At a meeting of the South Boston Town Council held on May 10, 2004 at 7:00 p.m. in the Council Chambers on Yancey Street, the following were present: Vice-Mayor Carroll Thackston, presiding, Council Member T. Chris Elliott, Council Member Edward Owens, Council Member Thomas S. Raab, Council Member J. Eric Roberts, Council Member D. Coleman Speece, Town Manager Terry A. “Ted” Daniel. Absent: Mayor Glen N. Abernathy. Staff: Director of Finance S. V. Saunders; Police Chief Mick Reed; Director of Public Works Alan Auld; and Town Clerk Jane Jones.

Rev. John Eure, Pastor, Ash Avenue Baptist Church, gave the invocation. On motion of Mr. Elliott, seconded by Mr. Owens, Council voted unanimously to approve the minutes of the April 12 and 26, 2004 meetings.

*SPECIAL USE PERMIT APPROVED TO ALLOW HALIFAX REGIONAL HOSPITAL TO CONSTRUCT A CARDIAC CARE FACILITY

The meeting having been duly advertised constituted a public hearing on a request from Halifax Regional Hospital for a special use permit to allow the construction of an attached facility to provide cardiac catheterization and non-invasive cardiology procedures at Halifax Regional Hospital. The Planning Commission held a public hearing on this issue on April 14, 2004 and recommended approval with no conditions. Mr. Mike Thomas, Manager of Support Services for Halifax Regional Hospital, spoke in support of the application. No one spoke in opposition. On motion of Mr. Raab, seconded by Mr. Speece, Council voted unanimously to approve the following resolution. The members of the Council voted as follows:

Yes No Absent Abstained

Elliott, T. C. None Abernathy, G none

Owens, Edward

Raab, Thomas

Roberts, Eric

Speece, Coleman

Thackston, Carroll

RESOLUTION OF THE SOUTH BOSTON TOWN COUNCIL APPROVING SPECIAL USE PERMIT #03-040301 TO ALLOW HALIFAX REGIONAL HOSPITAL TO CONSTRUCT A TWO-STORY CARDIAC CATHETERIZATION ADDITION TO THEIR EXISTING STRUCTURE IN A T-1 TRANSITIONAL ZONE

WHEREAS §114-235 [c] [2] states that Town Council action on Special Use Permits shall be by resolution, and

WHEREAS, the Halifax Regional Hospital, 2204 Wilborn Avenue, tax parcel 04-01-00-0004, has applied for a Special Use Permit to allow the construction of a 15,000 square foot two-story addition to provide cardiac catheterization services and non-invasive cardiology procedures at Halifax Regional Hospital, and

WHEREAS, §114-64 [b] [4] allows Hospitals, including customary incidental and support uses, as permitted by special use permit in T-1 Transitional Districts, and

WHEREAS, upon recommendation of the South Boston Planning Commission, the Town Council conducted a duly advertised public hearing on the Special Use Permit Application on April 14, 2004.

THEREFORE BE IT RESOLVED by the South Boston Town Council that Special Use Permit #03-040301 is approved and issued indefinitely with no conditions.

BE IT RESOLVED FURTHER, that in issuing this Special Use Permit, the Town Council of South Boston has determined that:

[a] Required public notices and adjacent property owner notifications were duly and legally made;

[b] Public comment was solicited during a required public hearing;

[c] Issuing the Special Use Permit will not harm or jeopardize the public health, safety and/or welfare of adjacent properties.

ADOPTED this 10^th day of May 2004.

*SECOND READING AND ADOPTION OF AN ORDINANCE AUTHORIZING THE ISSUANCE OF UP TO $4,500,000 GENERAL OBLIGATION BONDS

The meeting having been duly advertised constituted a public hearing on the Town’s intention to authorize the issuance of $4.5 million dollar general obligation bonds. Council adopted the ordinance on first reading at the April 26, 2004 meeting. No one spoke for or against the issue. On motion of Mr. Owens, seconded by Mr. Raab, Council voted unanimously to adopt the following ordinance on second and final reading.

AN ORDINANCE AUTHORIZING THE ISSUANCE OF UP TO $4,500,000 PRINCIPAL AMOUNT OF GENERAL OBLIGATION BONDS AND NOTES OF THE TOWN OF SOUTH BOSTON, VIRGINIA, FOR PURPOSES OF THE ACQUISITION, CONSTRUCTION, RENOVATION AND EQUIPPING OF PUBLIC WATER, SEWER, STORMWATER MANAGEMENT AND STREET FACILITIES, AND FOR A GRANT TO THE COMMUNITY ARTS CENTER FOUNDATION FOR CAPITAL IMPROVEMENTS FOR PUBLIC PURPOSES.

Be it Ordained by the Town Council of the Town of South Boston:

Section 1 ¾ Definitions

Unless the context shall clearly indicate some other meaning, the following words and terms shall for all purposes of this Ordinance and of any certificate, resolution or other instrument amendatory thereof or supplemental thereto for all purposes of any opinion or instrument or other documents therein or herein mentioned, have the following meanings:

“Act” shall mean the Public Finance Act, Chapter 26, Title 15.2 of the Code of Virginia of 1950, as amended.

“Bank” shall mean Community National Bank, South Boston, Virginia.

“Bond Anticipation Note” shall mean the Town’s General Obligation Note (Capital Improvement Projects), Series 2004A, authorized to be issued hereunder.

“Bond Counsel” shall mean Sands, Anderson, Marks & Miller, a Professional Corporation or another attorney or firm of attorneys nationally recognized on the subject of municipal bonds selected by the Town.

“Bonds” shall mean the Town’s general obligation bonds in an aggregate principal amount not to exceed $4,500,000 to finance and refinance the Project, authorized to be issued hereunder.

“Business Day” shall mean any Monday, Tuesday, Wednesday, Thursday or Friday on which commercial banks generally are open for business in the Commonwealth of Virginia.

“Clerk” shall mean the Clerk of the Council or the Deputy Clerk of the Council.

“Closing Date” shall mean the date on which the Notes are issued and delivered to the Bank.

“Code” shall mean the Internal Revenue Code of 1986, as amended, and applicable regulations, procedures and rulings thereunder.

“Commonwealth” shall mean the Commonwealth of Virginia.

“Council” shall mean the Town Council of the Town of South Boston, Virginia.

“Grant Anticipation Note” shall mean the Town’s General Obligation Note (Capital Improvement Projects), Series 2004B, authorized to be issued hereunder.

“Interest Accounts” shall mean the Interest Accounts in the Note Funds established by Section 6.

“Interest Date” shall mean each June 1 and December 1, beginning December 1, 2004, while any portion of the principal amount of the Notes is Outstanding.

“Maturity Date” shall mean one year after the Closing Date for the Grant Anticipation Note and three years after the Closing Date for the Bond Anticipation Note.

“Mayor” shall mean the Mayor or Vice Mayor of the Council.

“Note Funds” shall mean the Note Funds established by Section 6.

“Noteholders” or “Holders” shall mean the registered owners of the Notes.

“Notes” shall mean the Bond Anticipation Note and the Grant Anticipation Note.

“Outstanding” when used in reference to the Notes shall mean, as of a particular date, the Notes authenticated and delivered under this Ordinance except as to:

(i) any Note which is canceled by the Town at or before such date;

(ii) any Note for which cash equal to the principal amount of such Note, with interest to the date of maturity, shall have been deposited with the Paying Agent prior to maturity;

(iii) any Note for the redemption or purchase of which cash or noncallable direct obligations of the United States of America, equal to the redemption or purchase price thereof to the redemption or purchase date, shall have been deposited with the Paying Agent, for which notice of redemption or purchase shall have been given in accordance with the Ordinance;

(iv) any Note in lieu of, or in substitution for which, another Note shall have been authenticated and delivered pursuant to this Ordinance; and

(v) any Note which is deemed paid under the provisions of Section 9, except that such Note shall be considered Outstanding until the maturity or redemption date thereof only for the purposes of actually being paid.

“Paying Agent” shall mean the Town Director of Finance acting as Paying Agent hereunder as designated and authorized under Section 3 or the successors or assigns serving as such hereunder.

“Principal Account” shall mean the Principal Account in the Note Fund established by Section 6.

“Proceeds Funds” shall mean the Proceeds Funds established by Section 4.

“Registrar” shall mean the Paying Agent, or the successors or assigns serving as such hereunder.

“Series 2003 Note” shall mean the obligation of the Town to the Bank not to exceed the principal amount of $1,500,000, originally issued in May of 2003.

“Town" shall mean the Town of South Boston, Virginia.

“Town Finance Director” shall mean the Director of Finance of the Town.

“Town Manager” shall mean the Town Manager of the Town.

“Town Charter” shall mean the Town Charter of the Town of South Boston, as amended.

Section 2 ¾ Findings and Determinations

The Council hereby finds and determines that (i) the Town is in need of funds to be used by the Town to finance and refinance the acquisition, construction, and equipping of public water facilities, public sewer facilities, public stormwater management facilities and public street facilities, and to finance a grant to the Community Arts Center Foundation for capital improvements for public purposes (together, the “Project”) including the refunding of the Series 2003 Note, for costs of issuance of the Bonds and the Notes and for the payment of interest on the Bonds and the Notes; (ii) the obtaining of such funds will be for municipal purposes of the Town, for the welfare of citizens of the Town, for purposes which will serve the Town and its citizens pursuant to the authority of the Town to provide funds for and otherwise support the welfare of the Town’s citizens; and (iii) the most effective, efficient and expedient manner in which to provide such funds is through general obligation bonds and notes in an original principal amount not to exceed $4,500,000, to be issued by the Town as further described herein. The Council has held a public hearing on this Ordinance in accordance with the requirements of the Act prior to the final adoption of this Ordinance. The Bonds are authorized by this Ordinance. The Bond Anticipation Note is authorized by this Ordinance in anticipation of the issuance of the Bonds and the Grant Anticipation Note is authorized by this Ordinance and issued in advance of grants and reimbursements due the Town from the federal and state governments, all for the Project. The Notes are to be sold to the Bank, which has offered to purchase the same on certain terms and conditions pursuant to a Note Purchase Agreement between the Council and the Bank (the “Note Purchase Agreement”) the form of which has been presented to the Council, the issuance of such Bonds and Notes being within the power of the Town to contract debts, borrow money and make and issue evidence of indebtedness. The issuance of the Bonds and the Notes is in the best interests of the Town and its citizens. The Council elects to issue the Notes pursuant to the Act.

Section 3 ¾ Authorization, Form and Details of the Notes

There is hereby authorized to be issued general obligation Bonds of the Town in an aggregate original principal amount not to exceed $4,500,000 for capital improvement projects, as described in Section 2 above. The Bonds may be issued at a future time pursuant to a Supplemental Ordinance. In anticipation of the issuance of the Bonds, there is hereby authorized to be issued the Bond Anticipation Note in an aggregate original principal amount not to exceed $3,085,000 for capital improvement projects constituting a portion of the Project, as described in Section 2 above, and in advance of grants and reimbursements due the Town from the federal and state governments there is hereby authorized to be issued the Grant Anticipation Note in an aggregate original principal amount not to exceed $1,415,000 for capital improvement projects, which are subject to said grants and reimbursements, constituting a portion of the Project as described in Section 2 above. The Bond Anticipation Note shall be designated “General Obligation Note (Capital Improvement Projects), Series 2004A” and the Grant Anticipation Note shall be designated “General Obligation Note (Capital Improvement Projects), Series 2004B,” and each shall be issuable as fully registered notes, without coupons, shall be dated the Closing Date, shall be numbered R-1 and R‑2, respectively, and shall bear interest payable semiannually on each June 1 and December 1, beginning December 1, 2004, at the rate of 1.94% per annum for the Bond Anticipation Note and 1.94% per annum for the Grant Anticipation Note and the Notes shall mature on their respective Maturity Dates. The Notes are subject to redemption prior to maturity at the option of the Council at any time, in whole or in part, without premium or penalty, as limited by the terms of the Notes, at a redemption price equal to 100% of the principal amount of the Notes to be redeemed, plus interest accrued to the redemption date. At no time shall the principal amount of all Bonds and Notes Outstanding hereunder exceed $4,500,000.

The Notes are hereby authorized to be issued under the Act. The Notes shall bear interest from the date on which they are authenticated. Interest on the Notes shall be computed on the basis of 30-day months and a 360-day year.

Principal of, and interest on, the Notes shall be payable in lawful money of the United States of America. Principal of and interest on the Notes shall be payable at the principal office of the Paying Agent upon presentation and surrender of the Notes on their respective Maturity Dates.

The Notes shall be printed, lithographed or typewritten and shall be substantially in the form set forth below, with such appropriate variations, omissions and insertions as are permitted or required by this Ordinance.

If any principal of, or interest on, the Notes is not paid when due (whether at maturity, by acceleration or call for redemption, or otherwise), then, to the extent permitted by law, the overdue installments of principal shall bear interest until paid at the same rate as set forth in the Notes.

The Notes shall be signed by the facsimile or manual signature of the Town Manager and the Town Finance Director. The facsimile of the Town seal shall be printed thereon or manually impressed thereon and attested by the facsimile or manual signature of the Clerk. In case any officer whose signature or facsimile of whose signature shall appear on the Notes shall cease to be such officer before delivery of the Notes, such signature or facsimile shall nevertheless be valid and sufficient for all purposes, the same as if he or she remained in office until such delivery. The Notes may bear the facsimile signature of or may be signed by such persons as at the actual time of the execution thereof shall be the proper officers to sign the Notes although on the date of delivery of the Notes such persons may not have been such officers.

The Notes shall bear a certificate of authentication, in the form set forth in the “Form of Note” below, duly executed by the Registrar. The Registrar shall authenticate the Notes with the signature of an authorized officer of the Registrar. Only authenticated Notes shall be entitled to any right or benefit under this Ordinance, and such certificate on any Note issued hereunder shall be conclusive evidence that the Note has been duly issued and is secured by the provisions hereof.

The Paying Agent shall act as Registrar and shall maintain Registration Books for the registration and the registration of transfer of the Notes. The Town Finance Director is hereby designated and authorized to act as Paying Agent and Registrar hereunder. The transfer of the Notes may be registered only on the books kept for the registration and registration of transfer of any Note upon surrender thereof to the Registrar together with an assignment duly executed by the registered holder in person or by his or her duly authorized attorney or legal representative in such form as shall be satisfactory to the Registrar. Upon any such transfer, the Town shall execute and the Registrar shall authenticate and deliver, in exchange of the Note, a new Note, registered in the name of the transferee, of the same series, maturity and interest rate as the Note so exchanged, in any denomination or denominations authorized by this Ordinance.

The Registrar shall not be required to make any such registration or registration of transfer during the fifteen (15) days immediately preceding any Interest Payment Date, any Maturity Date or a redemption date.

Prior to due presentment for registration of transfer for any Note, the Registrar shall treat the registered holder as the person exclusively entitled to payment of principal of, premium, if any, and interest on, the Note and the exercise of all other rights and powers of the Holder.

If a Note has been mutilated, lost or destroyed, the Town shall execute and the Registrar shall authenticate and deliver a new Note of like date and tenor in exchange or substitution for, and upon cancellation of, such mutilated Note or in lieu of and in substitution for such lost or destroyed Note; provided, however, that the Town and the Registrar shall execute, authenticate and deliver such Note only if the Holder has paid the reasonable expenses and charges of the Town and the Registrar in connection therewith and, in the case of a lost or destroyed Note, has furnished to the Town and the Registrar (a) evidence satisfactory to them that such Note was lost or destroyed and the Holder was the Owner thereof and (b) indemnity satisfactory to them. If the Note has matured, instead of issuing a new Note, the Registrar may pay the same without surrender thereof upon receipt of the aforesaid evidence and indemnity.

If a Note has been paid (whether at maturity, by acceleration or otherwise) or delivered to the Paying Agent for cancellation, the Note shall not be reissued and the Registrar shall, unless otherwise directed by the Town, cremate, shred or otherwise dispose of the Note. The Registrar shall deliver to the Town a certificate of any such cremation, shredding or other disposition of the Note.

CUSIP identification numbers may be printed on the Notes, but such numbers shall not be deemed to be a part of any Note or a part of the contract evidenced thereby and no liability shall hereafter attach to the Town or any of the officers or agents thereof because or on account of said CUSIP numbers.

If less than all of the Notes are called for redemption, then the Notes to be redeemed shall be selected by lot in such manner as the Town, in its discretion may determine, each $5,000 portion of the principal amount of any Note being counted as one Note for this purpose. If a portion of a Note having a principal amount of more than $5,000 shall be called for redemption, then a new Note in principal amount equal to the unredeemed portion thereof shall be issued to the registered Holder upon surrender thereof.

Notice of redemption shall be sent by registered or certified mail by the Registrar to the registered Holder of each Note to be redeemed at his or her address as it appears on the registration books, provided that failure to give such notice, or any defect therein, shall not affect the validity of any proceedings for the redemption of any Notes with respect to which no such failure has occurred.

The Notes shall be substantially in the form set forth below, with such appropriate variations, omissions or insertions as may be approved by the Town Manager and the Town Finance Director, whose approval thereof shall be conclusively evidenced by the execution, delivery or acceptance of such Notes by the Town Manager and the Town Finance Director with such variations, omissions or insertions, and may have endorsed thereon such legend or text as may be necessary or appropriate to conform to any applicable rules and regulations of any governmental authority or any usage or requirement of law with respect thereto.

“FORM OF NOTE”

No. R-___ $____________

UNITED STATES OF AMERICA

COMMONWEALTH OF VIRGINIA, TOWN OF SOUTH BOSTON

GENERAL OBLIGATION NOTE

(CAPITAL IMPROVEMENT PROJECTS)

SERIES 2004__

Dated: May __, 2004

Registered Holder: Maturity Date: _______________, ____

Principal Sum:

$_________________ Interest Rate: ______%

KNOW ALL PERSONS BY THESE PRESENTS, that the Town of South Boston, Virginia (hereinafter sometimes referred to as the “Town”), a Town of the Commonwealth of Virginia, for value received hereby promises to pay to the registered holder (named above), or assigns, on the Maturity Date (specified above), subject to prior redemption as hereinafter provided, the Principal Sum (specified above) upon presentation and surrender of this Note at the principal corporate office of the Town Director of Finance, South Boston, Virginia, (the “Paying Agent”), and to pay interest on said Principal Sum, from the date of authentication hereof until the payment of said Principal Sum, at the rate per annum (specified above) payable on the Maturity Date, as follows:

Commencing on __________, 2004, and each ___________ and ______________ thereafter to the Maturity Date, interest only payments at the rate set forth above, with the final payment due hereunder in the amount of the principal balance outstanding on this Note and interest thereon at the rate set forth above, due and payable in full on or before _______________, _____.

Both principal of and interest on this Note are payable in any coin or currency of the United States of America which at the time of payment is legal tender for public and private debts.

It is hereby certified, recited and declared that all acts, conditions and things required to have happened, to exist and to have been performed precedent to and in the issuance of this Note do exist, have happened and have been performed in regular and due time, form and manner as required by law; that this Note does not exceed any constitutional, statutory or charter limitation of indebtedness; and that provision has been made for the payment of the principal of, and interest on, this Note and the series of which it is a part, as provided in the Ordinance.

No registration, transfer or exchange of this Note shall be permitted within fifteen (15) days of any Interest Payment Date, the Maturity Date or the date of redemption of this Note.

This Note is one of an authorized series of Notes in an aggregate original principal amount not to exceed $4,500,000, of like date and tenor herewith, except for number, denomination and maturity date, and is issued under and pursuant to and in compliance with the Constitution and laws of the Commonwealth of Virginia, including the Town Charter of the Town of South Boston, Virginia and Chapter 26, Title 15.2 of the Code of Virginia of 1950, as amended, the same being the Public Finance Act, and the Ordinance duly adopted under said Chapter by the Council on May 10, 2004 (the “Ordinance”).

This Note shall bear interest from the date on which this Note is authenticated. Interest on this Note shall be computed on the basis of 30-day months and 360-day year.

This Note is transferable only upon the registration books kept at the office of the Registrar by the registered holder hereof, or by his or her duly authorized attorney, upon surrender of this Note (together with a written instrument of transfer, satisfactory in form to the Registrar, duly executed by the registered holder or his or her duly authorized attorney, which may be the form endorsed hereon) and subject to the limitations and upon payment of the charges, if any, as provided in the Ordinance, and thereupon as provided in the Ordinance a new Note, in the aggregate principal amount and of the same series, interest rate and maturity as the Note surrendered, shall be issued in exchange therefor. The Town and the Registrar shall deem and treat the person in whose name this Note is registered as the absolute owner hereof for the purpose of receiving payment of, or on account of, the principal hereof and interest due hereon and for all other purposes whatsoever.

This Note is subject to redemption prior to maturity, at the option of the Council, at any time, in whole or in part, without premium or penalty, as limited by the terms hereof, at a redemption price equal to 100% of the principal amount of the Note to be redeemed, plus interest accrued to the redemption date. The records of the Holder hereof shall be prima facie evidence of the amount of principal and interest owed hereunder.

THIS NOTE, AND THE ISSUE OF WHICH IT IS A PART, IS A GENERAL OBLIGATION OF THE TOWN, FOR THE PAYMENT OF WHICH THE TOWN’S FULL FAITH AND CREDIT ARE IRREVOCABLY PLEDGED. THE COUNCIL IS AUTHORIZED AND REQUIRED TO LEVY AND COLLECT, ANNUALLY AT THE SAME TIME AND IN THE SAME MANNER AS OTHER TAXES OF THE TOWN ARE ASSESSED, LEVIED AND COLLECTED, A TAX UPON ALL TAXABLE PROPERTY WITHIN THE TOWN, OVER AND ABOVE ALL OTHER TAXES AUTHORIZED OR LIMITED BY LAW AND WITHOUT LIMITATION AS TO RATE OR AMOUNT, SUFFICIENT TO PAY WHEN DUE THE PRINCIPAL OF AND PREMIUM, IF ANY, AND INTEREST ON THE NOTE, TO THE EXTENT OTHER FUNDS OF THE TOWN ARE NOT LAWFULLY AVAILABLE AND APPROPRIATED FOR SUCH PURPOSE.

Reference is hereby made to the Ordinance and to all of the provisions thereof to which any Holder of this Note, by his or her acceptance hereof hereby assents, for definitions of terms; the description of and nature and extent of the security for the Note; the conditions upon which the Ordinance may be amended or supplemented without the consent of the holder of this Note and upon which it may be amended only with the consent of the holder of the Note affected thereby; the rights and remedies of the holder hereof with respect hereto; the rights, duties and obligations of the Town; the provisions discharging the Ordinance as to this Note and for the other terms and provisions of the Ordinance.

This Note shall not be valid or obligatory for any purpose unless the certificate of authentication hereon has been duly executed by the Registrar and the date of authentication inserted hereon.

IN WITNESS WHEREOF, the Town of South Boston, Virginia, by its Council has caused this Note to be signed by the Town Manager and Town Director of Finance and attested by the Clerk of said Council, by their manual or facsimile signatures, and its seal to be impressed or imprinted hereon, and this Note to be dated as set forth above.(SEAL)

_____________________________ __________________________________

Director of Finance Town Manager Town of South Boston, Virginia Town of South Boston, Virginia

Attest:

Clerk, Town Council

Town of South Boston, Virginia

CERTIFICATE OF AUTHENTICATION

This Note is one of the Notes described in the within-mentioned Ordinance.

REGISTRAR

By: ____________________________________

Director of Finance, Town of South Boston, Virginia

DATE OF AUTHENTICATION:

May __, 2004

[FORM OF ASSIGNMENT]

For value received, the undersigned hereby sells, assigns, and transfers unto ______________________________________________________________________________

Please insert social security number or other tax identification number of assignee: [__]

Name and address of assignee, including zip code: __________________________ the within-mentioned Note and hereby irrevocably constitutes and appoints _________________

attorney-in-fact, to transfer the same on the registration books thereof maintained in the

office of the within-mentioned Registrar with the full power of substitution in the

premises.

DATED: ___________________________

NOTE: The signature to this assignment must correspond with the name of the registered holder that is written on the face of the within Note in every particular, without alteration or enlargement or any change whatsoever.

Signature Guaranteed

___________________________________________

NOTICE: Signature(s) must be guaranteed by a member firm of the New York Stock Exchange or a commercial bank or trust company.

Section 4 ¾ Creation of Proceeds Funds

There is hereby established a trust fund to be designated the “Proceeds Fund, Town of South Boston General Obligation Note (Capital Improvement Projects), Series 2004A” (the “Series 2004A Proceeds Fund”) and a trust fund to be designated the “Proceeds Fund, Town of South Boston General Obligation Note (Capital Improvement Projects), Series 2004B”(the “Series 2004B Proceeds Fund”).

Section 5 ¾ Payments into Proceeds Funds

Proceeds of the Bond Anticipation Note shall be deposited into the Series 2004A Proceeds Fund, except that a portion of such proceeds (together with other available funds) sufficient to refund and redeem the Series 2003 Note in full may be paid directly to the Bank or otherwise credited to cause the Series 2003 Note to be cancelled, and funds to pay costs of issuance may be remitted directly in accordance with the Note Purchase Agreement, such proceeds to be used for the purposes provided in Section 2. Proceeds of the Grant Anticipation Note shall be deposited into the Series 2004B Proceeds Fund, except that funds to pay costs of issuance may be remitted directly in accordance with the Note Purchase Agreement, such proceeds to be used for the purposes provided in Section 2.

Section 6 ¾ Creation of Note Funds

There is hereby established a trust fund to be designated the “Note Fund, Town of South Boston General Obligation Notes (Capital Improvement Projects), Series 2004A” (the “Series 2004A Note Fund”) and a trust fund to be designated the “Note Fund, Town of South Boston General Obligation Notes (Capital Improvement Projects), Series 2004B” (the “Series 2004B Note Fund”), and in each such Note Fund there is hereby established an Interest Account and a Principal Account. As and when received, monies shall be deposited into the appropriate Note Fund, and payments from the Note Funds shall be made as follows:

(a) To each Interest Account in the respective Note Fund, subject to credit, if any, for proceeds of the respective Note deposited therein, on the Business Day prior to each Interest Date, an amount equal to the amount of interest that will become due on the respective Note on the next succeeding Interest Date; and

(b) To each Principal Account in the Note Funds on the Business Day prior to the applicable Maturity Date an amount equal to the principal that is required to be deposited into the Principal Account in order to pay the principal due on the Bond Anticipation Note or the Grant Anticipation Note, as applicable, on the respective Maturity Date of each.

Section 7 ¾ Accounts Within Funds

Any fund or account created by this Ordinance may contain such accounts or subaccounts as may be necessary for the orderly administration thereof.

Section 8 ¾ Investment of Funds

(a) The Town shall separately invest and reinvest any monies held in the funds established by this Ordinance in investments which would mature in amounts and at times so that the principal of, premium, if any, and interest on, the Notes can be paid when due at maturity thereof.

(b) Permissible investments include investments in securities that are legal investments under Chapter 18 of Title 2.1 of the Code of Virginia of 1950, as amended (Section 2.1-327 et seq.) and which are otherwise in compliance with Section 15.2-2619 of the Act.

Section 9 ¾ Defeasance

The obligations of the Town under this Ordinance and covenants of the Town provided for herein shall be fully discharged and satisfied as to the Notes and the Notes shall no longer be deemed to be Outstanding thereunder when the Notes shall have been purchased by the Town and canceled or destroyed, when the payment of principal of the Notes, plus interest on such principal to the due date thereof either (a) shall have been made or (b) shall have been provided for by irrevocably depositing with the Paying Agent for the Notes, money sufficient to make such payment, or direct and general obligations of, or obligations the principal of, and interest on, which are guaranteed by, the United States of America, maturing in such amounts and at such times as will insure the availability of sufficient monies to make such payment.

Section 10 ¾ General Obligation

The Council, in accordance with Section 15.2-2624 of the Act, is hereafter authorized and required to levy and collect annually, at the same time and in the same manner as other taxes of the Town are assessed, levied and collected, a tax upon all taxable property within the Town, over and above all other taxes, authorized or limited by law and without limitation as to rate or amount, sufficient to pay when due the principal of and premium, if any and interest on the Notes, to the extent other funds of the Town are not lawfully available and appropriated for such purpose.

Section 11 ¾ Event of Default

Each of the following shall constitute an event of default hereunder:

(a) Failure to pay the principal of the Notes when due;

(b) Failure to pay interest on the Notes when due;

(c) Failure of the Town to perform any other covenant or agreement contained in this Ordinance, which failure shall have continued for 60 days after the notice thereof from the Holders of not less than twenty percent (20%) of the Notes Outstanding; provided, however, that if any such failure shall be such that it cannot be cured or corrected within a 60-day period but is, in fact, susceptible of cure or correction, it shall not constitute an Event of Default if curative or corrective action is instituted within said period and diligently pursued until the failure of performance is cured or corrected;

(d) The instituting of any proceeding with the consent of the Town for the purpose of effecting composition between the Town and its creditors or for the purpose of adjusting the claims of creditors pursuant to any federal or state statute; or

(e) If the Town for any reason shall be rendered incapable of fulfilling its obligations under this Ordinance.

Upon the occurrence of an Event of Default, the Holders of not less than twenty-five percent (25%) in principal amount of the Note subject to the Event of Default then Outstanding may declare the principal of all of the Outstanding Note subject to the Event of Default and all accrued and unpaid interest thereon to be due and payable immediately. This provision is subject to the condition that if, at any time after such declaration and before any such further action has been taken, all arrears of interest on, and principal of, the Note subject to the Event of Default shall have been paid and all other Events of Default, if any, which shall have occurred have been remedied, then the Holders of such majority in principal amount of the Outstanding Note subject to the Event of Default may waive such default and annul such declaration.

If an Event of Default shall have occurred and be continuing, then the Holders of not less than twenty-five percent (25%) in principal amount of the Note subject to the Event of Default then Outstanding may call a meeting of the Holders of Notes for the purpose of selecting a Noteholders’ committee (the “Noteholders’ Committee”). At such meeting the Holders of not less than a majority in principal amount of the Outstanding Note subject to the Event of Default must be present in person or by proxy in order to constitute a quorum for the transaction of business. A quorum being present at such meeting, the Noteholders present may, by a majority of the votes cast, elect one or more persons who may or may not be Noteholders to the Noteholders’ Committee. The Noteholders’ Committee is empowered to exercise, as trustee for the Noteholders, all the rights and powers conferred on the Noteholders in the Ordinance.

In case an Event of Default shall occur, subject to the provisions referred to in the preceding paragraph, the Holders of the Outstanding Note subject to the Event of Default shall have the right to protect the rights vested in such Holders by the Ordinance by such appropriate judicial proceeding as such Holders shall determine either by suit in equity or by action at law.

Section 12 ¾ Enforcement by Noteholders

The Holders of the Notes may by mandamus or other appropriate proceeding at law or in equity in any court of competent jurisdiction, enforce and compel performance of this Ordinance and every provision and covenant thereof, including without limiting the generality of the foregoing, the enforcement of the performance of all obligations and duties and requirements to be done or performed by the Town by the Ordinance or by the applicable laws of the Commonwealth.

Section 13 ¾ Modification of Note Ordinance

The Town may, without the consent of the Noteholders, make any modification or amendment of this Ordinance required to cure any ambiguity or error herein contained or to make any amendments hereto or to grant to the Noteholders additional rights.

The Holders of not less than sixty-six and two-thirds percent (66-2/3%) in principal amount of the Outstanding Notes shall have the power to authorize any modifications to this Ordinance proposed by the Town other than as permitted above; provided that without the consent of the Holders of the Notes affected thereby, no modifications shall be made which will (a) extend the time of payment of principal of, or interest on, the Notes or reduce the principal amount thereof or the rate of interest thereon; (b) give to the Notes any preference over any other note or bond secured equally and ratably therewith; (c) deprive the Noteholders of the security afforded by this Ordinance, or (d) reduce the percentage in principal amount of the Notes required to authorize any modification to the Ordinance.

Section 14 ¾ Application of Proceeds; Sale of Notes

Proceeds derived from the sale of the Notes together with other monies available therefor shall be used to pay the costs of issuance and other expenses of the Town relating to the issuance of the Notes and thereafter any remaining funds to be deposited in the Proceeds Funds shall be used for the purposes specified in Section 2 of this Ordinance and otherwise used in accordance with the provisions of this Ordinance or an opinion of Bond Counsel. Interest accruing on the principal of the Proceeds Funds and any profit realized from it may be transferred to the respective Note Fund to be applied to the payment of interest on the respective Note during the acquisition, construction, improvement and equipping of the Project.