement cannot be modified or waived without the consent of the owner of each Bond affected thereby.

D-48 SUMMARY OF THE OPERATING AGREEMENT

The following is a summary of certain provisions of the Operating Agreement. This summary does not purport to be complete, and reference is made to the full text of the Operating Agreement for a complete recital of its terms, as well as a complete recital of the defined terms used therein.

Corporation to Operate Intercollegiate Athletics Program. In accordance with the principle of institutional control of intercollegiate athletics, the intercollegiate athletics program will be operated by the Corporation as a department of the University. Except for those policies and procedures that are unique to the Corporation, passed by the Corporation's Board of Directors, and approved by the President of the University, the Corporation shall be subject at all times to applicable University regulations and administrative policies.

The Corporation shall be entitled to maintain and operate an intercollegiate athletics program located on land and facilities owned or controlled by the University, which are described in the Operating Agreement and under the caption "FACILITIES" in Appendix A to this Official Statement. When the foregoing facilities are under the use and control of the Corporation, the Corporation shall be responsible for such use and control and for any claims arising out of the Corporation's use and control of the facilities. When the foregoing facilities are used and controlled by the University, it is agreed that claims arising out of this use and control shall be subject to the provisions of the Kansas Tort Claims Act, K.S.A. 75-6101, et seq., and that the Corporation's responsibilities shall be limited to any act or omission of the Corporation or its agents and employees.

The University shall provide power and water for indoor and outdoor facilities covered by the Operating Agreement. The University shall also provide such routine police and fire protection as is customarily provided other campus facilities, and shall make available to the Corporation use of the University's telephone system. The Corporation shall be responsible for paying for the use of the telephone system, data network, and its customary share of utilities.

The Corporation shall provide management and operational services for operating an intercollegiate athletics program and to collect and disburse the funds from such operations.

Revenues. All of the Corporation's revenue generated from its operations or facilities shall be the property of the Corporation maintained in special accounts with the Division of Financial Services of the University, and shall be used to defray the cost of operating, improving and maintaining the intercollegiate athletics program of the University, and to defray the cost of operating, constructing, improving, and maintaining facilities for the intercollegiate athletics program. Other revenue and donations that are deposited with the Foundation for the benefit of the intercollegiate athletics program may be drawn upon for expenditures of the Corporation. Any other revenues or donations deposited with the Foundation may be drawn upon for the Corporation's expenditures only upon approval of the President of the University.

Books and Records; Annual Audit. The Corporation will make available to the University all books and records of the Corporation and shall be audited annually by an independent certified public accountant with five copies of each audit furnished to the University's Internal Audit Department for filing with the Board of Regents, the State Division of Post Audit and appropriate University Offices.

Corporation Borrowing Subject to Approval of President of the University. With the prior approval of the President of the University, the Corporation may borrow money for the construction or improvement of facilities or for the purchase of equipment or for operational expenses.

D-49 Term. The Operating Agreement is effective January 26, 2011, and shall automatically and without further action on the part of either party be extended from year-to-year, unless and until one party shall give to the other party one-year written notice. The Operating Agreement shall immediately terminate in the event that the Corporation shall be dissolved either by mutual agreement of both parties or by order of the President of the University, the Board of Regents, or under the command of the laws of the State of Kansas. Notwithstanding the foregoing, (a) in no event shall the term of the Operating Agreement terminate prior to the first date upon which no Bonds are outstanding under the Indenture, without the prior written consent of the Authority and the Trustee and a written confirmation from each nationally recognized rating agency then maintaining a rating on any of the Bonds that such amendment will not adversely affect the ratings assigned to such Bonds and (b) in no event shall the term of the Operating Agreement terminate prior to the date upon which no Series 2002 Bonds are outstanding under the Indenture without the prior written consent of the Bond Insurer with respect to the Series 2002 Bonds.

No Indemnification. Neither the State of Kansas nor the University shall hold harmless or indemnify K-State Athletics, Inc. for any liability whatsoever; furthermore, neither the State of Kansas nor the University shall be required to purchase any insurance against loss or damage to any property or for any other subject matter relating to the Operating Agreement.

Employees. The President of the University retains the final authority to accept or reject the recommendations or decisions of the Compensation Committee or the Corporation's Board of Directors regarding the employment or compensation of any employee of the Corporation. Any employee contract in excess of $100,000 per year, or any contract that creates a financial obligation to an employee or other legal entity for longer than one calendar year must be submitted to the Board of Directors and the President of the University for approval.

Authority to Sign Legal Documents. The parties agree that the only persons with the authority to sign legal documents on behalf of the Corporation (with maximum expenditure commitment limits in parentheses) are: the Chief Executive Officer ($100,000); the Senior Associate Athletic Director/Chief of Staff ($50,000); and the Secretary/Treasurer ($100,000). Any transaction that exceeds these limits must be approved by the Board of Directors of the Corporation.

Use Restriction. Upon the occurrence and continuation of a default in the payment of any Note when the same becomes due and payable (whether at maturity, upon proceedings for redemption, by acceleration or otherwise) and the continuation of such default for a period of 15 days, the University (or the Authority or the Trustee, as assignees of the University's rights under this paragraph) shall have the right to give the Corporation written notice that all rights of the Corporation to use Bramlage Coliseum or the Bill Snyder Family Stadium/Football Complex on the Manhattan campus of the University for men's intercollegiate basketball or football games will be terminated on a date not earlier than 30 days after such notice is given, and if such occurrence of default has not been cured by said date, the University (or the Authority or the Trustee, as assignee of the University's rights under this paragraph) shall terminate all such uses on said date; and if such right is exercised the University may not conduct or authorize any other organization to conduct a men's intercollegiate basketball or football game within 50 miles of the Manhattan campus of the University until such payment default has been cured or no Bonds shall be outstanding under the Indenture. The University shall assign its rights under this paragraph to the Authority and the Trustee pursuant to the Assignment of Rights dated as of January 26, 2011 executed and delivered by the University. The University and the Corporation agree that upon acceptance of the assignment of the rights and obligations of the University and the Corporation under this paragraph to the Authority and the Trustee that the Authority or the Trustee may exercise such rights without the consent of the University or the Corporation.

D-50 Amendments. The Operating Agreement may be reviewed at any appropriate time by written request of either party to the Operating Agreement for the purpose of effecting such revision as may be necessitated by changing conditions, changed laws or regulations. Notwithstanding the foregoing, so long as any Bonds are outstanding, in no event shall the University and the Corporation (a) amend the Operating Agreement in a manner that terminates the Corporation's right to maintain and operate an intercollegiate athletics program on behalf of the University or the Corporation's right to receive the revenues generated from its operations and facilities, or (b) amend the provisions of the Operating Agreement described under the headings "Term," "Use Restriction," "Amendments," "Assignment" and "Third Party Beneficiaries" in any manner, without (i) the prior written consent of the Authority and the Trustee, (ii) a written confirmation from each nationally recognized rating agency then maintaining a rating on any of the Bonds that such amendment will not adversely affect the ratings assigned to such Bonds, and (iii) so long as any Series 2002 Bonds are outstanding under the Indenture, the prior written consent of the Bond Insurer with respect to the Series 2002 Bonds.

Assignment. The Operating Agreement may not be assigned by either party without the written consent of the Authority and the Trustee and a written confirmation from each nationally recognized rating agency then maintaining a rating on any of the Bonds that such assignment will not adversely affect the ratings assigned to such Bonds.

Third Party Beneficiaries. The Authority and the Trustee are intended third-party beneficiaries of the provisions of the Operating Agreement described under the headings "Term," "Use Restriction," "Amendments" and "Assignment," and they shall have enforceable rights and remedies with respect thereto until all of the Bonds are paid in full or legally defeased.

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APPENDIX E

FORM OF CONTINUING DISCLOSURE UNDERTAKING

$______$______KANSAS DEVELOPMENT FINANCE AUTHORITY KANSAS DEVELOPMENT FINANCE AUTHORITY Athletic Facilities Revenue Bonds Taxable Athletic Facilities Revenue Bonds (K-State Athletics, Incorporated Project) (K-State Athletics, Incorporated Project) Series 2012B-1 Series 2012B-2

THIS CONTINUING DISCLOSURE UNDERTAKING, dated as of March 1, 2012 (the “Disclosure Undertaking”), is executed and delivered by K-STATE ATHLETICS, INCORPORATED (the “Corporation”) and UMB BANK, N.A. (the “Dissemination Agent”) in connection with the issuance of the above-referenced bonds (jointly, the “Bonds”). The Bonds are being issued pursuant to a Trust Indenture dated as of December 1, 1998, as supplemented by a First Supplemental Trust Indenture dated as of March 1, 2002, an Amendatory Supplemental Trust Indenture dated as of January 26, 2011, a Second Supplemental Trust Indenture dated as of March 1, 2011 and a Third Supplemental Trust Indenture dated as of March 1, 2012 (collectively, the “Indenture”), between the Kansas Development Finance Authority and UMB Bank, N.A., as trustee. The Corporation and the Dissemination Agent covenant and agree as follows:

Section 1. Definitions. In addition to the definitions set forth in the Indenture, which apply to any capitalized term used in this Disclosure Undertaking unless otherwise defined in this Section, the following capitalized terms shall have the following meanings:

“Annual Report” means any Annual Report described in Section 2(a) of this Disclosure Undertaking.

“Beneficial Owner” means any registered owner of any Bonds and any Person which: (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.

“Board” means the Board of Regents of the State of Kansas.

“Dissemination Agent” shall mean initially UMB Bank, N.A., acting in its capacity as Dissemination Agent hereunder, or any successor Dissemination Agent designated in writing by the Corporation to serve as dissemination agent pursuant to this Disclosure Undertaking, as set forth in Section 5.

“EMMA” means the Electronic Municipal Market Access facility for municipal securities disclosure of the MSRB (www.emma.msrb.org).

“Financial Information” means the financial information of the Corporation described in Section 2(a)(i) hereof.

“Fiscal Year” means the one-year period commencing on July 1 of any year and ending on June 30 of the following year, and numbered for the year in which it ends, or such other date or dates as may be adopted by the Board for its general accounting purposes.

“GAAP” means generally accepted accounting principles, as applied to governmental units as in effect at the time of the preparation of the Annual Report.

“Material Events” means any of the events listed in Section 3(a) hereof.

“MSRB” means the Municipal Securities Rulemaking Board.

“Official Statement” means the Official Statement dated February 16, 2012 for the Bonds.

“Operating Data” means the operating data of the Corporation described in Section 2(a)(ii) hereof.

“Rule” means Rule 15c2-12(b)(5) adopted by the SEC under the Securities Exchange Act of 1934, as the same may be amended from time to time.

“SEC” means the Securities and Exchange Commission of the United States.

“State” means the State of Kansas.

“University” means Kansas State University.

Section 2. Provision of Annual Reports.

(a) The Corporation shall provide, or shall cause the Dissemination Agent to provide, as soon as practicable after they are available, but in no event more than 180 days after the end of each Fiscal Year, commencing with the Fiscal Year ended June 30, 2012, the Financial Information and the Operating Data (jointly, the “Annual Report”) as follows:

(i) Financial Information. Financial Information shall consist of the financial statements of the Corporation for the prior Fiscal Year, beginning with the Fiscal Year ending June 30, 2012, of the type and in substantially the format contained in the K-State Athletics, Inc. Annual Financial Report contained in Appendix B to the Official Statement. The method of preparation and basis of accounting of the Financial Information shall be as set forth in said Appendix B to the Official Statement or otherwise in conformance with State laws or regulations. If the Financial Information in the Annual Report is not prepared in accordance with GAAP, but such Financial Information in accordance with GAAP is available, such Financial Information shall also be provided in accordance with GAAP. The Financial Information in the Annual Report may be unaudited; provided, however, that if audited Financial Information is available, such audited Financial Information shall be provided to the Dissemination Agent for inclusion in the Annual Report when available. If the basis of accounting is changed to a basis less comprehensive than contained in the Official Statement, the Dissemination Agent shall provide notice of such change in the same manner as for a Material Event under Section 3(b) hereof.

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(ii) Operating Data. Operating Data with respect to the Corporation shall consist of the information and data regarding the Corporation in substantially the scope and form contained in each of the tables of information regarding the Corporation in Appendix A to the Official Statement and for the University in Appendix C to the Official Statement. Such information shall include actual information for such Fiscal Year but need not include revised estimates or projections for future Fiscal Years.

(iii) Any or all of the Annual Report may be incorporated by reference from other documents, including official statements of debt issues with respect to the Corporation that have been filed with the MSRB or the SEC and, in the case of a final official statement, that is available from the MSRB. The Corporation shall clearly identify each document incorporated by reference and the source from which it is available. The Financial Information and Operating Data may be submitted separately from the balance of the Annual Report and later than the date required above for the filing of the Annual Report if it is not available by that date. If the Fiscal Year changes, the Dissemination Agent shall provide notice of such change in the same manner as for a Material Event under Section 3(b).

(b) The Dissemination Agent shall:

(i) determine each year prior to the date for providing the Annual Report whether there has occurred a change in the MSRB’s e-mail address or filing procedures and requirements under EMMA; and

(ii) file the Annual Report specified by Section 2(a) hereof, or if the Annual Report is not received from the Corporation and thus not filed within the time period specified in Section 2(a) hereof, the Dissemination Agent shall send a notice to the MSRB in substantially the form attached as Exhibit A to this Disclosure Undertaking.

Section 3. Reporting of Material Events.

(a) The Corporation agrees that it will file, or cause the Dissemination Agent to file, pursuant to Section 3(b) below, in a timely manner not in excess of 10 business days after the occurrence of the event, notice of any of the following events with respect to the Bonds:

(i) principal and interest payment delinquencies;

(ii) non-payment related defaults, if material;

(iii) unscheduled draws on debt service reserves reflecting financial difficulties;

(iv) unscheduled draws on credit enhancements reflecting financial difficulties;

(v) substitution of credit or liquidity providers, or their failure to perform;

(vi) 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

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respect to the tax status of the Bonds, or other material events affecting the tax status of the Bonds;

(vii) modifications to rights of Bondholders, if material;

(viii) bond calls, if material, and tender offers;

(ix) defeasances;

(x) release, substitution or sale of property securing repayment of the Bonds, if material;

(xi) rating changes;

(xii) bankruptcy, insolvency, receivership or similar event of the Corporation*;

(xiii) the consummation of a merger, consolidation or acquisition involving the Corporation or the sale of all or substantially all of the assets of the Corporation, 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; or

(xiv) appointment of a successor additional trustee or the change of name of a trustee, if material.

(b) The Corporation shall file a notice of such occurrence in a timely manner, not in excess of 10 business days after the occurrence of the event with the MSRB, or may request that the Dissemination Agent provide such notice. If so requested by the Corporation, the Dissemination Agent will file a notice of such occurrence as set forth above. Notwithstanding the foregoing, notice of optional or unscheduled redemption of any Bonds or defeasance of any Bonds need not be given under this Disclosure Undertaking any earlier than the notice of such redemption or defeasance is given to the Owners of affected Bonds pursuant to the Indenture.

(c) The Dissemination Agent shall determine each time it is required to file information with the MSRB whether there has occurred a change in the MSRB’s e-mail address or filing procedures and requirements under EMMA.

Section 4. Filing. Submission of material event notices, Annual Reports, or any other filing required by this Disclosure Undertaking shall be effected by sending the filing or notice to the MSRB at www.emma.msrb.org (or such other address or addresses as the MSRB may from time to time specify),

*This event is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent or similar officer for the Corporation 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 Corporation, or if such jurisdiction has been assumed by leaving the existing governing 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 governmental authority having supervision or jurisdiction over substantially all of the assets or business of the Corporation.

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in such electronic format, accompanied by such identifying information, as shall have been prescribed by the MSRB and which shall be in effect on the date of filing of such information.

Section 5. Dissemination Agent. The Corporation may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Undertaking, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. The Dissemination Agent shall not be responsible in any manner for the content of any notice or report prepared by the Corporation. The appointment of a Dissemination Agent shall be effective upon the delivery to the Corporation of written acceptance of such designation in substantially the form set forth in Exhibit B hereto.

Section 6. Termination of Reporting Obligation. The obligations of the Corporation and the Dissemination Agent under this Disclosure Undertaking shall terminate upon the legal defeasance, prior redemption or payment in full of all of the Bonds. If a party’s obligations hereunder are assumed in full by some other entity, such other entity shall be responsible for compliance with this Disclosure Undertaking in the same manner as if it were the signatory hereto, and the assignor shall have no further responsibility hereunder. If such termination or assignment and assumption occurs prior to the final maturity of the Bonds, notice of such termination or assignment and assumption shall be given in the same manner as for a Material Event under Section 3(b).

Section 7. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Undertaking, the Corporation and the Dissemination Agent, if any, may amend this Disclosure Undertaking (and the Dissemination Agent shall not unreasonably refuse to execute any amendment so requested by the Corporation) and any provision of this Disclosure Undertaking may be waived, provided that (a) Bond Counsel or other counsel experienced in federal securities law matters provides the parties to this Disclosure Undertaking with its opinion that the undertakings contained herein, as so amended or after giving effect to such waiver, are in compliance with the Rule and all current amendments thereto and interpretations thereof that are applicable to this Disclosure Undertaking; (b) if the amendment or waiver relates to Section 2(a) or 3(a), it may be made only in connection with a change in circumstances that arises from a change in law or legal requirements, or change in the identity, nature or status of an obligated person with respect to the Bonds, or the type of business conducted; and (c) the amendment or waiver is either (i) approved by the Owners of the Bonds in the same manner as provided in the Indenture for amendments of the Indenture with consent of the Owners or (ii) does not in the opinion of Bond Counsel materially impair the interests of the Owners or Beneficial Owners of the Bonds.

In the event of any amendment or waiver of a provision of this Disclosure Undertaking, such amendment or waiver shall be described in the next Annual Report, which shall include a narrative explanation of the reason for the amendment or waiver and its impact on such Annual Report. In addition, if the amendment relates to the accounting principles to be followed in preparing financial statements: (a) notice of such change shall be given in the same manner as for a Material Event under Section 3(b) and (b) the Annual Report for the year in which the change is made should present a comparison (in narrative form and also, if feasible, in quantitative form) between the financial statements as prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles.

Section 8. Additional Information. Nothing in this Disclosure Undertaking shall be deemed to prevent the Corporation from disseminating any other information, using the means of dissemination set forth in this Disclosure Undertaking or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Material Event, in addition to that which is required by this Disclosure Undertaking. If the Corporation chooses to include any information in any

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Annual Report or notice of occurrence of a Material Event, in addition to that which is specifically required by this Disclosure Undertaking, the Corporation shall have no obligation under this Disclosure Undertaking to update such information or include it in any future Annual Report or notice of occurrence of a Material Event.

Section 9. Noncompliance. In the event of a failure of the Corporation or the Dissemination Agent, if any, to comply with any provision of this Disclosure Undertaking, any Beneficial Owner of the Bonds may take such actions as may be necessary and appropriate, including seeking mandamus or specific performance by court order, to cause the Corporation or the Dissemination Agent, if any, as the case may be, to comply with its obligations under this Disclosure Undertaking. Noncompliance with the provisions of this Disclosure Undertaking shall not be deemed an Event of Default under the Indenture, and the sole remedy under this Disclosure Undertaking in the event of any failure of the Corporation or the Dissemination Agent, if any, to comply with this Disclosure Undertaking shall be an action to compel performance.

Section 10. Duties, Immunities and Liabilities of Dissemination Agent. The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Agreement and the Corporation, to the extent permitted by law, agrees to indemnify and save the Dissemination Agent, its officers, directors, employees and agents, harmless against any loss, expense and liabilities which it may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the costs and expenses (including attorneys’ fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent’s negligence or willful misconduct. The obligations of the Corporation under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds. The Corporation shall pay the fees, charges and expenses of the Dissemination Agent in connection with its administration of this Disclosure Undertaking.

Section 11. Notices. Any notices or communications to or among any of the parties referenced in this Disclosure Undertaking may be given as follows:

(a) With respect to the Corporation:

K-State Athletics, Incorporated 1800 College Ave., Suite 142 Manhattan, Kansas 66502

(b) With respect to the Dissemination Agent:

UMB Bank, N.A. 130 N. Market Wichita, Kansas 67202 Attention: Corporate Trust Department

Any person may, by written notice to the other persons listed above, designate a different address to which subsequent notices or communications should be sent. Any such different address shall be included in the next Annual Report.

Section 12. Beneficiaries. This Disclosure Undertaking shall inure solely to the benefit of the parties hereto and Beneficial Owners from time to time of the Bonds and shall create no rights in any other Person.

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Section 13. Severability. If any provision in this Disclosure Undertaking shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

Section 14. Governing Law. This Disclosure Undertaking shall be governed by and construed in accordance with the laws of the State and any suits and actions arising out of this Disclosure Undertaking shall be instituted in a court of competent jurisdiction in the State.

Section 15. Electronic Transactions. The parties hereto agree that the transaction described herein may be conducted and related documents may be stored by electronic means. Copies, telecopies, facsimiles, electronic files and other reproductions of original executed documents shall be deemed to be authentic and valid counterparts of such original documents for all purposes, including the filing of any claim, action or suit in the appropriate court of law.

Section 16. Counterparts. This Disclosure Undertaking 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.

K-STATE ATHLETICS, INCORPORATED

By: Name: Title:

UMB BANK, N.A., as Dissemination Agent

By: Name: Title:

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Exhibit A to Continuing Disclosure Undertaking

Notice Of Failure To File Annual Report

Name of Obligated Person: K-State Athletics, Incorporated

Name of Bond Issue: $______Kansas Development Finance Authority Athletic Facilities Revenue Bonds (K-State Athletics, Incorporated Project), Series 2012B-1 and $______Kansas Development Finance Authority Taxable Athletic Facilities Revenue Bonds (K-State Athletics, Incorporated Project), Series 2012B-2

Date of Issuance: March __, 2012

NOTICE IS HEREBY GIVEN that the Obligated Person has not provided an Annual Report with respect to the above-named Bonds as required by the Continuing Disclosure Undertaking dated as of March 1, 2012. The Obligated Person anticipates that the Annual Report will be filed by .

Dated:

[DISSEMINATION AGENT], as Dissemination Agent

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Exhibit B

to Continuing Disclosure Undertaking

Acceptance Of Dissemination Agent

Name of Obligated Person: K-State Athletics, Incorporated

Dissemination Agent:

Notice Address of Dissemination Agent:

The Dissemination Agent set forth above, having been duly appointed by the Corporation to act in the capacity of Dissemination Agent pursuant to the Continuing Disclosure Undertaking to which this acceptance is attached, hereby accepts such duties and responsibilities set forth therein.

Dated:

[DISSEMINATION AGENT]

By , as Dissemination Agent

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APPENDIX F

PROPOSED FORM OF APPROVING OPINION OF BOND COUNSEL

[Closing Date]

Kansas Development Finance Authority K-State Athletics, Incorporated Topeka, Kansas Manhattan, Kansas

UMB Bank, N.A. Kansas City, Missouri

Re: Kansas Development Finance Authority Athletic Facilities Revenue Bonds (K-State Athletics, Incorporated Project), Series 2012B-1 (the "Series 2012B-1 Bonds")

Kansas Development Finance Authority Taxable Athletic Facilities Revenue Bonds (K-State Athletics, Incorporated Project), Series 2012B-2 (the "Series 2012B-2 Bonds")

Ladies and Gentlemen:

We have acted as bond counsel in connection with the issuance by the Kansas Development Finance Authority (the "Authority") of the above-captioned Series 2012B-1 Bonds and Series 2012B-2 Bonds (collectively, the "Series 2012B Bonds"), pursuant to the Kansas Development Finance Authority Act, K.S.A. 74-8901, et seq., as amended, and a Trust Indenture dated as of December 1, 1998, as supplemented by a First Supplemental Trust Indenture dated as of March 1, 2002, an Amendatory Supplemental Trust Indenture dated as of January 26, 2011, a Second Supplemental Trust Indenture dated as of March 1, 2011, and a Third Supplemental Trust Indenture dated as of March 1, 2012 (collectively, the "Indenture"), between the Authority and UMB Bank, N.A., as trustee (the "Trustee"). Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Indenture.

We have examined the law and such certified proceedings and other documents as we deem necessary to render this opinion. As to questions of fact material to our opinion, we have relied upon representations of the Authority and the Corporation contained in the Loan Agreement and the certified proceedings and other certifications of public officials and others furnished to us, without undertaking to verify the same by independent investigation.

Reference is made to the opinions of even date herewith of counsel to the Corporation, with respect to, among other matters, (a) the corporate status and due organization of the Corporation, (b) the status of the Corporation as an organization described in Section 501(c)(3) of the Internal Revenue Code of 1985, as amended (the "Code"), (c) the corporate power of the Corporation to enter into and perform their obligations under the Loan Agreement, the Series 2012B Note and certain other documents, and (d) the due authorization, execution and delivery of the Loan Agreement, the Series 2012B Note and certain other documents by the Corporation and the binding effect and enforceability of those documents against the Corporation.

Based upon the foregoing, we are of the opinion, under existing law, as follows:

1. The Series 2012B Bonds have been duly authorized, executed and delivered by the Authority and are valid and legally binding special obligations of the Authority, payable solely from the Loan payments made by the Corporation under the Loan Agreement and from other funds held by the Trustee and pledged under the Indenture on a parity of lien basis with the Authority's Series 2002 Bonds, Series 2011A Bonds and any Additional Bonds issued pursuant to the provisions of the Indenture. The Series 2012B Bonds do not constitute a debt or liability of the State of Kansas or of any political subdivision thereof within the meaning of any constitutional or statutory provision or limitation and do not constitute a pledge of the full faith and credit of the State of Kansas or of any political subdivision thereof. The issuance of the Series 2012B Bonds shall not, directly, indirectly or contingently, obligate the State of Kansas or any political subdivision thereof to levy any form of taxation therefor or to make any appropriation for their payment.

2. The Indenture and the Loan Agreement have been duly authorized, executed and delivered by the Authority and are valid and legally binding agreements of the Authority, enforceable against the Authority. The Series 2012B Note has been duly endorsed by the Authority to the Trustee and all of the Authority's right, title and interest in the Loan Agreement (except certain rights to indemnification, reimbursement and administrative fees) and the Series 2012B Note have been duly assigned by the Authority to the Trustee under the Indenture for the benefit and security of the owners of the Bonds.

3. All requirements for the issuance of the Series 2012B Bonds as Additional Bonds under the Indenture have been met, and the issuance of the Series 2012B Bonds will not result in the interest on any Tax-Exempt Bonds then Outstanding becoming subject to federal income taxes then in effect.

4. The interest on the Series 2012B-1 Bonds (including any original issue discount properly allocable to an owner of a Series 2012B-1 Bond) is excludable from gross income for federal income tax purposes and is not an item of tax preference for purposes of computing the federal alternative minimum tax imposed on individuals and corporations, but is taken into account in determining adjusted current earnings for the purpose of computing the alternative minimum tax imposed on certain corporations. The opinions set forth in this paragraph are subject to the condition that the Authority and the Corporation comply with all requirements of the Code that must be satisfied subsequent to the issuance of the Series 2012B-1 Bonds in order that interest thereon be, or continue to be, excludable from gross income for federal income tax purposes. The Authority and the Corporation have covenanted to comply with all of these requirements. Failure to comply with certain of these requirements may cause the interest on the Series 2012B-1 Bonds to be included in gross income for federal income tax purposes retroactive to the date of issuance of the Series 2012B-1 Bonds. The Series 2012B-1 Bonds have not been designated as "qualified tax-exempt obligations" for purposes of Section 265(b) of the Code.

5. The interest on the Series 2012B Bonds is exempt from all Kansas state, county and municipal taxes, including income, inheritance and property taxes; provided, however, that no opinion is expressed with respect to the applicability of the privilege tax imposed on banking institutions pursuant to K.S.A. 79-1107 and 79-1108. . The rights of the owners of the Series 2012B Bonds and the enforceability of the Series 2012B Bonds, the Trust Indenture, the Loan Agreement and the Series 2012B Note may be limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors’ rights generally and by equitable principles, whether considered at law or in equity.

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This opinion is given as of its date, and we assume no obligation to revise or supplement this opinion to reflect any facts or circumstances that may come to our attention or any changes in law that may occur after the date of this opinion.

Very truly yours,

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APPENDIX G

BOOK-ENTRY ONLY SYSTEM

The Depository Trust Company (“DTC”), New York, New York, will act as securities depository for the Series 2012 Bonds. The Series 2012 Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered security certificate will be issued for each series of the Series 2012 Bonds, each in the aggregate principal amount of such series, and will be deposited with DTC.

DTC, the world’s largest depository, is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, 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 3.5 million issues of U.S. and non-U.S. equity, corporate and municipal debt issues, and money market instruments from over 100 countries that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”). DTC has Standard & Poor’s highest rating: AAA. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com and www.dtc.org.

Purchases of the Series 2012 Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Series 2012 Bonds on DTC’s records. The ownership interest of each actual purchaser of each Series 2012 Bond (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Series 2012 Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the Series 2012 Bonds, except in the event that use of the book-entry system for the Series 2012 Bonds is discontinued.

To facilitate subsequent transfers, all Series 2012 Bonds deposited by Direct Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co. or such other name as may be requested by an authorized representative of DTC. The deposit of Series 2012 Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Series 2012 Bonds;

DTC’s records reflect only the identity of the Direct Participants to whose accounts such Series 2012 Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers.

Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of the Series 2012 Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Series 2012 Bonds, such as redemptions, tenders, defaults, and proposed amendments to the security documents. For example, Beneficial Owners of the Series 2012 Bonds may wish to ascertain that the nominee holding the Series 2012 Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them.

Redemption notices shall be sent to DTC. If less than all of the Series 2012 Bonds within an issue are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed.

Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to the Series 2012 Bonds unless authorized by a Direct Participant in accordance with DTC’s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the Authority as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts the Series 2012 Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).

Payment of principal or redemption price of and interest on the Series 2012 Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from the Authority or Trustee, on the payment date in accordance with their respective holdings shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name,” and will be the responsibility of such Participant and not of DTC, its nominee, the Trustee, or Authority, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal or redemption price of and interest on the Series 2012 Bonds to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the Authority or Trustee. Disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants.

DTC may discontinue providing its services as depository with respect to the Series 2012 Bonds at any time by giving reasonable notice to Authority or Trustee. Under such circumstances, in the event that a successor securities depository is not obtained, bond certificates are required to be printed and delivered.

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

THE INFORMATION IN THIS APPENDIX CONCERNING DTC AND DTC’S BOOK-ENTRY SYSTEM HAS BEEN OBTAINED FROM DTC. NEITHER THE AUTHORITY NOR

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THE PAYING AGENT WILL HAVE ANY RESPONSIBILITY OR OBLIGATION TO DIRECT PARTICIPANTS, INDIRECT PARTICIPANTS OR ANY BENEFICIAL OWNER WITH RESPECT TO: (1) THE ACCURACY OF ANY RECORDS MAINTAINED BY DTC, ANY DIRECT PARTICIPANT OR ANY INDIRECT PARTICIPANT; (2) THE PAYMENT BY DTC OR ANY DIRECT PARTICIPANT OR INDIRECT PARTICIPANT OF ANY AMOUNT WITH RESPECT TO THE PRINCIPAL OF, PREMIUM, IF ANY, OR INTEREST ON THE SERIES 2012 BONDS; (3) ANY NOTICE WHICH IS PERMITTED OR REQUIRED TO BE GIVEN TO BONDHOLDERS UNDER THE INDENTURE; OR (4) ANY CONSENT GIVEN OR OTHER ACTION TAKEN BY DTC AS BONDOWNER.

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