University of Virginia Library

SECTION 204. Determination of Fixed Interest Rate.

(a) If (i) the State Treasurer, the Bank, the Paying Agent and the Remarketing Agent shall have received a notice from the University given not less than forty-five (45) days in advance of December 1 in the Effective Year or any December 1 thereafter to the effect that the University elects to convert all of the Bonds to a Fixed Interest Rate on the next Fixed Rate Date, together with an opinion of Bond Counsel that such conversion will not cause interest on the Bonds to be subject to federal income tax, or (ii) at least forty-five (45) days prior to the expiration date of the Credit Facility, or any Substitute Credit Facility or Alternate Credit Facility, the University shall not have delivered a new Substitute Credit Facility or Alternate Credit Facility to the Paying Agent in accordance with the provisions of Sections 401 and 402 hereof, a Fixed Interest Rate for the Bonds of each stated maturity shall be established at a rate computed as hereinafter set forth on the next Fixed Rate Date.

(b) Prior to establishing a Fixed Interest Rate for the Bonds of each stated maturity, a Preliminary Fixed Interest Rate for the Bonds of each stated maturity shall be determined by the Remarketing Agent on the Determination Date next preceding the

Fixed Rate Date. The Preliminary Fixed Interest Rate for the Bonds of each stated maturity will be that rate which, in the judgment of the Remarketing Agent based on prevailing market rates, such judgment to be exercised in its sole discretion, is the minimum rate necessary for the Remarketing Agent to sell all of the Bonds of such maturity deemed to have been tendered pursuant to Section 402 hereof at par at 10:00 A.M., New York time, on the Fixed Rate Date. Prior to Noon, New York time, on such Determination Date, the Remarketing Agent shall notify the Paying Agent and the University of each Preliminary Fixed Interest Rate by telephone or other telecommunications device and shall confirm such notice in writing as soon as practicable thereafter. The Paying Agent shall then notify the State Treasurer of such Preliminary Fixed Interest Rates prior to 5:00 P.M., New York time, on such Determination Date. Notice of the Preliminary Fixed Interest Rates will be mailed by first-class mail by the Paying Agent to each Holder at his address as shown on the registration books on or before the second Business Day following such Determination Date. Such notice shall (i) specify the Fixed Rate Date, (ii) shall state that after the Fixed Rate Date the Holders shall no longer be entitled to deliver Bonds for purchase pursuant to the Series Resolution and that funds provided by the Credit Facility will no longer be available to pay principal on the Bonds, (iii) state, if available, what the Moody's rating on the Bonds will be after the Fixed Rate Date, (iv) state that the interest rate on the Bonds of each stated maturity will be converted as of the Fixed Rate Date to be the Preliminary Fixed Interest Rate for such maturity or, if higher, the Fixed Interest Rate for such maturity determined as provided in the Series Resolution and that such rate will remain in effect from and including the Fixed Rate Date until payment of the principal or redemption price of the Bonds of such maturity shall have been made or provided for in accordance with the Series Resolution, whether at maturity, upon redemption or otherwise, (v) state the Preliminary Fixed Interest Rates for the Bonds of each stated maturity, (vi) state that all Holders who wish to continue to own Bonds must give notice to that effect to the Paying Agent no later than 4:00 P.M., New York time, on the November 15 prior to the Fixed Rate Date or be deemed to have tendered their Bonds for purchase and (vi) state that any Holders of Bonds that are deemed to have tendered their Bonds shall not be entitled to any payment (including any interest to accrue subsequently to the Fixed Rate Date) other than the purchase price for such Bonds which shall be equal to the unpaid principal amount of such Bonds, and such Bonds shall no longer be entitled to the benefits of the Resolution except for the purpose of payment of the purchase price therefor, which payment shall be made only upon the surrender of such Bonds at the principal corporate trust office of the Paying Agent.

The Remarketing Agent shall determine the Fixed Interest Rate for the Bonds of each stated maturity on the third Business Day next preceding the Fixed Rate Date as hereinafter described. If no Bonds of a stated maturity shall be deemed to have been tendered to the Paying Agent for purchase on the Fixed Rate Date, the Fixed Interest Rate for the Bonds of such stated maturity will be a rate per annum equal to the Preliminary Fixed Interest Rate for the Bonds of such stated maturity. If any Bonds of a stated maturity shall be deemed to have been tendered to the Paying Agent for purchase on the Fixed Rate Date, the Fixed Interest Rate borne by all Bonds of such stated maturity will be a rate determined by the Remarketing Agent to be that rate, which, in the judgment of the Remarketing Agent based on prevailing market rates, such judgment to be exercised in its sole discretion, is the minimum rate necessary for the Remarketing Agent to sell all Bonds of such stated maturity deemed to have been tendered at par at 10:00 A.M., New York time, on the Fixed Interest Date.

On the Business Day following the determination of the Fixed Interest Rates the Remarketing Agent shall notify the Paying Agent and the University of the Fixed Interest Rates by telephone or other telecommunications device and shall confirm such notice in writing as soon as practicable thereafter. The Paying Agent shall then promptly notify the State Treasurer of the Fixed Interest Rates. Notice of the Fixed Interest Rates shall be mailed by first-class mail by the Paying Agent to each holder of Bonds on or before the second Business Day after their determination.

(c) Any Holder desiring to retain Bonds after the Fixed Rate Date must notify the Paying Agent in writing received not later than the November 15 prior to the Fixed Rate Date. Said notice shall state in substance:

• (1) The numbers and principal amounts of the Bonds which the Holder wishes to retain after the Fixed Rate Date;
• (2) A statement that the Holder wishes to continue to hold the Bonds specified in (1) above; and
• (3) The Holder is aware that the rating assigned to the Bonds by Moody's may be reduced or changed.

Any Holders not providing the Paying Agent with the notice described above shall be deemed to have tendered their Bonds to the Paying Agent effective as of the Fixed Rate Date and any such Holders shall have only those rights with respect to such Tendered Bond as are set forth in Section 207 hereof.

(d) In no event shall any Fixed Interest Rate exceed the Maximum Interest Rate unless the Board shall have amended the

Resolution to provide a higher Maximum Interest Rate pursuant to Section 801 hereof.

(e) In addition to bearing interest at the Fixed Interest Rate as described above, Bank Bonds shall bear interest as provided in Section 202 hereof during any period in which such Bank Bonds are held by the Bank or its designee.