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The 189th General Court of the Commonwealth of Massachusetts

Section 13: Resolutions or trust agreements securing bonds or notes; provisions; limitations; deposit, investment and application of proceeds; pledges

Section 13. (a) In the discretion of the board, but subject to the terms of the department's approval and of the authorizing vote, any bonds or notes issued hereunder may be secured by a resolution of the board or by a trust agreement between the city or town and a corporate trustee, which may be any trust company or bank having the powers of a trust company within the commonwealth and such trust agreement shall be in such form and executed in such manner as may be determined by the board. Such trust agreement or resolution may pledge or assign, in whole or in part, the revenues and other moneys derived or to be derived by the city or town from its electric department or system and any contract or other rights to receive the same, whether then existing or thereafter coming into existence and whether then held or thereafter acquired by the city or town, and the proceeds thereof, but shall not convey or mortgage the plant or any part thereof. Such trust agreement or resolution may contain, with respect to the electric plant and its finances, such provisions for protecting and enforcing the rights, security and remedies of the bondholders or noteholders as may be reasonable and proper and not in violation of law, including without limiting the generality of the foregoing provisions defining defaults and providing for remedies in the event thereof which may include the acceleration of maturities and covenants setting forth duties of, and limitations on, the city or town in relation to the acquisition, construction, improvement, enlargement, alteration, equipping, furnishing, maintenance, use, operation, repair, insurance and disposition of property, the custody, safeguarding, investment and application of moneys, the issue of additional bonds or notes, the fixing, revision and collection of fees and charges, the obligations of the city or town to pay for electricity used by it, the use of any surplus bond or note proceeds, the establishment of reserves, and the replacement of bonds, notes or coupons which shall become mutilated or be destroyed or lost. Such trust agreement or resolution may provide for the payment of debt service on general obligation bonds and notes issued by the city or town for electric purposes from the revenues or other moneys so pledged, either on a parity with any or all bonds and notes issued hereunder or otherwise. Subject to the provisions of this chapter, moneys subject to the trust agreement or resolution shall be held, invested and applied as provided therein, provided that moneys not deposited in trust with a corporate trustee shall be in the custody of the city or town treasurer. Moneys to be applied pursuant to the trust agreement or resolution shall be deemed appropriated for the purposes to which they are to be so applied.

(b) It shall be lawful for any bank or trust company to act as a depository or trustee of the proceeds of bonds or notes or of revenues or other moneys under any such trust agreement or resolution and to furnish such indemnifying bonds or to pledge such securities as may be required by the trust agreement or resolution. Any such trust agreement or resolution may set forth the rights and remedies of the bondholders or noteholders and of the trustee, and may restrict the individual right of action by bondholders or noteholders. All expenses incurred in carrying out the provisions of such trust agreement or resolution may be treated as current operating expenses. Debt service on bonds and notes issued hereunder and sums required to be reserved from revenues pursuant to such trust agreement or resolution shall, to the extent not otherwise provided, be included in the requirements of the sinking fund or serial debt of the plant for the purposes of sections fifty-seven and fifty-eight of chapter one hundred sixty-four, provided that sums so reserved for renewals in excess of ordinary repairs, extensions, reconstruction, enlargements and additions shall be in lieu of an equivalent allowance for depreciation. The pledge by any such trust agreement or resolution shall be valid and binding and shall be deemed continuously perfected for the purposes of the Uniform Commercial Code from the time when the pledge is made; the revenues, moneys, rights and proceeds so pledged and then held or thereafter acquired or received by the city or town shall immediately be subject to the lien of such pledge without any physical delivery or segregation thereof or further act; and the lien of any such pledge shall be valid and binding as against all parties having claims of any kind in tort, contract or otherwise against the city or town, irrespective of whether such parties have notice thereof. Neither the resolution nor any trust agreement by which a pledge is created need be filed or recorded except in the records of the board, and no filing need be made under the Uniform Commercial Code.