FIRST LIEN MASTER TRUST INDENTURE. between

Transcription

1 FIRST LIEN MASTER TRUST INDENTURE between CITY OF INDIANAPOLIS, ACTING BY AND THROUGH ITS BOARD OF DIRECTORS FOR UTILITIES OF ITS DEPARTMENT OF PUBLIC UTILITIES, AS ISSUER and U.S. BANK NATIONAL ASSOCIATION, AS TRUSTEE Dated as of July 1,2011

2 TABLE OF CONTENTS ARTICLE I. Page DEFINITIONS, INTERPRETATION, RATIFICATION, AUTHENTICATION, AND EFFECTIVE DATE 4 Section 101. Meanings and Construction 4 Section 102. Parties Interested Herein 23 Section 103. Accounting Terms 23 Section 104. Master Indenture a Contract 23 Section 105. Severability 23 Section 106. Execution of Master Indenture 24 ARTICLE II. FIRST LIEN BOND PROVISIONS 25 Section 201. Revenue Obligations 25 Section 202. Special Obligations 25 Section 203. No Recourse against Officers and Agents 25 Section 204. Legality 25 Section 205. Limitations upon State 26 ARTICLE III. TERMS, EXECUTION AND FORM OF FIRST LIEN BONDS 27 Section 301. Issuance of Bonds in Series 27 Section 302. First Lien Bond Details 27 Section 303. Redemption of the First Lien Bonds 28 Section 304. Notice of Redemption 28 Section 305. Negotiability 29 Section 306. Registration, Transfer and Exchange of First Lien Bonds 29 Section 307. DTC Book-Entry 30 Section 308, Execution of First Lien Bonds 31 Section 309. Use of Predecessor's Signature 32 Section 310. Authentication of the First Lien Bonds 32 Section 311. Incontestable Recital in First Lien Bonds 32 Section 312. First Lien Bond Delivery 32 Section 313. First Lien Bond Form 32 ARTICLE IV. ARTICLE V. GENERAL CONDITIONS OF ISSUANCE OF FIRST LIEN BONDS 33 Section 401. Purposes of Issuance 33 Section 402. General Conditions of Issuance 33 Section 403. Separate Systems 33 ADMINISTRATION OF AND ACCOUNTING FOR NET REVENUES 35 Section 501. Pledge Securing First Lien Bonds 35 Section 502. Establishment of Accounts and Subaccounts 35 Section 503. Establishment of Issuer Accounts 36

3 Section 504. Revenue Fund Deposits 36 Section 505. Administration of Revenue Fund 36 Section 506. Operation and Maintenance Expenses 36 Section 507. Bond Fund Payments 36 Section 508. Reserve Account Payments 37 Section 509. Additional Transfers from Revenue Fund 39 Section 510. Rate Stabilization Fund 40 Section 511. Funds Held for First Lien Bonds 40 Section 512. Construction Fund 40 ARTICLE VI. GENERAL ADMINISTRATION 41 Section 601. Administration of Accounts 41 Section 602. Places and Times of Deposits 41 Section 603. In vestment of Moneys 41 Section 604. Payment of Redemption Premiums 42 ARTICLE VII, PARITY BONDS 43 Section 701. First Lien Bonds 43 Section 702. Issuance of First Lien Bonds 43 Section 703. Supplemental Master Indenture 44 Section 704. Credit Facilities and Hedge Agreements 44 ARTICLE VIII. RATES, FEES AND OTHER CHARGES; BUDGETARY PROCEDURES 46 Section 801. Rate Covenant 46 Section 802. Collection of Charges 47 Section 803. Budgetary Procedures...47 ARTICLE IX. MISCELLANEOUS PROTECTIVE COVENANTS 48 Section 901. Performance of Duties 48 Section 902. Further Assurances 48 Section 903. Conditions Precedent 48 Section 904. Rules, Regulations, and Other Details 48 Section 905. Competent Personnel and Operation 48 Section 906. Maintenance of Water System 49 Section 907. Operation of Water System 49 Section 908. Competing Water Facilities 49 Section 909. Existence and Successors 49 Section 910. Loss from Condemnation 49 Section 911. Payment of Governmental Charges and Liens 49 Section 912. Liens 50 Section 913, Records and Accounts 50 Section 914. Rights Concerning Records 50 Section 915. Audits Required 50 Section 916. Accounting Principles 51 Section 917, Insurance 51 Section 918. Federal Tax and Arbitrage Covenant 51 ii

4 Section 919. Disposal of Water System 51 ARTICLE X. MISCELLANEOUS 53 Section Defe asance 53 Section Reserved 53 Section Statute of Limitations 53 Section Governmental Powe rs 54 ARTICLE XI. EVENTS OF DEFAULT; PRIVILEGES, RIGHTS AND REMEDIES 55 Section Bondholder's Remedies 55 Section Events of Default 55 Section Remedies for Defaults 56 Section Receiver's Rights and Privileges 56 Section Rights and Privileg es Cumulative 56 Section Duties upon Defaults 56 Section No Ace eleration 57 Section Duties in Bankruptc y Proceedings 57 Section Prejudicial Action Unnec essary 57 Section Rights of Provider of Credit Facility 57 Section Notice to Bondholde rs 58 ARTICLE XII. CONCERNING THE TRUSTEE 59 Section Appointment of Trustee 59 Section Propert y Held in Trust 59 Section Deposit and Securit y of Funds 59 Section Basic Duties o f Trustee 59 Section Trustee 's Conduct 59 Section Entry upon Water System 60 Section Further Pe rmitted Reliance 60 Section Other Immunities 61 Section Permitted Transactions w ith Issuer 61 Section Commingling of Mone ys 61 Section Compensation of Trustee 61 Section Preference in Event of Defaults 62 Section Adjustment and Allowance of Claims 62 Section Certificates of O fficers and Experts 63 Section Resignation of Trust ee 63 Section Removal of Trustee 63 Section Successor Truste e 63 Section Transfer of Rights and Property 64 Section Mer ger or Consolidation 64 ARTICLE XIII. AMENDMENT OF MASTER INDENTURE 65 Section Supplemental Indentures Not Requiring Consent of Bondholders 65 Section Supplemental M aster Indentures Requiring Consent of Bondholders 66 in

5 Section Notice of Supplemental Indentures 67 Section Manner of Evid encing Ownership of Bonds and Deemed Consent 67 IV

6 FIRST LIEN MASTER TRUST INDENTURE This FIRST LIEN MASTER TRUST INDENTURE dated as of July 1, 2011 (the "Master Indenture"), between the City of Indianapolis, a municipal corporation acting by and through its Board of Directors for Utilities of its Department of Public Utilities (the "Issuer"), and U.S. Bank National Association, a national banking association duly organized and existing under the laws of the United States, having a corporate trust office in Indianapolis, Indiana, as trustee (the "Trustee"), WITNESSETH: WHEREAS, the Issuer has entered into an Asset Purchase Agreement with the City of Indianapolis, Indiana (the "City"), and the Department of Waterworks of the City (the "Department"), acting by and through the Board of Waterworks to purchase the Water System (as defined herein) of the City and the Department and to thereafter own, as well as operate or otherwise provide for the operation and management of the Water System serving the inhabitants of Marion County and surrounding areas; and WHEREAS, the Issuer is authorized to issue bonds and certificates of indebtedness pursuant to Indiana Code payable out of the income and revenues derived from the Water System to finance such acquisitions, the construction of necessary betterments, improvements, extensions or additions to such systems or to pay prior obligations issued for such purpose; and WHEREAS, the Department previously financed the acquisition and construction of the Water System through the issuance of bonds (the "Department Bonds") pursuant to Resolution No. 18 of the Department dated April 22, 2002, as supplemented and amended (the "Department Resolution"); and WHEREAS, the Department Bonds were sold to The Indianapolis Local Public Improvement Bond Bank (the "Bond Bank") and the Bond Bank in turn issued bonds (the "Bond Bank Bonds") pursuant to the Trust Indenture dated as of April 1, 2002, as supplemented and amended (the "Bond Bank Trust Indenture"), between the Bond Bank and U.S. Bank National Association; and WHEREAS, the Department Resolution and the Bond Bank Indenture permit a substitute board, department or instrumentality of the City to succeed to the duties, privileges, powers, liabilities, disabilities, immunities and rights of the Department under the Department Resolution; WHEREAS, the Issuer, as a "Substitute Qualified Entity" pursuant to the Bond Bank Trust Indenture and a "Substitute Issuer" pursuant to the Department Resolution, will issue bonds (the "Series 2011 Bonds") in several series or subseries in substitution of the respective Department Bonds and the respective Bond Bank Bonds will remain outstanding; and WHEREAS, to effect the purchase of the Water System, to meet the requirements of the Bond Bank Trust Indenture and the Department Resolution and to fund additional improvements

7 thereto, the Issuer desires to enter into this Master Indenture and to issue First Lien Bonds (hereinafter defined), as described herein; and WHEREAS, all First Lien Bonds issued hereunder, now and in the future, are and shall be secured by a pledge of the Net Revenues and all moneys and securities held or to be held as part of the Pledged Funds (both as hereinafter defined); and WHEREAS, the Board of Directors for Utilities of the Department of Public Utilities of the City of Indianapolis has duly and legally authorized, executed, acknowledged and delivered this Master Indenture in this form for the purposes of, among other things, purchasing and improving the Water System through the issuance of the First Lien Bonds and providing for the issuance from time to time of additional First Lien Bonds; and WHEREAS, the Issuer is a special taxing district and an executive department of the City and a political subdivision of the State of Indiana ("State") and the Issuer and its Board are organized and operating under the Enabling Legislation and all laws supplemental thereto; and WHEREAS, the Issuer finds that the acquisition of the Water System and the operation, improvement and extension thereof, will serve a public purpose by enabling the Issuer to furnish customers of the Water System with an adequate, reliable, economical and healthful supply of water and by promoting economic development through the creation and retention of opportunities for gainful employment, business opportunities, and retention or attraction of investment. NOW, THEREFORE, the Issuer and Trustee hereby covenant and agree as follows: THIS MASTER TRUST INDENTURE W1TNESSETH: That the Issuer, in consideration of the premises and of the mutual covenants contained in this Master Indenture, and of the purchase and acceptance of the First Lien Bonds by the holders thereof and for entering into any Hedge Agreement and any Reimbursement Obligation associated with any First Lien Bonds, and for other valuable considerations, the receipt and sufficiency of which are hereby acknowledged, and for the purpose of fixing and declaring the terms and conditions upon which the First Lien Bonds are to be and may be issued, authenticated, delivered, secured and accepted by all persons who shall from time to time be or become the holders thereof, and to secure the payment of the principal of and redemption premium, if any, and interest on the First Lien Bonds at any time issued and outstanding under this Master Indenture, according to their tenor and effect, and the performance and observance of all the covenants and conditions in the First Lien Bonds and in this Master Indenture, has executed and delivered this Master Indenture, and has pledged and assigned, and by these presents does hereby pledge and assign, unto the Trustee, and to its successors in trust and to it and its assigns, the Net Revenues and all moneys and securities held or to be held as part of the Pledged Funds (hereinafter defined), subject to the provisions of this Master Indenture permitting the application thereof for the purposes and on the terms set forth in this Master Indenture. The pledge made by this Master Indenture is, and shall be, also subject to this Master Indenture, for the equal and proportionate benefit, security and protection of all First Lien Bonds -2-

8 issued or to be issued under and secured by this Master Indenture without preference, priority or distinction of any First Lien Bond over any other First Lien Bond or of any series of First Lien Bonds ove r any other series of First Lien Bonds b y reason of priority in the time of the execution, authentication, issue or sale thereof, or otherwise for any cause whatsoever, so that, except as aforesaid, each and every First Lien Bond issued hereunder shall have the same rights and privilege under and by virtue of this Master Indenture as if ail had been dated, executed, authenticated, issued and sold simultaneously with the execution and delivery of this Master Indenture; provided, however, that if the Issuer shall pay or cause to be paid to the holders of the First Lien Bonds the principal and interest and redemption premium, if any to become due in respect thereof at the times and in the manner stipulated therein and herein (or shall provide, as permitted by Article X, for the payment of the entire amount due and to become due thereon for principal, interest and redemption premium, if any), shall pay all Hedge Payments and Reimbursement Obligations in connection therewith, and shall keep, perform and observe all the covenants and promises in the First Lien Bonds and in this Master Indenture expressed to be kept, performed and observed by or on the part of the Issuer, and shall pay or cause to be paid to the Trustee all sums of money due and to become due to it in accordance with this Master Indenture, then this Master Indenture and the rights hereby granted shall cease, terminate and be void, at the option of the Issuer (evidenced by a certified resolution of the Board delivered to the Trustee), but otherwise this Master Indenture shall remain in full force and effect. It is further covenanted and agreed that the First Lien Bonds are to be issued, authenticated and delivered, and that the fees, income and funds herein pledged and provided to be applied to the payment thereof shall be held, accounted for and disposed of, upon and subject to the following covenants, conditions and trusts; and the Issuer, for itself and its successors, does hereby covenant and agree to and with the Trustee and its successors in trust under this Master Indenture, for the benefit of whomsoever shall hold the First Lien Bonds, as follows: -3-

9 ARTICLE I. DEFINITIONS. INTERPRETATION. RATIFICATION. AUTHENTICATION. AND EFFECTIVE DATE Section 101. Meanings and Construction. A. Definitions. The terms in this Section defined for all purposes of this Master Indenture and of any Supplemental Indenture, and of any other instrument or any other document pertaining hereto, except where the context by clear implication otherwise requires, shall have the meanings herein specified: "Accounting Principles" means accounting principles prescribed by the IURC and customarily used by the Issuer; provided that, if the IURC no longer prescribes accounting principles or if such accounting principles are not applicable to the Water System, "Accounting Principles" means accounting principles prescribed by the Issuer. "Accreted Value" means, as of any date of computation with respect to any Capital Appreciation Bond, an amount equal to the principal amount of such First Lien Bond plus the interest accrued on such First Lien Bond from the date of original issuance of such First Lien Bond to the Periodic Compounding Date next preceding the date of computation or the date of computation if a Periodic Compounding Date, such interest to accrue at the interest rate per annum of the Capital Appreciation Bonds set forth in the Supplemental Indenture authorizing such First Lien Bonds, compounded periodically on each Periodic Compounding Date. Plus, if such date of computation shall not be a Periodic Compounding Date, a portion of the difference between the Accreted Value as of the immediately preceding Periodic Compounding Date (or the date of original issuance if the date of computation is prior to the first Periodic Compounding Date succeeding the date of original issuance) and the Accreted Value as of the immediately succeeding Periodic Compounding Date, shall be calculated based upon an assumption that, unless otherwise provided in the Supplemental Indenture authorizing such Capital Appreciation Bonds, Accreted Value accrues in equal daily amounts on the basis of a year consisting of twelve 30-day months. "Additional Interest" means, for any period during which any Pledged Bonds are owned by a provider of a Credit Facility pursuant to a Credit Facility or Credit Facility Agreement, the amount of interest accrued on such Pledged Bonds at the Pledged Bond Rate less the amount of interest which would have accrued during such period on any equal principal amount of First Lien Bonds at the Bond Rate. "Affiliate" means any entity, excluding a Subsidiary, owned in part by the Issuer, a Subsidiary or another Affiliate. "Alternate Variable Rate Taxable Index" shall mean such index as, at the time, is in genera] use by taxable issuers as a proxy for short-term interest rates on debt obligations of state and local governments the interest on which is not excluded from gross income for federal income tax purposes, as determined by an Authorized Issuer Representative. -4-

10 "Alternate Variable Rate Tax-Exempt Index" shall mean such index as, at the time, is in general use by tax-exempt issuers as a proxy for short-term interest rates on debt obligations of state and local governments the interest on which is excluded from gross income for federal income tax purposes, as determined by an Authorized Issuer Representative. "Appreciated Value" shall mean, with respect to any Deferred Income Bond, (i) as of any date of computation prior to the Current Interest Commencement Date, an amount equal to the principal amount of such First Lien Bond plus the interest accrued on such First Lien Bond from its date of original issuance to the Periodic Compounding Date next preceding the date of computation or the date of computation if a Periodic Compounding Date, such interest to accrue at the interest rate per annum of the Deferred Income Bonds set forth in the Supplemental Indenture authorizing such First Lien Bonds, compounded periodically on each Periodic Compounding Date as in such Supplemental Indenture provided, plus, if such date of computation shall not be a Periodic Compounding Date, a portion of the difference between the Appreciated Value as of the immediately preceding Periodic Compounding Date (or the date of original issuance if the date of computation is prior to the first Periodic Compounding Date succeeding the date of original issuance) and the Appreciated Value as of the immediately succeeding Periodic Compounding Date, shall be calculated based upon an assumption that, unless otherwise provided in the Supplemental Indenture authorizing such Deferred Income Bonds, Appreciated Value accrues in equal daily amounts on the basis of a year consisting of twelve 30-day months and (ii) as of any date of computation on and after the Current Interest Commencement Date, the Appreciated Value on the Current Interest Commencement Date. "Asset Purchase Agreement" means the Asset Purchase Agreement by and among the City, the Department of Waterworks of the City of Indianapolis, acting by and through the Board of Waterworks and the Issuer dated as of August 11, "Authorized Issuer Representative" means the President (Chair), the Vice President (Vice Chair) or the Secretary of the Board or the President, a Senior Vice President, Vice President or Treasurer of Citizens Energy Group. "Banking Institution" means a state or national bank or trust company, which is a member of the Federal Deposit Insurance Corporation, which is located within the United States. "Board" means the Board of Directors for Utilities of the Department of Public Utilities of the City of Indianapolis or any successor board, body, commission or agency succeeding to the principal functions thereof. "Bond Bank" means The Indianapolis Local Public Improvement Bond Bank or its successors or assigns. "Bond Bank Bonds" has the meaning specified in the recitals hereof. "Bond Bank Trust Indenture" has the meaning specified in the recitals hereof. "Bond Counsel" means any firm of nationally recognized bond counsel selected by the Issuer and experienced in matters relating to tax-exempt financing. -5-

11 "Bond Fund" means the special and separate fund created in Section 502 of this Master Indenture. "Bond Rate" means the rate of interest per annum payable on specified First Lien Bonds other than Pledged Bonds. "Business Day" means any day other than a Saturday, Sunday or other day that banks in the City are permitted to be closed. "Capital Appreciation Bonds" means any First Lien Bonds issued under this Master Indenture as to which all or a portion of the interest is (i) compounded on the Periodic Compounding Dates that are specified in the Supplemental Indenture authorizing such Capital Appreciation Bonds and (ii) payable only at maturity, earlier redemption or other payment thereof pursuant to the Master Indenture or such Supplemental Indenture. "Capital Lease" means any lease of property to the Issuer, as lessee, which is required to be capitalized under generally accepted accounting principles. "Certified Interest Rate" means (i) with respect to First Lien Bonds that were or will be, at the date of the original issuance thereof, the subject of a bond counsel's opinion to the effect that the interest thereon is excluded from gross income for federal income tax purposes pursuant to Section 103 of the Code, a rate of interest equal to the average of the SIFMA Municipal Swap Index or the Alternate Variable Rate Tax-Exempt Index for the five (5) years preceding such date of determination; and (ii) with respect to First Lien Bonds that were not and will not be, at the date of the original issuance thereof, the subject of a bond counsel's opinion to the effect that the interest thereon is excluded from gross income for federal income tax purposes pursuant to Section 103 of the Code, a rate of interest equal to the average of the One- Month LIBOR Rate or the Alternate Variable Rate Taxable Index for the five (5) years preceding such date of determination. "Chief Financial Officer" means the person designated by the Issuer as having primary responsibility for the financial operations of the Water System. "Citizens Energy Group" means the trade name under which the Board operates. "City" means the consolidated City of Indianapolis, Indiana. "Closing" means the date of issuance of the 2011 Bonds. "Code" means, for each series of First Lien Bonds, the Internal Revenue Code of 1986, as in effect on the date of issuance of those First Lien Bonds, and the applicable judicial decisions or published rulings, or any applicable regulations promulgated or proposed thereunder or under the Internal Revenue Code of 1954 as in effect immediately prior to the enactment of the Tax Reform Act of

12 "Combined Maximum Annual Principal and Interest Requirements" means the maximum aggregate amount of First Lien Debt Service Requirements of First Lien Bonds which have a claim for payment on the Future Bonds Common Reserve Subaccount or Prior Bonds Common Reserve Subaccount, as applicable, falling due in any succeeding Fiscal Year. "Controller" means the duly appointed Controller of the City. "Credit Facility" shall mean a letter of credit, line of credit, insurance policy, standby purchase agreement or other similar credit facility issued by a municipal bond insurer, financial institution, trust company, insurance company or association which provides for the payment of principal or purchase price of, or interest on any series of First Lien Bonds or a portion thereof. "Credit Facility Agreement" shall mean any agreement between the Issuer and the provider of any Credit Facility. "Current Interest Commencement Date" shall mean, with respect to any particular Deferred Income Bonds, the date specified in the Supplemental Indenture authorizing such Deferred Income Bonds (which date must be prior to the maturity date for such Deferred Income Bonds) after which interest accruing on such Deferred Income Bonds shall be payable periodically on dates specified in such Supplemental Indenture with the first such payment date being the first such periodic date immediately succeeding such Current Interest Commencement Date. "Defeasance Securities" shall mean and include, to the extent permitted by law, any of the following securities, if and to the extent the same are at the time legal for investment of funds of the Issuer: (a) any bonds or other obligations which as to principal and interest constitute direct obligations of, or are unconditionally guaranteed by, the United States, including obligations of any Federal agency or corporation which has been or may hereafter be created pursuant to an act of Congress as an agency or instrumentality of the United States to the extent unconditionally guaranteed by the United States or any other evidences of an ownership interest in obligations or in specified portions thereof (which may consist of specified portions of the interest thereon) of the character described in this clause (i)held by a Banking Institution or Trust Bank as custodian, under which the owner of the investment is a real party in interest and has the right to proceed directly and individually against the obligor on the obligations described in this clause (i), and which underlying obligations are not available to satisfy any claim of the custodian or any person claiming through the custodian or to whom the custodian may be obligated; or (b) any bonds or other obligations of any state or governmental unit thereof, the interest on which is exempt from federal income taxation and which are rated at such time in the then highest rating category of two or more Rating Agencies; or (c) any bonds or other obligations of any federal agency or corporation which has or may hereafter be created pursuant to Congress as an agency or instrumentality of the United States; or -7-

13 (d) any bonds or other obligations of any state of the United States or of any agency, instrumentality or local governmental unit of any such state (i) which are not callable at the option of the obligor prior to maturity or as to which irrevocable notice has been given by the obligor to call such bonds or obligations on the date specified in the notice, (ii) which are fully secured as to principal and interest and redemption premium, if any, by a fund consisting only of cash or bonds or other obligations of the character described in clause (a) above which fund may be applied only to the payment of such principal of and interest and redemption premium, if any, on such bonds or other obligations on the maturity date or dates thereof or the specified redemption date or dates pursuant to such irrevocable instructions, as appropriate, and (iii) as to which the principal of and interest on the bonds and obligations of the character described in clause (a) above which have been deposited in such fund along with any cash on deposit in such fund is sufficient to pay principal of and interest and redemption premium, if any, on the bonds or obligations described in this clause (d) on the maturity date or dates thereof or on the redemption date or dates specified in the irrevocable instructions referred to in subclause (i) of this clause (d), as appropriate; or (e) any agreements or contracts with insurance companies or other financial institutions, or subsidiaries or affiliates thereof (hereinafter in this clause (e) referred to as "Providers"), (i) whose outstanding unsecured senior indebtedness or claims-paying ability, as the case may be, shall be rated, or who shall have a "financial programs rating" or other equivalent rating, in the highest whole rating category by at least two Rating Agencies or (ii) whose obligations under such agreements or contracts shall be unconditionally guaranteed by another insurance company or other financial institution, or subsidiary or affiliate thereof, whose outstanding unsecured senior indebtedness or claims-paying ability, as the case may be, shall be rated, or who shall have a "financial programs rating" or other equivalent rating, in the highest whole rating category by at least two Rating Agencies, pursuant to which agreements or contracts the Provider shall be absolutely, unconditionally and irrevocably obligated to repay the moneys invested by the Issuer and interest thereon at a guaranteed rate, without any right of recoupment, counterclaim or set off The Provider may have the right to assign its obligations under any investment agreement to any other insurance company or other financial institution, or subsidiary or affiliate thereof; provided, however, that such assignee also shall be an insurance company or other financial institution, or subsidiary or affiliate thereof, satisfying the requirements set forth in either clause (i) or clause (ii) of the preceding sentence; or (f) Facility. any other bonds or obligations approved by the applicable provider of a Credit The term "Defeasance Securities" with respect to First Lien Bonds issued subsequent to the Closing may include the following: (a) Direct obligations of any of the following federal agencies which obligations are not fully guaranteed by the full faith and credit of the United States of America: (i) Senior debt obligations rated "Aaa" by Moody's and "AAA" by S&P issued by the Federal National Mortgage Association (FNMA) or Federal Home Loan Mortgage Corporation (FHLMC); -8-

14 and (ii) (iii) Obligations of the Resolution Funding Corporation (REFCORP); Senior debt obligations of the Federal Home Loan Bank System. (b) any bonds or other obligations of any state or governmental unit thereof, the interest on which is exempt from federal income taxation and which are rated at such time in one of the two then highest rating categories of two or more Rating Agencies (without reference to qualifiers). Notwithstanding the foregoing, the term "Defeasance Securities" with respect to a particular series of First Lien Bonds may be further restricted or expanded as shall be set forth in the Supplemental Indenture relating to such series of First Lien Bonds. In such event, the modified definition of "Defeasance Securities" shall apply only to such series of First Lien Bonds unless provided otherwise by a Supplemental Indenture. "Deferred Income Bonds" means any First Lien Bonds as to which interest accruing prior to the Current Interest Commencement Date is (i) compounded periodically on the dates specified in the Supplemental Indenture authorizing such Deferred Income Bonds and (ii) payable only at redemption or other payment thereof pursuant to such Supplemental Indenture. "Department" means the Department of Waterworks of the City. "Department Bonds" has the meaning specified in the recitals hereof. "Department Resolution" has the meaning specified in the recitals hereof. "disposal" or "dispose" means the sale, destruction, razing, loan, lease, grant, transfer, assignment, option to sell, other contract, other disposition, or any combination thereof, of the Water System. "DTC" means the Depository Trust Company, New York, New York, or its nominee, or its successors and assigns, or any other depository performing similar functions under the Master Indenture. "Enabling Legislation" means 1C and other statutes applicable to the Issuer, including 1C "Events of Default" mean the events described in Section 1102 hereof. "Federal Government" means the United States, or any agency, instrumentality, or corporation thereof. "Financial Consultant" means any Person, including, but not limited to an Independent Accountant, who is not a member of the Board, or an employee or Authorized Issuer Representative of the Issuer retained by the Issuer to render fiscal or rate setting advice or to perform financial services in connection with the Bonds and/or the Water System. -9-

15 "First Lien Bonds" means any revenue bonds or notes of the Issuer issued under this Master Indenture payable from Net Revenues including the 2011 Bonds and any Parity Bonds. "First Lien Debt Service Requirements" means with respect to a period of time for which calculated, the aggregate of the payments required to be made by the Issuer in respect of principal whether at maturity or as a result of a mandatory prepayment, and the interest on outstanding First Lien Bonds (including any Reimbursement Obligations related thereto as described in Section 704 hereof) and any Hedge Payments with respect to Hedge Agreements; however excluding such principal or interest payments on First Lien Bonds to the extent that amounts are on deposit in an irrevocable escrow and such amounts (including, where appropriate, the earnings or other increment to accrue thereon) are required to be applied and are sufficient to pay such principal of, premium, if any, or interest on the scheduled payment dates at maturity or redemption; provided, further that in calculating the First Lien Debt Service Requirements for such period, the principal amount of any First Lien Bonds included in such calculation which is paid during such period shall be excluded to the extent such amount is paid from a source other than the Net Revenues, including but not limited to the proceeds of First Lien Bonds. Unless the Issuer specifies otherwise in a Supplemental Indenture First Lien Debt Service Requirements shall be interpreted in the following manner: (a) For any series of First Lien Bonds issued pursuant to a commercial paper, variable rate demand note or similar program for which the principal amortization is not known, except as provided in subparagraph (i) hereof, First Lien Debt Service Requirements shall be computed on the assumption that the principal amount shall continuously be refinanced under such program and remain outstanding, until the first Fiscal Year for which interest on such First Lien Bonds has not been capitalized or otherwise funded or provided for, at which time (which shall not be beyond the term of such program) it shall be assumed that the outstanding principal amount thereof shall be refinanced with a series of First Lien Bonds which shall be assumed to be amortized over a period not to exceed 30 years with relatively level principal and interest payments, and shall be assumed to bear interest at a fixed interest rate estimated by the Issuer's financial advisor or underwriter to be the interest rate such series of First Lien Bonds would bear if issued on such terms on the date of such estimate. (b) For any series of First Lien Bonds bearing interest at a variable or adjustable rate or a rate to be negotiated or revised from time to time such that the actual future rate of interest thereon cannot be ascertained at the time of calculation but for which the principal amortization is known, except as provided in subparagraph (d) hereof, it shall be assumed that such First Lien Bonds will bear interest as follows: (i) for any series of First Lien Bonds then Outstanding, at the rate of interest which is the weighted average rate of interest for such First Lien Bonds during the preceding 12 month period or such shorter period from the date of issue of such First Lien Bonds, and (ii) for any series of First Lien Bonds then proposed to be issued at the Certified Interest Rate. (c) First Lien Debt Service Requirements shall be calculated on the assumption that no First Lien Bonds Outstanding at the date of calculation will cease to be Outstanding except by reason of the payment of scheduled principal maturities or scheduled mandatory redemptions of such First Lien Bonds; except as provided in subparagraphs (a) or (i). -10-

16 (d) If the Issuer shall have Outstanding any variable or adjustable rate First Lien Bonds with respect to which the Issuer has executed any Hedge Agreement, the effect of which created or will create, in whole or in part, the economic equivalent of a fixed rate First Lien Bond, the First Lien Debt Service Requirements with respect thereto shall be calculated by reference to the effective fixed rate created by such transaction. If the effect of such Hedge Agreement is to create a fixed rate transaction for only a portion of the term or principal amount of the variable or adjustable rate First Lien Bonds, the First Lien Debt Service Requirements for the remaining term or principal amount of such variable or adjustable rate First Lien Bonds shall be determined by reference to either the actual payments or such other subparagraphs hereof as the Issuer shall elect. (e) If the Issuer shall enter into a Hedge Agreement in connection with a series of fixed rate First Lien Bonds the effect of which created or will create, in whole or in part, the economic equivalent of a First Lien Bond bearing interest at a variable or adjustable rate or a rate to be negotiated or revised from time to time, the First Lien Debt Service Requirement for such bonds shall be calculated by reference to the greater of (i) the principal and interest due on such First Lien Bonds, without adjustment for the effect of such Hedge Agreement or (ii) by reference to the effective variable rate (taking into account such Hedge Agreement) determined in accordance with subparagraph (b) hereof. (f) If the Issuer shall have deposited in escrow certain Defeasance Securities the principal and interest on which will be sufficient to pay any principal or interest due on Outstanding First Lien Bonds, First Lien Debt Service Requirements shall be calculated by excluding such principal or interest due on such First Lien Bonds, notwithstanding the fact that the Issuer has not fulfilled the requirements in Section 1001 for the discharge of such First Lien Bonds. (g) For any series of First Lien Bonds issued as Taxable Credit Bonds, including, but not limited to, "build America bonds" pursuant to Section 54AA(d) of the Code and which are also "qualified bonds" under Section 54AA (g) or any other Section of the Code, the interest amounts due on such First Lien Bonds shall be assumed to be net of the subsidy amount expected to be received. (h) For Capital Appreciation Bonds or Deferred Income Bonds, the Accreted Value of Capital Appreciation Bonds or the Appreciated Value of Deferred Income Bonds becoming due at maturity or by virtue of a sinking fund installment shall be included in the calculations of accrued and unpaid and accruing interest or principal installments made hereunder only from and after the date (the "Calculation Date") which is one year prior to the date on which such Accreted Value or Appreciated Value, as the case may be, becomes so due, and the principal and interest portions of such Accreted Value or Appreciated Value shall be deemed to accrue in equal daily installments from the Calculation Date to such due date. (i) For Tender Indebtedness, the options or obligations of the holders of such First Lien Bonds to tender the same for purchase or payment prior to their stated maturity or maturities shall be treated as principal on the first date on which such holders may or are required to tender such First Lien Bonds, except that any such option or obligation shall not be treated as principal and shall instead by governed by subparagraph (a) if such First Lien Bonds -11 -

17 are rated in at least one of the three highest long-term rating categories or in the two highest short-term rating categories (without regard to any gradations in such categories) by a Rating Agency. (j) With respect to First Lien Bonds having a term of longer than 24 months and 25% or more of the principal of which matures on the same date and which portion of the principal of such indebtedness is not required to be amortized by payment or redemption prior to such date, such First Lien Bonds shall be deemed to be amortized on a level debt service basis over the term of 30 years or, at the option of the Issuer, the actual term of such First Lien Bonds, assuming the interest rate shall be the 30 year revenue bond index, or the revenue bond index related to the actual term of such First Lien Bonds published by The Bond Buyer ("RBI") no more than two weeks prior to the date of calculation, or any similar index selected by the Issuer. "Fiscal Year" means the fiscal year selected by the Issuer from time to time for accounting purposes for the Water System. "Future Bonds" means those First Lien Bonds issued subsequent to the Closing the Issuer elects to be secured by the Future Bonds Common Reserve Subaccount. "Future Bonds Common Reserve Requirement" means the least of (i) 10% of the stated principal amount of all Future Bonds Outstanding, (ii) the Combined Maximum Annual Principal and Interest Requirements for the Future Bonds and (iii) 125% of the average annual First Lien Debt Service Requirements for the Future Bonds. "Future Bonds Common Reserve Subaccount" means the special and separate subaccount created in Section 502 of this Master Indenture within the Reserve Account of the Bond Fund for the Future Bonds. "Gas Utility Distribution System" means all assets and properties, including any and all interests therein, whether real or personal or tangible or intangible, held or operated by the Issuer in trust or otherwise and used directly to provide gas utility service the rates and charges for which are subject to regulation by the IURC or, in the absence of IURC regulation, under rates and charges established by the Board pursuant to Indiana Code or any successor provision of law. The Gas Utility Distribution System is a Separate System for purposes of this Master Indenture. "Gross Revenues" means all income and revenues received or accrued under generally accepted accounting principles derived directly or indirectly by the Issuer from the Water System and any other goods and services provided by, or from the operation and use of and otherwise pertaining to, the Water System, including, without limitation, all rates, fees, and other charges for the use of the Water System, or for any service rendered by the Issuer in the operation thereof, or any part thereof, directly or indirectly, the availability of any such service or the sale or other disposal of any commodity derived therefrom, but excluding any insurance proceeds, any moneys borrowed and used for the acquisition, construction, installation, improvement or equipping of capital improvements and any moneys received as grants, appropriations or gifts from the United States, the State or other sources, the use of which is limited by the grantor or donor to the acquisition, construction, installation, improvement or equipping of capital 1/ J 5-12-

18 improvements for the Water System, except to the extent any such moneys shall be received as payments for the use of the Water System, services rendered thereby, the availability of any such service or the disposal of any such commodities, "Gross Revenues" shall for purposes of the tests described in Section 702B and Section 80IB also include: (a) all income or other gain from the investment of Pledged Funds or Second Lien Pledged Funds (as defined in the Second Lien Master Indenture); (b) all amounts withdrawn from the Rate Stabilization Fund, if any, and deposited in the Revenue Fund in accordance with and subject to the limitations set forth in Section 801 hereof less all amounts withdrawn from the Revenue Fund and deposited into the Rate Stabilization Fund. "Hedge Agreement" means, to the extent permitted by law, any financial arrangement entered into by the Issuer with respect to the First Lien Bonds for the purpose of moderating interest rate fluctuations or any other purpose, (i) which is entered into with an entity that is a Qualified Provider at the time the arrangement is entered into; (ii) which is any of the following, or any combination thereof, or any option with respect thereto: a cap, floor or collar; forward rate; future rate; swap or such other exchange or rate protection transaction agreement; or other similar transaction (however designated); and (iii) which has been designated in writing to the Trustee by the Issuer as a Hedge Agreement with respect to all or a portion of the notional principal amount of such First Lien Bonds. "Hedge Payments" means amounts payable by the Issuer pursuant to any Hedge Agreement, excluding any termination payments, fees, expenses, and indemnity payments, if any. "Hedge Payments Account" means the special and separate account within the Bond Fund created in Section 502 of this Master Indenture. "Hedge Period" means the period during which a Hedge Agreement is in effect. "Hedge Receipts" means amounts payable by any provider of a Hedge Agreement to the Issuer pursuant to such Hedge Agreement, excluding termination payments, fees, expenses, and indemnity payments. "Hedged Bonds" means any First Lien Bonds with respect to which the Issuer shall have entered into a Hedge Agreement. "hereby," "herein," "hereinabove," "hereinafter," "hereinbefore," "hereof," "hereto," "hereunder," or any similar term refer to this Master Indenture and not solely to the particular portion thereof in which such word is used; "heretofore" means before the execution and effectiveness of this Master Indenture; and "hereafter" means after the execution and effectiveness of this Master Indenture. "holder," or any similar term, when used in conjunction with any First Lien Bond, means the registered owner of any First Lien Bond which is registered for payment. -13-

19 "1C" means the Indiana Code. "Independent Accountant" means any certified public accountant, or any firm of certified public accountants, duly licensed to practice and practicing as such under the laws of the State, as from time to time appointed and compensated by the Issuer who is not an Authorized Issuer Representative, a member of the Board or employee of the Issuer, but who may be regularly retained to make annual or similar audits of any books or records of the Issuer. "Interest Account" means the special and separate subaccount created in Section 502 of this Master Indenture within the Bond Fund. "Interest Payment Date" means each date on which interest is to become due on any First Lien Bonds, as established herein or in the Supplemental Indenture for such First Lien Bonds. "Issuer" means the City of Indianapolis, a municipal corporation acting by and through the Board of Directors for Utilities of its Department of Public Utilities in furtherance of the public charitable trust for the Water System. "IURC" means the Indiana Utility Regulatory Commission or if the IURC shall be abolished, or some part of its functions assumed by some other governmental agency, the agency, authority, board, body, commission or department succeeding to or sharing the functions thereof. "Lien" me ans any mortgage, pledge or lease of, security interest in or lien, charge restriction or encumbrance on the Water System or the Gross Revenues in favor of, or which secures any obligation to, any other entity or Person including any lien created by a Capital Lease. "Master Indenture" means this First Lien Master Indenture between the Issuer and the Trustee dated as of July 1,2011, as it may be amended or supplemented from time to time. "Net Revenues" means the Gross Revenues remaining after the deduction of the Operation and Maintenance Expenses. No determination of the Gross Revenues, Operation and Maintenance Expenses, or Net Revenues for purposes of Section 801 or Section 702 hereof shall be adjusted to reflect the following items, unless the Board determines, in its discretion, to make such adjustment: (i) any gain or loss resulting from the extinguishment of indebtedness or the sale, exchange or other disposition of assets not in the ordinary course of business, (ii) any unrealized gain or loss on investments, (iii)any unrealized changes in value of a Hedge Agreement or a Second Lien Hedge Agreement (as defined in the Second Lien Master Indenture, if any) or other derivative instrument, (iv) any extraordinary items under Accounting Principles from time to time, or (v) any changes in Accounting Principles becoming effective after the Closing. "One-Month LIBOR Rate" shall mean, as of any date of determination, the offered rate for deposits in U.S. dollars for a one-month period which appears on the Telerate Page 3750 at approximately 11:00 A.M., London time, on such date, or if such date is not a date on which -14-

20 dealings in U.S. dollars are transacted in the London interbank market, then on the next preceding day on which such dealings were transacted in such market. "Operation and Maintenance Expenses," or any phrase of similar import, means all reasonable and necessary current expenses of the Issuer, determined under Accounting Principles, of operating, maintaining, and repairing the Water System, but excluding interest expense and any allowance for depreciation or amortization; further, the term includes, without limitation: (a) Engineering, auditing, reporting, legal, planning, regulatory, and other overhead expenses relating to the administration, operation, and maintenance of the Water System, including any fees owed to any manager engaged or employed by the Issuer; (b) Fidelity bond and property and liability insurance premiums pertaining to the Water System, or a reasonably allocable share of a premium of any blanket bond or policy pertaining to the Water System; (c) Payments to pension, retirement, health, and hospitalization funds, and other insurance, and to any self-insurance fund as insurance premiums not in excess of such premiums which would otherwise be required for such insurance; (d) Any general taxes, payments in lieu of taxes, assessments, excise taxes, or other charges which may be lawfully imposed on, or paid by, the Issuer, the Water System, revenues therefrom, or the Issuer's income from or operations of any properties under its control and pertaining to the Water System, or any privilege in connection with the Water System or its operation; (e) The reasonable charges of the Indiana Finance Authority or another conduit issuer as the holder of First Lien Bonds or Second Lien Bonds, the Trustee, Paying Agent, Registrar and any other depositary bank, fiduciary or receiver under this Master Indenture, under any master indenture pertaining to Second Lien Bonds or other obligations; (f) Contractual services, professional services, salaries, other administrative expenses, and costs of materials, supplies, repairs, and labor, pertaining to the Water System; (g) (h) Any costs of utility services furnished to the Water System; Any lawful refunds of any Net Revenues; (i) The cost of funding any amount due the United States as rebate payments under Section 148(f) of the Code, and the cost of calculating and verifying the amount of such rebate payments; (j) Fees and charges payable to the Purchaser of First Lien Bonds or Second Lien Bonds pursuant to a bond purchase agreement or similar document; and (k) All other administrative, general, and commercial expenses incurred by the Issuer in connection with the Water System. I/

21 "Outstanding" when used with reference to the First Lien Bonds and as of any particular date means all the First Lien Bonds, including First Lien Bonds held by the Issuer, in any manner theretofore and thereupon being executed and delivered: (a) Except any First Lien Bond canceled by the Issuer, by the Trustee, Registrar, Paying Agent or otherwise on the Issuer's behalf, at or before such date; (b) Except any First Lien Bond, for the payment or the redemption of which shall have theretofore been made or provided for pursuant to Section 511 or 1201 hereof; and (c) Except any First Lien Bond in lieu of or in substitution for which another First Lien Bond shall have been executed and delivered pursuant to Section 306 hereof. "Parity Bonds" means any additional First Lien Bonds issued by the Issuer, the principal of, premium if any, and interest on which are payable from Net Revenues on a parity with the 2011 Bonds, which are issued in accordance with the requirements of Article IV and Section 702 hereof. "Paying Agent" means U.S. Bank National Association, a Banking Institution and a Trust Bank, and designated by the Issuer as the paying agent for the 2011 Bonds, which Banking Institution is also the Registrar hereunder and is an agent of the Issuer for the payment of the 2011 Bonds and for other administration of moneys pertaining to the Issuer; and the term Paying Agent includes any successor Banking Institution as such a paying agent. "Periodic Compounding Date" means the periodic date specified in a Supplemental Indenture authorizing Capital Appreciation Bonds or Deferred Income Bonds on which interest on such First Lien Bonds is to be compounded. "Permitted Encumbrances" means, from time to time: (a) Any Liens arising by reason of good faith deposits with the Issuer in connection with tenders, leases of real estate, bids or contract (other than contracts for the payment of money), deposits by the Issuer to secure public or statutory obligations, or to secure, or in lieu of, surety, stay or appeal bonds, and deposits as security for the payment of taxes or assessments or other similar charges; any Lien arising by reason of deposits with, or the giving of any form of security to, any governmental agency or any body created or approved by law or governmental regulation for any purpose at any time as required by law or governmental regulation as a condition to the transaction of any business or the exercise of any privilege or license, or to enable the Issuer to maintain self-insurance or to participate in any funds established to cover any insurance risks or in connection with workmen's compensation, unemployment insurance, pensions or profit sharing plans or other social security plans or programs, or to share in the privileges or benefits required for corporations participating in such arrangements; (b) Any Lien on any additional Water System property acquired by the Issuer after Closing, which Lien (i) secures indebtedness issued, incurred or assumed by the Issuer in connection with and to effect such acquisition or (ii) existing indebtedness which will remain outstanding after such acquisition but will not be assumed by the Issuer, if in each such case the -16-

22 aggregate principal amount of such indebtedness does not exceed the fair market value of the property subject to such Lien as determined in good faith by the Board; (c) Any lease which relates to the Water System which is of a type that is customarily the subject of such leases such as equipment; any lease, license or similar right to use the Water System to which the Issuer (or any predecessor in interest of such party) is a party existing as of the date of Closing and any renewals and extensions thereof; and any lease, license or similar right to use property where under the lease the Issuer is lessee, licensee or the equivalent thereof upon fair and reasonable terms no less favorable to the lessee or licensee than would be obtained in a comparable arm's-length transaction; (d) Any Lien for taxes and special assessments which is not then delinquent, or if then delinquent are being contested in accordance with the Master Indenture; (e) Any utility, access and other easement and right-of-way, restriction, encumbrance and exception which does not materially interfere with or materially impair the operation of the Water System (or, if such property is not being then operated, the operation for which it was designed or last modified); (f) Any mechanic's, laborer's, materialman's, supplier's or vendor's Lien or right in respect thereof if payment is not yet due under the contract in question or if such Lien is being contested in accordance with the Master Indenture; (g) Any such Lien, defect, irregularity of title and encroachment on adjoining property as normally exist with respect to property similar in character to the property involved and which does not materially adversely affect the value of, or materially impair, the property affected thereby for the purpose for which it was acquired or is held by the owner thereof, including without limitation a statutory lien granted to a bank or other financial institution, which lien has not been specifically granted to secure indebtedness and which does not apply to property which has been deposited as part of a plan to secure indebtedness; (h) Zoning laws and similar restrictions which are not violated by the property affected thereby; (i) All right, title and interest of the State, municipalities and the public in and to tunnels, bridges and passageways over, under or upon a public way; 0 Any Lien on or in property given, granted, bequeathed or devised by the owner thereof existing at the time of such gift, grant, bequest or devise, provided that (i) such Lien consists solely of restrictions on the use thereof or the income therefrom, or (ii) such Lien secures indebtedness which is not assumed by the Issuer and such Lien attaches solely to the property (including the income therefrom) which is the subject of such gift, grant, bequest or devise; (k) Any Lien of or resulting from any judgment or award, the time for the appeal or petition for rehearing of which shall not have expired, or in respect of which the Issuer shall at -17-

23 any time in good faith be prosecuting an appeal or proceeding for a review and in respect of which a stay of execution pending such appeal or proceeding for review shall be in existence; (1) Any Lien on any First Lien Bond or Second Lien Bond acquired by or on behalf of the Issuer in favor of the provider of an applicable Credit Facility for such bond; (m) Any such Lien, covenant, condition and restriction, if any, which does not secure indebtedness and which is other than those of the type referred to above, and which does not materially impair or materially interfere with the operation or usefulness thereof for the purpose for which such property was acquired or is held by the Issuer, as determined by the Board in its discretion; (n) Any Lien on the Water System existing as of the date of Closing which is identified as a Permitted Lien in the Asset Purchase Agreement; (o) Any Lien on moneys deposited with the Issuer by customers of the Water System or developers of property within the waterworks district of the Issuer; and (p) Purchase money security interests arising by operation of law. "Permitted Investments" means the investments permitted for the Issuer under the Enabling Legislation, as amended from time to time. "Person" means a corporation, firm, other body corporate (including, without limitation, the Federal Government, the State, or any other body corporate and politic), partnership, association, or individual, and also includes an executor, administrator, trustee, receiver, or other representative appointed according to law. "Pledged Bond" means any First Lien Bond purchased and held by an issuer of a Credit Facility pursuant to a Credit Facility Agreement. A First Lien Bond shall be deemed a Pledged Bond only for the actual period during which such First Lien Bond is owned by the provider of a Credit Facility pursuant to a Credit Facility Agreement. "Pledged Bond Rate" means the rate of interest payable on Pledged Bonds, as may be provided in a Credit Facility or Credit Facility Agreement. "Pledged Funds" means initially, the Reserve Fund (as further specified in a Supplemental Indenture), the Rate Stabilization Fund, the Construction Fund, the Revenue Fund, the Interest Account, the Principal Account and the Hedge Payments Account and any other funds, accounts or subaccounts created by the Issuer which are pledged to secure the payment of all the First Lien Bonds and any related Hedge Payments whether described in Section 501 of this Master Indenture or in any Supplemental Indenture; provided, however, that any funds, accounts or subaccounts created by the Issuer which are pledged pursuant to the Master Indenture or any Supplemental Indenture to secure the payment of only one or more series of First Lien Bonds or Second Lien Bonds from time to time shall only be pledged to such bonds. Pledged Funds shall not include any Second Lien Bond Fund, nor any interest account, principal account or hedge payments account contained therein, or any reserve fund created pursuant to -18-

24 the Second Lien Master Indenture or any indenture supplemental thereto and related to such Second Lien Bonds or other Subordinate Bonds. "Principal Account" means the special and separate subaccount created in Section 502 of this Master Indenture within the Bond Fund. "Principal Payment Date" means each date on which principal is to become due on any First Lien Bonds, by maturity or mandatory sinking fund redemption, as established herein or in the Supplemental Indenture for such First Lien Bonds. "Prior Bonds" means the 2011 Bonds and any First Lien Bonds the Issuer elects to be secured by the Prior Bonds Common Reserve Subaccount. "Prior Bonds Common Reserve Requirement" means at any time fifty percent (50%) of the Combined Maximum Annual Principal and Interest Requirements for the Prior Bonds. "Prior Bonds Common Reserve Subaccount" means the special and separate subaccount created in Section 502 of this Master Indenture within the Reserve Account of the Bond Fund for the Prior Bonds. "Purchaser" means the Bond Bank or any successor thereof and any other purchaser of First Lien Bonds. "Qualified Provider" means, a counterparty whose senior long term debt obligations, or whose obligations under a Hedge Agreement or Reserve Account Credit Facility are guaranteed by an entity whose senior long term debt obligations, are rated in one of the three highest Rating Categories by a Rating Agency which then has a rating in effect for the First Lien Bonds at the time the subject Hedge Agreement or Reserve Account Credit Facility is entered into. "Rate Stabilization Fund" means the special and separate fund of that name to be created and maintained by the Issuer in the Water Fund. "Rating Agencies" or "Rating Agency" means Fitch Ratings, Moody's Investors Service and Standard & Poor's Ratings Services or any successors thereto and any other nationally recognized credit rating agency then maintaining a rating on any First Lien Bonds at the request of the Issuer or any bonds of the Bond Bank issued to fund the purchase of any First Lien Bonds, "Rating Category" means the long term rating categories of a Rating Agency, disregarding pluses, minuses, and any numerical gradations. "Redemption Date" means the date fixed for the redemption prior to their respective fixed maturity dates of any First Lien Bonds in any notice of redemption, under Section 304 hereof. "Redemption Price" means, when used with respect to a First Lien Bond, the principal amount thereof plus the applicable premium, if any, payable upon the redemption thereof prior to the stated fixed maturity date of such First Lien Bond on a Redemption Date. -19-

25 "Refunding Bonds" means First Lien Bonds refunding all or a portion of any First Lien Bond outstanding. "Registrar" means the Paying Agent, U.S. Bank National Association, which Banking Institution is required to keep records for the registration, transfer, and exchange of the First Lien Bonds, or any successor thereof. "Regular Record Date" means the close of business on the fifteenth (15 th ) day of the calendar month next preceding each Interest Payment Date or any other date specified in a Supplemental Indenture as to any particular First Lien Bonds. "Reimbursement Obligation" shall mean any obligation of the Issuer to reimburse the provider of any Credit Facility or Reserve Account Credit Facility for any payment made by the provider under such Credit Facility or Reserve Account Credit Facility, or any other obligation of the Issuer to repay any amounts, including, but not limited to, fees or Additional Interest to such provider. "Reserve Account" means the special and separate account created in Section 502 of this Master Indenture within the Bond Fund. "Reserve Account Credit Facility" means any surety bond, any insurance policy, letter of credit, or line of credit, deposited in the Reserve Account in lieu of or in partial substitution for monies on deposit therein, the issuer of which at the time of deposit of such Reserve Account Credit Facility is a Qualified Provider. "Reserve Requirement" means the Future Bonds Common Reserve Requirement, the Prior Bonds Common Reserve Requirement and any Series Reserve Requirement. "Revenue Fund" means the special and separate fund to be maintained as provided in Section 503 of this Master Indenture. "Second Lien Bonds" means the revenue bonds of the Issuer issued pursuant to the Second Lien Master Indenture payable from Net Revenues and Pledged Funds expressly junior and subordinate to the First Lien Bonds. "Second Lien Master Indenture" means the Second Lien Master Indenture dated as of July 1, 2011, between the Issuer and The Bank of New York Mellon Trust Company, N.A., as Trustee, providing for the issuance of Second Lien Bonds. "Separate Systems" means any and all systems other than the Water System, now or hereafter owned or operated by the Issuer or CWA Authority, Inc., including, without limitation, the Gas Utility Distribution System, Thermal Energy System and the Wastewater System. "Series Reserve Requirement" means the amount, if any, established by a Supplemental Indenture as the reserve requirement for only one or more particular series of Parity Bonds. -20-

26 "Series Reserve Subaccount" means any special and separate subaccount within the Reserve Account of the Bond Fund as may be established by a Supplemental Indenture for one or more Series of First Lien Bonds, "SIFMA Municipal Swap Index" shall mean the rate determined on the basis of an index based upon the weekly interest rates of tax-exempt variable rate issues included in a database maintained by Municipal Market Data or any successor indexing agent which meets specific criteria established by The Securities Industry and Financial Markets Association. "Special Record Date" means the close of business on a date fixed to determine the names and addresses of holders for the purpose of paying defaulted interest. "State" means the State of Indiana. "Subordinate Bonds" means any other bonds, certificates of indebtedness and other evidences of indebtedness issued with a right to payment from the Net Revenues and Pledged Funds and secured by a lien on the Net Revenues and Pledged Funds expressly junior and subordinate to the First Lien Bonds and the Second Lien Bonds. "Subsidiary" means any corporation all or substantially all of whose outstanding voting stock shall at the time be owned by the Board. For the purposes only of this definition, the term "voting stock," as applied to the stock of any corporation, shall mean stock of any class or classes having voting power for the election of a majority of the directors of such corporation (other than such voting power created by events of default or upon the happening of any other contingency), CWA Authority, Inc. is not a subsidiary of the Issuer. "Supplemental Indenture" means each indenture adopted by the Issuer providing for the issuance of First Lien Bonds as permitted hereunder or to otherwise amend or supplement this Master Indenture. "Taxable Credit Bonds" means qualified First Lien Bonds the Issuer has elected to issue as taxable and receive a subsidy to reduce the effective interest rate. "Tax-Exempt Bonds" means any First Lien Bonds the interest on which has been determined, in the opinion of Bond Counsel, to be excludable from the gross income of the holders thereof for federal income tax purposes. "Tender Indebtedness" shall mean any First Lien Bond a feature of which is an option or obligation on the part of the holders of such First Lien Bond to tender all or a portion of such bond or bonds to a fiduciary for purchase or redemption prior to the stated maturity date of such bond or bonds, which may include variable rate or adjustable rate indebtedness with such a feature. 'Term Bond" or "Term Bonds" means any First Lien Bonds which are subject to scheduled mandatory sinking fund redemption prior to maturity as set forth in the Supplemental Indenture authorizing such First Lien Bonds

27 "Thermal Energy System" means the Issuer's Thermal Energy System, including the Steam Division and the Chilled Water Division, which system is a Separate System for purposes of this Master Indenture and all indentures entered into by the Issuer. "Trust Bank" means the Trustee and any Banking Institution which is also authorized to exercise and is exercising trust powers, and also means any branch of the Federal Reserve Bank. "Trustee" means U.S. Bank National Association, which Banking Institution is the fiduciary appointed by Section 1201 hereof, including any successor Trust Bank, which may at any time be substituted in its place as such a trustee. "2011 Bonds" means the "City of Indianapolis, Indiana Water System First Lien Revenue Bonds, Series 2011," issued in several series or subseries to conform to the respective Department Bonds and authorized to be issued by this Master Indenture and any Supplemental Indenture related thereto. "United States" means the United States of America; and where the context so indicates, such term means the geographical area comprising the United States of America. "Wastewater System" means the sewage works system and all real estate and equipment owned by CWA Authority, Inc. used in connection therewith and appurtenances thereto, and all extensions, additions and improvements thereto, and replacements thereof now or at any time hereafter constructed or acquired; and all services provided or to be provided by CWA Authority, Inc. therewith. The Wastewater System is a Separate System for purposes of this Master Indenture. "Water Fund" means the special and separate fund created by the Issuer as described in Section 502 hereof. "Water System" means the right, title and interest in, under and to all of the assets, properties and rights used and useful in the business of storing, supplying, distributing, and selling water to the public, and in providing ancillary services thereto, as described in the Asset Purchase Agreement, the acquisition of which was approved by the Issuer by resolution on August 11, 2010, and consisting of all properties, real, personal, mixed, tangible, intangible or otherwise, now owned by the Issuer or hereafter acquired by the Issuer through purchase, construction or otherwise, and used in connection with such Water System of the Issuer, and in any way pertaining thereto, all as located in or as necessary for or appropriate for or supporting the operation of the Water System, including, without limitation, machinery, apparatus, structures, buildings and related or appurtenant furniture, fixtures and other equipment, as such Water System is from time to time extended, bettered or otherwise improved, or any combination thereof. B, Construction. This Master Indenture, except where the context by clear implication herein otherwise requires, shall be construed as follows: (1) Words in the singular number include the plural, and words in the plural include the singular. -22-

28 (2) Words in the masculine gender include the feminine and the neuter, and when the sense so indicates words of the neuter gender refer to any gender. (3) Articles, sections, subsections, paragraphs, and subparagraphs mentioned by number, letter, or otherwise, correspond to the respective articles, sections, subsections, paragraphs, and subparagraphs of this Master Indenture so numbered or otherwise so designated. (4) The titles and leadlines applied to articles, sections, and subsections of this Master Indenture are inserted only as a matter of convenience and ease in reference and in no way define, limit, or describe the scope or intent of any provisions of this Master Indenture. (5) Any First Lien Bonds held by the Issuer shall not be deemed to be Outstanding for the purpose of redemption or Outstanding for the purpose of consents hereunder or for any other purpose provided herein. Section 102. Parties Interested Herein. Except as herein otherwise expressly provided, nothing herein expressed or implied is intended or shall be construed to confer upon or to give to any Person, other than the Issuer, the Board, the Paying Agent, the Trustee, the counterparty to a Hedge Agreement, the obligee of a Reimbursement Obligation and the holders from time to time of the First Lien Bonds, including, without limitation, the Paying Agent in its capacity as a paying agent and as the Registrar, any right, remedy, or claim under or by reason hereof or any covenant, condition, or stipulation hereof. All the covenants, stipulations, promises, and agreements herein contained by and on behalf of the Issuer shall be for the sole and exclusive benefit of the Issuer, the Board, the Paying Agent, the Trustee, the counterparty to a Hedge Agreement, the obligee of a Reimbursement Obligation and any holder of any First Lien Bonds, except as herein otherwise provided. Section 103. Accounting Terms. Unless this Master Indenture prescribes, this Master Indenture shall be interpreted by giving to the accounting terms used herein the respective definitions given to such terms under Accounting Principles. The Issuer shall apply Accounting Principles in determining and allocating (i) Gross Revenues of the Water System or Separate Systems; and (ii) the Operation and Maintenance Expenses of the Water System or Separate Systems. Section 104. Master Indenture a Contract. The provisions of this Master Indenture shall constitute a contract by and between the Issuer and the holders of the First Lien Bonds herein authorized, all the terms of which shall be enforceable as set forth herein by any and all appropriate proceedings in law or in equity. After the issuance of the First Lien Bonds and subject to Article XV, this Master Indenture shall not be repealed, amended or modified in any respect which will adversely affect the rights or interest of the holders of such First Lien Bonds, nor shall the Board adopt any resolution in any way adversely affecting the rights of the holders so long as any of the First Lien Bonds or the interests thereon, remain outstanding or unpaid. Section 105. Severabilitv. If any section, subsection, paragraph, clause, or other provision of this Master Indenture shall for any reason be held to be invalid or unenforceable, the -23-

29 invalidity or unenforceability of such section, subsection, paragraph, clause, or other provision shall not affect any of the remaining provisions of this Master Indenture. Section 106. Execution of Master Indenture. This Master Indenture shall be executed by the signature of the President and Chief Executive Officer of Citizens Energy Group, shall be attested by the Senior Vice President and Chief Financial Officer of Citizens Energy Group. -24-

30 ARTICLE II. FIRST LIEN BOND PROVISIONS Section 201, Revenue Obligations. The First Lien Bonds and related obligations, including related Hedge Payments and Reimbursement Obligations, ar e revenue obligations within the meaning of 1C Section 202. Special Obligations. All of the payments on the First Lien Bonds and the amounts payable by the Issuer pursuant to the provisions of a Hedge Agreement, a Credit Facility or a Reserve Account Credit Facility shall be payable solely out of the Net Revenues and any applicable Pledged Funds. Neither the Purchaser, any holder of the First Lien Bonds, nor any provider of a Credit Facility, a Reserve Account Credit Facility or a Hedge Agreement may look to any general or other fund of the Issuer, the City (or any political subdivision thereof) or the State for the payment of the First Lien Bonds, or the amounts payable by the Issuer pursuant to the provisions of a Hedge Agreement, a Credit Facility or a Reserve Account Credit Facility, except for the Net Revenues or any applicable Pledged Funds. Neither the First Lien Bonds nor the amounts payable by the Issuer pursuant to the provisions of a Hedge Agreement, a Credit Facility or a Reserve Account Credit Facility shall constitute an indebtedness or a debt within the meaning of any constitutional or statutory provision or limitation applicable to the City or the Issuer. Neither the First Lien Bonds, the Hedge Payments nor the Reimbursement Obligations shall be considered or held to be general obligations of the City or the Issuer but shall constitute the Issuer's special revenue obligations. Neither the Issuer nor the City (or any political subdivision thereof) pledges its full faith and credit for the payment of the First Lien Bonds or the amounts payable by the Issuer pursuant to the provisions of a Hedge Agreement, a Credit Facility or a Reserve Account Credit Facility. None of the covenants, agreements, representations, and warranties contained herein or in the First Lien Bonds, Hedge Agreements, Reserve Account Credit Facility or Credit Facility, shall ever impose or shall be construed as imposing any liability, obligation, or charge against the City or the Issuer (except for the applicable Pledged Funds) or the City's or the Issuer's general credit, or payable out of the City's general fund or out of any funds derived from taxation. Section 203. No Recourse against Officers and Agents. No recourse shall be had for the payment of the First Lien Bonds or amounts payable by the Issuer pursuant to the provisions of a Hedge Agreement, a Credit Facility or a Reserve Account Credit Facility or for any claim based thereon, or otherwise, upon this Master Indenture authorizing their issuance or any other instrument pertaining thereto, against any individual member, officer, employee or agent of the Board, the Issuer or the City, past, present, or future, either directly or indirectly, or otherwise, whether by virtue of any constitution, statute, or rule of law, or by the enforcement of any penalty, or otherwise, all such liability, if any, being by the acceptance of the First Lien Bonds or the delivery of any Hedge Agreement, Credit Facility or Reserve Account Credit Facility and as a part of the consideration of such issuance or delivery specially waived and released. Section 204. Legality. Upon the date of authentication and delivery of any of the First Lien Bonds, all conditions, acts and things required by law and the Master Indenture to exist, to I/26I1583.I5-25-

31 have happened and to have been performed precedent to and in the issuance of such First Lien Bonds shall exist, have happened and have been performed and the issue of such First Lien Bonds, together with all other indebtedness of the Issuer, shall comply in all respects with the applicable laws of the State. Section 205. Limitations upon State. A. 1C provides that the State will not adopt, amend, or repeal a statute in a way that impairs the rights and remedies of the owners of obligations, until the obligations, interest on the obligations, interest on an unpaid installment of interest, and all costs and expenses in connection with an action or proceedings by or on behalf of the owners are fully paid and discharged. B. Article I, Section 24 of the Indiana Constitution provides that the State shall not pass any law impairing the obligations of contracts. C. Article 1, Section 10 of the United States Constitution provides that no state shall pass any law impairing obligations of contracts. I/26II

32 ARTICLE III. TERMS. EXECUTION AND FORM OF FIRST LIEN BONDS Section 301. Issuance of Bonds in Scries. The First Lien Bonds issued under and secured by this Master Indenture shall be issued from time to time in such series as the Issuer shall determine and each series shall bear the descriptive title "City of Indianapolis, Indiana Water System First Lien Revenue Bonds, Series," according to which series is then being issued, except that the title may also reflect the issuance of Refunding Bonds and features of the First Lien Bonds being issued; for example, "Taxable," "Multi-Mode" and "Commercial Paper." The First Lien Bonds may contain such specifications, or may have imprinted thereon such legends, as the Issuer may deem appropriate and not inconsistent with this Master Indenture. Section 302. First Lien Bond Details. The First Lien Bonds shall be dated, in such form, in such denominations, bear interest and be payable as set forth in the Supplemental Indenture authorizing such First Lien Bonds. The principal of and redemption premium, if any, on any First Lien Bond shall be payable to the registered holder thereof as shown on the registration records kept by the Registrar, upon maturity or redemption thereof and upon presentation and surrender at the office of the Paying Agent or such other office as designated by the Paying Agent. If any First Lien Bond shall not be paid upon such presentation and surrender at or after maturity, it shall continue to draw interest at the interest rate borne by said First Lien Bond until the principal thereof is paid in full. Except as otherwise provided in Section 307 hereof or in any Supplemental Indenture applicable to a specific series of First Lien Bonds, payment of interest on any First Lien Bond shall be made to the registered holder thereof by check mailed by first class mail by the Paying Agent, on each Interest Payment Date (or, if such Interest Payment Date is not a Business Day, on the next succeeding Business Day), to the registered holder thereof, at his or her address as shown on the registration records kept by the Registrar as of the Regular Record Date; but any such interest not so timely paid or duly provided for shall cease to be payable to the holder thereof as shown on the registration records of the Registrar as of the Regular Record Date and shall be payable to the owner thereof, at his or her address, as shown on the registration records of the Registrar as of the Special Record Date. Such Special Record Date shall be fixed by the Paying Agent whenever moneys become available for payment of the defaulted interest, and notice of the Special Record Date shall be given to the holders of such First Lien Bonds not less than ten days prior thereto by first-class mail to each such holder as shown on the Registrar's registration records as of a date selected by the Registrar, stating the date of the Special Record Date and the date fixed for the payment of such defaulted interest. The Paying Agent may make payments of interest on any First Lien Bond by such alternative means as may be mutually agreed to between the holder of such First Lien Bond and the Paying Agent. All such payments shall be made in lawful money of the United States of America without deduction for any service charges of the Paying Agent or Registrar. A Supplemental Indenture authorizing a series of First Lien Bonds may provide for payment provisions different than those described above. -27-

33 Section 303. Redemption of the First Lien Bonds. A. Optional Redemption. First Lien Bonds of each series, or portions thereof shall be subject to redemption prior to their respective maturities, at the option of the Issuer, as provided in the Supplemental Indenture authorizing such First Lien Bonds. B. MandatorySinking fund. Redemption. The Term Bonds of each series shall be subject to mandatory sinking fund redemption at the option of the Issuer, as provided in the Supplemental Indenture authorizing such First Lien Bonds on the terms and at the Redemption Price stated therein. Section 304. Notice of Redemption. Unless a Supplemental Indenture provides otherwise or unless waived by any holder of the First Lien Bonds to be redeemed, official notice of any such redemption shall be given by the Registrar, on behalf of and on direction of the Issuer, by mailing a copy of an official redemption notice, by first class mail, postage prepaid, at least 30 days and not more than 60 days prior to the date fixed for redemption to the registered holder of the First Lien Bond or First Lien Bonds to be redeemed at the address shown on the Bond register or at such other address as is furnished in writing by such registered owner to the Registrar. Actual receipt of mailed notice by any holder of such First Lien Bonds shall not be a condition precedent to redemption of such First Lien Bond or First Lien Bonds. Failure to give such notice to the registered holder of any First Lien Bond, or any defect therein, shall not affect the validity of the proceedings for the redemption of any other First Lien Bonds. A certificate by the Registrar that such notice has been given as herein provided shall be conclusive against all parties. Unless a Supplemental Indenture provides otherwise, all official notices of redemption shall be dated and shall state: (1) the Redemption Date, (2) the Redemption Price, (3) the identification by CUSIP number, if any, and maturity (and, in the case of partial redemption of a maturity, other appropriate identification) of the First Lien Bonds to be redeemed, (4) that on the Redemption Date the Redemption Price will become due and payable upon each such First Lien Bond or portion thereof called for redemption, and that interest thereon shall cease to accrete from and after said date, and (5) the place where such First Lien Bonds are to be surrendered for payment of the Redemption Price, which place of payment shall be the principal office of the Paying Agent or such other office as designated by the Paying Agent (accrued interest to the Redemption Date being payable by mail or as otherwise provided in this Master Indenture or a Supplemental Indenture authorizing such First Lien Bonds). Unless a Supplemental Indenture provides otherwise, or unless waived by the Registrar, written direction to give a notice of optional redemption shall be given by the Issuer to the -28-

34 Registrar in writing not less than 45 days prior to the Redemption Date. No such written direction need be provided for mandatory redemption of First Lien Bonds under Section 303 B, and the Registrar shall call such First Lien Bonds in accordance with the Supplemental Indenture authorizing such First Lien Bonds. Each notice may further state that such redemption shall be conditional upon the Paying Agent receiving for deposit in the Bond Fund on or prior to the Redemption Date, monies authorized by the Issuer to be deposited into the Bond Fund that are sufficient to pay the Redemption Price, on the First Lien Bonds to be redeemed and that if such monies have not been so received, the notice shall be of no force and effect and the Issuer shall not be required to redeem such First Lien Bonds. Unless a Supplemental Indenture provides otherwise, or unless waived by the Registrar, the Issuer, not less than 45 days prior to the Redemption Date, shall advise the Registrar, in writing, of its election to conditionally redeem any First Lien Bonds as provided in this paragraph. Official notice of redemption having been given as aforesaid, the First Lien Bonds or portions thereof to be redeemed shall, on the Redemption Date, become due and payable at the Redemption Price therein specified, and from and after such date (unless the Issuer shall not have deposited payment of the Redemption Price into the Bond Fund) such First Lien Bonds or portions thereof shall cease to bear interest. Upon surrender of such First Lien Bonds for redemption in accordance with said notice, such First Lien Bonds shall be paid by the Paying Agent at the Redemption Price, if the Issuer has deposited with the Paying Agent an amount of money sufficient to pay the Redemption Price. Installments of interest due on or prior to the Redemption Date shall be payable as provided in the Supplemental Indenture authorizing such First Lien Bonds. Upon surrender for any partial redemption of any First Lien Bond, there shall be prepared for the registered owner a new First Lien Bond or First Lien Bonds of the same maturity in the amount of the unpaid principal. All First Lien Bonds which have been redeemed shall be canceled and destroyed by the Registrar and shall not be reissued. A Supplemental Indenture may provide for notice and redemption provisions different than those stated above. Section 305. Negotiability. The First Lien Bonds shall have all of the qualities and incidents of negotiable instruments under the laws of the State of Indiana, subject to the provisions for registration herein. Section 306. Registration. Transfer and Exchange of First Lien Bonds. The following terms are subject to the provisions of Sections 303 and 307 hereof and the provisions of any Supplemental Indenture with respect to the issuance of additional First Lien Bonds, A. Records for the registration and transfer of the First Lien Bonds shall be kept by the Registrar. Upon the surrender of any First Lien Bond at the Registrar, duly endorsed for transfer or accompanied by an assignment in form satisfactory to the Registrar duly executed by the owner or his or her attorney duly authorized in writing, the Registrar shall authenticate and deliver in the name of the transferee or transferees a new First Lien Bond or First Lien Bonds of the same series in a like aggregate principal amount and of the same maturity. First Lien Bonds may be exchanged at the Registrar for an equal aggregate principal amount of First Lien Bonds of the same series and maturity of other authorized denominations. The Registrar shall authenticate and deliver a First Lien Bond or First Lien Bonds, which the holder making the -29-

35 exchange is entitled to receive, bearing a number or numbers not previously assigned. For every exchange or transfer of First Lien Bonds requested by the holder thereof, the Registrar may make a sufficient charge to the bondholder to reimburse it for any tax, fee or other governmental charge required to be paid with respect to such exchange or transfer and may charge a sum sufficient to pay the cost of preparing and authenticating a new First Lien Bond. No such charge shall be levied in the case of an exchange resulting from an optional redemption of a First Lien Bond. B. The Registrar shall not be required to transfer or exchange (i)any First Lien Bond, or portion thereof, subject to redemption during a period beginning at the opening of business fifteen (15) days before the date of mailing by the Registrar of a notice of prior redemption of such First Lien Bonds and ending at the close of business on the date of such mailing; (ii) any such First Lien Bond, or any portion thereof, subject to redemption after the mailing of such notice as herein provided; or (iii) any First Lien Bond, or portion thereof, during a period beginning fifteen (15) days before the maturity date of such First Lien Bond presented for transfer. C. The person in whose name any First Lien Bond shall be registered, on the registration records kept by the Registrar, shall be deemed and regarded as the absolute owner thereof for the purpose of payment and for all other purposes (except to the extent otherwise provided herein); and payment of or on account of either principal or interest on any First Lien Bond shall be made only to or upon the written order of the owner thereof or his or her legal representative. All such payments shall be valid and effectual to discharge the liability upon such First Lien Bond to the extent of the sum or sums so paid. D. If any First Lien Bond shall be lost, stolen, destroyed or mutilated, the Registrar shall, upon receipt of such evidence, information or indemnity relating thereto as it or the Issuer may reasonably require, and upon payment by the holder of all expenses in connection therewith, authenticate and deliver a replacement First Lien Bond or First Lien Bonds of a like aggregate principal amount and of the same series and maturity, bearing a number or numbers not previously assigned. If such lost, stolen, destroyed or mutilated Bond shall have matured or shall have been called for redemption, the Registrar may direct that such First Lien Bond be paid by the Paying Agent in lieu of replacement. E. Whenever any First Lien Bond shall be surrendered to the Paying Agent upon payment thereof, or to the Registrar for transfer, exchange or replacement as provided herein, such First Lien Bond shall be promptly canceled or destroyed by the Paying Agent or Registrar, and counterparts of a certificate of such cancellation or proof of destruction shall be furnished by the Paving Agent or Registrar to the Issuer upon request. Section 307. DTC Book-Entry. The Issuer may elect to use DTC as a depository for any series of First Lien Bonds by providing for such election in a Supplemental Indenture. In such event, the provisions of such Supplemental Indenture and this Section shall apply. Such First Lien Bonds shall be issued in the name of Cede & Co., as nominee for DTC, as registered owner of such First Lien Bonds, and held in the custody of DTC. A single certificate will be issued and delivered to DTC for each maturity of such First Lien Bonds. The actual purchasers of such First Lien Bonds (the "Beneficial Owners") will not receive physical delivery of First I/ SO-

36 Lien Bond certificates except as provided herein. Beneficial Owners are expected to receive a written confirmation of their purchase providing details of each First Lien Bond acquired. For so long as DTC shall continue to serve as securities depository for any First Lien Bonds as provided herein, ajl transfers of beneficial ownership interests on such First Lien Bonds will be made by book-entry only, and no investor or other party purchasing, selling, or otherwise transferring beneficial ownership of First Lien Bonds is to receive, hold, or deliver any First Lien Bond certificate. For every transfer and exchange of the First Lien Bonds, the Beneficial Owner may be charged a sum sufficient to cover such Beneficial Owner's allocable share of any tax, fee, or other governmental charge that may be imposed in relation thereto. First Lien Bond certificates are required to be delivered to and registered in the name of the Beneficial Owner, under the following circumstances: (a) DTC determines to discontinue providing its service with respect to the applicable First Lien Bonds (such a determination may be made at any time by giving 30 days' notice to the Issuer and the Registrar and discharging its responsibilities with respect thereto under applicable law), or (b) the Issuer determines that continuation of the system of book-entry transfers through DTC (or a successor securities depository) is not in the best interests of the Beneficial Owners. The Issuer and the Registrar will recognize DTC or its nominee as the holder of any such First Lien Bonds for all purposes, including notices and voting. The Issuer and the Registrar covenant and agree, so long as DTC shall continue to serve as securities depository for all or any portion of the First Lien Bonds, to meet the requirements of DTC with respect to required notices and other provisions of a Letter of Representations between the Issuer and DTC. If necessary to comply with the terms and provisions of the Letter of Representations, a Supplemental Indenture shall be adopted to amend the Master Indenture as necessary. The Registrar is authorized to rely conclusively upon a certificate furnished by DTC and corresponding certificates from DTC participants and indirect participants as to the identity of, and the respective principal amount of First Lien Bonds beneficially owned by, the Beneficial Owner or Beneficial Owners. If at any time, DTC ceases to hold First Lien Bonds, a Supplemental Indenture amending the relevant provisions of this Master Indenture shall be adopted and thereafter all references in such Indenture to DTC in connection with such First Lien Bonds shall be of no further force or effect. Section 308. Execution of First Lien Bonds. The First Lien Bonds shall be executed in the name of the City, on behalf of the Issuer, by the manual or facsimile signature of the Mayor, attested by the Controller and the corporate seal (or a facsimile thereof), shall be impressed, -31 -

37 imprinted, engraved or otherwise reproduced thereon and attested by the manual or facsimile signature of the Clerk of the City-County Council of the City (provided that one or more of the signatures on the First Lien Bonds must be manual), or in such other manner as may be required or permitted by law. Section 309. Use of Predecessor's Signature. The First Lien Bonds bearing the signatures of the officers in office at the time of the signing thereof shall be the valid and binding obligations of the Issuer, notwithstanding that before the delivery thereof and the payment thereof any or all of the individuals whose signatures appear thereon shall have ceased to fill their respective offices. At the time of the execution of the First Lien Bonds and of a signature certificate pertaining thereto, the Mayor, the Controller and the Clerk of the City-County Council of the City, respectively, may adopt as and for his or her own signature, the signature of his or her predecessor in office if such signature appears upon any of the First Lien Bonds pertaining thereto. Section 310. Authentication of the First Lien Bonds. No First Lien Bond shall be valid or obligatory for any purpose unless the certificate of authentication thereon, substantially in the form provided in the Supplemental Indenture authorizing such First Lien Bonds, has been duly manually executed by the Registrar. By authenticating any of the First Lien Bonds initially delivered pursuant to this Master Indenture, the Registrar shall be deemed to have assented to all of the provisions of this Master Indenture. Section 311. Incontestable Recital in First Lien Bonds. Each First Lien Bond shall recite that it is issued pursuant to the Enabling Legislation which recital shall be conclusive evidence of the validity of the First Lien Bonds and the regularity of their issuance. Section 312. First Lien Bond Delivery. After registration, execution and authentication, the Controller shall cause the First Lien Bonds to be delivered to the purchaser or purchasers thereof, upon payment being made therefor on the terms of the sale of the First Lien Bonds. Section 313. First Lien Bond Form. Subject to the provisions of this Master Indenture, each First Lien Bond shall be in the form provided in the Supplemental Indenture authorizing such First Lien Bond. -32-

38 ARTICLE IV. GENERAL CONDITIONS OF ISSUANCE OF FIRST LIEN BONDS Section 401. Purposes of Issuance. The Issuer may authorize, execute and issue First Lien Bonds of one or more series pursuant to the terms, conditions and limitations of this Master Indenture, from time to time, for the purposes of providing funds for any purposes or assets of the Water System permitted to be financed with proceeds of First Lien Bonds under the Enabling Legislation (which shall include working capital purposes), costs of issuance, interest during construction and reserves, refunding First Lien Bonds or Second Lien Bonds or other obligations of the Issuer attributable to the Water System. Such First Lien Bonds shall be authenticated and delivered by the Registrar, but only in accordance with the terms and conditions provided in this Master Indenture. Section 402. General Conditions of Issuance. The Registrar shall not authenticate or deliver any First Lien Bonds, unless for such First Lien Bonds there shall be delivered to the Registrar the following: Issuer. (a) A written application or request for authentication signed by or on behalf of the (b) A Supplemental Indenture executed by the Issuer and the Trustee setting forth the provisions and form of such First Lien Bonds. (c) A certified copy of a resolution or resolutions of the Board authorizing the issuance and sale of such First Lien Bonds and authorizing the execution and delivery of such Supplemental Indenture. (d) A certificate of the Chief Financial Officer that there does not exist an Event of Default under this Master Indenture. (e) (f) An opinion of counsel to the Board. An opinion of Bond Counsel. (g) Evidence of compliance with the conditions of Section 702 with respect to any Parity Bonds prior to the issuance thereof, except that the 2011 Bonds need not meet the conditions of Section 702. Section 403. Separate Systems. (a) The Issuer may issue or become liable on bonds, notes, certificates, warrants or other evidence of indebtedness or any guaranties, direct or indirect, thereof to acquire and construct facilities or interests in the capacity or output thereof, which the Issuer has elected to acquire, construct and operate as a utility or system separate from the Water System; provided that such bonds, notes, certificates, warrants or other evidence of indebtedness are secured solely from sources other than Net Revenues or the Pledged Funds. The Gas Utility Distribution System, the Thermal Energy System and the Wastewater System are Separate Systems and no 1/261)

39 pledge from such systems nor from any Affiliate or Subsidiary is made to the payment of the First Lien Bonds. (b) Nothing in this Master Indenture shall limit or prohibit a Subsidiary or an Affiliate from incurring debt or issuing bonds, notes, certificates, warrants or other evidences of indebtedness. 1/26)

40 ARTICLE V. ADMINISTRATION OF AND ACCOUNTING FOR NET REVENUES Section 501. Pledge Securing First Lien Bonds. The Net Revenues and all moneys and securities held or to be held as part of the Pledged Funds are hereby pledged to secure the payment of the principal of, premium, if any, and interest on the First Lien Bonds and the Hedge Payments with respect to the Hedge Agreements. This pledge shall be valid and binding from and after the date of the first delivery of the 2011 Bonds; and the moneys, as received by the Issuer and hereby pledged, shall immediately be subject to the lien of this pledge without any physical delivery thereof, any filing, or further act. The lien of this pledge and the obligation to perform the contractual provisions hereby made shall have priority over any or all other obligations and liabilities of the Issuer; and the lien of this pledge shall be valid and binding as against all parties having claims of any kind in tort, contract, or otherwise against the Issuer (except as herein otherwise provided) irrespective of whether such parties have notice thereof. Pursuant to a Supplemental Indenture, the Issuer may create and pledge, from time to time, additional funds, accounts or subaccounts to add to the security provided for any of the First Lien Bonds. The payment of the First Lien Bonds and any amounts payable by the Issuer pursuant to the provisions of a Hedge Agreement, a Credit Facility or a Reserve Account Credit Facility is not secured by any encumbrance, mortgage or other pledge of property of the Issuer or the City, except the Net Revenues and any applicable Pledged Funds. No other property of the Issuer or the City, including, subject to Article XI, any portion or all of the Water System, shall be liable to be forfeited or taken for payment of the First Lien Bonds or amounts payable by the Issuer pursuant to the provisions of a Hedge Agreement, a Credit Facility or Reserve Account Credit Facility. Section 502. Establishment of Accounts and Subaccounts. There is hereby authorized to be created by the Issuer a separate fund designated as the "Water Fund," which fluid consists of a self-balancing group of accounts, including, without limitation, the respective separate accounts and subaccounts designated in this Master Indenture, and constitutes an independent fiscal and accounting entity. Separate accounts and subaccounts (other than those herein designated) pertaining to the Water Fund may from time to time be created, terminated, and otherwise modified by the Issuer in its discretion pursuant to a Supplemental Indenture. The Issuer hereby creates a fund within the Water Fund designated as the "Bond Fund", which shall be held by the Trustee, and hereby authorizes the following accounts within the Bond Fund designated: A. Interest Account. The "Interest Account": B. Principal Account The "Principal Account"; -35-

41 C. Hedge Payments Account. The "Hedge Payments Account"; and D. Reserve Account The "Reserve Account", with a "Future Bonds Common Reserve Subaccount," a "Prior Bonds Common Reserve Subaccount" and one or more separate Series Reserve Subaccounts for any one or more series of First Lien Bonds as may be provided in a Supplemental Indenture. Such Supplemental Indenture may provide that any reserve requirement may be satisfied by the deposit of funds in a reserve rand held pursuant to another document, Separate subaccounts of the above-named Accounts within the Bond Fund may be established for the benefit of any particular series of First Lien Bonds. Additionally, the Issuer is hereby authorized to establish additional Bond Funds in the Water Fund pursuant to the Second Lien Master Indenture or any other document, so long as such funds are funded on a subordinate basis to the Bond Fund described above. Section 503. Establishment of Issuer Accounts. The Issuer hereby establishes and authorizes the following special and separate accounts of the Water Fund under the control of the Issuer and not held by the Trustee (except in a capacity other than as Trustee, e.g., as custodian), and such accounts shall be maintained so long as any First Lien Bonds or Second Lien Bonds remain outstanding, and which are designated: A. Revenue Fund. The "Revenue Fund"; B. Rate Stabilization Fund. The "Rate Stabilization Fund"; and C. Construction Fund. The "Construction Fund". Section 504. Revenug Fund Deposits. So long as any of the First Lien Bonds shall be Outstanding, all Gross Revenues, upon their receipt from time to time by the Issuer, shall be deposited daily, as far as practicable, and shall be set aside and credited immediately to the Revenue Fund. Section 505. Administration of Revenue Fund. So long as any of the First Lien Bonds hereby authorized shall be Outstanding, the Revenue Fund shall continue to be administered, and the moneys on deposit therein shall continue to be applied in the order of priority provided in this Article V. Section 506. Operation and Maintenance Expenses. First, as a charge on the Revenue Fund from time to time, Gross Revenues shall be used to pay Operation and Maintenance Expenses. In addition, as provided in Section 1106 hereof, during any period of default the Issuer shall be permitted to maintain certain Gross Revenues in the Revenue Fund to provide for the payment of Operation and Maintenance Expenses for a period not exceeding two months. Section 507. Bond Fund Payments. Subsequent to the transfers described in Section 506 above, sufficient moneys shall be transferred by the Issuer from the Revenue Fund into the Interest Account, Principal Account and Hedge Payments Account (or any applicable subaccounts thereof) on a pro rata basis across all series of First Lien Bonds, all for the purpose of paying the principal of, premium, if any, and interest on such First Lien Bonds as it becomes -36-

42 due and payable and for the purpose of making Hedge Payments and paying Reimbursement Obligations. The Issuer may direct the Trustee to establish specific subaccounts of the Interest Account, the Principal Account and the Hedge Payments Account for any series. Amounts held in the foregoing Accounts shall not be used to pay Additional Interest unless otherwise provided by the Issuer in a Supplemental Indenture. A. Interest Payments. On or before the last Business Day of each month, the Issuer shall transfer from the Revenue Fund into the Interest Account (or any subaccount thereof), an amount equal to 1/6 of the amount of the interest due on any fixed rate Outstanding First Lien Bonds or Reimbursement Obligations on the next Interest Payment Date or such other amount as shall be specified in a Supplemental Indenture to assure that on the next Interest Payment Date, sufficient funds are on deposit in any particular sub-account of the Interest Account to make the Interest Payment that is due, after consideration of other moneys from time to time on deposit in such Interest Account, or such other amount as shall be specified in a Supplemental Indenture for a series of First Lien Bonds. The Issuer shall, as needed, deposit any amount necessary for payment of interest on any Interest Payment Date (in the event sufficient moneys are not on deposit therein) or on any Redemption Date. Moneys in the Interest Account shall be used solely to pay interest on the First Lien Bonds and the interest component of any Reimbursement Obligation when due and payable at maturity or upon redemption. The Issuer shall also deposit all Hedge Receipts under Hedge Agreements in the Interest Account (or any subaccount thereof) from time to time as and when received. B. Hedge Payments Account. On or before the Business Day preceding each payment date for Hedge Payments under Hedge Agreements, the Issuer shall transfer from the Revenue Fund into the Hedge Payments Account an amount which, together with any other moneys already on deposit therein and available to make such payment is not less than such Hedge Payments coming due on such payment date. Moneys in the Hedge Payments Account shall be used solely to pay Hedge Payments under Hedge Agreements when due and payable. In the alternative, the Issuer may provide in a Supplemental Indenture that such Hedge Payments are subordinate to the payments on the First Lien Bonds. C. Principal Payments. On or before the last Business Day of each month, the Issuer shall transfer from the Revenue Fund into the Principal Account, an amount together with any other moneys from time to time on deposit in such Principal Account equal to 1/12 of the amount of the principal due on Outstanding First Lien Bonds and Reimbursement Obligations on the next Principal Payment Date, or such other amount as shall be specified in a Supplemental Indenture for a series of First Lien Bonds. There shall also be transferred to the Principal Account, when needed, any amount necessary for payment of principal on any Principal Payment Date (in the event sufficient moneys are not on deposit therein) or any Redemption Date and any other amount as shall be specified in a Supplemental Indenture. Moneys in the Principal Account shall be used solely for the payment of principal of and premium, if any, on the First Lien Bonds and related Reimbursement Obligations as the same shall become due and payable at maturity or upon redemption. Section 508. Reserve Account Payments. Third, subsequent to the payments and transfers described in Sections 506 and 507 above, the Issuer shall transfer to the Trustee from any monies remaining in the Revenue Fund on or before the first Business Day of each month -37-

43 (which shall be applied across series on a pro rata basis based on the outstanding principal amount of the related First Lien Bonds), (i) the amount of any periodic deposit required to restore any deficiency as described under Section 508 A hereof and (ii) the amount of any deposit required to fund the applicable Reserve Requirement as described in Section 508B hereof. No transfer shall be made into any subaccount of the Reserve Account so long as the sum of the cash and securities therein plus the available balance of any applicable Reserve Account Credit Facility, if any, is at least equal to the applicable Reserve Requirement. The monies and any applicable Reserve Account Credit Facility in any subaccount of the Reserve Account shall be accumulated and maintained as a continuing reserve to be used to prevent deficiencies in the payments of principal of and interest on the First Lien Bonds which have a claim for payment on the applicable subaccount of the Reserve Account. A. If on any Interest Payment Date or Principal Payment Date for any First Lien Bonds that have a claim on a particular subaccount of the Reserve Account, there is not on deposit in the Interest Account, Hedge Payment Account or the Principal Account or applicable subaccount thereof a sufficient amount to pay the amounts of principal or interest due on said First Lien Bonds, Hedge Agreements or Reimbursement Obligations, then the Trustee shall transfer into the Interest Account, the Hedge Payments Account or the Principal Account from the applicable subaccount of the Reserve Account an amount not to exceed the deficiency in the Interest Account, Hedge Payments Account or Principal Account on such Interest Payment Date or Principal Payment Date. In the event that any subaccount of the Reserve Account is less than the applicable Reserve Requirement because of a withdrawal under this Section 508A or as a result of an annual valuation under Section 603 hereof, the Trustee shall calculate the amount of such deficiency and then determine the periodic deposit necessary to restore the subaccount of the Reserve Account to the applicable Reserve Requirement as follows. If a deficiency exists in the Future Bonds Common Reserve Subaccount or the Prior Bonds Common Reserve Subaccount, the monthly deposit shall be equal to the difference between the Future Bonds Common Reserve Requirement or the Prior Bonds Common Reserve Requirement, as applicable and the amount of cash and securities and the balance available to be drawn on the applicable Reserve Account Credit Facility on such date divided by twenty-four (24). In the event that a deficiency exists in a Series Reserve Subaccount, the monthly deposit shall be calculated in accordance with the terms of the Supplemental Indenture pursuant to which such Series Reserve Subaccount was created. The provider of a Reserve Account Credit Facility which has been drawn upon may be reimbursed from amounts deposited in the applicable subaccount of the Reserve Account from the Net Revenues in accordance with this Section 508. B. Upon the issuance of First Lien Bonds, the Issuer shall determine, in its discretion, whether or not such First Lien Bonds shall have a claim for payment of principal and interest on the Reserve Account or any subaccount thereof. Second Lien Bonds shall not have a claim for payment on the Reserve Account. If the Issuer determines that such First Lien Bonds shall have a claim for payment on the Future Bonds Common Reserve Subaccount or the Prior Bonds Common Reserve Subaccount, as applicable, for payment of principal of and interest on such First Lien Bonds, then the Issuer shall calculate the amount of the Future Bonds Common Reserve Requirement or the Prior Bonds Common Reserve Requirement, as applicable to reflect the issuance of such First Lien Bonds. Any resulting increase in the amount of the Future Bonds Common Reserve Requirement or the Prior Bonds Common Reserve Requirement, as I/ SS-

44 applicable, may be funded in whole or in part by the deposit of cash, a Reserve Account Credit Facility or through monthly deposits as described below, If the Issuer determines that any First Lien Bonds shall not have a claim for payment on the Future Bonds Common Reserve Subaccount or the Prior Bonds Common Reserve Subaccount, as applicable, the Issuer may determine to create a Series Reserve Subaccount for such First Lien Bonds and establish a related Series Reserve Requirement or to secure such series of First Lien Bonds with an existing Series Reserve Account. Such Series Reserve Subaccount will be funded in an amount and manner to be set forth in the Supplemental Indenture authorizing the issuance of such First Lien Bonds. In such event, such First Lien Bonds shall have a claim for payment on such Series Reserve Subaccount as set forth therein. Such Series Reserve Subaccount may be established for the benefit of one or more series of First Lien Bonds. In addition, the Issuer may determine that a series of First Lien Bonds shall have no claim on any Subaccount of the Reserve Account for the payment of principal of and interest thereon. All or any portion of any increase in the Future Bonds Common Reserve Requirement or the Prior Bonds Common Reserve Requirement, as applicable or any Series Reserve Requirement following the issuance of First Lien Bonds to be secured thereby, may be satisfied by providing in a Supplemental Indenture that monthly deposits of Net Revenues shall be made, in any specified manner, into the applicable subaccount of the Reserve Account following the issuance of said First Lien Bonds. In funding an increase in the Future Bonds Common Reserve Requirement, or the Prior Bonds Common Reserve Requirement, as applicable, such deposits for a series of First Lien Bonds shall commence on the first day of the month following the date on which such series of First Lien Bonds is issued and shall continue monthly thereafter for a period of 60 months or such lesser number of months as specified in the Supplemental Indenture. In funding a Series Reserve Subaccount, such deposits related to a series of First Lien Bonds shall commence and shall continue as specified in the Supplemental Indenture pursuant to which such Series Reserve Subaccount is established. In either case, such deposits shall equal, after taking into account any Reserve Account Credit Facility and other cash deposited in the applicable subaccount of the Reserve Account on the date of delivery of such series of First Lien Bonds, an amount equal to the applicable unfunded Reserve Requirement divided by the total number of deposits to be made. For purposes of establishing the amount held in the applicable subaccount of any Reserve Account, the Trustee shall include an amount equal to the available principal amount which could be drawn by the Trustee on any applicable Reserve Account Credit Facility, Any cash held in a subaccount of the Reserve Account in excess of the applicable Reserve Requirement (as determined under Section 603 hereof) shall be transferred from time to time by the Trustee to the Revenue Fund at the direction of the Issuer. Section 509. Additional Transfers from Revenue Fund. After making the deposits required by Section hereof, the Issuer may apply any remaining Net Revenues as follows: (a)//w/, to the payment of debt service on Second Lien Bonds, to make payments with respect to credit facilities and hedge agreements on a parity therewith or to make any transfers required to cure any deficiencies in any funds or accounts created for Second Lien Bonds; and (b) second, to any payments on hedge agreements or reimbursement obligations for First Lien Bonds or Second Lien Bonds not previously provided in the prior payments; (c) third, to fund the Rate Stabilization Fund; and (d) fourth, for any lawful purpose reasonably expected by the Issuer to contribute to or benefit the Water System or the public charitable trust to which the Water System are subject, including but not limited to, capital improvements, the costs of replacing any -39-

45 property or equipment of the Water System, the costs of any major extraordinary repairs, replacements or renewals of the Water System, acquiring land or any interest therein, making any payments in lieu of taxes, paying any lease or contractual obligations and making payments on Subordinate Bonds. Section 510. Rate Stabilization Fund. The Issuer may transfer, at any time, any amount from the Revenue Fund to the Rate Stabilization Fund created pursuant to Section 503 hereof. Amounts held in the Rate Stabilization Fund shall be used from time to time for any lawful purpose or purposes of the Issuer pertaining to the Water System, at the direction of the Board, including but not limited to the following: (a) to provide for shortfall of revenues resulting from usage of the Water System, (b) to pay for any extraordinary costs related to the Water System, (c) to make transfers to the Revenue Fund for purposes of making required deposits to the Bond Fund, and (d) to fund any shortfall in any other fund created hereunder or created in any document authorizing Second Lien Bonds or other obligations. Any limitation on the amount of a transfer from the Rate Stabilization Fund for the purpose of satisfying a rate covenant or the test for the issuance of additional bonds applicable to Second Lien Bonds shall be as specified in the Second Lien Master Indenture. Amounts in the Rate Stabilization Fund shall be used to fund any payment related to First Lien Bonds prior to being used to fund any payment related to Second Lien Bonds. Upon an Event of Default hereunder or an event of default occurring with respect to any Second Lien Bonds, the amounts held in the Rate Stabilization Fund shall be transferred to the Revenue Fund. Section 511. Funds Held for First Lien Bonds. Amounts held in any subaccount of the Interest Account, the Principal Account, the Hedge Payment Account or the Reserve Account are held with respect to particular First Lien Bonds pending such payment, and shall be set aside and held in trust for the holders of the respective First Lien Bonds entitled thereto then, for the purposes of this Master Indenture, such payments on such First Lien Bonds after the due date thereof, shall no longer be considered to be unpaid or Outstanding. Section 512. Construction Fund. In connection with the issuance of any First Lien Bonds, the Issuer may provide in the related Supplemental Indenture for the creation of a Construction Fund for such First Lien Bonds and provide for the use of funds on deposit therein. So long as any funds remain on deposit in the Construction Fund, however, such amounts shall be pledged solely to the holders of the First Lien Bonds for which such Fund or Account was created. I/26H5S3.J5-40-

46 ARTICLE VI. GENERAL ADMINISTRATION Section 601. Administration of Accounts. The separate accounts and subaccounts created in Article V hereof shall be administered as provided in this Article VI. Section 602. Places and Times of Deposits. Each of the separate accounts and subaccounts designated in Article V hereof shall be maintained as an account and kept separate from all other accounts solely for the purposes herein designated therefor, except as otherwise expressly stated herein. The moneys accounted for in such separate accounts and subaccounts shall be deposited in one or more bank accounts, except as herein otherwise provided. Nothing herein prevents the commingling of moneys accounted for in any two or more accounts or subaccounts, or both accounts and subaccounts, pertaining to the Water System, the Net Revenues, proceeds of securities, other moneys, or to the fund pertaining to the Water System and any other funds of the Issuer (each of which funds consists of a self-balancing group of accounts and constitutes an independent fiscal and accounting entity) in any bank account or any investment in Defeasance Securities or Permitted Investments hereunder (but not any account under Section 1001 hereof). Each such bank account shall be continuously secured to the fullest extent required or permitted by the laws of the State for the securing of public funds, subject to the provisions of Section 1203 hereof, and shall be irrevocable and not withdrawable by anyone for any purpose other than the purpose or purposes designated therefor. Each periodic payment shall be credited to the proper account or subaccount not later than the date therefor herein designated, except that when any such date shall be a Saturday, Sunday, or a legal holiday, then such payment shall be made on or before the next preceding Business Day. Notwithstanding any other provision herein to the contrary, collected moneys shall be deposited with the Paying Agent, or any other Banking Institution designated as a paying agent for any First Lien Bonds, at least by the day of each Interest Payment Date or Principal Payment Date sufficient to pay the amount coming due on the Outstanding First Lien Bonds. Section 603. Investment of Moneys. Any moneys in any account or subaccount created in Article V hereof, and not needed for immediate use, may be invested in any Permitted Investments at the written direction of an Authorized Issuer Representative from time to time. Such Permitted Investments shall mature not later than the date or dates on which an Authorized Issuer Representative estimates the proceeds thereof will be needed, and, in any event, in accordance with State law. In making each such investment or reinvestment of funds held by the Trustee, the Trustee may rely upon written or verbal instructions of an Authorized Issuer Representative, which are promptly followed in writing, and shall be under no duty as to the propriety of the investment made in accordance with such instructions. Any Permitted Investment purchased as an investment of moneys in any account or subaccount, shall be deemed at all times to be a part of such account or subaccount and held in trust therefor. Except as herein otherwise provided, any interest accruing thereon and any other gain realized therefrom shall be retained and credited to such account or subaccount. Any loss in any account or subaccount resulting from any such investments in Permitted Investments shall be retained and credited to such account or subaccount

47 Notwithstanding the foregoing, the Issuer may provide for a different allocation of interest earnings and gains or losses on Permitted Investments in such accounts or subaccounts in any Supplemental Indenture. No loss or profit in any account or subaccount on any investments or reinvestments in Permitted Investments shall be deemed to take place as a result of fluctuations in the market quotations of the Permitted Investments, prior to the sale or maturity thereof. In the computation of the amount in any account or subaccount for any purpose hereunder, except as herein otherwise expressly provided, Permitted Investments shall be valued at the amortized cost thereof (including any amount paid as accrued interest at the time of purchase of the obligation) and other bank deposits shall be valued at the amounts deposited, exclusive of any accrued interest or any other gain to the Issuer until such gain is realized. The Common Reserve Subaccount shall be valued annually on such basis on the last day of each Fiscal Year, Any Series Reserve Subaccounts shall be valued as provided in the Supplemental Indenture that created such subaccount. Section 604. Payment of Redemption Premiums. Notwithstanding any other provision herein, this Master Indenture requires the accumulation of moneys in any account or subaccount designated in Article V hereof for the payment of any issue of First Lien Bonds of amounts sufficient to pay not only the principal thereof and interest thereon but also the redemption premiums due in connection therewith, as the same become due, whenever the Issuer shall have exercised or shall have obligated itself to exercise a redemption option pertaining thereto or otherwise to call any security for redemption, except to the extent provision is otherwise made therefor, if any redemption premiums are due in connection therewith. In such event moneys shall be deposited in such account or subaccount for the payment of all such amounts without default as the same become due. -42-

48 ARTICLE VII. PARITY BONDS Section 701. First Lien Bonds. The First Lien Bonds (and as further described in and subject to Section 704 hereof, any Reimbursement Obligations related thereto) from time to time Outstanding and Hedge Payments under Hedge Agreements are equally and ratably secured by a lien on the Net Revenues and the Pledged Funds in the manner described in Section 501 hereof and shall not be entitled to any priority of one over the other in the application of the Net Revenues and the Pledged Funds regardless of the time or times of the issuance thereof. The Issuer may issue Parity Bonds and enter into Hedge Agreements and incur Reimbursement Obligations in accordance with this Master Indenture, and the Issuer shall issue no other obligations of any kind or nature payable from or enjoying a lien on the Net Revenues and the Pledged Funds having a priority over, or (except as permitted in this Master Indenture) on a parity, with the First Lien Bonds. Notwithstanding the foregoing, the Issuer may issue or enter into Second Lien Bonds or other obligations payable from and secured by a pledge of Net Revenues so Jong as such other obligations are junior and subordinate in lien on and right of payment from Net Revenues and Pledged Funds pledged hereunder to all First Lien Bonds. Section 702. Issuance of First Lien Bonds. The 2011 Bonds need not comply with this Section 702. First Lien Bonds may be issued pursuant to a Supplemental Indenture only if the Issuer demonstrates satisfaction of the conditions listed in paragraphs A and B below: A. At the time of the execution of the Supplemental Indenture authorizing the issuance of the First Lien Bonds, the Issuer shall certify that no Event of Default has occurred and is continuing or that any existing Event of Default would be cured following the issuance of the proposed First Lien Bonds. B. A Financial Consultant shall provide a report showing that either (1) the Net Revenues for either the most recent Fiscal Year for which audited financial statements are available or for any 12 out of the most recent 18 months were at least equal to 1.1 times the maximum annual First Lien Debt Service Requirements in any subsequent Fiscal Year (after including the First Lien Debt Service Requirements for the series of First Lien Bonds to be issued), or (2) the Net Revenues for the most recent Fiscal Year for which audited financial statements are available or for any 12 out of the most recent 18 months, after adjusting Net Revenues as described in the paragraph below, were at least equal to 1.2 times the maximum annual First Lien Debt Service Requirements in any subsequent Fiscal Year (after including the First Lien Debt Service Requirements for the series of First Lien Bonds to be issued.) The result of the calculations described in this paragraph B shall hereinafter be referred to as "Debt Service Coverage". In any calculation of the Debt Service Coverage as provided in Section 702B(2), the amount of Net Revenues may be increased by the amount estimated by the Financial Consultant, that will result from any change in any schedule of rates, fees and charges or any annexations or extensions to the Water System, including additional areas and new systems of the Water System placed into use subsequent to the commencement of the periods described in Section 702(B)(2) and prior to the date of issuance of the proposed First Lien Bonds, which have been approved by -43-

49 an order of the IURC issued prior to the time such computations are being made, based on the number of ratepayers during such next preceding Fiscal Year or 12 month period as if such modified schedule of rates, fees and charges and number of ratepayers shall have been in effect during the entire next preceding Fiscal Year or 12 month period. In addition, if the Issuer shall find it desirable to refund any Outstanding First Lien Bonds or outstanding Second Lien Bonds, such bonds may be refunded in whole or in part, and such Refunding Bonds may be issued as Parity Bonds upon compliance with Section 702A and 702B. Further, if the bonds to be refunded are First Lien Bonds, the Refunding Bonds may be issued as Parity Bonds if the Issuer certifies that the present value of the annual First Lien Debt Service Requirements of the Refunding Bonds is less than or equal to the present value (using the arbitrage yield on Refunding Bonds as the discount rate) of the annual First Lien Debt Service Requirements of the First Lien Bonds being refunded, and the Issuer may issue such Refunding Bonds without complying with Section 702A and 702B. Section 703. Supplementaj Master Indenture. Additional Parity Bonds payable from Net Revenues shall be issued or entered into only after authorization thereof by a resolution of the Board and execution of a Supplemental Indenture stating the purpose or purposes of the issuance of such additional First Lien Bonds, directing the application of the proceeds thereof to such purpose or purposes, directing the method for execution and authentication thereof, and the method for and parameters of fixing and determining the terms thereof. Upon such authorization, such additional First Lien Bonds may be executed by and on behalf of the Issuer and authenticated and delivered by the Issuer or upon its order. Section 704. Credit Facilities an<[ Hedge Agreements. In connection with the issuance of any First Lien Bonds or at any time thereafter, the Issuer may obtain or cause to be obtained one or more Credit Facilities providing for payment of all or a portion of the principal of, premium, if any, or interest due or to become due on such First Lien Bonds, providing for the purchase of such First Lien Bonds by the provider of a Credit Facility, or providing funds for the purchase of such First Lien Bonds by the Issuer. In connection therewith, the Issuer may enter into a Credit Facility Agreement with the provider of a Credit Facility providing for, among other things, (i) the payment of fees and expenses for the issuance of such Credit Facility; (ii) the terms and conditions of such Credit Facility and the First Lien Bonds affected thereby; and (iii) the security, if any, to be provided for the issuance of such Credit Facility. The Issuer may secure any Credit Facility by an agreement providing for the purchase of the First Lien Bonds secured thereby with such adjustments to the rate of interest, method of determining interest, maturity, or redemption provisions as are specified by the Issuer in the applicable Supplemental Indenture or Credit Facility Agreement. The Issuer may in a Credit Facility Agreement agree to directly reimburse the provider of such Credit Facility for amounts paid under the terms of such Credit Facility, together with interest thereon; provided, however, that no Reimbursement Obligation shall be created for purposes of the Master Indenture until amounts are paid under such Credit Facility. Any such Reimbursement Obligation shall be deemed to be one and the same as the First Lien Bonds to which the Credit Facility relates and which gave rise to such Reimbursement Obligation, and references to principal and interest payments with respect to such First Lien Bonds shall include principal and interest (except for Additional Interest and principal amortization requirements with respect to the Reimbursement Obligation that are more accelerated than the amortization requirements for the related First Lien Bonds, without -44-

50 acceleration) due on the Reimbursement Obligation incurred as a result of payment or purchase of such First Lien Bonds with the Credit Facility. All other amounts payable under the Credit Facility Agreement (including any Additional Interest and principal amortization requirements with respect to the Reimbursement Obligation that are more accelerated than the scheduled amortization requirements for the related First Lien Bonds) shall be fully subordinate to the payment of debt service on the related series of First Lien Bonds unless otherwise provided in a Supplemental Indenture. Any such Credit Facility shall be for the benefit of and secure such First Lien Bonds or portion thereof as specified in the applicable Supplemental Indenture. In connection with the issuance of any First Lien Bonds or at any time thereafter, the Issuer may enter into Hedge Agreements with Qualified Providers with respect to any First Lien Bonds. The Issuer shall authorize the execution, delivery, and performance of each Hedge Agreement by resolution of the Board or in a Supplemental Indenture, in which it shall designate the related Hedged Bonds. The Issuer's obligation to make Hedge Payments may be secured by a pledge of, and lien on, the Net Revenues on a parity with the lien securing the related Hedged Bonds, or may be subordinated in lien and right of payment to the payment of the Hedged Bonds, as specified by the Issuer in a Supplemental Indenture. Amounts other than Hedge Payments due from the Issuer under any Hedge Agreement shall be subordinated to such lien and right of payment. -45-

51 ARTICLE VIII. RATES. FEES AND OTHER CHARGES: BUDGETARY PROCEDURES Section 801. Rate Covenant. The Issuer shall, to the extent permitted by law, adopt, from time to time revise, and continue in effect, a schedule of rates, fees, and other charges for water and other goods and services provided by, and for the use of, the Water System as may be necessary or proper in order that the amount of the Gross Revenues at the end of each Fiscal Year, commencing with the Fiscal Year ending September 30, 2012, shall at least equal the sum of: A. All Operation and Maintenance Expenses for such Fiscal Year; and B. The greater of (i)for the Fiscal Years ending in 2012 and 2013, 1.1 times the amounts required to be transferred in such Fiscal Year to the Bond Fund for the timely payment of actual interest and principal payable on First Lien Bonds and for any Fiscal Year thereafter, 1.2 times the amounts required to be transferred in such Fiscal Year to the Bond Fund for the timely payment of actual interest and principal payable on First Lien Bonds or (ii) all amounts paid from the Gross Revenues in such Fiscal Year for (a) the amounts required to be transferred in such Fiscal Year to the Bond Fund for the timely payment of actual interest and principal payable on First Lien Bonds, (b) payments due in accordance with the terms of any Credit Facility Agreement, and (c) any payments to be made in any fund, account or subaccount of the Water Fund for First Lien Bonds (including funds to satisfy the requirements for establishment of a subaccount of the Reserve Account, any deficiencies in the Reserve Account or payments due on a Reserve Account Credit Facility). The foregoing rate covenant is subject to compliance by the Issuer with any legislation of the United States, the State, or other governmental body; or any regulation of, or other action taken by the Federal Government, any State agency, including the IURC, or any political subdivision of the State pursuant to such legislation; of the exercise of the police power thereof for the public welfare, which legislation, regulation, or action limits or otherwise inhibits the amounts of any rates, fees, and other charges due to the Issuer for the use of or otherwise pertaining to any and all services rendered by or at the Water System, including, without limitation, increases or decreases in the amounts of such rates, fees, or other charges (or any combination thereof). If the foregoing rate covenant is not satisfied for any Fiscal Year, the Issuer shall seek to revise the schedule of rates, fees and other charges for the use of the Water System in a manner as may be necessary to produce Gross Revenues to satisfy the rate covenant for the succeeding Fiscal Year. However, no Event of Default shall be deemed to occur so long as the Debt Service Requirements are being paid by the Issuer when due and payable. Additional filings seeking increased revenues or other relief before the IURC shall not be required so long as an issue of law or fact substantially the same to that which would be raised by such additional filing is then pending or has been decided pursuant to a non-appealable order that prevents raising such issue in subsequent proceedings on appeal or such an issue of law or fact was previously determined adversely on appeal. -46-

52 For purposes of this Section, the Issuer shall not be required to implement the procedures set forth in the paragraph above, if the Gross Revenues the Issuer would have received in the Fiscal Year described above would have been sufficient to meet the requirements of the rate covenant described in (B) above if the Gross Revenues for such Fiscal Year were determined by giving effect for the entirety of such Fiscal Year to any increase or decrease in rates, fees, rentals or other charges authorized by an order of the IURC issued by the date that is within 120 days after the end of such Fiscal Year. For purposes of satisfying the requirements of this Section 801(B)(i), the Issuer may transfer funds from the Rate Stabilization Fund, if any, maintained by the Issuer from time to time, to the Revenue Fund and count such amount transferred as Gross Revenues in any Fiscal Year unless such money was transferred to the Rate Stabilization Fund from the Revenue Fund during such Fiscal Year, whereby such amounts are already included in Gross Revenues for such Fiscal Year. Any amount so transferred from the Rate Stabilization Fund to the Revenue Fund shall be treated as Gross Revenues for such Fiscal Year for purposes of calculating the foregoing rate covenant; provided, the amount of any such transfer to the Revenue Fund and treated as Gross Revenues for such Fiscal Year shall not exceed 10% for any Fiscal Year ending in 2012 and 2013 and 20% thereafter of the Debt Service Requirements for such Fiscal Year for purposes of satisfying Section 801 B(i). Section 802. Collection of Charges. The Issuer shall cause all rates, fees, and other charges pertaining to the Water System to be collected as soon as reasonable, shall prescribe and enforce rules and regulations or impose contractual obligations for the payment thereof, including, without limitation, the imposition of penalties for any defaults, to the end that the Gross Revenues of the Water System shall be adequate to meet the requirements of this Master Indenture and any other instruments supplemental thereto. The rates, fees, and other charges due shall be collected in any lawful manner. Section 803. Budgetary Procedures. A. For the purposes of this Master Indenture the budgetary procedures of the Issuer shall be substantially as provided in this Section 803, The Board shall annually and at such other times, if any, as may be provided by law prepare and adopt a budget pertaining to the Water System pursuant to the Enabling Legislation, all laws supplemental thereto, and the provisions hereof. B. The Chief Financial Officer shall submit for each Fiscal Year, commencing with the first full Fiscal Year commencing after the Closing, to the Board an annual budget setting forth estimates of Gross Revenues and expenditure requirements for the Water System for such Fiscal Year, including, without limitation, the Operation and Maintenance Expenses for the Fiscal Year and the Debt Service Requirements for the Fiscal Year. Such annual budget may be supplemented and amended from time to time as determined by the Board. -47-

53 ARTICLE IX. MISCELLANEOUS PROTECTIVE COVENANTS Section 901. Performance of Duties. The Issuer shall faithfully and punctually perform or cause to be performed all duties with respect to the Net Revenues and the Water System required by the Constitution and laws of the State and the various resolutions, indentures and other instruments of the Issuer, including, without limitation, the proper segregation of the proceeds of the First Lien Bonds and any securities hereafter authorized and pertaining to the Water System and Net Revenues and their application from time to time to the respective accounts provided therefor. Section 902. Further Assurances. At any and all times the Issuer, acting by and through the Board except when otherwise required by law, shall, so far as it may be authorized by law, pass, make, do, execute, acknowledge, deliver, and file or record all and every such further instruments, acts, deeds, conveyances, assignments, transfers, other documents, and assurances as may be necessary or desirable for the better assuring, conveying, granting, assigning, and confirming all and singular the rights, the Net Revenues, and the Pledged Funds, or intended so to be, or which the Issuer may hereafter become bound to pledge or to assign, or as may be reasonable and required to carry out the purposes of this Master Indenture and any instrument supplemental thereto, and to comply with the Enabling Legislation. The Issuer, acting by and through the Board, shall at all times, to the extent permitted by law, defend, preserve, and protect the pledge of the Net Revenues and the Pledged Funds and all the rights of every holder of any First Lien Bonds against all claims and demands of all Persons whomsoever. Section 903. Cpnditions Precedent. Upon the date of issuance of any First Lien Bonds, all conditions, acts, and things required fay the Constitution or statutes of the United States, the Constitution or statutes of the State, including, without limitation, the Enabling Legislation, or this Master Indenture to exist, to have happened, and to have been performed precedent to or in the issuance of the First Lien Bonds shall exist, have happened, and have been performed; and the First Lien Bonds, together with all other obligations of the Issuer, shall not contravene any debt or other limitation prescribed by the Constitution or statutes of the United States, or the Constitution or statutes of the State. Section 904. Rules. Regulations, and Other Details. The Issuer shall establish and enforce reasonable rules and regulations governing the operation, care, repair, maintenance, management, control, occupancy, use, and services of the Water System. The Issuer shall observe and perform all of the terms and conditions contained in this Master Indenture and shall comply with all valid acts, rules, regulations, orders, and directives of any legislative, executive, administrative, or judicial body applicable to the Water System or the Issuer. Section 905. Competent Personnel and Operation. The Issuer shall at all times endeavor to employ in connection with the operation of the Water System in executive and managerial capacities only individuals competent therefor by reason of training and experience. The Issuer shall administer the Water System in accordance with sound business principles and prudent utility practice. -48-

54 Section 906. Maintenance of Water System. The Issuer shall, insofar as it may legally do so, without any violation of other provisions of this Master Indenture, maintain, preserve, keep, and operate the Water System or cause the Water System to be maintained, preserved, kept, and operated in good repair, working order, and condition. Section 907. Operation of Water System. The Issuer shall at all times operate the Water System properly and in a sound and economical manner and shall maintain, preserve, and keep the Water System properly, or cause the same, so to be maintained, preserved, and kept, with the appurtenances and every part and parcel thereof, in good repair, working order, and condition. The Issuer also shall from time to time make or cause to be made all necessary and proper repairs, replacements, and renewals so that at all times the operation of the Water System may he properly and advantageously conducted in conformity with standards customarily followed by municipalities operating water facilities of like size and character. Section 908. Competing Water Facilities. The Issuer shall not construct other facilities or structures to be operated by the Issuer separate from the Water System to furnish customers of the Water System with water if such action will have a material adverse effect on the Water System revenues otherwise available for the payment of the First Lien Bonds, as determined in the discretion of the Board. This Master Indenture shall have no effect on the Wastewater System. Section 909. Existence and Successors. A. The Issuer shall maintain its governing body structure, as set forth in the Enabling Legislation, and its legal existence, so long as any of the First Lien Bonds remain Outstanding, unless a body created by the General Assembly of the State for the express purpose of succeeding the Issuer, succeeds by action of the Board or by operation of law, to the duties, privileges, powers, liabilities, disabilities, immunities, and rights of the Issuer and is obligated by law to operate and maintain the Water System and to fix and collect Net Revenues as herein provided without adversely and materially affecting at any time the privileges and rights of any holder of the Outstanding Bonds. B. All of the covenants, stipulations, obligations, and agreements by or on behalf of and other provisions for the benefit of the Issuer or the Board contained herein shall bind and inure to the benefit of any body described in this Section 909 A or any officer or board thereof to whom or to which there shall be transferred by or in accordance with law any right, power, or duty of the Issuer or the Board or of their respective successors, if any, the possession of which is necessary or appropriate in order to comply with any such covenants, stipulations, obligations, agreements, or other provisions hereof. Section 910. Loss from Condemnation. If any part of the Water System shall be taken by the exercise of a power of eminent domain, the amount of any award received by the Issuer as a result of such taking shall be paid into any account of the Water Fund, as the Board may determine. Section 911. Payment of Governmental Charges and Liens. The Issuer shall pay or cause to be paid all taxes, payments in lieu of taxes, assessments, and other municipal or -49-

55 governmental charges, if any, lawfully levied, payable or assessed upon or in respect of the Water System or the Gross Revenues, when the same shall become due. The Issuer shall duly observe and comply with all valid requirements of any municipal or governmental authority relative to the Water System, except for any period during which the validity of the same is being contested in good failh by proper legal proceedings. The Issuer shall pay or cause to be discharged or shall make adequate provision to satisfy and to discharge all lawful claims and demands for labor, materials, supplies, or other objects which, if unpaid, might by law become a lien upon the Water System or the Gross Revenues. Nothing herein contained requires the Issuer to pay or cause to be discharged or to make provision for any such tax, assessment, lien, charge, claim or demand before the time when payment thereon shall be due, or so long as the validity thereof shall be contested in good faith. Section 912. yens. The Issuer shall not create or permit to be created any Lien on the Gross Revenues or the Water System, except for Permitted Encumbrances and as otherwise permitted in this Master Indenture. Other than Permitted Encumbrances or as otherwise provided herein, there are no Liens whatsoever on or against the Water System, or any pan thereof, or on or against the Gross Revenues. Section 913. Records and Accounts. So long as any of the First Lien Bonds remain Outstanding, proper records and accounts shall be kept by the Issuer, separate and apart from all other records and accounts, showing complete and correct entries of all transactions relating to the Water System and to all moneys pertaining thereto, including, without limitation, the Gross Revenues. Such records shall include (but not necessarily be limited to) monthly records, all in reasonable detail as may be determined by the Chief Financial Officer or his delegate and in accordance with standard accounting practices, showing: A. Receipts, The Gross Revenues and other moneys received and pertaining to the Water System; B. Purposes and Accounts. The respective purposes for which such moneys were paid and the respective accounts in which such moneys were accounted; and C. Complete Accounting. Complete and correct entries of all transactions relating to the receipt, disbursement, allocation, and application of all moneys. All requisitions, requests, certificates, opinions, and other documents received by any Person on behalf of the Issuer in connection with the Water System under the provisions of this Master Indenture shall be retained in the Issuer's official records in accordance with State law. Section 914. Rights Concerning Records. The Trustee shall have the right at all reasonable times to inspect all financial statements, other records, accounts, and data relating thereto, concerning the Water System, or the Gross Revenues, or any other moneys pertaining to the Water System, or any combination thereof, and to make copies of such financial statements, other records, accounts, and data. Section 915. Audits Required. The Issuer shall cause an audit to be made for each Fiscal Year following the close of the Fiscal Year of such records, accounts, and subaccounts by I/ SO-

56 an Independent Accountant, and shall order an audit report showing the receipts and disbursements for each account and subaccount pertaining to the Wate r System, including, without limitation, the Gross Revenues and file such report with the Trustee within 120 days of the close of such Fiscal Year, Such audit may be a part of the Issuer's combined audit of all of its operations, so long as the combined audit provides enough information for the Issuer to demonstrate compliance with the other requirements of this Indenture. Section 916. Accounting Principles. Records and accounts, and audits thereof, with respect to the Water System and the Gross Revenues, shall be currently kept and made, as nearly as practicable, in accordance with Accounting Principles, methods and terminology followed and construed for waterworks comparable to the Water System, except as may be otherwise provided herein or required by applicable law or regulation or by contractual obligation existing on the effective date of this Master Indenture. Section 917. Insurance. The Issuer shall keep the Water System insured with insurers of good standing against risks, accidents or casualties against which and to the extent, and with deductible and self-insurance provisions, to the extent that such insurance is commercially available, in such forms and amounts and with such provisions as the Board shall have determined as reasonable. All net proceeds of such insurance shall be applied, as determined by the Chief Financial Officer of the Issuer, to repair or replace the insured property that is damaged or destroyed, to make other capital improvements to the Wastewater System, to redeem First Lien Bonds or for deposit to the Revenue Fund, except for proceeds of business interruption insurance, which shall be credited to the Revenue Fund. Section 918. Federal Tax and Arbitrage Covenant. The Issuer shall not use or permit the use of any proceeds of Tax-Exempt Bonds or any other funds of the Issuer, directly or indirectly, to acquire any securities or obligations, and shall not use or permit the use of any Net Revenues in any manner, and shall not take or permit to be taken any other action or actions, which would cause any Tax-Exempt Bond to be an "arbitrage bond" within the meaning of Section 148 of the Code or which would otherwise affect the exclusion of interest on the Tax- Exempt Bonds from gross income of the recipients thereof for federal income tax purposes. The Issuer shall at all times do and perform all acts and things permitted by law and necessary or desirable in order to assure that interest paid by the Issuer on the Tax-Exempt Bonds shall, for federal income tax purposes, be excluded from the gross income of the recipients thereof. In furtherance of this covenant, the Issuer shall comply with the covenants regarding Tax-Exempt Bonds contained in any Supplemental Indenture. Section 919. Disposal of Water System. Except as permitted in this Master Indenture, neither all nor a substantial part of the Water System shall be sold, leased, alienated, or otherwise disposed of, until all the First Lien Bonds have been paid in full or provision has been made therefor, in accordance with Section 1001 hereof. The Issuer shall have and hereby reserves the right to sell, lease, or otherwise dispose of the Water System or a portion thereof, if any one of the following conditions exists, as determined by the Board in its sole discretion: (i)such property is not necessary for the operation of the remaining Water System; (ii) such property is not useful in the operation of the -51-

57 remaining Water System; (iii) such property is not profitable or cost effective with respect to the operations of the remaining Water System, (iv) the disposition of such property will not have a material adverse effect on the security for the First Lien Bonds, or (v) such disposition is in the best interest of the Issuer and the holders of the First Lien Bonds. The Issuer may use the moneys received from any such disposal as directed by the Board in accordance with this Master Indenture. The provisions of this Section 919 shall be in addition to any limitations imposed upon the sale, lease or disposition of the Water System imposed by the Asset Purchase Agreement. -52-

58 ARTICLE X. MISCELLANEOUS Section Defeasance. A. Except as otherwise set forth herein, when principal of and premium, if any, and interest on a First Lien Bond have been duly paid, the pledge and lien and all obligations hereunder shall thereby be discharged as to that First Lien Bond and it shall no longer be deemed to be Outstanding within the meaning of this Master Indenture, There shall be deemed to be such payment in the manner required under this Section 1001A if the Issuer has placed in escrow or in trust with a Trust Bank, an amount of moneys and Defeasance Securities, the maturing principal and interest on which will be sufficient to meet all such payment requirements of the First Lien Bond, as such requirements become due to the fixed maturity date of the First Lien Bond or to any Redemption Date or Redemption Dates as of which the Issuer shall have exercised or shall have obligated itself to exercise its prior redemption option by a call of the First Lien Bond thereafter maturing for payment on such date, at which time the provisions of such First Lien Bond shall be deemed terminated, defeased and discharged. The Defeasance Securities shall become due prior to the respective times on which the proceeds thereof shall be needed, in accordance with a schedule established and agreed upon between the Issuer and such Trust Bank at the time of the creation of the escrow or trust, or the Defeasance Securities shall be subject to redemption at the option of the holders thereof to assure such availability as so needed to meet such schedule. If at any time the Issuer has so placed in escrow or trust an amount sufficient to pay designated principal of and premium, if any, and interest on First Lien Bonds constituting less than all of such payment requirements of the First Lien Bonds becoming due on and before their respective due dates, be they the fixed maturity dates of the First Lien Bonds or any such Redemption Date pertaining to the First Lien Bonds, such designated payment requirements shall be deemed paid and discharged under this Master Indenture. For the purposes of this Section, "Defeasance Securities" shall not include any Defeasance Securities which are callable by any party other than the holder thereof. B. Notwithstanding anything in this Section to the contrary, in the event that the principal of or interest on the First Lien Bonds shall be paid by the provider of a Credit Facility or Reserve Account Credit Facility pursuant to the terms thereof, the First Lien Bonds shall not be deemed to have been duly paid within the meaning of Section 1001 A, remain Outstanding and shall not be defeased or otherwise satisfied until the amounts owed by the Issuer pursuant to the terms of the agreement between the Issuer and the provider of such Credit Facility or Reserve Account Credit Facility are paid to the provider of such facility. Section Reserved. Section Statute of Limitations. No action or suit based upon any First Lien Bond or other obligation of the Issuer shall be commenced after it is barred by any statute of limitations pertaining thereto. Any trust or fiduciary relationship between the Issuer and the holder of any First Lien Bond or the obligee regarding any such obligation shall be conclusively presumed to have been repudiated on the fixed maturity date or other due date thereof unless the First Lien Bond is presented for payment or demand for payment of any such obligation is -53-

59 otherwise made before the expiration of the applicable limitation period. Any moneys from whatever source derived remaining in any account reserved, pledged, or otherwise held for the payment of any such obligation, action or suit for the collection of which has been barred, shall revert to the Revenue Fund, unless the Board shall otherwise provide by instrument of the Issuer. Nothing herein prevents the payment of any such obligation after any action or suit for its collection has been barred if the Board deems it in the best interests of the public so to do and orders such payment to be made. Section Governmental Powers. The enforceability of the Issuer's obligations and creditors' remedies is: A. Equity Principles. Subject to general principles of equity to the extent relevant to the Issuer (regardless of whether such enforceability is considered in a proceeding in equity or at law), B. Limitations Fixed by Law. Subject to the limitations upon enforceability fixed by bankruptcy, insolvency, reorganization, moratorium, and other laws affecting creditors' rights and privileges, C. State and U.S. Powers. Otherwise subject to the reasonable exercise in the future by the State and its governmental bodies of the police powers and the powers of eminent domain, taxation, and licensing inherent in the sovereignty of the State and to the exercise by the United States of the powers delegated to it by the Constitution of the United States, D. Limitations Upon Suits. Subject to the limitations stated in the 11 th Amendment, Constitution of the United States, upon suits against states in Federal courts. Nothing herein prohibits or limits the exercise by the Federal Government, the State, or any other governmental entity of their respective sovereign powers. Generally, the State can neither contract away such sovereign powers nor limit or inhibit by contract the proper exercise of such powers, and this Master Indenture does not purport to do so. -54-

60 ARTICLE XI. EVENTS OF DEFAULT; PRIVILEGES. RIGHTS AND REMEDIES Section Bondholder's Remedies. The holder of any First Lien Bond and the Trustee, acting for each such holder, shall be entitled to all of the privileges, rights, and remedies provided herein and as provided or permitted at law or in equity or by statutes, but subject to the provisions herein concerning the prior use of the Net Revenues for the payment of the First Lien Bonds. Section Events of Default. Except as otherwise provided in this Master Indenture, each of the following events is hereby declared an Event of Default: A. Nonpayment of Principal and Premium. Payment of the principal of any of the First Lien Bonds, or any redemption premium due in connection therewith, or both, is not made when the same becomes due and payable, either at maturity or by proceedings for prior redemption, or otherwise; B. Nonpayment of Interest. Payment of any installment of interest on First Lien Bonds is not made when the same becomes due and payable; C. Default of Any Provision. Except as otherwise provided herein, including as provided in Section 801 hereof, if the Issuer makes any default in the due and punctual performance of any other of the representations, covenants, conditions, agreements, and other provisions contained in the First Lien Bonds in this Master Indenture or in a Supplemental Indenture relating thereto on its part to be performed, and such default continues for 90 days after written notice specifying such default and requiring the same to be remedied is given to the Issuer directly by the holders of a majority in principal amount of the First Lien Bonds then Outstanding or such notice from such holders is received by the Trustee and delivered to the Issuer by the Trustee provided, however, if the failure stated in such notice can be corrected, but not within such 90 day period, the Issuer shall have 180 days after such written notice to cure such default if corrective action is instituted by the Issuer within such 90 day period and diligently pursued until the failure is corrected; D. Appointment of Receiver. Etc. If an order, judgment or decree shall be entered by any court of competent jurisdiction (i) appointing a receiver, trustee, or liquidator for the whole or any substantial part of the Water System, (ii) granting relief in involuntary proceedings with respect to the Water System under the federal Bankruptcy Code, or (iii) assuming custody or control of the whole or any substantial part of the Water System under the provision of any law for the relief or aid of debtors, and such order, judgment or decree shall not be vacated or set aside or stayed (or, if custody or control is assumed by such order, such custody or control shall not be otherwise terminated), within 60 days from the date of the entry of such order, judgment or decree; E. Credit Facility. Failure by any provider of a Credit Facility to pay the purchase price of First Lien Bonds under any Credit Facility then in effect or delivery to the Issuer by a -55-

61 provider of a Credit Facility of written notice stating that pursuant to its Credit Facility Agreement, it is authorized to declare an "event of default" on the First Lien Bonds hereunder. F. Hedge Agreement. Delivery to the Issuer by a Qualified Provider of written notice stating pursuant to the Hedge Agreement, it is authorized to declare an "event of default" on the First Lien Bonds hereunder; and G. Inability to Pay Debts. Etc. The Board shall (1) admit in writing its inability to pay its debts generally as they become due, (2) commence voluntary proceedings in bankruptcy or seeking a composition of indebtedness in either case relating to the Water System, (3) make an assignment for the benefit of its Water System creditors, (4) consent to the appointment of a receiver of the whole or any substantial part of the Water System, or (5) consent to the assumption by any court of competent jurisdiction under the provisions of any other law for the relief or aid of debtors of custody or control of the whole or any substantial part of the Water System. Section Remedies for Defaults. Upon the happening and continuance of any of the Events of Default, as provided in Section 1102 hereof, then and in every case the holder or holders of not less than a majority in principal amount of the First Lien Bonds then Outstanding or the Trustee therefor may proceed against the Issuer and its agents, officers, and employees to protect and to enforce the rights of any holder of First Lien Bonds under this Master Indenture by mandamus or by other suit, action, or special proceedings in equity or at law, in any court of competent jurisdiction, either for the appointment of a receiver or for the specific performance of any covenant or agreement contained herein or by an award of execution of any power herein granted for the enforcement of any proper, legal, or equitable remedy as such holder or holders may deem most effectual to protect and to enforce the rights aforesaid, or thereto enjoin any act or thing which may be unlawful or in violation of any right of any holder of any First Lien Bond, or to require the Issuer to act as if it were the trustee of an expressed trust, or any combination of such remedies. All such proceedings at law or in equity shall be instituted, had, and maintained for the equal benefit of all holders of the First Lien Bonds then Outstanding. Section Receiver's Rights and Privileges. Any receiver appointed in any proceedings to protect the rights of the holders of the First Lien Bonds, the consent to any such appointment being hereby expressly granted by the Issuer, may enter and take possession of the Water System, may operate and maintain the same, may prescribe rates, fees, and other charges, and may collect, receive, and apply all Gross Revenues and any other revenues pertaining to the Water System in the manner set forth in this Master Indenture. Section Rights and Privileges Cumulative. The failure of any holder of any Outstanding First Lien Bond to proceed in any manner herein provided shall not relieve the Issuer of any liability for failure to perform or carry out any duty, obligation, or other commitment. Each right or privilege of any such holder (or trustee thereof) is in addition and is cumulative to any other right or privilege, and the exercise of any right or privilege by or on behalf of any holder shall not be deemed a waiver of any other right or privilege thereof. Section Duties upon Defaults. Upon the happening of any of the Events of Default as provided in Section 1102 hereof, the Issuer, in addition, shall do and perform all proper acts -56-

62 on behalf of and for the holders of the First Lien Bonds to protect and to preserve the security created for the payment of the First Lien Bonds and to insure the payment of the First Lien Bonds promptly as the same become due. During any period of default, so long as any of the First Lien Bonds are Outstanding, at the determination of the Chief Financial Officer, Net Revenues shall fund an operating reserve in an amount of up to two months of Operating and Maintenance Expenses in order to permit the continued efficient operation of the Water System (provided such reserve shall not be permitted if already established pursuant to an authorizing Indenture for Second Lien Bonds), and, to the extent such revenues, if any, exceed the payment requirements of the Outstanding First Lien Bonds and related Hedge Payments under Hedge Agreements, both accrued and to accrue to their respective fixed maturity dates or to any Redemption Date or Redemption Dates pertaining thereto, whichever is earlier, into any like account or like accounts for any outstanding Second Lien Bonds and payments under hedge agreements related thereto. If the Issuer fails or refuses to proceed as provided in this Section, the holder or holders of not less than a majority in principal amount of the First Lien Bonds then Outstanding or the Trustee, after demand in writing, may proceed to protect and to enforce the rights of the holders of the First Lien Bonds as hereinabove provided; and to that end, any such holders of Outstanding First Lien Bonds or the Trustee shall be subrogated to all rights of the Issuer under any agreement, lease, or other contract involving Net Revenues, or that the Water System entered into prior to the effective date of this Master Indenture or thereafter while any such First Lien Bonds are Outstanding. Section No Acceleration. Nothing in this Master Indenture or any other instrument of the Issuer shall permit the acceleration of the time or times for the payment of the First Lien Bonds or any other bonds of the Issuer with respect to the Water System, prior to their respective maturities or other due dates as provided herein, even if the Issuer defaults in the payment of any such First Lien Bonds or other bonds hereunder, except to the extent ordered by a court of competent jurisdiction. Section Duties in Bankruptcy Proceedings. If any user of the Water System proceeds under any laws of the United States relating to bankruptcy, including, without limitation, any action under law providing for corporate reorganization, it shall be the duty of the Issuer and its appropriate officers and such parties are hereby authorized and directed to take all necessary steps for the benefit of the holders of the First Lien Bonds in such proceedings, including, without limitation, the filing of any claims for unpaid rates, fees, other charges, and other payments due to the Issuer or otherwise arising from the breach of any of the covenants, terms, or conditions of any contract pertaining to the Water System, unless the Board determines that the costs of such action are likely to exceed the amounts thereby recovered from such obligor. Section Prejudicial Action Unnecessary. Nothing in this Article XI requires the Issuer to proceed as provided therein if the Board determines that if the Issuer so proceeds it is more likely than not to incur a net loss rather than a gain or such action is otherwise likely to affect materially and prejudicially the holders of the Outstanding First Lien Bonds. Section Rights of Provider of Credit Facility. Notwithstanding any other provision of the Master Indenture, in the event that the Issuer or the Trustee shall draw under a Credit Facility any amount for the payment of principal of or interest on any First Lien Bonds, then -57-

63 upon such payment the related provider of the Credit Facility shall succeed to and become subrogated to the rights of the recipients of such payments and such principal or interest shall be deemed to continue to be unpaid and Outstanding for all purposes find shall continue to be fully secured by the Net Revenues until the provider of the Credit Facility, as successor and subrogee, has been paid all amounts owing in respect of such subrogated payments of principal and interest. Such rights shall be limited and evidenced by having the Issuer note the rights of the provider of the Credit Facility as successor and subrogee on its records, and the Issuer shall, upon request, deliver to the provider of the Credit Facility (i) in the case of interest on the First Lien Bonds, an acknowledgment of the ownership by the provider of the Credit Facility of interest to be paid on the First Lien Bonds specifying the amount of interest owed, the period represented by such interest, and the numbers of the First Lien Bonds on which such interest is owed and (ii) in the case of principal of the First Lien Bonds, either the First Lien Bonds themselves duly assigned to the provider of the Credit Facility or new First Lien Bonds registered in the name of the provider of the Credit Facility or in such other name as the provider of the Credit Facility shall specify. Whenever moneys become available for the payment of any interest then overdue, the provider of the Credit Facility shall be treated as to interest owed to it as successor and subrogee as if it had been the holder of the First Lien Bonds on which such interest is payable on any special record date therefor. Section Notice to Bondholders. The Trustee within 90 days after the occurrence of an Event of Default shall give to the owners of the First Lien Bonds, by first-class mail, postage prepaid at such owner's address appearing upon the books of registry kept by the Registrar, notice of all Events of Default known to the Trustee, unless such Events of Default shall have been cured before the giving of such notice; provided that, except in the case of an Event of Default defined in paragraphs A or B of Section 1102, the Trustee shall be protected in withholding such notice if the Trustee in good faith determines that the withholding of such notice is in the interests of the holders of the First Lien Bonds. -58-

64 ARTICLE XII. CONCERNING THE TRUSTEE Section Appointment of Trustee. U.S. Bank National Association is hereby appointed and confirmed as Trustee. The Trustee shall signify its acceptance of the duties and obligations imposed upon it by this Master Indenture by executing the certificate of authentication endorsed upon each of the First Lien Bonds; and the Trustee shall be deemed to have accepted such duties and obligations not only with respect to the First Lien Bonds so authenticated, but also with respect to all the First Lien Bonds thereafter to be issued hereunder. Section Property Held in Trust, All moneys and securities held by the Trustee at any time pursuant to the terms of this Master Indenture shall be and hereby are assigned, transferred, and set over unto such Trustee in trust for the purposes and under the terms and conditions of this Master Indenture. Section Deposit and Security of Funds. Subject to the provisions of Sections 602 and 603 hereof, all moneys (not including securities) held by the Trustee may, subject to the provisions of this Section, be deposited by the Trustee in demand or time deposit in its banking department, the banking department of any of the Trustee's affiliates, or with such other Banking Institutions as may be designated in writing by the Issuer. The Trustee shall allow and credit interest on any such moneys held by it at such rate as it customarily allows upon similar funds of similar size and under similar conditions or as required by law. Interest or any other gain in respect of moneys or on securities in any account shall be credited in accordance with the provisions of Article VI hereof. Section Basic Duties of Trustee. The Trustee undertakes, prior to default, and after the curing of all defaults which may have occurred, to perform such duties and only such duties as are specifically set forth in this Master Indenture as supplemented from time to time and, in case of an Event of Default (which has not been cured) to exercise such of the rights and powers vested in it by this Master Indenture and to use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs, except as herein otherwise expressly provided. The Trustee, upon receipt of evidence furnished to it by or on behalf of the Issuer pursuant to any provision of this Master Indenture shall examine the same to determine whether or not such evidence conforms to the requirements of this Master Indenture. Section Trustee's Conduct. Except as herein otherwise expressly provided, no provision of this Master Indenture relieves the Trustee from liability for its own gross negligent action, its own negligent failure to act, or its own willful misconduct, except that: A. Absence of Implied Duties. Prior to default hereunder and after the curing of all defaults which may have occurred, the Trustee shall not be liable except for the performance of such duties as are specifically set out in this Master Indenture, and no implied covenants or obligations shall be read into this Master Indenture against the Trustee, but the duties and I/26H

65 obligations of the Trustee, prior to default and after curing of all defaults which may have occurred, shall be determined solely by the express provisions of this Master Indenture; B. Reliance Upon Master Indenture. Prior to default hereunder and after the curing of all defaults which may have occurred, and in the absence of bad faith on the part of the Trustee, the Trustee may conclusively rely as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates, opinions, or other instruments conforming to the requirements of this Master Indenture; C. No Liability for Mere Error of Judgment. The Trustee shall not be personally liable for any error of judgment made in good faith by a responsible officer or officers of the Trustee, unless it shall be proven that the Trustee was negligent in ascertaining the pertinent facts or in the performance of an expressed duty; D. Action Directed by Bondholders. The Trustee shall not be personally liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the holders of not less than a majority in principal amount of the First Lien Bonds Outstanding relating to the time, method, and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee under this Master Indenture; E. Incurrcnce of Personal Liabilities. The Trustee shall not be required to advance or expend or use its own fiinds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if the repayment of such funds or liability is not assured to it by the security afforded it by the terms of this Master Indenture or by other security or indemnity reasonably satisfactory to the Trustee; F. Limited Liability Concerning Bonds. The Trustee shall not be under any responsibility or duty with respect to the disposition by the Issuer of the First Lien Bonds or the application by the Issuer of the proceeds thereof or of any moneys paid to the Issuer under any of the provisions hereof, except to the extent that such proceeds are paid to the Trustee in its capacity as Trustee or Paying Agent; and O. Cost of Execution or Enforcement of Trusts. The Trustee, in the case of any default hereunder, shall not be under any obligation to take any action toward the execution or enforcement of the trusts created by this Master Indenture, which, in the opinion of the Trustee, will likely involve it in expense or liability, unless one or more of the holders of First Lien Bonds shall, as often as required by the Trustee, furnish to the Trustee security and indemnity satisfactory to the Trustee against such expense or liability. Section Entry upon Water System. The Trustee shall not be personally liable in case of entry by it upon the Water System for debts contracted or liability or damages incurred in the management or operation of the Water System. 1205: Section Further Permitted Reliance. To the extent permitted by Sections 1204 and -60-

66 A. Reliance upon Documents. The Trustee may rely and shall be protected in acting upon any resolution, Supplemental Indenture, certificate, opinion, notice, request, consent, order, appraisal, report, bond, or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; B. Reliance upoa Counsel. The Trustee may consult with counsel and the opinion of such counsel shall be full and complete authorization and protection in respect of any action taken or suffered by it hereunder in good faith and in accordance with the opinion of such counsel; and C. Reliance upon Assistants. Whenever this Master Indenture provides for certain action to be taken or a certain document shall be executed and forwarded to the Trustee or otherwise by a designated official and such action is taken or such document is executed and so forwarded by the assistant to such official or by an acting official so designated, the Trustee may conclusively assume that the designated official is unable to act in such capacity at such time and the assistant or acting official is then authorized to take such action or to execute and so forward such document, as the case may be; and the Trustee may rely upon such action or document. Section Other Immunities. The Trustee shall not be under any responsibility for the approval of any expert for any of the purposes expressed in this Master Indenture, but nothing in this Section contained shall relieve the Trustee of its obligation to exercise reasonable care with respect to the approval of independent experts who may furnish opinions or certificates to the Trustee pursuant to any provision of this Master Indenture. Any instrument of the Board shall be evidenced to the Trustee by a copy thereof certified by an Authorized Issuer Representative to have been duly adopted, and the Trustee may accept such copy as conclusive evidence of the adoption of such instrument. Nothing contained in this Section modifies the obligation of the Trustee to exercise after default the rights and powers vested in it by this Master Indenture with the degree of care and skill specified in Section No surety bond or other security shall be required of the Trustee unless ordered by a court having jurisdiction and for cause shown. Section Permitted Transactions with Issuer. The Trustee, the affiliates of the Trustee, any paying agent, and any other Banking Institution to which this Master Indenture pertains may buy, hold, sell or deal in, or be a pledgee of the First Lien Bonds and any other securities of the Issuer and may engage or be interested in any financial or other transaction with the Issuer, all as freely as if they were not Trustee, paying agent, or such other bank hereunder. Section Commingling of Moneys. Except as herein otherwise provided, all moneys received by the Trustee, whether as Trustee or otherwise, until used or applied as herein provided, shall be held in trust for the purposes for which they were paid, but need not be segregated from other moneys except to the extent required by law, unless herein otherwise expressly provided. Section Compensation of Trustee. The Issuer covenants and agrees to pay to the Trustee from time to time, and the Trustee shall be entitled to, reasonable compensation for all services rendered by it in the execution of the trusts hereby created and in the exercise and performance of any of the powers and duties hereunder of the Trustee, which compensation shall -61-

67 not be limited by any provision of law in regard to the compensation of a trustee of an express trust; and the Issuer will pay to the Trustee from time to time its expenses and disbursements (including, without limitation, reasonable compensation and the expenses, charges, counsel fees, and other disbursements of its counsel, officers, employees, other agents, and of all other Persons not regularly in the Trustee's employ). To the extent permitted by law, the Issuer also covenants to indemnify the Trustee for, and to hold it harmless against, any loss, liability, or expense incurred without negligence or bad faith on the part of the Trustee, arising out of or in connection with the acceptance or administration of this trust, including the costs and expenses of defending against any claim of liability in the premises. Section Preference in Event of Defaults. In order to further assure the Trustee that it will be compensated, reimbursed, and indemnified, all parties to this Master Indenture agree, and hereafter each holder of any First Lien Bond and any other security hereafter authorized and payable from Net Revenues by his acceptance thereof shall be deemed to have agreed that in the event of the occurrence of any one or more of the events of default mentioned in Section 1102 hereof, the Trustee may file from time to time in any proceeding or proceedings one or more claims, supplemental claims, and amended claims as a creditor for its reasonable compensation for all services rendered by it (including services rendered during the course of any such proceeding or proceedings) and for reimbursement as Operation and Maintenance Expenses for all advances, expenses, and disbursements (including the reasonable compensation and the expenses and disbursements of its counsel and of all other Persons not regularly in its employ) made or incurred by it in the execution of the trusts hereby created and in the exercise and performance of any of the powers and duties herein of the Trustee, and for any and all amounts to which the Trustee is entitled as indemnity; and the Trustee and its counsel and agents may file in any such proceeding or proceedings applications or petitions for compensation for such services rendered, for reimbursement for such advances, expenses, and disbursements, and for such indemnity, as such Operation and Maintenance Expenses. Section AdjustmentandAllowance of Claims. The claim or claims of the Trustee filed in any such proceeding or proceedings shall be reduced by the amount of compensation for services, reimbursement for advances, expenses, and disbursements, and indemnity paid to it following final allowance to it and to its counsel and agents by the court in any such proceedings as an expense of administration or in connection with a plan of reorganization or readjustment. To the extent that compensation, reimbursement, and indemnity are denied to the Trustee or to its counsel or its other agents because of not being rendered or incurred in connection with the administration of an estate in a proceeding or in connection with a plan of reorganization or readjustment approved as required by law, because such services were not rendered in the interests of and with benefit to the estate of the Issuer as a whole but in the interest of and with benefit to the holders of the First Lien Bonds and any other securities hereafter authorized and payable from Net Revenues in the execution of the trusts hereby created or in the exercise and performance of any of the powers and duties hereunder of the Trustee, or because of any other reason, the court may, to the extent permitted by law, allow such claim, as supplemented and amended, in any such proceeding or proceedings and for the purposes of any plan of reorganization or readjustment of the Issuer's obligations, may classify the Trustee as a creditor of a class having priority for the payment of the Operation and Maintenance Expenses, and precedence over the class in which the holders of the First Lien Bonds and any such securities are placed. The amount of the claim or claims of the Trustee for services rendered and for -62-

68 advances, expenses, and disbursements, including the reasonable compensation and the expenses and disbursements of its counsel and of all Persons not regularly in its employ which are not allowed and paid in any such proceeding, but for which the Trustee is entitled to the allowance of a claim as herein provided may be fixed by the court or judge in any such proceeding or proceedings to the extent that such court or judge has or exercises jurisdiction over the amount of any such claim or claims. Section Certificates of Officers and Experts. Whenever in the administration of the trusts of this Master Indenture, prior to a default hereunder, the Trustee shall deem it necessary or desirable that a matter be proved or established prior to taking or suffering any action hereunder, such matter (unless other evidence in respect thereof be herein specifically prescribed), subject to the provisions of Sections 1204 and 1205, may be deemed to be prima facie proved and established by a certificate signed by an Authorized Issuer Representative and delivered to the Trustee, and any such certificate so conclusively proved shall be full warrant to the Trustee for any action taken or suffered by it under the provisions of this Master Indenture upon the faith thereof. Likewise, all appraiser's certificates, engineer's certificates, independent appraiser's certificates, independent engineer's certificates, officers' certificates, and other certificates or instruments herein provided to be given to the Trustee, shall be full warrant and protection to the Trustee, subject to the provisions of Sections 1204 and 1205 hereof, for any action or non-action taken or suffered by it under the provisions of this Master Indenture upon the faith thereof. Whenever it is provided in this Master Indenture that the Trustee shall take any action upon the happening of a specified event or upon the fulfillment of any condition or upon the request of the Issuer or of any holder of any First Lien Bond, the Trustee shall have full power to give any and all notices and to do any and all acts and things incident to such action. Section Resignation of Trustee. The Trustee, or any successor thereof, may at any time resign and be discharged of its duties and obligations hereunder by giving not less than 60 days' written notice to the Issuer. Such resignation shall take effect upon the day specified in such notice unless previously a successor shall have been appointed by the Issuer or holders of First Lien Bonds as herein provided, in which event such resignation shall take effect immediately on the appointment of such successor. Section Removal of Trustee. The Trustee, or any successor thereof, may be removed at any time by the Issuer, as long as the Issuer is not in default pursuant to the terms of this Master Indenture or any Supplemental Indenture authorizing the issuance of Parity Bonds, and at any time by the holders of a majority in principal amount of the First Lien Bonds, by an instrument or concurrent instruments in writing signed and acknowledged by such holders of First Lien Bonds or by their attorneys-in-fact duly authorized and delivered to the Issuer. The Issuer shall deliver copies of each such instrument to the Trustee and to any successor thereof. Section Successor Trustee. In case the Trustee, or any successor thereof, shall resign or shall be removed or shall become incapable of acting or shall be adjudged a bankrupt or insolvent, or if a receiver, liquidator, or conservator thereof or of its property shall be appointed, or if any public officer shall take charge or control thereof or of its property or affairs, a successor may be appointed by the Issuer, or in the case of removal of the Trustee by the holders, a successor may be appointed by the holders of a majority in principal amount of the then Outstanding First Lien Bonds by an instrument or concurrent instruments in writing signed and 1/ ,15-63-

69 acknowledged by such holders of such First Lien Bonds or by their attorneys-in-fact duly authorized and delivered to the Issuer. Pending such appointment by holders of such Firsi Lien Bonds, the Issuer shall forthwith appoint a successor to act until such appointment is made by the holders of such First Lien Bonds. The Issuer shall deliver copies of each such instrument and of any instrument of the Issuer providing for any such appointment to the successor and to the predecessor Trustee. If no appointment of a successor shall be made within 30 days after the Trustee has been removed or resigned or after the occurrence of any other event requiring or authorizing such appointment, any holder of such First Lien Bonds or the trustee of such First Lien Bonds may apply to any court of competent jurisdiction for the appointment of such a successor, and the court thereupon after such notice, if any, as the court may deem proper and may prescribe, may appoint such successor. Any successor appointed under the provisions of this Section shall be a Trust Bank and willing and able to accept the appointment on reasonable and customary terms and authorized by law to perform all the duties required by this Master Indenture. Section Transfer of Rights and Property. Any successor appointed under the provisions of this Master Indenture shall execute, acknowledge, and deliver to its predecessor and also to the Issuer an instrument accepting such appointment; and thereupon such successor, without any further act, deed, or conveyance, shall become fully vested with all moneys, estates, properties, rights, powers, duties, and obligations of its predecessor hereunder, with like effect as if originally appointed herein as Trustee; but the Trustee then ceasing to act shall, nevertheless, on request by the Issuer or by such successor, execute, acknowledge, and deliver such instruments of conveyance and further assurance and such other things as may reasonably be required for more fully and certainly vesting and confirming in such successor all the right, title, and interest of such Trustee in and to any property held by it hereunder and shall pay over, assign, and deliver to such successor any money or other property subject to the trusts and conditions herein set forth. If any deed, conveyance, or instrument in writing from the Issuer is required by such successor for more fully and certainly vesting in and confirming to it any such moneys, estates, properties, rights, powers, duties, or obligations, any and all such deeds, conveyances, and instruments in writing shall on request and so far as may be authorized by law be executed, acknowledged, and delivered to the Issuer by the Trustee originally appointed herein. Section Merger or Consolidation. Any company in which the Trustee may be merged or with which it may consolidate or any company resulting from any merger or consolidation to which it shall be a party or any company to which the Trustee may sell or transfer all or substantially all of its corporate trust business, shall be the successor to the Trustee without any further act, deed, or conveyance. -64-

70 ARTICLE XIII. AMENDMENT OF MASTER INDENTURE Section Supplemental Indentures Not Requiring Consent of Bondholders. The Issuer and the Trustee, from time to time and at any time, subject to the conditions and restrictions in the Master Indenture, may enter into one or more Supplemental Indentures which thereafter shall form a part of the Master Indenture, for any one or more or all of the following purposes: A. To add to the covenants and agreements of the Issuer in the Master Indenture other covenants and agreements thereafter to be observed or to surrender, restrict, or limit any right or power reserved in the Master Indenture to or conferred upon the Issuer; B. To make such provisions for the purpose of curing any ambiguity, or of curing, correcting, or supplementing any defective provision, mistakes or manifest error contained in the Master Indenture, or in regard to matters or questions arising under the Master Indenture, as the Issuer may deem necessary or desirable and not inconsistent with the Master Indenture; C. To subject to the lien and pledge of the Master Indenture additional revenues, receipts, properties, or other collateral; D. To evidence the appointment of successors to any Trustee, Paying Agent(s), or Bond Registrars); E. To modify, amend, or supplement the Master Indenture in such manner as to permit the qualification of the Master Indenture under the Trust Indenture Act of 1939 or any federal statute hereinafter in effect, and similarly to add to the Master Indenture such other terms, conditions, and provisions as may be permitted or required by such Trust Indenture Act of 1939 or any similar federal statute; F. To make any modification or amendment of the Master Indenture required in order to make any First Lien Bonds eligible for acceptance by DTC or any similar holding institution or to permit the issuance of any First Lien Bonds or interests therein in book-entry form; G. To modify any of the provisions of the Master Indenture in any respect if such modification shall not become effective until after the First Lien Bonds Outstanding immediately prior to the effective date of such Supplemental Indenture shall cease to be Outstanding and if any First Lien Bonds issued contemporaneously with or after the effective date of such Supplemental Indenture shall contain a specific reference to the modifications contained in such subsequent proceedings; H. To modify the Master Indenture to permit the qualification of any First Lien Bonds for offer or sale under the securities laws of any state in the United States of America; I. To provide for the issuance of Parity Bonds or the entry into a Hedge Agreement or Credit Facility in accordance with the terms of the Master Indenture; -65-

71 J. To modify the Master Indenture in any way in connection with the issuance of Parity Bonds, if the Issuer determines such modification does not materially adversely affect the existing holders of any First Lien Bonds; K. To modify any of the provisions of the Master Indenture in any other respect (other than a modification of the type described in Section 1302 requiring the unanimous written consent of the holders of the affected Bonds) that the Board in good faith determines will not have a material adverse effect on the security for the First Lien Bonds; and L. To authorize any change or amendment in the Master Indenture which, as evidenced by a certificate of the Chief Financial Officer of the Issuer, would not result in a reduction or withdrawal in the ratings assigned to the First Lien Bonds. Any Supplemental Indenture authorized by the provisions of this Section may be adopted by the Issuer without the consent of or notice to the owners of any of the First Lien Bonds at the time Outstanding, notwithstanding any of the provisions of Section Any Supplemental Indenture of the Issuer may modify the provisions of the Master Indenture in such a manner, and to such extent and containing such provisions, as the Issuer may deem necessary or desirable to effect any of the purposes stated above. As used in this Section, the term "modify" shall mean "modify, amend or supplement" and the term "modification" shall mean "modification, amendment or supplement." Section 1302, Supplemental Master Indentures Requiring Consent of Bondholders. With the consent of the owners of not less than a majority in aggregate principal amount of the Outstanding First Lien Bonds of a class (senior and subordinate) affected by the terms of the proposed Supplemental Indenture, the Issuer and the Trustee may from time to time and at any time enter into a Supplemental Indenture for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of the Master Indenture or of any Supplemental Indenture. If any such modification or amendment will not take effect so long as a First Lien Bond of any specified series remains Outstanding, consent of the holder of such First Lien Bond of such series shall not be required and such series of First Lien Bonds shall not be Outstanding for purposes of any calculation of Outstanding First Lien Bonds under this Section; provided, however, that no such Supplemental Indenture shall: (1) extend the maturity date or due date of any mandatory sinking fund redemption with respect to any First Lien Bond Outstanding under the Master Indenture; (2) reduce or extend the time for payment of principal of, redemption premium, or interest on any First Lien Bond Outstanding under the Master Indenture; (3) reduce any premium payable upon the redemption of any First Lien Bond under the Master Indenture or advance the date upon which any First Lien Bond may first be called for redemption prior to its stated maturity date; (4) give to any First Lien Bond or First Lien Bonds (or related Hedge Agreements) a preference over any other First Lien Bond or First Lien Bonds (or related Hedge Agreements); (5) permit the creation of any Lien on the Net Revenues having a lien equal to or prior to the lien created under the Master Indenture for the First Lien Bonds except as permitted in this Master Indenture; (6) reduce the percentage of owners of either class of First Lien Bonds required to approve any such Supplemental Indenture; or (7) deprive the owners of the First Lien Bonds of the right to payment of the First Lien Bonds from the Net 1/ ,15-66-