UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF PUERTO RICO

 1 The Debtors in these Title III Cases, along with each Debtor’s respective Title III case number and the last four (4) 

digits of each Debtor’s federal tax identification number, as applicable, are the (i) Commonwealth of Puerto Rico 

(Bankruptcy Case No. 17-bk-3283-LTS) (Last Four Digits of Federal Tax ID: 3481); (ii) Puerto Rico Sales Tax 

Financing Corporation (Bankruptcy Case No. 17-bk-3284-LTS) (Last Four Digits of Federal Tax ID: 8474); (iii) 

Puerto Rico Highways and Transportation Authority (Bankruptcy Case No. 17-bk-3567-LTS) (Last Four Digits of 

Federal Tax ID: 3808); (iv) Employees Retirement System of the Government of the Commonwealth of Puerto Rico 

(Bankruptcy Case No. 17-bk-3566-LTS) (Last Four Digits of Federal Tax ID: 9686); (v) Puerto Rico Electric Power 

Authority (Bankruptcy Case No. 17-bk-4780-LTS) (Last Four Digits of Federal Tax ID: 3747); and (vi) Puerto Rico 

Public Buildings Authority (Bankruptcy Case No. 19-bk-5523-LTS) (Last Four Digits of Federal Tax ID: 3801) (Title 

III case numbers are listed as Bankruptcy Case numbers due to software limitations).

In re: 

THE FINANCIAL OVERSIGHT AND 

MANAGEMENT BOARD FOR PUERTO RICO, 

as representative of

THE COMMONWEALTH OF PUERTO RICO, et al.,

 Debtors.1

PROMESA Title III

Case No. 17-bk-3283-LTS

(Jointly Administered)

In re:

THE FINANCIAL OVERSIGHT AND 

MANAGEMENT BOARD FOR PUERTO RICO, 

as a representative of

PUERTO RICO ELECTRIC POWER AUTHORITY,

Debtor.

PROMESA Title III

Case No. 17-bk-4780-LTS

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THE FINANCIAL OVERSIGHT AND MANAGEMENT 

BOARD FOR PUERTO RICO, 

as representative of

PUERTO RICO ELECTRIC POWER AUTHORITY,

Plaintiff/

CounterclaimDefendant,

PUERTO RICO FISCAL AGENCY AND FINANCIAL 

ADVISORY AUTHORITY, THE OFFICIAL COMMITTEE 

OF UNSECURED CREDITORS OF ALL TITLE III 

DEBTORS, UNION DE TRABAJADORES DE LA 

INDUSTRIA ELECTRICA Y RIEGO INC., AND SISTEMA 

DE RETIRO DE LOS EMPLEADOS DE LA AUTORIDAD 

DE ENERGIA ELECTRICA,

Plaintiff-Intervenors,

v.

U.S. BANK NATIONAL ASSOCIATION, AS TRUSTEE,

Defendant/

CounterclaimPlaintiff,

THE AD HOC GROUP OF PREPA BONDHOLDERS, 

ASSURED GUARANTY CORP., ASSURED GUARANTY

MUNICIPAL CORP., NATIONAL PUBLIC FINANCE

GUARANTEE CORPORATION, AND SYNCORA 

GUARANTEE, INC.,

DefendantIntervenors/

CounterclaimPlaintiffs.

Adv. Proc. No. 19-00391-LTS

PROMESA Title III

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JOINT INFORMATIVE MOTION SUBMITTING

CONFORMED TRUST AGREEMENT IN RESPONSE TO JANUARY 5, 2023 

ORDER CONCERNING PREPA TRUST AGREEMENT [ECF No. 115]

To the Honorable United States District Judge Laura Taylor Swain:

1. In compliance with the Court’s Order Concerning PREPA Trust Agreement [ECF 

No. 115; Adv. Proc. No. 19-0391] (the “Order”),2 the Oversight Board and Defendants have met 

and conferred and hereby submit a joint conformed Trust Agreement, attached hereto as Exhibit 

A, incorporating the Original Trust Agreement and all supplemental agreements thereto3 (the 

“Joint Conformed Trust Agreement”).

2. The parties agree that the Court can rely on the Joint Conformed Trust Agreement 

in connection with this adversary proceeding, but reserve the right to refer to the original Trust 

Agreement and specific supplements as the authoritative text to the extent relevant.

3. A redline of the Joint Conformed Trust Agreement against the as-submitted 

Conformed Trust Agreement (Exhibit 1 to the Defendants’ Motion for Summary Judgment [ECF 

No. 67-4]), is attached hereto as Exhibit B.

4

4. To the extent any inconsistency is later identified between the Joint Conformed 

Trust Agreement and the Original Trust Agreement, as modified by the nineteen supplemental 

agreements, the Original Trust Agreement and supplemental agreements shall govern. Nothing in 

this motion or the Joint Conformed Trust Agreement shall be used to argue that any party to this 

motion has waived any argument or admitted any facts related to the contents therein, and all such 

parties’ rights are reserved.

 2 Capitalized terms used but not otherwise defined shall have the meaning given to them in the Order.

3 See Morales Decl. Exs. B-U.

4 Due to limitations in the software used to prepare this redline, the redline does not reflect the text that appears in the 

margins of the Joint Conformed Trust Agreement.

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Dated: January 10, 2023

 San Juan, Puerto Rico

Respectfully submitted,

/s/ Martin J. Bienenstock

Martin J. Bienenstock 

Ehud Barak

Margaret A. Dale

Jeffrey W. Levitan 

Michael T. Mervis

Daniel S. Desatnik

Elliot R. Stevens

(Admitted Pro Hac Vice)

PROSKAUER ROSE LLP

Eleven Times Square

New York, NY 10036

Tel: (212) 969-3000

Fax: (212) 969-2900

Paul V. Possinger

(Admitted Pro Hac Vice)

PROSKAUER ROSE LLP

70 West Madison, Suite 3800 

Chicago, IL 60602

Tel: (312) 962-3550

Fax: (312) 962-3551

Attorneys for the Financial 

Oversight and Management Board 

as sole Title III representative for PREPA

/s/ Luis F. del Valle-Emmanuelli

 Luis F. del Valle-Emmanuelli 

USDC-PR No. 209514 

P.O. Box 79897 

Carolina, Puerto Rico 00984-9897 

Tel. 787.647.3503 

Fax. N/A 

dvelawoffices@gmail.com 

Of Counsel for A&S Legal Studio, PSC

434 Avenida Hostos

San Juan, PR 00918

Tel (787) 751-6764/763-0565

Fax (787) 763-8260 

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Co-Attorney for the Financial 

Oversight and Management Board 

as Representative for PREPA

TORO COLÓN MULLET P.S.C.

/s/ Manuel Fernández-Bared

Manuel Fernández-Bared

USDC-PR No. 204,204

P.O. Box 195383

San Juan, PR 00919-5383

Tel.: (787) 751-8999

Fax: (787) 763-7760

E-mail: mfb@tcm.law

/s/ Linette Figueroa-Torres

Linette Figueroa-Torres

USDC-PR No. 227,104

E-mail: lft@tcm.law

/s/ Nayda Perez-Roman

Nayda Perez-Roman

USDC–PR No. 300,208

E-mail: nperez@tcm.law

Counsel for the Ad Hoc Group of PREPA 

Bondholders

KRAMER LEVIN 

NAFTALIS & FRANKEL LLP

/s/ Amy Caton

Amy Caton*

Thomas Moers Mayer*

Alice J. Byowitz*

1177 Avenue of the Americas

New York, New York 10036

Tel.: (212) 715-9100

Fax: (212) 715-8000

Email: acaton@kramerlevin.com

tmayer@kramerlevin.com

abyowitz@kramerlevin.com

Gary A. Orseck*

Matthew M. Madden*

2000 K Street NW, 4th Floor

Washington, DC 20006

Tel: (202) 775-4500

Fax: (202) 775-4510

Email: gorseck@kramerlevin.com

mmadden@kramerlevin.com

*Admitted Pro Hac Vice

Counsel for the Ad Hoc Group of PREPA 

Bondholders

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CASELLAS ALCOVER & BURGOS P.S.C.

By: /s/ Heriberto Burgos Pérez 

Heriberto Burgos Pérez

USDC-PR No. 204,809

Ricardo F. Casellas-Sánchez

USDC-PR No. 203,114

Diana Pérez-Seda

USDC–PR No. 232,014

P.O. Box 364924

San Juan, PR 00936-4924

Tel.: (787) 756-1400

Fax: (787) 756-1401

E-mail: hburgos@cabprlaw.com 

 rcasellas@cabprlaw.com

 dperez@cabprlaw.com 

Counsel for Assured Guaranty Corp. and Assured 

Guaranty Municipal Corp.

CADWALADER, WICKERSHAM & 

TAFT LLP

By: /s/ William J. Natbony 

Howard R. Hawkins, Jr.* 

Mark C. Ellenberg* 

Casey J. Servais* 

William J. Natbony*

Thomas J. Curtin*

200 Liberty Street

New York, New York 10281

Tel.: (212) 504-6000

Fax: (212) 406-6666

Email: howard.hawkins@cwt.com

 mark.ellenberg@cwt.com 

 casey.servais@cwt.com

 bill.natbony@cwt.com

 thomas.curtin@cwt.com

 

*Admitted Pro Hac Vice

Counsel for Assured Guaranty Corp. and 

Assured Guaranty Municipal Corp.

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REICHARD & ESCALERA, LLC

By: /s/ Rafael Escalara 

Rafael Escalara 

USDC-PR No. 122,609

/s/ Sylvia M. Arizmendi 

Sylvia M. Arizmendi

USDC-PR No. 210,714

/s/ Carlos R. Rivera-Ortiz 

Carlos R. Rivera-Ortiz

USDC–PR No. 303,409

255 Ponce de León Avenue

MCS Plaza, 10th Floor

San Juan, PR 00917-1913

Tel.: (787) 777-8888

Fax: (787) 765-4225

E-mail: escalara@reichardescalera.com 

 arizmendis@reichardescalera.com

 riverac@reichardescalera.com

 

Counsel for Syncora Guarantee, Inc.

QUINN EMANUEL URQUHART & 

SULLIVAN, LLP

By: /s/ Susheel Kirpalani 

Susheel Kirpalani*

Daniel Salinas

USDC-PR No. 224,006

Eric Kay*

51 Madison Avenue, 22nd Floor

New York, New York 10010-1603

Tel.: (212) 849-7000

Fax: (212) 849-7100

Email: susheelkirpalani@quinnemanuel.com

 danielsalias@quinnemanuel.com 

 erickay@quinnemanuel.com

* Admitted Pro Hac Vice

Counsel for Syncora Guarantee, Inc.

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RIVERA, TULLA & FERRER LLC

/s/ Eric A. Tulla

Eric A. Tulla

USDC-DPR No. 118313

Email: etulla@riveratulla.com

Rivera Tulla & Ferrer Building

50 Quisqueya Street

San Juan, PR 00917-1212

Tel: (787)753-0438

Fax: (787)767-5784 

Counsel for U.S. Bank National 

Association, in its Capacity as Trustee

MASLON LLP

/s/ Clark T. Whitmore

Clark T. Whitmore* 

Michael C. McCarthy* 

John Duffey* 

Jason M. Reed* 

90 South Seventh Street, Suite 330

Minneapolis, MN 55402

Tel.: (612) 672-8200

Fax: (612) 672-8397

Email: clark.whitmore@maslon.com

mike.mccarthy@maslon.com

john.duffey@maslon.com

jason.reed@maslon.com

* Admitted Pro Hac Vice

Counsel for U.S. Bank National 

Association, in its Capacity as Trustee

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ADSUAR MUÑIZ GOYCO

SEDA & PÉREZ-OCHOA, P.S.C.

By: /s/ Eric Pérez-Ochoa 

Eric Pérez-Ochoa

(USDC-PR No. 206314)

Luis Oliver-Fraticelli

(USDC-PR No. 209204)

Alexandra Casellas-Cabrera

(USDC-PR No. 301010)

PO BOX 70294

San Juan, PR 00936

Telephone: 787.756.9000

Facsimile: 787.756.9010

Email: epo@amgprlaw.com

 loliver@amgprlaw.com

acasellas@amgprlaw.com

Attorneys for National Public Finance

Guarantee Corporation

WEIL, GOTSHAL & MANGES LLP

By: /s/ Robert Berezin 

Matthew S. Barr* 

Jonathan Polkes* 

Robert Berezin* 

767 Fifth Avenue

New York, New York 10153

Telephone: (212) 310-8000

Facsimile: (212) 310-8007

Email: matt.barr@weil.com

jonathan.polkes@weil.com

robert.berezin@weil.com

Gabriel A. Morgan* 

700 Louisiana Street, Suite 1700

Houston, TX 77002

Telephone: (713) 546-5000

Facsimile: (713) 224-9511

Email: gabriel.morgan@weil.com

* Admitted Pro Hac Vice

Attorneys for National Public Finance

Guarantee Corporation

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CERTIFICATE OF SERVICE

I hereby certify that, on this same date, I electronically filed the foregoing with the Clerk 

of the Court using the CM/ECF system, which will send notifications of such filing to all CM/ECF 

participants in this case.

/s/ Luis F. del Valle-Emmanuelli

Luis F. del Valle-Emmanuelli

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Exhibit A

Joint Conformed Trust Agreement

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CERTIFICATE

I, RAFAEL BETANCOURT. Secretary of Puerto Rico Water Resources Authority, DO HEREBY 

CERTIFY that the attached Trust Agreement, dated as of January 1, 1974, is substantially in the form 

of the Trust Agreement which was presented at the meeting of the Authority duly called and held 

on December 4, 1973 and authorized by the Authority by Resolution No. 1391 duly adopted at 

said meeting.

WITNESS my hand this 8th day of January, 1974.

/s/ 

Secretary

Puerto Rico Water Resources

Authority

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PUERTO RICO ELECTRIC POWER AUTHORITY

TO

FIRST NATIONAL CITY BANK

Trustee

Trust Agreement

Dated as of January 1, 1974

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THIS TRUST AGREEMENT, DATED FOR CONVENIENCE OF 

REFERENCE AS OF JANUARY 1, 1974, BY AND BETWEEN

PUERTO RICO ELECTRIC POWER AUTHORITY,

a body corporate and politic constituting a public corporation and 

governmental instrumentality of the Commonwealth of Puerto Rico 

(hereinafter sometimes called the “Authority”), and

FIRST NATIONAL CITY BANK,

a national banking association duly incorporated and existing under 

the laws of the United States of America and having its principal 

office in the Borough of Manhattan, City and State of New York, 

which is authorized under such laws to exercise trust powers and is 

subject to examination by federal authority (said banking association 

and any bank or trust company becoming successor trustee under this 

Agreement being hereinafter sometimes called the “Trustee”), 

WITNESSETH:

Authority Act. WHEREAS, by Act No. 83 of the Legislature of Puerto Rico, 

approved May 2, 1941, as amended, reenacted and supplemented (the 

“Authority Act”), the Authority was created a body corporate and 

politic constituting a public corporation and governmental 

instrumentality of the Commonwealth of Puerto Rico; and

Powers of Authority. WHEREAS, by virtue of the Authority Act the Authority is 

empowered to conserve, develop and utilize the water and energy 

resources of Puerto Rico for the purpose of making available to the 

inhabitants of the Commonwealth, in the widest economic manner, 

the benefits thereof, for the promotion of the general welfare and to 

increase commerce and prosperity, and the Authority is granted and 

may exercise all the rights and powers necessary or convenient to 

carry out the aforesaid purposes including but not limited to the 

following, among others:

(a) to have complete control and supervision of any 

undertaking constructed or acquired by it including the power 

to determine the character of and necessity for all its 

expenditures and the manner in which they shall be incurred, 

allowed and paid without regard to the provisions of any laws 

governing the expenditure of public funds, and such 

determination shall be final and conclusive upon all officers 

of the Commonwealth Government, and to prescribe, adopt, 

amend, and repeal such rules and regulations as may be 

necessary or proper for the exercise and performance of its 

powers and duties or to govern the rendering of service or sale 

or exchange of water or electric energy;

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(b) to sue and be sued, implead and be impleaded, 

complain and defend, in all courts;

(c) to make contracts and to execute all instruments 

necessary or convenient in the exercise of any of its powers ;

(d) to acquire in any lawful manner including, but 

without limitation, acquisition by purchase, whether by 

agreement or by the exercise of the power of eminent domain, 

lease, bequest, devise, gift, and to hold, maintain, use and 

operate any undertaking or parts thereof ;

(e) to acquire in the manner set forth above, produce, 

impound, develop, manufacture, treat, hold, conserve, use, 

transmit, distribute, supply, exchange, sell, rent and otherwise 

dispose of, water, electric energy, equipment, and such other 

things, supplies and services as the Authority shall deem 

necessary, proper, incidental, or convenient in connection 

with its activities; provided, that in disposing at wholesale of 

electric energy the Authority shall give preference and 

priority as to supply to public bodies and cooperatives;

(f) to construct or reconstruct any undertaking or any 

part or parts thereof, and any additions, improvements, and 

extensions to any undertaking of the Authority by contract or 

contracts, or under, through, or by means of its own officers, 

agents, and employees;

(g) to determine, fix, alter, charge and collect 

reasonable rates, fees, rentals, and other charges for the use of 

the facilities of the Authority, or for the services, electric 

energy, or other commodities sold, rendered, or furnished by 

it, which shall be sufficient for the payment of the expenses 

of the Authority incurred in the conservation, development, 

improvement, extension, repair, maintenance, and operation 

of its facilities and properties, for the payment of the principal 

of and interest on its bonds, and for fulfilling the terms and 

provisions of such covenants as may be made with, or for the 

benefit of, the purchasers or holders of any bonds of the 

Authority;

(h) to borrow money, make and issue bonds of the 

Authority for any of its corporate purposes, and to secure 

payment of its bonds and of any and all other obligations by 

pledge of or lien on all or any of its contracts, revenues, and 

income only; and

(i) to make and issue bonds for the purpose of funding, 

refunding, purchasing, paying, or discharging any of the 

outstanding bonds or obligations issued or assumed by it or 

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any bonds or obligations the principal or interest of which is 

payable in whole or in part from its revenues; and

The System and the 

1947 Indenture.

WHEREAS, the Authority owns and operates an integrated 

system for the generation, transmission and distribution of electricity 

throughout the Commonwealth of Puerto Rico, and for the purpose of 

providing funds, with other available funds, for refunding certain 

outstanding bonds and paying the cost of a capital improvement 

program to provide additional generating capacity for the System (as 

defined herein) and necessary extensions of the transmission and 

distribution lines of the System and other improvements, the 

Authority has heretofore issued its Puerto Rico Water Resources 

Authority Electric Revenue Bonds, outstanding on the date hereof in 

the aggregate principal amount of $868,643,000, under and pursuant 

to the provisions of a trust indenture, dated as of the first day of 

January, 1947, by and between the Authority and The National City 

Bank of New York (now First National City Bank), as trustee, as 

amended by supplemental indentures dated as of January 1, 1948, 

July 1, 1956, January 1, 1961, March 1, 1962, March 1, 1965, April 

1, 1967, April 1, 1970 and September 1, 1971 (said indenture as so 

amended, together with all future amendments and all indentures 

supplemental thereto as therein permitted, being herein called the 

“1947 Indenture”) ; and

Resignation of 

Trustee under the 

1947 Indenture.

WHEREAS, First National City Bank has resigned as trustee 

under the 1947 Indenture and has thereby become discharged from 

the trusts created thereby ; and

Successor trustee 

under the 1947 

Indenture.

WHEREAS, the Authority has appointed The Chase Manhattan 

Bank (National Association) trustee under the 1947 Indenture, and 

said banking association, having executed, acknowledged and 

delivered to its predecessor trustee, and also to the Authority, an 

instrument in writing accepting such appointment under the 1947 

Indenture, is now vested with all rights, immunities, powers and 

trusts, and subject to all the duties and obligations, of its predecessor 

trustee under the 1947 Indenture; and

Determination to 

acquire additional 

facilities.

WHEREAS, based upon surveys, estimates and 

recommendations, the Authority has found and determined that it is 

necessary and advisable to provide funds for additional facilities for 

the generation, transmission and distribution of electricity to serve the 

present and prospective demands upon the System, and has 

determined that it is necessary to increase its capacity to issue revenue 

bonds secured as hereinafter provided to provide funds for the 

foregoing purposes; and

Determination to WHEREAS, the Authority deems it advisable to make provision 

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issue revenue bonds. for the issuance from time to time of revenue bonds on a parity with 

the bonds issued initially under the provisions of this Agreement for 

the purpose of paying all or any part of the cost of any Improvements 

(as defined herein) ; and

WHEREAS, the Authority has determined that the coupon 

bonds to be issued hereunder and the interest coupons to be attached 

thereto, the registered bonds without coupons to be issued hereunder 

and the certificate of authentication by the Trustee to be endorsed on 

all such bonds shall be, respectively, substantially in the following 

forms, with such variations, omissions and insertions as are required 

or permitted by this Agreement :

Form of coupon 

bonds.

[FORM OF COUPON BONDS]

No __________ $________

UNITED STATES OF AMERICA

PUERTO RICO ELECTRIC POWER AUTHORITY

POWER REVENUE BOND, SERIES.......

Puerto Rico Electric Power Authority, a body corporate and 

politic constituting a public corporation and governmental 

instrumentality of the Commonwealth of Puerto Rico (herein 

sometimes called the “Authority”), for value received, hereby 

promises to pay, solely from the special fund provided therefor as 

hereinafter set forth, to the bearer on the 1st day of ________, ___ (or 

earlier as herein-after referred to), upon the presentation and 

surrender hereof, the principal sum of_________________

THOUSAND DOLLARS and to pay, solely from said special fund, 

interest thereon from the date hereof at the rate of ____________ per 

centum (____%) per annum until payment of said principal sum, such 

interest to the maturity hereof being payable semi-annually on the 1st 

days of January and July in each year upon the presentation and 

surrender of the coupons representing such interest as the same 

respectively become due. Both the principal of and the interest on this 

bond are payable in any coin or currency of the United States of 

America which on the respective dates of payment thereof is legal 

tender for the payment of public and private debts. 

The principal of this bond and the interest hereon are payable 

at the principal office of__________________________, in the 

_____________________, or at the principal office of

____________, in the Borough of Manhattan, City and State of New 

York, at the option of the holder, or at such other office or agency of 

the Authority maintained for that purpose as the Authority shall 

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determine.

This bond shall not be deemed to constitute a debt or 

obligation of the Commonwealth of Puerto Rico or any of its 

municipalities or other political subdivisions, and neither the 

Commonwealth of Puerto Rico nor any such municipalities or other 

political subdivisions are liable for the payment of this bond or the 

interest hereon, but this bond shall be payable as to both principal and 

interest solely from the special fund provided therefor as hereinafter 

set forth.

This bond is one of a duly authorized series of revenue bonds 

known as “Puerto Rico Electric Power Authority Power Revenue 

Bonds, Series............................... ”, dated as of the 1st day of..........., 

_______________....................... , consisting of bonds maturing in 

annual installments on the 1st day of in the years 

______ to .................................... , inclusive (herein called the “serial 

bonds”), and of bonds maturing on the 1st day of and the 

1st day of .................................... , _______ (herein collectively 

called the “term bonds”), and issued for the purpose of paying the cost 

of acquiring or constructing capital improvements to the electric 

power properties of the Authority (the electric power properties 

owned and operated by the Authority as a single integrated system, 

together with all improvements, renewals and replacements thereof 

and extensions and additions thereto financed under the provisions of 

the 1947 Indenture (hereinafter mentioned) and the Agreement 

(hereinafter mentioned), being herein called the “System”).

All of the bonds are issued under and pursuant to a trust 

agreement (said agreement, together with all agreements 

supplemental thereto as therein permitted, being herein called the 

“Agreement”), dated as of the 1st day of January, 1974, by and 

between the Authority and First National City Bank, in the Borough 

of Manhattan, City and State of New York (said banking association 

and any bank or trust company becoming successor trustee under the 

Agreement being herein called the “Trustee”), an executed 

counterpart of which Agreement is on file at the corporate trust office 

of the Trustee. Reference is hereby made to the Agreement for the 

provisions, among others, with respect to the custody and application 

of the proceeds of bonds issued under the Agreement, the collection 

and disposition of revenues, the fund charged with and pledged to the 

payment of the interest on and the principal of the bonds, the nature 

and extent of the security, the terms and conditions on which the 

bonds of each series are or may be issued, the rights, duties and 

obligations of the Authority and of the Trustee and the rights of the 

holders of the bonds, and, by the acceptance of this bond, the holder 

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hereof assents to all of the provisions of the Agreement.

The Agreement provides for the issuance, from time to time, 

under the conditions, limitations and restrictions therein set forth, of 

additional series of bonds (such bonds and the bonds of the series of 

which this is one being herein collectively called the “bonds”).

This bond is issued and the Agreement was made and entered 

into under and pursuant to the Puerto Rican Federal Relations Act and 

the Constitution and laws of the Commonwealth of Puerto Rico, 

including Act No. 83 of the Legislature of Puerto Rico, approved May 

2, 1941, as amended, reenacted and supplemented (the “Authority 

Act”), and under and pursuant to resolutions duly adopted by the 

Authority.

The Agreement provides for the fixing, charging and 

collecting by the Authority of reasonable rates and charges for the use 

of the services and facilities furnished by the System sufficient to 

provide for the payment of the expenses of the Authority incurred in 

the conservation, repair, maintenance and operation of the System 

and for the payment of the principal of and the interest on the 1947 

Indenture Bonds and the bonds as the same become due and payable, 

including reserves for such purposes. The 1947 Indenture provides 

for the deposit to the credit of a special fund designated “Water 

Resources Authority Renewal and Replacement Fund” (herein called 

the “Renewal and Replacement Fund”) of the revenues of the System, 

to the extent required, over and above such expenses of conservation, 

repair, maintenance and operation and the amounts required to be 

deposited to the credit of the Puerto Rico Water Resources Authority 

Electric Revenue Bonds Sinking Fund and the Puerto Rico Water 

Resources Authority General Reserve Fund under the 1947 Indenture, 

and the Agreement provides for the deposit to the credit of the 

Renewal and Replacement Fund of sufficient funds to provide for the 

payments from said Fund to the special fund created under the 

Agreement designated “Puerto Rico Water Resources Authority 

Power Revenue Bonds Interest and Sinking Fund” (herein called the 

“Sinking Fund”). The Agreement also provides for the payment into 

the Sinking Fund of a sufficient amount of the funds on deposit to the 

credit of the Renewal and Replacement Fund to pay the principal of 

and the interest on all bonds issued under the Agreement as the same 

become due and payable and to create a reserve for such purpose, 

which special fund is pledged to and charged with the payment of the 

principal of and the interest on the bonds.

The Authority has heretofore issued under the provisions of 

the trust indenture, dated as of the first day of January, 1947 (such 

indenture as amended being herein called the “1947 Indenture”), 

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Puerto Rico Water Resources Authority Electric Revenue Bonds 

(herein, with any additional bonds which hereafter may be issued 

under the provisions of the 1947 Indenture, called the “1947 

Indenture Bonds”). Until all of the 1947 Indenture Bonds shall be paid 

or provision shall be made for their payment and the release of the 

1947 Indenture, the revenues of the System, over and above the 

expenses of conservation, repair, maintenance and operation thereof, 

are pledged to the extent required to the payment of the principal of 

and the interest on the outstanding 1947 Indenture Bonds.

The bonds are issuable as coupon bonds and as registered 

bonds without coupons, in such denominations as the Authority may 

by resolution determine. At the corporate trust office of the Trustee, 

in the manner and subject to the limitations and conditions provided 

in the Agreement and without cost except for any tax or other 

governmental charge, registered bonds without coupons may be 

exchanged for an equal aggregate principal amount of coupon bonds 

of the same series and maturity, bearing interest at the same rate and 

having attached thereto coupons representing all unpaid interest due 

or to become due thereon, or of registered bonds without coupons of 

the same series and maturity, of authorized denominations and 

bearing interest at the same rate, and coupon bonds with all coupons 

appertaining thereto representing all unpaid interest due or to become 

due thereon may in like manner be exchanged for an equal aggregate 

principal amount of registered bonds without coupons of the same 

series and maturity, of authorized denominations and bearing interest 

at the same rate.

[Here insert in the bonds of each Series the terms of 

redemption applicable to the bonds of such Series.]

The moneys in the Sinking Fund available for the purchase or 

redemption of bonds shall be allocated to all series of bonds 

outstanding under the Agreement in the manner provided in the 

Agreement.

If less than all of the bonds of any one maturity of a series 

shall be called for redemption, the particular bonds or portions of 

registered bonds without coupons to be redeemed from such series 

and maturity shall be selected by the Trustee as provided in the 

Agreement.

Any such redemption, either in whole or in part, shall be made 

upon at least thirty (30) days’ prior notice by publication and 

otherwise as provided in the Agreement, and shall be made in the 

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manner and under the terms and conditions provided in the 

Agreement. On the date designated for redemption, notice having 

been published as provided in the Agreement, the bonds or portions 

of registered bonds without coupons so called for redemption shall 

become and be due and payable at the redemption price provided for 

redemption of such bonds or such portions thereof on such date, and, 

if moneys for payment of the redemption price and the accrued 

interest are held by the Trustee or by the paying agents, as provided 

in the Agreement, interest on such bonds or such portions thereof so 

called for redemption shall cease to accrue, the coupons for any such 

interest payable subsequent to the redemption date shall be void, such 

bonds or such portions thereof so called for redemption shall cease to 

be entitled to any benefit or security under the Agreement, and the 

holders or registered owners thereof shall have no rights in respect of 

such bonds or such portions thereof so called for redemption except 

to receive payment of the redemption price thereof and the accrued 

interest so held by the Trustee or by the paying agents.

The holder of this bond shall have no right to enforce the 

provisions of the Agreement or to institute action to enforce the 

covenants therein, or to take any action with respect to any event of 

default under the Agreement, or to institute, appear in or defend any 

suit or other proceeding with respect thereto, except as provided in 

the Agreement.

In certain events, on the conditions, in the manner and with 

the effect set forth in the Agreement, the principal of all the bonds 

then outstanding under the Agreement may become or may be 

declared due and payable before the stated maturities thereof, together 

with the interest accrued thereon.

Modifications or alterations of the Agreement or of any 

agreement supplemental thereto may be made by the Authority and 

the Trustee only to the extent and in the circumstances permitted by 

the Agreement.

As declared by the Authority Act, this bond shall at all times 

be, and shall be understood to be, a negotiable instrument for all 

purposes.

This bond is issued with the intent that the laws of the 

Commonwealth of Puerto Rico shall govern its construction.

All acts, conditions and things required by the Puerto Rican 

Federal Relations Act and the Constitution and laws of the 

Commonwealth of Puerto Rico and the rules and regulations of the 

Authority to happen, exist and be performed precedent to and in the 

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issuance of this bond and the execution of the Agreement have 

happened, exist and have been performed as so required.

This bond shall not be valid or become obligatory for any 

purpose or be entitled to any benefit or security under the Agreement 

until it shall have been authenticated by the execution by the Trustee 

of the certificate of authentication endorsed hereon.

IN WITNESS WHEREOF, Puerto Rico Electric Power Authority 

has caused this bond to [be signed by] [bear the facsimile signature 

of] the Executive Director of the Authority and to [be signed by] [bear 

the facsimile signature of] the Secretary of the Authority, and a 

facsimile of its corporate seal to be imprinted hereon, and the attached 

interest coupons to bear the facsimile signature of said Executive 

Director, all as of the 1st day of................................................, 

_____.

[Facsimile of

corporate seal]

PUERTO RICO ELECTRIC

POWER AUTHORITY

By .............................................

Executive Director

Secretary

Form of coupons. [FORM OF COUPONS]

No__________ 

$_________

On ............................. 1, 19 ........... , Puerto Rico Electric 

Power Authority will pay to bearer (unless the bond mentioned below 

shall previously have become payable as provided in the Agreement 

referred to in said bond and provision for payment thereof shall have 

been duly made) at the principal office of, in the ,

...............................................,or at the principal office of ,

...............................................in the Borough of Manhattan, City and 

State of New York, at the option of the bearer, or at such other office 

or agency of the Authority maintained for that purpose as the 

Authority shall determine upon the presentation and surrender hereof, 

the sum of..............................Dollars in any coin or currency of the 

United States of America which at the time of payment is legal tender 

for the payment of public and private debts, solely from the special 

fund referred to in, and for the semiannual interest then due upon, its 

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Puerto Rico Electric Power Authority Power Revenue Bond, Series,

...............................................dated as of.. , , No .

 

Executive Director, Puerto Rico

Electric Power Authority

Form of registered 

bonds without 

coupons.

[FORM OF REGISTERED BONDS WITHOUT COUPONS]

Same as Form of Coupon Bonds except as follows :

1.Substitute the following for the caption and the first 

paragraph:

No. R______ $_________

UNITED STATES OF AMERICA

PUERTO RICO ELECTRIC POWER AUTHORITY

POWER REVENUE BOND, SERIES

Puerto Rico Electric Power Authority, a body corporate and 

politic constituting a public corporation and governmental 

instrumentality of the Commonwealth of Puerto Rico (herein 

sometimes called the ‘‘Authority”), for value received, hereby 

promises to pay, solely from the special fund provided therefor as 

hereinafter set forth, to.............................................. , or registered 

assigns or legal representative, on the 1st day of _____, ____ (or 

earlier as hereinafter referred to), upon the presentation and surrender 

hereof at the Corporate Trust Office of the Trustee (hereinafter 

mentioned), the principal sum of ............................. DOLLARS in any 

coin or currency of the United States of America which on the date of 

payment thereof is legal tender for the payment of public and private 

debts, and to pay, solely from said special fund, to the registered 

owner hereof by check mailed to the registered owner at his address 

as it appears on the bond registration books of the Authority, interest 

on said principal sum from the date hereof or from the January 1 or 

July 1 next preceding the date of authentication to which interest shall 

have been paid, unless such date of authentication is a January 1 or 

July 1, in which case, from such date, semi-annually on January 1 and 

July 1 in each year in like coin or currency, at the rate of per 

centum ( .................................................................... %) per annum 

until payment of said principal sum.

2. Substitute the following for the paragraph concerning 

the notice of redemption and the effect thereof:

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Any such redemption, either in whole or in part, shall be made 

upon at least thirty (30) days’ prior notice by publication and 

otherwise as provided in the Agreement, and shall be made in the 

manner and under the terms and conditions provided in the 

Agreement. On the date designated for redemption, notice having 

been published as provided in the Agreement, the bonds or portions 

of registered bonds without coupons so called for redemption shall 

become and be due and payable at the redemption price provided for 

redemption of such bonds or such portions thereof on such date, and, 

if moneys for payment of the redemption price and the accrued 

interest are held by the Trustee, as provided in the Agreement, interest 

on such bonds or such portions thereof so called for redemption shall 

cease to accrue, such bonds or such portions thereof so called for 

redemption shall cease to be entitled to any benefit or security under 

the Agreement, and the holders or registered owners thereof shall 

have no rights in respect of such bonds or such portions thereof so 

called for redemption except to receive payment of the redemption 

price thereof and the accrued interest so held by the Trustee. If a 

portion of this bond shall be called for redemption, a new bond or 

bonds in principal amount equal to the unredeemed portion hereof 

will be issued to the registered owner upon the surrender hereof.

3. Substitute the following for the paragraph concerning 

negotiability :

The transfer of this bond is registrable by the registered owner 

hereof in person or by his attorney or legal representative at the 

principal office of the Trustee but only in the manner and subject to 

the limitations and conditions provided in the Agreement and upon 

surrender and cancellation of this bond. Upon any such registration 

of transfer the Authority shall execute and the Trustee shall 

authenticate and deliver in exchange for this bond a new registered 

bond or bonds without coupons, registered in the name of the 

transferee, of authorized denominations, or, at the option of the 

transferee, coupon bonds with coupons attached representing all 

unpaid interest due or to become due thereon, in aggregate principal 

amount equal to the principal amount of this bond, of the same series 

and maturity and bearing interest at the same rate.

As declared by the Authority Act, this bond, notwithstanding 

the provisions for registration of transfer stated herein and contained 

in the Agreement, shall at all times be, and shall be understood to be, 

a negotiable instrument for all purposes.

4. Substitute the following for the witnessing clause:

IN WITNESS WHEREOF, Puerto Rico Electric Power Authority 

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has caused this bond to [be signed by] [bear the facsimile signature 

of] the Executive Director of the Authority and to [be signed by] [bear 

the facsimile signature of] the Secretary of the Authority, and a 

facsimile of its corporate seal to be imprinted hereon, all as of the 1st 

day of , .

Form of Certificate of 

Authentication.

5. Omit the Form of Coupons.

[TO BE ENDORSED ON ALL BONDS]

CERTIFICATE OF AUTHENTICATION

This is one of the bonds of the series designated therein and 

issued under the provisions of the within mentioned Agreement.

First National City Bank, Trustee

By .....................................

Authorized Officer

Form of Certificate of 

Authentication for 

registered bonds.

[TO BE ENDORSED ON ALL REGISTERED BONDS FOLLOWING

THE CERTIFICATE OF AUTHENTICATION]

Date of authentication: .........................................

And

Power to enter 

Agreement.

WHEREAS, by virtue of the Authority Act, the Authority is 

authorized to issue revenue bonds as hereinafter provided, to enter 

into this Agreement and to do or cause to be done all the acts and 

things herein provided or required to be done as hereinafter 

covenanted ; and

Authorization of 

Agreement.

WHEREAS, the execution and delivery of this Agreement have 

been duly authorized by resolution of the Authority; and

Recital of compliance 

with law.

WHEREAS, all acts, conditions and things required by the 

Puerto Rican Federal Relations Act, by the Constitution and laws of 

the Commonwealth of Puerto Rico and the rules and regulations of 

the Authority to happen, exist and be performed precedent to and in 

the execution and delivery of this Agreement have happened, exist 

and have been performed as so required, in order to make this 

Agreement a legal, valid and binding trust agreement for the security 

of the bonds in accordance with its terms; and

Recital of acceptance WHEREAS, the Trustee has accepted the trusts created by this 

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by Trustee. Agreement and in evidence thereof has joined in the execution hereof;

Pledge of revenues of 

the System

Now, THEREFORE, THIS AGREEMENT WITNESSETH, that in 

consideration of the premises, of the acceptance by the Trustee of the 

trusts hereby created, and of the purchase and acceptance of the bonds 

by the holders thereof, and also for and in consideration of the sum of 

One Dollar to the Authority in hand paid by the Trustee at or before 

the execution and delivery of this Agreement, the receipt of which is 

hereby acknowledged, and for the purpose of fixing and declaring the 

terms and conditions upon which the bonds are to be issued, executed, 

authenticated, delivered, secured and accepted by all persons who 

shall from time to time be or become holders thereof, and in order to 

secure the payment of all the bonds at any time issued and outstanding 

hereunder and the interest and the redemption premium, if any, 

thereon according to their tenor, purport and effect, and in order to 

secure the performance and observance of all the covenants, 

agreements and conditions therein and herein contained, the 

Authority has executed and delivered this Agreement and has pledged 

and does hereby pledge to the Trustee the revenues of the System, 

subject to the pledge of such revenues to the payment of the principal 

of and the interest on the 1947 Indenture Bonds (hereinafter 

mentioned), and other moneys to the extent provided in this 

Agreement as security for the payment of the bonds and the interest 

and the redemption premium, if any, thereon and as security for the 

satisfaction of any other obligation assumed by it in 

Agreement of parties. connection with such bonds, and it is mutually agreed and covenanted 

by and between the parties hereto, for the equal and proportionate 

benefit and security of all and singular the present and future holders 

of the bonds issued and to be issued under this Agreement, without 

preference, priority or distinction as to lien or otherwise, except as 

otherwise hereinafter provided, of any one bond over any other bond, 

by reason of priority in the issue, sale or negotiation thereof or 

otherwise, as follows:

ARTICLE I.

DEFINITIONS.

SECTION 101. In addition to words and terms elsewhere 

defined in this Agreement, the following words and terms shall have 

the following meanings, unless some other meaning is plainly 

intended:

Accreted Value. The term “Accreted Value” shall mean with respect to any 

Capital Appreciation Bonds (i) as of any Valuation Date, the amount 

set forth for such date in the resolution authorizing such Capital 

Appreciation Bonds and (ii) as of any date other than a Valuation 

Date, the sum of (a) the Accreted Value on the preceding Valuation 

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Date and (b) the product of (1) a fraction, the numerator of which is 

the actual number of days having elapsed from the preceding 

Valuation Date and the denominator of which is the actual number of 

days from such preceding Valuation Date to the next succeeding 

Valuation Date and (2) the difference between the Accreted Values 

for such Valuation Dates.

Additional 

Construction Fund 

Usage.

The term “Additional Construction Fund Usage” shall have 

the meaning given to it in Section 405.

Ad Hoc Group. The term “Ad Hoc Group” shall mean such term as defined in 

the Forbearance Agreement.

Agreement. The word “Agreement” shall mean this Agreement, dated as 

of January 1, 1974, together with all agreements supplemental hereto 

as herein permitted.

Amending Creditors. The term “Amending Creditors” shall mean Assured 

Guaranty Corp., Assured Guaranty Municipal Corp., National Public 

Finance Guarantee Corporation, Syncora Guarantee Inc., and the Ad 

Hoc Group, including successors and assigns thereof. For the 

purposes of this Agreement, the Trustee shall be entitled to rely on a 

certification of an Amending Creditor that it is an Amending Creditor.

Amending Creditor 

Bonds.

The term “Amending Creditor Bonds” shall mean, with 

respect to any date, all outstanding bonds that are beneficially owned 

or (without duplication) insured by the Amending Creditors as of such 

date (which outstanding bonds that are beneficially owned by the 

Amending Creditors shall only include such bonds of which the other 

Amending Creditors have received written notice, which notice will 

be effective one (1) business day after receipt). For purposes of this 

Agreement, the Trustee shall be entitled to rely on a certification by 

an Amending Creditor that it beneficially owns or (without 

duplication) insures certain principal amount of outstanding bonds.

Amendment. The term “Amendment” shall refer to the Seventeenth 

Supplemental Agreement, dated as of July 1, 2015, by and between 

the Authority and the Trustee.

Amendment Effective 

Date.

The term “Amendment Effective Date” shall mean March 16, 

2016, being the effective date of the Eighteenth Amendment.

Amendment Period. The term “Amendment Period” shall mean the period from 

the Amendment Effective Date until the Amendment Termination 

Date.

Amendment The term “Amendment Termination Date” shall mean the 

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Termination Date. earliest of (a) the Scheduled Amendment Termination Date, (b) the 

date on which (i) the “Support Period” (as defined in the RSA) has 

expired or terminated in accordance with the terms of the RSA 

(including expiration or termination as a result of withdrawal by the 

relevant Supporting Creditors from the RSA) as to any Supporting 

Creditor Class or as to any Insurer (as defined in the RSA), and 

whether such termination or expiration occurred on, before or after 

the date of the Eighteenth Amendment, and (ii) the Trustee has 

received written notice from the Authority or any Supporting Creditor 

(as defined in the RSA) or former Supporting Creditor confirming the 

same, and (c) the filing of a proceeding by or on behalf of the 

Authority pursuant to the Puerto Rico Public Corporation Debt 

Enforcement and Recovery Act, title 11 of the U.S. Code, or any other 

any bankruptcy or insolvency law, or the commencement of any other 

action or proceeding that seeks to adjust, extend or challenge the 

claims of creditors pursuant to any federal, state or Puerto Rico 

statute, now in effect or hereinafter enacted. Upon the occurrence of 

the date described in clause (b)(i) of this definition, the Authority 

shall promptly, and in any event within 2 business days thereof, 

provide written notice to the Trustee confirming such occurrence. For 

purposes of this Agreement, the Trustee shall be entitled to rely on a 

certification of any person or entity that it is a Supporting Creditor or 

former Supporting Creditor, as applicable.

Amortization 

Accrual.

The term “Amortization Accrual” shall mean for any period 

the amount of an Amortization Requirement that would accrue during 

such period if such Requirement accrued ratably on the basis of a year 

consisting of twelve (12) thirty-day months. Unless otherwise 

provided by resolution of the Authority or an agreement supplemental 

hereto, the monthly accrual in respect of an Amortization 

Requirement for a term bond shall commence on the first day of each 

month in the fiscal year for which such Requirement has been 

established and shall end on the first day of the month succeeding the 

relevant Deposit Day.

Amortization 

Requirement.

As applied to the term bonds of any Series, the term 

“Amortization Requirement” for any fiscal year shall mean the 

principal amount fixed or computed for such fiscal year as hereinafter 

set forth for the retirement of such term bonds by purchase or 

redemption.

The Amortization Requirements for the term bonds of each 

Series shall be initially the respective principal amounts for each 

fiscal year as fixed in a resolution of the Board adopted prior to the 

issuance of the bonds of such Series; provided, however, that if any 

additional term bonds of such Series shall be issued under the 

provisions of the first paragraph of Section 210 of this Agreement, 

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the respective Amortization Requirements for the term bonds of such 

Series shall be increased in proportion as nearly as may be practicable 

to the increase in the total principal amount of the term bonds of such 

Series. The aggregate amount of such Amortization Requirements for 

the term bonds of each Series shall be equal to the aggregate principal 

amount of the term bonds of such Series. The Amortization 

Requirements for the term bonds of each Series shall begin in the 

fiscal year determined by the Board.

If at the close of any fiscal year the total principal amount of 

term bonds of any Series retired by purchase or redemption, or prior 

to the close of such fiscal year called for redemption under the 

provisions of Section 511 of this Agreement, shall be in excess of the 

amount of the Amortization Requirements for the term bonds of such 

Series for such fiscal year, then the amount of the Amortization 

Requirements for the term bonds of such Series shall be reduced for 

such subsequent fiscal years in such amounts aggregating the amount 

of such excess as shall be determined by the Executive Director in an 

order filed with the Trustee on or before the 10th day of July 

following the close of such fiscal year.

If at the close of any fiscal year the total principal amount of 

term bonds of any Series retired by purchase or redemption, or called 

for redemption under the provisions of Section 511 of this 

Agreement, prior to the close of such fiscal year shall be less than the 

amount of the Amortization Requirements for the term bonds of such 

Series for such fiscal year, then the amount of the Amortization 

Requirements for the term bonds of such Series for the next 

succeeding fiscal year shall be increased by the amount of the excess 

of such deficiency over the amount then held to the credit of the 

Redemption Account.

It shall be the duty of the Trustee, on or before the 15th day of 

July in each fiscal year, to compute the Amortization Requirements 

for the then current fiscal year for the term bonds of each Series then 

outstanding. The Amortization Requirement for the then current 

fiscal year shall continue to be applicable during the balance of such 

current fiscal year and no adjustment shall be made therein by reason 

of term bonds purchased or redeemed or called for redemption during 

such current fiscal year.

Annual Budget. The term “Annual Budget” shall mean the Authority’s budget 

of Current Expenses and Capital Expenditures for a fiscal year 

adopted pursuant to the provisions of Section 504 of this Agreement.

Authority. The word “Authority” shall mean the Puerto Rico Electric 

Power Authority, a body corporate and politic constituting a public 

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corporation and governmental instrumentality of the Commonwealth 

of Puerto Rico, and the successor or successors of the Authority.

Authority Act. The term “Authority Act” shall mean the Puerto Rico Water 

Resources Authority Act, being Act No. 83 of the Legislature of 

Puerto Rico, approved May 2, 1941, as amended and reenacted by 

Act No. 19, approved April 8, 1942, as amended, and Act No. 111, 

approved May 6, 1941, as amended by Act No. 153, approved May 

14, 1943, as amended.

Approved Costs of 

Improvements. [Note: 

This definition only 

survives, if at all, 

pursuant to the 

conditional and limited 

survival provisions of 

Section 2(iii) of the 

Eighteenth 

Supplemental 

Agreement.]

The term “Approved Costs of Improvements” shall mean the 

Approved Initial Costs of Improvements and any other costs of 

Improvements (and of extensions of the System) which the Required 

Amending Creditors or their respective advisors have confirmed are 

reasonably acceptable (or which have been deemed reasonably 

acceptable to the Required Amending Creditors in accordance with 

clause (3) of Section 505) and regarding which the Authority 

provided written certification to the Trustee and the Required 

Amending Creditors or their respective advisors, that such costs of 

Improvements (and of extensions of the System) are or are deemed to 

be reasonably acceptable to the Required Amending Creditors or their 

respective advisors.

Approved Initial 

Costs of 

Improvements. [Note: 

This definition only 

survives, if at all, 

pursuant to the 

conditional and limited 

survival provisions of 

Section 2(iii) of the 

Eighteenth 

Supplemental 

Agreement.]

The term “Approved Initial Costs of Improvements” shall

mean the costs of Improvements (and of extensions of the System) 

specified in the initial schedule approved by the Required Amending 

Creditors pursuant to Section 505.

Board. The word “Board” shall mean the governing board of the 

Authority as constituted from time to time and defined by the 

Authority Act, or if said Board shall be abolished, then the board, 

body or officer succeeding to the principal functions thereof or to 

whom the powers of the Authority shall be given by law.

Bond Service 

Account.

The term “Bond Service Account” shall mean the special 

account created in the Sinking Fund by the provisions of Section 507 

of this Agreement.

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18

Bondholders of 

record.

The term “bondholder of record” shall mean any bondholder 

who shall have filed with the Secretary, within the period of two years 

immediately prior to any time when such term has application, a 

written request setting forth his name and address and the particular 

reports, notices and other documents which he desires to receive and 

which are required to be mailed under the requirements of this 

Agreement.

Bonds. The word “bonds” shall mean the bonds issued under this 

Agreement

BPA. The term “BPA” shall mean the Bond Purchase Agreement, 

and all annexes, schedules and exhibits thereto, dated as of January 

27, 2016, and the Bond Purchase Agreement, and all annexes, 

schedules and exhibits thereto, dated as of June 29, 2016, each by and 

among the Authority and the Purchasers defined therein, as the same 

may be amended, supplemented or otherwise modified from time to 

time in accordance with its terms).

Build America Bonds. The term “Build America Bonds” shall mean a series of bonds 

designated as “Build America Bonds” by the Authority for purposes 

of Section 54AA of the Code and for which the Authority has 

irrevocably elected pursuant to Section 54AA(g) of the Code to 

receive the Federal Subsidy from the United States Treasury in 

connection therewith under Section 6431 of the Code and apply it in 

accordance with the provisions of the resolution or resolutions 

adopted by the Board authorizing the issuance of such bonds.

Capital Appreciation 

Bonds.

The term “Capital Appreciation Bonds” shall mean any bonds

hereafter issued as to which interest is payable only at the maturity or 

prior redemption of such bonds. For the purposes of (i) receiving 

payment of the redemption price if a Capital Appreciation Bond is 

redeemed prior to maturity to the extent provided in the resolution 

authorizing the Capital Appreciation Bonds, or (ii) receiving payment 

of a Capital Appreciation Bond if the principal of all bonds is declared 

immediately due and payable following an event of default as 

provided in Section 802 of this Agreement or (iii) computing the 

principal amount of bonds held by the registered owner of a Capital 

Appreciation Bond in giving to the Authority or the Trustee any 

notice, consent, request, or demand pursuant to this Agreement for 

any purpose whatsoever, the principal amount of a Capital 

Appreciation Bond shall be deemed to be its Accreted Value. In the 

case of Capital Appreciation Bonds that are convertible to bonds with 

interest payable prior to maturity or prior redemption of such bonds, 

the term “Capital Appreciation Bonds” shall be limited to the period 

prior to such conversion, and after such conversion, the bonds shall 

be viewed as any other bonds of the same type for purposes of this 

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Agreement.

Capital Expenditures. The term “Capital Expenditures” shall mean all expenditures 

made on account of the cost of the Capital Improvement Program, as 

defined in the 1947 Indenture, and the cost of Improvements under 

this Agreement and the 1947 Indenture and those expenditures made 

for the purposes for which funds are provided pursuant to the 

provisions of Section 512 of the 1947 Indenture.

Capital Improvement 

Fund.

The term “Capital Improvement Fund” shall mean the Puerto 

Rico Electric Power Authority Capital Improvement Fund, a special 

fund created and designated by Section 507 of this Agreement.

Citibank/Scotiabank 

Lenders.

The term “Citibank/Scotiabank Lenders” shall mean Citibank, 

N.A. or its transferees, as applicable, and the Lenders (as defined in 

the Scotiabank Credit Agreement).

Citibank/Scotiabank 

Lines of Credit.

The term “Citibank/Scotiabank Lines of Credit” shall mean 

that certain Trade Finance Facility Agreement, dated as of July 20, 

2012, between the Authority and Citibank, N.A. or its transferees, as 

applicable, as amended or otherwise modified from time to time, and 

the Scotiabank Credit Agreement.

Construction Fund. The term “Construction Fund” shall mean the Puerto Rico 

Electric Power Authority Power System Construction Fund, a special 

fund created and designated by the provisions of Section 401 of this 

Agreement.

Construction Fund 

Replenishment 

Amount. [Note: This 

definition only 

survives, if at all, 

pursuant to the 

conditional and limited 

survival provisions of 

Section 2(a) of the 

Sixteenth Supplemental 

Agreement.]

The term “Construction Fund Replenishment Amount” shall 

mean in respect of a Construction Fund Replenishment Date an 

amount equal to:

(a) the aggregate amount of all Additional Construction 

Fund Usages prior to such Construction Fund Replenishment Date,

less, the sum of:

(b) the aggregate amount that the Authority has applied to 

the cost of Improvements from any source other than the Construction 

Fund from or after the Amendment Effective Date, irrespective of 

whether such amount has been applied prior to or after the 

commencement of any bankruptcy proceeding, insolvency 

proceeding, proceeding under the Puerto Rico Public Corporation 

Debt Enforcement and Recovery Act, Act No. 71-2014, or any similar 

proceeding, and

(c) the aggregate amount theretofore credited to the 

Construction Fund by the Authority pursuant to Section 406 of this 

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20

Agreement.

Construction Fund 

Replenishment Date.

[Note: This definition 

only survives, if at all, 

pursuant to the 

conditional and limited 

survival provisions of 

Section 2(a) of the 

Sixteenth Supplemental 

Agreement.]

The term “Construction Fund Replenishment Date” shall 

mean the twenty-fifth (25) day of each month (or if such day is not a 

business day, the immediately succeeding business day) on which the 

Construction Fund Replenishment Amount is greater than zero.

Consulting Engineers. The term “Consulting Engineers” shall mean the engineer or 

engineering firm or corporation at the time employed by the Authority 

under the provisions of Section 706 of this Agreement to perform and 

carry out the duties imposed on the Consulting Engineers by this 

Agreement.

Controller. The word “Controller” shall mean the Controller or any 

Assistant Controller of the Authority, or if there is no controller or 

assistant controller, then any person designated by the Board or by 

the by-laws of the Authority to perform the functions of the chief 

financial officer of the Authority.

Cost. The word “cost”, as applied to any Improvements, shall 

embrace the cost of the acquisition and construction and all 

obligations and expenses and all items of cost which are set forth in 

Section 403 of this Agreement.

Current Expenses. The term “Current Expenses” shall mean the Authority’s 

reasonable and necessary current expenses of maintaining, repairing 

and operating the System and shall include, without limiting the 

generality of the foregoing, all administrative expenses, insurance 

premiums, expenses of preliminary surveys not chargeable to Capital 

Expenditures, engineering expenses relating to operation and 

maintenance, fees and expenses of the Trustee, the 1947 Trustee, the 

Paying Agents and of the paying agents under the 1947 Indenture, 

legal expenses, any payment to pension or retirement funds, and all 

other expenses required to be paid by the Authority under the 

provisions of the 1947 Indenture, this Agreement or by law, or 

permitted by standard practices for public utility systems, similar to 

the properties and business of the Authority and applicable in the 

circumstances but shall not include any deposits to the credit of the 

Sinking Fund, the Reserve Maintenance Fund, the Self-insurance 

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21

Fund, the Capital Improvement Fund or the 1947 Sinking Fund or 

deposits under the provisions of Sections 511, 512 and 513 of the 

1947 Indenture, and the Subordinate Obligation Fund. 

Notwithstanding the foregoing or anything herein to the contrary, 

none of the holders, the Trustee, and the Authority shall contest 

whether an expense, claim, liability, or amount shall be construed as 

a Current Expense under this Agreement based solely on (x) the 

Citibank/Scotiabank Lenders’ actions on the Amendment Effective 

Date or during the Amendment Period, including (i) forbearing, 

delaying or failing to exercise remedies, (ii) agreeing to a 

postponement or delay in payment of interest or principal, (iii) 

granting an extension of any maturity date, or (iv) not requiring the 

repayment or reborrowing of any loans or not requiring any loans to 

be revolving loans, or (y) the inclusion in this Agreement as a 

Potential Default, and the inclusion in the Forbearance Agreement as 

a “Potential Default” (as defined in the Forbearance Agreement) of 

the Authority’s use of moneys from the General Fund to service its 

debts under the Citibank/Scotiabank Lines of Credit. 

Notwithstanding the foregoing or anything herein to the contrary, 

none of the holders, the Trustee, and the Authority shall contest 

whether an expense, claim, liability, or amount shall be construed as 

a Current Expense under this Agreement based solely on (x) the 

Citibank/Scotiabank Lenders’ actions on the Amendment Effective 

Date or during the Amendment Period, including (i) forbearing, 

delaying or failing to exercise remedies, (ii) agreeing to a 

postponement or delay in payment of interest or principal, (iii) 

granting an extension of any maturity date, or (iv) not requiring the 

repayment or reborrowing of any loans or not requiring any loans to 

be revolving loans, or (y) the inclusion in this Agreement as a 

Potential Default, and the inclusion in the Forbearance Agreement as 

a “Potential Default” (as defined in the Forbearance Agreement) of 

the Authority’s use of moneys from the General Fund to service its 

debts under the Citibank/Scotiabank Lines of Credit. 

Notwithstanding the foregoing or anything herein to the contrary, 

none of the holders, the Trustee, and the Authority shall contest 

whether an expense, claim, liability, or amount shall be construed as 

a Current Expense under this Agreement based solely on (x) the 

Solus/Scotiabank Lenders’ actions on February 3, 2016 (the New 

Effective Date (as defined in the RSA)), during the Amendment 

Period, or during the time the Support Period (as defined in the RSA) 

is in full force and effect as to each Supporting Creditor Class other 

than GDB, including (i) forbearing, delaying or failing to exercise 

remedies, (ii) agreeing to a postponement or delay in payment of 

interest or principal, (iii) granting an extension of any maturity date, 

or (iv) not requiring the repayment or reborrowing of any loans or not 

requiring any loans to be revolving loans, or (y) the inclusion in this 

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22

Agreement as a Potential Default, and the inclusion in the RSA as a 

“Potential Default” (as defined in the RSA) of the Authority’s use of 

moneys from the General Fund to service its debts under the 

Solus/Scotiabank Lines of Credit.

Daily newspaper. The term “daily newspaper” shall mean a newspaper regularly 

published in the English language on at least five (5) business days in 

each calendar week and, in the case of a newspaper published in the 

Commonwealth of Puerto Rico, may include a newspaper regularly 

published in the Spanish language on at least five (5) business days 

in each calendar week.

Depositary. The word “Depositary” shall mean one or more banks or trust 

companies duly authorized under the laws of the United States of 

America, or any state thereof or the Commonwealth of Puerto Rico 

to engage in the banking business therein and designated by the 

Authority as a depositary of moneys under the provisions of this 

Agreement, each such depositary to be a member of the Federal 

Deposit Insurance Corporation and shall also mean the Trustee and 

Government Development Bank for Puerto Rico.

Deposit Day. The term “Deposit Day” shall mean the date specified in the 

first paragraph of Section 507 of this Agreement as the date by which 

all of the moneys then held to the credit of the Revenue Fund shall be 

withdrawn by the Treasurer and deposited in the manner set forth in 

said Section.

Designated Maturity 

Bonds.

The term “Designated Maturity Bonds” shall mean the 

indebtedness incurred by the Authority under the terms of a separate 

trust agreement or resolution, which indebtedness has a maturity of at 

least ten (10) years and is secured, as to the unamortized principal 

thereof, on a subordinate basis to the bonds and for which (i) no 

amortization of principal has been established or (ii) the aggregate 

amount of the amortized principal that has been established is less 

than the principal amount of the indebtedness; provided that interest 

on said indebtedness and any amortized principal of said indebtedness 

may be payable on a parity, respectively, with interest on bonds and 

Amortization Requirements on term bonds, in which case said 

interest and amortized principal shall be included in the calculation 

of Principal and Interest Requirements on bonds for purposes of this 

Agreement and shall otherwise be deemed to be, and be payable as, 

interest and Amortization Requirements on bonds for purposes of this 

Agreement.

Eighteenth 

Amendment.

The term “Eighteenth Amendment” shall refer to the 

Eighteenth Supplemental Agreement, dated as of March 1, 2016, by 

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23

and between the Authority and the Trustee.

Executive Director. The term “Executive Director” shall mean the Executive 

Director or the Vice Executive Director of the Authority for the time 

being, or if there is no Executive Director or Vice Executive Director, 

then any person designated by the Board or by the by-laws of the 

Authority to perform the functions of the Executive Director.

Extendible Maturity 

Bonds.

The term “Extendible Maturity Bonds” shall mean bonds the 

maturities of which, by their terms, may be extended by and at the 

option of the bondholder or the Authority.

Federally Subsidized 

Bonds.

The term “Federally Subsidized Bonds” shall mean either 

Build America Bonds or Other Subsidy Bonds or both, as the case 

may be.

Federal Subsidy. The term “Federal Subsidy” shall mean a payment made by 

the Secretary of the Department of Treasury to or for the account of 

the Authority pursuant to the Code in respect of a series of bonds 

constituting Federally Subsidized Bonds. Any Federal Subsidy to be 

received by the Authority in respect of such series of bonds shall be 

identified as such in the resolution authorizing the issuance of such 

series of bonds to which it relates.

Federal Subsidy 

Payments.

The term “Federal Subsidy Payments” shall mean the amount 

of Federal Subsidy actually paid to and received by the Trustee in 

respect of an interest payment for the series of Federally Subsidized 

Bonds to which it relates. Such Federal Subsidy Payments shall be 

deposited directly into the Bond Service Account in the Sinking Fund.

Fiscal year. The term “fiscal year” shall mean the period commencing on 

the 1st day of July of any year and ending on the last day of June of 

the following year.

Forbearance 

Agreement.

The term “Forbearance Agreement” shall have the meaning 

set forth in the third recital of the Seventeenth Supplemental 

Agreement.

General Fund. The term “General Fund” shall mean the Puerto Rico Electric 

Power Authority General Fund, a special fund created and designated 

by the provisions of Section 503 of this Agreement.

General Reserve 

Fund.

The term “General Reserve Fund” shall mean the Puerto Rico 

Electric Power Authority General Reserve Fund, a special fund 

created and designated by the provisions of Section 511 of the 1947 

Indenture.

Government The term “Government Obligations” shall mean (i) direct 

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Obligations. obligations of, or obligations the principal of and the interest on which 

are unconditionally guaranteed by, the United States Government, 

including securities evidencing ownership interests in such 

obligations or in specified portions thereof (which may consist of 

specific portions of the principal of or interest in such obligations) (ii) 

bonds, debentures or notes issued by any of the following Federal 

agencies: Banks for Cooperatives, Federal Intermediate Credit Banks, 

Federal Home Loan Banks, Export-Import Bank of the United States, 

Government National Mortgage Association, Federal Land Banks, or 

the Federal National Mortgage Association (including participation 

certificates issued by such Association) and (iii) all other obligations 

issued or unconditionally guaranteed as to principal and interest by 

an agency or person controlled or supervised by and acting as an 

instrumentality of the United States Government pursuant to 

authority granted by the Congress.

Improvements. The word “Improvements” shall mean such improvements, 

renewals and replacements of the System or any part thereof and such 

extensions and additions thereto as may be necessary or desirable, in 

the judgment of the Board, to keep the same in proper condition for 

the safe, efficient and economic operation thereof and to integrate into 

the System any unit or part thereof, and shall include such electricpower projects as may be authorized to be acquired or constructed by 

the Authority under the provisions of the Authority Act and such 

improvements, renewals and replacements of such properties and the 

System and such extensions and additions thereto as may be 

necessary or desirable for continuous and efficient service to the 

public, which shall be financed in whole or in substantial part from 

the proceeds of bonds issued under the provisions of the 1947 

Indenture or this Agreement or from moneys deposited to the credit 

of the 1947 Construction Fund, the Construction Fund or the Renewal 

and Replacement Fund.

Independent 

Consultant.

The term “Independent Consultant” shall mean the consultant 

or consulting firm or corporation at the time employed by the 

Authority under the provisions of Section 706 of this Agreement to 

perform and carry out the duties of the Independent Consultant by this 

Agreement.

Initial Improvements 

Period. [Note: This 

definition only 

survives, if at all, 

pursuant to the 

conditional and limited 

survival provisions of 

Section 2(iii) of the 

The term “Initial Improvements Period” shall have the 

meaning given to it in Section 505. 

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25

Eighteenth 

Supplemental 

Agreement.]

Interest Accrual. The term “Interest Accrual” shall mean for any period the 

amount of interest that would accrue during such period if such 

interest accrued ratably on the basis of a year consisting of twelve 

(12) thirty-day months. Unless otherwise provided by resolution of 

the Authority or an agreement supplemental hereto, the monthly 

accrual in respect of interest on the bonds shall commence on the later 

to occur of the date of issue of the bonds of such Series and the date 

that is six months prior to the due date of such interest and shall end 

on the first day of the month following the relevant Deposit Day. In 

the case of Variable Rate Bonds, the amount deposited shall be based 

on the sum of the interest accrued through the business day preceding 

the relevant Deposit Day and the interest (calculated at the maximum 

rate of interest on such Bonds, or if there is no such maximum rate, 

then at the rate on such Bonds on the business day preceding the 

Deposit Day plus one percent (1%)) that would accrue on such Bonds 

from the Deposit Day to the later to occur of the first day of the next 

calendar month and any interest payment date on such Bonds 

occurring prior to the next Deposit Day.

Investment 

Obligations.

The term “Investment Obligations” shall mean (i) 

Government Obligations, (ii) obligations of any state or territory of 

the United States or political subdivision thereof (other than 

obligations rated lower than the three highest grades by a nationally 

recognized rating agency), (iii) repurchase agreements with 

commercial banks fully secured by Government Obligations and (iv) 

any other investment obligations permitted for governmental 

instrumentalities such as the Authority under the laws of the 

Commonwealth of Puerto Rico which are rated, on the date of 

investment therein, in any of the three highest grades by a nationally 

recognized rating agency, or which are collateralized by any of the 

other Investment Obligations described herein.

Net Revenues. The term “Net Revenues” for any particular period shall mean 

the amount of the excess of the Revenues for such period over the 

Current Expenses for such period.

1947 Construction 

Fund.

The term “1947 Construction Fund” shall mean the Puerto 

Rico Electric Power Authority Construction Fund, a special fund 

created and designated by the provisions of Section 401 of the 1947 

Indenture.

1947 Indenture. The term “1947 Indenture” shall mean the Trust Indenture, 

dated as of January 1, 1947, by and between the Authority and The 

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26

National City Bank of New York (now First National City Bank), as 

trustee, as amended by Supplemental Indentures, dated January 1, 

1948, July 1, 1956, January 1, 1961, March 1, 1962, March 1, 1965, 

April 1, 1967, April 1, 1970 and September 1, 1971, together with all 

future amendments and all indentures supplemental thereto as therein 

permitted.

1947 Indenture 

Bonds.

The term “1947 Indenture Bonds” shall mean the bonds issued 

under the 1947 Indenture.

1947 Revenue Fund. The term “1947 Revenue Fund” shall mean the Electric Power 

Authority Electric Revenue Fund, a special fund created and 

designated by the provisions of Section 506 of the 1947 Indenture.

1947 Sinking Fund. The term “1947 Sinking Fund” shall mean the Puerto Rico 

Electric Power Authority Electric Revenue Bonds Sinking Fund, a 

special fund created and designated by the provisions of Section 507 

of the 1947 Indenture.

1947 Trustee. The term “1947 Trustee” shall mean the trustee under the 

1947 Indenture for the time being, whether original or successor.

Opinion of Counsel. The term “Opinion of Counsel” shall mean a written opinion 

of counsel who may (except as otherwise expressly provided in this 

Agreement) be counsel for the Authority. Every opinion of counsel 

required to be filed with the Trustee in connection with an application 

to the Trustee to authenticate bonds under this Agreement shall 

contain the following statements: (i) that the Authority has the legal 

right and power to enter into this Agreement and has duly authorized 

and validly executed and delivered this Agreement and this 

Agreement is legally valid and binding upon the Authority and 

enforceable in accordance with its terms, (ii) that this Agreement 

creates a legally valid and effective pledge of the Net Revenues, 

subject only to the lien of the 1947 Indenture, and of the moneys, 

securities and funds held or set aside under this Agreement as security 

for the bonds, subject to the application thereof to the purposes and 

on the conditions permitted by this Agreement and specifying the 

place or places, if any, where filing or recording of any document is 

necessary in order to make such pledge effective or to continue it in 

effect, (iii) that the Authority has paid all municipal or governmental 

charges lawfully levied or assessed upon the System or any part 

thereof or upon any Revenues, (iv) that the issuance of the bonds then 

directed to be authenticated and delivered will not violate any 

provision of law or of the by-laws of the Authority, or result in the 

breach of, or constitute a default under, any agreement, indenture or 

other instrument to which the Authority is a party or by which it may 

be bound, (v) that no authorization, consent or approval or 

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withholding of objection of any governmental body or regulatory 

authority is requisite to the legal issue of said bonds (unless such 

opinion shall show that no authorization, consent or approval or 

withholding of objection is requisite to the legal issue of said bonds, 

it shall specify and attach any officially authenticated certificates, or 

other documents, by which such authorization, consent or approval or 

withholding of objection is evidenced), and (vi) that the bonds then 

directed to be authenticated and delivered are legally valid and 

binding direct obligations of the Authority, enforceable in accordance 

with their terms and the terms of this Agreement and have been duly 

and validly authorized and issued in accordance with law and this 

Agreement.

Other Subsidy Bonds. The term “Other Subsidy Bonds” shall mean bonds for which 

a subsidy or other payment made by the Secretary of the Department 

of Treasury may be made in respect of such bonds other than under 

Section 6431 of the Code.

Paying Agents. The term “Paying Agents” shall mean with respect to the 

bonds of each Series the one or more banks or trust companies 

designated in a resolution of the Board or the office or agency of the 

Authority where the coupon bonds and coupons may be presented for 

payment.

Predecessor Bonds. The term “predecessor bonds” shall mean, with respect to any 

registered bond without coupons, every previous bond evidencing all 

or a portion of the same debt as that evidenced by such registered 

bond without coupons; and, for the purpose of this definition, any 

bond authenticated and delivered under Section 212 of this 

Agreement in lieu of a mutilated, destroyed or lost bond shall be 

deemed to evidence the same debt as the mutilated, destroyed or lost 

bond.

Prerefunded 

Municipals.

The term “Prerefunded Municipals” shall mean any bonds or 

other obligations of any state of the United States of America or 

Puerto Rico or of any agency, instrumentality or local governmental 

unit of any such state or Puerto Rico (a) which are (x) not callable 

prior to maturity or (y) as to which irrevocable instructions have been 

given to the trustee of such bonds or other obligations by the obligor 

to give due notice of redemption and to call such bonds or other 

obligations for redemption on the date or dates specified in such 

instructions, (b) which are secured as to principal, redemption 

premium, if any, and interest by a fund consisting only of cash or 

Government Obligations or Time Deposits, secured in the manner set 

forth in Section 601 of this Agreement, which fund 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 

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date or dates thereof or the specified redemption date or dates 

pursuant to such irrevocable instructions, as appropriate, and (c) as to 

which the principal of and interest on the Government Obligations or 

Time Deposits, secured in the manner set forth in Section 601 of this 

Agreement, which have been deposited in such fund, along with any 

cash on deposit in such fund are sufficient to pay principal of and 

interest and redemption premium, if any, on the bonds or other 

obligations on the maturity date or dates thereof or on the redemption 

date or dates specified in the irrevocable instructions referred to in 

clause (a) of this paragraph, as appropriate.

Principal Accrual. The term “Principal Accrual” shall mean for any period the 

amount of principal that would accrue during such period if such 

principal accrued ratably on the basis of a year consisting of twelve 

(12) thirty-day months. Unless otherwise provided by resolution of 

the Authority or an agreement supplemental hereto, the monthly 

accrual in respect of the principal of serial bonds shall commence on 

the first day of the twelfth month preceding the due date of such 

principal and shall end on the first day of the month succeeding the 

relevant Deposit Day.

Principal and Interest 

Requirements.

The term “Principal and Interest Requirements” for any fiscal 

year, as applied to the bonds of any Series issued under this 

Agreement or the 1947 Indenture, shall mean the sum of:

(a) the amount required to pay the interest on all 

outstanding bonds of such Series which is payable on January 1 in 

such fiscal year and on July 1 in the following fiscal year,

(b) the amount required to pay the principal of all 

outstanding serial bonds of such Series which is payable after July 31 

in such fiscal year and on or prior to July 31 in the following fiscal 

year, and

(c) the Amortization Requirement for the term bonds of 

such Series for such fiscal year.

The Principal and Interest Requirements for the bonds of any Series 

issued under this Agreement shall be determined, as required from 

time to time, by the Trustee. In computing the Principal and Interest 

Requirements for any fiscal year for the bonds of any Series, the 

Trustee shall assume that an amount of the term bonds of such Series 

equal to the Amortization Requirement for the term bonds of such 

Series for such fiscal year will be retired by purchase or redemption 

on July 1 in the following fiscal year.

For purposes of determining the aggregate Principal and 

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Interest Requirements in the covenant as to rates contained in Section 

502, the maximum Principal and Interest Requirements for purposes 

of Section 704 and the maximum aggregate Principal and Interest 

Requirements for purposes of Section 712 of this Agreement, the 

interest rate on Variable Rate Bonds shall be assumed to be one 

hundred ten percent (110%) of the greater of (i) the average interest 

rate on such Variable Rate Bonds during the twelve months ending 

with the month preceding the date of calculation; or such shorter 

period that such Variable Rate Bonds shall have been outstanding 

under this Agreement, or (ii) the rate of interest on such Variable Rate 

Bonds on the date of calculation. For purposes of determining the 

maximum aggregate Principal and Interest Requirements and the 

maximum Principal and Interest Requirements for purposes of 

Sections 208, 209 and 210 of this Agreement, the interest rate on 

Variable Rate Bonds outstanding or proposed to be issued on the date 

of calculation shall be determined in accordance with the formula in 

the previous sentence. If Variable Rate Bonds are payable at the 

option of the Bondholder and the source for said payment is a credit 

or liquidity facility, the “put” date or dates shall be ignored and the 

stated dates for Amortization Requirements and principal payments 

thereof shall be used for purposes of this calculation. If the Authority 

has notified the Trustee that a SWAP agreement is in effect in respect 

of Variable Rate Bonds, then for all purposes of this paragraph, 

except for the purpose of determining the aggregate Principal and 

Interest Requirements in the covenant as to rates contained in Section 

502 hereof, in the certificate mentioned in clause (d) of Section 208 

hereof and in the covenant contained in Section 704 hereof, the 

interest rate on such Variable Rate Bonds shall be the SWAP rate 

under such SWAP agreement.

For purposes of determining the above requirements in the 

case of Put Bonds, the “put” dates or dates shall be ignored if the 

source for payment of said put is a credit or liquidity facility and the 

stated dates for Amortization Requirements and principal payments 

shall be used. For purposes of determining the above requirements in 

the case of Extendible Maturity Bonds, the bonds shall be deemed to 

mature on the later of the stated maturity date or the date to which 

such stated maturity date has been extended. For purposes of 

determining the above requirements in the case of Capital 

Appreciation Bonds, the principal and interest portions of the 

Accreted Value of Capital Appreciation Bonds becoming due at 

maturity or by virtue of an Amortization Requirement shall be 

included in the calculations of accrued and unpaid interest and 

principal requirements in such manner and during such period of time 

as is specified in the resolution authorizing such Capital Appreciation 

Bonds. 

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Principal and Interest Requirements on bonds shall be deemed 

to include the amount required to pay interest on outstanding 

Designated Maturity Bonds and any amortized principal of said 

Designated Maturity Bonds for any fiscal year, if said interest and 

amortized principal are payable, under the trust agreement or 

resolution providing for said Designated Maturity Bonds, on a parity 

with interest and Amortization Requirements on bonds.

To the extent all or a portion of the principal of, Amortization 

Requirements for or interest on, any bonds of any Series are payable 

from moneys irrevocably set aside or deposited irrevocably for such 

purpose with a bank or trust company (which may include the 

Trustee) or from Investment Obligations irrevocably set aside or 

deposited irrevocably for such purpose with a bank or trust company 

(which may include the Trustee) or Time Deposits, secured in the 

manner set forth in Section 601 of this Agreement, and irrevocably 

set aside for such purpose, the principal of and the interest on which 

when due will provide sufficient moneys to make such payments, 

such principal, Amortization Requirements or interest shall not be 

included in determining Principal and Interest Requirements; 

provided, however, that for purposes of the definition of Principal and 

Interest Requirements as used in Sections 502(A)(b) and 502(B)(b), 

respectively, said definition shall include any interest payable from 

any amount deposited to the credit of the Bond Service Account from 

the proceeds of bonds to pay interest to accrue thereon. The Executive 

Director or his designee shall deliver to the Trustee a certificate 

describing the principal of, Amortization Requirements for and 

interest on any bonds for which moneys, Investment Obligations or 

Time Deposits have been set aside or deposited pursuant to this 

paragraph, and stating that such principal, Amortization 

Requirements and interest should not be included in determining the 

Principal and Interest Requirements. Upon request of the Trustee, the 

Authority shall cause to be delivered to the Trustee a certificate of an 

independent verification agent as to the sufficiency of the maturing 

principal amounts of any Investment Obligations or Time Deposits, 

together with interest thereon, set aside or deposited pursuant to this 

paragraph to pay said principal, Amortization Requirements and 

interest.

For purposes of determining the maximum Principal and 

Interest Requirements for purposes of Sections 208, 209 and 210 of 

this Agreement, the aggregate Principal and Interest Requirements in 

the covenant as to rates contained in Section 502, the maximum 

Principal and Interest Requirements for purposes of Section 704 and 

the maximum aggregate Principal and Interest Requirements for 

purposes of Section 712 of this Agreement, on the date of issuance of 

a Federally Subsidized Bonds and for so long as the Trustee shall 

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receive the scheduled amount of the Federal Subsidy Payments on or 

before such interest is payable, all or a portion of the interest in 

respect of one or more series of Federally Subsidized Bonds shall be 

excluded from the calculation of the Principal and Interest 

Requirement if, and to the extent that the interest thereon is payable 

from a Federal Subsidy. Notwithstanding the foregoing, if the Trustee 

shall not receive the scheduled amount of the Federal Subsidy 

Payments on or before the date interest on such Federally Subsidized 

Bonds is payable or within thirty (30) of the date such Federal 

Subsidy Payments were scheduled to be received under the then 

current applicable law and regulations, then from and after the 

occurrence of such failure to receive such Federal Subsidy and until

such Federal Subsidy Payments shall resume and all prior 

deficiencies are cured, the exclusion from the calculation of the 

Principal and Interest Requirement set forth in the preceding sentence 

shall no longer be effective for purposes of determining the maximum 

Principal and Interest Requirements for purposes of Sections 208, 209 

and 210 of this Agreement, the aggregate Principal and Interest 

Requirements in the covenant as to rates contained in Section 502, the 

maximum Principal and Interest Requirements for purposes of 

Section 704 and the maximum aggregate Principal and Interest 

Requirements for purposes of Section 712 of this Agreement.

Potential Default. The term “Potential Default” shall mean each of the events 

specified on Schedule 1, the occurrence of which would give rise to 

a default under this Agreement.

Put Bonds. The term “Put Bonds” shall mean bonds, other than Variable 

Rate Bonds, which by their terms may be tendered by and at the 

option of the holder thereof for payment prior to the stated maturity 

thereof.

Redemption Account. The term “Redemption Account” shall mean the special 

account created in the Sinking Fund by the provisions of Section 507 

of this Agreement.

Renewal and 

Replacement Fund.

The term “Renewal and Replacement Fund” shall mean the 

Electric Power Authority Renewal and Replacement Fund, a special 

fund created and designated by the provisions of Section 512 of the 

1947 Indenture.

Required Amending 

Creditors.

The term “Required Amending Creditors” shall mean (i) 

Assured Guaranty Corp, and Assured Guaranty Municipal Corp., (ii) 

National Public Finance Guarantee Corporation, and, (iii) at any 

given time, Holders (as defined in the RSA) that (A) are party to the 

RSA, and (B) in the aggregate beneficially own a majority of the 

aggregate principal amount of Uninsured Bonds (as that term is 

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defined in the RSA) beneficially owned by Holders (as defined in the 

RSA) then party to the RSA.

Reserve Account. The term “Reserve Account” shall mean the special account 

created in the Sinking Fund by the provisions of Section 507 of this 

Agreement.

Reserve Account 

Insurance Policy.

The term “Reserve Account Insurance Policy” shall mean the 

insurance policy, surety bond or other acceptable evidence of 

insurance, if any, to be deposited in the Reserve Account in lieu of or 

in partial substitution for cash or securities on deposit therein, for the 

purpose of making the payments required to be made from the 

Reserve Account under Section 510 hereof. The issuer providing such 

insurance shall be a municipal bond insurer that is rated, at the time 

of deposit into the Reserve Account, in one of the three highest rating 

categories (without regard to gradations within a category) by either 

(i) Standard & Poor’s Corporation or its successor, or Moody’s 

Investors Service, Inc. or its successors or (ii) if both such 

corporations shall be dissolved or liquidated or shall no longer 

perform the functions of a securities rating agency, a nationally 

recognized rating agency.

Reserve Account 

Letter of Credit.

The term “Reserve Account Letter of Credit” shall mean the 

irrevocable, transferable letter of credit, if any, to be deposited in the 

Reserve Account in lieu of or in partial substitution for cash or 

securities on deposit therein, for the purpose of making the payments 

required to be made from the Reserve Account under Section 510 

hereof. The issuer providing such letter of credit shall be a banking 

association, bank or trust company or branch thereof whose letter of 

credit results in the rating of municipal obligations secured by such 

letter of credit to be rated, at the time of deposit into the Reserve 

Account, in one of the three highest grades by (i) either Standard & 

Poor’s Corporation or its successor, or Moody’s Investors Service, 

Inc. or its successor or (ii) if both such corporations shall be dissolved 

or liquidated or shall no longer perform the functions of a securities 

rating agency, a nationally recognized rating agency.

Reserve Maintenance 

Fund.

The term “Reserve Maintenance Fund” shall mean the Puerto 

Rico Electric Power Authority Reserve Maintenance Fund, a special 

fund created and designated by the provisions of Section 507 of this 

Agreement.

Retained General 

Fund Amount. [Note: 

This definition only 

survives, if at all, 

pursuant to the 

The term “Retained General Fund Amount” shall mean 

$50,000,000.

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conditional and limited 

survival provisions of 

Section 2(a) of the 

Sixteenth Supplemental 

Agreement.]

Revenue Fund. The term “Revenue Fund” shall mean the Puerto Rico Electric 

Power Authority Power Revenue Fund, a special fund created and 

designated by the provisions of Section 506 of this Agreement.

Revenues. The word “Revenues” shall mean all moneys received by the 

Authority in connection with or as a result of its ownership or 

operation of the System, including the income derived by the 

Authority from the sale of electricity generated or distributed by the 

System, any proceeds of use and occupancy insurance on the System 

or any part thereof and income from investments made under the 

provisions of the 1947 Indenture and this Agreement, except income 

from the investment of moneys in the 1947 Construction Fund, the 

Construction Fund, the Capital Improvement Fund, the Subordinate 

Obligations Fund to the extent such income has been derived from 

the investment of moneys in such Fund to be used to pay Subordinate 

Obligations incurred to pay the cost of any work or properties which 

have not been included by the Authority as part of the System as 

provided in Section 516 hereof and the Reserve Maintenance Fund 

which shall be deemed to be a part of said Funds, respectively. Except 

for the purpose of determining the amount of the Revenues in the 

covenant as to rates contained in Section 502 hereof, Revenues shall 

not include any amounts paid to the Authority by a SWAP party in 

connection with Variable Rate Bonds.

RSA. The term “RSA” shall have the meaning set forth in the third 

recital of the Eighteenth Amendment.

Scheduled 

Amendment 

Termination Date.

The term “Scheduled Amendment Termination Date” shall 

mean 11:59 p.m. (prevailing Eastern Time) on June 30, 2016.

Scotiabank Credit 

Agreement.

The term “Scotiabank Credit Agreement” shall mean that 

certain Credit Agreement, dated as of May 4, 2012, between the 

Authority, as borrower, the lenders party thereto, and Scotiabank de 

Puerto Rico, as administrative agent, as amended or otherwise 

modified from time to time.

Self-insurance Fund. The term “Self-insurance Fund” shall mean the Puerto Rico 

Electric Power Authority Self-insurance Fund, a special fund created 

and designated by the provisions of Section 507 of this Agreement.

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Secretary. The word “Secretary” shall mean the Secretary or any 

Assistant Secretary of the Authority, or if there is no secretary or 

assistant secretary, then any person designated by the Board or by the 

by-laws of the Authority to perform the functions of the Secretary.

serial bonds and term 

bonds.

The term “serial bonds” shall mean the bonds of a Series 

which shall be stated to mature in annual or semi-annual installments 

or bonds which are otherwise designated serial bonds in a resolution 

of the Board adopted prior to the issuance of such bonds, and the term 

“term bonds” shall mean the bonds of a Series maturing on July 1 and 

designated term bonds in a resolution of the Board adopted prior to 

the issuance of such bonds.

Series. The word “Series” shall mean either (i) the bonds issued and 

delivered at any one time under the provisions of Sections 208 or 209 

of this Agreement or (ii) the refunding bonds issued at any one time 

under the provisions of the second paragraph of Section 210 of this 

Agreement. Bonds issued under the first paragraph of Section 210 of 

this Agreement to refund serial bonds of any Series shall be deemed 

to constitute a part of the bonds of such Series.

Series 2015A Bonds. The term “Series 2015A Bonds” shall mean the Authority’s 

Power Revenue Bonds, Series 2015A, issued pursuant to Resolution 

4239, adopted by the Authority on June 30, 2015, as supplemented 

by Resolution No. 4246, adopted by the Authority on July 30, 2015.

Series 2016 Bonds. The term “Series 2016 Bonds” shall mean collectively the 

Authority’s Power Revenue Bonds, Series 2016A, Power Revenue 

Bonds, Series 2016B, Power Revenue Bonds, Series 2016C, Power 

Revenue Bonds, Series 2016D, and Power Revenue Bonds, Series 

2016E, issued pursuant to Resolution 4338, adopted by the Authority 

on March 15, 2016, as amended, and Resolution 4391, adopted by the 

Authority on June 28, 2016, and sold pursuant to the BPA.

Sinking Fund. The term “Sinking Fund” shall mean the Puerto Rico Electric 

Power Authority Power Revenue Bonds Interest and Sinking Fund, a 

special fund created and designated by the provisions of Section 507 

of this Agreement.

Specified Period

Defeasance Fund

The term “Specified Period Defeasance Fund” shall have the 

meaning given to it in Section 517.

Specified Period 

Principal and Interest 

Requirements.

The term “Specified Period Principal and Interest 

Requirements” shall mean the Principal and Interest Requirements 

for all outstanding bonds which accrue and are payable on or before 

January 1, 2015, excluding for purposes of the calculation of such 

Requirements any Federal Subsidy Payments.

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Solus. The term “Solus” shall have the meaning given such term in 

the RSA.

Solus Credit 

Agreement. 

The term “Solus Credit Agreement” shall mean that certain 

Trade Finance Facility Agreement, dated as of July 20, 2012, between 

the Authority and Citibank, N.A. or its transferees party thereto from 

time to time (including Solus), as applicable, as amended or otherwise 

modified from time to time.

Solus/Scotiabank 

Lenders. 

The term “Solus/Scotiabank Lenders” shall mean Citibank, 

N.A. or its transferees (including Solus), as applicable, and the 

Lenders (as defined in the Scotiabank Credit Agreement).

Solus/Scotiabank 

Lines of Credit.

The term “Solus/Scotiabank Lines of Credit” shall mean the 

Solus Credit Agreement and the Scotiabank Credit Agreement.

Supporting Creditor 

Class. 

The term “Supporting Creditor Class” refers to (i) GDB, (ii) 

the Holders, (iii) the Insurers, (iv) Solus or (v) Scotiabank and the 

Scotiabank Lenders, each as defined in the RSA.

SWAP Agreement. “SWAP agreement” shall mean an agreement between the 

Authority and a SWAP party whereby the SWAP party agrees to pay 

to the Authority amounts calculated on the basis of all or a portion of 

the interest on Variable Rate Bonds at or prior to the times such 

interest is due and payable in consideration of the Authority’s 

payment to the SWAP party of amounts set forth in the SWAP 

agreement.

SWAP Party. “SWAP party” shall mean a person who is party to a SWAP 

agreement and whose senior obligations are rated at the time of the 

execution and delivery of such SWAP agreement in one of the three 

highest rating categories (without regard to gradations within a 

category) by (i) Standard & Poor’s Corporation or its successor and 

(ii) Moody’s Investors Service or its successor.

SWAP Rate. “SWAP rate” shall mean the fixed rate per annum on the 

principal amount of Variable Rate Bonds covered by a SWAP 

agreement equal to the percentage derived by dividing (i) the sum of 

the amounts in the last twelve months paid by the Authority in respect 

of interest on such bonds and to the SWAP party less the amount paid 

to the Authority by the SWAP party by (ii) such principal amount of 

Variable Rate Bonds; provided, however, that if such SWAP 

agreement has been in effect for less than twelve months, such 

percentage shall be multiplied by 360 divided by the number of days 

between the effective date of such SWAP agreement and the date of 

calculation determined on the basis of 30-day months.

Subordinate The term “Subordinate Obligations” shall mean any 

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Obligations. obligations of the Authority incurred as provided in Section 516 of 

this Agreement.

Subordinate 

Obligations Fund.

The term “Subordinate Obligations Fund” shall mean the 

Puerto Rico Electric Power Authority Subordinate Obligations Fund, 

a special fund created and designated by Section 507 of this 

Agreement.

System. The word “System” shall mean all the properties presently 

owned and operated by the Authority as a single integrated system, 

together with all works and properties which may be hereafter 

acquired or constructed by the Authority in connection with the 

production, distribution or sale of electric energy and the acquisition 

or construction of which shall be financed in whole or in part from 

the proceeds of bonds issued under the provisions of the 1947 

Indenture or this Agreement or from moneys deposited to the credit 

of the 1947 Construction Fund, the Construction Fund, the Capital 

Improvement Fund or the Renewal and Replacement Fund or from 

Subordinate Obligations to the extent such works and properties have 

been included by the Authority as part of the System as provided in 

Section 516 hereof.

Time Deposits. The term “Time Deposits” shall mean time deposits, 

certificates of deposit or similar arrangements with the Trustee, 

Government Development Bank for Puerto Rico or any bank or trust 

company which is a member of the Federal Deposit Insurance 

Corporation having a combined capital and surplus aggregating notless than $100,000,000.

Treasurer. The word “Treasurer” shall mean the Treasurer or any 

Assistant Treasurer of the Authority, or if there is no treasurer or 

assistant treasurer, then any person designated by the Board or by the 

by-laws of the Authority to perform the functions of the Treasurer.

Variable Rate Bonds. The term “Variable Rate Bonds” shall mean bonds issued with 

a variable, adjustable, convertible or similar interest rate which is not 

fixed in percentage at the date of issue for the term thereof, and which 

may or may not be convertible to a fixed interest rate for the 

remainder of their term.

Validation

Proceeding.

The term “Validation Proceeding” shall mean any validation 

or other legal proceedings in which holders of bonds may have a right 

to participate under Section 35(c) or (d) of Act No. 4-2016 of the 

Legislature of Puerto Rico, approved on February 16, 2016 (as the 

same may be amended, the PREPA Revitalization Act).

Valuation Date.

The term “Valuation Date” shall mean with respect to any 

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Capital Appreciation Bonds the date or dates set forth in the 

resolution authorizing such bonds on which Accreted Values are 

assigned to the Capital Appreciation Bonds.

Trustee. The word “Trustee” shall mean the Trustee for the time being, 

whether original or successor.

Miscellaneous. SECTION 102. Words of the masculine gender shall be deemed 

and construed to include correlative words of the feminine and neuter 

genders. Unless the context shall otherwise indicate, the words 

“bond”, “coupon”, “owner”, “holder” and “person” shall include the 

plural as well as the singular number, the word “person” shall mean 

any individual, corporation, partnership, joint venture, association, 

joint-stock company, trust, unincorporated organization or 

government or any agency or political subdivision thereof, and the 

word “holder” or “bondholder” when used herein with respect to 

bonds issued hereunder shall mean the holder or registered owner, as 

the case may be, of bonds at the time issued and outstanding 

hereunder.

ARTICLE II.

FORM, EXECUTION AND REGISTRATION OF BONDS AND CONDITIONS 

FOR AUTHENTICATION AND DELIVERY OF BONDS.

Limitation on 

issuance of bonds.

SECTION 201. No bonds may be issued under the provisions 

of this Agreement except in accordance with the provisions of this 

Article.

Form of bonds. SECTION 202. The definitive bonds are issuable as coupon 

bonds or as registered bonds without coupons or both. The definitive 

bonds issued under the provisions of this Article shall be substantially 

in the forms hereinabove set forth, with such appropriate variations, 

omissions and insertions as are permitted or required by this 

Agreement and with such additional changes as may be necessary or 

appropriate to conform to the provisions of the resolution or 

resolutions providing for the issuance of such bonds. All such bonds 

may have endorsed thereon such legends or text as may be necessary 

or appropriate to conform to any applicable rules and regulations of 

any governmental authority or of any securities exchange on which 

the bonds may be listed or traded or any usage or requirement of law 

with respect thereto or as may be authorized by the Authority and 

approved by the Trustee. The form of bonds may be changed as 

specified in said resolution or resolutions to reflect appropriate 

provisions for the issuance of bonds with interest payable other than 

semi-annually, and may reflect, without limitation, provisions for 

Capital Appreciation Bonds, Variable Rate Bonds, Put Bonds, 

Extendible Maturity Bonds and other types of bonds, subject to any 

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limitations under the laws of Puerto Rico at the time of the issuance 

of the particular bonds.

Details of bonds. SECTION 203. The bonds shall be dated, shall bear interest 

until their payment, such interest to the maturity thereof being 

payable semi-annually on the 1st days of January and July in each 

year, and shall be stated to mature (subject to the right of prior 

redemption), all as hereinafter provided. Notwithstanding the 

previous sentence, bonds may bear interest payable other than semiannually, as may be provided by the resolution or resolutions 

authorizing the issuance of particular bonds, and bonds may include, 

without limitation, Capital Appreciation Bonds, Variable Rate Bonds, 

Put Bonds, Extendible Maturity Bonds and other types of bonds, 

subject to any limitations under the laws of Puerto Rico at the time of 

the issuance of the particular bonds.

Each coupon bond shall bear interest from its date. Each 

registered bond without coupons shall bear interest from the interest 

payment date next preceding the date on which it is authenticated, 

unless authenticated on an interest payment date, in which case it shall 

bear interest from such interest payment date, or, unless authenticated 

prior to the first interest payment date, in which case it shall bear 

interest from its date; provided, however, that if at the time of 

authentication of any registered bond without coupons interest is in 

default, such bond shall bear interest from the date to which interest 

shall have been paid.

Execution of bonds 

and coupons.

The bonds shall be signed by, or bear the facsimile signature 

of, the Executive Director and shall be signed by, or bear the facsimile 

signature of, the Secretary, and a facsimile of the corporate seal of the 

Authority shall be imprinted on the bonds.

The coupons attached to the coupon bonds shall be 

substantially in the form hereinabove set forth and shall bear the 

facsimile signature of the Executive Director.

In case any officer whose signature or a facsimile of whose 

signature shall appear on any bonds or coupons shall cease to be such 

officer before the delivery of such bonds, such signature or such 

facsimile shall nevertheless be valid and sufficient for all purposes 

the same as if he had remained in office until such delivery, and also 

any bond may bear the facsimile signature of or may be signed by

such persons as at the actual time of the execution of such bond shall 

be the proper officers to sign such bond although at the date of such 

bond such persons may not have been such officers.

Payment of principal Both the principal of and the interest on the bonds shall be 

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and interest. payable in any coin or currency of the United States of America which 

on the respective dates of payment thereof is legal tender for the 

payment of public and private debts. The principal of coupon bonds 

of each Series and the interest on all coupon bonds of such Series 

shall be payable at the principal offices of the Paying Agents 

designated for the bonds of such Series. The principal of all registered 

bonds without coupons shall be payable only to the registered owner 

or his legal representative at the principal corporate trust office of the 

Trustee, and payment of the interest on each registered bond without 

coupons shall, except as may otherwise be provided by resolution of 

the Authority authorizing the issuance of any Series of bonds under 

this Agreement, be made by the Trustee on each interest payment date 

to the person appearing on the registration books of the Authority 

hereinafter provided for as the registered owner thereof (or of any 

predecessor bond) on the 15th day of the month next preceding such 

interest payment date, by check mailed to such registered owner at 

his address as it appears on such registration books. Except as 

provided in Section 211 of this Agreement, payment of the principal 

of all bonds shall be made upon the presentation and surrender of such 

bonds as the same shall become due and payable. Payment of the 

interest on the coupon bonds shall be made upon the presentation and 

surrender of the coupons, if any, representing such interest as the 

same respectively become due and payable.

Authentication of 

bonds.

SECTION 204. Only such of the bonds as shall have endorsed 

thereon a certificate of authentication substantially in the form 

hereinabove set forth, duly executed by the Trustee, shall be entitled 

to any benefit or security under this Agreement. No bond and no 

coupon appertaining to any coupon bond shall be valid or obligatory 

for any purpose unless and until such certificate of authentication 

shall have been duly executed by the Trustee, and such certificate of 

the Trustee upon any such bond shall be conclusive evidence that 

such bond has been duly authenticated and delivered under this 

Agreement. The Trustee’s certificate of authentication on any bond 

shall be deemed to have been duly executed if signed by an authorized 

officer of the Trustee, but it shall not be necessary that the same 

officer sign the certificate of authentication on all of the bonds that 

may be issued hereunder at any one time. Before authenticating or 

delivering any coupon bonds the Trustee shall detach and cancel all 

matured coupons, if any, appertaining thereto, except any coupons 

which represent unpaid interest.

Exchange of coupon 

bonds for registered 

bonds.

SECTION 205. Coupon bonds, upon surrender thereof at the 

principal office of the Trustee with all unmatured coupons and all 

matured coupons in default, if any, appertaining thereto, may, at the 

option of the holder thereof, be exchanged for an equal aggregate 

principal amount of registered bonds without coupons of the same 

Case:19-00391-LTS Doc#:118-1 Filed:01/10/23 Entered:01/10/23 21:08:06 Desc:

Exhibit A Page 42 of 128

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Exhibit 3 Page 52 of 252
40

Series and maturity, of any denomination or denominations 

authorized by this Agreement, bearing interest at the same rate, and, 

with the exception of the differences between the form of coupon 

bonds and the form of registered bonds without coupons which are 

set forth in the preamble of this Agreement, in the same form as the 

coupon bonds surrendered for exchange.

Exchange of 

registered bonds for 

coupon bonds or 

registered bonds.

Registered bonds without coupons, upon surrender thereof at 

the principal office of the Trustee, together with an assignment duly 

executed by the registered owner or his attorney or legal 

representative in such form as shall be satisfactory to the Trustee, 

may, at the option of the registered owner thereof, be exchanged for 

an equal aggregate principal amount of coupon bonds of the same 

Series (if authorized for such Series) and maturity, bearing interest at 

the same rate and having attached thereto coupons representing all 

unpaid interest due or to become due thereon, or of registered bonds 

without coupons of the same Series and maturity, of any 

denomination or denominations authorized by this Agreement, and 

bearing interest at the same rate, and in either case, with the exception 

of the differences between the form of coupon bonds and the form of 

registered bonds without coupons which are set forth in the preamble 

of this Agreement, in the same form as the registered bonds without 

coupons surrendered for exchange. 

The Authority shall make provision for the exchange of bonds 

at the principal office of the Trustee.

Negotiability of 

coupon bonds.

Transfer of registered 

bonds.

SECTION 206. Title to any coupon bond and to any interest 

coupon shall pass by delivery in the same manner as a negotiable 

instrument payable to bearer. The Trustee as Bond Registrar shall 

keep books for the registration of and for the registration of transfers 

of bonds as provided in this Agreement. The transfer of any registered 

bond without coupons may be registered only upon the books kept for 

the registration of and registration of transfers of bonds upon 

surrender thereof to the Bond Registrar together with an assignment 

duly executed by the registered owner or his attorney or legal 

representative in such form as shall be satisfactory to the Bond 

Registrar. Upon any such registration of transfer the Authority shall 

execute and the Trustee shall authenticate and deliver in exchange for 

such bond a new registered bond or bonds without coupons registered 

in the name of the transferee, of any denomination or denominations 

authorized by this Agreement, or, at the option of the transferee and 

if coupon bonds are authorized for the same Series as such bond, 

coupon bonds with coupons attached representing all unpaid interest 

due or to become due thereon, in an aggregate principal amount equal 

to the principal amount of such registered bond without coupons, of 

Case:19-00391-LTS Doc#:118-1 Filed:01/10/23 Entered:01/10/23 21:08:06 Desc:

Exhibit A Page 43 of 128

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Exhibit 3 Page 53 of 252
41

the same Series and maturity and bearing interest at the same rate.

Cancellation of bonds 

and coupons 

surrendered for 

exchange or transfer.

In all cases in which bonds shall be exchanged or the transfer 

of registered bonds without coupons shall be registered hereunder, the 

Authority shall execute and the Trustee shall authenticate and deliver 

at the earliest practicable time bonds in accordance with the 

provisions of this Agreement. All registered bonds without coupons 

surrendered in any such exchange or registration of transfer shall 

forthwith be cancelled by the Trustee. All coupon bonds and 

unmatured coupons surrendered in any such exchange or registration 

of transfer shall be retained by the Trustee in its custody. The 

Authority or the Trustee may make a charge for every such exchange 

or registration of transfer of bonds sufficient to reimburse it for any 

tax or other governmental charge required to be paid with respect to 

such exchange or registration of transfer, but no other charge shall be 

made to any bondholder for the privilege of exchanging or registering 

the transfer of bonds under the provisions of this Agreement. Neither 

the Authority nor the Trustee shall, except as may otherwise be 

provided by resolution of the Authority authorizing the issuance of 

any Series of bonds under this Agreement, be required to make any 

such exchange or registration of transfer of bonds, during the fifteen 

(15) days immediately preceding any interest payment date on the 

bonds or, in the case of any proposed redemption of bonds, 

immediately preceding the date of first publication of notice of such 

redemption (or if all the bonds to be redeemed are issuable as 

registered bonds without coupons, immediately preceding the date of 

mailing of notice of such redemption), or after such bond or any 

portion thereof has been selected for redemption.

Ownership of 

registered bonds.

Ownership of coupon 

bonds.

SECTION 207. As to any registered bond without coupons, the 

person in whose name the same shall be registered shall be deemed 

and regarded as the absolute owner thereof for all purposes, and 

payment of or on account of the principal of and the premium, if any, 

and the interest on any such bond shall be made only to the registered 

owner thereof or his legal representative. All such payments shall be 

valid and effectual to satisfy and discharge the liability upon such 

bond including the interest thereon to the extent of the sum or sums 

so paid. The Authority, the Trustee, the Bond Registrar and the 

Paying Agents may deem and treat the bearer of any coupon bond and 

the bearer of any coupon appertaining to any coupon bond as the 

absolute owner of such bond or coupon, as the case may be, whether 

such bond or coupon shall be overdue or not, for the purpose of 

receiving payment thereof and for all other purposes whatsoever, and 

neither the Authority, the Trustee, the Bond Registrar nor the Paying 

Agents shall be affected by any notice to the contrary.

Case:19-00391-LTS Doc#:118-1 Filed:01/10/23 Entered:01/10/23 21:08:06 Desc:

Exhibit A Page 44 of 128

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Exhibit 3 Page 54 of 252
42

Transfer of title of 

bonds.

Any person in possession of any coupon bond or of any 

coupon appertaining to any coupon bond is hereby authorized to 

represent himself as the absolute owner of such bond or coupon, as 

the case may be, and is hereby granted power to transfer absolute title 

thereto by delivery thereof to a bona fide purchaser for value (present 

or antecedent) without notice of prior defenses or equities or claims 

of ownership enforceable against his transferor or any person in the 

chain of title and before the maturity of such bond. Any registered 

owner of any registered bond without coupons is hereby granted 

power to transfer absolute title thereto by assignment thereof to a 

bona fide purchaser for value (present or antecedent) without notice 

of prior defenses or equities or claims of ownership enforceable 

against his assignor or any person in the chain of title and before the 

maturity of such bond. Every prior holder or owner of any bond or of 

any coupon appertaining to any coupon bond shall be deemed to have 

waived and renounced all of his equities or rights therein in favor of 

every such bona fide purchaser, and every such bona fide purchaser 

shall acquire absolute title thereto and to all rights represented 

thereby.

Issuance of revenue 

bonds to pay cost of 

Improvements.

SECTION 208. Revenue bonds of the Authority may be issued 

under and secured by this Agreement, subject to the conditions 

hereinafter provided in this Section, from time to time for the purpose 

of paying all or any part of the cost of any Improvements, including 

the repayment of moneys advanced for paying such cost and, if 

deemed necessary by the Board, the payment of the interest to accrue 

on such moneys advanced to the date of such payment and for 

providing moneys for deposit to the credit of the Reserve Account.

Before any bonds shall be issued under the provisions of this 

Section, the Board shall adopt a resolution or resolutions authorizing 

the issuance of such bonds, fixing the amount and the details thereof, 

describing in brief and general terms the Improvements which are to 

be acquired or constructed or which were acquired or constructed 

from any advances of moneys to be repaid from the proceeds of such 

bonds, and specifying the amount, if any, of the proceeds of such 

bonds to be deposited to the credit of the Reserve Account. The bonds 

of each Series issued under the provisions of this Section shall be 

designated ‘Puerto Rico Electric Power Authority Power Revenue 

Bonds, Series ....’ (inserting a year or a letter to identify the particular 

Series), shall be issued in such form, shall be in such denominations, 

shall be dated, shall bear interest at a rate or rates not exceeding the 

maximum rate then permitted by law, shall be stated to mature on July 

1 as to term bonds or annually on January 1 or July 1 or semi-annually 

on January 1 and July 1 as to serial bonds, in such year or years, not 

later than fifty (50) years from their date, shall be made redeemable 

at such times and prices (subject to the provisions of Article III of this 

Case:19-00391-LTS Doc#:118-1 Filed:01/10/23 Entered:01/10/23 21:08:06 Desc:

Exhibit A Page 45 of 128

Case:17-03283-LTS Doc#:24532-3 Filed:06/12/23 Entered:06/12/23 19:11:54 Desc:

Exhibit 3 Page 55 of 252
43

Agreement), shall be numbered, shall have such Paying Agents, and 

the term bonds of such Series shall have such Amortization 

Requirements, all as may be provided by resolution or resolutions 

adopted by the Board prior to the issuance of such bonds. Except as 

to any differences in the maturities thereof or the rate or rates of 

interest or the provisions for redemption, such bonds shall be on a 

parity with and shall be entitled to the same benefits and security 

under this Agreement as all other bonds issued under this Agreement.

Before any Variable Rate Bonds shall be issued under the 

provisions of this Section, the Board shall adopt a resolution 

specifying, without limitation, the interest rate calculation methods 

and any conversion features, and any credit or liquidity facility which 

may be drawn upon to make principal and interest payments on the 

Variable Rate Bonds. The Variable Rate Bonds may provide that the 

owner of any such Bond may demand payment of principal and 

interest within a stated period after delivering notice to a designated 

agent for the Authority and providing a copy of the notice with the 

tender of the Variable Rate Bond to such agent. The designated agent 

for the Authority, in accordance with the terms of a remarketing or 

placement agreement, may provide for the resale or redelivery of the 

Variable Rate Bonds on behalf of the Authority at a price provided 

for in the agreement. If the Variable Rate Bonds shall not be resold 

or redelivered within a stated period, the agent for the Authority may 

be authorized to draw upon a previously executed credit or liquidity 

facility of one or more banks or other financial or lending institutions 

for payment of interest and principal for a particular Series of 

Variable Rate Bonds to which such credit or liquidity facility shall

pertain. The particular form or forms of such demand provisions, the 

period or periods for payment of principal and interest after delivery 

of notice, the appointment of the agent for the Authority, the terms 

and provisions for the remarketing or placement agreement, and the 

terms and provisions of the credit or liquidity facility, including the 

terms of any lien on Revenues in connection with the credit or 

liquidity facility not inconsistent with Section 712 hereof, shall be as 

designated by a resolution of the Board pertaining to the Variable 

Rate Bonds to which such terms and provisions are applicable prior 

to the issuance thereof. Before any Put Bonds shall be issued under 

the provisions of this Section, the Board shall adopt a resolution 

which may provide for some of the above terms and provisions. 

Before any Extendible Maturity Bonds shall be issued under the 

provisions of this Section, the Board shall adopt a resolution which 

shall set forth the terms and conditions of the exercise by the 

bondholders or the Authority of any option to extend the maturity of 

said bonds. Before any Capital Appreciation Bonds shall be issued 

under the provisions of this Section, the Board shall adopt a resolution 

specifying the Valuation Dates, the Accreted Values on such dates, 

Case:19-00391-LTS Doc#:118-1 Filed:01/10/23 Entered:01/10/23 21:08:06 Desc:

Exhibit A Page 46 of 128

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Exhibit 3 Page 56 of 252
44

the manner in which and the period during which principal and 

interest shall be deemed to accrue on such bonds for purposes of the 

definition of “Principal and Interest Requirements” and the amount 

of any deposit required for the Reserve Account in accordance with 

Section 507 hereof.

Prior to the issuance of any Federally Subsidized Bonds, the 

Board shall adopt a resolution identifying the details of such bonds, 

including, without limitation, the rate or rates of interest to be paid on 

such bonds, the source or sources and the amount of the Federal 

Subsidy expected to be received by the Authority in respect of such 

Series of Federally Subsidized Bonds, whether the amounts received 

from such Federal Subsidy are to be pledged solely to the owners of 

such Series of Federally Subsidized Bonds or to the owners of all 

outstanding bonds and a covenant by the Authority to take such 

actions as are necessary to ensure receipt of such Federal Subsidy.

Conditions of

authentication and

delivery.

Such bonds shall be executed substantially in the form and 

manner hereinabove set forth and shall be deposited with the Trustee 

for authentication, but before the Trustee shall authenticate and 

deliver such bonds there shall be filed with the Trustee the following; 

provided, however, that the certificate referred to in clause (c) below 

shall not be required to be delivered in connection with the issuance 

of the Series 2016 Bonds:

(a) a copy, certified by the Secretary, of the resolution or 

resolutions mentioned above;

(b) a copy, certified by the Secretary, of the resolution 

of the Board awarding such bonds, specifying the interest rate for 

each of such bonds and directing the authentication and delivery of 

such bonds to or upon the order of the purchasers mentioned therein 

upon payment of the purchase price therein set forth and the accrued 

interest on such bonds;

(c) a certificate, signed by the Executive Director and 

approved by the Consulting Engineers, setting forth:

(i) the amount of the Net Revenues for any twelve 

(12) consecutive calendar months out of the eighteen (18) 

calendar months immediately preceding the date of the 

issuance of such bonds, adjusted to reflect the moneys which 

would have been received if the rate schedule in effect on the 

date of the issuance of such bonds had been in effect 

throughout such twelve (12) calendar months,

(ii) the amount of the maximum aggregate 

Case:19-00391-LTS Doc#:118-1 Filed:01/10/23 Entered:01/10/23 21:08:06 Desc:

Exhibit A Page 47 of 128

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Exhibit 3 Page 57 of 252
45

Principal and Interest Requirements for any fiscal year 

thereafter on account of all 1947 Indenture Bonds then 

outstanding and all bonds then outstanding under this 

Agreement,

(iii) the amount of the maximum aggregate 

Principal and Interest Requirements for any fiscal year 

thereafter on account of all 1947 Indenture Bonds then 

outstanding and all bonds then outstanding under this 

Agreement and the bonds then to be issued hereunder,

(iv) his estimate of the Net Revenues for each of 

the five (5) fiscal years immediately following the fiscal year 

in which the issuance of such bonds occurs, taking into 

account the rate schedule in effect on the date of the issuance 

of such bonds and any rate schedule the Authority has 

covenanted to put in effect during such five (5) fiscal years,

(v) his estimate of the average annual Net 

Revenues for such five (5) fiscal years, taking into account the 

rate schedules referred to in item (iv) of this clause (c),

(vi) the percentage derived by dividing the amount 

in item (i) of this clause (c) by the amount shown in item (ii) 

of said clause, and

(vii) the percentage derived by dividing the amount 

in item (v) of this clause (c) by the amount shown in item (iii) 

of said clause;

(d) if any of the 1947 Indenture Bonds are outstanding, a 

certificate, signed by the Executive Director and approved by the 

Consulting Engineers, to the effect that the sum determined by the 

Authority, with the approval of the Consulting Engineers, as the 

proper amount to be transferred each month from the 1947 Revenue 

Fund to the credit of the Renewal and Replacement Fund is not less 

than one-twelfth (1/12) of the maximum Principal and Interest 

Requirements for any fiscal year thereafter to and including the fiscal 

year in which the last maturity of any outstanding 1947 Indenture 

Bonds occurs on account of all bonds then outstanding under this 

Agreement and the bonds then to be issued hereunder; and 

(e) an Opinion of Counsel stating that all conditions precedent 

to the delivery of such bonds have been fulfilled.

When the documents mentioned above in this Section shall 

have been filed with the Trustee and when the bonds described in the 

resolutions mentioned in clauses (a) and (b) of this Section shall have 

Case:19-00391-LTS Doc#:118-1 Filed:01/10/23 Entered:01/10/23 21:08:06 Desc:

Exhibit A Page 48 of 128

Case:17-03283-LTS Doc#:24532-3 Filed:06/12/23 Entered:06/12/23 19:11:54 Desc:

Exhibit 3 Page 58 of 252
46

been executed and authenticated as required by this Agreement, the 

Trustee shall deliver such bonds at one time to or upon the order of 

the purchasers mentioned in the resolution mentioned in said clause 

(b), but only upon payment to the Trustee of the purchase price of 

such bonds and the accrued interest. The Trustee shall be entitled to 

rely upon such resolutions as to all matters stated therein. The 

Trustee, however, shall not authenticate and deliver such bonds 

unless each of the percentages shown in items (vi) and (vii) of the 

certificate mentioned in clause (c) of this Section is not less than one 

hundred twenty per centum (120%); provided, however, that such 

requirement shall not apply in connection with the issuance of the 

Series 2016 Bonds.

Disposition of bond 

proceeds.

The proceeds (excluding accrued interest but including any 

premium) of such bonds shall be deposited as is required by the 

resolution or resolutions authorizing the issuance of such bonds; 

provided, however, that any balance of such proceeds remaining after 

providing for (i) any repayment of moneys advanced to the Authority, 

including any payment of interest accrued on such moneys advanced 

to the date of such payment, (ii) any deposit to the credit of the 

Reserve Account, and (iii) any deposit to the Bond Service Account 

on account of interest on such bonds in accordance with clause (f) of 

Section 403 of this Agreement and (iv) any payment of expenses 

incident to the financing shall be paid to the Authority for deposit to 

the credit of the Construction Fund.

All moneys received as accrued interest on bonds issued under 

the provisions of this Section shall be deposited with the Trustee to 

the credit of the Bond Service Account.

Issuance of revenue 

bonds for any proper 

corporate purpose.

SECTION 209. After the outstanding 1947 Indenture Bonds 

have been paid or provision has been made for their payment and the 

release of the 1947 Indenture, in addition to any other bonds which 

may be issued under the provisions of this Article, revenue bonds of 

the Authority may be issued under and secured by this Agreement, 

subject to the conditions hereinafter provided in this Section, from 

time to time for any proper corporate purpose of the Authority (other 

than for the purpose of refunding outstanding bonds of the Authority 

other than the Series 2016 Bonds or for the purpose of providing 

funds to pay any part of the cost of Improvements or for repaying 

advances for such purpose).

Before any bonds shall be issued under the provisions of this 

Section, the Board shall adopt a resolution or resolutions authorizing 

the issuance of such bonds, fixing the amount and the details thereof 

and setting forth the purpose for which such bonds are to be issued. 

The bonds of each Series issued under the provisions of this Section 

Case:19-00391-LTS Doc#:118-1 Filed:01/10/23 Entered:01/10/23 21:08:06 Desc:

Exhibit A Page 49 of 128

Case:17-03283-LTS Doc#:24532-3 Filed:06/12/23 Entered:06/12/23 19:11:54 Desc:

Exhibit 3 Page 59 of 252
47

shall be designated ‘Puerto Rico Electric Power Authority Power 

Revenue Bonds, Series . . . .’ (inserting a year or a letter to identify 

the particular Series), shall be issued in such form, shall be in such 

denominations, shall be dated, shall bear interest at a rate or rates not 

exceeding the maximum rate then permitted by law, shall be stated to 

mature on July 1 as to term bonds or annually on January 1 or July 1 

or semi-annually on January 1 and July 1 as to serial bonds, in such 

year or years, not later than fifty (50) years from their date, shall be 

made redeemable at such times and prices (subject to the provisions 

of Article III of this Agreement), shall be numbered, shall have such 

Paying Agents and the term bonds of such Series shall have such 

Amortization Requirements, all as may be provided by resolution or 

resolutions adopted by the Board prior to the issuance of such bonds. 

Except as to any differences in the maturities thereof or the rate or 

rates of interest or the provisions for redemption, such bonds shall be 

on a parity with and shall be entitled to the same benefits and security 

under this Agreement as all other bonds issued under this Agreement.

Before any Variable Rate Bonds shall be issued under the 

provisions of this Section, the Board shall adopt a resolution 

specifying, without limitation, the interest rate calculation methods 

and any conversion features, and any credit or liquidity facility which 

may be drawn upon to make principal and interest payments on the 

Variable Rate Bonds. The Variable Rate Bonds may provide that the 

owner of any such Bond may demand payment of principal and 

interest within a stated period after delivering notice to a designated 

agent for the Authority and providing a copy of the notice with the 

tender of the Variable Rate Bond to such agent. The designated agent 

for the Authority, in accordance with the terms of a remarketing or 

placement agreement, may provide for the resale or redelivery of the 

Variable Rate Bonds on behalf of the Authority at a price provided 

for in the agreement. If the Variable Rate Bonds shall not be resold 

or redelivered within a stated period, the agent for the Authority may 

be authorized to draw upon a previously executed credit or liquidity 

facility of one or more banks or other financial or lending institutions 

for payment of interest and principal for a particular Series of 

Variable Rate Bonds to which such credit or liquidity facility shall 

pertain. The particular form or forms of such demand provisions, the 

period or periods for payment of principal and interest after delivery 

of notice, the appointment of the agent for the Authority, the terms 

and provisions for the remarketing or placement agreement, and the 

terms and provisions of the credit or liquidity facility, including the 

terms of any lien on Revenues in connection with the credit or 

liquidity facility not inconsistent with Section 712 hereof, shall be as 

designated by a resolution of the Board pertaining to the Variable 

Rate Bonds to which such terms and provisions are applicable prior 

to the issuance thereof. Before any Put Bonds shall be issued under 

Case:19-00391-LTS Doc#:118-1 Filed:01/10/23 Entered:01/10/23 21:08:06 Desc:

Exhibit A Page 50 of 128

Case:17-03283-LTS Doc#:24532-3 Filed:06/12/23 Entered:06/12/23 19:11:54 Desc:

Exhibit 3 Page 60 of 252
48

the provisions of this Section, the Board shall adopt a resolution 

which may provide for some of the above terms and provisions. 

Before any Extendible Maturity Bonds shall be issued under the 

provisions of this Section, the Board shall adopt a resolution which 

shall set forth the terms and conditions of the exercise by the 

bondholders or the Authority of any option to extend the maturity of 

said bonds. Before any Capital Appreciation Bonds shall be issued 

under the provisions of this Section, the Board shall adopt a resolution 

specifying the Valuation Dates, the Accreted Values on such dates, 

the manner in which and the period during which principal and 

interest shall be deemed to accrue on such bonds for purposes of the 

definition of “Principal and Interest Requirements” and the amount 

of any deposit required for the Reserve Account in accordance with 

Section 507 hereof.

Prior to the issuance of any Federally Subsidized Bonds, the 

Board shall adopt a resolution identifying the details of such bonds, 

including, without limitation, the rate or rates of interest to be paid on 

such bonds, the source or sources and the amount of the Federal 

Subsidy expected to be received by the Authority in respect of such 

Series of Federally Subsidized Bonds, whether the amounts received 

from such Federal Subsidy are to be pledged solely to the owners of 

such Series of Federally Subsidized Bonds or to the owners of all 

outstanding bonds and a covenant by the Authority to take such 

actions as are necessary to ensure receipt of such Federal Subsidy.

Conditions of 

authentication and 

delivery.

Such bonds shall be executed substantially in the form and 

manner hereinabove set forth and shall be deposited with the Trustee 

for authentication, but before the Trustee shall authenticate and 

deliver such bonds there shall be filed with the Trustee the following; 

provided, however, that the certificate referred to in clause (c) below 

shall not be required to be delivered in connection with the issuance 

of the Series 2015A Bonds or the Series 2016 Bonds:

(a) a copy, certified by the Secretary, of the resolution or 

resolutions mentioned above;

(b) a copy, certified by the Secretary, of the resolution of 

the Board awarding such bonds, specifying the interest rate for each 

of such bonds and directing the authentication and delivery of such 

bonds to or upon the order of the purchasers mentioned therein upon 

payment of the purchase price therein set forth and the accrued 

interest on such bonds;

(c) a certificate, signed by the Executive Director and 

approved by the Consulting Engineers, setting forth:

(i) the amount of the Net Revenues for any twelve 

Case:19-00391-LTS Doc#:118-1 Filed:01/10/23 Entered:01/10/23 21:08:06 Desc:

Exhibit A Page 51 of 128

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Exhibit 3 Page 61 of 252
49

(12) consecutive calendar months out of the eighteen (18) calendar 

months immediately preceding the date of the issuance of such bonds, 

adjusted to reflect the moneys which would have been received if the 

rate schedule in effect on the date of the issuance of such bonds had 

been in effect throughout such twelve (12) calendar months,

(ii) the amount of the maximum aggregate Principal 

and Interest Requirements for any fiscal year thereafter on account of 

all bonds then outstanding under this Agreement,

(iii) the amount of the maximum aggregate Principal 

and Interest Requirements for any fiscal year thereafter on account of 

all bonds then outstanding under this Agreement and the bonds then 

to be issued hereunder,

(iv) his estimate of the Net Revenues for each of the 

five (5) fiscal years immediately following the fiscal year in which 

the issuance of such bonds occurs, taking into account the rate 

schedule in effect on the date of the issuance of such bonds and any 

rate schedule the Authority has covenanted to put in effect during 

such five (5) fiscal years,

(v) his estimate of the average annual Net Revenues 

for such five (5) fiscal years, taking into account the rate schedules 

referred to in item (iv) of this clause (c),

(vi) the percentage derived by dividing the amount in 

item (i) of this clause (c) by the amount shown in item(ii)of said 

clause, and

(vii) the percentage derived by dividing the amount in 

item (v) of this clause (c) by the amount shown in item (iii) of said 

clause; and

(d) an Opinion of Counsel stating that all conditions precedent 

to the delivery of such bonds have been fulfilled.

When the documents mentioned above in this Section shall 

have been filed with the Trustee and when the bonds described in the 

resolutions mentioned in clauses (a) and (b) of this Section shall have 

been executed and authenticated as required by this Agreement, the 

Trustee shall deliver such bonds at one time to or upon the order of 

the purchasers mentioned in the resolution mentioned in said clause 

(b), but only upon payment to the Trustee of the purchase price of 

such bonds and the accrued interest. The Trustee shall be entitled to 

rely upon such resolutions as to all matters stated therein. The 

Trustee, however, shall not authenticate and deliver such bonds 

unless each of the percentages shown in items (vi) and (vii) of the 

certificate mentioned in clause (c) of this Section is not less than one 

hundred twenty per centum (120%); provided, however, that such 

requirement shall not apply in connection with the issuance of the 

Case:19-00391-LTS Doc#:118-1 Filed:01/10/23 Entered:01/10/23 21:08:06 Desc:

Exhibit A Page 52 of 128

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Exhibit 3 Page 62 of 252
50

Series 2015A Bonds or the Series 2016 Bonds.

Disposition of bond 

proceeds.

The proceeds (excluding accrued interest but including any 

premium) of such bonds shall be deposited as is required by the 

resolution or resolutions authorizing the issuance of such bonds.

All moneys received as accrued interest on bonds issued under 

the provisions of this Section shall be deposited with the Trustee to 

the credit of the Bond Service Account.

Issuance of revenue 

refunding bonds to 

refund all 1947 

Indenture Bonds and 

bonds issued under 

this Agreement.

SECTION 210. If at any time the Board shall determine that the 

moneys in the Sinking Fund available for such purpose will not be 

sufficient for paying at their maturity the serial bonds of any Series 

which will mature within one year thereafter, revenue refunding 

bonds of the Authority may be issued under and secured by this 

Agreement, subject to the conditions hereinafter provided in this 

Section, for the purpose of providing funds for refunding such bonds 

and, if deemed necessary by the Board, for paying the interest to 

accrue thereon to their maturity and any expenses in connection with 

such refunding. Before any bonds shall be issued under the provisions 

of this paragraph the Board shall adopt a resolution or resolutions 

authorizing the issuance of such bonds, fixing the amount and the 

details thereof, and describing the bonds to be refunded. Such revenue 

refunding bonds shall be deemed to constitute a part of the term 

bonds, if any, of such Series and shall mature at the same time and 

shall be subject to redemption at the same times and prices as such 

term bonds or, in case all the outstanding bonds of such Series shall 

be serial bonds, such revenue refunding bonds shall mature on the 1st 

day of July in a year not earlier than one year after the last maturing 

installment of the bonds of such Series and not later than fifty (50) 

years from their date, shall be deemed to be terms bonds of such 

Series and shall be made redeemable at such times and prices (subject 

to the provisions of Article III of this Agreement), all as may be 

provided by the resolution or resolutions authorizing the issuance of 

such bonds. Such revenue refunding bonds shall be designated, shall 

be issued in such form, shall be dated and shall bear interest at a rate 

not exceeding the maximum rate then permitted by law, all as may be 

provided by resolution or resolutions adopted by the Board prior to 

the issuance of such bonds.

Revenue refunding bonds of the Authority may also be issued 

under and secured by this Agreement, subject to the conditions 

hereinafter provided in this Section, from time to time, for the purpose 

of providing funds, with any other available funds, for redeeming 

prior to or at their maturity or maturities all of the outstanding 1947 

Indenture Bonds, any 1947 Indenture Bonds issued for a purpose for 

which moneys may be expended from the Renewal and Replacement 

Fund, all or any part of the outstanding bonds of any Series or 

outstanding Designated Maturity Bonds, including the payment of 

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Exhibit 3 Page 63 of 252
51

any redemption premium thereon, and, if deemed necessary by the 

Board, for paying the interest to accrue thereon to the date fixed for 

their redemption or their maturity and any expenses in connection 

with such refunding, and for the purpose of providing moneys for 

deposit to the credit of the Reserve Account. Before any bonds shall 

be issued under the provisions of this paragraph, the Board shall adopt 

a resolution authorizing the issuance of such bonds, fixing the amount 

and the details thereof and describing the bonds to be redeemed or 

paid. Such revenue refunding bonds shall be designated, shall be 

issued in such form, shall be in such denominations, shall be dated, 

shall bear interest at a rate or rates not exceeding the maximum rate 

then permitted by law, shall be stated to mature on July 1 as to term 

bonds or annually on January 1 or July 1 or semi-annually on January 

1 and July 1 as to serial bonds in such year or years, not later than 

fifty (50) years from their date, and shall be made redeemable at such 

times and prices (subject to the provisions of Article III of this 

Agreement), shall be numbered, shall have such Paying Agents, and 

any term bonds of such Series shall have such Amortization 

Requirements, all as may be provided by resolution or resolutions 

adopted by the Board prior to the issuance of such bonds. Except as 

to any differences in the maturities thereof or the rate or rates of 

interest or the provisions for redemption, such revenue refunding 

bonds shall be on a parity with and shall be entitled to the same benefit 

and security of this Agreement as all other bonds issued under this 

Agreement.

Before any Variable Rate Bonds shall be issued under the 

provisions of this Section, the Board shall adopt a resolution 

specifying, without limitation, the interest rate calculation methods 

and any conversion features, and any credit or liquidity facility which 

may be drawn upon to make principal and interest payments on the 

Variable Rate Bonds. The Variable Rate Bonds may provide that the 

owner of any such Bond may demand payment of principal and 

interest within a stated period after delivering notice to a designated 

agent for the Authority and providing a copy of the notice with the 

tender of the Variable Rate Bond to such agent. The designated agent 

for the Authority, in accordance with the terms of a remarketing or 

placement agreement, may provide for the resale or redelivery of the 

Variable Rate Bonds on behalf of the Authority at a price provided 

for in the agreement. If the Variable Rate Bonds shall not be resold 

or redelivered within a stated period, the agent for the Authority may 

be authorized to draw upon a previously executed credit or liquidity 

facility of one or more banks or other financial or lending institutions 

for payment of interest and principal for a particular Series of 

Variable Rate Bonds to which such credit or liquidity facility shall 

pertain. The particular form or forms of such demand provisions, the 

period or periods for payment of principal and interest after delivery 

of notice, the appointment of the agent for the Authority, the terms 

and provisions for the remarketing or placement agreement, and the 

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Exhibit 3 Page 64 of 252
52

terms and provisions of the credit or liquidity facility, including the 

terms of any lien on Revenues in connection with the credit or 

liquidity facility not inconsistent with Section 712 hereof, shall be as 

designated by a resolution of the Board pertaining to the Variable 

Rate Bonds to which such terms and provisions are applicable prior 

to the issuance thereof. Before any Put Bonds shall be issued under 

the provisions of this Section, the Board shall adopt a resolution 

which may provide for some of the above terms and provisions. 

Before any Extendible Maturity Bonds shall be issued under the 

provisions of this Section, the Board shall adopt a resolution which 

shall set forth the terms and conditions of the exercise by the 

bondholders or the Authority of any option to extend the maturity of 

said bonds. Before any Capital Appreciation Bonds shall be issued 

under the provisions of this Section, the Board shall adopt a resolution 

specifying the Valuation Dates, the Accreted Values on such dates, 

the manner in which and the period during which principal and 

interest shall be deemed to accrue on such bonds for purposes of the 

definition of “Principal and Interest Requirements” and the amount 

of any deposit required for the Reserve Account in accordance with 

Section 507 hereof.

Conditions of 

authentication and 

delivery.

Revenue refunding bonds issued under the provisions of this 

Section shall be executed substantially in the form and manner 

hereinabove set forth and shall be deposited with the Trustee for 

authentication, but before the Trustee shall authenticate and deliver 

such bonds there shall be filed with the Trustee the following:

(a) a copy, certified by the Secretary, of the resolutions 

mentioned above;

(b) a copy, certified by the Secretary, of the resolution adopted 

by the Board awarding such bonds, specifying the interest rate for 

each of such bonds and directing the authentication and delivery of 

such bonds to or upon the order of the purchasers mentioned therein 

upon payment of the purchase price therein set forth and the accrued 

interest on such bonds;

(c) in case such bonds are to be issued for the purpose of 

providing funds for redeeming all of the outstanding 1947 Indenture 

Bonds or any 1947 Indenture Bonds issued for a purpose for which 

moneys may be expended from the Renewal and Replacement Fund, 

all or any part of the outstanding bonds of any Series or outstanding 

Designated Maturity Bonds at or prior to their maturity or maturities;

(i) a certificate, signed by the Executive Director, 

setting forth (A) the amount of the maximum aggregate Principal and 

Interest Requirements for any fiscal year thereafter on account of all 

1947 Indenture Bonds then outstanding and all bonds then 

outstanding under this Agreement, and (B) the amount of the 

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maximum aggregate Principal and Interest Requirements for any 

fiscal year thereafter on account of all 1947 Indenture Bonds then 

outstanding and all bonds to be outstanding under this Agreement 

after the issuance of such revenue refunding bonds and the 

redemption or payment of the bonds to be refunded; and

(ii) such documents as shall be required by the Trustee 

to show that provision has been made in accordance with the 

provisions of the 1947 Indenture or this Agreement, as the case may 

be, for the redemption or payment of all of the bonds to be refunded; 

and

(d) an Opinion of Counsel stating that all conditions 

precedent to the delivery of such bonds have been fulfilled.

When the documents mentioned above in this Section shall 

have been filed with the Trustee and when the bonds described in the 

resolutions mentioned in clauses (a) and (b) of this Section shall have 

been executed and authenticated as required by this Agreement, the 

Trustee shall deliver such bonds at one time to or upon the order of 

the purchasers mentioned in the resolution mentioned in said clause 

(b), but only upon payment to the Trustee of the purchase price of 

such bonds and the accrued interest. The Trustee shall be entitled to 

rely upon such resolution as to all matters stated therein. The Trustee, 

however, shall not authenticate and deliver such bonds unless

(I) the proceeds (excluding accrued interest but including 

any premium) of such revenue refunding bonds, together with any 

moneys to be withdrawn from the Sinking Fund by the Trustee, and 

any other moneys which have been made available to the Trustee for 

such purpose as hereinafter provided, or the principal of and the 

interest on the investment of such proceeds or any such moneys, shall 

be not less than an amount sufficient to pay the principal of and the 

redemption premium, if any, on the bonds to be refunded and the 

interest which will become due and payable on or prior to the date of 

their payment or redemption, the financing costs in connection with 

such refunding, and any deposit to the credit of the Reserve Account, 

and

(II) in case such bonds are to be issued for the purpose of 

providing funds for redeeming all of the outstanding 1947 Indenture 

Bonds or any 1947 Indenture Bonds issued for a purpose for which 

moneys may be expended from the Renewal and Replacement Fund, 

all or any part of the outstanding bonds of any Series or outstanding 

Designated Maturity Bonds prior to or at their maturity or maturities, 

either (1) the amount shown in item (B) of the certificate mentioned 

in subclause (i) of clause (c) of this Section shall be less than the 

amount shown in item (A) of said certificate or (2) there shall be filed 

with the Trustee a certificate, signed by the Executive Director and 

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approved by the Consulting Engineers, setting forth

(A) the amount of the Net Revenues for any twelve (12) 

consecutive calendar months out of the eighteen (18) calendar months 

immediately preceding the date of the issuance of such bonds, 

adjusted to reflect the moneys which would have been received if the 

rate schedule in effect on the date of the issuance of such bonds had 

been in effect throughout such twelve (12) calendar months,

(B) his estimate of the Net Revenues for each of the five 

(5) fiscal years immediately following the fiscal year in which the 

issuance of such bonds occurs, taking into account the rate schedule 

in effect on the date of the issuance of such bonds and any rate 

schedule the Authority has covenanted to put in effect during such 

five (5) fiscal years, and

(C) his estimate of the average annual Net Revenues for 

such five (5) fiscal years, taking into account the rate schedules 

referred to in item (B) above, and stating that each of the amounts 

shown in items (A) and (C) above is not less than one hundred twenty 

per centum (120%) of each of the amounts shown in items (A) and 

(B) of the certificate mentioned in subclause (i) of clause (c) of this 

Section.

Disposition of bond 

proceeds.

The proceeds of such revenue refunding bonds shall, to the 

extent practicable, be invested and reinvested by the Trustee, with the 

approval of the Executive Director, in Government Obligations, in 

Prerefunded Municipals or in Time Deposits, secured in the manner 

set forth in Section 601 of this Agreement, and the moneys so 

invested shall be available for use when required. The income derived 

from such investments shall be added to such proceeds and applied in 

accordance with the provisions of this Section 210.

Simultaneously with the delivery of such revenue refunding 

bonds, the Trustee shall withdraw from the Bond Service Account 

and the Redemption Account in the Sinking Fund an amount equal to 

the sum of the amounts deposited to the credit of such Accounts under 

the provisions of Section 507 of this Agreement on account of the 

interest which is payable on the bonds to be refunded on the next 

interest payment date of such bonds and on account of the next 

maturing installment of principal of or the current Amortization 

Requirement for the bonds to be refunded, but no such withdrawal 

shall be made on account of any deposits to the credit of the Reserve 

Account in the Sinking Fund. The amount so withdrawn, the proceeds 

(excluding accrued interest but including any premium) of such 

revenue refunding bonds and any other moneys which have been 

made available to the Trustee for such purpose, shall be held by the 

Trustee or deposited with the Paying Agents to be held in trust for the 

sole and exclusive purpose of paying such principal, redemption 

premium and interest; provided, however, that such portion of the 

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Exhibit 3 Page 67 of 252
55

proceeds of such revenue refunding bonds as is specified by the 

Executive Director in a certificate filed with the Trustee shall be paid 

to the Authority to be used for the payment of expenses incident to 

the financing and the portion of the proceeds of such revenue 

refunding bonds to be deposited to the credit of the Reserve Account 

shall be deposited in the Reserve Account. Any part of the proceeds 

of such revenue refunding bonds which are not needed for the purpose 

of paying the principal of and the redemption premium, if any, on the 

bonds to be refunded, making any deposit to the Reserve Account or 

paying any expenses in connection with such refunding shall be 

deposited with the Trustee to the credit of the Bond Service Account 

in the Sinking Fund. The amount received as accrued interest on such 

revenue refunding bonds shall be deposited with the Trustee to the 

credit of the Bond Service Account in the Sinking Fund.

SECTION 210A. Revenue refunding bonds of the Authority 

may also be issued under and secured by this Agreement, subject to 

the conditions hereinafter provided in this Section, at one time, for 

the purpose of exchanging such revenue refunding bonds for an equal

principal amount of all of the 1947 Indenture Bonds then outstanding. 

Before any bonds shall be issued under the provisions of this Section 

210A, the Board shall adopt a resolution authorizing the issuance of 

such bonds, fixing the amount and details thereof and describing the 

1947 Indenture Bonds to be exchanged therefor. Such revenue 

refunding bonds shall be designated, shall be issued in the form of 

registered bonds without coupons, shall be in such denominations and 

shall be numbered, all as may be provided by resolution or resolutions 

adopted by the Board prior to the issuance of such bonds. Such 

revenue refunding bonds shall be dated the July 1 or January 1 to 

which interest has been paid on the 1947 Indenture Bonds to be 

exchanged therefor, shall bear interest at the same rate or rates as the 

interest on such 1947 Indenture Bonds, shall be stated to mature in 

the same principal amounts and on the same dates as such 1947 

Indenture Bonds and shall be subject to redemption at the same times 

and prices, either in whole or in part, as such 1947 Indenture Bonds. 

Except as to any differences in the maturities thereof or the rate or 

rates of interest or the provisions for redemption, such revenue 

refunding bonds shall be on a parity with and shall be entitled to the 

same benefit and security of this Agreement as all other bonds issued 

under this Agreement.

Revenue refunding bonds issued under the provisions of this

Section shall be executed substantially in the form and manner 

hereinabove set forth and shall be deposited with the Trustee for 

authentication, but before the Trustee shall authenticate and deliver 

such bonds there shall be filed with the Trustee the following:

(a) a copy, certified by the Secretary, of the resolution or 

resolutions mentioned above;

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56

(b) a copy, certified by the Secretary, of the resolution adopted 

by the Board directing the authentication and delivery of such bonds 

to or upon the order of the holders of the 1947 Indenture Bonds to be 

exchanged therefor;

(c) such documents as shall be required by the Trustee to show 

that, upon the date designated for exchange, no 1947 Indenture Bonds 

shall then be outstanding under the provisions of the 1947 Indenture;

(d) an opinion of counsel, who may be counsel for the 

Authority, to the effect that, on the date designated for exchange, 

notice having been duly given in the manner and under the conditions 

hereinafter provided and revenue refunding bonds duly executed and 

authenticated as herein provided being held by the Trustee for 

delivery for exchange for 1947 Indenture Bonds, interest on such 

1947 Indenture Bonds shall be deemed to have ceased to accrue from 

the January 1 or July 1 to which interest has been paid, the coupons 

for any coupon bonds called for exchange payable subsequent to the 

exchange date shall be void and such 1947 Indenture Bonds shall 

cease to be entitled to any lien, benefit or security under the 1947 

Indenture and the holders of such 1947 Indenture Bonds shall have 

no rights in respect thereof, except to receive such revenue refunding 

bonds of the same principal amount and maturity, bearing interest at 

the same rate, subject to redemption at the same times and prices as 

such 1947 Indenture Bonds and of any denomination or 

denominations authorized by this Agreement; and

(e) an Opinion of Counsel stating that all conditions precedent 

to the delivery of such bonds have been fulfilled.

Not later than forty-five (45) days before the exchange date of 

such revenue refunding bonds for such 1947 Indenture Bonds, the 

Authority shall give written notice to the Trustee and the 1947 Trustee 

of the proposed exchange and shall direct the 1947 Trustee to provide 

the Trustee with the names and addresses of the owners of such 1947 

Indenture Bonds that are registered bonds without coupons or coupon 

bonds registered as to principal alone or as to both principal and 

interest. At least thirty (30) days before such exchange date the 

Trustee shall cause a notice of such exchange substantially in the form 

prepared by the Authority and signed by the Trustee (a) to be 

published once in a daily newspaper of general circulation published 

in the Municipality of San Juan, Puerto Rico, and in a daily newspaper 

of general circulation or a financial journal published in the Borough 

of Manhattan, City and State of New York, and (b) to be mailed, 

postage prepaid, to all registered owners of such 1947 Indenture 

Bonds at their addresses provided to the Trustee by the 1947 Trustee, 

but failure to mail such notice to any registered owner shall not affect 

the validity of the proceedings for the exchange of 1947 Indenture 

Bonds of any other registered owners. If all the 1947 Indenture Bonds 

to be exchanged are registered bonds without coupons or coupon 

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Exhibit 3 Page 69 of 252
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bonds registered as to principal alone or as to both principal and 

interest, such notice shall be given by mail, and the Trustee shall not 

be required to publish such notice. Each such notice shall set forth the 

date fixed for exchange, the address of the office of the Trustee at 

which the 1947 Indenture Bonds with all unmatured coupons 

appurtenant thereto, if any, shall be presented and surrendered for 

exchange, that on the exchange date interest on such 1947 Indenture 

Bonds shall be deemed to have ceased to accrue from the January 1 

or July 1 to which interest has been paid, the coupons for any coupon 

bonds called for exchange payable subsequent to the exchange date 

shall be void and such 1947 Indenture Bonds shall cease to be entitled 

to any lien, benefit or security under the 1947 Indenture and the 

holders of such 1947 Indenture Bonds shall have no rights in respect 

thereof, except to receive registered bonds without coupons issued 

hereunder of the same principal amount and maturity, bearing interest 

at the same rate, subject to redemption at the same times and prices 

as such 1947 Indenture Bonds and of any denomination or 

denominations authorized by this Agreement.

All 1947 Indenture Bonds and unmatured coupons 

appurtenant thereto, if any, upon surrender thereof to the Trustee shall 

be delivered to the 1947 Trustee for cancellation.

Temporary bonds. SECTION 211. Until definitive bonds of any Series are ready 

for delivery, there may be executed, and upon request of the Authority 

the Trustee shall authenticate and deliver, in lieu of definitive bonds 

and subject to the same limitations and conditions, temporary printed, 

typewritten, engraved or lithographed bonds, in the form of either 

coupon bonds in such denominations, with or without coupons, or 

registered bonds without coupons in such denominations, or both, or 

in the form of a single registered bond without coupons in a 

denomination equal to the aggregate principal amount of such 

definitive bonds and payable in installments corresponding to the 

maturities of such definitive bonds, with payment record attached for 

the notation of payments of such installments and interest, without 

presentation and surrender of such single registered bond, as the 

Authority by resolution may provide, substantially of the tenor 

hereinabove set forth and with such appropriate omissions, insertions 

and variations as may be required.

Until definitive bonds of any Series are ready for delivery, any 

temporary bond of such Series may, if so provided by the Authority 

by resolution, be exchanged at the principal office of the Trustee, 

without charge to the holder thereof, for an equal aggregate principal 

amount of temporary coupon bonds or of temporary registered bonds 

without coupons or both, of like tenor, of the same Series and maturity 

and bearing interest at the same rate.

If temporary bonds shall be issued, the Authority shall cause 

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the definitive bonds to be prepared and to be executed and delivered 

to the Trustee, and the Trustee, upon presentation to it at its principal 

office of any temporary bond accompanied by all unpaid coupons, if 

any, shall cancel the same and authenticate and deliver in exchange 

therefor at the place designated by the holder, without charge to the 

holder thereof, a definitive bond or bonds of an equal aggregate 

principal amount, of the same Series and maturity and bearing interest 

at the same rate as the temporary bond surrendered. Upon any such 

exchange all coupons appertaining to definitive coupon bonds and 

representing interest theretofore paid shall be detached and cancelled 

by the Trustee. Until so exchanged the temporary bonds shall in all 

respects be entitled to the same benefit and security of this Agreement 

as the definitive bonds to be issued and authenticated hereunder. 

Interest on temporary coupon bonds, when due and payable, if the 

definitive bonds shall not be ready for exchange, shall be paid on 

presentation of such temporary coupon bonds and notation of such 

payment shall be endorsed thereon, or such interest shall be paid upon 

the surrender of the appropriate coupons if coupons representing such 

interest shall be attached to such temporary bonds. No charge for 

taxes or governmental charges shall be made against the holder upon 

an exchange of a temporary bond for a definitive bond.

Mutilated, destroyed 

or lost bonds.

SECTION 212. In case any bond secured hereby shall become 

mutilated or be destroyed or lost, the Authority shall cause to be 

executed, and the Trustee shall authenticate and deliver, a new bond 

of like date and tenor in exchange and substitution for and upon the 

cancellation of such mutilated bond and its interest coupons, if any, 

or in lieu of and in substitution for such bond and its coupons, if any, 

destroyed or lost, upon the holder’s paying the reasonable expenses 

and charges of the Authority and the Trustee in connection therewith 

and, in the case of a bond destroyed or lost, his filing with the Trustee 

evidence satisfactory to it and to the Authority that such bond and 

coupons, if any, were destroyed or lost, and of his ownership thereof, 

and furnishing the Authority and the Trustee with indemnity 

satisfactory to them.

ARTICLE III.

REDEMPTION OF BONDS.

Redemption of bonds. SECTION 301. The bonds of any Series issued under the 

provisions of this Agreement shall be made subject to redemption, 

both in whole and in part and at such time and prices, as may be 

provided by resolution adopted by the Authority prior to the issuance 

of such bonds; provided, however, that term bonds shall be made 

subject to redemption to the extent of any Amortization Requirements 

therefor on July 1 immediately following each year in which there is 

an Amortization Requirement in respect of such bonds.

Selection by Trustee. If less than all of the bonds of any one maturity of a Series 

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59

shall be called for redemption, the particular bonds or portions of 

registered bonds without coupons to be redemmed from such Series 

and maturity shall be selected by the Trustee in such manner as the 

Trustee in its discretion may determine; provided, however, that the 

portion of any registered bond without coupons to be redeemed shall 

be in the principal amount equal to the lowest denomination 

authorized for such Series or some multiple thereof, and that, in 

selecting bonds for redemption, the Trustee shall treat each registered 

bond without coupons as representing that number of bonds which is 

obtained by dividing the principal amount of such registered bond 

without coupons by the amount of such lowest authorized 

denomination.

For purposes of this Section 301, if less than all of the Capital 

Appreciation Bonds shall be called for redemption, the portion of any 

Capital Appreciation Bond of a denomination of more than the 

maturity amount specified in the resolution authorizing such Bonds 

to be redeemed shall be such maturity amount or a multiple thereof, 

and, in selecting portions of such Capital Appreciation Bond for 

redemption, the Trustee shall treat such Capital Appreciation Bond as 

representing that number of Capital Appreciation Bonds of such 

maturity amount which is obtained by dividing the maturity amount 

of such Capital Appreciation Bond to be redeemed in part by the 

maturity amount specified in such resolution.

Redemption notice. SECTION 302. At least thirty (30) days before the redemption 

date of any bonds the Trustee shall cause a notice of any such 

redemption, either in whole or in part, signed by the Trustee, (a) to be 

published once in a daily newspaper of general circulation published 

in the Municipality of San Juan, Puerto Rico, and in a daily newspaper 

of general circulation or a financial journal published in the Borough 

of Manhattan, City and State of New York, (b) to be filed with the 

Paying Agents, and (c) to be mailed, postage prepaid, to all registered 

owners of bonds or portions of bonds to be redeemed at their 

addresses as they appear on the registration books hereinabove 

provided for, but failure so to file or mail any such notice shall not 

affect the validity of the proceedings for such redemption; provided, 

however, that the requirement for notice set forth in this Section 302 

shall not apply to any redemption of the Series 2016 Bonds or any 

portions thereof. If all the bonds to be redeemed are issuable only as 

registered bonds without coupons, such notice of redemption shall be 

given by mail and the Trustee shall not be required to publish such 

notice of redemption. Each such notice shall set forth the date fixed 

for redemption, the redemption price to be paid and, if less than all of 

the bonds of any one maturity of a Series then outstanding shall be 

called for redemption, the distinctive numbers and letters, if any, of 

such bonds to be redeemed and, in the case of registered bonds 

without coupons to be redeemed in part only, the portion of the 

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principal amount thereof to be redeemed. In case any registered bond 

without coupons is to be redeemed in part only, the notice of 

redemption which relates to such bond shall state also that on or after 

the redemption date, upon surrender of such bond, a new bond or 

bonds of the same Series and maturity, bearing interest at the same 

rate and in principal amount equal to the unredeemed portion of such 

bond will be issued.

Effect of calling for 

redemption.

SECTION 303. On the date so designated for redemption, 

notice having been given in the manner and under the conditions 

hereinabove provided, the bonds or portions of registered bonds 

without coupons so called for redemption shall become and be due 

and payable at the redemption price provided for redemption of such 

bonds or portions of bonds on such date, and, if moneys for payment 

of the redemption price and the accrued interest are held in separate 

accounts by the Trustee or by the Paying Agents in trust for the 

holders of the bonds or portions thereof to be redeemed, as provided 

in this Agreement, interest on the bonds or portions of bonds so called 

for redemption shall cease to accrue, the coupons for interest on any 

coupon bonds so called for redemption payable subsequent to the 

redemption date shall be void, such bonds or portions of bonds shall 

cease to be entitled to any benefit or security under this Agreement, 

and the holders or registered owners of such bonds or portions of 

bonds shall have no rights in respect thereof except to receive 

payment of the redemption price thereof and the accrued interest and, 

to the extent provided in Section 305 of this Article, to receive bonds 

for any unredeemed portions of registered bonds without coupons.

Matured coupons. SECTION 304. All unpaid coupons which appertain to coupon 

bonds so called for redemption and which shall have become due and 

payable on or prior to the date of redemption designated in such notice 

shall continue to be payable to the bearers severally and respectively 

upon the presentation and surrender of such coupons.

Redemption of 

portion of registered 

bonds.

SECTION 305. In case part but not all of an outstanding 

registered bond without coupons shall be selected for redemption, the 

registered owner thereof or his attorney or legal representative shall 

present and surrender such bond to the Trustee for payment of the 

principal amount thereof so called for redemption, and the Authority 

shall execute and the Trustee shall authenticate and deliver to or upon 

the order of such registered owner or his legal representative, without 

charge therefor, for the unredeemed portion of the principal amount 

of the registered bond without coupons so surrendered, either coupon 

bonds (if authorized for the Series of such registered bond) or a 

registered bond or bonds without coupons, at the option of such 

registered owner or his attorney or legal representative, of the same 

Series and maturity, bearing interest at the same rate and of any 

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denomination or denominations authorized by this Agreement.

Cancellation of bonds 

and coupons 

redeemed.

SECTION 306. Coupon bonds so redeemed and all unmatured 

coupons appertaining thereto, and registered bonds without coupons 

so presented and surrendered, shall be cancelled upon the surrender 

thereof.

Bonds and portions of 

bonds called for 

redemption not 

deemed outstanding.

SECTION 307. Bonds and portions of bonds which have been 

duly called for redemption under the provisions of this Article, or with 

respect to which irrevocable instructions to call for redemption or 

payment at or prior to maturity have been given to the Trustee in form 

satisfactory to it, and for the payment of principal or the redemption 

price and the accrued interest of which sufficient moneys, or 

Government Obligations or Prerefunded Municipals or Time 

Deposits, secured in the manner set forth in Section 601 of this 

Agreement, shall be held in separate accounts by the Trustee or by 

the Paying Agents in trust for the holders of the bonds or portions 

thereof to be paid or redeemed, all as provided in this Agreement, 

shall not thereafter be deemed to be outstanding under the provisions 

of this Agreement.

ARTICLE IV.

CUSTODY AND APPLICATION OF PROCEEDS OF BONDS

Construction Fund. SECTION 401. A special fund is hereby created and designated 

“Puerto Rico Electric Power Authority Power System Construction 

Fund” (herein sometimes called the “Construction Fund”), to the 

credit of which such deposits shall be made as are required by the 

provisions of Section 208 of this Agreement. There shall also be 

deposited to the credit of the Construction Fund any moneys received 

from any other source for paying any portion of the cost of any 

Improvements. One or more separate accounts may be created in the 

Construction Fund for use for specified projects.

The moneys in the Construction Fund shall be held by the 

Authority in trust, separate and apart from all other funds of the 

Authority, and shall be applied to the payment of the cost of any 

Improvements and, except for any moneys in separate accounts in the 

Construction Fund received from the United States Government or 

any agency thereof or from the Commonwealth of Puerto Rico or any 

agency thereof, pending such application, shall be subject to a lien 

and charge in favor of the holders of the bonds issued and outstanding 

under this Agreement and for the further security of such holders until 

paid out or transferred as herein provided.

Payments from 

Construction Fund.

SECTION 402. Payment of the cost of any Improvements shall 

be made from the Construction Fund as herein provided. Moneys in 

the Construction Fund shall be disbursed by check, voucher, order, 

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draft, certificate or warrant signed by the Executive Director or by 

any officer or employee of the Authority designated by him for such 

purpose.

Items of cost. SECTION 403. For the purposes of this Article, the cost of any 

Improvements shall embrace the cost of acquisition or construction 

and equipment and all other items of cost incident to such acquisition 

and construction and equipment and the financing thereof, and shall 

include, without intending thereby to limit or restrict any proper 

definition of such cost under the provisions of law or this Agreement, 

the following:

(a) obligations incurred for labor and materials and to 

contractors, builders and materialmen in connection with the 

construction of any Improvements;

(b) the cost of acquiring by purchase, if such purchase 

shall be deemed expedient, and the amount of any award or final 

judgment in or any settlement or compromise of any proceeding to 

acquire by condemnation, such property, lands, rights, rights of way, 

franchises, easements and other interests in land constituting a part 

of, or as may be deemed necessary or convenient for the construction 

of any Improvements, options and partial payments thereon, the cost 

of filling, draining or improving any lands so acquired, and the 

amount of any damages incident to or consequent upon the 

construction of any Improvements ;

(c) the fees and expenses of the Trustee for its services 

under Article II of this Agreement, including its services in 

connection with the acceptance of the trusts hereby created, legal 

expenses and fees, fees and expenses of consultants, financing 

charges, cost of preparing and issuing the bonds, taxes or other 

municipal or governmental charges lawfully levied or assessed during 

construction upon any Improvements, and premiums on insurance in 

connection with any Improvements during construction;

(d) fees and expenses of architects or engineers for 

making studies, surveys and testing, for preparing plans and 

specifications and supervising construction, as well as for the 

performance of all other duties of architects or engineers set forth 

herein in relation to the construction of any Improvements;

(e) expenses of administration properly chargeable to any 

Improvements and all other items of expense not elsewhere in this 

Section specified, incident to the acquisition or construction and 

equipment of any Improvements;

(f) interest on the bonds prior to and during construction 

of the Improvements financed by such bonds and for such period after 

completion of such construction as the Authority may determine, if 

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then permitted by law; and

(g) any obligation or expense heretofore or hereafter 

incurred by the Authority and any amounts heretofore or hereafter 

advanced by the Commonwealth of Puerto Rico or any agency thereof 

or by the United States Government, or from any other source, for 

any of the foregoing purposes.

Lands for projects. SECTION 404. The Authority covenants that no disbursement 

will be made for the purchase price or cost of any electric system or 

portion thereof, or any lands, buildings, franchises, licenses, 

easements or rights of way, unless and until counsel for the Authority 

shall have rendered his written opinion to the Authority to the effect 

that the Authority either has or will have immediately upon such 

disbursement (by reason of the prior or simultaneous delivery of 

proper instruments of conveyance and transfer mentioned in such 

opinion) title thereto sufficient for the purposes of the System.

[Note: This Section 

406 only survives, if at 

all, pursuant to the 

conditional and limited 

survival provisions of 

Section 2(a) of the 

Sixteenth Supplemental 

Agreement.]

SECTION 406. Replenishment of the Construction Fund. On 

any Construction Fund Replenishment Date, to the extent that 

moneys in the General Fund exceed the Retained General Fund 

Amount, the Authority shall transfer from the General Fund to the 

credit of the Construction Fund an amount equal to the lesser of (x) 

the excess over the Retained General Fund Amount and (y) the 

Construction Fund Replenishment Amount, in accordance with 

Section 505 of this Agreement.

ARTICLE V.

REVENUES AND FUNDS.

Covenant as to bills 

for services.

SECTION 501. The Authority covenants that it will continue to 

render bills for the services and facilities furnished by the System on 

a monthly or bi-monthly basis until such time as the Authority shall 

deem it advisable to change the period covered by such bills, and that 

it will establish and enforce reasonable regulations in relation to the 

collection of such bills.

Covenant as to rates. SECTION 502. The Authority further covenants that it will at 

all times fix, charge and collect reasonable rates and charges for the 

use of the services and facilities furnished by the System and that 

from time to time, and as often as it shall appear necessary, it will 

adjust such rates and charges so that the Revenues will at all times be 

sufficient

(A) until the outstanding 1947 Indenture Bonds have been 

paid or provision has been made for their payment and the release of 

the 1947 Indenture :

(a) to pay the Current Expenses of the System, and

(b) to provide the greater of (i) the amount equal to one 

hundred twenty per centum (120%) of the aggregate Principal and 

Interest Requirements for the next fiscal year on account of all 1947 

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Indenture Bonds then outstanding and all bonds then outstanding 

under this Agreement, reduced by any amount deposited to the credit 

of the Bond Service Account from the proceeds of bonds to pay 

interest to accrue thereon in such fiscal year, or (ii) the amount 

required to make the deposits, transfers and payments mentioned in 

items (1) through (4), inclusive, below:

(1) to make the deposits to the credit of the 1947 Sinking 

Fund which are required to be made in each fiscal year under the 

provisions of Section 507 of the 1947 Indenture,

(2) to make the deposits to the credit of the General 

Reserve Fund which are required to be made in each fiscal year under 

the provisions of Section 511 of the 1947 Indenture,

(3) to make the transfers to the credit of the Renewal and 

Replacement Fund which are required to be made in each fiscal year 

under the provisions of Section 512 of the 1947 Indenture, and

(4) to make the payments which are required to be made 

in each fiscal year under the provisions of clause (a) of Section 513 

of the 1947 Indenture, and

(B) after the outstanding 1947 Indenture Bonds have been 

paid or provision has been made for their payment and the release of 

the 1947 Indenture:

(a) to pay the Current Expenses of the System, and

(b) to provide an amount at least equal to one hundred 

twenty per centum (120%) of the aggregate Principal and Interest 

Requirements for the next fiscal year on account of all the bonds then 

outstanding under this Agreement, reduced by any amount deposited 

to the credit of the Bond Service Account from the proceeds of bonds 

to pay interest to accrue thereon in such fiscal year.

The Authority further covenants that if at any time the 

Revenues shall not be sufficient to make such deposits, transfers and 

payments, it will revise the rates and charges for the services and 

facilities furnished by the System and, if necessary, it will revise its 

regulations in relation to the collection of bills for such services and 

facilities, so that such deficiency will be made up before the end of 

the next ensuing fiscal year. Should any deficiency not be made up in 

such next ensuing fiscal year, the requirement therefor, except as to 

the payments which are required to be made in such fiscal year under 

subclause (4) of clause (b) of paragraph (A) of this Section, shall be 

cumulative and the Authority shall continue to revise such rates until 

such deficiency shall have been completely made up.

Forthwith upon the adoption of any revision of rates and 

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charges the Authority shall cause certified copies thereof to be filed 

with the Trustee.

In the event that the Authority shall fail to adjust the schedule 

of rates and charges in accordance with the provisions of this Section, 

the Trustee, without regard to whether an event of default, as defined 

in Article VIII of this Agreement, shall have occurred, shall, upon the 

request of the holders of not less than ten per centum (10%) in 

principal amount of all bonds then outstanding and upon being 

indemnified to its satisfaction, institute and prosecute in a court of 

competent jurisdiction an appropriate suit, action or proceeding to 

compel the Authority to adjust such schedule in accordance with the

requirements of this Section, and the Authority covenants that it will 

adopt and charge rates and charges in compliance with any judgment, 

order or decree entered in any such suit, action or proceeding.

General Fund. SECTION 503. A special fund is hereby created and designated 

the “Puerto Rico Electric Power Authority General Fund” (herein 

sometimes called the “General Fund”). The Authority covenants that, 

after the outstanding 1947 Indenture Bonds have been paid or 

provision has been made for their payment and the release of the 1947 

Indenture, all Revenues, other than income from investments made 

under the provisions of this Agreement, will be deposited as received 

in the name of the Authority with a qualified depositary or 

depositaries to the credit of the General Fund and applied in 

accordance with the provisions of this Article.

Annual Budget. SECTION 504. The Authority covenants that on or before the 

15th day of May in each year the Board will cause to be prepared and 

will adopt and file with the Secretary, with the Trustee and with the 

Consulting Engineers a proposed budget of Current Expenses and of 

Capital Expenditures for the ensuing fiscal year.

The Authority further covenants that such proposed budget of 

Current Expenses will be prepared in such manner as to segregate, in 

so far as advisable, the accounts in respect of the different classes of 

operations, projects, undertakings and activities of the Authority and 

will be prepared on the basis of monthly requirements so that it will 

be possible to determine from the budget the Current Expenses for 

each month during the fiscal year, that it will comply with any 

reasonable request of the Consulting Engineers as to the 

classifications in which such budget shall be prepared, and that such 

proposed budget of Capital Expenditures will show separately (a) so 

long as any 1947 Indenture Bonds are outstanding, the amount to be 

expended during such fiscal year from moneys deposited or 

transferred to the credit of the Renewal and Replacement Fund, 

including a separate statement as to the amount to be withdrawn from 

said Fund under the provisions of Section 507 of this Agreement, (b) 

the amount to be expended during such fiscal year from moneys 

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deposited to the credit of the Construction Fund and, so long as any 

1947 Indenture Bonds are outstanding, the 1947 Construction Fund, 

and (c) the amount of the working cash funds required for each month 

during such fiscal year.

The Authority further covenants that on the 1st day of June of 

each year, or on the first business day thereafter, it will hold a public 

hearing at its office in the Municipality of San Juan, Puerto Rico, on 

the proposed budget for the ensuing fiscal year, at which any 

bondholder, any consumer or any other interested person may appear, 

in person or by agent or attorney, and present any objections he may 

have to such proposed budget, and that promptly after each such 

public hearing and, in any event, on or before the first day of the next 

ensuing fiscal year the Board will finally adopt the annual budget of 

Current Expenses and Capital Expenditures for such fiscal year 

(which budget, together with any amendment thereof or supplement 

thereto as hereinafter permitted, is herein sometimes called the 

“Annual Budget”). The Authority covenants that the total 

expenditures provided for in the Annual Budget of Current Expenses 

will not exceed the total expenditures set forth in the proposed budget 

unless such excess shall be approved by the Consulting Engineers, 

and that before adopting the budget of Capital Expenditures it will 

receive and consider the Consulting Engineers’ advices and 

recommendations with respect thereto.

If for any reason the Board shall not have adopted the Annual 

Budget before the first day of any fiscal year, the proposed budget for 

such fiscal year, if approved by the Consulting Engineers, or, if there 

is none so approved, the budget for the preceding fiscal year, shall, 

until the adoption of the Annual Budget, be deemed to be in force and 

shall be treated as the Annual Budget under the provisions of this 

Article; provided, however, that, so long as any 1947 Indenture Bonds 

are outstanding, the amounts provided for in the Annual Budget to be 

transferred from the 1947 Revenue Fund to the Renewal and 

Replacement Fund shall not be less than the amount set forth in the 

most recent certificate of the Executive Director filed with the Trustee 

pursuant to clause (d) of Section 208 of this Agreement.

The Board may at any time cause to be prepared and may file 

with the Secretary, with the Trustee and with the Consulting 

Engineers, and the Board may thereafter adopt, after receiving the 

approval of the Consulting Engineers, an amended or supplemental 

Annual Budget for the then current fiscal year.

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Application of 

moneys in General 

Fund. [Note: 

Bracketed sentence 

beginning with “On 

each Construction 

Fund Replenishment 

Date” only survives, if 

at all, pursuant to the 

conditional and limited 

survival provisions of 

Section 2(a) of the 

Sixteenth Supplemental 

Agreement.]

SECTION 505. The Authority covenants that moneys in the 

General Fund will be used first for the payment of the Current 

Expenses of the System, that such expenses will not exceed an 

amount which is reasonable and necessary for maintaining, repairing 

and operating the System in an efficient and economical manner, and 

that the total amount of Current Expenses in any fiscal year will not 

exceed the amount provided therefor in the Annual Budget for such 

fiscal year or any amendment thereof or supplement thereto unless 

such expenses shall be required by conditions beyond the control of 

the Authority happening during such fiscal year and which could not 

reasonably have been contemplated at the time of the adoption of the 

Annual Budget. If at any time the total amount theretofore expended 

during any fiscal year for Current Expenses shall exceed the total 

amount provided in the Annual Budget for Current Expenses for such 

fiscal year, the Authority covenants that it will report in writing the 

amount of such excess and the reason or reasons therefor to the 

Consulting Engineers and to the Trustee as soon as practicable but not 

later than the last day of the sixth month following the month in which 

such excess shall have occurred. 

[Note: Bracketed 

sentence beginning 

with “On each 

Construction Fund 

Replenishment Date” 

only survives, if at all, 

pursuant to the 

conditional and limited 

survival provisions of 

Section 2(a) of the 

Sixteenth Supplemental 

Agreement.]

[On each Construction Fund Replenishment Date, the 

Authority shall apply moneys credited to the General Fund to satisfy 

its replenishment obligation under Section 406 prior to using such 

moneys for the payment of Current Expenses. Notwithstanding 

anything in this Agreement to the contrary, after the Amendment 

Period, the obligation to replenish the Construction Fund in 

accordance with Section 406 shall be junior and subject to the 

obligation to pay Current Expenses in accordance with this Section 

505 and to transfer moneys from the General Fund to the Revenue 

Fund in accordance with Section 506 of this Agreement until the 

bonds are paid or deemed paid in full under the provisions of this 

Agreement.]

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[Note: Bracketed 

clauses (1) through (6) 

only survives, if at all, 

pursuant to the 

conditional and limited 

survival provisions of 

Section 2(iii) of the 

Eighteenth 

Supplemental 

Agreement, which 

provides that these 

clauses and any related 

definitions will 

continue in effect 

solely as to clause (5) 

until all moneys 

transferred to the 

Capital Improvement 

Fund (if any) during 

the Amendment Period 

shall have been applied 

in accordance 

therewith and all 

related certifications 

have been made.]

[(1) After the Amendment Effective Date and not less than 

ten (10) business days before the first transfer of moneys from the 

General Fund to the Capital Improvement Fund pursuant to clause 

(4) of this Section 505, the Authority shall submit to the Amending 

Creditors or their respective advisors for approval a schedule of 

expected costs of Improvements (and of extensions to the System) 

during an initial period of not more than thirteen (13) weeks from 

the date of transfer of moneys from the General Fund to the Capital 

Improvement Fund (the “Initial Improvements Period”) that 

itemizes and contains a brief description of Improvements (and of 

such extensions of the System) and the applicable project name or 

names assigned thereto by the Authority the costs of which are 

expected to be paid from moneys in the Capital Improvement Fund, 

the Reserve Maintenance Fund or the Construction Fund during 

such Initial Improvements Period, along with a monthly cost 

forecast for each such project during the Initial Improvements 

Period. 

(2) At any point thereafter during the Amendment Period, 

at least ten (10) business days before the requested date of approval, 

the Authority may submit to the Amending Creditors or their 

respective advisors for approval (i) a revised schedule of expected 

Improvements (and of extensions of the System) during the Initial 

Improvements Period or (ii) a schedule of expected Improvements 

(and of extensions of the System) during a subsequent thirteen (13) 

week period commencing on the date of delivery of such schedule 

(in each case that itemizes and specifies the expected costs of such 

Improvements (and of extensions of the System) during such 

period and contains a brief description of such Improvements (and 

of such extensions of the System) and the applicable project name 

or names assigned thereto by the Authority) the costs of which are 

expected to be paid from moneys in the Capital Improvement Fund, 

the Reserve Maintenance Fund or the Construction Fund during 

such period following the date of delivery of such schedule, along 

with a monthly cost forecast for each such project during such 

period. 

(3) Within not more than ten (10) business days after 

receipt of any such schedule referred to in clauses (1) or (2) above 

in this Section, the Required Amending Creditors or their 

respective advisors may deliver to the Authority written 

confirmation or confirmations that the costs of Improvements (and 

of extensions of the System) described in the applicable schedule 

(the “Proposed Improvements”) are or are not reasonably 

acceptable. In addition, if within not more than ten (10) business 

days after receipt of any such schedule referred to in clauses (1) or 

(2) above in this Section, none of the Required Amending Creditor 

Groups nor any of their respective advisors objects in one or more 

writings to the Authority to any such schedule of Proposed 

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Improvements, such Proposed Improvements shall be deemed to be 

reasonably acceptable to the Required Amending Creditors for 

purposes of this Section 505. Upon receipt of written confirmation 

from each Required Amending Creditor Group or its advisor 

stating that such Proposed Improvements are acceptable or, to the 

extent a Required Amending Creditor Group or its advisor has not 

provided a written confirmation stating that such Proposed 

Improvements are acceptable, the expiration of such ten (10) 

business day period without the receipt by the Authority of any 

objection from such Required Amending Creditor Group or its 

advisors, the Authority shall provide a certificate to the Trustee and 

the Amending Creditors or their respective advisors, signed by the 

Executive Director or by any other officer or employee of the 

Authority with fiscal authority, attaching such schedule and 

certifying that it has received from each Required Amending 

Creditor Group or its advisor either (a) a written confirmation that 

the Proposed Improvements described in such schedule are 

reasonably acceptable or (b) no objection within the applicable time 

period described above and, as a result, that such Proposed 

Improvements are deemed to be reasonably acceptable to such 

Required Amending Creditor Group for purposes of this Section 

505. 

(4) During the Amendment Period, and subject to the 

Authority’s compliance with the provisions of clauses (1) through 

(3) of this Section 505, the Authority may transfer moneys from the 

General Fund to the Capital Improvement Fund to be applied as 

provided in Section 512B of this Agreement to pay Approved Costs 

of Improvements, provided that:

(a) immediately prior to any such transfer, the 

balance in the Construction Fund and the Capital 

Improvement Fund in the aggregate is less than $75,000,000;

(b) on the date of each such transfer and 

application the representations of the Authority given in 

Section 12(b) of the RSA are true and correct as of the date of 

any such transfer and as of the date of any application of such 

funds; 

(c) immediately following any such transfer, the 

aggregate amount of moneys transferred pursuant to this 

clause (4) plus the aggregate amount of moneys deposited in 

the Construction Fund after the date of the Eighteenth 

Amendment does not exceed the aggregate amount of 

Approved Costs of Improvements; 

(d) any moneys so transferred during the 

Amendment Period shall be applied by the Authority only to 

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Approved Costs of Improvements and are applied in the 

manner required by the Agreement for application of moneys 

from the Construction Fund; and

(e) on a quarterly basis, on the fifteenth (15th) day 

of the month, the Authority shall provide a certification to the 

Trustee and each Amending Creditor or its advisors for the 

three-month period preceding the first day of the month in 

which the certification is given, (i) indicating whether the 

Improvements on the schedules of Approved Costs of 

Improvements are complete, and, for any such Improvements 

that are not complete, an estimate of the percentage of 

completion of the project, (ii) containing an estimate of the 

actual costs towards which the moneys in the Construction 

Fund, Reserve Maintenance Fund and/or Capital 

Improvement Fund were applied during such three-month 

period on a project-level basis, and (iii) stating that all funds 

withdrawn from the Construction Fund, Reserve Maintenance 

Fund and/or Capital Improvement Fund during such threemonth period were applied to Approved Costs of 

Improvements (A) in a manner consistent with the required 

manner of application of moneys from the Construction Fund 

and (B) in compliance with the Eighteenth Amendment.

(5) After the Amendment Period but subject to any obligation 

of the Authority to transfer funds to the Bond Service Account and 

the Redemption Account as and when required under Section 512B, 

for so long as moneys transferred to the Capital Improvement Fund 

pursuant to clause (4) remain in the Capital Improvement Fund, (i) 

the Authority may not apply such moneys for costs of Improvements 

(or of extensions of the System) other than Approved Costs of 

Improvements approved during the Amendment Period in accordance 

with the terms of this Section 505 and (ii) the Authority must provide 

the certification in clause (4)(e) following the expenditure of such 

funds; provided, however, that if the Authority decides not to apply 

such funds to such Approved Costs of Improvements, then it shall 

transfer such funds to the General Fund.

(6) The Trustee shall have no duty to review any certification 

received pursuant to previous clauses (1)-(5) for any purpose, except 

to confirm that such certification has been delivered, and the Trustee 

shall be authorized to provide any requesting bondholder with a copy 

of any such certification.]

Revenue Fund. SECTION 506. A special fund is hereby created and designated 

the “Puerto Rico Electric Power Authority Power Revenue Fund”

(herein sometimes called the “Revenue Fund”). After the outstanding 

1947 Indenture Bonds have been paid or provision has been made for 

their payment and the release of the 1947 Indenture, the Treasurer 

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shall transfer, on or before the 15th day of each month, from the 

General Fund to the credit of the Revenue Fund an amount equal to 

the amount of all moneys held for the credit of the General Fund on 

the last day of the preceding month less such amount to be held as a 

reserve for Current Expenses as the Treasurer may determine, but not 

more than one-sixth (1/6) of the amount shown by the Annual Budget 

to be necessary for Current Expenses for the current fiscal year, such 

transfer to be made on the books of the Authority as of the close of 

the preceding month. The Authority covenants that all moneys to the 

credit of the Revenue Fund will be applied to the purposes and in the 

order set forth in this Article.

Sinking Fund.

Bond Service

Account, Reserve 

Account and 

Redemption Account.

Reserve Maintenance 

Fund.

SECTION 507. A special fund is hereby created and designated 

the “Puerto Rico Electric Power Authority Power Revenue Bonds 

Interest and Sinking Fund” (herein sometimes called the “Sinking 

Fund”). There are hereby created three separate accounts in the 

Sinking Fund designated “Bond Service Account”, “Reserve 

Account” and “Redemption Account”, respectively. Another special 

fund is hereby created and designated “Puerto Rico Electric Power 

Authority Reserve Maintenance Fund” (herein sometimes called the 

“Reserve Maintenance Fund”). Two other special funds are hereby 

created and designated “Puerto Rico Electric Power Authority Selfinsurance Fund” (herein some times called the “Self-insurance 

Fund”) and “Puerto Rico Electric Power Authority Capital 

Improvement Fund” (herein sometimes called the “Capital 

Improvement Fund”). Another special fund is hereby created and 

designated “Puerto Rico Electric Power Authority Subordinate 

Obligations Fund” (herein some times called the “Subordinate 

Obligations Fund”). On or before the last day of the month during 

which the first Series of bonds shall be issued under the provisions of 

Section 208 of this Agreement and on or before the 25th day of each 

month thereafter, (i) until the outstanding 1947 Indenture Bonds have 

been paid or provision has been made for their payment and the 

release of the 1947 Indenture, it shall be the duty of the Executive 

Director or any officer or employee of the Authority designated by 

him for such purpose to withdraw from the Renewal and Replacement 

Fund, and (ii) after the outstanding 1947 Indenture Bonds have been 

paid or provision has been made for their payment and the release of 

the 1947 Indenture it shall be the duty of the Treasurer to withdraw 

from the Revenue Fund, all of the moneys then held to the credit of 

such Fund (less any amount equal to the amount of Federal Subsidy 

Payments that have not been received as of the 25th of the month 

preceding the Interest Payment Date to which such Federal Subsidy 

Payments relate, which amount will be held in the Revenue Fund and 

(x) if the Federal Subsidy Payment has not been received by the 

Authority by such Interest Payment Date, transferred to the Bond 

Service Account on the Interest Payment Date and applied to the 

payment of interest on Bonds or (y) if the Federal Subsidy Payment 

has been received by the Authority on or before such Interest 

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Payment Date, remain on deposit in the Revenue Fund for application 

in accordance with the provisions below in the following calendar 

month) and deposit the moneys so withdrawn to the credit of the 

following Accounts and Funds in the following order:

(a) to the credit of the Bond Service Account, such 

amount thereof (or the entire sum so withdrawn if less than the 

required amount) as may be required to make the total amount then 

to the credit of the Bond Service Account equal to the sum of 

(i) the Interest Accrual on all the outstanding bonds to 

and including the first day of the next calendar month, and

(ii) the Principal Accrual on the outstanding serial 

bonds to and including the first day of the next calendar 

month;

(b) to the credit of the Redemption Account, such 

amount, if any, of any balance remaining after making the deposit 

under clause (a) above (or the entire balance if less than the required 

amount) as may be required to make the amount then to the credit of 

the Redemption Account equal to the Amortization Accrual to and 

including the first day of the next calendar month;

(c) to the credit of the Reserve Account, such amount, if 

any, of any balance remaining after making the deposits under 

clauses (a) and (b) above (or the entire balance if less than the required 

amount) as may be required to make the amount then to the credit of 

the Reserve Account, including the amount of any Reserve Account 

Insurance Policy or any Reserve Account Letter of Credit therein, 

equal to the interest payable on the bonds of each Series issued 

hereunder within the next ensuing twelve (12) months; (A) provided, 

however, that the amount so deposited in any month in respect of 

bonds of any Series issued under Sections 208 or 209 of this 

Agreement need not exceed one-sixtieth (1/60) of the amount of the 

increase in the interest payable within the next ensuing twelve (12) 

months resulting from the issuance of the bonds of such Series; and 

that if the amount so deposited in any month to the credit of said 

Account shall be less than the required amount for such month, the 

requirement therefor shall nevertheless be cumulative and the amount 

of any deficiency in any month shall be added to the amount 

otherwise required to be deposited in each month thereafter until such 

time as such deficiency shall have been made up; and that in the case 

of Variable Rate Bonds, the minimum amount to be deposited in the 

Reserve Account over the period required herein, shall be based 

initially on the interest rate in effect on the date of issuance of the 

Variable Rate Bonds and then shall be adjusted on the 25th day of 

each subsequent month based on the actual interest accrued from the 

25th day of the previous month to the date of adjustment, except that 

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in the case of Variable Rate Bonds in respect of which the Authority 

has notified the Trustee that a SWAP agreement is in effect, the 

Trustee shall use the SWAP rate in calculating the interest payable on 

such Bonds within the next ensuing twelve (12) months; and that in 

the case of Capital Appreciation Bonds, the minimum amount 

required to be deposited in the Reserve Account shall be an amount

derived from the interest rate which has been used to calculate the 

assumed yield on such bonds through their maturity times the 

Accreted Value of such bonds on the Valuation Date occurring at or 

after the first day of the twelfth succeeding month to the date of 

calculation of this requirement, as may be further specified in the 

resolution authorizing Capital Appreciation Bonds; and (B) provided, 

however, that in the case of Federally Subsidized Bonds, the amount 

of interest deemed to be payable on such bonds from the date of 

issuance of such Federally Subsidized Bonds and for so long as the 

Trustee shall receive the scheduled amount of the Federal Subsidy 

Payments on or before such interest shall be payable shall exclude the 

amount of interest to be paid from the Federal Subsidy and provided 

further, however, that if the Trustee shall not receive the scheduled 

amount of the Federal Subsidy Payments on or before the date interest 

on such Federally Subsidized Bonds is payable or within thirty (30) 

of the date such Federal Subsidy Payments were scheduled to be 

received under the then current applicable law and regulations, then 

for purposes of the calculation of interest to be credited to the Reserve 

Account, the amount shall be equal to the interest payable on the 

bonds of each Series issued hereunder within the next twelve (12) 

months. 

(d) to the credit of the Reserve Maintenance Fund, such 

amount, if any, of any balance remaining after making the deposits 

under clauses (a), (b) and (c) above (or the entire balance if less than 

the required amount) as may be recommended by the Consulting 

Engineers, as provided by Section 706 of this Agreement, to be 

deposited to the credit of said Fund during such month; provided, 

however, that if the amount so deposited to the credit of said Fund in 

any month shall be less than the amount recommended by the 

Consulting Engineers, the requirement therefor shall nonetheless be 

cumulative and the amount of any such deficiency in any month shall 

be added to the amount otherwise required to be deposited in each 

month thereafter until such time as such deficiency shall have been 

made up, unless such requirement shall have been modified by the 

Consulting Engineers in writing, a signed copy of such modification 

to be filed with the Authority; and provided further, however, that in 

the event that the Authority shall so covenant in respect of any 

Subordinate Obligation, as authorized by Section 516 of this 

Agreement, the deposit required by this clause (d) in any month shall 

be equal to the least of

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(i) the amount described above in this clause (d),

(ii) the amount of $400,000, and

(iii) an amount that when added to the amount then held to the 

credit of the Reserve Maintenance Fund shall make the total amount 

to the credit of said Fund equal to $10,000,000;

(e) to the credit of one or more special accounts in the 

Subordinate Obligations Fund, such amount, if any, of any balance 

remaining after making the deposits under clauses (a), (b), (c) and (d) 

above (or the entire balance if less than the required amount) that 

together with funds then held to the credit of the Subordinate 

Obligations Fund will make the total amount then to the credit thereof 

equal to any amounts required to be paid or accrued with respect to 

any Subordinate Obligations prior to the Deposit Day of the next 

succeeding month from or to the Subordinate Obligations Fund;

(f) in the event the Authority shall have covenanted pursuant 

to Section 516 with respect to Subordinate Obligations to limit its 

deposit to the Reserve Maintenance Fund in accordance with the 

provisions of the second proviso of clause (d) above and in fact the 

deposit to said Fund pursuant to clause (d) was limited to the amount 

described in subclause (ii) or (iii), to the credit of the Reserve 

Maintenance Fund, such amount, if any, of any balance remaining 

after making the deposits under clauses (a), (b), (c), (d) and (e) above 

(or the entire balance if less than the required amount) as may be 

required to make the total amount deposited to the credit of the 

Reserve Maintenance Fund in such month equal to the amount 

described in subclause (i) of clause (d) above;

(g) On the date of the release of the 1947 Indenture, to the 

credit of the Self-insurance Fund an amount equal to the amount held 

to the credit of the General Reserve Fund under the 1947 Indenture 

on the date of such release remaining after making the deposits under 

clauses (a), (b), (c), (d), (e) and (f) above and thereafter such amount, 

if any, of any balance remaining after making the deposits under 

clauses (a), (b), (c), (d), (e) and (f) above, as the Consulting Engineers 

shall from time to time recommend; and

(h) After the outstanding 1947 Indenture Bonds have been 

paid or provision has been made for their payment and the release of 

the 1947 Indenture, to the credit of the Capital Improvement Fund 

such amount, if any, of any balance remaining after making the 

deposits under clauses (a), (b), (c), (d), (e), (f) and (g) above, as the 

Consulting Engineers shall recommend as provided by Section 706 

of this Agreement; provided, however, that if the amount so deposited 

to the credit of said Fund during any fiscal year of the Authority shall 

be less than the amount recommended by the Consulting Engineers, 

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the requirement therefor shall nevertheless be cumulative and the 

amount of any such deficiency in any such fiscal year shall be added 

to the amount otherwise required to be deposited in each fiscal year 

thereafter until such time as such deficiency shall have been made up, 

unless such requirement shall have been modified by the Consulting 

Engineers in writing, a signed copy of such modification to be filed 

with the Authority.

Until the 1947 Indenture Bonds have been paid or provision 

has been made for their payment and the release of the 1947 

Indenture, any balance remaining after making the deposits under 

clauses (a), (b) and (c) above shall be transferred to the Renewal and 

Replacement Fund. After the outstanding 1947 Indenture Bonds have 

been paid or provision has been made for their payment and the 

release of the 1947 Indenture, any balance remaining after making the 

deposits under clauses (a) through (h) above may be used for any 

lawful purpose of the Authority.

The moneys in the Sinking Fund shall be held by the Trustee 

in trust, and the moneys in the Reserve Maintenance Fund, the Selfinsurance Fund and the Capital Improvement Fund shall be held by 

the Authority in trust, separate and apart from all other funds of the 

Authority, and shall be applied as hereinafter provided with respect 

to such Funds and, pending such application, shall be subject to a lien 

and charge in favor of the holders of the bonds issued and outstanding 

under this Agreement and for the further security of such holders until 

paid out or transferred as herein provided. The moneys in each 

account in the Subordinate Obligations Fund shall be held by the 

Authority (or a Depositary) in trust, separate and apart from all other 

funds of the Authority, and shall be applied as hereinafter provided 

with respect to such Fund and, pending such application, shall be 

subject to a lien and charge in favor of the holders of the Subordinate 

Obligations incurred in the manner provided under this Agreement 

and for the further security of such holders until paid out or 

transferred as herein provided. The Authority (or such Depositary) 

may establish one or more accounts within the Subordinate 

Obligations Fund corresponding to the source of moneys or particular 

Subordinate Obligations for each deposit made into said Fund so that 

the Authority (and such Depositary) may ascertain the source and date 

of deposit of the moneys in each such account.

Disposition of 

balances in 1947 

Indenture funds and 

accounts.

SECTION 508. At such time as the outstanding 1947 Indenture 

Bonds shall be paid or provision shall be made for their payment and 

the Trustee under the 1947 Indenture shall have released the 1947 

Indenture, all moneys (other than moneys held for the redemption or 

payment of bonds and coupons), including any obligations purchased 

as an investment of such moneys, then held for the credit of the 

special funds and accounts created under the provisions of the 1947 

Indenture shall be withdrawn and deposited to the credit of the special 

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funds and accounts created under the provisions of this Agreement, 

as follows :

1947 Indenture Agreement

Construction Fund Construction Fund

General Fund General Fund

Revenue Fund Revenue Fund

Sinking Fund, including Reserve Account in

Reserve Account Sinking Fund

General Reserve Fund General Fund

Renewal and Replacement Fund General Fund

At the same time the Authority shall withdraw all moneys 

then held to the credit of the Construction Fund revolving fund 

under the provisions of the 1947 Indenture and deposit such moneys 

to the credit of the Construction Fund under the provisions of this 

Agreement.

Application of 

moneys in Bond 

Service Account.

SECTION 509. The Trustee shall, on the business day 

immediately preceding each interest payment date, withdraw from the 

Bond Service Account and (a) remit by mail to each owner of 

registered bonds without coupons the amounts required for paying the 

interest on such bonds as such interest becomes due and payable and 

(b) set aside or deposit in trust with the Paying Agents the amounts 

required for paying the interest on the coupon bonds as such interest 

becomes due and payable and the principal of all serial bonds as such 

principal becomes due and payable.

Notwithstanding the foregoing, if principal and interest 

payments, or a portion thereof (other than any payments of the 

purchase price of bonds pursuant to a “put”), for particular bonds have 

been made on behalf of the Authority by a credit or liquidity facility 

issuer or other entity insuring, guaranteeing or providing for said 

payments, amounts deposited in the Bond Service Account and 

allocable to said payments for said bonds shall be paid, to the extent 

required under any agreement, to the credit or liquidity facility issuer 

or entity having theretofore made said corresponding payment.

Application of 

moneys in Reserve 

Account.

SECTION 510. Moneys held for the credit of the Reserve 

Account or amounts available under any Reserve Account Insurance 

Policy or Reserve Account Letter of Credit shall first be used for the 

purpose of paying interest on the bonds and maturing principal of the 

serial bonds whenever and to the extent that the moneys held for the 

credit of the Bond Service Account shall be insufficient for such 

purpose and thereafter for the purpose of making the deposits to the 

credit of the Redemption Account pursuant to the requirements of 

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clause (b) of Section 507 of this Agreement whenever and to the 

extent that the withdrawals from the Renewal and Replacement Fund 

or the Revenue Fund, as the case may be, are insufficient for such 

purpose. If at any time the moneys held for the credit of the Reserve 

Account, including amounts available under any Reserve Account 

Insurance Policy or Reserve Account Letter of Credit, shall exceed 

interest payable within the next ensuing twelve (12) months on the 

bonds of each Series issued and then outstanding hereunder, such 

excess moneys shall be transferred to the credit of the Bond Service 

Account or any Reserve Account Insurance Policy or Reserve 

Account Letter of Credit may be reduced to the extent of such excess, 

at the option of the Authority. For purposes of determining whether 

any excess exists in the Reserve Account, the amount required for 

Capital Appreciation Bonds and interest payable within the next 

ensuing twelve (12) months for Variable Rate Bonds shall be 

calculated in accordance with clause (c) of Section 507, and the 

minimum amount required in the Reserve Account shall be deemed 

to include any additional level of funding of the Reserve Account 

required under the terms of the resolution adopted by the Authority 

for the bonds.

Notwithstanding anything to the contrary contained in Section 

507 or elsewhere in this Agreement, in lieu, or in partial satisfaction, 

of any required deposit into the Reserve Account, the Authority may 

cause to be deposited into the Reserve Account a Reserve Account 

Insurance Policy or a Reserve Account Letter of Credit, as to which 

any reimbursement obligation in respect of a drawing thereon may be 

secured by a lien on Revenues not inconsistent with Section 712 

hereof, for the benefit of the holders of the bonds in an amount equal 

to the required deposit or any portion thereof, and which Reserve 

Account Insurance Policy or Reserve Account Letter of Credit shall 

be payable or available to be drawn upon, as the case may be (upon 

the giving of notice as required thereunder), on any date on which 

moneys are required to be paid out of the Reserve Account pursuant 

to the first sentence of this Section 510. If a disbursement is made 

under the Reserve Account Insurance Policy or the Reserve Account 

Letter of Credit, the Authority shall be obligated either to reinstate the 

amount of such Reserve Account Insurance Policy or Reserve 

Account Letter of Credit or to deposit into the Reserve Account 

moneys, in accordance with the provisions of Section 507 hereof, in 

the amount of the disbursement made under such Reserve Account 

Insurance Policy or Reserve Account Letter of Credit, or a 

combination of such alternatives. The Authority may at any time 

substitute (i) all or a portion of the moneys held to the credit of the 

Reserve Account with a Reserve Account Insurance Policy or 

Reserve Account Letter of Credit, or a combination of such 

alternatives, (ii) all or a portion of any Reserve Account Insurance 

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Policy on deposit in the Reserve Account with moneys or a Reserve 

Account Letter of Credit, or a combination of such alternatives, or 

(iii) all or a portion of any Reserve Account Letter of Credit on 

deposit in the Reserve Account with moneys or a Reserve Account 

Insurance Policy, or a combination of such alternatives. Any moneys 

on deposit in the Reserve Account in substitution of which a Reserve 

Account Insurance Policy or Reserve Account Letter of Credit is 

deposited into the Reserve Account shall, to the extent not required 

to fund any deficiences in the amount then required to be on deposit 

in the Reserve Account, be released and immediately paid over to the

Authority to be used by the Authority for any lawful purpose of the 

Authority. Prior to the expiration date of any Reserve Account 

Insurance Policy or Reserve Account Letter of Credit then on deposit 

to the credit of the Reserve Account, the Authority shall (x) cause the 

term of such Reserve Account Insurance Policy or Reserve Account 

Letter of Credit to be extended, (y) replace any such Reserve Account 

Insurance Policy with moneys (which may include, without 

limitation, moneys available under the Reserve Account Insurance 

Policy or from any other source available for such purpose) or a 

Reserve Account Letter of Credit, or a combination of such 

alternatives, or (z) replace any such Reserve Account Letter of Credit 

with moneys (which may include, without limitation, moneys 

available under the Reserve Account Letter of Credit or from any 

other source available for such purpose) or a Reserve Account 

Insurance Policy, or a combination of such alternatives; provided that, 

in the event the Authority has not extended or replaced the expiring 

Reserve Account Insurance Policy or Reserve Account Letter of 

Credit by the fifth (5th) business day prior to the date of expiration, 

the expiring Reserve Account Insurance Policy or Reserve Account 

Letter of Credit shall, on such date, be drawn upon to fund the Reserve 

Account. For purposes of this Agreement, other than Article VI 

hereof, moneys for deposit to, or held for the credit of, the Reserve 

Account shall include amounts available under any Reserve Account 

Insurance Policy or Reserve Account Letter of Credit on deposit in 

the Reserve Account.

Application of 

moneys in 

Redemption Account.

SECTION 511. Moneys held for the credit of the Redemption 

Account shall be applied to the retirement of bonds issued under the 

provisions of this Agreement as follows:

Purchase of bonds. (a) Subject to the provisions of paragraph (c) of this Section, 

the Trustee shall endeavor to purchase bonds or portions of bonds 

secured hereby and then outstanding, whether or not such bonds or 

portions shall then be subject to redemption, at the most advantageous 

price obtainable with reasonable diligence, such price not to exceed 

the principal of such bonds plus the amount of the premium, if any, 

which would be payable on the next redemption date to the holders 

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Redemption of bonds.

of such bonds under the provisions of Article III of this Agreement if 

such bonds or portions of bonds should be called for redemption on 

such date from the moneys in the Sinking Fund. The Trustee shall pay 

the interest accrued on such bonds or portions of bonds to the date of 

settlement therefor from the Bond Service Account and the purchase 

price from the Redemption Account, but no such purchase shall be 

made by the Trustee within the period of forty-five (45) days 

immediately preceding any interest payment date on which such 

bonds are subject to call for redemption under the provisions of this 

Agreement except from moneys other than the moneys set aside or 

deposited for the redemption of bonds.

(b) Subject to the provisions of paragraph (c) of this Section, 

the Trustee shall call for redemption on each interest payment date on 

which bonds are subject to redemption from moneys in the Sinking 

Fund such amount of bonds or portions of bonds then subject to 

redemption as, with the redemption premium, if any, will exhaust the 

moneys then held for the credit of the Redemption Account as nearly 

as may be; provided, however, that not less than One Hundred 

Thousand Dollars ($100,000) principal amount of bonds shall be 

called for redemption at any one time. Such redemption shall be made 

pursuant to the provisions of Article III of this Agreement. Prior to 

calling bonds or portions of bonds for redemption the Trustee shall 

withdraw from the Bond Service Account and from the Redemption 

Account and set aside in separate accounts or deposit with the Paying 

Agents the respective amounts required for paying the interest on, and 

the principal and redemption premium of, the bonds or portions of 

bonds so called for redemption.

(c) Moneys in the Redemption Account shall be applied by 

the Trustee in each fiscal year to the retirement of bonds of each 

Series then outstanding in the following order:

first, the term bonds of each such Series to the extent of the 

Amortization Requirement, if any, for such fiscal year for the term 

bonds of each such Series then outstanding, plus the applicable 

premium, if any, and, if the amount available in such fiscal year shall 

not be equal thereto, then in proportion to the Amortization 

Requirement, if any, for such fiscal year for the term bonds of each 

such Series then outstanding, plus the applicable premium, if any;

second, any balance then remaining shall be applied to the 

purchase of any bonds secured hereby and then outstanding whether 

or not such bonds shall then be subject to redemption, in accordance 

with the provisions of paragraph (a) of this Section;

third, any balance then remaining shall be applied to the 

redemption of the term bonds of each such Series in proportion to the 

Amortization Requirement, if any, for such fiscal year for the term 

bonds of each such Series then outstanding, plus the applicable 

premium, if any; and

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fourth, after the retirement of all term bonds, any balance still 

remaining shall be applied to the retirement of the serial bonds of each 

Series in proportion to the aggregate principal amount of the serial 

bonds of each such Series originally issued under the provisions of 

this Agreement.

Until the outstanding 1947 Indenture Bonds have been paid or 

provision has been made for their payment and the release of the 1947 

Indenture, the Authority shall pay from the Renewal and Replacement 

Fund all expenses in connection with any such purchase or such 

redemption ; thereafter all such expenses shall be paid from the 

Revenue Fund.

Notwithstanding the foregoing, if amounts applied to the 

retirement of bonds that would have been applied from the 

Redemption Account are paid instead by a credit or liquidity facility 

issuer or other entity insuring, guaranteeing or providing for said 

payment, amounts deposited in the Redemption Account and 

allocable to said payments for said bonds shall be paid, to the extent 

required under any agreement, to the credit or liquidity facility issuer 

or entity having theretofore made said corresponding payment.

Use of moneys in 

Reserve Maintenance 

Fund.

SECTION 512. Except as hereinafter provided in this Section 

and in Section 707 of this Agreement, moneys held for the credit of 

the Reserve Maintenance Fund shall be disbursed only for the purpose 

of paying the cost of unusual or extraordinary maintenance or repairs, 

maintenance or repairs not recurring annually and renewals and 

replacements, including major items of equipment. Such 

disbursements shall be made in accordance with the provisions of 

Section 402 of this Agreement for payments from the Construction 

Fund.

If at any time moneys held for the credit of the Bond Service 

Account and the Reserve Account shall be insufficient for the purpose 

of paying the interest on all bonds and the principal of the serial bonds 

as such interest and principal become due and payable, then the 

Authority shall transfer from any moneys held for the credit of the 

Reserve Maintenance Fund to the credit of the Bond Service Account 

an amount sufficient to make up any such deficiency. If at any time 

the moneys held for the credit of the Redemption Account and the 

Reserve Account shall be insufficient for the purpose of providing 

funds for the retirement of term bonds to the extent of the 

Amortization Requirements therefor at the end of any fiscal year, then 

the Authority shall transfer from any moneys held for the credit of the 

Reserve Maintenance Fund an amount sufficient to make up any such 

deficiency; provided, however, that no such transfer shall be made 

unless the moneys then held for the credit of the Bond Service 

Account are at least equal to the maximum requirement therefor under 

clause (a) of Section 507 of this Agreement. Any moneys so 

transferred from the Reserve Maintenance Fund shall be restored by 

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the Authority from available moneys in the Revenue Fund, subject to 

the same conditions as are prescribed for deposits to the credit of the 

Reserve Maintenance Fund under the provisions of Section 507 of 

this Agreement.

SECTION 512A. Except as hereinafter provided in the 

following two paragraphs and in Section 707 of this Agreement, 

moneys held for the credit of the Self-insurance Fund (1) shall be 

disbursed in the manner provided by Section 402 of this Agreement 

for disbursements from the Construction Fund only for the purpose 

of paying the cost of repairing, replacing or reconstructing any 

property damaged or destroyed from or extraordinary expenses 

incurred as a result of a cause which is not covered by insurance under 

the provisions of said Section 707 or (2) shall be transferred to the 

Revenue Fund in an amount, approved by the Consulting Engineers, 

equal to the loss of income from the System as a result of a cause 

which is not covered by insurance under the provisions of said 

Section 707.

If at any time moneys held for the credit of the Bond Service 

Account and the Reserve Account (including moneys transferred 

from the Reserve Maintenance Fund to the credit of the Bond Service 

Account pursuant to the provisions of the first sentence of the second 

paragraph of Section 512 of this Agreement) shall be insufficient for 

the purpose of paying the interest on all bonds and the principal of all 

serial bonds as such interest and principal become due and payable, 

then the Authority shall transfer from any moneys held for the credit 

of the Self-insurance Fund to the credit of the Bond Service Account 

an amount sufficient to make up such deficiency. If at any time 

moneys held for the credit of the Redemption Account and the 

Reserve Account (including moneys transferred from the Reserve 

Maintenance Fund to the credit of the Redemption Account pursuant 

to the provisions of the second sentence of the second paragraph of 

Section 512 of this Agreement) shall be insufficient for the purpose 

of providing funds for the retirement of bonds to the extent of the 

Amortization Requirements therefor at the end of any fiscal year, then 

the Authority shall transfer from any moneys held for the credit of the 

Self-insurance Fund to the credit of the Redemption Account an 

amount sufficient to make up any such deficiency; provided, 

however, that no such transfer shall be made unless the moneys then 

held for the credit of the Bond Service Account are at least equal to 

the maximum requirement therefor under clause (a) of Section 507 of 

this Agreement.

If the Authority shall have determined that all or any portion 

of the moneys held to the credit of the Self-insurance Fund is no 

longer needed for the purposes specified in the second preceding 

paragraph, the Authority may withdraw an amount equal to such 

portion from the Self-insurance Fund and transfer such amount to the 

credit of the Bond Service Account; provided, however, that no such 

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transfer shall be made prior to the time that the Consulting Engineers 

shall have approved such transfer in writing.

SECTION 512B. Moneys held for the credit of the Capital 

Improvement Fund shall be disbursed in the manner provided by 

Section 402 of this Agreement only for paying the cost of anticipated 

extensions and Improvements of the System the cost of which has not 

otherwise been provided for from the proceeds of bonds issued under 

the provisions of this Agreement.

If at any time moneys held for the credit of the Bond Service 

Account and the Reserve Account (including moneys transferred 

from the Reserve Maintenance Fund or the Self-insurance Fund to the 

credit of the Bond Service Account pursuant to the provisions of the 

first sentence of the second paragraph of Sections 512 and 512A of 

this Agreement, respectively) shall be insufficient for the purpose of 

paying the interest on all bonds and the principal of all serial bonds 

as such interest and principal become due and payable, then the 

Authority shall transfer from any moneys held for the credit of the 

Capital Improvement Fund to the credit of the Bond Service Account 

an amount sufficient to make up such deficiency. If at any time 

moneys held for the credit of the Redemption Account and the 

Reserve Account (including moneys transferred from the Reserve 

Maintenance Fund or the Self-insurance Fund to the credit of the 

Redemption Account pursuant to the provisions of the second 

sentence of the second paragraph of Sections 512 and 512A of this 

Agreement, respectively) shall be insufficient for the purpose of 

providing funds for the retirement of bonds to the extent of the 

Amortization Requirements therefor at the end of any fiscal year, then 

the Authority shall transfer from any moneys held for the credit of the 

Capital Improvement Fund to the credit of the Redemption Account 

an amount sufficient to make up any such deficiency; provided, 

however, that no such transfer shall be made unless the moneys then 

held for the credit of the Bond Service Account are at least equal to 

the maximum requirement therefor under clause (a) of Section 507 of 

this Agreement.

Application and 

pledge of moneys in 

Sinking Fund.

SECTION 513. Subject to the terms and conditions set forth in 

this Agreement, moneys held for the credit of the Bond Service 

Account, the Reserve Account and the Redemption Account shall be 

held in trust and disbursed by the Trustee for (a) the payment of 

interest on the bonds issued hereunder as such interest becomes due 

and payable, or (b) the payment of the principal of such bonds at their 

respective maturities, or (c) the payment of the purchase or 

redemption price of such bonds before their respective maturities, and 

such moneys are hereby pledged to and charged with the payments 

mentioned in this Section.

Whenever the total of the moneys held for the credit of the 

Bond Service Account, the Reserve Account and the Redemption 

Account shall be sufficient for paying the principal of and the 

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Exhibit 3 Page 95 of 252
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redemption premium, if any, and the interest accrued on all bonds 

then outstanding under the provisions of this Agreement, such 

moneys shall be applied by the Trustee to the payment, purchase or 

redemption of such bonds.

Moneys set aside for 

principal and interest

held in trust.

Moneys unclaimed 

for six years after 

maturity of bonds and 

coupons.

SECTION 514. All moneys which the Trustee shall have 

withdrawn from the Sinking Fund or shall have received from any 

other source and set aside, or deposited with the Paying Agents, for 

the purpose of paying any of the bonds hereby secured, either at the 

maturity thereof or upon call for redemption, or for the purpose of 

paying any maturing coupons appertaining to any of the coupon 

bonds hereby secured, shall be held in trust for the respective holders 

of such bonds or coupons. But any moneys which shall be so set aside 

or deposited by the Trustee and which shall remain unclaimed by the 

holders of such bonds or of such coupons for the period of six (6) 

years after the date on which such bonds or such coupons shall have 

become due and payable shall upon request in writing be paid to the 

Authority or to such officer, board or body as may then be entitled by 

law to receive the same, and thereafter the holders of such bonds or 

coupons shall look only to the Authority or to such officer, board or 

body, as the case may be, for payment and then only to the extent of 

the amounts so received without any interest thereon, and the Trustee 

and the Paying Agents shall have no responsibility with respect to 

such moneys.

Cancellation of bonds 

and coupons upon 

payment.

SECTION 515. All bonds paid, redeemed or purchased, either 

at or before maturity, together with all unmatured coupons, if any,

appertaining thereto, shall be cancelled upon the payment, 

redemption or purchase of such bonds and shall be delivered to the 

Trustee when such payment, redemption or purchase is made. All 

coupons, which are paid by the Paying Agents, shall be cancelled 

upon their payment and delivered to the Trustee in the Borough of 

Manhattan, City and State of New York. Except for such coupons, all 

bonds and coupons cancelled under any of the provisions of this 

Agreement shall be destroyed by the Trustee, which shall execute a 

certificate in duplicate describing the bonds and coupons so destroyed 

except that the numbers of the bonds to which such coupons appertain 

may be omitted unless otherwise directed by the Authority, and one 

executed certificate shall be filed with the Secretary and the other 

executed certificate shall be retained by the Trustee. The coupons so 

paid by such Paying Agent shall be destroyed by the Trustee in the 

Borough of Manhattan, City and State of New York, which shall 

execute a certificate in triplicate describing the coupons so destroyed 

except that the numbers of the bonds to which such coupons appertain 

may be omitted unless otherwise directed by the Authority, and one 

executed certificate shall be filed with the Secretary and another with 

the Trustee and the third executed certificate shall be retained by such 

Paying Agent. 

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SECTION 516. Application of Moneys in Subordinate 

Obligations Fund. (a) Moneys held for the credit of the Subordinate 

Obligations Fund shall be paid out or pledged by the Authority as 

necessary to enable the Authority to meet its Subordinate Obligations. 

Subordinate Obligations may be incurred or issued by the Authority 

for any proper corporate purpose of the Authority.

(b) The Authority shall have the right to covenant with the 

holders from time to time of any Subordinate Obligations issued or 

incurred by the Authority to limit the deposits to the Reserve 

Maintenance Fund as authorized by Section 507(d) and to add to the 

conditions, limitations and restrictions under which bonds may be 

issued under the provisions of Sections 208, 209 and 210 hereof.

(c) Any such Subordinate Obligations shall be payable out of 

and may be secured by a pledge of (i) such amounts in the Subordinate 

Obligations Fund as may from time to time be available therefor, and 

(ii) any other funds of the Authority that may be available for such 

purpose, provided that any such payment or pledge made pursuant to 

clause (i) of this sentence shall be, and shall be expressed to be, 

subordinate and junior in all respects to the lien and charge of the 

bonds secured hereby upon the Revenues.

(d) Before incurring any Subordinate Obligations the 

proceeds of which shall finance in whole or in part the acquisition or 

construction of any works or properties by the Authority in 

connection with the production, distribution or sale of electric energy, 

the Authority shall adopt a resolution specifying whether or not such 

works or properties are to be included as part of the System.

(e) The resolution, indenture or other instrument securing 

each issue of Subordinate Obligations shall contain provisions (which 

shall be binding on all holders of such Subordinate Obligations) not 

more favorable to the holders of such Subordinate Obligations than 

the following:

(1) In the event of any insolvency or bankruptcy 

proceedings, and any receivership, liquidation, reorganization or their 

similar proceedings in connection therewith, relative to the Authority 

or to its creditors, as such, or to its property, and in the event of any 

proceedings for voluntary liquidation, dissolution or other winding up 

of the Authority, whether or not involving insolvency or bankruptcy, 

the owners of all bonds then outstanding shall be entitled to receive 

payment in full of all principal and interest due on all such bonds in 

accordance with the provisions of this Agreement before the holders 

of the Subordinate Obligations are entitled to receive any payment 

from the funds pledged to the bonds on account of principal (and 

premium, if any) or interest upon the Subordinate Obligations.

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(2) In the event that any Subordinate Obligation is 

declared due and payable before its expressed maturity because of the 

occurrence of an event of default (under circumstances when the 

provisions of (1) above shall not be applicable), the owners of all 

bonds outstanding at the time such Subordinate Obligation becomes 

due and payable because of the occurrence of such an event of default 

shall be entitled to receive payment in full of all principal of and 

interest on all such bonds then due and payable before the holder of 

such Subordinate Obligation is entitled to receive any accelerated 

payment from the Revenues and other moneys pledged to the bonds 

under this Agreement of principal (and premium, if any) or interest 

upon such Subordinate Obligation.

(3) If any event of default specified in Section 802 hereof 

with respect to the bonds shall have occurred and be continuing 

(under circumstances when the provisions of (1) above shall not be 

applicable), the owners of all bonds then outstanding shall be entitled 

to receive payment in full of all principal of and interest on all such 

bonds as the same become due and payable before the holders of the 

Subordinate Obligations are entitled to receive, subject to the 

provisions of (5) below, any payment from the Revenues or other 

moneys pledged to the bonds under this Agreement of principal (and 

premium, if any) or interest upon the Subordinate Obligations.

(4) No owner of a bond shall be prejudiced in this right to 

enforce subordination of the Subordinate Obligations by any act or 

failure to act on the part of the Authority.

(5) The Subordinate Obligations may provide that the 

provisions of (1), (2), (3) and (4) above are solely for the purpose of 

defining the relative rights of the owners of the bonds on the one hand, 

and the holders of Subordinate Obligations on the other hand, and that 

nothing therein shall impair, as between the Authority and the holders 

of the Subordinate Obligations, the obligation of the Authority, which 

is unconditional and absolute, to pay to the holders thereof the 

principal thereof and premium, if any, and interest thereon in 

accordance with their terms, nor shall anything therein prevent the 

holders of the Subordinate Obligations from exercising all remedies 

otherwise permitted by applicable law or thereunder upon default 

thereunder, subject to the rights under (1), (2), (3) and (4) above of 

the owners of bonds to receive cash, property or securities from the 

funds pledged to the bonds under this Agreement otherwise payable 

or deliverable to the holders of the Subordinate Obligations; and the 

Subordinate Obligations may provide that, insofar as a trustee or 

paying agent for such Subordinate Obligations is concerned, the 

foregoing provisions shall not prevent the application by such trustee 

or paying agent of any moneys deposited with such trustee or paying 

agent for the purpose of the payment of or on account of the principal 

(and premium, if any) and interest on such Subordinate Obligations 

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if such trustee or paying agent did not have knowledge at the time of 

such application that such payment was prohibited by the foregoing 

provisions.

(6) Any issue of Subordinate Obligations may have such 

rank or priority with respect to any other issue of Subordinate 

Obligations as may be provided in the resolution, trust agreement or 

other instrument securing such issue of Subordinate Obligations and 

may contain such other provisions as are not in conflict with the 

provisions of this Agreement.

(7) Neither the Trustee nor any Depositary shall be 

deemed to owe any fiduciary duty to the holders of Subordinate 

Obligations and shall not be liable to such holders if it shall 

mistakenly pay over or transfer to owners of bonds, the Authority or 

any other person, moneys to which any holders of Subordinate 

Obligations shall be entitled by virtue of this Section 516 or 

otherwise, provided, however, that neither the Trustee nor any 

Depositary then holding the Subordinate Obligations Fund shall be 

relieved from liability for its own negligent action, its own negligent 

failure to act, or its own willful misconduct. Notwithstanding any of 

the provisions of this Section 516 or any other provision of this 

Agreement, neither the Trustee nor any such Depositary shall at any 

time be charged with knowledge of the existence of any facts that 

would prohibit the making of any payment of moneys to or by the 

Trustee or any such Depositary in respect of Subordinate Obligations 

or of any default in the payment of the principal of or premium, if 

any, or interest on any Subordinate Obligations, unless and until the 

Trustee or such Depositary shall have received written notice thereof 

from the Authority or the holders of a majority in principal amount of 

any class or category of any Subordinate Obligations or from any 

trustee or other fiduciary therefor and any financial institution that 

provides credit or security for any Subordinate Obligations.

SECTION 517. Specified Period Principal and Interest 

Requirements Defeasance. A special fund within the Reserve 

Account is hereby created and designated the “Puerto Rico Electric 

Power Authority Revenue Bonds Specified Period Defeasance Fund”

(herein sometimes called the “Specified Period Defeasance Fund”) to 

be held by the Trustee separate and apart from all other funds and 

accounts held under this Agreement. The transfer of moneys from the 

Reserve Account to the Specified Period Defeasance Fund in 

accordance with Section 510A hereof shall constitute an irrevocable 

deposit of such moneys in trust solely for the purpose of paying the 

Specified Period Principal and Interest Requirements, and such 

moneys will not constitute property of the Authority. Upon such 

transfer and deposit to the Specified Period Defeasance Fund, the 

obligation of the Authority to pay the Specified Period Principal and 

Interest Requirements will be discharged to the extent of each such 

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deposit, and the sole recourse of the holders of outstanding bonds in 

respect of the portion of the Specified Period Principal and Interest 

Requirements equal to the aggregate of amounts so deposited shall be 

to the amounts then to the credit of the Specified Period Defeasance 

Fund. The transfer and deposit set forth above shall not in any way 

affect the obligations of the Authority to pay the Principal and Interest 

Requirements with respect to the outstanding bonds other than the 

obligation to pay the portion of the Specified Period Principal and 

Interest Requirements equal to the aggregate of the amounts that are 

credited to the Specified Period Defeasance Fund. On each date on 

which any Specified Period Principal and Interest Requirements are 

payable, the Trustee shall apply moneys in the Specified Period 

Defeasance Fund to pay the Specified Period Principal and Interest 

Requirements that are payable on such date. Any amounts remaining 

in the Specified Period Defeasance Fund after all Specified Period 

Principal and Interest Requirements are paid in full shall be 

transferred to the Reserve Account. Moneys held in the Special 

Period Defeasance Fund shall, as nearly as may be practicable, be 

continuously invested and reinvested by the Trustee in Government 

Obligations which shall mature, or which shall be subject to 

redemption by the holder thereof at the option of such holder, not later 

than the respective dates when moneys held in said Fund will be 

required for the purposes intended.

ARTICLE VI.

DEPOSITARIES OF MONEYS, SECURITY FOR DEPOSITS AND 

INVESTMENT OF FUNDS.

Deposits constitute 

trust funds.

SECTION 601. All moneys received by the Authority under the 

provisions of this Agreement shall be deposited with a Depositary or 

Depositaries, shall be held in trust, shall be applied only in accordance 

with the provisions of this Agreement and shall not be subject to lien 

or attachment by any creditor of the Authority.

Security for deposits. All moneys deposited with the Trustee or any other 

Depositary hereunder in excess of the amount guaranteed by the 

Federal Deposit Insurance Corporation or other Federal agency shall 

be continuously secured, for the benefit of the Authority and the 

holders of the bonds, either (a) by lodging with a bank or trust 

company approved by the Authority and by the Trustee as custodian, 

or, if then permitted by law, by setting aside under control of the trust 

department of the bank holding such deposit, as collateral security, 

Government Obligations, or, with the approval of the Trustee, other 

marketable securities eligible as security for the deposit of trust funds 

under applicable regulations of the Comptroller of the Currency of 

the United States or applicable Commonwealth of Puerto Rico or state 

law or regulations, having a market value (exclusive of accrued 

interest) not less than the amount of such deposit, or (b), if the 

furnishing of security as provided in clause (a) of this Section is not 

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permitted by applicable law, in such other manner as may then be 

required or permitted by applicable Commonwealth of Puerto Rico, 

state or Federal laws or regulations regarding the security for, or 

granting a preference in the case of, the deposit of trust funds; 

provided, however, that it shall not be necessary for the Paying 

Agents to give security for the deposits of any moneys with them for 

the payment of the principal of or the redemption premium or the 

interest on any bonds issued hereunder, or for the Trustee to give 

security for any moneys which shall be represented by obligations 

purchased under the provisions of this Article as an investment of 

such moneys.

All moneys deposited with each Depositary, including the 

Trustee, shall be credited to the particular fund or account to which 

such moneys belong.

Investment of 

moneys.

SECTION 602. Moneys held for the credit of the Bond Service 

Account and the Redemption Account, shall, as nearly as may be 

practicable., be continuously invested and reinvested by the Trustee 

in Government Obligations which shall mature, or which shall be 

subject to redemption by the holder thereof at the option of such 

holder, not later than the respective dates when moneys held for the 

credit of said Accounts will be required for the purposes intended, or 

in Time Deposits ; provided, however, that each such Time Deposit 

shall permit the moneys so placed to be available for use at the times 

provided above.

Moneys held for the credit of the Construction Fund, the 

Reserve Maintenance Fund and the Self-insurance Fund shall, as 

nearly as may be practicable, be continuously invested and reinvested 

by the Authority in Investment Obligations, and moneys held for the 

credit of the Revenue Fund shall, as nearly as may be practicable, be 

continuously invested and reinvested by the Authority in Government 

Obligations, which Investment Obligations and Government 

Obligations shall mature, or shall be subject to redemption by the 

holder thereof at the option of such holder, not later than the 

respective dates when moneys held for the credit of said Funds will 

be required for the purposes intended, or in Time Deposits; provided, 

however, that each such Time Deposit shall permit the moneys so 

placed to be available for use at the times provided above.

Moneys held for the credit of the Reserve Account shall, as 

nearly as may be practicable, be continuously invested and reinvested 

by the Trustee in Investment Obligations which shall mature, or 

which shall be subject to redemption by the holder thereof at the 

option of such holder, (i) as to approximately 50% of such moneys, 

not later than 5 years after the date of such investment, and (ii) as to 

the balance of such moneys, as directed by the order mentioned 

below, or in Time Deposits; provided, however, that each such Time 

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Deposit shall permit the moneys so placed to be available for use at 

the times provided above.

Fifty per centum (50%) of the moneys held for the credit of 

the Reserve Account shall be invested by the Trustee upon receipt of 

an order signed by the Executive Director or other authorized officer 

of the Authority or authorized representative of the Executive 

Director or other authorized officer stating the amount to be invested 

and directing such investment in Investment Obligations having such 

maturities as are specified in such order. Such obligations shall be 

sold by the Trustee upon receipt of an order signed by the Executive 

Director or other authorized officer of the Authority or authorized 

representative of the Executive Director or other authorized officer.

Notwithstanding any provision of this Section to the contrary, 

moneys held to the credit of the Self-insurance Fund may also be 

invested by the Authority in any investments authorized by Act No. 

447 of the Legislature of Puerto Rico, approved May 15, 1951, as 

amended from time to time (codified as Title 3, Chapter 33, Section 

779, Laws of Puerto Rico Annotated), for the Retirement System of 

the Employees of the Government for Puerto Rico and its 

Instrumentalities; provided, however, that the Authority shall invest 

not less than the lesser of $25,000,000 and the entire balance to the 

credit of such Fund in Investment Obligations with an average 

weighted maturity of not in excess of three years.

Prior to investing any moneys held for the credit of the Selfinsurance Fund in other Investment Obligations, the Authority shall 

require an Independent Consultant retained pursuant to the provisions 

of Section 706 to present a report described in said Section 706 

recommending what portion of moneys held for the credit of the Selfinsurance Fund the Authority shall maintain invested in Investment 

Obligations. Should the Self-insurance Fund be held by the Trustee 

on behalf of the Authority, a copy of such report will be furnished to 

the Trustee.

Prior to investing any moneys held for the credit of the Selfinsurance Fund in other than Investment Obligations, the Authority 

shall, after duly considering the report it shall have received pursuant 

to the foregoing paragraph, formally adopt, subject to the consent of 

Government Development Bank for Puerto Rico, and maintain an 

investment policy first determining, subject to the limitation 

prescribed by the second preceding paragraph, the minimum portion 

of the moneys held for the credit of the Self-insurance Fund to remain 

invested in Investment Obligations and then setting forth prudent 

investment principles, considerations and goals, including, without 

limitation, liquidity, diversification of assets, safety and rate or rates 

of return, that will govern the investment strategies and goals for the 

balance of the moneys held for the credit of the Self-insurance Fund. 

The Authority agrees to advise the Trustee in writing of those 

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investments other than Investment Obligations that are authorized by 

said investment policy.

The Board shall receive at each regular meeting a detailed 

report from its Treasurer of the current portfolio of Investment 

Obligations, other securities and other moneys held to the credit of 

the Self-insurance Fund.

Investments deemed 

to be part of Fund or 

Account for which 

purchased.

Obligations and Time Deposits so purchased as an investment 

of moneys in any such Fund or Account shall be deemed at all times 

to be part of such Fund or Account. The interest accruing thereon and 

any profit realized from such investment shall be credited to such 

Fund or Account and any loss resulting from such investment shall 

be charged to such Fund or Account. The Trustee shall sell or present 

for payment or redemption any obligations so acquired whenever it 

shall be necessary so to do in order to provide moneys to meet any 

payment from such Fund or Account. Neither the Trustee nor the 

Authority nor any officer or agent of either thereof shall be liable or 

responsible for any loss resulting from any such investment.

ARTICLE VII.

PARTICULAR COVENANTS.

Payment of principal, 

interest and premium.

Pledge of revenues.

Bonds not general 

obligations of 

Commonwealth of 

Puerto Rico.

SECTION 701. The Authority covenants that it will promptly 

pay the principal of and the interest on each and every bond issued 

under the provisions of this Agreement at the places, on the dates and 

in the manner specified herein and in said bonds and in the coupons, 

if any, appertaining thereto, and any premium required for the 

retirement of said bonds by purchase or redemption, according to the 

true intent and meaning thereof. Until the 1947 Indenture Bonds have 

been paid or provision has been made for their payment and the 

release of the 1947 Indenture, such principal, interest and premium 

are payable solely from moneys in the Renewal and Replacement 

Fund and said moneys are hereby pledged to the payment thereof in 

the manner and to the extent hereinabove particularly specified. After 

the 1947 Indenture Bonds have been paid or provision has been made 

for their payment and the release of the 1947 Indenture, such 

principal, interest and premium will be payable solely from the 

Revenues and said Revenues are hereby pledged to the payment 

thereof in the manner and to the extent hereinabove particularly 

specified. Nothing in the bonds or in this Agreement shall be deemed 

to constitute the bonds a debt or obligation of the Commonwealth of 

Puerto Rico or any of its municipalities or other political subdivisions, 

and neither the Commonwealth of Puerto Rico nor any such 

municipalities or other political subdivisions shall be liable for the 

payment of the principal of or the interest on the bonds.

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Offices or agencies for 

payment of coupon 

bonds and coupons.

The Authority further covenants that so long as any bonds 

issuable as coupon bonds shall be outstanding it will cause offices or 

agencies where the coupon bonds and coupons may be presented for 

payment to be maintained in the Borough of Manhattan, City and 

State of New York.

Covenant to integrate 

Improvements into 

System.

SECTION 702. The Authority covenants that, upon the 

acquisition or construction of any Improvements, it will forthwith 

integrate the properties so acquired or constructed with the System 

and will thereupon operate and maintain the System and all of such 

properties as an integrated system.

Covenant to construct 

Improvements in 

accordance with 

plans.

Covenant as to 

operation.

Compliance with 1947 

Indenture.

Release of 1947 

Indenture.

Covenant as to 

amendment of 1947 

The Authority further covenants that it will construct all 

Improvements and all other works or properties constituting part of

the System for the construction of which bonds or Subordinate 

Obligations shall be issued under the provisions of this Agreement, 

or for which moneys repayable from the proceeds of bonds or 

Subordinate Obligations issued under the provisions of this 

Agreement shall have been advanced to the Authority, in accordance 

with plans theretofore adopted by the Board and approved by the 

Consulting Engineers and that upon the completion of such 

Improvements or other works or properties it will operate and 

maintain the same as a part of the System.

The Authority further covenants that it will establish and 

enforce reasonable rules and regulations governing the use of the 

System and the operation thereof, that all compensation, salaries, fees 

and wages paid by it in connection with the maintenance, repair and 

operation of the System will be reasonable, that no more persons will 

be employed by it than are necessary, that it will operate the System 

in an efficient and economical manner, that it will at all times 

maintain the System in good repair and in sound operating condition 

and will make all necessary repairs, renewals and replacements, and 

that it will comply with all valid acts, rules, regulations, orders and 

directions of any legislative, executive, administrative or judicial 

body applicable to the System.

SECTION 703. The Authority further covenants that, until all 

of the 1947 Indenture Bonds shall have been paid or provision shall 

have been made for their payment and the 1947 Indenture shall have 

been released, it will duly and punctually perform all of the 

covenants, agreements and conditions contained in the 1947 

Indenture on the part of the Authority to be performed. The Authority 

further covenants that it will cause the 1947 Indenture to be released 

at the earliest practicable date. The Authority further covenants that 

it will not enter into any indenture or agreement supplemental to the 

1947 Indenture for the purpose of granting to or conferring upon the 

1947 Trustee for the benefit of the holders of the bonds issued under 

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Exhibit A Page 94 of 128

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Indenture. the 1947 Indenture any additional rights, remedies, powers, authority 

or security that may lawfully be granted to or conferred upon such 

holders or the 1947 Trustee, or for the purpose of modifying, altering, 

amending, adding to or rescinding, in any particular, any of the terms 

or provisions contained in the 1947 Indenture, or for the purpose of 

extending the maturity of any 1947 Indenture Bond or creating a lien 

upon or a pledge of revenues ranking prior to or on a parity with the 

lien or pledge created by the 1947 Indenture. Nothing herein 

contained shall prevent the Authority from entering into an indenture 

or agreement supplemental to the 1947 Indenture to cure any 

ambiguity or formal defect or omission in the 1947 Indenture; and 

notwithstanding the above, the Authority may enter into any 

indenture or agreement supplemental to the 1947 Indenture for any 

purposes permitted thereunder, including, without limitation, 

modifying any of the terms or provisions contained in the 1947 

Indenture, to the extent that any such indenture or agreement would 

not adversely affect the interest of the bondholders under this 

Agreement. Under this Section, the Trustee will be entitled to receive, 

and shall be fully protected in relying upon the opinion of any counsel 

approved by it, who may be counsel for the Authority.

Covenant as to 

Renewal and 

Replacement Fund.

SECTION 704. The Authority covenants that so long as any 

1947 Indenture Bonds are outstanding under the provisions of the 

1947 Indenture it will cause to be made the deposits to the credit of 

the Renewal and Replacement Fund required by Section 512 of the 

1947 Indenture and it will not revise its determination as to the proper 

amount to be transferred each month from the 1947 Revenue Fund to 

the credit of the Renewal and Replacement Fund by reducing such 

amount below one-twelfth (1/12) of the maximum Principal and 

Interest Requirements for any fiscal year thereafter to and including 

the fiscal year in which the last maturity of any outstanding 1947 

Indenture Bonds occurs on account of all bonds then outstanding 

under this Agreement.

Payment of lawful 

charges. SECTION 705. Except as otherwise permitted in this 

Agreement the Authority further covenants that, out of the Revenues, 

it will pay all municipal or governmental charges lawfully levied or 

assessed upon the System or any part thereof or upon any Revenues 

when the same shall become due, that it will duly observe and comply 

with all valid requirements of any municipal or governmental 

authority relative to the System, that it will not create or suffer to be 

created any lien or charge upon the System or any part thereof or upon 

the Revenues ranking equally with or prior to the bonds, except the 

lien and charge of the 1947 Indenture Bonds and the bonds secured 

hereby upon the Revenues, and that, out of the Revenues, it will pay 

or cause to be discharged, or will make adequate provision to satisfy 

and discharge, within sixty (60) days after the same shall accrue, all 

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Exhibit 3 Page 105 of 252
93

lawful claims and demands for labor, materials, supplies or other 

objects which, if unpaid, might by law become a lien upon the System 

or any part thereof or the Revenues; provided, however, that nothing 

contained in this Section shall require the Authority to pay or cause 

to be discharged, or make provision for, any such lien or charge so 

long as the validity thereof shall be contested in good faith and by 

appropriate legal proceedings.

Employment of 

Consulting Engineers.

SECTION 706. The Authority covenants and agrees that so long 

as any 1947 Indenture Bonds are outstanding it will, for the purpose 

of performing and carrying out the duties imposed on the Consulting 

Engineers by this Agreement, employ such Consulting Engineers as 

are employed under Section 704 of the 1947 Indenture, and after the 

1947 Indenture Bonds have been paid or provision has been made for 

their payment and the release of the 1947 Indenture and so long as 

any bonds are outstanding under this Agreement, it will employ an 

independent engineer or engineering firm or corporation having a 

wide and favorable repute in the United States for skill and experience 

in the construction and operation of electric systems. No engineer or 

engineering firm shall be employed as Consulting Engineers under 

this Agreement, except with the written approval of the Trustee. 

Except for fees and expenses incurred under the provisions of Section 

403 of this Agreement, the cost of employing Consulting Engineers 

shall be treated as a part of the cost of operation and maintenance of 

the System.

It shall be the duty of the Consulting Engineers to prepare and 

file with the Authority and with the Trustee on or before the 1st day 

of November in each year a report setting forth their 

recommendations as to any necessary or advisable revisions of rates 

and charges and such other advices and recommendations as they may 

deem desirable. After the outstanding 1947 Indenture Bonds have 

been paid or provision has been made for their payment and the 

release of the 1947 Indenture, it shall be the duty of the Consulting 

Engineers to include in such report their recommendations as to the 

amount that should be deposited monthly during the ensuing fiscal 

year to the credit of the Reserve Maintenance Fund for the purposes 

set forth in Section 512 of this Agreement, deposited during the 

ensuing fiscal year to the credit of the Self-insurance Fund for the 

purposes set forth in Section 512A of this Agreement, if any, and 

deposited during the ensuing fiscal year to the credit of the Capital 

Improvement Fund for the purposes set forth in Section 512B of this 

Agreement.

The Authority further covenants that the Consulting 

Engineers shall at all times have free access to all properties of the 

System and every part thereof for the purposes of inspection and 

examination, and that its books, records and accounts may be 

examined by the Consulting Engineers at all reasonable times.

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The Authority covenants and agrees that so long as any bonds 

are outstanding under this Agreement, it will, for the purpose of 

carrying out the duties imposed on the Independent Consultant by this 

Agreement, employ one or more independent firms having a wide and 

favorable repute in the United States for expertise in risk management 

and other insurance matters related to the construction and operation 

of electric systems. Except for fees and expenses incurred under the 

provisions of Section 403 of this Agreement, the cost of employing 

such Independent Consultant shall be treated as part of the cost of 

operation and maintenance of the System.

It shall be the duty of the Independent Consultant to prepare 

and file with the Authority and the Trustee at least biennially, on or 

before the first day of November, beginning November 1, 1999, a 

report setting forth its recommendations, based on a review of the 

insurance then maintained by the Authority in accordance with 

Section 707 of this Agreement and the status of the Self-insurance 

Fund, of any changes in coverage, including its recommendations of 

policy limits and deductibles and self-insurance, and investment 

strategies for the Self-insurance Fund.

Insurance. SECTION 707. The Authority covenants that it will at all times 

carry insurance, in a responsible insurance company or companies 

authorized and qualified under the laws of Puerto Rico to assume the 

risk thereof, covering such properties belonging to the System as are 

customarily insured, and against loss or damage from such causes as 

are customarily insured against, by companies engaged in similar 

business.

All such policies shall be for the benefit of the Authority, shall 

be made payable to the Authority and shall be deposited with the 

Treasurer, and the Treasurer shall have the sole right to receive the 

proceeds of such policies and to collect and receipt for claims 

thereunder. The proceeds of any and all such insurance shall be 

deposited by the Treasurer in the name of the Authority in a 

Depositary.

The Authority covenants that, immediately after any loss or 

damage to any properties of the System resulting from any cause, 

whether or not such loss or damage shall be covered by insurance, it 

will cause its engineers to prepare plans and specifications for 

repairing, replacing or reconstructing (either in accordance with the 

original or a different design) the damaged or destroyed property, and 

that it will forthwith commence and diligently prosecute the repair, 

replacement or reconstruction of the damaged or destroyed property 

unless it shall determine that the repair, replacement or reconstruction 

of such property is not essential to the efficient operation of the 

System.

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Exhibit A Page 97 of 128

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The proceeds of all insurance policies referred to in this 

Section shall be available for, and shall to the extent necessary be 

applied to, the repair, replacement or reconstruction of the damaged 

or destroyed property, and shall be disbursed in the manner provided 

by Section 402 of this Agreement for disbursements from the 

Construction Fund. Until the 1947 Indenture Bonds have been paid 

or provision has been made for their payment and the release of the 

1947 Indenture, if such proceeds are more than sufficient for such 

purpose, the balance remaining shall be deposited to the credit of the 

Renewal and Replacement Fund. After the 1947 Indenture Bonds 

have been paid or provision has been made for their payment and the 

release of the 1947 Indenture, such balance shall be deposited to the 

credit of the Redemption Account in the Sinking Fund or, at the 

option of the Authority, to the credit of the Construction Fund. Until 

the 1947 Indenture Bonds have been paid or provision has been made 

for their payment and the release of the 1947 Indenture, if such 

proceeds shall be insufficient for such purpose, the deficiency may be 

supplied, first, out of moneys in the General Reserve Fund under the 

1947 Indenture, and second, out of moneys in the Renewal and 

Replacement Fund. After the 1947 Indenture Bonds have been paid 

or provision has been made for their payment and the release of the 

1947 Indenture, such deficiency may be supplied out of any moneys 

held for the credit of the Reserve Maintenance Fund or from any other 

moneys of the Authority available for such purpose, including any 

moneys held for the credit of the Self-insurance Fund.

Until the 1947 Indenture Bonds have been paid or provision 

has been made for their payment and the release of the 1947 

Indenture, the proceeds of any insurance not applied within eighteen 

(18) months after their receipt by the Treasurer to repairing, replacing 

or reconstructing the damaged or destroyed property, unless the 

Authority shall be prevented from so doing because of conditions 

beyond its control, or unless the holders of fifty-one per centum 

(51%) in aggregate principal amount of all 1947 Indenture Bonds then 

outstanding shall otherwise direct, shall be deposited to the credit of 

the Renewal and Replacement Fund. After the 1947 Indenture Bonds 

have been paid or provision has been made for their payment and the 

release of the 1947 Indenture, such proceeds shall be deposited to the 

credit of the Redemption Account in the Sinking Fund or, at the 

option of the Authority, to the credit of the Construction Fund, unless 

the Authority shall be prevented from so doing because of conditions 

beyond its control, or unless the holders of fifty-one per centum 

(51%) in aggregate principal amount of all bonds then outstanding 

under this Agreement shall otherwise direct.

Inspection of 

SECTION 708. All insurance policies shall be open to the 

inspection of the bondholders and their representatives at all 

reasonable times. The Treasurer of the Authority is hereby authorized 

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insurance policies. to demand, collect, sue and receipt for the insurance money which 

may become due and payable under any policies payable to the 

Authority.

No inconsistent 

action.

SECTION 709. The Authority covenants and agrees that, so 

long as any of the bonds secured hereby shall be outstanding, none of 

the gross revenues of the System will be used for any purpose other 

than as provided in the 1947 Indenture and this Agreement, and that 

no contract or contracts will be entered into or any action taken by 

which the rights of the Trustee or of the bondholders might be 

impaired or diminished.

Accurate records.

SECTION 710. The Authority covenants that its accounts will 

be kept according to standard practices for public utility systems 

similar to the properties and business of the Authority and applicable 

in such circumstances, and in such manner as appropriately to 

segregate, in so far as advisable, the accounts in respect of the 

different classes of its operations, projects, undertakings and 

activities, that it will keep accurate records and accounts of all items 

of cost and expenditures relating to the System and to each integral 

unit of the System, the Revenues collected and the application of the 

Revenues, and the number of consumers, and that it will keep such 

records and accounts with respect to its physical properties in such 

manner that it will be possible at all times to identify both the amounts 

and the items of all additions and retirements.

Monthly reports. The Authority further covenants that at least once each month 

it will cause to be filed with the Trustee and the Consulting Engineers 

copies of any revisions of the rate schedules during the preceding 

calendar month and a report, signed by the Executive Director, setting 

forth the following:

(a) a separate income and expense statement for Revenue 

Fund purposes of the System for the preceding calendar month and 

the twelve (12) months’ period ending with such month;

(b) a statement for the preceding calendar month and for 

the fiscal year to date of all deposits and transfers to the credit of and 

withdrawals from each special fund and account created under the 

provisions of this Agreement, showing the balance to the credit of 

each such fund or account;

(c) a statement of the amount of bonds issued, paid, 

purchased or redeemed during the preceding calendar month;

(d) a balance sheet as of the end of the preceding calendar 

month;

(e) the amounts on deposit at the end of the preceding 

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calendar month in each bank or trust company; and

(f) the amounts of the proceeds received during the 

preceding calendar month from any sales of property pursuant to 

Section 712 of this Article.

Annual audits. The Authority further covenants that in the first month of each 

fiscal year it will cause an audit to be made of its books and accounts 

pertaining to the System by an independent firm of certified public 

accountants of suitable experience and responsibility and widely 

known in the United States, to be chosen by the Executive Director 

with the approval of the Trustee. Before the first day of the third 

month following the making of such audit, reports of such audits shall 

be filed with the Trustee and the Authority, and copies of such reports 

shall be mailed to the Consulting Engineers. Such audit reports shall 

set forth in respect of the preceding fiscal year the same matters as 

are hereinabove required for the monthly reports.

Additional reports or 

audits.

The Authority further covenants that it will cause any 

additional reports or audits relating to the System to be made as 

required by law or by any applicable rules or regulations of any 

governmental authority or of any securities exchange on which the 

bonds may be listed or traded, and that as often as may be requested 

it will furnish to the Trustee such other information concerning the 

System or the operation thereof as the Trustee may reasonably 

request. The cost of such audits shall be treated as a part of the cost 

of operation of the System.

Covenant as to 

additional 1947 

Indenture Bonds.

SECTION 711. The Authority covenants that so long as any 

bonds shall be outstanding under the provisions of this Agreement it 

will not issue additional 1947 Indenture Bonds which mature after 

July 1, 2007 and except as follows :

(a) revenue bonds under the provisions of Section 209 of 

the 1947 Indenture issued to pay the cost of Improvements 

and sold to the Rural Electrification Administration of the 

United States of America; provided, however, that the 

aggregate principal amount of such revenue bonds issued 

hereafter shall not exceed $12,834,000,

(b) revenue bonds under the provisions of Section 210 of 

the 1947 Indenture issued for the purpose of providing 

working cash funds for the Authority; provided, however, that 

the aggregate principal amount of such revenue bonds 

outstanding in any fiscal year hereafter shall not exceed onesixth (1/6) of the amount shown by the Annual Budget to be 

necessary for Current Expenses for such fiscal year or for the 

next ensuing fiscal year, whichever is greater, and

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(c) revenue refunding bonds under the provisions of 

Section 211 of the 1947 Indenture.

Covenant against sale 

or encumbrance; 

exceptions.

SECTION 712. (a) The Authority covenants that so long as any 

bonds shall be outstanding under the provisions of this Agreement 

and except as in this Agreement otherwise permitted, it will not sell, 

lease or otherwise dispose of or encumber the System or any part 

thereof and will not create or permit to be created any charge or lien 

on the Revenues ranking equally with or prior to the charge or lien on 

the Revenues of the bonds issued under and secured by this 

Agreement; provided that in conjunction with the issuance of bonds, 

the Authority may secure its obligations to the provider of a credit or 

liquidity facility securing said bonds on a parity with the Authority’s 

bonds under this Agreement. The Authority may, however, from time 

to time, sell any machinery, fixtures, apparatus, tools, instruments, or 

other movable property acquired by it in connection with the System, 

or any materials used in connection therewith, if the Authority shall 

determine that such articles are no longer needed or are no longer 

useful in connection with the construction or operation and 

maintenance of the System, and the proceeds thereof shall be applied 

to the replacement of the properties so sold or disposed of or shall be 

deposited (i) until the 1947 Indenture Bonds have been paid or 

provision has been made for their payment and the release of the 1947 

Indenture, to the credit of the Renewal and Replacement Fund, and 

(ii) after the 1947 Indenture Bonds have been paid or provision has 

been made for their payment and the release of the 1947 Indenture, to 

the credit of the Redemption Account in the Sinking Fund or the 

Construction Fund, at the option of the Authority.

(b) Notwithstanding the provisions of paragraph (a) of this 

Section, the Authority may from time to time sell or lease such 

other property forming part of the System as is not needed or 

serves no useful purpose in connection with the maintenance and 

operation of the System, and the proceeds of any such sale of 

property which is declared by resolution of the Board to be 

unnecessary for the System shall be deposited, so long as any 

1947 Indenture Bonds are outstanding, to the credit of the 

Renewal and Replacement Fund or to the credit of the 1947 

Reserve Account, as may be provided by such resolution, and, 

after the 1947 Indenture Bonds shall have been paid or provision 

has been made for their payment and the release of the 1947 

Indenture, to the credit of the Redemption Account in the Sinking 

Fund or the Construction Fund, as may be provided by such 

resolution. Until the 1947 Indenture Bonds have been paid or 

provision has been made for their payment and the release of the 

1947 Indenture, the rentals under any such lease shall be 

deposited to the credit of the 1947 Revenue Fund, and thereafter 

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such rentals shall be deposited to the credit of the Revenue Fund.

(c) Notwithstanding the provisions of paragraph (a) of this 

Section, after the 1947 Indenture Bonds have been paid or 

provision has been made for their payment and the release of the 

1947 Indenture, the Authority may from time to time permanently 

abandon the use of, sell or lease any property forming a part of 

the System but only if

(1) there shall be filed with the Trustee prior to such 

abandonment, sale or lease a certificate, signed by the 

Executive Director and approved by the Consulting 

Engineers, stating

(A) that the Authority is not then in default in the 

performance of any of the covenants, conditions, 

agreements or provisions contained in this Agreement, 

and

(B) that the Net Revenues for any twelve (12) 

consecutive calendar months out of the eighteen (18) 

calendar months next preceding the date of such 

certificate, after giving effect to such abandonment, sale 

or lease and any replacement and after adjustment to 

reflect the moneys which would have been received if 

the rate schedule in effect on the date of such certificate 

had been in effect throughout such twelve (12) calendar 

months, are not less than one hundred twenty per centum 

(120%) of the maximum aggregate Principal and 

Interest Requirements for any fiscal year thereafter on 

account of all bonds then outstanding under the 

provisions of this Agreement, and

(2) the amount held by the Trustee to the credit of the 

Reserve Account in the Sinking Fund is the maximum 

amount required under the provisions of Section 507 of this 

Agreement. 

The proceeds of the sale of any property forming part of the 

System under the provisions of paragraph (c) of this Section 

shall either be deposited by the Authority to the credit of the 

Redemption Account in the Sinking Fund or the Construction 

Fund, at the option of the Authority, or shall be applied to the 

replacement of the property so sold, and any property 

acquired as such replacement shall become a part of the 

System subject to the provisions of this Agreement. The 

rentals under any such lease shall be deposited to the credit 

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Exhibit A Page 102 of 128

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of the Revenue Fund.

For purposes of paragraphs (b) and (c) of this Section, 

references to sales or leases shall include also other transfers 

of property and for purposes of paragraph (c) of this Section 

the transferee may be considered in lieu of the Authority or 

in addition to the Authority if the transferee agrees to assume 

the Authority’s obligations under this Agreement and the 

Authority delivers to the Trustee an opinion of counsel to the 

Authority to the effect that the transferee’s undertaking to 

assume the Authority’s obligations hereunder is legally valid 

and binding with the same effect as though the transferee 

were the Authority. If the transferee is a public corporation 

or other governmental entity, such transfer shall be permitted 

notwithstanding the Authority’s failure to demonstrate the 

necessary coverage requirement in paragraph (c) above; 

provided that the Authority delivers a certificate of its 

Consulting Engineers to the Trustee demonstrating that the 

coverage ratio shown in the above certificate is not reduced 

due to such transfer.

(d) Notwithstanding the provisions of paragraph (a) of this 

Section, except as may conflict with the provisions of the 1947 

Indenture until the 1947 Indenture Bonds have been paid or 

provisions have been made for their payment and the release of 

the 1947 Indenture, the Authority may lease portions of the 

System, or grant licenses, easements and other rights or make 

contracts or other arrangements for operation or use of portions 

of the System, if there shall be delivered to the Trustee the 

following:

(i) a report of the Consulting Engineers 

determining that (A) the proposed lessee or other 

contracting party is a financially responsible entity 

with substantial experience in the operation and 

management of utilities of the type and size of the 

System, and (B) the available revenues projected to 

be derived from the portion of the System subject 

to the lease, contract, license, easement or other 

arrangement following the date on which such 

lease, contract, license, easement or other 

arrangement is to be effective are forecasted to be 

sufficient to pay the Authority the rent or other 

payments provided by such lease, contract, license, 

easement or other arrangement and to make all 

necessary repairs, improvements and replacements 

to said portion of the System in the condition it was 

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Exhibit A Page 103 of 128

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Exhibit 3 Page 113 of 252
101

prior to such lease, contract, license, easement or 

other arrangement; and

(ii) a certificate of the Consulting Engineers to 

the effect that the lease, contract, license, easement 

or other arrangement provides (A) for rent or other 

payments sufficient, with other Net Revenues 

projected to be derived from the System to make all 

payments of the Principal and Interest 

Requirements for all Bonds which will remain 

Outstanding following the execution and delivery 

of the lease, contract, license, easement or other 

arrangement, (B) operational covenants binding on 

the lessee or other contracting party similar to those 

covenants contained in this Agreement and (C) to 

the extent permitted by law in the case of a lease, 

for immediate termination of the lease of such 

lessee without resort to legal process in the event of 

a default under the lease; and

(iii) an opinion of counsel of recognized 

standing in the field of law relating to municipal 

bonds to the effect that the proposed transaction 

would not adversely affect the federal income tax 

status of any Bonds.

The rentals and other payments under any such lease, 

contaract, license, easement or other arrangement shall be 

included in the definition of Revenues and shall be deposited 

to the credit of the Revenue Fund.

Section 713. With respect to Build America Bonds, the 

Authority hereby covenants to file, or cause to be filed, a 

Form 8038-CP with the Internal Revenue Service not less 

than 45 days and not more than 90 days prior to the date 

interest on the Build America Bonds shall be payable, as 

provided in Notice 2010-26 issued by the Internal Revenue 

Service, so long as filing such form is a condition to receipt 

of the Federal Subsidy prior to the date such interest shall be 

payable. In the event that the Internal Revenue Service shall 

amend or revise the guidance provided in Notice 2010-26, 

the Authority agrees that it shall take all such actions as are 

necessary to ensure receipt of the Federal Subsidy. With 

respect to Other Subsidy Bonds, the Authority hereby 

covenants it shall take all such actions as are necessary to 

ensure receipt of the Federal Subsidy related to such series of 

bonds as shall be set forth in the resolution relating to such 

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102

Other Subsidy Bonds. The only effect of any failure to 

comply with this Section 713 shall be that the Federal 

Subsidy to which such failure relates shall no longer be 

excluded from the calculation of Principal and interest 

Requirements.

ARTICLE VIII.

REMEDIES.

Extended coupons. SECTION 801. In case the time for the payment of any coupon 

or the interest on any registered bond without coupons shall be 

extended, whether or not such extension be by or with the consent of 

the Authority, such coupon or such interest so extended shall not be 

entitled in case of default hereunder to the benefit or security of this 

Agreement except subject to the prior payment in full of the principal 

of all bonds then outstanding and of all coupons and interest the time 

for the payment of which shall not have been extended.

Events of default. SECTION 802. Each of the following events is hereby declared 

an “event of default”, that is to say: If

(a) payment of the principal and of the redemption premium, 

if any, of any of the bonds shall not be made when the same shall 

become due and payable, either at maturity or by proceedings for 

redemption or otherwise; or

(b) payment of any installment of interest on any of the bonds 

shall not be made when the same shall become due and payable; or 

(c) the Authority shall for any reason be rendered incapable of 

fulfilling its obligations hereunder; or

(d) any part of the System necessary for its effective operation 

shall be destroyed or damaged and shall not be properly repaired, 

replaced or reconstructed; or

(e) final judgment for the payment of money shall be rendered 

against the Authority as a result of the ownership, control or 

operation of the System and any such judgment shall not be 

discharged within sixty (60) days from the entry thereof or an 

appeal shall not be taken therefrom or from the order, decree or 

process upon which or pursuant to which such judgment shall have 

been granted or entered, in such manner as to stay the execution of 

or levy under such judgment, order, decree or process or the 

enforcement thereof; or

(f) an order or decree shall be entered, with the consent or 

acquiescence of the Authority, for the purpose of effecting 

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103

composition between the Authority and its creditors or for the 

purpose of adjusting the claims of such creditors pursuant to any 

federal or Commonwealth statute now or hereafter enacted, if the 

claims of such creditors are under any circumstances payable from 

the Revenues; or

(g) any proceeding shall be instituted, with the consent or 

acquiescence of the Authority, for the purpose of effecting a 

composition between the Authority and its creditors or for the 

purpose of adjusting the claims of such creditors pursuant to any 

federal or Commonwealth statute now or hereafter enacted, if the 

claims of such creditors are under any circumstances payable from 

the Revenues; or

(h) the Authority shall default in the due and punctual 

performance of any other of the covenants, conditions, agreements 

and provisions contained in the bonds or in this Agreement on the 

part of the Authority to be performed, including meeting any 

Amortization Requirement, and such default shall continue for 

thirty (30) days after written notice specifying such default and 

requiring same to be remedied shall have been given to the 

Authority by the Trustee, which may give such notice in its 

discretion and shall give such notice at the written request of the 

holders of not less than ten per centum (10%) in aggregate principal 

amount of the bonds then outstanding; or

(i) an event of default within the meaning of that term in 

Section 802 of the 1947 Indenture shall occur.

(j) notice has been received by the Trustee and the Authority, 

from the bank or other financial or lending institution providing a 

credit or liquidity facility or other entity insuring, guaranteeing or 

providing for payments of principal or interest in respect of any 

bonds that an event of default has occurred under the agreement 

underlying said facility, or a failure by said bank or other financial 

or lending institution or other entity to make said facility available 

or to reinstate the interest component of said facility, in accordance 

with the terms of said facility, to the extent said notice or failure is 

established as an event of default under the terms of the resolution 

authorizing the issuance of said bonds.

Acceleration of 

maturities.

SECTION 803. Upon the happening and continuance of any 

event of default specified in Section 802 of this Article, then and in 

every such case the Trustee may, and upon the written request of the 

holders of not less than twenty per centum (20%) in aggregate 

principal amount of the bonds then outstanding shall, by a notice in 

writing to the Authority, declare the principal of all of the bonds then 

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104

outstanding (if not then due and payable) to be due and payable 

immediately, and upon such declaration the same shall become and 

be immediately due and payable, anything contained in the bonds or 

in this Agreement to the contrary notwithstanding; provided, 

however, that if at any time after the principal of the bonds shall have 

been so declared to be due and payable, and before the entry of final 

judgment or decree in any suit, action or proceeding instituted on 

account of such default, or before the completion of the enforcement 

of any other remedy under this Agreement, moneys shall have 

accumulated in the Sinking Fund sufficient to pay the principal of all 

matured bonds and all arrears of interest, if any, upon all the bonds 

then outstanding (except the principal of any bonds not then due and 

payable by their terms and the interest accrued on such bonds since 

the last interest payment date), and the charges, compensation, 

expenses, disbursements, advances and liabilities of the Trustee and 

all other amounts then payable by the Authority hereunder shall have 

been paid or a sum sufficient to pay the same shall have been 

deposited with the Trustee, and every other default known to the 

Trustee in the observance or performance of any covenant, condition, 

agreement or provision contained in the bonds or in this Agreement 

(other than a default in the payment of the principal of such bonds 

then due and payable only because of a declaration under this Section) 

shall have been remedied to the satisfaction of the Trustee, then and 

in every such case the Trustee may, and upon the written request of 

the holders of not less than twenty per centum (20%) in aggregate 

principal amount of the bonds not then due and payable by their terms 

and then outstanding shall, by written notice to the Authority, rescind 

and annul such declaration and its consequences, but no such 

rescission or annulment shall extend to or affect any subsequent 

default or impair any right consequent thereon.

Enforcement of 

remedies.

SECTION 804. Upon the happening and continuance of any 

event of default specified in Section 802 of this Article, then and in 

every such case the Trustee may proceed, and upon the written 

request of the holders of not less than ten per centum (10%) in 

aggregate principal amount of the bonds then outstanding hereunder 

shall proceed, subject to the provisions of Section 902 of this 

Agreement, to protect and enforce its rights and the rights of the 

bondholders under applicable laws or under this Agreement by such 

suits, actions or special proceedings in equity or at law, or by 

proceedings in the office of any board or officer having jurisdiction, 

either for the appointment of a receiver as authorized by the Authority 

Act or for the specific performance of any covenant or agreement 

contained herein or in aid or execution of any power herein granted 

or for the enforcement of any proper legal or equitable remedy, as the 

Trustee, being advised by counsel, shall deem most effectual to 

protect and enforce such rights; provided, however, that the Trustee 

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105

shall not be required to proceed for the appointment of a receiver of 

the System unless it shall receive the written request of the holders of 

not less than twenty-five centum (25%) in principal amount of the 

bonds then outstanding under the provisions of this Agreement.

In the enforcement of any remedy under this Agreement the 

Trustee shall be entitled to sue for, enforce payment of and receive 

any and all amounts then or during any default becoming, and at any 

time remaining, due from the Authority for principal, interest or 

otherwise under any of the provisions of this Agreement or of the 

bonds and unpaid, with interest on overdue payments of principal at 

the rate or rates of interest specified in such bonds, together with any 

and all costs and expenses of collection and of all proceedings 

hereunder and under such bonds, without prejudice to any other right 

or remedy of the Trustee or of the bondholders, and to recover and 

enforce any judgment or decree against the Authority, but solely as 

provided herein and in such bonds, for any portion of such amounts 

remaining unpaid and interest, costs and expenses as above provided, 

and to collect (but solely from moneys in the Sinking Fund and any 

other moneys available for such purpose) in any manner provided by 

law, the moneys adjudged or decreed to be payable.

Pro rata application

of funds.

SECTION 805. Anything in this Agreement to the contrary 

notwithstanding, if at any time the moneys in the Sinking Fund shall 

not be sufficient to pay the interest on or the principal of the bonds as 

the same shall become due and payable (either by their terms or by 

acceleration of maturities under the provisions of Section 803 of this 

Article), such moneys, together with any moneys then available or 

thereafter becoming available for such purpose, whether through the 

exercise of the remedies provided for in this Article or otherwise, 

shall be applied as follows :

(a) If the principal of all the bonds shall not have become or 

shall not have been declared due and payable, all such moneys shall 

be applied

first: to the payment to the persons entitled thereto of all 

installments of interest then due and payable in the order in which 

such installments became due and payable and, if the amount 

available shall not be sufficient to pay in full any particular 

installment, then to the payment, ratably, according to the amounts

due on such installment, to the persons entitled thereto, without any 

discrimination or preference except as to any difference in the 

respective rates of interest specified in the bonds;

second: to the payment to the persons entitled thereto of the 

unpaid principal of any of the bonds which shall have become due 

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106

and payable (other than bonds called for redemption for the payment 

of which moneys are held pursuant to the provisions of this 

Agreement) in the order of their due dates, with interest on the 

principal amount of such bonds at the respective rates specified 

therein from the respective dates upon which such bonds became due 

and payable, and, if the amount available shall not be sufficient to pay 

in full the principal of the bonds due and payable on any particular 

date, together with such interest, then to the payment first of such 

interest, ratably, according to the amount of such interest due on such 

date, and then to the payment of such principal, ratably, according to 

the amount of such principal due on such date, to the persons entitled 

thereto without any discrimination or preference except as to any 

difference in the respective rates of interest specified in the bonds; 

and

third: to the payment of the interest on and the principal of the 

bonds, to the purchase and retirement of bonds and to the redemption 

of bonds, all in accordance with the provisions of Article V of this 

Agreement.

(b) If the principal of all the bonds shall have become or 

shall have been declared due and payable, all such moneys shall be 

applied

first: to the payment to the persons entitled thereto of all 

installments of interest due and payable on or prior to maturity, if any, 

in the order in which such installments became due and payable and, 

if the amount available shall not be sufficient to pay in full any 

particular installment, then to the payment, ratably, according to the 

amounts due on such installment, to the persons entitled thereto, 

without any discrimination or preference except as to any difference 

in the respective rates of interest specified in the bonds, and then to 

the payment of any interest due and payable after maturity on the 

bonds, ratably, to the persons entitled thereto, without any 

discrimination or preference except as to any difference in the 

respective rates of interest specified in the bonds ; and 

second: to the payment of the principal of the bonds, ratably, 

to the persons entitled thereto, without preference or priority of any 

bond over any other bond.

(c) If the principal of all the bonds shall have been 

declared due and payable and if such declaration shall thereafter have 

been rescinded and annulled under the provisions of Section 803 of 

this Article, then, subject to the provisions of paragraph (b) of this 

Section in the event that the principal of all the bonds shall later 

become due and payable or be declared due and payable, the moneys 

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107

remaining in and thereafter accruing to the Sinking Fund shall be 

applied in accordance with the provisions of paragraph (a) of this 

Section.

The provisions of paragraphs (a), (b) and (c) of this Section 

are in all respects subject to the provisions of Section 801 of this 

Article.

Whenever moneys are to be applied by the Trustee pursuant 

to the provisions of this Section, such moneys shall be applied by the 

Trustee at such times, and from time to time, as the Trustee in its sole 

discretion shall determine, having due regard to the amount of such 

moneys available for application and the likelihood of additional 

moneys becoming available for such application in the future; the 

deposit of such moneys with the Paying Agents, or otherwise setting 

aside such moneys, in trust for the proper purpose shall constitute 

proper application by the Trustee; and the Trustee shall incur no 

liability whatsoever to the Authority, to any bondholder or to any 

other person for any delay in applying any such moneys, so long as 

the Trustee acts with reasonable diligence, having due regard to the 

circumstances, and ultimately applies the same in accordance with 

such provisions of this Agreement as may be applicable at the time of 

application by the Trustee. Whenever the Trustee shall exercise such 

discretion in applying such moneys, it shall fix the date (which shall 

be an interest payment date unless the Trustee 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 fixing of any such date, and shall not be 

required to make payment to the holder of any unpaid coupon or any 

bond until such coupon or such bond and all unmatured coupons, if 

any, appertaining to such bond shall be surrendered to the Trustee for 

appropriate endorsement, or for cancellation if fully paid.

Effect of 

discontinuance of 

proceedings.

SECTION 806. In case any proceeding taken by the Trustee or 

bondholders on account of any default shall have been discontinued 

or abandoned for any reason, then and in every such case the 

Authority, the Trustee and the bondholders shall be restored to their 

former positions and rights hereunder, respectively, and all rights, 

remedies, powers and duties of the Trustee shall continue as though 

no such proceeding had been taken.

Majority of 

bondholders may 

control proceedings.

SECTION 807. Anything in this Agreement to the contrary 

notwithstanding, the holders of a majority in principal amount of the 

bonds then outstanding hereunder shall have the right, subject to the 

provisions of Section 902 of this Agreement, by an instrument or 

concurrent instruments in writing executed and delivered to the 

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Trustee, to direct the method and place of conducting all remedial 

proceedings to be taken by the Trustee hereunder, provided that such 

direction shall not be otherwise than in accordance with law or the 

provisions of this Agreement.

Restrictions upon 

action by individual 

bondholder.

SECTION 808. No holder of any of the bonds shall have any 

right to institute any suit, action or proceeding in equity or at law on 

any bond or for the execution of any trust hereunder or for any other 

remedy hereunder unless such holder previously shall have given to 

the Trustee written notice of the event of default on account of which 

such suit, action or proceeding is to be instituted, and unless also the 

holders of not less than ten per centum (10%) in aggregate principal 

amount of the bonds then outstanding shall have made written request 

of the Trustee after the right to exercise such powers or right of action, 

as the case may be, shall have accrued, and shall have afforded the 

Trustee a reasonable opportunity either to proceed to exercise the 

powers hereinabove granted or to institute such action, suit or 

proceeding in its or their name, and unless, also, there shall have been 

offered to the Trustee reasonable security and indemnity against the 

costs, expenses and liabilities to be incurred therein or thereby, and 

the Trustee shall have refused or neglected to comply with such 

request within a reasonable time; and such notification, request and 

offer of indemnity are hereby declared in every such case, at the 

option of the Trustee, to be conditions precedent to the execution of 

the powers and trusts of this Agreement or to any other remedy 

hereunder; provided, however, that notwithstanding the foregoing 

provisions of this Section and without complying therewith, the 

holders of not less than twenty per centum (20%) in aggregate 

principal amount of the bonds then outstanding may institute any such 

suit, action or proceeding in their own names for the benefit of all 

holders of bonds hereunder. It is understood and intended that, except 

as otherwise above provided, no one or more holders of the bonds 

hereby secured shall have any right in any manner whatever by his or 

their action to affect, disturb or prejudice the security of this 

Agreement, or to enforce any right hereunder except in the manner 

herein provided, that all proceedings at law or in equity shall be 

instituted, had and maintained in the manner herein provided and for 

the benefit of all holders of such outstanding bonds and coupons, and 

that any individual right of action or other right given to one or more 

of such holders by law is restricted by this Agreement to the rights 

and remedies herein provided.

Actions by Trustee. SECTION 809. All rights of action under this Agreement or 

under any of the bonds secured hereby, enforceable by the Trustee, 

may be enforced by it without the possession of any of the bonds or 

the coupons appertaining thereto or the production thereof at the trial 

or other proceeding relative thereto, and any such suit, action or 

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109

proceeding instituted by the Trustee shall be brought in its name for 

the benefit of all of the holders of such bonds and coupons, subject to 

the provisions of this Agreement.

No remedy exclusive.

SECTION 810. No remedy herein conferred upon or reserved 

to the Trustee or to the holders of the bonds is intended to be exclusive 

of any other remedy or remedies herein provided, and each and every 

such remedy shall be cumulative and shall be in addition to every 

other remedy given hereunder.

No delay or omission 

construed to be a 

waiver.

Repeated exercise of 

powers and remedies.

SECTION 811. No delay or omission of the Trustee or of any 

holder of the bonds to exercise any right or power accruing upon 

any default shall impair any such right or power or shall be 

construed to be a waiver of any such default or an acquiescence 

therein; and every power and remedy given by this Agreement to the 

Trustee and to the holders of the bonds, respectively, may be 

exercised from time to time and as often as may be deemed 

expedient.

Waiver of default. The Trustee may, and upon written request of the holders of 

not less than a majority in principal amount of the bonds then 

outstanding shall, waive any default which in its opinion shall have 

been remedied before the entry of final judgment or decree in any 

suit, action or proceeding instituted by it under the provisions of this 

Agreement or before the completion of the enforcement of any other 

remedy under this Agreement, but no such waiver shall extend to or 

affect any other existing or any subsequent default or defaults or 

impair any rights or remedies consequent thereon.

Notice of default. SECTION 812. The Trustee shall mail to all registered owners 

of bonds at their addresses as they appear on the registration books 

and to all bondholders of record, written notice of the occurrence of 

any event of default set forth in Section 802 of this Article within 

thirty (30) days after the Trustee shall have notice, pursuant to the 

provisions of Section 908 of this Agreement, that any such event of 

default shall have occurred. The Trustee shall not, however, be 

subject to any liability to any bondholder by reason of its failure to 

mail any such notice.

Section 812. Rights of Holders Regarding Validation 

Proceeding. Nothing in this Agreement shall affect, limit or impair 

the rights of the holders of bonds to participate in any Validation 

Proceeding.

ARTICLE IX.

CONCERNING THE TRUSTEE.

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Acceptance of trusts.

SECTION 901. The Trustee accepts and agrees to execute the 

trusts imposed upon it by this Agreement, but only upon the terms 

and conditions set forth in this Article and subject to the provisions 

of this Agreement, to all of which the parties hereto and the respective 

holders of the bonds agree.

Trustee entitled to 

indemnity.

Trustee may act 

without indemnity.

Reimbursement of 

Trustee.

SECTION 902. The Trustee shall be under no obligation to 

institute any suit, or to take any remedial proceeding under this 

Agreement, or to enter any appearance or in any way defend in any 

suit in which it may be made defendant, or to take any steps in the 

execution of the trusts hereby created or in the enforcement of any 

rights and powers hereunder, until it shall be indemnified to its 

satisfaction against any and all costs and expenses, outlays and 

counsel fees and other reasonable disbursements, and against all 

liability; the Trustee may, nevertheless, begin suit, or appear in and 

defend suit, or do anything else in its judgment proper to be done by 

it as such Trustee, without indemnity, and in such case the Authority 

shall reimburse the Trustee from Revenues for all costs and expenses, 

outlays and counsel fees and other reasonable disbursements properly 

incurred in connection therewith. If the Authority shall fail to make 

such reimbursement, the Trustee may reimburse itself from any 

moneys in its possession under the provisions of this Agreement and 

shall be entitled to a preference therefor over any of the bonds or 

coupons outstanding hereunder.

Limitation on 

obligations and 

responsibilities of 

Trustee.

SECTION 903. The Trustee shall be under no obligation to 

effect or maintain insurance or to renew any policies of insurance or 

to inquire as to the sufficiency of any policies of insurance carried by 

the Authority, or to report, or make or file claims or proof of loss for, 

any loss or damage insured against or which may occur, or to keep 

itself informed or advised as to the payment of any taxes or 

assessments, or to require any such payment to be made. The Trustee 

shall have no responsibility in respect of the validity, sufficiency, due 

execution or acknowledgment by the Authority of this Agreement, or, 

except as to the authentication thereof, in respect of the validity of the 

bonds or of the coupons or the due execution or issuance thereof. The 

Trustee shall be under no obligation to see that any duties herein 

imposed upon the Authority, the Consulting Engineers, the 

Independent Consultant, the Paying Agents, any Depositary, or any 

party other than itself, or any covenants herein contained on the part 

of any party other than itself to be performed, shall be done or 

performed, and the Trustee shall be under no obligation for failure to 

see that any such duties or covenants are so done or performed.

Trustee not liable for 

failure of Authority to 

act or for deposits in 

SECTION 904. The Trustee shall not be liable or responsible 

because of the failure of the Authority or of any of its employees or 

agents to make any collections or deposits or to perform any act 

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111

other banks. herein required of the Authority or because of the loss of any moneys 

arising through the insolvency or the act or default or omission of any 

other Depositary in which such moneys shall have been deposited 

under the provisions of this Agreement. The Trustee shall not be 

responsible for the application of any of the proceeds of the bonds or 

any other moneys deposited with it and paid out, withdrawn or 

transferred hereunder if such application, payment, withdrawal or 

transfer shall be made in accordance with the provisions of this 

Agreement. The immunities and exemptions from liability of the 

Trustee hereunder shall extend to its directors, officers, employees 

and agents.

Compensation and 

indemnification of 

Trustee.

SECTION 905. Subject to the provisions of any contract 

between the Authority and the Trustee relating to the compensation 

of the Trustee, the Authority shall, from the Revenues, pay to the 

Trustee reasonable compensation for all services performed by it 

hereunder and also all its reasonable expenses, charges and other 

disbursements and those of its attorneys, agents and employees 

incurred in and about the administration and execution of the trusts 

hereby created and the performance of its powers and duties 

hereunder, and, from such Revenues only, shall indemnify and save 

the Trustee harmless against any liabilities which it may incur in the 

exercise and performance of its powers and duties hereunder. If the 

Authority shall fail to make any payment required by this Section, the 

Trustee may make such payment from any moneys in its possession 

under the provisions of this Agreement and shall be entitled to a 

preference therefor over any of the bonds or coupons outstanding 

hereunder.

Monthly statement 

from Trustee.

SECTION 906. It shall be the duty of the Trustee, on or before 

the 10th day of each month, to file with the Authority a statement 

setting forth in respect of the preceding calendar month

(a) the amount withdrawn or transferred by it and the 

amount deposited with it on account of each Fund and Account held 

by it under the provisions of this Agreement,

(b) the amount on deposit with it at the end of such month 

to the credit of each such Fund and Account,

(c) a brief description of all obligations held by it as an

investment of moneys in each such Fund and Account,

(d) the amount applied to the purchase or redemption of 

bonds under the provisions of Section 511 of this Agreement and a 

description of the bonds or portions of bonds so purchased or 

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112

redeemed, and

(e) any other information which the Authority may 

reasonably request.

All records and files pertaining to the trusts hereunder in the 

custody of the Trustee shall be open at all reasonable times to the 

inspection of the Authority and its agents and representatives.

Trustee may rely on 

certificates.

SECTION 907. In case at any time it shall be necessary or 

desirable for the Trustee to make any investigation respecting any fact 

preparatory to taking or not taking any action or doing or not doing 

anything as such Trustee, and in any case in which this Agreement 

provides for permitting or taking any action, the Trustee may rely 

conclusively upon any certificate, requisition, opinion or other 

instrument required or permitted to be filed with it under the 

provisions of this Agreement, and any such instrument shall be 

conclusive evidence of such fact to protect the Trustee in any action 

that it may or may not take or in respect of anything it may or may 

not do, in good faith, by reason of the supposed existence of such fact. 

Except as otherwise provided in this Agreement, any request, notice, 

certificate or other instrument from the Authority to the Trustee shall 

be deemed to have been signed by the proper party or parties if signed 

by the Executive Director or by any officer or employee of the 

Authority who shall be designated by the Authority by resolution for 

that purpose, and the Trustee may accept and rely upon a certificate 

signed by the Executive Director as to any action taken by the 

Authority.

Notice of default. SECTION 908. Except upon the happening of any event of 

default specified in clauses (a) and (b) of Section 802 of this 

Agreement, the Trustee shall not be obliged to take notice or be 

deemed to have notice of any event of default hereunder, unless 

specifically notified in writing of such event of default by the holders 

of not less than ten per centum (10%) in aggregate principal amount 

of the bonds hereby secured and then outstanding.

Trustee may deal in 

bonds and take action 

as bondholder.

SECTION 909. The bank or trust company acting as Trustee 

under this Agreement, and its directors, officers, employees or agents, 

may in good faith buy, sell, own, hold and deal in any of the bonds or 

coupons issued under and secured by this Agreement, may join in any 

action which any bondholder may be entitled to take with like effect 

as if such bank or trust company were not the Trustee under this 

Agreement, may engage or be interested in any financial or other 

transaction with the Authority, and may maintain any and all other 

general banking and business relations with the Authority with like 

effect and in the same manner as if the Trustee were not a party to this 

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Agreement; and no implied covenant shall be read into this 

Agreement against the Trustee in respect of such matters.

Trustee not 

responsible for 

recitals.

SECTION 910. The recitals, statements and representations 

contained herein and in the bonds (excluding the Trustee’s certificate 

of authentication on the bonds) shall be taken and construed as made 

by and on the part of the Authority and not by the Trustee, and the 

Trustee assumes and shall be under no responsibility for the 

correctness of the same.

Trustee protected in 

relying on certain 

documents.

SECTION 911. The Trustee shall be protected and shall incur 

no liability in acting or proceeding, or in not acting or not proceeding, 

in good faith, reasonably and in accordance with the terms of this 

Agreement, upon any resolution, order, notice, request, consent, 

waiver, certificate, statement, affidavit, requisition, bond or other 

paper or document which it shall in good faith reasonably believe to 

be genuine and to have been adopted or signed by the proper board or 

person or to have been prepared and furnished pursuant to any of the 

provisions of this Agreement, or upon the written opinion of any 

attorney, engineer or accountant believed by the Trustee to be 

qualified in relation to the subject matter, and the Trustee shall be 

under no duty to make any investigation or inquiry as to any 

statements contained or matters referred to in any such instrument. 

The Trustee shall not be under any obligation to see to the recording 

or filing of this Agreement or otherwise to the giving to any person 

of notice of the provisions hereof.

Resignation of 

Trustee.

SECTION 912. The Trustee may resign and thereby become 

discharged from the trusts hereby created, by notice in writing to be 

given to the Authority and published once in a daily newspaper of 

general circulation published in the Municipality of San Juan, Puerto 

Rico, and in a daily newspaper of general circulation or a financial 

journal published in the Borough of Manhattan, City and State of New 

York, not less than sixty (60) days before such resignation is to take 

effect, but such resignation shall take effect immediately upon the 

appointment of a new Trustee hereunder, if such new Trustee shall be 

appointed before the time limited by such notice and shall then accept 

the trusts hereof.

Removal of Trustee. SECTION 913. The Trustee may be removed at any time by an 

instrument or concurrent instruments in writing executed by the 

holders of not less than a majority in principal amount of the bonds 

hereby secured and then outstanding and filed with the Authority. A 

facsimile copy of each such instrument shall be delivered promptly 

by the Authority to the Trustee. The Trustee may also be removed at 

any time for any breach of trust or for acting or proceeding in 

violation of, or for failing to act or proceed in accordance with, any 

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114

provision of this Agreement with respect to the duties and obligations 

of the Trustee by any court of competent jurisdiction upon the 

application of the Authority pursuant to resolution or the holders of 

not less than ten per centum (10%) in aggregate principal amount of 

the bonds then outstanding under this Agreement.

Appointment of 

successor Trustee.

SECTION 914. If at any time hereafter the Trustee shall resign, 

be removed, be dissolved or otherwise become incapable of acting, 

or the bank or trust company acting as Trustee shall be taken over by 

any governmental official, agency, department or board, the position 

of Trustee shall thereupon become vacant. If the position of Trustee 

shall become vacant for any of the foregoing reasons or for any other 

reason, the Authority shall appoint a Trustee to fill such vacancy. The 

Authority shall publish notice of any such appointment by it made 

once in each week for four (4) successive weeks in a daily newspaper 

of general circulation published in the Municipality of San Juan, 

Puerto Rico, and in a daily newspaper of general circulation or a 

financial journal published in the Borough of Manhattan, City and 

State of New York.

At any time within one year after any such vacancy shall have 

occurred, the holders of a majority in principal amount of the bonds 

hereby secured and then outstanding, by an instrument or concurrent 

instruments in writing, executed by such bondholders and filed with 

the Authority, may appoint a successor Trustee, which shall 

supersede any Trustee theretofore appointed by the Authority. 

Facsimile copies of each such instrument shall be delivered promptly 

by the Authority to the predecessor Trustee and to the Trustee so 

appointed by the bondholders.

If no appointment of a successor Trustee shall be made 

pursuant to the foregoing provisions of this Section within ten (10) 

days after the vacancy shall have occurred, the holder of any bond 

outstanding hereunder or any retiring Trustee may apply to any court 

of competent jurisdiction within the Commonwealth of Puerto Rico 

or the State of New York to appoint a successor Trustee. Such court 

may thereupon, after such notice, if any, as such court may deem 

proper and prescribe, appoint a successor Trustee.

Any Trustee hereafter appointed shall be a bank or trust 

company having its principal office in the Borough of Manhattan, 

City and State of New York, duly authorized to exercise corporate 

trust powers and subject to examination by federal or state authority, 

of good standing, and having at the time of its appointment a 

combined capital and surplus aggregating not less than Fifty Million 

Dollars ($50,000,000) (or whose obligations hereunder are 

guaranteed by a bank or trust company duly authorized to exercise 

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corporate trust powers and subject to examination by federal or state 

authority, of good standing, and having at the time of the appointment 

of such Trustee, a combined capital and surplus of at least such 

amount).

Vesting of trusts in 

successor Trustee.

SECTION 915. Every successor Trustee appointed hereunder 

shall execute, acknowledge and deliver to its predecessor, and also to 

the Authority, an instrument in writing accepting such appointment 

hereunder, and thereupon such successor Trustee, without any further

act, shall become fully vested with all the rights, immunities, powers 

and trusts, and subject to all the duties and obligations, of its 

predecessor; but such predecessor shall, nevertheless, on the written 

request of its successor or of the Authority, and upon payment of the 

expenses, charges and other disbursements of such predecessor which 

are payable pursuant to the provisions of Section 905 of this Article, 

execute and deliver an instrument transferring to such successor 

Trustee all the rights, immunities, powers and trusts of such 

predecessor hereunder; and every predecessor Trustee shall deliver 

all property and moneys held by it hereunder to its successor. Should 

any instrument in writing from the Authority be required by any 

successor Trustee for more fully and certainly vesting in such Trustee 

the rights, immunities, powers and trusts hereby vested or intended to 

be vested in the predecessor Trustee, any such instrument in writing 

shall and will, on request, be executed, acknowledged and delivered 

by the Authority.

Notwithstanding any of the foregoing provisions of this 

Article, any bank or trust company having power to perform the 

duties and execute the trusts of this Agreement and otherwise 

qualified to act as Trustee hereunder with or into which the bank or 

trust company acting as Trustee may be merged, converted or 

consolidated, or to which the assets and business of such bank or 

trust company may be sold, shall be deemed the successor of the 

Trustee.

ARTICLE X.

EXECUTION OF INSTRUMENTS BY BONDHOLDERS AND PROOF OF 

OWNERSHIP OF BONDS.

Execution of 

instruments by 

bondholders.

SECTION 1001. Any request, direction, consent or other 

instrument in writing required or permitted by this Agreement to be 

signed or executed by bondholders may be in any number of 

concurrent instruments of similar tenor and may be signed or 

executed by such bondholders or their attorneys or legal 

representatives. Proof of the execution of any such instrument and of 

the ownership of bonds shall be sufficient for any purpose of this 

Agreement and shall be conclusive in favor of the Trustee with regard 

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to any action taken by it under such instrument if made in the 

following manner:

Proof of execution. (a) The fact and date of the execution by any person of 

any such instrument may be proved by the verification of any officer 

in any jurisdiction who, by the laws thereof, has power to take 

affidavits within such jurisdiction, to the effect that such instrument 

was subscribed and sworn to before him, or by an affidavit of a 

witness to such execution. Where such execution is on behalf of a 

person other than an individual such verification or affidavit shall also 

constitute sufficient proof of the authority of the signer thereof.

Proof of holding of 

bonds.

(b) The fact of the holding of coupon bonds hereunder by 

any bondholder and the amount and the numbers of such bonds and 

the date of his holding the same may be proved by the affidavit of the 

person claiming to be such holder, if such affidavit shall be deemed 

by the Trustee to be satisfactory, or by a certificate executed by any 

trust company, bank, banker or any other depositary, wherever 

situated, if such certificate shall be deemed by the Trustee to be 

satisfactory, showing that at the date therein mentioned such person 

had on deposit with or exhibited to such trust company, bank, banker 

or other depositary the bonds described in such certificate. The 

Trustee may conclusively assume that such ownership continues until 

written notice to the contrary is served upon it. The ownership of 

registered bonds without coupons shall be proved by the registration 

books kept under the provisions of Section 206 of this Agreement.

Other proof.

Bondholders’ actions 

bind future holders.

But nothing contained in this Article shall be construed as 

limiting the Trustee to such proof, it being intended that the Trustee 

may accept any other evidence of the matters herein stated which it 

may deem sufficient. Any request or consent of the holder of any 

bond shall bind every future holder of the same bond in respect of 

anything done by the Trustee in pursuance of such request or consent.

Notwithstanding any of the foregoing provisions of this 

Section, the Trustee shall not be required to recognize any person as 

a holder of any bond or coupon or to take any action at his request 

unless such bond or coupon shall be deposited with it.

ARTICLE XI.

SUPPLEMENTAL AGREEMENTS.

Supplemental 

agreements by 

Authority and 

Trustee.

SECTION 1101. The Authority and the Trustee may, from time 

to time, enter into such agreements supplemental hereto as shall not 

be inconsistent with the terms and provisions hereof (which 

supplemental agreements shall thereafter form a part hereof)

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(a) to cure any ambiguity, to correct or supplement any 

provision herein which may be inconsistent with any other provision 

herein, or to make any other provisions with respect to matters or 

questions arising under this Agreement which shall not be 

inconsistent with the provisions of this Agreement, provided such 

action shall not adversely affect the interest of the bondholders, or

(b) to grant to or confer upon the Trustee for the benefit 

of the bondholders any additional rights, remedies, powers, authority 

or security that may lawfully be granted to or conferred upon the 

bondholders or the Trustee, or

(c) to add to the conditions, limitations and restrictions 

on the issuance of bonds under the provisions of this Agreement other 

conditions, limitations and restrictions thereafter to be observed, or

(d) to add to the covenants and agreements of the 

Authority in this Agreement other covenants and agreements 

thereafter to be observed by the Authority or to surrender any right or 

power herein reserved to or conferred upon the Authority.

Notice of 

supplemental 

agreement.

At least thirty (30) days prior to the execution of any 

supplemental agreement for any of the purposes of this Section, the 

Trustee shall cause a notice of the proposed execution of such 

supplemental agreement to be mailed, postage prepaid, to all 

registered owners of bonds at their addresses as they appear on the 

registration books and to all bondholders of record. Such notice shall 

briefly set forth the nature of the proposed supplemental agreement 

and shall state that copies thereof are on file at the principal office of 

the Trustee for inspection by all bondholders. A failure on the part of 

the Trustee to mail the notice required by this Section shall not affect 

the validity of such supplemental agreement.

Modification of 

Agreement with 

consent of 60% of 

bondholders.

Restrictions on 

modifications.

SECTION 1102. Subject to the terms and provisions contained 

in this Section, and not otherwise, the holders of not less than sixty 

per centum (60%) in aggregate principal amount of the bonds then 

outstanding shall have the right, from time to time, anything 

contained in this Agreement to the contrary notwithstanding, to 

consent to and approve the execution by the Authority and the Trustee 

of such agreement or agreements supplemental hereto as shall be 

deemed necessary or desirable by the Authority for the purpose of 

modifying, altering, amending, adding to, repealing or rescinding, in 

any particular, any of the terms or provisions contained in this 

Agreement or in any supplemental agreement; provided, however, 

that nothing herein contained shall permit, or be construed as 

permitting, (a) an extension of the maturity of the principal of or the 

inerest on any bond issued hereunder, or (b) a reduction in the 

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principal amount of any bond or the redemption premium or the rate 

of interest thereon, or (c) the creation of a lien upon or a pledge of the 

Revenues other than any lien and pledge created by or permitted by 

this Agreement, or (d) a preference or priority of any bond or bonds 

over any other bond or bonds, or (e) a reduction in the aggregate 

principal amount of the bonds required for consent to such 

supplemental agreement. Nothing herein contained, however, shall be 

construed as making necessary the approval by bondholders of the 

execution of any supplemental agreement as authorized in Section 

1101 of this Article.

Notice of 

supplemental 

agreement.

If at any time the Authority shall request the Trustee to enter 

into any supplemental agreement for any of the purposes of this 

Section, the Trustee shall, at the expense of the Authority, cause 

notice of the proposed execution of such supplemental agreement to 

be published once in each week for four (4) successive weeks in a 

daily newspaper of general circulation published in the Municipality 

of San Juan, Puerto Rico, and in a daily newspaper of general 

circulation or a financial journal published in the Borough of 

Manhattan, City and State of New York, and, on or before the date of 

the first publication of such notice, the Trustee shall also cause a 

similar notice to be mailed, postage prepaid, to all registered owners 

of bonds at their addresses as they appear on the registration books 

and all bondholders of record. Such notice shall briefly set forth the 

nature of the proposed supplemental agreement and shall state that 

copies thereof are on file at the principal office of the Trustee for 

inspection by all bondholders. The Trustee shall not, however, be 

subject to any liability to any bondholder by reason of its failure to 

mail the notice required by this Section, and any such failure shall not 

affect the validity of such supplemental agreement when consented to 

and approved as provided in this Section.

Whenever, at any time within one year after the date of the 

first publication of such notice, the Authority shall deliver to the 

Trustee an instrument or instruments in writing purporting to be 

executed by the holders of not less than sixty per centum (60%) in 

aggregate principal amount of the bonds then outstanding, which 

instrument or instruments shall refer to the proposed supplemental 

agreement described in such notice and shall specifically consent to 

and approve the execution thereof in substantially the form of the 

copy thereof referred to in such notice, thereupon, but not otherwise, 

the Trustee may execute such supplemental agreement in 

substantially such form, without liability or responsibility to any 

holder of any bond, whether or not such holder shall have consented 

thereto.

Consent of holders of If the holders of not less than sixty per centum (60%) in 

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60% of bonds binds 

all.

aggregate principal amount of the bonds outstanding at the time of 

the execution of such supplemental agreement shall have consented 

to and approved the execution thereof as herein provided, no holder 

of any bond shall have any right to object to the execution of such 

supplemental agreement, or to object to any of the terms and 

provisions contained therein or the operation thereof, or in any 

manner to question the propriety of the execution thereof, or to enjoin 

or restrain the Trustee or the Authority from executing the same or 

from taking any action pursuant to the provisions thereof.

Upon the execution of any supplemental agreement pursuant 

to the provisions of this Section, this Agreement shall be and be 

deemed to be modified and amended in accordance therewith, and the 

respective rights, duties and obligations under this Agreement of the 

Authority, the Trustee and all holders of bonds then outstanding shall 

thereafter be determined, exercised and enforced in all respects under 

the provisions of this Agreement as so modified and amended.

Trustee joining in 

supplemental 

agreement.

Supplemental 

agreements part of 

this Agreement.

SECTION 1103. The Trustee is authorized to join with the 

Authority in the execution of any such supplemental agreement and 

to make the further agreements and stipulations which may be 

contained therein. Any supplemental agreement executed in 

accordance with the provisions of this Article shall thereafter form a 

part of this Agreement, and all of the terms and conditions contained 

in any such supplemental agreement as to any provision authorized to 

be contained therein shall be and shall be deemed to be part of the 

terms and conditions of this Agreement for any and all purposes. In 

case of the execution and delivery of any supplemental agreement, 

express reference may be made thereto in the text of any bonds issued 

thereafter, if deemed necessary or desirable by the Trustee.

Responsibilities of 

Trustee under this 

Article.

Trustee may rely 

upon opinion of 

counsel.

SECTION 1104. In each and every case provided for in this 

Article, the Trustee shall be entitled to exercise its discretion in 

determining whether or not any proposed supplemental agreement, or 

any term or provision therein contained, is desirable, having in view 

the purposes of such instrument, the needs of the Authority, the rights 

and interests of the bondholders, and the rights, obligations and 

interests of the Trustee, and the Trustee shall not be under any 

responsibility or liability to the Authority or to any bondholder or to 

anyone whomsoever for its refusal in good faith to enter into any such 

supplemental agreement if such agreement is deemed by it to be 

contrary to the provisions of this Article. The Trustee shall be entitled 

to receive, and shall be fully protected in relying upon, the opinion of 

any counsel approved by it, who may be counsel for the Authority, as 

evidence that any such proposed supplemental agreement does or 

does not comply with the provisions of this Agreement, and that it is 

or is not proper for it, under the provisions of this Article, to join in 

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the execution of such supplemental agreement.

ARTICLE XII.

DEFEASANCE.

Release of Agreement. SECTION 1201. If, when the bonds secured hereby shall have 

become due and payable in accordance with their terms or otherwise 

as provided in this Agreement or shall have been duly called for 

redemption or irrevocable instructions to call the bonds for 

redemption or payment shall have been given by the Authority to the 

Trustee, the whole amount of the principal and the interest and the 

premium, if any, so due and payable upon all of the bonds and 

coupons then outstanding shall be paid or sufficient moneys, or 

Government Obligations or Prerefunded Municipals or Time 

Deposits, secured in the manner set forth in Section 601 of this 

Agreement, the principal of and the interest on which when due will 

provide sufficient moneys, shall be held by the Trustee or the Paying 

Agents for such purpose under the provisions of this Agreement, and 

provision shall also be made for paying all other sums payable 

hereunder by the Authority, then and in that case the right, title and 

interest of the Trustee hereunder shall thereupon cease, determine and 

become void, and the Trustee in such case, on demand of the 

Authority, shall release this Agreement and shall execute such 

documents to evidence such release as may be reasonably required by 

the Authority, and shall turn over to the Authority or to such officer, 

board or body as may then be entitled by law to receive the same any 

surplus in any account in the Sinking Fund and all balances remaining 

in any other funds or accounts other than moneys held for the 

redemption or payment of bonds or coupons; otherwise this 

Agreement shall be, continue and remain in full force and effect;

provided, however, that in the event Government Obligations or 

Prerefunded Municipals or Time Deposits, secured in the manner set 

forth in Section 601 of this Agreement, shall be held by the Trustee 

as hereinabove provided, (i) in addition to the requirements set forth 

in Article III of this Agreement, the Trustee shall within thirty (30) 

days after such obligations shall have been deposited with it cause a 

notice signed by the Trustee to be published once in a daily newspaper 

of general circulation published in the Municipality of San Juan, 

Puerto Rico, and in a daily newspaper of general circulation or a 

financial journal published in the Borough of Manhattan, City and 

State of New York, setting forth (a) the date designated for the 

redemption of the bonds, (b) a description of the Government 

Obligations or Prerefunded Municipals or Time Deposits so held by

it and (c) that this Agreement has been released in accordance with 

the provisions of this Section, and (ii) the Trustee shall nevertheless 

retain such rights, powers and privileges under this Agreement, as 

may be necessary and convenient in respect of the bonds for the 

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payment of the principal, interest and any premium for which such 

Government Obligations or Prerefunded Municipals have been 

deposited or such Time Deposits have been made.

For purposes of determining whether Variable Rate Bonds 

shall be deemed to have been paid prior to the maturity or redemption 

date thereof, as the case may be, the interest to come due on such 

Variable Rate Bonds on or prior to the maturity date or redemption 

date thereof, as the case may be, shall be calculated at the maximum 

rate permitted by the terms thereof.

Put Bonds and Extendible Maturity Bonds shall be deemed to 

have been paid only if there shall have been deposited with the 

Trustee moneys, Government Obligations, Prerefunded Municipals 

Time Deposits, secured in the manner set forth in Section 601 of this 

Agreement, as applicable, in an amount which shall be sufficient to 

pay when due the maximum amount of principal of and premium, if 

any, and interest on such bonds which would become payable to the 

holders of such bonds upon the exercise of any options or extensions 

of maturity; provided, however, that, if at the time a deposit is made 

with the Trustee, such options or extensions are no longer exercisable, 

such bond shall not be considered a Put Bond or an Extendible 

Maturity Bond for purposes of this Section.

ARTICLE XIII.

MISCELLANEOUS PROVISIONS.

Successorship of

Authority.

SECTION 1301. All covenants, stipulations, obligations and 

agreements of the Authority contained in this Agreement shall be 

deemed to be covenants, stipulations, obligations and agreements of 

the Authority to the full extent authorized or permitted by the laws of

the Commonwealth of Puerto Rico, and all such covenants, 

stipulations, obligations and agreements shall be binding upon the 

successor or successors thereof from time to time and upon any 

officer, board, body or commission to whom or to which any power 

or duty affecting such covenants, stipulations, obligations and 

agreements shall be transferred by or in accordance with law.

No covenant, stipulation, obligation or agreement herein 

contained shall be deemed to be a covenant, stipulation, obligation or 

agreement of any present or future member, agent or employee of the 

Authority in his individual capacity, and neither the members of the 

Authority or of any other agency of the Commonwealth of Puerto 

Rico nor any officer thereof or of the Authority, present or future, 

executing the bonds shall be liable personally on the bonds or be 

subject to any personal liability or responsibility by reason of the 

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issuance thereof.

The laws of the Commonwealth of Puerto Rico shall govern 

the construction of this Agreement, except that the rights, limitations 

of rights, immunities, duties and obligations of the Trustee shall be 

governed by the laws of the State of New York.

Manner of giving 

notice, etc.

SECTION 1302. Any notice, demand, direction, request or 

other instrument authorized or required by this Agreement to be given 

to or filed with the Authority or the Trustee shall be deemed to have 

been sufficiently given or filed for all purposes of this Agreement if 

and when sent by first class mail:

to the Authority, if addressed to the Executive Director, 

Puerto Rico Electric Power Authority, San Juan, Puerto Rico;

to the Trustee, if addressed to it at its Corporate Trust Office, 

or to any successor Trustee, if addressed to it at its principal office.

Successorship of 

Paying Agents.

SECTION 1303. Any bank or trust company with or into which 

any Paying Agent may be merged, converted or consolidated, or to 

which the assets and business of such Paying Agent may be sold, shall 

be deemed the successor of such Paying Agent for the purposes of 

this Agreement. If the position of any Paying Agent shall become 

vacant for any reason, the Authority shall, within thirty (30) days 

thereafter, appoint a bank or trust company located in the same city 

as Paying Agent to fill such vacancy; provided, however, that if the 

Authority shall fail to appoint such Paying Agent within such period, 

the Trustee shall make such appointment.

Parties and 

bondholders alone 

have rights under 

Agreement.

SECTION 1304. Except as herein otherwise expressly 

provided, nothing in this Agreement expressed or implied is intended 

or shall be construed to confer upon any person, firm or corporation 

other than the parties hereto and the holders of the bonds issued under 

the provisions of this Agreement any right, remedy or claim, legal or 

equitable, under or by reason of this Agreement or any provisions 

hereof, this Agreement and all its provisions being intended to be and 

being for the sole and exclusive benefit of the parties hereto and the 

holders from time to time of the bonds issued hereunder.

Effect of partial 

invalidity.

SECTION 1305. In case any one or more of the provisions of 

this Agreement or of the bonds or coupons issued hereunder shall for 

any reason be held to be illegal or invalid, such illegality or invalidity 

shall not affect any other provision of this Agreement or of the bonds 

or coupons, but this Agreement and the bonds and coupons shall be 

construed and enforced as if such illegal or invalid provision had not 

been contained therein. In case any covenant, stipulation, obligation 

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or agreement contained in the bonds or in this Agreement shall for 

any reason be held to be in violation of law, then such covenant, 

stipulation, obligation or agreement shall be deemed to be the 

covenant, stipulation, obligation or agreement of the Authority to the 

full extent permitted by law.

Substitute 

publication.

SECTION 1306. If, because of the temporary or permanent 

suspension of publication of any newspaper or financial journal or for 

any other reason, the Trustee or the Authority shall be unable to 

publish in a newspaper or financial journal any notice required to be 

published by the provisions of this Agreement, the Trustee or the 

Authority, as the case may be, shall give such notice in such other 

manner as in its judgment shall most effectively approximate such 

publication thereof, and the giving of such notice in such manner shall 

for all purposes of this Agreement be deemed to be compliance with 

the requirement for the publication thereof.

In case, by reason of the suspension of regular mail service as 

a result of a strike, work stoppage or similar activity, it shall be 

impractical to mail notice of any event to registered owners of bonds 

or to bondholders of record when such notice is required to be given 

pursuant to any provision of this Agreement, any manner of giving 

notice as shall be satisfactory to the Trustee and the Authority shall 

be deemed to be a sufficient giving of such notice.

Other funds not 

prohibited.

SECTION 1307. Nothing in this Agreement expressed or 

implied shall be construed as preventing the Authority, if then 

authorized or permitted by law, from financing the acquisition or 

construction of any land, building, structure or other facility by the 

issuance of obligations which are not issued under or secured by the 

provisions of this Agreement or the 1947 Indenture or by entering 

into any financing agreement or agreements relating to any such 

facility pursuant to which the Authority has the right to the use, 

occupancy and possession of such facility and is required to make 

periodic payments in an aggregate amount substantially equal to the 

cost of such facility and reasonable financing charges, regardless of 

the disposition of title to such facility.

Headings, etc. not 

part of Agreement.

SECTION 1308. Any headings preceding the texts of the 

several articles hereof, and any table of contents appended to copies 

hereof, shall be solely for convenience of reference and shall not 

constitute a part of this Agreement, nor shall they affect its meaning, 

construction or effect.

Multiple 

counterparts.

SECTION 1309. This Agreement may be executed in multiple 

counterparts, each of which shall be regarded for all purposes as an 

original, and such counterparts shall constitute but one and the same 

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instrument.

IN WITNESS WHEREOF, Puerto Rico Water Resources 

Authority has caused this Agreement to be executed by its Executive 

Director and its corporate seal to be impressed hereon and attested by 

its Secretary or an Assistant Secretary and First National City Bank 

has caused this Agreement to be executed in its behalf by one of its 

Vice Presidents and its corporate seal to be impressed hereon and 

attested by one of its Associate Trust Officers, all as of the day and 

year first above written

PUERTO RICO WATER RESOURCES AUTHORITY

By /s/ 

Executive Director

Execution by 

Authority.

[SEAL]

Attest:

/s/ 

Secretary

FIRST NATIONAL CITY BANK

By /s/ 

Vice President

Execution by

Trustee.

[SEAL]

Attest:

/s/

Associate Trust Officer

Acknowledgment by 

Authority.

STATE OF NEW YORK

SS. COUNTY OF NEW YORK

On the 7th day of January, 1974, before me personally Came 

Julio Negroni, to me known, who, being by me duly sworn, did 

depose and say that he resides at 269 Georgetown St., San Juan, 

Puerto Rico; that he is the Executive Director of Puerto Rico Water 

Resources Authority; and that he signed his name to the above 

instrument by order of the Authority, the Authority being the public 

corporation described in and which executed the above instrument.

/s/ Gundars Aperans

Notary Public

My commission expires

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[SEAL]

Acknowledgment by 

Trustee.

STATE OF NEW YORK

SS. COUNTY OF NEW YORK

On the 7th day of January, 1974, before me personally came 

D.C. McNeill, to me Known, who, being by me duly sworn, did 

depose and say that he resides at 33 Ferris Hill Rd, New Canaan, 

Conn.; that he is a Vice President of First National City Bank, the 

banking association described in and which executed the above 

instrument; that he knows the seal thereof; that the seal affixed to said 

instrument is the corporate seal of said banking association; that it 

was so affixed by authority of said banking association; and that he 

signed his name thereto by like authority.

/s/ Gundars Aperans

Notary Public

My commission expires

[SEAL]

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Exhibit A Page 128 of 128

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Exhibit 3 Page 138 of 252
Exhibit B

Redline Comparison of 

Joint Conformed Trust Agreement against

Defendants’ As-Submitted Conformed Trust Agreement

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Exhibit B Page 1 of 114

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Exhibit 3 Page 139 of 252
1

4841-4826-4667.3

[NOTE: THIS DOCUMENT IS A COMPILATION OF THE 1974 TRUST AGREEMENT 

AND SUPPLEMENTS 1-19 THERETO. THIS VERSION EXCLUDES ANY 

TEMPORARY MODIFICATION MADE PURSUANT TO SUPPLEMENTS 16-19 THAT 

BY ITS TERMS EXPIRED UPON EXPIRATION OF THE “AMENDMENT PERIOD” 

OR APPLICABLE “AMENDMENT TERMINATION DATE”. ANY FOOTNOTES SET 

FORTH IN THIS VERSION ARE COMMENTS FROM THE COMPILER AND WERE 

NOT CONTAINED IN THE ORIGINAL AGREEMENT OR ANY SUPPLEMENTS 

THERETO] CERTIFICATE

PUERTO RICO ELECTRIC POWER AUTHORITY 

TO

STATE STREET BANK AND TRUST COMPANY, N.A. 

Successor Trustee 

TRUST AGREEMENT 

Dated as of January 1, 1974, as amended

I, RAFAEL BETANCOURT. Secretary of Puerto Rico Water Resources Authority, DO HEREBY 

CERTIFY that the attached Trust Agreement, dated as of January 1, 1974, is substantially in the form 

of the Trust Agreement which was presented at the meeting of the Authority duly called and held 

on December 4, 1973 and authorized by the Authority by Resolution No. 1391 duly adopted at 

said meeting.

Case:19-00391-LTS Doc#:118-2 Filed:01/10/23 Entered:01/10/23 21:08:06 Desc:

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4841-4826-4667.3

WITNESS my hand this 8th day of January, 1974.

/s/ 

Secretary

Puerto Rico Water Resources

Authority

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3

4841-4826-4667.3

TABLE OF CONTENTSPUERTO RICO ELECTRIC POWER AUTHORITY 

TO

Page

Parties .............................................................................................................................................. 1

Recitals ............................................................................................................................................ 1

Authority Act .......................................................................................................... 1

Powers of Authority ................................................................................................ 1

The System and the 1947 Indenture ........................................................................ 2

Resignation of Trustee under the 1947 Indenture ................................................... 3

Successor trustee under the 1947 Indenture ............................................................ 3

Determination to acquire additional facilities ......................................................... 3

Determination to issue revenue bonds .................................................................... 3

Forms .............................................................................................................................................. 3

Coupon Bonds ......................................................................................................... 3

Coupons .................................................................................................................. 8

Registered Bonds Without Coupons ....................................................................... 9

Certificate of Authentication ................................................................................. 11

Power to enter Agreement .................................................................................... 11

Authorization of Agreement ................................................................................. 11

Compliance with law ............................................................................................ 11

Acceptance of trusts by Trustee ............................................................................ 11

Pledge of revenues ................................................................................................ 11

Agreement of the parties ....................................................................................... 12

Article 1 

Definitions

Section 101. Meaning of Words and Terms ....................................................................... 12

Accreted Value .............................................................................................. 12

Additional Construction Fund Usage ............................................................ 12

Ad Hoc Group ............................................................................................... 12

Agreement ..................................................................................................... 12

Amending Creditors ...................................................................................... 12

Amendment ................................................................................................... 13

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4841-4826-4667.3

Amendment Effective Date ........................................................................... 13

Amendment Period ........................................................................................ 13

Amendment Period Budget ........................................................................... 13

Amendment Termination Date ...................................................................... 13

Amortization Accrual .................................................................................... 13

Amortization Requirement ............................................................................ 14

Annual Budget ............................................................................................... 15

Approved Costs of Improvements ................................................................. 15

Approved Initial Costs of Improvements ...................................................... 15

Authority ....................................................................................................... 15

Authority Act ................................................................................................. 15

Board ............................................................................................................. 15

Bond Service Account ................................................................................... 15

bondholder of record ..................................................................................... 15

bonds ............................................................................................................. 15

BPA ............................................................................................................... 15

Build America Bonds .................................................................................... 16

Capital Appreciation Bonds .......................................................................... 16

Capital Expenditures ..................................................................................... 16

Capital Improvement Fund ............................................................................ 16

Construction Fund ......................................................................................... 17

Construction Fund Replenishment Amount .................................................. 17

Construction Fund Replenishment Date ........................................................ 17

Consulting Engineers .................................................................................... 17

Controller ....................................................................................................... 17

cost ................................................................................................................. 17

Current Expenses ........................................................................................... 18

daily newspaper ............................................................................................. 18

Depositary ..................................................................................................... 19

Deposit Day ................................................................................................... 19

Designated Maturity Bonds ........................................................................... 19

Eighteenth Amendment ................................................................................. 19

Executive Director ......................................................................................... 19

Extendible Maturity Bonds ........................................................................... 19

Federally Subsidized Bonds .......................................................................... 19

Federal Subsidy ............................................................................................. 19

Federal Subsidy ............................................................................................. 19

Federal Subsidy Payments ............................................................................. 19

fiscal year ...................................................................................................... 20

Forbearance Agreement ................................................................................ 20

General Fund ................................................................................................. 20

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4841-4826-4667.3

General Reserve Fund ................................................................................... 20

Government Obligations ............................................................................... 20

Improvements ................................................................................................ 20

Independent Consultant ................................................................................. 21

Initial Improvements Period .......................................................................... 21

Interest Accrual ............................................................................................. 21

Investment Obligations .................................................................................. 21

Net Revenues ................................................................................................. 21

1947 Construction Fund ................................................................................ 21

1947 Indenture ............................................................................................... 21

1947 Indenture Bonds ................................................................................... 22

1947 Revenue Fund ....................................................................................... 22

1947 Sinking Fund ........................................................................................ 22

1947 Trustee .................................................................................................. 22

Opinion of Counsel ....................................................................................... 22

Other Subsidy Bonds ..................................................................................... 23

Paying Agents ................................................................................................ 23

Potential Default ............................................................................................ 23

predecessor bonds .......................................................................................... 23

Prerefunded Municipals ................................................................................ 23

Principal Accrual ........................................................................................... 23

Principal and Interest Requirements .............................................................. 24

Put Bonds ...................................................................................................... 26

Redemption Account ..................................................................................... 26

Renewal and Replacement Fund ................................................................... 26

Required Amending Creditor Group ............................................................. 26

Required Amending Creditors ....................................................................... 26

Reserve Account ............................................................................................ 27

Reserve Account Insurance Policy ................................................................ 27

Reserve Account Letter of Credit .................................................................. 27

Reserve Maintenance Fund ........................................................................... 27

Retained General Fund Amount .................................................................... 27

Revenue Fund ................................................................................................ 27

Revenues ....................................................................................................... 27

RSA ............................................................................................................... 28

Scotiabank Credit Agreement ....................................................................... 28

Secretary ........................................................................................................ 28

Self-insurance Fund ....................................................................................... 28

serial bonds .................................................................................................... 28

Series ............................................................................................................. 28

Series 2016 Bonds ......................................................................................... 29

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Sinking Fund ................................................................................................. 29

Solus .............................................................................................................. 29

Solus Credit Agreement ................................................................................ 29

Solus/Scotiabank Lenders ............................................................................. 29

Solus/Scotiabank Lines of Credit .................................................................. 29

Specified Period Principal and Interest Requirements .................................. 29

Specified Period Defeasance Fund ................................................................ 29

Subordinate Obligations ................................................................................ 29

Subordinate Obligations Fund ....................................................................... 30

Supporting Creditor Class ............................................................................. 30

SWAP agreement .......................................................................................... 30

SWAP party ................................................................................................... 30

SWAP rate ..................................................................................................... 30

System ........................................................................................................... 30

Time Deposits ................................................................................................ 30

Treasurer ........................................................................................................ 31

FIRST NATIONAL CITY BANK

Trustee 31

Validation Proceeding ................................................................................... 31

Valuation Date ............................................................................................... 31

Variable Rate Bonds ...................................................................................... 31

Section 102. Miscellaneous Definitions ............................................................................. 31

Article 2 

Form, Execution and Registration of Bonds and Conditions 

for Authentication and Delivery of Bonds

Section 201. Limitations on Issuance of Bonds .................................................................. 31

Section 202. Form of Bonds ............................................................................................... 31

Section 203. Details of Bonds ............................................................................................ 32

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Exhibit B Page 7 of 114

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4841-4826-4667.3

Execution of bonds and coupons ................................................................... 32

Payment of principal and interest .................................................................. 32

Section 204. Authentication of Bonds ................................................................................ 33

Section 205. Exchange of Coupon Bonds for Registered Bonds ....................................... 33

Exchange of registered bonds for coupon bonds or registered bonds ........... 33

Section 206. Negotiation of Coupon Bonds ....................................................................... 34

Transfer of registered bonds .......................................................................... 34

Cancellation of bonds and coupons surrendered for exchange or 

transfer ........................................................................................................... 34

Section 207. Ownership of Registered Bonds .................................................................... 34

Ownership of coupon bonds .......................................................................... 35

Transfer of title of bonds ............................................................................... 35

Section 208. Issuance of Revenue Bonds to Pay Cost of Improvements ........................... 35

Conditions of authentication and delivery ..................................................... 36

Disposition of bond proceeds ........................................................................ 38

Section 209. Issuance of Revenue Bonds for any Proper Corporate Purpose .................... 38

Conditions of authentication and delivery ..................................................... 40

Disposition of bond proceeds ........................................................................ 41

Section 210. Issuance of Revenue Refunding Bonds to Refund all 1947 Indenture 

Bonds and Bonds Issued Under this Agreement ........................................... 41

Conditions of authentication and delivery ..................................................... 43

Disposition of bond proceeds ........................................................................ 45

Conditions of authentication and delivery ..................................................... 46

Section 211. Temporary Bonds .......................................................................................... 47

Section 212. Mutilated, Destroyed or Lost Bonds .............................................................. 48

Article 3 

Redemption of Bonds

Section 301. Redemption of Bonds .................................................................................... 48

Selection by Trustee ...................................................................................... 48

Rules relating to Capital Appreciation Bonds ............................................... 49

Section 302. Redemption Notice ........................................................................................ 49

Section 303. Effect of Calling for Redemption .................................................................. 49

Section 304. Matured Coupons ........................................................................................... 50

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Exhibit B Page 8 of 114

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4841-4826-4667.3

Section 305. Redemption of Portion of Registered Bonds ................................................. 50

Section 306. Cancellation of Bonds and Coupons Redeemed ............................................ 50

Section 307. Bonds and Portions of Bonds Called for Redemption not Deemed 

Outstanding.................................................................................................... 50

Article 4 

Custody and Application of Proceeds of Bonds

Section 401. Construction Fund ......................................................................................... 50

Section 402. Payments from Construction Fund ................................................................ 51

Section 403. Items of Cost .................................................................................................. 51

Section 404. Lands for Projects .......................................................................................... 52

Section 405. Additional Application of Moneys in Construction Fund ............................. 52

Section 406. Replenishment of the Construction Fund ...................................................... 53

Article 5 

Revenues and Funds

Section 501. Covenants as to Bills for Services ................................................................. 53

Section 502. Covenants as to Rates .................................................................................... 53

Section 503. General Fund ................................................................................................. 55

Section 504. Annual Budget ............................................................................................... 55

Section 505. Application of Moneys in General Fund ....................................................... 56

Section 506. Revenue Fund ................................................................................................ 59

Section 507. Sinking Fund .................................................................................................. 59

Bond Service Account, Reserve Account and Redemption Account............ 59

Reserve Maintenance Fund ........................................................................... 61

Reserve Maintenance Fund ........................................................................... 61

Subordinate Obligations Fund ....................................................................... 62

Self-insurance Fund ....................................................................................... 62

Capital Improvement Fund ............................................................................ 62

Section 508. Disposition of Balances in 1947 Indenture Funds and Accounts .................. 63

Section 509. Application of Moneys in Bond Service Account ......................................... 63

Section 510. Application of Moneys in Reserve Account .................................................. 64

Section 511. Application of Moneys in Redemption Account ........................................... 65

Purchase of bonds .......................................................................................... 65

Redemption of bonds ..................................................................................... 66

Section 512. Use of Moneys in Reserve Maintenance Fund .............................................. 67

Section 513. Application and Pledge of Moneys in Sinking Fund ..................................... 69

Section 514. Moneys Set Aside for Principal and Interest Held in Trust ........................... 69

Case:19-00391-LTS Doc#:118-2 Filed:01/10/23 Entered:01/10/23 21:08:06 Desc:

Exhibit B Page 9 of 114

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4841-4826-4667.3

Moneys unclaimed for six years after maturity of bonds and coupons ......... 69

Section 515. Cancellation of Bonds and Coupons upon Payment ...................................... 69

Section 516. Application of Moneys in Subordinate Obligations Fund ............................. 70

Section 517. Specified Period Principal and Interest Requirements Defeasance ............... 72

Article 6 

Depositaries of Moneys, Security for Deposits and Investment of Funds

Section 601. Deposits Constitute Trust Funds .................................................................... 73

Security for deposits ...................................................................................... 73

Section 602. Investment of Moneys ................................................................................... 74

Investments deemed to be part of Fund or Account for which 

purchased ....................................................................................................... 76

Article 7 

Particular Covenants

Section 701. Payment of Principal, Interest and Premium ................................................. 76

Pledge of revenues ......................................................................................... 76

Bonds not general obligations of Commonwealth of Puerto Rico ................ 76

Offices or agencies for payment of coupon bonds and coupons ................... 76

Section 702. Covenant to Integrate Improvements into System ......................................... 76

Covenant to construct Improvements in accordance with plans ................... 77

Covenants as to operation .............................................................................. 77

Section 703. Compliance with 1947 Indenture ................................................................... 77

Release of 1947 Indenture ............................................................................. 77

Covenant as to amendment of 1947 Indenture .............................................. 77

Section 704. Covenant as to Renewal and Replacement Fund ........................................... 77

Section 705. Payment of Lawful Changes .......................................................................... 78

Section 706. Employment of Consulting Engineers ........................................................... 78

Employment of Independent Consultant ....................................................... 78

Section 707. Insurance ........................................................................................................ 79

Section 708. Inspection of Insurance Policies .................................................................... 80

Section 709. No Inconsistent Action .................................................................................. 80

Section 710. Accurate Records ........................................................................................... 80

Monthly reports ............................................................................................. 81

Annual audits ................................................................................................. 81

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Exhibit B Page 10 of 114

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4841-4826-4667.3

Additional reports or audits ........................................................................... 81

Section 711. Covenant as to Additional 1947 Indenture Bonds ......................................... 82

Section 712. Covenant Against a Sale or Encumbrance; Exceptions ................................. 82

Section 713. Build America Bonds .................................................................................... 84

Article 8 

Remedies

Section 801. Extended Coupons ......................................................................................... 85

Section 802. Events of Default ........................................................................................... 85

Section 803. Acceleration of Maturities ............................................................................. 86

Section 804. Enforcement of Remedies .............................................................................. 87

Section 805. Pro rata Application of Funds ........................................................................ 88

Section 806. Effect of Discontinuance of Proceedings ...................................................... 89

Section 807. Majority of Bondholders May Control Proceedings ..................................... 89

Section 808. Restrictions upon Action by Individual Bondholder ..................................... 90

Section 809. Actions by Trustee ......................................................................................... 90

Section 810. No Remedy Exclusive ................................................................................... 90

Section 811. No Delay or Omission Construed To Be a Waiver ....................................... 90

Repeated exercise of powers and remedies ................................................... 90

Waiver of default ........................................................................................... 91

Section 812. Notice of Default ........................................................................................... 91

Section 813. Rights of Holders Regarding Validation Proceeding .................................... 91

Article 9 

Concerning The Trustee

Section 901. Acceptance of Trusts ..................................................................................... 91

Section 902. Trustee Entitled to Indemnity ........................................................................ 91

Trustee may act without indemnity ............................................................... 91

Reimbursement of Trustee ............................................................................ 91

Section 903. Limitation on Obligations and Responsibilities of Trustee ........................... 91

Section 904. Trustee not Liable for Failure of Authority to Act or for Deposits in 

Other Banks ................................................................................................... 92

Section 905. Compensation and Indemnification of Trustee .............................................. 92

Section 906. Monthly Statement from Trustee ................................................................... 92

Section 907. Trustee May Rely on Certificates .................................................................. 93

Section 908. Notice of Default ........................................................................................... 93

Section 909. Trustee May Deal in Bonds and Take Action as Bondholder ....................... 93

Section 910. Trustee no Responsible for Recitals .............................................................. 93

Case:19-00391-LTS Doc#:118-2 Filed:01/10/23 Entered:01/10/23 21:08:06 Desc:

Exhibit B Page 11 of 114

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4841-4826-4667.3

Section 911. Trustee Protected in Relying on Certain Documents .................................... 94

Section 912. Resignation of Trustee ................................................................................... 94

Section 913. Removal of Trustee ........................................................................................ 94

Section 914. Appointment of Successor Trustee ................................................................ 94

Section 915. Vesting of Trusts in Successor Trustee ......................................................... 95

Article 10 

Execution of Instruments by Bondholders and Proof of Ownership of Bonds

Section 1001. Execution of Instruments by Bondholders .................................................... 96

Article 11 

Supplemental Agreements

Section 1101. Supplemental Agreements by Authority and Trustee .................................... 96

Notice of supplemental agreement ................................................................ 97

Section 1102. Modification of Agreement with Consent of 60% of Bondholders ............... 97

Restrictions on modifications ........................................................................ 97

Notice of supplemental agreement ................................................................ 98

Consent of holders of 60% of bonds binds all ............................................... 98

Section 1103. Trustee Joining in Supplemental Agreement ................................................. 98

Supplemental agreements part of this Agreement ......................................... 98

Section 1104. Responsibilities of Trustee Under this Article ............................................... 99

Trustee may rely upon opinion of counsel .................................................... 99

Article 12 

Defeasance

Section 1201. Release of Agreement .................................................................................... 99

Article 13 

Miscellaneous Provisions

Section 1301. Successorship of Authority .......................................................................... 100

Section 1302. Manner of Giving Notice, Etc. .................................................................... 100

Section 1303. Successorship of Paying Agents .................................................................. 101

Section 1304. Parties and Bondholders Alone Have Rights Under Agreement ................. 101

Section 1305. Effect of Partial Invalidity ........................................................................... 101

Section 1306. Substitute Publication .................................................................................. 101

Section 1307. Other Funds not Prohibited .......................................................................... 102

Section 1308. Headings, etc. not Part of Agreement .......................................................... 102

Case:19-00391-LTS Doc#:118-2 Filed:01/10/23 Entered:01/10/23 21:08:06 Desc:

Exhibit B Page 12 of 114

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4841-4826-4667.3

Section 1309. Multiple Counterparts .................................................................................. 102

EXECUTION

Execution by Authority ............................................................................................................... 103

Execution by Trustee .................................................................................................................. 103

ACKNOWLEDGEMENTS

Acknowledgment by Authority................................................................................................... 104

Acknowledgment by Trustee ...................................................................................................... 104

Trust Agreement

Dated as of January 1, 1974

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4841-4826-4667.3

PUERTO RICO ELECTRIC POWER AUTHORITY 

TO

FIRST NATIONAL CITY BANK

Trustee

Trust Agreement

Dated as of January 1, 1974

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Exhibit B Page 14 of 114

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Exhibit 3 Page 152 of 252
22199362.3 1

This Trust Agreement, dated for convenience of reference as of January 1, 1974, by and 

between 

Puerto Rico Electric Power Authority, 

a body corporate and politic constituting a public corporation and governmental instrumentality of 

the Commonwealth of Puerto Rico (hereinafter sometimes called the “Authority”), and 

State Street Bank and Trust Company, N.A. First National City Bank,

a national banking association duly incorporated and existing under the laws of the United States 

of America and having its principal office in the Borough of Manhattan, City and State of New 

York, which is authorized under such laws to exercise trust powers and is subject to examination 

by federal authority (said banking association and any bank or trust company becoming successor 

trustee under this Agreement being hereinafter sometimes called the “Trustee”), Witnesseth: 

Whereas, by Act No. 83 of the Legislature of Puerto Rico, approved May 2, 1941, as 

amended, reenacted and supplemented (the “Authority Act“”), the Authority was created a body 

corporate and politic constituting a public corporation and governmental instrumentality of the 

Commonwealth of Puerto Rico; and 

Whereas, by virtue of the Authority Act the Authority is empowered to conserve, develop 

and utilize the water and energy resources of Puerto Rico for the purpose of making available to 

the inhabitants of the Commonwealth, in the widest economic manner, the benefits thereof, for the 

promotion of the general welfare and to increase commerce and prosperity, and the Authority is 

granted and may exercise all the rights and powers necessary or convenient to carry out the 

aforesaid purposes including but not limited to the following, among others: 

(a) to have complete control and supervision of any undertaking constructed 

or acquired by it including the power to determine the character of and necessity for all its 

expenditures and the manner in which they shall be incurred, allowed and paid without 

regard to the provisions of any laws governing the expenditure of public funds, and such 

determination shall be final and conclusive upon all officers of the Commonwealth 

Government, and to prescribe, adopt, amend, and repeal such rules and regulations as may 

be necessary or proper for the exercise and performance of its powers and duties or to 

govern the rendering of service or sale or exchange of water or electric energy; 

(b) to sue and be sued, implead and be impleaded, complain and defend, in all 

courts; 

(c) to make contracts and to execute all instruments necessary or convenient 

in the exercise of any of its powers ; 

(d) to acquire in any lawful manner including, but without limitation, 

acquisition by purchase, whether by agreement or by the exercise of the power of eminent 

domain, lease, bequest, devise, gift, and to hold, maintain, use and operate any undertaking 

or, parts thereof ; 

(e) to acquire in the manner set forth above, produce, impound, develop, 

manufacture, treat, hold, conserve, use, transmit, distribute, supply, exchange, sell, rent and 

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Exhibit B Page 15 of 114

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2

otherwise dispose of, water, electric energy, equipment, and such other things, supplies and 

services as the Authority shall deem necessary, proper, incidental, or convenient in 

connection with its activities; provided, that in disposing at wholesale of electric energy 

the Authority shall give preference and priority as to supply to public bodies and 

cooperatives; 

(f) to construct or reconstruct any undertaking or any part or parts thereof, and 

any additions, improvements, and extensions to any undertaking of the Authority by 

contract or contracts, or under, through, or by means of its own officers, agents, and 

employees; 

(g) to determine, fix, alter, charge and collect reasonable rates, fees, rentals, 

and other charges for the use of the facilities of the Authority, or for the services, electric 

energy, or other commodities sold, rendered, or furnished by it, which shall be sufficient 

for the payment of the expenses of the Authority incurred in the conservation, development, 

improvement, extension, repair, maintenance, and operation of its facilities and properties, 

for the payment of the principal of and interest on its bonds, and for, fulfilling the terms 

and provisions of such covenants as may be made with, or for the benefit of, the purchasers 

or holders of any bonds of the Authority; 

(h) to borrow money, make and issue bonds of the Authority for any of its 

corporate purposes, and to secure payment of its bonds and of any and all other obligations 

by pledge of or lien on all or any of its contracts, revenues, and income only; and 

(i) to make and issue bonds for the purpose of funding, refunding, purchasing, 

paying, or discharging any of the outstanding bonds or obligations issued or assumed by it 

or any bonds or obligations the principal or interest of which is payable in whole or in part 

from its revenues; and 

Whereas, the Authority owns and operates an integrated system for the generation, 

transmission and distribution of electricity throughout the Commonwealth of Puerto Rico, and for 

the purpose of providing funds, with other available funds, for refunding certain outstanding bonds 

and paying the cost of a capital improvement program to provide additional generating capacity 

for the System (as defined herein) and necessary extensions of the transmission and distribution 

lines of the System and other improvements, the Authority has heretofore issued its Puerto Rico 

Water Resources Authority Electric Revenue Bonds, outstanding on the date hereof in the 

aggregate principal amount of $868,643,000, under and pursuant to the provisions of a trust 

indenture, dated as of the first day of January, 1947, by and between the Authority and The 

National City Bank of New York (now First National City Bank), as trustee, as amended by 

supplemental indentures dated as of January 1, 1948, July 1, 1956, January 1, 1961, March 1, 1962, 

March 1, 1965, April 1, 1967, April 1, 1970 and September 1, 1971 (said indenture as so amended, 

together with all future amendments and all indentures supplemental thereto as therein permitted, 

being herein called the “1947 Indenture”) ; and 

Whereas, First National City Bank has resigned as trustee under the 1947 Indenture and 

has thereby become discharged from the trusts created thereby ; and 

Whereas, the Authority has appointed The Chase Manhattan Bank (National Association) 

trustee under the 1947 Indenture, and said banking association, having executed, acknowledged 

Case:19-00391-LTS Doc#:118-2 Filed:01/10/23 Entered:01/10/23 21:08:06 Desc:

Exhibit B Page 16 of 114

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Exhibit 3 Page 154 of 252
3

and delivered to its predecessor trustee, and also to the Authority, an instrument in writing 

accepting such appointment under the 1947 Indenture, is now vested with all rights, immunities, 

powers and trusts, and subject to all the duties and obligations, of its predecessor trustee under the 

1947 Indenture; and 

Whereas, based upon surveys, estimates and recommendations, the Authority has found 

and determined that it is necessary and advisable to provide funds for additional facilities for the 

generation, transmission and distribution of electricity to serve the present and prospective 

demands upon the System, and has determined that it is necessary to increase its capacity to issue 

revenue bonds secured as hereinafter provided to provide funds for the foregoing purposes; and 

Whereas, the Authority deems it advisable to make provision for the issuance from time to 

time of revenue bonds on a parity with the bonds issued initially under the provisions of this 

Agreement for the purpose of paying all or any part of the cost of any Improvements (as defined 

herein) ; and 

Whereas, the Authority has determined that the coupon bonds to be issued hereunder and 

the interest coupons to be attached thereto, the registered bonds without coupons to be issued 

hereunder and the certificate of authentication by the Trustee to be endorsed on all such bonds 

shall be, respectively, substantially in the following forms, with such variations, omissions and 

insertions as are required or permitted by this Agreement : 

 [Form of Coupon Bonds][form of coupon bonds]

No. __________ $________

UNITED STATES OF AMERICA

PUERTO RICO ELECTRIC POWER AUTHORITY 

Power Revenue Bond, Series.......

Puerto Rico Electric Power Authority, a body corporate and politic constituting a public 

corporation and governmental instrumentality of the Commonwealth of Puerto Rico (herein 

sometimes called the “Authority”), for value received, hereby promises to pay, solely from the 

special fund provided therefor as hereinafter set forth, to the bearer on the 1st day of ________, 

___ (or earlier as hereinafterherein-after referred to), upon the presentation and surrender hereof, 

the principal sum of..............._________________ Thousand Dollars and to pay, solely from 

said special fund, interest thereon from the date hereof at the rate of ____________ per centum 

(____%) per annum until payment of said principal sum, such interest to the maturity hereof being 

payable semi-annually on the 1st days of January and July in each year upon the presentation and 

surrender of the coupons representing such interest as the same respectively become due. Both 

the principal of and the interest on this bond are payable in any coin or currency of the United 

States of America which on the respective dates of payment thereof is legal tender for the payment 

of public and private debts. 

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The principal of this bond and the interest hereon are payable at the principal office of 

__________________________, in the _____________________, or at the principal office of 

____________, in the Borough of Manhattan, City and State of New York, at the option of the 

holder, or at such other office or agency of the Authority maintained for that purpose as the 

Authority shall determine. 

This bond shall not be deemed to constitute a debt or obligation of the Commonwealth of 

Puerto Rico or any of its municipalities or other political subdivisions, and neither the 

Commonwealth of Puerto Rico nor any such municipalities or other political subdivisions are 

liable for the payment of this bond or the interest hereon, but this bond shall be payable as to both 

principal and interest solely from the special fund provided therefor as hereinafter set forth. 

This bond is one of a duly authorized series of revenue bonds known as “Puerto Rico 

Electric Power Authority Power Revenue Bonds, Series ___.” “, dated as of the 1st day of

__________................................. , _______________, consisting of bonds maturing in annual 

installments on the 1st day of ____... in the years __________ to __________ __ , inclusive 

(herein called the “serial bonds”), and of bonds maturing on the 1st day of _______, _______ 

and the 1st day of _______, , _______ (herein collectively called the “term bonds”), and issued 

for the purpose of paying the cost of acquiring or constructing capital improvements to the electric 

power properties of the Authority (the electric power properties owned and operated by the 

Authority as a single integrated system, together with all improvements, renewals and 

replacements thereof and extensions and additions thereto financed under the provisions of the 

1947 Indenture (hereinafter mentioned) and the Agreement (hereinafter mentioned), being herein 

called the “System”). 

All of the bonds are issued under and pursuant to a trust agreement (said agreement, 

together with all agreements supplemental thereto as therein permitted, being herein called the 

“Agreement”), dated as of the 1st day of January, 1974, by and between the Authority and First 

National City Bank, in the Borough of Manhattan, City and State of New York (said banking 

association and any bank or trust company becoming successor trustee under the Agreement being 

herein called the “Trustee”), an executed counterpart of which Agreement is on file at the corporate 

trust office of the Trustee. Reference is hereby made to the Agreement for the provisions, among 

others, with respect to the custody and application of the proceeds of bonds issued under the 

Agreement, the collection and disposition of revenues, the fund charged with and pledged to the 

payment of the interest on and the principal of the bonds, the nature and extent of the security, the 

terms and conditions on which the bonds of each series are or may be issued, the rights, duties and 

obligations of the Authority and of the Trustee and the rights of the holders of the bonds, and, by 

the acceptance of this bond, the holder hereof assents to all of the provisions of the Agreement. 

The Agreement provides for the issuance, from time to time, under the conditions, 

limitations and restrictions therein set forth, of additional series of bonds (such bonds and the 

bonds of the series of which this is one being herein collectively called the “bonds”). 

This bond is issued and the Agreement was made and entered into under and pursuant to 

the Puerto Rican Federal Relations Act and the Constitution and laws of the Commonwealth of 

Puerto Rico, including Act No. 83 of the Legislature of Puerto Rico, approved May 2, 1941, as 

amended, reenacted and supplemented (the “Authority Act”), and under and pursuant to 

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resolutions duly adopted by the Authority. 

The Agreement provides for the fixing, charging and collecting by the Authority of 

reasonable rates and charges for the use of the services and facilities furnished by the System 

sufficient to provide for the payment of the expenses of the Authority incurred in the conservation, 

repair, maintenance and operation of the System and for the payment of the principal of and the 

interest on the 1947 Indenture Bonds and the bonds as the same become due and payable, including 

reserves for such purposes. The 1947 Indenture provides for the deposit to the credit of a special 

fund designated “Water Resources Authority Renewal and Replacement Fund” (herein called the 

“Renewal and Replacement Fund”) of the revenues of the System, to the extent required, over and 

above such expenses of conservation, repair, maintenance and operation and the amounts required 

to be deposited to the credit of the Puerto Rico Water Resources Authority Electric Revenue Bonds 

Sinking Fund and the Puerto Rico Water Resources Authority General Reserve Fund under the 

1947 Indenture, and the Agreement provides for the deposit to the credit of the Renewal and 

Replacement Fund of sufficient funds to provide for the payments from said Fund to the special 

fund created under the Agreement designated “Puerto Rico Water Resources Authority Power 

Revenue Bonds Interest and Sinking Fund” (herein called the “Sinking Fund”). The Agreement 

also provides for the payment into the Sinking Fund of a sufficient amount of the funds on deposit 

to the credit of the Renewal and Replacement Fund to pay the principal of and the interest on all 

bonds issued under the Agreement as the same become due and payable and to create a reserve for 

such purpose, which special fund is pledged to and charged with the payment of the principal of 

and the interest on the bonds. 

The Authority has heretofore issued under the provisions of the trust indenture, dated as of 

the first day of January, 1947 (such indenture as amended being herein called the “1947 

Indenture”), Puerto Rico Water Resources Authority Electric Revenue Bonds (herein, with any 

additional bonds which hereafter may be issued under the provisions of the 1947 Indenture, called 

the “1947 Indenture Bonds”). Until all of the 1947 Indenture Bonds shall be paid or provision 

shall be made for their payment and the release of the 1947 Indenture, the revenues of the System, 

over and above the expenses of conservation, repair, maintenance and operation thereof, are 

pledged to the extent required to the payment of the principal of and the interest on the outstanding 

1947 Indenture Bonds. 

The bonds are issuable as coupon bonds and as registered bonds without coupons, in such 

denominations as the Authority may by resolution determine. At the corporate trust office of the 

Trustee, in the manner and subject to the limitations and conditions provided in the Agreement 

and without cost except for any tax or other governmental charge, registered bonds without 

coupons may be exchanged for an equal aggregate principal amount of coupon bonds of the same 

series and maturity, bearing interest at the same rate and having attached thereto coupons 

representing all unpaid interest due or to become due thereon, or of registered bonds without 

coupons of the same series and maturity, of authorized denominations and bearing interest at the 

same rate, and coupon bonds with all coupons appertaining thereto representing all unpaid interest 

due or to become due thereon may in like manner be exchanged for an equal aggregate principal 

amount of registered bonds without coupons of the same series and maturity, of authorized 

denominations and bearing interest at the same rate. 

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[Here insert in the bonds of each Series the terms of redemption applicable to the bonds of 

such Series.] 

The moneys in the Sinking Fund available for the purchase or redemption of bonds shall 

be allocated to all series of bonds outstanding under the Agreement in the manner provided in the 

Agreement. 

If less than all of the bonds of any one maturity of a series shall be called for redemption, 

the particular bonds or portions of registered bonds without coupons to be redeemed from such 

series and maturity shall be selected by the Trustee as provided in the Agreement. 

Any such redemption, either in whole or in part, shall be made upon at least thirty (30) 

days’ prior notice by publication and otherwise as provided in the Agreement, and shall be made 

in the manner and under the terms and conditions provided in the Agreement. On the date 

designated for redemption, notice having been published as provided in the Agreement, the bonds 

or portions of registered bonds without coupons so called for redemption shall become and be due 

and payable at the redemption price provided for redemption of such bonds or such portions thereof 

on such date, and, if moneys for payment of the redemption price and the accrued interest are held 

by the Trustee or by the paying agents, as provided in the Agreement, interest on such bonds or 

such portions thereof so called for redemption shall cease to accrue, the coupons for any such 

interest payable subsequent to the redemption date shall be void, such bonds or such portions 

thereof so called for redemption shall cease to be entitled to any benefit or security under the 

Agreement, and the holders or registered owners thereof shall have no rights in respect of such 

bonds or such portions thereof so called for redemption except to receive payment of the 

redemption price thereof and the accrued interest so held by the Trustee or by the paying agents. 

The holder of this bond shall have no right to enforce the provisions of the Agreement or 

to institute action to enforce the covenants therein, or to take any action with respect to any event 

of default under the Agreement, or to institute, appear in or defend any suit or other proceeding 

with respect thereto, except as provided in the Agreement. 

In certain events, on the conditions, in the manner and with the effect set forth in the 

Agreement, the principal of all the bonds then outstanding under the Agreement may become or 

may be declared due and payable before the stated maturities thereof, together with the interest 

accrued thereon. 

Modifications or alterations of the Agreement or of any agreement supplemental thereto 

may be made by the Authority and the Trustee only to the extent and in the circumstances permitted 

by the Agreement. 

As declared by the Authority Act, this bond shall at all times be, and shall be understood 

to be, a negotiable instrument for all purposes. 

This bond is issued with the intent that the laws of the Commonwealth of Puerto Rico shall 

govern its construction. 

All acts, conditions and things required by the Puerto Rican Federal Relations Act and the 

Constitution and laws of the Commonwealth of Puerto Rico and the rules and regulations of the 

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Authority to happen, exist and be performed precedent to and in the issuance of this bond and the 

execution of the Agreement have happened, exist and have been performed as so required. 

This bond shall not be valid or become obligatory for any purpose, or be entitled to any 

benefit or security under the Agreement until it shall have been authenticated by the execution by 

the Trustee of the certificate of authentication endorsed hereon. 

In Witness Whereof, Puerto Rico Electric Power Authority has caused this bond to [be 

signed by] [bear the facsimile signature of] the Executive Director of the Authority and to [be 

signed by] [bear the facsimile signature of] the Secretary of the Authority, and a facsimile of its 

corporate seal to be imprinted hereon, and the attached interest coupons to bear the facsimile 

signature of said Executive Director, all as of the 1st day of ____________ , _____. 

[Facsimile of 

corporate seal] 

PUERTO RICO ELECTRIC 

POWER AUTHORITY 

By: .............................................. 

Executive Director

 .................................................... 

Secretary 

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[Form of Coupons][form of coupons]

No. ___ _______ 

$__________

On __________ ......... 1, 19__ ....... , Puerto Rico Electric Power Authority will pay to 

bearer (unless the bond mentioned below shall previously have become payable as provided in the 

Agreement referred to in said bond and provision for payment thereof shall have been duly made) 

at the principal office of __________ , in the __________, ________________, 

............................................... , ................... , or at the principal office of __________ , in the 

Borough of Manhattan, City and State of New York, at the option of the bearer, or at such other 

office or agency of the Authority maintained for that purpose as the Authority shall determine 

upon the presentation and surrender hereof, the sum of __________ Dollars in any coin or 

currency of the United States of America which at the time of payment is legal tender for the 

payment of public and private debts, solely from the special fund referred to in, and for the semiannualsemiannual interest then due upon, its Puerto Rico Electric Power Authority Power Revenue 

Bond, Series __________, , dated as of __________, __________, , No .

__________. Executive 

Director, Puerto Rico 

Electric Power Authority 

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[Form of Registered Bonds Without Coupons][form of registered bonds without coupons]

Same as Form of Coupon Bonds except as follows : 

(1)1.Substitute the following for the caption and the first paragraph:

No. R______ $__________

UNITED STATES OF AMERICA

PUERTO RICO ELECTRIC POWER AUTHORITY

POWER REVENUE BOND, SERIES ___

Power Revenue Bond, Series

Puerto Rico Electric Power Authority, a body corporate and politic constituting a public 

corporation and governmental instrumentality of the Commonwealth of Puerto Rico (herein 

sometimes called the “‘‘Authority”), for value received, hereby promises to pay, solely from the 

special fund provided therefor as hereinafter set forth, to __________ , or registered assigns 

or legal representative, on the 1st day of __________, ___)_ (or earlier as hereinafter referred to), 

upon the presentation and surrender hereof at the Corporate Trust Office of the Trustee (hereinafter 

mentioned), the principal sum of .............................. Dollars in any coin or currency of the United 

States of America which on the date of payment thereof is legal tender for the payment of public 

and private debts, and to pay, solely from said special fund, to the registered owner hereof by check 

mailed to the registered owner at his address as it appears on the bond registration books of the 

Authority, interest on said principal sum from the date hereof or from the January 1 or July 1 next 

preceding the date of authentication to which interest shall have been paid, unless such date of 

authentication is a January 1 or July 1, in which case, from such date, semi-annually on January 1 

and July 1 in each year in like coin or currency, at the rate of __________ per centum (___

.................................................................................... %) per annum until payment of said principal 

sum. 

(2)2. Substitute the following for the paragraph concerning the notice of redemption and 

the effect thereof:

Any such redemption, either in whole or in part, shall be made upon at least thirty (30) 

days’ prior notice by publication and otherwise as provided in the Agreement, and shall be made 

in the manner and under the terms and conditions provided in the Agreement. On the date 

designated for redemption, notice having been published as provided in the Agreement, the bonds 

or portions of registered bonds without coupons so called for redemption shall become and be due 

and payable at the redemption price provided for redemption of such bonds or such portions thereof 

on such date, and, if moneys for payment of the redemption price and the accrued interest are held 

by the Trustee, as provided in the Agreement, interest on such bonds or such portions thereof so 

called for redemption shall cease to accrue, such bonds or such portions thereof so called for 

redemption shall cease to be entitled to any benefit or security under the Agreement, and the 

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holders or registered owners thereof shall have no rights in respect of such bonds or such portions 

thereof so called for redemption except to receive payment of the redemption price thereof and the 

accrued interest so held by the Trustee. If a portion of this bond shall be called for redemption, a 

new bond or bonds in principal amount equal to the unredeemed portion hereof will be issued to 

the registered owner upon the surrender hereof. 

(3)3. Substitute the following for the paragraph concerning negotiability :

The transfer of this bond is registrable by the registered owner hereof in person or by his 

attorney or legal representative at the principal office of the Trustee but only in the manner and 

subject to the limitations and conditions provided in the Agreement and upon surrender and 

cancellation of this bond. Upon any such registration of transfer the Authority shall execute and 

the Trustee shall authenticate and deliver in exchange for this bond a new registered bond or bonds 

without coupons, registered in the name of the transferee, of authorized denominations, or, at the 

option of the transferee, coupon bonds with coupons attached representing all unpaid interest due 

or to become due thereon, in aggregate principal amount equal to the principal amount of this 

bond, of the same series and maturity and bearing interest at the same rate. 

As declared by the Authority Act, this bond, notwithstanding the provisions for registration 

of transfer stated herein and contained in the Agreement, shall at all times be, and shall be 

understood to be, a negotiable instrument for all purposes. 

(4)4. Substitute the following for the witnessing clause: 

In Witness Whereof, Puerto Rico Electric Power Authority has caused this bond to [be 

signed by] [bear the facsimile signature of] the Executive Director of the Authority and to [be 

[signed by] [bear the facsimile signature of] the Secretary of the Authority, and a facsimile of its 

corporate seal to be imprinted hereon, all as of the 1st day of __________, __________ , . 

(5) 5. Omit the Form of Coupons.

[to be endorsed on all bonds] 

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Certificate of Authentication

CERTIFICATE OF AUTHENTICATION

This is one of the bonds of the series designated therein and issued under the provisions of 

the within mentioned Agreement. 

State StreetFirst National City Bank and Trust Company, N.A., Trustee

By: 

Authorized Officer 

[to be endorsed on all registered bonds following the 

certificate of authentication

THE CERTIFICATE OF AUTHENTICATION]

Date of authentication: ................ .................... 

and

And

Whereas, by virtue of the Authority Act, the Authority is authorized to issue revenue bonds 

as hereinafter provided, to enter into this Agreement and to do or cause to be done all the acts and 

things herein provided or required to be done as hereinafter covenanted ; and 

Whereas, the execution and delivery of this Agreement have been duly authorized by 

resolution of the Authority; and 

Whereas, all acts, conditions and things required by the Puerto Rican Federal Relations 

Act, by the Constitution and laws of the Commonwealth of Puerto Rico and the rules and 

regulations of the Authority to happen, exist and be performed precedent to and in the execution 

and delivery of this Agreement have happened, exist and have been performed as so required, in 

order to make this Agreement a legal, valid and binding trust agreement for the security of the 

bonds in accordance with its terms; and 

Whereas, the Trustee has accepted the trusts created by this Agreement and in evidence 

thereof has joined in the execution hereof; 

Now, Therefore, This Agreement Witnesseth, that in consideration of the premises, of the 

acceptance by the Trustee of the trusts hereby created, and of the purchase and acceptance of the 

bonds by the holders thereof, and also for and in consideration of the sum of One Dollar to the 

Authority in hand paid by the Trustee at or before the execution and delivery of this Agreement, 

the receipt of which is hereby acknowledged, and for the purpose of fixing and declaring the terms 

and conditions upon which the bonds are to be issued, executed, authenticated, delivered, secured 

and accepted by all persons who shall from time to time be or become holders thereof, and in order 

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to secure the payment of all the bonds at any time issued and outstanding hereunder and the interest 

and the redemption premium, if any, thereon according to their tenor, purport and effect, and in 

order to secure the performance and observance of all the covenants, agreements and conditions 

therein and herein contained, the Authority has executed and delivered this Agreement and has 

pledged and does hereby pledge to the Trustee the revenues of the System, subject to the pledge 

of such revenues to the payment of the principal of and the interest on the 1947 Indenture Bonds 

(hereinafter mentioned), and other moneys to the extent provided in this Agreement as security for 

the payment of the bonds and the interest and the redemption premium, if any, thereon and as 

security for the satisfaction of any other obligation assumed by it in 

connection with such bonds, and it is mutually agreed and covenanted by and between the parties 

hereto, for the equal and proportionate benefit and security of all and singular the present and 

future holders of the bonds issued and to be issued under this Agreement, without preference, 

priority or distinction as to lien or otherwise, except as otherwise hereinafter provided, of any one 

bond over any other bond, by reason of priority in the issue, sale or negotiation thereof or 

otherwise, as follows: 

Article 1ARTICLE I.

Definitions.

Section 101.Meaning of Words and Terms. In addition to words and terms elsewhere 

defined in this Agreement, the following words and terms shall have the following meanings, 

unless some other meaning is plainly intended: 

The term “Accreted Value“” shall mean with respect to any Capital Appreciation Bonds 

(i) as of any Valuation Date, the amount set forth for such date in the resolution authorizing such 

Capital Appreciation Bonds and (ii) as of any date other than a Valuation Date, the sum of (a) the 

Accreted Value on the preceding Valuation Date and (b) the product of (1) a fraction, the 

numerator of which is the actual number of days having elapsed from the preceding Valuation 

Date and the denominator of which is the actual number of days from such preceding Valuation 

Date to the next succeeding Valuation Date and (2) the difference between the Accreted Values 

for such Valuation Dates. 

The term “Additional Construction Fund Usage“” shall have the meaning given to it in 

Section 405. [This definition from the 16th Supplemental Agreement may no longer be in effect – 

see footnote 2 on page 51.]

The term “Ad Hoc Group“” shall mean such term as defined in the RSAForbearance 

Agreement. 

The word “Agreement“” shall mean this Agreement, dated as of January 1, 1974, together 

with all agreements supplemental hereto as herein permitted. 

The term “Amending Creditors“” shall mean Assured Guaranty Corp., Assured Guaranty 

Municipal Corp., National Public Finance Guarantee Corporation, Solus (solely in its capacity as 

a bondholder),Syncora Guarantee Inc., and the Ad Hoc Group and any other Holder (as defined in 

the RSA) , including successors and assigns thereof. For the purposes of this Agreement, the 

Trustee shall be entitled to rely on a certification of an Amending Creditor that it is an Amending 

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Creditor.

The term “Amending Creditor Bonds” shall mean, with respect to any date, all outstanding 

bonds that are beneficially owned or (without duplication) insured by the Amending Creditors as 

of such date (which outstanding bonds that are beneficially owned by the Amending Creditors 

shall only include such bonds of which the other Amending Creditors have received written notice, 

which notice will be effective one (1) business day after receipt). For purposes of this Agreement, 

the Trustee shall be entitled to rely on a certification of any person or entity that it isby an 

Amending Creditor that it beneficially owns or (without duplication) insures certain principal 

amount of outstanding bonds. 

The term “Amendment“” shall refer to the Sixteenth Supplemental 

Agreement/Seventeenth Supplemental Agreement, dated as of August 1, 2014/July 1, 2015, by 

and between the Authority and the Trustee. [This definition from the 16th and 17th Supplemental 

Agreements may no longer be in effect.]

The term “Amendment Effective Date“” shall mean April 28, 2017,March 16, 2016, being 

the effective date of the NineteenthEighteenth Amendment. 

The term “Amendment Period“” shall mean the period from the Amendment Effective 

Date until the Amendment Termination Date. 

The term “Amendment Period Budget“ shall mean the Initial 13-Week Cash Flow 

Statement or Subsequent 13-Week Budget, as applicable (each as defined in the Forbearance 

Agreement). [This definition from the 16th Supplemental Agreement may no longer be in effect – 

see footnote 2 on page 51.]The term “Amendment Termination Date“” shall mean the earliest of 

(a) June 30, 2017,the Scheduled Amendment Termination Date, (b) the date on which (i) the 

“Support Period” (as defined in the RSA) has expired or terminated in accordance with the terms 

of the RSA (including, without limitation, expiration or termination as a result of withdrawal by 

the relevant Supporting Creditors from the RSA) as to any Supporting Creditor Class or as to any 

Insurer (as defined in the RSA), and whether such termination or expiration occurred on, before 

or after the date of the NineteenthEighteenth Amendment, and (ii) the Trustee has received written 

notice from the Authority or any Supporting Creditor (as defined in the RSA) or former Supporting 

Creditor confirming the same, and (c) the filing of a proceeding by or on behalf of the Authority 

pursuant to the Puerto Rico Public Corporation Debt Enforcement and Recovery Act, title 11 of 

the U.S. Code, or any other any bankruptcy or insolvency law, or the commencement of any other 

action or proceeding that seeks to adjust, extend or challenge the claims of creditors pursuant to 

any federal, state or Puerto Rico statute, now in effect or hereinafter enacted, including a Title III 

proceeding under PROMESA; provided, however, that the commencement of a process or 

proceeding under Title VI of PROMESA shall not cause the termination of this Amendment, and 

shall not trigger an Amendment Termination Date. . Upon the occurrence of the date described in 

clause (b)(i) of this definition, the Authority shall promptly, and in any event within 2 business 

days thereof, provide written notice to the Trustee confirming such occurrence. For purposes of 

this Agreement, the Trustee shall be entitled to rely on a certification of any person or entity that 

it is a Supporting Creditor or former Supporting Creditor, as applicable. 

The term “Amortization Accrual“” shall mean for any period the amount of an 

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Amortization Requirement that would accrue during such period if such Requirement accrued 

ratably on the basis of a year consisting of twelve (12) thirty-day months. Unless otherwise 

provided by resolution of the Authority or an agreement supplemental hereto, the monthly accrual 

in respect of an Amortization Requirement for a term bond shall commence on the first day of 

each month in the fiscal year for which such Requirement has been established and shall end on 

the first day of the month succeeding the relevant Deposit Day. 

As applied to the term bonds of any Series, the term “Amortization Requirement“” for any 

fiscal year shall mean the principal amount fixed or computed for such fiscal year as hereinafter 

set forth for the retirement of such term bonds by purchase or redemption. 

The Amortization Requirements for the term bonds of each Series shall be initially the 

respective principal amounts for each fiscal year as fixed in a resolution of the Board adopted prior 

to the issuance of the bonds of such Series; provided, however, that if any additional term bonds 

of such Series shall be issued under the provisions of the first paragraph of Section 210 of this 

Agreement, the respective Amortization Requirements for the term bonds of such Series shall be 

increased in proportion as nearly as may be practicable to the increase in the total principal amount 

of the term bonds of such Series. The aggregate amount of such Amortization Requirements for 

the term bonds of each Series shall be equal to the aggregate principal amount of the term bonds 

of such Series. The Amortization Requirements for the term bonds of each Series shall begin in 

the fiscal year determined by the Board. 

If at the close of any fiscal year the total principal amount of term bonds of any Series 

retired by purchase or redemption, or prior to the close of such fiscal year called for redemption 

under the provisions of Section 511 of this Agreement, shall be in excess of the amount of the 

Amortization Requirements for the term bonds of such Series for such fiscal year, then the amount 

of the Amortization Requirements for the term bonds of such Series shall be reduced for such 

subsequent fiscal years in such amounts aggregating the amount of such excess as shall be 

determined by the Executive Director in an order filed with the Trustee on or before the 10th day 

of July following the close of such fiscal year. 

If at the close of any fiscal year the total principal amount of term bonds of any Series 

retired by purchase or redemption, or called for redemption under the provisions of Section 511 of 

this Agreement, prior to the close of such fiscal year shall be less than the amount of the 

Amortization Requirements for the term bonds of such Series for such fiscal year, then the amount 

of the Amortization Requirements for the term bonds of such Series for the next succeeding fiscal 

year shall be increased by the amount of the excess of such deficiency over the amount then held 

to the credit of the Redemption Account. 

It shall be the duty of the Trustee, on or before the 15th day of July in each fiscal year, to 

compute the Amortization Requirements for the then current fiscal year for the term bonds of each 

Series then outstanding. The Amortization Requirement for the then current fiscal year shall 

continue to be applicable during the balance of such current fiscal year and no adjustment shall be 

made therein by reason of term bonds purchased or redeemed or called for redemption during such 

current fiscal year. 

The term “Annual Budget“” shall mean the Authority’s budget of Current Expenses and 

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Exhibit B Page 28 of 114

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Capital Expenditures for a fiscal year adopted pursuant to the provisions of Section 504 of this 

Agreement. 

The word “Authority” shall mean the Puerto Rico Electric Power Authority, a body 

corporate and politic constituting a public corporation and governmental instrumentality of the 

Commonwealth of Puerto Rico, and the successor or successors of the Authority.

The term “Authority Act” shall mean the Puerto Rico Water Resources Authority Act, 

being Act No. 83 of the Legislature of Puerto Rico, approved May 2, 1941, as amended and 

reenacted by Act No. 19, approved April 8, 1942, as amended, and Act No. 111, approved May 6, 

1941, as amended by Act No. 153, approved May 14, 1943, as amended.

The term “Approved Costs of Improvements“” shall mean the Approved Initial Costs of 

Improvements and any other costs of Improvements (and of extensions of the System) which the 

Required Amending Creditors or their respective advisors have confirmed are reasonably 

acceptable (or which have been deemed reasonably acceptable to the Required Amending 

Creditors in accordance with clause (3) of Section 505) and regarding which the Authority 

provided written certification to the Trustee and the Required Amending Creditors or their 

respective advisors, that such costs of Improvements (and of extensions of the System) are or are 

deemed to be reasonably acceptable to the Required Amending Creditors or their respective 

advisors. 

The term “Approved Initial Costs of Improvements“” shall mean the costs of 

Improvements (and of extensions of the System) specified in the initial schedule approved by the 

Required Amending Creditors pursuant to Section 505. 

The word “Authority“ shall mean the Puerto Rico Electric Power Authority, a body 

corporate and politic constituting a public corporation and governmental instrumentality of 

the Commonwealth of Puerto Rico, and the successor or successors of the Authority.

The term “Authority Act“ shall mean the Puerto Rico Water Resources Authority 

Act, being Act No. 83 of the Legislature of Puerto Rico, approved May 2, 1941, as amended 

and reenacted by Act No. 19, approved April 8, 1942, as amended, and Act No. 111, 

approved May 6, 1941, as amended by Act No. 153, approved May 14, 1943, as amended.

The word “Board“” shall mean the governing board of the Authority as constituted from 

time to time and defined by the Authority Act, or if said Board shall be abolished, then the board, 

body or officer succeeding to the principal functions thereof or to whom the powers of the 

Authority shall be given by law. 

The term “Bond Service Account“” shall mean the special account created in the Sinking 

Fund by the provisions of Section 507 of this Agreement. 

The term “bondholder of record“” shall mean any bondholder who shall have filed with 

the Secretary, within the period of two years immediately prior to any time when such term has 

application, a written request setting forth his name and address and the particular reports, notices,

and other documents which he desires to receive and which are required to be mailed under the 

requirements of this Agreement. 

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Exhibit B Page 29 of 114

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The word “bonds“” shall mean the bonds issued under this Agreement.

The term “BPA“” shall mean the Bond Purchase Agreement, and all annexes, schedules 

and exhibits thereto, dated as of January 27, 2016, and the Bond Purchase Agreement, and all 

annexes, schedules and exhibits thereto, dated as of June 29, 2016, each by and among the 

Authority and the Purchasers defined therein, as the same may be amended, supplemented or 

otherwise modified from time to time in accordance with its terms). 

The term “Build America Bonds“” shall mean a series of bonds designated as “Build 

America Bonds” by the Authority for purposes of Section 54AA of the Code and for which the 

Authority has irrevocably elected pursuant to Section 54AA(g) of the Code to receive the Federal 

Subsidy from the United States Treasury in connection therewith under Section 6431 of the Code 

and apply it in accordance with the provisions of the resolution or resolutions adopted by the Board 

authorizing the issuance of such bonds. 

The term “Capital Appreciation Bonds“” shall mean any bonds hereafter issued as to which 

interest is payable only at the maturity or prior redemption of such bonds. For the purposes of (i) 

receiving payment of the redemption price if a Capital Appreciation Bond is redeemed prior to 

maturity to the extent provided in the resolution authorizing the Capital Appreciation Bonds, or 

(ii) receiving payment of a Capital Appreciation Bond if the principal of all bonds is declared 

immediately due and payable following an event of default as provided in Section 802 of this 

Agreement or (iii) computing the principal amount of bonds held by the registered owner of a 

Capital Appreciation Bond in giving to the Authority or the Trustee any notice, consent, request, 

or demand pursuant to this Agreement for any purpose whatsoever, the principal amount of a 

Capital Appreciation Bond shall be deemed to be its Accreted Value. In the case of Capital 

Appreciation Bonds that are convertible to bonds with interest payable prior to maturity or prior 

redemption of such bonds, the term “Capital Appreciation Bonds” shall be limited to the period 

prior to such conversion, and after such conversion, the bonds shall be viewed as any other bonds 

of the same type for purposes of this Agreement. 

The term “Capital Expenditures“” shall mean all expenditures made on account of the cost 

of the Capital Improvement Program, as defined in the 1947 Indenture, and the cost of 

Improvements under this Agreement and the 1947 Indenture and those expenditures made for the 

purposes for which funds are provided pursuant to the provisions of Section 512 of the 1947 

Indenture. 

The term “Capital Improvement Fund“” shall mean the Puerto Rico Electric Power 

Authority Capital Improvement Fund, a special fund created and designated by Section 507 of this 

Agreement. 

The term “Citibank/Scotiabank Lenders” shall mean Citibank, N.A. or its transferees, as 

applicable, and the Lenders (as defined in the Scotiabank Credit Agreement).

The term “Citibank/Scotiabank Lines of Credit” shall mean that certain Trade Finance 

Facility Agreement, dated as of July 20, 2012, between the Authority and Citibank, N.A. or its 

transferees, as applicable, as amended or otherwise modified from time to time, and the Scotiabank 

Credit Agreement.

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The term “Construction Fund“” shall mean the Puerto Rico Electric Power Authority 

Power System Construction Fund, a special fund created and designated by the provisions of 

Section 401 of this Agreement. 

The term “Construction Fund Replenishment Amount“” shall mean in respect of a 

Construction Fund Replenishment Date an amount equal to: 

(a) the aggregate amount of all Additional Construction Fund Usages prior to such 

Construction Fund Replenishment Date, 

less, the sum of: 

(b) the aggregate amount that the Authority has applied to the cost of Improvements 

from any source other than the Construction Fund from or after the Amendment Effective Date, 

irrespective of whether such amount has been applied prior to or after the commencement of any 

bankruptcy proceeding, insolvency proceeding, proceeding under the Puerto Rico Public 

Corporation Debt Enforcement and Recovery Act, Act No. 71-2014, or any similar proceeding, 

and 

(c) the aggregate amount theretofore credited to the Construction Fund by the 

Authority pursuant to Section 406 of this Agreement. 

[This definition from the 16th Supplemental Agreement may no longer be in effect 

– see footnote 2 on page 51.]

The term “Construction Fund Replenishment Date“” shall mean the twenty-fifth (25th) day 

of each month (or if such day is not a business day, the immediately succeeding business day) on 

which the Construction Fund Replenishment Amount is greater than zero. [This definition from 

the 16th Supplemental Agreement may no longer be in effect – see footnote 2 on page 51.]

The term “Consulting Engineers“” shall mean the engineer or engineering firm or 

corporation at the time employed by the Authority under the provisions of Section 706 of this 

Agreement to perform and carry out the duties imposed on the Consulting Engineers by this 

Agreement. 

The word “Controller“” shall mean the Controller or any Assistant Controller of the 

Authority, or if there is no Controller or Assistant Controllercontroller or assistant controller, then 

any person designated by the Board or by the by-laws of the Authority to perform the functions of 

the chief financial officer of the Authority. 

The word “cost“”, as applied to any Improvements, shall embrace the cost of the 

acquisition and construction and all obligations and expenses and all items of cost which are set 

forth in Section 403 of this Agreement. 

The term “Current Expenses“” shall mean the Authority’s reasonable and necessary current 

expenses of maintaining, repairing and operating the System and shall include, without limiting 

the generality of the foregoing, all administrative expenses, insurance premiums, expenses of 

preliminary surveys not chargeable to Capital Expenditures, engineering expenses relating to 

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Exhibit B Page 31 of 114

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operation and maintenance, fees and expenses of the Trustee, the 1947 Trustee, the Paying Agents 

and of the paying agents under the 1947 Indenture, legal expenses, any payment to pension or 

retirement funds, and all other expenses required to be paid by the Authority under the provisions 

of the 1947 Indenture, this Agreement or by law, or permitted by standard practices for public 

utility systems, similar to the properties and business of the Authority and applicable in the 

circumstances but shall not include any deposits to the credit of the Sinking Fund, the Reserve 

Maintenance Fund, the Subordinate Obligations Fund, the Self-insurance Fund and, the Capital 

Improvement Fund or the 1947 Sinking Fund or deposits under the provisions of Sections 511, 

512 and 513 of the 1947 Indenture, and the Subordinate Obligations Fund. Obligation Fund. 

Notwithstanding the foregoing or anything herein to the contrary, none of the holders, the Trustee, 

and the Authority shall contest whether an expense, claim, liability, or amount shall be construed 

as a Current Expense under this Agreement based solely on (x) the Citibank/Scotiabank Lenders’ 

actions on the Amendment Effective Date or during the Amendment Period, including (i) 

forbearing, delaying or failing to exercise remedies, (ii) agreeing to a postponement or delay in 

payment of interest or principal, (iii) granting an extension of any maturity date, or (iv) not 

requiring the repayment or reborrowing of any loans or not requiring any loans to be revolving 

loans, or (y) the inclusion in this Agreement as a Potential Default, and the inclusion in the 

Forbearance Agreement as a “Potential Default” (as defined in the Forbearance Agreement) of the 

Authority’s use of moneys from the General Fund to service its debts under the 

Citibank/Scotiabank Lines of Credit. Notwithstanding the foregoing or anything herein to the 

contrary, none of the holders, the Trustee, and the Authority shall contest whether an expense, 

claim, liability, or amount shall be construed as a Current Expense under this Agreement based 

solely on (x) the Citibank/Scotiabank Lenders’ actions on the Amendment Effective Date or during 

the Amendment Period, including (i) forbearing, delaying or failing to exercise remedies, (ii) 

agreeing to a postponement or delay in payment of interest or principal, (iii) granting an extension 

of any maturity date, or (iv) not requiring the repayment or reborrowing of any loans or not 

requiring any loans to be revolving loans, or (y) the inclusion in this Agreement as a Potential 

Default, and the inclusion in the Forbearance Agreement as a “Potential Default” (as defined in 

the Forbearance Agreement) of the Authority’s use of moneys from the General Fund to service 

its debts under the Citibank/Scotiabank Lines of Credit. Notwithstanding the foregoing or anything 

herein to the contrary, none of the holders, the Trustee, and the Authority shall contest whether an 

expense, claim, liability, or amount shall be construed as a Current Expense under this Agreement 

based solely on (x) the Solus/Scotiabank Lenders’ actions on February 3, 2016 (the New Effective 

Date (as defined in the RSA)), during the Amendment Period, or during the time the Support Period 

(as defined in the RSA) is in full force and effect as to each Supporting Creditor Class other than 

GDB, including (i) forbearing, delaying or failing to exercise remedies, (ii) agreeing to a 

postponement or delay in payment of interest or principal, (iii) granting an extension of any 

maturity date, or (iv) not requiring the repayment or reborrowing of any loans or not requiring any 

loans to be revolving loans, or (y) the inclusion in this Agreement as a Potential Default, and the 

inclusion in the RSA as a “Potential Default” (as defined in the RSA) of the Authority’s use of 

moneys from the General Fund to service its debts under the Solus/Scotiabank Lines of Credit. 

The term “daily newspaper“” shall mean a newspaper regularly published in the English 

language on at least five (5) business days in each calendar week and, in the case of a newspaper 

published in the Commonwealth of Puerto Rico, may include a newspaper regularly published in 

the Spanish language on at least five (5) business days in each calendar week. 

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The word “Depositary“” shall mean one or more banks or trust companies duly authorized 

under the laws of the United States of America, or any state thereof or the Commonwealth of 

Puerto Rico to engage in the banking business therein and designated by the Authority as a 

depositary of moneys under the provisions of this Agreement, each such depositary to be a member 

of the Federal Deposit Insurance Corporation and shall also mean the Trustee and Government 

Development Bank for Puerto Rico. 

The term “Deposit Day“” shall mean the date specified in the first paragraph of Section 

507 of this Agreement as the date by which all of the moneys then held to the credit of the Revenue 

Fund shall be withdrawn by the Treasurer and deposited in the manner set forth in said Section. 

The term “Designated Maturity Bonds“” shall mean the indebtedness incurred by the 

Authority under the terms of a separate trust agreement or resolution, which indebtedness has a 

maturity of at least ten (10) years and is secured, as to the unamortized principal thereof, on a 

subordinate basis to the bonds and for which (i) no amortization of principal has been established 

or (ii) the aggregate amount of the amortized principal that has been established is less than the 

principal amount of the indebtedness; provided that interest on said indebtedness and any 

amortized principal of said indebtedness may be payable on a parity, respectively, with interest on 

bonds and Amortization Requirements on term bonds, in which case said interest and amortized 

principal shall be included in the calculation of Principal and Interest Requirements on bonds for 

purposes of this Agreement and shall otherwise be deemed to be, and be payable as, interest and 

Amortization Requirements on bonds for purposes of this Agreement. 

The term “Eighteenth Amendment“” shall refer to the Eighteenth Supplemental 

Agreement, dated as of March 1, 2016, as amended by First Amendment dated June 22, 2016, by 

and between the Authority and the Trustee. 

The term “Executive Director“” shall mean the Executive Director or the Vice Executive 

Director of the Authority for the time being, or if there is no Executive Director or Vice Executive 

Director, then any person designated by the Board or by the by-laws of the Authority to perform 

the functions of the Executive Director. 

The term “Extendible Maturity Bonds“” shall mean bonds the maturities of which, by their 

terms, may be extended by and at the option of the bondholder or the Authority. 

The term “Federally Subsidized Bonds“” shall mean either Build America Bonds or Other 

Subsidy Bonds or both, as the case may be. 

The term “Federal Subsidy“” shall mean a payment made by the Secretary of the 

Department of Treasury to or for the account of the Authority pursuant to the Code in respect of a 

series of bonds constituting Federally Subsidized Bonds. Any Federal Subsidy to be received by 

the Authority in respect of such series of bonds shall be identified as such in the resolution 

authorizing the issuance of such series of bonds to which it relates. 

The term “Federal Subsidy Payments“” shall mean the amount of Federal Subsidy actually 

paid to and received by the Trustee in respect of an interest payment for the series of Federally 

Subsidized Bonds to which it relates. Such Federal Subsidy Payments shall be deposited directly 

into the Bond Service Account in the Sinking Fund. 

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The term “fiscal year“” shall mean the period commencing on the 1st day of July of any 

year and ending on the last day of June of the following year. 

The term “Forbearance Agreement“” shall have the meaning set forth in the third recital of 

the Seventeenth Supplemental Agreement. [This definition from the 16th and 17th Supplemental 

Agreements may no longer be in effect – see footnote 2 on page 51.]

The term “General Fund“” shall mean the Puerto Rico Electric Power Authority General 

Fund, a special fund created and designated by the provisions of Section 503 of this Agreement. 

The term “General Reserve Fund“” shall mean the Puerto Rico Electric Power Authority 

General Reserve Fund, a special fund created and designated by the provisions of Section 511 of 

the 1947 Indenture. 

The term “Government Obligations“” shall mean (i) direct obligations of, or obligations 

the principal of and the interest on which are unconditionally guaranteed by, the United States 

Government, including securities evidencing ownership interests in such obligations or in 

specified portions thereof (which may consist of specific portions of the principal of or interest in 

such obligations), (ii) bonds, debentures or notes issued by any of the following Federal agencies: 

Banks for Cooperatives, Federal Intermediate Credit Banks, Federal Home Loan Banks, ExportImport Bank of the United States, Government National Mortgage Association, Federal Land 

Banks, or the Federal National Mortgage Association (including participation certificates issued 

by such Association) and (iii) all other obligations issued or unconditionally guaranteed as to 

principal and interest by an agency or person controlled or supervised by and acting as an 

instrumentality of the United States Government pursuant to authority granted by the Congress. 

The word “Improvements“” shall mean such improvements, renewals and replacements of 

the System or any part thereof and such extensions and additions thereto as may be necessary or 

desirable, in the judgment of the Board, to keep the same in proper condition for the safe, efficient 

and economic operation thereof and to integrate into the System any unit or part thereof, and shall 

include such electric-power projects as may be authorized to be acquired or constructed by the 

Authority under the provisions of the Authority Act and such improvements, renewals and 

replacements of such properties and the System and such extensions and additions thereto as may 

be necessary or desirable for continuous and efficient service to the public, which shall be financed 

in whole or in substantial part from the proceeds of bonds issued under the provisions of the 1947 

Indenture or this Agreement or from moneys deposited to the credit of the 1947 Construction Fund, 

the Construction Fund or the Renewal and Replacement Fund. 

The term “Independent Consultant“” shall mean the consultant or consulting firm or 

corporation at the time employed by the Authority under the provisions of Section 706 of this 

Agreement to perform and carry out the duties of the Independent Consultant by this Agreement. 

The term “Initial Improvements Period“” shall have the meaning given to it in Section 505. 

The term “Interest Accrual“” shall mean for any period the amount of interest that would 

accrue during such period if such interest accrued ratably on the basis of a year consisting of twelve 

(12) thirty-day months. Unless otherwise provided by resolution of the Authority or an agreement 

supplemental hereto, the monthly accrual in respect of interest on the bonds shall commence on 

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21

the later to occur of the date of issue of the bonds of such Series and the date that is six months 

prior to the due date of such interest and shall end on the first day of the month following the 

relevant Deposit Day. In the case of Variable Rate Bonds, the amount deposited shall be based on 

the sum of the interest accrued through the business day preceding the relevant Deposit Day and 

the interest (calculated at the maximum rate of interest on such Bonds, or if there is no such 

maximum rate, then at the rate on such Bonds on the business day preceding the Deposit Day plus 

one percent (1%)) that would accrue on such Bonds from the Deposit Day to the later to occur of 

the first day of the next calendar month and any interest payment date on such Bonds occurring 

prior to the next Deposit Day. 

The term “Investment Obligations“” shall mean (i) Government Obligations, (ii) 

obligations of any state or territory of the United States or political subdivision thereof (other than 

obligations rated lower than the three highest grades by a nationally recognized rating agency), 

(iii) repurchase agreements with commercial banks fully secured by Government Obligations and 

(iv) any other investment obligations permitted for governmental instrumentalities such as the 

Authority under the laws of the Commonwealth of Puerto Rico which are rated, on the date of 

investment therein, in any of the three highest grades by a nationally recognized rating agency, or 

which are collateralized by any of the other Investment Obligations described herein. 

The term “Net Revenues“” for any particular period shall mean the amount of the excess 

of the Revenues for such period over the Current Expenses for such period. 

The term “1947 Construction Fund“” shall mean the Puerto Rico Electric Power Authority 

Construction Fund, a special fund created and designated by the provisions of Section 401 of the 

1947 Indenture. 

The term “1947 Indenture“” shall mean the Trust Indenture, dated as of January 1, 1947, 

by and between the Authority and The National City Bank of New York (now First National City 

Bank), as trustee, as amended by Supplemental Indentures, dated January 1, 1948, July 1, 1956, 

January 1, 1961, March 1, 1962, March 1, 1965, April 1, 1967, April 1, 1970 and September 1, 

1971, together with all future amendments and all indentures supplemental thereto as therein 

permitted. 

The term “1947 Indenture Bonds“” shall mean the bonds issued under the 1947 Indenture. 

The term “1947 Revenue Fund“” shall mean the Electric Power Authority Electric Revenue 

Fund, a special fund created and designated by the provisions of Section 506 of the 1947 Indenture. 

The term “1947 Sinking Fund“” shall mean the Puerto Rico Electric Power Authority 

Electric Revenue Bonds Sinking Fund, a special fund created and designated by the provisions of 

Section 507 of the 1947 Indenture. 

The term “1947 Trustee“” shall mean the trustee under the 1947 Indenture for the time 

being, whether original or successor. 

The term “Nineteenth Amendment” shall refer to the Nineteenth Supplemental Agreement, 

dated as of April 1, 2017, by and between the Authority and the Trustee.The term “Opinion of 

Counsel“” shall mean a written opinion of counsel who may (except as otherwise expressly 

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22

provided in this Agreement) be counsel for the Authority. Every opinion of counsel required to 

be filed with the Trustee in connection with an application to the Trustee to authenticate bonds 

under this Agreement shall contain the following statements: (i) that the Authority has the legal 

right and power to enter into this Agreement and has duly authorized and validly executed and 

delivered this Agreement and this Agreement is legally valid and binding upon the Authority and 

enforceable in accordance with its terms, (ii) that this Agreement creates a legally valid and 

effective pledge of the Net Revenues, subject only to the lien of the 1947 Indenture, and of the 

moneys, securities and funds held or set aside under this Agreement as security for the bonds, 

subject to the application thereof to the purposes and on the conditions permitted by this 

Agreement and specifying the place or places, if any, where filing or recording of any document 

is necessary in order to make such pledge effective or to continue it in effect, (iii) that the Authority 

has paid all municipal or governmental charges lawfully levied or assessed upon the System or 

any part thereof or upon any Revenues, (iv) that the issuance of the bonds then directed to be 

authenticated and delivered will not violate any provision of law or of the by-laws of the Authority, 

or result in the breach of, or constitute a default under, any agreement, indenture or other 

instrument to which the Authority is a party or by which it may be bound, (v) that no authorization, 

consent or approval or withholding of objection of any governmental body or regulatory authority 

is requisite to the legal issue of said bonds (unless such opinion shall show that no authorization, 

consent or approval or withholding of objection is requisite to the legal issue of said bonds, it shall 

specify and attach any officially authenticated certificates, or other documents, by which such 

authorization, consent or approval or withholding of objection is evidenced), and (vi) that the 

bonds then directed to be authenticated and delivered are legally valid and binding direct 

obligations of the Authority, enforceable in accordance with their terms and the terms of this 

Agreement and have been duly and validly authorized and issued in accordance with law and this 

Agreement. 

The term “Other Subsidy Bonds“” shall mean bonds for which a subsidy or other payment 

made by the Secretary of the Department of Treasury may be made in respect of such bonds other 

than under Section 6431 of the Code. 

The term “Paying Agents“” shall mean with respect to the bonds of each Series the one or 

more banks or trust companies designated in a resolution of the Board or the office or agency of 

the Authority where the coupon bonds and coupons may be presented for payment. 

The term “Potential Default“ shall mean each of the events specified on Schedule 1 of the 

Eighteenth Supplemental Agreement, the occurrence of which would give rise to a default under 

this Agreement.The term “predecessor bonds“” shall mean, with respect to any registered bond 

without coupons, every previous bond evidencing all or a portion of the same debt as that 

evidenced by such registered bond without coupons; and, for the purpose of this definition, any 

bond authenticated and delivered under Section 212 of this Agreement in lieu of a mutilated, 

destroyed or lost bond shall be deemed to evidence the same debt as the mutilated, destroyed or 

lost bond. 

The term “Prerefunded Municipals“” shall mean any bonds or other obligations of any state 

of the United States of America or Puerto Rico or of any agency, instrumentality or local 

governmental unit of any such state or Puerto Rico (a) which are (x) not callable prior to maturity 

or (y) as to which irrevocable instructions have been given to the trustee of such bonds or other 

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23

obligations by the obligor to give due notice of redemption and to call such bonds or other 

obligations for redemption on the date or dates specified in such instructions, (b) which are secured 

as to principal, redemption premium, if any, and interest by a fund consisting only of cash or 

Government Obligations or Time Deposits, secured in the manner set forth in Section 601 of this 

Agreement, which fund 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 (c) as to which the principal of and interest on the Government Obligations or 

Time Deposits, secured in the manner set forth in Section 601 of this Agreement, which have been 

deposited in such fund, along with any cash on deposit in such fund are sufficient to pay principal 

of and interest and redemption premium, if any, on the bonds or other obligations on the maturity 

date or dates thereof or on the redemption date or dates specified in the irrevocable instructions 

referred to in clause (a) of this paragraph, as appropriate. 

The term “Principal Accrual“” shall mean for any period the amount of principal that would 

accrue during such period if such principal accrued ratably on the basis of a year consisting of 

twelve (12) thirty-day months. Unless otherwise provided by resolution of the Authority or an 

agreement supplemental hereto, the monthly accrual in respect of the principal of serial bonds shall 

commence on the first day of the twelfth month preceding the due date of such principal and shall 

end on the first day of the month succeeding the relevant Deposit Day. 

The term “Principal and Interest Requirements“” for any fiscal year, as applied to the bonds 

of any Series issued under this Agreement or the 1947 Indenture, shall mean the sum of: 

(a) the amount required to pay the interest on all outstanding bonds of such Series 

which is payable on January 1 in such fiscal year and on July 1 in the following fiscal year, 

(b) the amount required to pay the principal of all outstanding serial bonds of such 

Series which is payable after July 31 in such fiscal year and on or prior to July 31 in the following 

fiscal year, and 

(c) the Amortization Requirement for the term bonds of such Series for such fiscal 

year. 

The Principal and Interest Requirements for the bonds of any Series issued under this Agreement 

shall be determined, as required from time to time, by the Trustee. In computing the Principal and 

Interest Requirements for any fiscal year for the bonds of any Series, the Trustee shall assume that 

an amount of the term bonds of such Series equal to the Amortization Requirement for the term 

bonds of such Series for such fiscal year will be retired by purchase or redemption on July 1 in the 

following fiscal year. 

For purposes of determining the aggregate Principal and Interest Requirements in the 

covenant as to rates contained in Section 502, the maximum Principal and Interest Requirements 

for purposes of Section 704 and the maximum aggregate Principal and Interest Requirements for 

purposes of Section 712 of this Agreement, the interest rate on Variable Rate Bonds shall be 

assumed to be one hundred ten percent (110%) of the greater of (i) the average interest rate on 

such Variable Rate Bonds during the twelve months ending with the month preceding the date of 

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24

calculation,; or such shorter period that such Variable Rate Bonds shall have been outstanding 

under this Agreement, or (ii) the rate of interest on such Variable Rate Bonds on the date of 

calculation. For purposes of determining the maximum aggregate Principal and Interest 

Requirements and the maximum Principal and Interest Requirements for purposes of Sections 208, 

209 and 210 of this Agreement, the interest rate on Variable Rate Bonds outstanding or proposed 

to be issued on the date of calculation shall be determined in accordance with the formula in the 

previous sentence. If Variable Rate Bonds are payable at the option of the Bondholder and the 

source for said payment is a credit or liquidity facility, the “put” date or dates shall be ignored and 

the stated dates for Amortization Requirements and principal payments thereof shall be used for 

purposes of this calculation. If the Authority has notified the Trustee that a SWAP agreement is 

in effect in respect of Variable Rate Bonds, then for all purposes of this paragraph, except for the 

purpose of determining the aggregate Principal and Interest Requirements in the covenant as to 

rates contained in Section 502 hereof, in the certificate mentioned in clause (d) of Section 208 

hereof and in the covenant contained in Section 704 hereof, the interest rate on such Variable Rate 

Bonds shall be the SWAP rate under such SWAP agreement. 

For purposes of determining the above requirements in the case of Put Bonds, the “put” 

datedates or dates shall be ignored if the source for payment of said put is a credit or liquidity 

facility and the stated dates for Amortization Requirements and principal payments shall be used. 

For purposes of determining the above requirements in the case of Extendible Maturity Bonds, the 

bonds shall be deemed to mature on the later of the stated maturity date or the date to which such 

stated maturity date has been extended. For purposes of determining the above requirements in 

the case of Capital Appreciation Bonds, the principal and interest portions of the Accreted Value 

of Capital Appreciation Bonds becoming due at maturity or by virtue of an Amortization 

Requirement shall be included in the calculations of accrued and unpaid interest and principal 

requirements in such manner and during such period of time as is specified in the resolution 

authorizing such Capital Appreciation Bonds. 

Principal and Interest Requirements on bonds shall be deemed to include the amount 

required to pay interest on outstanding Designated Maturity Bonds and any amortized principal of 

said Designated Maturity Bonds for any fiscal year, if said interest and amortized principal are 

payable, under the trust agreement or resolution providing for said Designated Maturity Bonds, on 

a parity with interest and Amortization Requirements on bonds. 

To the extent all or a portion of the principal of, Amortization Requirements for or interest 

on, any bonds of any Series are payable from moneys irrevocably set aside or deposited irrevocably 

for such purpose with a bank or trust company (which may include the Trustee) or from Investment 

Obligations irrevocably set aside or deposited irrevocably for such purpose with a bank or trust 

company (which may include the Trustee) or Time Deposits, secured in the manner set forth in 

Section 601 of this Agreement, and irrevocably set aside for such purpose, the principal of and the 

interest on which when due will provide sufficient moneys to make such payments, such principal, 

Amortization Requirements or interest shall not be included in determining Principal and Interest 

Requirements; provided, however, that for purposes of the definition of Principal and Interest 

Requirements as used in Sections 502(A)(b) and 502(B)(b), respectively, said definition shall 

include any interest payable from any amount deposited to the credit of the Bond Service Account 

from the proceeds of bonds to pay interest to accrue thereon. The Executive Director or his 

designee shall deliver to the Trustee a certificate describing the principal of, Amortization 

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Requirements for and interest on any bonds for which moneys, Investment Obligations or Time 

Deposits have been set aside or deposited pursuant to this paragraph, and stating that such 

principal, Amortization Requirements and interest should not be included in determining the 

Principal and Interest Requirements. Upon request of the Trustee, the Authority shall cause to be 

delivered to the Trustee a certificate of an independent verification agent as to the sufficiency of 

the maturing principal amounts of any Investment Obligations or Time Deposits, together with 

interest thereon, set aside or deposited pursuant to this paragraph to pay said principal, 

Amortization Requirements and interest. 

For purposes of determining the maximum Principal and Interest Requirements for 

purposes of Sections 208, 209 and 210 of this Agreement, the aggregate Principal and Interest 

Requirements in the covenant as to rates contained in Section 502, the maximum Principal and 

Interest Requirements for purposes of Section 704 and the maximum aggregate Principal and 

Interest Requirements for purposes of Section 712 of this Agreement, on the date of issuance of a 

Federally Subsidized Bonds and for so long as the Trustee shall receive the scheduled amount of 

the Federal Subsidy Payments on or before such interest is payable, all or a portion of the interest 

in respect of one or more series of Federally Subsidized Bonds shall be excluded from the 

calculation of the Principal and Interest Requirement if, and to the extent that the interest thereon 

is payable from a Federal Subsidy. Notwithstanding the foregoing, if the Trustee shall not receive 

the scheduled amount of the Federal Subsidy Payments on or before the date interest on such 

Federally Subsidized Bonds is payable or within thirty (30) of the date such Federal Subsidy 

Payments were scheduled to be received under the then current applicable law and regulations, 

then from and after the occurrence of such failure to receive such Federal Subsidy and until such 

Federal Subsidy Payments shall resume and all prior deficiencies are cured, the exclusion from the 

calculation of the Principal and Interest Requirement set forth in the preceding sentence shall no 

longer be effective for purposes of determining the maximum Principal and Interest Requirements 

for purposes of Sections 208, 209 and 210 of this Agreement, the aggregate Principal and Interest 

Requirements in the covenant as to rates contained in Section 502, the maximum Principal and 

Interest Requirements for purposes of Section 704 and the maximum aggregate Principal and 

Interest Requirements for purposes of Section 712 of this Agreement. 

The term “Potential Default” shall mean each of the events specified on Schedule 1, the 

occurrence of which would give rise to a default under this Agreement.

The term “Put Bonds“” shall mean bonds, other than Variable Rate Bonds, which by their 

terms may be tendered by and at the option of the holder thereof for payment prior to the stated 

maturity thereof. 

The term “Redemption Account“” shall mean the special account created in the Sinking 

Fund by the provisions of Section 507 of this Agreement. 

The term “Renewal and Replacement Fund“” shall mean the Electric Power Authority 

Renewal and Replacement Fund, a special fund created and designated by the provisions of Section 

512 of the 1947 Indenture. 

The term “Required Amending Creditor Group“ refers individually to each of (i) Assured 

Guaranty Corp. and Assured Guaranty Municipal Corp., (ii) National Public Finance Guarantee 

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Corporation, or, (iii) at any given time, Holders (as defined in the RSA) that (A) are party to the 

RSA, and (B) in the aggregate beneficially own a majority of the aggregate principal amount of 

Uninsured Bonds (as that term is defined in the RSA) beneficially owned by Holders (as defined 

in the RSA) then party to the RSA.The term “Required Amending Creditors“” shall mean (i) 

Assured Guaranty Corp., and Assured Guaranty Municipal Corp., (ii) National Public Finance 

Guarantee Corporation, and, (iii) at any given time, Holders (as defined in the RSA) that (A) are 

party to the RSA, and (B) in the aggregate beneficially own a majority of the aggregate principal 

amount of Uninsured Bonds (as that term is defined in the RSA) beneficially owned by Holders 

(as defined in the RSA) then party to the RSA. 

The term “Reserve Account“” shall mean the special account created in the Sinking Fund 

by the provisions of Section 507 of this Agreement. 

The term “Reserve Account Insurance Policy“” shall mean the insurance policy, surety 

bond or other acceptable evidence of insurance, if any, to be deposited in the Reserve Account in 

lieu of or in partial substitution for cash or securities on deposit therein, for the purpose of making 

the payments required to be made from the Reserve Account under Section 510 hereof. The issuer 

providing such insurance shall be a municipal bond insurer that is rated, at the time of deposit into 

the Reserve Account, in one of the three highest rating categories (without regard to gradations 

within a category) by either (i) Standard & Poor’s Corporation or its successor, or Moody’s 

Investors Service, Inc. or its successors or (ii) if both such corporations shall be dissolved or 

liquidated or shall no longer perform the functions of a securities rating agency, a nationally 

recognized rating agency. 

The term “Reserve Account Letter of Credit“” shall mean the irrevocable, transferable 

letter of credit, if any, to be deposited in the Reserve Account in lieu of or in partial substitution 

for cash or securities on deposit therein, for the purpose of making the payments required to be 

made from the Reserve Account under Section 510 hereof. The issuer providing such letter of 

credit shall be a banking association, bank or trust company or branch thereof whose letter of credit 

results in the rating of municipal obligations secured by such letter of credit to be rated, at the time 

of deposit into the Reserve Account, in one of the three highest grades by (i) either Standard & 

Poor’s Corporation or its successor, or Moody’s Investors Service, Inc. or its successor or (ii) if 

both such corporations shall be dissolved or liquidated or shall no longer perform the functions of 

a securities rating agency, a nationally recognized rating agency. 

The term “Reserve Maintenance Fund“” shall mean the Puerto Rico Electric Power 

Authority Reserve Maintenance Fund, a special fund created and designated by the provisions of 

Section 507 of this Agreement. 

The term “Retained General Fund Amount“” shall mean $50,000,000. [This definition 

from the 16th Supplemental Agreement may no longer be in effect – see footnote 2 - page 51.]

The term “Revenue Fund“” shall mean the Puerto Rico Electric Power Authority Power 

Revenue Fund, a special fund created and designated by the provisions of Section 506 of this 

Agreement. 

The word “Revenues“” shall mean all moneys received by the Authority in connection with 

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27

or as a result of its ownership or operation of the System, including the income derived by the 

Authority from the sale of electricity generated or distributed by the System, any proceeds of use 

and occupancy insurance on the System or any part thereof and income from investments made 

under the provisions of the 1947 Indenture and this Agreement, except income from the investment 

of moneys in the 1947 Construction Fund, the Construction Fund, the Capital Improvement Fund, 

the Subordinate Obligations Fund to the extent such income has been derived from the investment 

of moneys in such Fund to be used to pay Subordinate Obligations incurred to pay the cost of any 

work or properties which have not been included by the Authority as part of the System as provided 

in Section 516 hereof, and the Reserve Maintenance Fund which shall be deemed to be a part of 

said Funds, respectively. Except for the purpose of determining the amount of the Revenues in 

the covenant as to rates contained in Section 502 hereof, Revenues shall not include any amounts 

paid to the Authority by a SWAP party in connection with Variable Rate Bonds. 

The term “RSA“” shall have the meaning set forth in the third recital of the 

NineteenthEighteenth Amendment. 

The term “Scheduled Amendment Termination Date” shall mean 11:59 p.m. (prevailing 

Eastern Time) on June 30, 2016.

The term “Scotiabank Credit Agreement“” shall mean that certain Credit Agreement, dated 

as of May 4, 2012, between the Authority, as borrower, the lenders party thereto, and Scotiabank 

de Puerto Rico, as administrative agent, as amended or otherwise modified from time to time. 

The term “Self-insurance Fund” shall mean the Puerto Rico Electric Power Authority Selfinsurance Fund, a special fund created and designated by the provisions of Section 507 of this 

Agreement.

The word “Secretary“” shall mean the Secretary or any Assistant Secretary of the 

Authority, or if there is no secretary or assistant secretary, then any person designated by the Board 

or by the by-laws of the Authority to perform the functions of the Secretary. 

The term “Self-insurance Fund“ shall mean the Puerto Rico Electric Power Authority Selfinsurance Fund, a special fund created and designated by the provisions of Section 507 of this 

Agreement.The term “serial bonds“” shall mean the bonds of a Series which shall be stated to 

mature in annual or semi-annual installments or bonds which are otherwise designated serial bonds 

in a resolution of the Board adopted prior to the issuance of such bonds, and the term “term bonds” 

shall mean the bonds of a Series maturing on July 1 and designated term bonds in a resolution of 

the Board adopted prior to the issuance of such bonds. 

The word “Series“” shall mean either (i) the bonds issued and delivered at any one time 

under the provisions of Sections 208 or 209 of this Agreement or (ii) the refunding bonds issued 

at any one time under the provisions of the second paragraph of Section 210 of this Agreement. 

Bonds issued under the first paragraph of Section 210 of this Agreement to refund serial bonds of 

any Series shall be deemed to constitute a part of the bonds of such Series. 

The term “Series 2015A Bonds” shall mean the Authority’s Power Revenue Bonds, Series 

2015A, issued pursuant to Resolution 4239, adopted by the Authority on June 30, 2015, as 

supplemented by Resolution No. 4246, adopted by the Authority on July 30, 2015.

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The term “Series 2016 Bonds“” shall mean collectively the Authority’s Power Revenue 

Bonds, Series 2016A, Power Revenue Bonds, Series 2016B, Power Revenue Bonds, Series 2016C, 

Power Revenue Bonds, Series 2016D, and Power Revenue Bonds, Series 2016E, issued pursuant 

to Resolution 4338, adopted by the Authority on March 15, 2016, as amended, and Resolution 

4391, adopted by the Authority on June 28, 2016, and sold pursuant to the BPA. 

The term “Sinking Fund“” shall mean the Puerto Rico Electric Power Authority Power 

Revenue Bonds Interest and Sinking Fund, a special fund created and designated by the provisions 

of Section 507 of this Agreement. 

The term “Specified Period Defeasance Fund” shall have the meaning given to it in Section 

517.

The term “Specified Period Principal and Interest Requirements” shall mean the Principal 

and Interest Requirements for all outstanding bonds which accrue and are payable on or before 

January 1, 2015, excluding for purposes of the calculation of such Requirements any Federal 

Subsidy Payments.

The term “Solus“” shall have the meaning given such term in the RSA. 

The term “Solus Credit Agreement“” shall mean that certain Trade Finance Facility 

Agreement, dated as of July 20, 2012, between the Authority and Citibank, N.A. or its transferees 

party thereto from time to time (including Solus), as applicable, as amended or otherwise modified 

from time to time. 

The term “Solus/Scotiabank Lenders“” shall mean Citibank, N.A. or its transferees 

(including Solus), as applicable, and the Lenders (as defined in the Scotiabank Credit Agreement). 

The term “Solus/Scotiabank Lines of Credit“” shall mean the Solus Credit Agreement and 

the Scotiabank Credit Agreement. 

The term “Specified Period Principal and Interest Requirements“ shall mean the Principal 

and Interest Requirements for all outstanding bonds which accrue and are payable on or before 

January 1, 2015, excluding for purposes of the calculation of such Requirements any Federal 

Subsidy Payments. 

The term “Specified Period Defeasance Fund“ shall have the meaning given to it in 

Section 517. 

The term “Subordinate Obligations“ shall mean any obligations of the Authority 

incurred as provided in Section 516 of this Agreement.

The term “Subordinate Obligations Fund“ shall mean the Puerto Rico Electric 

Power Authority Subordinate Obligations Fund, a special fund created and designated by 

Section 507 of this Agreement.The term “Supporting Creditor Class“” refers to (i) GDB1, 

(ii) the Holders, (iii) the Insurers, (iv) the Solus Lenders or (v) Scotiabank and the 

Scotiabank Lenders, each as defined in the RSA. 

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“SWAP agreement“” shall mean an agreement between the Authority and a SWAP party 

whereby the SWAP party agrees to pay to the Authority amounts calculated on the basis of all or 

a portion of the interest on Variable Rate Bonds at or prior to the times such interest is due and 

payable in consideration of the Authority’s payment to the SWAP party of amounts set forth in the 

SWAP agreement. 

“SWAP party“” shall mean a person who is party to a SWAP agreement and whose senior 

obligations are rated at the time of the execution and delivery of such SWAP agreement in one of 

the three highest rating categories (without regard to gradations within a category) by (i) Standard 

& Poor’s Corporation or its successor and (ii) Moody’s Investors Service or its successor. 

“SWAP rate“” shall mean the fixed rate per annum on the principal amount of Variable 

Rate Bonds covered by a SWAP agreement equal to the percentage derived by dividing (i) the sum 

of the amounts in the last twelve months paid by the Authority in respect of interest on such bonds 

and to the SWAP party less the amount paid to the Authority by the SWAP party by (ii) such 

principal amount of Variable Rate Bonds; provided, however, that if such SWAP agreement has 

been in effect for less than twelve months, such percentage shall be multiplied by 360 divided by 

the number of days between the effective date of such SWAP agreement and the date of calculation 

determined on the basis of 30-day months. 

The term “Subordinate Obligations” shall mean any obligations of the Authority incurred 

as provided in Section 516 of this Agreement.

The term “Subordinate Obligations Fund” shall mean the Puerto Rico Electric Power 

Authority Subordinate Obligations Fund, a special fund created and designated by Section 507 of 

this Agreement.

The word “System“” shall mean all the properties presently owned and operated by the 

Authority as a single integrated system, together with all works and properties which may be 

hereafter acquired or constructed by the Authority in connection with the production, distribution 

or sale of electric energy and the acquisition or construction of which shall be financed in whole 

or in part from the proceeds of bonds issued under the provisions of the 1947 Indenture or this 

Agreement or from moneys deposited to the credit of the 1947 Construction Fund, the Construction 

Fund, the Capital Improvement Fund or the Renewal and Replacement Fund or from Subordinate 

Obligations to the extent such works and properties have been included by the Authority as part 

of the System as provided in Section 516 hereof. 

The term “Time Deposits“” shall mean time deposits, certificates of deposit or similar 

arrangements with the Trustee, Government Development Bank for Puerto Rico or any bank or 

trust company which is a member of the Federal Deposit Insurance Corporation having a combined 

capital and surplus aggregating not- less than $100,000,000. 

The word “Treasurer“” shall mean the Treasurer or any Assistant Treasurer of the 

Authority, or if there is no treasurer or assistant treasurer, then any person designated by the Board 

or by the by-laws of the Authority to perform the functions of the Treasurer. 

The word “Trustee“ shall mean the Trustee for the time being, whether original or 

successor.term “Variable Rate Bonds” shall mean bonds issued with a variable, adjustable, 

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convertible or similar interest rate which is not fixed in percentage at the date of issue for the term 

thereof, and which may or may not be convertible to a fixed interest rate for the remainder of their 

term.

The term “Validation Proceeding“” shall mean any validation or other legal proceedings 

in which holders of bonds may have a right to participate under Section 35(c) or (d) of Act No. 4-

2016 of the Legislature of Puerto Rico, approved on February 16, 2016 (as the same may be 

amended, the PREPA Revitalization Act). 

The term “Valuation Date“” shall mean with respect to any Capital Appreciation Bonds 

the date or dates set forth in the resolution authorizing such bonds on which Accreted Values are 

assigned to the Capital Appreciation Bonds. 

The term “Variable Rate Bonds“ shall mean bonds issued with a variable, adjustable, 

convertible or similar interest rate which is not fixed in percentage at the date of issue for the term 

thereof, and which may or may not be convertible to a fixed interest rate for the remainder of their 

term.word “Trustee” shall mean the Trustee for the time being, whether original or successor.

Section 102.Miscellaneous Definitions. Words of the masculine gender shall be deemed 

and construed to include correlative words of the feminine and neuter genders. Unless the context 

shall otherwise indicate, the words “bond”, “coupon”, “owner”, “holder” and “person” shall 

include the plural as well as the singular number, the word “person” shall mean any individual, 

corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated 

organization or government or any agency or political subdivision thereof, and the word “holder” 

or “bondholder” when used herein with respect to bonds issued hereunder shall mean the holder 

or registered owner, as the case may be, of bonds at the time issued and outstanding hereunder. 

Article 2ARTICLE II.

Form, Execution and Registration of Bonds and Conditions for Authentication and Delivery of 

Bonds.

Section 201.Limitations on Issuance of Bonds. No bonds may be issued under the 

provisions of this Agreement except in accordance with the provisions of this Article. 

Section 202.Form of Bonds. The definitive bonds are issuable as coupon bonds or as 

registered bonds without coupons or both. The definitive bonds issued under the provisions of this 

Article shall be substantially in the forms hereinabove set forth, with such appropriate variations, 

omissions and insertions as are permitted or required by this Agreement and with such additional 

changes as may be necessary or appropriate to conform to the provisions of the resolution or 

resolutions providing for the issuance of such bonds. All such bonds may have endorsed thereon 

such legends or text as may be necessary or appropriate to conform to any applicable rules and 

regulations of any governmental authority or of any securities exchange on which the bonds may 

be listed or traded or any usage or requirement of law with respect thereto or as may be authorized 

by the Authority and approved by the Trustee. The form of bonds may be changed as specified in 

said resolution or resolutions to reflect appropriate provisions for the issuance of bonds with 

interest payable other than semi-annually, and may reflect, without limitation, provisions for 

Capital Appreciation Bonds, Variable Rate Bonds, Put Bonds, Extendible Maturity Bonds and 

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other types of bonds, subject to any limitations under the laws of Puerto Rico at the time of the 

issuance of the particular bonds. 

Section 203.Details of Bonds. The bonds shall be dated, shall bear interest until their 

payment, such interest to the maturity thereof being payable semi-annually on the 1st days of 

January and July in each year, and shall be stated to mature (subject to the right of prior 

redemption), all as hereinafter provided. Notwithstanding the previous sentence, bonds may bear 

interest payable other than semi-annually, as may be provided by the resolution or resolutions 

authorizing the issuance of particular bonds, and bonds may include, without limitation, Capital 

Appreciation Bonds, Variable Rate Bonds, Put Bonds, Extendible Maturity Bonds and other types 

of bonds, subject to any limitations under the laws of Puerto Rico at the time of the issuance of the 

particular bonds. 

Each coupon bond shall bear interest from its date. Each registered bond without coupons 

shall bear interest from the interest payment date next preceding the date on which it is 

authenticated, unless authenticated on an interest payment date, in which case it shall bear interest 

from such interest payment date, or, unless authenticated prior to the first interest payment date, 

in which case it shall bear interest from its date; provided, however, that if at the time of 

authentication of any registered bond without coupons interest is in default, such bond shall bear 

interest from the date to which interest shall have been paid. 

The bonds shall be signed by, or bear the facsimile signature of, the Executive Director and 

shall be signed by, or bear the facsimile signature of, the Secretary, and a facsimile of the corporate 

seal of the Authority shall be imprinted on the bonds. 

The coupons attached to the coupon bonds shall be substantially in the form hereinabove 

set forth and shall bear the facsimile signature of the Executive Director. 

In case any officer whose signature or a facsimile of whose signature shall appear on any 

bonds or coupons shall cease to be such officer before the delivery of such bonds, such signature 

or such facsimile shall nevertheless be valid and sufficient for all purposes the same as if he had 

remained in office until such delivery, and also any bond may bear the facsimile signature of or 

may be signed by such persons as at the actual time of the execution of such bond shall be the 

proper officers to sign such bond although at the date of such bond such persons may not have 

been such officers. 

Both the principal of and the interest on the bonds shall be payable in any coin or currency 

of the United States of America which on the respective dates of payment thereof is legal tender 

for the payment of public and private debts. The principal of coupon bonds of each Series and the 

interest on all coupon bonds of such Series shall be payable at the principal offices of the Paying 

Agents designated for the bonds of such Series. The principal of all registered bonds without 

coupons shall be payable only to the registered owner or his legal representative at the principal 

corporate trust office of the Trustee, and payment of the interest on each registered bond without 

coupons shall, except as may otherwise be provided by resolution of the Authority authorizing the 

issuance of any Series of bonds under this Agreement, be made by the Trustee on each interest 

payment date to the person appearing on the registration books of the Authority hereinafter 

provided for as the registered owner thereof (or of any predecessor bond) on the 15th day of the 

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32

month next preceding such interest payment date, by check mailed to such registered owner at his 

address as it appears on such registration books. Except as provided in Section 211 of this 

Agreement, payment of the principal of all bonds shall be made upon the presentation and 

surrender of such bonds as the same shall become due and payable. Payment of the interest on the 

coupon bonds shall be made upon the presentation and surrender of the coupons, if any, 

representing such interest as the same respectively become due and payable. 

Section 204.Authentication of Bonds. Only such of the bonds as shall have endorsed 

thereon a certificate of authentication substantially in the form hereinabove set forth, duly executed 

by the Trustee, shall be entitled to any benefit or security under this Agreement. No bond and no 

coupon appertaining to any coupon bond shall be valid or obligatory for any purpose unless and 

until such certificate of authentication shall have been duly executed by the Trustee, and such 

certificate of the Trustee upon any such bond shall be conclusive evidence that such bond has been 

duly authenticated and delivered under this Agreement. The Trustee’s certificate of authentication 

on any bond shall be deemed to have been duly executed if signed by an authorized officer of the 

Trustee, but it shall not be necessary that the same officer sign the certificate of authentication on 

all of the bonds that may be issued hereunder at any one time. Before authenticating or delivering 

any coupon bonds the Trustee shall detach and cancel all matured coupons, if any, appertaining 

thereto, except any coupons which represent unpaid interest. 

Section 205.Exchange of Coupon Bonds for Registered Bonds. Coupon bonds, upon 

surrender thereof at the principal office of the Trustee with all unmatured coupons and all matured 

coupons in default, if any, appertaining thereto, may, at the option of the holder thereof, be 

exchanged for an equal aggregate principal amount of registered bonds without coupons of the 

same Series and maturity, of any denomination or denominations authorized by this Agreement, 

bearing interest at the same rate, and, with the exception of the differences between the form of 

coupon bonds and the form of registered bonds without coupons which are set forth in the preamble 

of this Agreement, in the same form as the coupon bonds surrendered for exchange. 

Registered bonds without coupons, upon surrender thereof at the principal office of the 

Trustee, together with an assignment duly executed by the registered owner or his attorney or legal 

representative in such form as shall be satisfactory to the Trustee, may, at the option of the 

registered owner thereof, be exchanged for an equal aggregate principal amount of coupon bonds 

of the same Series (if authorized for such Series) and maturity, bearing interest at the same rate 

and having attached thereto coupons representing all unpaid interest due or to become due thereon, 

or of registered bonds without coupons of the same Series and maturity, of any denomination or 

denominations authorized by this Agreement, and bearing interest at the same rate, and in either 

case, with the exception of the differences between the form of coupon bonds and the form of 

registered bonds without coupons which are set forth in the preamble of this Agreement, in the 

same form as the registered bonds without coupons surrendered for exchange. 

The Authority shall make provision for the exchange of bonds at the principal office of the 

Trustee. 

Section 206.Negotiation of Coupon Bonds. Title to any coupon bond and to any interest 

coupon shall pass by delivery in the same manner as a negotiable instrument payable to bearer. 

The Trustee as Bond Registrar shall keep books for the registration of and for the registration of 

Case:19-00391-LTS Doc#:118-2 Filed:01/10/23 Entered:01/10/23 21:08:06 Desc:

Exhibit B Page 46 of 114

Case:17-03283-LTS Doc#:24532-3 Filed:06/12/23 Entered:06/12/23 19:11:54 Desc:

Exhibit 3 Page 184 of 252
33

transfers of bonds as provided in this Agreement. The transfer of any registered bond without 

coupons may be registered only upon the books kept for the registration of and registration of 

transfers of bonds upon surrender thereof to the Bond Registrar together with an assignment duly 

executed by the registered owner or his attorney or legal representative in such form as shall be 

satisfactory to the Bond Registrar. Upon any such registration of transfer the Authority shall 

execute and the Trustee shall authenticate and deliver in exchange for such bond a new registered 

bond or bonds without coupons registered in the name of the transferee, of any denomination or 

denominations authorized by this Agreement, or, at the option of the transferee and if coupon 

bonds are authorized for the same Series ofas such bond, coupon bonds with coupons attached 

representing all unpaid interest due or to become due thereon, in an aggregate principal amount 

equal to the principal amount of such registered bond without coupons, of the same Series and 

maturity and bearing interest at the same rate. 

In all cases in which bonds shall be exchanged or the transfer of registered bonds without 

coupons shall be registered hereunder, the Authority shall execute and the Trustee shall 

authenticate and deliver at the earliest practicable time bonds in accordance with the provisions of 

this Agreement. All registered bonds without coupons surrendered in any such exchange or 

registration of transfer shall forthwith be cancelled by the Trustee. All coupon bonds and 

unmatured coupons surrendered in any such exchange or registration of transfer shall be retained 

by the Trustee in its custody. The Authority or the Trustee may make a charge for every such 

exchange or registration of transfer of bonds sufficient to reimburse it for any tax or other 

governmental charge required to be paid with respect to such exchange or registration of transfer, 

but no other charge shall be made to any bondholder for the privilege of exchanging or registering 

the transfer of bonds under the provisions of this Agreement. Neither the Authority nor the Trustee 

shall, except as may otherwise be provided by resolution of the Authority authorizing the issuance 

of any Series of bonds under this Agreement, be required to make any such exchange or 

registration of transfer of bonds, during the fifteen (15) days immediately preceding anany interest 

payment date on the bonds or, in the case of any proposed redemption of bonds, immediately 

preceding the date of first publication of notice of such redemption (or, if all the bonds to be 

redeemed are issuable as registered bonds without coupons, immediately preceding the date of 

mailing of notice of such redemption), or after such bond or any portion thereof has been selected 

for redemption. 

Section 207.Ownership of Registered Bonds. As to any registered bond without coupons, 

the person in whose name the same shall be registered shall be deemed and regarded as the absolute 

owner thereof for all purposes, and payment of or on account of the principal of and the premium, 

if any, and the interest on any such bond shall be made only to the registered owner thereof or his 

legal representative. All such payments shall be valid and effectual to satisfy and discharge the 

liability upon such bond including the interest thereon to the extent of the sum or sums so paid. 

The Authority, the Trustee, the Bond RegisterRegistrar and the Paying Agents may deem and treat 

the bearer of any coupon bond and the bearer of any coupon appertaining to any coupon bond as 

the absolute owner of such bond or coupon, as the case may be, whether such bond or coupon shall 

be overdue or not, for the purpose of receiving payment thereof and for all other purposes 

whatsoever, and neither the Authority, the Trustee, the Bond Registrar nor the Paying Agents shall 

be affected by any notice to the contrary. 

Any person in possession of any coupon bond or of any coupon appertaining to any coupon 

Case:19-00391-LTS Doc#:118-2 Filed:01/10/23 Entered:01/10/23 21:08:06 Desc:

Exhibit B Page 47 of 114

Case:17-03283-LTS Doc#:24532-3 Filed:06/12/23 Entered:06/12/23 19:11:54 Desc:

Exhibit 3 Page 185 of 252
34

bond is hereby authorized to represent himself as the absolute owner of such bond or coupon, as 

the case may be, and is hereby granted power to transfer absolute title thereto by delivery thereof 

to a bona fide purchaser for value (present or antecedent) without notice of prior defenses or 

equities or claims of ownership enforceable against his transferor or any person in the chain of title 

and before the maturity of such bond. Any registered owner of any registered bond without 

coupons is hereby granted power to transfer absolute title thereto by assignment thereof to a bona 

fide purchaser for value (present or antecedent) without notice of prior defenses or equities or 

claims of ownership enforceable against his assignor or any person in the chain of title and before 

the maturity of such bond. Every prior holder or owner of any bond or of any coupon appertaining 

to any coupon bond shall be deemed to have waived and renounced all of his equities or rights 

therein in favor of every such bona fide purchaser, and every such bona fide purchaser shall acquire 

absolute title thereto and to all rights represented thereby. 

Section 208.Issuance of Revenue Bonds to Pay Cost of Improvements. Revenue bonds of 

the Authority may be issued under and secured by this Agreement, subject to the conditions 

hereinafter provided in this Section, from time to time for the purpose of paying all or any part of 

the cost of any Improvements, including the repayment of moneys advanced for paying such cost 

and, if deemed necessary by the Board, the payment of the interest to accrue on such moneys 

advanced to the date of such payment and for providing moneys for deposit to the credit of the 

Reserve Account. 

Before any bonds shall be issued under the provisions of this Section, the Board shall adopt 

a resolution or resolutions authorizing the issuance of such bonds, fixing the amount and the details 

thereof, describing in brief and general terms the Improvements which are to be acquired or 

constructed or which were acquired or constructed from any advances of moneys to be repaid from 

the proceeds of such bonds, and specifying the amount, if any, of the proceeds of such bonds to be 

deposited to the credit of the Reserve Account. The bonds of each Series issued under the 

provisions of this Section shall be designated “‘Puerto Rico Electric Power Authority Power 

Revenue Bonds, Series ......”’ (inserting a year or a letter to identify the particular Series), shall be 

issued in such form, shall be in such denominations, shall be dated, shall bear interest at a rate or 

rates not exceeding the maximum rate then permitted by law, shall be stated to mature on July 1 

as to term bonds or annually on January 1 or July 1 or semi-annually on January 1 and July 1 as to 

serial bonds, in such year or years, not later than fifty (50) years from their date, shall be made 

redeemable at such times and prices (subject to the provisions of Article III of this Agreement), 

shall be numbered, shall have such Paying Agents, and the term bonds of such Series shall have 

such Amortization Requirements, all as may be provided by resolution or resolutions adopted by 

the Board prior to the issuance of such bonds. Except as to any differences in the maturities thereof 

or the rate or rates of interest or the provisions for redemption, such bonds shall be on a parity with 

and shall be entitled to the same benefits and security under this Agreement as all other bonds 

issued under this Agreement. 

Before any Variable Rate Bonds shall be issued under the provisions of this Section, the 

Board shall adopt a resolution specifying, without limitation, the interest rate calculation methods 

and any conversion features, and any credit or liquidity facility which may be drawn upon to make 

principal and interest payments on the Variable Rate Bonds. The Variable Rate Bonds may 

provide that the owner of any such Bond may demand payment of principal and interest within a 

stated period after delivering notice to a designated agent for the Authority and providing a copy 

Case:19-00391-LTS Doc#:118-2 Filed:01/10/23 Entered:01/10/23 21:08:06 Desc:

Exhibit B Page 48 of 114

Case:17-03283-LTS Doc#:24532-3 Filed:06/12/23 Entered:06/12/23 19:11:54 Desc:

Exhibit 3 Page 186 of 252
35

of the notice with the tender of the Variable Rate Bond to such agent. The designated agent for 

the Authority, in accordance with the terms of a remarketing or placement agreement, may provide 

for the resale or redelivery of the Variable Rate Bonds on behalf of the Authority at a price 

provided for in the agreement. If the Variable Rate Bonds shall not be resold or redelivered within 

a stated period, the agent for the Authority may be authorized to draw upon a previously executed 

credit or liquidity facility of one or more banks or other financial or lending institutions for 

payment of interest and principal for a particular Series of Variable Rate Bonds to which such 

credit or liquidity facility shall pertain. The particular form or forms of such demand provisions, 

the period or periods for payment of principal and interest after delivery of notice, the appointment 

of the agent for the Authority, the terms and provisions for the remarketing or placement 

agreement, and the terms and provisions of the credit or liquidity facility, including the terms of 

any lien on Revenues in connection with the credit or liquidity facility not inconsistent with Section 

712 hereof, shall be as designated by a resolution of the Board pertaining to the Variable Rate 

Bonds to which such terms and provisions are applicable prior to the issuance thereof. Before any 

Put Bonds shall be issued under the provisions of this Section, the Board shall adopt a resolution 

which may provide for some of the above terms and provisions. Before any Extendible Maturity 

Bonds shall be issued under the provisions of this Section, the Board shall adopt a resolution which 

shall set forth the terms and conditions of the exercise by the bondholders or the Authority of any 

option to extend the maturity of said bonds. Before any Capital Appreciation Bonds shall be issued 

under the provisions of this Section, the Board shall adopt a resolution specifying the Valuation 

Dates, the Accreted Values on such dates, the manner in which and the period during which 

principal and interest shall be deemed to accrue on such bonds for purposes of the definition of 

“Principal and Interest Requirements” and the amount of any deposit required for the Reserve 

Account in accordance with Section 507 hereof. 

Prior to the issuance of any Federally Subsidized Bonds, the Board shall adopt a resolution 

identifying the details of such bonds, including, without limitation, the rate or rates of interest to 

be paid on such bonds, the source or sources and the amount of the Federal Subsidy expected to 

be received by the Authority in respect of such Series of Federally Subsidized Bonds, whether the 

amounts received from such Federal Subsidy are to be pledged solely to the owners of such Series 

of Federally Subsidized Bonds or to the owners of all outstanding bonds and a covenant by the 

Authority to take such actions as are necessary to ensure receipt of such Federal Subsidy. 

Such bonds shall be executed substantially in the form and manner hereinabove set forth 

and shall be deposited with the Trustee for authentication, but before the Trustee shall authenticate 

and deliver such bonds there shall be filed with the Trustee the following; provided, however, that 

the certificate referred to in clause (c) below shall not be required to be delivered in connection 

with the issuance of the Series 2016 Bonds: 

(a) a copy, certified by the Secretary, of the resolution or resolutions mentioned above; 

(b) a copy, certified by the Secretary, of the resolution of the Board awarding such 

bonds, specifying the interest rate for each of such bonds and directing the authentication and 

delivery of such bonds to or upon the order of the purchasers mentioned therein upon payment of 

the purchase price therein set forth and the accrued interest on such bonds; 

(c) a certificate, signed by the Executive Director and approved by the Consulting 

Case:19-00391-LTS Doc#:118-2 Filed:01/10/23 Entered:01/10/23 21:08:06 Desc:

Exhibit B Page 49 of 114

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Exhibit 3 Page 187 of 252
36

Engineers, setting forth: 

(i) the amount of the Net Revenues for any twelve (12) consecutive calendar 

months out of the eighteen (18) calendar months immediately preceding the date of the 

issuance of such bonds, adjusted to reflect the moneys which would have been received if 

the rate schedule in effect on the date of the issuance of such bonds had been in effect 

throughout such twelve (12) calendar months, 

(ii) the amount of the maximum aggregate Principal and Interest Requirements 

for any fiscal year thereafter on account of all 1947 Indenture Bonds then outstanding and 

all bonds then outstanding under this Agreement, 

(iii) the amount of the maximum aggregate Principal and Interest Requirements 

for any fiscal year thereafter on account of all 1947 Indenture Bonds then outstanding and 

all bonds then outstanding under this Agreement and the bonds then to be issued hereunder, 

(iv) his estimate of the Net Revenues for each of the five (5) fiscal years 

immediately following the fiscal year in which the issuance of such bonds occurs, taking 

into account the rate schedule in effect on the date of the issuance of such bonds and any 

rate schedule the Authority has covenanted to put in effect during such five (5) fiscal years, 

(v) his estimate of the average annual Net Revenues for such five (5) fiscal 

years, taking into account the rate schedules referred to in item (iv) of this clause (c), 

(vi) the percentage derived by dividing the amount in item (i) of this clause (c) 

by the amount shown in item (ii) of said clause, and 

(vii) the percentage derived by dividing the amount in item (v) of this clause (c) 

by the amount shown in item (iii) of said clause; 

(d) if any of the 1947 Indenture Bonds are outstanding, a certificate, signed by the 

Executive Director and approved by the Consulting Engineers, to the effect that the sum 

determined by the Authority, with the approval of the Consulting Engineers, as the proper amount 

to be transferred each month from the 1947 Revenue Fund to the credit of the Renewal and 

Replacement Fund is not less than one-twelfth (1/12) of the maximum Principal and Interest 

Requirements for any fiscal year thereafter to and including the fiscal year in which the last 

maturity of any outstanding 1947 Indenture Bonds occurs on account of all bonds then outstanding 

under this Agreement and the bonds then to be issued hereunder; and 

(e) an Opinion of Counsel stating that all conditions precedent to the delivery of such 

bonds have been fulfilled. 

When the documents mentioned above in this Section shall have been filed with the Trustee 

and when the bonds described in the resolutions mentioned in clauses (a) and (b) of this Section 

shall have been executed and authenticated as required by this Agreement, the Trustee shall deliver 

such bonds at one time to or upon the order of the purchasers mentioned in the resolution 

mentioned in said clause (b), but only upon payment to the Trustee of the purchase price of such 

bonds and the accrued interest. The Trustee shall be entitled to rely upon such resolutions as to all 

Case:19-00391-LTS Doc#:118-2 Filed:01/10/23 Entered:01/10/23 21:08:06 Desc:

Exhibit B Page 50 of 114

Case:17-03283-LTS Doc#:24532-3 Filed:06/12/23 Entered:06/12/23 19:11:54 Desc:

Exhibit 3 Page 188 of 252
37

matters stated therein. The Trustee, however, shall not authenticate and deliver such bonds unless 

each of the percentages shown in items (vi) and (vii) of the certificate mentioned in clause (c) of 

this Section is not less than one hundred twenty per centum (120%); provided, however, that such 

requirement shall not apply in connection with the issuance of the Series 2016 Bonds. 

The proceeds (excluding accrued interest but including any premium) of such bonds shall 

be deposited as is required by the resolution or resolutions authorizing the issuance of such bonds; 

provided, however, that any balance of such proceeds remaining after providing for (i) any 

repayment of moneys advanced to the Authority, including any payment of interest accrued on 

such moneys advanced to the date of such payment, (ii) any deposit to the credit of the Reserve 

Account, and (iii) any deposit to the Bond Service Account on account of interest on such bonds 

in accordance with clause (f) of Section 403 of this Agreement and (iv) any payment of expenses 

incident to the financing shall be paid to the Authority for deposit to the credit of the Construction 

Fund. 

All moneys received as accrued interest on bonds issued under the provisions of this 

Section shall be deposited with the Trustee to the credit of the Bond Service Account. 

Section 209.Issuance of Revenue Bonds for any Proper Corporate Purpose. After the 

outstanding 1947 Indenture Bonds have been paid or provision has been made for their payment 

and the release of the 1947 Indenture, in addition to any other bonds which may be issued under 

the provisions of this Article, revenue bonds of the Authority may be issued under and secured by 

this Agreement, subject to the conditions hereinafter provided in this Section, from time to time 

for any proper corporate purpose of the Authority (other than for the purpose of refunding 

outstanding bonds of the Authority other than the Series 2016 Bonds or for the purpose of 

providing funds to pay any part of the cost of Improvements or for repaying advances for such 

purpose). 

Before any bonds shall be issued under the provisions of this Section, the Board shall adopt 

a resolution or resolutions authorizing the issuance of such bonds, fixing the amount and the details 

thereof and setting forth the purpose for which such bonds are to be issued. The bonds of each 

Series issued under the provisions of this Section shall be designated “‘Puerto Rico Electric Power 

Authority Power Revenue Bonds, Series . . . ..”’ (inserting a year or a letter to identify the particular 

Series), shall be issued in such form, shall be in such denominations, shall be dated, shall bear 

interest at a rate or rates not exceeding the maximum rate then permitted by law, shall be stated to 

mature on July 1 as to term bonds or annually on January 1 or July 1 or semi-annually on January 

1 and July 1 as to serial bonds, in such year or years, not later than fifty (50) years from their date, 

shall be made redeemable at such times and prices (subject to the provisions of Article III of this 

Agreement), shall be numbered, shall have such Paying Agents and the term bonds of such Series 

shall have such Amortization Requirements, all as may be provided by resolution or resolutions 

adopted by the Board prior to the issuance of such bonds. Except as to any differences in the 

maturities thereof or the rate or rates of interest or the provisions for redemption, such bonds shall 

be on a parity with and shall be entitled to the same benefits and security under this Agreement as 

all other bonds issued under this Agreement. 

Before any Variable Rate Bonds shall be issued under the provisionprovisions of this 

Section, the Board shall adopt a resolution specifying, without limitation, the interest rate 

Case:19-00391-LTS Doc#:118-2 Filed:01/10/23 Entered:01/10/23 21:08:06 Desc:

Exhibit B Page 51 of 114

Case:17-03283-LTS Doc#:24532-3 Filed:06/12/23 Entered:06/12/23 19:11:54 Desc:

Exhibit 3 Page 189 of 252
38

calculation methods and any conversion features, and any credit or liquidity facility which may be 

drawn upon to make principal and interest payments on the Variable Rate Bonds. The Variable 

Rate Bonds may provide that the owner of any such bondBond may demand payment of principal 

and interest within a stated period after delivering notice to a designated agent for the Authority 

and providing a copy of the notice with the tender of the Variable Rate Bond to such agent. The 

designated agent for the Authority, in accordance with the terms of a remarketing or placement 

agreement, may provide for the resale or redelivery of the Variable Rate Bonds on behalf of the 

Authority at a price provided for in the agreement. If the Variable Rate Bonds shall not be resold 

or redelivered within a stated period, the agent for the Authority may be authorized to draw upon 

a previously executed credit or liquidity facility of one or more banks or other financial or lending 

institutions for payment of interest and principal for a particular Series of Variable Rate Bonds to 

which such credit or liquidity facility shall pertain. The particular form or forms of such demand 

provisions, the period or periods for payment of principal and interest after delivery of notice, the 

appointment of the agent for the Authority, the terms and provisions offor the remarketing or 

placement agreement, and the terms and provisions of the credit or liquidity facility, including the 

terms of any lien on Revenues in connection with the credit or liquidity facility not inconsistent 

with Section 712 hereof, shall be as designated by a resolution of the Board pertaining to the 

Variable Rate Bonds to which such terms and provisions are applicable adopted prior to the 

issuance thereof. Before any Put Bonds shall be issued under the provisions of this Section, the 

Board shall adopt a resolution which may provide for some of the above terms and provisions. 

Before any Extendible Maturity Bonds shall be issued under the provisions of this Section, the 

Board shall adopt a resolution which shall set forth the terms and conditions of the exercise by the 

bondholders ofor the Authority of any option to extend the maturity of said bonds. Before any 

Capital Appreciation Bonds shall be issued under the provisions of this Section, the 

AuthorityBoard shall adopt a resolution specifying the Valuation Dates, the Accreted Values on 

such dates, the manner in which and the period during which principal and interest shall be deemed 

to accrue on such bonds for purposes of the definition of “Principal and Interest Requirements” 

and the amount of any deposit required for the Reserve Account in accordance with Section 507 

hereof. 

Prior to the issuance of any Federally Subsidized Bonds, the Board shall adopt a resolution 

identifying the details of such bonds, including, without limitation, the rate or rates of interest to 

be paid on such bonds, the source or sources and the amount of the Federal Subsidy expected to 

be received by the Authority in respect of such Series of Federally Subsidized Bonds, whether the 

amounts received from such Federal Subsidy are to be pledged solely to the owners of such Series 

of Federally Subsidized Bonds or to the owners of all outstanding bonds and a covenant by the 

Authority to take such actions as are necessary to ensure receipt of such Federal Subsidy. 

Such bonds shall be executed substantially in the form and manner hereinabove set forth 

and shall be deposited with the Trustee for authentication, but before the Trustee shall authenticate 

and deliver such bonds there shall be filed with the Trustee the following; provided, however, that 

the certificate referred to in clause (c) below shall not be required to be delivered in connection 

with the issuance of the Series 2015A Bonds or the Series 2016 Bonds: 

(a) a copy, certified by the Secretary, of the resolution or resolutions mentioned above; 

(b) a copy, certified by the Secretary, of the resolution of the Board awarding such 

Case:19-00391-LTS Doc#:118-2 Filed:01/10/23 Entered:01/10/23 21:08:06 Desc:

Exhibit B Page 52 of 114

Case:17-03283-LTS Doc#:24532-3 Filed:06/12/23 Entered:06/12/23 19:11:54 Desc:

Exhibit 3 Page 190 of 252
39

bonds, specifying the interest rate for each of such bonds and directing the authentication and 

delivery of such bonds to or upon the order of the purchasers mentioned therein upon payment of 

the purchase price therein set forth and the accrued interest on such bonds; 

(c) a certificate, signed by the Executive Director and approved by the Consulting 

Engineers, setting forth: 

(i) the amount of the Net Revenues for any twelve (12) consecutive calendar 

months out of the eighteen (18) calendar months immediately preceding the date of the issuance 

of such bonds, adjusted to reflect the moneys which would have been received if the rate schedule 

in effect on the date of the issuance of such bonds had been in effect throughout such twelve (12) 

calendar months, 

(ii) the amount of the maximum aggregate Principal and Interest Requirements 

for any fiscal year thereafter on account of all bonds then outstanding under this Agreement, 

(iii) the amount of the maximum aggregate Principal and Interest Requirements 

for any fiscal year thereafter on account of all bonds then outstanding under this Agreement and 

the bonds then to be issued hereunder, 

(iv) his estimate of the Net Revenues for each of the five (5) fiscal years 

immediately following the fiscal year in which the issuance of such bonds occurs, taking into 

account the rate schedule in effect on the date of the issuance of such bonds and any rate schedule 

the Authority has covenanted to put in effect during such five (5) fiscal years, 

(v) his estimate of the average annual Net Revenues for such five (5) fiscal 

years, taking into account the rate schedules referred to in item (iv) of this clause (c), 

(vi) the percentage derived by dividing the amount in item (i) of this clause (c) 

by the amount shown in item (ii) of said clause, and 

(vii) the percentage derived by dividing the amount in item (v) of this clause (c) 

by the amount shown in item (iii) of said clause; and 

(d) an Opinion of Counsel stating that all conditions precedent to the delivery of such 

bonds have been fulfilled. 

When the documents mentioned above in this Section shall have been filed with the Trustee 

and when the bonds described in the resolutions mentioned in clauses (a) and (b) of this Section 

shall have been executed and authenticated as required by this Agreement, the Trustee shall deliver 

such bonds at one time to or upon the order of the purchasers mentioned in the resolution 

mentioned in said clause (b), but only upon payment to the Trustee of the purchase price of such 

bonds and the accrued interest. The Trustee shall be entitled to rely upon such resolutions as to all 

matters stated therein. The Trustee, however, shall not authenticate and deliver such bonds unless 

each of the percentages shown in items (vi) and (vii) of the certificate mentioned in clause (c) of 

this Section is not less than one hundred twenty per centum (120%),; provided, however, that such 

requirement shall not apply in connection with the issuance of the Series 2015A Bonds or the 

Series 2016 Bonds. 

The proceeds (excluding accrued interest but including any premium) of such bonds shall 

be deposited as is required by the resolution or resolutions authorizing the issuance of such bonds. 

All moneys received as accrued interest on bonds issued under the provisions of this 

Case:19-00391-LTS Doc#:118-2 Filed:01/10/23 Entered:01/10/23 21:08:06 Desc:

Exhibit B Page 53 of 114

Case:17-03283-LTS Doc#:24532-3 Filed:06/12/23 Entered:06/12/23 19:11:54 Desc:

Exhibit 3 Page 191 of 252
40

Section shall be deposited with the Trustee to the credit of the Bond Service Account. 

Section 210.Issuance of Revenue Refunding Bonds to Refund all 1947 Indenture Bonds 

and Bonds Issued Under this Agreement. If at any time the Board shall determine that the moneys 

in the Sinking Fund available for such purpose will not be sufficient for paying at their maturity 

the serial bonds of any Series which will mature within one year thereafter, revenue refunding 

bonds of the Authority may be issued under and secured by this Agreement, subject to the 

conditions hereinafter provided in this Section, for the purpose of providing funds for refunding 

such bonds and, if deemed necessary by the Board, for paying the interest to accrue thereon to 

their maturity and any expenses in connection with such refunding. Before any bonds shall be 

issued under the provisions of this paragraph the Board shall adopt a resolution or resolutions 

authorizing the issuance of such bonds, fixing the amount and the details thereof, and describing 

the bonds to be refunded. Such revenue refunding bonds shall be deemed to constitute a part of 

the term bonds, if any, of such Series and shall mature at the same time and shall be subject to 

redemption at the same times and prices as such term bonds or, in case all the outstanding bonds 

of such Series shall be serial bonds, such revenue refunding bonds shall mature on the 1st day of 

July in a year not earlier than one year after the last maturing installment of the bonds of such 

Series and not later than fifty (50) years from their date, shall be deemed to be termterms bonds of 

such Series and shall be made redeemable at such times and prices (subject to the provisions of 

Article III of this Agreement), all as may be provided by the resolution or resolutions authorizing 

the issuance of such bonds. Such revenue refunding bonds shall be designated, shall be issued in 

such form, shall be dated and shall bear interest at a rate not exceeding the maximum rate then 

permitted by law, all as may be provided by resolution or resolutions adopted by the Board prior 

to the issuance of such bonds. 

Revenue refunding bonds of the Authority may also be issued under and secured by this 

Agreement, subject to the conditions hereinafter provided in this Section, from time to time, for 

the purpose of providing funds, with any other available funds, for redeeming prior to or at their 

maturity or maturities all of the outstanding 1947 Indenture Bonds, any 1947 Indenture Bonds 

issued for a purpose for which moneys may be expended from the Renewal and Replacement Fund, 

all or any part of the outstanding bonds of any Series or outstanding Designated Maturity Bonds, 

including the payment of any redemption premium thereon, and, if deemed necessary by the Board, 

for paying the interest to accrue thereon to the date fixed for their redemption or their maturity and 

any expenses in connection with such refunding, and for the purpose of providing moneys for 

deposit to the credit of the Reserve Account. Before any bonds shall be issued under the provisions 

of this paragraph, the Board shall adopt a resolution authorizing the issuance of such bonds, fixing 

the amount and the details thereof and describing the bonds to be redeemed or paid. Such revenue 

refunding bonds shall be designated, shall be issued in such form, shall be in such denominations, 

shall be dated, shall bear interest at a rate or rates not exceeding the maximum rate then permitted 

by law, shall be stated to mature on July 1 as to term bonds or annually on January 1 or July 1 or 

semi-annually on January 1 and July 1 as to serial bonds in such year or years, not later than fifty 

(50) years from their date, and shall be made redeemable at such times and prices (subject to the 

provisions of Article III of this Agreement), shall be numbered, shall have such Paying Agents, 

and any term bonds of such Series shall have such Amortization Requirements, all as may be 

provided by resolution or resolutions adopted by the Board prior to the issuance of such bonds. 

Except as to any differences in the maturities thereof or the rate or rates of interest or the provisions 

for redemption, such revenue refunding bonds shall be on a parity with and shall be entitled to the 

same benefit and security of this Agreement as all other bonds issued under this Agreement. 

Case:19-00391-LTS Doc#:118-2 Filed:01/10/23 Entered:01/10/23 21:08:06 Desc:

Exhibit B Page 54 of 114

Case:17-03283-LTS Doc#:24532-3 Filed:06/12/23 Entered:06/12/23 19:11:54 Desc:

Exhibit 3 Page 192 of 252
41

Before any Variable Rate Bonds shall be issued under the provisions of this Section, the 

Board shall adopt a resolution specifying, without limitation, the interest rate calculation methods 

and any conversion features, and any credit or liquidity facility which may be drawn upon to make 

principal and interest payments on the Variable Rate Bonds. The Variable Rate Bonds may 

provide that the owner of any such Bond may demand payment of principal and interest from the 

Authority within a stated period after delivering notice to a designated agent for the Authority and 

providing a copy of the notice with the tender of the Variable Rate Bond to such agent. The 

designated agent for the Authority, in accordance with the terms of a remarketing or placement 

agreement, may provide for the resale or redelivery of the Variable Rate Bonds on behalf of the 

Authority at a price provided for in the agreement. If the Variable Rate Bonds shall not be resold 

or redelivered within a stated period, the agent for the Authority may be authorized to draw upon 

a previously executed credit or liquidity facility of one or more banks or other financial or lending 

institutions for payment of interest and principal for a particular Series of Variable Rate Bonds to 

which such credit or liquidity facility shall pertain. The particular form or forms of such demand 

provisions, the period or periods for payment of principal and interest after delivery of notice, the 

appointment of the agent for the Authority, the terms and provisions offor the remarketing or 

placement agreement, and the terms and provisions of the credit or liquidity facility, including the 

terms of any lien on Revenues in connection with the credit or liquidity facility not inconsistent 

with Section 712 hereof, shall be as designated by a resolution of the Board pertaining to the 

Variable Rate Bonds to which such terms and provisions are applicable adopted prior to the 

issuance thereof. Before any Put Bonds shall be issued under the provisions of this Section, the 

Board shall adopt a resolution which may provide for some of the above terms and provisions. 

Before any Extendible Maturity Bonds shall be issued under the provisions of this Section, the 

Board shall adopt a resolution which shall set forth the terms and conditions of the exercise by the 

bondholders or the Authority of any option to extend the maturity of said bonds. Before any 

Capital Appreciation Bonds shall be issued under the provisions of this Section, the 

AuthorityBoard shall adopt a resolution specifying the Valuation Dates, the Accreted Values on 

such dates, the manner in which and the period during which principal and interest shall be deemed 

to accrue on such bonds for purposes of the definition of “Principal and Interest Requirements” 

and the amount of any deposit required for the Reserve AmountAccount in accordance with 

Section 507 hereof. 

Revenue refunding bonds issued under the provisions of this Section shall be executed 

substantially in the form and manner hereinabove set forth and shall be deposited with the Trustee 

for authentication, but before the Trustee shall authenticate and deliver such bonds there shall be 

filed with the Trustee the following: 

(a) a copy, certified by the Secretary, of the resolution or resolutions mentioned above; 

(b) a copy, certified by the Secretary, of the resolution adopted by the Board awarding 

such bonds, specifying the interest rate for each of such bonds and directing the authentication and 

delivery of such bonds to or upon the order of the purchasers mentioned therein upon payment of 

the purchase price therein set forth and the accrued interest on such bonds; 

(c) in case such bonds are to be issued for the purpose of providing funds for 

redeeming all of the outstanding 1947 Indenture Bonds or any 1947 Indenture Bonds issued for a 

purpose for which moneys may be expended from the Renewal and Replacement Fund, or all or 

any part of the outstanding bonds of any Series or outstanding Designated Maturity Bonds at or 

prior to their maturity or maturities.;

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Exhibit B Page 55 of 114

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Exhibit 3 Page 193 of 252
42

(i) a certificate, signed by the Executive Director, setting forth (A) the amount of the 

maximum aggregate Principal and Interest Requirements for any fiscal year thereafter on account 

of all 1947 Indenture Bonds then outstanding and all bonds then outstanding under this Agreement, 

and (B) the amount of the maximum aggregate Principal and Interest Requirements for any fiscal 

year thereafter on account of all 1947 Indenture Bonds then outstanding and all bonds to be 

outstanding under this Agreement after the issuance of such revenue refunding bonds and the 

redemption or payment of the bonds to be refunded; and 

(ii) such documents as shall be required by the Trustee to show that provision has 

been made in accordance with the provisions of the 1947 Indenture or this Agreement, as the case 

may be, for the redemption or payment of all of the bonds to be refunded; and 

(d) an Opinion of Counsel stating that all conditions precedent to the delivery of such 

bonds have been fulfilled. 

When the documents mentioned above in this Section shall have been filed with the Trustee 

and when the bonds described in the resolutions mentioned in clauses (a) and (b) of this Section 

shall have been executed and authenticated as required by this Agreement, the Trustee shall deliver 

such bonds at one time to or upon the order of the purchasers mentioned in the resolution 

mentioned in said clause (b), but only upon payment to the Trustee of the purchase price of such 

bonds and the accrued interest. The Trustee shall be entitled to rely upon such resolution as to all 

matters stated therein. The Trustee, however, shall not authenticate and deliver such bonds unless 

(I) the proceeds (excluding accrued interest but including any premium) of such 

revenue refunding bonds, together with any moneys to be withdrawn from the Sinking Fund by 

the Trustee, and any other moneys which have been made available to the Trustee for such purpose 

as hereinafter provided, or the principal of and the interest on the investment of such proceeds or 

any such moneys, shall be not less than an amount sufficient to pay the principal of and the 

redemption premium, if any, on the bonds to be refunded and the interest which will become due 

and payable on or prior to the date of their payment or redemption, the financing costs in 

connection with such refunding, and any deposit to the credit of the Reserve Account, and 

(II) in case such bonds are to be issued for the purpose of providing funds for redeeming 

all of the outstanding 1947 Indenture Bonds or any 1947 Indenture Bonds issued for a purpose for 

which moneys may be expended from the Renewal and Replacement Fund, all or any part of the 

outstanding bonds of any Series or outstanding Designated Maturity Bonds prior to or at their 

maturity or maturities, either (1) the amount shown in item (B) of the certificate mentioned in 

subclause (i) of clause (c) of this Section shall be less than the amount shown in item (A) of said 

certificate or (2) there shall be filed with the Trustee a certificate, signed by the Executive Director 

and approved by the Consulting Engineers, setting forth 

(A) the amount of the Net Revenues for any twelve (12) consecutive calendar months 

out of the eighteen (18) calendar months immediately preceding the date of the issuance of such 

bonds, adjusted to reflect the moneys which would have been received if the rate schedule in effect 

on the date of the issuance of such bonds had been in effect throughout such twelve (12) calendar 

months, 

(B) his estimate of the Net Revenues for each of the five (5) fiscal years immediately 

following the fiscal year in which the issuance of such bonds occurs, taking into account the rate 

schedule in effect on the date of the issuance of such bonds and any rate schedule the Authority 

Case:19-00391-LTS Doc#:118-2 Filed:01/10/23 Entered:01/10/23 21:08:06 Desc:

Exhibit B Page 56 of 114

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Exhibit 3 Page 194 of 252
43

has covenanted to put in effect during such five (5) fiscal years, and 

(C) his estimate of the average annual Net Revenues for such five (5) fiscal years, taking 

into account the rate schedules referred to in item (B) above, and stating that each of the amounts 

shown in items (A) and (C) above is not less than one hundred twenty per centum (120%) of each 

of the amounts shown in items (A) and (B) of the certificate mentioned in subclause (i) of clause 

(c) of this Section. 

The proceeds of such revenue refunding bonds shall, to the extent practicable, be invested 

and reinvested by the Trustee, with the approval of the Executive Director, in Government 

Obligations, in Prerefunded Municipals or in Time Deposits, secured in the manner set forth in 

Section 601 of this Agreement, and the moneys so invested shall be available for use when 

required. The income derived from such investments shall be added to such proceeds and applied 

in accordance with the provisions of this Section 210. 

Simultaneously with the delivery of such revenue refunding bonds, the Trustee shall 

withdraw from the Bond Service Account and the Redemption Account in the Sinking Fund an 

amount equal to the sum of the amounts deposited to the credit of such Accounts under the 

provisions of Section 507 of this Agreement on account of the interest which is payable on the 

bonds to be refunded on the next interest payment date of such bonds and on account of the next 

maturing installment of principal of or the current Amortization Requirement for the bonds to be 

refunded, but no such withdrawal shall be made on account of any deposits to the credit of the 

Reserve Account in the Sinking Fund. The amount so withdrawn, the proceeds (excluding accrued 

interest but including any premium) of such revenue refunding bonds and any other moneys which 

have been made available to the Trustee for such purpose, shall be held by the Trustee or deposited 

with the Paying Agents to be held in trust for the sole and exclusive purpose of paying such 

principal, redemption premium and interest; provided, however, that such portion of the proceeds 

of such revenue refunding bonds as is specified by the Executive Director in a certificate filed with 

the Trustee shall be paid to the Authority to be used for the payment of expenses incident to the 

financing and the portion of the proceeds of such revenue refunding bonds to be deposited to the 

credit of the Reserve Account shall be deposited in the Reserve Account. Any part of the proceeds 

of such revenue refunding bonds which are not needed for the purpose of paying the principal of 

and the redemption premium, if any, on the bonds to be refunded, making any deposit to the 

Reserve Account or paying any expenses in connection with such refunding shall be deposited 

with the Trustee to the credit of the Bond Service Account in the Sinking Fund. The amount 

received as accrued interest on such revenue refunding bonds shall be deposited with the Trustee 

to the credit of the Bond Service Account in the Sinking Fund. 

Section 210A. Issuance of Revenue Refunding Bonds for Purpose of Exchanging such 

Bonds for all Outstanding 1947 Indenture Bonds. Revenue refunding bonds of the Authority may 

also be issued under and secured by this Agreement, subject to the conditions hereinafter provided 

in this Section, at one time, for the purpose of exchanging such revenue refunding bonds for an 

equal principal amount of all of the 1947 Indenture Bonds then outstanding. Before any bonds 

shall be issued under the provisions of this Section 210A, the Board shall adopt a resolution 

authorizing the issuance of such bonds, fixing the amount and details thereof and describing the 

1947 Indenture Bonds to be exchanged therefor. Such revenue refunding bonds shall be 

designated, shall be issued in the form of registered bonds without coupons, shall be in such 

denominations and shall be numbered, all as may be provided by resolution or resolutions adopted 

by the Board prior to the issuance of such bonds. Such revenue refunding bonds shall be dated the 

July 1 or January 1 to which interest has been paid on the 1947 Indenture Bonds to be exchanged 

Case:19-00391-LTS Doc#:118-2 Filed:01/10/23 Entered:01/10/23 21:08:06 Desc:

Exhibit B Page 57 of 114

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Exhibit 3 Page 195 of 252
44

therefor, shall bear interest at the same rate or rates as the interest on such 1947 Indenture Bonds, 

shall be stated to mature in the same principal amounts and on the same dates as such 1947 

Indenture Bonds and shall be subject to redemption at the same times and prices, either in whole 

or in part, as such 1947 Indenture Bonds. Except as to any differences in the maturities thereof or 

the rate or rates of interest or the provisions for redemption, such revenue refunding bonds shall 

be on a parity with and shall be entitled to the same benefit and security of this Agreement as all 

other bonds issued under this Agreement. 

Revenue refunding bonds issued under the provisions of this Section shall be executed 

substantially in the form and manner hereinabove set forth and shall be deposited with the Trustee 

for authentication, but before the Trustee shall authenticate and deliver such bonds there shall be 

filed with the Trustee the following: 

(a) a copy, certified by the Secretary, of the resolution or resolutions mentioned above; 

(b) a copy, certified by the Secretary, of the resolution adopted by the Board directing 

the authentication and delivery of such bonds to or upon the order of the holders of the 1947 

Indenture Bonds to be exchanged therefor; 

(c) such documents as shall be required by the Trustee to show that, upon the date 

designated for exchange, no 1947 Indenture Bonds shall then be outstanding under the provisions 

of the 1947 Indenture; 

(d) an opinion of counsel, who may be counsel for the Authority, to the effect that, on 

the date designated for exchange, notice having been duly given in the manner and under the 

conditions hereinafter provided and revenue refunding bonds duly executed and authenticated as 

herein provided being held by the Trustee for delivery for exchange for 1947 Indenture Bonds, 

interest on such 1947 Indenture Bonds shall be deemed to have ceased to accrue from the January 

1 or July 1 to which interest has been paid, the coupons for any coupon bonds called for exchange 

payable subsequent to the exchange date shall be void and such 1947 Indenture Bonds shall cease 

to be entitled to any lien, benefit or security under the 1947 Indenture and the holders of such 1947 

Indenture Bonds shall have no rights in respect thereof, except to receive such revenue refunding 

bonds of the same principal amount and maturity, bearing interest at the same rate, subject to 

redemption at the same times and prices as such 1947 Indenture Bonds and of any denomination 

or denominations authorized by this Agreement; and 

(e) an Opinion of Counsel stating that all conditions precedent to the delivery of such 

bonds have been fulfilled. 

Not later than forty-five (45) days before the exchange date of such revenue refunding 

bonds for such 1947 Indenture Bonds, the Authority shall give written notice to the Trustee and 

the 1947 Trustee of the proposed exchange and shall direct the 1947 Trustee to provide the Trustee 

with the names and addresses of the owners of such 1947 Indenture Bonds that are registered bonds 

without coupons or coupon bonds registered as to principal alone or as to both principal and 

interest. At least thirty (30) days before such exchange date the Trustee shall cause a notice of 

such exchange substantially in the form prepared by the Authority and signed by the Trustee (a) 

to be published once in a daily newspaper of general circulation published in the Municipality of 

San Juan, Puerto Rico, and in a daily newspaper of general circulation or a financial journal 

published in the Borough of Manhattan, City and State of New York, and (b) to be mailed, postage 

prepaid, to all registered owners of such 1947 Indenture Bonds at their addresses provided to the 

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Exhibit B Page 58 of 114

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Exhibit 3 Page 196 of 252
45

Trustee by the 1947 Trustee, but failure to mail such notice to any registered owner shall not affect 

the validity of the proceedings for the exchange of 1947 Indenture Bonds of any other registered 

owners. If all the 1947 Indenture Bonds to be exchanged are registered bonds without coupons or 

coupon bonds registered as to principal alone or as to both principal and interest, such notice shall 

be given by mail, and the Trustee shall not be required to publish such notice. Each such notice 

shall set forth the date fixed for exchange, the address of the office of the Trustee at which the 

1947 Indenture Bonds with all unmatured coupons appurtenant thereto, if any, shall be presented 

and surrendered for exchange, that on the exchange date interest on such 1947 Indenture Bonds 

shall be deemed to have ceased to accrue from the January 1 or July 1 to which interest has been 

paid, the coupons for any coupon bonds called for exchange payable subsequent to the exchange 

date shall be void and such 1947 Indenture Bonds shall cease to be entitled to any lien, benefit or 

security under the 1947 Indenture and the holders of such 1947 Indenture Bonds shall have no 

rights in respect thereof, except to receive registered bonds without coupons issued hereunder of 

the same principal amount and maturity, bearing interest at the same rate, subject to redemption at 

the same timetimes and prices as such 1947 Indenture Bonds and of any denomination or 

denominations authorized by this Agreement. 

All 1947 Indenture Bonds and unmatured coupons appurtenant thereto, if any, upon 

surrender thereof to the Trustee shall be delivered to the 1947 Trustee for cancellation. 

Section 211.Temporary Bonds. Until definitive bonds of any Series are ready for delivery, 

there may be executed, and upon request of the Authority the Trustee shall authenticate and deliver, 

in lieu of definitive bonds and subject to the same limitations and conditions, temporary printed, 

typewritten, engraved or lithographed bonds, in the form of either coupon bonds in such 

denominations, with or without coupons, or registered bonds without coupons in such 

denominations, or both, or in the form of a single registered bond without coupons in a 

denomination equal to the aggregate principal amount of such definitive bonds and payable in 

installments corresponding to the maturities of such definitive bonds, with payment record 

attached for the notation of payments of such installments and interest, without presentation and 

surrender of such single registered bond, as the Authority by resolution may provide, substantially 

of the tenor hereinabove set forth and with such appropriate omissions, insertions and variations 

as may be required. 

Until definitive bonds of any Series are ready for delivery, any temporary bond of such 

Series may, if so provided by the Authority by resolution, be exchanged at the principal office of 

the Trustee, without charge to the holder thereof, for an equal aggregate principal amount of 

temporary coupon bonds or of temporary registered bonds without coupons or both, of like tenor, 

of the same Series and maturity and bearing interest at the same rate. 

If temporary bonds shall be issued, the Authority shall cause the definitive bonds to be 

prepared and to be executed and delivered to the Trustee, and the Trustee, upon presentation to it 

at its principal office of any temporary bond accompanied by all unpaid coupons, if any, shall 

cancel the same and authenticate and deliver in exchange therefor at the place designated by the 

holder, without charge to the holder thereof, a definitive bond or bonds of an equal aggregate 

principal amount, of the same Series and maturity and bearing interest at the same rate as the 

temporary bond surrendered. Upon any such exchange all coupons appertaining to definitive 

coupon bonds and representing interest theretofore paid shall be detached and cancelled by the 

Trustee. Until so exchanged the temporary bonds shall in all respects be entitled to the same 

benefit and security of this Agreement as the definitive bonds to be issued and authenticated 

hereunder. Interest on temporary coupon bonds, when due and payable, if the definitive bonds 

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Exhibit B Page 59 of 114

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Exhibit 3 Page 197 of 252
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shall not be ready for exchange, shall be paid on presentation of such temporary coupon bonds and 

notation of such payment shall be endorsed thereon, or such interest shall be paid upon the 

surrender of the appropriate coupons if coupons representing such interest shall be attached to such 

temporary bonds. No charge for taxes or governmental charges shall be made against the holder 

upon an exchange of a temporary bond for a definitive bond. 

Section 212.Mutilated, Destroyed or Lost Bonds. In case any bond secured hereby shall 

become mutilated, or be destroyed or lost, the Authority shall cause to be executed, and the Trustee 

shall authenticate and deliver, a new bond of like date and tenor in exchange and substitution for 

and upon the cancellation of such mutilated bond and its interest coupons, if any, or in lieu of and 

in substitution for such bond and its coupons, if any, destroyed or lost, upon the holder’s paying 

the reasonable expenses and charges of the Authority and the Trustee in connection therewith and, 

in the case of a bond destroyed or lost, his filing with the Trustee evidence satisfactory to it and to 

the Authority that such bond and coupons, if any, were destroyed or lost, and of his ownership 

thereof, and furnishing the Authority and the Trustee with indemnity satisfactory to them. 

Article 3ARTICLE III.

Redemption of Bonds.

Section 301.Redemption of Bonds. The bonds of any Series issued under the provisions 

of this Agreement shall be made subject to redemption, both in whole and in part and at such time 

and prices, as may be provided by resolution adopted by the Authority prior to the issuance of such 

bonds; provided, however, that term bonds shall be made subject to redemption to the extent of 

any Amortization Requirements therefor on July 1 immediately following each year in which there 

is an Amortization Requirement in respect of such bonds. 

If less than all of the bonds of any one maturity of a Series shall be called for redemption, 

the particular bonds or portions of registered bonds without coupons to be redeemedredemmed

from such Series and maturity shall be selected by the Trustee in such manner as the Trustee in its 

discretion may determine; provided, however, that the portion of any registered bond without 

coupons to be redeemed shall be in the principal amount equal to the lowest denomination of 

coupon bonds authorized for such Series or some multiple thereof, and that, in selecting bonds for 

redemption, the Trustee shall treat each registered bond without coupons as representing that 

number of coupon bonds which is obtained by dividing the principal amount of such registered 

bond without coupons by the amount of such lowest authorized denomination. 

For purposes of this Section 301,301, if less than all of the Capital Appreciation Bonds 

shall be called for redemption, the portion of any Capital Appreciation BondsBond of a 

denomination of more than the maturity amount specified in the resolution authorizing such Bonds 

to be redeemed shall be such maturity amount or a multiple thereof, and, in selecting portions of 

such Capital Appreciation BondsBond for redemption, the Trustee shall treat such Capital 

Appreciation Bond as representing that number of Capital Appreciation Bonds of such maturity 

amount which is obtained by dividing the maturity amount of such Capital Appreciation Bond to 

be redeemed in part by the maturity amount specified in such resolution. 

Section 302.Redemption Notice. At least thirty (30) days before the redemption date of 

any bonds the Trustee shall cause a notice of any such redemption, either in whole or in part, signed 

by the Trustee, (a) to be published once in a daily newspaper of general circulation published in 

the Municipality of San Juan, Puerto Rico, and in a daily newspaper of general circulation or a 

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Exhibit B Page 60 of 114

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Exhibit 3 Page 198 of 252
47

financial journal published in the Borough of Manhattan, City and State of New York, (b) to be 

filed with the Paying Agents, and (c) to be mailed, postage prepaid, to all registered owners of 

bonds or portions of bonds to be redeemed at their addresses as they appear on the registration 

books hereinabove provided for, but failure so to file or mail any such notice shall not affect the 

validity of the proceedings for such redemption; provided, however, that the requirement for notice 

set forth in this Section 302 shall not apply to any redemption of the Series 2016 Bonds or any 

portions thereof. If all the bonds to be redeemed are issuable only as registered bonds without 

coupons, such notice of redemption shall be given by mail and the Trustee shall not be required to 

publish such notice of redemption. Each such notice shall set forth the date fixed for redemption, 

the redemption price to be paid and, if less than all of the bonds of any one maturity of a Series 

then outstanding shall be called for redemption, the distinctive numbers and letters, if any, of such 

bonds to be redeemed and, in the case of registered bonds without coupons to be redeemed in part 

only, the portion of the principal amount thereof to be redeemed. In case any registered bond 

without coupons is to be redeemed in part only, the notice of redemption which relates to such 

bond shall state also that on or after the redemption date, upon surrender of such bond, a new bond 

or bonds of the same Series and maturity, bearing interest at the same rate and in principal amount 

equal to the unredeemed portion of such bond will be issued. 

Section 303.Effect of Calling for Redemption. On the date so designated for redemption, 

notice having been given in the manner and under the conditions hereinabove provided, the bonds 

or portions of registered bonds without coupons so called for redemption shall become and be due 

and payable at the redemption price provided for redemption of such bonds or portions of bonds 

on such date, and, if moneys for payment of the redemption price and the accrued interest are held 

in separate accounts by the Trustee or by the Paying Agents in trust for the holders of the bonds or 

portions thereof to be redeemed, as provided in this Agreement, interest on the bonds or portions 

of bonds so called for redemption shall cease to accrue, the coupons for interest on any coupon 

bonds so called for redemption payable subsequent to the redemption date shall be void, such 

bonds or portions of bonds shall cease to be entitled to any benefit or security under this 

Agreement, and the holders or registered owners of such bonds or portions of bonds shall have no 

rights in respect thereof except to receive payment of the redemption price thereof and the accrued 

interest and, to the extent provided in Section 305 of this Article, to receive bonds for any 

unredeemed portions of registered bonds without coupons. 

Section 304.Matured Coupons. All unpaid coupons which appertain to coupon bonds so 

called for redemption and which shall have become due and payable on or prior to the date of 

redemption designated in such notice shall continue to be payable to the bearers severally and 

respectively upon the presentation and surrender of such coupons. 

Section 305.Redemption of Portion of Registered Bonds. In case part but not all of an 

outstanding registered bond without coupons shall be selected for redemption, the registered owner 

thereof or his attorney or legal representative shall present and surrender such bond to the Trustee 

for payment of the principal amount thereof so called for redemption, and the Authority shall 

execute and the Trustee shall authenticate and deliver to or upon the order of such registered owner 

or his legal representative, without charge therefor, for the unredeemed portion of the principal 

amount of the registered bond without coupons so surrendered, either coupon bonds (if authorized 

for the Series of such registered bond) or a registered bond or bonds without coupons, at the option 

of such registered owner or his attorney or legal representative, of the same Series and maturity, 

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Exhibit B Page 61 of 114

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Exhibit 3 Page 199 of 252
48

bearing interest at the same rate and of any denomination or denominations authorized by this 

Agreement. 

Section 306.Cancellation of Bonds and Coupons Redeemed. Coupon bonds so redeemed 

and all unmatured coupons appertaining thereto, and registered bonds without coupons so 

presented and surrendered, shall be cancelled upon the surrender, thereof. 

Section 307.Bonds and Portions of Bonds Called for Redemption not Deemed Outstanding. 

Bonds and portions of bonds which have been duly called for redemption under the provisions of 

this Article, or with respect to which irrevocable instructions to call for redemption or payment at 

or prior to maturity have been given to the Trustee in form satisfactory to it, and for the payment 

of principal or the redemption price and the accrued interest of which sufficient moneys, or 

Government Obligations or Prerefunded Municipals or Time Deposits, secured in the manner set 

forth in Section 601 of this Agreement, shall be held in separate accounts by the Trustee or by the 

Paying Agents in trust for the holders of the bonds or portions thereof to be paid or redeemed, all 

as provided in this Agreement, shall not thereafter be deemed to be outstanding under the 

provisions of this Agreement. 

Article 4ARTICLE IV.

Custody and Application of Proceeds of Bonds 

Section 401.Construction Fund. A special fund is hereby created and designated “Puerto 

Rico Electric Power Authority Power System Construction Fund” (herein sometimes called the 

“Construction Fund”), to the credit of which such deposits shall be made as are required by the 

provisions of Section 208 of this Agreement. There shall also be deposited to the credit of the 

Construction Fund any moneys received from any other source for paying any portion of the cost 

of any Improvements. One or more separate accounts may be created in the Construction Fund 

for use for specified projects. 

The moneys in the Construction Fund shall be held by the Authority in trust, separate and 

apart from all other funds of the Authority, and shall be applied to the payment of the cost of any 

Improvements and, except for any moneys in separate accounts in the Construction Fund received 

from the United States Government or any agency thereof or from the Commonwealth of Puerto 

Rico or any agency thereof, pending such application, shall be subject to a lien and charge in favor 

of the holders of the bonds issued and outstanding under this Agreement and for the further security 

of such holders until paid out or transferred as herein provided. 

Section 402.Payments from Construction Fund. Payment of the cost of any Improvements 

shall be made from the Construction Fund as herein provided. Moneys in the Construction Fund 

shall be disbursed by check, voucher, order, draft, certificate or warrant signed by the Executive 

Director or by any officer or employee of the Authority designated by him for such purpose. 

Section 403.Items of Cost. For the purposes of this Article, the cost of any Improvements 

shall embrace the cost of acquisition or construction and equipment and all other items of cost 

incident to such acquisition and construction and equipment and the financing thereof, and shall 

include, without intending thereby to limit or restrict any proper definition of such cost under the 

provisions of law or this Agreement, the following: 

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49

(a) obligations incurred for labor and materials and to contractors, builders and 

materialmen in connection with the construction of any Improvements; 

(b) the cost of acquiring by purchase, if such purchase shall be deemed expedient, and 

the amount of any award or final judgment in or any settlement or compromise of any proceeding 

to acquire by condemnation;, such property, lands, rights, rights of way, franchises, easements and 

other interests in land constituting a part of, or as may be deemed necessary or convenient for the 

construction of any Improvements, options and partial payments thereon, the cost of filling, 

draining or improving any lands so acquired, and the amount of any damages incident to or 

consequent upon the construction of any Improvements ; 

(c) the fees and expenses of the Trustee for its services under Article II of this 

Agreement, including its services in connection with the acceptance of the trusts hereby created, 

legal expenses and fees, fees and expenses of consultants, financing charges, cost of preparing and 

issuing the bonds, taxes or other municipal or governmental charges lawfully levied or assessed 

during construction upon any Improvements, and premiums on insurance in connection with any 

Improvements during construction; 

(d) fees and expenses of architects or engineers for making studies, surveys and testing, 

for preparing plans and specifications and supervising construction, as well as for the performance 

of all other duties of architects or engineers set forth herein in relation to the construction of any 

Improvements; 

(e) expenses of administration properly chargeable to any Improvements and all other 

items of expense not elsewhere in this Section specified, incident to the acquisition or construction 

and equipment of any Improvements; 

(f) interest on the bonds prior to and during construction of the Improvements financed 

by such bonds and for such period after completion of such construction as the Authority may 

determine, if then permitted by law; and 

(g) any obligation or expense heretofore or hereafter incurred by the Authority and any 

amounts heretofore or hereafter advanced by the Commonwealth of Puerto Rico or any agency 

thereof or by the United States Government, or from any other source, for any of the foregoing 

purposes. 

Section 404.Lands for Projects. The Authority covenants that no disbursement will be 

made for the purchase price or cost of any electric system or portion thereof, or any lands, 

buildings, franchises, licenses, easements or rights of way, unless and until counsel for the 

Authority shall have rendered his written opinion to the Authority to the effect that the Authority 

either has or will have immediately upon such disbursement (by reason of the prior or simultaneous 

delivery of proper instruments of conveyance and transfer mentioned in such opinion) title thereto 

sufficient for the purposes of the System. 

Section 405. Additional Application of Moneys in Construction Fund.2 During the 

Amendment Period, the Authority may apply moneys in the Construction Fund to the payment of 

the cost of any Current Expense that is not a cost of Improvement (each such application, an 

“Additional Construction Fund Usage”), provided that:

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(a) there are not sufficient moneys to pay such Current Expense held by the 

Authority in the General Fund in excess of the Retained General Fund Amount on the date such 

payment is required;

(b) the representations of the Authority given in Section 3(b) of the Forbearance 

Agreement are true and correct as of the date of such application;

(c) such Current Expense is in accordance with the Amendment Period Budget 

in effect at the time of such payment, inclusive of any permitted variances specified in the 

Forbearance Agreement;

(d) none of the material facts that formed the basis for the officer’s certificate 

delivered by the Authority in connection with the Sixteenth Supplemental Opinion has changed 

since the date of such certification and the Current Expense to be paid with such Additional 

Construction Fund Usage is in compliance with the covenants of the Authority in such 

certification; and

(e) the Trustee and the Amending Creditors receive a certification from the 

Authority (in the form of Exhibit A hereto) specifying the amount of moneys to be applied and the 

Current Expenses to be paid with such moneys, and certifying that the statements in paragraphs 

(a) through (d) above are true as of the date of the certification, signed by the Executive Director 

or by any other officer or employee of the Authority with fiscal authority, designated by the 

Executive Director for such purpose. The Trustee shall have no duty to review any such 

certification for any purpose, except to confirm that a certification has been made, and the Trustee 

shall be authorized to provide any requesting bondholder with a copy of any such certifications 

received. 

Section 406. Replenishment of the Construction Fund. On any Construction Fund 

Replenishment Date, to the extent that moneys in the General Fund exceed the Retained General 

Fund Amount, the Authority shall transfer from the General Fund to the credit of the Construction 

Fund an amount equal to the lesser of (x) the excess over the Retained General Fund Amount and 

(y) the Construction Fund Replenishment Amount, in accordance with Section 505 of this 

Agreement. [See Footnote 2 -This Section 406 from the 16th Supplemental Agreement may no 

longer be in effect.]

Article 5ARTICLE V.

Revenues and Funds.

Section 501.Covenants as to Bills for Services. The Authority covenants that it will 

continue to render bills for the services and facilities furnished by the System on a monthly or bimonthly basis until such time as the Authority shall deem it advisable to change the period covered 

by such bills, and that it will establish and enforce reasonable regulations in relation to the 

collection of such bills. 

Section 502.Covenants as to Rates. The Authority further covenants that it will at all times 

fix, charge and collect reasonable rates and charges for the use of the services and facilities 

furnished by the System and that from time to time, and as often as it shall appear necessary, it 

will adjust such rates and charges so that the Revenues will at all times be sufficient 

(A) until the outstanding 1947 Indenture Bonds have been paid or provision has been 

made for their payment and the release of the 1947 Indenture : 

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(a) to pay the Current Expenses of the System, and 

(b) to provide the greater of (i) the amount equal to one hundred twenty per centum 

(120%) of the aggregate Principal and Interest Requirements for the next fiscal year on account of 

all 1947 Indenture Bonds then outstanding and all bonds then outstanding under this Agreement, 

reduced by any amount deposited to the credit of the Bond Service Account from the proceeds of 

bonds to pay interest to accrue thereon in such fiscal year, or (ii) the amount required to make the 

deposits, transfers and payments mentioned in items (1) through (4), inclusive, below: 

(1) to make the deposits to the credit of the 1947 Sinking Fund which are required to 

be made in each fiscal year under the provisions of Section 507 of the 1947 Indenture, 

(2) to make the deposits to the credit of the General Reserve Fund which are required 

to be made in each fiscal year under the provisions of Section 511 of the 1947 Indenture, 

(3) to make the transfers to the credit of the Renewal and Replacement Fund which are 

required to be made in each fiscal year under the provisions of Section 512 of the 1947 Indenture, 

and 

(4) to make the payments which are required to be made in each fiscal year under the 

provisions of clause (a) of Section 513 of the 1947 Indenture, and 

(B) after the outstanding 1947 Indenture Bonds have been paid or 

provision has been made for their payment and the release of the 1947 Indenture: 

(a) to pay the Current Expenses of the System, and 

(b) to provide an amount at least equal to one hundred twenty per centum (120%) of 

the aggregate Principal and Interest Requirements for the next fiscal year on account of all the 

bonds then outstanding under this Agreement, reduced by any amount deposited to the credit of 

the Bond Service Account from the proceeds of bonds to pay interest to accrue thereon in such 

fiscal year. 

The Authority further covenants that if at any time the Revenues shall not be sufficient to 

make such deposits, transfers and payments, it will revise the rates and charges for the services 

and facilities furnished by the System and, if necessary, it will revise its regulations in relation to 

the collection of bills for such services and facilities, so that such deficiency will be made up before 

the end of the next ensuing fiscal year. Should any deficiency not be made up in such next ensuing 

fiscal year, the requirement therefor, except as to the payments which are required to be made in 

such fiscal year under subclause (4) of clause (b) of paragraph (A) of this Section, shall be 

cumulative and the Authority shall continue to revise such rates until such deficiency shall have 

been completely made up. 

Forthwith upon the adoption of any revision of rates and charges the Authority shall cause 

certified copies thereof to be filed with the Trustee. 

In the event that the Authority shall fail to adjust the schedule of rates and charges in 

accordance with the provisions of this Section, the Trustee, without regard to whether an event of 

default, as defined in Article VIII of this Agreement, shall have occurred, shall, upon the request 

of the holders of not less, than ten per centum (10%) in principal amount of all bonds then 

outstanding and upon being indemnified to its satisfaction, institute and prosecute in a court of 

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competent jurisdiction an appropriate suit, action or proceeding to compel the Authority to adjust 

such schedule in accordance with the requirements of this Section, and the Authority covenants 

that it will adopt and charge rates and charges in compliance with any judgment, order or decree 

entered in any such suit, action or proceeding. 

Section 503.General Fund. A special fund is hereby created and designated the “Puerto 

Rico Electric Power Authority General Fund” (herein sometimes called the “General Fund”). The 

Authority covenants that, after the outstanding 1947 Indenture Bonds have been paid or provision 

has been made for their payment and the release of the 1947 Indenture, all Revenues, other than 

income from investments made under the provisions of this Agreement, will be deposited as 

received in the name of the Authority with a qualified depositary or depositaries to the credit of 

the General Fund and applied in accordance with the provisions of this Article. 

Section 504.Annual Budget. The Authority covenants that on or before the 15th day of 

May in each year the Board will cause to be prepared and will adopt and file with the Secretary, 

with the Trustee and with the Consulting Engineers a proposed budget of Current Expenses and of 

Capital Expenditures for the ensuing fiscal year. 

The Authority further covenants that such proposed budget of Current Expenses will be 

prepared in such manner as to segregate, in so far as advisable, the accounts in respect of the 

different classes of operations, projects, undertakings and activities of the Authority and will be 

prepared on the basis of monthly requirements so that it will be possible to determine from the 

budget the Current Expenses for each month during the fiscal year, that it will comply with any 

reasonable request of the Consulting Engineers as to the classifications in which such budget shall 

be prepared, and that such proposed budget of Capital Expenditures will show separately (a) so 

long as any 1947 Indenture Bonds are outstanding, the amount to be expended during such fiscal 

year from moneys deposited or transferred to the credit of the Renewal and Replacement Fund, 

including a separate statement as to the amount to be withdrawn from said Fund under the 

provisions of Section 507 of this Agreement, (b) the amount to be expended during such fiscal 

year from moneys deposited to the credit of the Construction Fund and, so long as any 1947 

Indenture Bonds are outstanding, the 1947 Construction Fund, and (c) the amount of the working 

cash funds required for each month during such fiscal year. 

The Authority further covenants that on the 1st day of June of each year, or on the first 

business day thereafter, it will hold a public hearing at its office in the Municipality of San Juan, 

Puerto Rico, on the proposed budget for the ensuing fiscal year, at which any bondholder, any 

consumer or any other interested person may appear, in person or by agent or attorney, and present 

any objections he may have to such proposed budget, and that promptly after each such public 

hearing and, in any event, on or before the first day of the next ensuing fiscal year the Board will 

finally adopt the annual budget of Current Expenses and Capital Expenditures for such fiscal year 

(which budget, together with any amendment thereof or supplement thereto as hereinafter 

permitted, is herein sometimes called the “Annual Budget”). The Authority covenants that the total 

expenditures provided for in the Annual Budget of Current Expenses will not exceed the total

expenditures set forth in the proposed budget unless such excess shall be approved by the 

Consulting Engineers, and that before adopting the budget of Capital Expenditures it will receive 

and consider the Consulting Engineers’ advices and recommendations with respect thereto. 

If for any reason the Board shall not have adopted the Annual Budget before the first day 

of any fiscal year, the proposed budget for such fiscal year, if approved by the Consulting 

Engineers, or, if there is none so approved, the budget for the preceding fiscal year, shall, until the 

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adoption of the Annual Budget, be deemed to be in force and shall be treated as the Annual Budget 

under the provisions of this Article; provided, however, that, so long as any 1947 Indenture Bonds 

are outstanding, the amounts provided for in the Annual Budget to be transferred from the 1947 

Revenue Fund to the Renewal and Replacement Fund shall not be less than the amount set forth 

in the most recent certificate of the Executive Director filed with the Trustee pursuant to clause (d) 

of Section 208 of this Agreement. 

The Board may at any time cause to be prepared and may file with the Secretary, with the 

Trustee and with the Consulting Engineers, and the Board may thereafter adopt, after receiving the 

approval of the Consulting Engineers, an amended or supplemental Annual Budget for the then 

current fiscal year. 

Section 505.Application of Moneys in General Fund. The Authority covenants that 

moneys in the General Fund will be used first for the payment of the Current Expenses of the 

System, that such expenses will not exceed an amount which is reasonable and necessary for 

maintaining, repairing and operating the System in an efficient and economical manner, and that 

the total amount of Current Expenses in any fiscal year will not exceed the amount provided 

therefor in the Annual Budget for such fiscal year or any amendment thereof or supplement thereto 

unless such expenses shall be required by conditions beyond the control of the Authority 

happening during such fiscal year and which could not reasonably have been contemplated at the 

time of the adoption of the Annual Budget. If at any time the total amount theretofore expended 

during any fiscal year for Current Expenses shall exceed the total amount provided in the Annual 

Budget for Current Expenses for such fiscal year, the Authority covenants that it will report in 

writing the amount of such excess and the reason or reasons therefor to the Consulting Engineers 

and to the Trustee as soon as practicable but not later than the last day of the sixth month following 

the month in which such excess shall have occurred. 

[On each Construction Fund Replenishment Date, the Authority shall apply moneys 

credited to the General Fund to satisfy its replenishment obligation under Section 406 prior to 

using such moneys for the payment of Current Expenses. Notwithstanding anything in this 

Agreement to the contrary, after the Amendment Period, the obligation to replenish the 

Construction Fund in accordance with Section 406 shall be junior and subject to the obligation to 

pay Current Expenses in accordance with this Section 505 and to transfer moneys from the General 

Fund to the Revenue Fund in accordance with Section 506 of this Agreement until the bonds are 

paid or deemed paid in full under the provisions of this Agreement. [This provision from the 16th 

Supplemental Agreement may no longer be in effect – see footnote 2 on page 51 and subparagraphs 

(1)-(6) below, which were added pursuant to the Eighteenth Supplemental Agreement, are subject 

to the limited survival provisions set for the in such subparagraph (5).] 

[(1) After the Amendment Effective Date and not less than ten (10) business days before 

the first transfer of moneys from the General Fund to the Capital Improvement Fund pursuant 

to clause (4) of this Section 505, the Authority shall submit to the Amending Creditors or their 

respective advisors for approval a schedule of expected costs of Improvements (and of 

extensions to the System) during an initial period of not more than thirteen (13) weeks from the 

date of transfer of moneys from the General Fund to the Capital Improvement Fund (the “Initial 

Improvements Period”) that itemizes and contains a brief description of Improvements (and of 

such extensions of the System) and the applicable project name or names assigned thereto by 

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the Authority the costs of which are expected to be paid from moneys in the Capital 

Improvement Fund, the Reserve Maintenance Fund or the Construction Fund during such Initial 

Improvements Period, along with a monthly cost forecast for each such project during the Initial 

Improvements Period. 

(2) At any point thereafter during the Amendment Period, at least ten (10) business 

days before the requested date of approval, the Authority may submit to the Amending Creditors 

or their respective advisors for approval (i) a revised schedule of expected Improvements (and 

of extensions of the System) during the Initial Improvements Period or (ii) a schedule of 

expected Improvements (and of extensions of the System) during a subsequent thirteen (13) 

week period commencing on the date of delivery of such schedule (in each case that itemizes 

and specifies the expected costs of such Improvements (and of extensions of the System) during 

such period and contains a brief description of such Improvements (and of such extensions of 

the System) and the applicable project name or names assigned thereto by the Authority) the 

costs of which are expected to be paid from moneys in the Capital Improvement Fund, the 

Reserve Maintenance Fund or the Construction Fund during such period following the date of 

delivery of such schedule, along with a monthly cost forecast for each such project during such 

period. 

(3) Within not more than ten (10) business days after receipt of any such schedule 

referred to in clauses (1) or (2) above in this Section, the Required Amending Creditors or their 

respective advisors may deliver to the Authority written confirmation or confirmations that the 

costs of Improvements (and of extensions of the System) described in the applicable schedule 

(the “Proposed Improvements”) are or are not reasonably acceptable. In addition, if within not 

more than ten (10) business days after receipt of any such schedule referred to in clauses (1) or 

(2) above in this Section, none of the Required Amending Creditor Groups nor any of their 

respective advisors objects in one or more writings to the Authority to any such schedule of 

Proposed Improvements, such Proposed Improvements shall be deemed to be reasonably 

acceptable to the Required Amending Creditors for purposes of this Section 505. Upon receipt 

of written confirmation from each Required Amending Creditor Group or its advisor stating that 

such Proposed Improvements are acceptable or, to the extent a Required Amending Creditor 

Group or its advisor has not provided a written confirmation stating that such Proposed 

Improvements are acceptable, the expiration of such ten (10) business day period without the 

receipt by the Authority of any objection from such Required Amending Creditor Group or its 

advisors, the Authority shall provide a certificate to the Trustee and the Amending Creditors or 

their respective advisors, signed by the Executive Director or by any other officer or employee 

of the Authority with fiscal authority, attaching such schedule and certifying that it has received 

from each Required Amending Creditor Group or its advisor either (a) a written confirmation 

that the Proposed Improvements described in such schedule are reasonably acceptable or (b) no 

objection within the applicable time period described above and, as a result, that such Proposed 

Improvements are deemed to be reasonably acceptable to such Required Amending Creditor 

Group for purposes of this Section 505. 

(4) During the Amendment Period, and subject to the Authority’s compliance with the 

provisions of clauses (1) through (3) of this Section 505, the Authority may transfer moneys 

from the General Fund to the Capital Improvement Fund to be applied as provided in Section 

512B of this Agreement to pay Approved Costs of Improvements, provided that: 

(ia) immediately prior to any such transfer, the balance in the Construction Fund 

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and the Capital Improvement Fund in the aggregate is less than $75,000,000; 

(iib) on the date of each such transfer and application the representations of the 

Authority given in Section 12(b) of the RSA are true and correct as of the date of any such 

transfer and as of the date of any application of such funds; 

(iiic) immediately following any such transfer, the aggregate amount of moneys 

transferred pursuant to this clause (4) plus the aggregate amount of moneys deposited in 

the Construction Fund after the date of the Eighteenth Amendment does not exceed the 

aggregate amount of Approved Costs of Improvements; 

(ivd) any moneys so transferred during the Amendment Period shall be applied 

by the Authority only to Approved Costs of Improvements and are applied in the manner 

required by the Agreement for application of moneys from the Construction Fund; and 

(ve) on a quarterly basis, on the fifteenth (15th) day of the month, the Authority 

shall provide a certification to the Trustee and each Amending Creditor or its advisors for 

the three-month period preceding the first day of the month in which the certification is 

given, (i) indicating whether the Improvements on the schedules of Approved Costs of 

Improvements are complete, and, for any such Improvements that are not complete, an 

estimate of the percentage of completion of the project, (ii) containing an estimate of the 

actual costs towards which the moneys in the Construction Fund, Reserve Maintenance 

Fund and/or Capital Improvement Fund were applied during such three-month period on a 

project-level basis, and (iii) stating that all funds withdrawn from the Construction Fund, 

Reserve Maintenance Fund and/or Capital Improvement Fund during such three-month 

period were applied to Approved Costs of Improvements (A) in a manner consistent with 

the required manner of application of moneys from the Construction Fund and (B) in 

compliance with the Eighteenth Amendment. 

(5) After the Amendment Period but subject to any obligation of the Authority to 

transfer funds to the Bond Service Account and the Redemption Account as and when required 

under Section 512B, for so long as moneys transferred to the Capital Improvement Fund pursuant 

to clause (4) remain in the Capital Improvement Fund, (i) the Authority may not apply such 

moneys for costs of Improvements (or of extensions of the System) other than Approved Costs of 

Improvements approved during the Amendment Period in accordance with the terms of this 

Section 505 and (ii) the Authority must provide the certification in clause (4)(e) following the 

expenditure of such funds; provided, however, that if the Authority decides not to apply such funds 

to such Approved Costs of Improvements, then it shall transfer such funds to the General Fund. 

(6) The Trustee shall have no duty to review any certification received pursuant to 

previous clauses (1)-(5) for any purpose, except to confirm that such certification has been 

delivered, and the Trustee shall be authorized to provide any requesting bondholder with a copy 

of any such certification.]

Section 506.Revenue Fund. A special fund is hereby created and designated the “Puerto 

Rico Electric Power Authority Power Revenue Fund” (herein sometimes called the “Revenue 

Fund”). After the outstanding 1947 Indenture Bonds have been paid or provision has been made 

for their payment and the release of the 1947 Indenture, the Treasurer shall transfer, on or before 

the 15th day of each month, from the General Fund to the credit of the Revenue Fund an amount 

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equal to the amount of all moneys held for the credit of the General Fund on the last day of the 

preceding month less such amount to be held as a reserve for Current Expenses as the Treasurer 

may determine, but not more than one-sixth (1/6) of the amount shown by the Annual Budget to 

be necessary for Current Expenses for the current fiscal year, such transfer to be made on the books 

of the Authority as of the close of the preceding month. The Authority covenants that all moneys 

to the credit of the Revenue Fund will be applied to the purposes and in the order set forth in this 

Article. 

Section 507.Sinking Fund. A special fund is hereby created and designated the “Puerto 

Rico Electric Power Authority Power Revenue Bonds Interest and Sinking Fund” (herein 

sometimes called the “Sinking Fund”). There are hereby created three separate accounts in the 

Sinking Fund designated “Bond Service Account”, “Reserve Account” and “Redemption 

Account”, respectively. Another special fund is hereby created and designated “Puerto Rico 

Electric Power Authority Reserve Maintenance Fund” (herein sometimes called the “Reserve 

Maintenance Fund”). Two other special funds are hereby created and designated “Puerto Rico 

Electric Power Authority Self-insurance Fund” (herein sometimessome times called the “Selfinsurance Fund”) and “Puerto Rico Electric Power Authority Capital Improvement Fund” (herein 

sometimes called the “Capital Improvement Fund”). Another special fund is hereby created and 

designated “Puerto Rico Electric Power Authority Subordinate Obligations Fund” (herein 

sometimessome times called the “Subordinate Obligations Fund”). On or before the last day of 

the month during which the first Series of bonds shall be issued under the provisions of Section 

208 of this Agreement and on or before the 25th day of each month thereafter, (i) until the 

outstanding 1947 Indenture Bonds have been paid or provision has been made for their payment 

and the release of the 1947 Indenture, it shall be the duty of the Executive Director or any officer 

or employee of the Authority designated by him for such purpose to withdraw from the Renewal 

and Replacement Fund, and (ii) after the outstanding 1947 Indenture Bonds have been paid or 

provision has been made for their payment and the release of the 1947 Indenture, it shall be the 

duty of the Treasurer to withdraw from the Revenue Fund, all of the moneys then held to the credit 

of such Fund (less any amount equal to the amount of Federal Subsidy Payments that have not 

been received as of the 25th of the month preceding the Interest Payment Date to which such 

Federal Subsidy Payments relate, which amount will be held in the Revenue Fund and (x) if the 

Federal Subsidy Payment has not been received by the Authority by such Interest Payment Date, 

transferred to the Bond Service Account on the Interest Payment Date and applied to the payment 

of interest on Bonds or (y) if the Federal Subsidy Payment has been received by the Authority on 

or before such Interest Payment Date, remain on deposit in the Revenue Fund for application in 

accordance with the provisions below in the following calendar month) and deposit the moneys so 

withdrawn to the credit of the following Accounts and Funds in the following order: 

(a) to the credit of the Bond Service Account, such amount thereof (or the entire sum 

so withdrawn if less than the required amount) as may be required to make the total amount then 

to the credit of the Bond Service Account equal to the sum of 

(i) the Interest Accrual on all the outstanding bonds to and including the first 

day of the next calendar month, and 

(ii) the Principal Accrual on the outstanding serial bonds to and including the 

first day of the next calendar month; 

(b) to the credit of the Redemption Account, such amount, if any, of any balance 

remaining after making the deposit under clause (a) above (or the entire balance if less than the 

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required amount) as may be required to make the amount then to the credit of the Redemption 

Account equal to the Amortization Accrual to and including the first day of the next calendar 

month; 

(c) to the credit of the Reserve Account, such amount, if any, of any balance remaining 

after making the deposits under clauses (a) and (b) above (or the entire balance if less than the 

required amount) as may be required to make the amount then to the credit of the Reserve Account, 

including the amount of any Reserve Account Insurance Policy or any Reserve Account Letter of 

Credit therein, equal to the interest payable on the bonds of each Series issued hereunder within 

the next ensuing twelve (12) months; (A) provided, however, that the amount so deposited in any 

month in respect of bonds of any Series issued under Sections 208 or 209 of this Agreement need 

not exceed one-sixtieth (1/60) of the amount of the increase in the interest payable within the next 

ensuing twelve (12) months resulting from the issuance of the bonds of such Series; and that if the 

amount so deposited in any month to the credit of said Account shall be less than the required 

amount for such month, the requirement therefor shall nevertheless be cumulative and the amount 

of any deficiency in any month shall be added to the amount otherwise required to be deposited in 

each month thereafter until such time as such deficiency shall have been made up; and that in the 

case of Variable Rate Bonds, the minimum amount to be deposited in the Reserve Account over 

the period required herein, shall be based initially on the interest rate in effect on the date of 

issuance of the Variable Rate Bonds and then shall be adjusted on the 25th day of each subsequent 

month based on the actual interest accrued from the 25th day of the previous month to the date of 

adjustment, except that in the case of Variable Rate Bonds in respect of which the Authority has 

notified the Trustee that a SWAP agreement is in effect, the Trustee shall use the SWAP rate in 

calculating the interest payable on such Bonds within the next ensuing twelve (12) months; and 

that in the case of Capital Appreciation Bonds, the minimum amount required to be deposited in 

the Reserve Account shall be an amount derived from the interest rate which has been used to 

calculate the assumed yield on such bonds through their maturity times the Accreted Value of such 

bonds on the Valuation Date occurring at or after the first day of the twelfth succeeding month to 

the date of calculation of this requirement, as may be further specified in the resolution authorizing 

Capital Appreciation Bonds; and (B) provided, however, that in the case of Federally Subsidized 

Bonds, the amount of interest deemed to be payable on such bonds from the date of issuance of 

such Federally Subsidized Bonds and for so long as the Trustee shall receive the scheduled amount 

of the Federal Subsidy Payments on or before such interest shall be payable shall exclude the 

amount of interest to be paid from the Federal Subsidy and provided further, however, that if the 

Trustee shall not receive the scheduled amount of the Federal Subsidy Payments on or before the 

date interest on such Federally Subsidized Bonds is payable or within thirty (30) of the date such 

Federal Subsidy Payments were scheduled to be received under the then current applicable law 

and regulations, then for purposes of the calculation of interest to be credited to the Reserve 

Account, the amount shall be equal to the interest payable on the bonds of each Series issued 

hereunder within the next twelve (12) months. 

(d) to the credit of the Reserve Maintenance Fund, such amount, if any, of any balance 

remaining after making the deposits under clauses (a), (b) and (c) above (or the entire balance if 

less than the required amount) as may be recommended by the Consulting Engineers, as provided 

by Section 706 of this Agreement, to be deposited to the credit of said Fund during such month; 

provided, however, that if the amount so deposited to the credit of said Fund in any month shall 

be less than the amount recommended by the Consulting Engineers, the requirement therefor shall 

nonetheless be cumulative and the amount of any such deficiency in any month shall be added to 

the amount otherwise required to be deposited in each month thereafter until such time as such 

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deficiency shall have been made up, unless such requirement shall have been modified by the 

Consulting Engineers in writing, a signed copy of such modification to be filed with the Authority; 

and provided further, however, that in the event that the Authority shall so covenant in respect of 

any Subordinate Obligation, as authorized by Section 516 of this Agreement, the deposit required 

by this clause (d) in any month shall be equal to the least of 

(i) the amount described above in this clause (d), 

(ii) the amount of $400,000, and 

(iii) an amount that when added to the amount then held to the credit of the Reserve 

Maintenance Fund shall make the total amount to the credit of said Fund equal to $10,000,000; 

(e) to the credit of one or more special accounts in the Subordinate Obligations Fund, 

such amount, if any, of any balance remaining after making the deposits under clauses (a), (b), (c) 

and (d) above (or the entire balance if less than the required amount) that together with funds then 

held to the credit of the Subordinate Obligations Fund will make the total amount then to the credit 

thereof equal to any amounts required to be paid or accrued with respect to any Subordinate 

Obligations prior to the Deposit Day of the next succeeding month from or to the Subordinate 

Obligations Fund; 

(f) in the event the Authority shall have covenanted pursuant to Section 516 with 

respect to Subordinate Obligations to limit its deposit to the Reserve Maintenance Fund in 

accordance with the provisions of the second proviso of clause (d) above and in fact the deposit to 

said Fund pursuant to clause (d) was limited to the amount described in subclause (ii) or (iii), to 

the credit of the Reserve Maintenance Fund, such amount, if any, of any balance remaining after 

making the deposits under clauses (a), (b), (c), (d) and (e) above (or the entire balance if less than 

the required amount) as may be required to make the total amount deposited to the credit of the 

Reserve Maintenance Fund in such month equal to the amount described in subclause (i) of clause 

(d) above; 

(g) on On the date of the release of the 1947 Indenture, to the credit of the Self-insurance 

Fund an amount equal to the amount held to the credit of the General Reserve Fund under the 1947 

Indenture on the date of such release remaining after making the deposits under clauses (a), (b), 

(c), (d), (e) and (f) above and thereafter such amount, if any, of any balance remaining after making 

the deposits under clauses (a), (b), (c), (d), (e) and (f) above, as the Consulting Engineers shall 

from time to time recommend; and 

(h) after After the outstanding 1947 Indenture Bonds have been paid or provision has been 

made for their payment and the release of the 1947 Indenture, to the credit of the Capital 

Improvement Fund such amount, if any, of any balance remaining after making the deposits under 

clauses (a), (b), (c), (d), (e), (f) and (g) above, as the Consulting Engineers shall recommend as 

provided by Section 706 of this Agreement; provided, however, that if the amount so deposited to 

the credit of said Fund during any fiscal year of the Authority shall be less than the amount 

recommended by the Consulting Engineers, the requirement therefor shall nevertheless be 

cumulative and the amount of any such deficiency in any such fiscal year shall be added to the 

amount otherwise required to be deposited in each fiscal year thereafter until such time as such 

deficiency shall have been made up, unless such requirement shall have been modified by the 

Consulting Engineers in writing, a signed copy of such modification to be filed with the Authority. 

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Exhibit B Page 72 of 114

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Until the 1947 Indenture Bonds have been paid or provision has been made for their 

payment and the release of the 1947 Indenture, any balance remaining after making the deposits 

under clauses (a), (b) and (c) above shall be transferred to the Renewal and Replacement Fund. 

After the outstanding 1947 Indenture Bonds have been paid or provision has been made for their 

payment and the release of the 1947 Indenture, any balance remaining after making the deposits 

under clauses (a) through (h) above may be used for any lawful purpose of the Authority. 

The moneys in the Sinking Fund shall be held by the Trustee in trust, and the moneys in 

the Reserve Maintenance Fund, the Self-insurance Fund and the Capital Improvement Fund shall 

be held by the Authority in trust, separate and apart from all other funds of the Authority, and shall 

be applied as hereinafter provided with respect to such Funds and, pending such application, shall 

be subject to a lien and charge in favor of the holders of the bonds issued and outstanding under 

this Agreement and for the further security of such holders until paid out or transferred as herein 

provided. The moneys in each account in the Subordinate Obligations Fund shall be held by the 

Authority (or a Depositary) in trust, separate and apart from all other funds of the Authority, and 

shall be applied as hereinafter provided with respect to such Fund and, pending such application, 

shall be subject to a lien and charge in favor of the holders of the Subordinate Obligations incurred 

in the manner provided under this Agreement and for the further security of such holders until paid 

out or transferred as herein provided. The Authority (or such Depositary) may establish one or 

more accounts within the Subordinate Obligations Fund corresponding to the source of moneys or 

particular Subordinate Obligations for each deposit made into said Fund so that the Authority (and 

such Depositary) may ascertain the source and date of deposit of the moneys in each such account. 

Section 508.Disposition of Balances in 1947 Indenture Funds and Accounts. At such time 

as the outstanding 1947 Indenture Bonds shall be paid or provision shall be made for their payment 

and the trusteeTrustee under the 1947 Indenture shall have released the 1947 Indenture, all moneys 

(other than moneys held for the redemption or payment of bonds and coupons), including any 

obligations purchased as an investment of such moneys, then held for the credit of the special funds 

and accounts created under the provisions of the 1947 Indenture shall be withdrawn and deposited 

to the credit of the special funds and accounts created under the provisions of this Agreement, as 

follows : 

1947 Indenture Agreement 

Construction Fund Construction Fund 

General Fund General Fund 

Revenue Fund Revenue Fund 

Sinking Fund, including Reserve Account Reserve Account in Sinking Fund

Reserve Account Sinking Fund

General Reserve Fund General Fund 

Renewal and Replacement Fund General Fund 

At the same time the Authority shall withdraw all moneys then held to the credit of the 

Construction Fund revolving fund under the provisions of the 1947 Indenture and deposit such 

moneys to the credit of the Construction Fund under the provisions of this Agreement. 

Section 509.Application of Moneys in Bond Service Account. The Trustee shall, on the 

business day immediately preceding each interest payment date, withdraw from the Bond Service 

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Account and (a) remit by mail to each owner of registered bonds without coupons the amounts 

required for paying the interest on such bonds as such interest becomes due and payable and (b) 

set aside or deposit in trust with the Paying Agents the amounts required for paying the interest on 

the coupon bonds as such interest becomes due and payable and the principal of all serial bonds as 

such principal becomes due and payable. 

Notwithstanding the foregoing, if principal and interest payments, or a portion thereof 

(other than any payments of the purchase price of bonds pursuant to a “put”), for particular bonds 

have been made on behalf of the Authority by a credit or liquidity facility issuer or other entity 

insuring, guaranteeing or providing for said payments, amounts deposited in the Bond Service 

Account and allocable to said payments for said bonds shall be paid, to the extent required under 

any agreement, to the credit or liquidity facility issuer or entity having theretofore made said 

corresponding payment. 

Section 510.Application of Moneys in Reserve Account. Moneys held for the credit of 

the Reserve Account or amounts available under any Reserve Account Insurance Policy or Reserve 

Account Letter of Credit shall first be used for the purpose of paying interest on the bonds and 

maturing principal of the serial bonds whenever and to the extent that the moneys held for the 

credit of the Bond Service Account shall be insufficient for such purpose and thereafter for the 

purpose of making the deposits to the credit of the Redemption Account pursuant to the 

requirements of clause (b) of Section 507 of this Agreement whenever and to the extent that the 

withdrawals from the Renewal and Replacement Fund or the Revenue Fund, as the case may be, 

are insufficient for such purpose. If at any time the moneys held for the credit of the Reserve 

Account, including amounts available under any Reserve Account Insurance Policy or Reserve 

Account Letter of Credit, shall exceed interest payable within the next ensuing twelve (12) months 

on the bonds of each Series issued and then outstanding hereunder, such excess moneys shall be 

transferred to the credit of the Bond Service Account or any Reserve Account Insurance Policy or 

Reserve Account Letter of Credit may be reduced to the extent of such excess, at the option of the 

Authority. For purposes of determining whether any excess exists in the Reserve Account, the 

amount required for Capital Appreciation Bonds and interest payable within the next ensuing 

twelve (12) months for Variable Rate Bonds shall be calculated in accordance with clause (c) of 

Section 507, and the minimum amount required in the Reserve Account shall be deemed to include 

any additional level of funding of the Reserve Account required under the terms of the resolution 

adopted by the Authority for suchthe bonds. 

Notwithstanding anything to the contrary contained in Section 507 or elsewhere in this 

Agreement, in lieu, or in partial satisfaction, of any required deposit into the Reserve Account, the 

Authority may cause to be deposited into the Reserve Account a Reserve Account Insurance Policy 

or a Reserve Account Letter of Credit, as to which any reimbursement obligation in respect of a 

drawing thereon may be secured by a lien on Revenues not inconsistent with Section 712 hereof, 

for the benefit of the holders of the bonds in an amount equal to the required deposit or any portion 

thereof, and which Reserve Account Insurance Policy or Reserve Account Letter of Credit shall 

be payable or available to be drawn upon, as the case may be (upon the giving of notice as required 

thereunder), on any date on which moneys are required to be paid out of the Reserve Account 

pursuant to the first sentence of this Section 510. If a disbursement is made under the Reserve 

Account Insurance Policy or the Reserve Account Letter of Credit, the Authority shall be obligated 

either to reinstate the amount of such Reserve Account Insurance Policy or Reserve Account Letter 

of Credit or to deposit into the Reserve Account moneys, in accordance with the provisions of 

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Section 507 hereof, in the amount of the disbursement made under such Reserve Account 

Insurance Policy or Reserve Account Letter of Credit, or a combination of such alternatives. The 

Authority may at any time substitute (i) all or a portion of the moneys held to the credit of the 

Reserve Account with a Reserve Account Insurance Policy or Reserve Account Letter of Credit, 

or a combination of such alternatives, (ii) all or a portion of any Reserve Account Insurance Policy 

on deposit in the Reserve Account with moneys or a Reserve Account Letter of Credit, or a 

combination of such alternatives, or (iii) all or a portion of any Reserve Account Letter of Credit 

on deposit in the Reserve Account with moneys or a Reserve Account Insurance Policy, or a 

combination of such alternatives. Any moneys on deposit in the Reserve Account in substitution 

of which a Reserve Account Insurance Policy or Reserve Account Letter of Credit is deposited 

into the Reserve Account shall, to the extent not required to fund any deficienciesdeficiences in 

the amount then required to be on deposit in the Reserve Account, be released and immediately 

paid over to the Authority to be used by the Authority for any lawful purpose of the Authority. 

Prior to the expiration date of any Reserve Account Insurance Policy or Reserve Account Letter 

of Credit then on deposit to the credit of the Reserve Account, the Authority shall (x) cause the 

term of such Reserve Account Insurance Policy or Reserve Account Letter of Credit to be 

extended, (y) replace any such Reserve Account Insurance Policy with moneys (which may 

include, without limitation, moneys available under the Reserve Account Insurance Policy or from 

any other source available for such purpose) or a Reserve Account Letter of Credit, or a 

combination of such alternatives, or (z) replace any such Reserve Account Letter of Credit with 

moneys (which may include, without limitation, moneys available under the Reserve Account 

Letter of Credit or from any other source available for such purpose) or a Reserve Account 

Insurance Policy, or a combination of saidsuch alternatives; provided that, in the event the 

Authority has not extended or replaced the expiring Reserve Account Insurance Policy or Reserve 

Account Letter of Credit by the fifth (5th) business day prior to the date of expiration, the expiring 

Reserve Account Insurance Policy or Reserve Account Letter of Credit shall, on such date, be 

drawn upon to fund the Reserve Account. For purposes of this Agreement, other than Article VI 

hereof, moneys depositedfor deposit to, or held for the credit of, the Reserve Account shall include 

amounts available under any Reserve Account Insurance Policy or Reserve Account Letter of 

Credit on deposit in the Reserve Account. 

Application of Moneys in Redemption Account

. SECTION 511. Moneys held for the credit of the Redemption Account shall be applied 

to the retirement of bonds issued under the provisions of this Agreement as follows: 

(a) Subject to the provisions of paragraph (c) of this Section, the Trustee shall 

endeavor to purchase bonds or portions of bonds secured hereby and then outstanding, whether or 

not such bonds or portions shall then be subject to redemption, at the most advantageous price 

obtainable with reasonable diligence, such price not to exceed the principal of such bonds plus the 

amount of the premium, if any, which would be payable on the next redemption date to the holders 

of such bonds under the provisions of Article III of this Agreement if such bonds or portions of 

bonds should be called for redemption on such date from the moneys in the Sinking Fund. The 

Trustee shall pay the interest accrued on such bonds or portions of bonds to the date of settlement 

therefor from the Bond Service Account and the purchase price from the Redemption Account, 

but no such purchase shall be made by the Trustee within the period of forty-five (45) days 

immediately preceding any interest payment date on which such bonds are subject to call for 

redemption under the provisions of this Agreement except from moneys other than the moneys set 

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62

aside or deposited for the redemption of bonds. 

(b) Subject to the provisions of paragraph (c) of this Section, the Trustee shall call for 

redemption on each interest payment date on which bonds are subject to redemption from moneys 

in the Sinking Fund such amount of bonds or portions of bonds then subject to redemption as, with 

the redemption premium, if any, will exhaust the moneys then held for the credit of the Redemption 

Account as nearly as may be; provided, however, that not less than One Hundred Thousand Dollars 

($100,000) principal amount of bonds shall be called for redemption at any one time. Such 

redemption shall be made pursuant to the provisions of Article III of this Agreement. Prior to 

calling bonds or portions of bonds for redemption the Trustee shall withdraw from the Bond 

Service Account and from the Redemption Account and set aside in separate accounts or deposit 

with the Paying Agents the respective amounts required for paying the interest on, and the principal 

and redemption premium of, the bonds or portions of bonds so called for redemption. 

(c) Moneys in the Redemption Account shall be applied by the Trustee in each fiscal 

year to the retirement of bonds of each Series then outstanding in the following order: 

first, the term bonds of each such Series to the extent of the Amortization Requirement, if 

any, for such fiscal year for the term bonds of each such Series then outstanding, plus the applicable 

premium, if any, and, if the amount available in such fiscal year shall not be equal thereto, then in 

proportion to the Amortization Requirement, if any, for such fiscal year for the term bonds of each 

such Series then outstanding, plus the applicable premium, if any; 

second, any balance then remaining shall be applied to the purchase of any bonds secured 

hereby and then outstanding whether or not such bonds shall then be subject to redemption, in 

accordance with the provisions of paragraph (a) of this Section; 

third, any balance then remaining shall be applied to the redemption of the term bonds of 

each such Series in proportion to the Amortization Requirement, if any, for such fiscal year for the 

term bonds of each such Series then outstanding, plus the applicable premium, if any; and 

fourth, after the retirement of all term bonds, any balance still remaining shall be applied 

to the retirement of the serial bonds of each Series in proportion to the aggregate principal amount 

of the serial bonds of each such Series originally issued under the provisions of this Agreement. 

Until the outstanding 1947 Indenture Bonds have been paid or provision has been made for 

their payment and the release of the 1947 Indenture, the Authority shall pay from the Renewal and 

Replacement Fund all expenses in connection with any such purchase or such redemption ; 

thereafter all such expenses shall be paid from the Revenue Fund. 

Notwithstanding the foregoing, if amounts applied to the retirement of bonds that would 

have been applied from the Redemption Account are paid instead by a credit or liquidity facility 

issuer or other entity insuring, guaranteeing or providing for said payment, amounts deposited in 

the Redemption Account and allocable to said payments for said bonds shall be paid, to the extent 

required under any agreement, to the credit or liquidity facility issuer or entity having theretofore 

made said corresponding payment. 

Section 512.Use of Moneys in Reserve Maintenance Fund. Except as hereinafter provided 

in this Section and in Section 707 of this Agreement, moneys held for the credit of the Reserve 

Maintenance Fund shall be disbursed only for the purpose of paying the cost of unusual or 

extraordinary maintenance or repairs, maintenance or repairs not recurring annually and renewals 

and replacements, including major items of equipment. Such disbursements shall be made in 

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accordance with the provisions of Section 402 of this Agreement for payments from the 

Construction Fund. 

If at any time moneys held for the credit of the Bond Service Account and the Reserve 

Account shall be insufficient for the purpose of paying the interest on all bonds and the principal 

of the serial bonds as such interest and principal become due and payable, then the Authority shall 

transfer from any moneys held for the credit of the Reserve Maintenance Fund to the credit of the 

Bond Service Account an amount sufficient to make up any such deficiency. If at any time the 

moneys held for the credit of the Redemption Account and the Reserve Account shall be 

insufficient for the purpose of providing funds for the retirement of term bonds to the extent of the 

Amortization Requirements therefor at the end of any fiscal year, then the Authority shall transfer 

from any moneys held for the credit of the Reserve Maintenance Fund an amount sufficient to 

make up any such deficiency; provided, however, that no such transfer shall be made unless the 

moneys then held for the credit of the Bond Service Account are at least equal to the maximum 

requirement therefor under clause (a) of Section 507 of this Agreement. Any moneys so transferred 

from the Reserve Maintenance Fund shall be restored by the Authority from available moneys in 

the Revenue Fund, subject to the same conditions as are prescribed for deposits to the credit of the 

Reserve Maintenance Fund under the provisions of Section 507 of this Agreement. 

Section 512A. Use of Moneys in Self-Insurance Fund. Except as hereinafter provided in 

the following two paragraphs and in Section 707 of this Agreement, moneys held for the credit of 

the Self-insurance Fund (1) shall be disbursed in the manner provided by Section 402 of this 

Agreement for disbursements from the Construction Fund only for the purpose of paying the cost 

of repairing, replacing or reconstructing any property damaged or destroyed from or extraordinary 

expenses incurred as a result of a cause which is not covered by insurance under the provisions of 

said Section 707 or (2) shall be transferred to the Revenue Fund in an amount, approved by the 

Consulting Engineers, equal to the loss of income from the System as a result of a cause which is 

not covered by insurance under the provisions of said Section 707. 

If at any time moneys held for the credit of the Bond Service Account and the Reserve 

Account (including moneys transferred from the Reserve Maintenance Fund to the credit of the 

Bond Service Account pursuant to the provisions of the first sentence of the second paragraph of 

Section 512 of this Agreement) shall be insufficient for the purpose of paying the interest on all 

bonds and the principal of all serial bonds as such interest and principal become due and payable, 

then the Authority shall transfer from any moneys held for the credit of the Self-insurance Fund to 

the credit of the Bond Service Account an amount sufficient to make up such deficiency. If at any 

time moneys held for the credit of the Redemption Account and the Reserve Account (including 

moneys transferred from the Reserve Maintenance Fund to the credit of the Redemption Account 

pursuant to the provisions of the second sentence of the second paragraph of Section 512 of this 

Agreement) shall be insufficient for the purpose of providing funds for the retirement of bonds to 

the extent of the Amortization Requirements therefor at the end of any fiscal year, then the 

Authority shall transfer from any moneys held for the credit of the Self-insurance Fund to the credit 

of the Redemption Account an amount sufficient to make up any such deficiency; provided, 

however, that no such transfer shall be made unless the moneys then held for the credit of the Bond 

Service Account are at least equal to the maximum requirement therefor under clause (a) of Section 

507 of this Agreement. 

If the Authority shall have determined that all or any portion of the moneys held to the 

credit of the Self-insurance Fund is no longer needed for the purposes specified in the second 

preceding paragraph, the Authority may withdraw an amount equal to such portion from the SelfCase:19-00391-LTS Doc#:118-2 Filed:01/10/23 Entered:01/10/23 21:08:06 Desc:

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insurance Fund and transfer such amount to the credit of the Bond Service Account; provided, 

however, that no such transfer shall be made prior to the time that the Consulting Engineers shall 

have approved such transfer in writing. 

Section 512B. Use of Moneys in Capital Improvement Fund. Moneys held for the credit 

of the Capital Improvement Fund shall be disbursed in the manner provided by Section 402 of this 

Agreement only for paying the cost of anticipated extensions and Improvements of the System the 

cost of which has not otherwise been provided for from the proceeds of bonds issued under the 

provisions of this Agreement. 

If at any time moneys held for the credit of the Bond Service Account and the Reserve 

Account (including moneys transferred from the Reserve Maintenance Fund or the Self-insurance 

Fund to the credit of the Bond Service Account pursuant to the provisions of the first sentence of 

the second paragraph of Sections 512 and 512A of this Agreement, respectively) shall be 

insufficient for the purpose of paying the interest on all bonds and the principal of all serial bonds 

as such interest and principal become due and payable, then the Authority shall transfer from any 

moneys held for the credit of the Capital Improvement Fund to the credit of the Bond Service 

Account an amount sufficient to make up such deficiency. If at any time moneys held for the 

credit of the Redemption Account and the Reserve Account (including moneys transferred from 

the Reserve Maintenance Fund or the Self-insurance Fund to the credit of the Redemption Account 

pursuant to the provisions of the second sentence of the second paragraph of Sections 512 and 

512A of this Agreement, respectively) shall be insufficient for the purpose of providing funds for 

the retirement of bonds to the extent of the Amortization Requirements therefor at the end of any 

fiscal year, then the Authority shall transfer from any moneys held for the credit of the Capital 

Improvement Fund to the credit of the Redemption Account an amount sufficient to make up any 

such deficiency; provided, however, that no such transfer shall be made unless the moneys then 

held for the credit of the Bond Service Account are at least equal to the maximum requirement 

therefor under clause (a) of Section 507 of this Agreement. 

Section 513.Application and Pledge of Moneys in Sinking Fund. Subject to the terms and 

conditions set forth in this Agreement, moneys held for the credit of the Bond Service Account, 

the Reserve Account and the Redemption Account shall be held in trust and disbursed by the 

Trustee for (a) the payment of interest on the bonds issued hereunder as such interest becomes due 

and payable, or (b) the payment of the principal of such bonds at the their respective maturities, or 

(c) the payment of the purchase or redemption price of such bonds before their respective 

maturities, and such moneys are hereby pledged to and charged with the payments mentioned in 

this Section. 

Whenever the total of the moneys held for the credit of the Bond Service Account, the 

Reserve Account and the Redemption Account shall be sufficient for paying the principal of and 

the redemption premium, if any, and the interest accrued on all bonds then outstanding under the 

provisions of this Agreement, such moneys shall be applied by the Trustee to the payment, 

purchase or redemption of such bonds. 

Section 514.Moneys Set Aside for Principal and Interest Held in Trust. All moneys which 

the Trustee shall have withdrawn from the Sinking Fund or shall have received from any other 

source and set aside, or deposited with the Paying Agents, for the purpose of paying any of the 

bonds hereby secured, either at the maturity thereof or upon call for redemption, or for the purpose 

of paying any maturing coupons appertaining to any of the coupon bonds hereby secured, shall be 

held in trust for the respective holders of such bonds or coupons. But any moneys which shall be 

so set aside or deposited by the Trustee and which shall remain unclaimed by the holders of such 

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Exhibit 3 Page 216 of 252
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bonds or of such coupons for the period of six (6) years after the date on which such bonds or such 

coupons shall have become due and payable shall upon request in writing be paid to the Authority 

or to such officer, board or body as may then be entitled by law to receive the same, and thereafter 

the holders of such bonds or coupons shall look only to the Authority or to such officer, board or 

body, as the case may be, for payment and then only to the extent of the amounts so received 

without any interest thereon, and the Trustee and the Paying Agents shall have no responsibility 

with respect to such moneys. 

Section 515.Cancellation of Bonds and Coupons upon Payment. All bonds paid, redeemed 

or purchased, either at or before maturity, together with all unmatured coupons, if any,

appertaining thereto, shall be cancelled upon the payment, redemption or purchase of such bonds 

and shall be delivered to the Trustee when such payment, redemption or purchase is made. All 

coupons, which are paid by the Paying Agents, shall be cancelled upon their payment and delivered 

to the Trustee in the Borough of Manhattan, City and State of New York. Except for such coupons, 

all bonds and coupons cancelled under any of the provisions of this Agreement shall be destroyed 

by the Trustee, which shall execute a certificate in duplicate describing the bonds and coupons so 

destroyed except that the numbers of the bonds to which such coupons appertain may be omitted 

unless otherwise directed by the Authority, and one executed certificate shall be filed with the 

Secretary and the other executed certificate shall be retained by the Trustee. The coupons so paid 

by anysuch Paying Agent shall be destroyed by the Trustee in the Borough of Manhattan, City and 

State of New York, which shall execute a certificate in triplicate describing the coupons so 

destroyed except that the numbers of the bonds to which such coupons appertain may be omitted 

unless otherwise directed by the Authority, and one executed certificate shall be filed with the 

Secretary and another with the Trustee and the third executed certificate shall be retained by such 

Paying Agent. 

SECTION 516. Application of Moneys in Subordinate Obligations Fund. (a) Moneys held 

for the credit of the Subordinate Obligations Fund shall be paid out or pledged by the Authority as 

necessary to enable the Authority to meet its Subordinate Obligations. Subordinate Obligations 

may be incurred or issued by the Authority for any proper corporate purpose of the Authority. 

(b) The Authority shall have the right to covenant with the holders from time to time 

of any Subordinate Obligations issued or incurred by the Authority to limit the deposits to the 

Reserve Maintenance Fund as authorized by Section 507(d) and to add to the conditions, 

limitations and restrictions under which bonds may be issued under the provisions of Sections 208, 

209 and 210 hereof. 

(c) Any such Subordinate Obligations shall be payable out of and may be secured by 

a pledge of (i) such amounts in the Subordinate Obligations Fund as may from time to time be 

available therefor, and (ii) any other funds of the Authority that may be available for such purpose, 

provided that any such payment or pledge made pursuant to clause (i) of this sentence shall be, 

and shall be expressed to be, subordinate and junior in all respects to the lien and charge of the 

bonds secured hereby upon the Revenues. 

(d) Before incurring any Subordinate Obligations the proceeds of which shall finance 

in whole or in part the acquisition or construction of any works or properties by the Authority in 

connection with the production, distribution or sale of electric energy, the Authority shall adopt a 

resolution specifying whether or not such works or properties are to be included as part of the 

System. 

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(e) The resolution, indenture or other instrument securing each issue of Subordinate 

Obligations shall contain provisions (which shall be binding on all holders of such Subordinate 

Obligations) not more favorable to the holders of such Subordinate Obligations than the following: 

(1) In the event of any insolvency or bankruptcy proceedings, and any receivership, 

liquidation, reorganization or othertheir similar proceedings in connection therewith, relative to 

the Authority or to its creditors, as such, or to its property, and in the event of any proceedings for 

voluntary liquidation, dissolution or other winding up of the Authority, whether or not involving 

insolvency or bankruptcy, the owners of all bonds then outstanding shall be entitled to receive 

payment in full of all principal and interest due on all such bonds in accordance with the provisions 

of this Agreement before the holders of the Subordinate Obligations are entitled to receive any 

payment from the funds pledged to the bonds on account of principal (and premium, if any) or 

interest upon the Subordinate Obligations. 

(2) In the event that any Subordinate Obligation is declared due and payable before its 

expressed maturity because of the occurrence of an event of default (under circumstances when 

the provisions of (1) above shall not be applicable), the owners of all bonds outstanding at the time 

such Subordinate Obligation becomes due and payable because of the occurrence of such an event 

of default shall be entitled to receive payment in full of all principal of and interest on all such 

bonds then due and payable before the holder of such Subordinate Obligation is entitled to receive 

any accelerated payment from the Revenues and other moneys pledged to the bonds under this 

Agreement of principal (and premium, if any) or interest upon such Subordinate Obligation. 

(3) If any event of default specified in Section 802 hereof with respect to the bonds 

shall have occurred and be continuing (under circumstances when the provisions of (1) above shall 

not be applicable), the owners of all bonds then outstanding shall be entitled to receive payment in 

full of all principal of and interest on all such bonds as the same become due and payable before 

the holders of the Subordinate Obligations are entitled to receive, subject to the provisions of (5) 

below, any payment from the Revenues or other moneys pledged to the bonds under this 

Agreement of principal (and premium, if any) or interest upon the Subordinate Obligations. 

(4) No owner of a bond shall be prejudiced in this right to enforce subordination of the 

Subordinate Obligations by any act or failure to act on the part of the Authority. 

(5) The Subordinate Obligations may provide that the provisions of (1), (2), (3) and (4) 

above are solely for the purpose of defining the relative rights of the owners of the bonds on the 

one hand, and the holders of Subordinate Obligations on the other hand, and that nothing therein 

shall impair, as between the Authority and the holders of the Subordinate Obligations, the 

obligation of the Authority, which is unconditional and absolute, to pay to the holders thereof the 

principal thereof and premium, if any, and interest thereon in accordance with their terms, nor shall 

anything therein prevent the holders of the Subordinate Obligations from exercising all remedies 

otherwise permitted by applicable law or thereunder upon default thereunder, subject to the rights 

under (1), (2), (3) and (4) above of the owners of bonds to receive cash, property or securities from 

the funds pledged to the bonds under this Agreement otherwise payable or deliverable to the 

holders of the Subordinate Obligations; and the Subordinate Obligations may provide that, insofar 

as a trustee or paying agent for such Subordinate Obligations is concerned, the foregoing 

provisions shall not prevent the application by such trustee or paying agent of any moneys 

deposited with such trustee or paying agent for the purpose of the payment of or on account of the 

principal (and premium, if any) and interest on such Subordinate Obligations if such trustee or 

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paying agent did not have knowledge at the time of such application that such payment was 

prohibited by the foregoing provisions. 

(6) Any issue of Subordinate Obligations may have such rank or priority with respect 

to any other issue of Subordinate Obligations as may be provided in the resolution, trust agreement 

or other instrument securing such issue of Subordinate Obligations and may contain such other 

provisions as are not in conflict with the provisions of this Agreement. 

(7) Neither the Trustee nor any Depositary shall be deemed to owe any fiduciary duty 

to the holders of Subordinate Obligations and shall not be liable to such holders if it shall 

mistakenly pay over or transfer to owners of bonds, the Authority or any other person, moneys to 

which any holders of Subordinate Obligations shall be entitled by virtue of this Section 516 or 

otherwise;, provided, however, that neither the Trustee nor any Depositary then holding the 

Subordinate Obligations Fund shall be relieved from liability for its own negligent action, its own 

negligent failure to act, or its own willful misconduct. Notwithstanding any of the provisions of 

this Section 516 or any other provision of this Agreement, neither the Trustee nor any such 

Depositary shall at any time be charged with knowledge of the existence of any facts that would 

prohibit the making of any payment of moneys to or by the Trustee or any such Depositary in 

respect of Subordinate Obligations or of any default in the payment of the principal of or premium, 

if any, or interest on any Subordinate Obligations, unless and until the Trustee or such Depositary 

shall have received written notice thereof from the Authority or the holders of a majority in 

principal amount of any class or category of any Subordinate Obligations or from any trustee or 

other fiduciary therefor and any financial institution that provides credit or security for any 

Subordinate Obligations. 

Section 517. Specified Period Principal and Interest Requirements Defeasance. A special 

fund within the Reserve Account is hereby created and designated the “Puerto Rico Electric Power 

Authority Revenue Bonds Specified Period Defeasance Fund” (herein sometimes called the 

“Specified Period Defeasance Fund”) to be held by the Trustee separate and apart from all other 

funds and accounts held under this Agreement. The transfer of moneys from the Reserve Account 

to the Specified Period Defeasance Fund in accordance with Section 510A hereof shall constitute 

an irrevocable deposit of such moneys in trust solely for the purpose of paying the Specified Period 

Principal and Interest Requirements, and such moneys will not constitute property of the Authority. 

Upon such transfer and deposit to the Specified Period Defeasance Fund, the obligation of the 

Authority to pay the Specified Period Principal and Interest Requirements will be discharged to 

the extent of each such deposit, and the sole recourse of the holders of outstanding bonds in respect 

of the portion of the Specified Period Principal and Interest Requirements equal to the aggregate 

of amounts so deposited shall be to the amounts then to the credit of the Specified Period 

Defeasance Fund. The transfer and deposit set forth above shall not in any way affect the 

obligations of the Authority to pay the Principal and Interest Requirements with respect to the 

outstanding bonds other than the obligation to pay the portion of the Specified Period Principal 

and Interest Requirements equal to the aggregate of the amounts that are credited to the Specified 

Period Defeasance Fund. On each date on which any Specified Period Principal and Interest 

Requirements are payable, the Trustee shall apply moneys in the Specified Period Defeasance 

Fund to pay the Specified Period Principal and Interest Requirements that are payable on such 

date. Any amounts remaining in the Specified Period Defeasance Fund after all Specified Period 

Principal and Interest Requirements are paid in full shall be transferred to the Reserve Account. 

Moneys held in the SpecifiedSpecial Period Defeasance Fund shall, as nearly as may be 

practicable, be continuously invested and reinvested by the Trustee in Government Obligations 

which shall mature, or which shall be subject to redemption by the holder thereof at the option of 

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such holder, not later than the respective dates when moneys held in said Fund will be required for 

the purposes intended. 

Article 6ARTICLE VI.

Depositaries of Moneys, Security for Deposits and Investment of Funds.

Section 601.Deposits Constitute Trust Funds. All moneys received by the Authority under the 

provisions of this Agreement shall be deposited with a DepositoryDepositary or Depositaries, shall 

be held in trust, shall be applied only in accordance with the provisions of this Agreement and 

shall not be subject to lien or attachment by any creditor of the Authority. 

All moneys deposited with the Trustee or any other Depositary hereunder in excess of the 

amount guaranteed by the Federal Deposit Insurance Corporation or other Federal agency shall be 

continuously secured, for the benefit of the Authority and the holders of the bonds, either (a) by 

lodging with a bank or trust company approved by the Authority and by the Trustee as custodian, 

or, if then permitted by law, by setting aside under control of the trust department of the bank 

holding such deposit, as collateral security, Government Obligations, or, with the approval of the 

Trustee, other marketable securities eligible as security for the deposit of trust funds under 

applicable regulations of the Comptroller of the Currency of the United States or applicable 

Commonwealth of Puerto Rico or state law or regulations, having a market value (exclusive of 

accrued interest) not less than the amount of such deposit, or (b), if the furnishing of security as 

provided in clause (a) of this Section is not permitted by applicable law, in such other manner as 

may then be required or permitted by applicable Commonwealth of Puerto Rico, state or Federal 

laws or regulations regarding the security for, or granting a preference in the case of, the deposit 

of trust funds; provided, however, that it shall not be necessary for the Paying Agents to give 

security for the deposits of any moneys with them for the payment of the principal of or the 

redemption premium or the interest on any bonds issued hereunder, or for the Trustee to give 

security for any moneys which shall be represented by obligations purchased under the provisions 

of this Article as an investment of such moneys. 

All moneys deposited with each Depositary, including the Trustee, shall be credited to the 

particular fund or account to which such moneys belong. 

Section 602.Investment of Moneys. Moneys held for the credit of the Bond Service 

Account and the Redemption Account, shall, as nearly as may be practicable., be continuously 

invested and reinvested by the Trustee in Government Obligations which shall mature, or which 

shall be subject to redemption by the holder thereof at the option of such holder, not later than the 

respective dates when moneys held for the credit of said Accounts will be required for the purposes 

intended, or in Time Deposits ; provided, however, that each such Time Deposit shall permit the 

moneys so placed to be available for use at the times provided above. 

Moneys held for the credit of the Construction Fund, the Reserve Maintenance Fund and 

the Self-insurance Fund shall, as nearly as may be practicable, be continuously invested and 

reinvested by the Authority in Investment Obligations, and moneys held for the credit of the 

Revenue Fund shall, as nearly as may be practicable, be continuously invested and reinvested by 

the Authority in Government Obligations, which Investment Obligations and Government 

Obligations shall mature, or shall be subject to redemption by the holder thereof at the option of 

such holder, not later than the respective dates when moneys held for the credit of said Funds will 

be required for the purposes intended, or in Time Deposits; provided, however, that each such 

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Time Deposit shall permit the moneys so placed to be available for use at the times provided above. 

Moneys held for the credit of the Reserve Account shall, as nearly as may be practicable, 

be continuously invested and reinvested by the Trustee in Investment Obligations which shall 

mature, or which shall be subject to redemption by the holder thereof at the option of such holder, 

(i) as to approximately 50% of such moneys, not later than 5 years after the date of such investment, 

and (ii) as to the balance of such moneys, as directed by the order mentioned below, or in Time 

Deposits; provided, however, that each such Time Deposit shall permit the moneys so placed to 

be available for use at the times provided above. 

Fifty per centum (50%) of the moneys held for the credit of the Reserve Account shall be 

invested by the Trustee upon receipt of an order signed by the Executive Director or other 

authorized officer of the Authority or authorized representative of the Executive Director or other 

authorized officer stating the amount to be invested and directing such investment in Investment 

Obligations having such maturities as are specified in such order. Such obligations shall be sold 

by the Trustee upon receipt of an order signed by the Executive Director or other authorized officer 

of the Authority or authorized representative of the Executive Director or other authorized officer. 

Notwithstanding any provision of this Section to the contrary, moneys held to the credit of 

the Self-insurance Fund may also be invested by the Authority in any investments authorized by 

Act No. 447 of the Legislature of Puerto Rico, approved May 15, 1951, as amended from time to 

time (codified as Title 3, Chapter 33, Section 779, Laws of Puerto Rico Annotated), for the 

Retirement System of the Employees of the Government for Puerto Rico and its Instrumentalities; 

provided, however, that the Authority shall invest not less than the lesser of $25,000,000 and the 

entire balance to the credit of such Fund in Investment Obligations with an average weighted 

maturity of not in excess of three years. 

Prior to investing any moneys held for the credit of the Self-insurance Fund in other than

Investment Obligations, the Authority shall require an Independent Consultant retained pursuant 

to the provisions of Section 706 to present a report described in said Section 706 recommending 

what portion of moneys held for the credit of the Self-insurance Fund the Authority shall maintain 

invested in Investment Obligations. Should the Self-insurance Fund be held by the Trustee on 

behalf of the Authority, a copy of such report will be furnished to the Trustee. 

Prior to investing any moneys held for the credit of the Self-insurance Fund in other than 

Investment Obligations, the Authority shall, after duly considering the report it shall have received 

pursuant to the foregoing paragraph, formally adopt, subject to the consent of Government 

Development Bank for Puerto Rico, and maintain an investment policy first determining, subject 

to the limitation prescribed by the second preceding paragraph, the minimum portion of the 

moneys held for the credit of the Self-insurance Fund to remain invested in Investment Obligations 

and then setting forth prudent investment principles, considerations and goals, including, without 

limitation, liquidity, diversification of assets, safety and rate or rates of return, that will govern the 

investment strategies and goals for the balance of the moneys held for the credit of the Selfinsurance Fund. The Authority agrees to advise the Trustee in writing of those investments other 

than Investment Obligations that are authorized by said investment policy. 

The Board shall receive at each regular meeting a detailed report from its Treasurer of the 

current portfolio of Investment Obligations, other securities and other moneys held to the credit of 

the Self-insurance Fund. 

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Obligations and Time Deposits so purchased as an investment of moneys in any such Fund 

or Account shall be deemed at all times to be part of such Fund or Account. The interest accruing 

thereon and any profit realized from such investment shall be credited to such Fund or Account 

and any loss resulting from such investment shall be charged to such Fund or Account. The Trustee 

shall sell or present for payment or redemption any obligations so acquired whenever it shall be 

necessary so to do in order to provide moneys to meet any payment from such Fund or Account. 

Neither the Trustee nor the Authority nor any officer or agent of either thereof shall be liable or 

responsible for any loss resulting from any such investment. 

Article 7ARTICLE VII.

Particular Covenants.

Payment of Principal, Interest and Premium

. SECTION 701. The Authority covenants that it will promptly pay the principal of and 

the interest on each and every bond issued under the provisions of this Agreement at the places, 

on the dates and in the manner specified herein and in said bonds and in the coupons, if any, 

appertaining thereto, and any premium required for the retirement of said bonds by purchase or 

redemption, according to the true intent and meaning thereof. Until the 1947 Indenture Bonds 

have been paid or provision has been made for their payment and the release of the 1947 Indenture, 

such principal, interest and premium are payable solely from moneys in the Renewal and 

Replacement Fund and said moneys are hereby pledged to the payment thereof in the manner and 

to the extent hereinabove particularly specified. After the 1947 Indenture Bonds have been paid 

or provision has been made for their payment and the release of the 1947 Indenture, such principal, 

interest and premium will be payable solely from the Revenues and said Revenues are hereby 

pledged to the payment thereof in the manner and to the extent hereinabove particularly specified. 

Nothing in the bonds or in this Agreement shall be deemed to constitute the bonds a debt or 

obligation of the Commonwealth of Puerto Rico or any of its municipalities or other political 

subdivisions, and neither the Commonwealth of Puerto Rico nor any such municipalities or other 

political subdivisions shall be liable for the payment of the principal of or the interest on the bonds. 

The Authority further covenants that so long as any bonds issuable as coupon bonds shall 

be outstanding it will cause offices or agencies where the coupon bonds and coupons may be 

presented for payment to be maintained in the Borough of Manhattan, City and State of New 

York.

Section 702.Covenant to Integrate Improvements into System. The Authority covenants 

that, upon the acquisition or construction of any Improvements, it will forthwith integrate the 

properties so acquired or constructed with the System and will thereupon operate and maintain the 

System and all of such properties as an integrated system. 

The Authority further covenants that it will construct all Improvements and all other works 

onor properties constituting part of the System for the construction of which bonds or Subordinate 

Obligations shall be issued under the provisions of this Agreement, or for which moneys repayable 

from the proceeds of bonds or Subordinate Obligations issued under the provisions of this 

Agreement shall have been advanced to the Authority, in accordance with plans theretofore 

adopted by the Board and approved by the Consulting Engineers and that upon the completion of 

such Improvements or other works or properties it will operate and maintain the same as a part of 

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the System. 

The Authority further covenants that it will establish and enforce reasonable rules and 

regulations governing the use of the System and the operation thereof, that all compensation, 

salaries, fees and wages paid by it in connection with the maintenance, repair and operation of the 

System will be reasonable, that no more persons will be employed by it than are necessary, that it 

will operate the System in an efficient and economical manner, that it will at all times maintain the 

System in good repair and in sound operating condition and will mademake all necessary repairs, 

renewals and replacements, and that it will comply with all valid acts, rules, regulations, orders 

and directions of any legislative, executive, administrative or judicial body applicable to the 

System. 

Section 703.Compliance with 1947 Indenture. The Authority further covenants that, until 

all of the 1947 Indenture Bonds shall have been paid or provision shall have been made for their 

payment and the 1947 Indenture shall have been released, it will duly and punctually perform all 

of the covenants, agreements and conditions contained in the 1947 Indenture on the part of the 

Authority to be performed. The Authority further covenants that it will cause the 1947 Indenture 

to be released at the earliest practicable date. The Authority further covenants that it will not enter 

into any indenture or agreement supplemental to the 1947 Indenture for the purpose of granting to 

or conferring upon the 1947 Trustee for the benefit of the holders of the bonds issued under the 

1947 Indenture any additional rights, remedies, powers, authority or security that may lawfully be 

granted to or conferred upon such holders or the 1947 Trustee, or for the purpose of modifying, 

altering, amending, adding to or rescinding, in any particular, any of the terms or provisions 

contained in the 1947 Indenture, or for the purpose of extending the maturity of any 1947 Indenture 

Bond or creating a lien upon or a pledge of revenues ranking prior to or on a parity with the lien 

or pledge created by the 1947 Indenture. Nothing herein contained shall prevent the Authority 

from entering into an indenture or agreement supplemental to the 1947 Indenture to cure any 

ambiguity or formal defect or omission in the 1947 Indenture; and notwithstanding the above, the 

Authority may enter into any indenture or agreement supplemental to the 1947 Indenture for any 

purposes permitted thereunder, including, without limitation, modifying any of the terms or 

provisions contained in the 1947 Indenture, to the extent that any such indenture or agreement 

would not adversely affect the interest of the bondholders under this Agreement. Under this 

Section, the Trustee will be entitled to receive, and shall be fully protected in relying upon the 

opinion of any counsel approved by it, who may be counsel for the Authority. 

Section 704.Covenant as to Renewal and Replacement Fund. The Authority covenants 

that so long as any 1947 Indenture Bonds are outstanding under the provisions of the 1947 

Indenture it will cause to be made the deposits to the credit of the Renewal and Replacement Fund 

required by Section 512 of the 1947 Indenture and it will not revise its determination as to the 

proper amount to be transferred each month from the 1947 Revenue Fund to the credit of the 

Renewal and Replacement Fund by reducing such amount below one-twelfth (1/12) of the 

maximum Principal and Interest Requirements for any fiscal year thereafter to and including the 

fiscal year in which the last maturity of any outstanding 1947 Indenture Bonds occurs on account 

of all bonds then outstanding under this Agreement. 

Section 705.Payment of Lawful Changes. Except as otherwise permitted in this 

Agreement, the Authority further covenants that, out of the Revenues, it will pay all municipal or 

governmental charges lawfully levied or assessed upon the System or any part thereof or upon any 

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Revenues when the same shall become due, that it will duly observe and comply with all valid 

requirements of any municipal or governmental authority relative to the System, that it will not 

create or suffer to be created any lien or charge upon the System or any part thereof or upon the 

Revenues ranking equally with or prior to the bonds, except the lien and charge of the 1947 

Indenture Bonds and the bonds secured hereby upon the Revenues and as otherwise permitted by 

this Agreement, and that, out of the Revenues, it will pay or cause to be discharged, or will make 

adequate provision to satisfy and discharge, within sixty (60) days after the same shall accrue, all 

lawful claims and demands for labor, materials, supplies or other objects which, if unpaid, might 

by law become a lien upon the System or any part thereof or the Revenues; provided, however, 

that nothing contained in this Section shall require the Authority to pay or cause to be discharged, 

or make provision for, any such lien or charge so long as the validity thereof shall be contested in 

good faith and by appropriate legal proceedings. 

Section 706.Employment of Consulting Engineers. The Authority covenants and agrees 

that so long as any 1947 indentureIndenture Bonds are outstanding it will, for the purpose of 

performing and carrying out the duties imposed on the Consulting Engineers by this Agreement, 

employ such Consulting Engineers as are employed under Section 704 of the 1947 Indenture, and 

after the 1947 Indenture Bonds have been paid or provision has been made for their payment and 

the release of the 1947 Indenture and so long as any bonds are outstanding under this Agreement, 

it will employ an independent engineer or engineering firm or corporation having a wide and 

favorable repute in the United States for skill and experience in the construction and operation of 

electric systems. No engineer or engineering firm shall be employed as Consulting Engineers 

under this Agreement, except with the written approval of the Trustee. Except for fees and 

expenses incurred under the provisions of Section 403 of this Agreement, the cost of employing 

Consulting Engineers shall be treated as a part of the cost of operation and maintenance of the 

System. 

It shall be the duty of the Consulting Engineers to prepare and file with the Authority and 

with the Trustee on or before the 1st day of November in each year a report setting forth their 

recommendations as to any necessary or advisable revisions of rates and charges and such other 

advices and recommendations as they may deem desirable. After the outstanding 1947 Indenture 

Bonds have been paid or provision has been made for their payment and the release of the 1947 

Indenture, it shall be the duty of the Consulting Engineers to include in such report their 

recommendations as to the amount that should be deposited monthly during the ensuing fiscal year 

to the credit of the Reserve Maintenance Fund for the purposes set forth in Section 512 of this 

Agreement, deposited during the ensuing fiscal year to the credit of the Self-insurance Fund for 

the purposes set forth in Section 512A of this Agreement, if any, and deposited during the ensuing 

fiscal year to the credit of the Capital Improvement Fund for the purposes set forth in Section 512B 

of this Agreement. 

The Authority further covenants that the Consulting Engineers shall at all times have free 

access to all properties of the System and every part thereof for the purposes of inspection and 

examination, and that its books, records and accounts may be examined by the Consulting 

Engineers at all reasonable times. 

The Authority covenants and agrees that so long as any bonds are outstanding under this 

Agreement, it will, for the purpose of carrying out the duties imposed on the Independent 

Consultant by this Agreement, employ one or more independent firms having a wide and favorable 

repute in the United States for expertise in risk management and other insurance matters related to 

the construction and operation of electric systems. Except for fees and expenses incurred under 

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the provisions of Section 403 of this Agreement, the cost of employing such Independent 

Consultant shall be treated as part of the cost of operation and maintenance of the System. 

It shall be the duty of the Independent Consultant to prepare and file with the Authority 

and the Trustee at least biennially, on or before the first day of November, beginning November 

,1, 1999, a report setting forth its recommendations, based on a review of the insurance then 

maintained by the Authority in accordance with Section 707 of this Agreement and the status of 

the Self-insurance Fund, of any changes in coverage, including its recommendations of policy 

limits and deductibles and self-insurance, and investment strategies for the Self-insurance Fund. 

Section 707.Insurance. The Authority covenants that it will at all times carry insurance, 

in a responsible insurance company or companies authorized and qualified under the laws of 

Puerto Rico to assume the risk thereof, covering such properties belonging to the System as are 

customarily insured, and against loss or damage from such causes as are customarily insured 

against, by companies engaged in similar business. 

All such policies shall be for the benefit of the Authority, shall be made payable to the 

Authority and shall be deposited with the Treasurer, and the Treasurer shall have the sole right to 

receive the proceeds of such policies and to collect and receipt for claims thereunder. The proceeds 

of any and all such insurance shall be deposited by the Treasurer in the name of the Authority in a 

Depositary. 

The Authority covenants that, immediately after any loss or damage to any properties of 

the System resulting from any cause, whether or not such loss or damage shall be covered by 

insurance, it will cause its engineers to prepare plans and specifications for repairing, replacing or 

reconstructing (either in accordance with the original or a different design) the damaged or 

destroyed property, and that it will forthwith commence and diligently prosecute the repair, 

replacement or reconstruction of the damaged or destroyed property unless it shall determine that 

the repair, replacement or reconstruction of such property is not essential to the efficient operation 

of the System. 

The proceeds of all insurance policies referred to in this Section shall be available for, and 

shall to the extent necessary be applied to, the repair, replacement or reconstruction of the damaged 

or destroyed property, and shall be disbursed in the manner provided by Section 402 of this 

Agreement for disbursements from the Construction Fund. Until the 1947 Indenture Bonds have 

been paid or provision has been made for their payment and the release of the 1947 Indenture, if 

such proceeds are more than sufficient for such purpose, the balance remaining shall be deposited 

to the credit of the Renewal and Replacement Fund. After the 1947 Indenture Bonds have been 

paid or provision has been made for their payment and the release of the 1947 Indenture, such 

balance shall be deposited to the credit of the Redemption Account in the Sinking Fund or, at the 

option of the Authority, to the credit of the Construction Fund. Until the 1947 Indenture Bonds 

have been paid or provision has been made for their payment and the release of the 1947 Indenture, 

if such proceeds shall be insufficient for such purpose, the deficiency may be supplied, first, out 

of moneys in the General Reserve Fund under the 1947 Indenture, and second, out of moneys in 

the Renewal and Replacement Fund. After the 1947 Indenture Bonds have been paid or provision 

has been made for their payment and the release of the 1947 Indenture, such deficiency may be 

supplied out of any moneys held for the credit of the Reserve Maintenance Fund or from any other 

moneys of the Authority available for such purpose, including any moneys held for the credit of 

the Self-insurance Fund. 

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Until the 1947 Indenture Bonds have been paid or provision has been made for their 

payment and the release of the 1947 Indenture, the proceeds of any insurance not applied within 

eighteen (18) months after their receipt by the Treasurer to repairing, replacing or reconstructing 

the damaged or destroyed property, unless the Authority shall be prevented from so doing because 

of conditions beyond its control, or unless the holders of fifty-one per centum (51%) in aggregate 

principal amount of all 1947 Indenture Bonds then outstanding shall otherwise direct, shall be 

deposited to the credit of the Renewal and Replacement Fund. After the 1947 Indenture Bonds 

have been paid or provision has been made for their payment and the release of the 1947 Indenture, 

such proceeds shall be deposited to the credit of the Redemption Account in the Sinking Fund or, 

at the option of the Authority, to the credit of the Construction Fund, unless the Authority shall be 

prevented from so doing because of conditions beyond its control, or unless the holders of fiftyone per centum (51%) in aggregate principal amount of all bonds then outstanding under this 

Agreement shall otherwise direct. 

Section 708.Inspection of Insurance Policies. All insurance policies shall be open to the 

inspection of the bondholders and their representatives at all reasonable times. The Treasurer of 

the Authority is hereby authorized to demand, collect, sue and receipt for the insurance money 

which may become due and payable under any policies payable to the Authority. 

Section 709.No Inconsistent Action. The Authority covenants and agrees that, so long as 

any of the bonds secured hereby shall be outstanding, none of the gross revenues of the System 

will be used for any purpose other than as provided in the 1947 Indenture and this Agreement, and 

that no contract or contracts will be entered into or any action taken by which the rights of the 

Trustee or of the bondholders might be impaired or diminished. 

Section 710.Accurate Records. The Authority covenants that its accounts will be kept 

according to standard practices for public utility systems similar to the properties and business of 

the Authority and applicable in such circumstances, and in such manner as appropriately to 

segregate, in so far as advisable, the accounts in respect of the different classes of its operations, 

projects, undertakings and activities, that it will keep accurate records and accounts of all items of 

cost and expenditures relating to the System and to each integral unit of the System, the Revenues 

collected and the application of the Revenues, and the number of consumers, and that it will keep 

such records and accounts with respect to its physical properties in such manner that it will be 

possible at all times to identify both the amounts and the items of all additions and retirements. 

The Authority further covenants that at least once each month it will cause to be filed with 

the Trustee and the Consulting Engineers copies of any revisions of the rate schedules during the 

preceding calendar month and a report, signed by the Executive Director, setting forth the 

following: 

(a) a separate income and expense statement for Revenue Fund purposes of the System 

for the preceding calendar month and the twelve (12) months’ period ending with such month; 

(b) a statement for the preceding calendar month and for the fiscal year to date of all 

deposits and transfers to the credit of and withdrawals from each special fund and account created 

under the provisions of this Agreement, showing the balance to the credit of each such fund or 

account; 

(c) a statement of the amount of bonds issued, paid, purchased or redeemed during the 

preceding calendar month; 

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(d) a balance sheet as of the end of the preceding calendar month; 

(e) the amounts on deposit at the end of the preceding calendar month in each bank or 

trust company; and 

(f) the amounts of the proceeds received during the preceding calendar month from 

any sales of property pursuant to Section 712 of this Article. 

The Authority further covenants that in the first month of each fiscal year it will cause an 

audit to be made of its books and accounts pertaining to the System by an independent firm of 

certified public accountants of suitable experience and responsibility and widely known in the 

United States, to be chosen by the Executive Director with the approval of the Trustee. Before the 

first day of the third month following the making of such audit, reports of such audits shall be filed 

with the Trustee and the Authority, and copies of such reports shall be mailed to the Consulting 

Engineers. Such audit reports shall set forth in respect of the preceding fiscal year the same matters 

as are hereinabove required for the monthly reports. 

The Authority further covenants that it will cause any additional reports or audits relating 

to the System to be made as required by law or by any applicable rules or regulations of any 

governmental authority or of any securities exchange on which the bonds may be listed or traded, 

and that as often as may be requested it will furnish to the Trustee such other information 

concerning the System or the operation thereof as the Trustee may reasonably request. The cost 

of such audits shall be treated as a part of the cost of operation of the System. 

Section 711.Covenant as to Additional 1947 Indenture Bonds. The Authority covenants 

that so long as any bonds shall be outstanding under the provisions of this Agreement it will not 

issue additional 1947 Indenture Bonds which mature after July 1, 2007 and except as follows : 

(a) revenue bonds under the provisions of Section 209 of the 1947 Indenture issued to 

pay the cost of Improvements and sold to the Rural Electrification Administration of the 

United States of America; provided, however, that the aggregate principal amount of such 

revenue bonds issued hereafter shall not exceed $12,834,000, 

(b) revenue bonds under the provisions of Section 210 of the 1947 Indenture issued for 

the purpose of providing working cash funds for the Authority; provided, however, that the 

aggregate principal amount of such revenue bonds outstanding in any fiscal year hereafter 

shall not exceed one-sixth (1/6) of the amount shown by the Annual Budget to be necessary 

for Current Expenses for such fiscal year or for the next ensuing fiscal year, whichever is 

greater, and 

(c) revenue refunding bonds under the provisions of Section 211 of the 1947 Indenture. 

Section 712.Covenant Against a Sale or Encumbrance; Exceptions. (a) The Authority 

covenants that so long as any bonds shall be outstanding under the provisions of this Agreement 

and except as in this Agreement otherwise permitted, it will not sell, lease or otherwise dispose of 

or encumber the System or any part thereof and will not create or permit to be created any charge 

or lien on the Revenues ranking equally with or prior to the charge or lien on the Revenues of the 

bonds issued under and secured by this Agreement; provided that in conjunction with the issuance 

of bonds, the Authority may secure its obligations to the provider of a credit or liquidity facility 

securing said bonds on a parity with the Authority’s bonds under this Agreement. The Authority 

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may, however, from time to time, sell any machinery, fixtures, apparatus, tools, instruments, or 

other movable property acquired by it in connection with the System, or any materials used in 

connection therewith, if the Authority shall determine that such articles are no longer needed or 

are no longer useful in connection with the construction or operation and maintenance of the 

System, and the proceeds thereof shall be applied to the replacement of the properties so sold or 

disposed of or shall be deposited (i) until the 1947 Indenture Bonds have been paid or provision 

has been made for their payment and the release of the 1947 Indenture, to the credit of the Renewal 

and Replacement Fund, and (ii) after the 1947 Indenture Bonds have been paid or provision has 

been made for their payment and the release of the 1947 Indenture, to the credit of the Redemption 

Account in the Sinking Fund or the Construction Fund, at the option of the Authority. 

(b) Notwithstanding the provisions of paragraph (a) of this Section, the Authority may 

from time to time sell or lease such other property forming part of the System as is not needed 

or serves no useful purpose in connection with the maintenance and operation of the System, 

and the proceeds of any such sale of property which is declared by resolution of the Board to 

be unnecessary for the System shall be deposited, so long as any 1947 Indenture Bonds are 

outstanding, to the credit of the Renewal and Replacement Fund or to the credit of the 1947 

Reserve Account, as may be provided by such resolution, and, after the 1947 Indenture Bonds 

shall have been paid or provision has been made for their payment and the release of the 1947 

Indenture, to the credit of the Redemption Account in the Sinking Fund or the Construction 

Fund, as may be provided by such resolution. Until the 1947 Indenture Bonds have been paid 

or provision has been made for their payment and the release of the 1947 Indenture, the rentals 

under any such lease shall be deposited to the credit of the 1947 Revenue Fund, and thereafter 

such rentals shall be deposited to the credit of the Revenue Fund. 

(c) Notwithstanding the provisions of paragraph (a) of this Section, after the 1947 

Indenture Bonds have been paid or provision has been made for their payment and the release 

of the 1947 Indenture, the Authority may from time to time permanently abandon the use of, 

sell or lease any property forming a part of the System but only if 

(1) there shall be filed with the Trustee prior to such abandonment, sale or lease 

a certificate, signed by the Executive Director and approved by the Consulting Engineers, 

stating 

(A) that the Authority is not then in default in the performance of any of the 

covenants, conditions, agreements or provisions contained in this Agreement, and 

(B) that the Net Revenues for any twelve (12) consecutive calendar months out 

of the eighteen (18) calendar months next preceding the date of such certificate, after 

giving effect to such abandonment, sale or lease and any replacement and after 

adjustment to reflect the moneys which would have been received if the rate schedule 

in effect on the date of such certificate had been in effect throughout such twelve (12) 

calendar months, are not less than one hundred twenty per centum (120%) of the 

maximum aggregate Principal and Interest Requirements for any fiscal year thereafter 

on account of all bonds then outstanding under the provisions of this Agreement, and 

(2) the amount held by the Trustee to the credit of the Reserve Account in the 

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Sinking Fund is the maximum amount required under the provisions of Section 507 of this 

Agreement. 

The proceeds of the sale of any property forming part of the System under the provisions 

of paragraph (c) of this Section shall either be deposited by the Authority to the credit of 

the Redemption Account in the Sinking Fund or the Construction Fund, at the option of 

the Authority, or shall be applied to the replacement of the property so sold, and any 

property acquired as such replacement shall become a part of the System subject to the 

provisions of this Agreement. The rentals under any such lease shall be deposited to the 

credit of the Revenue Fund. 

For purposes of paragraphs (b) and (c) of this Section, references to sales or leases 

shall include also other transfers of property and for purposes of paragraph (c) of this 

Section the transferee may be considered in lieu of the Authority or in addition to the 

Authority if the transferee agrees to assume the Authority’s obligations under this 

Agreement and the Authority delivers to the Trustee an opinion of counsel to the Authority 

to the effect that the transferee’s undertaking to assume the Authority’s obligations 

hereunder is legally valid and binding with the same effect as though the transferee were 

the Authority. If the transferee is a public corporation or other governmental entity, such 

transfer shall be permitted notwithstanding the Authority’s failure to demonstrate the 

necessary coverage requirement in paragraph (c) above; provided that the Authority 

delivers a certificate of its Consulting Engineers to the Trustee demonstrating that the 

coverage ratio shown in the above certificate is not reduced due to such transfer. 

(d) Notwithstanding the provisions of paragraph (a) of this Section, except as may 

conflict with the provisions of the 1947 Indenture until the 1947 Indenture Bonds have been 

paid or provision hasprovisions have been made for their payment and the release of the 1947 

Indenture, the Authority may lease portions of the System, or grant licenses, easements and 

other rights or make contracts or other arrangements for operation or use of portions of the 

System, if there shall be delivered to the Trustee the following: 

(i) a report of the Consulting Engineers determining that 

(A) the proposed lessee or other contracting party is a financially responsible 

entity with substantial experience in the operation and management of utilities 

of the type and size of the System, and (B) the available revenues projected to 

be derived from the portion of the System subject to the lease, contract, license, 

easement or other arrangement following the date on which such lease, contract, 

license, easement or other arrangement is to be effective are forecasted to be 

sufficient to pay to the Authority the rent or other payments provided by such 

lease, contract, license, easement or other arrangementsarrangement and to make 

all necessary repairs, improvements and replacements to said portion of the 

System in the condition it was prior to such lease, contract, license, easement or 

other arrangement; and 

(ii) a certificate of the Consulting Engineers to the effect 

that the lease, contract, license, easement or other arrangement provides (A) for 

rent or other payments sufficient, with other Net Revenues projected to be 

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derived from the System, to make all payments of the Principal and Interest 

Requirements for all Bonds which will remain Outstanding following the 

execution and delivery of the lease, contract, license, easement or other 

arrangement, (B) operational covenants binding on the lessee or other 

contracting party similar to those covenants contained in this Agreement and (C) 

to the extent permitted by law in the case of a lease, for immediate termination 

of the lease of such lessee without resort to legal process in the event of a default 

under the lease; and 

(iii) an opinion of counsel of recognized standing in the field 

of law relating to municipal bonds to the effect that the proposed transaction 

would not adversely affect the federal income tax status of any bondsBonds. 

The rentals and other payments under any such lease, contractcontaract, license, easement 

or other arrangement shall be included in the definition of Revenues and shall be deposited 

to the credit of the Revenue Fund. 

Section 713.Build America Bonds. With respect to Build America Bonds, the 

Authority hereby covenants to file, or cause to be filed, a Form 8038-CP with the Internal 

Revenue Service not less than 45 days and not more than 90 days prior to the date interest 

on the Build America Bonds shall be payable, as provided in Notice 2010-26 issued by 

the Internal Revenue Service, so long as filing such form is a condition to receipt of the 

Federal Subsidy prior to the date such interest shall be payable. In the event that the 

Internal Revenue Service shall amend or revise the guidance provided in Notice 2010-26, 

the Authority agrees that it shall take all such actions as are necessary to ensure receipt of 

the Federal Subsidy. With respect to Other Subsidy Bonds, the Authority hereby 

covenants it shall take all such actions as are necessary to ensure receipt of the Federal 

Subsidy related to such series of bonds as shall be set forth in the resolution relating to 

such Other Subsidy Bonds. The only effect of any failure to comply with this Section 713 

shall be that the Federal Subsidy to which such failure relates shall no longer be excluded 

from the calculation of Principal and interest Requirements. 

Article 8ARTICLE VIII.

Remedies.

Section 801.Extended Coupons. In case the time for the payment of any coupon or the 

interest on any registered bond without coupons shall be extended, whether or not such extension 

be by or with the consent of the Authority, such coupon or such interest so extended shall not be 

entitled in case of default hereunder to the benefit or security of this Agreement except subject to 

the prior payment in full of the principal of all bonds then outstanding and of all coupons and 

interest the time for the payment of which shall not have been extended. 

Section 802.Events of Default. Each of the following events is hereby declared an “event 

of default”, that is to say: If 

(a) payment of the principal and of the redemption premium, if any, of any of the bonds 

shall not be made when the same shall become due and payable, either at maturity or by 

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proceedings for redemption or otherwise; or 

(b) payment of any installment of interest on any of the bonds shall not be made when the 

same shall become due and payable; or 

(c) the Authority shall for any reason be rendered incapable of fulfilling its obligations 

hereunder; or 

(d) any part of the System necessary for its effective operation shall be destroyed or 

damaged and shall not be properly repaired, replaced or reconstructed; or 

(e) final judgment for the payment of money shall be rendered against the Authority 

as a result of the ownership, control or operation of the System and any such judgment shall not 

be discharged within sixty (60) days from the entry thereof or an appeal shall not be taken 

therefrom or from the order, decree or process upon which or pursuant to which such judgment 

shall have been granted or entered, in such manner as to stay the execution of or levy under such 

judgment, order, decree or process or the enforcement thereof; or 

(f) an order or decree shall be entered, with the consent or acquiescence of the Authority, 

for the purpose of effecting composition between the Authority and its creditors or for the 

purpose of adjusting the claims of such creditors pursuant to any federal or Commonwealth 

statute now or hereafter enacted, if the claims of such creditors are under any circumstances 

payable from the Revenues; or 

(g) any proceeding shall be instituted, with the consent or acquiescence of the Authority, 

for the purpose of effecting a composition between the Authority and its creditors or for the 

purpose of adjusting the claims of such creditors pursuant to any federal or Commonwealth 

statute now or hereafter enacted, if the claims of such creditors are under any circumstances 

payable from the Revenues; or 

(h) the Authority shall default in the due and punctual performance of any other of the 

covenants, conditions, agreements and provisions contained in the bonds or in this Agreement 

on the part of the Authority to be performed, including meeting any Amortization Requirement, 

and such default shall continue for thirty (30) days after written notice specifying such default 

and requiring same to be remedied shall have been given to the Authority by the Trustee, which 

may give such notice in its discretion and shall give such notice at the written request of the 

holders of not less than ten per centum (10%) in aggregate principal amount of the bonds then 

outstanding; or 

(i) an event of default within the meaning of that term in Section 802 of the 1947 Indenture 

shall occur; or.

(j) notice has been received by the Trustee and the Authority, from the bank or other 

financial or lending institution providing a credit or liquidity facility or other entity insuring, 

guaranteeing or providing for payments of principal or interest in respect of any bonds that an 

event of default has occurred under the agreement underlying said facility, or a failure by said 

bank or other financial or lending institution or other entity to make said facility available or to 

reinstate the interest component of said facility, in accordance with the terms of said facility, to 

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the extent said notice or failure is established as an event of default under the terms of the 

resolution authorizing the issuance of said bonds. 

Section 803.Acceleration of Maturities. Upon the happening and continuance of any event 

of default specified in Section 802 of this Article, then and in every such case the Trustee may, 

and upon the written request of the holders of not less than twenty per centum (20%) in aggregate 

principal amount of the bonds then outstanding shall, by a notice in writing to the Authority, 

declare the principal of all of the bonds then outstanding (if not then due and payable) to be due 

and payable immediately, and upon such declaration the same shall become and be immediately 

due and payable, anything contained in the bonds or in this Agreement to the contrary 

notwithstanding; provided, however, that if at any time after the principal of the bonds shall have 

been so declared to be due and payable, and before the entry of final judgment or decree in any 

suit, action or proceeding instituted on account of such default, or before the completion of the 

enforcement of any other remedy under this Agreement, moneys shall have accumulated in the 

Sinking Fund sufficient to pay the principal of all matured bonds and all arrears of interest, if any, 

upon all the bonds then outstanding (except the principal of any bonds not then due and payable 

by their terms and the interest accrued on such bonds since the last interest payment date), and the 

charges, compensation, expenses, disbursements, advances and liabilities of the Trustee and all 

other amounts then payable by the Authority hereunder shall have been paid or a sum sufficient to 

pay the same shall have been deposited with the Trustee, and every other default known to the 

Trustee in the observance or performance of any covenant, condition, agreement or provision 

contained in the bonds or in this Agreement (other than a default in the payment of the principal 

of such bonds then due and payable only because of a declaration under this Section) shall have 

been remedied to the satisfaction of the Trustee, then and in every such case the Trustee may, and 

upon the written request of the holders of not less than twenty per centum (20%) in aggregate 

principal amount of the bonds not then due and payable by their terms and then outstanding shall, 

by written notice to the Authority, rescind and annul such declaration and its consequences, but no 

such rescission or annulment shall extend to or affect any subsequent default or impair any right 

consequent thereon. 

Section 804.Enforcement of Remedies. Upon the happening and continuance of any event 

of default specified in Section 802 of this Article, then and in every such case the Trustee may 

proceed, and upon the written request of the holders of not less than ten per centum (10%) in 

aggregate principal amount of the bonds then outstanding hereunder shall proceed, subject to the 

provisions of Section 902 of this Agreement, to protect and enforce its rights and the rights of the 

bondholders under applicable laws or under this Agreement by such suits, actions or special 

proceedings in equity or at law, or by proceedings in the office of any board or officer having 

jurisdiction, either for the appointment of a receiver as authorized by the Authority Act or for the 

specific performance of any covenant or agreement contained herein or in aid or execution of any 

power herein granted or for the enforcement of any proper legal or equitable remedy, as the 

Trustee, being advised by counsel, shall deem most effectual to protect and enforce such rights; 

provided, however, that the Trustee shall not be required to proceed for the appointment of a 

receiver of the System unless it shall receive the written request of the holders of not less than 

twenty-five per centum (25%) in principal amount of the bonds then outstanding under the 

provisions of this Agreement. 

In the enforcement of any remedy under this Agreement the Trustee shall be entitled to sue 

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for, enforce payment of and receive any and all amounts then or during any default becoming, and 

at any time remaining, due from the Authority for principal, interest or otherwise under any of the 

provisions of this Agreement or of the bonds and unpaid, with interest on overdue payments of 

principal at the rate or rates of interest specified in such bonds, together with any and all costs and 

expenses of collection and of all proceedings hereunder and under such bonds, without prejudice 

to any other right or remedy of the Trustee or of the bondholders, and to recover and enforce any 

judgment or decree against the Authority, but solely as provided herein and in such bonds, for any 

portion of such amounts remaining unpaid and interest, costs and expenses as above provided, and 

to collect (but solely from moneys in the Sinking Fund and any other moneys available for such 

purpose) in any manner provided by law, the moneys adjudged or decreed to be payable. 

Section 805.Pro rata Application of Funds. Anything in this Agreement to the contrary 

notwithstanding, if at any time the moneys in the Sinking Fund shall not be sufficient to pay the 

interest on or the principal of the bonds as the same shall become due and payable (either by their 

terms or by acceleration of maturities under the provisions of Section 803 of this Article), such 

moneys, together with any moneys then available or thereafter becoming available for such 

purpose, whether through the exercise of the remedies provided for in this Article or otherwise, 

shall be applied as follows : 

(a) If the principal of all the bonds shall not have become or shall not have been 

declared due and payable, all such moneys shall be applied 

first: to the payment to the persons entitled thereto of all installments of interest then due 

and payable in the order in which such installments became due and payable and, if the amount 

available shall not be sufficient to pay in full any particular installment, then to the payment, 

ratably, according to the amounts due on such installment, to the persons entitled thereto, without 

any discrimination or preference except as to any difference in the respective rates of interest 

specified in the bonds; 

second: to the payment to the persons entitled thereto of the unpaid principal of any of the 

bonds which shall have become due and payable (other than bonds called for redemption for the 

payment of which moneys are held pursuant to the provisions of this Agreement) in the order of 

their due dates, with interest on the principal amount of such bonds at the respective rates specified 

therein from the respective dates upon which such bonds became due and payable, and, if the 

amount available shall not be sufficient to pay in full the principal of the bonds due and payable 

on any particular date, together with such interest, then to the payment first of such interest, ratably, 

according to the amount of such interest due on such date, and then to the payment of such 

principal, ratably, according to the amount of such principal due on such date, to the persons 

entitled thereto without any discrimination or preference except as to any difference in the 

respective rates of interest specified in the bonds; and 

third: to the payment of the interest on and the principal of the bonds, to the purchase and 

retirement of bonds and to the redemption of bonds, all in accordance with the provisions of Article 

V of this Agreement. 

(b) If the principal of all the bonds shall have become or shall have been declared due 

and payable, all such moneys shall be applied 

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first: to the payment to the persons entitled thereto of all installments of interest due and 

payable on or prior to maturity, if any, in the order in which such installments became due and 

payable and, if the amount available shall not be sufficient to pay in full any particular installment, 

then to the payment, ratably, according to the amounts due on such installment, to the persons 

entitled thereto, without any discrimination or preference except as to any difference in the 

respective rates of interest specified in the bonds, and then to the payment of any interest due and 

payable after maturity on the bonds, ratably, to the persons entitled thereto, without any 

discrimination or preference except as to any difference in the respective rates of interest specified 

in the bonds ; and 

second: to the payment of the principal of the bonds, ratably, to the persons entitled thereto, 

without preference or priority of any bond over any other bond. 

(c) If the principal of all the bonds shall have been declared due and payable and if 

such declaration shall thereafter have been rescinded and annulled under the provisions of Section 

803 of this Article, then, subject to the provisions of paragraph (b) of this Section in the event that 

the principal of all the bonds shall later become due and payable or be declared due and payable, 

the moneys remaining in and thereafter accruing to the Sinking Fund shall be applied in accordance 

with the provisions of paragraph (a) of this Section. 

The provisions of paragraphs (a), (b) and (c) of this Section are in all respects subject to 

the provisions of Section 801 of this Article. 

Whenever moneys are to be applied by the Trustee pursuant to the provisions of this 

Section, such moneys shall be applied by the Trustee at such times, and from time to time, as the 

Trustee in its sole discretion shall determine, having due regard to the amount of such moneys 

available for application and the likelihood of additional moneys becoming available for such 

application in the future; the deposit of such moneys with the Paying Agents, or otherwise setting 

aside such moneys, in trust for the proper purpose shall constitute proper application by the 

Trustee; and the Trustee shall incur no liability whatsoever to the Authority, to any bondholder or 

to any other person for any delay in applying any such moneys, so long as the Trustee acts with 

reasonable diligence, having due regard to the circumstances, and ultimately applies the same in 

accordance with such provisions of this Agreement as may be applicable at the time of application 

by the Trustee. Whenever the Trustee shall exercise such discretion in applying such moneys, it 

shall fix the date (which shall be an interest payment date unless the Trustee 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 fixing of any such date, and shall not be required to make 

payment to the holder of any unpaid coupon or any bond until such coupon or such bond and all 

unmatured coupons, if any, appertaining to such bond shall be surrendered to the Trustee for 

appropriate endorsement, or for cancellation if fully paid. 

Section 806.Effect of Discontinuance of Proceedings. In case any proceeding taken by 

the Trustee or bondholders on account of any default shall have been discontinued or abandoned 

for any reason, then and in every such case the Authority, the Trustee and the bondholders shall 

be restored to their former positions and rights hereunder, respectively, and all rights, remedies, 

powers and duties of the Trustee shall continue as though no such proceeding had been taken. 

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Section 807.Majority of Bondholders May Control Proceedings. Anything in this 

Agreement to the contrary notwithstanding, the holders of a majority in principal amount of the 

bonds then outstanding hereunder shall have the right, subject to the provisions of Section 902 of 

this Agreement, by an instrument or concurrent instruments in writing executed and delivered to 

the Trustee, to direct the method and place of conducting all remedial proceedings to be taken by 

the Trustee hereunder, provided that such direction shall not be otherwise than in accordance with 

law or the provisions of this Agreement. 

Section 808.Restrictions upon Action by Individual Bondholder. No holder of any of the 

bonds shall have any right to institute any suit, action or proceeding in equity or at law on any 

bond or for the execution of any trust hereunder or for any other remedy hereunder unless such 

holder previously shall have given to the Trustee written notice of the event of default on account 

of which such suit, action or proceeding is to be instituted, and unless also the holders of not less 

than ten per centum (10%) in aggregate principal amount of the bonds then outstanding shall have 

made written request of the Trustee after the right to exercise such powers or right of action, as the 

case may be, shall have accrued, and shall have afforded the Trustee a reasonable opportunity 

either to proceed to exercise the powers hereinabove granted or to institute such action, suit or 

proceeding in its or their name, and unless, also, there shall have been offered to the Trustee 

reasonable security and indemnity against the costs, expenses and liabilities to be incurred therein 

or thereby, and the Trustee shall have refused or neglected to comply with such request within a 

reasonable time; and such notification, request and offer of indemnity are hereby declared in every 

such case, at the option of the Trustee, to be conditions precedent to the execution of the powers 

and trusts of this Agreement or to any other remedy hereunder; provided, however, that 

notwithstanding the foregoing provisions of this Section and without complying therewith, the 

holders of not less than twenty per centum (20%) in aggregate principal amount of the bonds then 

outstanding may institute any such suit, action or proceeding in their own names for the benefit of 

all holders of bonds hereunder. It is understood and intended that, except as otherwise above 

provided, no one or more holders of the bonds hereby secured shall have any right in any manner 

whatever by his or their action to affect, disturb or prejudice the security of this Agreement, or to 

enforce any right hereunder except in the manner herein provided, that all proceedings at law or in 

equity shall be instituted, had and maintained in the manner herein provided and for the benefit of 

all holders of such outstanding bonds and coupons, and that any individual right of action or other 

right given to one or more of such holders by law is restricted by this Agreement to the rights and 

remedies herein provided. 

Section 809.Actions by Trustee. All rights of action under this Agreement or under any 

of the bonds secured hereby, enforceable by the Trustee, may be enforced by it without the 

possession of any of the bonds or the coupons appertaining thereto or the production thereof at the 

trial or other proceeding relative thereto, and any such suit, action or proceeding instituted by the 

Trustee shall be brought in its name for the benefit of all of the holders of such bonds and coupons, 

subject to the provisions of this Agreement. 

Section 810.No Remedy Exclusive. No remedy herein conferred upon or reserved to the 

Trustee or to the holders of the bonds is intended to be exclusive of any other remedy or remedies 

herein provided, and each and every such remedy shall be cumulative and shall be in addition to 

every other remedy given hereunder. 

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Section 811.No Delay or Omission Construed To Be a Waiver. No delay or omission of 

the Trustee or of any holder of the bonds to exercise any right or power accruing upon any 

default shall impair any such right or power or shall be construed to be a waiver of any such 

default or an acquiescence therein; and every power and remedy given by this Agreement to the 

Trustee and to the holders of the bonds, respectively, may be exercised from time to time and as 

often as may be deemed expedient. 

The Trustee may, and upon written request of the holders of not less than a majority in 

principal amount of the bonds then outstanding shall, waive any default which in its opinion shall 

have been remedied before the entry of final judgment or decree in any suit, action or proceeding 

instituted by it under the provisions of this Agreement or before the completion of the enforcement 

of any other remedy under this Agreement, but no such waiver shall extend to or affect any other 

existing or any subsequent default or defaults or impair any rights or remedies consequent thereon. 

Section 812.Notice of Default. The Trustee shall mail to all registered owners of bonds at 

their addresses as they appear on the registration books and to all the bondholders of record, written 

notice of the occurrence of any event of default set forth in Section 802 of this Article within thirty 

(30) days after the Trustee shall have notice, pursuant to the provisions of Section 908 of this 

Agreement, that any such event of default shall have occurred. The Trustee shall not, however, be 

subject to any liability to any bondholder by reason of its failure to mail any such notice. 

Section 812. Rights of Holders Regarding Validation Proceeding. Nothing in this 

Agreement shall affect, limit or impair the rights of the holders of bonds to participate in any 

Validation Proceeding. 

Article 9ARTICLE IX.

Concerning Thethe Trustee.

Section 901.Acceptance of Trusts. The Trustee accepts and agrees to execute the trusts 

imposed upon it by this Agreement, but only upon the terms and conditions set forth in this Article 

and subject to the provisions of this Agreement, to all of which the parties hereto and the respective 

holders of the bonds agree. 

Section 902.Trustee Entitled to Indemnity. The Trustee shall be under no obligation to 

institute any suit, or to take any remedial proceeding under this Agreement, or to enter any 

appearance or in any way defend in any suit in which it may be made defendant, or to take any 

steps in the execution of the trusts hereby created or in the enforcement of any rights and powers 

hereunder, until it shall be indemnified to its satisfaction against any and all costs and expenses, 

outlays and counsel fees and other reasonable disbursements, and against all liability; the Trustee 

may, nevertheless, begin suit, or appear in and defend suit, or do anything else in its judgment 

proper to be done by it as such Trustee, without indemnity, and in such case the Authority shall 

reimburse the Trustee from Revenues for all costs and expenses, outlays and counsel fees and other 

reasonable disbursements properly incurred in connection therewith. If the Authority shall fail to 

make such reimbursement, the Trustee may reimburse itself from any moneys in its possession 

under the provisions of this Agreement and shall be entitled to a preference therefor over any of 

the bonds or coupons outstanding hereunder. 

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Section 903.Limitation on Obligations and Responsibilities of Trustee. The Trustee shall 

be under no obligation to effect or maintain insurance or to renew any policies of insurance or to 

inquire as to the sufficiency of any policies of insurance carried by the Authority, or to report, or 

make or file claims or proof of loss for, any loss or damage insured against or which may occur, 

or to keep itself informed or advised as to the payment of any taxes or assessments, or to require 

any such payment to be made. The Trustee shall have no responsibility in respect of the validity, 

sufficiency, due execution or acknowledgementacknowledgment by the Authority of this 

Agreement, or, except as to the authentication thereof, in respect of the validity of the bonds or of 

the coupons or the due execution or issuance thereof. The Trustee shall be under no obligation to 

see that any duties herein imposed upon the Authority, the Consulting Engineers, the Independent 

Consultant, the Paying Agents, any Depositary, or any party other than itself, or any covenants 

herein contained on the part of any party other than itself to be performed, shall be done or 

performed, and the Trustee shall be under no obligation for failure to see that any such duties or 

covenants are so done or performed. 

Section 904.Trustee not Liable for Failure of Authority to Act or for Deposits in Other 

Banks. The Trustee shall not be liable or responsible because of the failure of the Authority or of 

any orof its employees or agents to make any collections or deposits or to perform any act herein 

required of the Authority or because of the loss of any moneys arising through the insolvency or 

the act or default or omission of any other Depositary in which such moneys shall have been 

deposited under the provisions of this Agreement. The Trustee shall not be responsible for the 

application of any of the proceeds of the bonds or any other moneys deposited with it and paid out, 

withdrawn or transferred hereunder if such application, payment, withdrawal or transfer shall be 

made in accordance with the provisions of this Agreement. The immunities and exemptions from 

liability of the Trustee hereunder shall extend to its directors, officers, employees and agents. 

Section 905.Compensation and Indemnification of Trustee. Subject to the provisions of 

any contract between the Authority and the Trustee relating to the compensation of the Trustee, 

the Authority shall, from the Revenues, pay to the Trustee reasonable compensation for all services 

performed by it hereunder and also all its reasonable expenses, charges and other disbursements 

and those of its attorneys, agents and employees incurred in and about the administration and 

execution of the trusts hereby created and the performance of its powers and duties hereunder, and, 

from such Revenues only, shall indemnify and save the Trustee harmless against any liabilities 

which it may incur in the exercise and performance of its powers and duties hereunder. If the 

Authority shall fail to make any payment required by this Section, the Trustee may make such 

payment from any moneys in its possession under the provisions of this Agreement and shall be 

entitled to a preference therefor over any of the bonds or coupons outstanding hereunder. 

SECTION 906.Monthly Statement from Trustee. It shall be the duty of the Trustee, on or 

before the 10th day of each month, to file with the Authority a statement setting forth in respect of 

the preceding calendar month 

(a) the amount withdrawn or transferred by it and the amount deposited with it on 

account of each Fund and Account held by it under the provisions of this Agreement, 

(b) the amount on deposit with it at the end of such month to the credit of each such 

Fund and Account, 

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(c) a brief description of all obligations held by it as an investment of moneys in each 

such Fund and Account, 

(d) the amount applied to the purchase or redemption of bonds under the provisions of 

Section 511 of this Agreement and a description of the bonds or portions of bonds so purchased or 

redeemed, and 

(e) any other information which the Authority may reasonably request. 

All records and files pertaining to the trusts hereunder in the custody of the Trustee shall 

be open at all reasonable times to the inspection of the Authority and its agents and representatives. 

Section 907.Trustee May Rely on Certificates. In case at any time it shall be necessary or 

desirable for the Trustee to make any investigation respecting any fact preparatory to taking or not 

taking any action or doing or not doing anything as such Trustee, and in any case in which this 

Agreement provides for permitting or taking any action, the Trustee may rely conclusively upon 

any certificate, requisition, opinion or other instrument required or permitted to be filed with it 

under the provisions of this Agreement, and any such instrument shall be conclusive evidence of 

such fact to protect the Trustee in any action that it may or may not take or in respect of anything 

it may or may not do, in good faith, by reason of the supposed existence of such fact. Except as 

otherwise provided in this Agreement, any request, notice, certificate or other instrument from the 

Authority to the Trustee shall be deemed to have been signed by the proper party or parties if 

signed by the Executive Director or by any officer or employee of the Authority who shall be 

designated by the Authority by resolution for that purpose, and the Trustee may accept and rely 

upon a certificate signed by the Executive Director as to any action taken by the Authority. 

Section 908.Notice of Default. Except upon the happening of any event of default 

specified in clauses (a) and (b) of Section 802 of this Agreement, the Trustee shall not be obliged 

to take notice or be deemed to have notice of any event of default hereunder, unless specifically 

notified in writing of such event of default by the holders of not less than ten per centum (10%) in 

aggregate principal amount of the bonds hereby secured and then outstanding. 

Section 909.Trustee May Deal in Bonds and Take Action as Bondholder. The bank or 

trust company acting as Trustee under this Agreement, and its directors, officers, employees or 

agents, may in good faith buy, sell, own, hold and deal in any of the bonds or coupons issued under 

and secured by this Agreement, may join in any action which any bondholder may be entitled to 

take with like effect as if such bank or trust company were not the Trustee under this Agreement, 

may engage or be interested in any financial or other transaction with the Authority, and may 

maintain any and all other general banking and business relations with the Authority with like 

effect and in the same manner as if the Trustee were not a party to this Agreement; and no implied 

covenant shall be read into this Agreement against the Trustee in respect of such matters. 

Section 910.Trustee no Responsible for Recitals. The recitals, statements and 

representations contained herein and in the bonds (excluding the Trustee’s certificate of 

authentication on the bonds) shall be taken and construed as made by and on the part of the 

Authority and not by the Trustee, and the Trustee assumes and shall be under no responsibility for 

the correctness of the same. 

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Section 911.Trustee Protected in Relying on Certain Documents. The Trustee shall be 

protected and shall incur no liability in acting or proceeding, or in not acting or not proceeding, in 

good faith, reasonably and in accordance with the terms of this Agreement, upon any resolution, 

order, notice, request, consent, waiver, certificate, statement, affidavit, requisition, bond or other 

paper or document which it shall in good faith reasonably believe to be genuine and to have been 

adopted or signed by the proper board or person or to have been prepared and furnished pursuant 

to any of the provisions of this Agreement, or upon the written opinion of any attorney, engineer 

or accountant believed by the Trustee to be qualified in relation to the subject matter, and the 

Trustee shall be under no duty to make any investigation or inquiry as to any statements contained 

or matters referred to in any such instrument. The Trustee shall not be under any obligation to see 

to the recording or filing of this Agreement or otherwise to the giving to any person of notice of 

the provisions hereof. 

Section 912.Resignation of Trustee. The Trustee may resign and thereby become 

discharged from the trusts hereby created, by notice in writing to be given to the Authority and 

published once in a daily newspaper of general circulation published in the Municipality of San 

Juan, Puerto Rico, and in a daily newspaper of general circulation or a financial journal published 

in the Borough of Manhattan, City and State of New York, not less than sixty (60) days before 

such resignation is to take effect, but such resignation shall take effect immediately upon the 

appointment of a new Trustee hereunder, if such new Trustee shall be appointed before the time 

limited by such notice and shall then accept the trusts hereof. 

Section 913.Removal of Trustee. The Trustee may be removed at any time by an 

instrument or concurrent instruments in writing executed by the holders of not less than a majority 

in principal amount of the bonds hereby secured and then outstanding and filed with the Authority. 

A facsimile copy of each such instrument shall be delivered promptly by the Authority to the 

Trustee. The Trustee may also be removed at any time for any breach of trust or for acting or 

proceeding in violation of, or for failing to act or proceed in accordance with, any provision of this 

Agreement with respect to the duties and obligations of the Trustee by any court of competent 

jurisdiction upon the application of the Authority pursuant to resolution or the holders of not less 

than ten per centum (10%) in aggregate principal amount of the bonds then outstanding under this 

Agreement. 

Section 914.Appointment of Successor Trustee. If at any time hereafter the Trustee shall 

resign, be removed, be dissolved or otherwise become incapable of acting, or the bank or trust 

company acting as Trustee shall be taken over by any governmental official, agency, department 

or board, the position of Trustee shall thereupon become vacant. If the position of Trustee shall 

become vacant for any of the foregoing reasons or for any other reason, the Authority shall appoint 

a Trustee to fill such vacancy. The Authority shall publish notice of any such appointment by it 

made once in each week for four (4) successive weeks in a daily newspaper of general circulation 

published in the Municipality of San Juan, Puerto Rico, and in a daily newspaper of general 

circulation or a financial journal published in the Borough of Manhattan, City and State of New 

York. 

At any time within one year after any such vacancy shall have occurred, the holders of a 

majority in principal amount of the bonds hereby secured and then outstanding, by an instrument 

or concurrent instruments in writing, executed by such bondholders and filed with the Authority, 

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may appoint a successor Trustee, which shall supersede any Trustee theretofore appointed by the 

Authority. Facsimile copies of each such instrument shall be delivered promptly by the Authority 

to the predecessor Trustee and to the Trustee so appointed by the bondholders. 

If no appointment of a successor Trustee shall be made pursuant to the foregoing provisions 

of this Section within ten (10) days after the vacancy shall have occurred, the holder of any bond 

outstanding hereunder or any retiring Trustee may apply to any court of competent jurisdiction 

within the Commonwealth of Puerto Rico or the State of New York to appoint a successor Trustee. 

Such court may thereupon, after such notice, if any, as such court may deem proper and prescribe, 

appoint a successor Trustee. 

Any Trustee hereafter appointed shall be a bank or trust company having its principal office 

in the Borough of Manhattan, City and State of New York, duly authorized to exercise corporate 

trust powers and subject to examination by federal or state authority, of good standing, and having 

at the time of its appointment a combined capital and surplus aggregating not less than Fifty 

Million Dollars ($50,000,000) (or whose obligations hereunder are guaranteed by a bank or trust 

company duly authorized to exercise corporate trust powers and subject to examination by federal 

or state authority, of good standing, and having at the time of the appointment of such Trustee, a 

combined capital and surplus of at least such amount). 

Section 915.Vesting of Trusts in Successor Trustee. Every successor Trustee appointed 

hereunder shall execute, acknowledge and deliver to its predecessor, and also to the Authority, an 

instrument in writing accepting such appointment hereunder, and thereupon such successor 

Trustee, without any further act, shall become fully vested with all the rights, immunities, powers 

and trusts, and subject to all the duties and obligations, of its predecessor; but such predecessor 

shall, nevertheless, on the written request of its successor or of the Authority, and upon payment 

of the expenses, charges and other disbursements of such predecessor which are payable pursuant 

to the provisions of Section 905 of this Article, execute and deliver an instrument transferring to 

such successor Trustee all the rights, immunities, powers and trusts of such predecessor hereunder; 

and every predecessor Trustee shall deliver all property and moneys held by it hereunder to its 

successor. Should any instrument in writing from the Authority be required by any successor 

Trustee for more fully and certainly vesting in such Trustee the rights, immunities, powers and 

trusts hereby vested or intended to be vested in the predecessor Trustee, any such instrument in 

writing shall and will, on request, be executed, acknowledged and delivered by the Authority. 

Notwithstanding any of the foregoing provisions of this Article, any bank or trust company 

having power to perform the duties and execute the trusts of this Agreement and otherwise 

qualified to act as Trustee hereunder with or into which the bank or trust company acting as 

Trustee may be merged, converted or consolidated, or to which the assets and business of such 

bank or trust company may be sold, shall be deemed the successor of the Trustee. 

Article 10ARTICLE X.

Execution of Instruments by Bondholders and Proof of Ownership of Bonds.

Section 1001.Execution of Instruments by Bondholders. Any request, direction, consent 

or other instrument in writing required or permitted by this Agreement to be signed or executed by 

bondholders may be in any number of concurrent instruments of similar tenor and may be signed 

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or executed by such bondholders or their attorneys or legal representatives. Proof of the execution 

of any such instrument and of the ownership of bonds shall be sufficient for any purpose of this 

Agreement and shall be conclusive in favor of the Trustee with regard to any action taken by it 

under such instrument if made in the following manner: 

(a) The fact and date of the execution by any person of any such instrument may be 

proved by the verification of any officer in any jurisdiction who, by the laws thereof, has power to 

take affidavits within such jurisdiction, to the effect that such instrument was subscribed and sworn 

to before him, or by an affidavit of a witness to such execution. Where such execution is on behalf 

of a person other than an individual such verification or affidavit shall also constitute sufficient 

proof of the authority of the signer thereof. 

(b) The fact of the holding of coupon bonds hereunder by any bondholder and the 

amount and the numbers of such bonds and the date of his holding the same may be proved by the 

affidavit of the person claiming to be such holder, if such affidavit shall be deemed by the Trustee 

to be satisfactory, or by a certificate executed by any trust company, bank, banker or any other 

depositary, wherever situated, if such certificate shall be deemed by the Trustee to be satisfactory, 

showing that at the date therein mentioned such person had on deposit with or exhibited to such 

trust company, bank, banker or other depositary the bonds described in such certificate. The 

Trustee may conclusively assume that such ownership continues until written notice to the contrary 

is served upon it. The ownership of registered bonds without coupons shall be proved by the 

registration books kept under the provisions of Section 206 of this Agreement. 

But nothing contained in this Article shall be construed as limiting the Trustee to such 

proof, it being intended that the Trustee may accept any other evidence of the matters herein stated 

which it may deem sufficient. Any request or consent of the holder of any bond shall bind every 

future holder of the same bond in respect of anything done by the Trustee in pursuance of such 

request or consent. 

Notwithstanding any of the foregoing provisions of this Section, the Trustee shall not be 

required to recognize any person as a holder of any bond or coupon or to take any action at his 

request unless such bond or coupon shall be deposited with it. 

Article 11ARTICLE XI.

Supplemental Agreements.

Section 1101.Supplemental Agreements by Authority and Trustee. The Authority and the 

Trustee may, from time to time, enter into such agreements supplemental hereto as shall not be 

inconsistent with the terms and provisions hereof (which supplemental agreements shall thereafter 

form a part hereof) 

(a) to cure any ambiguity, to correct or supplement any provision herein which may be 

inconsistent with any other provision herein, or to make any other provisions with respect to 

matters or questions arising under this Agreement which shall not be inconsistent with the 

provisions of this Agreement, provided such action shall not adversely affect the interest of the 

bondholders, or 

(b) to grant to or confer upon the Trustee for the benefit of the bondholders any 

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additional rights, remedies, powers, authority or security that may lawfully be granted to or 

conferred upon the bondholders or the Trustee, or 

(c) to add to the conditions, limitations and restrictions on the issuance of bonds under 

the provisions of this Agreement other conditions, limitations and restrictions thereafter to be 

observed, or 

(d) to add to the covenants and agreements of the Authority in this Agreement other 

covenants and agreements thereafter to be observed by the Authority or to surrender any right or 

power herein reserved to or conferred upon the Authority. 

At least thirty (30) days prior to the execution of any supplemental agreement for any of 

the purposes of this Section, the Trustee shall cause a notice of the proposed execution of such 

supplemental agreement to be mailed, postage prepaid, to all registered owners of bonds at their 

addresses as they appear on the registration books and to all bondholders of record. Such notice 

shall briefly set forth the nature of the proposed supplemental agreement and shall state that copies 

thereof are on file at the principal office of the Trustee for inspection by all bondholders. A failure 

on the part of the Trustee to mail the notice required by this Section shall not affect the validity of 

such supplemental agreement. 

Section 1102.Modification of Agreement with Consent of 60% of Bondholders. Subject 

to the terms and provisions contained in this Section, and not otherwise, the holders of not less 

than sixty per centum (60%) in aggregate principal amount of the bonds then outstanding shall 

have the right, from time to time, anything contained in this Agreement to the contrary 

notwithstanding, to consent to and approve the execution by the Authority and the Trustee of such 

agreement or agreements supplemental hereto as shall be deemed necessary or desirable by the 

Authority for the purpose of modifying, altering, amending, adding to, repealing or rescinding, in 

any particular, any of the terms or provisions contained in this Agreement or in any supplemental 

agreement; provided, however, that nothing herein contained shall permit, or be construed as 

permitting, (a) an extension of the maturity of the principal of or the interestinerest on any bond 

issued hereunder, or (b) a reduction in the principal amount of any bond or the redemption 

premium or the rate of interest thereon, or (c) the creation of a lien upon or a pledge of the Revenues 

other than theany lien and pledge created by or permitted by this Agreement, or (d) a preference 

or priority of any bond or bonds over any other bond or bonds, or (e) a reduction in the aggregate 

principal amount of the bonds required for consent to such supplemental agreement. Nothing 

herein contained, however, shall be construed as making necessary the approval by bondholders 

of the execution of any supplemental agreement as authorized in Section 1101 of this Article. 

If at any time the Authority shall request the Trustee to enter into any supplemental 

agreement for any of the purposes of this Section, the Trustee shall, at the expense of the Authority, 

cause notice of the proposed execution of such supplemental agreement to be published once in 

each week for four (4) successive weeks in a daily newspaper of general circulation published in 

the Municipality of San Juan, Puerto Rico, and in a daily newspaper of general circulation or a 

financial journal published in the Borough of Manhattan, City and State of New York, and, on or 

before the date of the first publication of such notice, the Trustee shall also cause a similar notice 

to be mailed, postage prepaid, to all registered owners of bonds at their addresses as they appear 

on the registration books and all bondholders of record. Such notice shall briefly set forth the 

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nature of the proposed supplemental agreement and shall state that copies thereof are on file at the 

principal office of the Trustee for inspection by all bondholders. The Trustee shall not, however, 

be subject to any liability to any bondholder by reason of its failure to mail the notice required by 

this Section, and any such failure shall not affect the validity of such supplemental agreement when 

consented to and approved as provided in this Section. 

Whenever, at any time within one year after the date of the first publication of such notice, 

the Authority shall deliver to the Trustee an instrument or instruments in writing purporting to be 

executed by the holders of not less than sixty per centum (60%) in aggregate principal amount of 

the bonds then outstanding, which instrument or instruments shall refer to the proposed 

supplemental agreement described in such notice and shall specifically consent to and approve the 

execution thereof in substantially the form of the copy thereof referred to in such notice, thereupon, 

but not otherwise, the Trustee may execute such supplemental agreement in substantially such 

form, without liability or responsibility to any holder of any bond, whether or not such holder shall 

have consented thereto. 

If the holders of not less than sixty per centum (60%) in aggregate principal amount of the 

bonds outstanding at the time of the execution of such supplemental agreement shall have 

consented to and approved the execution thereof as herein provided, no holder of any bond shall 

have any right to object to the execution of such supplemental agreement, or to object to any of 

the terms and provisions contained therein or the operation thereof, or in any manner to question 

the propriety of the execution thereof, or to enjoin or restrain the Trustee or the Authority from 

executing the same or from taking any action pursuant to the provisions thereof. 

Upon the execution of any supplemental agreement pursuant to the provisions of this 

Section, this Agreement shall be and be deemed to be modified and amended in accordance 

therewith, and the respective rights, duties and obligations under this Agreement of the Authority, 

the Trustee and all holders of bonds then outstanding shall thereafter be determined, exercised and 

enforced in all respects under the provisions of this Agreement as so modified and amended. 

Section 1103.Trustee Joining in Supplemental Agreement. The Trustee is authorized to 

join with the Authority in the execution of any such supplemental agreement and to make the 

further agreements and stipulations which may be contained therein. Any supplemental agreement 

executed in accordance with the provisions of this Article shall thereafter form a part of this 

Agreement, and all of the terms and conditions contained in any such supplemental agreement as 

to any provision authorized to be contained therein shall be and shall be deemed to be part of the 

terms and conditions of this Agreement for any and all purposes. In case of the execution and 

delivery of any supplemental agreement, express reference may be made thereto in the text of any 

bonds issued thereafter, if deemed necessary or desirable by the Trustee. 

SECTION 1104.Responsibilities of Trustee Under this Article. In each and every case 

provided for in this Article, the Trustee shall be entitled to exercise its discretion in determining 

whether or not any proposed supplemental agreement, or any term or provision therein contained, 

is desirable, having in view the purposes of such instrument, the needs of the Authority, the rights 

and interests of the bondholders, and the rights, obligations and interests of the Trustee, and the 

Trustee shall not be under any responsibility or liability to the Authority or to any bondholder or 

to anyone whomsoever for its refusal in good faith to enter into any such supplemental agreement 

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if such agreement is deemed by it to be contrary to the provisions of this Article. The Trustee shall 

be entitled to receive, and shall be fully protected in relying upon, the opinion of any counsel 

approved by it, who may be counsel for the Authority, as evidence that any such proposed 

supplemental agreement does or does not comply with the provisions of this Agreement, and that 

it is or is not proper for it, under the provisions of this Article, to join in the execution of such 

supplemental agreement. 

Article 12ARTICLE XII.

Defeasance.

Section 1201.Release of Agreement. If, when the bonds secured hereby shall have become 

due and payable in accordance with their terms or otherwise as provided in this Agreement or shall 

have been duly called for redemption or irrevocable instructions to call the bonds for redemption 

or payment shall have been given by the Authority to the Trustee, the whole amount of the principal 

and the interest and the premium, if any, so due and payable upon all of the bonds and coupons 

then outstanding shall be paid or sufficient moneys, or Government Obligations or Prerefunded 

Municipals or Time Deposits, secured in the manner set forth in Section 601 of this Agreement, 

the principal of and the interest on which when due will provide sufficient moneys, shall be held 

by the Trustee or the Paying Agents for such purpose under the provisions of this Agreement, and 

provision shall also be made for paying all other sums payable hereunder by the Authority, then 

and in that case the right, title and interest of the Trustee hereunder shall thereupon cease, 

determine and become void, and the Trustee in such case, on demand of the Authority, shall release 

this Agreement and shall execute such documents to evidence such release as may be reasonably 

required by the Authority, and shall turn over to the Authority or to such officer, board or body as 

may then be entitled by law to receive the same any surplus in any account in the Sinking Fund 

and all balances remaining in any other funds or accounts other than moneys held for the 

redemption or payment of bonds or coupons; otherwise this Agreement shall be, continue and 

remain in full force and effect; provided, however, that in the event Government Obligations or 

Prerefunded Municipals or Time Deposits, secured in the manner set forth in Section 601 of this 

Agreement, shall be held by the Trustee as hereinabove provided, (i) in addition to the 

requirements set forth in Article III of this Agreement, the Trustee shall within thirty (30) days 

after such obligations shall have been deposited with it cause a notice signed by the Trustee to be 

published once in a daily newspaper of general circulation published in the Municipality of San 

Juan, Puerto Rico, and in a daily newspaper of general circulation or a financial journal published 

in the Borough of Manhattan, City and State of New York, setting forth (a) the date designated for 

the redemption of the bonds, (b) a description of the Government Obligations or Prerefunded 

Municipals or Time Deposits so held by it and (c) that this Agreement has been released in 

accordance with the provisions of this Section, and (ii) the Trustee shall nevertheless retain such 

rights, powers and privileges under this Agreement, as may be necessary and convenient in respect 

of the bonds for the payment of the principal, interest and any premium for which such 

Government Obligations or Prerefunded Municipals have been deposited or such Time Deposits 

have been made. 

For purposes of determining whether Variable Rate Bonds shall be deemed to have been 

paid prior to the maturity or redemption date thereof, as the case may be, the interest to come due 

on such Variable Rate Bonds on or prior to the maturity date or redemption date thereof, as the 

case may be, shall be calculated at the maximum rate permitted by the terms thereof. 

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Put Bonds and Extendible Maturity Bonds shall be deemed to have been paid only if there 

shall have been deposited with the Trustee moneys, Government Obligations, Prerefunded 

Municipals or Time Deposits, secured in the manner set forth in Section 601 of this Agreement, 

as applicable, in an amount which shall be sufficient to pay when due the maximum amount of 

principal of and premium, if any, and interest on such bonds which would become payable to the 

holders of such bonds upon the exercise of any options or extensions of maturity; provided, 

however, that, if at the time a deposit is made with the Trustee, such options or extensions are no 

longer exercisable, such bond shall not be considered a Put Bond or an Extendible Maturity Bond 

for purposes of this Section. 

Article 13ARTICLE XIII.

Miscellaneous Provisions.

Section 1301.Successorship of Authority. All covenants, stipulations, obligations and 

agreements of the Authority contained in this Agreement shall be deemed to be covenants, 

stipulations, obligations and agreements of the Authority to the full extent authorized or permitted 

by the laws of the Commonwealth of Puerto Rico, and all such covenants, stipulations, obligations 

and agreements shall be binding upon the successor or successors thereof from time to time and 

upon any officer, board, body or commission to whom or to which any power or duty affecting 

such covenants, stipulations, obligations and agreements shall be transferred by or in accordance 

with law. 

No covenant, stipulation, obligation or agreement herein contained shall be deemed to be 

a covenant, stipulation, obligation or agreement of any present or future member, agent or 

employee of the Authority in his individual capacity, and neither the members of the Authority or 

of any other agency of the Commonwealth of Puerto Rico nor any officer thereof or of the 

Authority, present or future, executing the bonds shall be liable personally on the bonds or be 

subject to any personal liability or responsibility by reason of the issuance thereof. 

The laws of the Commonwealth of Puerto Rico shall govern the construction of this 

Agreement, except that the rights, limitations of rights, immunities, duties and obligations of the 

Trustee shall be governed by the laws of the State of New York. 

Section 1302.Manner of Giving Notice, Etc.. Any notice, demand, direction, request or 

other instrument authorized or required by this Agreement to be given to or filed with the Authority 

or the Trustee shall be deemed to have been sufficiently given or filed for all purposes of this 

Agreement if and when sent by first class mail: 

to the Authority, if addressed to the Executive Director, Puerto Rico Electric Power 

Authority, San Juan, Puerto Rico; 

to the Trustee, if addressed to it at its Corporate Trust Office, or to any successor Trustee, 

if addressed to it at its principal office. 

Section 1303.Successorship of Paying Agents. Any bank or trust company with or into 

which any Paying Agent may be merged, converted or consolidated, or to which the assets and 

business of such Paying Agent may be sold, shall be deemed the successor of such Paying Agent 

for the purposes of this Agreement. If the position of any Paying Agent shall become vacant for 

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any reason, the Authority shall, within thirty (30) days thereafter, appoint a bank or trust company 

located in the same city as Paying Agent to fill such vacancy; provided, however, that if the 

Authority shall fail to appoint such Paying Agent within such period, the Trustee shall make such 

appointment. 

Section 1304.Parties and Bondholders Alone Have Rights Under Agreement. Except as 

herein otherwise expressly provided, nothing in this Agreement expressed or implied is intended 

or shall be construed to confer upon any person, firm or corporation other than the parties hereto 

and the holders of the bonds issued under the provisions of this Agreement any right, remedy or 

claim, legal or equitable, under or by reason of this Agreement or any provisions hereof, this 

Agreement and all its provisions being intended to be and being for the sole and exclusive benefit 

of the parties hereto and the holders from time to time of the bonds issued hereunder. 

Section 1305.Effect of Partial Invalidity. In case any one or more of the provisions of this 

Agreement or of the bonds or coupons issued hereunder shall for any reason be held to be illegal 

or invalid, such illegality or invalidity shall not affect any other provision of this Agreement or of 

the bonds or coupons, but this Agreement and the bonds and coupons shall be construed and 

enforced as if such illegal or invalid provision had not been contained therein. In case any 

covenant, stipulation, obligation or agreement contained in the bonds or in this Agreement shall 

for any reason be held to be in violation of law, then such covenant, stipulation, obligation or 

agreement shall be deemed to be the covenant, stipulation, obligation or agreement of the 

Authority to the full extent permitted by law. 

Section 1306.Substitute Publication. If, because of the temporary or permanent suspension 

of publication of any newspaper or financial journal or for any other reason, the Trustee or the 

Authority shall be unable to publish in a newspaper or financial journal any notice required to be 

published by the provisions of this Agreement, the Trustee or the Authority, as the case may be, 

shall give such notice in such other manner as in its judgment shall most effectively approximate 

such publication thereof, and the giving of such notice in such manner shall for all purposes of this 

Agreement be deemed to be compliance with the requirement for the publication thereof. 

In case, by reason of the suspension of regular mail service as a result of a strike, work 

stoppage or similar activity, it shall be impractical to mail notice of any event to registered owners 

of bonds or to bondholders of record when such notice is required to be given pursuant to any 

provision of this Agreement, any manner of giving notice as shall be satisfactory to the Trustee 

and the Authority shall be deemed to be a sufficient giving of such notice. 

Section 1307.Other Funds not Prohibited. Nothing in this Agreement expressed or implied 

shall be construed as preventing the Authority, if then authorized or permitted by law, from 

financing the acquisition or construction of any land, building, structure or other facility by the 

issuance of obligations which are not issued under or secured by the provisions of this Agreement 

or the 1947 Indenture or by entering into any financing agreement or agreements relating to any 

such facility pursuant to which the Authority has the right to the use, occupancy and possession of 

such facility and is required to make periodic payments in an aggregate amount substantially equal 

to the cost of such facility and reasonable financing charges, regardless of the disposition of title 

to such facility. 

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Section 1308.Headings, etc. not Part of Agreement. Any headings preceding the texts of 

the several articles hereof, and any table of contents appended to copies hereof, shall be solely for 

convenience of reference and shall not constitute a part of this Agreement, nor shall they affect its 

meaning, construction or effect. 

Section 1309.Multiple Counterparts. This Agreement may be executed in multiple 

counterparts, each of which shall be regarded for all purposes as an original, and such counterparts 

shall constitute but one and the same instrument. 

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[Original signature page; does not reflect renaming of 

Authority and appointment of successor trustee]

In Witness Whereof, Puerto Rico Water Resources Authority has caused this Agreement 

to be executed by its Executive Director and its corporate seal to be impressed hereon and attested 

by its Secretary or an Assistant Secretary and First National City Bank has caused this Agreement 

to be executed in its behalf by one of its Vice Presidents and its corporate seal to be impressed 

hereon and attested by one of its Associate Trust Officers, all as of the day and year first above 

written.

PUERTO RICO WATER RESOURCES 

AUTHORITY

Puerto Rico Water Resources Authority

By /s/ Julio Negroni 

 

Executive Director 

[seal]SEAL]

Attest: 

/s/ R. Betancourt 

Secretary 

FIRST NATIONAL CITY BANK

First National City Bank

By /s/ D.C. McNeill 

 

Vice President 

[seal]SEAL]

Attest: 

/s/ J.A. Olive 

Associate Trust Officer

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[Original acknowledgement page; does not reflect renaming of 

Authority or appointment of successor trustee]

State of New York )

) ss. 

County of New York )

On the 7th day of January, 1974, before me personally came JULIO NEGRONICame Julio 

Negroni, to me known, who, being by me duly sworn, did depose and say that he resides at 269 

Georgetown St., San Juan, Puerto Rico; that he is the Executive Director of Puerto Rico Water 

Resources Authority; and that he signed his name to the above instrument by order of the 

Authority, the Authority being the public corporation described in and which executed the above 

instrument. 

/s/ Gundars Aperans 

Notary Public 

GUNDARS APERANS 

Notary Public, State of New York 

No. 31-5091740 

Qualified in New York County 

Commission Expires March 30, 1974My commission expires

[seal]SEAL]

State of New York )

) ss. 

County of New York )

On the 7th day of January, 1974, before me personally came D.C. MCNEILLMcNeill, to 

me knownKnown, who, being by me duly sworn, did depose and say that he resides at 33 Ferris 

Hill Rd., New Canaan, Conn.; that he is a Vice President of First National City Bank, the banking 

association described in and which executed the above instrument; that he knows the seal thereof; 

that the seal affixed to said instrument is the corporate seal of said banking association; that it was 

so affixed by authority of said banking association; and that he signed his name thereto by like 

authority. 

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/s/ Gundars Aperans 

Notary Public 

GUNDARS APERANS 

Notary Public, State of New York 

No. 31-5091740 

Qualified in New York County 

Commission Expires March 30, 1974My commission expires

[seal]SEAL]

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Description Conformed Trust Agreement 1974 (with compiler 

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Document 2 ID 

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1

 From the Eighteenth Supplemental Agreement. Should be “Government Development Bank for Puerto 

Rico”:

2

 This Section 405 and 406 from the 16th Supplemental Agreement may no longer be in effect – and such 

provisions and related definitions are to continue until the replenishment obligations under Section 406 

have been satisfied in full.

 

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