University of Virginia Library

Section 2. For the purpose of providing funds for the purpose set forth in paragraph (e) of Section 1 hereof, the University is hereby authorized to borrow the sum of $7,500,000 from the Foundation and, in evidence thereof, to issue its promissory note (the "Note") in the principal amount of Seven Million Five Hundred Thousand Dollars ($7,500,000). The principal of and the interest on the Note shall be payable solely from available funds of University of Virginia Hospitals, subject to the rights of the registered owners of the Prior Bonds and the rights of the holders of any additional Bonds issued pursuant to the Master Resolution adopted by the Executive Committee of the Board on November 30, 1984, as amended on May 30, 1985 (collectively, the "Master Resolution") and the holders of Parity Indebtedness (as defined in the Master Resolution) in and to the Net Revenues (as defined in the Master Resolution).

The Note shall be dated as of the date of issuance thereof and shall be stated to mature, subject to the right of prepayment hereinafter set forth, on the fifth anniversary of its date; provided, however, that the stated maturity of the Note may be extended, at the option of the Foundation, for an additional period of five years. The Foundation shall exercise such option be delivering to the Vice President for Business and Finance of the University, not later than 30 days prior to the original stated maturity of the Note, written notice of its election to so extend the maturity. In such event the University shall cause to be executed and delivered to the Foundation a new promissory note of the University, in substantially the form of the Note hereinafter set forth, reflecting such extended maturity date, and simultaneously therewith the Foundation shall deliver to the University, in exchange therefor, the Note. The Vice President for Business and Finance of the University shall promptly upon receipt of the original Note cause the same to be cancelled.

• The Note shall bear interest as follows:
• (a) With respect to any proceeds of the Note that have not been expended by the University, the interest thereon shall be equal to the investment income, including capital

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  gains, realized thereon, such amount to be paid to the Foundation by the University promptly upon receipt by the University. For purposes of this subparagraph, the purchase of an investment by the University shall not be deemed to constitute an expenditure of proceeds of the Note.
• (b) To the extent any proceeds of the Note have been expended by the University, the average outstanding balance for any calendar quarter shall bear interest, calculated on the basis of a year of 365/366 days and actual days elapsed, payable quarterly in arrears on each February 1, May 1, August 1 and November 1 at a rate per annum equal to the average rate earned on the Common Fund Short-Term Fund for the previous calendar quarter plus 1/2 of 1%. Such rate shall be recalculated quarterly.

The University covenants to maintain records and books of account in form sufficient to enable the calculations required by the preceding paragraph to be made in a timely manner, which records and books of account shall be available for inspection by the Foundation, acting through its officers, agents, employees and other authorized representatives, at reasonable times and upon reasonable notice. The University covenants that it will provide prompt written notice to the Foundation of any expenditure of the proceeds of the Note, determined as provided in Section 5 hereof, specifying the amount of such expenditure and the date on which it was made.

Both the principal of and the interest on the Note shall be payable in such lawful money of the United States of America as at the time of payment thereof is legal tender for the payment of public and private debts. The principal of the Note shall be payable, upon the presentation and surrender thereof, at the office of the Vice President for Business and Finance of the University, Madison Hall, University Avenue, Charlottesville, Virginia. Payment of interest on the Note shall be made on each interest payment date to the Foundation.

The Note may be prepaid, at the option of the University, at any time prior to the maturity thereof, either in whole or in part, from any moneys that may be made available for such purpose, at the principal amount of the Note to be prepaid, together with the interest accrued thereon to the date of prepayment, without penalty.

On the date of prepayment, moneys for such prepayment having been delivered to the Foundation, the University's obligation with respect to the Note or any part thereof so prepaid shall be discharged and any interest on the Note or any part thereof so prepaid shall cease to accrue.

The Note shall not be transferable by the Foundation without the prior written consent of the Vice President for Business and Finance of the University.