NEW ISSUE - BOOK-ENTRY ONLY Ratings: Standard & Poor’s: AAA Moody’s: Aa2 (See “Ratings” herein) In the opinion of Bond Counsel, under existing law, assuming continued compliance with certain provisions of the Internal Revenue Code of 1986, as amended, interest on the Bonds will not be included in the gross income of holders of the Bonds for federal income tax purposes. Interest on the Bonds will not constitute a preference item for the purposes of computation of the alternative minimum tax imposed on certain individuals and corporations, although interest on the Bonds will be taken into account in computing the alternative minimum tax applicable to certain corporations. In the opinion of Bond Counsel, interest on the Bonds and any profit made on the sale thereof are exempt from Massachusetts personal income taxes, and the Bonds are exempt from Massachusetts personal property taxes. See “TAX EXEMPTION” herein. $519,785,000 Massachusetts Bay Transportation Authority Senior Sales Tax Bonds 2004 Series B Dated: March 9, 2004 Due: July 1, as shown on the inside cover The Bonds will be issued by means of a book-entry only system evidencing ownership and transfer of the Bonds on the records of The Depository Trust Company (“DTC”) and its participants. Details of payment of the Bonds are more fully described in this Official Statement. The Bonds will bear interest from the date of initial delivery thereof and interest will be payable on July 1, 2004 and semiannually thereafter on each January 1 and July 1, calculated on the basis of a 360-day year of twelve 30-day months. The Bonds are not subject to optional redemption prior to maturity. The Bonds will constitute special obligations of the Massachusetts Bay Transportation Authority (the “Authority”) payable solely from and secured by a pledge of Pledged Revenues and funds and accounts established under the Sales Tax Bond Trust Agreement dated as of July 1, 2000, by and between the Authority and U.S. Bank National Association, Boston, Massachusetts, as successor trustee (the “Trustee”), as supplemented by the Ninth Supplemental Trust Agreement authorizing the issuance of the Bonds dated as of March 1, 2004, by and between the Authority and the Trustee. The Authority has no taxing power. Neither the Commonwealth of Massachusetts (the “Commonwealth”) nor any political subdivision thereof shall be obligated to pay the Bonds and neither the faith and credit nor the taxing power of the Commonwealth or any political subdivision thereof (other than the Authority) is pledged to such payment, except as described herein. The Bonds are offered when, as and if issued and received by the Underwriters, subject to the unqualified approval of legality by Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., Boston, Massachusetts, Bond Counsel to the Authority, and certain other conditions. Certain legal matters will be passed upon for the Underwriters by Palmer & Dodge LLP, Boston, Massachusetts. The Bonds are expected to be available for delivery on or about March 9, 2004, at or through DTC in New York, New York. UBS Financial Services Inc. Bear, Stearns & Co. Inc. Lehman Brothers Morgan Stanley Raymond James & Associates, Inc. Siebert Brandford Shank & Co., LLC Carolan & Co. Citigroup Corby Capital Markets, Inc. Division of Oppenheimer & Co. Inc. Goldman, Sachs & Co. JPMorgan M.R. Beal & Company Merrill Lynch & Co. Quick & Reilly, Inc. RBC Dain Rauscher Inc. February 26, 2004 Massachusetts Bay Transportation Authority Senior Sales Tax Bonds 2004 Series B Dated: March 9, 2004 Due: July 1, as shown below Maturity Amount Rate Yield CUSIP* 2004 $ 6,580,000 2% 0.90% 575579EQ6 2005 1,830,000 2 1.03 575579ER4 2009 11,455,000 3 2.31 575579ES2 2010 11,860,000 4 2.55 575579ET0 2011 33,315,000 5 2.81 575579EU7 2012 26,530,000 4 3.05 575579EV5 2013 26,670,000 3(cid:489) 3.25 575579EW3 2014 32,105,000 5¼ 3.42 575579EX1 2015 25,995,000 5¼ 3.55 575579EY9 2016 42,000,000 5¼ 3.65 575579EZ6 2017 47,475,000 5¼ 3.74 575579FA0 2018 39,190,000 5¼ 3.84 575579FB8 2019 41,285,000 5¼ 3.94 575579FC6 2020 56,225,000 5¼ 4.02 575579FD4 2021 59,230,000 5¼ 4.09 575579FE2 2022 15,740,000 5¼ 4.17 575579FF9 2023 16,595,000 5¼ 4.25 575579FG7 2024 4,210,000 4 4.31 575579FH5 $21,495,000 5¼% Term Bonds due July 1, 2030 to Yield 4.41% CUSIP* - 575579FJ1 * Copyright 2004, American Bankers Association. CUSIP data herein are provided by Standard & Poor’s, CUSIP Service Bureau, a division of The McGraw-Hill Companies, Inc. The CUSIP numbers listed above are being provided solely for the convenience of Bondowners only at the time of issuance of the Bonds and the Authority does not make any representation with respect to such numbers or undertake any responsibility for their accuracy now or at any time in the future. The CUSIP number for a specific maturity is subject to being changed after the issuance of the Bonds as a result of various subsequent actions including, but not limited to, a refunding in whole or in part of such maturity or as a result of the procurement of secondary market portfolio insurance or other similar enhancement by investors that is applicable to all or a portion of certain maturities of the Bonds. MASSACHUSETTS BAY TRANSPORTATION AUTHORITY BOARD OF DIRECTORS DANIEL GRABAUSKAS,CHAIRMAN MARY E.BURKE FRANK F.CHIN WILLIEJ.DAVIS RICHARD M.FIELDING JANICE LOUX BARON H.MARTIN JOSEPH M.TROLLA RICHARD C.WALKER,III SENIOR MANAGEMENT MICHAEL H.MULHERN,GENERAL MANAGER STEPHENA.BERRANG...................................................................Assistant General Manager for Strategic Planning JOSEPHC.CARTER ................................................................................................................................Chief of Police JONATHAN R.DAVIS ...............................................................Deputy General Manager and Chief Financial Officer DENNISA.DIZOGLIO .........................................................Assistant General Manager for Planning and Real Estate BRIANDONOHOE ....................Assistant General Manager for Labor Relations and Occupational Health Services ANNEY.HERZENBERG ...........................................................................................................Chief Operating Officer WILLIAMA.MITCHELL,JR. ................................................................................................................General Counsel ROSSJ.RODINO .............................Assistant General Manager for Intergovernmental Affairs and Public Relations DAVID W. RYAN ..............................................................Assistant General Manager for Design and Construction GERALDINESCOLL..............................................................Assistant General Manager for Environmental Affairs PORTIAE.SCOTT............................................Assistant General Manager for Human Resources and Chief of Staff WESLEYG.WALLACE,JR............................................................................................................Treasurer-Controller IN CONNECTION WITH THE OFFERING OF THE BONDS, THE UNDERWRITERS MAY OVER ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF SUCH BONDS AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. The information set forth herein has been obtained from the Authority and other sources which are believed to be reliable, but, as to information from other than the Authority, it is not to be construed as a representation by the Authority or the Underwriters. The information and expressions of opinion herein are subject to change without notice and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the Authority since the date hereof, except as expressly set forth herein. The various tables may not add due to rounding of figures. The Underwriters have provided the following sentence for inclusion in this Official Statement. The Underwriters have reviewed the information in this Official Statement in accordance with, and as part of, their responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriters do not guarantee the accuracy or completeness of such information. No dealer, broker, salesperson or other person has been authorized to give any information or to make any representation other than those contained in this Official Statement, and, if given or made, such other information or representations must not be relied upon as having been authorized by the Authority. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the Bonds offered hereby by any person in any jurisdiction in which it is unlawful for such person to make such offer, solicitation or sale. All quotations from and summaries and explanations of provisions of laws, resolutions, the Bonds and other documents herein do not purport to be complete; reference is made to said laws, resolutions, the Bonds and other documents for full and complete statements of their provisions. Copies of the above are available for inspection at the offices of the Authority and the Trustee. TABLE OF CONTENTS Page Page INTRODUCTION..............................................................1 Flow of Funds...............................................................31 The Bonds.......................................................................1 Indebtedness Under the Assessment Bond Trust Background.....................................................................2 Agreement....................................................................31 Forward Funding.............................................................3 Statutory Covenant.......................................................31 Official Statement............................................................4 Assessments.................................................................32 THE AUTHORITY.............................................................5 Other Withholding of Local Aid..................................33 Board of Directors...........................................................5 Potential Local Aid Intercepts......................................33 Administration.................................................................7 Legal Obligations of Assessed Cities and Towns.........34 General............................................................................7 Proposition2½.............................................................35 Operations.......................................................................8 Local Aid......................................................................36 Indebtedness....................................................................9 LEGAL INVESTMENTS AND SECURITY Capital Investment Program..........................................13 FOR DEPOSITS..............................................................37 APPLICATION OF PROCEEDS.....................................14 LITIGATION...................................................................37 PLAN OF REFUNDING..................................................14 LEGISLATION...............................................................38 THE BONDS....................................................................15 TAX EXEMPTION.........................................................38 General..........................................................................15 RATINGS........................................................................39 Redemption Provisions..................................................15 CERTAIN LEGAL MATTERS.......................................39 Book-Entry Only System..............................................15 UNDERWRITING...........................................................39 Transfer and Exchange..................................................18 VERIFICATION OF MATHEMATICAL DEBT SERVICE REQUIREMENTS ON SENIOR COMPUTATIONS..........................................................40 SALES TAX BONDS.......................................................19 CONTINUING DISCLOSURE.......................................40 SECURITY FOR THE SALES TAX BONDS.................20 MISCELLANEOUS........................................................40 Pledge Under the Sales Tax Bond Trust Agreement.....20 Flow of Funds...............................................................21 APPENDIX A Summary of Certain Provisions of the Provision for the Payment of Prior Obligations.............24 Sales Tax Bond Trust Agreement A-1 Pledge of Amounts Payable Under the Assessment APPENDIX B Summary of Certain Provisions of the Bond Trust Agreement..................................................24 Assessment Bond Trust Agreement B-1 APPENDIX C Proposed Form of Opinion of Bond Pledge Under Sales Tax Bond Trust Agreement to Counsel C-1 Assessment Bonds.........................................................24 APPENDIX D Continuing Disclosure Undertaking D-1 Senior Debt Service Reserve Fund................................24 APPENDIX E Information Regarding Assessments and Deficiency Fund and Capital Maintenance Fund...........25 Local Aid E-1 Additional Indebtedness................................................25 APPENDIX F List of Refunded Bonds F-1 Statutory Covenant........................................................26 DEDICATED SALES TAX..............................................27 ASSESSMENT BOND TRUST AGREEMENT AND ASSESSMENTS...............................................................29 Pledge Under the Assessment Bond Trust Agreement..30 OFFICIAL STATEMENT OF THE MASSACHUSETTS BAY TRANSPORTATION AUTHORITY PERTAINING TO ITS SENIOR SALES TAX BONDS 2004 SERIES B INTRODUCTION The purpose of this Official Statement, which includes the cover page and the Appendices hereto, is to furnish information in connection with the sale by the Massachusetts Bay Transportation Authority (the “Authority” or “MBTA”) of its $519,785,000 Senior Sales Tax Bonds, 2004 Series B (the “Bonds”). Unless otherwise defined herein, certain capitalized terms used herein shall have the meanings set forth in APPENDIX A – “SUMMARY OF CERTAIN PROVISIONS OF THE SALES TAX BOND TRUST AGREEMENT - Definitions” or, in the case of capitalized terms related to the Assessment Bond Trust Agreement (hereinafter defined), the meanings set forth in APPENDIX B – “SUMMARY OF CERTAIN PROVISIONS OF THE ASSESSMENT BOND TRUST AGREEMENT.” The Bonds The Bonds are authorized to be issued pursuant to the Enabling Act (hereinafter defined), and are to be issued under a Sales Tax Bond Trust Agreement dated as of July 1, 2000 by and between the Authority and U.S. Bank National Association, Boston, Massachusetts, as successor trustee (the “Trustee”), as amended (the “Trust Agreement”) and as supplemented by the Ninth Supplemental Trust Agreement authorizing the issuance of the Bonds (the “Ninth Supplemental Trust Agreement”) dated as of March 1, 2004 by and between the Authority and the Trustee (together with the Trust Agreement, the “Sales Tax Bond Trust Agreement”). The Bonds are being issued for the following purposes: • to refund the Authority’s outstanding bonds listed in APPENDIX F (the “Refunded Bonds”); • to fund a portion of the Senior Debt Service Reserve Fund for the Bonds; and • to pay costs of issuing the Bonds. See “APPLICATION OF PROCEEDS” and “PLAN OF REFUNDING.” As used herein, the term “Senior Sales Tax Bonds” means the Bonds and all other Senior Sales Tax Bonds previously or hereafter issued under the Trust Agreement on parity with the Bonds. The Trust Agreement provides for the issuance of additional Senior Sales Tax Bonds and Subordinated Sales Tax Bonds (collectively, the “Sales Tax Bonds”) and the Authority expects to issue additional Sales Tax Bonds in the future. See “THE AUTHORITY - Capital Investment Program.” The Bonds constitute special obligations of the Authority, secured as to the payment of principal and Redemption Price, if any, of and interest thereon by a pledge of certain revenues and other moneys received or derived under the Enabling Act thereof for the purposes and on the terms and conditions provided therein, including without limitation, the greater of the base revenue amount or the dedicated sales tax revenue amount, both as defined in the Enabling Act (“Dedicated Sales Tax”). See “DEDICATED SALES TAX.” The Bonds constitute the eighth series of Sales Tax Bonds to be issued under the Trust Agreement. See “SECURITY FOR THE SALES TAX BONDS” and APPENDIX A – “SUMMARY OF CERTAIN PROVISIONS OF THE SALES TAX BOND TRUST AGREEMENT.” 1 The Authority has no taxing power. Neither the Commonwealth of Massachusetts (the “Commonwealth”) nor any political subdivision thereof (other than the Authority) shall be obligated to pay the Bonds and neither the faith and credit nor the taxing power of the Commonwealth or any such political subdivision thereof is pledged to such payment, except as described herein. Background The Authority was originally created in 1964 pursuant to Chapter 161A of Massachusetts General Laws, as amended prior to July 1, 2000 (“Prior Act”), as a body politic and corporate and a political subdivision of the Commonwealth to finance and operate mass transportation facilities within (and to a certain extent, outside) its territory. The territorial area of the Authority consisted of 78 cities and towns in the greater Boston metropolitan area. Under the Prior Act, the Commonwealth provided various forms of financial assistance to offset the Authority’s operating deficit. In order to finance its capital program, the Authority was authorized to issue indebtedness secured by its general obligation. If the Authority lacked funds to pay such indebtedness, the Commonwealth was obligated to pay such amount, to which obligation the Commonwealth’s full faith and credit was pledged (the “Commonwealth Guaranty”). In addition, the Commonwealth entered into a contract for financial assistance with the Authority pursuant to which the Commonwealth agreed to pay a portion of the debt service on such indebtedness (the “Section 28 Assistance”). Furthermore, the Commonwealth paid to the Authority the total amount of expenses in excess of revenues (the “Net Cost of Service”). Net Cost of Service was paid in arrears upon certification by the Authority to the Commonwealth. In order to meet current costs, the Authority received advances of the Net Cost of Service or issued operating notes. The Commonwealth recovered a portion of the Net Cost of Service paid to the Authority through amounts assessed on cities and towns in the Authority’s territory. Pursuant to the Prior Act and in order to fund a portion of its capital program, the Authority periodically issued bonds under the General Bond Resolution of the Authority adopted February 15, 1967, as amended, and notes and entered into certain leases and other obligations, each of which was secured by a combination of the Commonwealth Guaranty, Section 28 Assistance and the Commonwealth’s payment of the Net Cost of Service. Such bonds, notes, leases and other obligations outstanding as of July 1, 2000 are collectively referred to herein as the “Prior Obligations.” For information regarding the outstanding principal amount of Prior Obligations, see “THE AUTHORITY - Indebtedness.” 2 Forward Funding As part of its Fiscal Year 2000 annual appropriations act, Chapter 127 of the Acts of 1999 of the Commonwealth, as amended (“Chapter 127” or the “Forward Funding Legislation”), the Commonwealth repealed and restated the Prior Act effective July 1, 2000. The Prior Act as restated by Section 151 of Chapter 127, together with Section 35T of Chapter 10 of Massachusetts General Laws, also enacted as part of Chapter 127, are collectively referred to herein as the “Enabling Act.” Commencing July 1, 2000, the Authority no longer received Net Cost of Service, which had been unlimited, or Section 28 Assistance. Instead, under the Enabling Act, the Authority receives a dedicated revenue stream consisting of the amounts assessed on cities and towns of the Authority in accordance with the Enabling Act (the “Assessments”) and the Dedicated Sales Tax (collectively, the “Dedicated Revenues”). The Dedicated Sales Tax is equal to the greater of the amount raised by a 1% statewide sales tax, which equals 20% of the existing statewide 5% sales tax, or as of July 1, 2000, $645,000,000, in either case to be funded from existing sales tax receipts, subject to upward adjustment under certain circumstances set forth in the Enabling Act. See “DEDICATED SALES TAX.” The Enabling Act and the new financing mechanism for the Authority established thereunder have been referred to as “Forward Funding” to reflect the fact that the Authority’s costs are no longer funded in arrears. The Enabling Act expanded the territory of the Authority to 175 cities and towns, but aggregate annual Assessments payable by such cities and towns are reduced in five equal amounts from approximately $144 million in Fiscal Year 2001 to approximately $136 million in Fiscal Year 2006. After 2006, aggregate Assessments will be adjusted annually for inflation but will not be permitted to increase by more than 2.5% per year. For further information regarding Assessments, see “ASSESSMENT BOND TRUST AGREEMENT AND ASSESSMENTS.” The Dedicated Revenues are credited upon receipt, without appropriation, to the Commonwealth’s state and local contribution fund (the “Fund” or the “State and Local Contribution Fund”). Such amounts shall be disbursed upon the request of the General Manager to the Authority so long as the Authority shall certify that it has provided in its budget each year for the payment of the Prior Obligations due during such year. In connection with its Fiscal Year 2004 budget, the Authority has certified that it has provided for the payment of Prior Obligations during Fiscal Year 2004 in such annual budget. See “SECURITY FOR THE SALES TAX BONDS - Provision for the Payment of Prior Obligations” and “ASSESSMENT BOND TRUST AGREEMENT AND ASSESSMENTS.” In order to clarify certain procedural provisions in the Enabling Act, the Authority entered into a Memorandum of Understanding dated as of July 1, 2000 with the Executive Office of Administration and Finance, the Office of the State Treasurer, the Office of the Comptroller and the Department of Revenue (the “MOU”). In accordance with the MOU, the Dedicated Sales Tax is deposited to the Fund upon the issuance by the Department of Revenue of the Monthly Report of Collections and Refunds (the so-called “blue book”). Under Massachusetts law, the blue book shall be issued not later than the last business day of each month with respect to the prior month, except with respect to June of each year. For each June, pursuant to the MOU, 90% of the estimated Dedicated Sales Tax shall be deposited on or about the 14th Business Day of July, with the remainder to be deposited in accordance with applicable law. Assessments are deposited to the Fund quarterly, on September 30, December 31, March 31 and June 30. Under the Enabling Act, the Dedicated Revenues are impressed with a trust for the benefit of Authority bondholders. Furthermore, the Commonwealth covenants that while any Authority bonds or notes secured by the Dedicated Revenues are outstanding and remain unpaid, the Dedicated Revenues shall not be diverted, and, so long as the Dedicated Revenues are necessary for the purpose for which they have been pledged, the rate of the sales tax shall not be reduced below the amount of the Dedicated Sales 3 Tax and annual aggregate Assessments shall not be reduced below $136,026,868. See “DEDICATED SALES TAX” and “ASSESSMENT BOND TRUST AGREEMENT AND ASSESSMENTS.” To the extent that the Dedicated Revenues are insufficient in any year to provide for the payment of the Prior Obligations in such year, the Commonwealth shall remain liable to pay such Prior Obligations to the same extent as under the Prior Act; provided, however, that any such payment by the Commonwealth shall be repayable within five years by the Authority, without interest, from the Dedicated Revenues. Under the Enabling Act, the Authority is no longer authorized to issue indebtedness supported by the Commonwealth Guaranty. Furthermore, the Commonwealth no longer shall pay Net Cost of Service or Section 28 Assistance. Instead, in general, Authority indebtedness may be a general obligation of the Authority or may be secured by a pledge or conveyance of all or a portion of revenues, receipts or other assets or funds of the Authority, including without limitation, the Dedicated Sales Tax and Assessments. Pursuant to the Sales Tax Bond Trust Agreement, the Bonds are secured by a pledge of the Dedicated Sales Tax and, after meeting the obligations under an Assessment Bond Trust Agreement dated as of July 1, 2000 (the “Assessment Bond Trust Agreement”) by and between the Authority and State Street Bank and Trust Company, as trustee (the “Assessment Bond Trustee”), the Assessments, along with other Authority revenues as described under “SECURITY FOR THE SALES TAX BONDS - Pledge Under the Sales Tax Bond Trust Agreement to the Assessment Bonds.” Pursuant to special legislation, the Authority may issue bonds in accordance with the Enabling Act secured by appropriations from the Commonwealth, the proceeds of such bonds to be used solely to finance or refinance the extension of commuter rail service to Fall River and New Bedford. Under the Enabling Act, the Authority is required to meet all of its operating and capital expenditures from Dedicated Revenues, federal assistance and revenues generated from operation of the Authority’s system, including without limitation fare revenues and non-fare revenues (e.g., parking and advertising revenues). The Authority has identified cost containment and revenue enhancement initiatives, which it believes to be necessary and sufficient to provide for the long-term operation and maintenance of the Authority’s transportation system without additional financial assistance from the Commonwealth. There can be no assurance that such initiatives will provide sufficient financial resources to sustain the long- term operation and maintenance of the Authority’s transportation system. However, under the Enabling Act, the pledge and receipt of Dedicated Sales Tax is not contingent upon the Authority’s provision of transportation services. Subject to the limitations with respect to the Assessments described under “ASSESSMENT BOND TRUST AGREEMENT AND ASSESSMENTS” the Authority’s failure to provide transportation services at current levels would not affect the Commonwealth’s or the assessed cities’ and towns’ obligation or ability to provide the Dedicated Revenues. See “THE AUTHORITY - Operations.” Official Statement There follows in this Official Statement a description of the Authority, together with summaries of the terms of the Bonds and certain provisions of the Enabling Act, the Forward Funding Legislation, the Sales Tax Bond Trust Agreement and the Assessment Bond Trust Agreement. All references herein to the Enabling Act, the Forward Funding Legislation, the Sales Tax Bond Trust Agreement and the Assessment Bond Trust Agreement are qualified in their entirety by reference to such law and documents, copies of which are available from the Authority or the Trustee, and all references to the Bonds are qualified in their entirety by reference to the definitive forms thereof and the information with respect thereto contained in the Sales Tax Bond Trust Agreement. 4 Appendix A is a summary of certain provisions of the Sales Tax Bond Trust Agreement. Appendix B is a summary of certain provisions of the Assessment Bond Trust Agreement. Appendix C sets forth the proposed form of opinion of Bond Counsel. Appendix D sets forth the proposed Form of Continuing Disclosure Agreement to be executed by the Authority and the Trustee. Appendix E sets forth certain information regarding Assessments and Local Aid. Appendix F contains a list of bonds to be refunded with the proceeds of the Bonds. This Official Statement does not contain the audited financial statements of the Authority or general financial and operating information about the Authority because the Bonds are secured by a first lien on Dedicated Sales Tax and other Pledged Revenues (hereinafter defined) under the Sales Tax Bond Trust Agreement and, as described herein, amounts available under the Assessment Bond Trust Agreement, and not by the general obligation of the Authority, and the Dedicated Sales Tax is not derived from or otherwise related to the Authority’s operations. See “THE AUTHORITY - Operations.” For further information about the Authority, reference is made to the Authority’s most recent annual report filed with each Nationally Recognized Municipal Securities Information Repository (“NRMSIR”) pursuant to the Authority’s continuing disclosure undertaking for certain Prior Obligations, which report includes audited financial statements, among other information. THE AUTHORITY The Authority was created in 1964 by the Prior Act and is a body politic and corporate and a political subdivision of the Commonwealth. Under the Enabling Act, the territorial area of the Authority consists generally of 175 cities and towns directly or indirectly receiving Authority service. The 175 cities and towns are grouped into three categories, based upon the weighting of each member’s allocable percentage of Assessments: (i) the 14 cities and towns; (ii) the 51 cities and towns; and (iii) the other served communities. The Authority finances and operates mass transportation facilities within its territory and to a limited extent outside its territory and is authorized to enter into agreements for providing mass transportation service by private companies, including railroads. Board of Directors The Enabling Act provides that the affairs of the Authority shall be managed by a board of nine directors (the “Board of Directors” or “Board”). The Secretary of the Executive Office of Transportation and Construction of the Commonwealth (hereinafter called the “Secretary”) serves ex officio as the Chairman of the Board. Eight directors are appointed by the Governor of the Commonwealth to serve two-year terms and are eligible for reappointment. The directors appointed by the Governor shall consist of one selected from a list provided by the Mayor of Boston, one selected from a list provided by the chief executive officers of each of the 14 cities and towns, excluding Boston, and one selected from a list provided by the metropolitan area planning council on behalf of the 51 cities and towns and other served communities. Of the appointees of the Governor, one shall be experienced in transportation, one shall be a member of a national or international labor organization, one shall be experienced in environmental protection, one shall be experienced in administration and finance and one shall be experienced in consumer protection. No more than five of the nine directors shall be members of the same political party. No fewer than seven of the directors shall be residents of the Authority’s territory. Under the Enabling Act, the Board has the power to appoint and employ a General Manager and other officers. The Enabling Act also provides that the Advisory Board, consisting of a representative of each of the cities and towns paying Assessments, shall have certain specified powers, including the power to approve the Authority’s long term capital program and annual operating budget or to subject the operating budget to itemized reductions. The Enabling Act does not provide for the Authority to be a debtor under the federal bankruptcy code. 5 The Authority’s directors are: DANIELGRABAUSKAS,Chairman, Ipswich, Massachusetts, ex officio. Former Republican Party Nominee for State Treasurer; former Registrar of Motor Vehicles; former Director, Massachusetts Office of Consumer Affairs and Business Regulation; former Chief of Staff, Department of Economic Development; former trainer and election observer for non-profit International Republican Institute; former Chief of Staff, Executive Office of Health and Human Services; former Deputy Secretary, Executive Office of Communities and Development. MARY E.BURKE,Director, Worcester, Massachusetts, term expiresJune 30, 2005. Educator and community volunteer; Research Associate, Worcester Regional Research Bureau; co-founder and Chair of Board of Directors, Abby Kelley Foster Regional Charter Schools; former professor at Assumption College. FRANK F.CHIN,Director, Boston, Massachusetts, term expires June 30, 2005. Chairman of Chinatown Community, Incorporated; Member of Empowerment Zone Board; former Purchasing Agent of the City of Boston; has served Chinatown/South Cove Neighborhood Council and Board of Directors of the South Cove YMCA and New England Aquarium. WILLIE J.DAVIS,Director, Newton, Massachusetts, term expires June 30, 2005. Practicing Attorney; Board Member of the Committee for Public Counsel Services; former United States Magistrate Judge; former Assistant United States Attorney for the District of Massachusetts; and former assistant Attorney General of the Commonwealth of Massachusetts. RICHARDM.FIELDING,Director, Lawrence, Massachusetts, term expires June 30, 2004. Employed at Raytheon Company; member of Local 1505 and Vice Chairman of the Board of the Lawrence Housing Authority. JANICELOUX, Director, Boston, Massachusetts, term expires June 30, 2004. President of Greater Boston Hotel Employees Local 26 Union; Treasurer of the Local 26 Trust Funds; former Vice-President and Benefits Officer of Local 26. BARON H.MARTIN,Director, East Wareham, Massachusetts, term expires June 30, 2004. Mediator for the Appeals Court for the Commonwealth of Massachusetts; Arbitrator; former First Justice of the Wareham District Court; former First Justice of the Appellate Division of the District Court Southern Division; former Special Justice of the Roxbury District Court; former Adjunct Professor of Law at Southern New England Law School; and former First Assistant General Counsel of the Metropolitan Transit Authority, the predecessor to the Authority. 6