EXHIBIT 11 

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Execution version 

AMENDED AND RESTATED RESTRUCTURING SUPPORT AGREEMENT 

THIS AMENDED AND RESTATED RESTRUCTURING SUPPORT AGREEMENT 

(including the annexes, exhibits and schedules attached hereto and as amended, supplemented or 

otherwise modified from time to time in accordance with the terms hereof, this “Agreement” or 

“RSA”), dated as of December 23, 2015, is entered into by and among Puerto Rico Electric 

Power Authority (“PREPA”), National Public Finance Guarantee Corporation (“National”), 

Assured Guaranty Corp., Assured Guaranty Municipal Corp. (together with Assured Guaranty 

Corp., “Assured”), Syncora Guarantee Inc. (“Syncora”), the undersigned members of the Ad 

Hoc Group of PREPA Bondholders identified on Annex A (the “Ad Hoc Group”), Scotiabank de 

Puerto Rico (in its capacity as administrative agent for the Scotiabank Lenders, “Scotiabank”), 

the lenders (the “Scotiabank Lenders”) under that certain Scotiabank Credit Agreement (as 

herein defined), Solus Opportunities Fund 5 LP, SOLA LTD and Ultra Master LTD 

(collectively, “Solus” or the “Solus Lenders” and together with Scotiabank, the Scotiabank 

Lenders and any persons who execute a joinder to this Agreement pursuant to section 18(b) 

hereof in the form of Annex B-2, the “Credit Agreements Lenders”), and Government 

Development Bank for Puerto Rico (“GDB”). National and Assured will be referred to herein 

collectively as the “Insurers,” and the Ad Hoc Group, together with persons who beneficially 

own or control Uninsured Bonds (as defined herein) and are party to this Agreement (including, 

for the avoidance of doubt, Solus) or execute a joinder to this Agreement pursuant to section 

18(a) hereof in the form of Annex B-1, will be referred to herein collectively as the “Holders,” 

and the Insurers, the Holders, Scotiabank, the Scotiabank Lenders, Solus and GDB will be 

referred to herein collectively as the “Supporting Creditors.” The Supporting Creditors, together 

with PREPA, will be referred to herein collectively as the “Parties.” 

RECITALS 

A. PREPA is the issuer of power revenue bonds (collectively, the “Revenue Bonds”) and 

power revenue refunding bonds (collectively with the Revenue Bonds, the “Bonds”) issued and 

outstanding pursuant to that certain Trust Agreement, dated as of January 1, 1974, as amended 

and supplemented through July 1, 2015, between PREPA and U.S. Bank National Association, 

as successor trustee (the “Trustee” and, with respect to said trust agreement, as amended, the 

“Trust Agreement”). Capitalized terms used but not defined in this Agreement shall have the 

meanings given to such terms in the Trust Agreement. 

B. Each individual series of Bonds issued under the Trust Agreement was authorized 

pursuant to specific resolutions of PREPA authorizing the issuance of such series of Bonds. 

C. In connection with the issuance of certain of the Bonds (such Bonds, the “Insured 

Bonds”), PREPA entered into various insurance agreements with the Trustee corresponding to 

insurance policies issued by various insurers including National, Assured and Syncora (such 

insurance policies to which any of National, Assured or Syncora or any other person that insures 

Bonds is currently a party, and the insurance agreements related thereto, collectively, the “Bond 

Insurance Agreements” and, together with the Trust Agreement, the Bonds, the resolutions 

approving the Bonds, and any other agreements, supplements, amendments, or other documents 

executed or delivered in connection with the issuance or maintenance of the Bonds, including the 

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TA Amendment (as defined herein), the “Bond Documents”). Any Bonds that are not Insured 

Bonds are referred to herein as “Uninsured Bonds.” 

D. PREPA has requested, and the Insurers and Holders have agreed, subject to the terms and 

conditions of this Agreement, to consent to an amendment of the Trust Agreement in the form 

and substance reasonably acceptable to the Supermajority Holders, the Supermajority Insurers 

and the Supermajority Credit Agreement Lenders and consistent with the description attached 

hereto as Annex C (the “TA Amendment”). 

E. The Bond Insurance Agreements provide the Insurers the sole right in lieu of the 

beneficial owners of the applicable Insured Bonds to consent to the TA Amendment in 

accordance with the terms of such Bond Insurance Agreements. 

F. PREPA, Scotiabank and the Scotiabank Lenders have entered into that certain Credit 

Agreement, dated as of May 4, 2012 (as amended, restated, extended, supplemented or otherwise 

modified and in effect from time to time, the “Scotiabank Credit Agreement”), with Scotiabank 

as agent thereunder.

G. PREPA and the Solus Lenders are parties to that certain Trade Finance Facility 

Agreement, dated as of July 20, 2012 (as amended, restated, extended, supplemented or 

otherwise modified and in effect from time to time, the “Solus Credit Agreement” and together 

with the Scotiabank Credit Agreement, the “Credit Agreements”). 

H. PREPA and GDB have entered into that certain Collateral Swap Loan Agreement, dated 

as of June 21, 2013 (as amended, restated, extended, supplemented or otherwise modified from 

time to time and currently in effect, together with any related documents, the “Collateral Swap 

Loan Agreement”). 

I. PREPA and GDB have entered into that certain Isabela Dam Loan Agreement, dated as 

of March 26, 2004 (as amended, restated, extended, supplemented or otherwise modified from 

time to time and currently in effect, together with any related documents, the “Isabela Dam 

Loan Agreement” and together with the Collateral Swap Loan Agreement, the “GDB Loan 

Agreements”). 

J. GDB is the fiscal agent under that certain Loan Agreement, dated as of September 6, 

2012, by and between Puerto Rico Infrastructure Financing Authority, acting on behalf of the 

Commonwealth of Puerto Rico (“PRIFA”), and PREPA (as amended, restated, extended, 

supplemented or otherwise modified from time to time and currently in effect, together with any 

related documents, the “Aguirre Loan Agreement”). 

K. GDB is the fiscal agent under that certain Financial Agreement, dated as of September 

27, 2013, by and between PRIFA and PREPA (as amended, restated, extended, supplemented or 

otherwise modified from time to time and currently in effect, together with any related 

documents, the “San Juan Water Financial Agreement”). 

L. As of the date hereof, the total outstanding principal amount of Bonds insured by National under 

the Bond Insurance Agreements is $1,329,155,000, the total outstanding principal amount of 

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Insured Bonds that are beneficially owned by National is $0 and the total outstanding amount of 

Uninsured Bonds that are beneficially owned by National is $0.1

M. As of the date hereof, the total outstanding principal amount of Bonds insured by Assured 

under the Bond Insurance Agreements is $830,550,000, the total outstanding principal amount of 

Insured Bonds that are beneficially owned by Assured is $02

 and the total outstanding principal 

amount of Uninsured Bonds that are beneficially owned by Assured is $0. 

N. As of the date hereof, the total outstanding principal amount of Bonds insured by Syncora 

under the Bond Insurance Agreements is $197,405,000, the total outstanding principal amount of 

Insured Bonds that are beneficially owned by Syncora and the total outstanding principal amount 

of Uninsured Bonds that are beneficially owned by Syncora are set forth on its respective 

signature page hereto . 

O. PREPA and GDB have entered into certain depository and custodial agreements (as 

amended, restated, extended, supplemented or otherwise modified from time to time and 

currently in effect, together with any related documents, the “Custodial Agreements” and, 

together with the Collateral Swap Loan Agreement, the Isabela Dam Loan Agreement, the 

Aguirre Loan Agreement, and the San Juan Water Financial Agreement, the “GDB 

Agreements”). 

P. As of the date hereof, $8,107,995,000.00 in principal amount of Bonds is outstanding. The total 

outstanding principal amount of Bonds as of any date shall be known hereunder as the “Bond 

Principal Amount”. 

Q. As of the date hereof, the total outstanding principal amount of Uninsured Bonds that are 

beneficially owned by each member of the Ad Hoc Group is set forth on their respective 

signature pages hereto. 

R. As of the date hereof, the total outstanding principal amount of Uninsured Bonds that are 

beneficially owned by Solus is set forth on its respective signature page hereto. 

S. The Insurers and the Holders collectively control more than 60% of the total outstanding 

principal amount of the Bonds for purposes of consenting to the TA Amendment. 

T. As of the date hereof, there is $549,950,000 in aggregate principal amount (the 

“Scotiabank Principal Amount”) (plus applicable accrued fees and interest) outstanding under 

the Scotiabank Credit Agreement (the loans outstanding thereunder, the “Scotiabank Loans”) 

and the total outstanding principal amount of Uninsured Bonds that are beneficially owned or 

controlled by Scotiabank and the Scotiabank Lenders is $35,000. 

U. As of the date hereof, there is $146,041,914.24 in aggregate principal amount (the “Solus 

Principal Amount”, together with the Scotiabank Principal Amount, the “Credit Agreements 

 

1

 For the avoidance of doubt, this figure excludes National’s ownership of any 2015A Bonds, which have been 

defeased. 

2

 For the avoidance of doubt, this figure excludes Assured’s ownership of any 2015A Bonds, which have been 

defeased. 

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Principal Amount,” and the Credit Agreements Principal Amount collectively with the Bond 

Principal Amount, the “Outstanding Principal Amount”) (plus applicable accrued fees and 

interest) outstanding under the Solus Credit Agreement (the loans outstanding thereunder, the 

“Solus Loans”). 

V. PREPA, the Holders, the Credit Agreement Lenders and GDB entered into a 

Restructuring Support Agreement on November 5, 2015 (as amended by the Amendment No. 1, 

Amendment No. 2, Amendment No. 3 and Amendment No. 4 (each as defined below), the 

“Initial RSA”). 

W. PREPA, the Holders, the Credit Agreement Lenders and GDB entered into an 

Amendment No. 1 to the Initial RSA, dated as of November 12, 2015 (the “Amendment No. 1”), 

an Amendment No. 2 to the Initial RSA, dated as of November 20, 2015 (the “Amendment No. 

2”), an Amendment No. 3 to the Initial RSA, dated as of December 7, 2015 (the “Amendment 

No. 3”) and an Amendment No. 4 to the Initial RSA, dated as of December 17, 2015 (the 

“Amendment No. 4”). 

X. After good faith, arm’s length negotiations, the Parties have agreed, subject to the terms 

and conditions of this Agreement, to amend and restate in its entirety the Initial RSA to support 

the Recovery Plan (as defined herein) as described in the Recovery Plan Term Sheet (as defined 

herein) attached hereto as Annex D, including, without limitation, the Consent Solicitation, the 

Exchange Offer and Credit Agreements Amendments (each as defined in the Recovery Plan 

Term Sheet). 

NOW, THEREFORE, in consideration of the mutual promises set forth herein and for 

other good and valuable consideration, the receipt and sufficiency of which are hereby 

acknowledged, the Parties hereby agree as follows: 

1. Mutual Obligations and Acknowledgments. 

(a) During the period commencing on the Effective Date (as defined herein) and 

ending on the termination of this Agreement with respect to, or withdrawal from 

this Agreement by, such Party in accordance with the terms hereof (such period 

with respect to such Party, the “Support Period”), each Party shall work 

collaboratively and in good faith with the other Parties to finalize, document and 

implement a comprehensive recovery plan (including the incorporated terms and 

conditions below, the “Recovery Plan”) incorporating (i) the terms and conditions 

described on the Recovery Plan Term Sheet attached hereto as Annex D 

(including all schedules thereto, the “Recovery Plan Term Sheet”) (ii) the terms 

and conditions described on the January Payment Term Sheet (as defined herein) 

and (iii) such other terms, conditions and documents necessary to implement and 

effect the Recovery Plan based on, and consistent with, the Recovery Plan Term 

Sheet and this Agreement, including without limitation the definitive 

documentation relating to the transactions set forth in the January Payment Term 

Sheet (the “January Payment Transactions”), the Exchange Offer, Cash Tender, 

Backstop Facility, Consent Solicitation, TA Amendment and Credit Agreements 

Amendments, the Securitization Documents and any bills or legislation to enact 

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the Legislative Reform Package (each as defined herein or in the Recovery Plan 

Term Sheet) (such bills, legislations or documents, in Acceptable Form (as 

defined herein), collectively, the “Recovery Plan Documents”), which Recovery 

Plan Documents shall (A) contain the same economic terms as, and other terms 

consistent in all material respects with, the terms set forth in the Recovery Plan 

Term Sheet, (B) be consistent with this Agreement in all material respects and (C) 

not contain any material additional terms, elements or transactions that adversely 

affect any Supporting Creditor in its capacity as a PREPA creditor (any such bill, 

legislation, document, agreement, pleading or transaction that satisfies the 

standards described in the foregoing clauses (A)-(C) in this subsection shall be 

deemed to be in “Acceptable Form” as such term is used in this Agreement). For 

the avoidance of doubt, for purposes of this Agreement, if an event affects a 

Supporting Creditor in its capacity as a potential future surety provider or future 

holder of Securitization Bonds (as defined below), insurer of Securitization Bonds 

or Bonds defeased with Securitization Bonds, in each case pursuant to the 

Recovery Plan, then such event shall be deemed to affect such Supporting 

Creditor in its capacity as a PREPA creditor. “Securitization Bonds” refer to the 

bonds referred to as “Securitization Bonds” and “Restructuring Bonds” in the 

Recovery Plan Term Sheet, including, for the avoidance of doubt, in Schedules IA, I-B and II thereto. 

(b) The Parties hereby mutually acknowledge and agree that nothing in this 

Agreement or in any forbearance agreement entered into between or among any 

of the Supporting Creditors and PREPA prior to the Effective Date (a “Prior 

Forbearance Agreement”) shall prejudice any of the Supporting Creditors’ right 

to contest or defend, formally or informally, the priority of repayments of the 

Scotiabank Loan Obligations (as such term is defined herein) and the Solus Loan 

Obligations (as such term is defined herein) relative to the Bonds. 

Notwithstanding the foregoing or anything herein to the contrary, the Supporting 

Creditors and PREPA agree not to contest or take any position, whether formally 

or informally, regarding the priority of repayments of the Scotiabank Loan 

Obligations or the Solus Loan Obligations relative to the Bonds on the basis of (x) 

any of the following actions or agreements by Scotiabank, the Scotiabank 

Lenders, or the Solus Lenders, as applicable, on or prior to the Effective Date and 

during the Support Period: (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, (iv) not requiring the 

repayment or readvance of any loans under the Scotiabank Credit Agreement or 

Solus Credit Agreement or not requiring any loans under the Scotiabank Credit 

Agreement or Solus Credit Agreement to be revolving loans, (y) the inclusion in 

this Agreement as a Bond Potential Default, in any Prior Forbearance Agreement 

as a “Potential Default” (as defined therein), and in the Trust Agreement (as 

amended) as a “Potential Default” (as defined in the Trust Agreement, as 

amended), of PREPA’s use of monies from the General Fund (as defined in the 

Trust Agreement) to service its debt under the Scotiabank Credit Agreement or 

Solus Credit Agreement, or (z) PREPA servicing its debt outstanding under the 

Credit Agreements or the Trust Agreement, including any payment of principal 

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made on July 1, 2015, and none of the Supporting Creditors or PREPA shall (or 

shall, in the case of the Bonds, direct the Trustee to) use any such actions as a 

basis for contesting whether any expense, claim, liability or amount shall be 

construed as a “Current Expense” under the Trust Agreement by virtue of the 

foregoing or use any such actions in making any argument, filing any pleading or 

complaint, or supporting any other person in doing the same. 

(c) “Securitization Documents” means (A) all documents relating to the 

Securitization Bonds, including, without limitation and for the avoidance of 

doubt, (i) the Restructuring Resolution (as defined in the Recovery Plan Term 

Sheet), Securitization Trust Agreement (as defined below), and Servicing 

Agreement (as defined in the Recovery Plan Term Sheet), (ii) the governing 

documents of the issuer of the Securitization Bonds (the “Securitization SPV”), 

(iii) the form of Securitization Bonds, (iv) any other agreements to be entered 

into, resolutions adopted or certificates delivered by the Securitization SPV that 

affect the holders of Securitization Bonds and (v) any documents executed or 

delivered pursuant to the Securitization Special Legislation (as defined in the 

Recovery Plan Term Sheet), and the forms of such documents and, without 

duplication, (B) all documents implementing the transactions contemplated by 

Schedule II to the Recovery Plan Term Sheet. The “Securitization Trust 

Agreement” refers to the Initial Trust Agreement (as defined in the Recovery Plan 

Term Sheet). 

2. PREPA’s Obligations. During the Support Period, PREPA shall: 

(a) support and take any and all commercially reasonable, necessary or appropriate 

actions to facilitate, implement and consummate the Recovery Plan and the 

Recovery Plan Documents; 

(b) work cooperatively with the Supporting Creditors and their advisors to prepare 

and execute any documentation necessary (including the Recovery Plan 

Documents), as well as to take such steps as are commercially reasonable, 

necessary or appropriate to implement and consummate the Recovery Plan; 

(c) refrain from (i) taking, recommending, proposing, supporting, soliciting, or 

participating in any action not required by law that is inconsistent in any material 

respect with, or that would materially delay or impede approval, execution of 

documentation for, or implementation or consummation of the Recovery Plan, or 

that is otherwise inconsistent in any material respect with the express terms of this 

Agreement, (ii) directly or indirectly, proposing, supporting, soliciting, or 

participating in the formulation of any plan or proposal to restructure PREPA 

other than the Recovery Plan, and (iii) initiating any proceeding under any 

bankruptcy or insolvency law, any suspension period or proceeding under the 

Recovery Act, or any other action or proceeding that seeks to adjust, extend or 

challenge the claims of the Supporting Creditors pursuant to any federal, state or 

Puerto Rico statute, now or hereinafter enacted into law, except for any such 

proceeding to implement the Recovery Plan; provided that PREPA shall exercise 

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commercially reasonable efforts to provide the Supporting Creditors’ advisors 

with draft copies of the petition and all motions, applications, pleadings and other 

material documents that it intends to file with the applicable court or 

governmental authority in connection therewith, in each case at least five (5) 

business days before the filing date and in any event shall provide such drafts to 

the Supporting Creditors’ advisors within at least three (3) business days before 

the filing date, and shall consult with, and consider in good faith any 

recommendations made by, the Supporting Creditors’ advisors with respect to 

each such document; provided further that any such filed document shall be in 

Acceptable Form as determined in good faith by each Requisite Supporting 

Creditor Majority and Supermajority Insurers; 

(d) Refrain from directly or indirectly promoting or supporting any bill or legislation 

that is materially inconsistent with the Recovery Plan or this Agreement, that 

would materially and adversely affect the ability of PREPA to comply with its 

obligations under this Agreement or under the Recovery Plan Documents, or that 

would materially and adversely affect any Supporting Creditor in its capacity as a 

PREPA creditor; 

(e) Refrain from filing any documents in or regarding any validation proceeding (a 

“Validation Proceeding”) in respect of the Securitization Bonds, their issuance or 

the relevant authorizing legislation or publicly disclose (or permit to be publicly 

disclosed) any written legal opinions (from counsel for PREPA or the 

Securitization SPV, including, without limitation, bond counsel) regarding the 

validity of the securitization charge for the Securitization Bonds or the validity of 

the legislation authorizing the Securitization Bonds unless such documents or 

written legal opinions are reasonably acceptable to the Supermajority Holders and 

the Supermajority Insurers; provided however that, if PREPA or its legal advisors 

do not receive any written objection to any such document or written legal 

opinion from Holders of Uninsured Bonds holding at least 20% of principal 

amount of the Uninsured Bonds held by all Holders or from Insurers insuring at 

least 30% of principal amount of Insured Bonds within five (5) days after the 

legal advisors to the Holders and Insurers receive notice of and a copy of the final 

form of such document or written legal opinion (and, where all or a portion of 

such document or written legal opinion is not in English, an English translation of 

such document or written legal opinion), such document or written legal opinion 

shall be deemed to be reasonably acceptable to the Supermajority Holders and the 

Supermajority Insurers for purposes of this section 2(e); provided further that 

PREPA shall exercise commercially reasonable efforts to provide the Supporting 

Creditors’ legal advisors with draft copies of the petition and all documents 

intended to be filed in any such Validation Proceeding and of any written legal 

opinions (from counsel for PREPA or the Securitization SPV, including, without 

limitation, bond counsel) intended to be obtained and publicly disclosed, in each 

case at least five (5) business days before the date such document is filed or 

opinion is obtained or publicly disclosed, and shall consult with, and consider in 

good faith any recommendations made by, the Supporting Creditors’ legal 

advisors with respect to each such document and opinion; 

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(f) Other than as provided in section 9(c), refrain from entering into a restructuring 

support agreement or similar agreement related to the Recovery Plan or otherwise 

relating to a restructuring of all or a portion of the debt constituting the 

Outstanding Principal Amount with any Insurer, Syncora, any other person that 

insures Bonds, any Supporting Creditor or any other holder of such debt other 

than by means of an Amendment to this Agreement pursuant to section 17; and 

(g) Keep the Supporting Creditors’ financial and legal advisors reasonably informed 

regarding the PREC Public Hearing (as defined herein), and consult with such 

advisors in good faith with respect to any documents that PREPA may file or 

publish (or which PREPA is assisting the SPV or other parties in filing or 

publishing) relating to the PREC Public Hearing. 

Notwithstanding anything to the contrary herein but subject to section 22, nothing 

in this Agreement or the Recovery Plan shall limit or restrict PREPA from taking 

any action that PREPA shall deem necessary or appropriate to preserve, protect or 

defend any of its rights under this Agreement, the Recovery Plan or the Recovery 

Plan Documents. 

Notwithstanding anything to the contrary contained herein, but subject to section 

16, nothing in this Agreement shall limit or restrict PREPA from taking any 

action that PREPA may take under the Bond Documents, Credit Agreements 

and/or GDB Agreements, at law or in equity, that PREPA deems is necessary or 

appropriate to preserve, protect or defend (but not to enforce) any of PREPA’s 

rights thereunder against any challenge, including, without limitation, (i) 

defending, intervening in or filing any legal proceedings relating to any such 

rights of PREPA, (ii) sending notices to any persons, governmental authorities or 

entities concerning the existence of any such rights of PREPA, or (iii) otherwise 

preserving any of the rights, remedies, positions or defenses of PREPA, all of 

which are hereby expressly reserved. 

3. Supporting Creditors’ Obligations. During the Support Period, each Supporting 

Creditor (other than GDB) shall: 

(a) support and take any and all commercially reasonable, necessary or appropriate 

actions to facilitate, implement and consummate the Recovery Plan, including, 

without limitation, by working cooperatively with PREPA, the other Supporting 

Creditors, and their respective advisors to prepare and execute any documentation 

necessary (including the Recovery Plan Documents) and by giving any notices, 

orders, instructions or directions that are commercially reasonable, necessary or 

appropriate to support, facilitate, implement or consummate, or otherwise give 

effect to the Recovery Plan; provided, however, that nothing in this Agreement 

shall require any Supporting Creditor to indemnify the Trustee; 

(b) refrain from (i) taking, recommending, proposing, supporting, soliciting, or 

participating in any action not required by law that is inconsistent in any material 

respect with, or that would materially delay or impede approval, execution of 

documentation for, or implementation or consummation of the Recovery Plan, or 

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that is otherwise inconsistent in any material respect with the express terms of this 

Agreement, and (ii) directly or indirectly, proposing, supporting, soliciting, or 

participating in the formulation of any plan or proposal to restructure PREPA 

other than the Recovery Plan; and 

(c) Refrain from directly or indirectly promoting or supporting any bill or legislation 

that is materially inconsistent with the Recovery Plan or this Agreement, that 

would materially and adversely affect the ability of PREPA to comply with its 

obligations under this Agreement or the Recovery Plan Documents including, 

without limitation, commencing any rate case with the Energy Commission, or 

that would materially and adversely affect any Supporting Creditor in its capacity 

as a PREPA creditor. 

Notwithstanding anything in this Agreement, but subject to section 7 hereof, each 

Supporting Creditor is entitled to act to protect its interests as holders of other 

obligations issued by the Commonwealth of Puerto Rico or any of its 

instrumentalities (other than PREPA). 

Except as expressly provided in this Agreement, including the Recovery Plan and 

any Recovery Plan Document, each Supporting Creditor shall in no way be 

required as a result of this Agreement to expend any cash resources or assume any 

additional risk or liability (including, for the avoidance of doubt, indemnifying the 

Trustee) in support of the Recovery Plan or this Agreement. Each Supporting 

Creditor acknowledges that PREPA has made no representations as to what 

actions, if any, PREPA will take after this Agreement terminates. 

4. Insurers’ and Holders’ Obligations. 

(a) During the Support Period, the Ad Hoc Group and Solus shall: 

(i) negotiate with PREPA in good faith to provide a backstop for the 

financing of a Cash Tender (as defined in the Recovery Plan Term Sheet) 

for the Non-Forbearing Uninsured Holders (as defined in the Recovery 

Plan Term Sheet) on terms to be determined by mutual agreement between 

each Holder providing a portion of the backstop and PREPA (the 

“Backstop Facility”). 

(b) During the Support Period, each Holder shall: 

(i) tender any and all Uninsured Bonds (other than the January Payment 

Bonds) owned or controlled by such Holder in the Exchange Offer. 

Notwithstanding anything to the contrary in this Agreement, no Holder 

shall be required to tender into the Exchange Offer any of the Bonds sold 

by PREPA pursuant to the January Bond Purchase Agreement (the 

“January Payment Bonds”) and the terms of any exchange of the January 

Payment Bonds shall be governed by the January Payment Term Sheet 

and the January Bond Purchase Agreement. 

(c) During the Support Period, National and Assured shall: 

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(i) participate in purchasing the January Payment Bonds as set forth in 

section 8, and provide the DSRF sureties, in each case, subject to the terms 

and conditions set forth in Schedule II to the Recovery Plan Term Sheet 

(together, the “Insurers’ Transactions”); provided that it shall be a 

condition precedent to each applicable Insurer’s obligations hereunder and 

under Schedule II to the Recovery Plan Term Sheet that PREPA shall not 

have commenced or be subject to (a) any proceeding under bankruptcy or 

insolvency law, (b) any suspension period or proceeding under the 

Recovery Act, or (c) any other action or proceeding that seeks to adjust, 

extend or challenge the claims of the Supporting Creditors, in each case 

whether pursuant to any federal, state, Puerto Rico or other statute or law, 

now or hereinafter in effect. 

For the avoidance of doubt, each applicable Insurer’s obligation to 

participate in the Insurers’ Transactions in accordance with the terms of 

Schedule II to the Recovery Plan Term Sheet shall be limited to the 

amounts of the Insurers’ Transactions that are set forth in the letter 

agreement between National and Assured described in footnote three of 

Schedule II to the Recovery Plan Term Sheet, and no Insurer shall be 

obligated to participate in or perform the Insurers’ Transactions in respect 

of amounts or obligations set forth in such letter or in Schedule II to the 

Recovery Plan Term Sheet with respect to any of the other Insurers. 

(ii) National agrees to seek approval of a stay and/or suspend all proceedings 

related to National’s petition for a temporary rate increase filed before the 

Energy Commission on September 17, 2015, and the subsequent appeal of 

that action filed with the Puerto Rico Circuit Court of Appeals on October 

30, 2015 (the “Action”) until the earlier of the following occurs (such 

period, the “Suspension Period”): (x) termination of this Agreement and 

(y) National’s withdrawal from or termination of this Agreement. PREPA 

agrees to support National’s request for a stay or suspension, including by 

filing a formal pleading indicating its support. Such stay or suspension 

shall be without prejudice to any of the Parties’ rights upon resumption of 

litigation in those proceedings after termination of the Suspension 

Period. Notwithstanding the foregoing, this Agreement shall not prohibit 

National from responding to any pleading, order, court communication, or 

notice as necessary to preserve National’s Action and National’s rights in 

the Action during the Suspension Period, or from unilaterally dismissing 

its appeal of the Action. 

(iii) During the Suspension Period, except to the extent provided in the last two 

sentences of this paragraph, refrain from instituting, commencing, 

prosecuting, joining, supporting or otherwise participating directly or 

indirectly in any way in any legal or administrative proceedings regarding 

PREPA’s rates other than the Rate Structure contemplated in the Recovery 

Plan. Nothing in this Agreement shall prohibit or limit in any way the 

Insurers’ participation in the Integrated Resources Plan 

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proceedings. Except with respect to the Action to the extent provided 

herein, this Agreement does not prohibit the Insurers from intervening in, 

filing pleadings or other documents with, or otherwise participating in any 

proceeding before the Energy Commission; provided that, during the 

Suspension Period, such intervention or filings shall in no way interfere 

with or delay PREPA’s rate case related to the Rate Structure filed with 

the Energy Commission pursuant to the Recovery Plan. 

(d) During the Support Period, each of the Insurers and Holders shall: 

(i) consent to the execution and delivery by PREPA and the Trustee of the 

TA Amendment, in compliance with the terms of the Trust Agreement; 

(ii) in the case of a Holder, deliver consents with respect to any and all 

Uninsured Bonds owned or controlled by such Holder in the Consent 

Solicitation, and, in the case of an Insurer, deliver consents with respect to 

any and all Insured Bonds insured by such Insurer, as described in 

Schedule II to the Recovery Plan Term Sheet, in each case in accordance 

with the terms of the Bond Documents; 

(iii) take all commercially reasonable and necessary actions to effectuate 

and/or implement the TA Amendment, the Insurers’ Transactions, the 

Consent Solicitation and the Exchange Offer, as applicable, including, 

without limitation, transmitting its consent direction to its Depository 

Trust Company participant or participants, and any other person whose 

action is required to effectuate and/or implement the TA Amendment, the 

Insurers’ Transactions, the Consent Solicitation and the Exchange Offer, 

as applicable (but without any obligation under this Agreement to 

indemnify the Trustee); and 

(iv) forbear from exercising, or consenting to the exercise of, any right to 

direct the Trustee to enforce or exercise any rights or remedies available to 

the Trustee under the Trust Agreement or applicable law arising solely by 

reason of any default or event of default under any Bond Document that 

may have occurred or may subsequently occur as identified on Annex E 

attached hereto (the “Bond Potential Defaults”). 

(e) Notwithstanding anything to the contrary contained herein, nothing in this 

Agreement shall limit or restrict any Holder or Insurer or the Trustee from taking 

any action that the Trustee or any such Holder or Insurer may take under its 

respective Bond Documents, at law or in equity, that the Trustee or any such 

Holder or Insurer deems necessary or appropriate to preserve, protect or defend 

(but not to enforce) any trust rights, security interests, collateral, pledges of assets, 

liens, any other property rights or any other rights under the Bond Documents for 

the benefit of the Trustee or the Bonds, either held directly by the Holders or 

Insurers or held through the Trustee (the “Rights”) against any challenge, 

infringement or assertion of priority, including, without limitation, (i) defending, 

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intervening in or filing pleadings and other documents in any legal proceedings 

relating to any such Rights, (ii) sending notices to any persons, governmental 

authorities or entities concerning the existence of any such Rights, (iii) directing 

the Trustee to take any action to preserve, protect or defend any such Rights, (iv) 

appearing and participating as a party in interest in any matter to be adjudicated or 

decided in any bankruptcy or insolvency proceeding concerning PREPA, or 

(v) otherwise preserving any of the rights, remedies, positions or defenses of such 

Insurer or Holder or the Trustee, all of which are hereby expressly reserved. 

(f) Notwithstanding anything to the contrary herein but subject to section 22, nothing 

in this Agreement or the Recovery Plan shall limit or restrict any Insurer or 

Holder from taking any action that any such Insurer or Holder shall deem 

necessary or appropriate to preserve, protect or defend any of its rights under this 

Agreement, the Recovery Plan or the Recovery Plan Documents. 

(g) During the Support Period, (i) except as provided by the Recovery Plan, PREPA’s 

obligations to pay any and all Principal and Interest Requirements when due in 

accordance with the terms of the Bond Documents shall continue, and (ii) the 

Insurers and Holders agree and acknowledge that PREPA shall not be required to 

make transfers to the Revenue Fund or the Sinking Fund pursuant to Sections 506 

or 507 of the Trust Agreement. 

(h) Except as expressly provided herein or in the TA Amendment, none of (A) the 

existence, execution, delivery or performance of any term or provision of this 

Agreement or the TA Amendment, (B) any failure by any Holder or Insurer to 

object to any document or action contemplated by or taken under or in connection 

with this Agreement or the TA Amendment, or (C) any action taken under or in 

connection with this Agreement or the TA Amendment, including any approvals 

or consents to any action or document, shall (i) constitute a modification or 

relinquishment of any term or aspect of, or any right or remedy under or with 

respect to, the Bond Documents or any other document (other than this 

Agreement to the extent expressly provided herein) or under applicable law; 

(ii) constitute a consent to, waiver of, or admission of any default or event of 

default (or the absence of a default or event of default) in any of the Bond 

Documents; (iii) extend the due date of any obligations under the Bond 

Documents or otherwise affect the enforceability of such obligations; (iv) give 

rise to any obligation to extend, amend, waive or otherwise modify any term or 

condition of any of the applicable Bond Documents, or in the case of the Insurers 

and Holders, to direct the Trustee with respect to any of the foregoing; (v) give 

rise to any defenses or counterclaims to PREPA, the Insurers or the Holders, or to 

any right of the Insurers or Holders to direct the Trustee under the Bond 

Documents, to compel payment of the obligations under any of the applicable 

Bond Documents or to otherwise enforce rights or remedies thereunder or under 

applicable law; (vi) prohibit any Insurer or Holder from instituting, commencing, 

prosecuting, joining, interceding in, supporting or otherwise participating directly 

or indirectly in any way in any legal proceedings regarding the validity or 

enforceability of the Puerto Rico Public Corporation Debt Enforcement and 

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Recovery Act, Act No. 71-2014 (as amended, supplemented, modified, 

superseded, or replaced with other legislation in respect of a restructuring of 

PREPA, the “Recovery Act”) or any provision thereof, or intervening or otherwise 

participating in any lawsuit filed by any party regarding the validity or 

enforceability of the Recovery Act (any such legal proceedings, actions or 

lawsuits, “Recovery Act Legal Actions”); or (vii) prejudice the rights of any party 

to the Recovery Act Legal Actions. Except as expressly limited herein, each 

Insurer, each Holder and PREPA hereby expressly reserves all of its rights, 

remedies, positions and defenses under or with respect to the Bond Documents 

and under applicable law, and waives none. From and after the termination of this 

Agreement as to any Insurer or Holder, (x) each such Insurer or Holder (each, a 

“Terminated Insurer” or “Terminated Holder”, respectively) shall be entitled to 

protect, defend, enforce and assert any of its rights, remedies, positions and 

defenses under or with respect to the Bond Documents, in accordance with their 

respective terms, or under applicable law, including without limitation, 

commencing legal proceedings and (y) PREPA shall, subject to its obligations 

under this Agreement to the remaining Parties, be entitled to protect, defend, 

enforce and assert any of its rights, remedies, positions and defenses under or with 

respect to the Bond Documents, in accordance with their respective terms, or 

under applicable law, including without limitation, commencing legal 

proceedings, solely against the Terminated Insurer or Terminated Holder, as 

applicable. PREPA acknowledges that no Insurer or Holder has made any 

representations as to what actions, if any, any Holder or Insurer will take after this 

Agreement terminates as to such Holder or Insurer (including by withdrawal). 

5. Scotiabank and the Scotiabank Lenders’ Obligations. 

(a) Scotiabank and the Scotiabank Lenders shall (i) (A) consent to the Scotiabank 

Credit Agreement Amendments (as defined in the Recovery Plan Term Sheet) 

with respect to all or part of the Scotiabank Loans and/or (B) exchange all or part 

of the Scotiabank Loans in the Exchange Offer (as described in the Recovery Plan 

Term Sheet) and (ii) agree to take any and all reasonably necessary and 

appropriate action to effectuate the Scotiabank Credit Agreement Amendments 

and/or the Exchange Offer, as applicable, in each case so that the entirety of the 

Scotiabank Loans are either subject to the Scotiabank Credit Agreement 

Amendments or exchanged into the Exchange Offer (or a combination thereof). 

(b) PREPA, Scotiabank and the Scotiabank Lenders agree that the definition of 

“Maturity Date” under the Scotiabank Credit Agreement shall be amended in its 

entirety as follows: 

““Maturity Date” means the date that certain Restructuring Support 

Agreement (the “Restructuring Support Agreement”) between the 

Borrower and the Administrative Agent and the Scotiabank Lenders, 

among other parties, dated as of November 5, 2015, terminates with 

respect to the Administrative Agent and the Scotiabank Lenders, on the 

one hand, and the Borrower, on the other hand, or the Administrative 

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Agent and the Scotiabank Lenders cease to be “Supporting Creditors” 

thereunder, in each case in accordance with the terms of the Restructuring 

Support Agreement.” 

(c) During the Support Period, subject to the terms and conditions set forth herein, 

Scotiabank and each of the Scotiabank Lenders agrees as follows: 

(i) With respect to the Scotiabank Credit Agreement, Scotiabank and each 

Scotiabank Lender will forbear from exercising, or consenting to the 

exercise of, any right to direct the Agent (as such term is defined in the 

Scotiabank Credit Agreement) to enforce or exercise any rights or 

remedies available to the Agent under the Scotiabank Credit Agreement or 

applicable law arising solely by reason of any Default or Event of Default 

(as such terms are defined in the Scotiabank Credit Agreement) that may 

have occurred or may subsequently occur as identified on Annex F 

attached hereto (the “Scotiabank Potential Defaults”); and 

(ii) Scotiabank and each Scotiabank Lender will forbear from enforcing or 

exercising any rights or remedies available under the Loan Documents (as 

such term is defined in the Scotiabank Credit Agreement) or applicable 

law in respect of the Scotiabank Potential Defaults. 

(d) Notwithstanding anything to the contrary contained herein, nothing in this 

Agreement shall limit or restrict Scotiabank or any Scotiabank Lender from (i) 

taking any action that Scotiabank or any such Scotiabank Lender may take under 

the Loan Documents, at law or in equity, that Scotiabank or such Scotiabank 

Lender deems is necessary or appropriate to preserve, protect or defend (but not to 

enforce) any of the Scotiabank Priority Rights (as defined below) against any 

challenge, infringement or assertion of priority, including, without limitation, 

(A) defending, intervening in or filing any legal proceedings relating to any such 

Scotiabank Priority Rights, (B) sending notices to any persons, governmental 

authorities or entities concerning the existence of any such Scotiabank Priority 

Rights, or (C) otherwise preserving any of the rights, remedies, positions or 

defenses of Scotiabank or such Scotiabank Lender, all of which are hereby 

expressly reserved; (ii) defending, intervening in or filing pleadings and other 

documents in any legal proceedings relating to the validity, amount, priority, or 

other terms of the Scotiabank Credit Agreement or the Scotiabank Loan 

Obligations; (iii) intervening in, filing pleadings or other documents with, or 

otherwise participating in any proceeding before the Energy Commission; or (iv) 

appearing and participating as a party in interest in any matter to be adjudicated or 

decided in any bankruptcy or insolvency proceeding concerning PREPA, 

provided that the positions advocated in connection with such appearance are not 

materially inconsistent with the Recovery Plan and do not delay or hinder in any 

material respect, or prevent consummation of the Recovery Plan. For purposes 

hereof, “Scotiabank Priority Rights” shall mean the treatment of the Obligations 

(as such term is defined in the Scotiabank Credit Agreement, the “Scotiabank 

Loan Obligations”) as “Current Expenses” under the Trust Agreement. 

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(e) PREPA shall continue to make scheduled payments of interest in cash under the 

Scotiabank Credit Agreement; provided that, notwithstanding anything to the 

contrary in the Scotiabank Credit Agreement, during the Support Period, interest 

shall accrue and be paid in cash on the Scotiabank Loan Obligations at a rate of 

7.25% per annum on the first business day of each month. The Agent on behalf 

of the Scotiabank Lenders acknowledges and agrees that no default interest under 

the Scotiabank Credit Agreement will accrue or be paid during the Support 

Period. 

(f) Except as expressly provided herein, none of (A) the existence, execution, 

delivery or performance of any term or provision of this Agreement, (B) any 

failure by Scotiabank or any Scotiabank Lender to object to any document or 

action contemplated by or taken under or in connection with this Agreement, or 

(C) any action taken under or in connection with this Agreement, including any 

approvals or consents to any action or document, shall (i) constitute a 

modification or relinquishment of any term or aspect of, or any right or remedy 

under or with respect to, the Loan Documents or a direction to Scotiabank with 

respect to any of the foregoing; (ii) constitute a consent to, waiver of, or 

admission of any default or event of default (or the absence of a default or event 

of default) in any of the Loan Documents; (iii) extend the due date of any 

obligations under the Loan Documents or otherwise affect the enforceability of 

such obligations; (iv) give rise to any obligation to extend, amend, waive or 

otherwise modify any term or condition of any of the applicable Loan Documents; 

(v) give rise to any defenses or counterclaims for PREPA, Scotiabank or the 

Scotiabank Lenders, or to any right of the Scotiabank Lenders to direct the Agent 

under the Loan Documents, to compel payment of the obligations under any of 

the applicable Loan Documents or to otherwise enforce rights or remedies 

thereunder; (vi) prohibit Scotiabank or the Scotiabank Lenders from instituting, 

commencing, prosecuting, joining, interceding in, supporting or otherwise 

participating directly or indirectly in any way in any legal proceedings regarding 

the validity, enforceability or application of the Recovery Act or any provision 

thereof, or intervening or otherwise participating in any Recovery Act Legal 

Action; or (vii) prejudice the rights of any party to the Recovery Act Legal 

Actions. Except as expressly limited herein, Scotiabank, each Scotiabank Lender 

and PREPA each hereby expressly reserve all of their respective rights, remedies, 

positions and defenses under or with respect to the Loan Documents and under 

applicable law, and waive none. From and after the termination of this 

Agreement as to Scotiabank and the Scotiabank Lenders, (x) Scotiabank and each 

Scotiabank Lender shall be entitled to protect, defend, enforce and assert any of 

their respective rights, remedies, positions and defenses under or with respect to 

the Loan Documents in accordance with their respective terms or under applicable 

law, including without limitation commencing legal proceedings, and (y) PREPA 

shall, subject to its obligations under this Agreement to the remaining Parties, be 

entitled to protect, defend, enforce and assert any of its respective rights, 

remedies, positions and defenses under or with respect to the Loan Documents in 

accordance with their respective terms or under applicable law, including without 

limitation commencing legal proceedings. PREPA acknowledges that none of 

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Scotiabank and the Scotiabank Lenders have made any representations as to what 

actions, if any, Scotiabank and the Scotiabank Lenders will take after this 

Agreement terminates, and with respect thereto Scotiabank and the Scotiabank 

Lenders specifically reserve any and all rights, remedies, and claims Scotiabank 

and the Scotiabank Lenders have (after giving effect hereto) with respect to the 

Scotiabank Potential Defaults and each other Default (as such term is defined in 

the Scotiabank Credit Agreement) that may occur. 

(g) Notwithstanding anything to the contrary herein but subject to section 22, nothing 

in this Agreement or the Recovery Plan shall limit or restrict Scotiabank or any 

Scotiabank Lender from taking any action that Scotiabank or such Scotiabank 

Lender shall deem necessary or appropriate to preserve, protect or defend any of 

its rights under this Agreement, the Recovery Plan or the Recovery Plan 

Documents. 

6. Solus and the Solus Lenders’ Obligations. 

(a) Each Solus Lender (i) shall (A) consent to the Solus Credit Agreement 

Amendments (as defined in the Recovery Plan Term Sheet, together with the 

Scotiabank Credit Agreement Amendments, the “Credit Agreements 

Amendments”) with respect to all or part of the Solus Loans and/or (B) exchange 

all or part of the Solus Loans in the Exchange Offer (as described in the Recovery 

Plan Term Sheet) and (ii) agrees to take any and all reasonably necessary and 

appropriate action to effectuate the Solus Credit Agreement Amendments and/or 

the Exchange Offer, as applicable, in each case so that the entirety of the Solus 

Loans are either subject to the Solus Credit Agreement Amendments or 

exchanged into the Exchange Offer (or a combination thereof).

(b) During the Support Period, subject to the terms and conditions set forth herein, 

the Solus Lenders agree that, with respect to the Solus Credit Agreement, the 

Solus Lenders will forbear from enforcing or exercising any rights or remedies 

available to the Solus Lenders under the Solus Credit Agreement or applicable 

law arising solely by reason of any Default or Event of Default (as such terms are 

defined in the Solus Credit Agreement) that may have occurred or may 

subsequently occur as identified on Annex G attached hereto (the “Solus 

Potential Defaults”, and collectively with the Scotiabank Potential Defaults and 

Bond Potential Defaults, the “Potential Defaults”). 

(c) Notwithstanding anything to the contrary contained herein, nothing in this 

Agreement shall limit or restrict Solus from (i) taking any action that Solus may 

take under the Facility Documents (as such term is defined in the Solus Credit 

Agreement), at law or in equity, that Solus deems is necessary or appropriate to 

preserve, protect or defend (but not to enforce) any of the Solus Priority Rights 

(as defined below) against any challenge, infringement or assertion of priority, 

including, without limitation, (A) defending, intervening in or filing pleadings and 

other documents in any legal proceedings relating to any such Solus Priority 

Rights, (B) sending notices to any persons, governmental authorities or entities 

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concerning the existence of any such Solus Priority Rights, or (C) otherwise 

preserving any of the rights, remedies, positions or defenses of Solus, all of which 

are hereby expressly reserved; (ii) defending, intervening in or filing pleadings 

and other documents in any legal proceedings relating to the validity, amount, 

priority, or other terms of the Solus Credit Agreement or the Solus Loan 

Obligations; (iii) intervening in, filing pleadings or other documents with, or 

otherwise participating in any proceeding before the Energy Commission; or (iv) 

appearing and participating as a party in interest in any matter to be adjudicated or 

decided in any bankruptcy or insolvency proceeding concerning PREPA, 

provided that the positions advocated in connection with such appearance are not 

materially inconsistent with the Recovery Plan and do not delay or hinder in any 

material respect, or prevent consummation of the Recovery Plan. For purposes 

hereof, “Solus Priority Rights” shall mean the treatment of the Obligations (as 

such term is defined in the Solus Credit Agreement, the “Solus Loan 

Obligations”) as “Current Expenses” under the Trust Agreement. 

(d) PREPA shall continue to make scheduled payments of interest in cash under the 

Solus Credit Agreement; provided that notwithstanding anything to the contrary 

in the Solus Credit Agreement, during the Support Period, interest shall accrue 

and be paid in cash on the Solus Loan Obligations at a rate of 7.25% per annum 

on the first business day of each month. Each of the Solus Lenders acknowledges 

and agrees that no default interest under the Solus Credit Agreement will accrue 

or be paid during the Support Period. 

(e) Except as expressly provided herein, none of (A) the existence, execution, 

delivery or performance of any term or provision of this Agreement, (B) any 

failure by any Solus Lender to object to any document or action contemplated by 

or taken under or in connection with this Agreement, or (C) any action taken 

under or in connection with this Agreement, including any approvals or consents 

to any action or document, shall (i) constitute a modification or relinquishment of 

any term or aspect of, or any right or remedy under or with respect to, the Facility 

Documents; (ii) constitute a consent to, waiver of, or admission of any default or 

event of default (or the absence of a default or event of default) in any of the 

Facility Documents; (iii) extend the due date of any obligations under the Facility 

Documents or otherwise affect the enforceability of such obligations; (iv) give 

rise to any obligation to extend, amend, waive or otherwise modify any term or 

condition of any of the applicable Facility Documents; (v) give rise to any 

defenses or counterclaims to PREPA or the Solus Lenders, or to any right of the 

Solus Lenders to compel payment of the obligations under any of the applicable 

Facility Documents or to otherwise enforce rights or remedies thereunder; 

(vi) prohibit the Solus Lenders from instituting, commencing, prosecuting, 

joining, interceding in, supporting or otherwise participating directly or indirectly 

in any way in any legal proceedings regarding the validity, enforceability or 

application of the Recovery Act or any provision thereof, or intervening or 

otherwise participating in any Recovery Act Legal Actions; or (vii) prejudice the 

rights of any party to the Recovery Act Legal Actions. Notwithstanding anything 

to the contrary, nothing in this Agreement shall amend or modify Sections 8.02 

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and 8.04 of the Solus Credit Agreement. Except as expressly limited herein, each 

Solus Lender and PREPA hereby expressly reserves all of its rights, remedies, 

positions and defenses under or with respect to the Facility Documents and under 

applicable law, and waives none. From and after the termination of this 

Agreement as to Solus, the Solus Lenders and PREPA shall, subject to PREPA’s 

obligations under this Agreement to the remaining Parties, be entitled to protect, 

defend, enforce and assert any of their respective rights, remedies, positions and 

defenses under or with respect to the Loan Documents in accordance with their 

respective terms or under applicable law, including without limitation 

commencing legal proceedings. PREPA acknowledges that Solus has made no 

representations as to what actions, if any, Solus will take after this Agreement 

terminates as to Solus (including by withdrawal), and with respect thereto Solus 

hereby specifically reserves any and all rights, remedies, and claims it has (after 

giving effect hereto) with respect to the Solus Potential Defaults and each other 

Default (as such term is defined in the Solus Credit Agreement) that may occur. 

(f) Notwithstanding anything to the contrary herein but subject to section 22, nothing 

in this Agreement or the Recovery Plan shall limit or restrict Solus from taking 

any action that Solus shall deem necessary or appropriate to preserve, protect or 

defend any of its rights under this Agreement, the Recovery Plan or the Recovery 

Plan Documents. 

7. GDB’s Obligations. 

(a) During the Support Period: 

(i) GDB shall work cooperatively with the Supporting Creditors and their 

advisors to prepare and execute any documentation necessary (including 

the Recovery Plan Documents), as well as to take such steps as are 

commercially reasonable, necessary or appropriate to support, facilitate, 

implement and consummate the Recovery Plan; 

(ii) GDB (x) shall consent to the GDB Loan Amendments (as defined in the 

Recovery Plan Term Sheet) with respect to all or part of its indebtedness 

under the GDB Loan Agreements and/or (y) exchange all or part of its 

indebtedness under the GDB Loan Agreements in the Exchange Offer (as 

described in the Recovery Plan Term Sheet) and (z) agrees to take any and 

all reasonably necessary and appropriate action to effectuate the GDB 

Loan Amendments and/or the Exchange Offer, as applicable, in each case 

so that the entirety of its indebtedness under the GDB Loan Agreements is 

either subject to the GDB Loan Amendments or exchanged into the 

Exchange Offer (or a combination thereof); 

(iii) upon the request of PREPA or the Supporting Creditors, GDB shall 

provide reasonable access to its management in connection with the 

documentation, execution, and implementation of the Recovery Plan in the 

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form of regular meetings between and/or among such management, 

advisors to PREPA, and the Supporting Creditors and/or their advisors; 

(iv) upon the terms and subject to the conditions set forth herein, GDB shall 

not enforce any rights or remedies (including, without limitation, the 

commencement of any legal proceedings and the exercise of any right of 

setoff or recoupment) against PREPA or its assets in respect of GDB’s 

rights or claims under the GDB Loan Agreements or GDB’s pecuniary 

rights or claims to payment under any other contract or agreement 

between GDB and PREPA; 

(v) GDB shall refrain from directly or indirectly promoting or supporting any 

bill or legislation that is materially inconsistent with the Recovery Plan or 

this Agreement, that would materially and adversely affect the ability of 

PREPA to comply with its obligations under this Agreement or under the 

Recovery Plan Documents, or that would materially and adversely affect 

any Supporting Creditor in its capacity as a PREPA creditor; and 

(vi) GDB shall refrain from (i) taking, recommending, proposing, supporting, 

soliciting, or participating in any action not required by law that is 

inconsistent in any material respect with, or that would materially delay or 

impede approval, execution of documentation for, or implementation or 

consummation of the Recovery Plan, or that is otherwise inconsistent in 

any material respect with the express terms of this Agreement, and (ii) 

directly or indirectly, proposing, supporting, soliciting, or participating in 

the formulation of any plan or proposal to restructure PREPA other than 

the Recovery Plan.

(b) Nothing contained in this Agreement is intended, or shall be deemed or construed 

to (i) constitute a waiver of any term or provision of the GDB Agreements (other 

than waiver of the exercise of any rights or remedies, including any exercise of a 

setoff or recoup right, in each case during the Support Period) and any other 

agreements between GDB and PREPA or applicable law, (ii) establish a custom 

or course of dealing between PREPA, on the one hand, and GDB, on the other 

hand, or (iii) limit or restrict GDB’s ability or right to exercise its duty to act as 

the fiscal agent to any other person. 

(c) Notwithstanding anything to the contrary contained herein, nothing in this 

Agreement shall limit or restrict GDB from taking any action that GDB may take 

under the GDB Agreements, at law or in equity, that is necessary or appropriate to 

preserve, protect or defend (but not to enforce) any of GDB’s rights thereunder 

against any challenge, including, without limitation, (i) defending, intervening in 

or filing any legal proceedings relating to any such GDB’s rights, (ii) sending 

notices to any persons, governmental authorities or entities concerning the 

existence of any such GDB’s rights, or (iii) otherwise preserving any of the rights, 

remedies, positions or defenses of GDB, all of which are hereby expressly 

reserved; provided, however that during the Support Period GDB shall not have 

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the right to setoff against any of PREPA’s moneys, notwithstanding if GDB has 

such rights under the GDB Loan Agreements or under any other applicable 

documents or law. 

(d) Upon termination of this Agreement, without the requirement of any notice to 

PREPA or any other person or Party: (i) all agreements set forth in section 

7(a)(iv) of this Agreement shall terminate automatically and be of no further force 

or effect, and (ii) subject to the terms of the GDB Agreements and applicable law, 

except as otherwise required by this Agreement, GDB and PREPA shall be free in 

their sole and absolute discretion without limitation to proceed to enforce any or 

all of their respective rights and remedies set forth in the GDB Agreements and 

applicable law including, without limitation, commencing legal proceedings. 

Notwithstanding anything to the contrary herein but subject to section 22, nothing 

in this Agreement or the Recovery Plan shall limit or restrict GDB from taking 

any action that GDB shall deem necessary or appropriate to preserve, protect or 

defend any of its rights under this Agreement, the Recovery Plan or the Recovery 

Plan Documents. 

(e) GDB agrees that during the Support Period PREPA shall have no obligation to 

pay any principal or interest under the GDB Loan Agreements, provided that 

interest shall continue to accrue but shall not be payable unless and until all 

principal and interest due and payable to the Supporting Creditors shall have been 

paid; notwithstanding the foregoing, such GDB principal or interest payments 

may be made on a current basis to the extent paid out of funds disbursed by a 

federal or local governmental entity (other than PREPA) for the purpose of paying 

such amounts pursuant to a federal or local program or appropriation. 

(f) Except as expressly provided in this Agreement, including the Recovery Plan and 

any Recovery Plan Document, GDB shall in no way be required as a result of this 

Agreement to expend any cash resources or assume any additional risk or liability 

in support of the Recovery Plan or this Agreement. GDB acknowledges that 

PREPA and the Supporting Creditors have made no representations as to what 

actions, if any, PREPA or any of the Supporting Creditors will take after this 

Agreement terminates. 

8. Additional Covenant by the Participating Holders, PREPA, and the Insurers. 

Each of the Participating Holders (as defined in the January Payment Term 

Sheet), PREPA and the applicable Insurers agree to execute a mutually agreeable 

bond purchase agreement (the “January Bond Purchase Agreement”), in 

accordance with and subject to the terms and conditions set forth in Annex H 

hereto (“January Payment Term Sheet”). 

9. Additional Covenants by PREPA. PREPA hereby covenants as follows: 

(a) During the Support Period, PREPA shall provide the following to each 

Supporting Creditor or, if so directed by a Supporting Creditor in writing, such 

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Supporting Creditor’s financial and legal advisors, in each case, subject to an 

Acceptable NDA: 

(i) Within two (2) business days after receipt, any default, event of default or 

termination notice received by PREPA under the Trust Agreement, the 

Credit Agreements, the GDB Loan Agreements or any other agreement 

under which PREPA owes or could owe more than $10 million if a 

counterparty exercises remedies thereunder; 

(ii) Within five (5) business days after the end of any month, a cash report 

showing account balances for the General Fund and the Construction Fund 

(as each term is defined in the Trust Agreement); 

(iii) Within five (5) business days after execution by PREPA, copies of any 

agreements with vendors for the delivery of fuel oil or for the purchase of 

power with projected annual spend of greater than $50 million; 

(iv) Within five (5) business days after PREPA has proposed or received any 

proposal that it intends in good faith to consider, any such proposal 

(whether formal or informal) that concerns any new financing or loan 

facility or any proposed recovery program or debt enforcement plan; 

(v) Within five (5) business days after the Effective Date, a 13-week cash 

flow statement (the “Initial 13-Week Cash Flow Statement”) and weekly 

updates to the Initial 13-Week Cash Flow Statement (the “Rolling 13-

Week Cash Flow Statement”); 

(vi) No later than seven (7) business days prior to the end of the period 

covered by the Initial 13-Week Cash Flow Statement and each subsequent 

13-week period, a budget covering the next 13-week period including the 

same categories as the Initial 13-Week Cash Flow Statement; 

(vii) Copies of all documents filed or published by any person relating to the 

PREC Public Hearing (including any comment period), to the extent not 

publicly available online and to the extent permissible under any relevant 

confidentiality obligation; and 

(viii) Written notice of any (A) default by any Party under this Agreement, or 

(B) Termination Event (as defined herein), and, in the case of clause (A), 

the waiver or cure of any such default, in each case within two (2) 

business days after the occurrence of such default, Termination Event, 

waiver, or cure, shall have been notified in writing to PREPA or PREPA 

shall have otherwise obtained actual knowledge of the occurrence of such 

default, Termination Event, waiver, or cure. 

(b) During the Support Period, PREPA shall (i) consult, in good faith, with the 

Supporting Creditors’ financial and legal advisors with respect to (A) any 

proposal that concerns any new financing or loan facility, (B) any proposed 

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recovery program or debt enforcement plan, (C) any rate case (a “Rate Case”) to 

be submitted to the Energy Commission (including with respect to the Rate 

Structure (as defined in the Recovery Plan Term Sheet)), the initial petition and 

other substantive pleadings (excluding any pleadings responding to information 

requests) submitted to the Energy Commission, (D) any substantive pleadings 

(excluding any pleadings responding to information requests) submitted to the 

Energy Commission in connection with the SPV Petition, (E) the Legislative 

Reform Package, and, for the avoidance of doubt, to the extent practicable, any 

amendments thereto, and (F) to the extent permissible under relevant 

confidentiality agreements with the rating agencies, any presentations provided to, 

or discussions or correspondence with, any rating agency in connection with 

PREPA’s efforts to obtain a rating on the Securitization Bonds; (ii) consider, in 

good faith, any recommendations made by such advisors with respect to each of 

the foregoing; provided, that, with respect to item (C), (D) and (F) above (to the 

extent practicable, and for (F), only with respect to presentations provided to any 

rating agencies), PREPA shall provide a copy of each of the documents described 

therein to each of the Supporting Creditors’ financial and legal advisors no later 

than five (5) business days prior to submission to the Energy Commission or a 

rating agency, as applicable; and (iii) keep the Supporting Creditors’ financial and 

legal advisors reasonably informed regarding any material developments with 

respect to (X) the matters described in clauses (i)(A)-(F) of this subsection, (Y) 

any power purchase agreement or public-private partnership with PREPA, and (Z) 

any other material transaction outside the ordinary course of PREPA’s business. 

(c) Except as provided by the Recovery Plan, PREPA shall not agree to any 

amendments, modifications, or supplements to the Bond Documents, Credit 

Agreements or GDB Loan Agreements (collectively, the “Supporting Creditor 

Agreements”) that (A) prejudice or impair any Supporting Creditors’ rights (as 

applicable) under the applicable Supporting Creditor Agreements or are otherwise 

adverse to any Supporting Creditors in their capacity as PREPA creditors, (B) 

enhance the existing rights of the Insurers, Holders, Scotiabank, the Scotiabank 

Lenders, Solus or GDB (as applicable), or (C) without limiting the preceding 

clauses (A) or (B), modify any Supporting Creditor Agreement (as applicable) in 

any way that is adverse to any Supporting Creditor (in its capacity as a PREPA 

creditor) not party to such agreement or which enhances the rights of any 

Supporting Creditor under a Supporting Creditor Agreement, in the case of 

clauses (A), (B) and (C), without the written consent of the Requisite Supporting 

Creditors and Supermajority Insurers, counting, for purposes of clause (C) only, 

only those Supporting Creditors within each class of Supporting Creditors that are 

not parties to such Supporting Creditor Agreement. 

Prior to entering into any amendment, modification or supplement to the 

Supporting Creditor Agreements, PREPA shall provide written notice of any such 

proposed amendment (each, a “Proposed Amendment”) to the financial and legal 

advisors of any Supporting Creditors not party to such Supporting Creditor 

Agreement no less than ten (10) business days prior to the effectiveness of such 

Proposed Amendment. If PREPA does not receive any written objection to a 

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Proposed Amendment from counsel to any such Supporting Creditors within ten 

(10) business days after providing such notice, no consent of such Supporting 

Creditors shall be required pursuant to the preceding paragraph prior to PREPA’s 

entry into the applicable Proposed Amendment; 

(d) It shall use reasonable commercial efforts to respond promptly to any reasonable 

written request for information concerning further diligence requests made by any 

Supporting Creditor; 

(e) It shall provide to the Supporting Creditors and their advisors reasonable access to 

its management and advisors that are participating in the development of the 

Recovery Plan from time to time, including, without limitation, if requested, 

weekly meetings and/or telephone conference calls with the financial advisors to 

the Supporting Creditors to discuss, among other things, any of the reports 

provided pursuant to section 9(a) of this Agreement; 

(f) It shall use commercially reasonable efforts to pursue any overdue accounts in 

respect of its accounts receivable from all of its customers (including, without 

limitation, all governmental entities and municipalities) and take all reasonable 

actions to seek to collect such Revenues; 

(g) It shall attempt, in good faith, to minimize potential setoff risks in conducting its 

cash management practices; 

(h) It shall satisfy, when due and in accordance with their terms, its payment 

obligations under (i) the interest rate swap transaction between PREPA and UBS 

AG, Stamford Branch, evidenced by a confirmation, dated April 18, 2007, as 

amended and supplemented from time to time; and (ii) the interest rate swap 

transaction between PREPA and JPMorgan Chase Bank, N.A., evidenced by a 

confirmation, dated April 27, 2007, as amended and supplemented from time to 

time (such swaps, the “Assured Swaps”); 

(i) PREPA shall record (i) revenue from municipalities and associated receivable 

balances on a gross basis, without reflecting any offset or accounting adjustment 

for Contributions in Lieu of Taxes (“CILT”); and (ii) CILT liabilities on a gross 

basis; 

(j) PREPA shall post the following to its publicly accessible website within two (2) 

business days after the date such documents are delivered to the Trustee (and shall 

make such delivery on a timely basis): (i) the annual report of the consulting 

engineers required under Section 706 of the Trust Agreement and (ii) the monthly 

statements under Section 710 of the Trust Agreement; 

(k) On the Effective Date, PREPA paid to each (x) Holder (or its designee) a support 

fee (the “Holder Support Fee”) in cash in an amount equal to its pro rata share 

(calculated based on the Bond Principal Amount held or controlled by all 

Holders) of $1,250,000, and (y) Credit Agreements Lender (or its designee) a 

support fee (the “Lender Support Fee”) in cash in an amount equal to its pro rata 

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share (calculated based on the Credit Agreements Principal Amount held or 

controlled by the Credit Agreements Lenders in their capacities as such) of 

$400,000; in each case under clauses (x) and (y) above, upon PREPA’s receipt of 

a written certification by such Supporting Creditor (or its designee) that such pro 

rata share does not exceed, after giving effect to amounts reimbursed to their 

advisors from payments of prior fees made by PREPA under the Prior 

Forbearance Agreements, the aggregate amount of fees and expenses incurred by 

such Supporting Creditor relating to work performed in connection with PREPA’s 

restructuring, including the negotiation and documentation of this Agreement and 

the Recovery Plan and related diligence (but excluding, for the avoidance of 

doubt, any work related to litigation by such Supporting Creditor, or in which 

such Supporting Creditor participates, against PREPA or in respect of the 

Recovery Act or in respect of any rate case brought by such Supporting Creditor 

or in which such Supporting Creditor participates), which shall be creditable 

against any obligation of PREPA to pay any fees and expenses of such Supporting 

Creditor; 

(l) No later than the first (1st) business day of each month after the Effective Date 

during the Support Period, counsel to each Supporting Creditor that receives a 

payment pursuant to Section 9(k) shall, by written notice to PREPA’s counsel, 

subject to section 14, advise PREPA of any changes in the aggregate principal 

amount of Uninsured Bonds, Insured Bonds (solely in the case of the Insurers), 

Scotiabank Loans or Solus Loans (as applicable) beneficially owned, controlled 

or insured by its clients that are Supporting Creditors. On the fifteenth (15th) day 

of each calendar month (or the first business day thereafter), starting on the first 

such day after the Effective Date and through the Closing Date (as defined 

herein), PREPA shall pay, in arrears, a support fee to (x) each Holder that is a 

Party to this Agreement at such time (or its designee) equal to its pro rata share 

(calculated based on the aggregate principal amount of Uninsured Bonds held or 

controlled by all Holders Party to this Agreement at such time) of $1,000,000, and 

(y) each Credit Agreements Lender that is a Party to this Agreement at such time 

(or its designee) equal to its pro rata share (calculated based on the Credit 

Agreements Principal Amount held or controlled by the Credit Agreements 

Lenders in their capacities as such) of $250,000; in each case, upon PREPA’s 

receipt of a written certification by such Supporting Creditor (or its designee) that 

such pro rata share does not exceed, after giving effect to amounts reimbursed to 

their advisors from payments of prior fees made by PREPA under the Prior 

Forbearance Agreements or otherwise, the aggregate amount of fees and expenses 

incurred by such Supporting Creditor relating to work performed in connection 

with PREPA’s restructuring, including the negotiation and documentation of this 

Agreement and the Recovery Plan and related diligence (but excluding, for the 

avoidance of doubt, any work related to litigation by such Supporting Creditor, or 

in which such Supporting Creditor participates, against PREPA or in respect of 

the Recovery Act or in respect of any rate case brought by such Supporting 

Creditor or in which such Supporting Creditor participates), which shall be 

creditable against any obligation of PREPA to pay any fees and expenses of such 

Supporting Creditor; 

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(m) On the Restatement Effective Date, PREPA shall pay to National and Assured (or 

any designee), if such Insurer is a Supporting Creditor Party, a support fee (the 

“Schedule II Insurer Support Fee”), which is separate and distinct from 

quarterly fees and premium described in Schedule II to the Recovery Plan Term 

Sheet, in cash in an amount equal to such Insurer’s share (as set forth in the letter 

agreement between National and Assured described in footnote three of Schedule 

II of the Recovery Plan Term Sheet) of $1,000,000. On the fifteenth (15th) day of 

each calendar month (or the first business day thereafter), starting on the first such 

day after the Effective Date and through the Closing Date (as defined herein), 

PREPA shall pay, in arrears, a support fee to National and Assured (or any 

designee), if such Insurer is a Party to this Agreement at such time, equal to such 

Insurer’s share (as set forth in the letter agreement between National and Assured 

described in footnote three of Schedule II of the Recovery Plan Term Sheet) of 

$1,000,000; upon PREPA’s receipt of a written certification by National and 

Assured (or their designee) that such pro rata share does not exceed, after giving 

effect to amounts reimbursed to their advisors from payments of prior fees made 

by PREPA under the Prior Forbearance Agreements or otherwise, the aggregate 

amount of fees and expenses incurred by such Supporting Creditor relating to 

work performed in connection with PREPA’s restructuring, including the 

negotiation and documentation of this Agreement and the Recovery Plan and 

related diligence (but excluding, for the avoidance of doubt, any work related to 

litigation by such Supporting Creditor, or in which such Supporting Creditor 

participates, against PREPA or in respect of the Recovery Act or in respect of any 

rate case brought by such Supporting Creditor or in which such Supporting 

Creditor participates), which shall be creditable against any obligation of PREPA 

to pay any fees and expenses of such Supporting Creditor. In consideration of the 

fees set forth in this paragraph, notwithstanding any other contractual rights to the 

contrary, Assured and National shall not be entitled to any fees or expenses 

(including, for the avoidance of doubt, any fees and expenses of legal and 

financial advisors) incurred in connection with PREPA’s restructuring other than 

the Schedule II Insurer Support Fee, the monthly fees payable hereunder, and the 

Quarterly Fee and the DSRF surety premiums described in Schedule II of the 

Recovery Plan Term Sheet; 

(n) PREPA shall include in the Consent Solicitation documents a description of the 

revised “Current Expenses” definition to be incorporated in the Trust Agreement 

pursuant to the Closing Date Trust Agreement Amendments (as described in the 

Recovery Plan Term Sheet), which definition in the Closing Date Trust 

Agreement Amendments shall expressly provide that the Scotiabank Loan 

Obligations and the Solus Loan Obligations shall constitute “Current Expenses” 

under the Trust Agreement, as provided in the Recovery Plan Term Sheet; 

(o) PREPA shall retain a recognized search firm with extensive experience in 

selecting executives and directors for electric utility companies (other than 

PREPA) of similar size, complexity and risks as PREPA (the “Search Firm”) to 

conduct a search for independent directors as contemplated by the Legislative 

Reform Package on or before February 19, 2016, and shall consult, in good faith, 

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with the Supporting Creditors (subject to an Acceptable NDA) and the financial 

and legal advisors of the Supporting Creditors before retaining any search firm; 

(p) During the Support Period PREPA shall not institute, join or support any action or 

proceeding to challenge, modify, alter or otherwise take any public position 

regarding the treatment of the Solus Loan Obligations and the Scotiabank Loan 

Obligations as “Current Expenses” under the Trust Agreement; and 

(q) PREPA and Syncora shall each negotiate in good faith to reach an agreement with 

the Supporting Creditors with respect to Syncora’s participation in the Recovery 

Plan on or prior to January 22, 2016. 

10. Withdrawal. Any Supporting Creditor (other than GDB) may withdraw from this 

Agreement upon the occurrence of any of the following events (each, a “Withdrawal Event”) 

upon written notice to PREPA and the advisors to the other Supporting Creditors, in which case 

this Agreement will terminate as to such notifying Supporting Creditor (each a “Withdrawing 

Creditor”) and it will no longer be considered a Supporting Creditor as of the date of delivery of 

such written notice (or the expiration of any applicable cure period): 

(a) The TA Amendment is not effective on or before forty-five (45) days after the 

Restatement Effective Date; 

(b) PREPA does not receive from the U.S. Internal Revenue Service (the “IRS”), on 

or before May 30, 2016, a private letter ruling or a closing agreement in an 

Acceptable Form as determined in good faith by such Withdrawing Creditor; 

provided, that such failure has not been cured within ten (10) days after receipt of 

a written notice thereof from such Withdrawing Creditor; provided further that 

such notice may be provided no later than ten (10) days after the legal advisors to 

the Supporting Creditors receive notice of and an executed copy of such IRS 

private letter ruling or closing agreement (as applicable); 

(c) During the Support Period, any regulatory authority or court of competent 

jurisdiction appoints a receiver with respect to PREPA; unless such appointment 

has, prior to the withdrawal of such Withdrawing Creditor, been stayed, reversed 

or vacated; 

(d) Any of GDB, Scotiabank, the Scotiabank Lenders, the Solus Lenders, Holders of 

more than 15.0% in principal amount of the aggregate amount of the Uninsured 

Bonds beneficially owned or controlled by all the Holders at such time, or the 

individual Insurers (each, a “Triggering Creditor”), fail to comply with any of the 

material terms, covenants, provisions, or conditions of this Agreement or any such 

material terms, provisions or conditions are otherwise subject to any breach, 

default or violation on the part of any Triggering Creditor, or any of the material 

representations or warranties of any Triggering Creditor as set forth in this 

Agreement is not true or accurate in any material respect at any time during the 

Support Period (each of the foregoing, a “Default”), which Default, if capable of 

being cured, is not cured within ten (10) days after receipt of a written notice 

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thereof from such Withdrawing Creditor; provided that such Default materially 

and adversely affects the rights or interests of such Withdrawing Creditor under 

this Agreement; 

(e) Either of PREPA or GDB breaches its obligations under sections 2(d), 2(f) or 

7(a)(v), respectively; provided that such breach, if capable of being cured, is not 

cured within ten (10) days after receipt of a written notice thereof from such 

Withdrawing Creditor; 

(f) The Energy Commission or the Commonwealth orders or approves (i) a reduction 

in the base rates of PREPA or (ii) an adjustment in any rates of PREPA in a 

manner that adversely and materially affects the Supporting Creditors in their 

capacity as PREPA creditors as determined in good faith by such Withdrawing 

Creditor; provided, that, such order or approval has not been stayed, reversed or 

vacated within ten (10) days after receipt of a written notice thereof from such 

Withdrawing Creditor; 

(g) PREPA or the Securitization SPV files any document in or regarding any 

Validation Proceeding in respect of the Securitization Bonds, their issuance or the 

relevant authorizing legislation or publicly discloses (or permits to be publicly 

disclosed) any written legal opinions regarding the validity of the securitization 

charge for the Securitization Bonds or the validity of the legislation authorizing 

the Securitization Bonds that are not reasonably acceptable as determined in good 

faith by such Withdrawing Creditor; provided however that, if PREPA or its legal 

advisors do not receive any written objection to any such document or written 

legal opinion from counsel to the Supporting Creditor within five (5) days after 

providing such counsel with a copy of the final form of such document or written 

legal opinion (and where all or a portion of such document or written legal 

opinion is not in English, an English translation of such document or written legal 

opinion) accompanied by a notice stating the accompanying document or written 

legal opinion is in final form, such document or written legal opinion shall be 

deemed to be reasonably acceptable to such Supporting Creditor for purposes of 

this section 10(g); 

(h) An Amendment pursuant to section 17(e)(C) becomes effective without the 

consent of such Withdrawing Creditor; provided that a Supporting Creditor may 

only withdraw from this Agreement pursuant to this section 10(h) within ten (10) 

days after receipt of a notice pursuant to section 17 that such Amendment has 

been entered into; 

(i) An Amendment becomes effective without the consent of such Withdrawing 

Creditor which (x) effects a change in (A) the Exchange Offer exchange ratio, (B) 

the interest rates of the Securitization Bonds, (C) the Ratings Condition (as 

defined in the Recovery Plan Term Sheet) or (D) the date prior to which the 

optional redemption of the Securitization Bonds is not permitted, or (y) reflects an 

agreement with one or more Insurers (or Syncora or any other person that insures 

Bonds) with respect to any participation or change in participation for any Insurer 

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(or Syncora or any other person that insures Bonds) in the Recovery Plan, 

including the terms set forth in Schedule II to the Recovery Plan Term Sheet; 

provided that a Supporting Creditor may only withdraw from this Agreement 

pursuant to this section 10(i) within ten (10) days after receipt of a notice pursuant 

to section 17 that such Amendment has been entered into; 

(j) PREPA or any other party acting on its behalf commences any proceeding under 

any bankruptcy or insolvency law, suspension period or proceeding under the 

Recovery Act or any other action or proceeding that seeks to adjust, extend or 

challenge the claims of the Supporting Creditors pursuant to any federal, state or 

Puerto Rico statute, now or hereinafter enacted into law, except for any such 

proceeding to implement the Recovery Plan in accordance with section 2(c); 

provided that each Supporting Creditor shall be deemed to have withdrawn 

automatically (without the requirement to deliver any written notice) upon 

commencement of any such proceeding, unless such Supporting Creditor shall 

have elected to expressly waive in writing its withdrawal right; 

(k) PREPA fails to make any required debt service payment on any of the Bonds; 

(l) Legislation containing substantive provisions that implements the Recovery Plan 

is not enacted into law on or before January 22, 2016; 

(m) An Amendment becomes effective without the consent of such Withdrawing 

Creditor which effects a change to (A) sections 13(e)(vi) or 13(e)(viii) or (B) 

notices delivered pursuant thereto, or any consequences of the notices 

contemplated thereby; provided that a Supporting Creditor may only withdraw 

from this Agreement pursuant to this section 10(m) within ten (10) days after 

receipt of a notice pursuant to section 17 that such Amendment has been entered 

into. 

Once a Party is no longer a Party to this Agreement (including due to a withdrawal 

pursuant to section 10), such Party shall be entitled to exercise any rights or remedies it may 

have under or in respect of the Bond Documents, Loan Documents, Facility Documents or 

applicable law, at law or in equity, and any applicable statutes of limitation with respect to any 

such rights or remedies shall be tolled during the Support Period applicable to such Party; 

provided that in such event, PREPA or GDB shall, subject to their respective obligations under 

this Agreement to the remaining Parties, be entitled to protect, defend, enforce and assert any of 

its rights, remedies, positions and defenses or take any other action that PREPA or GDB may 

take under the Bond Documents, Loan Documents, Facility Documents, GDB Agreements (as 

applicable) or applicable law, at law or in equity, in connection thereto, in each case, solely 

against Parties no longer Party to this Agreement, subject in all respects to section 16. The 

withdrawal of a Supporting Creditor from this Agreement shall be deemed a withdrawal from 

this Agreement with respect to all Bonds, Scotiabank Loans and Solus Loans (as applicable) held 

or insured by such Withdrawing Creditor. 

11. Conditions to Effectiveness. The Initial RSA was initially executed and became 

effective on November 5, 2015 (the “Effective Date”). The amendment and restatement of this 

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Agreement embodied herein shall become effective as of the date (the “Restatement Effective 

Date”) that each of the following shall have occurred: 

(a) Each Party (including, for the avoidance of doubt, members of the Ad Hoc Group 

beneficially owning or controlling, in the aggregate, not less than 35% of the 

Bond Principal Amount) shall have duly delivered and executed a counterpart of 

this Agreement no later than 11:59 p.m. (prevailing Eastern Time) on December 

23, 2015; 

(b) No proceeding pursuant to the Recovery Act or any other action or proceeding 

that seeks to adjust the claims of the Supporting Creditors pursuant to any federal, 

state, or Puerto Rico statute, now or hereinafter enacted into law, shall have been 

instituted by or on behalf of PREPA; 

(c) PREPA shall, no later than 11:59 p.m. (prevailing Eastern Time) on December 28, 

2015, have received and provided written confirmation to all Supporting Creditors 

of all approvals required to enter into and perform this Agreement, including, 

without limitation, (i) submission to the Supporting Creditors of resolutions duly 

adopted by the boards of directors of each of PREPA and GDB, in each case 

authorizing PREPA and GDB, respectively, to enter into and perform this 

Agreement, and (ii) submission of this Agreement for registration with the Office 

of the Comptroller of the Commonwealth of Puerto Rico pursuant to the 

provisions of Act. No. 18 of the Legislative Assembly of the Commonwealth, 

approved on October 30, 1975, as amended; and 

(d) PREPA shall, no later than 11:59 p.m. (prevailing Eastern Time) on December 28, 

2015, have paid the Schedule II Insurer Support Fee to National and Assured (or 

their designees) in accordance with section 9(m). 

12. Representations. 

(a) Mutual Representations. Each Party hereby represents and warrants to the other 

as follows (each of which is a continuing representation and warranty, and shall 

be true during the Support Period): 

(i) it has the legal right, power and authority to enter into this Agreement 

and consummate the transactions contemplated hereby; 

(ii) this Agreement is a legal, valid and binding obligation of such Party, 

enforceable against it in accordance with its terms (subject to applicable 

bankruptcy, reorganization, insolvency, moratorium or similar laws 

affecting creditors’ rights generally and subject, as to enforceability, to 

equitable principles of general application (regardless of whether 

enforcement is sought in a proceeding at equity or law)); 

(iii) (A) with respect to PREPA, it is a public corporation of the 

Commonwealth of Puerto Rico, duly existing under the laws of the 

Commonwealth of Puerto Rico, and (B) with respect to each Party, it is 

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duly organized and validly existing and in good standing under the laws 

of the jurisdiction of its organization with full power and authority to 

execute and deliver, and to perform and observe the terms and 

provisions of, this Agreement; and 

(iv) the execution, delivery, performance and observance of this Agreement 

by such Party (A) have been duly authorized by all necessary action on 

the part of such Party, do not and will not conflict with, or result in a 

violation of, any law applicable to it, and do not require it to obtain any 

permit, consent, approval, order or authorization of, or provide notice to 

or make a filing with, any court, governmental or regulator agency or 

authority or other person or entity that has not been obtained, provided 

or made, as applicable, (B) (1) with respect to PREPA, do not 

contravene, or constitute a default under, any provision of applicable law 

or regulation or of any agreement, judgment, injunction, order, decree or 

other instrument binding on PREPA and (2) with respect to each Party, 

do not and will not violate, conflict with or result in the breach of any 

provision of its organizational or governance documents and (C) do not 

and will not result in any breach of, constitute a default (or event which 

with the giving of notice or lapse of time, or both, would become a 

default) under, require any consent under or give to others any rights of 

termination, amendment, acceleration, suspension, revocation or 

cancellation of, any note, bond, mortgage, indenture, contract, 

agreement, lease, sublease, license, permit, franchise or other instrument 

or arrangement (including without limitation the Bond Documents, Loan 

Documents, Facility Documents and GDB Agreements) to which it is a 

party, which would materially adversely affect its ability to carry out its 

obligations under and otherwise observe this Agreement or cause the 

occurrence of a Termination Event. 

(b) Additional Representations of PREPA. PREPA hereby represents and warrants as 

follows (each of which is a continuing representation and warranty, and shall be 

true during the Support Period): 

(i) except to the extent that a Potential Default has occurred, no default under 

any Bond Document, Loan Document, Facility Document or GDB 

Agreement has occurred and is continuing to the best of its knowledge; 

(ii) it is in full compliance with, and no breach or default has occurred or is 

continuing in respect of, the covenants contained in Section 712 of the 

Trust Agreement; and 

(iii) each of the representations in the Recitals set forth above as to PREPA is 

true and accurate as of the date hereof. 

(c) Additional Representations of the Insurers. Each of the Insurers hereby represents 

and warrants as follows (each of which is a continuing representation and 

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warranty, and shall, subject to the provisions herein relating to Transfer (as 

defined in section 18(a) below) be true throughout the Support Period): 

(i) with respect to the Insured Bonds identified on its respective signature 

page hereto, the applicable Insurer has the sole right in lieu of the 

beneficial owners of such Insured Bonds to consent to the TA Amendment 

and to deliver the consents set forth in the Schedule II to the Recovery 

Plan Term Sheet as part of the Consent Solicitation; 

(ii) no default or event of default has occurred with respect to it under any 

Bond Insurance Agreement to which it is a party; 

(iii) it has not transferred any voting, consent or direction rights related to the 

applicable Insured Bonds; and 

(iv) each of the representations in the Recitals set forth above as to such 

Insurer is true and accurate as of the date hereof. 

(d) Additional Representations of the Holders. Each of the Holders hereby represents 

and warrants as follows (each of which is a continuing representation and 

warranty, and shall, subject to the provisions relating to Transfer (as defined in 

section 18(a) below) be true throughout the Support Period): 

(i) it owns or has investment management responsibility for accounts that 

own Uninsured Bonds in the principal amounts set forth on its respective 

signature page hereto or joinder to this Agreement in the form of Annex 

B-1 (as applicable), and that it has not sold, assigned, transferred, 

participated or otherwise pledged such Bonds, or any voting, consent or 

direction rights related to such Bonds, to any other person or entity, in 

each case, except as permitted by section 18 of this Agreement; and 

(ii) each of the representations in the Recitals set forth above as to the Holders 

is true and accurate as of the date hereof. 

(e) Additional Representations of Scotiabank and the Scotiabank Lenders. Each of 

Scotiabank and the Scotiabank Lenders hereby represents and warrants (which is 

a continuing representation and warranty, and shall, subject to the provisions 

herein relating to Transfer (as defined in section 18(a), below) be true throughout 

the Support Period) that each of the representations in the Recitals set forth above 

as to Scotiabank and the Scotiabank Lenders is true and accurate as of the date 

hereof. 

(f) Additional Representations of Solus. Solus hereby represents and warrants 

(which is a continuing representation and warranty, and shall, subject to the 

provisions herein relating to Transfer (as defined in section 18(a), below) be true 

throughout the Support Period) that each of the representations in the Recitals set 

forth above as to Solus is true and accurate as of the date hereof. 

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32 

13. Termination. 

(a) This Agreement shall terminate as to all Parties at 11:59 p.m. (prevailing Eastern 

Time) on June 30, 2016 (the “Termination Date”), unless terminated earlier in 

accordance with the terms of this Agreement. 

(b) In addition, this Agreement shall terminate as to all Parties automatically upon the 

occurrence of each of the following events (or the expiration of any applicable 

cure period) (each an “Automatic Termination Date”): 

(i) [RESERVED]; 

(ii) PREPA does not initiate a rate approval process with respect to the Rate 

Structure on or before March 22, 2016; 

(iii) The Securitization SPV does not file with the Energy Commission a 

petition (including the proposed Restructuring Resolution and other 

supporting documentation, the “SPV Petition”) for the approval of the 

calculation methodology for the Transition Charges and the Adjustment 

Mechanism (each as defined in the Recovery Plan Term Sheet) on or 

before February 10, 2016; 

(iv) Legislation containing substantive provisions that implements the 

Recovery Plan is not enacted into law on or before January 22, 2016; 

(v) The Energy Commission does not conduct a public hearing process to 

approve a revised rate structure (which may include a provisional rate in 

accordance with Schedule VI to the Recovery Plan Term Sheet) designed 

to implement the Recovery Plan as contemplated by, and in accordance 

with each deadline set forth in, the Legislative Reform Package, as 

enacted into law (the “Rate Public Hearing”); 

(vi) The Energy Commission does not approve a revised rate, which may be a 

provisional rate, on or prior to June 10, 2016; 

(vii) The Energy Commission does not conduct a public hearing process to 

approve the calculation methodology for the Transition Charges and the 

Adjustment Mechanism as contemplated by, and in accordance with each 

deadline set forth in, Schedule I-A to the Recovery Plan Term Sheet (the 

“SPV Public Hearing”, and together with the Rate Public Hearing, the 

“PREC Public Hearing”); 

(viii) On or prior to the sixtieth (60th) day after the SPV Petition is filed with the 

Energy Commission, the Energy Commission has not issued the 

Restructuring Order (as defined in the Recovery Plan Term Sheet) or the 

calculation methodology for the Transition Charges and the Adjustment 

Mechanism have not otherwise been approved or deemed approved in 

accordance with Schedule I-A to the Recovery Plan Term Sheet; 

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(ix) PREPA does not commence the Exchange Offer, Consent Solicitation and 

Credit Agreements Amendment Solicitation (each as defined in the 

Recovery Plan Term Sheet) on or before June 15, 2016; 

(x) PREPA does not consummate the Exchange Offer, Consent Solicitation or 

Credit Agreements Amendments on or before forty-five (45) days after the 

commencement thereof, unless with respect to (x) the Exchange Offer and 

Consent Solicitation, each is extended with the consent of Majority 

Holders and Supermajority Insurers, or (y) the Credit Agreements 

Amendments, the Credit Agreements Amendment Solicitation is extended 

with the consent of Majority Scotiabank Lenders and Majority Solus 

Lenders; 

(xi) The Securitization SPV is not formed and its board is not appointed within 

three (3) business days after the Securitization Special Legislation is 

enacted into law; 

(xii) The Securitization SPV does not adopt the Restructuring Resolution by 

two (2) business days after the earlier of (A) the date the Energy 

Commission issues the Restructuring Order or (B) the date the calculation 

methodology for the Transition Charges and the Adjustment Mechanism 

have otherwise been approved or deemed approved in accordance with 

Schedule I-A to the Recovery Plan Term Sheet; 

(xiii) Neither GDB nor the Securitization SPV publishes a notice to interested 

parties regarding challenges to the Securitization Special Legislation 

within three (3) business days after the Securitization Special Legislation 

is enacted into law; 

(xiv) The Securitization SPV does not publish a notice to interested parties 

regarding challenges to the Restructuring Resolution and the 

Securitization Bonds within three (3) business day after the Restructuring 

Resolution is adopted; 

(xv) During the Support Period, except as expressly permitted under this 

Agreement and the Recovery Plan, PREPA makes any principal 

repayment of any outstanding indebtedness under the Bond Documents, 

the Credit Agreements or the GDB Loan Agreements, except with respect 

to the Series 2015A Bonds issued by PREPA on July 30, 2015; or 

(xvi) On the date on which each of the Exchange Offer, Consent Solicitation, 

Closing Date Trust Agreement Amendments and Credit Agreements 

Restructuring (each as defined in the Recovery Plan Term Sheet) closes 

and becomes effective (the “Closing Date”). 

(c) In addition, PREPA shall have the right, upon written notice to the Supporting 

Creditors, to terminate this Agreement upon the occurrence of any of the 

following events (each, a “PREPA Termination Event”): 

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(i) Solely as to the applicable Supporting Creditor (a “Defaulting 

Creditor”), if such Defaulting Creditor fails to comply with any of the 

material terms, covenants, provisions, or conditions of this Agreement or 

any Recovery Plan Document or any such material terms, provisions or 

conditions are otherwise subject to any breach, default or violation on 

the part of such Defaulting Creditor, or any of the material 

representations or warranties of such Defaulting Creditor as set forth in 

this Agreement is not true or accurate in any material respect at any time 

during the Support Period (each of the foregoing, a “Supporting 

Creditor Default”), which Supporting Creditor Default, if capable of 

being cured, is not cured within ten (10) days after receipt of a written 

notice thereof from PREPA; 

(ii) Either (a) the Ad Hoc Group, together with any direct or indirect Bond 

Qualified Transferee of any of the members of the Ad Hoc Group, 

ceases to beneficially own or control, in the aggregate, at least 30% of 

the Bond Principal Amount or (b) one or more members of the Ad Hoc 

Group that are signatories to this Agreement as of the date hereof cease 

to collectively beneficially own or control, in the aggregate, at least 40% 

in principal amount of the aggregate amount of the Uninsured Bonds 

collectively beneficially owned or controlled by the Ad Hoc Group as of 

the date hereof; 

(iii) PREPA’s governing board of directors adopts a resolution determining, 

after consultation with counsel, that materially changed circumstances 

exist warranting a termination of this Agreement as a result of the 

board’s fiduciary or statutory duties; provided that in such case, PREPA 

shall provide no less than three (3) business days’ prior written notice of 

such determination to the Supporting Creditors; 

(iv) In the event that (x) PREPA and the Supporting Creditors that intend to 

participate in the Backstop Facility have not held discussions regarding a 

general framework for the Backstop Facility on or prior to May 2, 2016, 

(y) the Supporting Creditors that intend to participate in the Backstop 

Facility have not proposed a term sheet setting forth the basic terms of 

the Backstop Facility (a “Backstop Term Sheet”) on or prior to May 24, 

2016, or (z) PREPA has not reached an agreement with the applicable 

Supporting Creditors as to such Backstop Term Sheet on or prior to June 

6, 2016; 

(v) In the event that PREPA and the applicable Supporting Creditors do not 

execute the January Bond Purchase Agreement, on or prior to December 

29, 2015, in accordance with the terms and conditions set forth in Annex 

H hereto; 

(vi) In the event that the Requisite Supporting Creditors do not provide their 

written approval of the final version of a definitive document described 

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in section 13(e)(xiv) within five (5) business days after PREPA has 

requested such written approval; 

(vii) Solely as to the Defaulting Creditor, if such Defaulting Creditor 

breaches its obligations under section 3(c); provided that such breach, if 

capable of being cured, is not cured within ten (10) days after receipt of 

a written notice thereof from PREPA; or 

(viii) In the event that any of the Participating Holders or Insurers do not pay 

the purchase price for the January Payment Bonds on or prior to the 

earlier of (i) the Funding Date (as defined in Annex H hereto) and (ii) 

February 26, 2016, in either case other than as a result of (A) the failure 

by PREPA to satisfy conditions (1), (2), (3), (7), (8), (9) or (10) set forth 

under paragraph “Conditions Precedent to Purchasers’ Obligations” 

included in Annex H hereto or (B) a decision by PREPA in its discretion 

to not issue the January Payment Bonds as described in the first sentence 

under “Conditions Precedent to Purchasers’ Obligations” included in 

Annex H hereto. 

A PREPA Termination Event shall be deemed to have occurred as of the date 

and time when PREPA delivers such written notice (or after expiration of the 

relevant cure period or notice period) and shall terminate this Agreement with 

respect to all applicable Parties thereto. 

(d) In addition, PREPA or any Supporting Creditor shall have the right, upon written 

notice to the other Parties, to terminate this Agreement in the event that (i) at any 

time, the Supporting Creditors beneficially own, hold, control or insure in the 

aggregate less than 50% of the Outstanding Principal Amount or (ii) a court, 

arbitral tribunal, administrative agency or commission or other governmental or 

regulatory agency or authority issues, enters, enacts, promulgates or enforces a 

statute, law, ordinance, rule or regulation, or judgment, injunction or order (that is 

final and non-appealable and that has not been vacated, withdrawn or overturned 

within thirty (30) days after notice thereof) enjoining, staying or otherwise 

prohibiting the transactions contemplated by this Agreement, including 

implementation of the Recovery Plan (each, a “Mutual Termination Event”). 

Such termination shall be deemed to have occurred as of the date and time when 

the notifying Party delivers such written notice. 

(e) In addition, this Agreement may be terminated as between: 

(1) the Holders, as a class, and the other Parties, by the delivery to PREPA 

and the other Supporting Creditors, of a written notice by the Holders that 

beneficially own or control at least 50.1% in principal amount of the 

aggregate amount of the Uninsured Bonds beneficially owned or 

controlled by all the Holders at such time (the “Majority Holders”); or 

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(2) one or more Insurers that beneficially control or insure at least 30% in 

principal amount of the aggregate amount of the Bonds beneficially 

controlled or insured by all the Insurers at such time (the “Applicable 

Insurers”), and the other Parties, by the delivery to PREPA and the other 

Supporting Creditors, of a written notice by such Applicable Insurers; or 

(3) Scotiabank and the Scotiabank Lenders, as a class, and the other Parties, 

by the delivery to PREPA and the other Supporting Creditors, of a written 

notice by Scotiabank on behalf of the Scotiabank Lenders that hold or 

control at least 50.1% in principal amount of the Scotiabank Principal 

Amount held by them at such time (the “Majority Scotiabank Lenders”); 

or 

(4) the Solus Lenders, as a class, and the other Parties, by the delivery to 

PREPA and the other Supporting Creditors, of a written notice by the 

Solus Lenders that hold or control at least 50.1% in principal amount of 

the Solus Principal Amount held by them at such time (the “Majority 

Solus Lenders”, and the Majority Holders, Applicable Insurers and 

Majority Scotiabank Lenders, or Majority Solus Lenders, as applicable in 

the context in which such term is used, each a “Requisite Supporting 

Creditor Majority” and collectively the “Requisite Supporting 

Creditors”); 

in each case, in the exercise of their discretion upon the occurrence and 

continuation of any of the following events (each, a “Creditor Termination 

Event”, and together with the Mutual Termination Events, the PREPA 

Termination Events, the Automatic Termination Dates or the Termination Date, 

each a “Termination Event”): 

(i) A default by PREPA or an event of default (except for the Potential 

Defaults) has occurred and is continuing under any Bond Document, 

Recovery Plan Document, Loan Document or Facility Document and, if 

subject to a cure period, has not been cured by PREPA within the 

applicable cure period; 

(ii) Any federal or Puerto Rico law is enacted into law or a legal action is 

commenced by a party other than such Supporting Creditors either of 

which has a material adverse effect on PREPA or the rights or interests of 

such Supporting Creditors, in their capacity as creditors of PREPA; 

provided, that in no event shall a Recovery Act Legal Action constitute a 

material adverse effect on PREPA or the Supporting Creditors; provided, 

further, that if capable of being cured, such material adverse effect has not 

been cured within five (5) business days after receipt of a written notice 

thereof from such notifying Supporting Creditors; 

(iii) PREPA fails to comply with any of the material terms, covenants, 

provisions, or conditions of this Agreement or any such material terms, 

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covenants provisions or conditions are otherwise subject to any breach, 

default or violation on the part of PREPA, or any of the material 

representations or warranties of PREPA as set forth in this Agreement is 

not true or accurate in any material respect at any time during the Support 

Period (each of the foregoing, a “PREPA Support Agreement Default”), 

which PREPA Support Agreement Default, if capable of being cured, is 

not cured within ten (10) days after receipt of a written notice thereof from 

such notifying Supporting Creditors; 

(iv) PREPA seeks, or announces an intent, to effect a restructuring plan other 

than the plan contemplated by the Recovery Plan; 

(v) [Reserved] 

(vi) (A) The Legislative Reform Package (other than the Securitization Special 

Legislation) is not enacted into law in an Acceptable Form or (B) any 

amendment to the Legislative Reform Package (other than the 

Securitization Special Legislation) is enacted into law and such 

amendment is not in an Acceptable Form, in each case, as determined in 

good faith by the notifying Majority Holders or Applicable Insurers; 

provided, that, such failure (whether described in the preceding clause (A) 

or (B)) has not been cured within ten (10) days after receipt of a written 

notice thereof from such notifying Majority Holders or Applicable 

Insurers; provided further that such notice may be provided no later than 

fifteen (15) days after the legal advisors to the Holders and Insurers 

receive notice of and a copy of the enacted legislation; and provided

further that if a Holder or Insurer (or the Majority Holders or Applicable 

Insurers on its behalf) fails to deliver a notice of termination under this 

section 13(e)(vi) within the aforementioned fifteen (15) day period, the 

Legislative Reform Package (other than the Securitization Special 

Legislation) shall be deemed to be in Acceptable Form as to such Holder 

or Insurer for purposes of this section 13(e)(vi) and condition precedent (6) 

set forth in January Payment Term Sheet under “Conditions Precedent to 

Purchasers’ Obligations”; 

(vii) (A) The Legislative Reform Package (other than the Securitization Special 

Legislation) is not enacted into law in form and substance reasonably 

acceptable or (B) any amendment to the Legislative Reform Package 

(other than the Securitization Special Legislation) is enacted into law and 

such amendment is not in form and substance reasonably acceptable, in 

each case, as determined in good faith by the notifying Majority 

Scotiabank Lenders or Majority Solus Lenders; provided, that, such failure 

(whether described in the preceding clause (A) or (B)) has not been cured 

within ten (10) days after receipt of a written notice thereof from such 

notifying Majority Scotiabank Lenders or Majority Solus Lenders;

provided further that such notice may be provided no later than fifteen 

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38 

(15) days after the legal advisors to the Scotiabank Lenders and Solus 

Lenders receive notice of and a copy of the enacted legislation; 

(viii) (A) The Securitization Special Legislation is not enacted into law in form 

and substance reasonably acceptable or (B) any amendment to the 

Securitization Special Legislation is enacted into law and such amendment 

is not in form and substance reasonably acceptable, in each case, as 

determined in good faith by the notifying Majority Holders or Applicable 

Insurers; provided, that, such failure (whether described in the preceding 

clause (A) or (B)) has not been cured within ten (10) days after receipt of a 

written notice thereof from such notifying Majority Holders or Applicable 

Insurers; provided further that such notice may be provided no later than 

fifteen (15) days after the legal advisors to the Holders and Insurers 

receive notice of and a copy of the enacted legislation; and provided

further that if a Holder or Insurer (or the Majority Holders or Applicable 

Insurers on its behalf) fails to deliver a notice of termination under this 

section 13(e)(viii) within the aforementioned fifteen (15) day period, the 

Securitization Special Legislation shall be deemed to be reasonably 

acceptable as to such Holder or Insurer for purposes of this section 

13(e)(viii) and condition precedent (6) set forth in January Payment Term 

Sheet under “Conditions Precedent to Purchasers’ Obligations”; 

(ix) (A) The Securitization Special Legislation is not enacted into law in an 

Acceptable Form or (B) any amendment to the Securitization Special 

Legislation is enacted into law and such amendment is not in an 

Acceptable Form, in each case, as determined in good faith by the 

notifying Majority Scotiabank Lenders or Majority Solus Lenders; 

provided, that, such failure (whether described in the preceding clause (A) 

or (B)) has not been cured within ten (10) days after receipt of a written 

notice thereof from such notifying Majority Scotiabank Lenders or 

Majority Solus Lenders; provided further that such notice may be provided 

no later than fifteen (15) days after the legal advisors to the Scotiabank 

Lenders and Solus Lenders receive notice of and a copy of the enacted 

legislation; 

(x) Any petition or substantive pleading (excluding any pleadings responding 

to information requests) filed by PREPA with the Energy Commission in a 

Rate Case is not in an Acceptable Form as determined in good faith by the 

notifying Requisite Supporting Creditor Majority; provided, that, such 

failure has not been cured within ten (10) days after receipt of a written 

notice thereof from counsel to such Requisite Supporting Creditor 

Majority; provided further that such notice may be provided no later than 

(x) five (5) business days after the financial and legal advisors to the 

Supporting Creditors receive notice of and a copy of the filed petition or 

pleading in English (as applicable), and (y) fifteen (15) days after the 

financial and legal advisors to the Supporting Creditors receive notice of 

and a copy of the filed petition or pleading in Spanish (as applicable); 

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provided further that, with respect to each Scotiabank Lender and each 

Solus Lender, any such petition or pleading that seeks a provisional rate 

that does not cover all operating costs, capital expenditures and debt costs 

(assuming a restructuring in accordance with the Recovery Plan) shall be 

deemed not to be in Acceptable Form; 

(xi) PREPA supports or proposes any bill or legislation relating to the 

Legislative Reform Package (or, for the avoidance of doubt, any 

amendment to any such bill or legislation) which is not in an Acceptable 

Form as determined in good faith by the notifying Requisite Supporting 

Creditor Majority; provided, that, such failure has not been cured within 

ten (10) days after receipt of a written notice thereof from such Requisite 

Supporting Creditor Majority; provided further that such notice may be 

provided no later than fifteen (15) days after the legal advisors to the 

Supporting Creditors receive notice of and a copy of any such bill or 

legislation; 

(xii) The Energy Commission does not approve the Rate Structure in an 

Acceptable Form as determined in good faith by the notifying Majority 

Holders or Applicable Insurers; provided, that, such notice may be 

provided no later than fifteen (15) days after the legal advisors to the 

Holders and Insurers receive notice of and a copy of such approved Rate 

Structure as well as, to the extent not publicly available online and to the 

extent permissible under any relevant confidentiality obligation, copies of 

all orders and regulations implementing such approved Rate Structure; 

(xiii) The Energy Commission does not approve the Rate Structure in form and 

substance reasonably acceptable as determined in good faith by the 

notifying Majority Scotiabank Lenders or Majority Solus Lenders; 

provided, that, such notice may be provided no later than fifteen (15) days 

after the legal advisors to the Scotiabank Lenders and Solus Lenders 

receive notice of and a copy of such approved Rate Structure as well as, to 

the extent not publicly available online and to the extent permissible under 

any relevant confidentiality obligation, copies of all orders and regulations 

implementing such approved Rate Structure; 

(xiv) Any of the definitive documentation (other than with respect to the 

Securitization Documents) relating to the Exchange Offer, Cash Tender, 

Backstop Facility, the January Payment Transactions, the Consent 

Solicitation, the TA Amendment, the Closing Date Trust Agreement 

Amendments, the Credit Agreements Amendments and the Credit 

Agreements Amendment Solicitation is not entered into or adopted in 

form and substance reasonably acceptable as determined in good faith by 

the notifying Requisite Supporting Creditor Majority; it being understood 

that any determination by a Requisite Supporting Creditor Majority that 

any such final definitive documentation is reasonably acceptable shall be 

evidenced by such Requisite Supporting Creditor Majority’s written 

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40 

approval, which, in the case of the Insurers, for the avoidance of doubt, 

shall require the written approval of both National and Assured; 

(xv) PREPA enters into any new financing or loan facility, recovery program 

or debt enforcement plan, any power purchase agreement or public-private 

partnership or any other material transaction outside the ordinary course of 

PREPA’s business which the notifying Requisite Supporting Creditor 

Majority determines in good faith is not in Acceptable Form; provided that 

such notice may be provided no later than ten (10) days after the financial 

and legal advisors to the Supporting Creditors receive notice of and a copy 

of such executed definitive documentation entered into in connection with 

the foregoing; 

(xvi) Any Securitization Documents are adopted, entered into or enacted into 

law in form or substance not reasonably acceptable as determined in good 

faith by the notifying Majority Holders or Applicable Insurers; provided

however that, if PREPA does not receive any written objection to any such 

document from Majority Holders or Applicable Insurers within five (5) 

business days after such document has been adopted, entered into or 

enacted into law and a copy of such document was provided to the 

Holders’ and the Insurers’ legal advisors together with notice that such 

document has been adopted, entered into or enacted into law, such 

document shall be deemed to be reasonably acceptable to each Holder and 

each Insurer for purposes of this section 13(e)(xvi); 

(xvii) Any Securitization Documents are not adopted, entered into or enacted 

into law in an Acceptable Form as determined in good faith by the 

notifying Majority Scotiabank Lenders or Majority Solus Lenders; 

provided however that, if PREPA does not receive any written objection to 

any such document from Majority Scotiabank Lenders or Majority Solus 

Lenders within five (5) business days after such document has been 

adopted, entered into or enacted into law and a copy of such document 

was provided to the Scotiabank Lenders’ and Solus Lenders’ legal 

advisors together with notice that such document has been adopted, 

entered into or enacted into law, such document shall be deemed to be in 

Acceptable Form to each Scotiabank Lender and Solus Lender for 

purposes of this section 13(e)(xvii); 

(xviii) PREPA does not launch the RFQ Process (as defined in the Recovery Plan 

Term Sheet) on or before April 1, 2016 in a manner and on terms 

consistent in all material respects with the Recovery Plan and this 

Agreement and which does not include any additional or inconsistent 

terms that materially and adversely affect such Supporting Creditor in its 

capacity as a PREPA creditor; provided, that, such failure has not been 

cured within ten (10) days after receipt of a written notice thereof from 

such notifying Requisite Supporting Creditor Majority; 

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(xix) The Securitization SPV shall have not become a Party to this Agreement, 

on or before twenty-five (25) days after the Legislative Reform Package is 

enacted into law, on such terms and with such Amendments as shall be 

reasonably acceptable as determined in good faith by the notifying 

Requisite Supporting Creditor Majority; provided, that, such failure has 

not been cured within ten (10) days after receipt of a written notice thereof 

from counsel to such Requisite Supporting Creditor Majority; provided

further that such notice may be provided no later than five (5) business 

days after the financial and legal advisors to the Supporting Creditors 

receive notice of and a copy of such executed Amendment; 

(xx) Prior to its entry into this Agreement, the Securitization SPV takes an 

action that materially and adversely affects any Supporting Creditor in its 

capacity as a creditor of PREPA; provided, that, such material adverse 

effect has not been cured within ten (10) days after receipt of a written 

notice thereof from the notifying Requisite Supporting Creditor Majority; 

(xxi) In the event that PREPA and the applicable Supporting Creditors do not 

execute the January Bond Purchase Agreement, on or prior to December 

29, 2015, in accordance with the terms and conditions set forth in Annex 

H hereto; 

(xxii) In the event that (x) PREPA and the Supporting Creditors that intend to 

participate in the Backstop Facility have not held discussions regarding a 

general framework for the Backstop Facility on or prior to May 2, 2016, 

(y) the Supporting Creditors that intend to participate in the Backstop 

Facility have not proposed a Backstop Term Sheet on or prior to May 24, 

2016, or (z) PREPA has not reached an agreement with the applicable 

Supporting Creditors as to such Backstop Term Sheet on or prior to June 

6, 2016; 

(xxiii) In the event that (i) the SPV Petition, (ii) any other submissions or filings 

made by PREPA or the SPV in connection with the SPV Petition or (iii) 

the Restructuring Order is not reasonably acceptable as determined in 

good faith by the notifying Requisite Supporting Creditor Majority; 

provided that such notice may be provided no later than fifteen (15) days 

after the financial and legal advisors to the Supporting Creditors receive 

notice of and a copy of the document as filed with, submitted to or issued 

by the Energy Commission; or 

(xxiv) GDB breaches any material obligation under the Custodial Agreements to 

honor, within a commercially reasonable period of time, a duly authorized 

withdrawal request made by PREPA in the ordinary course of business. 

Whenever a substantive provision of this Agreement requires that one or more Supporting 

Creditors be excluded in the determination of “Majority Solus Lenders”, Majority Scotiabank 

Lenders”, “Applicable Insurers”, “Majority Holders”, “Requisite Supporting Creditor Majority” 

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42 

or “Requisite Supporting Creditors”, such defined term or terms shall be calculated after giving 

effect to the exclusion of such Supporting Creditors, and the exclusion of the principal amount of 

claims held or insured by them from both numerator and denominator in the calculation of any 

majority, in connection with the use thereof in such substantive provision. 

(f) In addition, this Agreement may be terminated as between Assured or National 

and the other Parties, by the delivery to PREPA and the other Supporting 

Creditors, of a written notice by such Insurer following a failure of PREPA to 

make required payments to holders of the Series 2015A Bonds, in which case 

such Insurer shall no longer be considered a Supporting Creditor as of the date of 

delivery of such written notice. 

(g) In addition, this Agreement may be terminated as between Assured and the other 

Parties, by the delivery to PREPA and the other Supporting Creditors, of a written 

notice by Assured in the event that PREPA fails to satisfy its payment obligations 

under the Assured Swaps, in which case Assured shall no longer be considered a 

Supporting Creditor as of the date of delivery of such written notice. 

(h) In addition, this Agreement shall automatically terminate (without the 

requirement to deliver any written notice) as between Syncora and the other 

Parties, in the event that PREPA and Syncora do not reach agreement with the 

Supporting Creditors with respect to Syncora’s participation in the Recovery Plan 

on or prior to January 22, 2016. 

If this Agreement is terminated as to the Solus Lenders as a class, this Agreement shall also 

terminate as to Solus in its capacity as a Holder (and the Bonds owned by Solus shall no longer 

be bound by this Agreement), and if this Agreement is terminated as to the Holders as a class, 

this Agreement shall also terminate as to the Solus Lenders as a class (and the Solus Loans 

owned by Solus shall no longer be bound by this Agreement), in either case without the need for 

any further approvals or consents. 

14. Disclosure of Information. 

(a) Subject to section 14(c) below, PREPA shall be required to provide to the 

Supporting Creditors’ advisors any information reasonably necessary to 

understand the transactions contemplated in this Agreement. 

(b) Subject to section 14(c) below, during the Support Period, to the extent that a 

Supporting Creditor in good faith seeks any confidential information with respect 

to (i) a determination whether a basis exists for a Withdrawal Event, or (ii) a 

determination whether a basis exists for a Termination Event, PREPA will 

provide such confidential information to the Supporting Creditor’s advisors to the 

extent reasonably necessary to make such determination. 

(c) Notwithstanding anything herein to the contrary: 

(i) PREPA shall not be required to provide any documents or information that 

is confidential information to any Supporting Creditor or any of its 

advisors that is not party to (A) if the Supporting Creditor or advisor has 

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signed a non-disclosure agreement with PREPA in the past (including, for 

the avoidance of doubt, pursuant to Section 6 of any Prior Forbearance 

Agreement), a non-disclosure agreement on the same or substantially 

similar terms and with an agreed-upon cleansing date and that has a term 

until at least December 31, 2016 or an extension to the term of its existing 

non-disclosure agreement through at least December 31, 2016, or (B) if 

the Supporting Creditor or advisor has not signed a non-disclosure 

agreement with PREPA in the past, a non-disclosure agreement on terms 

reasonably acceptable to PREPA and with an agreed-upon cleansing date 

and that has a term until at least December 31, 2016 (each non-disclosure 

agreement that meets conditions under preceding clauses (A) or (B), an 

“Acceptable NDA”); and 

(ii) PREPA may elect to designate as confidential information, including on 

an advisors-only basis, any document or information that (A) is not 

otherwise required to be provided to the Trustee under the Trust 

Agreement, any Bond Document or applicable law or (B) has not been 

transmitted to other entities without an Acceptable NDA. 

(d) Notwithstanding anything herein to the contrary, information concerning the 

Bonds beneficially owned or insured by the Supporting Creditors, including, 

without limitation, the description of such Bonds reflected on the signature pages 

hereto, the description of such Bonds on any documentation related to the TA 

Amendment, and information delivered pursuant to section 14(e), below, shall be 

confidential, and shall not be disclosed to any person without the prior written 

consent of the applicable Supporting Creditor, except to PREPA’s and the other 

Supporting Creditors’ attorneys or advisors (solely to the extent necessary for 

them to perform their obligations under this Agreement and the Trust Agreement) 

(collectively, the “Authorized Persons”); provided, however, that an Authorized 

Person that receives such confidential information shall be permitted to disclose 

such information (i) on an aggregate basis, the principal amount held by all 

Supporting Creditors collectively (without disclosing individual holdings), (ii) to 

the extent required by any law, rule or regulation or by any subpoena or similar 

judicial and/or administrative order, or other regulatory authority (including any 

self-regulatory organization having jurisdiction or claiming to have jurisdiction 

over such person), or (iii) to the extent that such information is or becomes 

generally available to the public other than as a result of disclosure by an 

Authorized Person; provided further, however, that an Authorized Person that 

receives such confidential information concerning the Bonds beneficially owned 

or insured by the Supporting Creditors shall be permitted to disclose to its 

respective clients the aggregate percentage of Bonds beneficially owned or 

insured by any group of Insurers or Holders, without disclosure of the amount or 

percentage of Bonds beneficially owned or insured by any individual Insurer or 

Holder. 

(e) PREPA authorizes the Trustee to disclose to a beneficial holder of Bonds, upon 

request of such holder, (i) any reports or certificates required to be filed with the 

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Trustee under the following sections of the Trust Agreement: 502 (revisions of 

rates), 504 (annual and supplemental budgets), 505 (report of expenditure in 

excess of annual budget), 706 (report of the Consulting Engineers), 710 (monthly 

reports on income, expense and other matters set forth therein, annual audits and 

additional reports or audits required by law) and 712 (abandonment, sale or lease 

of any part of the System); and (ii) the balances in any funds or accounts held by 

the Trustee for the benefit of holders of Bonds. 

15. Further Acquisition. This Agreement shall not limit, abridge, or otherwise impair, 

or be construed to preclude, the right of any Supporting Creditor to acquire additional Bonds or 

additional rights and obligations under any Credit Agreement; provided that any additional 

Uninsured Bonds or additional rights and obligations under any Credit Agreement acquired by 

any Party shall be, and shall automatically be deemed to be, subject to the terms and conditions 

of this Agreement. 

16. Release of Claims and Waiver of Defenses. 

(a) In further consideration of the Supporting Creditors’ entry into and performance 

under this Agreement, PREPA, on behalf of itself and its successors, assigns, 

parents, subsidiaries, affiliates, officers, directors, employees, agents and 

attorneys hereby forever, fully, unconditionally and irrevocably waives and 

releases the Supporting Creditors (other than GDB) and their respective 

successors, assigns, parents, subsidiaries, affiliates, officers, directors, employees, 

attorneys, advisors and agents (collectively, the “Releasees”) from any and all 

claims, liabilities, obligations, debts, causes of action (whether at law or in equity 

or otherwise), defenses, counterclaims and setoffs of any kind, whether known or 

unknown, liquidated or unliquidated, matured or unmatured, fixed or contingent, 

or otherwise, directly or indirectly arising out of, connected with, resulting from 

or related to any act or omission by such Supporting Creditors or any other 

Releasee with respect to the Bond Documents, Loan Documents and Facility 

Documents, except to the extent that any such claims, liabilities, obligations, 

debts, causes of action, defenses, counterclaims and setoffs are found in a final, 

nonappealable judgment of a court of competent jurisdiction to have resulted from 

the gross negligence or willful misconduct of the applicable Releasees. Nothing 

in this Agreement shall (x) release any obligations of the Insurers (or Syncora or 

any other person insuring Bonds) under the Bond Insurance Agreements, or (y) 

release GDB or any of its affiliates, or any of their respective successors, assigns, 

officers, directors, employees, attorneys, or agents, from any claim, liability, 

obligation, debt, cause of action, defense, counterclaim, or setoff, except as 

provided in subsection 16(b) below. 

(b) In further consideration of GDB’s entry into and performance under this 

Agreement, upon the occurrence of the Closing Date, PREPA, on behalf of itself 

and its successors, assigns, parents, subsidiaries, affiliates, officers, directors, 

employees, agents and attorneys, shall forever, fully, unconditionally and 

irrevocably waive and release GDB and its Releasees from any and all claims, 

liabilities, obligations, debts, causes of action (whether at law or in equity or 

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otherwise), defenses, counterclaims and setoffs of any kind, whether known or 

unknown, liquidated or unliquidated, matured or unmatured, fixed or contingent, 

or otherwise, directly or indirectly arising out of, connected with, resulting from 

or related to any act or omission by GDB or any other Releasee with respect to the 

Bond Documents and GDB Loan Agreements, except to the extent that any such 

claims, liabilities, obligations, debts, causes of action, defenses, counterclaims 

and setoffs are found in a final, nonappealable judgment of a court of competent 

jurisdiction to have resulted from the gross negligence or willful misconduct of 

GDB or the applicable Releasees. 

17. Amendments and Waivers. 

Once effective, this Agreement, including, for the avoidance of doubt, the 

Recovery Plan Term Sheet attached hereto as Annex D, may not be modified, 

amended, supplemented or otherwise altered (except as expressly provided 

herein), and no term or condition may be waived (such modification, amendment, 

supplement and waiver, referred to collectively as an “Amendment”), except in a 

writing signed by PREPA and Majority Holders, Supermajority Insurers, Majority 

Scotiabank Lenders and Majority Solus Lenders; provided, however, that: 

(a) any Amendment to the terms described in Schedule I to the Recovery Plan Term 

Sheet (the “Holders’ Terms”), shall require the written consent of: (i) PREPA, (ii) 

Holders that beneficially own or control at least 80.0% in principal amount of the 

aggregate amount of the Uninsured Bonds beneficially owned or controlled by all 

the Holders that are Supporting Creditors at such time (the “Supermajority 

Holders”) and (iii) (A) Supermajority Insurers, Majority Scotiabank Lenders and 

Majority Solus Lenders, if such Amendment (x) does not enhance or improve the 

Holders’ Terms and (y) does not materially and adversely affect any of the 

Insurers or the Credit Agreements Lenders, or (B) Insurers that beneficially 

control or insure at least 75.0% in principal amount of the aggregate amount of 

the Bonds beneficially controlled or insured by all the Insurers that are Supporting 

Creditors at such time (the “Supermajority Insurers”) if the conditions of either 

clause (x) or (y) above are not satisfied with respect to any Insurer and 

Supermajority Credit Agreements Lenders (as defined herein) if the conditions of 

either clause (x) or (y) above are not satisfied with respect to any Credit 

Agreements Lender; 

(b) any Amendment to the terms described in Schedule II to the Recovery Plan Term 

Sheet (the “Insurers’ Terms”), shall require the written consent of: (i) PREPA, 

(ii) Supermajority Insurers and (iii) (A) Supermajority Holders, Majority 

Scotiabank Lenders and Majority Solus Lenders, if such Amendment (x) does not 

enhance or improve the Insurers’ Terms and (y) does not materially and adversely 

affect any of the Holders or the Credit Agreements Lenders, or (B) Supermajority 

Holders if the conditions of either clause (x) or (y) above are not satisfied with 

respect to any Holder and Supermajority Credit Agreements Lenders if the 

conditions of either clause (x) or (y) above are not satisfied with respect to any 

Credit Agreements Lender; 

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(c) any Amendment to the terms described in Schedule III to the Recovery Plan Term 

Sheet (the “Fuel Lines Lenders’ Terms”), shall require the written consent of: (i) 

PREPA, (ii) Solus Lenders holding at least 75.0% in principal amount of the 

Solus Principal Amount held by all Solus Lenders that are Supporting Creditors at 

such time and Scotiabank Lenders holding at least 75.0% in principal amount of 

the Scotiabank Principal Amount held by all Scotiabank Lenders that are 

Supporting Creditors at such time (the “Supermajority Credit Agreements 

Lenders”) and (iii) (A) Majority Holders and Supermajority Insurers, if such 

Amendment (x) does not enhance or improve the Credit Agreements Lenders’ 

Terms and (y) does not materially and adversely affect any of the Holders or the 

Insurers, or (B) Supermajority Holders if the conditions of either clause (x) or (y) 

above are not satisfied with respect to any Holder and Supermajority Insurers if 

the conditions of either clause (x) or (y) above are not satisfied with respect to any 

Insurer; or 

(d) any Amendment to the non-economic terms described in Schedules IV, VI, VII, 

VIII and IX to the Recovery Plan Term Sheet (the “Non-Economic Terms”), 

shall require the written consent of: (i) PREPA, (ii) Supermajority Holders, (iii) 

Supermajority Insurers and (iv) Supermajority Credit Agreements Lenders. 

(e) Notwithstanding anything in this section 17, 

(A) any Amendment that alters the percentage of Bond Principal Amount, 

Solus Principal Amount or Scotiabank Principal Amount, as applicable, 

required for (i) determining consents, amendments, terminations, 

withdrawals, extensions or other actions hereunder (including, without 

limitation, this section 17), or (ii) determining the termination or 

withdrawal rights of such Supporting Creditors hereunder (including, 

without limitation, sections 10 or 13), in each case, shall not be effective 

unless in writing and signed by PREPA and each Supporting Creditor 

affected by such Amendment; 

(B) any Amendment whose sole effect is to change one or more dates or 

deadlines set forth in sections 10 or 13 (other than as set forth in sections 

13(a) and 10(l)) shall require the consent of PREPA, GDB, Supermajority 

Insurers and the Requisite Supporting Creditors; and 

(C) other than as provided in sections 17(e)(A) and 17(e)(B), any Amendment 

that materially alters any provision relating to termination or extension of, 

or withdrawal from, this Agreement (including for the avoidance of doubt, 

an amendment to the dates set forth in sections 13(a) or 10(l)) shall not be 

effective unless in writing and signed by PREPA, GDB, the Supermajority 

Holders, the Supermajority Insurers and the Supermajority Credit 

Agreements Lenders; 

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provided, that section 13(d) and this section 17 shall not be amended without the 

written consent of each Supporting Creditor that is a Party to this Agreement as of 

the date of such Amendment. 

Notice of any Amendment pursuant to this Section 17 shall be provided to each 

Supporting Creditor within two (2) business days of the date of such Amendment. 

18. Assignment; Transfer Restrictions. 

(a) For the period commencing as of the date any Supporting Creditor executes this 

Agreement until the earliest to occur of (i) the fifteenth (15th) business day 

following such date if the Restatement Effective Date has not occurred and (ii) 

termination of this Agreement as to such Supporting Creditor pursuant to the 

terms hereof (the “Bond Transfer Limitation Period”), such Supporting Creditor 

shall not sell, assign, transfer or otherwise pledge or dispose (“Transfer”) any 

Uninsured Bonds beneficially owned by such Supporting Creditor, or any voting, 

consent or direction rights related to such Uninsured Bonds, except such Transfer 

may be made (A) if the transferee is a Supporting Creditor at the time of the 

Transfer or (B) if the transferee is not a Supporting Creditor at the time of the 

Transfer, such transferee (a transferee pursuant to this clause (B) or the 

immediately preceding clause (A), a “Bond Qualified Transferee”) delivers to 

each of the Supporting Creditors’ advisors and PREPA, at or prior to the time of 

the Transfer, the joinder attached hereto as Annex B-1, pursuant to which such 

transferee shall assume all obligations of such Supporting Creditor transferor 

hereunder (such transferee, if any, shall also be a “Supporting Creditor” 

hereunder). In addition, and without limiting the foregoing, each of the Insurers 

agrees that it will not transfer any voting, consent or direction rights related to 

Insured Bonds during the Bond Transfer Limitation Period unless the transferee 

agrees to be bound by the terms of this Agreement and delivers notice of such 

agreement to each of the Supporting Creditors and PREPA; provided that an 

Insurer may Transfer Insured Bonds beneficially owned by such Insurer if the 

Transfer is by an Insurer and the Bonds Transferred are Insured Bonds, and the 

representations and warranties of the applicable Insurer contained in section 12(c) 

hereof are true after giving effect to the Transfer with respect to such Bonds. To 

the extent that a Transfer violates the provisions of this section, the Transfer shall 

be void ab initio and the applicable Bonds and the Supporting Creditor attempting 

the Transfer of the Bonds shall continue to remain subject to the terms of this 

Agreement. This Agreement shall in no way be construed to preclude any of the 

Supporting Creditors from acquiring additional Bonds; provided that any such 

acquired Uninsured Bonds shall automatically and immediately upon acquisition 

by a Supporting Creditor be deemed subject to all of the terms of this Agreement. 

(b) For the period commencing as of the date any Supporting Creditor executes this 

Agreement until the earliest to occur of (i) the fifteenth (15th) business day 

following such date if the Restatement Effective Date has not occurred and 

(ii) termination of this Agreement pursuant to the terms hereof (the “Fuel Line 

Limitation Period”), such Supporting Creditor shall not Transfer all or a portion 

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of any of its rights and obligations under any Credit Agreement except such 

Transfer may be made (A) if the transferee is a Supporting Creditor at the time of 

the Transfer, or (B) if the transferee is not a Supporting Creditor at the time of the 

Transfer, such transferee (a “Credit Agreement Qualified Transferee”) delivers 

to each of the Supporting Creditors’ advisors and PREPA, at or prior to the time 

of the Transfer, the joinder attached hereto as Annex B-2, pursuant to which such 

transferee shall assume all obligations of such Supporting Creditor transferor 

hereunder (such transferee, if any, shall also be a “Supporting Creditor” 

hereunder). To the extent that a Transfer violates the provisions of this section, 

the Transfer shall be void ab initio and the applicable rights and obligations under 

the applicable Credit Agreement and the Supporting Creditor attempting the 

Transfer of such rights and obligations shall continue to remain subject to the 

terms of this Agreement. This Agreement shall in no way be construed to 

preclude any of the Supporting Creditors from acquiring additional rights and 

obligations under any Credit Agreement; provided that any such acquired rights 

and obligations under a Credit Agreement shall automatically and immediately 

upon acquisition by a Supporting Creditor be deemed subject to all of the terms of 

this Agreement. 

(c) Notwithstanding anything contained in this Agreement to the contrary, (i) a 

Supporting Creditor may Transfer any right, title or interest in the Uninsured 

Bonds, the Scotiabank Credit Agreement, or the Solus Credit Agreement to a 

Qualified Marketmaker, acting in its capacity as a Qualified Marketmaker, 

without the requirement that such Qualified Marketmaker be or become a 

Supporting Creditor; provided that such Qualified Marketmaker subsequently 

Transfers such right, title or interest in the Uninsured Bonds, the Scotiabank 

Credit Agreement or the Solus Credit Agreement to a Supporting Creditor, a 

Bond Qualified Transferee or a Credit Agreement Qualified Transferee within the 

earlier of (x) the date that is ten (10) days after such Qualified Marketmaker’s 

acquisition of such right, title or interest and (y) in the event the transfer to the 

Qualified Marketmaker occurs prior to the record date set for the Exchange Offer 

and Consent Solicitation, the record date set for the Exchange Offer and Consent 

Solicitation; and (ii) to the extent that a Supporting Creditor is acting in its 

capacity as a Qualified Marketmaker, it may Transfer any right, title or interest in 

the Uninsured Bonds that the Qualified Marketmaker acquires from a holder of 

the Uninsured Bonds that is not a Supporting Creditor without the requirement 

that the transferee be or become a Supporting Creditor. 

(d) “Qualified Marketmaker” means an entity that (x) holds itself out to the market 

as standing ready in the ordinary course of its business to purchase from 

customers and sell to customers debt securities such as the Bonds or debt 

obligations such as the Scotiabank Loans and the Solus Loans or enter with 

customers into long and short positions in debt securities such as the Bonds, in its 

capacity as a dealer or market maker in such Bonds; (y) is in fact regularly in the 

business of making a market in debt securities or bank debt obligations; and (z) if 

transacting with respect to Bonds, is registered with the Securities and Exchange 

Commission and Financial Institutions Regulatory Authority.

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No later than the first (1st) business day of each month, and upon PREPA’s reasonable 

request, (i) each Holder shall disclose to PREPA a list of the principal amount of 

Uninsured Bonds beneficially owned by such Holder, and (ii) the Ad Hoc Group shall 

disclose to PREPA a list, by CUSIP number, of the aggregate principal amount of 

Uninsured Bonds collectively held by the Ad Hoc Group, which disclosures pursuant to 

the preceding clauses (i) and (ii) shall be treated as confidential information by PREPA in 

accordance with section 14(d). The foregoing shall not prohibit PREPA from disclosing 

the aggregate holdings of the Ad Hoc Group or all Supporting Creditors collectively. 

19. No Third Party Beneficiaries. The terms and conditions of this Agreement are 

intended solely for the benefit of the Parties and their respective successors and permitted 

assigns, and it is not the intention of the Parties to confer third-party beneficiary rights upon any 

other person. 

20. No Solicitation. The Parties acknowledge and agree that neither the negotiation 

nor the execution and delivery of this Agreement is, nor shall it be deemed to be, a solicitation 

within the meaning of any applicable state or federal securities laws. 

21. Settlement Discussions. This Agreement is the product of negotiations among the 

Parties hereto and reflects various agreements and compromises to implement the Recovery 

Plan. Pursuant and subject to Federal Rule of Evidence 408 and any applicable state or 

Commonwealth rules of evidence, this Agreement and all negotiations relating hereto shall not 

be admissible into evidence in any proceeding other than a proceeding to enforce the terms of 

this Agreement. 

22. Remedies. The sole and exclusive remedy of any Party for any breach of this 

Agreement by any other Party shall be termination under section 13 or withdrawal under section 

10, and such breach shall not give rise to any claims against any Party at law or in equity; 

provided, however, that notwithstanding the foregoing, the Parties agree that (i) irreparable 

damage would occur in the event that any Supporting Creditor breaches its obligations under 

sections 4(b)(i), 4(c)(i)-(iii), 4(d)(i), 4(e)(i)-(ii), 5(a)(i), 6(a)(i), 7(a)(ii)(x) and (y), 15 or 17(e) 

(the “Specified Sections”) of this Agreement, and accordingly PREPA shall be entitled to 

specific performance in the event of any breach of the Specified Sections in the Enforcement 

Court (as defined below) if such breach has not been cured within ten (10) days after receipt by 

the applicable Supporting Creditor of a written notice specifying such breach and requesting its 

cure; (ii) irreparable damage would occur in the event that PREPA or any Supporting Creditor 

breaches its obligations under sections 1(b) or 14 of this Agreement, and accordingly PREPA 

and each Supporting Creditor shall be entitled to specific performance in the event of any breach 

of sections 1(b) or 14 of this Agreement in the Enforcement Court; and (iii) specific performance 

in accordance with the preceding clauses (i) and (ii) (as applicable), together with termination of 

this Agreement in accordance with section 13 and withdrawal from this Agreement in 

accordance with section 10, as applicable, shall be the sole remedies for any breach of the 

Specified Sections or sections 1(b) or 14 of this Agreement. For the avoidance of doubt, no 

Party shall be entitled to monetary damages for any breach of any provision of this Agreement, 

including the Specified Sections. As used herein, the “Enforcement Court” refers to any federal 

court sitting in the Puerto Rico district and any appellate court from any thereof or, in the event 

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such federal court does not have or accept jurisdiction, a Commonwealth court and any appellate 

court from any thereof. 

For the avoidance of doubt, any consent right, termination right or withdrawal right 

provided to a Supporting Creditor under this Agreement shall be cumulative to, and not in lieu 

of, any other consent right, termination right or withdrawal right provided to such Supporting 

Creditor hereunder.

23. No Waiver. The failure or neglect by a Party to enforce any rights under this 

Agreement will not be deemed to be a waiver of that Party’s rights. No waiver of satisfaction or 

nonperformance of an obligation under this Agreement will be effective unless in writing and 

signed by the Party granting the waiver. 

24. Successors and Assigns. This Agreement shall be binding upon and inure to the 

benefit of the Parties hereto and their respective successors, legal representatives and assigns. 

PREPA shall not assign or transfer its rights under this Agreement without the consent of each of 

the Supporting Creditors. No Supporting Creditor shall assign or transfer its rights under this 

Agreement other than in connection with a Transfer pursuant to section 18 of this Agreement. 

This Agreement is entered into for the exclusive benefit of the Parties hereto, no other person 

shall derive any rights or benefits herefrom, and all third-party beneficiary rights are hereby 

expressly disclaimed. 

25. Further Assurances. The parties hereto agree that upon the reasonable request of 

any other Party to this Agreement, each such Party will execute and deliver to the requesting 

Party such other additional instruments and documents or perform or cause to be performed such 

other and further acts and things, as may be reasonably necessary to more fully consummate the 

transactions as set forth in this Agreement; provided, however, that performance by any Party 

under this paragraph shall not create any new liability or obligation on the performing Party 

whatsoever. 

26. Notice. All notices or demands given or made by one Party to the other relating 

to this Agreement shall be in writing and either (i) personally served or sent by registered or 

certified mail, postage paid, return receipt requested, overnight delivery service, in each case, 

with a copy by electronic mail transmission or (ii) by electronic mail transmission with a copy by 

first-class mail, and shall be deemed given for purposes of this Agreement on the earlier of the 

date of actual receipt or three (3) days after the deposit thereof in the mail; provided, however, 

that no notice or consent pursuant to any provision of this Agreement, including for the 

avoidance of doubt Sections 10, 13 and 17, shall be deemed to have been delivered by any 

Scotiabank Lender unless given by Scotiabank, in which case such notice or consent shall be 

deemed to have been given by, and be effective as to, all Scotiabank Lenders. Scotiabank and 

each Scotiabank Lender hereby agree, for the sole benefit of Scotiabank and each other 

Scotiabank Lender, as applicable, that Scotiabank shall give such notices and consents in 

accordance with and subject to the provisions of the Scotiabank Credit Agreement, including 

Section 9.02 thereof. Any notice required to be given by any Party hereunder may be delivered 

by such Party’s counsel on such Party’s behalf. Unless a different or additional address for 

subsequent notices is specified in a notice sent or delivered in accordance with this section, such 

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51 

notices or demands shall be sent solely to the notice addresses listed below for advisors to the 

Supporting Creditors and the other below-listed entities: 

If to PREPA: 

Richard J. Cooper, Esq. and 

Sean A. O’Neal, Esq. 

Cleary Gottlieb Steen & Hamilton LLP 

One Liberty Plaza 

New York, NY 10006 

rcooper@cgsh.com 

soneal@cgsh.com 

and 

Puerto Rico Electric Power Authority 

Attention: Office of the General Counsel 

P.O. Box 364267 

San Juan, Puerto Rico 00936-4267 

If to GDB: 

Alejandro Febres 

Government Development Bank for Puerto 

Rico 

P.O. Box 42001 

San Juan, PR 00940-2001 

Alejandro.Febres@bgfpr.com 

If to Syncora: 

Richard F. Hahn, Esq. and 

My Chi To, Esq. 

Debevoise & Plimpton LLP 

919 Third Avenue 

New York, NY 10022 

rfhahn@debevoise.com 

mcto@debevoise.com 

and 

James W. Lundy, Jr. 

Syncora Holdings Ltd. 

135 W. 50th Street, 20th Floor 

New York, New York 10020 

James.lundy@scafg.com 

If to National: 

Marcia Goldstein, Esq., 

Joseph Smolinsky, Esq. and 

Sara Coelho, Esq. 

Weil, Gotshal & Manges LLP 

767 Fifth Avenue 

New York, NY 10153 

Marcia.goldstein@weil.com 

Joseph.Smolinsky@weil.com 

Sara.coelho@weil.com

and 

Patricia Ferrari and 

Adam Bergonzi 

National Public Finance Guarantee Corporation 

1 Manhattanville Road, Suite 301 

Purchase, NY 10577 

Trish.Ferrari@mbia.com 

Adam.bergonzi@nationalpfg.com 

If to the Ad Hoc Group: 

Amy Caton, Esq., 

Alice J. Byowitz, Esq. and 

Steven Segal, Esq. 

If to Assured: 

Jorge Gana and 

Kevin Lyons 

Assured Guaranty Corp. 

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52 

Kramer Levin Naftalis & Frankel LLP 

1177 Avenue of the Americas 

New York NY 10036 

acaton@kramerlevin.com 

abyowitz@kramerlevin.com 

ssegal@kramerlevin.com 

and 

Ari Gabinet 

Michael Sternhell 

Oppenheimer Funds 

Two World Financial Center 

225 Liberty Street, New York, NY 10281 

agabinet@ofiglobal.com 

msternhell@ofiglobal.com 

31 W. 52nd St 

New York, NY 10019 

jgana@assuredguaranty.com 

klyons@assuredguaranty.com 

and 

Lary Stromfeld, Esq. 

Howard Hawkins, Esq. 

Mark Ellenberg, Esq. and 

Ivan Loncar, Esq. 

Cadwalader, Wickersham & Taft LLP 

One World Financial Center 

New York, NY 10281 

lary.stromfeld@cwt.com 

howard.hawkins@cwt.com 

mark.ellenberg@cwt.com 

ivan.loncar@cwt.com 

If to Solus: 

Stephen Blauner 

Francis Blair 

Solus Alternative Asset Management LP 

410 Park Avenue 

11th Floor 

New York, NY 10022 

sblauner@soluslp.com 

fblair@soluslp.com 

and 

Steve Fuhrman 

Nicholas Baker 

Simpson Thacher & Bartlett LLP 

425 Lexington Avenue 

New York, NY 10017 

sfuhrman@stblaw.com 

nbaker@stblaw.com 

If to Scotiabank: 

Richard G. Mason, 

Austin T. Witt and 

Brian Bolin 

Wachtell, Lipton, Rosen & Katz 

51 West 52nd Street 

New York, NY 10019 

rgmason@wlrk.com 

awitt@wlrk.com 

bbolin@wlrk.com 

and 

Roy Purcell 

Scotiabank de Puerto Rico 

Scotiabank Plaza 

290 Jesus T. Pinero Avenue 

8th Floor 

San Juan, PR 00918 

Roy.purcell@scotiabank.com 

27. Governing Law. This Agreement, but for the avoidance of doubt, not the TA 

Amendment, shall be governed and construed and enforced in accordance with the laws of the 

State of New York. Terms used in the TA Amendment that are defined herein shall be construed 

in accordance with the last paragraph of Section 1301 of the Trust Agreement when interpreting 

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53 

the TA Amendment, and shall be construed in accordance with the laws of the State of New 

York when interpreting this Agreement. 

28. Jurisdiction. Subject to section 22, any dispute arising under or in connection 

with this Agreement shall be brought in the exclusive jurisdiction and venue of the courts of the 

Commonwealth of Puerto Rico or the United States District Court for the District of Puerto Rico. 

For the avoidance of doubt, this section 28 shall not apply to any Recovery Plan Document and 

each such document shall be governed in accordance with its own terms. 

29. WAIVER OF TRIAL BY JURY. EACH PARTY TO THIS AGREEMENT 

HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, 

DEMAND, ACTION OR CAUSE OF ACTION ARISING SOLELY OUT OF THIS 

AGREEMENT, INCLUDING, WITHOUT LIMITATION, ANY PRESENT OR FUTURE 

MODIFICATION THEREOF, WHETHER SUCH CLAIM, DEMAND, ACTION OR CAUSE 

OF ACTION IS NOW EXISTING OR HEREAFTER ARISING, AND WHETHER 

SOUNDING IN CONTRACT OR TORT OR OTHERWISE; AND EACH PARTY HEREBY 

AGREES AND CONSENTS THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN 

ORIGINAL COUNTERPART OR COPY OF THIS SECTION WITH ANY COURT AS 

WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER 

OF ANY RIGHT THEY MIGHT OTHERWISE HAVE TO TRIAL BY JURY. For the 

avoidance of doubt, this section shall not apply to any definitive documentation relating to any 

Recovery Plan Document, the Exchange Offer, Consent Solicitation or Credit Agreements 

Amendments and such documentation shall be governed in accordance with its own terms. 

30. Survival. Upon the termination of this Agreement as to a Party hereunder, (i) 

such Party shall cease to be a party to this Agreement and this Agreement shall be null and void 

and of no further force or effect with respect to such Party, except that, notwithstanding anything 

to the contrary in this Agreement, sections 1(b), 16, 19, 21, 22, 26 – 30, 32 shall survive and 

continue to be fully enforceable in accordance with their terms notwithstanding such termination, 

(ii) the applicable Party shall be free to enforce their respective rights and remedies under (A) the 

Bond Documents and applicable law, (B) the Loan Documents, the Facility Documents and 

applicable law, and (C) the GDB Agreements and applicable law, in each case as applicable, and 

(iii) nothing herein shall be construed as a waiver by any Party of any or all of such Party’s 

rights, and the Parties expressly reserve any and all of their respective rights, subject to the terms 

of section 16. 

31. Counterparts. This Agreement may be executed in any number of counterparts, 

all of which taken together shall constitute one and the same instrument, and either of the Parties 

hereto may execute this Agreement by signing any such counterpart. Delivery of an executed 

signature page of this Agreement by facsimile or email transmission shall be effective as delivery 

of a manually executed counterpart hereof. 

32. Business Day. The term “business day” means any day other than a Saturday, 

Sunday, or legal holiday on which the banking institutions in the Municipality of San Juan, 

Puerto Rico are authorized by law to be closed. 

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54 

33. Entire Agreement. This Agreement constitutes the entire agreement, and 

supersedes any prior agreements, including any deemed agreements, among the Parties regarding 

the subject matter hereof. 

34. Headings. The headings of the sections, paragraphs, and subsections of this 

Agreement are inserted for convenience only and shall not affect the interpretation hereof. 

[Remainder of page intentionally blank; signature pages follow] 

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SCOTIABANK DE PUERTO RICO, as Agent and

as [.,ender

By:

Name: ,To/ AP?EIL

ritre: utir 74rs t pran

BANCO POPULAR DE PUERTO RICO, as

ORIENTAL BANK, as Lender

By:

Name:

Title:

By:

Name:

Title:

FIRSTBANK PUERTO RICO, as Lender

By:

Name:

Title:

IRSA - Signdure Pagel

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List of Annexes 

Annex A - Ad Hoc Group Members 

Annex B-1 – RSA Joinder Form (Bonds) 

Annex B-2 – RSA Joinder Form (Credit Agreements) 

Annex C – Trust Agreement Amendment 

Annex D – Recovery Plan Term Sheet 

Annex E - Bond Potential Defaults 

Annex F – Scotiabank Potential Defaults 

Annex G – Solus Potential Defaults 

Annex H – January Payment Term Sheet 

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Annex A 

Ad Hoc Group Members 

AG MM, L.P. 

AG CAPITAL RECOVERY PARTNERS VIII, L.P. 

AG ELEVEN PARTNERS, L.P. 

AG SUPER FUND INTERNATIONAL PARTNERS, L.P. 

NUTMEG PARTNERS, L.P. 

AG CENTRE STREET PARTNERSHIP, L.P. 

AG PRINCESS, LP 

AG SUPER FUND, L.P. 

BLUEMOUNTAIN GUADALUPE PEAK FUND L.P. 

BLUEMOUNTAIN FOINAVEN MASTER FUND L.P. 

BLUEMOUNTAIN CREDIT OPPORTUNITIES MASTER FUND I L.P. 

BLUEMOUNTAIN KICKING HORSE FUND L.P. 

BLUEMOUNTAIN STRATEGIC CREDIT MASTER FUND L.P. 

BLUEMOUNTAIN DISTRESSED MASTER FUND L.P. 

BLUEMOUNTAIN TIMBERLINE LTD. 

BLUEMOUNTAIN CREDIT ALTERNATIVES MASTER FUND L.P. 

BLUEMOUNTAIN MONTENVERS MASTER FUND SCA SICAV-SIF 

BLUEMOUNTAIN CAPITAL MANAGEMENT, LLC 

BLUEMOUNTAIN LOGAN OPPORTUNITIES MASTER FUND L.P. 

D.E. SHAW GALVANIC PORTFOLIOS, L.C.C. 

CALIFORNIA INTERMEDIATE TERM TAX FREE INCOME FUND 

CALIFORNIA HIGH YIELD MUNICIPAL BOND FUND 

TENNEESEE MUNICIPAL BOND FUND 

CALIFORNIA TAX FREE INCOME FUND 

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NEW YORK TAX FREE INCOME FUND 

FEDERAL TAX FREE INCOME FUND 

DOUBLE TAX FREE INCOME FUND 

COLORADO TAX FREE INCOME FUND 

GEORGIA TAX FREE INCOME FUND 

PENNSYLVANIA TAX FREE INCOME FUND 

HIGH YIELD TAX FREE INCOME FUND 

MISSOURI TAX FREE INCOME FUND 

OREGON TAX FREE INCOME FUND 

VIRGINIATAX FREE INCOME FUND 

FLORIDA TAX FREE INCOME FUND 

LOUISIANA TAX FREE INCOME FUND 

MARYLAND TAX FREE INCOME FUND 

NORTH CAROLINA TAX FREE INCOME FUND 

NEW JERSEY TAX FREE INCOME FUND 

FRANKLIN STRATEGIC INCOME FUND UNITED STATES 

FIST -FRANKLIN TOTAL RETURN FUND 

FRANKLIN STRATEGIC INCOME FUND CANADA 

FTIF- FRANKLIN US TOTAL RETURN FUND 

FTVIP- FRANKLIN STRATEGIC INCOME VIP FUND 

FDP SERIES FT TOTAL RETURN FDP FUND 

FTIF- FRANKLIN STRATEGIC INCOME FUND 

FT OPPORTUNISTIC DISTRESSED FUND, LTD. 

GOLDMAN SACHS HIGH YIELD MUNICIPAL FUND, A SERIES OF THE GOLDMAN 

SACHS TRUST 

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GOLDMAN SACHS DYNAMIC MUNICIPAL INCOME FUND, A SERIES OF THE 

GOLDMAN SACHS TRUST 

GOLDMAN SACHS SHORT DURATION TAX-FREE FUND, A SERIES OF THE 

GOLDMAN SACHS TRUST 

KNIGHTHEAD MASTER FUND, L.P. 

KNIGHTHEAD ANNUITY & LIFE ASSURANCE COMPANY 

LMA SPC FOR AND ON BEHALF OF THE MAP 84 SEGREGATED PORTFOLIO 

KNIGHTHEAD (NY) FUND, L.P. 

MARATHON CREDIT DISLOCATION FUND, LP 

MARATHON STRATEGIC OPPORTUNITIES PROGRAM, LP 

MARATHON COURT SQUARE, LP 

MARATHON CENTRE STREET PARTNERSHIP, L.P. 

KTRS CREDIT FUND, LP 

MARATHON CURRITUCK FUND, LP – SERIES C 

BALDR MASON FUND INC. 

MARATHON CREDIT OPPORTUNITY MASTER FUND, LTD. 

MV CREDIT OPPORTUNITY FUND, L.P. 

MARATHON SPECIAL OPPORTUNITY MASTER FUND, LTD 

MARATHON LES GRANDES JORASSES MASTER FUND 

PENTELI MASTER FUND, LTD 

MASTER SIF SICAV SIF 

MARATHON LIQUID CREDIT LONG SHORT FUND 

OPPENHEIMER ROCHESTER AMT –FREE MUNICIPAL FUND 

OPPENHEIMER ROCHESTER AMT –FREE NEW YORK MUNICIPAL FUND 

OPPENHEIMER ROCHESTER CALIFORNIA MUNICIPAL FUND 

OPPENHEIMER ROCHESTER LIMITED TERM CALIFORNIA MUNICIPAL FUND 

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OPPENHEIMER ROCHESTER LIMITED TERM MUNICIPAL FUND (A SERIES OF 

OPPENHEIMER MUNICIPAL FUND) 

OPPENHEIMER ROCHESTER LIMITED TERM NEW YORK MUNICIPAL FUND (A 

SERIES OF ROCHESTER PORTFOLIO SERIES) 

OPPENHEIMER ROCHESTER NEW JERSEY MUNICIPAL FUND (A SERIES OF 

OPPENHEIMER MULTI-STATE MUNICIPAL TRUST) 

OPPENHEIMER ROCHESTER PENNSYLVANIA MUNICIPAL FUND (A SERIES OF 

OPPENHEIMER MULTI-STATE MUNICIPAL TRUST) 

OPPENHEIMER ROCHESTER HIGH YIELD MUNICIPAL FUND (A SERIES OF 

OPPENHEIMER MULTI-STATE MUNICIPAL TRUST) 

OPPENHEIMER ROCHESTER FUND MUNICIPALS 

OPPENHEIMER ROCHESTER OHIO MUNICIPAL FUND 

OPPENHEIMER ROCHESTER MICHIGAN MUNICIPAL FUND 

OPPENHEIMER ROCHESTER MASSACHUSETTS MUNICIPAL FUND 

OPPENHEIMER ROCHESTER VIRGINIA MUNICIPAL FUND 

OPPENHEIMER ROCHESTER ARIZONA MUNICIPAL FUND 

OPPENHEIMER ROCHESTER MARYLAND MUNICIPAL FUND 

OPPENHEIMER ROCHESTER NORTH CAROLINA MUNICIPAL FUND 

OPPENHEIMER ROCHESTER MINNESOTA MUNICIPAL FUND 

MASSMUTUAL INTERNATIONAL HOLDING MSC 

MASSMUTUAL UNIFIED TRADITIONAL SEPARATE ACCOUNT 

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Annex B-1 

RSA Joinder Form (Bonds)

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1 

FORM OF JOINDER 

This Joinder to the Amended and Restated Restructuring Support Agreement (as 

amended, supplemented or otherwise modified from time to time, the “Restructuring Support 

Agreement”), dated as of [●], 2015 by and among: Puerto Rico Electric Power Authority 

(“PREPA”), National Public Finance Guarantee Corporation (“National”), Assured Guaranty 

Corp., Assured Guaranty Municipal Corp. (together with Assured Guaranty Corp., “Assured”), 

Syncora Guarantee Inc. (“Syncora”), the members of the Ad Hoc Group of PREPA Bondholders 

identified on Annex A thereto (the “Ad Hoc Group”), Scotiabank de Puerto Rico (in its capacity 

as administrative agent for the Scotiabank Lenders, “Scotiabank”), the lenders (the “Scotiabank 

Lenders”) under that certain Scotiabank Credit Agreement, Solus Opportunities Fund 5 LP, Sola 

LTD and Ultra Master LTD (the “Solus Lenders” or “Solus”), and Government Development 

Bank for Puerto Rico (“GDB”), is executed and delivered by [___________] (the “Joining 

Supporting Creditor”). Each capitalized term used herein but not defined herein shall have the 

meaning set forth in the Restructuring Support Agreement. 

1. Agreement to be Bound. The Joining Supporting Creditor hereby agrees 

to be bound by all of the terms of the Restructuring Support Agreement. The Joining Supporting 

Creditor shall hereafter be deemed to be a “Supporting Creditor” and a Party for all purposes 

under the Restructuring Support Agreement. 

2. Representations and Warranties. With respect to the aggregate principal 

amount of Uninsured Bonds held by the Joining Supporting Creditor upon consummation of the 

Transfer of such Uninsured Bonds to the Joining Supporting Creditor, the Joining Supporting 

Creditor hereby makes, as of the date hereof, the representations and warranties of the Holders 

set forth in sections 12(a) and 12(d) of the Restructuring Support Agreement to each of the other 

Parties to the Restructuring Support Agreement. 

3. Governing Law. Section 27 of the Restructuring Support Agreement is 

incorporated by reference as if set forth fully herein, except that any references to “Agreement” 

shall be replaced with references to “Joinder”. 

* * * * 

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IN WITNESS WHEREOF, the Joining Supporting Creditor has caused this Joinder to be 

executed as of the date first written above. 

Entity Name of Joining Supporting Creditor 

Authorized Signatory: 

By: ________________________________ 

Name: 

Title: 

Address: 

Principal amount of Uninsured Bonds beneficially owned by Joining Supporting Creditor, or 

beneficially owned by accounts for which Joining Supporting Creditor has investment 

management responsibility: 

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Annex B-2 

RSA Joinder Form (Credit Agreements)

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FORM OF JOINDER 

This Joinder to the Amended and Restated Restructuring Support Agreement (as 

amended, supplemented or otherwise modified from time to time, the “Restructuring Support 

Agreement”), dated as of [●], 2015 by and among: Puerto Rico Electric Power Authority 

(“PREPA”), National Public Finance Guarantee Corporation (“National”), Assured Guaranty 

Corp., Assured Guaranty Municipal Corp. (together with Assured Guaranty Corp., “Assured”), 

Syncora Guarantee Inc. (“Syncora”), the members of the Ad Hoc Group of PREPA Bondholders 

identified on Annex A thereto (the “Ad Hoc Group”), Scotiabank de Puerto Rico (in its capacity 

as administrative agent for the Scotiabank Lenders, “Scotiabank”), the lenders (the “Scotiabank 

Lenders”) under that certain Scotiabank Credit Agreement, Solus Opportunities Fund 5 LP, Sola 

LTD and Ultra Master LTD (the “Solus Lenders” or “Solus”), and Government Development 

Bank for Puerto Rico (“GDB”), is executed and delivered by [___________] (the “Joining 

Supporting Creditor”). Each capitalized term used herein but not defined herein shall have the 

meaning set forth in the Restructuring Support Agreement. 

1. Agreement to be Bound. The Joining Supporting Creditor hereby agrees 

to be bound by all of the terms of the Restructuring Support Agreement. The Joining Supporting 

Creditor shall hereafter be deemed to be a “Supporting Creditor” and a Party for all purposes 

under the Restructuring Support Agreement. 

2. Representations and Warranties. With respect to any rights and obligations 

under any Credit Agreement held by the Joining Supporting Creditor upon consummation of the 

Transfer of such rights and obligations to the Joining Supporting Creditor, the Joining 

Supporting Creditor hereby makes, as of the date hereof, the representations and warranties of (i) 

Scotiabank and the Scotiabank Lenders, set forth in sections 12(a) and 12(e) of the Restructuring 

Support Agreement, or (ii) Solus, set forth in sections 12(a) and 12(f) of the Restructuring 

Support Agreement, as applicable, to each of the other Parties to the Restructuring Support 

Agreement. 

3. Governing Law. Section 27 of the Restructuring Support Agreement is 

incorporated by reference as if set forth fully herein, except that any references to “Agreement” 

shall be replaced with references to “Joinder”. 

* * * * 

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IN WITNESS WHEREOF, the Joining Supporting Creditor has caused this Joinder to be 

executed as of the date first written above. 

Entity Name of Joining Supporting Creditor 

Authorized Signatory: 

By: ________________________________ 

Name: 

Title: 

Address: 

Principal amount under Scotiabank Credit Agreement and Solus Credit Agreement beneficially 

owned by Joining Supporting Creditor, or beneficially owned by accounts for which Joining 

Supporting Creditor has investment management responsibility: 

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Annex C 

Trust Agreement Amendment 

[Trust Agreement Amendment to (i) increase thresholds for exercise of remedies so long as the 

Restructuring Support Agreement is in effect as to Supermajority Insurers and each other class of 

Supporting Creditors and (ii) provide that fuel line lenders’ Current Expense status is not prejudiced by 

their entering the RSA and previous forbearance agreements, in each case, similarly to the amendments 

entered into in connection with forbearance agreements. The Trust Agreement Amendment shall be in 

form and substance reasonably acceptable to the Supermajority Holders, the Supermajority Insurers and 

the Supermajority Credit Agreement Lenders. The Trust Agreement Amendment shall only be effective as 

to matters described in clause (i) on the 16th day following passage of the Legislative Reform Package. 

The provisions in the Trust Agreement Amendment permitting the issuance of the January Payment Bonds 

shall be effective before issuance of those bonds. 

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Annex D 

Recovery Plan Term Sheet 

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Execution version 

ANNEX D 

RECOVERY PLAN TERM SHEET

This Recovery Plan Term Sheet does not address all material terms that would be required in definitive documents 

and in order to consummate the transactions set forth in this Recovery Plan Term Sheet. This Recovery Plan Term 

Sheet does not constitute (nor shall it be construed as) an offer with respect to any securities. 

Capitalized terms used but not defined herein shall have the meanings ascribed to such terms in the Restructuring 

Support Agreement. 

FORBEARING 

UNINSURED 

BONDS

 Existing holders of uninsured power revenue and revenue refunding bonds 

(“Uninsured Bonds”) who are parties to the Restructuring Support 

Agreement (“Forbearing Uninsured Holders”) will participate in (a) a 

consent solicitation to amend the Trust Agreement (“Consent Solicitation”) 

to reflect agreed upon amendments, including amendments described in 

Schedule II hereto (“Closing Date Trust Agreement Amendments”), which 

amendments shall, among others, (A) expressly provide that (1) the 

Scotiabank Loan Obligations and the Solus Loan Obligations constitute 

“Current Expenses” under the Trust Agreement, (2) any amendments, 

waivers, modifications or supplements to the Trust Agreement that would 

amend, modify, or waive such status as “Current Expenses” shall require the 

prior written consent of the Scotiabank, the Scotiabank Lenders, and the Solus 

Lenders (or their respective successors and assigns, as applicable) and that 

Scotiabank, the Scotiabank Lenders, and the Solus Lenders (and their 

respective successors and assigns) are express third-party beneficiaries of the 

provisions of the Trust Agreement providing for such “Current Expense” 

status and consent rights, and (B) include the other amendments described in 

Schedule II hereto in the section titled “Exit Consents” and (b) an exchange 

offer (“Exchange Offer”) to exchange 100% of their Uninsured Bonds (other 

than the January Payment Bonds) for new securitization bonds 

(“Securitization Bonds”), at an exchange ratio of 85%, to be issued by a new 

bankruptcy-remote public corporation and governmental instrumentality of the 

Commonwealth, including the terms set forth in Schedule I-B hereto 

(“Securitization Term Sheet”). 

NON-FORBEARING 

UNINSURED 

BONDS

 Existing holders of uninsured power revenue and revenue refunding bonds 

(“Uninsured Bonds”) who are not parties to the Restructuring Support 

Agreement (“Non-Forbearing Uninsured Holders”) shall have the option 

to either (a) participate in the Consent Solicitation and participate in the 

Exchange Offer on the same terms as the Forbearing Uninsured Holders, or 

(b) participate in the Consent Solicitation and tender their bonds in a cash 

tender at a price to be determined in consultation with the parties providing 

the Backstop Facility, their advisors and PREPA’s advisors (“Cash 

Tender”). 

INSURERS  The Insurers (other than Syncora) shall participate in purchasing the January 

Payment Bonds as set forth in section 8 of the RSA, and provide the DSRF 

sureties, in each case, subject to the terms and conditions set forth in 

Schedule II hereto. 

 The Insured Bonds (other than the Insured Bonds insured by Syncora) shall 

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receive the treatment provided for in Schedule II hereto. 

CREDIT 

AGREEMENTS

 Each Scotiabank Lender and Solus Lender under its Credit Agreements shall 

either (a) amend and restate the applicable Credit Agreement as set forth in 

Schedule III hereto (the “Solus Credit Agreement Amendment” and the 

“Scotiabank Credit Agreement Amendment”, together, the “Credit 

Agreements Amendments”, and the solicitation of consents with respect to 

the Credit Agreements Amendments, the “Credit Agreements Amendment 

Solicitation”) and/or (b) exchange all or a portion of its indebtedness under its 

Credit Agreement into Securitization Bonds, so that all of the outstanding 

indebtedness held by such Scotiabank Lender and Solus Lender shall be 

restructured or exchanged (together with the Credit Agreements Amendments, 

the “Credit Agreements Restructuring”). 

GDB DEBT  Existing indebtedness owed to GDB will be subject to substantially the same 

treatment as the indebtedness under the Credit Agreements. 

SWAP 

OBLIGATIONS

 Swap obligations will be paid out in full on the current schedule. 

NEW 

GOVERNANCE

 Recovery Plan will provide for the establishment of a new governance 

structure for PREPA, with the purposes of promoting long-term planning and 

sustainability, reducing political interference and encouraging use of industry 

best practices. A summary of the governance changes, which will require 

adoption of legislation, is attached hereto as Schedule IV (“New 

Governance”). 

OPERATIONAL 

IMPROVEMENTS

 In connection with the Recovery Plan, PREPA will implement operational 

improvements with respect to, among others, procurement, fuel supply, 

customer service, collections and safety (“Operational Improvements”). A 

summary of Operational Improvements is attached hereto as Schedule V. 

LABOR / PENSIONS  PREPA will implement initiatives (the “Labor Initiatives”) to achieve labor 

cost savings, including as set forth in Schedule V. 

RATE STRUCTURE  PREPA will seek Energy Commission approval for a new rate structure (the 

“Rate Structure”) incorporating the elements set forth in Schedule VI hereto, 

including without limitation approval by the Energy Commission of the Rate 

Structure on an expedited basis.

CAPITAL PLAN  Recovery Plan will include a capital improvement plan intended to permit 

PREPA to achieve compliance with applicable environmental laws and 

regulations, including MATS and other standards, as well as enhance 

efficiency, reliability and flexibility of its power generation assets. A 

summary of the development plans for the Aguirre Offshore Gas Port 

(“AOGP”), PREPA’s generation assets (“Generation Assets”) and 

transmission and distribution network (“T&D Network”) is set forth in 

Schedule VII hereto (“Capital Plan”). 

 In addition, in connection with the Recovery Plan, PREPA will conduct a 

competitive bidding process in accordance with applicable laws, as described 

in Schedule VIII hereto (“RFP Process”), to retain one or more private sector 

entities to carry out the Capital Plan with respect to certain Generation Assets. 

In the event that no acceptable bidders are identified and/or bids are 

submitted, PREPA shall carry out the Capital Plan through its available 

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resources. 

CONDITIONS 

PRECEDENT

The closing of each of the Consent Solicitation, Closing Date Trust Agreement 

Amendments, Exchange Offer and Credit Agreements Restructuring (collectively, 

the “Restructuring Transactions”) will be conditioned on the prior or 

simultaneous closing of each of the other Restructuring Transactions. In addition, 

the closing of the Restructuring Transactions will be conditioned on the 

following, among other conditions:

 Negotiation and execution of all documents and agreements necessary to 

consummate the Restructuring Transactions.

 Enactment of legislative reform to implement the Recovery Plan. A summary 

of the legislative reform package is attached hereto as Schedule I-A 

(“Securitization Special Legislation”) and Schedule IX (collectively, the 

“Legislative Reform Package”).

 Energy Commission approval of the Rate Structure.

 After the participation of the Non-Forbearing Uninsured Holders as described 

above, no more than $700 million (or such higher other amount determined at 

PREPA’s discretion) of Uninsured Bonds (other than the January Payment 

Bonds) shall be outstanding, subject to input from PREPA’s advisors.

 All substantial documentation, including without limitation required 

legislation, securitization documentation, new trust agreement documentation 

(regarding the PREPA Trust Agreement and the Securitization Bonds trust 

agreement), is subject to the Supporting Creditors’ consultation and, as 

applicable, consent, withdrawal and termination rights with respect thereto as 

provided in the Restructuring Support Agreement. 

 Receipt of unqualified opinion of U.S. recognized bond counsel that interest 

on the Securitization Bonds and each of the Credit Agreements (after giving 

effect to the Credit Agreement Amendments), is excludable from gross 

income for federal income tax purposes and exempt from all state and Puerto 

Rico taxes. 

 Appointment of a number of directors of the Board of PREPA that is 

sufficient for the Board to take any action in accordance with Section A of the 

Legislative Reform Package, provided that at least 3 independent directors 

shall have been appointed. 

 Implementation of the New Governance. 

 Receipt of all necessary consents and internal approvals.

 Other customary conditions precedent to be discussed.

 

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4 

SCHEDULES

Schedule I-A Securitization Special Legislation Outline 

Schedule I-B Securitization Term Sheet 

Schedule II Monoline Term Sheet 

Schedule III Credit Agreements Restructuring 

Schedule IV New Governance 

Schedule V Operational Improvements 

Schedule VI Rate Structure 

Schedule VII Capital Plan 

Schedule VIII REOI / RFQ / RFP Indicative Plan 

Schedule IX Legislative Reform Package 

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Execution version 

Schedule I-A 

Securitization Special Legislation Outline 

Section 1. Definitions. As used or referred to in this Act, unless a differing meaning 

clearly appears from the context: 

“Adjustment Mechanism” means the formulaic adjustment mechanism contained in a 

Restructuring Resolution, and approved in a Restructuring Order, to be applied by the 

Corporation periodically, but not less often than semi-annually, to adjust the Transition Charges 

to ensure the collection of Transition Charge Revenues sufficient to provide for the timely 

payment of Ongoing Financing Costs, as further described in Section 4 of this Act. The 

Adjustment Mechanism and its implementation shall not be subject to legislative or any other 

governmental review or approval, except the approval of the Adjustment Mechanism in the 

Restructuring Order as provided in Section 5(b) of this Act and as provided in Section 4 of this 

Act regarding review by the Corporation for and correction of mathematical errors. 

“Ancillary Agreement” means any bond insurance policy, letter of credit, reserve 

account, surety bond, swap arrangement, hedging arrangement, liquidity or credit support 

arrangement or other arrangement designed to promote the credit quality and marketability of 

Restructuring Bonds or to mitigate the risk of a change in interest rates. 

“Approved Restructuring Costs” means any or all of the following costs approved under 

a Restructuring Resolution: (a) the capital costs related to the construction and equipping of the 

Aguirre Offshore Gasport, subject to satisfaction of any conditions set forth in the applicable 

Trust Agreement for any outstanding Restructuring Bonds; (b) the costs of retiring [[or 

defeasing]]1

 all or a portion of PREPA’s debt obligations or the Restructuring Bonds; (c) rebate, 

yield reduction payments and any other amounts payable to the United States to preserve or 

protect the federal tax-exempt status of PREPA’s or the Corporation’s outstanding debt 

obligations; (d) deposits from proceeds of Restructuring Bonds to the credit of a capitalized 

interest fund or account, debt service reserve fund or account or operating expense reserve fund 

or account established in connection with such Restructuring Bonds and, solely in connection 

with the first issue of Restructuring Bonds, a deposit to the Self-Insurance Fund, established 

pursuant to the trust agreement, dated as of January 1, 1974, as amended, by and between 

PREPA and U.S. Bank National Association, as successor trustee, in an amount not to exceed 

$100 million; and (e) subject to any limitations contained in this Act, Financing Costs. 

 “Board” means the board of directors of the Corporation established pursuant to Section 

2 hereof. 

“Cause” means with respect to a director of the Corporation, (i) acts or omissions by such 

director that constitute willful disregard of, or bad faith or gross negligence with respect to, such 

director duties under this Act and the Corporation’s other organizational documents; (ii) that 

such director has engaged in or has been charged with, or has been convicted of, fraud or other 

 

[

1

 NTD: Inclusion of double bracketed language dependent on whether agreement with monolines is reached] 

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2 

acts constituting a crime under any law applicable to such director, (iii) that such director is 

unable to perform his or her duties as director due to death, disability or incapacity, (iv) that such 

director no longer meets the requirements of this Act, or (v) any other act or omission set forth in 

Section __ of this Act. 

“Commission” means the Puerto Rico Energy Commission established by Act No. 57 of 

the Legislative Assembly of Puerto Rico, approved on May 27, 2014, as amended. 

“Corporation” means Puerto Rico Electric Power Authority Revitalization Corporation, a 

special purpose public corporation and a governmental instrumentality of the Commonwealth, 

established pursuant to Section 2 hereof. 

“Court” has the meaning given to it in Section 5(c)(1) of this Act. 

“Customer” means any Person that is connected to or takes or receives electric service 

within the Commonwealth by means of the electric generation, transmission or distribution 

facilities constituting part of System Assets, whether or not those electric generation, 

transmission or distribution facilities are owned by PREPA. PREPA shall not be a Customer. 

Each municipality in the Commonwealth shall be a Customer to the extent that the dollar value 

of its usage of electric service (including in determining such value the dollar value of Transition 

Charges which would otherwise be imposed on such municipality and PREPA charges) in any 

fiscal year exceeds the dollar value owed by PREPA to such municipality as a contribution in 

lieu of taxes for such fiscal year. 

[[“Defeasance” means with respect to any debt, the legal or economic defeasance of such 

debt. “Defease” has a meaning correlative thereto.]] 

“Financing Costs” means the costs to issue, service, repay or refinance Restructuring 

Bonds, whether incurred upon issuance of such Restructuring Bonds or over the life of the 

Restructuring Bonds, and approved for recovery in a Restructuring Resolution. Without 

limitation or duplication, “Financing Costs” may include, as applicable, any of the following: 

(a) principal, interest and redemption premiums payable on Restructuring Bonds; 

(b) any payment required under an Ancillary Agreement and any amount required to 

fund or replenish (or to reimburse a third party for replenishing) a debt service reserve fund or 

account, operating reserve fund or account or other fund or account established under a Trust 

Agreement, any Ancillary Agreement, resolution or other financing document relating to the 

Restructuring Bonds; 

(c) any federal or state taxes and charges, including federal or state payments or 

contributions in lieu of taxes, franchise fees or license fees imposed on Transition Charge 

Revenues (but excluding any Commonwealth or local taxes, fees or contributions or payments in 

lieu of taxes); 

(d) any cost related to obtaining a Restructuring Order, administering the 

Corporation, the Restructuring Bonds or the Restructuring Property, including the costs of 

implementing the Adjustment Mechanism, Trustee (and other similar fiduciary), legal, 

accounting and other consultants’, depository, calculation agent, manager, rating agency fees and 

expenses and Servicing Fees and expenses, in each case subject to the provisions of this Act; 

(e) any cost related to protecting the status of Restructuring Property and collecting 

Transition Charges, including any cost related to any judicial or similar proceedings that the 

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Corporation or the Trustee or any owner of all or a portion of Restructuring Property deems 

necessary to enforce or collect Transition Charge Revenues or protect the Restructuring Property 

or any other costs referred to in Section 8(a) of this Act, in each case subject to the provisions of 

this Act; and 

(f) any other cost related to issuing Restructuring Bonds, administering and servicing 

Restructuring Property and Restructuring Bonds, including costs of calculating adjustments of 

Transition Charges, Servicing Fees and expenses, Trustee (or similar fiduciary) fees and 

expenses, legal fees and expenses, accounting fees and expenses, administration fees and 

expenses, placement fees and expenses, underwriting fees and expenses, printing and marketing 

fees, filing or listing fees, fees and expenses of the Corporation’s other consultants, if any, rating 

agency fees and any other cost approved by the Board as necessary or desirable for the 

accomplishment of the purposes of this Act. 

“Financing Entity” means any Servicer, Trustee (or similar fiduciary), collateral or 

escrow agent, or other Person acting for the benefit of owners of the Restructuring Bonds or the 

Corporation that may own Restructuring Property or have rights to receive proceeds of 

Restructuring Bonds. 

“Interested Person” means (a) the trustee representing the owners of PREPA’s 

outstanding bonds, (b) the securities depositary, if any, at which any of such bonds shall be 

immobilized, (c) any owner of PREPA’s outstanding debt obligations or any Person providing 

credit or liquidity support, including financial guaranty insurance, to any or all of such 

obligations, (d) any financial institution to which PREPA is indebted (other than through the 

securities depositary) or otherwise obligated, (e) the Secretary of Justice of Puerto Rico, (f) any 

Customer, (g) any vendor of PREPA not included in clause (f) of this definition, (h) any Person 

who has filed with the secretary of the Board and PREPA a request to receive the notice set forth 

in Section 5(c)(2) or 5(d)(2) of this Act, (i) any Person who would otherwise be entitled to 

receive notice with respect to the adjustment of PREPA rates and charges and (j) any other 

Person interested in the matters raised in the proceedings provided for in Section 5(c) or 5(d) of 

this Act. 

“Non-bypassable” means that the Transition Charge shall be paid by all Customers, even 

if the Customer elects to purchase electricity in whole or in part from an alternative electric 

supplier. 

“Ongoing Financing Costs” means Financing Costs that are not Upfront Financing Costs 

and any excess of actual Upfront Financing Costs over the Corporation’s estimate of Upfront 

Financing Costs to be paid from the proceeds of the Restructuring Bonds. 

“Person” means any natural or juridical person, including any local agency, or any 

individual, firm, partnership, joint venture, trust, joint stock company, association or public or 

private corporation, municipality, organized or existing under the laws of the Commonwealth, 

the United States of America or any state, any agency or instrumentality of the United States, or 

any combination of the above. 

“PREPA” means Puerto Rico Electric Power Authority, a public corporation and 

governmental instrumentality established and existing by virtue of Act No. 83 of the Legislative 

Assembly of Puerto Rico, approved May 2, 1941, as amended, and any successor or successors 

thereto, including successors referred to in Section 5(l) of this Act. 

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“Restructuring Bonds” means bonds, notes, or other evidences of indebtedness that are 

issued by the Corporation pursuant to this Act, any Restructuring Resolution and the Trust 

Agreement related thereto (a) the [[payments on or]] proceeds of which are used, directly or 

indirectly, to finance or refinance Approved Restructuring Costs, (b) that are directly or 

indirectly secured by, or payable from, Restructuring Property, and (c) that have a term no longer 

than thirty-five years. 

“Restructuring Order” means the irrevocable order of the Commission that is not subject 

to further Commission review or amendment approving the calculation methodology for the 

Transition Charges and the Adjustment Mechanism related thereto, as provided in this Act. 

“Restructuring Property” means a Restructuring Resolution and the property rights and 

interests created thereby, including the right, title, and interest in and to: (a) the right to create 

and receive Transition Charges; (b) the Transition Charges, as adjusted from time to time in 

accordance with the Adjustment Mechanism, including any rights under a Servicing Agreement 

assigned pursuant to the related Trust Agreement or other security agreement; (c) all revenues, 

collections, claims, payments, money, or proceeds of or arising from the Transition Charges or 

constituting Transition Charges, regardless of whether such revenues, collections, claims, 

payments, money, or proceeds are billed, received, collected or maintained by PREPA or by the 

Corporation together with or commingled with other revenues, collections, claims, payments, 

money or proceeds; (d) all rights to obtain adjustments to the Transition Charges pursuant to the 

terms of the Restructuring Resolution related thereto; and (e) all reserves established in 

connection with the Restructuring Bonds or the Restructuring Property. Upon the issuance of 

Restructuring Bonds, Restructuring Property shall constitute a vested, presently existing property 

right in the Corporation, as initial owner, subject to Section 8(c) and any pledge of Restructuring 

Property pursuant to this Act, notwithstanding the fact that the value of the property right will 

depend on further acts that have not yet occurred, including Customers remaining or becoming 

connected to the System Assets and taking or receiving electric service, the imposition and 

billing of Transition Charges, or PREPA performing services. 

“Restructuring Resolution” means a resolution of the Board adopted in accordance with 

this Act, which resolution creates Restructuring Property, approves the imposition and collection 

of Transition Charges and the financing of Approved Restructuring Costs through the issuance of 

Restructuring Bonds and which resolution contains the related Adjustment Mechanism, all as 

provided in Section 4 of this Act. 

“Servicer” means PREPA to the extent permitted by this Act, and if PREPA is replaced 

as Servicer pursuant to the Servicing Agreement, a Person or Persons authorized and required, by 

contract or otherwise, to impose, bill or collect Transition Charges, to prepare periodic reports 

regarding billings and collections of Transition Charges, to remit collections to or for the account 

of the Corporation or its assigns or pledgees, including a Financing Entity, and to provide other 

related services for the Corporation, which may include calculation of periodic adjustments to 

the Transition Charges or providing other services related to the Restructuring Property; and 

shall be deemed to include any co-Servicer, subservicer, backup servicer (including if it becomes 

a Servicer under a Servicing Agreement), replacement servicer or the successors of any of the 

foregoing, authorized to act as such under a Restructuring Resolution. 

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“Servicing Agreement” means the agreement or agreements between the Corporation and 

the Servicer providing for the administering and servicing of Restructuring Property, as the same 

may be amended from time to time by the parties thereto in a manner not prohibited by this Act. 

“Servicing Fee” means the periodic amount paid to a Servicer for its services required in 

connection with the issuance of Restructuring Bonds and the administering and servicing of 

Restructuring Property. 

“System Assets” means the electric generation, transmission and distribution facilities 

(and other general property and equipment used in connection therewith), whether now existing 

or hereafter acquired, used by PREPA as of the effective date of this Act or thereafter acquired 

for use by it, including any successor electric utility, in providing electric service to Customers, 

including any transmission and distribution service. 

“Third-party Biller” means any Person authorized to bill or collect transition charges 

other than the Corporation, PREPA or, if different, a Servicer. 

“Transition Charge Revenues” means all money and other property received or to be 

received, directly or indirectly, on account of the Transition Charges, and all proceeds of the 

investment thereof. 

“Transition Charges” means those rates and charges that are separate from rates of 

PREPA and that are imposed pursuant to a Restructuring Resolution on Customers to recover the 

Ongoing Financing Costs, and shall include a pro rata share of any late payment fee imposed in 

respect of any past-due bill for electric service that includes in such bill an amount for Transition 

Charges. 

“Trust Agreement” means a trust agreement, trust indenture or similar agreement 

executed by the Corporation and the Trustee establishing the rights and responsibilities of the 

Corporation and of the owners of Restructuring Bonds issued thereunder and secured thereby. 

“Trustee” means the trustee party to a Trust Agreement representing the owners of the 

Restructuring Bonds issued and secured thereunder. 

“Upfront Financing Costs” means the costs associated with obtaining the Restructuring 

Order, the structuring, marketing, and issuance of Restructuring Bonds, not including scheduled 

debt service or other Ongoing Financing Costs, to the extent such Ongoing Financing Costs are 

payable from Transition Charge Revenues. Upfront Financing Costs include Trustee (or similar 

fiduciary) fees and expenses, legal fees and expenses, accounting fees and expenses, 

administration fees and expenses, placement fees and expenses, underwriting fees and expenses, 

printing and marketing fees, filing or listing fees and compliance fees, fees and expenses of the 

Corporation’s other consultants, if any, rating agency fees and any other cost approved by the 

Board as necessary or desirable for the accomplishment of the purposes of this Act and shall 

include reimbursement to any Person of amounts advanced for payment of such costs. 

Section 2. Creation of Corporation. (a) A special purpose public corporation and 

governmental instrumentality of the Commonwealth is hereby created to be known as “Puerto 

Rico Electric Power Authority Revitalization Corporation,” which shall exercise essential 

governmental and public powers for the good of the public. The Corporation shall not be created 

or organized, and its operations shall not be conducted, for the purpose of making a profit. No 

part of the revenues or assets of the Corporation shall inure to the benefit of or be distributable to 

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6 

its directors or officers or any other private Persons, except as herein provided for reasonable 

consideration for actual services rendered or property. 

(b) (1) The Corporation shall be governed by a Board consisting of three directors. 

Until the Governor appoints the non-interim directors in accordance with paragraph (2) of this 

subsection (b), the President of Government Development Bank for Puerto Rico, the Executive 

Director of Puerto Rico Infrastructure Financing Authority and the Secretary of State of the 

Commonwealth shall serve as directors ex officio whose terms shall expire on the date that the 

Governor makes the appointments from the list referred to below in paragraph (2) of this 

subsection (b). 

(2) The non-interim appointment of the directors shall be made in accordance 

with the procedures set forth in this paragraph (2). The non-interim appointment of the directors 

shall be made by the Governor after receiving input from the President of the Senate and the 

President of the House of Representatives not later than March 1, 2016. The directors so 

appointed by the Governor shall be selected from a list of at least ten (10) candidates prepared by 

a recognized firm in the field of search for executive candidates, according to objective criteria 

that take into account professional and educational backgrounds and delivered to the Governor. 

Such list must include at least two (2) Commonwealth residents. The Governor, in his/her 

discretion, shall evaluate the list of recommended candidates and choose three (3) individuals 

from the list. If the Governor does not appoint three directors from such list within twenty (20) 

days after such list’s submission to the Governor, the above-mentioned search firm shall submit 

another list within the next thirty (30) days. 

(3) The ex officio interim directors shall occupy their respective director 

positions as long as they serve in their current offices. Of the non-interim directors originally 

appointed by the Governor, one shall serve a term of four years from the date of appointment, 

one shall serve a term of five years from the date of appointment and one shall serve a term of 

six years from the date of appointment. Each director shall continue in office until his or her 

successor has been appointed and qualified. Except for the ex officio, interim directors, all 

Board members shall be obliged to comply with The New York Stock Exchange Corporate 

Governance Rules (NYSE Independent Director Rules) for director independence. Nothing in 

this Act shall preclude a Customer from being a director solely because such Person is a 

Customer. The ex officio interim directors shall not receive compensation for services provided 

as directors. The non-interim directors shall receive a market-based compensation comparable to 

that received by board members of local institutions of similar size, complexity and risks. No 

member of the Board shall receive more than fifty thousand dollars ($50,000) annually, on such 

account. 

(4) Any vacancy among the non-interim directors shall be filled by 

appointment by the Governor for the unexpired term of the original appointment and following 

the same procedures through which the original, non-interim appointments were made, and the 

Governor may use the most recent ten (10) candidate list submitted by the search firm described 

in the following sentence. Accordingly, the Governor shall elect from a list of at least ten (10) 

candidates submitted by a recognized firm in the field of search for executive candidates, which 

will be selected following objective criteria that take into account experience as well as 

professional and educational qualifications. Such list shall include at least two (2) residents of 

the Commonwealth. Upon expiration of their respective terms, the Governor shall appoint 

successors for a period of six (6) years following the same procedures by which the original, 

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non-interim appointments were made. No non-interim director may be designated for said 

position for more than two (2) terms. Directors may be removed by the Governor only for 

Cause. The process of selection of candidates performed by a recognized firm in the field of 

search for executive candidates shall be effective for a period of fifteen (15) years, after which 

the Legislative Assembly will evaluate the performance of the Corporation and the Board and 

determine whether or not it is appropriate to continue with said process of election. If the 

Legislative Assembly takes no action upon the expiration of the period described in the 

preceding sentence, the process for selecting directors shall continue in effect until the 

Legislative Assembly changes such process, subject to any requirements imposed by any Trust 

Agreement and laws applicable to the preservation of the tax-exempt or otherwise tax favored 

status of interest on any Restructuring Bonds. 

(5) In addition to the other requirements established in this Section 2(b), no 

Person may become a non-interim director if he/she: (i) is an employee, retiree, or has any direct 

or indirect substantial economic interest in any private company with which the Corporation or 

PREPA has any contracts or with whom it engages in transactions of any kind, other than the 

purchase of electric service under generally applicable rates and tariffs; (ii) within two (2) years 

before holding office, has had a business relationship with or any interest in any private company 

with which the Corporation, PREPA, Government Development Bank for Puerto Rico or the 

Commonwealth has any contracts or with whom it engages in transactions of any kind, other 

than the purchase of electric service under generally applicable rates and tariffs; (iii) has been a 

member of a local or central directing body of a political party registered in the Commonwealth, 

during the year immediately preceding his/her appointment; (iv) is an employee, member, 

advisor, or contractor of PREPA’s labor unions; or (v) has failed to provide the certification of 

having filed income tax returns during the five (5) preceding taxable years issued by the 

Department of the Treasury, the certification of having no debts outstanding with PREPA, the 

Criminal Record issued by the Puerto Rico Police Department, as well as negative certifications 

of the Child Support Administration (ASUME, Spanish acronym) and the Municipal Revenues 

Collection Center (CRIM, Spanish acronym). 

(6) Except for the ex officio directors, no director shall be considered a public 

employee under the terms of Section 5.1 of Act 1-2012. 

(7) Each director shall have a fiduciary duty to act in the best interests of the 

Corporation, including the owners of the Restructuring Bonds and its other creditors, and such 

other duties as may be specified in the organizational documents or other agreements of the 

Corporation. 

(8) A majority of the directors at the time serving shall constitute a quorum 

for the transaction of any business or the exercise of any power or function of the Corporation. 

The Board may delegate to one or more of its directors, or officers, agents and employees, such 

powers and duties as the Board may deem proper. 

(c) Without impairing the rights pursuant to Section 3 of this Act, the Board and the 

officers, agents and employees of the Corporation shall not incur civil liability for any actions 

taken in good faith in the performance of their duties and responsibilities pursuant to the 

provisions of this Act, provided there has been no conduct that constitutes a crime, breach of 

duty of loyalty or gross negligence, and they shall be indemnified for any costs incurred in 

connection with any claim for which they enjoy immunity as provided hereunder. The Board, its 

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8 

directors and any officers, agents or employees of the Corporation shall also be fully indemnified 

for any civil liability adjudicated under the laws of the United States of America. The governing 

board and individual directors, officers, agents and employees of any Servicer shall be entitled to 

the immunities from personal liability as shall be specified by law and if not so specified, to the 

immunities from personal liability as are specified in this Section 2(c) mutatis mutandis. 

Section 3. Powers of the Corporation; No Merger. (a) The Corporation is hereby 

authorized to: 

(1) Adopt Restructuring Resolutions; 

(2) In consideration of providing financial assistance to PREPA by payment 

of Approved Restructuring Costs, impose and collect Transition Charges in connection with the 

financing of Approved Restructuring Costs through the issuance of Restructuring Bonds for the 

benefit of PREPA, including (i) making such Transition Charges Non-bypassable to Customers 

and (ii) approving an Adjustment Mechanism, subject to Commission approval in a 

Restructuring Order prior to the issuance of the related Restructuring Bonds; 

(3) Issue Restructuring Bonds contemplated by a Restructuring Resolution 

and pledge the Restructuring Property to the payment thereof; 

(4) Provide for and direct the use of proceeds of Restructuring Bonds on 

behalf of PREPA in accordance with a Restructuring Resolution and a Trust Agreement executed 

by the Corporation in connection with such Restructuring Bonds; and 

(5) Contract for administering and servicing of Restructuring Property and 

Restructuring Bonds and for administrative services, including by hiring a manager or 

administrator that is not an employee of PREPA. 

(b) The Corporation shall have no authority to engage in other business activities; but 

shall, in connection with the powers specified in paragraph (a) of this Section 3, have the power 

to: 

(1) sue and be sued; and settle existing or threatened litigation on such terms 

as the Board may approve; 

(2) have a seal and alter the same at its pleasure; 

(3) make and alter by-laws for its organization and internal management and 

make and alter rules and regulations governing its operations and the use of its property, in each 

case in accordance with the limitations set forth in this Act; 

(4) make and execute contracts and all other instruments necessary or 

convenient for the exercise of its powers and functions under this Act and to commence any 

action to protect or enforce any right conferred upon it by any law, contract or other agreement, 

including make and execute contracts with PREPA, any other Servicers, any Financing Entity or 

any other Person (public or private) to administer and service Restructuring Property, to service 

Restructuring Bonds issued by the Corporation and to provide services administering the 

Corporation, and to pay compensation for such services; 

(5) appoint officers, agents and employees, prescribe their duties and 

qualifications, fix their compensation and engage the services of consultants, accountants, 

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9 

counsel and others on a contract basis for rendering professional and technical assistance and 

advice and pay compensation therefor; 

(6) pay its operating expenses, scheduled debt service on Restructuring Bonds 

and other Ongoing Financing Costs; 

(7) provide for the rights of the owners of the Restructuring Bonds; 

(8) implement and enforce the implementation of the Adjustment Mechanism 

in accordance with the related Restructuring Resolution and Servicing Agreement; 

(9) procure insurance against any loss in connection with its activities, 

properties and assets in such amount and from such insurers as it may deem desirable; 

(10) invest any funds under its custody and control in investment securities or 

under any Ancillary Agreement; 

(11) establish and maintain such reserves and special funds and accounts, to be 

held in trust or otherwise, as may be required by agreements made in connection with the 

Restructuring Bonds, or any agreement between itself and third parties; 

(12) as security for the payment of the principal of and interest on any 

Restructuring Bonds issued by it pursuant to this Act, and any agreement made in connection 

therewith, pledge and create liens on all or any part of its revenues or assets, including 

Restructuring Property, unspent proceeds of its Restructuring Bonds, Transition Charge 

Revenues, and earnings from the investment and reinvestment of unspent proceeds of its 

Restructuring Bonds and Transition Charge Revenues; and 

(13) exercise such other corporate powers not inconsistent herewith, as are 

conferred upon corporations by the laws of the Commonwealth and to exercise all its powers 

within and without the Commonwealth to the same extent as natural Persons might or could do 

and (without duplication) do any and all things necessary or convenient to carry out its purposes 

and exercise the powers expressly given and granted in this Section 3. 

(c) So long as any Restructuring Bonds remain outstanding and any Financing Costs 

that have or may become due have not been paid in full, the Corporation shall not be authorized 

to dissolve, liquidate or transfer or sell all or substantially all of the Corporation’s assets (except 

as expressly provided for in the applicable Trust Agreement), or merge or consolidate, directly or 

indirectly, with any Person. Additionally, the Corporation shall not have the power or authority 

to incur, guarantee or otherwise become obligated to pay any debt or other obligations other than 

Restructuring Bonds and Financing Costs unless otherwise permitted by a Restructuring 

Resolution. The Corporation shall not own any assets or property other than the Restructuring 

Property, incidental personal property necessary for the ownership and operation of the 

Restructuring Property and any investment-grade securities in accordance with the terms of the 

Restructuring Bonds. The Corporation shall keep its assets and liabilities separate and distinct 

from those of any other Person, including PREPA. 

(d) The Corporation shall not pledge its assets to secure the obligations of any other 

Person or hold out its credit as being available to satisfy the obligations of any other Person. 

(e) Each of the Corporation and PREPA shall maintain its books, financial records 

and accounts (including inter-entity transaction accounts) in a manner so as to identify separately 

the assets and liabilities of each such entity from those of any other Person; each shall observe all 

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applicable corporate procedures and formalities, including, where applicable, the holding of 

regular periodic and special meetings of governing bodies, the recording and maintenance of 

minutes of such meetings, and the recording and maintenance of resolutions, if any, adopted at 

such meetings; and all transactions and agreements between and among the Corporation, PREPA 

and any Person will reflect the separate legal existence of each entity and shall be formally 

documented in writing. The Corporation shall not enter into any transaction with an affiliate of 

PREPA, the Corporation, Government Development Bank for Puerto Rico or the 

Commonwealth except on commercially reasonable terms similar to those available to 

unaffiliated Persons in an arm’s length transaction. 

(f) The Corporation and PREPA shall each have separate annual financial statements, 

prepared in accordance with generally accepted accounting principles, that reflect the separate 

assets and liabilities of each such entity and all transactions and transfers of funds involving each 

such entity, and each shall pay or bear the cost of the preparation of its own financial statements 

regardless of whether such statements (whether audited or unaudited) are prepared internally or 

by a certified public accounting firm that prepares or audits its financial statements. 

(g) The Corporation and PREPA shall pay their respective liabilities and losses from 

their own respective separate assets. In furtherance of the foregoing, the Corporation shall 

compensate all employees, consultants, independent contractors and agents from its own funds 

for services provided to it by such employees, consultants, independent contractors and agents. 

The Corporation shall maintain a sufficient number of employees in light of its contemplated 

business purpose. 

(h) Each of the Corporation and PREPA shall not commingle any of its assets, funds 

or liabilities with the assets, funds or liabilities of any other Person. Each of them shall conduct 

all business between itself and third parties in its own name separate and distinct from the other 

and shall correct any known misunderstanding regarding its separate identity. 

(i) Neither the assets nor the creditworthiness of PREPA shall be held out as being 

available for the payment of any liability of the Corporation, and vice versa. Assets shall not be 

transferred by PREPA to or from the Corporation inconsistently with this Act or with the intent 

to hinder, delay or defraud creditors. 

(j) PREPA in its papers and the statements of its officials shall refer to the 

Corporation as a separate and distinct legal entity; and shall take no action that is inconsistent 

with this Act or that would give any of its creditors cause to believe either that any such 

obligations incurred by PREPA would be not only the obligation of PREPA, but also of the 

Corporation, or that PREPA were not or would not continue to remain an entity separate and 

distinct from the Corporation. 

Section 4. Content of Restructuring Resolution. In connection with any issuance of 

Restructuring Bonds, the Restructuring Resolution related thereto, in addition to the other 

matters required to be included in such Restructuring Resolution by this Act, shall contain 

provisions, among others, (i) specifying the maximum amount of Restructuring Bonds 

authorized for issuance, including parameters or limitations for such maturities, scheduled 

maturities, interest rates or interest rate determination methods and other details of the 

Restructuring Bonds as the Board finds appropriate; (ii) a description of the Approved 

Restructuring Costs to be paid through the issuance of the Restructuring Bonds and recovered 

through Transition Charges; (iii) the qualitative or quantitative limitations on Financing Costs to 

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be recovered (not to impair the ability to pay and service the Restructuring Bonds in accordance 

with their terms); (iv) the calculation methodology for the Transition Charges; (v) a description 

of the Adjustment Mechanism to be applied based on the methodology for allocating Transition 

Charges to reconcile actual collections with forecasted collections on at least a semi-annual basis 

to ensure that the collections of Transition Charges are adequate to pay principal of and interest 

on the associated Restructuring Bonds when due pursuant to the expected amortization schedule, 

to fund all debt service reserve funds or accounts to the required levels and to pay when due all 

Ongoing Financing Costs; (vi) a description of the benefits to Customers and to PREPA that are 

expected to result from the issuance of Restructuring Bonds; (vii) a finding that the calculation 

methodology determined pursuant to clause (iv) and the Adjustment Mechanism described in 

clause (v) are fair and reasonable; (viii) authorizing the creation of the Restructuring Property 

and specifying that it will be created and vest in the Corporation upon the issuance of the 

Restructuring Bonds and addressing such other matters as may be necessary or desirable for the 

marketing or servicing of the Restructuring Bonds or the servicing of the Restructuring Property; 

(ix) authorizing the imposition, billing and collection of Transition Charges to pay debt service 

on the Restructuring Bonds and other Ongoing Financing Costs; (x) a description of the 

Restructuring Property that will be created pursuant to the Restructuring Resolution and vested 

upon the issuance of the Restructuring Bonds in the Corporation and that may be used to pay and 

secure the payment of the Restructuring Bonds; (xi) authorizing the execution and delivery by 

the Corporation of one or more servicing, billing or collection agreements with one or more 

Servicers and other agents and providing for the appointment of co-Servicer or subservicer upon 

the occurrence of such events as the Corporation, being advised by its consultants, determines 

enhances the marketability of the Restructuring Bonds; (xii) authorizing the execution and 

delivery by the Corporation of one or more depository, trust or escrow agreements with financial 

institutions or other Persons providing for the escrowing and allocation of the collections of 

Customer bills between PREPA and the Corporation, as the Corporation, in consultation with 

such advisers as it may deem appropriate, determines enhances the marketability of the 

Restructuring Bonds; (xiii) requiring the filing of such billing and collection reports relating to 

the Transition Charges as the Corporation may require from the Servicer (not less frequently than 

monthly); (xiv) authorizing the form of and the execution and delivery of a Trust Agreement; 

and (xv) such other findings, determinations and authorizations as the Corporation, being advised 

by its consultants, shall deem appropriate. 

Each Restructuring Resolution, the Restructuring Property and the Adjustment 

Mechanism and all other obligations of the Corporation set forth in such Restructuring 

Resolution will be direct, explicit, irrevocable and unconditional upon issuance of the 

Restructuring Bonds, legally enforceable against the Commonwealth, PREPA, the Corporation 

and the Customers. Except for the requirements in Section 5(b) of this Act, the Transition 

Charges and the Adjustment Mechanism will not be subject to any other provision of law, 

including the provisions of Act No. 21 of the Legislature of Puerto Rico, approved May 31, 

1985, Act No. 57 of the Legislature of Puerto Rico, approved May 27, 2014, as amended, and 

any other provision of law requiring or providing for the review (except by the Corporation as 

provided below) or approval of rates of any governmental entity, or the holding of public 

hearings or notification of rate changes of any governmental entity, including the Legislative 

Assembly or the Commission, and neither the Commission nor any other governmental entity 

shall adopt any regulations, rules or procedures or take any other action that would delay or 

adversely affect the implementation of the Adjustment Mechanism or collection of Transition 

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Charge Revenues. The Corporation’s review of the periodic adjustment of Transition Charges 

pursuant to the Adjustment Mechanism shall be limited solely to the mathematical accuracy of 

the calculations of the amount of such adjustments, and in connection with each such review by 

the Corporation, it shall retain the services of one of more Persons with the necessary experience 

in reviewing such periodic adjustments for mathematical accuracy. If the Corporation 

determines that the calculation of any adjustment in Transition Charges was mathematically 

inaccurate, such adjustment shall be changed not later than the next succeeding application of the 

Adjustment Mechanism, and estimated over collections or under collections resulting from such 

mathematical inaccuracy shall be taken into account in connection therewith, but no Customer 

shall be entitled to a refund of Transition Charges or the retroactive application of the same by 

reason of mathematical inaccuracies in such periodic adjustments. No adjustment of Transition 

Charges pursuant to the Adjustment Mechanism shall in any way affect the irrevocability of the 

Restructuring Resolution related thereto. PREPA is authorized and directed to provide to the 

Corporation and its agents such information as may be required for the Corporation’s calculation 

and review, and for a third-party calculation agent’s review, of all such periodic adjustments. 

Section 5. Restructuring Bonds. (a) Authorization to Issue Restructuring Bonds; 

Transition Charges. The Corporation is authorized, without review or approval by the 

Commission or any other governmental entity, to issue Restructuring Bonds [[(which may 

include the issuance of Restructuring Bonds to defease all or any portion of PREPA’s debt)]] at 

one time or (subject to satisfying the conditions, if any, therefor set forth in any then existing 

Trust Agreement) from time to time for (i) Approved Restructuring Costs or (ii) refinancing 

Restructuring Bonds to achieve [[(without taking into account for purposes of calculating any 

such savings any Restructuring Bonds issued to defease all or any portion of PREPA’s debt)]] 

net present value debt service savings. In connection with the adoption of the initial 

Restructuring Resolution and the Restructuring Bonds related thereto, the term Approved 

Restructuring Costs shall not include the purpose set forth in clause (a) of the definition thereof 

in Section 1 of this Act. After the date on which the initial series of Restructuring Bonds is 

issued, other series of Restructuring Bonds may be issued from time to time, provided that with 

respect to any Restructuring Bonds issued for the purpose described in clause (a) of the 

definition of Approved Restructuring Costs in Section 1 of this Act, any conditions for 

maintaining the credit rating on such initial series, as set forth in the related Trust Agreement, are 

satisfied. 

(b) Approval Process. (i) Notwithstanding any other provision of law to the contrary, 

the Corporation shall submit a petition to the Commission accompanied by a proposed 

Restructuring Resolution and such other information as is required in [Article 17] of this Act. 

Pursuant to [Article 17] of this Act, the Commission will review the proposed form of 

Restructuring Resolution and such other information to determine whether the calculation 

methodology followed by the Corporation for the Transition Charges, and the Adjustment 

Mechanism to be applied to adjust the Transition Charges is consistent with the cost distribution 

and other standards set forth in [Article 17] of this Act and is not arbitrary or capricious. The 

Commission shall conduct one or more public hearings with respect to the same as provided in 

[Article 17] of this Act. The Corporation may not adopt a Restructuring Resolution unless the 

Commission has either approved a Restructuring Order or the Commission has lost jurisdiction 

in accordance with [Article 17] of this Act. The Corporation shall adopt a Restructuring 

Resolution within 5 business days after (A) approval by the Commission of the related 

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Restructuring Order or (B) the date on which the Commission has lost jurisdiction in accordance 

with [Article 17] of this Act. 

 (ii) Any judicial proceedings challenging a Restructuring Order or the findings and 

determinations in a Restructuring Resolution shall only be brought in accordance with the 

procedures set forth in subsection (d) of this Section 5, and the Court shall review such findings 

and determinations under the standard of whether the Commission or the Corporation acted in a 

manner that was arbitrary or capricious. 

(c) Validation of Act. (1) Within seven (7) days after the effective date of this Act, 

the Corporation or Government Development Bank for Puerto Rico shall publish in the manner 

provided in paragraph (2) of this subsection (c) a notice inviting any Interested Person to bring 

an action in the Superior Court, San Juan Part (the “Court”), to determine, among other things: 

(A) the validity of this Act; 

(B) that any provision of this Act, including the imposition of 

Transition Charges, does not result in the breach or impairment of any contract or covenant made 

by the Commonwealth or PREPA to the bondholders or other creditors of PREPA, or in any 

taking of property by the Commonwealth without just compensation; 

(C) that the money to be received by or on behalf of the Corporation or 

any Servicer from the related Transition Charge is revenue and income of the Corporation and 

not of PREPA or any other Person and is not available resources of the Commonwealth nor does 

the Transition Charge constitute a tax and that the right of the Corporation to impose and collect 

Transition Charges may not be revoked or rescinded; 

(D) that the Transition Charge Revenues are not subject to any lien or 

charge of bondholders or other creditors of PREPA or any other Person other than the lien or 

charge of the applicable Trust Agreement to be entered into in connection with the issuance of 

the applicable Restructuring Bonds; and 

(E) any or all other matters relating to the foregoing including any 

United States or Commonwealth Constitutional matters. 

(2) The Corporation or Government Development Bank for Puerto Rico 

acting on behalf of the Corporation shall give notice to all Interested Persons of the passage of 

this Act and the opportunity to challenge its validity by publication once a week for three 

successive weeks in a newspaper of general circulation in the Commonwealth and in a 

newspaper of general circulation or a financial journal published or circulated in The City of 

New York. In addition, (i) the Corporation, Government Development Bank for Puerto Rico and 

PREPA shall post a copy of the notice on their websites, (ii) not more than five (5) days after the 

first such publication, the Corporation or Government Development Bank for Puerto Rico acting 

on behalf of the Corporation shall (A) to the extent known by the Corporation or Government 

Development Bank for Puerto Rico deliver, or cause to be delivered, a copy of the notice to those 

Interested Persons listed in clauses (a) through (e) of the definition of Interested Person in 

Section 1 of this Act and (B) file or cause PREPA to file a copy of the notice with the Electronic 

Municipal Market Access system maintained by the Municipal Securities Rulemaking Board (or 

equivalent), (iii) PREPA shall deliver a copy of the notice referred to above to all Customers by 

means of (A) a direct mailing of such notice to such Customers not more than ten (10) days after 

the first such publication and (B) an insert included in the next billing statement distributed by it 

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after the first such publication and to all Interested Persons listed in clause (g) of the definition of 

said term, and (iv) not more than fifteen (15) days after the first such publication the Corporation 

or PREPA shall deliver a copy of the notice to any Interested Person listed in clauses (h) and, to 

the extent known by PREPA, clause (i) of the definition of such term in Section 1 of this Act. 

(3) Upon the first publication of the notice in a newspaper of general 

circulation in the Commonwealth and in a newspaper of general circulation or a financial journal 

published or circulated in The City of New York, all Interested Persons will be deemed to know 

or have reason to know of the passage of this Act and any alleged injury or claims related to this 

Act. A 60-day term of repose [caducidad] to challenge this Act as set forth in paragraph 1 of this 

subsection (c) shall begin on the date of the first publication of such notice in a newspaper of 

general circulation in the Commonwealth and in a newspaper of general circulation or a financial 

journal published or circulated in The City of New York (and if not first published on the same 

date, the later date of the two publication dates shall be used for this purpose). The notice shall 

provide a detailed summary of the matter the Corporation seeks to validate. The notice shall be 

substantially similar to the form provided below: 

Notice of Enactment of PREPA Revitalization Act 

[On [insert date], Act No. __ of the Legislative Assembly of Puerto Rico, approved ____ 

__, 201[5], became effective. Any party interested may, not later than ___________ [not more 

than 60 days after the first publication of notice], appear and contest in the Superior Court, San 

Juan Part, the legality or validity of said Act or any matter related thereto. No court shall have 

jurisdiction of any purported action relating to the aforementioned Act if such purported action is 

filed after the specified date. No contest except by the Corporation of any thing or matter under 

the aforementioned Act shall be made other than within the time and the manner herein 

specified. 

[Detailed summary; additional information_______________________] 

Puerto Rico Electric Power 

Authority Revitalization Corporation 

(4) Only the Court shall have jurisdiction over any purported action relating to 

the matters addressed in this subsection (c), and only if such challenge or contest is timely filed 

within the 60-day statute of repose [caducidad]. Any Interested Person may, within this 60-day 

period, appear and contest the legality or validity of any matter sought to be determined. No 

other court shall have jurisdiction of any purported action relating to any of the matters 

addressed in this subsection (c). The Court shall lack jurisdiction if such purported action is filed 

after this 60-day period. 

(5) If more than one action is pending concerning similar contests which may 

be brought under this subsection, they shall be consolidated, and the Court may make such 

orders as may be necessary or proper to effect consolidation and as may tend to avoid 

unnecessary costs or delays. Such orders shall not be appealable to or reviewable by any court, 

except that they may be questioned on appeal of the final judgment as prescribed in paragraph 

(7) of subsection (d) of this Section. Actions brought pursuant to this Act shall be entitled to 

liberal joinder and cross-claim rules and given preference over all other civil actions before the 

court in the matter of setting the same for motions, pleadings, hearing or trial, and in hearing the 

same, to the end that such actions shall be speedily heard and determined. 

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(6) No contest except by the Corporation of any thing or matter under this 

subsection (c) shall be made other than within the time and the manner specified in this 

subsection (c), except for any contest permitted to be brought in accordance with subsection (d) 

of this Section 5. Nothing in subsections (c) and (d) of this Section 5 shall preclude the use by 

the Corporation of any other remedy to determine the validity of any thing or matter. 

(7) An appeal from the final judgment of the trial court may only be taken 

directly to the Supreme Court of the Commonwealth, in the manner described in 

subsection (f)(2) below. 

(d) Validation of Initial Issuance of Restructuring Bonds. (1) After the Commission 

has approved the initial Restructuring Order and the Corporation has approved the initial 

Restructuring Resolution and prior to the award of the first issue of Restructuring Bonds, the 

Corporation shall publish in the manner set forth in paragraph (2) of this subsection (d) a notice 

inviting any Interested Person to bring an action in the Court to determine, among other things: 

(A) the validity of the Restructuring Order, the Corporation’s approval 

of Restructuring Bonds, including provisions for the payment of such Restructuring Bonds, the 

validity of such Restructuring Bonds, the creation of Restructuring Property, the validity of the 

formula or formulae used to establish the amount of such Transition Charges for each Customer 

class, including the distribution of Financing Costs among Customer classes, and all proceedings 

of the Corporation related thereto; 

(B) the validity and enforceability of the Transition Charges and the 

Adjustment Mechanism and that the right of the Corporation to impose and collect Transition 

Charges may not be revoked or rescinded; 

(C) that neither the issuance of the Restructuring Bonds [[(including 

the use of such Restructuring Bonds by PREPA to defease its outstanding debt)]] nor the amount 

of the Transition Charge results in the breach of any contract or covenant made by the 

Commonwealth or PREPA to the bondholders or other creditors of PREPA, any fraudulent 

conveyance or any taking of property by the Commonwealth without just compensation or is 

otherwise subject to avoidance or rescission; and 

(D) any or all other matters relating to the foregoing including any 

United States or Commonwealth Constitutional matters. 

(2) The Corporation shall give notice to all Interested Persons of the adoption 

of the Restructuring Resolution and the authorization of the Restructuring Bonds and the 

opportunity to challenge their validity by publication of notice once a week for three successive 

weeks in a newspaper of general circulation in the Commonwealth and in a newspaper of general 

circulation or a financial journal published or circulated in The City of New York. In addition, 

(i) the Corporation, Government Development Bank for Puerto Rico and PREPA shall post a 

copy of the notice along with a copy of the Restructuring Resolution on their websites, (ii) not 

later than five (5) days after the first such publication, the Corporation or Government 

Development Bank for Puerto Rico acting on behalf of the Corporation shall (A) to the extent 

known by the Corporation or Government Development Bank for Puerto Rico deliver, or cause 

to be delivered, a copy of the notice to those Interested Persons listed in clauses (a) through (e) 

of the definition of Interested Person in Section 1 of this Act, and (B) file or cause PREPA to file 

a copy of the notice with the Electronic Municipal Market Access system maintained by the 

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Municipal Securities Rulemaking Board (or equivalent), (iii) PREPA shall deliver a copy of the 

Corporation’s notice referred to above to all Customers by means of (A) a direct mailing of such 

notice to such Customers not more than ten (10) days after the first such publication and (B) an 

insert included in the next billing statement distributed by it after the first such publication and to 

all Interested Persons listed in clause (g) of said definition, and (iv) not more than fifteen (15) 

days after the first such publication the Corporation or PREPA shall deliver a copy of the notice 

to any Interested Person listed in clauses (h) and, to the extent known by PREPA, clause (i) of 

the definition of such term in Section 1 of this Act. 

(3) Upon the first publication of the notice in a newspaper of general 

circulation in the Commonwealth and in a newspaper of general circulation or a financial journal 

published or circulated in The City of New York, all Interested Persons and any other Person 

interested in the matter will be deemed to know or have reason to know of the passage of this 

Act and any injury or claims related to this Act. A 45-day term of repose [caducidad] to 

challenge this Act as set forth in paragraph 1 of this subsection (d) shall begin to run at the time 

of the first publication of the notice in a newspaper of general circulation in the Commonwealth 

and in a newspaper of general circulation or a financial journal published or circulated in The 

City of New York (and if not first published on the same date, the later date of the two 

publication dates shall be used for this purpose). The notice shall provide a detailed summary of 

the matter the Corporation seeks to validate. The notice shall be substantially similar to the form 

provided below: 

Notice of Puerto Rico Electric Power Authority Debt Restructuring 

[On [insert date], Puerto Rico Electric Power Authority Revitalization Corporation (the 

“Corporation”) approved Resolution No. __ (the “Restructuring Resolution”) authorizing the 

issuance of not to exceed $___________ principal amount of its [insert designation of 

Restructuring Bonds]. In connection with such issuance, the Corporation will, pursuant to 

authority granted under Act No. __ of the Legislative Assembly of Puerto Rico, approved 

____________, as amended, impose a Transition Charge of [insert amount and basis of 

calculation] on all Customers of Puerto Rico Electric Power Authority commencing 

[immediately after the issuance of said Restructuring Bonds; if different, add effective date]. 

Any party interested may, not later than ___________ [not more than 45 days after the 

first publication of notice], appear and contest in the Superior Court, San Juan Part, the legality 

or validity of any matter sought to be determined. No court shall have jurisdiction of any 

purported action relating to the aforementioned Act, the Restructuring Resolution or any of the 

matters addressed in said Act if such purported action is filed after the specified date. No contest 

except by the Corporation of any thing or matter under the aforementioned Act shall be made 

other than within the time and the manner herein specified. 

[Detailed summary; additional information_______________________] 

Puerto Rico Electric Power 

Authority Revitalization Corporation 

(4) Only the Court shall have jurisdiction over any purported action relating to 

the matters addressed in this subsection (d), and only if such challenge or contest is timely filed 

within the 45-day statute of repose [caducidad]. Any Interested Person may, within this 45-day 

period, appear and contest the legality or validity of any matter sought to be determined. No 

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other court shall have jurisdiction of any purported action relating to the matters addressed in this 

subsection (d). The Court shall lack jurisdiction if such purported action is filed after this 45-day 

period. 

(5) For purposes of this subsection (d), the Restructuring Bonds and 

Transition Charges shall be deemed to be in existence upon their authorization and the 

Restructuring Bonds and Transition Charges shall be deemed authorized as of the date of 

adoption by the Board of the Restructuring Resolution. 

(6) No contest except by the Corporation of any thing or matter under this 

subsection (d) shall be made other than within the time and the manner herein specified. 

Nothing in subsections (c) and (d) of this Section 5 shall preclude the use by the Corporation of 

any other remedy to determine the validity of any thing or matter. 

(7) An appeal from the final judgment of the trial court may only be taken 

directly to the Supreme Court of the Commonwealth, in the manner described in 

subsection (f)(2) below. 

(e) Actions to be Consolidated; Liberal Joinder and Cross-claim Rules, etc. If more 

than one action is pending concerning similar contests which may be brought under this Act, 

they shall to the extent practicable be consolidated for trial, and the court may make such orders 

as may be necessary or proper to effect consolidation and as may tend to avoid unnecessary costs 

or delays. Such orders shall not be appealable to or reviewable by any court, except that they 

may be questioned on appeal of the final judgment as prescribed in this Section 5. Actions 

brought pursuant to this Act shall be entitled to liberal joinder and cross-claim rules and given 

preference over all other civil actions before the court in the matter of setting the same for 

motions, pleadings, hearing or trial, and in hearing the same, to the end that such actions shall be 

speedily heard and determined. 

(f) Nature of Judgment; Appeals. (1) Any final judgment of the Court entered 

pursuant to this Act, if no appeal is taken, or if taken and the final judgment is affirmed, shall, 

notwithstanding any other provision of law thereupon become and thereafter be forever binding 

and conclusive, as to all matters therein adjudicated or which at that time could have been 

adjudicated, against the Corporation and against all other Persons, including the Commonwealth, 

the Commission, the Servicer and PREPA, and the final judgment shall permanently enjoin the 

institution by any Person of any action or proceeding raising any issue as to which the judgment 

is binding and conclusive. Furthermore, in the case of any final judgment rendered pursuant to 

subsection (d) of this Act, it shall be irrefutably presumed that said approval for the issuance of 

the Restructuring Bonds has been duly and regularly adopted by the Corporation in compliance 

with this Act and of any other applicable law. Following any final judgment, the validity of this 

Act, said issuance approval or any of this Act’s provisions, including the provisions for payment 

of the Restructuring Bonds to which such approval relates wherever contained, and the validity 

of said Restructuring Bonds authorized thereby, shall not be questioned by any Person, 

regardless of the provisions in conflict with any provision of this Act or any other act or 

regulation, and no action, suit or proceeding questioning any issue which was litigated or which 

could have been litigated, including whether the money received by or on behalf of the 

Corporation or any Servicer is revenue or income of the Corporation or of PREPA or constitutes 

available resources of the Commonwealth, or constitute a tax, or whether the imposition or 

collection of the Transition Charges may be revoked or rescinded or whether the Transition 

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Charge Revenues are subject to any lien or charge of bondholders or other creditors of PREPA or 

whether the passage of this Act or the issuance of the Restructuring Bonds results in the breach 

of any contract or covenant made by the Commonwealth to the bondholders or other creditors of 

PREPA, or in any taking of property by the Commonwealth without just compensation, or in any 

fraudulent conveyance or is otherwise subject to avoidance or rescission or any other United 

States or Commonwealth Constitutional matter whether or not related to the foregoing, shall 

thereafter be heard by any court. 

(2) Notwithstanding any other provision of law and any rule of court, no 

appeal shall be allowed from any judgment entered pursuant to this Act unless it is filed with the 

Supreme Court of the Commonwealth within 30 days after the notice of entry of the judgment, 

and the failure to file such appeal within such period shall thereafter bar any appeals court from 

exercising jurisdiction over the matters which could be so appealed. 

(g) Agreement to Issue Restructuring Bonds. The Corporation may issue 

Restructuring Bonds, in one or more series, and at one or more times, pursuant to an agreement 

to issue the Restructuring Bonds [[or to defease PREPA’s outstanding debt]]. The Restructuring 

Bonds may be sold for cash or delivered to any Person for such consideration (provided by that 

Person or any other Person) as the Board may deem adequate. No later than the third business 

day after the pricing of the related Restructuring Bonds in accordance with any such agreement, 

the Servicer shall calculate and the calculation agent for Corporation employed in accordance 

with the provisions of the applicable Trust Agreement shall confirm the calculation of the initial 

Transition Charges, which shall be effective from the date specified in the corresponding 

Restructuring Resolution without any further action by the Corporation or any other Person. 

(h) Irrevocability. Upon the issuance of the Restructuring Bonds, the Restructuring 

Resolution corresponding thereto, the related Transition Charges, including their Nonbypassability and the procedures for the applicable Adjustment Mechanism, as provided in the 

Restructuring Resolution, Trust Agreement or other security document related thereto, shall be 

irrevocable, final, non-discretionary and effective without further action by the Corporation or 

any other Person. 

(i) Transition Charges Non-bypassable; Payment to Depository. For so long as 

Restructuring Bonds are outstanding, and the Approved Restructuring Costs (including, without 

duplication, any payments that have or may become due under Ancillary Agreements) have not 

been paid in full, the Transition Charges authorized and imposed by this Act shall be Nonbypassable and shall apply to all Customers. 

Without limiting authority elsewhere conferred, PREPA is hereby authorized and 

directed to enter into a Servicing Agreement and perform such duties of the Servicer as may be 

required or permitted by this Act, to provide further assurances to the Corporation, other 

Financing Entities or the owner (if different) of all or a portion of the Restructuring Property in 

respect of the Restructuring Property and receipt of the Transition Charge Revenues, and to do 

all things necessary or desirable for the accomplishment of the purposes of this Act. The 

Servicer shall terminate service to non-paying Customers on the same basis as termination of 

service is permitted for nonpayment of electric or other rates by PREPA, but none of the 

Corporation, other owner of the Restructuring Property and the Trustee may directly terminate 

electric service to any Customer. 

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The Corporation shall impose and adjust, and the Corporation, PREPA and, if different, 

the Servicer (as their respective duties may be specified pursuant to the applicable Restructuring 

Resolution) shall impose and adjust, bill and collect any Transition Charges applicable to all 

Customers, shall include in each such bill the applicable Transition Charge as a separate line 

item (or footnote), shall allocate partial payments by Customers between the Corporation and 

PREPA as provided in subsection (k)(1) below and the Servicing Agreement, and shall take all 

other actions permitted by law to collect unpaid bills including making use of any intercept 

provisions for non-payment of electric or other rates by public agencies, municipalities, public 

corporations or other governmental entities that is applicable to nonpayment of electric or other 

rates charged by PREPA, shall exercise all enforcement rights of the owner or pledgee of the 

Restructuring Property for the benefit of such owner or pledgee, and shall remit any Transition 

Charge Revenue to the owner or pledgee of the Restructuring Property. The corresponding Trust 

Agreement may provide that the calculation of all Transition Charges and adjustments thereto 

shall be confirmed by a third-party calculation agent unrelated to the Government of Puerto Rico 

or PREPA (which may be the Servicer if PREPA is no longer the Servicer) appointed by the 

Corporation or the Trustee. 

The Servicer shall, except to the extent otherwise specified in a Restructuring Resolution, 

be entitled to reasonable compensation, which in the case of PREPA shall not be less than the 

estimated incremental cost of imposing and billing the Transition Charges and collecting the 

Transition Charge Revenues, preparing servicing reports and performing customary servicing 

services required by any Servicing Agreement in connection with the Restructuring Bonds. The 

Corporation (or the Trustee in accordance with the terms of the applicable Trust Agreement) is 

authorized to replace the Servicer upon the occurrence in respect of such Servicer of an event of 

default as defined or specified in the Servicing Agreement. 

As soon as possible after receipt of same, all Transition Charge Revenues and PREPA 

charges shall be paid or deposited or directed to be paid or deposited to a special collection 

account at a bank organized under and subject to regulation by the laws of the United States or 

any state thereof (and licensed to operate in the Commonwealth) selected by the Corporation and 

not related to PREPA or the Commonwealth or under the control of PREPA. Such amounts shall 

be allocated and remitted to the Corporation or its assigns or pledgees and to PREPA or its 

assigns or pledgees on a daily basis in accordance with their respective interests. Any Servicing 

Agreement and depository agreement shall be required to include the forgoing deposit and 

allocation requirements. 

Under no circumstances shall any Transition Charges imposed or Restructuring Property 

created by the Corporation to secure any Restructuring Bonds be or be deemed to be raised by 

taxation, be deemed to be for any purpose PREPA or Commonwealth revenue or be or be 

deemed to be for any purpose received as a result of PREPA’s ownership or operation of its 

System Assets, nor shall any Restructuring Bonds be or be deemed to be a debt or other 

obligation of PREPA or the Commonwealth or any of its other political subdivisions. PREPA 

shall in servicing and collecting any Transition Charges be deemed to be acting solely as an 

agent of the Corporation and not as principal, any such Charges to be held in trust for the 

exclusive benefit of the Corporation, the owners of Restructuring Bonds and Persons entitled to 

receive payment therefrom for any Financing Costs (such Transition Charges shall not lose their 

character as Transition Charges by virtue of any possession by PREPA) and PREPA shall 

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immediately transfer any such Transition Charges received to the special collection account 

referred to in the first sentence of the preceding paragraph. 

(j) Restructuring Property. (1) Restructuring Property shall constitute an existing, 

present and continuing property right for all purposes, including for agreements securing 

Restructuring Bonds, whether or not the revenues and proceeds arising with respect thereto have 

accrued, and notwithstanding the fact that the imposition and collection of Transition Charges 

will depend on further acts that have not yet occurred, including: (a) PREPA delivering 

services, (b) a Servicer performing servicing functions relating to the billing and collection of 

Transition Charges, and (c) the level of future consumption (or no consumption) of such service. 

Restructuring Property shall exist whether or not Transition Charges have been imposed, billed, 

accrued or collected and notwithstanding the fact that the value or amount of the Restructuring 

Property is dependent on the future provision of service to Customers. Subject to applicable law 

and regulations, the timely payment in full of all Transition Charges shall be a condition of 

receiving service from PREPA. 

(2) All Restructuring Property shall continue to exist until the corresponding 

Restructuring Bonds and all Ongoing Financing Costs relating to the Restructuring Bonds have 

been paid in full. 

(3) If the Servicer defaults in any required remittance of Transition Charge 

Revenues or shall otherwise default in the performance of its obligations under any agreement 

related thereto, any court in the Commonwealth, including the federal district court for the 

District of Puerto Rico, upon application by the Corporation, in accordance with the terms of the 

Servicing Agreement, or the Trustee or the owners of the Restructuring Bonds in accordance 

with the terms of the corresponding Trust Agreement, and without limiting any other remedies 

available to the applying party, shall order the sequestration and payment of the Transition 

Charge Revenues for the benefit of the owners or pledgees of Restructuring Property. The order 

shall remain in full force and effect notwithstanding any bankruptcy, reorganization, or other 

insolvency proceedings with respect to a Servicer, the Corporation, PREPA or any other Person. 

(k) No Set-off Regarding Restructuring Property, etc.; Statutory Lien. 

(1) Restructuring Property, Transition Charges, Transition Charge Revenues, and the interests of 

a bondholder, Financing Entity or any other Person in Restructuring Property or in Transition 

Charge Revenues are not subject to set-off, counterclaim, surcharge or defense by a Servicer, any 

Customer, the Corporation, PREPA, holders of any other debt issued by PREPA (or any other 

creditors of PREPA) or any other Person or in connection with any default, bankruptcy, 

reorganization or other insolvency proceeding of any of the foregoing Persons. To the extent 

that any Customer makes a partial payment of a bill containing both Transition Charges and any 

other charges, such payment shall be allocated pro rata between the Transition Charges and the 

other charges. 

(2) Restructuring Bonds and obligations of the Corporation under Ancillary 

Agreements shall be secured by a statutory lien on the Restructuring Property in favor of the 

owners or beneficial owners of Restructuring Bonds and parties to such Ancillary Agreements. 

The lien shall automatically arise upon issuance of the applicable Restructuring Bonds without 

the need for any action or authorization by the Corporation or the Board. The lien shall be valid 

and binding from the time the Restructuring Bonds or Ancillary Agreements, as applicable, are 

executed and delivered. The Restructuring Property shall be immediately subject to the lien, and 

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the lien shall immediately attach to the Restructuring Property and be effective, binding, and 

enforceable against PREPA, its creditors, their successors, transferees, and creditors, and all 

others asserting rights therein, irrespective of whether those Persons have notice of the lien and 

without the need for any physical delivery, recordation, filing, or further act. The lien is created 

by this Act and not by any security agreement, but may be enforced by a Trustee or other 

fiduciary for the owners or beneficial owners of Restructuring Bonds. 

This statutory lien is a continuously perfected security interest and has priority 

over any other lien, created by operation of law or otherwise, that may subsequently attach to 

that Restructuring Property or any proceeds thereof unless the owners or beneficial owners of 

Restructuring Bonds have as specified in the applicable Trust Agreement agreed in writing 

otherwise. This statutory lien is a lien on Transition Charges and all Transition Charge Revenues 

or other proceeds that are deposited in any deposit account or other account of the Servicer or 

other Person in which Transition Charge Revenues or other proceeds have been commingled 

with other funds. Without limiting the effectiveness of the statutory lien created by this Act, any 

other security interest that may apply to Transition Charge Revenues shall be terminated when 

such revenues or proceeds are transferred to a segregated account for an assignee or a Financing 

Entity. No application of the Adjustment Mechanism shall affect the validity, perfection, or 

priority of the statutory lien created by this Act. Any Transition Charge Revenues commingled 

with other funds subject to any lien shall be administered in a manner that allows for the 

identification of the Transition Charge Revenues and such other funds. 

(3) The statutory lien shall not adversely be affected or impaired by, among 

other things, the commingling of Transition Charge Revenues or other proceeds from Transition 

Charges with other amounts regardless of the Person holding such amounts. Any Transition 

Charge Revenues commingled with other funds subject to any lien shall be administered in a 

manner that allows for the identification of the Transition Charge Revenues and such other 

funds. 

(l) Successors Bound. PREPA, any successor or assign of PREPA or any other 

Person with any operational control of any portion of the System Assets, whether as owner, 

lessee, franchisee or otherwise and any successor Servicer shall be bound by the requirements of 

this Act and shall perform and satisfy all obligations imposed pursuant hereto in the same 

manner and to the same extent as did its predecessor, including the obligation to bill, adjust and 

enforce the payment of Transition Charges. 

(m) Authorization to Pledge Restructuring Property. All or any portion of 

Restructuring Property may be pledged to secure the payment of Restructuring Bonds, amounts 

payable to Financing Entities, and other Ongoing Financing Costs. So long as the Restructuring 

Property remains pledged to secure any such payments, revenues from the collection of 

Transition Charges shall be applied solely to pay Ongoing Financing Costs. 

(n) Legality for Investment. The Restructuring Bonds are hereby made securities in 

which all public officers and bodies of the Commonwealth and all public corporations, 

municipalities and municipal subdivisions, all insurance companies and associations and other 

Persons carrying on an insurance business, all banks, bankers, trust companies, savings banks 

and savings associations including savings and loan associations, building and loan associations, 

investment companies and other Persons carrying on a banking business, all administrators, 

conservators, guardians, executors, trustees and other fiduciaries, and all other Persons now or 

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hereafter authorized to invest in bonds or in other obligations of the Commonwealth, may 

properly and legally invest funds, including capital, in their control or belonging to them; and the 

Restructuring Bonds may be deposited with and may be received by all public officers and 

bodies of the Commonwealth and all municipalities and public corporations for any purpose for 

which the deposit of bonds or other obligations of the Commonwealth is now or may hereafter be 

authorized. 

(o) Tax Exemption. (1) It is hereby determined that this Act and the carrying out of 

its purposes are in all respects for the benefit of the people of the Commonwealth and for a 

public purpose. Accordingly, the Corporation shall be regarded as performing an essential 

governmental function in the exercise of the powers conferred upon it pursuant to this Act and 

shall not be required to pay, and the Restructuring Property, including the Transition Charges 

and Transition Charge Revenues, regardless of whether the Corporation is the owner of the 

Restructuring Property, shall not be subject to any fees, taxes, special ad valorem levies or 

assessments of any kind, including income taxes, franchise taxes, sales taxes or other taxes or 

payments or contributions in lieu of taxes. In addition, Persons that enter into contracts with the 

Corporation shall not be subject to the tax on contracts imposed by Act No. 1 of the Legislative 

Assembly of Puerto Rico, approved January 31, 2011, as amended. 

(2) the Commonwealth hereby covenants with the purchasers and with all 

subsequent owners and transferees of Restructuring Bonds, in consideration of the acceptance of 

and payment for the Restructuring Bonds, that the Restructuring Bonds and the income 

therefrom and all revenues, money, and other property pledged to pay or to secure the payment 

of such Bonds shall at all times be free from taxation; and this covenant may be included in the 

Restructuring Bonds. 

(p) Restructuring Bonds Negotiable Instruments. Whether or not the Restructuring 

Bonds are of such form and character as to be negotiable instruments under the terms of the 

uniform commercial code, the Restructuring Bonds are hereby made negotiable instruments 

within the meaning of and for all the purposes of the uniform commercial code and any other 

applicable laws of the Commonwealth, subject only to the provisions of the Restructuring Bonds 

for registration. 

(q) No Personal or Corporate Liability on Restructuring Bonds. Neither the directors 

of the Corporation nor any Person executing Restructuring Bonds shall be liable personally 

thereon or be subject to any personal or corporate liability or accountability solely by reason of 

the issuance thereof. The Restructuring Bonds shall not be a debt of the Commonwealth, nor 

shall they be payable out of any funds other than those of the Corporation; and such Bonds shall 

contain on the face thereof a statement to that effect. 

Section 6. Use of Proceeds[[; Defeasance of PREPA Debt]]. The proceeds of the 

Restructuring Bonds shall be used only to pay or fund Upfront Financing Costs and all remaining 

proceeds will be contributed to or for the account of PREPA or otherwise applied to Approved 

Restructuring Costs, all as provided in the applicable Restructuring Resolution. [[Restructuring 

Bonds may also be issued without such issuance generating any proceeds to defease a portion of 

PREPA’s outstanding debt.]] Upon payment or defeasance of all Restructuring Bonds and all 

related Financing Costs, all amounts held or receivable by the Corporation or any Financing 

Entity shall be used to make a refund or credit to Customers on the same basis that Transition 

Charges are then being imposed, to the extent such a refund or credit is practical. Any failure by 

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any Person to apply the proceeds of the Restructuring Bonds in a reasonable, prudent and 

appropriate manner or otherwise comply with any provisions of this Act (including any 

Restructuring Resolution or applicable Trust Agreement or any agreement between the 

Corporation and PREPA) shall not invalidate, impair or affect any Restructuring Property, 

Transition Charge or Restructuring Bonds. 

Section 7. No Recourse. Restructuring Bonds shall be without recourse to the credit 

or any assets of the Corporation, PREPA, the Commonwealth, any Third-party Biller, any 

Servicer, co-Servicer or subservicer, escrow agent or other Financing Entity, other than the 

Restructuring Property and other assets and revenues specified in the applicable Restructuring 

Resolution, Trust Agreement or other security document. 

Section 8. Standing. (a) Subject to the limitations, if any, in any Restructuring 

Resolution or related Trust Agreement, the Corporation or any other owner of Restructuring 

Property, or the applicable Trustee, (1) is authorized to hire consultants, attorneys and other 

Persons and enter into such agreements as the Corporation, other owner or Trustee deems 

necessary to enforce and collect the Transition Charge Revenues or protect the Restructuring 

Property and include the cost thereof as a Financing Cost, and notwithstanding any other 

provision of law, and (2) shall be expressly permitted hereby to (i) bring actions against any 

owner of the System Assets, any Servicer, or any other Person authorized to bill or collect 

Transition Charges, any Customers or any other Person for failure to impose, bill, pay or collect 

any Transition Charges constituting part of the Restructuring Property then pledged as security 

for such Restructuring Bonds or for enforcement of any other provision of this Act or action 

taken by the Corporation in respect thereof or (ii) take any other action as the Corporation, other 

owner of Restructuring Property or the Trustee may deem necessary to enforce and collect the 

Transition Charge Revenues or protect the Restructuring Property in accordance with the terms 

of the Restructuring Resolution related thereto and applicable Restructuring Bonds, regardless of 

whether an event default has occurred and is continuing in respect of the Restructuring Bonds, 

but no action may be brought by the Corporation, the Trustee or the party to any Ancillary 

Agreement or on their behalf (other than through PREPA or any successor Servicer) against any 

Customer for its failure to pay any Transition Charge so long as PREPA or any successor 

Servicer is complying with its obligations under the Servicing Agreement with respect to the 

enforcement of any collection of charges (including Transition Charges) due from such 

Customer. 

(b) Any court shall have jurisdiction over any actions for failure to impose, bill, pay 

or collect any Transition Charges or for enforcement of any provision of this Act. 

(c) Subject to the terms of any Trust Agreement, after the occurrence of an event of 

default and during the continuance thereof with respect to the Restructuring Bonds, all or any 

portion of Restructuring Property may be transferred, sold, conveyed or assigned (including by 

an action to foreclose on the Restructuring Property) to any Person. 

Section 9. Corporation Not a Utility. The Corporation shall not be considered to be 

an electric power company, electric power service company or electric power generation 

company (as such terms are defined in Act No. 57 of the Legislative Assembly of Puerto Rico, 

approved May 27, 2014, as amended), public utility or Person providing utility service solely by 

virtue of the transactions described in this Act. None of the transactions authorized by this Act, 

including the adoption of a Restructuring Resolution, the creation of Restructuring Property, the 

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initial Transition Charge and any adjustment to the Transition Charges authorized by this Act, 

shall be subject to review or approval by any governmental authority, including the Commission, 

except the approval in the Restructuring Order of the calculation methodology for the Transition 

Charges and the Adjustment Mechanism as provided in Section 5(b) of this Act and as provided 

in Section 4 of this Act regarding review by the Corporation for and correction of mathematical 

errors. 

Section 10. Termination of Corporation. The corporate existence of the Corporation 

shall continue until terminated by law, but no such law shall take effect so long as the 

Corporation shall have bonds, notes and other obligations outstanding, unless provision has been 

made for the payment thereof in accordance with the terms thereof. Upon termination of the 

existence of the Corporation, all of its rights and properties shall pass to and be vested in the 

Commonwealth. 

Section 11. Commonwealth Non-impairment and Bankruptcy Covenants. 

Notwithstanding any provision of this Act or any other law of the Commonwealth to the 

contrary, prior to the date that is one year and one day after the Corporation no longer has any 

Restructuring Bonds outstanding or any Ancillary Agreement with payment obligations that have 

or may become due thereunder, the Corporation shall have no authority to file a petition for relief 

as a debtor under any chapter of the federal bankruptcy code or any other bankruptcy, 

insolvency, debt composition, moratorium, receiver or similar federal laws or any 

Commonwealth bankruptcy, moratorium, debt adjustment, composition or similar laws 

permitting stay or delay of payment or discharge or reduction in amount owed on any 

Restructuring Bonds as may, from time to time, be in effect, and no public officer, organization, 

entity or other Person shall authorize the Corporation to be or become a debtor under chapter 9 

or similar federal law or any such Commonwealth law during such period. The Commonwealth 

hereby covenants with the owners of the Restructuring Bonds and parties to any Ancillary 

Agreements that the Commonwealth will not limit or alter the denial of authority under this 

Section 11 during the period referred to in the preceding sentence. The Corporation is authorized 

and directed as agent of the Commonwealth to include this covenant as an agreement of the 

Commonwealth in any contract with the owners of Restructuring Bonds or such Ancillary 

Agreement parties. 

The Commonwealth further covenants, pledges and agrees with the owners of any 

Restructuring Bonds and with those Persons that enter into contracts with the Corporation, 

including parties to any Ancillary Agreement, pursuant to the provisions of this Act, that after 

the issuance of Restructuring Bonds, the Commonwealth will not authorize the issuance of debt 

by any public corporation and governmental instrumentality of the Commonwealth or any other 

Person secured by Restructuring Property or any other rights and interests in rates, charges, taxes 

or assessments that are separate from rates and charges of PREPA and that are imposed upon 

Customers (in their capacity as Customers) to recover the ongoing financing costs of such debt, 

if upon the issuance of such debt the security for any Restructuring Bonds or such Ancillary 

Agreements shall be materially impaired. It shall be conclusive proof that such security shall not 

be materially impaired if upon the issuance of such debt, the credit ratings for the then 

outstanding Restructuring Bonds (without regard to any third-party credit enhancement) shall not 

have been reduced or withdrawn. The Corporation is authorized and directed as agent of the 

Commonwealth to include this covenant as an agreement of the Commonwealth in any contract 

with the owners of Restructuring Bonds or such Persons. 

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The Commonwealth further covenants, pledges and agrees with the owners of any 

Restructuring Bonds issued under this Act and with those Persons that enter into other contracts 

with the Corporation, including parties to any Ancillary Agreement, pursuant to the provisions of 

this Act, that it shall not limit, alter, impair, postpone or terminate the rights conferred in this 

Act, any Restructuring Resolution and related agreements, including the requirements in 

Sections 2(b)(3) and 5(i) of this Act, until such Restructuring Bonds and the interest thereon are 

paid or legally defeased in accordance with their terms and such other contracts are fully 

performed and honored on the part of the Corporation. The Corporation is authorized and 

directed as agent of the Commonwealth to include this covenant as an agreement of the 

Commonwealth in any contract with the owners of Restructuring Bonds. 

The Commonwealth further covenants, pledges and agrees with the owners of any 

Restructuring Bonds issued under this Act and with those Persons that enter into other contracts 

with the Corporation, pursuant to the provisions of this Act, that after the issuance of 

Restructuring Bonds, neither the Commonwealth nor any agency, political subdivision or other 

instrumentality thereof (including the Commission) shall take or permit any action to limit, alter, 

reduce, impair, postpone or terminate the rights conferred in any Restructuring Resolution, 

including those relating to Transition Charges and the related Adjustment Mechanism, as the 

same may be adjusted from time to time pursuant to the applicable Restructuring Resolution in a 

manner that impairs the rights or remedies of the Corporation or the owners of the Restructuring 

Bonds, parties to any Ancillary Agreement or any Financing Entity or the security for the 

Restructuring Bonds or Ancillary Agreements, or that impairs the Restructuring Property or the 

billing or collection of Transition Charge Revenues; nor shall the amount of revenues arising 

with respect to Restructuring Property be subject in any way to limitation, alteration, reduction, 

impairment, postponement or termination by the Commonwealth or any agency, political 

subdivision or other instrumentality thereof (except by the Corporation as contemplated by the 

Adjustment Mechanism). The Corporation is authorized and directed as agent of the 

Commonwealth to include this covenant as an agreement of the Commonwealth in any contract 

with the owners of Restructuring Bonds or such Ancillary Agreement parties. 

Section 12. Rules of Interpretation; Effectiveness of Act. (a) The powers and 

faculties conferred upon the Corporation by this Act shall be interpreted liberally so as to 

promote the development and implementation of the public policy enunciated in this Act. 

Notwithstanding any provisions of law to the contrary, no approvals, notices or authorizations 

other than those specified in this Act shall be required with respect to the transactions and 

contracts authorized in or contemplated by this Act. 

(b) In the event of conflict between this Act and any other law, this Act shall govern 

to the extent of the conflict. 

(c) Effective on the date that Restructuring Bonds are first issued under authority of 

this Act, if any provision of this Act is held to be invalid or is invalidated, superseded, replaced, 

repealed or expires for any reason, that occurrence shall not affect any action allowed under this 

Act that is taken by the Corporation, the Commission, PREPA, a Servicer or other collection 

agent, a Financing Entity, a holder of Restructuring Bonds or a party to an Ancillary Agreement 

and any such action shall remain in full force and effect. 

(d) If any section, subdivision, paragraph or subparagraph of this Act or the 

application thereof to any Person, circumstance or transaction is held by a court of competent 

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jurisdiction to be unconstitutional or invalid, the unconstitutionality or invalidity shall not affect 

the constitutionality or validity of any other section, subdivision, paragraph or subparagraph of 

this Act or its application or validity to any Person, circumstance or transaction, including the 

irrevocability of any Transition Charge imposed pursuant to this Act, the validity of the 

Restructuring Bonds or their issuance, the transfer or assignment of Restructuring Property or the 

collection and recovery of Transition Charge Revenues, but shall be confined in its operation to 

the clause, sentence, paragraph, subdivision, section or part thereof directly involved in the 

controversy in which such judgment shall have been rendered. To these ends, the Legislative 

Assembly of Puerto Rico hereby declares that the provisions of this Act are intended to be 

severable and that said Legislative Assembly would have enacted this Act even if any section, 

subdivision, paragraph or subparagraph of this Act held to be unconstitutional or invalid had not 

been included in this Act. 

(e) The Corporation may provide for the interpretation and construction of any of its 

agreements to be governed by the law of the State of New York, applied as if all such 

agreements were executed in New York and to be performed entirely within New York. The 

Corporation is authorized to submit in each Restructuring Resolution and the Trust Agreement 

corresponding thereto and all other agreements related to the issuance of Restructuring Bonds 

[and PREPA is authorized to submit in the Servicing Agreement] to non-exclusive in personam

jurisdiction and venue in the state and federal courts located in New York, New York, and the 

Corporation is authorized to agree to maintain contacts with the State of New York sufficient to 

give the courts located therein personal jurisdiction over the Corporation, and waive any 

objection to venue. All matters of the constitutional and statutory law of the Commonwealth 

(including this Act) and any Restructuring Resolution, all rights of the Corporation or the 

Servicer against any Customer by virtue of this Act and of the effect of the judgments and 

decrees of the Commonwealth courts, shall in all events be governed by the law of the 

Commonwealth. Notwithstanding any provision in this Act to the contrary, any proceeding 

commenced and undertaken pursuant to the provisions of Sections 5(c) or 5(d) of this Act must 

be filed in the Court and follow the procedures established therein. 

 

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EXCERPTS OF ADDITIONAL PROVISIONS OF THE PREPA REVITALIZATION ACT 

RELATING TO PUBLIC HEARING PROCESS FOR CONSIDERATION OF THE 

PETITIONS TO BE FILED BY THE CORPORATION AND PREPA:

Article 17.- A new Article 6.25A is added to Act No. 57-2014, as amended, which shall read 

as follows: 

“Article 6.25A –Rate Determination and Review Following the Agreement with Creditors. 

(a) Initial Rate Review. As a measure for the approval of the new rate structure contemplated by 

the Agreement with Creditors referenced in Section 6A of Act No. 83 of May 2, 1941, the Commission 

shall conduct the following expedited and extraordinary procedures to evaluate (i) the petition for 

approval of PREPA’s rate structure to be filed by PREPA and, separately and independently, (ii) the 

petition for approval of the calculation methodology for the Transition Charges and the Adjustment 

Mechanism to be presented by the Puerto Rico Electric Power Authority Revitalization Corporation (the 

“Corporation”) as contemplated in Chapter III of the PREPA Revitalization Act. The Corporation, the 

Authority and the Commission shall organize and coordinate in good faith an itinerary for review of the 

petitions of the Corporation and the Authority so that the management of those procedures is adequate, 

complies with the itineraries prescribed in the Agreement with Creditors and that the evaluation of the 

Commission of both petitions facilitates fulfillment of said itineraries for implementation of the 

restructuring. 

 

(b) Review of Petition by the Corporation. With respect to the review by the Commission of the 

calculation methodology for the Transition Charges and the Adjustment Mechanism (as such terms are 

defined in Chapter III of the PREPA Revitalization Act) to be imposed by the Corporation in connection 

with Restructuring Bonds (as such term is defined in Chapter III of the PREPA Revitalization Act), the 

Corporation shall file a petition before the Commission, which petition shall include a copy of the initial 

proposed Restructuring Resolution (as such term is defined in Chapter III of the PREPA Revitalization Act), 

which Resolution shall comply with the provisions of Article 30 of the PREPA Revitalization Act, and the 

documents listed in item (b)B. of this Article 6.25A. The date of the filing of the petition by the 

Corporation shall be known as the “Corporation Petition Date”. 

 

A. The scope of the Commission’s review will be limited to, based on the information, assumptions 

and conditions set forth in the Restructuring Resolution and all other items submitted by the 

Corporation pursuant to (b)B. of this Article 6.25A, determining whether the calculation 

methodology for the Transition Charges and the Adjustment Mechanism included in the 

Restructuring Resolution complies with the following criteria and principles for distributing 

Financing Costs among Customer classes and for fixing and adjusting the Transition Charges (as 

such term is defined in Chapter III of the PREPA Revitalization Act): 

(1) The share of Financing Costs to be recovered from each customer class shall 

be calculated based upon the historic energy (kWh) usage of each class of 

Customers, as such information is provided by PREPA, and as the Corporation 

shall have determined in a not capricious or arbitrary way, is practicable to 

administer and ensures the full and timely payment of the Restructuring Bonds in 

accordance with their terms and other Ongoing Financing Costs (as such term is 

defined in Chapter III of the PREPA Revitalization Act). 

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(2) Once the share of Financing Costs to be recovered from each Customer class 

shall have been calculated (i) Transition Charges for Customers (other than 

residential customers) will be based upon historic energy usage (kWh) data, and 

(ii) Transition Charges for all residential Customers will be a per capita charge 

based upon average historical energy usage for all residential class Customers, 

as such information is provided by PREPA, and as the Corporation shall have 

determined in a not capricious or arbitrary way, is practicable to administer and 

ensures the full and timely payment of the Restructuring Bonds in accordance 

with their terms and other Ongoing Financing Costs. 

(3) Delinquencies of any class of Customers will be added to the revenue 

requirements of next periods and allocated among all Customer classes as 

provided in clauses (1) and (2) of this paragraph (b)A. 

(4) When calculating Customer energy usage in clauses (1) and (2) of this paragraph 

(b)A, if the Corporation determines that the inclusion of estimated load served by net 

metering or distributed generation ("behind the meter") is adequate and consistent to 

make Transition Charges not arbitrary or capricious, is practical to administer, and would 

ensure the full and timely payment of the Restructuring Bonds in accordance with their 

terms and other Ongoing Financing Costs, such estimates shall be included in the 

referred calculation of usage. 

B. The Corporation’s filing of a petition shall be deemed complete and shall be accepted for filing by 

the Commission and the period for the review process referred in paragraph (b)C.(5) of this 

Article 6.25A shall not be tolled, if the Corporation submits with or includes in the petition: 

(1) A form of Restructuring Resolution that includes: 

(i) A description of Ongoing Financing Costs; 

(ii) The determination of Customer classes among which Ongoing Financing 

Costs are distributed and the distribution of Ongoing Financing Costs among 

Customer classes; 

(iii) The calculation of Transition Charges for Customers (other than 

residential customers) based upon historical energy usage (kWh) data; 

(iv) The calculation of Transition Charges for residential Customers on a per 

Customer charge based upon average historical energy usage for the residential 

class; 

(v) A provision that delinquencies of any class of Customers will be 

distributed among all Customer classes as provided in (b) B. (1) (ii), (iii) and (iv) of 

this Article 6.25A and included in the Adjustment Mechanism; 

(vi) Whether the Corporation shall include estimated load served by net 

metering or estimated distributed generation (“behind the meter”) in 

determining energy usage in (b) B. (1) (ii), (iii) and (iv) of this Article 6.25A and 

included in the Adjustment Mechanism; 

(vii) A determination by the Corporation that: 

(1) the distributions in (b) B. (1) (ii), (iii) and (iv) of this Article 6.25A 

are practicable to administer and ensure the full and timely payment of 

all Ongoing Financing Costs during the term of the Restructuring Bonds; 

and 

(2) if the Corporation determines to include estimated net metering 

or estimated distributed generation (“behind the meter”) in determining 

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29 

energy usage in (b) B. (1) (ii), (iii) and (iv) of this Article 6.25A, that this 

inclusion is adequate and consistent to make Transition Charges not 

arbitrary or capricious, is practicable to administer and ensures the full 

and timely payment of all Ongoing Financing Costs during the term of 

the Restructuring Bonds. 

(2) The historic energy (kWh) usage of each class of Customers as certified by an 

officer of PREPA that served as the basis of the distributions set forth in (b)B. (1) (ii), (iii) 

and (iv) of this Article 6.25A; and 

(3) A report prepared by an independent financial consultant with recognized 

expertise in financing public electric utilities setting forth material assumptions, historical 

energy (kWh) usage, a projection of Ongoing Financing Costs and Transition Charges 

during the term of the Restructuring Bonds, and a conclusion that such Transition 

Charges distributed as provided b.B. (1) (ii), (iii) and (iv) of this Article 6.25A and in 

accordance with the assumptions included in such report, will ensure the full and timely 

payment of all Ongoing Financing Costs during the term of the Restructuring Bonds. 

C. The process for review by the Commission of the Corporation’s petition shall be the 

following: 

(1) The Commission, PREPA and the Corporation shall publish on their 

respective websites the petition presented by the Corporation within 24 hours of 

its receipt by the Commission. The Commission shall notify the public of the 

upcoming public hearing or hearings to evaluate the petition by the Corporation 

at least ten (10) days in advance of holding such hearings, which announcement 

shall include the matters to be discussed, the location, date and time of the 

hearing. The announcement shall also comply with the following: (i) it shall be 

published in two newspapers of general circulation in the Commonwealth at least 

twice during such ten (10) day period, (ii) posting a copy of such announcement 

during such period of ten (10) days in the main offices of the Commission, the 

Corporation and PREPA and in each PREPA Customer service office, in each 

case in a place fully accessible to the public during normal business hours, and 

(iii) posting a copy of such announcement along with copies of the petition 

including the form of initial Restructuring Resolution and all supporting 

documentation required to be filed with the petition, on the websites of the 

Commission, the Corporation, PREPA and the Government Development Bank 

for Puerto Rico, safeguarding confidential or privileged information included in 

such documents, if any. The public hearing shall be held in order to collect the 

general opinion of the citizens regarding the compliance with the criteria 

previously established for the Corporation’s calculation methodology for the 

Transition Charges and the Adjustment Mechanism. The Commission shall 

appoint an independent official examiner to preside over the hearing or hearings. 

(2) The official examiner shall have fifteen (15) days after the conclusion of 

the last public hearing to submit a report to the Commission. The report shall be 

published on the Commission’s, the Corporation’s, PREPA’s and the Government 

Development Bank’s websites. The report shall include a record of all objections, 

testimonies, opinions, documents, recommendations and any other pertinent 

information presented during the hearings, as well as the examiner’s own 

conclusions and recommendations. Any person interested in submitting further 

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30 

comments with respect to the examiner’s report, may do so in writing to the 

Commission within ten (10) days after the publication of the report. 

(3) The Commission shall review the Corporation’s petition with the 

documentation filed by the Corporation pursuant to b(B) of this Article 6.25A, the 

examiner’s report and any comments thereto, and shall issue a resolution and 

order regarding the Corporation’s petition for approval of the calculation 

methodology for the Transition Charges and the Adjustment Mechanism within 

the term of sixty (60) days from the Corporation Petition Date, as required below 

in item (b)C.(5). of this Article 6.25A. The Commission shall approve or 

disapprove the calculation methodology for the Transition Charges and 

Adjustment Mechanism. The Commission shall have no authority to limit, qualify, 

amend or otherwise change the Restructuring Resolution. 

(4) The evaluation process to be conducted by the Commission shall be a 

transparent process, and will consider the urgent need to implement an agile, 

flexible, informal process, so that the citizens may provide their testimonies and 

express their opinions in the public hearing or submit them in writing during a 

specific period of time to be determined by the Commission within the expedited 

process established herein in order to allow the Commission and its examiner to 

act in a diligent way within the parameters established in section b.A of this 

Article 6.25A. 

(5) The Commission shall have the power and it shall be its duty, upon 

receiving the Corporation’s petition to either approve or reject the calculation 

methodology for the Transition Charges and the Adjustment Mechanism in the 

Restructuring Resolution within sixty (60) days after the Corporation Petition 

Date. The Commission shall approve the calculation methodology for the 

Transition Charges and the Adjustment Mechanism included the Restructuring 

Resolution, in which case it shall issue a Restructuring Order approving such 

calculation methodology during the given period of sixty (60) days after the 

Corporation Petition Date, unless the Commission determines in a written order 

during the given period of sixty (60) days after the Corporation Petition Date that 

either the determinations to be made by the Corporation in the Restructuring 

Resolution with respect to the calculation methodology for the Transition Charges 

and the Adjustment Mechanism are arbitrary and capricious or that any material 

assumption or conclusion of the report referred to in (b)(B)(3) is clearly 

erroneous. If during the given period of sixty (60) days after the Corporation 

Petition Date, the Commission has not reached a final decision to approve or 

reject the Corporation’s petition, the calculation methodology for the Transition 

Charges and Adjustment Mechanism proposed by the Corporation shall become 

final, the Commission shall lose jurisdiction to approve the calculation 

methodology for the Transition Charges and Adjustment Mechanism and the 

Corporation may adopt the Restructuring Resolution. Any party wishing to 

challenge the Commission’s Restructuring Order or the approval deemed granted 

by the inaction of the Commission shall follow the process contemplated in Article 

31(d) of the PREPA Revitalization Act. In that process, the court shall sustain the 

Commission’s Restructuring Order in which the Commission has determined 

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whether the calculation methodology for the Transition Charges and Adjustment 

Mechanism was or was not arbitrary or capricious, or if the Corporation’s 

petition to the Commission on calculation methodology for the Transition 

Charges and Adjustment Mechanism has been deemed approved, if there is 

substantial evidence in the administrative record that supports such Order or 

petition by the Corporation, as the case may be. The Commission’s approval 

shall become final and irrevocable upon the earlier of (A) approval by the 

Commission of the related Restructuring Order or (B) the date on which the 

Commission has lost jurisdiction; subject only to the process contemplated in 

Article 31(d) of the PREPA Revitalization Act. 

 (c) Review of Petition by PREPA. With respect to the review by the Commission of the 

petition by PREPA of its proposed rate structure, PREPA shall submit a petition for the 

Commission including reasonable and relevant information that supports the fulfillment of the 

following just and reasonable standards. The date of the filing of the petition by PREPA shall be 

known as the “PREPA Petition Date” 

A. The scope of the Commission’s review of PREPA’s petition shall be to determine 

whether or not PREPA’s proposed rate structure complies with the following 

criteria and principles: 

(1) It includes the appropriate mechanism to obtain the necessary revenue levels 

in order to cover its costs, including (i) the annual debt service, including 

principal, interest, reserves and other requirements imposed by agreements with 

creditors (excluding the Transition Charge of the securitization structure that 

shall be determined separately) as modified by the Agreement with Creditors, as 

well as (ii) costs of the purchase of fuel and energy, (iii) operational, maintenance 

and administrative costs, including maintenance of the transmission and 

distribution network, employees’ payroll and fringe benefits in accordance with 

the capacity of PREPA to pay for such benefits and with the contemplated 

savings, (iv) costs of necessary capital investments for the applicable period, (v) 

costs of CILT and other contributions and subsidies that PREPA is obliged to make 

pursuant to special laws, (vi) other reasonable and necessary costs. The cost 

analysis shall determine the adequate distribution among the different classes or 

kinds of customers with similar uses and levels of demand so that such 

distribution of costs is fair and equitable; 

(2) It does not violate any of the terms or conditions required by PREPA’s Trust 

Agreement with its bondholders, assuming that the amendments contemplated 

in the Agreement with Creditors are effective in accordance with their terms; 

(3) It provides for a periodic reconciliation with revenues in excess or below what 

is necessary to cover costs of providing services, so that any subsequent 

necessary adjustments to billings can be made; 

(4) It remains in effect during cycles of at least three years, except for periodic 

adjustments that are inherent to the structure, which adjustment shall be 

presented as part of the proposal filed with the Commission; 

(5) It considers efficiencies and operational and administrative savings 

contemplated in the Agreement with Creditors, as determined and reasonably 

estimated in good faith by PREPA at the date of presentation of the proposal to 

the Commission; and 

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32 

(6) Considering the level of debt and operational expenses prior to the 

restructuring, and the rate that would have been necessary for PREPA to comply 

with all of its obligations if the Agreement with Creditors had not taken place, 

the new proposed rate reflects a just and reasonable allocation of PREPA’s costs 

among all of its customer classes. 

B. The Commission and PREPA shall publish on their websites the petition presented 

by PREPA within 24 hours of its receipt by the Commission. The Commission 

shall notify the public of the upcoming public hearing or hearings to evaluate 

PREPA’s petition at least ten (10) days in advance of holding such hearings, 

which announcement shall include the matters to be discussed and the location, 

date and time of the hearing. The announcement shall also comply with the 

following: (1) it shall be published in two newspapers of general circulation in 

the Commonwealth at least twice during such ten (10) day period, (2) a copy of 

such announcement shall be continuously posted during such ten (10) day period 

in the main office of the Commission and PREPA and in each PREPA Customer 

service office, in each case in a place fully accessible to the public during normal 

business hours, and (3) a copy of such announcement along with copies of 

PREPA’s rate proposal and all supporting documents and other information shall 

be posted on the websites of the Commission, PREPA and the Government 

Development Bank for Puerto Rico, safeguarding confidential or privileged 

information included in such documents, if any. The public hearing shall be held 

in order to collect the general opinion of the citizens regarding the compliance by 

the PREPA rate proposal with the criteria established in paragraph (c)A. of this 

Article 6.25A. The Commission shall appoint an independent official examiner to 

preside over the hearing or hearings. 

C. The official examiner shall have fifteen (15) days after the conclusion of the last public 

hearing to submit a report to the Commission. The report shall be published on the 

Commission’s, PREPA’s and the Government Development Bank’s websites. The report 

shall include a record of all objections, testimonies, opinions, documents, 

recommendations and any other pertinent information presented during the hearings, as 

well as the examiner’s own conclusions and recommendations. Any person interested in 

submitting further comments with respect to the examiner’s report, may do so in writing 

to the Commission within ten (10) days after the publication of the report. 

D. The Commission shall review PREPA’s petition, any other supporting materials that 

PREPA may have filed, the examiner’s report and comments thereto and shall issue a 

resolution and order regarding PREPA’s petition for approval of the proposed rate 

structure within the term of sixty (60) days from the PREPA Petition Date, as required 

below in paragraph (c)(F) of this Article 6.25A. 

E. The evaluation process to be conducted by the Commission shall be a transparent 

process, and will consider the urgent need to implement an agile, flexible, informal 

process, so that the citizens may provide their testimonies and express their opinions in 

the public hearing or submit them in writing during a specific period of time to be 

determined by the Commission within the expedited process established herein in order 

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33 

to allow the Commission and its examiner to act in a diligent way, in each case subject to 

the parameters established in this subsection c. 

F. If during the given period of sixty (60) days after the PREPA Petition Date the 

Commission has not reached a final decision to approve or reject PREPA’s petition for 

approval of the proposed rate structure, PREPA’s proposed structure shall take effect 

immediately as an emergency rate while the Commission reaches a final decision within 

a term that shall not exceed thirty (30) additional days. The emergency rate hereby 

authorized shall not be considered a temporary rate nor shall it be subject to the 

applicable dispositions of Section 6B of Act 83 of May 2, 1941, nor to Article 6.25 of this 

law. If after ninety (90) days following the PREPA Petition Date, the Commission has not 

reached a final decision to approve or reject the proposed rate structure, PREPA’s 

proposed rate structure shall become final and the Commission shall lose its jurisdiction 

to approve it. If the Commission determines that the proposed rate does not comply with 

the criteria previously enumerated, it shall justify its decision with specific reference to 

said criteria and to the documents and information that support its resolution. 

Notwithstanding the foregoing, the PREPA proposed rate structure shall not be reflected 

in bills to the Customers until the Restructuring Bonds are issued. 

 

(d) Subsequent Rate Review. If the Commission determines to reject the Corporation’s petition for 

approval of the calculation methodology for the Transition Charges and Adjustment Mechanism 

proposed by the Corporation or the rate structure proposed by PREPA, or if PREPA withdraws its request 

for rate approval, PREPA shall commence an ordinary rate case before the Commission within ninety (90) 

days of such rejection or withdrawal following the provisions and procedures established in Section 6B 

and 6C of Act 83 of May 2, 1941. 

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Execution version 

Schedule I-B 

Securitization Term Sheet 

Indicative Summary of Terms 

Capitalized terms used in this Schedule that are not explicitly defined herein shall have the meanings 

ascribed to them in Section 1 of Schedule I-A or the Restructuring Support Agreement (the 

“Agreement”). All terms and conditions in Schedule I-A (“Schedule I-A” and as enacted the 

“Securitization Special Legislation”) are deemed to be incorporated herein and are in addition to, and 

not in lieu of, the terms and conditions herein. The Supporting Creditors, the Corporation, and as 

appropriate PREPA, shall be referred to in this term sheet (this “Term Sheet”) as the “Parties”. 

All blank terms and conditions in this Term Sheet shall be mutually agreed upon between the Parties. 

This Term Sheet does not constitute (nor shall it be construed as) an offer with respect to any securities. 

This Term Sheet does not address all material terms that would be required in definitive documents and in 

order to consummate the transactions set forth in this Term Sheet, and is subject to definitive 

documentation in form and substance reasonably acceptable to the Supporting Creditors. 

Issuer Puerto Rico Electric Power Authority Revitalization Corporation 

(“Corporation”), a public corporation and governmental instrumentality of 

the Commonwealth constituting a special purpose, bankruptcy-ineligible 

issuer created pursuant to Schedule I-A formed to own the Restructuring 

Property and authorized to issue the Restructuring Bonds and to perform 

activities incidental thereto. Neither PREPA nor any other affiliate thereof 

will be an obligor under the Restructuring Bonds. 

So long as any Restructuring Bonds remain outstanding and any Financing 

Costs that have or may become due have not been paid in full, the 

Corporation shall not be authorized to dissolve, liquidate or transfer or sell 

all or substantially all of the Corporation’s assets, or merge or consolidate, 

directly or indirectly, with any Person, and this restriction shall be included 

as a covenant in each Trust Agreement, including the Initial Trust 

Agreement. Additionally, the Corporation shall not have the power or 

authority to incur, guarantee or otherwise become obligated to pay any debt 

or other obligations other than Restructuring Bonds and Financing Costs, and 

no Restructuring Resolution or Trust Agreement shall authorize the 

Corporation to do so, and this restriction shall be included as a covenant in 

all Trust Agreements, including the Initial Trust Agreement. 

The Corporation shall not own any assets or property other than the 

Restructuring Property, incidental personal property necessary for the 

ownership and operation of the Restructuring Property and any investmentgrade securities in accordance with the terms of the Restructuring Bonds. 

The Corporation shall keep its assets and liabilities separate and distinct from 

those of any other Person, including PREPA. 

Prior to the date that is one year and one day after the Corporation no longer 

has any Restructuring Bonds outstanding or any Ancillary Agreement with 

payment obligations that have or may become due thereunder, the 

Corporation shall have no authority to file a petition for relief as a debtor 

under any chapter of the federal bankruptcy code or any other bankruptcy, 

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2 

insolvency, debt composition, moratorium, receiver or similar federal laws or 

any Commonwealth bankruptcy, moratorium, debt adjustment, composition 

or similar laws permitting stay or delay of payment or discharge or reduction 

in amount owed on any Restructuring Bonds as may, from time to time, be in 

effect, and no public officer, organization, entity or other Person shall 

authorize the Corporation to be or become a debtor under chapter 9 or similar 

federal law or any such Commonwealth law during such period. 

The corporate existence of the Corporation shall continue until terminated by 

law, but no such law shall take effect so long as the Corporation shall have 

bonds, notes and other obligations outstanding, unless adequate provision has 

been made for the payment thereof. 

The Corporation, and the Restructuring Property, including the Transition 

Charges and Transition Charge Revenues, regardless of whether the 

Corporation is the owner of the Restructuring Property, shall not be subject 

to any fees, taxes, special ad valorem levies or assessments of any kind, 

including income taxes, franchise taxes, sales taxes or other taxes or 

payments or contributions in lieu of taxes. 

Issuance of 

Restructuring Bonds 

Restructuring Bonds may be issued at one time or (subject to satisfying the 

conditions set forth in this Term Sheet, including the Ratings Condition 

(defined below), and in the Trust Agreement relating to issuance of an 

additional series of Restructuring Bonds) from time to time for (i) defeasing 

Restructuring Bonds to achieve net present value debt service savings or (ii) 

other Approved Restructuring Costs (excluding defeasance of Restructuring 

Bonds). 

The Trust Agreement pursuant to which the initial series of Restructuring 

Bonds are issued (the “Initial Trust Agreement”) shall contain terms and 

conditions regarding additional issuances of Restructuring Bonds (whether 

issued under the same or a separate Restructuring Resolution, and whether 

secured by the initial Transition Charge or a new or additional Transition 

Charge or other charge on Customers) that are reasonably acceptable to the 

Parties, which shall include the Ratings Condition. 

Issuance of Restructuring Bonds will not be subject to review or approval by 

the Commission or any other governmental entity; provided, that the 

Transition Charges and Adjustment Mechanism shall be subject to 

Commission review as set forth in Schedule I-A. The Restructuring Bonds 

may be sold for cash or delivered to any Person for such consideration as the 

Board may deem adequate; provided, that the Initial Trust Agreement may 

contain terms and conditions that are reasonably acceptable to the Parties 

excluding the Corporation, PREPA, the Commonwealth, or its 

instrumentalities, public corporations, or municipalities, or any subsidiary or 

affiliate of any of them from directly or indirectly holding, voting or 

controlling Restructuring Bonds. 

Initial Issuance The initial series of Restructuring Bonds will be issued in connection with 

the Exchange Offer, to generate proceeds to fund certain reserves and costs 

of issuance, and to replenish PREPA’s Self-insurance Fund in an amount no 

greater than $100 million; provided, that any Restructuring Bonds issued to 

replenish the Self-insurance Fund shall contain terms that are the same in all 

material respects as the Restructuring Bonds issued to the Forbearing 

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3 

Uninsured Holders and that are reasonably agreed upon between the parties; 

and provided further that, prior to the issuance of such Restructuring Bonds, 

the parties shall reasonably agree that such Restructuring Bonds will not 

have a material impact on the pricing of the Restructuring Bonds issued to 

the Forbearing Uninsured Holders. The initial issuance of Restructuring 

Bonds shall be for purposes reasonably acceptable to the Parties and solely 

for the purposes set forth in clauses (b), (d) and (e) of the definition of 

Approved Restructuring Costs as defined in Schedule I-A, and to the extent 

reasonably agreed by the Parties for the purpose set forth in clause (c) of 

such definition. Such issuance shall not include the purpose set forth in 

clause (a) of the definition thereof as defined in Section 1 of Schedule I-A. 

The initial issuance of Restructuring Bonds shall be scheduled to pay 

principal annually or semi-annually and interest semi-annually in accordance 

with the terms described in this Term Sheet. 

The initial issuance of Restructuring Bonds shall be issued in the following 

forms: 

• Restructuring Bonds paying current interest (“Current Interest Bonds”) 

• Convertible capital appreciation Restructuring Bonds accreting interest 

for the first 5 years (or such other term as may be reasonably acceptable 

to the Parties) after the issue date and converting into Current Interest 

Bonds thereafter (“Convertible CABs”) 

The amount of Current Interest Bonds and Convertible CABs issued shall be 

determined based on the elections of each PREPA creditor participating in 

the Exchange Offer, subject to any caps reasonably agreed upon between the 

Parties. 

Ratings Condition The initial issuance of Restructuring Bonds shall receive an investment grade 

rating from any rating agency that rates the Restructuring Bonds. PREPA 

shall request and diligently pursue ratings from Moody’s and Standard and 

Poor’s. 

Before any future issuance of Restructuring Bonds or incurrence of any other 

indebtedness or guarantee of indebtedness by the Corporation (whether 

issued under the same or a separate Restructuring Resolution, and whether 

secured by the Transition Charge in effect prior to the time of issuance or a 

new or additional Transition Charge or other charge on Customers), the 

Corporation must provide the Trustee confirmation that (i) each rating 

agency that maintains a rating on the Restructuring Bonds outstanding at that 

time has confirmed the proposed action will not result in a suspension, 

reduction or withdrawal of the then current rating by such rating agency or 

agencies and (ii) at least one rating agency will maintain the same or higher 

rating as it originally assigned to the initial series of Restructuring Bonds. 

The above terms (the “Ratings Condition”) shall be included as a covenant 

in the Initial Trust Agreement. 

Interest Rate For Current Interest Bonds: 

• Weighted average interest rate 

across maturities (based on yield 

curve) shall be fixed at the 

For Convertible CABs: 

• Weighted average interest / 

accretion rate across maturities 

(based on yield curve) shall be 

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4 

specified rates (BBB- and above) 

subject to the final investment 

grade rating, as follows: 

AAA: 4.00% 

AA+/AA/AA-: 4.25% 

A+/A/A-: 4.50% 

BBB+/BBB/BBB-: 4.75% 

fixed at the specified rates 

(BBB- and above) subject to the 

final investment grade rating, as 

follows: 

AAA: 4.50% 

AA+/AA/AA-: 4.75% 

A+/A/A-: 5.25% 

BBB+/BBB/BBB-: 5.50% 

Exchange Ratio 85.0%; provided that the exchange ratio shall not apply to the January 

Payment Bonds, which January Payment Bonds shall be governed by Annex 

H and the Bond Purchase Agreement (as defined therein). 

Interest Accrual; 

Interest Payment Dates 

Interest will be due or accrue (as applicable) at a fixed rate on a 30/360 basis 

and due as follows: 

For Current Interest Bonds: 

• Only cash interest will be 

payable during 5 years following 

the issue date (thereafter, cash 

interest and principal will be 

payable) 

• Interest will be payable semiannually, [________] and 

[_________] (each, an “Interest 

Payment Date”) 

• First scheduled Interest Payment 

Date is [_______, 2016] 

For Convertible CABs: 

• Interest will accrete during 5 

years following the issue date 

(thereafter, cash interest and 

principal will be payable) 

• Interest will be payable semiannually on each Interest 

Payment Date after 5-year 

conversion date (based on 

accreted value as of such 5th

anniversary) 

Principal Payments Principal will be repaid sequentially starting in the sixth year after the issue 

date until each applicable Scheduled Retirement Date with annual or semiannual payments on each [___________] and on the Scheduled Retirement 

Date for each Tranche (each, a “Principal Payment Date”), with the 

amortization schedule to be reasonably agreed by the Parties. 

No Tranches will receive principal payments until all Tranches with earlier 

Scheduled Retirement Dates have been paid in full, unless (i) a failure to 

fully retire Restructuring Bonds on the Final Maturity Date occurs with 

respect to two or more Tranches, in which case a principal payment shall be 

made pro rata with respect to such Tranches, or (ii) there is an acceleration of 

the Restructuring Bonds following an event of default in which case 

principal of all Tranches will be paid on a pro-rata basis. 

Expected Average Life As is reasonably acceptable to the Parties. 

Expected Scheduled 

Retirement Date; Bond 

Structure 

Scheduled maturity in [•] 2043; Restructuring Bonds may be issued as a 

combination of serial and term bonds with earlier scheduled maturity and/or 

sinking fund redemption dates as is reasonably acceptable to the Parties. 

Final Maturity Date At least two years after Scheduled Retirement Date, or such period of time as 

required to obtain investment grade rating that is not less than one year. 

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5 

Scheduled Retirement 

Dates 

Principal of Restructuring Bonds is expected to be paid or redeemed in full 

on the Scheduled Retirement Dates based on a serial bond and sinking fund 

(term bond) amortization schedule that is reasonably acceptable to the Parties 

(each maturity thereunder, a “Scheduled Retirement Date” and each series 

of Restructuring Bonds redeemable on each Scheduled Retirement Date, a 

“Tranche”). 

Optional Redemption For Current Interest Bonds: 

• Not optionally callable for 10 

years after issue date 

For Convertible CABs: 

• Not optionally callable for 10 

years after conversion date 

At Par Mandatory 

Redemption 

For Current Interest Bonds: 

• As required to preserve taxexempt status of Current Interest 

Bonds (e.g., change in use of 

refinanced assets) 

For Convertible CABs: 

• As required to preserve taxexempt status of Convertible 

CABs (e.g., change in use of 

refinanced assets) 

Debt Service Reserve 

Fund; Surety 

Reimbursement 

Obligation 

Securitization shall have a debt service reserve of up to 10% as required to 

receive an investment grade rating. Size of the reserve shall be determined by 

PREPA in consultation with the rating agencies and the Ad Hoc Group, and 

shall be sized such that, together with net interest cost on the Restructuring 

Bonds, PREPA minimizes its funding costs. Reserve to be funded from 

Restructuring Bond proceeds, a surety policy, and/or deposits over time. If a 

portion of the debt service reserve is secured by a surety, the Corporation’s 

reimbursement obligation thereunder will be subordinate to the payment of 

debt service on the Restructuring Bonds prior to the principal thereof and 

accrued and unpaid interest thereon being declared immediately due and 

payable, and upon and after such declaration, such reimbursement obligation 

shall be payable pari passu with the payment of such principal and any 

accrued and unpaid interest thereon. 

Tax Treatment Tax-exempt 

Denominations Integral multiples of $5,000 or such other multiple that is reasonably 

acceptable to the Parties. 

Exchange Offer In connection with PREPA’s restructuring, the Restructuring Bonds shall be 

issued in exchange for PREPA’s existing indebtedness held by the following 

holders of outstanding PREPA bonds (“Exchange Offer”): 

1- Forbearing Uninsured Holders 

2- Non-Forbearing Uninsured Holders 

In addition, Lenders under Credit Agreements shall have the opportunity to 

exchange their claims under the Credit Agreements in accordance with the 

terms of the Agreement. 

Restructuring Bonds may also be sold to potential “Backstop Parties” in 

exchange for cash consideration, on terms to be negotiated between PREPA 

and the Backstop Parties, that will be used to tender for outstanding PREPA 

bonds. 

Minimum Participation 

Rate 

Minimum participation rate in the Exchange Offer, waivable by PREPA in 

accordance with the Agreement: 

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6 

1- Forbearing Uninsured Holders: 100% of Bonds; provided, that any 

January Payment Bonds held by such Forbearing Uninsured Holders 

shall be governed by Annex H and the Bond Purchase Agreement (as 

described therein). 

2- Non- Forbearing Uninsured Holders: Principal amount such that 

principal amount of outstanding PREPA Bonds, but not including 

any January Payment Bonds, held by non-exchanging Uninsured 

Non-Forbearing Holders does not exceed $700 million, or such 

higher other amount determined at PREPA’s discretion, after 

consultation with investment bankers and the Forbearing Uninsured 

Holders 

There will be no minimum participation rate for the Lenders under Credit 

Agreements. 

Restructuring 

Resolution; Financing 

Costs 

The Corporation will submit to the Commission along with the form of 

Restructuring Resolution a petition (and such other materials explicitly 

required by statute to be submitted along with the petition) for approval of 

the calculation methodology for the Transition Charges and the Adjustment 

Mechanism. The scope and standard of the Commission’s review of the 

Corporation’s petition will be as set forth in Schedule I-A. If the 

Commission does not approve the Transition Charges and the Adjustment 

Mechanism within sixty (60) days after submission, the Transition Charges 

and Adjustment Mechanism shall become final and the Commission shall 

lose jurisdiction to approve them. 

Within two (2) business days of the Commission’s approval of the 

calculation methodology for the Transition Charges and the Adjustment 

Mechanism, the Corporation shall adopt a Restructuring Resolution creating, 

and constituting part of, the Restructuring Property and approving the 

imposition and collection of Transition Charges, and the financing of 

Approved Restructuring Costs through the issuance of Restructuring Bonds, 

and which Restructuring Resolution contains the Adjustment Mechanism. 

The Restructuring Resolution shall address such other matters as may be 

necessary or desirable for the marketing or servicing of the Restructuring 

Bonds or servicing the Restructuring Property, with such terms and 

conditions that are reasonably acceptable to the Parties. Such Restructuring 

Resolution shall be irrevocable. 

Financing Costs that are reasonably acceptable to the Parties and subject to 

caps that are reasonably acceptable to the Parties shall be set forth in the 

Restructuring Resolution and the Initial Trust Agreement. 

Trustee The Trustee for the initial issuance of Restructuring Bonds shall be a 

mainland financial institution reasonably acceptable to the Parties. 

Servicer PREPA as the initial Servicer shall covenant in the Servicing Agreement, as 

described in Schedule I-A and as reasonably agreed by the Parties, in 

connection with the initial series of Restructuring Bonds to, among other 

things: 

• Obtain meter reads, calculate or estimate electricity usage, calculate per 

capita charges and bill the Transition Charges to the Customers pursuant 

to a Servicing Agreement (defined below) as a separate line item on 

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7 

PREPA’s bills; 

• Direct Customers that do not pay in person (either at PREPA service 

centers or at designated bank branches) to remit Transition Charges, 

together with all other PREPA charges (including any CILTs that may be 

billed to Customers), to a third-party collection agent reasonably 

acceptable to the Parties that is neither affiliated with, nor located in, the 

Commonwealth (the “Depository”). If PREPA receives any billed 

amounts from Customers in respect of PREPA charges and/or Transition 

Charges, then PREPA shall promptly transfer such receipts to the 

Depository; 

• Calculate the Adjustment Mechanism at least semiannually; 

• Daily allocation of Transition Charges and PREPA charges by the 

Depository; 

• Include charges for CILT as a line item on all Customer bills separate 

from the Transition Charge and all other PREPA charges; 

• Use best efforts to collect all Transition Charges; 

• Provide to the Corporation, Trustee (or, if different, any owner of all or 

any portion of the Restructuring Property), any rating agency rating the 

Restructuring Bonds, or any calculation agent, as the case may be, any 

financial information in respect of the Servicer, or any material 

information regarding the Restructuring Property, as may be necessary 

for the Corporation, Trustee (or such other owner), any rating agency 

rating the Restructuring Bonds, or any calculation agent to monitor the 

Servicer’s performance under the Servicing Agreement, perform their 

respective duties, determine compliance by the Servicer with the 

Servicing Agreement or calculate the Transition Charge or perform the 

Adjustment Mechanism; 

• Terminate service to non-paying Customers on the same basis as 

termination of service is permitted for nonpayment of electric or other 

rates by PREPA; and 

• Make use of any intercept provisions for non-payment of electric or other 

rates by public agencies, municipalities, public corporations or other 

governmental entities that are applicable to nonpayment of electric or 

other rates charged by PREPA. 

Servicing Agreement The Servicing Agreement shall provide for the billing and collection of the 

Transition Charges, on terms and conditions (including PREPA’s obligations 

thereunder and the Trustee’s replacement powers upon a default by PREPA 

under the Servicing Agreement, among other things) as described in 

Schedule I-A and as reasonably agreed by the Parties. PREPA shall provide 

the Corporation with monthly reports on Transition Charge collections and 

such other information as may be reasonably agreed by the Parties. 

The Servicing Agreement shall: 

• set forth caps on the Servicer’s compensation consistent with Schedule IA, which caps shall be reasonably agreed by the Parties; 

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8 

• include the deposit and allocation requirements of Schedule I-A; and 

• contain provisions, reasonably agreed upon by the Parties, for resignation 

or removal, and replacement, of the Servicer. 

The Servicing Agreement shall include a backup servicer on terms 

reasonably agreed upon by the Parties. It may also include co-Servicers or 

subservicers, as reasonably agreed upon by the Parties. It shall also provide 

for the option on the part of the Servicer to make advances to the Corporation 

with respect to Transition Charge receivables and for the Trustee’s 

replacement of the Servicer, subject to terms and conditions reasonably 

agreed upon by the Parties but to include failure to take reasonable collection 

actions against Customers. 

Depository Amounts held by Depository shall be allocated and transferred daily to 

Trustee (in respect of Transition Charge collections) and PREPA (in respect 

of PREPA charges) in accordance with a methodology reasonably agreed 

upon by the Parties. The Trustee shall receive and hold all such amounts in a 

segregated deposit account at a branch located in New York City. 

PREPA will be expressly prohibited in the Servicing Agreement from acting 

as Depository in respect of the Transition Charges. If PREPA receives any 

Transition Charges, such receipt will be in its capacity as agent of the 

Corporation only, and PREPA will hold such Transition Charges in trust for 

the exclusive benefit of the Corporation, holders of Restructuring Bonds and 

the persons entitled to the Financing Costs to be paid, directly or indirectly, 

from the Transition Charges in accordance with the terms and conditions of 

the Restructuring Resolution. PREPA shall take any action necessary to 

direct third parties to turn over Transition Charges and PREPA charges to the 

Depository. Transition Charges shall not lose their character as revenues of 

the Corporation by virtue of possession by PREPA or any other party, and 

such Transition Charges shall be transferred as soon as possible to the 

Depository. 

The Depository (i) shall be a mainland financial institution reasonably agreed 

upon by the Parties, (ii) shall not be related to the Commonwealth or its 

instrumentalities, public corporations, or municipalities, and (iii) shall hold 

its accounts in New York City. 

The Initial Trust Agreement shall authorize the Trustee to replace the 

Depository, subject to terms and conditions reasonably agreed upon by the 

Parties. 

Any funds held by the Depository or the Trustee shall be invested in either 

cash or in obligations of or backed by the full faith and credit of the United 

States Government. Without limiting the foregoing, no funds shall be 

invested in any certificates of deposit or other obligations of the GDB or 

deposited in or with the GDB. 

Calculation Agent A third-party calculation agent (not affiliated with the Commonwealth or its 

instrumentalities, public corporations, or municipalities) (in such capacity, 

“Calculation Agent”) reasonably agreed upon by the Parties will be 

appointed and retained to confirm Servicer’s calculation of Transition 

Charges and application of the Adjustment Mechanism. 

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9 

The Initial Trust Agreement shall include the qualifications for the 

Calculation Agent and shall allow the Trustee to remove and replace the 

Calculation Agent. 

In case of a dispute between the Calculation Agent and the Servicer, an 

independent expert shall be appointed. 

Restructuring Property; 

Security; Statutory Lien

The Restructuring Property created by the Corporation pursuant to Schedule 

I-A and the Restructuring Resolution will be as described in Schedule I-A. 

Restructuring Bonds and obligations of the Corporation under Ancillary 

Agreements shall be secured by the same statutory lien on the Restructuring 

Property in favor of the owners or beneficial owners of Restructuring Bonds 

and parties to such Ancillary Agreements, subject, in the case of the 

Ancillary Agreements, to the subordination provisions described herein 

under “Debt Service Reserve Fund; Surety Reimbursement Obligation”. 

Pursuant to the Initial Trust Agreement, the Corporation shall grant the 

Trustee a security interest in the Restructuring Property, and in all other 

funds and accounts held by the Trustee thereunder, to secure the initial series 

of Restructuring Bonds. Such pledge of Restructuring Property or proceeds 

thereof, including any moneys, revenues or property or of a revenue 

producing contract or contracts constituting part of the Restructuring 

Property, made by the Corporation, shall be perfected as described in 

Schedule I-A. 

The lien of the Trustee shall have priority over any other lien on the 

Restructuring Property, and the Initial Trust Agreement shall not permit any 

other lien on the Restructuring Property senior to the lien of the 

Restructuring Bonds and the Ancillary Agreements. 

Trustee shall have the right to foreclose on all Restructuring Property, 

including the Servicing Agreement, and sell such property. 

Transition Charges Provisions relating to the Transition Charges, including irrevocability and 

non-bypassability, application to all PREPA customers and inclusion in 

Customers’ bills, among other things, as described in Schedule I-A. 

True-up Mechanism for 

Payment of Scheduled 

Principal and Interest 

Establishment and operation of the Adjustment Mechanism established by 

the Restructuring Resolution and as described in Schedule I-A and to be 

included in the Restructuring Resolution. The Adjustment Mechanism shall 

be applied not less than semi-annually and will result in adjustments to 

Transition Charges as shall be necessary to provide for the payment of the 

Restructuring Bonds by their respective Schedule Retirement Dates. 

Priority of Payment On each payment date in respect of principal and interest, all amounts on 

deposit in the collection account will be available to pay the following 

amounts in the following priority (except as may otherwise be reasonably 

agreed upon by the Parties): 

1. Fees, costs and expenses owed to the Trustee (up to a cap to be 

negotiated) 

2. Depository, Servicer (up to a cap to be negotiated) and Calculation 

Agent fees (up to a cap to be negotiated) 

3. [Administration fees in character and amount to be negotiated] 

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10 

4. Other Ongoing Financing Costs 

5. Interest on Restructuring Bonds (if applicable) 

6. Principal of each Tranche of Restructuring Bonds when due, pro rata 

and sequentially by tranche when due prior to acceleration, and pro 

rata across all tranches upon acceleration 

7. Indemnity amounts owed to the Trustee 

8. Amounts owed by Corporation in satisfaction of reimbursement 

obligation under any surety held to the credit of Debt Service 

Reserve Fund unless the provider of such surety fails to reinstate 

such surety by any amount that was previously reimbursed to such 

surety provider 

9. Replenishment of Debt Service Reserve Fund to required reserve 

level 

10. Amounts owed by Corporation in satisfaction of reimbursement 

obligation under any surety held to the credit of Debt Service 

Reserve Fund that are not paid under clause (8) above 

11. Excess amounts to be held for distribution on subsequent Interest 

Payment Dates and/or Principal Payment Dates, as applicable. 

Partial Payments 

Allocated Pro Rata 

Any partial payments by PREPA’s customers shall be allocated pro rata 

between the Corporation (in respect of the Transition Charges) and PREPA 

(in respect of the PREPA charges), such pro rata allocation to be based upon 

the relative amounts of the Transition Charges and the PREPA charges as a 

part of the total bill. 

Events of Default The Initial Trust Agreement shall include the following events of default and 

such other events of default as may be reasonably agreed by the Parties: 

• Payment default on any Restructuring Bond, subject to such notice and 

cure periods, if any, as may be reasonably agreed upon by the Parties; 

provided, that the failure to pay or redeem principal of any Restructuring 

Bonds on or after the applicable Scheduled Retirement Date will not 

constitute an event of default unless such Restructuring Bonds are not 

paid/redeemed in full on the related Final Maturity Date; 

• Covenant defaults subject to such notice and cure periods, if any, as may 

be reasonably agreed upon by the Parties; 

• An event of default by any party under the Servicing Agreement; 

• Bankruptcy defaults reasonably agreed upon by the Parties; 

• Any act or failure to act by the Commonwealth or any of its agencies 

(including the Corporation), officers or employees that violates or is not 

in accordance with the Restructuring Resolution or the Commonwealth 

Pledge; and 

• If the Commonwealth (either directly or through any of its public 

corporations, instrumentalities, or municipalities) (i) issues debt secured 

by Restructuring Property or any other rights and interests in rates, 

charges, taxes or assessments that are separate from rates and charges of 

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11 

PREPA and that are imposed upon Customers (in their capacity as 

Customers) to recover the ongoing financing costs of such debt, if upon 

the issuance of such debt the security for any Restructuring Bonds or 

such Ancillary Agreements shall be materially impaired; (ii) creates or 

imposes, or permits to be created or imposed, a tax or similar charge 

upon electric service within the Commonwealth by means of any 

facilities constituting part of System Assets, if such tax or other charge 

shall materially impair the security for any Restructuring Bonds or such 

Ancillary Agreements; and/or (iii) if prior to any issuance of debt 

described in clause (i) above or the creation or imposition of a tax or 

charge described in clause (ii) above, the Trustee shall not have been 

provided with written confirmation upon each such issuance, or creation 

or imposition, as the case may be, that the credit ratings for the then 

outstanding Restructuring Bonds (without regard to any third-party credit 

enhancement) shall not have been withdrawn or reduced below the 

ratings assigned thereto at the time of original issuance.

Successors or Managers 

Bound by Securitization 

Special Legislation 

Any successor owner or manager of the PREPA system assets and any 

successor Servicer shall be bound by the requirements as described in 

Schedule I-A. 

Governance The Initial Trust Agreement shall provide such terms and conditions 

regarding the Corporation’s governance as reasonably agreed by the Parties. 

Commonwealth Pledge As provided in Schedule I-A, the Commonwealth will make tax-exempt, 

non-impairment and bankruptcy pledges, and other covenants, as described 

in Schedule I-A, that will expressly form part of the contract of the holders of 

the Restructuring Bonds. 

The Initial Trust Agreement shall include all the covenants of the 

Commonwealth set forth in Schedule I-A, including those in Section 5(o)(2) 

and Section 11. 

Remedies The Corporation, the Trustee and any owner of all or a portion of the 

Restructuring Property shall have the rights set forth in Section 8(a) of 

Schedule I-A, along with other rights and remedies to be reasonably agreed 

by the Parties. 

The Initial Trust Agreement shall include no limitation on the exercise of 

rights under Section 8(a) of Schedule I-A except as specifically set forth in 

Section 8(a) of Schedule I-A. 

The Initial Trust Agreement shall provide that if an event of default shall 

have occurred and be continuing thereunder, the Trustee may, in addition to 

other remedies provided in such Initial Trust Agreement, foreclose on and 

sell all Restructuring Property and other collateral or any portion thereof or 

rights or interests therein, at one or more public or private sales called and 

conducted in any manner permitted by law. Such remedy shall not be subject 

to any other limitation in the Initial Trust Agreement. 

Governing Law; Venue All documents relating to the Restructuring Bonds or the issuance of the 

Restructuring Bonds, including any Trust Agreement (including the Initial 

Trust Agreement) or Servicing Agreement (other than the Restructuring 

Resolution), and all the Corporation’s agreements shall be governed by the 

law of the State of New York, applied as if all such documents and 

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12 

agreements were executed in New York and were performed entirely within 

New York. All rights of the holders of the Restructuring Bonds shall be 

governed by the law of New York. 

The Corporation shall, in each Restructuring Resolution and all Trust 

Agreements (including the Initial Trust Agreement) corresponding thereto, 

and all other agreements related to the issuance of Restructuring Bonds: 

• submit to non-exclusive in personam jurisdiction and venue in the 

state and federal courts located in New York, New York; 

• agree to maintain contacts with the State of New York sufficient to 

give the courts located therein personal jurisdiction over the 

Corporation; and 

• waive any objection to venue. 

PREPA shall, in the Servicing Agreement: 

• submit to non-exclusive in personam jurisdiction and venue in the 

state and federal courts located in New York, New York; and 

• waive any objection to venue. 

Conditions Precedent Customary conditions precedent to be mutually agreed upon between the 

Parties and shall include: 

• Treatment of Lenders on terms substantially consistent with 

Schedule III to the RSA and acceptable to the Holders; 

• Treatment of Insurers on terms acceptable to the Holders; 

• Satisfaction of the Ratings Condition; 

• Passage of Securitization Special Legislation in accordance with the 

terms of the Agreement; 

• Tender of minimum percentages required under Exchange Offer 

(subject to the terms in the Minimum Participation Rate); 

• Receipt by the Trustee, for the benefit of the owners of the 

Restructuring Bonds, of resolutions and legal opinions, in form and 

substance satisfactory to counsel for Ad Hoc Group, from the 

Corporation’s counsel and bond counsel, PREPA’s counsel and bond 

counsel, and the Secretary of Justice of the Commonwealth; 

• Completion of the Validation Proceeding and any appeals therefrom; 

and 

• All Securitization Documents (including the Restructuring 

Resolution and the Servicing Agreement), and all documents related 

to the Consent Solicitation, Exchange Offer, and Closing Date Trust 

Agreement Amendments, have been negotiated between the Parties 

and are in form and substance reasonably agreeable to the Parties. 

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Execution version 

Schedule II 

MONOLINE TERM SHEET 

This Term Sheet does not purport to list or summarize all of the terms and conditions of the proposed 

securitization and related transactions. All information contained herein is qualified in its entirety by the 

information that would be contained in the final documentation for the proposed securitization and 

related transactions. This Term Sheet contemplates that the Closing Date (as herein defined) will occur 

on or prior to June 30, 2016.1

Term Description 

Legacy Bonds Revenue bonds issued by the Puerto Rico Electric Power Authority 

(“PREPA”) and outstanding under the Trust Agreement, dated as of January 

1, 1974, as amended and supplemented from time to time, between PREPA 

and U.S. Bank, National Association (the “Trust Agreement”). 

Securitization Bonds Bonds that are (a) “Restructuring Bonds” as described in the Securitization 

Term Sheet2

 attached to the Restructuring Support Agreement (as amended 

from time-to-time and to include Monolines as Supporting Creditors, the 

“RSA” and the parties to the RSA, the “RSA Parties”), dated as of November 

5, 2015 (the “Securitization Term Sheet”) and (b) payable and secured on a 

pari passu basis with all other Restructuring Bonds contemplated by the 

Securitization Term Sheet. Securitization Bonds may be issued by the 

Corporation (as defined in the Securitization Term Sheet) from time to time, 

including on the Closing Date (as defined herein), in accordance with the 

terms of the Securitization Term Sheet and subject to the limitations herein. 

For the avoidance of doubt, none of the Securitization Bonds will be insured 

by National or Assured, unless otherwise agreed. 

Exchange Offer Securitization Bonds that are issued on the closing date (the “Closing Date”) 

of PREPA’s exchange offer in exchange for uninsured Legacy Bonds as 

 

1

 For the avoidance of doubt, if this Monoline Term Sheet or any term in the Recovery Plan Term Sheet (as 

defined in the RSA) provides a consent right or other right to a Supporting Creditor (as such term is defined in the 

RSA) but does not provide that right to other Supporting Creditors, such provision shall not imply that such other 

Supporting Creditors do not have or will not have such right. 

2

 Securitization Term Sheet to be revised to provide or clarify (i) that any DSRF surety reimbursement obligation 

will be subordinated to debt service on Securitization Bonds prior to their acceleration, and that upon acceleration 

such reimbursement obligation will be payable on a pari passu basis with such Securitization Bonds, (ii) that the lag 

between the Scheduled Retirement Date and Final Maturity Date (each as defined in the Securitization Term Sheet) 

for any tranche will in no event be less than one year, (iii) that the servicing agreement and other relevant 

documentation will permit the servicer to provide, at its option, advances to the Corporation with respect to 

Transition Charge (as defined in the Securitization Term Sheet) receivables, (iv) in the “Restructuring Property; 

Statutory Lien” section thereof, that Ancillary Agreements will also be secured by such property, subject to 

subordination as otherwise described herein, and (v) in the “True-up Mechanism for Payment of Scheduled Principal 

and Interest,” that the Transition Charge will be adjusted to ensure that collections are sufficient to pay 

Securitization Bonds by their Scheduled Retirement Date. Other than as set forth in this footnote, nothing in this 

Monoline Term Sheet shall limit or amend the terms of the Securitization Term Sheet, including, for the avoidance 

of doubt, with respect to the purposes for which the initial issuance of Restructuring Bonds may be issued. 

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2 

Securitization Bonds described in the RSA, dated as of November 5, 2015 (the “Exchange Offer”). 

Clear Market Period During the three-year (thirty-six (36) month) period after the Closing Date 

(the “Clear Market Period”), the Corporation shall not issue any new 

Securitization Bonds unless they have a yield equal to or lower than the 

interest rate of the Exchange Offer Securitization Bonds having the same 

weighted average maturity as such new Securitization Bonds and meet the 

Ratings Condition (as defined in the Securitization Term Sheet) and any other 

terms agreed upon by the RSA Parties in the trust agreement for the initial 

series of Restructuring Bonds. 

Refinancing of Callable 

Insured Legacy Bonds 

$345mm of callable Legacy Bonds (the “Callable Insured Legacy Bonds”) 

insured by Assured and National (collectively, the “Monolines”) 3 will be 

refinanced with Securitization Bonds or otherwise called or refinanced no 

later than six (6) months after the expiration of the Clear Market Period (such 

six (6)-month period, the “Refinancing Period”); provided that PREPA (i) 

shall use good faith efforts to refinance such Callable Insured Legacy Bonds 

as promptly as possible during the Refinancing Period subject to market 

conditions, (ii) may prioritize in its own discretion the order in which such 

Callable Insured Legacy Bonds will be called so long as all Callable Insured 

Legacy Bonds insured by National are called or refinanced before any 

Callable Insured Legacy Bonds insured by Assured are called or refinanced, 

and (iii) shall not be obligated to refinance the Callable Insured Legacy Bonds 

if it determines not to based on market conditions, provided that the failure to 

refinance the Callable Insured Legacy Bonds for any reason, including market 

conditions, will not result in a default or other liability of PREPA or the 

Corporation other than accelerated replacement of all DSRF sureties, as 

described below. 

 Refinancing of NonCallable Insured Legacy 

Bonds 

During the Refinancing Period, PREPA will fund a tender at a price not 

higher than par for $62mm of non-callable Legacy Bonds (the “Non-Callable 

Insured Legacy Bonds”) insured by National and due within the next five 

years after the tender with proceeds of Securitization Bonds or other funds; 

provided that PREPA (i) shall use good faith efforts to refinance such NonCallable Insured Legacy Bonds as promptly as possible during the 

Refinancing Period subject to market conditions, (ii) may prioritize in its own 

discretion the order in which such Non-Callable Insured Legacy Bonds will 

be called, and (iii) shall not be obligated to refinance the Non-Callable 

Insured Legacy Bonds if it determines not to based on market conditions, 

provided that failure to refinance the Non-Callable Insured Legacy Bonds for 

any reason, including market conditions, will not result in a default or other 

liability of PREPA or the Corporation other than accelerated replacement of 

all DSRF sureties, as described below; provided further, that PREPA may 

fund such tender or otherwise refinance the Non-Callable Insured Legacy 

 

3

 Final allocation between Assured and National of the amounts of DSRF sureties will be reflected in a letter 

agreement between National and Assured and acknowledged by PREPA. While this Term Sheet addresses only 

Assured and National’s wrapped Legacy Bonds, Syncora is expected to contribute to the overall deal with such 

contribution being consistent with the contributions of other Monolines and commensurate with Syncora’s exposure 

to PREPA and with the form of such contribution to be agreed to among Syncora, the Monolines, the other 

Supporting Creditors under the RSA and PREPA. 

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3 

Bonds at any time prior to the Refinancing Period, so long as any 

Securitization Bonds issued to fund such tender or refinancing during the 

Clear Market Period comply with the requirements in effect during the Clear 

Market Period described herein under “Clear Market Period.” 

Refinancing of Other 

Insured Legacy Bonds 

After the Refinancing Period, refinancing of other insured Legacy Bonds with 

Securitization Bonds (without extending the amortization or increasing debt 

service), to the extent economically beneficial to PREPA and the Corporation 

as determined by PREPA and the Corporation from time to time, subject to 

the documentation for such refinancing being acceptable to the Monolines. 

Any such Securitization Bonds may only be issued if they meet the Ratings 

Condition and any other terms agreed upon by the RSA Parties in the trust 

agreement for the initial series of Restructuring Bonds. 

Mirror Bonds All other insured Legacy Bonds that are not retired as provided above will be 

economically defeased4

 through issuance, no later than the Closing Date, of 

Securitization Bonds that will have the same economic terms (i.e., amount, 

interest rate5

, and maturity6) as the remaining insured Legacy Bonds and shall 

not accelerate as a result of acceleration of the Legacy Bonds (such 

Securitization Bonds, the “Mirror Bonds”).7 8

 

 

4

 Mechanics of economic defeasance of insured Legacy Bonds (including, without limitation, secondary market 

insured Legacy Bonds) to be discussed. 

5

 So long as the related interest rate swap agreement remains in effect, the interest rate for Mirror Bonds that 

economically defease variable rate insured Legacy Bonds shall bear interest at the fixed rate payable by PREPA 

under the applicable interest rate swap agreement. In such case, the Mirror Bonds will secure both debt service on 

the related insured Legacy Bonds and the applicable interest rate swap. If the related interest rate swap agreement 

expires or terminates, the interest rate for Mirror Bonds that economically defease variable rate insured Legacy 

Bonds shall be identical to the interest rate borne by such variable rate insured Legacy Bonds. 

6

 The Scheduled Retirement Date for a series of Mirror Bonds will be the same as the maturity date for the related 

insured Legacy Bonds and the Final Maturity Date for such series of Mirror Bonds will be two-years (or any shorter 

period if the lag applicable to other Securitization Bonds is less than two years) after the maturity date of such 

related insured Legacy Bonds. 

7

 If an interest amount on a series of Mirror Bonds is not paid when due or if such series of Mirror Bonds is not 

paid in full by its Scheduled Retirement Date (which is also the maturity date of the related insured Legacy Bonds), 

then (a) the DSRF securing such series of Mirror Bonds shall be drawn upon to fund any such shortfall (with cash 

being applied in such DSRF before a claim is made on the related DSRF surety) and (b) if the draw on the DSRF is 

not sufficient to satisfy such shortfall in its entirety, any remaining shortfall on the related insured Legacy Bonds 

shall be payable from any net revenues that are available for payment of debt service of Legacy Bonds in accordance 

with the terms of the Legacy Bonds trust agreement (as amended to the extent agreed in the RSA). The applicable 

insurance agreements will be amended to provide that if the related Legacy Bonds are not paid in full on their 

maturity date after the application of funds pursuant to the immediately preceding sentence, then the respective 

Monoline will be deemed to have agreed to forbear from exercising remedies as a result of the payment default as 

long as (a) PREPA has provided evidence satisfactory to the Monolines that an increase in PREPA's rates is the only 

action available to it for curing such payment default and (b) PREPA increases its rates and obtains the approval of 

the Commission for such increase within an agreed period of such payment default so that such increased rates are 

sufficient to ensure that such defaulted Legacy Bonds will be fully paid within an agreed period after such payment 

default. Pursuant to such amended insurance agreement, the respective Monoline will assign to PREPA its right, 

title and interest in any payments received by the escrow agent under Mirror Bonds after the date on which the 

related insured Legacy Bonds have been paid in full. Consistent with other Securitization Bonds, if the applicable 

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4 

January 1 Payment See January Payment Term Sheet (as defined in the RSA). 

July 1 Payment If the Closing Date occurs before July 1, provision for funding of the July 1, 

2016 payment shall have been made in a manner satisfactory to each of the 

Monolines and to the Ad Hoc Group. 

If the Closing Date does not occur by July 1 and each of the parties has agreed 

(in its sole discretion) to extend the RSA, then it will be a condition precedent 

to the Monolines further obligations under the RSA that the July 1 payment 

has been made. 

Securitization Bonds to 

Fund Restructuring 

Transactions 

Amount of Securitization Bonds that may be issued: 

-On the Closing Date: 

o The Exchange Offer Securitization Bonds. 

o $2,086mm in Mirror Bonds.9

 

o Nothing in this Monoline Term Sheet shall prohibit the 

Corporation from issuing Securitization Bonds on the Closing 

Date in the aggregate principal amount not exceeding 1% of 

the total amount of Securitization Bonds issued to fund the 

Cash-Funded DSRF and up to $50 million of Securitization 

Bonds on the Closing Date to fund the SIF, provided that any 

such potential issuance shall be subject in all respects to the 

terms, conditions and contingencies set forth in the Initial 

RSA, including the Securitization Term Sheet or as otherwise 

may be agreed to by the RSA Parties. For the avoidance of 

doubt, the foregoing shall not enhance or diminish the rights 

of any of the RSA Parties or the Corporation regarding the 

potential issuance of such Securitization Bonds. 

o An amount of Securitization Bonds that the RSA Parties 

agree may be necessary to fund a Cash Tender with the goal 

of achieving the minimum Exchange Offer participation 

levels as set forth in the Securitization Term Sheet, provided

that such Securitization Bonds shall be issued with a yield 

 series of Mirror Bonds is not paid in full by its Final Maturity Date (i.e., two years (or any shorter period if the lag 

applicable to other Securitization Bonds is less than two years) after the maturity date of the related insured Legacy 

Bonds), then an event of default will have occurred under the indenture for the Securitization Bonds. 

8

 Assured and National will have all voting and enforcement rights of the holders of Mirror Bonds, as consistent 

with the Legacy Bonds trust agreement and the insurance agreements. 

9

 Such amount includes all insured Legacy Bonds that are outstanding as of the Closing Date and will be 

increased by an amount equal to the aggregate principal amount outstanding of Purchased Bonds (as defined in the 

January Payment Term Sheet) and shall subsequently be reduced by the aggregate principal amount of Refinanced 

Insured Bonds that are refinanced with Securitization Bonds and by the aggregate principal amount of Purchased 

Bonds that are exchanged for Securitization Bonds as provided in the January Payment Term Sheet. Amount and 

mechanics to be discussed, but may increase in the event that the Monolines refinance the July 1 payment, which for 

the avoidance of doubt, will require the consent of the RSA Parties. 

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5 

equal to or lower than the interest rate of the Exchange Offer 

Securitization Bonds of the same weighted average maturity 

as such Securitization Bonds or as otherwise may be agreed 

by the RSA Parties. 

o Other Securitization Bonds that may be agreed to by the RSA 

Parties. 

- After the Closing Date: 

o Nothing in this Monoline Term Sheet shall prohibit the 

Corporation from issuing up to $500 of Securitization Bonds 

after the Closing Date to fund AOGP; provided that any such 

potential issuance shall be subject in all respects to the terms, 

conditions and contingencies set forth in the Initial RSA, 

including the Securitization Term Sheet or as otherwise may 

be agreed by the RSA Parties. For the avoidance of doubt, the 

foregoing shall not enhance or diminish the rights of any of 

the RSA Parties or the Corporation regarding the potential 

issuance of such Securitization Bonds. 

o Additional Securitization Bonds issued in exchange for 

Purchased Bonds in accordance with the January Payment 

Term Sheet. 

- After the Clear Market Period: 

o Up to $345mm to refinance the Callable Insured Legacy 

Bonds (amount subject to reduction based on amount of 

surety). 

o Up to $62mm to fund tender of Non-Callable Insured Legacy 

Bonds. 

o Other Securitization Bonds that may be agreed to by the RSA 

Parties. 

• Securitization Bonds may only be issued after the Closing Date if 

they meet the Ratings Condition and any other terms agreed upon by 

the RSA Parties in the trust agreement for the initial series of 

Restructuring Bonds; provided that Interest rate on Securitization 

Bonds to be issued as part of the Refinanced Insured Bond 

Transactions to refinance the Refinanced Insured Bonds during the 

Refinancing Period may be set based on market conditions at the time 

of issuance and the Corporation will take any market risk associated 

with, and the Ratings Condition will not apply to, the issuance of such 

Securitization Bonds in the Refinanced Insured Bond Transactions 

after the Clear Market Period. 

• Notwithstanding anything to the contrary in this Term Sheet, the 

aggregate amount of Refinanced Insured Bonds to be refinanced or 

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6 

refunded with Securitization Bonds pursuant to this Term Sheet shall 

be no greater than the aggregate amount of the DSRF sureties 

securing Securitization Bonds (other than Mirror Bonds) plus $24 

million. The aggregate principal amount of such Refinanced Insured 

Bonds to be refinanced to complete the Refinanced Insured Bond 

Transactions (as defined below) and the sum of the aggregate amount 

of DSRF sureties provided by the Monolines to secure Securitization 

Bonds shall be measured pro forma for the Refinanced Insured Bond 

Transactions. 

• Other terms of Securitization Bonds shall conform to the 

Securitization Term Sheet and the Securitization Special Legislation 

(as defined in the RSA). 

Series 2015A Bonds All remaining principal (approximately $105mm) due at maturity on January 

1, 2016 to be funded via the SIF and any balance to be paid by PREPA from 

operating cash. 

Securitization DSRF • Separate Debt Service Reserve Fund (each, a “DSRF”) to be established 

for each series of Mirror Bonds (each, a “Mirror Bond DSRF”), and 

common DSRF to be established for all of the Securitization Bonds other 

than the Mirror Bonds (the “Common DSRF”). Aggregate surety 

capacity provided by National and Assured for both the Mirror Bond 

DSRF and the Common DSRF shall in no event be in excess of 

$435.6010 mm. 

• Common DSRF requirement to be up to 10% of the outstanding 

aggregate principal amount of Securitization Bonds (other than Mirror 

Bonds), but in no event shall the Common DSRF surety capacity 

provided by Assured and National be in excess of $383.4411mm (the 

“Maximum Common DSRF Surety Capacity”). PREPA will provide 

National and Assured with the same consultation rights as to the rating 

agency process as is provided to the Ad Hoc Group (as defined in the 

RSA) in the RSA dated as of November 5, 2015. 

o Common DSRF will be initially funded by the Corporation in 

cash at the time of the issuance of the Securitization Bonds 

(other than the Mirror Bonds) in an amount equal to 1% of 

the outstanding aggregate principal amount of such 

Securitization Bonds (the “Cash-Funded Common DSRF”) 

and Assured and National to provide Common DSRF sureties 

 

10 This amount will be increased by an amount equal to (i) 2.5% of the aggregate principal amount of Purchased 

Bonds (as defined in the January Payment Term Sheet) that are not owned by Syncora and (ii) an additional 6.5% of 

the aggregate principal amount of Purchased Bonds that are exchanged for Securitization Bonds as provided in the 

January Payment Term Sheet and that are not owned by Syncora. Otherwise, such amount cannot be increased 

without the consent of National and Assured. 

11 This amount will be increased by an amount equal to 9% of the aggregate principal amount of Purchased Bonds 

that are exchanged for Securitization Bonds as provided in the January Payment Term Sheet and that are not owned 

by Syncora. Otherwise, such amount cannot be increased without the consent of National and Assured. 

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7 

in an amount up to 9% of such outstanding aggregate 

principal amount with claims on any such surety arising only 

after the applicable cash reserve is fully exhausted on a prorata basis. If the Common DSRF requirement is lower than 

10%, such DSRF shall be funded with 1/10 cash from the 

Corporation and 9/10 with a surety from National and 

Assured. 

• Mirror Bond DSRF requirement to be up to 3.5% of the outstanding 

aggregate principal amount of each series of Mirror Bonds, but in no 

event shall such DSRF surety capacity provided by Assured and National 

be in excess of $52.1612mm (the “Maximum Mirror Bond DSRF Surety 

Capacity” and, collectively with the Maximum Common DSRF Surety 

Capacity, the “Maximum DSRF Surety Capacity”). 

o Mirror Bond DSRF will be initially funded by the 

Corporation in cash at the time of the issuance of the 

Mirror Bonds in an amount equal to 1% of the 

outstanding aggregate principal amount of such Mirror 

Bonds (the “Cash-Funded Mirror Bond DSRF” 13 and 

together with the Cash-Funded Common DSRF, the 

“Cash-Funded DSRF”) and Assured and National to 

provide Mirror Bond DSRF sureties in an amount equal 

to 2.5% of such outstanding aggregate principal amount 

with claims on any such surety arising only after the 

applicable cash reserve is fully exhausted. The Mirror 

Bond DSRF requirement shall not be lower than 3.5%. If 

after an agreed upon time period after the Closing Date 

the Mirror Bonds are not rated investment grade by S&P 

and Moody's, then the Monolines will have the option to 

increase the DSRF requirement for Mirror Bonds to up to 

10% of the outstanding aggregate principal amount of 

such Mirror Bonds and increase the amount of the DSRF 

sureties for such Mirror Bonds to up to 9% of the 

outstanding aggregate principal amount of such Mirror 

Bonds (with the corresponding obligation of the 

Corporation to pay premiums associated to such 

increased amount). 

 

12 This amount will be increased by an amount equal to 2.5% of the aggregate principal amount of Purchased 

Bonds that are not owned by Syncora, but will subsequently be reduced by 2.5% of the aggregate principal amount 

of Purchased Bonds that are exchanged for Securitization Bonds as provided in the January Payment Term Sheet 

that are not owned by Syncora. Otherwise, such amount cannot be increased without the consent of National and 

Assured. 

13 On the Closing Date, the Cash-Funded Mirror Bond DSRF will include an amount equal to 1% of the aggregate 

principal amount of Purchased Bonds outstanding on the Closing Date. In the event holders of Purchased Bonds 

exchange such Purchased Bonds for Securitization Bonds in the manner contemplated by the January Payment Term 

Sheet, an amount of cash equal to 1% of the aggregate principal amount of such exchanged Purchased Bonds shall 

be transferred from the applicable Cash-Funded Mirror Bond DSRF to the Cash-Funded Common DSRF.

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8 

o Monolines will enter into a forward commitment to 

provide, on the closing date of any refinancing of 

Refinanced Insured Bonds with Securitization Bonds 

during the Refinancing Period, a Common DSRF surety 

in an amount up to 9% of the outstanding aggregate 

principal amount of such Refinanced Insured Bonds that 

are refinanced with Securitization Bonds during the 

Refinancing Period (and the Mirror Bond DSRF surety 

related to such Refinanced Insured Bonds will be released 

upon such refinancing) (the “Forward Surety 

Commitment”), provided that the Corporation shall also 

fund the Common DSRF surety in an amount up to 1% of 

such Refinanced Insured Bonds. If the Common DSRF 

requirement is lower than 10%, such DSRF will be 

funded with 1/10 cash from the Corporation and the 

Forward Surety Commitment shall apply to 9/10 of the 

Common DSRF requirement. The aggregate of the 

Maximum DSRF Surety Capacity provided with respect 

to the Closing Date and the additional Common DSRF 

surety capacity provided pursuant to the commitment 

described in this paragraph shall not exceed $462mm14. 

• Prior to acceleration, repayment of any amounts drawn on any 

DSRF surety shall be subordinate to the payment of scheduled 

interest on and principal of the Securitization Bonds. After 

acceleration, repayment of any amounts drawn on any DSRF 

surety shall be pari passu with the Securitization Bonds, it being 

agreed that the occurrence of a payment default under the Mirror 

Bonds will not constitute an event of default under the trust 

agreement securing the Securitization Bonds (including the 

Mirror Bonds) until the aggregate amount of interest on and 

principal of Mirror Bonds that has not been paid when due and 

continues to be unpaid is greater than the amount of any excess of 

10% of the aggregate principal amount of such Mirror Bonds over 

the DSRF requirement for such Mirror Bonds.15

• All DSRF sureties for each series of Securitization Bonds shall be 

replaced by the Corporation using cash over 7 years beginning in year 7, 

 

14 This amount will be increased by an amount equal to (i) 2.5% of the aggregate principal amount of Purchased 

Bonds that are not owned by Syncora and (ii) an additional 6.5% of the aggregate principal amount of Purchased 

Bonds that are exchanged for Securitization Bonds as provided in the January Payment Term Sheet and that are not 

owned by Syncora. Otherwise, such amount cannot be increased without the consent of National and Assured.

15 Criteria to determine events of default under the trust agreement for the Securitization Bonds subject to review 

and feedback from rating agencies and the consent of the RSA Parties. 

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9 

to be funded in equal amounts each year. 

o If an Excess Surety Event exists as of the date that is two (2) 

years after the Closing Date 16 , then the percentage of the 

DSRF sureties equal to the Excess Surety Amount shall be 

replaced by the Corporation using cash over nine (9) years to 

be funded in equal amounts each year with the Transition 

Payment (as such term is defined in the Securitization Term 

Sheet) to be adjusted beginning on the 25th month after the 

Closing Date and the first cash replacement shall occur on the 

31st month after the Closing Date. If an Excess Surety Event 

exists as of the date that is 2 years after the Closing Date, but 

ceases to exist at any time thereafter, then any remaining 

amount of the DSRF sureties shall be replaced by the 

Corporation using cash over 7 years beginning in year 7, to 

be funded in equal amounts each year. 

o The existence of an Excess Surety Event will not result in a 

default or any liability of PREPA or the Corporation other 

than accelerated replacement of all DSRF sureties referenced 

in this section. 

o RSA Parties to work collaboratively on mutually agreeable 

terms for rate stabilization and treatment of excess cash 

received by the Corporation. 

o The true-up mechanism described in the Securitization Term 

Sheet shall provide for the adjustment of the Transition 

Charges at least semi-annually to ensure that the collection of 

revenues is sufficient for, among other things, the timely 

replacement of the DSRF sureties with cash in accordance 

with the above schedule. 

o DSRF surety providers will have the direct right to enforce 

the foregoing true-up adjustment subject to any limitations set 

forth in the definitive documentation, including the priority of 

payments described above. If the DSRF surety replacement 

does not occur in accordance with actual replacement 

schedule described above, DSRF surety providers will have 

the right to exercise other rights and remedies provided for 

under the relevant surety documentation (including the 

replacement of the servicer and other service providers if 

such service providers are the cause for such noncompliance). 

“Refinanced Insured Bonds” means the Callable and Non-Callable Insured 

Legacy Bonds that may be refinanced through the Refinanced Insured Bond 

 

16 If an Excess Surety Event exists on the true-up adjustment date immediately preceding the date that is 2 years 

after the closing of the Exchange Offer, then it will be assumed for purposes of the true-up adjustment occurring on 

such date that such Excess Surety Event will continue to exist as of the second year anniversary date. 

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10 

Transactions; provided, however, that, the aggregate principal amount of such 

Callable and Non-Callable Insured Legacy Bonds that may be refinanced 

shall not exceed the sum of the aggregate amount of DSRF sureties provided 

by the Monolines to secure Securitization Bonds (other than Mirror Bonds) 

plus $24 million. The aggregate principal amount of such insured Legacy 

Bonds that may be refinanced to complete the Refinanced Insured Bond 

Transactions and the sum of the aggregate amount of DSRF sureties provided 

by the Monolines to secure Securitization Bonds other than Mirror Bonds 

shall be measured pro forma for the Refinanced Insured Bond 

Transactions. 

“Refinanced Insured Bond Transactions” means the refinancing of the 

Callable and Non-Callable Legacy Bonds with Securitization Bonds other 

than Mirror Bonds in accordance with the terms set forth opposite the 

headings “Refinancing of Callable Insured Legacy Bonds” and “Refinancing 

of Non-Callable Insured Legacy Bonds.” 

“Excess Surety Amount” means, as of any day, the percentage of the 

aggregate principal amount of Refinanced Insured Bonds that are not 

refinanced through Refinanced Insured Bonds Transactions on or prior to 

such day. 

“Excess Surety Event” means that, as of any day, there is an Excess Surety 

Amount greater than zero on such day. 

Legacy Bonds • No new Legacy Bond covenants. 

• Debt service requirements on the remaining insured Legacy Bonds, if 

any, shall not be included in the rate covenant calculation under the 

Legacy Bonds trust agreement (as amended pursuant to exit consents), 

except upon a payment default on such insured Legacy Bonds as 

provided in footnote 7. 

• The DSRF requirement under the Trust Agreement with respect to the 

insured Legacy Bonds that are economically defeased with related 

Mirror Bonds will be suspended pursuant to exit consents and such 

insured Legacy Bonds will not be secured by the Legacy Bonds DSRF 

for as long as no defaults have occurred under the Mirror Bonds. 

• Mirror Bonds to be deposited into an irrevocable escrow to solely 

support related insured Legacy Bonds. The arrangements with respect to 

the escrow deposit of the Mirror Bonds will be structured so that the 

escrow is bankruptcy remote from PREPA, not subject to Federal, 

Commonwealth or state taxation and preserves the tax-exempt status of 

the insured Legacy Bonds. Mirror Bonds shall be (i) issued 

simultaneously with the Securitization Bonds issued in the Exchange 

Offer, (ii) held in irrevocable escrow, and (iii) include restrictions against 

any trading of interests in Mirror Bonds separately from the Legacy 

Bonds. For the avoidance of doubt, the holders of insured Legacy Bonds 

that are supported by Mirror Bonds shall not have the right to exchange 

their Legacy Bonds for such Mirror Bonds and shall only have the right 

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11 

to transfer any of their interests in such Mirror Bonds by transferring 

their Legacy Bonds. 

• The obligation of PREPA to make a debt service payment under 

the insured Legacy Bonds that are economically defeased will be 

discharged only upon the application of the corresponding debt 

service payment under the related Mirror Bonds to the payment of 

such debt service payment. As a result, such insured Legacy 

Bonds will continue to be “outstanding” for purposes of the 

Legacy Bonds trust agreement (other than for purposes agreed by 

the Parties, including without limitation the rate covenant and 

sizing the DSRF requirement for the insured Legacy Bonds) and 

National and Assured shall retain the rights (including voting and 

enforcement rights) that they currently have with respect to such 

Legacy Bonds, provided that (i) the holders of the insured Legacy 

Bonds will not have the right to recover amounts in excess of 

interest on and principal of such insured Legacy Bonds; (ii) 

PREPA will not be liable for breaches by the Corporation or other 

parties (i.e., Agents); (iii) any amounts paid under the related 

Mirror Bonds after such insured Legacy Bonds have been paid in 

full will be assigned to PREPA, all as described in footnote 7; and 

(iv) the DSRF supporting such Mirror Bonds shall be applied 

towards any payment shortfall on the Mirror Bonds as described 

in footnote 7, and the forbearance provisions of the amended 

insurance agreements shall apply as described in footnote 7. 

Parties to discuss mechanics of implementing these arrangements 

including whether and to what extent these rights will be 

embedded in National’s and Assured’s insurance agreements 

rather than the underlying Legacy Bonds. 

Fees • Payment by the Corporation of annual premiums with respect to the 

Common DSRF Surety, Mirror Bond DSRF Surety and Forward Surety 

Commitment of 2% of the face amount of each such DSRF surety for the 

year for which the premium is paid. 

• In addition, as of the Closing Date, an additional surety fee of $1.25mm 

per quarter shall begin accruing on such day and be payable by the 

Corporation in arrears on a quarterly basis (the “Quarterly Fee”) 17 ; 

provided that the sum of all Quarterly Fees paid shall not exceed $7mm. 

• Payment to the Monolines of (i) a $1mm “Insurer Support Fee” upon 

entry into the RSA, and (ii) a monthly $1mm fee during the term of the 

RSA, to be allocated between the Monolines as set forth in the letter 

agreement referenced in footnote 3. Notwithstanding any other 

contractual rights to the contrary, Assured and National shall not be 

entitled to any fees or expenses (including, for the avoidance of doubt, 

any fees and expenses of legal and financial advisors) incurred in 

 

17 The allocation of the Quarterly Fee shall be reflected in the letter agreement referenced in footnote 3 between the 

Monolines. 

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12 

connection with PREPA’s restructuring or the issuance of the 

Securitization Bonds prior to the Closing Date other than the Insurer 

Support Fee, the monthly fees payable under the RSA, and the Quarterly 

Fee and the DSRF surety premiums described herein. 

Exit Consents National and Assured to provide exit consents 18 with respect to Legacy 

Bonds, including to: 

(i) suspend DSRF requirement for insured Legacy Bonds so that such 

insured Legacy Bonds are no longer required to be supported by a 

DSRF for as long as no default has occurred under the Mirror Bonds; 

(ii) amend SIF requirements to permit replenishment of a certain agreed 

(between PREPA, the Monolines and the Ad Hoc Group) amount and 

over a reasonable period of time to be agreed between PREPA, the 

Monolines, and the Ad Hoc Group, subject to the terms in the 

Securitization Term Sheet and the terms set forth herein; 

(iii) amend Current Expense definition to clearly include the restructured 

fuel line repayment, a refinancing thereof (on economic terms that, in 

the aggregate, are no less favorable, including in an amount not in 

excess of the (x) fuel line debt subject to the RSA dated as of 

November 5, 2015) plus (y) the Solus Unpaid Expense Amount and 

the Scotiabank Unpaid Expense Amount, as applicable (subject to an 

aggregate cap of $1mm for both the Solus Unpaid Expense Amount 

and the Scotiabank Unpaid Expense Amount) and any hedging 

expenses; 

(iv) amendments to remove or clarify potential restrictions on the issuance 

of Securitization Bonds and the Mirror Bonds, if any19; 

(v) amend to permit potential public-private partnerships and asset sale 

processes, subject to agreed covenants (e.g., ratings confirmation, 

coverage tests, use of proceeds, etc.); 

(vi) amend to increase the thresholds for exercise of remedies to simple 

majority; and 

(vii) other amendments to events of default and remedies to be agreed. 

Legislation, 

Documentation and 

Opinions 

The closing of the transactions contemplated herein shall be subject to the 

conditions precedent set forth in the RSA, as amended, which shall include 

the conditions set forth in the RSA dated as of November 5, 2015 with respect 

to the PREPA Revitalization Act and the documentation20 necessary to effect 

 

18 Nothing herein shall preclude PREPA from seeking or obtaining additional, valid exit consents from uninsured 

bondholders to effectuate the amendments contemplated herein. 

19 Parties (including PREPA, the Monolines, and the Ad Hoc Group) to agree on a list of specific amendments that 

would be necessary to permit the issuance of Securitization Bonds (including Mirror Bonds). 

20 Documentation implementing transactions contemplated by this term sheet shall be included in the defined term 

“Securitization Documents” in the RSA. 

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13 

such transactions and related legal opinions (including, without limitation, a 

final non-appealable judgment validating such transactions) all being in form 

and substance reasonably acceptable to Assured and National.21

Amendment to RSA to be entered into by the parties no later than December 

23, 2015. 

Servicing Acceptable servicing agreements and arrangements with PREPA as 

contemplated by the RSA dated as of November 5, 2015. 

 

21 This includes, without limitation, conditions regarding PREPA governance and Commonwealth support. 

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Exhibit 11 Page 154 of 198
Execution version 

1 

Schedule III 

Credit Agreements Restructuring 

Capitalized terms used herein and not otherwise defined shall have the meaning assigned to such 

terms in the Restructuring Support Agreement (the “RSA”) or the Recovery Plan Term Sheet, as 

applicable. 

General: Lenders under the existing Solus Credit Agreement and Scotiabank Credit Agreement shall 

have the option to elect, prior to the closing of the Restructuring Transactions, either of the following 

alternatives (or a combination thereof): 

(a) Amend and restate the Solus Credit Agreement or the Scotiabank Credit Agreement, as 

applicable, as set forth below to provide for an amended and restated term loan facility (the 

“Solus Facility” or the “Scotiabank Facility”, as applicable); and/or 

(b) Exchange all or part of their indebtedness under the Solus Credit Agreement and Scotiabank 

Credit Agreement, as applicable, into Securitization Bonds (subject to the terms and 

conditions set forth in the Securitization Term Sheet, including with respect to the 85% 

exchange ratio and interest-only period). 

Solus Credit Agreement Amendment

Amended and Restated 

Bank Facility 

Revolving facility under the Solus Credit Agreement is converted into 

a term loan facility. 

Amount US$146,041,914.24 (the “Unadjusted Principal Amount”) plus the 

Solus Unpaid Expense Amount; provided that the Solus Unpaid 

Expense Amount shall be subject to a cap in an amount equal to the pro 

rata share (calculated based on the Credit Agreements Principal 

Amount held or controlled by the Credit Agreements Lenders in their 

capacities as such) of $1,000,000 (the “Total Unpaid Expenses 

Amount Cap”). 

Unpaid Expenses The principal amount of the Solus Facility or the Securitization Bonds 

issued to the Solus Lenders in their capacities as such shall be 

increased by an amount (the “Solus Unpaid Expense Amount”) equal 

to all reasonable and documented unreimbursed out-of-pocket costs 

and expenses incurred by the Solus Lenders as of the Closing Date in 

connection with the Solus Credit Agreement, PREPA’s restructuring 

negotiations, the RSA, and the transactions contemplated hereby and 

thereby (including the Recovery Plan), as certified to PREPA by the 

Solus Lenders; provided that with respect to the advisors’ costs, these 

shall be limited to the reasonable and documented out-of pockets costs 

and expenses of one (1) Puerto Rico counsel and one (1) New York 

counsel to the Solus Lenders; provided further that the aggregate 

amount of Solus Unpaid Expense Amount shall in no event exceed its 

pro rata share of the Total Unpaid Expenses Amount Cap. For the 

avoidance of doubt, the Lender Support Fee and monthly amounts paid 

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2 

to the Solus Lenders pursuant to Sections 9(k) and (l), respectively, of 

the RSA shall not be credited against the Solus Unpaid Expense 

Amount. 

Interest Rate 5.75% per annum, paid in cash quarterly in arrears 

Maturity 6 years from the date of issuance 

Amortization Quarterly amortization, based on a fixed payment schedule (see 

Schedule A below with respect to the Unadjusted Principal Amount). 

The payments set forth in Schedule A below shall be automatically 

adjusted so that the Solus Unpaid Expense Amount is amortized on the 

same percentage basis as the Unadjusted Principal Amount. 

Security/Ranking Unsecured. 

The Closing Date Trust Agreement Amendments (as defined below) 

shall provide that the Solus Facility, any refinancing thereof, and all 

debt service thereof and obligations thereunder, shall constitute, and be 

included in PREPA’s annual budget as, current expenses of PREPA 

and shall constitute “Current Expenses” (as defined in the Trust 

Agreement governing the Bonds) relative to PREPA’s power revenue 

bonds that are not exchanged for securitized bonds (the “Bonds”) and 

other obligations that are not presently defined as Current Expenses 

and shall be paid prior to any payment of the Bonds (i.e., the Bonds 

shall remain net revenue bonds). The foregoing shall be set forth in an 

amendment to the Trust Agreement executed by persons holding or 

controlling at least 60% of the Bonds prior to the closing of the 

Restructuring Transactions, which amendment shall be in form and 

substance reasonably satisfactory to the Solus Lenders (the “Closing 

Date Trust Agreement Amendments”). 

The Closing Date Trust Agreement Amendments shall provide that any 

amendments, waivers, modifications or supplements to the Trust 

Agreement that would amend, modify or waive the current expense 

status of the Solus Facility as contemplated above shall require the 

prior written consent of the Solus Lenders (or their successors and 

assigns, as applicable), and the Solus Lenders (and their successors and 

assigns, as applicable) shall be included as express third party 

beneficiaries of the Trust Agreement with respect to such current 

expense status and consent rights. 

The Closing Date Trust Agreement Amendments shall be conditioned 

on customary legal opinions and resolutions each in form and 

substance reasonably satisfactory to the Solus Lenders. 

Tax-Exempt Status The Solus Facility shall be tax-exempt under U.S. federal, state and 

Puerto Rico law to the extent permitted by law and on terms mutually 

acceptable to PREPA and the Solus Lenders.

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Exhibit 11 Page 156 of 198
3 

Other Loan Terms Representations and warranties, covenants (including financial 

maintenance covenants) and events of default to be based on Solus 

Credit Agreement, with revisions and additions to be mutually agreed 

in light of final agreed capital structure and business plan of 

restructured PREPA. Events of default will include, without limitation, 

cross-payment default and cross-acceleration to Material Indebtedness 

(as defined in the Solus Credit Agreement) of PREPA. Negative 

covenants may include, without limitation, restrictions on direct or 

indirect payments, transfers, and servicing advances by PREPA to or 

for the account of the Corporation that are acceptable to the RSA 

Parties. 

PREPA and the Solus Lenders will negotiate mutually agreeable 

covenants and related events of default to be included in the Solus 

Credit Agreement Amendment executed prior to the Closing Date, 

which provisions may include, among other things, lender protections 

in the event that the permanent rate approved by the Energy 

Commission negatively affects PREPA’s ability to service the debt 

under the Solus Facility, relative to any provisional rate. 

Governing Law Commonwealth 

Jurisdiction Exclusive jurisdiction of SDNY and US District Court of PR (or NY 

Supreme Court) 

Conditions to 

Consummation 

Same as those set forth in the Securitization Term Sheet, but including 

in addition: 

• Treatment of Ad Hoc group on terms substantially consistent with 

Securitization Term Sheet and otherwise acceptable to Solus 

Lenders; 

• Treatment of Scotiabank credit agreement and monolines on terms 

acceptable to Solus Lenders; and 

• The RSA shall be in full force and effect as to the Solus Lenders 

and PREPA. 

• Receipt by the Solus Lenders of customary legal opinions and 

resolutions in form and substance reasonably satisfactory to the 

Lenders. 

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Exhibit 11 Page 157 of 198
4 

*** *** *** 

Schedule A – Principal and Interest Schedule1

Interest Principal Total Debt Service

3/31/2016 2,099,353 $ 5,476,572 $ 7,575,924 $ 

6/30/2016 2,020,627 $ 5,476,572 $ 7,497,199 $ 

9/30/2016 1,941,901 $ 5,476,572 $ 7,418,473 $ 

12/31/2016 1,863,175 $ 5,476,572 $ 7,339,747 $ 

3/31/2017 1,784,450 $ 5,476,572 $ 7,261,021 $ 

6/30/2017 1,705,724 $ 5,476,572 $ 7,182,296 $ 

9/30/2017 1,626,998 $ 5,476,572 $ 7,103,570 $ 

12/31/2017 1,548,272 $ 5,476,572 $ 7,024,844 $ 

3/31/2018 1,469,547 $ 5,476,572 $ 6,946,119 $ 

6/30/2018 1,390,821 $ 5,476,572 $ 6,867,393 $ 

9/30/2018 1,312,095 $ 5,476,572 $ 6,788,667 $ 

12/31/2018 1,233,370 $ 5,476,572 $ 6,709,941 $ 

3/31/2019 1,154,644 $ 7,302,096 $ 8,456,740 $ 

6/30/2019 1,049,676 $ 7,302,096 $ 8,351,772 $ 

9/30/2019 944,709 $ 7,302,096 $ 8,246,804 $ 

12/31/2019 839,741 $ 7,302,096 $ 8,141,837 $ 

3/30/2020 734,773 $ 9,127,620 $ 9,862,393 $ 

6/29/2020 603,564 $ 9,127,620 $ 9,731,183 $ 

9/29/2020 472,354 $ 9,127,620 $ 9,599,974 $ 

12/30/2020 341,145 $ 9,127,620 $ 9,468,764 $ 

3/30/2021 209,935 $ 3,651,048 $ 3,860,983 $ 

6/29/2021 157,451 $ 3,651,048 $ 3,808,499 $ 

9/29/2021 104,968 $ 3,651,048 $ 3,756,015 $ 

12/30/2021 52,484 $ 3,651,048 $ 3,703,532 $ 

Total 26,661,777 $ 146,041,914 $ 172,703,691 $ 

 

1

 Assumes an issuance date of January 1, 2016 and does not include the Solus Unpaid Expense Amount. 

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Exhibit 11 Page 158 of 198
5 

Scotiabank Credit Agreement Amendment 

Amended and Restated 

Bank Facility 

Revolving facility under the Scotiabank Credit Agreement is converted 

into a term loan facility. 

Amount US$549,950,000.00 (the “Unadjusted Principal Amount”) plus the 

Scotiabank Unpaid Expense Amount; provided that the Scotiabank 

Unpaid Expense Amount shall be subject to a cap in an amount equal 

to the pro rata share (calculated based on the Credit Agreements 

Principal Amount held or controlled by the Credit Agreements Lenders 

in their capacities as such) of $1,000,000 (the “Total Unpaid 

Expenses Amount Cap”). 

Unpaid Expenses The principal amount of the Scotiabank Facility shall be increased by 

an amount (the “Scotiabank Unpaid Expense Amount”) equal to all 

reasonable and documented unreimbursed out-of-pocket costs and 

expenses incurred by Scotiabank as of the Closing Date in connection 

with the Scotiabank Credit Agreement, PREPA’s restructuring 

negotiations, the RSA, and the transactions contemplated hereby and 

thereby (including the Recovery Plan), as certified to PREPA by 

Scotiabank; provided that with respect to the advisors’ costs, these 

shall be limited to the reasonable and documented out-of pockets costs 

and expenses of one (1) Puerto Rico counsel, one (1) New York 

counsel and one (1) financial advisor to Scotiabank; provided further 

that the aggregate amount of Scotiabank Unpaid Expense Amount shall 

in no event exceed its pro rata share of the Total Unpaid Expenses 

Amount Cap. For the avoidance of doubt, the Lender Support Fee and 

monthly amounts paid to Scotiabank and the Scotiabank Lenders 

pursuant to Sections 9(k) and (l), respectively, of the RSA shall not be 

credited against the Scotiabank Unpaid Expense Amount. 

Interest Rate 5.75% per annum, paid in cash quarterly in arrears 

Maturity 6 years from the date of issuance 

Amortization Quarterly amortization, based on a fixed payment schedule (see 

Schedule B below with respect to the Unadjusted Principal Amount). 

The payments set forth in Schedule B below shall be automatically 

adjusted so that the Scotiabank Unpaid Expense Amount is amortized 

on the same percentage basis as the Unadjusted Principal Amount. 

Security/Ranking Unsecured. 

The Closing Date Trust Agreement Amendments (as defined below) 

shall provide that the Scotiabank Facility, any refinancing thereof, and 

all debt service thereof and obligations thereunder, shall constitute, and 

be included in PREPA’s annual budget as, current expenses of PREPA 

and shall constitute “Current Expenses” (as defined in the Trust 

Agreement governing the Bonds) relative to PREPA’s power revenue 

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Exhibit 11 Page 159 of 198
6 

bonds that are not exchanged for securitized bonds (the “Bonds”) and 

other obligations that are not presently defined as Current Expenses 

and shall be paid prior to any payment of the Bonds (i.e., the Bonds 

shall remain net revenue bonds). The foregoing shall be set forth in an 

amendment to the Trust Agreement executed by persons holding or 

controlling at least 60% of the Bonds prior to the closing of the 

Restructuring Transactions, which amendment shall be in form and 

substance reasonably satisfactory to the Scotiabank Lenders (the 

“Closing Date Trust Agreement Amendments”). 

The Closing Date Trust Agreement Amendments shall provide that any 

amendments, waivers, modifications or supplements to the Trust 

Agreement that would amend, modify or waive the current expense 

status of the Scotiabank Facility as contemplated above shall require 

the prior written consent of Scotiabank (or its successor or assign) on 

behalf of the Scotiabank Lenders (or their respective successors and 

assigns), and Scotiabank and the Scotiabank Lenders (and their 

respective successors and assigns) shall be included as express third 

party beneficiaries of the Trust Agreement with respect to such current 

expense status and consent rights. 

The Closing Date Trust Agreement Amendments shall be conditioned 

on customary legal opinions and resolutions each in form and 

substance reasonably satisfactory to Scotiabank, on behalf of the 

Scotiabank Lenders. 

Tax-Exempt Status The Scotiabank Facility shall be tax-exempt under U.S. federal, state, 

and Puerto Rico law to the extent permitted by law and on terms 

mutually acceptable to PREPA and the Scotiabank Lenders.

Other Loan Terms Representations and warranties, covenants (including financial 

maintenance covenants) and events of default to be based on 

Scotiabank Credit Agreement, with revisions and additions to be 

mutually agreed in light of final agreed capital structure and business 

plan of restructured PREPA. Events of default will include, without 

limitation, cross-payment default and cross-acceleration to Material 

Indebtedness (as defined in the Scotiabank Credit Agreement) of 

PREPA. Negative covenants may include, without limitation, 

restrictions on direct or indirect payments, transfers, and servicing 

advances by PREPA to or for the account of the Corporation that are 

acceptable to the RSA Parties. 

PREPA and the Scotiabank Lenders will negotiate mutually agreeable 

covenants and related events of default to be included in the Scotiabank 

Credit Agreement Amendment executed prior to the Closing Date, 

which provisions may include, among other things, lender protections 

in the event that the permanent rate approved by the Energy 

Commission negatively affects PREPA’s ability to service the debt 

under the Scotiabank Facility, relative to any provisional rate. 

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Exhibit 11 Page 160 of 198
7 

Governing Law Commonwealth 

Jurisdiction Exclusive jurisdiction of SDNY and US District Court of PR (or NY 

Supreme Court) 

Conditions to 

Consummation 

Same as those set forth in the Securitization Term Sheet, but including 

in addition: 

• Treatment of ad hoc group on terms substantially consistent with 

Securitization Term Sheet and otherwise acceptable to Scotiabank; 

• The RSA shall be in full force and effect as to Scotiabank, the 

Scotiabank Lenders, and PREPA; 

• Receipt by Scotiabank and the Scotiabank Lenders of customary 

legal opinions and resolutions in form and substance reasonably 

satisfactory to Scotiabank, on behalf of the Scotiabank Lenders; 

and 

• Treatment of Solus credit agreement and monolines on terms 

acceptable to Scotiabank. 

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Exhibit 11 Page 161 of 198
8 

*** *** *** 

Schedule B – Principal and Interest Schedule2

Date Principal Interest 

Total Debt 

Service 

 

3/31/16 $20,623,125 $7,905,531 $28,528,656 

6/30/16 20,623,125 7,609,074 28,232,199 

9/30/16 20,623,125 7,312,616 27,935,741 

12/31/16 20,623,125 7,016,159 27,639,284 

3/31/17 20,623,125 6,719,702 27,342,827 

6/30/17 20,623,125 6,423,244 27,046,369 

9/30/17 20,623,125 6,126,787 26,749,912 

12/31/17 20,623,125 5,830,329 26,453,454 

3/31/18 20,623,125 5,533,872 26,156,997 

6/30/18 20,623,125 5,237,414 25,860,539 

9/30/18 20,623,125 4,940,957 25,564,082 

12/31/18 20,623,125 4,644,500 25,267,625 

3/31/19 27,497,500 4,348,042 31,845,542 

6/30/19 27,497,500 3,952,766 31,450,266 

9/30/19 27,497,500 3,557,489 31,054,989 

12/31/19 27,497,500 3,162,213 30,659,713 

3/31/20 34,371,875 2,766,936 37,138,811 

6/30/20 34,371,875 2,272,840 36,644,715 

9/30/20 34,371,875 1,778,745 36,150,620 

12/31/20 34,371,875 1,284,649 35,656,524 

3/31/21 13,748,750 790,553 14,539,303 

6/30/21 13,748,750 592,915 14,341,665 

9/30/21 13,748,750 395,277 14,144,027 

12/31/21 13,748,750 197,638 13,946,388 

Total $549,950,000 $100,400,247 $650,350,247 

 

2

 Assumes an issuance date of January 1, 2016 and does not include the Scotiabank Unpaid Expense Amount. 

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Exhibit 11 Page 162 of 198
Execution version 

Schedule IV 

New Governance 

[See Recovery Plan Term Sheet, Schedule IX- Legislative Reform Package, item A – 

“Governance”] 

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Exhibit 11 Page 163 of 198
Execution version 

Schedule V 

Operational Improvements 

Capitalized terms used herein and not otherwise defined shall have the meaning assigned to such terms in 

the RSA or the Recovery Plan Term Sheet, as applicable. 

A. ON-GOING FUEL PROCUREMENT INITIATIVES

Activities Benefits 

Optimize 

Generation 

Dispatch 

 Continuously monitor fuel unit 

$/MMbtu costs to leverage cost 

arbitrage from the different fuel 

sources to optimize cost per kwh 

 Fuel cost savings benefiting end 

customers 

Fuel Inventory 

Controls 

 Standardize inventory controls 

across all plants with a standard 

inventory tool 

 Integrate inventory controls into 

“Asset Suite” 

 Provide robust inventory controls 

that follow industry standards 

 Create visibility for inventory 

variations in an auditable process 

Fuel Sourcing 

 Support the tendering/retendering 

process to identify lower cost 

suppliers focused on adders 

reduction 

 Get alternative suppliers to drive 

competitive pricing 

 Reduce cost of adders for Fuel Oil # 

6 by 15-30% through FY2017 

Fuel Supply 

Chain Structure 

 Evaluate infrastructure options to 

allow different supply alternatives 

while leveraging the AOGP 

 Enable fuel diversity for the 

different plants 

 Provide sustainable supply 

redundancies for NG 

 Leverage alternate NG sources to 

obtain favorable pricing in the 

midterm for Costa Sur 

Fuel 

Consumption 

(Generation) 

 Reduce the utilization of the 

existing fleet by optimizing the 

spinning reserve levels 

 Mitigate the forced outages 

driving increased higher cost unit 

usage (i.e., Diesel) 

 Reduced fuel consumption by using 

the most efficient units 

 Potential generation spinning 

reserves reduction 

 

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2 

B. ON-GOING CUSTOMER SERVICE INITIATIVES

Activities Benefits 

General 

customers 

 Implement new process for 

service suspension / new fees for 

reconnection 

 Accelerate process to bring Law 

33 cases to arbitration and collect 

full deposit 

 Launch collection of inactive 

accounts with Collection Agencies 

 Endeavor to improve call center 

response time, outage restoration 

time, and overall customer service 

satisfaction 

 One time cash improvement for 

reduced A/R 

 Increased reconnection fees 

Decrease Non 

Technical 

Losses 

 Continue implementation of 

programs to improve theft 

detection and recovery 

 Decrease in the amount of 

accounts estimated each month, 

improve the estimation algorithm 

 Accelerate remediation of meters 

with no reading 

 Reduce the time it takes to 

complete service suspension for 

non-payment 

 PREPA retains the costs saved 

though the base rate, rest is passed 

on to customers through reduce fuel 

and PP charges 

Municipalities  Collection of charges at “for profit 

sites” 

 Additional revenue 

 

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3 

C. ON-GOING FLEET & OTHER GENERAL O&M INITIATIVES

Activities Benefits 

Procurement 

 Execute on security guard phase I 

& II 

 Develop and execute sourcing of 

fleet parts 

 Develop and execute sounding of 

MDE/MRO parts 

 Improve procurement processes 

and limit decentralization of 

activities 

 Improved cost base 

 Increased use of standardized, 

catalogued items will reduce 

complexity and drive SG&A 

efficiencies 

Inventory 

 Review footprint and optimize 

warehouse operations (in 

coordination with fleet 

consolidation) 

 Identify and dispose of obsolete 

and slow moving SKU’s 

 Reset safety stock levels to reduce 

overall inventory 

 Reduced labor and network costs 

(fewer locations with increased 

velocity) 

 Limit write-downs / obsolete SKU’s

Shops 

 Review footprint and optimize 

shop operations (in coordination 

with fleet optimization) 

 Develop shop SWAT team to 

target shops (weekly basis) with 

high out of service % 

 Rollout improved metrics to drive 

higher accountability 

 Review and execute on 

opportunities to outsource lower 

skill maintenance tasks 

 Improved vehicle availability 

 Reduce T&D non-productive labor 

time (“patio entries”)

Fleet 

 Review network and reduce 

overall fleet, increasing utilization 

 Expand usage of GPS across fleet 

to increase visibility to and drive 

improvement within utilization 

 Consolidate overall accountability 

of fleet (availability, utilization, 

cost) within transportation 

 Develop fleet renewal program by 

 Reduced investment required to 

renew fleet 

 Improved tracking and centralized 

accountability will enable more 

efficient rebalancing of fleet 

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Exhibit 11 Page 166 of 198
4 

vehicle class 

Real Estate 

 Engage third party to develop 

cohesive real estate portfolio 

strategy and divest excess 

properties 

 More efficient use of real estate 

assets 

 One-time liquidity gain selling 

excess properties 

D. EMPLOYEE RELATED 

Activities Benefits 

Safety 

 Engage consultant to assess 

current safety environment and 

develop framework for achieving 

a culture focused on safety 

 Reduce frequency of safety related 

incidents and serious accidents 

Productivity  Address inflexible work rules and 

high absenteeism 

 Improved labor and employee 

productivity 

Employee 

related 

 Rollout and restructured, merit 

based organization 

 Develop updated job descriptions 

including clear KPI’s to measure 

performance 

 Merit based organization with clear 

accountability to support key 

objectives and tasks 

Case:17-03283-LTS Doc#:4014-7 Filed:10/04/18 Entered:10/04/18 16:51:23 Desc:

Exhibit 11 Page 167 of 198
Execution Version 

Schedule VI 

Rate Structure 

Capitalized terms used herein and not otherwise defined shall have the meaning assigned to such terms in 

the RSA or the Recovery Plan Term Sheet, as applicable.

1.1 Overview 

PREPA rates will be established through a rate structure, as approved by the Energy Commission. 

PREPA will file a rate case that shall include a request for the approval of a provisional rate, which 

provisional rate shall be determined by the Energy Commission no earlier than 60 days from the date the 

petition is deemed complete by the Energy Commission. In addition, a portion of PREPA’s existing debt 

will be restructured using a securitized debt structure that will require the imposition of a surcharge (the 

“Transition Charge”) in accordance with the Recovery Plan. PREPA rates plus the Transition Charge 

will constitute the full charge to PREPA customers, but the Energy Commission shall only have 

jurisdiction to approve the methodology to calculate the Transition Charge and the Adjustment 

Mechanism. The securitization structure, including the Transition Charge and the Adjustment 

Mechanism, is described in Schedule I-B. 

1.2 Rate Process 

Energy Commission’s first rate review and approval process to be undertaken in connection with the 

Recovery Plan will follow the regular revision process of Act 57-2014, which provides for a review 

process than can take up to one hundred eighty (180) days for the Energy Commission to make a final 

determination on the petition, with the possibility of a provisional rate implemented sooner. 

1.3 Rate Structure 

1.3.1 Provisional Rate

PREPA shall file a request for the approval of a provisional rate at the same time that the permanent rate 

petition is presented. The Energy Commission has the discretion to establish a provisional rate, as 

requested by PREPA or as the Commission may determine, and it shall become effective not earlier than 

sixty (60) days from the date the petition is deemed complete by the Energy Commission. If approved, 

the provisional rate shall be effective for as long as the Commission is evaluating the permanent rate 

petition. PREPA shall request an amendment to the Revitalization Act clarifying that the provisional rate 

shall be effective until PREPA implements the permanent rate approved by the Energy Commission, 

which implementation shall not be longer than sixty (60) days, unless the Energy Commission extends 

such period as requested by PREPA. 

The provisional rate requested will be designed to cover all operating costs, capital expenditures and debt 

costs consistent with the three year permanent rate case cycle (assuming a restructuring in accordance 

with the Recovery Plan). The provisional rate will be implemented in the most expedited manner 

possible. 

1.3.2 Permanent Rate---Formula Ratemaking Mechanism 

PREPA’s rate consultant, Navigant, has recommended a Formula Ratemaking Mechanism (“FRM”) for 

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2 

setting PREPA’s rates. FRM uses a predetermined formula to determine the upcoming year’s revenue 

requirements based on the test period expenses (usually a prior year adjusted for known and/or 

measurable changes). Revenue requirements are composed of all operating costs including fuel, 

purchased power, operations and maintenance expenses, revenue funded capital expenditures, CILT, 

subsidies, taxes paid, debt service and any other costs expected to be incurred (assuming a restructuring in 

accordance with the Recovery Plan). Debt service includes principal, interest, debt service reserves 

and/or debt service coverage ratio (“DSCR”), but excludes any debt service recovered through the 

Transition Charge. The resulting revenue requirement is compared against revenues calculated using 

existing rates for the test period to determine if rates are sufficient to cover full costs of providing services 

and if not make appropriate adjustments. 

1.3.3 Revenue Requirements Overview 

The FRM addresses each component to determine the best approach to estimate the component’s costs 

during the test period. Fiscal year (“FY”) 2017 will be used as the first rate case’s test period given the 

first rate case will mainly cover FY2017. Most components are linked to FY2014 adjusted for known and 

measurable changes. Some components, such as debt and cost improvements, will be based on forward 

estimates given inputs underlying these components have altered or changed dramatically or the 

component did not exist previously. 

Fuel, purchased power, CILT and subsidies will all be pass-through components. While these 

components will be estimated to arrive at full revenue requirements for illustrative purposes, rates for 

these components will be determined by actual costs. Fuel and purchased power use estimated costs as 

both components have been very volatile in recent years. 

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3 

1.3.4 FRM Allocation to Customer Classes 

The FRM process will include a Cost of Service (“COS”) analysis to assign or allocate each relevant cost 

component on an appropriate basis to determine the relative costs to serve various customer classes with 

similar end uses and demand. The objective of the COS is to apportion the total utility costs among 

customer classes in a fair and equitable manner. 

1.4 Approval Process 

To minimize time and expense associated with rate filings and to minimize delays in adjusting rates, 

Navigant has recommended using FRM for setting rates for a period which is the greater of [nine] years 

RATE 

COMPONENT TEST YEAR SOURCE

Revenue Requirements

Operating Expense

Pass-Through Charges1

Fuel2 Fuel Pass-Through IRP FY 17 Estimate

Purchased Power PP Pass-Through IRP FY 17 Estimate

CILT/Subsidies Set Aside Subsidy Pass-Through FY 2015 Payments to Municipalities 

Non-fuel O&M Expense

Generation Expenses PREPA Base Rate FY14 adjusted to FY 2015

Transmission Expenses PREPA Base Rate FY14 adjusted to FY 2015

Distribution Expenses PREPA Base Rate FY14 adjusted to FY 2015

Customer Billing Expenses PREPA Base Rate FY14 adjusted to FY 2015

Administrative and General Expenses PREPA Base Rate FY14 adjusted to FY 2015

Post Employment Benefits PREPA Base Rate FY14 adjusted to FY 2015

Other Operating Expenses

Bad Debt Expense PREPA Base Rate FY15 Uncollected Billed Revenue (excluding CILT/Subsidies)

Energy Commission Assessment PREPA Base Rate New Assessment

Adjustments

Less: Other Income PREPA Base Rate Other Income Credited Against Revenue Requirements

Less: Improvements 3 PREPA Base Rate TBD

Plus: Rate Stabilization/Working Capital PREPA Base Rate TBD

Other Expenses

Debt and Capital Expenses

Legacy Debt Service PREPA Base Rate Restructured Debt Agreements

Revenue Funded Capital Expenditure 4 PREPA Base Rate IRP (payment timing adjusted)

Securitization5

Transition Charge Securitization Restructured Debt Agreements

Footnotes:

1 Pass-through charges are included for full rate illustrative purposes only, rates will be reflective of actual costs incurred

2 Includes estimated fuel related improvements

3 Improvements to take into account operational and administrative efficiencies/savings contemplated in the RSA that are reasonably estimated as of the date of the 

submission of the rate case as determined in good faith by PREPA

4 Excludes any capital expenditures funded by debt of other external parties

5 Securitization is a separate charge and is not part of the PREPA Revenue Requirements

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Exhibit 11 Page 170 of 198
4 

or until PREPA restores investment grade metrics. Navigant also proposes a three year rate cycle in 

which the FRM would be evaluated every three years with the Energy Commission. 

1.5 Rate Process

Assuming a three year rate cycle, the rate process will have a base year (“Base Year”) and two non-base 

years (“Non-Base Years”) in each rate cycle. The Base Year rate determination will be based on 

estimated revenue requirements while the Non-Base Year rate determinations will also include an 

adjustment for under or over recovery of rates and known and/or measurable changes from the Base Year. 

The Base Year will also include the COS analysis in the rate filing. 

1.5.1 FRM Base Year 

The FRM Base Year has the following attributes: 

• Operations, maintenance and capital expenditure expenses for all functions of the utility including 

transmission, distribution, generation and customer service; 

• Fuel, purchased power, CILT and subsidies are estimated to arrive at full revenue requirements, 

however, charges will be a pass-through and based on actual costs; 

• Capital expenditure budget to be funded from revenues for all years in rate cycle; 

• Debt service including principal, interest, funding of debt service reserves and/or DSCR; and 

• Administrative costs including those costs associated with PREPA’s restructuring. 

1.5.2 FRM Non-Base Years 

The FRM Non-Base Years have the following attributes: 

• Adjustment for under / over-recovery of costs adjusted for weighted average cost of capital 

during prior year; 

• Debt service adjustments; and 

• Known and/or measurable changes from Base Year. 

1.6 Periodic Informational Filings and Rate Adjustments 

PREPA will make periodic informational filings with the Energy Commission. After the end of each 

period, PREPA will file with the Energy Commission indicating the under / over-recovery of FRM 

components during the previous period represented by the difference between revenues collected and total 

costs incurred plus debt service requirements such as debt service reserve and/or DSCR adjusted for 

weighted average cost of capital. The periodic filings will be made within 45 days of the end of the 

applicable period and will provide year-to-date results. To the extent practicable, the periodic 

informational filings will be based off the most recent audited financials. 

Periodic rate adjustments are proposed to be undertaken as follows: 

• Pass-through components, fuel, purchased power, CILT, would be adjusted periodically but at 

least every period, except period one of the Base Year, to reflect under / over-recovery of fuel, 

purchased power, CILT and subsidies costs for the previous period plus reflect any revision in 

forecasted fuel, purchased power, CILT and subsidy costs for the upcoming period. All 

adjustments will be formulaically determined and occur automatically with Energy Commission 

review limited to application and calculation of the formulas. 

• At least every year revenue requirements will be adjusted as shown in section 1.4. All non-passthrough rate components will be reviewed via the periodic filing and may be adjusted periodically 

if it is required to meet cash obligations. 

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• All rate adjustments for all components are made concurrently to the extent possible to make the 

process less administratively burdensome for both the Energy Commission and PREPA. 

In the event of an unusual occurrence, such as a storm or other unforeseen event resulting in higher cash 

costs, PREPA may seek an emergency rate adjustment. PREPA may temporarily (for no more than 180 

days) increase the rate in the event of an emergency, including natural disasters, environmental 

emergencies and others, as contemplated under Act 21-1985. The emergency rates will be presented to 

the Energy Commission and will become effective immediately upon such filing. If such emergency rates 

need to become permanent, PREPA shall present a rate case before the Energy Commission and begin 

any process for such revision before the expiration of the 180 days. 

1.7 Billing and Rate Implementation 

PREPA bills will be redesigned to reflect the new rate structure and to provide additional transparency for 

various cost components as well as the Transition Charge. The bill redesign will require the PREPA 

billing system and reporting to be completely modified. This includes new bill designs and reporting for 

each of 51 different customer classes. The ultimate billing design will be determined by the rate structure 

and rates the Energy Commission approves as well as the securitization structure. 

The bill design will be transparent and shall include at a minimum the items listed below. Other details 

regarding costs will be published on PREPA’s website and by the Energy Commission. 

• Transition Charge; 

• Base Rate Charge; 

• Fuel and Purchased Power Cost Adjustment (true-up); and 

• CILT and Subsidies. 

The billing system modification will take several months to implement. Assuming the rate review 

process commences in March 2016 and is limited to a 180 day approval time period and the securitization 

Transition Charge and Adjustment Mechanism are established and approved by April 2016, PREPA 

estimates the provisional rate could be implemented by July 1, 2016. The new bills reflecting the 

approved permanent rate structure could be ready by no earlier than September 30, 2016. Actual timing 

will be dependent on the restructuring process, legislative change, rate review and approval process, 

implementation challenges and reporting requirements. 

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Schedule VII 

Capital Plan 

The following Capital Plan is subject to revision based on input received from regulatory agencies, if 

applicable, and through the REOI/RFP Process.1

Capitalized terms used herein and not otherwise defined shall have the meaning assigned to such 

terms in the RSA or the Recovery Plan Term Sheet, as applicable. 

A. Phase I (2016-2021) 

Investment/Action Effect 

AOGP and 

Aguirre Related 

Projects 

 Construction of AOGP 

 Conversion of Aguirre steam and 

combined cycle units to burn 

natural gas 

 Improve fuel diversity 

 MATS Compliance 

Palo Seco New 

Units 

 Construction of New Units at Palo 

Seco 

 MATS compliance 

 Improve renewable integration 

capability 

 Improve energy efficiency 

 Maintain electric system stability 

Limited 

Operation of 

Existing Units 

 Limited use of oil-fired units at 

San Juan, Costa Sur, Palo Seco 

 MATS compliance 

 Limited use of inefficient/old units 

 Maintain electric system stability 

under emergency conditions 

T&D 

 New equipment (i.e. STATCOMs, 

capacitors, etc.) and installations 

in transmission and distribution 

system 

 Modernize aging infrastructure 

 Improve system reliability and 

increase flexibility 

 Facilitate renewable integration and 

trends in distributed generation 

 

 

1

Subject to modifications as required to reach a consent decree with EPA and the Puerto Rico Energy 

Commission’s approval of the PREPA IRP. 

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B. Phase II (after 2021)2

Investment/Action Effect 

Fleet Upgrade 

 Repowering existing units and/or 

installation of new combined 

cycle units at Aguirre (Steam and 

CC) and Costa Sur 

 Improve energy efficiency

 Replace aging infrastructure

 Improve renewable integration 

capability

 

2

 Phase II capital plan as well timing could be amended or modified due to circumstances changing. 

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Schedule VIII 

REOI / RFQ / RFP Indicative Plan 

The Request for Expressions of Interest (“REOI”), Request for Qualification (“RFQ”) and Request for 

Proposals (“RFP”) plans are indicative and are subject to revisions based on a number of factors, 

including without limitation enactment of legislative reforms and approval and revisions of PREPA’s 

Integrated Resource Plan. Each plan’s timing is dependent on timing of previous processes completion. 

Capitalized terms used herein and not otherwise defined shall have the meaning assigned to such terms in 

the RSA or the Recovery Plan Term Sheet, as applicable. 

Proposed Timeline Work Stream 

 Q3/Q4 2015 – REOI 

Process 

− Preparation for Request for Expressions of Interest (“REOI”) 

− PREPA designated representatives from various functional areas collect 

due diligence materials and populate REOI data room 

− Secure necessary authorizations and launch REOI 

− Preparation and execution of confidentiality agreements for REOI 

participants 

− Receipt and review of REOI responses with proposals for asset 

modernization projects 

− Respond to REOI questions and inquiries 

− Supplement REOI data room as appropriate 

− Identify potential RFP market participants for market soundings (to be 

supplemented and informed by participants in REOI process) 

Q1 2016- RFQ/RFP 

Process 

− Define scope of RFQ and RFP based on PREPA objectives and REOI 

responses, if applicable 

− Identify any roadblocks, authorizations or limitations for RFQ/RFP 

processes and proposed structure 

− Prepare RFQ and associated ancillary documents, to include: 

 Overview of RFQ and RFP process, rules, procedures and schedule 

 Rules of submission and required submission forms 

 Required respondent structure (addresses conflicts of interest; rules 

for consortia) 

 Confidentiality procedures 

 Selection objectives (technical and financial criteria) 

 Protest procedures 

 Reserved PREPA rights 

− Prepare RFP and associated ancillary documents, to include: 

 Detailed outline of scope of generation units being sought 

 If relevant, description of existing facility or facilities and historical 

operating performance 

 Required technical and performance criteria for new units 

 Description of RFP rules and procedures 

 Outline of terms and conditions 

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 Selection objectives 

 Prepare term sheet and contract for RFP 

− Identify, collect and upload information to RFP data room 

− Prepare and finalize RFQ materials 

− Create process for requests for information 

− Secure necessary authorizations for launching RFQ 

− Launch RFQ Process 

− Finalize contract to be included in RFP 

− Draft and finalize confidentiality agreements for RFP participants 

Q2 2016 − Complete RFP data room 

− Prepare RFP marketing materials including information memorandum 

and presentations to be given by PREPA 

− Receive and evaluate RFQ responses, announce RFP participants

− Launch RFP 

− Execute confidentiality agreements with RFP participants and allow 

access to RFP data room 

− Respond to due diligence requests, and supplement due diligence 

materials as appropriate 

− Conduct site visits as appropriate 

− Receive and review first round of comments on contract from RFP 

participants 

Q3 2016 − Receive initial RFP proposals and contract revisions 

− Refine scope of RFP based on initial proposals and prepare revised RFP 

contract based on submissions if applicable 

− Provide revised RFP contract to RFP participants 

Q4 2016 − RFP participants provide final proposals and comments on RFP contract 

− Evaluate of RFP submissions and identify preferred bidder(s) 

− Revise RFP contract 

− Provide final bid version of RFP contract to preferred bidder(s) 

− RFP participants submit final bids and contracts 

− Negotiate and finalize bid and contract 

− Present preferred bidder(s) and gain any necessary approvals for 

preferred bidder(s) and contract 

− Announce preferred bidder, if any 

− Commence closing 

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Schedule IX 

Legislative Reform Package 

“PREPA REVITALIZATION ACT” 

This outline (in addition to Schedule I-A) summarizes key legislative reform measures intended 

to implement the Recovery Plan contemplated by the Restructuring Support Agreement and to 

fulfill the public policy established by the Puerto Rico Energy Transformation and RELIEF Act, 

Act No. 57-2015. 

A. Governance 

Proposed Amendments: 

PREPA’s Organic Act would be amended to provide as follows: 

1. Board Composition:

1

a. 7 Board members – must include: (i) 1 elected consumer representative; and 

(ii) 6 independent members appointed by Governor from a 10-person list of 

candidates prepared according to objective criteria by a Search Firm, which 

list must include, to the extent available, at least 5 Puerto Rico residents 

(Governor may request additional candidates who meet such criteria). Board 

members appointed by Governor with input from the President of the Senate 

and the President of the House of Representatives. “Search Firm” shall mean a 

recognized firm with experience in selecting board members in the energy 

industry and institutions of similar size, complexity and risks as PREPA. 

b. For the Board to take any action, at least four (4) members shall have been 

appointed. 

c. Authorize the establishment of market based compensation commensurate 

with that received by board members of institutions in the energy industry of 

similar size, complexity and risks as PREPA, taking into account PREPA’s 

status as a public corporation and in any event sufficient to attract qualified 

candidates. 

d. All directors (including elected consumer representative) must meet the Final 

NYSE Corporate Governance Rules for director independence. 

e. Directors shall not be deemed to be public officers (funcionarios públicos) for 

purposes of reporting income and other financial disclosures, including under 

Act No. 1-2012. 

 

1

 Consumer representative may be increased to two (2) with a commensurate decrease in the number of 

independent members. 

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f. Require an evaluation of the Board with respect to corporate governance 

matters PREPA at least once every three (3) years by a recognized corporate 

governance consultant with extensive experience advising board of directors 

of companies (other than PREPA) with similar risks, complexities and income 

as. PREPA shall publish a public version of the consultant’s report, including 

findings and recommendations by the consultant. The Governor will receive a 

copy of the full report. 

g. Within the first year of being constituted, the Board shall adopt a formal 

document establishing the mission, vision, values, and strategic goals of the 

Authority, in accordance with the public policy enacted by Act No. 57-2014, 

as amended, and the Restructuring Agreement. The Board shall revise said 

document annually. 

2. Replacement Mechanics: 

a. Initial Board Members to have staggered terms of 5 and 6 years. Thereafter, 

members to be appointed for a term of five years, with a limit of three terms 

per Board member. In the event of death, resignation or incapacity of an 

independent member, a replacement will need to be appointed within 6 

months of the date on which the vacancy occurs and the Governor may use the 

most recent list of independent board members presented by a Search Firm. 

b. Governor appointed Board members shall be replaced by Governor, chosen by 

the Governor from a 10-person list of candidates as provided above, with 

input from the President of the Senate and the President of the House of 

Representatives. 

3. Suspension of Process of Election for Independent Members: 

a. The use of a Search Firm to provide a list of candidates for independent 

members to be presented to the Governor, will remain in effect for fifteen (15) 

years, after which period of time the Legislative Assembly will assess whether 

the mechanism of election shall be extended or amended. Absent legislative 

action, said mechanism shall remain in effect until it is established otherwise 

by legislative action. 

4. Quorum: 

a. Quorum for meetings requires at least 4 members. 

b. Decisions will be made by majority of members present at a meeting (but 

without taking into account abstaining votes). 

5. Faculties: 

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a. Provide authorization to the Board to authorize the use competitive 

negotiated processes (RFPs), rather than formal bids, for certain purchases and 

contracts, beyond professional services or fuel procurement, to foster genuine 

competition, avoid collusion, and obtain for PREPA the best possible price 

from as many sources as possible. 

b. PREPA Board to implement the savings set forth in the RSA and in the rate 

case that will be presented by PREPA to the Energy Commission. 

6. Prohibited Activities; Basis for Removal:

a. Specify prohibited political activities applicable to Board members similar to 

Federal Hatch Act or PRASA Enabling Act: 

(i) Impose limitations on participation in political campaigns, fundraising activities or contributing to political parties or candidates; 

(ii) Cannot hold any elected, administrative or directive positions in 

political parties; 

(iii) Cannot hold the position if in the past it held any elected, 

administrative or directive positions in political parties; 

(iv) Cannot violate any of the remaining provisions in Section 4 of Act 

No. 83 regarding requirements to be a member. 

b. Establish specific basis for removing from their positions, strictly based on 

violation to the prohibitions stated above, and non-performance, unethical 

behavior or other improper actions. 

7. Management:

a. Incorporate positions for “executive officers” and grant the board the power 

to establish specific professional criteria that shall be used to select upper and 

key middle management positions; compensation shall be comparable to 

professionals in similar positions in electric utility companies in the US of 

similar size, complexity and risks as PREPA. 

b. Specify prohibited activities for upper and key middle management, as stated 

above for Board members. 

c. Establish specific basis for removing upper and key middle management, as 

stated above for Board members. 

8. [Reserved] 

9. D&O Liability: 

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Add the following provisions (to foster the recruitment of the candidates needed 

under the new governance structure): “Without impairment to the rights pursuant 

to the provisions of §§ 3077-3092a of Title 32, the Board and its past, current or 

future individual directors, and the officers, agents or employees of the Authority 

shall not incur civil liability for any action taken in good faith in the performance 

of their duties and responsibilities pursuant to the provisions of this chapter, 

provided there has been no conduct that constitutes a crime or gross negligence, 

and they shall be indemnified for any costs incurred in connection with any claim 

for which they enjoy immunity as provided hereunder. The Board and its 

individual directors, and officers, agents or employees of the Authority shall also 

be fully indemnified for any civil liability adjudicated under the laws of the 

United States of America for any action taken in good faith in the performance of 

their duties and responsibilities pursuant to the provisions of this chapter, 

provided there has been no conduct that constitutes a crime or gross negligence.” 

B. Electricity Rates and Rate Structure 

Proposed Amendments: 

The Energy Relief Act would be amended as follows: 

I. Rate resulting from negotiation with creditors under the Restructuring Agreement: 

1. Clarify that Energy Commission can approve new rate structure proposed by PREPA 

as agreed in the RSA without having to conduct the initial rate review contemplated 

by Act 57-2014. 

2. Expedited and criteria-specific process mandated to the Energy Commission to 

approve or reject the rate structure: See Recovery Plan Term Sheet Schedule I-A

II. With respect to prospective “ordinary” rate revision processes: 

1. Clarify that PREPA and the Energy Commission may hold joint hearings to 

consider prospective rate adjustments proposed by PREPA. No need for each one 

to hold separate hearings for the same purpose. 

2. Clarify that if the Energy Commission, on its own, commences a rate adjustment 

review process, PREPA is not required to conduct hearings. 

3. Clarify that if OIPC Director has not been appointed or no OIPC resources are 

available (staff/members) the OIPC’s functions would instead be performed by 

the a person designated by the Governor within the same rate revision process. 

4. PREPA may temporarily (for no more than 180 days) increase the rate in the 

event of an emergency, including natural disasters, environmental emergencies 

and others, as contemplated under Act 21-1985. The emergency rates will be 

presented to the Energy Commission and will become effective immediately upon 

such filing. As is contemplated under Act 21, if such emergency rates need to 

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become permanent, PREPA shall present a rate case before the Commission and 

begin any process for such revision before the expiration of the 180 days. 

III. Transparent Bill

1. PREPA and Commission to establish a plan for the implementation of the new 

transparent bill to include, at a minimum, the following line items: 

a. Securitization Charge 

b. Base Rate Charge 

c. Fuel and Purchased Power Cost Adjustment 

d. CILT and Subsidies 

2. The current invoice form shall continue to be valid until the first rate review process 

is finalized and, within 180 days after the rate structure presented to the Commission 

is approved, PREPA shall implement the new transparent bill. 

3. Clarify that the calculation of the Transition Charge and the Adjustment Mechanism 

will be effective in accordance with the Restructuring Order issued by the 

Commission, either in the current bill or as part of the new transparent bill. 

IV. Transition Charge 

See Recovery Plan Term Sheet Schedule I-A

C. Securitization For Refinancing PREPA Debt 

See Recovery Plan Term Sheet Schedule I-A 

D. Collection of Receivables 

Proposed Amendments: 

1. Government Agencies and Public Corporations2

PREPA’s Organic Act is amended, or changes are included as part of a current bill under 

consideration by the House of Representatives to provide that any public corporation and 

agency of the central government with an outstanding debt to PREPA, shall enter into a 

payment plan. If the agency or public corporation does not comply with these payments, 

PREPA is authorized to curtail or disconnect.

 

2

 These provisions will be incorporated into another bill currently in the House of Representative and already 

passed at the Senate. 

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2. Private Consumers 

PREPA’s Organic Act would be amended to authorize PREPA as follows:

1. PREPA shall have the power to report to the credit bureaus delinquent residential 

customers who have disputed or undisputed debt outstanding with PREPA of 

more than sixty (60) days without a payment plan after sending one collection 

letter. Indications of past due amounts in at least two current invoices and one 

separate collection letter warning that credit bureaus will be informed if 

delinquent debt is not paid within the period specified in the letter, shall be 

considered reasonable and sufficient collection mechanisms. 

2. PREPA may not deny service to any new customer (to the extent that such 

customer or entities incorporated or controlled by such customer do not currently 

owe payment to PREPA under prior contracts), but shall have the power to 

conduct credit checks of customers requesting new accounts and to require 

security deposits from new customers depending on their risk level based on 

credit scores. 

3. Amend Act 57-2014 to simplify the dispute process, establish requirements to 

deter frivolous claims and correct loopholes currently being used by customers to 

eternally challenge invoices and avoid disconnection. 

a. Disputes and claims (i) must relate to the actual electric bill as applied to a 

customer (i.e., matters such as incorrect meter reads, incorrect consumption 

calculations, incorrect rate applicability, or incorrect accounting of payments 

made by customer) and (ii) cannot be used to challenge the rate structure in 

general or the securitization charge. 

E. Issuance of Debt by PREPA 

Proposed Amendments: 

PREPA’s Organic Act would be amended to: 

1. Provide that the Energy Commission must submit any recommendation or 

comment to GDB with respect to PREPA debt no later than ten (10) days 

following a notification by the GDB about a proposed debt issuance, except that 

the Energy Commission shall not have any jurisdiction to make a 

recommendation or comment with respect to any debt issued by PREPA in 

connection with the Restructuring Transactions. 

2. Authorize PREPA to create liens over its assets, except land, solely to comply 

with federal requirements to obtain financing/guaranty from the U.S. Department 

of Energy for AOGP and in any event subject to applicable contractual limitations 

including those set forth in the Trust Agreement and each of the Credit 

Agreements (in each case, as amended). 

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F. Authority to conduct RFP processes for Operation and Maintenance and other 

Outsourcing Public Private Agreements for Modernization of Infrastructure and 

Expansion/Replacement Capacity (including with IPPs), with respect to (i) 

Transmission and Distribution Facilities and (ii) Existing and New Generation 

Facilities. 

Proposed Amendments: 

PREPA’s Organic Act, the Energy Relief Act and the PPP Act would be amended to: 

1. Specifically authorize PREPA to enter into any kind of Public-Private Partnership 

(“PPP”) agreements permitted by Act No. 29-2009, including PPP agreements for 

long-term land leases, the development, concession, financing, construction, 

operation and/or maintenance of all or part of its electrical system or any other 

related facility/project. Execution of said contracts shall not require prior approval 

from the Energy Commission or PPP Authority. The authority shall have 

exclusive jurisdiction to run the RFP process for said PPPs, unless the Authority 

requires assistance from the PPP Authority or the Commission, as determined by 

the Authority. 

2. Eliminate Energy Commission jurisdiction to carry out procurement processes 

related to the modernization of PREPA generation fleet and approval of selection 

and execution of related power purchase agreements. 

3. The Authority shall be in charge of running the process of publication, evaluation 

and negotiation of RFPs, as provided by the Board and under surveillance of the 

Partnership Committee, which will be integrated by two representatives of the 

Authority, one representative of the Government Development Bank, one 

representative of the Energy Public Policy Office and one representative of the 

Authority for the PPP. 

4. Expressly provide PREPA with the PPP procurement process requirements for a 

fair and transparent bidding and awarding of contracts, similar to the PPP Act but 

directed by PREPA. The amendment would, among other criteria as may be 

discussed with stakeholders, include what is provided by Section 8 (Partnership 

Committee), Section 9 (Procedure for the Selection of Proponents and Award of 

Partnerships), Section 10 (Partnership Contract, except for the power granted to 

contractors to fix rates provided in subsection (c)), Section 12 (Tax Liability and 

Benefits), Section 19 (Inapplicability of Certain Laws), Section 20 (Judicial 

Review Procedures). 

5. As part of any RFP process, PREPA would evaluate and consider alternative 

means to achieve the objectives of the RFP, including by not bringing private 

capital to finance the capital projects being considered, and it will pursue the 

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alternative that best serves its customers in terms of improving the cost, reliability 

and quality of its services to its customers. 

6. IPPs, would remain subject to Energy Commission regulation and oversight once 

the power plant comes on-line as an “energy company” under Act 57-2014. 

G. Efficiency and Net Metering 

Amend applicable laws to: 

1. Revise Section 2.9 of Act 57-2014 regarding achieving “high efficiency” to 

provide that the Energy Commission shall ensure that the IRP selected plan 

guarantees efficiency in the generation of power. 

2. Revise provisions on renewable RPS: Grant legislative waiver of 5 years and 

include hydroelectric power and distributed generation generated as counting 

towards compliance with RPS. 

3. Revise Net Metering Act 114-2007 as follows: 

a. Net metering customers will be compensated at a rate that will not trigger any 

cross subsidies that would economically harm other customers. Credits to net 

metering customers will be for the entire production for their systems (behind 

the meter consumption and amount exported to the grid) based on PREPA’s 

marginal cost.. In accordance with a revised mechanism and calculation of 

amounts charged and credited, Section 4 and Section 5 of Law 114 will be 

amended. Any PREPA regulation or existing agreement will be subject to 

the new established rate design. 

H. CILT and Collections from Municipalities3

PREPA’s Organic Act would be amended to provide as follows: 

1. The legislation will ratify that the provisions regarding CILT reform included in 

Act 57-2014 shall become effective and be applicable to municipal accounts 

corresponding to FY 2015 with respect to all aspects of CILT. However, to assist 

any municipality that may have exceeded its CILT cap in FY 2015 and owes 

PREPA an amount that cannot be paid in its entirety as part of the FY 2016 

budget, an alternative mechanism shall be granted to come current with its debt, 

 

3

 Proposed amendments assume that the Energy Commissions pending CILT regulation is approved and that 

PREPA’s suggestions are incorporated therein.

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including a separate payment plan or reduction of its Municipal CILT Cap for FY 

2016. 

2. Eliminate rebates of 40% if the savings are higher than 5%. The alternative is that 

the costs of such rebates shall be paid by clients as pass-through. 

3. Municipalities must pay for amounts consumed in excess of CILT cap in 

currency, not by way of compensation or set-off. 

4. The reference to 11% of gross revenues from fuel and energy purchases to 

calculate the amount from which to pay CILT and other subsidies and reserves, is 

replaced by CILT becoming a pass-through cost payable directly by customers. 

However, municipalities’ consumption covered by the CILT continues to be 

capped as per Act 57-2014. Provision requiring 2% for stabilization fund is 

eliminated. 

5. CILT will be expressly included as a line item in the bill to customers as part of 

the revised rate structure. 

6. Include that if after collection efforts by PREPA in accordance with Energy 

Commission CILT regulation (which includes disconnection) a municipality still 

owes amounts to PREPA over the Municipal CILT Cap, PREPA shall notify 

CRIM and the CRIM shall deduct from any amounts otherwise payable by CRIM 

for the benefit of such municipality and remit such amounts to PREPA. 

7. If a municipality still owes amounts and neither the municipality nor CRIM has 

remitted such amounts within thirty (30) days from PREPA’s notification to the 

CRIM, PREPA shall notify GDB, and GDB shall include such amounts in the 

calculation of the delinquent municipality’s borrowing margin, so that it is not 

available for other financing. 

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Annex E 

Bond Potential Defaults1

1. Any default or event of default under section 802(h) of the Trust Agreement as a 

result of PREPA’s failure to comply with or perform its obligations under section 501 of the 

Trust Agreement or any similar provision of any other Bond Document, insofar as such 

noncompliance or failure is a result of PREPA’s failure to establish and enforce reasonable 

regulations in relation to the collection of bills for services and facilities provided by PREPA. 

2. Any default or event of default under section 802(h) of the Trust Agreement as a 

result of PREPA’s failure to comply with or perform its obligations under section 502 of the 

Trust Agreement or any similar provision of any other Bond Document, insofar as such 

noncompliance or failure is a result of PREPA’s failure to revise the rates and charges for the 

services and facilities furnished by PREPA, or the result of PREPA’s failure to revise its 

regulations in relation to the collection of bills for such services and facilities. 

3. Any default or event of default under section 802(h) of the Trust Agreement as a 

result of PREPA’s failure to comply with or perform its obligations under section 503 or section 

505 of the Trust Agreement or any similar provision of any other Bond Document, insofar as 

such noncompliance or failure is a result of PREPA’s use of monies from the General Fund to 

service its debt under its line of credit with Scotiabank and/or its line of credit with Solus in 

accordance with the Restructuring Support Agreement in effect as of the Effective Date. 

4. Any default or event of default under section 802(h) of the Trust Agreement as a 

result of PREPA’s failure to comply with or perform its obligations under section 504 of the 

Trust Agreement or any similar provision of any other Bond Document, insofar as such 

noncompliance or failure is a result of PREPA’s failure to adopt and file a budget that is 

consistent with the procedural and/or substantive requirements of section 504 of the Trust 

Agreement or any such similar provision contained in the Bond Documents, as applicable. 

5. Any default or event of default under section 802(h) of the Trust Agreement as a 

result of PREPA’s failure to comply with or perform its obligations under section 506 of the 

Trust Agreement or any similar provision of any other Bond Document, insofar as such 

noncompliance or failure is a result of PREPA’s failure to transfer monies from the General 

Fund to the Revenue Fund in a manner consistent with section 506 of the Trust Agreement or 

any such similar provision contained in the Bond Documents, as applicable. 

6. Any default or event of default under section 802(h) of the Trust Agreement as a 

result of PREPA’s failure to comply with or perform its obligations under section 507 of the 

Trust Agreement or any similar provision of any other Bond Document, insofar as such 

noncompliance or failure is a result of PREPA’s failure to transfer monies from the Revenue 

 

1

 Capitalized terms used in this Annex E that are not defined in the Restructuring Support Agreement shall have the 

meanings ascribed to them in the Trust Agreement. 

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2 

Fund to the Sinking Fund in a manner consistent with section 507 of the Trust Agreement or any 

such similar provision contained in the Bond Documents, as applicable. 

7. Any default or event of default under section 802(h) of the Trust Agreement as a 

result of PREPA’s failure to comply with or perform its obligations under section 702 of the 

Trust Agreement or any similar provision of any other Bond Document, as applicable, insofar as 

such noncompliance or failure is a result of PREPA’s failure to operate in an efficient and 

economical manner, maintain the system in good repair and sound operating condition (including 

by making all necessary repairs, renewals and replacements), or as a result of PREPA’s 

employment of more persons than are necessary and non-compliance with all valid and 

applicable rules, regulations, and orders. 

8. Any default or event of default under section 802(h) of the Trust Agreement as a 

result of PREPA’s failure to keep accurate records or complete and file its audited financial 

statements within the time periods specified in section 710 of the Trust Agreement or any similar 

provision of any other Bond Document; provided that the failure to cause to be filed with the 

Trustee and the Consulting Engineers the monthly reports required by section 710 of the Trust 

Agreement shall not be a Bond Potential Default. 

9. Any default or event of default under Section 802(i) of the Trust Agreement. 

10. Any default or event of default under the Bond Insurance Agreements as a result 

of PREPA’s failure to pay or reimburse the Insurers for any and all charges, fees, costs and 

expenses incurred by the Insurers in connection with the Bond Insurance Agreements. 

11. Any default or event of default under the Bond Insurance Agreements as a result 

of PREPA’s failure to comply with any reporting requirements to the Insurers under the Bond 

Insurance Agreements. 

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1 

Annex F 

Scotiabank Potential Defaults1

1. Any Default or Event of Default under clause (d) of Article VII of the Scotiabank 

Credit Agreement, solely with respect to any failure to comply with Section 5.02(a) of the 

Scotiabank Credit Agreement in relation to PREPA’s obligation to give notice within 10 days of 

(a) the change in PREPA’s Senior Debt rating by Moody’s or S&P’s (an Adjustment Event), 

specifically (i) Moody’s change of its rating of PREPA’s Senior Debt to “Ba2” on February 7, 

2014, (ii) S&P’s change of its rating of PREPA’s Senior Debt to “BBB-“ on June 18, 2014 and 

(b) a Default due to such change in Senior Debt rating resulting in the counterparties under 

certain interest rate swap agreements or Solus under the Solus Credit Agreement, each 

constituting Material Indebtedness under the Scotiabank Credit Agreement, having the right to 

cause the corresponding Indebtedness to become due prior to their respective scheduled 

maturities under the Scotiabank Credit Agreement. 

2. Any Default or Event of Default under clause (f) of Article VII of the Scotiabank 

Credit Agreement in connection with any defaults listed on (i) Annex E to the Restructuring 

Support Agreement and (ii) Annex G to the Restructuring Support Agreement. 

3. Any Default or Event of Default under clause (g) of Article VII of the Scotiabank 

Credit Agreement in connection with any defaults listed on (i) Annex E to the Restructuring 

Support Agreement and (ii) Annex G to the Restructuring Support Agreement. 

4. Any Default or Event of Default under sub-clause (vi) of clause (i) of Article VII 

of the Scotiabank Credit Agreement (solely with respect to relief under the Recovery Act). 

5. Any Default or Event of Default under clause (j) of Article VII of the Scotiabank 

Credit Agreement. 

6. Any Default or Event of Default under clause (a) of Article VII of the Scotiabank 

Credit Agreement as a result of PREPA’s failure to pay any principal of or default interest on 

any Advance during the Support Period. 

7. Any Default or Event of Default under clause (b) of Article VII of the Scotiabank 

Credit Agreement as a result of PREPA’s failure to pay any fees incurred by advisors to the 

Administrative Agent and the Scotiabank Lenders during the Support Period (other than fees 

required to be paid pursuant to the Restructuring Support Agreement). 

 

1

 Capitalized terms used in this Annex F that are not defined in the Restructuring Support Agreement shall have the 

meanings ascribed to them in the Scotiabank Credit Agreement. 

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1 

Annex G 

Solus Potential Defaults1

1. Any Default or Event of Default under clause (d) of Article VII of the Solus 

Credit Agreement, solely with respect to any failure to comply with Section 5.02(a) of the Solus 

Credit Agreement in relation to PREPA’s obligation to give notice within 10 days of (a) the 

change in PREPA’s Senior Debt rating by Moody’s or S&P’s (an Adjustment Event) and (b) a 

Default due to such change in Senior Debt rating resulting in the counterparties under certain 

interest rate swap agreements or the Scotiabank Lenders under the Scotiabank Credit Agreement, 

each constituting Material Indebtedness under the Solus Credit Agreement, having the right to 

cause the corresponding Indebtedness to become due prior to their respective scheduled 

maturities under the Solus Credit Agreement. 

2. Any Default or Event of Default under clause (f) of Article VII of the Solus 

Credit Agreement, in connection with any default listed on (i) Annex E to the Restructuring 

Support Agreement and (ii) Annex F to the Restructuring Support Agreement. 

3. Any Default or Event of Default under clause (g) of Article VII of the Solus 

Credit Agreement, in connection with any default listed on (i) Annex E to the Restructuring 

Support Agreement and (ii) Annex F to the Restructuring Support Agreement. 

4. Any Default or Event of Default under sub-clause (vi) of clause (i) of Article VII 

of the Solus Credit Agreement (solely with respect to relief under the Recovery Act). 

5. Any Default or Event of Default under clause (j) of Article VII of the Solus Credit 

Agreement. 

6. Any Default or Event of Default under clause (a) of Article VII of the Solus 

Credit Agreement as a result of PREPA’s failure to pay any principal of or default interest on 

any Advance during the Support Period. 

7. Any Default or Event of Default under clause (q) of Article VII of the Solus 

Credit Agreement as a result of the downgrading of the long term rating of the Senior Debt, 

specifically (i) Moody’s change of its rating of PREPA’s Senior Debt to “Caa2” on July 1, 

2014, (ii) S&P’s change of its rating of PREPA’s Senior Debt to “CCC“ on July 31, 2014. 

8. Any Default or Event of Default under clause (b) of Article VII of the Solus 

Credit Agreement as a result of PREPA’s failure to pay any fees incurred by advisors to Solus 

during the Support Period (other than fees required to be paid pursuant to the Restructuring 

Support Agreement). 

 

1

 Capitalized terms used in this Annex G that are not defined in the Restructuring Support Agreement shall have the 

meanings ascribed to them in the Solus Credit Agreement. 

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Execution version 

ANNEX H 

PUERTO RICO ELECTRIC POWER AUTHORITY

JANUARY PAYMENT TERM SHEET

The rights of all parties are subject to the agreement and execution of a bond purchase agreement and other 

definitive documentation in all respects. This January Payment Term Sheet does not address all material terms that 

would be required in definitive documents, including the bond purchase agreement. This January Payment Term 

Sheet does not constitute (nor shall it be construed as) an offer with respect to any securities. 

Capitalized terms used but not defined herein shall have the meanings ascribed to them in the Restructuring Support 

Agreement (including the Recovery Plan Term Sheet (as defined therein)) and that certain Trust Agreement, dated 

as of January 1, 1974, as amended and supplemented, between PREPA and U.S. Bank National Association, as 

successor trustee (the “Trustee” and, with respect to said trust agreement, as amended, the “Trust Agreement”).

PREPA: Puerto Rico Electric Power Authority (“PREPA”) 

Monolines: National Public Finance Guarantee Corporation (“National”); and Assured 

Guaranty Corp. and Assured Guaranty Municipal Corp. (together, “Assured”, 

and together with National, the “Monolines”). 

Participating 

Holders: 

Members of the Ad Hoc Group (each, a “Participating Holder”, and together 

with PREPA and the Monolines, the “Parties”). 

Allocation of 

January Interest 

Payment:

The January 1, 2016 interest payment in the amount of $196 million (the 

“January Interest Payment”) shall be paid from the following sources, after 

giving effect to the transactions described in this January Payment Term Sheet: 

(1) $25 million to be paid from the BABs interest account & Capitalized 

Interest Account; 

(2) From the General Fund in an amount equal to $115 million1

 which is 

the amount of proceeds of Purchased Bonds purchased by the 

Monolines and Participating Holders in accordance with the terms set 

forth below; and 

(3) An additional no less than $55 million2

 to be paid from the General 

Fund. 

PREPA Obligations: Transfers for January Interest Payment 

Subject to the conditions set forth below, on December 31, 2015, PREPA will 

 

1

 Aggregate proceeds of Purchased Bonds to equal the amount necessary to cover the aggregate amount of interest 

(net of payments from the BABs interest account to the BABs bonds and the Capitalized Interest Account to the 

Series 2013A bonds) due on January 1, 2016 with respect to (i) Uninsured Bonds held by members of the Ad Hoc 

Group, and (ii) the Insured Bonds insured by the Monolines. 

2

 Amount necessary to cover (i) Syncora’s, (ii) Solus’s and (iii) Non-Supporting Uninsured Holders’ portion of the 

January Interest Payment, net of payments from the BABs interest account to the BABs bonds and the Capitalized 

Interest Account to the Series 2013A bonds. 

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 2 

transfer $171 million3 from the General Fund to the Bond Service Account 

with monies on deposit therein for debt service due on the Bonds on January 1, 

2016. 

Execution of other agreements 

No later than December 23, 2015, PREPA will enter into an Amended and 

Restated Restructuring Support Agreement with the Monolines and the 

Holders. No later than December 29, PREPA will execute the Bond Purchase 

Agreement (as defined below). 

Purchasers’ 

Obligations: 

Bond Purchase Agreement4

(1) No later than December 29, 2015, the Monolines and Participating 

Holders (in this context, collectively, the “Purchasers”) will enter into 

a binding commitment (the “Bond Purchase Agreement”) to 

purchase Bonds (the “Purchased Bonds”) in the aggregate principal 

amount of $115 million on the Funding Date (as defined below), at a 

price equal to the face amount of Purchased Bonds (the “Purchase 

Price”). The Purchasers’ obligation under the Bond Purchase 

Agreement to pay the Purchase Price will be conditioned upon the 

events listed in “Conditions Precedent to Purchasers’ Obligations” and 

“Additional Conditions Precedent to Purchasers’ Obligations” below. 

(2) The Participating Holders shall purchase Purchased Bonds for $65 

million and the Monolines shall purchase Purchased Bonds for $50 

million5

 on the Funding Date (as defined below). 

The Purchased Bonds will be fully negotiable, freely transferable on 

issuance subject to the RSA, and have the following key terms: 

a) Same priority, remedies and acceleration rights as existing 

Bonds. 

b) Maturity date of July 1, 2019. 

c) Mandatory early redemption upon the terms and conditions 

 

3

 Amount to be transferred from General Fund to include amount necessary to cover the entire January Interest 

Payment, other than amounts covered by BABs interest account & Capitalized Interest Account. 

4

 Securitization Term Sheet to be amended to clarify that (i) Purchased Bonds are not taken into account for 

purposes of calculating the $700 million threshold set forth under “Minimum Participation Rate” and (ii) holders 

of Purchased Bonds shall not be required to tender the Purchased Bonds in the Exchange Offer described therein 

and shall instead receive the treatment described herein. 

5

 Each Participating Holder’s and Monoline’s purchase rights and obligations shall be based on its pro rata share of 

the aggregate amount of interest (net of interest on the Series 2015A bonds and payments from the BABs interest 

account to the BABs bonds and the Capitalized Interest Account to the Series 2013A bonds) due on January 1, 

2016 and shall not exceed such pro rata share. For the avoidance of doubt, no Purchaser shall be liable as a result 

of the failure of any other Purchaser to perform its obligations, including its obligation to purchase Purchased 

Bonds. 

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 3 

described below. 

d) Upon the Closing Date (as defined in the RSA), holders of the 

Purchased Bonds shall have their bonds (which shall thereafter 

be referred to as “Defeased Purchased Bonds”) economically 

defeased through issuance of January Mirror Bonds (as 

defined below). No later than the Election Date (as defined 

below), holders of the Defeased Purchased Bonds may elect to 

exchange their Defeased Purchased Bonds directly into 

Securitization Bonds with economic terms as set forth below 

at 100% of principal amount. Unless any holder of Defeased 

Purchased Bonds has affirmatively elected to exchange its 

Defeased Purchased Bonds in the Exchange Offer on or prior 

to the Election Date, it will be deemed that such holder has 

elected to keep its Defeased Purchased Bonds. 

e) Interest rate: 10% per annum, payable in cash semi-annually 

on January 1 and July 1. 

f) Each Purchaser may elect to have the Bonds beneficially 

owned by such Purchaser insured, with the premium to be 

agreed upon by the Purchaser and the insurer (such premium 

to be paid by the Purchaser from interest on the Bonds or 

otherwise by the Purchaser). 

Conditions Precedent 

to Purchasers’ 

Obligations 

The Bond Purchase Agreement shall provide that the Purchasers shall be 

obligated to purchase the Purchased Bonds on the Funding Date. PREPA shall 

have the right to decide not to issue the Purchased Bonds in its discretion at 

any time before the Funding Date, upon delivery of written notice to each of 

the Purchasers; provided, however, that such decision by PREPA shall not 

permit it to terminate the RSA or alter its obligations thereunder on the basis 

that the Purchasers have not purchased the Purchased Bonds. As used herein, 

the “Funding Date” refers to a date mutually agreeable to PREPA and the 

Purchasers that is no less than 10 calendar days after satisfaction or waiver (in 

each Purchaser’s sole discretion) of all the conditions precedent, including the 

Funding Trigger Date; provided that the Funding Date shall not be later than 

February 26, 2015. 

The Purchasers’ obligation to purchase on the Funding Date shall be subject to 

all the terms and conditions listed herein (including, for the avoidance of 

doubt, the transfers for and payment in full of the January Interest Payment), 

the terms and conditions listed in the Bond Purchase Agreement, and the 

following additional terms and conditions:6

(1) Sidley Austin LLP, Bond Counsel, shall have issued an unqualified 

opinion in form and substance satisfactory to the Purchasers and to the 

Authority as to the validity and enforceability of the Purchased Bonds 

and of the Trust Agreement Amendment (as defined herein) and 

 

6

 The Bond Purchase Agreement shall provide that it shall terminate upon the automatic termination of the RSA or 

the occurrence or failure to occur (as applicable) of the following conditions: conditions (2), (5), (7), or (9). 

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 4 

consistent with the standards set forth herein. The approving opinion 

to be rendered on the Funding Date by said Bond Counsel shall 

explicitly state that no opinion is expressed regarding the treatment of 

interest on the Purchased Bonds for Federal income tax purposes. 

(2) PREPA shall have made the transfers for and payment in full of the 

January Interest Payment due on the Bonds. 

(3) PREPA shall not have breached the Bond Purchase Agreement. 

(4) The applicable Purchaser shall not have withdrawn from the RSA as 

permitted in accordance with its terms, and the RSA shall remain in 

full force and effect as to such Purchaser. 

(5) The Securitization Special Legislation and the Legislative Reform 

Package (other than the Securitization Special Legislation) shall have 

been enacted into law no later than January 22, 2016. 

(6) PREPA shall have given written notice of the enactment into law of 

the Securitization Special Legislation and the Legislative Reform 

Package (other than the Securitization Special Legislation) no later 

than one day after such enactment into law (the “Enactment Notice”), 

and (i) PREPA shall not have received within 15 calendar days after 

the Enactment Notice a notice in response (a “Deficiency Notice”) 

from either the Participating Holders committing to purchase a 

majority of the principal amount of Purchased Bonds (the “Majority 

Participating Holders”), Assured or National, stating either that: 

o The Securitization Special Legislation as enacted into law is 

not reasonably acceptable to the noticing parties; or 

o The Legislative Reform Package (other than the Securitization 

Special Legislation), as enacted into law, is not in Acceptable 

Form; 

in either case stating the objection to the statute or statutes, or (ii) if 

PREPA has received a Deficiency Notice, the objection is resolved 

within 10 days of receipt of the Deficiency Notice to the satisfaction of 

each of PREPA, National, Assured and the Majority Participating 

Holders; provided further that, if a Purchaser (or Majority Holders on 

its behalf) has not delivered a notice of termination pursuant to section 

13(e)(vi) or (viii) of the RSA within the time periods set forth therein, 

(A) the Securitization Special Legislation shall be deemed reasonably 

acceptable as to such Purchaser for purposes of this condition 

precedent (6) and section 13(e)(viii), and (B) the Legislative Reform 

Package (other than the Securitization Special Legislation) shall be 

deemed in Acceptable Form as to such Purchaser for purposes of this 

condition precedent (6) and section 13(e)(vi). 

(7) No proceeding pursuant to the Recovery Act, title 11 of the United 

States Code, nor any other action or proceeding that seeks to adjust, 

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 5 

extend, or challenge the claims of the Supporting Creditors or institute 

any suspension period pursuant to any federal, state, or Puerto Rican 

statute, now or hereinafter enacted into law, shall have been instituted 

by or on behalf of PREPA. 

(8) The Trust Agreement Amendment (as defined below) shall be in 

effect. 

(9) No receiver has been appointed with respect to PREPA, unless such 

appointment has, prior to the applicable Funding Date, been stayed, 

reversed or vacated. 

(10) No event of default under the Trust Agreement shall have 

occurred, unless such event of default is subject to forbearance 

pursuant to the RSA, or the applicable Purchaser has (in its own 

discretion) waived the breach or event of default. 

All conditions precedent to the Funding Date shall have been satisfied no later 

than the earlier of (i) 26 days after enactment of the Securitization Special 

Legislation and the Legislative Reform Package (other than the Securitization 

Special Legislation) and (ii) February 17, 2016 (the earlier of such dates, the 

“Funding Trigger Date”). 

Mandatory Early 

Redemption 

PREPA shall be obligated to redeem the full amount of the Purchased Bonds 

upon the occurrence of the later of the following, subject to the redemption 

procedures of the Trust Agreement: 

(1) The date upon which the RSA terminates as to any Applicable Insurer 

or any Purchaser’s respective Supporting Creditor class, as applicable; 

and 

(2) July 1, 2016; 

in either case provided that the Closing Date has not occurred by that date. For 

the avoidance of doubt, the RSA shall terminate with respect to each Purchaser 

on June 30, 2016, unless extended beyond that date in such Purchaser’s sole 

discretion. 

A failure to redeem the full amount of the Purchased Bonds on a mandatory 

redemption date or upon maturity shall constitute an Event of Default under the 

Trust Agreement. 

Closing Date and 

Election Date 

On the Closing Date of the RSA, if the Purchased Bonds have not been 

redeemed early in accordance with the mandatory early redemption 

requirements, all Purchased Bonds shall be economically defeased through the 

issuance of January Mirror Bonds. On the Election Date, Holders of the 

Defeased Purchased Bonds shall have the right to elect that their Defeased 

Purchased Bonds be exchanged for Securitization Bonds on terms as set forth 

below. Unless any holder of the Defeased Purchased Bonds has affirmatively 

elected to exchange its Defeased Purchased Bonds, it will be deemed that such 

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 6 

holder has elected to retain its Defeased Purchased Bonds. 

Securitization Bonds Holders who elect to exchange their Defeased Purchased Bonds for 

Securitization Bonds shall receive Securitization Bonds with the following key 

terms: 

a) Same priority, remedies and acceleration rights as all 

Securitization Bonds issued on the Closing Date. 

b) Scheduled Retirement Date of July 1, 2019 and Final Maturity 

Date of July 1, 2021. 

c) Interest rate: payable in cash semi-annually on January 1 and 

July 1 at a rate equal to the weighted average of the interest 

rates on all Securitization Bonds at issuance; provided, that if 

the weighted average market yield on all Securitization Bonds, 

based on trading prices during the first 20 days of regular-way 

trading, is higher than the weighted average of the issuance 

interest rates, the interest shall be increased to the lesser of the 

weighted average market yield and 50 b.p. above the weighted 

average of the issuance interest rates; and provided further that 

the election to exchange into Securitization Bonds shall take 

place 15 calendar days after the determination of the weighted 

average market yield (such date, the “Election Date”); and 

provided further that, the Parties shall agree on a calculation 

methodology that will take into account the shorter tenor of the 

Purchased Bonds. 

d) Exchange ratio of 100%. 

Use of Proceeds Applied in a manner consistent with tax-exemption of interest on Purchased 

Bonds and Securitization Bonds issued in exchange for all or any portion of the 

Purchased Bonds as described herein. 

Tax Issues Purchased Bonds will be structured in conformity with the requirements of 

Section 103 and related provisions of the Internal Revenue Code, including the 

timely filing of a Form 8038-G, to enable Sidley Austin LLP, in its capacity as 

Bond Counsel, to deliver its opinion, retroactive to the date of issuance, that 

the interest on such bonds is excludable from gross income for Federal income 

tax purposes and exempt from Puerto Rico and state and local income taxes 

promptly following the issuance by the Internal Revenue Service of letter 

rulings favorably addressing, among other matters, the changes to the 

governance of PREPA effected by the Legislative Reform Package and subject 

to change in law risks and the delivery of customary certificates in support of 

its opinion. 

January Mirror The Purchased Bonds shall be economically defeased on the Closing Date by 

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 7 

Bonds the Securitization SPV issuing Mirror Bonds with the same economic terms 

(i.e., amount, interest rate, and maturity7

) as the Purchased Bonds (such Mirror 

Bonds, the “January Mirror Bonds”), which January Mirror Bonds will be 

used to economically defease the Defeased Purchased Bonds on the same 

terms and conditions as provided for other Mirror Bonds in the Monoline Term 

Sheet. The January Mirror Bonds shall not accelerate as a result of 

acceleration of the Legacy Bonds.8

 

The January Mirror Bonds shall have the same rights and remedies as all other 

Mirror Bonds, including benefiting from a Mirror Bond DSRF funded at the 

same level and on the same terms as all other Mirror Bond DSRFs. The 

January Mirror Bonds shall be deposited into an irrevocable escrow subject to 

the same terms and subject to the same restrictions regarding issuance, trading, 

and transfer as the other Mirror Bonds. 

The obligation of PREPA to make a debt service payment under the Purchased 

Bonds once they are economically defeased will be discharged only upon the 

application of the corresponding debt service payment under the related 

January Mirror Bonds to the payment of such debt service payment. As a 

result, such Purchased Bonds will continue to be “outstanding” for purposes of 

the Trust Agreement (other than for purposes agreed by the Parties), and each 

respective Purchaser shall retain the rights (including voting and enforcement 

rights) that they have under the Trust Agreement with respect to the Purchased 

Bonds, provided that (i) the holders of the Purchased Bonds will not have the 

right to recover amounts in excess of interest on and principal of the Purchased 

Bonds; (ii) PREPA will not be liable for breaches by the Securitization SPV or 

other parties (i.e., Agents); and (iii) any amounts paid under the related January 

Mirror Bonds after the Purchased Bonds have been paid in full will be assigned 

to PREPA as described in the Monoline Term Sheet. Parties to discuss 

mechanics of implementing these arrangements. 

Equal Treatment Each Purchaser (whether a Participating Holder or Monoline) will purchase the 

Purchased Bonds on the exact same terms and under the same Bond Purchase 

Agreement. The Bond Purchase Agreement will provide that any future offers 

made to one Purchaser relating to the Purchased Bonds shall be made to all 

Purchasers. 

Mutual Conditions 

Precedent 

Amended and Restated Restructuring Support Agreement 

On or prior to December 23, 2015, the Monolines, the Ad Hoc Group, 

Scotiabank, the Scotiabank Lenders and Solus (collectively, the “Supporting 

Creditors”) shall have entered into the Amended and Restated Restructuring 

Support Agreement. 

 

7

 The Scheduled Retirement Date for the January Mirror Bonds will be the same as the maturity date for Purchased 

Bonds and the Final Maturity Date for the January Mirror Bonds will be two-years (or any shorter period if the lag 

applicable to other Securitization Bonds is less than two years) after the maturity date of the Purchased Bonds. 

8

 The Purchasers will have all voting and enforcement rights of the holders of Mirror Bonds, consistent with the 

Monoline Term Sheet. 

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 8 

Additional 

Conditions Precedent 

to Purchasers’ 

Obligations 

As a condition to the obligation of the Purchasers to fund under the Bond 

Purchase Agreement, PREPA, the Holders, the Monolines and the Trustee 

shall have amended the Trust Agreement as follows (the “Trust Agreement 

Amendment”): 

a) Waiver of the requirements under Section 209 of the Trust 

Agreement (“Issuance of Revenue Bonds for any Proper Corporate 

Purpose”), solely for the purpose of allowing the issuance of the 

Purchased Bonds and to the extent necessary permitting the other 

transactions contemplated hereunder and all other amendments 

necessary to make Purchased Bonds payable and enforceable by 

their terms; and 

b) During the period the Amended and Restated Restructuring 

Support Agreement remains in effect as to each Supporting 

Creditor class, National and Assured, increase thresholds for the 

exercise of remedies to a majority of bondholders, consistent with 

the terms of the 17th Supplemental Agreement to the Trust 

Agreement. 

As a further condition to the obligation of the Purchasers to purchase on the 

Funding Date, all conditions to purchase set forth in the Bond Purchase 

Agreement shall have been satisfied or waived and the following conditions to 

the obligation of the Purchasers to purchase under the Bond Purchase 

Agreement shall have been met: 

a) All conditions herein having been met or waived; and 

b) All documents to be executed as described herein shall be in a 

form reasonably acceptable to PREPA and each of the Purchasers. 

Governing Law; 

Venue 

The Purchased Bonds shall be governed by the laws set forth in section 1301 of 

the Trust Agreement. 

The Bond Purchase Agreement shall be governed by the laws of the 

Commonwealth, and PREPA shall submit to jurisdiction in any federal court 

sitting in the Puerto Rico district and any appellate court therefrom or, in the 

event such federal court does not have or accept jurisdiction, a Commonwealth 

court and any appellate court therefrom. 

The January Mirror Bonds shall be governed by the laws of the state of New 

York, and the Securitization SPV shall submit to jurisdiction in the state and 

federal courts located in New York, New York, and waive any objection to 

jurisdiction and venue. 

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 9 

Fees PREPA shall pay all reasonable and documented9

 fees and expenses arising out 

of the negotiation and documentation of this January Payment Term Sheet and 

the Bond Purchase Agreement. 

 

9

 Reasonable and documented fees and expenses shall not include time detail but will contain a summary of 

estimated hours by attorney and total fees and expenses. 

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