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EXHIBIT B

Project No. CH-NC-73-(D)
University of North Carolina
Chapel Hill, North Carolina

SPECIAL CONDITIONS:

(a) The Borrower shall offer for public sale at the same time, subject to competitive bidding, its "University of North Carolina Dormitory System Revenue Bonds of 1963, Series A, C, D, E, and F", dated November 1, 1963, in the aggregate principal amount of $6,724,000, deposit the accrued interest received from such sale of such Bonds into the "University of North Carolina Dormitory System Bond and Interest Sinking Fund Account of 1963" provided for by Special Condition (e) hereof and utilize the principal proceeds as follows:

(1) The principal proceeds derived from the sale of any of the Series A bonds, together with the remaining unsold portion of such Series, shall be used to effect a refunding of the Borrower's outstanding "University of North Carolina Dormitory Revenue Bonds - Series 1956", dated November 1, 1956, scheduled to mature from November 1, 1964, through November 1, 1994, totaling $1,647,000 in principal amount and now held by the Government.

(2) The principal proceeds derived from the sale of any of the Series C Bonds, together with the remaining unsold portion of such Series, shall be used to effect a refunding of the Borrower's outstanding "University of North Carolina Dormitory Revenue Bonds of 1960, Series "A", dated November 1, 1960, scheduled to mature from November 1, 1971 through November 1, 1979, totaling $533,000 in principal amount and now held by the Government

(3) The principal proceeds derived from the sale of any of the Series D Bonds, together with the remaining unsold portion of such Series, shall be used to effect a refund of the Borrower's outstanding "University of North Carolina Dormitory Revenue Bonds of 1960, Series B", dated November 1, 1960, scheduled to mature from November 1, 1980, through November 1, 1991, totaling $1,000,000 in principal amount and now held by the Government.

(4) The principal proceeds derived from the sale of any of the Series E Bonds, together with the remaining unsold portion of such Series, shall be used to effect a refunding of the Borrower's outstanding "University of North Carolina Dormitory Revenue Bonds of 1960, Series C", dated November 1, 1960, scheduled to mature from November 1, 1992, through November 1, 2000, totaling $1,000,000 in principal amount and now held by the Government.

(5) The principal proceeds, $2,544,000 derived from the sale of the Series F bonds shall be deposited into the Construction Account on Project CH-NC-73 (D) as herein provided for.

Notwithstanding the above provisions of this Condition, the aggregate amount of the "University of North Carolina Dormitory System Revenue Bonds of 1963" and of the individual Series shall be reduced by the amounts of the Bonds, if any, which shall have been retired prior to the actual consummation of the contemplated exchange and sale; provided, however, that in such an event, the retirement schedules, the bond numbers and the redemption provisions of said individual Series of Bonds shall be revised to indicate such lesser amount or amounts.

(b) The Borrower covenants and agrees, as soon as the provisions of Special Condition (a) above have been complied with, to establish a "University of North Carolina Dormitory System" (hereinafter sometimes referred to as the "Dormitory System") to consist of:

(1) The Existing dormitories for men known as Avery Hall, Parker Hall and Teague Hall and the housing addition to Spencer Hall constructed under Project NC. 31-CH-8 (D) and financed from the proceeds of the "University of North Carolina Dormitory Revenue Bonds - Series 1956", dated November 1, 1956, herein refunded.