Okaloosa County BOCC — April 1, 2014 — Bond Trust Indenture.2BL

NGN Draft No.2 3/26/2014 019.14 BOND TRUST INDENTURE BETWEEN OKALOOSA COUNTY, FLORIDA, as Issuer AND __________________________, as Bond Trustee DATED AS OF APRIL 1, 2014 $___________ Okaloosa County, Florida Utilities System Revenue Bonds, Series 2014 (Auburn Water System, Inc. Project)  TABLE OF CONTENTS Page ARTICLE I DEFINITIONS SECTION 1.1. DEFINITIONS ............................................................................................4 ARTICLE II THE BONDS SECTION 2.1. AUTHORIZED AMOUNT OF BONDS ..................................................14 SECTION 2.2. ISSUANCE OF SERIES 2014 BONDS; ADDITIONAL BONDS ..........14 SECTION 2.3. EXECUTION; LIMITED OBLIGATION; NO LIABILITY OF STATE .................................................................................................16 SECTION 2.4. AUTHENTICATION................................................................................16 SECTION 2.5. FORM OF BONDS AND TEMPORARY BONDS .................................17 SECTION 2.6. DELIVERY OF SERIES 2014 BONDS ...................................................17 SECTION 2.7. MUTILATED, LOST, STOLEN OR DESTROYED BONDS ................18 SECTION 2.8. TRANSFER AND EXCHANGE OF BONDS; PERSONS TREATED AS OWNERS ...................................................................18 SECTION 2.9. BOOK-ENTRY ONLY SYSTEM FOR THE BONDS ............................19 SECTION 2.10. SUCCESSOR SECURITIES DEPOSITORY; TRANSFERS OUTSIDE BOOK-ENTRY ONLY SYSTEM ....................................20 SECTION 2.11. PAYMENTS AND NOTICES TO CEDE & CO .....................................20 ARTICLE III APPLICATION OF BOND PROCEEDS AND REQUIRED FUND DEPOSITS SECTION 3.1. EXPENSE FUND......................................................................................21 SECTION 3.2. PROJECT FUND ......................................................................................21 SECTION 3.3. DEPOSIT OF BOND PROCEEDS...........................................................22 ARTICLE IV REVENUES AND FUNDS SECTION 4.1. SOURCE OF PAYMENT OF BONDS ....................................................24 SECTION 4.2. BOND SINKING FUND ..........................................................................24 SECTION 4.3. REDEMPTION FUND .............................................................................24 SECTION 4.4. INVESTMENT OF FUNDS; INCOME ...................................................24 SECTION 4.5. TRUST FUNDS ........................................................................................25 SECTION 4.6. EXCLUDED FUNDS; TRANSFERS TO REBATE FUND....................25 i  ARTICLE V REDEMPTION OF BONDS SECTION 5.1. MANDATORY SINKING FUND REDEMPTIONS WITHOUT PREMIUM...........................................................................................26 SECTION 5.2. OPTIONAL REDEMPTION ....................................................................27 SECTION 5.3. PURCHASE IN LIEU OF REDEMPTION ..............................................28 SECTION 5.4. NOTICE OF REDEMPTION; CONDITIONAL NOTICE ......................28 SECTION 5.5. METHOD OF SELECTING BONDS IN CASE OF PARTIAL REDEMPTION....................................................................................29 SECTION 5.6. BONDS DUE AND PAYABLE ON REDEMPTION DATE; INTEREST CEASES TO ACCRUE ...................................................29 SECTION 5.7. CANCELLATION ....................................................................................29 ARTICLE VI GENERAL COVENANTS SECTION 6.1. PAYMENT OF PRINCIPAL, PREMIUM, IF ANY, AND INTEREST...........................................................................................30 SECTION 6.2. PERFORMANCE OF COVENANTS; LEGAL AUTHORIZATION.............................................................................30 SECTION 6.3. OWNERSHIP; INSTRUMENTS OF FURTHER ASSURANCE ...........30 SECTION 6.4. RECORDING AND FILING ....................................................................31 SECTION 6.5. BOOKS AND RECORDS ........................................................................31 SECTION 6.6. LIST OF BONDHOLDERS......................................................................31 SECTION 6.7. RIGHTS UNDER THE LOAN AGREEMENT .......................................31 SECTION 6.8. DESIGNATION OF ADDITIONAL PAYING AGENTS .......................31 SECTION 6.9. ARBITRAGE; COMPLIANCE WITH TAX EXEMPTION AGREEMENT.....................................................................................31 ARTICLE VII EVENTS OF DEFAULT AND REMEDIES SECTION 7.1. EVENTS OF DEFAULT ..........................................................................33 SECTION 7.2. ACCELERATION ....................................................................................34 SECTION 7.3. REMEDIES; RIGHTS OF BONDHOLDERS..........................................35 SECTION 7.4. DIRECTION OF PROCEEDINGS BY HOLDERS.................................35 SECTION 7.5. APPOINTMENT OF RECEIVERS ..........................................................36 SECTION 7.6. APPLICATION OF MONEYS.................................................................36 SECTION 7.7. REMEDIES VESTED IN BOND TRUSTEE...........................................37 SECTION 7.8. RIGHTS AND REMEDIES OF BONDHOLDERS .................................37 SECTION 7.9. TERMINATION OF PROCEEDINGS.....................................................38 SECTION 7.10. WAIVER OF EVENTS OF DEFAULT ...................................................38 SECTION 7.11. BORROWER'S RIGHTS OF POSSESSION AND USE OF PROPERTY.........................................................................................39 ii SECTION 7.12. WAIVER OF REDEMPTION; EFFECT OF SALE OF TRUST ESTATE...............................................................................................39 SECTION 7.13. NOTICE OF DEFAULT. ..........................................................................39 ARTICLE VIII THE BOND TRUSTEE SECTION 8.1. ACCEPTANCE OF THE TRUSTS ..........................................................40 SECTION 8.2. FEES, CHARGES AND EXPENSES OF BOND TRUSTEE AND ANY ADDITIONAL PAYING AGENT ............................................42 SECTION 8.3. NOTICE TO THE ISSUER AND BONDHOLDERS IF DEFAULT OCCURS ..........................................................................43 SECTION 8.4. INTERVENTION BY BOND TRUSTEE ................................................43 SECTION 8.5. SUCCESSOR BOND TRUSTEE .............................................................43 SECTION 8.6. BOND TRUSTEE REQUIRED; ELIGIBILITY ......................................43 SECTION 8.7. RESIGNATION BY THE BOND TRUSTEE ..........................................44 SECTION 8.8. REMOVAL OF THE BOND TRUSTEE .................................................44 SECTION 8.9. APPOINTMENT OF SUCCESSOR BOND TRUSTEE BY THE BONDHOLDERS; TEMPORARY BOND TRUSTEE ......................44 SECTION 8.10. CONCERNING ANY SUCCESSOR BOND TRUSTEES ......................45 SECTION 8.11. BOND TRUSTEE PROTECTED IN RELYING UPON RESOLUTION, ETC...........................................................................45 SECTION 8.12. SUCCESSOR BOND TRUSTEE AS BOND TRUSTEE OF FUNDS, PAYING AGENT AND BOND REGISTRAR ...................45 SECTION 8.13. PAYING AGENTS; APPOINTMENT AND ACCEPTANCE OF DUTIES; REMOVAL .........................................................................46 ARTICLE IX SUPPLEMENTAL INDENTURES SECTION 9.1. SUPPLEMENTAL INDENTURES NOT REQUIRING CONSENT OF BONDHOLDERS ......................................................47 SECTION 9.2. SUPPLEMENTAL INDENTURES REQUIRING CONSENT OF BONDHOLDERS................................................................................48 ARTICLE X AMENDMENTS, ETC. TO BORROWER'S DOCUMENTS SECTION 10.1. AMENDMENTS TO THE BORROWER'S DOCUMENTS NOT REQUIRING CONSENT ....................................................................50 SECTION 10.2. AMENDMENTS TO THE BORROWER'S DOCUMENTS REQUIRING CONSENT OF BONDHOLDERS ...............................50 iii  ARTICLE XI SATISFACTION OF THIS BOND INDENTURE SECTION 11.1. DEFEASANCE .........................................................................................52 SECTION 11.2. LIABILITY OF ISSUER NOT DISCHARGED ......................................53 SECTION 11.3. SELECTION OF DEFEASED BONDS ...................................................53 SECTION 11.4. WHEN REFUNDING IS NOT PERMITTED..........................................53 ARTICLE XII MANNER OF EVIDENCING OWNERSHIP OF BONDS SECTION 12.1. PROOF OF OWNERSHIP........................................................................54 ARTICLE XIII MISCELLANEOUS SECTION 13.1. LIMITATION OF RIGHTS ......................................................................55 SECTION 13.2. UNCLAIMED MONEYS .........................................................................55 SECTION 13.3. SEVERABILITY ......................................................................................55 SECTION 13.4. NOTICES ..................................................................................................56 SECTION 13.5. ADDITIONAL NOTICES TO RATING AGENCIES .............................56 SECTION 13.6. COUNTERPARTS....................................................................................57 SECTION 13.7. APPLICABLE LAW.................................................................................57 SECTION 13.8. IMMUNITY OF OFFICERS, EMPLOYEES AND MEMBERS OF ISSUER..........................................................................................57 EXHIBIT A FORM OF BOND EXHIBIT B FORM OF REQUISITION FOR EXPENSE FUND AND PROJECT FUND iv  BOND TRUST INDENTURE THIS BOND TRUST INDENTURE ("Bond Indenture") is dated as of April 1, 2014 and is between OKALOOSA COUNTY, FLORIDA, as issuer, and _________________________, a state banking corporation organized and existing under the laws of the State of ________, as bond trustee (the "Bond Trustee"). PRELIMINARY STATEMENT Okaloosa County, Florida, a political subdivision of the State of Florida (together with any successors, the "Issuer") has authorized the issuance of a series of revenue bonds consisting of $________ initial aggregate principal amount of its tax exempt Utilities System Revenue Bonds, Series 2014A (Auburn Water System, Inc. Project) (the "Series 2014A Bonds") and $________ initial aggregate principal amount of its taxable Utilities System Revenue Bonds, Series 2014B (Auburn Water System, Inc. Project) (the "Series 2014B Bonds," collectively, the "Series 2014 Bonds"). The Series 2014 Bonds, together with any Additional Bonds issued under this Bond Indenture, are referred to herein as the "Bonds." The Bonds will be issued pursuant to Chapter 159, Part II, Florida Statutes, as amended, and other applicable provisions of law (the "Act"), and this Bond Indenture. The proceeds derived from the sale of the Bonds will be loaned to Auburn Water System, Inc., a Florida non-profit corporation (together with its successors and assigns and any surviving, resulting or transferee corporation, the "Borrower"), pursuant to a Loan Agreement dated as of April 1, 2014 between the Borrower and the Issuer, and assigned by the Issuer to the Bond Trustee (as amended from time to time, the "Loan Agreement"). The Series 2014 Bonds are being issued to (i) finance all or a portion of the costs of acquiring, constructing, improving and equipping of improvements to the water utility system operated by the Borrower, (ii) refund certain outstanding indebtedness of the Borrower, and (iii) pay certain costs associated with the issuance of the Series 2014 Bonds. NOW, THEREFORE, THIS BOND INDENTURE WITNESSETH: That the Issuer in consideration of the premises and of the purchase of the Bonds and of other good and lawful consideration, the receipt of which is hereby acknowledged, and to secure the payment of the principal of, premium, if any, and interest on the Bonds and the performance and observance of all of the covenants and conditions herein and therein contained, has executed and delivered this Bond Indenture and has conveyed, granted, assigned, transferred, pledged, set over and confirmed and granted a security interest in and by these presents does hereby convey, grant, assign, transfer, pledge, set over and confirm and grant a security interest in, unto the Bond Trustee, its successor or successors and its or their assigns forever, with power of sale, all and singular the property, real and personal, hereinafter described (said property being herein sometimes referred to as the "trust estate") to wit: 1  GRANTING CLAUSES DIVISION I All right, title and interest of the Issuer in and to the funds created hereunder and all amounts held therein, including investment earnings; DIVISION II All right, title and interest of the Issuer in and to the Loan Agreement and the amounts payable to the Issuer under the Loan Agreement (excluding Unassigned Rights); DIVISION III Any and all other property of every kind and nature from time to time hereafter, by delivery or by writing of any kind, conveyed, pledged, assigned or transferred as and for additional security hereunder by the Issuer or the Borrower or by anyone in their behalf to the Bond Trustee, including, without limitation, any funds held by the Bond Trustee in any of the funds established hereunder as security for the Bonds; EXCEPTED PROPERTY There is, however, expressly excepted and excluded from the trust estate moneys held by the Bond Trustee in the Rebate Fund established pursuant to the Tax Exemption Agreement; TO HAVE AND TO HOLD, all and singular, the properties and the rights and privileges hereby conveyed, assigned and pledged by the Issuer or intended so to be, unto the Bond Trustee and its successors and assigns forever, in trust, nevertheless, with power of sale for the equal and pro rata benefit and security of each and every holder of the Bonds issued and to be issued hereunder, without preference, priority or distinction as to participation in the lien, benefit and protection hereof of one Bond over or from the others, by reason of priority in the issue or negotiation or maturity thereof, or for any other reason whatsoever, except as herein otherwise expressly provided, so that each and all of such Bonds shall have the same right, lien and privilege under this Bond Indenture and shall be equally secured hereby with the same effect as if the same had all been made, issued and negotiated simultaneously with the delivery hereof and were expressed to mature on one and the same date; PROVIDED, NEVERTHELESS, and these presents are upon the express condition, that if the Issuer or its successors or assigns shall well and truly pay or cause to be paid the principal of the Bonds with interest, according to the provisions set forth in such Bonds and each of them or shall provide for the payment or redemption of such Bonds by depositing or causing to be deposited with the Bond Trustee the entire amount of funds or securities required for payment or redemption thereof when and as authorized by the provisions hereof, and shall also pay or cause to be paid all other sums payable hereunder by the Issuer, then these presents and the estate and rights hereby granted shall cease, determine and become void, and thereupon the Bond Trustee, on payment of its lawful charges and disbursements then unpaid, on demand of the Issuer and upon the payment of the costs and expenses thereof, shall duly execute, 2 acknowledge and deliver to the Issuer such instruments of satisfaction or release as may be necessary or proper to discharge this Bond Indenture, including if appropriate any required discharge of record, and if necessary, shall grant, reassign and deliver to the Issuer, its successors or assigns, all and singular the property, rights, privileges and interests by it hereby granted, conveyed and assigned, and all substitutes therefor, or any part thereof, not previously disposed of or released as herein provided; otherwise this Bond Indenture shall be and remain in full force; AND IT IS HEREBY COVENANTED, DECLARED AND AGREED by and between the parties hereto that all Bonds are to be issued, authenticated and delivered, and that all the trust estate is to be held and applied, subject to the further covenants, conditions, releases, uses and trusts hereinafter set forth, and the Issuer, for itself and its successors, does hereby covenant and agree to and with the Bond Trustee and its respective successors in said trust, for the benefit of those who shall own the Bonds, or any of them, as follows: 3  ARTICLE I DEFINITIONS SECTION 1.1. DEFINITIONS. To the extent not defined herein, the terms used in this Bond Indenture shall have the same meanings as set forth in the Loan Agreement. All accounting terms not otherwise defined in the Loan Agreement or herein have the meanings assigned to them in accordance with generally accepted accounting principles then in effect. In addition to the words and terms elsewhere defined in this Bond Indenture or the Loan Agreement, the following words and terms as used in this Bond Indenture shall have the following meanings unless the context or use indicates another or different meaning or intent: "Act" has the meaning specified in the Preliminary Statement to this Bond Indenture. "Additional Bonds" means any bonds secured on parity with the Series 2014 Bonds issued pursuant to Section 2.2 hereof. "Authorized Denomination" means $5,000 and any integral multiple in excess thereof. "Bond Counsel" means Nabors, Giblin & Nickerson, P.A., or any other nationally recognized municipal bond counsel acceptable to the Issuer. "Bond Indenture" means this Bond Trust Indenture dated as of April 1, 2014, including the Exhibits hereto, from the Issuer to the Bond Trustee, as it may from time to time be amended or supplemented. "Bond Register" means the registration books of the Issuer kept by the Bond Trustee to evidence the registration and transfer of Bonds. "Bond Registrar" means the Bond Trustee as keeper of the Bond Register. "Bond Sinking Fund" means the fund by that name created in Section 4.4 hereof. "Bond Trustee" means ___________________, or any successor trustee under this Bond Indenture. "Bondholder," "holder" and "owner of the Bonds" means any registered owner of any Bond. "Bonds" means, collectively, the Series 2014 Bonds and any Additional Bonds. "Borrower" has the meaning specified in the Preliminary Statement to this Bond Indenture. "Borrower Bond" means any Bond which is registered in the name of the Borrower. "Borrower's Closing Certificate" means the Officer's Certificate of the Borrower dated the date of and delivered on the Closing Date. 4  "Borrower's Documents" means the Loan Agreement, the Official Statement, the Tax Exemption Agreement and all other documents to which the Borrower is a party related to the issuance of the Bonds. "Business Day" means a day which is not (a) a Saturday, Sunday or legal holiday or any other day on which banking institutions in the State or the State of New York are authorized by law to close, or (b) a day on which the New York Stock Exchange is closed. "Clerk" means the Clerk of the Circuit Court, ex officio Clerk of the Board of County Commissioners of Okaloosa County, Florida, as his or her designee. "Closing Date" means April ___, 2014, the date of the initial issuance and delivery of the Bonds. "Code" means the Internal Revenue Code of 1986, as amended. Each reference to a Section of the Code herein shall be deemed to include the United States Treasury Regulations, including temporary or proposed regulations relating to such Section which are applicable to the Bonds or the use of the proceeds thereof. "Connection Fees" means the fees and charges, if any, which relate to acquiring, constructing, equipping or expanding the capacity of the System for the purpose of paying or reimbursing the equitable share of the capital cost relating to such acquisition, construction, expansion or equipping of capacity or expansion thereof in order to serve new users of the System, to the extent the same are lawfully levied, collected and pledged. "Connection Fees" include those fees and charges currently known under Florida law as "impact fees" but shall not include fees and charges imposed for the cost of physically hooking up or connecting to the System. "Consulting Engineers" shall mean any engineering firm of reputation for skill and experience with respect to the construction, maintenance and operation of facilities similar to the facilities that make up all or a portion of the System, which is duly licensed under the laws of the State of Florida and designated by the Borrower to perform the duties of the Consulting Engineers under the provisions hereof and of the Loan Agreement. "Debt Service" shall mean, at any time, the aggregate amount in the then applicable period of time of (1) interest required to be paid on the Outstanding Bonds during such period of time, except to the extent that such interest is to be paid from deposits in the Bond Sinking Fund or Project Fund made from Bond proceeds for such purpose, (2) principal of Outstanding Bonds maturing in such period of time, and (3) the Bond Sinking Fund redemption requirements scheduled to be paid during such period of time. "Debt Service Requirement" shall mean the aggregate amount of Debt Service on the Bonds for each applicable Fiscal Year. "Defaulted Interest" means interest on any Bond which is payable but not duly paid on the date due. "DTC" means The Depository Trust Company. 5  "DTC Participant" means those broker dealers, banks and other financial institutions reflected on the books of DTC. "Expense Fund" means the fund by that name created in Section 3.1 hereof. "Fitch" means Fitch Inc. d/b/a Fitch Ratings, its successors and assigns, and, if such corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, "Fitch" shall be deemed to refer to any other nationally recognized securities rating agency which has been designated by the Borrower by notice to the Issuer and the Bond Trustee. "Governing Body" means the board of directors, the board of trustees or similar group in which the right to exercise the powers of corporate directors or trustees is vested. "Government Obligations" means (a) United States Government Obligations, or (b) evidences of a direct ownership in future interest or principal payments on United States Government Obligations, which United States Government Obligations are held in book-entry form on the books of the Department of the Treasury. "Gross Revenues" means all accounts, receipts, revenues, payments, income and other moneys received by or on behalf of the Borrower from any source, whether or not in connection with the ownership or the operation of all or any part of the System, including, without limitation, all operating and nonoperating revenues, and all rights to receive the same whether in the form of accounts, accounts receivable, contract rights, chattel paper, instruments, general intangibles of the Borrower and the proceeds thereof, the proceeds of any insurance coverage on and condemnation awards in respect of the System or any gain on the sale or other Borrower disposition of property, all deposit accounts, securities accounts and securities entitlements; all of the foregoing, whether now existing or hereafter coming into existence and whether now owned or held or hereafter acquired by the Borrower; and including all gifts, grants, bequests, donations and contributions, except those heretofore or hereafter made, designated at the time of making by the donor or maker as being for certain specified purposes inconsistent with the application thereof to the payments due from the Borrower under the Loan Agreement and except any income derived therefrom to the extent required by such designation or restriction. Gross Revenues shall not include Connection Fees or proceeds of Bonds or other Indebtedness. "Immediate Notice" means notice by telephone, telex, telecopier or electronic mail to such telephone number, telex number or telecopier number or electronic mail address as the addressee shall have directed in writing, promptly followed by written notice by first class mail postage prepaid to such address as the addressee shall have directed in writing. "Independent Counsel" means an attorney duly admitted to practice law before the highest court of any state and, without limitation, may include independent legal counsel for the Issuer, the Borrower or the Bond Trustee. "Interest Payment Date" means ________ 1 and ________ 1 of each year, commencing _________ 1, 2014. 6  "Investment Earnings" shall mean all income and earnings derived from the investment of moneys in the funds and accounts established hereunder, other than the Rebate Fund. "Issuer" has the meaning specified in the Preliminary Statement to this Bond Indenture. "Issuer's Expenses" means the reasonable and necessary fees and expenses incurred by the Issuer with respect to this Bond Indenture, the Loan Agreement, the Purchase Contract, the Bonds or any property financed or refinanced with the proceeds of the Bonds, including any advances made by the Issuer, plus interest on those advances as provided by any of the applicable documents to which the Borrower is a party and those for any legal, accounting, financial or other experts reasonably retained by the Issuer, as well as any recording expenses, trustee's acceptance fees, escrow and title insurance costs, legal fees, bank fees, bond insurance and rating agency fees, printing expenses and other fees and fair and customary expenses incurred or to be incurred by or on behalf of the Issuer in connection with or as an incident to the issuance and sale of the Bonds. "Loan Agreement" has the meaning specified in the Preliminary Statement of this Bond Indenture. "Maturity Date" means the maturity date for each Bond assigned a specific serial or different term maturity date pursuant to Section 2.2 hereof. "Moody's" means Moody's Investors Service, Inc., a corporation organized and existing under the laws of the State of Delaware, its successors and assigns, and, if such corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, "Moody's" shall be deemed to refer to any other nationally recognized securities rating agency which has been designated by the Borrower by notice to the Bond Trustee and the Issuer. "Net Revenues" means Gross Revenues less Operating Expenses, each for the applicable period measured. "Officer's Certificate" means a certificate signed, in the case of a certificate delivered by a corporation, by the president, any vice president or any other officer authorized to sign by resolution of the Governing Body of such corporation or, in the case of a certificate delivered by any other Person, the chief executive, chief financial officer or general counsel of such other Person, in either case whose authority to execute such Officer's Certificate shall be evidenced to the satisfaction of the Bond Trustee. "Official Statement" means the Official Statement dated _________, 2014, prepared in connection with the issuance and sale of the Series 2014 Bonds. "Operating Expenses" means all expenses of the Borrower relating to the operation of the System, including, but not limited to, expenses and fees of the Bond Trustee, but excluding items that do not require the expenditure of cash (depreciation, amortization, etc.). "Opinion of Bond Counsel" means a written opinion of Bond Counsel in form and substance acceptable to the Issuer and the Bond Trustee, which opinion may be based on a ruling or rulings of the Internal Revenue Service. 7  "Outstanding Bonds" or "Bonds Outstanding" means all Bonds which have been duly authenticated and delivered by the Bond Trustee under this Bond Indenture, except: (a) Bonds canceled after purchase in the open market or because of payment at or redemption prior to maturity; (b) Bonds for the payment or redemption of which cash or Government Obligations shall have been theretofore deposited with the Bond Trustee (whether upon or prior to the maturity or redemption date of any such Bonds) in accordance with Article XI of this Bond Indenture; provided that if such Bonds are to be redeemed prior to the maturity thereof, notice of such redemption shall have been given or arrangements satisfactory to the Bond Trustee shall have been made therefor, or waiver of such notice satisfactory in form to the Bond Trustee shall have been filed with the Bond Trustee; (c) Bonds in lieu of which others have been authenticated under Section 2.7 or 2.8 of this Bond Indenture; and (d) for the purpose of all consents, approvals, waivers and notices required to be obtained or given under this Bond Indenture, Bonds held or owned by the Borrower or any Person controlling, controlled by or under common control with the Borrower to the extent provided in Section 12.1 hereof. "Outstanding Parity Indebtedness" means the mortgage loan previously entered into by the Borrower dated May 24, 1995. "Parity Indebtedness" shall mean the Outstanding Parity Indebtedness and any Additional Indebtedness authorized to be issued pursuant to Section 5.12 of the Loan Agreement. "Paying Agent" means the Bond Trustee and the bank or banks, if any, designated pursuant to this Bond Indenture to receive and disburse the principal of and interest on the Bonds. "Person" means any natural person, firm, joint venture, association, partnership, business trust, corporation, limited liability company, public body, agency or political subdivision thereof or any other similar entity. "Principal Payment Date" means the date on which a principal payment, whether at maturity or pursuant to a mandatory sinking fund amortization, is due on the Bonds. "Project" means all personal and real property to be financed in whole or in part, and whether directly or indirectly, with the proceeds of the Bonds. "Project Fund" means the fund by that name created in Section 3.2 hereof. "Purchase Contract" means the Bond Purchase Agreement dated _________, 2014, among the Underwriter, the Issuer and the Borrower, providing for the sale of the Bonds. 8  "Qualified Investments" means any of the following, if and to the extent that the same are at the time legal for investment of funds of the Issuer: A. Direct obligations of the United States of America (including obligations issued or held in book-entry form on the books of the Department of the Treasury, and CATS and TIGRS) or obligations the principal of and interest on which are unconditionally guaranteed by the United States of America. B. Bonds, debentures, notes or other evidence of indebtedness issued or guaranteed by any of the following federal agencies and provided such obligations are backed by the full faith and credit of the United States of America (stripped securities are only permitted if they have been stripped by the agency itself): 1. U.S. Export-Import Bank (Eximbank) Direct obligations or fully guaranteed certificates of beneficial ownership 2. Farmers Home Administration (FmHA) Certificates of beneficial ownership 3. Federal Financing Bank 4. Federal Housing Administration Debentures (FHA) 5. General Services Administration Participation certificates 6. Government National Mortgage Association (GNMA or "Ginnie Mae") GNMA - guaranteed mortgage-backed bonds GNMA - guaranteed pass-through obligations 7. U.S. Maritime Administration Guaranteed Title XI financing 8. U.S. Department of Housing and Urban Development (HUD) Project Notes Local Authority Bonds New Communities Debentures - U.S. government guaranteed debentures U.S. Public Housing Notes and Bonds - U.S. government guaranteed public housing notes and bonds C. Bonds, debentures, notes or other evidence of indebtedness issued or guaranteed by any of the following non-full faith and credit U.S. government agencies (stripped securities are only permitted if they have been stripped by the agency itself): 1. Federal Home Loan Bank System Senior debt obligations 9  2. Student Loan Marketing Association (SLMA or "Sallie Mae") Senior debt obligations 3. Resolution Funding Corp. (REFCORP) obligations 4. Farm Credit System Consolidated system-wide bonds and notes D. Money market funds which may be managed or advised by the Bond Trustee or affiliates registered under the Federal Investment Company Act of 1940, whose shares are registered under the Federal Securities Act of 1933, and having a rating by Standard & Poor's of AAAm-G; AAA-m; or AA-m and if rated by Moody=s rated Aaa, Aa1 or Aa2 and that are invested only in Qualified Investments. E. Certificates of deposit secured at all times by collateral described in A. and/or B. above. Such certificates must be issued by commercial banks, savings and loan associations or mutual savings banks. The collateral must be held by a third party and the bondholders must have a perfected first security interest in the collateral. F. Certificates of deposit, savings accounts, deposit accounts or money market deposits which are fully insured by FDIC, including BIF and SAIF. G. Debt obligations of any U.S. corporation or trust, which obligations are rated by at least two nationally recognized rating agencies in one of the three highest rating categories, or commercial paper of same rated by at least two nationally recognized rating agencies in the highest rating category at the time of purchase (without incorporating refinements or gradation of rating category by numerical modifier or otherwise). H. Commercial paper rated, at the time of purchase, "Prime - 1" by Moody's and "A- 1" or better by S&P. I. Bonds or notes issued by any state or municipality which are rated by Moody's and S&P in one of the two highest rating categories at the time of purchase. J. Federal funds or bankers acceptances with a maximum term of one year of any bank which has an unsecured, uninsured and unguaranteed obligation rating of "Prime - 1" or "A3" or better by Moody's and "A-1" or "A" or better by S&P. K. Repurchase Agreements must follow the following criteria: 1. Repos must be between the municipal entity and a dealer bank or securities firm a. Primary dealers on the Federal Reserve reporting dealer list which are rated A or better by Standard & Poor's and Moody's, or b. Banks rated "A" or above by Standard & Poor's and Moody's. 10  2. The written repo contract must include the following: a. Securities which are acceptable for transfer are: (l) Direct U.S. governments, or (2) Federal agencies backed by the full faith and credit of the U.S. government (and FNMA & FHLMC) b. The term of the repo may be up to 30 days c. The collateral must be delivered to the municipal entity, trustee (if trustee is not supplying the collateral) or third party acting as agent for the trustee (if the trustee is supplying the collateral) before/simultaneous with payment (perfection by possession of certificated securities). d. Valuation of Collateral (l) The securities must be valued weekly, market-to-market at current market price plus accrued interest (a) The value of collateral must be equal to 104% of the amount of cash transferred by the municipal entity to the dealer bank or security firm under the repo plus accrued interest. If the value of securities held as collateral slips below 104% of the value of the cash transferred by municipality, then additional cash and/or acceptable securities must be transferred. If, however, the securities used as collateral are FNMA or FHLMC, then the value of collateral must equal 105%. 3. Legal opinion which must be delivered to the Borrower to the effect that the repo meets guidelines under state law for legal investment of public funds. Rating categories when referred to herein shall be without regard to gradations within such categories, such as "plus" or "minus." "Rating Agency" means, as applicable, Moody's, Standard & Poor's and Fitch, or their respective successors and assigns. "Rebate Fund" means the fund by that name created by the Tax Exemption Agreement. "Record Date" means the fifteenth day (whether or not a Business Day) next preceding an Interest Payment Date therefor. "Redemption Fund" means the fund by that name created in Section 4.3 hereof. 11  "Refunded Indebtedness" means the mortgage loans previously entered into by the Borrower dated November 12, 1992, September 1, 1997 and February 1, 2002, in the aggregate principal amount of $_________. "Representation Letter" means the Blanket Issuer Letter of Representations dated ___________, 2014, from the Issuer to DTC. "Series 2014 Bonds" means, collectively, the Series 2014A Bonds and Series 2014B Bonds. "Series 2014A Bonds" means the $__________ aggregate principal amount of Okaloosa County, Florida Utilities System Revenue Bonds, Series 2014A (Auburn Water System, Inc. Project) authorized to be issued by the Issuer pursuant to the terms and conditions of Section 2.2 hereof. "Series 2014B Bonds" means the $________ aggregate principal amount of Okaloosa County, Florida Utilities System Revenue Bonds, Series 2014B (Auburn Water System, Inc. Project) authorized to be issued by the Issuer pursuant to the terms and conditions of Section 2.2 hereof. "Special Record Date" means the date fixed by the Bond Trustee pursuant to Section 2.2 hereof for the payment of Defaulted Interest. "Standard & Poor's" or "S&P" means Standard & Poor's, a division of the McGraw- Hill Companies, Inc., a corporation organized and existing under the laws of the State of New York, its successors and assigns, and, if such corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, "Standard & Poor's" shall be deemed to refer to any other nationally recognized securities rating agency which has been designated by the Borrower by notice to the Bond Trustee and the Issuer. "State" means the State of Florida. "System" means the water production and distribution system operated by the Borrower. "Tax Exemption Agreement" means the Tax Exemption Agreement and Certificate relating to the Bonds dated April ___, 2014, between the Borrower and the Issuer. "Unassigned Rights" means the right of the Issuer to receive payment of its fees and expenses, the Issuer's right to indemnification in certain circumstances, the Issuer's right to execute and deliver supplements and amendments to the Loan Agreement and the Issuer's right to grant consents under the Loan Agreement. "Underwriter" means The Frazier Lanier Company. "United States Government Obligations" means direct obligations of, or obligations the payment of the principal of and interest on which are fully guaranteed by, the United States of America. 12  "Written Request" means with reference to the Issuer, a request in writing signed by the Chairman or Vice Chairman of the Board of County Commissioners of the Issuer and with reference to the Borrower means a request in writing signed by the President of the Borrower or any other officers designated in writing by the Issuer or the Borrower, as the case may be. "Written Requests" to requisition amounts deposited in the Expense Fund or Project Fund shall be in substantially the form of EXHIBIT B hereto. Words of the feminine gender shall be deemed and construed to include correlative words of the masculine and neuter genders. Unless the context shall otherwise indicate, words importing the singular number shall include the plural and vice versa. Headings of articles and sections herein and the table of contents hereof are solely for the convenience of reference, do not constitute a part hereof and shall not affect the meaning, construction or effect hereof. All references in this instrument to designated "Articles," "Sections" and other subdivisions are to the designated Articles, Sections and other subdivisions of this instrument as originally executed. The words "herein," "hereof" and "hereunder" and other words of similar import refer to this Bond Indenture as a whole and not to any particular Article, Section or other subdivision unless the context indicates otherwise. 13  ARTICLE II THE BONDS SECTION 2.1. AUTHORIZED AMOUNT OF BONDS. No Bonds may be issued under the provisions of this Bond Indenture except in accordance with this Article. The Series 2014 Bonds shall be issued in the initial aggregate principal amount of $_________. The Issuer may authorize (but shall not be required to), sell and deliver one or more series of Additional Bonds for the purposes provided herein upon satisfaction of the conditions and in the manner provided herein and in the Loan Agreement. SECTION 2.2. ISSUANCE OF SERIES 2014 BONDS; ADDITIONAL BONDS. (a) The Series 2014A Bonds shall be designated "Okaloosa County, Florida Utilities System Revenue Bonds, Series 2014A (Auburn Water System, Inc. Project)." The Series 2014B Bonds shall be designated "Okaloosa County, Florida Utilities System Revenue Bonds, Series 2014B (Auburn Water System, Inc. Project)." The Series 2014 Bonds shall be issuable as fully registered Bonds in Authorized Denominations. Unless the Issuer shall otherwise direct, the Series 2014 Bonds shall be numbered from R-1 upward, with appropriate series designations. Interest on the Series 2014 Bonds shall be payable on each Interest Payment Date applicable thereto. Each Series 2014 Bond shall be dated as of the most recent Interest Payment Date to which interest has been duly paid or provided for next preceding its date of issue, unless issued on an Interest Payment Date on which interest has been paid or provided for, in which event it shall be dated as of such Interest Payment Date or, if issued prior to the first Interest Payment Date on which interest is paid, it shall be dated the original date of issue. (b) The Series 2014A Bonds shall mature on _______ 1, in the years and in the principal amounts as follows, and bear interest at the rates per annum set forth below: Year Principal ( 1) Amount Interest Rate (c) The Series 2014B Bonds shall mature on ________, in the years and in the principal amounts as follows, and bear interest at the rates per annum set forth below: Year Principal ( 1) Amount Interest Rate (d) Interest on the Series 2014 Bonds shall be calculated on the basis of a 360 day year consisting of twelve (12), thirty (30) day months. 14  (e) The principal of and premium, if any, on the Series 2014 Bonds shall be payable upon presentation and surrender thereof at the designated corporate office of the Bond Trustee, or its successor in trust. Payment of principal of, premium, if any, and interest on the Series 2014 Bonds shall be payable in any currency of the United States of America which, at the respective dates of payment thereof, is legal tender for the payment of public and private debts. (f) Interest payments on a Series 2014 Bond (other than with respect to Defaulted Interest) shall be made to the registered owner thereof appearing on the Bond Register as of the close of business of the Bond Registrar on the Record Date; provided, however, that such payments shall be payable by check or draft of the Bond Trustee mailed on the Interest Payment Date to such registered owner at the address of such owner as it appears on the Bond Register or at such other address furnished in writing by such registered owner to the Bond Trustee or to any owner of $1,000,000 or more in aggregate principal amount of Series 2014 Bonds as of the close of business of the Bond Trustee on the Record Date for a particular Interest Payment Date, by wire transfer sent on the Interest Payment Date, to such owner. The foregoing notwithstanding, Defaulted Interest shall be payable as provided in (g) below. (g) Defaulted Interest with respect to any Series 2014 Bond shall cease to be payable to the holder of such Series 2014 Bond on the relevant Record Date and shall be payable to the holder in whose name such Series 2014 Bond is registered at the close of business on the Special Record Date for the payment of such Defaulted Interest, which Special Record Date shall be fixed in the following manner. The Borrower shall notify the Bond Trustee in writing of the amount of Defaulted Interest proposed to be paid on each Series 2014 Bond and the date of the proposed payment (which date shall be such as will enable the Bond Trustee to comply with the second sentence hereafter), and shall deposit with the Bond Trustee at the time of such notice an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Bond Trustee for such deposit prior to the date of the proposed payment. Money deposited with the Bond Trustee shall be held in trust for the benefit of the holders of the Series 2014 Bonds entitled to such Defaulted Interest as provided in this Section. Following receipt of such funds, the Bond Trustee shall fix a Special Record Date for the payment of such Defaulted Interest which shall be not more than 15 nor less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Bond Trustee of the notice of the proposed payment. The Bond Trustee shall promptly notify the Borrower of such Special Record Date and, in the name and at the expense of the Borrower, shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be mailed, first-class postage prepaid, not less than 10 days prior to such Special Record Date, to each holder of a Bond at the address of such holder as it appears on the Bond Register. (h) At the request of the Borrower and upon compliance by the Borrower with the requirements of the Loan Agreement with respect to the issuance or incurrence of Additional Indebtedness, the Issuer may (but shall not be required to) issue Additional Bonds from time to time for any purpose or combination of purposes permitted under the Act or other laws of the State. Those Additional Bonds shall be on a parity with the Series 2014 Bonds and any Additional Bonds issued and outstanding at the time or thereafter under this Bond Indenture. The terms and conditions of such Additional Bonds shall be set forth in a Supplemental Indenture in accordance with Section 9.1 hereof. 15  SECTION 2.3. EXECUTION; LIMITED OBLIGATION; NO LIABILITY OF STATE. The Bonds shall be executed on behalf of the Issuer by the facsimile or manual signature of the Chairman or Vice Chairman of its Board of County Commissioners and the Clerk or a Deputy Clerk (or such other officer or official as may be designated by the Issuer) and shall have impressed or printed manually or by facsimile thereon the corporate seal of the Issuer. The facsimile signatures of said Persons shall have the same force and effect as if such Persons had manually signed each of said Bonds. In case any officer whose signature or facsimile of whose signature shall appear on the Bonds shall cease to be such officer before the delivery of such Bonds, such signature or such facsimile shall nevertheless be valid and sufficient for all purposes, the same as if such Person had remained in office until delivery. The principal of, premium, if any, and interest on the Bonds shall be special and limited obligations of the Issuer payable solely from amounts payable under the Loan Agreement (except for Unassigned Rights and except to the extent paid out of moneys attributable to Bond proceeds or the income from the temporary investment thereof and, under certain circumstances, proceeds from insurance and condemnation awards) and shall be a valid claim of the respective holders thereof only against the funds established under this Bond Indenture and other moneys held by the Bond Trustee for the benefit of the Bonds and the payments due or to become due upon or under the Loan Agreement (except for Unassigned Rights), all of which are hereby assigned and pledged hereunder for the equal and ratable payment of the Bonds and shall be used for no other purpose than to pay the principal of, premium, if any, and interest on the Bonds, except as may be otherwise expressly authorized in this Bond Indenture. The principal of, premium, if any, and interest on the Bonds do not constitute a debt or liability of the State or of any agency or political subdivision thereof, other than a special and limited obligation of the Issuer within the meaning of the Act, or a pledge of the faith and credit of the State or any agency or political subdivision thereof, but shall be payable solely from the funds pledged therefor in accordance with this Bond Indenture. The issuance of the Bonds under the provisions of the Act does not, directly, indirectly or contingently, obligate the Issuer, the State or any agency or political subdivision thereof to levy any form of taxation for the payment thereof or to make any appropriation for their payment and the Bonds and the interest payable thereon do not now and shall never constitute a debt of the Issuer, the State or any agency or political subdivision thereof within the meaning of the Constitution or the statutes of the State, and do not now and shall never constitute a charge against the credit or taxing power of the Issuer, the State or any agency or political subdivision thereof. Neither the Issuer, the State nor any political subdivision or agency thereof shall in any event be liable for the payment of the principal of, redemption premium, if any, or interest on the Bonds or for the performance of any pledge, obligation or agreement of any kind whatsoever which may be undertaken by the Borrower. No breach by the Issuer of any such pledge, obligation or agreement may impose any liability, pecuniary or otherwise, upon the State or any agency or political subdivision thereof or any charge upon its or their general credit or against its or their taxing power. SECTION 2.4. AUTHENTICATION. No Bond shall be valid or obligatory for any purpose or entitled to any security or benefit under this Bond Indenture unless and until a certificate of authentication on such Bond substantially in the form set forth in EXHIBIT A shall 16 have been duly executed by the Bond Trustee, and such executed certificate of the Bond Trustee upon any such Bond shall be conclusive evidence that such Bond has been authenticated and delivered under this Bond Indenture. The Bond Trustee's certificate of authentication on any Bond shall be deemed to have been executed by it if signed by an authorized signatory of the Bond Trustee but it shall not be necessary that the same signatory sign the certificate of authentication on all of the Bonds issued hereunder. SECTION 2.5. FORM OF BONDS AND TEMPORARY BONDS. The Bonds shall be substantially in the form set forth in EXHIBIT A hereto with such appropriate variations, omissions and insertions as are permitted or required by this Bond Indenture or deemed necessary by the Bond Trustee, Bond Counsel and the Issuer. The Bonds may be initially issued in temporary form, exchangeable for definitive Bonds when ready for delivery. The temporary Bonds shall be of such denomination or denominations as may be determined by the Issuer, and may contain such reference to any of the provisions of this Bond Indenture as may be appropriate. Every temporary Bond shall be executed by the Issuer and be authenticated by the Bond Trustee upon the same conditions and in substantially the same manner as the definitive Bonds. If the Issuer issues temporary Bonds it will execute and furnish definitive Bonds without delay and thereupon the temporary Bonds may be surrendered for cancellation in exchange therefor at the designated corporate trust office of the Bond Trustee, and the Bond Trustee shall authenticate and deliver in exchange for such temporary Bonds an equal aggregate principal amount of definitive Bonds of authorized denominations. Until so exchanged, the temporary Bonds shall be entitled to the same benefits under this Bond Indenture as definitive Bonds authenticated and delivered hereunder. SECTION 2.6. DELIVERY OF SERIES 2014 BONDS. Upon the execution and delivery of this Bond Indenture, the Issuer shall execute and deliver to the Bond Trustee and the Bond Trustee shall authenticate the Series 2014A Bonds to be issued in the initial aggregate principal amount of $________ and the Series 2014B Bonds in the initial aggregate principal amount of $________, and the Bond Trustee shall deliver them to the Purchaser through the DTC system as may be directed by the Underwriter. Prior to the delivery by the Bond Trustee of any of the Series 2014 Bonds, there shall be filed with or delivered to the Bond Trustee and the Issuer: (a) a copy, duly certified by the Chairman or Vice Chairman of the Board of County Commissioners or the Clerk or any Deputy Clerk of the Issuer, of the resolution(s) adopted and approved by the Issuer authorizing the execution and delivery of the Loan Agreement, the Tax Exemption Agreement, the Purchase Contract and this Bond Indenture and the issuance and sale of the Series 2014 Bonds; (b) a certified copy of a letter from the Division of Bond Finance of the State of Florida providing sufficient private activity bond allocation in the amount of the Series 2014A Bonds; (c) a copy, duly certified by the Secretary or other designee of the Borrower, of the resolutions adopted and approved by the Borrower authorizing the execution and delivery of the 17 Loan Agreement, the Official Statement, the Tax Exemption Agreement and other documents and certificates executed by the Borrower in connection with the issuance of the Series 2014 Bonds, and approving this Bond Indenture and the issuance and sale of the Series 2014 Bonds; (d) an original executed counterpart of this Bond Indenture, the Loan Agreement and the Tax Exemption Agreement; (e) a request and authorization to the Bond Trustee on behalf of the Issuer and signed by its Chairman or Vice Chairman of the Board of County Commissioners to authenticate and deliver the Series 2014 Bonds in an initial aggregate principal amount not exceeding $_________ to the Underwriter upon payment to the Bond Trustee, but for the account of the Issuer, of the net proceeds from the sale of the Series 2014 Bonds; and (f) such other closing documents and opinions of counsel as the Bond Trustee, the Issuer, counsel to the Issuer or Bond Counsel may reasonably specify. SECTION 2.7. MUTILATED, LOST, STOLEN OR DESTROYED BONDS. In the event any temporary or definitive Bond is mutilated, lost, stolen or destroyed, the Issuer may execute and the Bond Trustee may authenticate a new Bond of like form, date and denomination as that mutilated, lost, stolen or destroyed; provided that, in the case of any mutilated Bond, such mutilated Bond shall first be surrendered to the Issuer, and in the case of any lost, stolen or destroyed Bond, there shall be first furnished to the Issuer and the Bond Trustee evidence of such loss, theft or destruction satisfactory to the Issuer and the Bond Trustee, together with indemnity satisfactory to them. In the event any such Bond shall have matured, instead of issuing a duplicate Bond the Issuer may pay the same without surrender thereof. The Issuer and the Bond Trustee may charge the holder or owner of such Bond with their reasonable fees and expenses in this connection. SECTION 2.8. TRANSFER AND EXCHANGE OF BONDS; PERSONS TREATED AS OWNERS. The Issuer shall cause the Bond Register to be kept at the designated corporate trust office of the Bond Trustee, as Bond Registrar, which is hereby constituted and appointed the registrar of the Issuer. Upon surrender for transfer of any Bond at the designated corporate trust office of the Bond Trustee, duly endorsed by, or accompanied by a written instrument or instruments of transfer in form satisfactory to the Bond Trustee and duly executed by, the registered owner or the attorney of such owner duly authorized in writing, the Issuer shall execute and the Bond Trustee shall authenticate, date and deliver in the name of the transferee or transferees a new Bond or Bonds of the same maturity of authorized denominations, for the same aggregate principal amount and of like tenor. Any Bond or Bonds may be exchanged at said office of the Bond Trustee for the same aggregate principal amount of Bond or Bonds of other authorized denominations and of like tenor. The execution by the Issuer of any Bond shall constitute full and due authorization of such Bond and the Bond Trustee shall thereby be authorized to authenticate, date and deliver such Bond. If any Bond is transferred or exchanged on the Bond Register by the Bond Trustee after notice of the optional redemption of such Bond has been given, the Bond Trustee shall attach a copy of such notice to the Bond issued in connection with such transfer or exchange. The Bond Trustee shall not be required to register the transfer of or exchange any Bond after the mailing of 18 notice calling such Bond or portion thereof for redemption has occurred as herein provided, or during the period of fifteen days next preceding the giving of notice calling any Bond or Bonds of the same maturity for redemption. The Person in whose name any Bond shall be registered shall be deemed and regarded as the absolute owner thereof for the purpose of receiving payment of or on account of principal thereof and premium, if any, thereon and interest due thereon and for all other purposes, and neither the Issuer nor the Bond Trustee shall be affected by any notice to the contrary, but such registration may be changed as herein provided. All such payments shall be valid and effectual to satisfy and discharge the liability upon such Bond to the extent of the sum or sums so paid. Any Bond surrendered for the purpose of payment or retirement or for exchange or transfer or for replacement pursuant to Section 2.7 or 2.8 hereof, shall be canceled upon surrender thereof to the Bond Trustee or any Paying Agent. Any such Bonds canceled by any Paying Agent other than the Bond Trustee shall be promptly transmitted by such Paying Agent to the Bond Trustee. Certification of Bonds canceled by the Bond Trustee and Bonds canceled by a Paying Agent other than the Bond Trustee which are transmitted to the Bond Trustee shall be made to the Issuer and to the Borrower. Canceled Bonds may be destroyed by the Bond Trustee unless instructions to the contrary are received from the Issuer or the Borrower. The Issuer and the Bond Trustee may charge each Bondholder requesting an exchange, change in registration or registration of transfer a sum not exceeding the actual cost of any tax, fee or other governmental charge required to be paid with respect to such exchange, registration or transfer, except in the case of the issuance of a definitive Bond for a temporary Bond and except in the case of the issuance of a Bond or Bonds for the unredeemed portion of a Bond surrendered for redemption. SECTION 2.9. BOOK-ENTRY ONLY SYSTEM FOR THE BONDS. The Bonds shall be initially issued in the form of a separate single fully registered Bond for each of the maturities. Upon initial issuance, the ownership of each such Bond shall be registered in the Bond Register in the name of Cede & Co., as nominee of DTC, and except as provided in Section 2.10 hereof, all of the Outstanding Bonds shall be registered in the Bond Register in the name of Cede & Co., as nominee of DTC. With respect to Bonds registered in the Bond Register in the name of Cede & Co., as nominee of DTC, the Issuer, the Bond Trustee and the Borrower shall have no responsibility or obligation to any DTC Participant or to any person on behalf of whom such a DTC Participant holds an interest in the Bonds. Without limiting the immediately preceding sentence, the Issuer, the Bond Trustee and the Borrower shall have no responsibility or obligation with respect to (i) the accuracy of the records of DTC, Cede & Co. or any DTC Participant with respect to any ownership interest in the Bonds, (ii) the delivery to any DTC Participant or any other Person, other than a Bondholder, as shown in the Bond Register, of any notice with respect to the Bonds, including any notice of redemption, or (iii) the payment to any DTC Participant or any other Person, other than a Bondholder, as shown in the Bond Register, of any amount with respect to principal of, premium, if any, or interest on the Bonds. Notwithstanding any other provision of this Bond Indenture to the contrary, the Issuer, the Bond Trustee and each Paying Agent, if any, shall be entitled to treat and consider the Person in whose name each Bond is registered in the 19 Bond Register as the absolute owner of such Bond for the purpose of payment of principal, premium, if any, and interest on such Bond, for the purpose of giving notices of redemption and other matters with respect to such Bond, for the purpose of registering transfers with respect to such Bond, and for all other purposes whatsoever. The Bond Trustee and each Paying Agent, if any, shall pay all principal of, premium, if any, and interest on the Bonds only to or upon the order of the respective Bondholders, as shown in the Bond Register as provided in this Bond Indenture, or their respective attorneys duly authorized in writing, and all such payments shall be valid and effective to satisfy and discharge the Issuer's obligations fully with respect to payment of principal of, premium, if any, and interest on the Bonds to the extent of the sum or sums so paid. No Person other than a Bondholder, as shown in the Bond Register, shall receive a Bond certificate evidencing the obligation of the Issuer to make payments of principal, premium, if any, and interest pursuant to this Bond Indenture. Upon delivery by DTC to the Bond Trustee of written notice to the effect that DTC has determined to substitute a new nominee in place of Cede & Co., and subject to the provisions in this Bond Indenture with respect to interest checks or drafts being mailed to the registered owner as of the close of business on the Record Date, the word "Cede & Co." in this Bond Indenture shall refer to such new nominee of DTC; and upon receipt of such a notice the Bond Trustee shall promptly deliver a copy thereof to each Paying Agent, if any. SECTION 2.10. SUCCESSOR SECURITIES DEPOSITORY; TRANSFERS OUTSIDE BOOK-ENTRY ONLY SYSTEM. In the event that the Issuer, the Borrower or the Bond Trustee determines that DTC is incapable of discharging its responsibilities described herein and in the Representation Letter or that it is in the best interest of the beneficial owners of the Bonds that they be able to obtain certificated Bonds, the Issuer or the Bond Trustee shall, with the consent of the Borrower (which consent shall not be unreasonably withheld), (i) appoint a successor securities depository, qualified to act as such under Section 17(a) of the Securities Exchange Act of 1934, as amended, notify DTC and DTC Participants of the appointment of such successor securities depository and transfer one or more separate Bond certificates to such successor securities depository, or (ii) notify DTC and DTC Participants of the availability through DTC of Bond certificates and transfer one or more separate Bond certificates to DTC Participants having Bonds credited to their DTC accounts. In such event, the Bonds shall no longer be restricted to being registered in the Bond Register in the name of Cede & Co., as nominee of DTC, but may be registered in the name of the successor securities depository, or its nominee, or in whatever name or names Bondholders transferring or exchanging Bonds shall designate, in accordance with the provisions of this Bond Indenture. The Bond Trustee shall give written notice to the Borrower of a determination to issue certificated bonds. SECTION 2.11. PAYMENTS AND NOTICES TO CEDE & CO. Notwithstanding any other provision of this Bond Indenture to the contrary, so long as any of the Bonds are registered in the name of Cede & Co., as nominee of DTC, all payments with respect to principal of, premium, if any, and interest on such Bonds and all notices with respect to such Bonds shall be made and given, respectively, in the manner provided in the Representation Letter. The Bond Trustee shall request in each notice sent to Cede & Co. pursuant to the terms of this Bond Indenture that Cede & Co. forward or cause to be forwarded such notice to the DTC Participants, but neither the Bond Trustee nor the Issuer shall be liable if the Bond Trustee fails to make such request or if Cede & Co. fails to honor such request. 20  ARTICLE III APPLICATION OF BOND PROCEEDS AND REQUIRED FUND DEPOSITS SECTION 3.1. EXPENSE FUND. A special fund is hereby established with the Bond Trustee and designated the "Expense Fund – Auburn Water System, Inc. Project" (hereinafter called the "Expense Fund") to the credit of which such deposits shall be made as are required by the provisions of Section 3.3 of this Bond Indenture. The monies in the Expense Fund shall be held by the Bond Trustee in trust and shall be applied to the payment of the costs of issuing the Bonds, including necessary incidental expenses and reimbursement to the Borrower for such costs and expenses paid by the Borrower in connection with issuing the Bonds and, pending such application, shall be subject to a lien and charge in favor of the holders of the Bonds for their security until paid out. After completion of payment of all costs of issuance of the Series 2014 Bonds, as certified by a Written Request of the Borrower to the Bond Trustee, and in any event no later than April 1, 2015, any surplus money in the Expense Fund shall be transferred to the Project Fund. Payments from the Expense Fund shall be made in accordance with the provisions of this paragraph. Before any such payment shall be made, there shall be filed with the Bond Trustee a Written Request of the Borrower substantially in the form attached hereto as EXHIBIT B, stating (i) the name of the person, firm or corporation to whom each such payment is due, (ii) the amount of each payment, and (iii) the purpose by general classification for which each obligation to be paid was incurred. Such Written Request shall be accompanied by written invoices for the matters referenced therein and if the purpose of the Written Request is to reimburse the Borrower for prior expenditures, proof of prior payment by the Borrower of such invoices. Upon receipt of each requisition the Bond Trustee shall pay the obligation set forth in such requisition out of money in the Expense Fund, and each such obligation shall be paid by wire transfer or by check signed by one or more officers or employees of the Bond Trustee designated for such purpose by the Bond Trustee. In making such payments the Bond Trustee may rely upon such Written Requests. SECTION 3.2. PROJECT FUND. A special fund is hereby established with the Bond Trustee and designated the "Project Fund – Auburn Water System, Inc. Project" (hereinafter called the "Project Fund"), to the credit of which such deposits shall be made as are required by the provisions of Section 3.3 of this Bond Indenture. Monies in the Project Fund shall be held by the Bond Trustee in trust and shall be applied to the payment of, and reimbursement to the Borrower for, costs and expenses in connection with the Project, and, pending such application, shall be subject to a lien and charge in favor of the holders of the Bonds for their security until paid out. After completion of the Project, as certified in a Written Request of the Borrower to the Bond Trustee, surplus money in the Project Fund shall be applied as directed in such Written Request as follows (and in the following order): (a) to pay the costs of new improvements or 21 equipment for the Borrower, but only upon receipt by the Bond Trustee of an Opinion of Bond Counsel that such payment will not adversely affect the validity of, or the exclusion from, gross income for federal income tax purposes of interest on the Series 2014A Bonds, (b) to the Bond Sinking Fund to pay interest coming due on the Bonds on the next two Interest Payment Dates, (c) upon receipt of an Opinion of Bond Counsel that such payment will not adversely affect the validity or exclusion from gross income for federal tax purposes of the interest on the Series 2014A Bonds, to the Bond Sinking Fund to pay the principal coming due on the Bonds on the next Principal Payment Date, and (d) to the Redemption Fund and held as a segregated subaccount therein to be used to purchase and retire Bonds at the Written Request of the Borrower or to redeem Bonds on their first optional redemption date, and such surplus money shall not be invested at a yield exceeding the yield on the Bonds. Payments from the Project Fund shall be made in accordance with the following provisions: before any such payment shall be made, there shall be filed with the Bond Trustee a Written Request of the Borrower substantially in the form attached hereto as EXHIBIT B, stating: (a) The name of the person, firm or corporation to whom each such payment is due; (b) The respective amounts to be paid; (c) The purpose by general classification for which each obligation to be paid was incurred; and (d) That obligations in the stated amounts have been incurred by the Borrower and are presently due and payable and that each item thereof is a necessary cost of the Project and is a proper charge against the Project Fund and has not been paid previously from the Project Fund. Such Written Request shall be accompanied by a summary of such invoices for the matters referenced therein and if the purpose of the Written Request is to reimburse the Borrower for prior expenditures, evidence of prior payment by the Borrower of such amounts. Upon receipt of each Written Request, the Bond Trustee shall pay the obligations set forth in such Written Request out of moneys in the Project Fund, and each such obligation shall be paid by check signed by the Bond Trustee or by wire transfer in accordance with the instructions provided by the Borrower. In making such payments, the Bond Trustee may conclusively rely upon such Written Request. SECTION 3.3. DEPOSIT OF BOND PROCEEDS. The Issuer, for and on behalf of the Borrower, shall deposit or cause to be deposited with the Bond Trustee all of the proceeds (net of discount, if any) loaned to the Borrower from the sale of the Series 2014 Bonds and the Bond Trustee shall deposit such proceeds as follows: (a) deposit $__________ of the Series 2014A Bond proceeds and $__________ of the Series 2014B Bond proceeds to the credit of the Bond Sinking Fund established pursuant to Section 4.2 hereof; and 22  (b) deposit $_________ of the Series 2014A Bond proceeds and $_________ of the Series 2014B Bond proceeds to the credit of the Expense Fund established pursuant to Section 3.1 hereof. (c) deposit the remainder of the Series 2014A Bond proceeds ($_________) to the credit of the Project Fund established pursuant to Section 3.2 hereof. (d) utilize the remainder of the Series 2014B Bond proceeds to retire the Refunded Indebtedness on the date hereof. 23  ARTICLE IV REVENUES AND FUNDS SECTION 4.1. SOURCE OF PAYMENT OF BONDS. The Bonds herein authorized and all payments to be made by the Issuer thereon and into the various Funds established under this Bond Indenture are not general obligations of the Issuer but are special limited obligations payable solely from amounts payable under the Loan Agreement pledged hereunder (it being understood that such pledged payments do not include the fees and expenses of the Issuer and amounts payable to the Issuer as indemnification under certain circumstances), and amounts on deposit in the Funds created hereunder (other than the Rebate Fund). SECTION 4.2. BOND SINKING FUND. The Issuer shall establish with the Bond Trustee and maintain so long as any of the Bonds are outstanding a separate account to be known as the "Bond Sinking Fund – Auburn Water System, Inc." (hereinafter called the "Bond Sinking Fund"). The Bond Sinking Fund shall be held by the Bond Trustee and shall be funded in accordance with Section 4.1 of the Loan Agreement. Except as provided in this paragraph, in Sections 7.6 or 8.2 hereof and as directed by the Borrower pursuant to the Tax Exemption Agreement, moneys in the Bond Sinking Fund shall be used solely for the payment of interest on and principal of the Bonds as the same shall become due and payable and to redeem the Bonds in accordance with the mandatory Bond Sinking Fund redemption schedule provided in Section 5.1 hereof. The Bond Trustee shall at all times maintain accurate records of deposits into the Bond Sinking Fund, and the sources and dates of such deposits. In lieu of such mandatory Bond Sinking Fund redemption the Bond Trustee may, at the written request of the Borrower, purchase an equal principal amount of Bonds with the same Maturity Date in the open market at prices not exceeding the principal amount of the Bonds being purchased plus accrued interest. In addition, the amount of Bonds to be redeemed on any date pursuant to the mandatory Bond Sinking Fund redemption schedule shall be reduced by the principal amount of Bonds with the same Maturity Date which are acquired by the Borrower and delivered to the Bond Trustee for cancellation. SECTION 4.3. REDEMPTION FUND. The Issuer shall establish with the Bond Trustee and maintain so long as any of the Bonds are outstanding a separate account to be known as the "Redemption Fund – Auburn Water System, Inc. Project" (the "Redemption Fund"). In the event of (i) prepayment by or on behalf of the Borrower under the Loan Agreement, (ii) receipt by the Bond Trustee of condemnation awards or insurance proceeds for purposes of redeeming Bonds, or (iii) deposit with the Bond Trustee by the Borrower or the Issuer of moneys from any other source for redeeming Bonds, except as otherwise provided in Section 4.2 of this Bond Indenture, such moneys shall be deposited in the Redemption Fund. Moneys on deposit in the Redemption Fund shall be used first to make up any deficiencies existing in the Bond Sinking Fund, and second for the purchase or redemption of Bonds in accordance with the provisions of Article V hereof. SECTION 4.4. INVESTMENT OF FUNDS; INCOME. (a) Moneys in the Bond Sinking Fund, Expense Fund, Project Fund and Redemption Fund shall be invested in Qualified Investments upon a Written Request of the Borrower filed with the Bond Trustee; provided, however, that moneys held in the Redemption Fund shall only 24 be invested in United States Government Obligations with a term not exceeding the earlier of 30 days from the date of investment of such moneys or the date such moneys are anticipated to be required. Absent a written request regarding investment instructions, the Bond Trustee shall invest the subject moneys in any investment vehicle described in item D of the term "Qualified Investments." Such investments shall be made so as to mature on or prior to the date or dates that moneys therefrom are anticipated to be required. The Bond Trustee, when authorized by the Borrower, may trade with itself in the purchase and sale of securities for such investments; provided, however, that in no case shall any investment be otherwise than in accordance with the investment limitations contained herein. The Bond Trustee shall not be liable or responsible for any loss resulting from any such investments. Any purchase or sale of securities may be accomplished through the Bond Trustee's bond department. (b) All income derived from the investment of moneys on deposit in the following funds shall be deposited as follows: (i) income derived from the investment of moneys on deposit in the Redemption Fund, Expense Fund and the Bond Sinking Fund shall be retained in such Funds; and (ii) income derived from the investment of moneys on deposit in the Project Fund (A) prior to the completion of the Project, shall be retained in the Project Fund, and (B) after completion of the Project, shall be applied in accordance with Section 3.2 hereof. SECTION 4.5. TRUST FUNDS. All moneys received by the Bond Trustee under the provisions of this Bond Indenture shall be trust funds under the terms hereof for the benefit of all Outstanding Bonds and shall not be subject to lien or attachment of any creditor of the Issuer or the Borrower. Such moneys shall be held in trust and applied in accordance with the provisions of this Bond Indenture. SECTION 4.6. EXCLUDED FUNDS; TRANSFERS TO REBATE FUND. The foregoing provisions of this Article IV notwithstanding, (i) the Rebate Fund shall not be considered a part of the "trust estate" created by this Bond Indenture, and (ii) the Bond Trustee shall be permitted to transfer moneys on deposit in any of the trust funds established under this Article IV to the Rebate Fund in accordance with the Written Request of the Borrower purported to be pursuant to the provisions of the Tax Exemption Agreement. 25  ARTICLE V REDEMPTION OF BONDS SECTION 5.1. MANDATORY SINKING FUND REDEMPTIONS WITHOUT PREMIUM. (a) The Series 2014A Bonds maturing on ________ 1, ______ shall be subject to mandatory redemption and payment prior to maturity in the principal amounts below at a redemption price equal to the principal amount thereof plus accrued interest to the redemption date, without premium. Pursuant to Section 4.2 of the Loan Agreement, the Borrower shall deposit in the Bond Sinking Fund a sum that, together with all amounts then on deposit in the Bond Sinking Fund and then available for the redemption of the Series 2014A Bonds, shall be sufficient to redeem (after credit as provided below) the following principal amounts of Series 2014A Bonds on the following sinking fund payment dates: _________1 Principal of the Year Amount $ *Final Maturity (b) The Series 2014B Bonds maturing on ________ 1, _____ shall be subject to mandatory redemption and payment prior to maturity in the principal amounts below at a redemption price equal to the principal amount thereof plus accrued interest to the redemption date, without premium. Pursuant to Section 4.2 of the Loan Agreement, the Borrower shall deposit in the Bond Sinking Fund a sum that, together with all amounts then on deposit in the Bond Sinking Fund and then available for the redemption of the Series 2014B Bonds shall be sufficient to redeem (after credit as provided below) the following principal amounts of Series 2014B Bonds on the following sinking fund payment dates: ________ 1 Principal of the Year Amount $ *Final Maturity (c) On or before the thirtieth (30th) day prior to any sinking fund payment date, the Bond Trustee shall proceed to select for redemption (by lot in such manner as the Bond Trustee 26 may determine), from all Outstanding Bonds subject to mandatory sinking fund redemption on such date, an aggregate principal amount of such Bonds equal to the amount required to be on deposit in the Bond Sinking Fund with respect to such Bonds on such sinking fund payment date, and shall call such Bonds or portions thereof in Authorized Denominations for redemption from the Bond Sinking Fund on such sinking fund payment date and give notice of such call. At the option of the Borrower, to be exercised by delivery of a Written Request of the Borrower to the Bond Trustee on or before the sixtieth (60th) day next preceding any sinking fund payment date, it may (i) deliver to the Bond Trustee for cancellation Bonds or portions thereof in Authorized Denominations of the maturity relating to such sinking fund payment date in any aggregate principal amount desired by the Borrower, or (ii) specify a principal amount of Bonds or portions thereof in Authorized Denominations or the maturity relating to such sinking fund payment date which prior to said date have been purchased or redeemed (otherwise than through the operation of the Bond Sinking Fund) and cancelled by the Bond Trustee at the request of the Borrower and not theretofore applied as a credit against any sinking fund payment. Each such Bond or portion thereof so delivered or previously redeemed shall be credited by the Bond Trustee at one hundred percent (100%) of the principal amount thereof against the obligation of the Issuer on such sinking fund payment date with respect to Bonds of such maturity. Any excess shall be credited against the next sinking fund payment relating to the Bonds of such maturity. In the event the Borrower shall avail itself of the provisions of clause (i) of the second sentence of this paragraph, the Written Request shall be accompanied by the Bonds or portions thereof to be cancelled. (d) The amount of mandatory Bond Sinking Fund redemption requirement shall be reduced by the amount of Bonds acquired and delivered in accordance with Section 4.3 hereof in satisfaction of such Bond Sinking Fund requirement. Payment or redemption of the Bonds through the Bond Sinking Fund shall be without premium. The Bonds shall be redeemed by the Bond Trustee pursuant to the provisions of this paragraph without any notice from or direction by the Issuer or the Borrower. Interest is payable upon mandatory Bond Sinking Fund redemptions as set forth in Section 4.2 hereof. SECTION 5.2. OPTIONAL REDEMPTION. (a) The Series 2014 Bonds are not redeemable at the option of the Borrower or the Issuer prior to _______ 1, _____. The Series 2014 Bonds may be redeemed in whole or in part at the option of the Issuer (upon the direction of the Borrower) on any date on or after _______ 1, ______ at the following redemption prices (expressed as a percentage of the principal amount to be redeemed) plus accrued interest to the date fixed for redemption during the periods set forth below: Redemption Period (Both Dates Inclusive) Redemption Price 27  (b) Any Series 2014 Bonds which are Borrower Bonds are subject to redemption in whole or in part (in an Authorized Denomination) prior to their Maturity Date at the option of the Borrower out of amounts deposited in the Redemption Fund by the Borrower, in whole or in part (and if in part, in an Authorized Denomination) on any Business Day while such Series 2014 Bonds are Borrower Bonds at a redemption price equal to 100% of the principal amount thereof plus accrued interest, if any, to the redemption date. SECTION 5.3. PURCHASE IN LIEU OF REDEMPTION. In lieu of an optional redemption and cancellation of Bonds, Bonds may be purchased by the Trustee on behalf of the Issuer at the direction of the Borrower for the premiums set forth in Section 5.2 hereof and either (i) cancelled, or (ii) remarketed. Notice and selection of Bonds being purchased pursuant to the provisions of this Section 5.3 shall be given/selected in the same manner as the notice and selection of Bonds called for optional redemption; provided, that the notice provided for in Section 5.4 hereof shall be modified as necessary to reflect a purchase in lieu of redemption. SECTION 5.4. NOTICE OF REDEMPTION; CONDITIONAL NOTICE. (a) Except as hereinafter provided, a copy of the notice of the call for any such redemption identifying the Bonds to be redeemed shall be given by first class mail, postage prepaid, to the registered owners of Bonds to be redeemed at their addresses as shown on the Bond Register not less than thirty (30) days or more than sixty (60) days prior to the redemption date. Except for mandatory Bond Sinking Fund redemptions, prior to the date that the redemption notice is first given as aforesaid, funds shall be placed with the Bond Trustee to pay the principal of such Bonds, any premium thereon and accrued interest thereon to the redemption date, or such notice shall state that any redemption is conditional on such funds being deposited with the Bond Trustee on the redemption date and that a failure to make such deposit shall not constitute an event of default hereunder. (b) Failure to give notice in the manner prescribed hereunder with respect to any Bond, or any defect in such notice, shall not affect the validity of the proceedings for redemption for any Bond with respect to which notice was properly given. Upon the happening of the above conditions and if sufficient moneys are on deposit with the Bond Trustee on the applicable redemption date to redeem the Bonds to be redeemed and to pay interest due thereon and premium, if any, the Bonds thus called shall not after the applicable redemption date bear interest, be protected by this Bond Indenture or be deemed to be outstanding under the provisions of this Bond Indenture. The Bond Trustee shall redeem, in the manner provided in this Article V, such an aggregate principal amount of such Bonds at the principal amount thereof plus accrued interest to the redemption date and unpaid thereon and premium, if any, as will exhaust as nearly as practicable such funds. At the direction of the Borrower, such funds may be invested in United States Government Obligations until needed for redemption payout. (c) Notwithstanding the foregoing, so long as Bonds are subject to the book-entry only system of registration, such notice shall only be sent to the corresponding securities depository (which shall initially be DTC) and such notice may be sent by means of facsimile or any other means acceptable to the securities depository. 28  (d) If any Bond is transferred or exchanged on the Bond Register by the Bond Registrar after notice has been given calling such Bond for redemption, the Bond Registrar will attach a copy of such notice to the Bond issued in connection with such transfer. SECTION 5.5. METHOD OF SELECTING BONDS IN CASE OF PARTIAL REDEMPTION. In the event that less than all of the Outstanding Bonds or portions thereof shall be redeemed, the maturities of the Bonds to be redeemed shall be designated by the Borrower and, if not so designated, the Bonds to be redeemed shall be redeemed in inverse order of maturity. If less than all Bonds or portions thereof of a single maturity are to be redeemed, they shall be selected by lot in such manner as the Bond Trustee may determine (subject to Section 5.1(d) hereof). In case a Bond is of a denomination larger than an Authorized Denomination, a portion of such Bond may be redeemed, but Bonds shall be redeemed only in the principal amount of an Authorized Denomination each or any integral multiple thereof. Upon surrender of any Bond for redemption in part only, the Issuer shall execute and the Bond Trustee shall authenticate and deliver to the owner thereof, at the expense of the Borrower, a new Bond or Bonds of the same maturity of Authorized Denominations in an aggregate principal amount equal to the unredeemed portion of the Bond surrendered. SECTION 5.6. BONDS DUE AND PAYABLE ON REDEMPTION DATE; INTEREST CEASES TO ACCRUE. Except as otherwise provided in Section 5.1 hereof, on or before the Business Day prior to the redemption date specified in the notice of redemption, an amount of money which together with all amounts then on deposit in the Bond Sinking Fund or Redemption Fund as appropriate and available for redemption of the Bonds shall be sufficient to redeem all Bonds called for redemption at the appropriate redemption price, including accrued interest to the date fixed for redemption, shall be paid to the Bond Trustee for deposit in the Bond Sinking Fund or Redemption Fund, as appropriate. On the redemption date the principal amount of each Bond to be redeemed, together with the accrued interest thereon to such date and redemption premium, if any, shall become due and payable; and from and after such date, notice having been given and the deposit having been made in accordance with the provisions of this Article V, then, notwithstanding that any Bonds called for redemption shall not have been surrendered, no further interest shall accrue on any such Bonds. From and after such date of redemption (such notice having been given and such deposit having been made), the Bonds to be redeemed shall not be deemed to be Outstanding hereunder, and the Issuer shall be under no further liability in respect thereof. SECTION 5.7. CANCELLATION. All Bonds which have been redeemed shall be cancelled and cremated or otherwise destroyed by the Bond Trustee and shall not be reissued and a counterpart of the certificate of cremation or other destruction evidencing such cremation or other destruction shall be furnished by the Bond Trustee to the Issuer and the Borrower; provided, however, that one or more new Bonds shall be issued for the unredeemed portion of any Bond without charge to the holder thereof. 29  ARTICLE VI GENERAL COVENANTS SECTION 6.1. PAYMENT OF PRINCIPAL, PREMIUM, IF ANY, AND INTEREST. Subject to the limited source of payment hereinafter referred to, the Issuer covenants that it will promptly pay the principal of, premium, if any, and interest on every Bond issued under this Bond Indenture at the place, on the dates and in the manner provided herein and in said Bond according to the true intent and meaning thereof. The principal of and interest and premium, if any, on the Bonds are payable solely from payments or prepayments by the Borrower under the Loan Agreement, which payments are hereby specifically assigned and pledged to the payment of the Bonds in the manner and to the extent herein specified, and nothing in the Bonds or in this Bond Indenture shall be considered as assigning or pledging any other funds or assets of the Issuer (except the moneys and the Loan Agreement pledged under this Bond Indenture). SECTION 6.2. PERFORMANCE OF COVENANTS; LEGAL AUTHORIZATION. The Issuer covenants that it will faithfully perform at all times any and all covenants, undertakings, stipulations and provisions contained in this Bond Indenture, in any and every Bond executed, authenticated and delivered hereunder and in all proceedings of its members pertaining thereto. The Issuer shall not be required to perform any undertaking or to execute any instrument pursuant to the provisions hereof until it shall have been requested to do so by the Borrower or the Bond Trustee, or shall have received the instrument to be executed and, at the option of the Issuer, shall have received from the party requesting such performance or execution assurance satisfactory to the Issuer that the Issuer shall be reimbursed for its reasonable expenses incurred or to be incurred in connection with such performance or execution. The Issuer represents that it is duly authorized under the Constitution and laws of the State to issue the Bonds authorized hereby, to execute this Bond Indenture, to assign the Loan Agreement and payments thereunder under this Bond Indenture in the manner and to the extent herein set forth; all action on its part for the issuance of the Bonds and the execution and delivery of this Bond Indenture has been taken; and the Bonds in the hands of the holders thereof as shown on the Bond Register are and will be valid and enforceable obligations of the Issuer according to the import thereof. SECTION 6.3. OWNERSHIP; INSTRUMENTS OF FURTHER ASSURANCE. The Issuer represents that the pledge and assignment of its interest in the Loan Agreement (other than the Unassigned Rights) to the Bond Trustee hereby made are valid. The Issuer covenants that it will defend, at the sole cost of the Borrower, its interest in the Loan Agreement and the assignment thereof to the Bond Trustee, for the benefit of the holders of the Bonds against the claims and demands of all Persons whomsoever. The Issuer covenants that, at the sole cost of the Borrower, it will do, execute, acknowledge and deliver or cause to be done, executed, acknowledged and delivered, such indentures supplemental hereto and such further acts, instruments and transfers as the Bond Trustee may reasonably require for the better assuring, transferring, conveying, pledging, assigning and confirming unto the Bond Trustee, the Loan Agreement and all payments thereon and thereunder pledged hereby to the payment of the principal of, premium, if any, and interest on the Bonds. 30  SECTION 6.4. RECORDING AND FILING. The Issuer covenants that, solely from additional amounts payable as provided in Section 4.8 of the Loan Agreement, it will cause, if necessary, this Bond Indenture and all supplements hereto and the Loan Agreement and all supplements thereto, and all related financing statements, to be kept, recorded and filed in such manner and in such places as may be required by law in order to preserve and protect fully the security of the holders of the Bonds and the rights of the Bond Trustee hereunder. SECTION 6.5. BOOKS AND RECORDS. The Issuer covenants that so long as any Bonds are outstanding and unpaid, to the extent of its financial dealings or transactions in relation to the Borrower and the amounts derived from the Loan Agreement pledged under this Bond Indenture, it will cause the Bond Trustee to keep, or cause to be kept, proper records and accounts and the Bond Trustee hereby agrees to keep such records and provide the same to the Issuer and Borrower upon reasonable request. Such records and accounts shall at all times be open for any lawful purpose to the inspection of such accountants or other agencies as the Bond Trustee may from time to time designate. SECTION 6.6. LIST OF BONDHOLDERS. The Bond Registrar will keep on file at its office the Bond Register, indicating the names and addresses of the holders of the Bonds and the serial numbers of such Bonds held by each of such holders. At reasonable times and under reasonable regulations established by the Bond Registrar, the Bond Register may be inspected and copied by the Borrower, the Issuer or by the authorized representative of any holder or holders of ten percent (10%) or more in outstanding principal amount of the Bonds, such ownership and the authority of any such designated representatives to be evidenced to the satisfaction of the Bond Registrar. SECTION 6.7. RIGHTS UNDER THE LOAN AGREEMENT. The Issuer agrees that the Bond Trustee in its own name or in the name of the Issuer may enforce all rights of the Issuer and all obligations of the Borrower under and pursuant to the Loan Agreement for and on behalf of the Bondholders (other than the Unassigned Rights), whether or not the Issuer is in default hereunder. SECTION 6.8. DESIGNATION OF ADDITIONAL PAYING AGENTS. The Issuer may, in its discretion (but only with the prior consent of the Borrower), cause the necessary arrangements to be made through the Bond Trustee and to be thereafter continued for the designation of alternate Paying Agents and for the making available of funds hereunder for the payment of such of the Bonds as shall be presented when due at the principal corporate trust office of the Bond Trustee, or its successor in trust hereunder, or at the principal corporate trust office of said alternate Paying Agents. SECTION 6.9. ARBITRAGE; COMPLIANCE WITH TAX EXEMPTION AGREEMENT. The Issuer covenants and agrees that it will not take any action or fail to take any action with respect to the investment of the proceeds of any Bonds issued under this Bond Indenture (regardless of the source thereof and whether or not held under this Bond Indenture) or with respect to the payments derived from the Loan Agreement or any other moneys regardless of source or where held which may, notwithstanding compliance with the other provisions of this Bond Indenture, the Loan Agreement and the Tax Exemption Agreement, result in constituting the Series 2014A Bonds "arbitrage bonds" within the meaning of such term as used in Section 31 148 of the Code. The Issuer further covenants and agrees that it will comply with and take all actions required by the Tax Exemption Agreement. 32  ARTICLE VII EVENTS OF DEFAULT AND REMEDIES SECTION 7.1. EVENTS OF DEFAULT. Each of the following events is hereby declared an "event of default:" (a) payment of any installment of interest on any of the Bonds (other than Borrower Bonds) shall not be made when the same shall become due and payable; or (b) payment of the principal of or the redemption premiums, if any, on any of the Bonds (other than Borrower Bonds) shall not be made when the same shall become due and payable, either at maturity, by proceedings for redemption or through failure to make any payment to any Fund hereunder or otherwise; or (c) the Issuer shall for any reason be rendered incapable of fulfilling its obligations hereunder; or (d) an order or decree shall be entered, appointing a receiver, receivers, custodian or custodians for any of the revenues of the Issuer, or approving a petition filed against the Issuer seeking reorganization of the Issuer under the federal bankruptcy laws or any other similar law or statute of the United States of America or any state thereof, or if any such order or decree, having been entered without the consent or acquiescence of the Issuer, shall not be vacated or discharged or stayed on appeal within sixty (60) days after the entry thereof; or (e) any proceeding shall be instituted, with the consent or acquiescence of the Issuer, or any plan shall be entered into by the Issuer, for the purpose of effecting a compromise between the Issuer and its creditors or for the purpose of adjusting the claims of such creditors pursuant to any federal or State statute now or hereafter enacted, if the claims of such creditors are under any circumstances payable from any part or all of the trust estate, including money derived by the Issuer under this Bond Indenture or the Loan Agreement (other than Unassigned Rights); or (f) the Issuer (i) files a petition in bankruptcy under the applicable title of the United States Code, as amended, (ii) makes an assignment for the benefit of its creditors, (iii) consents to the appointment of a receiver, custodian or trustee for itself or for the whole or any part of the trust estate, or (iv) is generally not paying its debts as such debts become due; or (g) (i) the Issuer is adjudged insolvent by a court of competent jurisdiction, (ii) on a petition in bankruptcy filed against the Issuer it is adjudged a bankrupt, or (iii) an order, judgment or decree is entered by any court of competent jurisdiction appointing, without the consent of the Issuer, a receiver, custodian or trustee of the Issuer or of the whole or any part of its property and any of the aforesaid adjudications, orders, judgments or decrees shall not be vacated or set aside or stayed within sixty (60) days from the date of entry thereof; or (h) the Issuer shall file a petition or answer seeking reorganization or any arrangement under the federal bankruptcy laws or any other applicable law or statute of the United States of America or any state thereof; or 33  (i) under the provisions of any other law for the relief or aid of debtors, any court of competent jurisdiction shall assume custody or control of the Issuer or of the whole or any substantial part of its property, and such custody or control shall not be terminated within thirty (30) days from the date of assumption of such custody or control; or (j) any event of default under the Loan Agreement shall occur and such event of default shall be continuing from and after the date the Issuer (or the Bond Trustee, as assignee of the Issuer) is entitled under the Loan Agreement to declare all amounts under the Loan Agreement to be immediately due and payable; or (k) the Issuer shall default in the due and punctual performance of any other of the covenants, conditions, agreements and provisions contained in the Bonds or in this Bond Indenture or in any indenture supplemental hereto on the part of the Issuer to be performed, and such default shall continue for thirty (30) days after written notice specifying such default and requiring the same to be remedied shall have been given to the Issuer, the Bond Trustee and the Borrower by the Bond Trustee, which notice the Bond Trustee may give in its discretion and must give at the request of the owners of not less than ten percent (10%) in aggregate principal amount of the Bonds then Outstanding hereunder; provided, that, if such default cannot with due diligence and dispatch be wholly cured within thirty (30) days but can be wholly cured, the failure of the Issuer to remedy such default within such 30-day period shall not constitute a default hereunder if the Issuer shall immediately upon receipt of such notice commence with due diligence and dispatch the curing of such default and, having so commenced the curing of such default, shall thereafter prosecute and complete the same with due diligence and dispatch; or (l) the Issuer, the Borrower or the Bond Trustee shall default in the performance of any covenant, condition, agreement or provision of the Tax Exemption Agreement, and such default shall continue for a period of thirty (30) days after written notice specifying such default and requiring the same to be remedied shall have been given to the party in default; provided, that if such default cannot with due diligence and dispatch be wholly cured within thirty (30) days but can be wholly cured, the failure of the Issuer, the Borrower or the Bond Trustee to remedy such default within such 30-day period shall not constitute a default hereunder if any of the foregoing shall immediately upon receipt of such notice commence with due diligence and dispatch the curing of such default and, having so commenced the curing of such default, shall thereafter prosecute and complete the same with due diligence and dispatch. SECTION 7.2. ACCELERATION. Anything in this Bond Indenture to the contrary notwithstanding, (a) upon the occurrence of an event of default specified in subsection (c) through (l) of Section 7.1 hereof the Bond Trustee may, without any action on the part of the Bondholders, or (b) upon the occurrence of an event of default specified in subsection (c) through (l) of Section 7.1 hereof and the written request of the owners of not less than 51% in principal amount of the Bonds then outstanding hereunder (exclusive of Borrower Bonds and any Bonds the registered owner of which is the Issuer), and upon being indemnified to its satisfaction as provided in Section 8.1(l) hereof, the Bond Trustee shall, or (c) upon the occurrence and continuance of an event of default specified in subsection (a) or (b) of Section 7.1 hereof, the Bond Trustee shall, within each such case by notice in writing delivered to the Issuer and the Borrower, declare the entire principal amount of the Bonds then outstanding hereunder and the interest accrued thereon immediately due and payable, and the entire principal 34 and interest shall thereupon become and be immediately due and payable, subject, however, to the provisions of Section 7.10 hereof with respect to waivers of events of default. The Bond Trustee shall give notice thereof by first class mail, postage prepaid, to all owners of Outstanding Bonds; provided, however, that the giving of such notice shall not be considered a precondition to the Bond Trustee declaring the entire principal amount of the Bonds then outstanding and the interest accrued thereon immediately due and payable. The Bonds shall cease to accrue interest on the date of acceleration if they are paid on such date. SECTION 7.3. REMEDIES; RIGHTS OF BONDHOLDERS. (a) Upon the occurrence of any event of default the Bond Trustee may take whatever action at law or in equity it deems necessary or desirable (i) to collect any amounts then due under this Bond Indenture, the Bonds or the Loan Agreement, (ii) to enforce performance of any obligation, agreement or covenant of the Issuer under this Bond Indenture or the Bonds, of the Borrower under the Loan Agreement, of a guarantor under any guaranty given with respect to any Bond or of the grantor of any other collateral given to secure the payment of the Bonds, or (iii) to otherwise enforce any of its rights. (b) If an event of default shall have occurred, and if it shall have been requested to do so by the holders of fifty-one percent (51%) in aggregate principal amount of the Bonds outstanding, and shall have been indemnified as provided in 8.1(l) hereof, the Bond Trustee shall be obligated to exercise such one or more of the rights and powers conferred by this Section as the Bond Trustee shall deem most expedient in the interests of the holders of the Bonds; provided, however, that the Bond Trustee shall have the right to decline to comply with any such request if the Bond Trustee shall be advised by counsel (who may be its own counsel) that the action so requested may not lawfully be taken or the Bond Trustee in good faith shall determine that such action would be unjustly prejudicial to the holders of the Bonds not parties to such request or would subject the Bond Trustee to personal liability. (c) No remedy by the terms of this Bond Indenture conferred upon or reserved to the Bond Trustee (or to the holders of the Bonds) is intended to be exclusive of any other remedy, but each and every such remedy shall be cumulative and shall be in addition to any other remedy given to the Bond Trustee or to the holders of the Bonds hereunder now or hereafter existing at law or in equity or by statute. (d) No delay or omission to exercise any right or power accruing upon any default or event of default shall impair any such right or power or shall be construed to be a waiver of any such default or event of default, or acquiescence therein; and every such right and power may be exercised from time to time and as often as may be deemed expedient. (e) No waiver of any default or event of default, hereunder, whether by the Bond Trustee, the holders of the Bonds, shall extend to or shall affect any subsequent default or event of default or shall impair any rights or remedies consequent thereon. SECTION 7.4. DIRECTION OF PROCEEDINGS BY HOLDERS. The holders of not less than a majority in aggregate principal amount of the Bonds then outstanding shall have the right, at any time, by an instrument or instruments in writing executed and 35 delivered to the Bond Trustee, to direct the method and place of conducting all proceedings to be taken in connection with the enforcement of the terms and conditions of this Bond Indenture, including enforcement of the rights of the Issuer under the Loan Agreement (other than Unassigned Rights) or for the appointment of a receiver or any other proceedings hereunder; provided that such direction shall be in accordance with the provisions of law and of this Bond Indenture. SECTION 7.5. APPOINTMENT OF RECEIVERS. Upon the occurrence of an event of default, and upon the filing of a suit or other commencement of judicial proceedings to enforce the rights of the Bond Trustee and the holders of Bonds under this Bond Indenture, the Bond Trustee shall be entitled, as a matter of right, to the appointment of a receiver or receivers of the revenues, issues, payments and profits pledged hereby, pending such proceedings, with such powers as the court making such appointment shall confer. SECTION 7.6. APPLICATION OF MONEYS. (a) Subject to the provisions of Section 4.1 hereof, all moneys received by the Bond Trustee, by any receiver or by any Bondholder pursuant to any right given or action taken under the provisions of this Article VII shall, after payment of the costs and expenses of the proceedings resulting in the collection of such moneys and of the expenses, including legal fees and expenses, liabilities and advances incurred or made by the Bond Trustee, be deposited in the Bond Sinking Fund, and all moneys so deposited during the continuance of an event of default (other than moneys for the payment of Bonds which have previously matured or otherwise become payable prior to such event of default or for the payment of interest due prior to such event of default), together with all moneys in the Funds maintained by the Bond Trustee under Articles III and IV hereof, shall be applied as follows: (i) Unless the principal of all the Bonds shall have become or shall have been declared due and payable, all such moneys shall be applied: First: To the payment of amounts, if any, payable pursuant to the Tax Exemption Agreement for rebate; Second: To the payment to the Persons entitled thereto of all installments of interest then due on the Bonds, in the order of the maturity of the installments of such interest, and, if the amount available shall not be sufficient to pay in full any particular installment, then to the payment ratably, according to the amounts due on such installment, to the Persons entitled thereto, without any discrimination or privilege; and Third: To the payment to the Persons entitled thereto of the unpaid principal of any of the Bonds which shall have become due (other than the Bonds called for redemption for the payment of which moneys are held pursuant to the provisions of this Bond Indenture), and, if the amount available shall not be sufficient to pay in full the Bonds, then to the payment ratably, according to the amount of principal due to the Persons entitled thereto, without any discrimination or privilege. 36  (ii) If the principal of all the Bonds shall have become due or shall have been declared due and payable, all such moneys shall be applied: First: To the payment of amounts, if any, payable pursuant to the Tax Exemption Agreement for rebate; and Second: To the payment of the principal and interest then due and unpaid upon the Bonds, without preference or priority of principal over interest or of interest over any other installment of interest, or of any Bond over any other Bond, ratably, according to the amounts due respectively for principal and interest, to the Persons entitled thereto without any discrimination or privilege. (iii) If the principal of all the Bonds shall have been declared due and payable, and if such declaration shall thereafter have been rescinded and annulled under the provisions of this Article, then, subject to the provisions of paragraph (b) of this Section, in the event that the principal of all the Bonds shall later become due or be declared due and payable, the moneys shall be applied in accordance with the provisions of paragraph (a) of this Section. (b) Whenever moneys are to be applied by the Bond Trustee pursuant to the provisions of this Section, such moneys shall be applied by it at such times, and from time to time, as the Bond Trustee shall determine, having due regard for the amount of such moneys available for application and the likelihood of additional moneys becoming available for such application in the future. Whenever the Bond Trustee shall apply such moneys, it shall fix the date (which shall be an Interest Payment Date unless it shall deem another date more suitable) upon which such application is to be made and upon such date interest on the amounts of principal to be paid on such date shall cease to accrue. The Bond Trustee shall give notice of the deposit with it of any such moneys and of the fixing of any such date and of the Special Record Date in accordance with Section 2.2(g) hereof 10 days prior to the Special Record Date. The Bond Trustee shall not be required to make payment to the holder of any unpaid Bond until such Bond shall be presented to the Bond Trustee for appropriate endorsement or for cancellation if fully paid. (c) Whenever all Bonds and interest thereon have been paid under the provisions of this Section 7.6 and all expenses and charges of the Bond Trustee have been paid, any balance remaining shall be paid to the Persons entitled to receive the same and then to the Borrower. SECTION 7.7. REMEDIES VESTED IN BOND TRUSTEE. All rights of action, including the right to file proofs of claim under this Bond Indenture or under any of the Bonds, may be enforced by the Bond Trustee without the possession of any of the Bonds or the production thereof in any trial or other proceedings relating thereto, and any such suit or proceeding instituted by the Bond Trustee shall be brought in its name as Bond Trustee without the necessity of joining as plaintiffs or defendants any holders of the Bonds, and any recovery of judgment shall be for the equal benefit of the holders of the Outstanding Bonds. SECTION 7.8. RIGHTS AND REMEDIES OF BONDHOLDERS. No holder of any Bond shall have any right to institute any suit, action or proceedings in equity or at law for 37 the enforcement of this Bond Indenture or for the execution of any trust hereof or for the appointment of a receiver or any other remedy hereunder, unless a default shall have become an event of default and the holders of not less than twenty-five percent (25%) in aggregate principal amount of the Bonds then outstanding shall have made written request to the Bond Trustee and shall have offered it reasonable opportunity either to proceed to exercise the powers hereinbefore granted or to institute such action, suit or proceeding in its own name, and unless also they have offered to the Bond Trustee indemnity as provided in Section 8.1, and unless the Bond Trustee shall thereafter fail or refuse to exercise the power hereinbefore granted, or to institute such action, suit or proceeding in its own name; and such notification, request and offer of indemnity are hereby declared in every case at the option of the Bond Trustee to be conditions precedent to the execution of the powers and trusts of this Bond Indenture and to any action or cause of action for the enforcement of this Bond Indenture, or for the appointment of a receiver or for any other remedy hereunder; it being understood and intended that no one or more holders of the Bonds shall have any right in any manner whatsoever to affect, disturb or prejudice the lien of this Bond Indenture by its, his, her or their action or to enforce any right hereunder except in the manner herein provided, and that all proceedings at law or in equity shall be instituted, had and maintained in the manner herein provided and for the equal benefit of the holders of all Bonds outstanding. Nothing in this Bond Indenture contained shall, however, affect or impair the right of any Bondholder to enforce the payment of the principal of and interest on any Bond at and after the maturity thereof, or the obligation of the Issuer to pay the principal of and interest on each of the Bonds issued hereunder to the respective holders thereof at the time and place, from the source and in the manner herein and in said Bonds expressed. SECTION 7.9. TERMINATION OF PROCEEDINGS. In case the Bond Trustee shall have proceeded to enforce any right under this Bond Indenture by the appointment of a receiver, or otherwise, and such proceedings shall have been discontinued or abandoned for any reason, or shall have been determined adversely to the Bond Trustee, then and in every case the Issuer and the Bond Trustee shall, subject to any determination in such proceeding, be restored to their former positions and rights hereunder with respect to the property pledged and assigned hereunder, and all rights, remedies and powers of the Bond Trustee shall continue as if no such proceedings had been taken. SECTION 7.10. WAIVER OF EVENTS OF DEFAULT. The Bond Trustee may, except with respect to defaults described in (1) below, waive any event of default hereunder and its consequences and rescind any declaration of maturity of principal, and shall do so, (1) upon written request of the owners of at least a majority in aggregate principal amount of all the Bonds outstanding in respect of which default in the payment of principal when due (whether by mandatory redemption through the Bond Sinking Fund or at the dates of maturity specified therein) and/or interest when due exists, or (2) upon written request of the owners of at least fifty-one percent (51%) in aggregate principal amount of all the Bonds outstanding in the case of any other event of default. The foregoing notwithstanding, in no event shall there be waived (a) any event of default in the payment of the principal of any Outstanding Bonds when due whether by mandatory redemption through the Bond Sinking Fund or at the dates of maturity specified therein, or (b) any default in the payment when due of the interest on any such Bonds unless prior to such waiver or rescission all arrears of interest, with interest thereon (to the extent permitted by law) at the rate borne by the Bonds in respect of which such default shall have occurred on overdue installments of interest or all arrears of payments of principal when due 38 (other than as a result of acceleration), as the case may be, and all expenses of the Bond Trustee and any Paying Agent in connection with such default shall have been paid or provided for and in case of any such waiver or rescission or in case any proceeding taken by the Bond Trustee on account of any such default shall have been discontinued or abandoned or determined adversely, then and in every such case the Issuer, the Bond Trustee and the Bondholders shall, subject to any determination in such proceeding, be restored to their former positions and rights hereunder respectively, but no such waiver or rescission shall extend to any subsequent or other default, or impair any right consequent thereon. SECTION 7.11. BORROWER'S RIGHTS OF POSSESSION AND USE OF PROPERTY. So long as the Borrower is in full compliance with the terms and provisions of the Loan Agreement, it shall be suffered and permitted to possess, use and enjoy its property and appurtenances thereto free of claims hereunder of the Issuer or the Bond Trustee. SECTION 7.12. WAIVER OF REDEMPTION; EFFECT OF SALE OF TRUST ESTATE. The Issuer, to the extent permitted by law, shall not claim any rights under any stay, valuation, exemption or extension law, and hereby waives any right of redemption which it may have in respect of property of the Borrower. Upon the institution of any foreclosure proceedings or upon any sale of the property of the Borrower to satisfy amounts owing under the Loan Agreement, or any acceleration of the maturity of the principal of all Bonds then outstanding hereunder, if not previously due and payable, such Bonds shall become immediately due and payable. SECTION 7.13. NOTICE OF DEFAULT. In the event of any default hereunder, the Bond Trustee will promptly give written notice thereof to the Issuer and the Borrower, setting forth the nature of such default. 39  ARTICLE VIII THE BOND TRUSTEE SECTION 8.1. ACCEPTANCE OF THE TRUSTS. The Bond Trustee accepts and agrees to execute the trusts imposed upon it by this Bond Indenture, but only upon the terms and conditions set forth herein. The Bond Trustee, prior to the occurrence of an event of default and after the curing of all events of default which may have occurred, undertakes to perform such duties and only such duties as are specifically set forth in this Bond Indenture, and no implied covenants or obligations should be read into this Bond Indenture against the Bond Trustee. In case an event of default hereunder has occurred and is continuing, the Bond Trustee shall exercise such of the rights and powers vested in it by this Bond Indenture and shall use the same degree of care as a prudent person would exercise or use in the circumstances in the conduct of such person's own affairs. The Bond Trustee agrees to perform such trusts only upon and subject to the following expressed terms and conditions: (a) The Bond Trustee may execute any of the trusts or powers hereof and perform any of its duties by or through attorneys, agents, receivers or employees, and shall not be responsible for the misconduct or negligence of the same appointed in accordance with the standard specified above, and shall be entitled to advice of counsel concerning all matters of trusts hereof and duties hereunder, and may in all cases pay such reasonable compensation to any attorney, agent, receiver or employee retained or employed by it in connection herewith. The Bond Trustee may act upon the opinion or advice of an attorney, surveyor, engineer or accountant selected by it in the exercise of reasonable care or, if selected or retained by the Issuer, approved by the Bond Trustee in the exercise of such care. The Bond Trustee shall not be responsible for any loss or damage resulting from any action or inaction based on its good faith reliance upon such opinion or advice. (b) The Bond Trustee shall not be responsible for any recital herein, or in the Bonds (except with respect to the certificate of the Bond Trustee endorsed on the Bonds), or for the investment of moneys as herein provided (except that no investment shall be made except in accordance with Section 4.4 hereof), or for the recording or rerecording, filing or re-filing of this Bond Indenture, or any supplement or amendment thereto, or the filing of financing statements, or for the validity of the execution by the Issuer of this Bond Indenture, or of any supplemental indentures or instruments of further assurance, or for the sufficiency of the security for the Bonds issued hereunder or intended to be secured hereby, or for the value or title of the property herein conveyed or otherwise as to the maintenance of the security hereof. The Bond Trustee may (but shall be under no duty to) require of the Issuer and the Borrower full information and advice as to the performance of the covenants, conditions and agreements in the Loan Agreement and shall make its best efforts, but without any obligation, to advise the Issuer and the Borrower of any default known to the Bond Trustee. Except as otherwise provided in Section 8.4 hereof, the Bond Trustee shall have no obligation to perform any of the duties of the Issuer under the Loan Agreement. (c) The Bond Trustee shall not be accountable for the use or application by the Issuer or the Borrower of any of the Bonds or the proceeds thereof or for the use or application of any money paid over by the Bond Trustee in accordance with the provisions of this Bond Indenture 40 or for the use and application of money received by any Paying Agent (except when the Bond Trustee acts as Paying Agent). The Bond Trustee may become the owner of Bonds secured hereby with the same rights it would have if not Bond Trustee. (d) The Bond Trustee shall be protected in acting upon any notice, order, requisition, request, consent, certificate, order, opinion (including an opinion of Independent Counsel), affidavit, letter, telegram or other paper or document in good faith deemed by it to be genuine and correct and to have been signed or sent by the proper person or persons. The Bond Trustee shall be protected in relying upon any telephonic or other electronic communication deemed by it in good faith to be genuine and correct and to be from the proper person or persons whenever this Bond Indenture permits such telephonic or other electronic communication. Any action taken by the Bond Trustee pursuant to this Bond Indenture upon the request or authority or consent of any person who at the time of making such request or giving such authority or consent is the owner of any Bond, shall be conclusive and binding upon all future owners of the same Bond and upon Bonds issued in exchange therefor or in place thereof. (e) As to the existence or non-existence of any fact or as to the sufficiency of validity of any instrument, paper or proceedings, the Bond Trustee shall be entitled to rely upon a certificate signed on behalf of the Issuer by the Chairman or Vice Chairman of its Board of County Commissioners or its Clerk or Deputy Clerk as sufficient evidence of the facts therein contained and prior to the occurrence of a default of which the Bond Trustee has been notified as provided in subsection (g) of this Section, or of which by said subsection it is deemed to have notice, shall also be at liberty to accept a similar certificate to the effect that any particular dealing, transaction or action is necessary or expedient, but may at its discretion secure such further evidence deemed necessary or advisable, but shall in no case be bound to secure the same. The Bond Trustee may accept a certificate of the Clerk or Deputy Clerk of the Issuer under its seal to the effect that a resolution in the form therein set forth has been adopted by the Issuer as conclusive evidence that such resolution has been duly adopted, and is in full force and effect. (f) The permissive right of the Bond Trustee to do things enumerated in this Bond Indenture shall not be construed as a duty and the Bond Trustee shall not be answerable for other than its negligence or willful misconduct. (g) The Bond Trustee shall not be required to take notice or be deemed to have notice of any default hereunder except failure to cause to be made any of the payments to the Bond Trustee required to be made by Article IV unless the Bond Trustee shall be specifically notified in writing of such default by the Issuer or by the holders of at least fifty-one percent (51%) in aggregate principal amount of all Bonds then outstanding, and all notices or other instruments required by this Bond Indenture to be delivered to the Bond Trustee must, in order to be effective, be delivered at the designated corporate trust office of the Bond Trustee, and in the absence of such notice so delivered, the Bond Trustee may conclusively assume there is no default except as aforesaid. (h) The Bond Trustee shall not be personally liable for any debts contracted or for damages to persons or to personal property injured or damaged, or for salaries or nonfulfillment of contracts during any period in which it may be in possession of or managing any property. 41  (i) At any and all reasonable times, and upon reasonable prior notice, the Bond Trustee and its duly authorized agents, attorneys, experts, engineers, accountants and representatives shall have the right fully to inspect any and all of the System, including all books, papers and records of the Issuer pertaining to the System and the Bonds, and to take such memoranda from and in regard thereto as may be desired. (j) The Bond Trustee shall not be required to give any bond or surety in respect of the execution of the said trusts and powers or otherwise in respect of the premises. (k) Notwithstanding anything elsewhere in this Bond Indenture contained, the Bond Trustee shall have the right, but shall not be required, to demand, in respect of the authentication of any Bonds, the withdrawal of any cash, the release of any property, or any action whatsoever within the purview of this Bond Indenture, any showings, certificates, opinions, appraisals or other information, or corporate action or evidence thereof, in addition to that by the terms hereof required as a condition of such action by the Bond Trustee deemed desirable for the purpose of establishing the right of the Issuer to the authentication of any Bonds, the withdrawal of any cash, the release of any property or the taking of any other action by the Bond Trustee. (l) Before taking any action under Article VII other than making payments of principal, interest and purchase price on the Bonds as they become due, including causing an acceleration when required by this Bond Indenture, the Bond Trustee may require that a satisfactory indemnity bond be furnished for the reimbursement of all expenses (including reasonable attorneys fees) which it may incur and to protect it against all liability, except liability which is adjudicated to have resulted from its negligence or willful misconduct in connection with any action so taken. (m) All moneys received by the Bond Trustee or any Paying Agent shall, until used or applied or invested as provided in this Bond Indenture, be held in trust for the purposes for which they were received but need not be segregated from other funds except to the extent required by law or by this Bond Indenture. Neither the Bond Trustee nor any Paying Agent shall be under any liability for interest on any moneys received hereunder except as may be otherwise agreed upon. SECTION 8.2. FEES, CHARGES AND EXPENSES OF BOND TRUSTEE AND ANY ADDITIONAL PAYING AGENT. The Bond Trustee shall be entitled to payment and/or reimbursement for reasonable fees and for its services, including its services as Paying Agent and Bond Registrar, and all advances, counsel fees and other expenses reasonably and necessarily made or incurred by the Bond Trustee in connection with such services. Any additional Paying Agent shall be entitled to payment and reimbursement for its reasonable fees and charges as additional Paying Agent for the Bonds. Upon an event of default, but only upon an event of default, the Bond Trustee and any additional Paying Agent shall have a right of payment prior to payment on account of interest or principal of or premium, if any, on any Bond for the foregoing advances, fees, costs, and expenses incurred; provided that the Bond Trustee and any such Paying Agent shall not have a prior right to payment or claim therefor against (a) moneys held to pay redemption price, including premium, of the Bonds previously called for redemption, or (b) moneys or obligations deposited with or paid to the Bond Trustee for the 42 redemption or payment of Bonds which are deemed to have been paid in accordance with Article XI hereof. The Issuer shall require the Borrower, pursuant to the Loan Agreement, and the Borrower shall indemnify and hold harmless the Bond Trustee against any liabilities which the Bond Trustee may incur in the exercise and performance of its powers and duties hereunder and under any other agreement referred to herein which are not due to the Bond Trustee's negligence or willful misconduct, and for any reasonable fees and expenses of the Bond Trustee to the extent funds are not available under this Bond Indenture for the payment thereof. The rights of the Bond Trustee under this Section 8.2 shall survive the payment in full of the Bonds and the discharge of this Bond Indenture. When the Bond Trustee incurs expenses or renders services after an event of default specified in Section 7.1 occurs, the reasonable expenses and the compensation for services (including the reasonable fees and expenses of its agents and counsel) are intended to constitute expenses of administration under applicable bankruptcy law. SECTION 8.3. NOTICE TO THE ISSUER AND BONDHOLDERS IF DEFAULT OCCURS. If a default occurs of which the Bond Trustee is by subsection (g) of Section 8.1 hereof required to take notice or if notice of default be given as in said subsection (g) provided, then the Bond Trustee shall give written notice thereof by mail to the Issuer and the Borrower and the registered owners of all Bonds then outstanding as shown on the Bond Register. SECTION 8.4. INTERVENTION BY BOND TRUSTEE. In any judicial proceeding to which the Issuer or the Borrower is or are a party and which in the opinion of the Bond Trustee and its counsel has a substantial bearing on the interests of the registered owners of the Bonds, the Bond Trustee may intervene on behalf of the Bondholders and, subject to the provisions of Section 8.1(l), shall do so if requested in writing by the registered owners of at least fifty-one percent (51%) in aggregate principal amount of all Bonds then outstanding. The rights and obligations of the Bond Trustee under this Section are subject to the approval of a court of competent jurisdiction. SECTION 8.5. SUCCESSOR BOND TRUSTEE. Any corporation or association into which the Bond Trustee may be converted or merged, or with which it may be consolidated, or to which it may sell or transfer its corporate trust business and assets as a whole or substantially as a whole, or any corporation or association resulting from any such conversion, sale, merger, consolidation or transfer to which it is a party, provided such corporation or association is otherwise eligible under Section 8.6 hereof, shall be and become the successor Bond Trustee hereunder and vested with all of the title to the whole property of the trust estate and all the trusts, powers, discretions, immunities, privileges and all other matters as was its predecessor, without the execution or filing of any instrument or any further act, deed or conveyance on the part of any of the parties hereto, anything herein to the contrary notwithstanding. SECTION 8.6. BOND TRUSTEE REQUIRED; ELIGIBILITY. There shall at all times be a Bond Trustee hereunder which shall be a commercial bank or trust company 43 operating within the State organized under the laws of the United States of America or the State or another state, authorized to exercise corporate trust powers, subject to supervision or examination by federal or state authorities, and having a reported combined capital and surplus of not less than $50,000,000 or assets under administration of not less than $200,000,000. If at any time the Bond Trustee shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner provided in Section 8.7 hereof. No resignation or removal of the Bond Trustee and no appointment of a successor Bond Trustee shall become effective until the successor Bond Trustee has accepted its appointment under Section 8.10 hereof. SECTION 8.7. RESIGNATION BY THE BOND TRUSTEE. The Bond Trustee and any successor Bond Trustee may at any time resign from the trusts hereby created by giving written notice to the Issuer and the Borrower and by registered or certified mail to each registered owner of the Bonds then outstanding, as shown by the Bond Register. Such notice to the Issuer and the Borrower may be served personally or sent by registered or certified mail. SECTION 8.8. REMOVAL OF THE BOND TRUSTEE. The Bond Trustee may be removed at any time, by an instrument or concurrent instruments in writing delivered to the Bond Trustee and the Issuer, and signed by the registered owners of not less than a majority in aggregate principal amount of the Bonds then outstanding. So long as no event of default has occurred and is continuing under this Bond Indenture or the Loan Agreement and no event shall have occurred which with the passage of time or the giving of notice or both would become such an event of default under this Bond Indenture or the Loan Agreement, the Bond Trustee may also be removed at any time by an instrument in writing signed by the Issuer, upon the written request of the Borrower, and delivered to the Bond Trustee. The foregoing notwithstanding, the Bond Trustee may not be removed by the Issuer unless written notice of the delivery of such instrument or instruments signed by the Issuer is mailed to the owners of all Bonds outstanding under this Bond Indenture, which notice indicates the Bond Trustee will be removed for cause (including maintaining non-competitive fees) and replaced by the successor trustee named in such notice, such removal and replacement to become effective on the 90th day next succeeding the date of such notice, unless the owners of not less than 10% in aggregate principal amount of such Bonds then outstanding under this Bond Indenture shall object in writing to such removal and replacement. Such notice shall be mailed by first class mail, postage prepaid, to the owners of all such Bonds then outstanding at the address of such owners then shown on the Bond Register. SECTION 8.9. APPOINTMENT OF SUCCESSOR BOND TRUSTEE BY THE BONDHOLDERS; TEMPORARY BOND TRUSTEE. In case the Bond Trustee hereunder shall resign or be removed, or be dissolved, or shall be in the process of dissolution or liquidation, or otherwise becomes incapable of acting hereunder, or in case it shall be taken under the control of any public officer or officers, or of a receiver appointed by a court, a successor may be appointed by the owners of a majority in aggregate principal amount of the Bonds then outstanding by an instrument or concurrent instruments in writing signed by such registered owners, or by their attorneys in fact, duly authorized; provided, nevertheless, that in case of such vacancy the Issuer by an instrument executed and signed by its Clerk or Deputy Clerk, or other designated officer of the Issuer under its seal, may appoint a temporary Bond Trustee to fill such vacancy until a successor Bond Trustee shall be appointed by the 44 Bondholders in the manner above provided; and any such temporary Bond Trustee so appointed by the Issuer shall immediately and without further action be superseded by the successor Bond Trustee so appointed by such Bondholders. The Issuer agrees to follow the direction of the Borrower in appointing a temporary Bond Trustee unless the Issuer shall have a reasonable objection to the entity selected by the Borrower. If a successor Bond Trustee has not been appointed or has not accepted such appointment within thirty days of notice of resignation or removal of the Bond Trustee, the Bond Trustee may apply to a court of competent jurisdiction for the appointment of a successor Bond Trustee, and the costs, expenses and attorney's fees which are incurred in connection with such proceeding shall be paid as provided in Section 8.2 hereof. SECTION 8.10. CONCERNING ANY SUCCESSOR BOND TRUSTEES. Every successor Bond Trustee appointed hereunder shall execute, acknowledge and deliver to its predecessor and also to the Issuer an instrument in writing accepting such appointment hereunder, and thereupon such successor, without any further act, deed or conveyance, shall become fully vested with all the estates, properties, rights, powers, trusts, duties and obligations of its predecessor; but such predecessor shall, nevertheless, on the Written Request of the Issuer, or of its successor, execute and deliver an instrument transferring to such successor Bond Trustee all the estates, properties, rights, powers and trusts of such predecessor hereunder and under the Tax Exemption Agreement; and every predecessor Bond Trustee shall deliver all securities and moneys held by it as Bond Trustee hereunder to its successor. Should any instrument in writing from the Issuer be required by any successor Bond Trustee for more fully and certainly vesting in such successor the estate, rights, powers and duties hereby vested or intended to be vested in the predecessor, any and all such instruments in writing shall, on request, be executed, acknowledged and delivered by the Issuer. The resignation of any Bond Trustee and the instrument or instruments removing any Bond Trustee and appointing a successor hereunder, together with all other instruments provided for in this Article, shall be filed and/or recorded by the successor Bond Trustee in each recording office, if any, where this Bond Indenture shall have been filed and/or recorded. Notice of the appointment of any successor Bond Trustee hereunder shall be given by such successor Bond Trustee to each Rating Agency at such time maintaining a rating with respect to the Bonds pursuant to Section 13.5 hereof. SECTION 8.11. BOND TRUSTEE PROTECTED IN RELYING UPON RESOLUTION, ETC. The resolutions, opinions, certificates and other instruments provided for in this Bond Indenture may be accepted by the Bond Trustee as conclusive evidence of the facts and conclusions stated therein and shall be full warrant, protection and authority to the Bond Trustee for the withdrawal of cash hereunder, upon receipt of written consent from the registered owners of at least fifty-one percent (51%) in aggregate principal amount of all Bonds then Outstanding. SECTION 8.12. SUCCESSOR BOND TRUSTEE AS BOND TRUSTEE OF FUNDS, PAYING AGENT AND BOND REGISTRAR. In the event of a change in the office of the Bond Trustee, the predecessor Bond Trustee which has resigned or been removed shall cease to be Bond Trustee of the Bond Sinking Fund, Project Fund, Redemption Fund, Expense Fund and any other trust funds provided hereunder and shall cease to be the Bond Registrar and 45 Paying Agent for the principal of, premium, if any, and interest on the Bonds, and the successor Bond Trustee shall become such Bond Trustee, Bond Registrar and Paying Agent unless a separate Paying Agent or Agents are appointed by the Issuer in connection with the appointment of any successor Bond Trustee. SECTION 8.13. PAYING AGENTS; APPOINTMENT AND ACCEPTANCE OF DUTIES; REMOVAL. (a) The Bond Trustee is hereby designated and agrees to act as principal Paying Agent and as Bond Registrar for and in respect of the Bonds. (b) The Issuer may appoint one or more additional Paying Agents for the Bonds. Any such Paying Agent shall be a commercial bank with trust powers or trust company organized under the laws of the United States of America or one of the states thereof. Each Paying Agent other than the Bond Trustee shall signify its acceptance of the duties and obligations imposed upon it by this Bond Indenture by executing and delivering to the Issuer and the Bond Trustee a written acceptance thereof. The Issuer may remove any Paying Agent other than the Bond Trustee and any successors thereto, and appoint a successor or successors thereto; provided that any such Paying Agent designated by the Issuer shall continue to be a Paying Agent of the Issuer for the purpose of paying the principal of, premium, if any, and interest on the Bonds until the designation of a successor as such Paying Agent. Each Paying Agent is hereby authorized to pay or redeem Bonds when duly presented to it for payment or redemption, which Bonds shall thereafter be delivered to the Bond Trustee for cancellation. 46  ARTICLE IX SUPPLEMENTAL INDENTURES SECTION 9.1. SUPPLEMENTAL INDENTURES NOT REQUIRING CONSENT OF BONDHOLDERS. The Issuer and the Bond Trustee may, without the consent of, or notice to, any of the Bondholders, enter into an indenture or indentures supplemental to this Bond Indenture, as shall not be inconsistent with the terms and provisions hereof, for any one or more of the following purposes: (a) to cure any ambiguity or formal defect or omission in this Bond Indenture; (b) to grant to or confer upon the Bond Trustee for the benefit of the Bondholders any additional rights, remedies, powers or authority that may lawfully be granted to or conferred upon the Bondholders and the Bond Trustee, or either of them; (c) to assign and pledge under this Bond Indenture additional revenues, properties or collateral; (d) to evidence the appointment of a separate bond trustee or the succession of a new bond trustee hereunder; (e) to modify, amend or supplement this Bond Indenture or any indenture supplemental hereto in such manner as to permit the qualification of this Bond Indenture under the Trust Indenture Act of 1939, as then amended, or any similar federal statute hereafter in effect or to permit the qualification of the Bonds for sale under the securities laws of any state of the United States of America; (f) to modify, amend or supplement this Bond Indenture or any indenture supplemental hereto in such manner as to permit the issuance of coupon Bonds of any Series hereunder and to permit the exchange of Bonds from fully registered form to coupon form and vice versa; (g) to provide for the refunding or advance refunding of the Bonds, including the right to establish and administer an escrow fund and to take related action in connection therewith; (h) to modify, amend or supplement this Bond Indenture or any indenture supplemental hereto in such manner as to permit certificated Bonds; (i) to modify, amend or supplement this Bond Indenture or any indenture supplemental hereto in such manner as to permit continued compliance with the Tax Exemption Agreement; (j) to modify, amend or supplement the provisions hereof in any other way which the Bond Trustee has determined (which determination may be based on such opinions of Independent Counsel and factual certificates as the Bond Trustee deems necessary) does not materially adversely affect the rights or interests of any Bondholder. The Bond Trustee shall be 47 entitled to rely upon an opinion of Bond Counsel in reaching the determination pursuant to this paragraph (j); or (k) to make necessary or advisable amendments or additions in connection with the issuance of Additional Bonds in accordance herewith, or with the incurrence of Additional Indebtedness in accordance with the Loan Agreement, which do not adversely affect the interests of the Bondholders. The Issuer and the Bond Trustee may not enter into an indenture or indentures supplemental to this Bond Indenture pursuant to paragraph (f) of this Section 9.1 unless the Issuer and the Bond Trustee shall have received an Opinion of Bond Counsel to the effect that the issuance of coupon Bonds will not adversely affect the validity of such Bonds or any exemption from federal income tax to which the interest on the Bonds would otherwise be entitled. If at any time the Borrower shall request the Issuer and the Bond Trustee to consent to any amendment pursuant to subsection (i) above, the Bond Trustee shall cause notice of the proposed execution of such amendment, change or modification to the Bond Indenture to be given to each Rating Agency then maintaining a rating on the Bonds by first class mail, postage prepaid, at least 10 days prior to the execution of such amendment, change or modification to the Bond Indenture, which notice shall include a copy of the proposed amendment, change or modification. In addition, if at any time the Borrower shall request the Issuer and the Bond Trustee to consent to any amendment pursuant to this Section, the Bond Trustee shall cause a copy of such amendment, change or modification to be mailed to each Rating Agency then maintaining a rating on the Bonds upon the execution and delivery of such amendment, change or modification. SECTION 9.2. SUPPLEMENTAL INDENTURES REQUIRING CONSENT OF BONDHOLDERS. In addition to supplemental indentures covered by Section 9.1 hereof and subject to the terms and provisions contained in this Section, and not otherwise, the holders of not less than a majority in aggregate principal amount of the Bonds which are outstanding hereunder at the time of the execution of such indenture or supplemental indenture shall have the right, from time to time, anything contained in this Bond Indenture to the contrary notwithstanding, to consent to and approve the execution by the Issuer and the Bond Trustee of such other indenture or indentures supplemental hereto as shall be deemed necessary and desirable by the Issuer for the purpose of modifying, altering, amending, adding to or rescinding, in any particular, any of the terms or provisions contained in this Bond Indenture or any supplemental indenture; provided, however, that nothing in this Section or in Section 9.1 hereof contained shall permit, or be construed as permitting, (a) an extension of the stated maturity or reduction in the principal amount of, or reduction in the rate or extension of the time of paying of interest on, or reduction of any premium payable on the redemption of, any Bonds, without the consent of the holders of such Bonds, (b) a reduction in the amount or extension of the time of any payment required to be made to or from the Bond Sinking Fund provided herein, without the consent of the holders of all the Bonds at the time outstanding, (c) a reduction in the aggregate principal amount of Bonds the holders of which are required to consent to any such supplemental indenture, without the consent of the holders of all the Bonds at the time outstanding, or (d) the 48 modification of the rights, duties or immunities of the Bond Trustee without the written consent of the Bond Trustee. If at any time the Issuer shall request the Bond Trustee to enter into any such supplemental indenture for any of the purposes of this Section, the Bond Trustee shall, upon being satisfactorily indemnified with respect to expenses, cause notice of the proposed execution of such supplemental indenture to be mailed by registered or certified mail to the registered owners of the Bonds at their addresses as the same shall appear on the Bond Register. Such notice shall briefly set forth the nature of the proposed supplemental indenture and shall state that copies thereof are on file at the designated corporate trust office of the Bond Trustee for inspection by all Bondholders. The Bond Trustee shall not, however, be subject to any liability to any Bondholder by reason of its failure to mail such notice, and any such failure shall not affect the validity of such supplemental indenture when consented to and approved as provided in this Section. If the holders of not less than a majority in aggregate principal amount of the Bonds which are outstanding hereunder at the time of the execution of any such supplemental indenture shall have consented to and approved the execution thereof as herein provided, no holder of any Bond shall have any right to object to any of the terms and provisions contained therein, or the operation thereof, or in any manner to question the propriety of the execution thereof, or to enjoin or restrain the Bond Trustee or the Issuer from executing the same or from taking any action pursuant to the provisions thereof. Upon the execution of any such supplemental indenture as in this Section permitted and provided, this Bond Indenture shall be and be deemed to be modified and amended in accordance therewith. If at any time the Borrower shall request the Issuer and the Bond Trustee to consent to any amendment, change or modification of this Bond Indenture pursuant to this Section 9.2, the Bond Trustee shall cause notice of the proposed execution of such amendment, change or modification to this Bond Indenture to be given to each Rating Agency maintaining a rating on the Bonds in the manner provided in Section 13.5 hereof at least 10 days prior to the execution of such amendment, change or modification to this Bond Indenture, which notice shall include a copy of the proposed amendment, change or modification to this Bond Indenture. 49  ARTICLE X AMENDMENTS, ETC. TO BORROWER'S DOCUMENTS SECTION 10.1. AMENDMENTS TO THE BORROWER'S DOCUMENTS NOT REQUIRING CONSENT. The Issuer, the Borrower and the Bond Trustee may, without the consent of or notice to the holders of the Bonds, consent to any amendment, change or modification of the Loan Agreement as may be required (i) by the provisions of the Loan Agreement and this Bond Indenture, (ii) for the purpose of curing any ambiguity or formal defect or omission, (iii) for the purpose of complying with the provisions of the Tax Exemption Agreement, (iv) to make necessary or advisable amendments or additions in connection with the issuance of Additional Indebtedness in accordance with the Loan Agreement; or (v) in connection with any other change therein which, in the judgment of the Bond Trustee (which judgment may be based on such opinions of Independent Counsel and factual certificates as the Bond Trustee deems necessary), does not materially adversely affect the rights of the Bond Trustee or the owners of the Bonds; provided, however, that nothing in this Section 10.1 shall permit, or be construed as permitting, any amendment, change or modification of the Loan Agreement that may result in anything described in the lettered clauses of Section 9.2 hereof, without the consent of each Bondholder affected. SECTION 10.2. AMENDMENTS TO THE BORROWER'S DOCUMENTS REQUIRING CONSENT OF BONDHOLDERS. Except for the amendments, changes or modifications as provided in Section 10.1 hereof, neither the Issuer nor the Bond Trustee shall consent to any other amendment, change or modification of the Loan Agreement without the written approval or consent of the holders of not less than a majority in aggregate principal amount of the Bonds which are outstanding hereunder at the time of execution of any such amendment, change or modification; provided, however, that no such amendment, change or modification shall ever affect the obligation of the Borrower to make payments under the Loan Agreement as they become due and payable. If at any time the Issuer or the Borrower shall request the consent of the Bond Trustee to any such proposed amendment, change or modification of the Loan Agreement, the Bond Trustee shall, upon being satisfactorily indemnified with respect to expenses, cause notice of such proposed amendment, change or modification to be mailed in the same manner as provided by Section 9.2 hereof with respect to supplemental indentures. Such notice shall briefly set forth the nature of such proposed amendment, change or modification and shall state that copies of the instrument embodying the same are on file at the principal office of the Bond Trustee for inspection by all Bondholders. The Bond Trustee shall not, however, be subject to any liability to any Bondholder by reason of its failure to mail such notice, and any such failure shall not affect the validity of such amendment, change or modification when consented to and approved as provided in this Section. If the holders of not less than a majority in aggregate principal amount of the Bonds outstanding hereunder at the time of the execution of any such amendment, change or modification shall have consented to and approved the execution thereof as herein provided, no holder of any Bond shall have any right to object to any of the terms and provisions contained therein, or the operation thereof, or in any manner to question the propriety of the execution thereof, or to enjoin or restrain the Bond Trustee or the Issuer from executing the same or from taking any action pursuant to the provisions thereof. 50  If at any time the Borrower shall request the Issuer and the Bond Trustee to consent to any amendment, change or modification of the Loan Agreement pursuant to this Section 10.2, the Bond Trustee shall cause notice of the proposed execution of such amendment, change or modification to the Loan Agreement to be given to each Rating Agency maintaining a rating on the Bonds in the manner provided in Section 13.5 hereof at least 10 days prior to the execution of such amendment, change or modification to the Loan Agreement, which notice shall include a copy of the proposed amendment, change or modification to the Loan Agreement. 51  ARTICLE XI SATISFACTION OF THIS BOND INDENTURE SECTION 11.1. DEFEASANCE. If the Issuer shall pay or provide for the payment of all or a portion of all Bonds outstanding (including, for the purpose of this Article, any Bonds held by the Borrower) in any one or more of the following ways: (a) by paying or causing to be paid the principal of (including redemption premium, if any) and interest on all or a portion of the Bonds outstanding (the portion, which may be all, being referred to as the "Paid Bonds"), as and when the same become due and payable; (b) by delivering to the Bond Trustee, for cancellation by it, the Paid Bonds; or (c) by depositing with the Bond Trustee, in trust, cash and/or Government Obligations which are not prepayable or callable prior to the date the moneys therefrom are anticipated to be required in such amount as will provide funds sufficient to pay (i) the principal of and redemption premium, if any, on such Paid Bonds due upon the maturity or redemption of such Paid Bonds, as the case may be; (ii) interest on such Paid Bonds as the same becomes due and payable until the maturity or redemption of such Paid Bonds; and (iii) all amounts, if any, due the Issuer and the Bond Trustee. (d) If the Issuer shall also pay or cause to be paid all other sums payable hereunder by the Issuer with respect to such Paid Bonds, then and in that case this Bond Indenture and the estate and rights granted hereunder shall cease, determine and become null and void as to the Paid Bonds, and thereupon the Bond Trustee shall, upon Written Request of the Issuer, and upon receipt by the Bond Trustee, of an Officer's Certificate of the Borrower and an opinion of Independent Counsel, each stating that in the opinion of the signers all conditions precedent to the satisfaction and discharge of this Bond Indenture with respect to the Paid Bonds have been complied with, forthwith execute proper instruments acknowledging satisfaction of and discharging this Bond Indenture and each related lien with respect to the Paid Bonds. The satisfaction and discharge of this Bond Indenture with respect to the Paid Bonds shall be without prejudice to the rights of the Bond Trustee to charge and be reimbursed by the Borrower for any expenditures which it may thereafter incur in connection herewith or with respect to any Bonds that may remain Outstanding. All moneys, funds, securities, or other property remaining on deposit in the Expense Fund, Bond Sinking Fund, Project Fund or Redemption Fund or in any other fund or investment under this Bond Indenture (other than said Government Obligations or other moneys deposited in trust as above provided and amounts held pursuant to Section 13.2 hereof) with respect to the Paid Bonds shall, upon the full satisfaction of this Bond Indenture with respect to such Paid Bonds, forthwith be transferred, paid over and distributed to the Issuer and the Borrower, as their respective interests may appear or, in the event all Bonds Outstanding are not paid, retained for the benefit of the remainder of the Outstanding Bonds. The Issuer or the Borrower may at any time surrender to the Bond Trustee for cancellation by it any Bonds previously authenticated and delivered which the Issuer or the 52 Borrower may have acquired in any manner whatsoever, and such Bonds, upon such surrender and cancellation, shall be deemed to be paid and retired. SECTION 11.2. LIABILITY OF ISSUER NOT DISCHARGED. Upon the deposit with the Bond Trustee, in trust, at or before maturity, of money or Government Obligations in the necessary amount to pay or redeem all Outstanding Bonds (whether upon or prior to maturity or the redemption date of such Bonds), provided that if such Bonds are to be redeemed prior to the maturity thereof, notice of such redemption shall have been given as in Article V herein provided, or provisions satisfactory to the Bond Trustee shall have been made for the giving of such notice, and compliance with the other payment requirements of Section 11.1, the Bond Indenture may be discharged in accordance with the provisions hereof with respect to the Paid Bonds, but the liability of the Issuer in respect of such Bonds shall continue provided that the holders thereof shall thereafter be entitled to payment only out of the moneys or Government Obligations deposited with the Bond Trustee as aforesaid. SECTION 11.3. SELECTION OF DEFEASED BONDS. If less than all Bonds of a series or maturity are defeased as provided in Section 11.1, the Bonds of such series and maturity to be paid from the trust shall be selected by the Bond Trustee by lot by such method as shall provide for the selection of portions (in Authorized Denominations) of the principal of Bonds of such series and maturity of a denomination larger than the smallest Authorized Denomination. Such selection shall be made within seven days after such trust is established. This selection process shall be in lieu of the selection process otherwise provided with respect to redemption of Bonds. After such selection is made, Bonds that are to be paid from such trust (including Bonds issued in exchange for such Bonds pursuant to the transfer or exchange provisions of this Bond Indenture) shall be identified by a separate CUSIP number or other designation satisfactory to the Trustee. The Trustee shall notify Holders whose Bonds (or portions thereof) have been selected for payment from such trust and shall direct such Bondholders to surrender their Bonds to the Trustee in exchange for Bonds with the appropriate designation. The selection of Bonds for payment from such trust pursuant to this Section shall be conclusive and binding on the Issuer, the Borrower and the Bondholders. SECTION 11.4. WHEN REFUNDING IS NOT PERMITTED. None of the Bonds outstanding hereunder may be refunded as aforesaid nor may this Bond Indenture be discharged if under any circumstances such refunding would result in the loss of any exemption for purposes of federal income taxation to which interest on such Bonds would otherwise be entitled. As a condition precedent to the refunding of any Bonds outstanding hereunder, the Bond Trustee shall receive an Opinion of Bond Counsel to the effect that any exclusion from gross income of interest on any Outstanding tax-exempt Bonds would not be adversely affected by such refunding. 53  ARTICLE XII MANNER OF EVIDENCING OWNERSHIP OF BONDS SECTION 12.1. PROOF OF OWNERSHIP. Any request, direction, consent or other instrument provided by this Bond Indenture to be signed and executed by the Bondholders may be in any number of concurrent writings of similar tenor and may be signed or executed by such Bondholders in person or by any agent appointed in writing. Proof of the execution of any such request, direction or other instrument or of the writing appointing any such agent and of the ownership of Bonds, if made in the following manner, shall be sufficient for any of the purposes of this Bond Indenture and shall be conclusive in favor of the Bond Trustee and the Issuer, with regard to any action taken by them, or either of them, under such request or other instrument, namely: (a) The fact and date of the execution by any person of any such writing may be proved by the certificate of any officer in any jurisdiction who by law has power to take acknowledgments in such jurisdiction, that the person signing such writing acknowledged before him the execution thereof, or by the affidavit of a witness of such execution; and (b) The ownership of Bonds and the amounts and numbers of such Bonds and the date of holding the same shall be proved by the Bond Register. Any action taken or suffered by the Bond Trustee pursuant to any provision of this Bond Indenture, upon the request or with the assent of any Person who at the time is the registered owner of any Bond or Bonds shall be conclusive and binding upon all future owners of the same Bond or Bonds. In determining whether the owners of the required principal amount of Bonds outstanding have taken any action under this Bond Indenture, Borrower Bonds (unless all Bonds which are then outstanding, determined without regard to this Section 12.1, are Borrower Bonds) shall be disregarded and deemed not to be outstanding, except that for the purpose of determining whether the Bond Trustee shall be protected in relying on any such action, only such Bonds which the Bond Trustee knows are so owned shall be so disregarded. Bonds so owned which have been pledged in good faith may be regarded as outstanding if the pledgee establishes to the satisfaction of the Bond Trustee the pledgee's right so to act with respect to such Bonds and that the pledgee is not any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Borrower. In case of a dispute as to such right, any decision by the Bond Trustee taken upon the advice of counsel shall be full protection to the Bond Trustee. 54  ARTICLE XIII MISCELLANEOUS SECTION 13.1. LIMITATION OF RIGHTS. With the exception of rights herein expressly conferred, nothing expressed or mentioned in or to be implied from this Bond Indenture or the Bonds is intended or shall be construed to give to any person or company other than the parties hereto and the holders of the Bonds, any legal or equitable right, remedy or claim under or in respect to this Bond Indenture or any covenants, conditions and provisions herein contained; this Bond Indenture and all of the covenants, conditions and provisions hereof being intended to be and being for the sole and exclusive benefit of the parties hereto and the holders of the Bonds as herein provided. SECTION 13.2. UNCLAIMED MONEYS. Any moneys deposited with the Bond Trustee by the Issuer in accordance with the terms and covenants of this Bond Indenture, in order to redeem or pay any Bond in accordance with the provisions of this Bond Indenture, and remaining unclaimed by the registered owner of the Bond for six (6) years after the date fixed for redemption or of maturity, as the case may be, shall, if the Issuer is not at the time to the knowledge of the Bond Trustee in default with respect to any of the terms and conditions of this Bond Indenture, or in the Bonds contained, be repaid by the Bond Trustee to the Borrower; and thereafter the registered owner of the Bond shall be entitled to look only to the Borrower for payment thereof; provided, however, that the Bond Trustee, before being required to make any such repayment, shall, at the expense of the Borrower, mail to the registered owner thereof at its address, as the same shall last appear on the Bond Register, a notice to the effect that said moneys have not been so applied and that after the date named in said notice any unclaimed balance of said moneys then remaining shall be returned to the Borrower. If the Borrower makes arrangements satisfactory to the Issuer and the Bond Trustee to indemnify the Issuer and the Bond Trustee for any costs which they may incur due to the unavailability of moneys due to such investment, such moneys may be invested in accordance with Section 4.4 hereof. Investment income on any such unclaimed moneys received by the Bond Trustee shall be deposited as provided in Section 4.4 hereof until the final maturity or redemption date of the Bonds. Any such income generated after such date shall be deemed to be unclaimed moneys of the type referred to in the first sentence of this Section and shall be disposed of in accordance with such sentence. The Borrower, by approval of this Bond Indenture as evidenced by the Loan Agreement, covenants and agrees to indemnify and save the Issuer and the Bond Trustee harmless from any and all loss, costs, liability and expense suffered or incurred by the Issuer and the Bond Trustee by reason of having returned any such moneys to the Borrower as herein provided. SECTION 13.3. SEVERABILITY. If any provision of this Bond Indenture shall be held or deemed to be or shall, in fact, be inoperative or unenforceable as applied in any particular case in any jurisdiction or jurisdictions or in all jurisdictions, or in all cases because it conflicts with any other provision or provisions or any constitution or statute or rule of public policy, or for any other reason, such circumstances shall not have the effect of rendering the provision in question inoperative or unenforceable in any other case or circumstance, or of rendering any other provision or provisions herein contained invalid, inoperative, or unenforceable to any extent whatever. 55  The invalidity of any one or more phrases, sentences, clauses or Sections in this Bond Indenture contained, shall not affect the remaining portions of this Bond Indenture, or any part thereof. SECTION 13.4. NOTICES. Except as otherwise provided in this Bond Indenture, all notices, certificates or other communications hereunder shall be sufficiently given and shall be deemed given when in writing and mailed by first class mail, postage prepaid, with proper address as indicated below. Any of such parties may, by written notice given by such party to the others, designate any address or addresses to which notices, certificates or other communications to them shall be sent when required as contemplated by this Bond Indenture. Until otherwise provided by the respective parties, all notices, certificates and communications to each of them shall be addressed as follows: To the Issuer: Okaloosa County, Florida 101 E. James Lee Boulevard Crestview, Florida 32536 Attention: Finance Director Telephone No.: 850/689-5000 x 3411 To the Borrower: Auburn Water System, Inc. 3097 Locke Lane Crestview, Florida 32536 Attention: President Telephone No.: 850/682-1258 To the Bond Trustee: ________________________ ________________________ ________________________ Attention: _______________ Telephone No.: ___________ The Bond Trustee shall give Immediate Notice to each owner of Bonds of any change in the addresses of the Bond Trustee. SECTION 13.5. ADDITIONAL NOTICES TO RATING AGENCIES. The Bond Trustee hereby agrees that if at any time (i) payment of principal and interest on the Bonds is accelerated pursuant to the provisions of Section 7.2 hereof, (ii) the Issuer, at the direction of the Borrower, shall redeem all or any portion of the Bonds outstanding hereunder prior to maturity, (iii) a successor Bond Trustee is appointed hereunder, (iv) the Bondholders shall consent to any amendment to this Bond Indenture, the Loan Agreement or shall waive any provision of this Bond Indenture or the Loan Agreement, or (v) the Issuer or the Borrower shall provide for the payment of all or any portion of the Bonds outstanding hereunder prior to maturity pursuant to Section 11.1 or 11.3 hereof, then, in each case, the Bond Trustee will promptly give notice of the occurrence of such event to each Rating Agency then maintaining a rating on the Bonds, which notice in the case of an event referred to in clause (iv) hereof shall include a copy of any such amendment or waiver. 56  SECTION 13.6. COUNTERPARTS. This Bond Indenture may be simultaneously executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. SECTION 13.7. APPLICABLE LAW. This Bond Indenture shall be governed exclusively by the applicable laws of the State. SECTION 13.8. IMMUNITY OF OFFICERS, EMPLOYEES AND MEMBERS OF ISSUER. No recourse shall be had for the payment of the principal of or premium, if any, or interest on any of the Bonds or for any claim based thereon or upon any obligation, covenant or agreement in this Bond Indenture contained against any past, present or future officer, director, member, employee or agent of the Issuer or any incorporator, officer, director, member, trustee, employee or agent of any successor corporation or body politic or of the State or any agency or political subdivision thereof, as such, either directly or through the Issuer or any successor corporation or body politic or of the State or any agency or political subdivision thereof, under any rule of law or equity, statute or constitution, or by the enforcement of any assessment or penalty or otherwise, and all such liability of any such incorporators, officers, directors, trustees, members, employees or agents as such is hereby expressly waived and released as a condition of and consideration for the execution of this Bond Indenture and the issuance of such Bonds. 57  [SIGNATURE PAGE FOR THE BOND TRUST INDENTURE] IN WITNESS WHEREOF, the Issuer has caused this Bond Indenture to be signed in its name and on its behalf by the Chairman of its Board of County Commissioners and attested by its Clerk, and ___________________ to evidence its acceptance of the trusts, created by this Bond Indenture has caused these presents to be signed in its name and on its behalf by one of its Authorized Signatories all as of the day and year first above written. OKALOOSA COUNTY, FLORIDA, as Issuer (SEAL) By: Chairman, Board of County Commissioners ATTEST: By: Clerk _____________________________, as Bond Trustee By: Authorized Signatory 58  EXHIBIT A FORM OF BOND UNITED STATES OF AMERICA STATE OF FLORIDA OKALOOSA COUNTY, FLORIDA UTILITIES SYSTEM REVENUE BOND, SERIES _____ (AUBURN WATER SYSTEM, INC. PROJECT) R-___ $__________ INTEREST RATE MATURITY DATE DATED DATE CUSIP _______ 1, ____ _______ ___, ______ REGISTERED OWNER: CEDE & CO. PRINCIPAL AMOUNT: Okaloosa County, Florida (the "Issuer"), a political subdivision of the State of Florida, for value received, hereby promises to pay in lawful money of the United States of America to the registered owner set forth above, or registered assigns, on the Maturity Date (as identified above), unless this Series ____ Bond shall be redeemable and shall have previously been called for redemption and payment of the redemption price made or provided for, but solely from amounts available under the Bond Indenture (hereinafter defined) and certain amounts payable under the Loan Agreement (hereinafter defined), which amounts and payments are pledged and assigned for the benefit and payment hereof pursuant to the Bond Indenture and not otherwise, the principal amount set forth above upon presentation and surrender thereof at the designated corporate trust office of __________________________, ________ , ________, as Bond Trustee, or its successor in trust under the Bond Indenture (as hereinafter defined) and to pay interest (computed as described herein and in the Bond Indenture) on such principal amount, but solely from said amounts available under the Bond Indenture and payable under the Loan Agreement, payable on each Interest Payment Date (as hereinafter defined) until payment of such principal amount, or provision therefor, shall have been made upon redemption or at maturity. Interest payments on this Bond (other than with respect to Defaulted Interest) shall be made to the registered owner hereof appearing on the Bond Register as of the close of business of the Bond Registrar on the Record Date. Interest on the Bonds shall, except as hereinafter provided, be paid by check or draft of the Bond Trustee mailed on the Interest Payment Date to such registered owner at the address of such owner as it appears on the Bond Register or at such other address furnished in writing by such registered owner to the Bond Trustee, or to any owner of $1,000,000 or more in aggregate principal amount of Bonds as of the close of business of the Bond Trustee on the Record Date for a particular Interest Payment Date, by wire transfer sent on A-1 the Interest Payment Date, to such owner. The foregoing notwithstanding, Defaulted Interest shall be payable as provided in the Bond Indenture. This Series ____ Bond is one of an authorized Series of Bonds issued under the hereinafter described Bond Indenture in the aggregate original principal amount of $__________ (the "Series ___ Bonds") for the purpose of loaning funds to Auburn Water System, Inc., a Florida non-profit corporation, (the "Borrower"), which will be used, together with certain other moneys, to (i) [finance all or a portion of the costs of acquiring and constructing improvements to the Borrower's existing water utility system], (ii) [refunding certain indebtedness of the Borrower], and (iii) pay certain expenses incurred in connection with the issuance of the Bonds, all as permitted under the Act. The proceeds derived from the sale of the Bonds will be loaned to the Borrower pursuant to a Loan Agreement dated as of April 1, 2014 between the Borrower and the Issuer (as amended from time to time, the "Loan Agreement"). The Series ______ Bonds, together with (i) the Issuer's Utility System Revenue Bonds, Series _____ and (ii) any Additional Bonds which may be issued on a parity therewith (collectively, the "Bonds") are issued under and equally and ratably secured by and entitled to the security of a Bond Trust Indenture dated as of April 1, 2014, (the "Bond Indenture") duly executed and delivered by the Issuer to _____________________ (the "Bond Trustee"), pursuant to which Bond Indenture, all of the right, title and interest of the Issuer in and to the Loan Agreement (excluding Unassigned Rights, as defined in the Bond Indenture) are assigned by the Issuer to the Bond Trustee as security for the Bonds. Under the terms of the Bond Indenture, all or any portion of the Bonds may be refunded through a deposit in escrow for the benefit of such refunded Bonds of cash or Government Obligations (as defined in the Bond Indenture) and become payable solely from such cash and Government Obligations. Reference is made to the Bond Indenture and the Loan Agreement and to all amendments thereto for the provisions, among others, with respect to the nature and extent of the security, the rights, duties and obligations of the Issuer and the Bond Trustee and the rights of the owners of the Bonds, and to all the provisions of which the owner hereof by the acceptance of this Series ____ Bond assents. NOTICE OF LIMITED OBLIGATION THIS SERIES ____ BOND AND SUCH OTHER BONDS OF THE SERIES OF WHICH IT FORMS A PART, AND THE INTEREST PAYABLE HEREON, DO NOT CONSTITUTE A DEBT OR LIABILITY OF THE STATE OF FLORIDA (THE "STATE") OR OF ANY POLITICAL SUBDIVISION OR AGENCY THEREOF OTHER THAN THE ISSUER, OR A PLEDGE OF THE FAITH AND CREDIT OF THE ISSUER, THE STATE OR ANY POLITICAL SUBDIVISION THEREOF BUT SHALL BE PAYABLE SOLELY FROM THE FUNDS PLEDGED THEREFOR IN ACCORDANCE WITH THE BOND INDENTURE. THE ISSUANCE OF THE BONDS UNDER THE PROVISIONS OF THE ACT DOES NOT, DIRECTLY, INDIRECTLY OR CONTINGENTLY, OBLIGATE THE STATE OR ANY POLITICAL SUBDIVISION OR AGENCY THEREOF TO LEVY ANY FORM OF TAXATION FOR THE PAYMENT THEREOF OR TO MAKE ANY APPROPRIATION FOR THEIR PAYMENT, AND THE BONDS AND THE INTEREST PAYABLE THEREON DO NOT NOW AND SHALL NEVER CONSTITUTE A DEBT OF THE ISSUER OF THE STATE WITHIN THE MEANING OF THE CONSTITUTION OR THE STATUTES OF THE STATE AND DO NOT NOW AND SHALL NEVER CONSTITUTE A CHARGE AGAINST THE A-2 CREDIT OR TAXING POWER OF THE ISSUER, THE STATE OR ANY POLITICAL SUBDIVISION OR AGENCY THEREOF. THE STATE SHALL NOT IN ANY EVENT BE LIABLE FOR THE PAYMENT OF THE PRINCIPAL OF, PREMIUM, IF ANY, OR INTEREST ON THE BONDS OR FOR THE PERFORMANCE OF ANY PLEDGE, OBLIGATION OR AGREEMENT OF ANY KIND WHATSOEVER WHICH MAY BE UNDERTAKEN BY THE ISSUER. THIS SERIES ____ BOND AND THE OTHER BONDS, AND THE INTEREST AND PREMIUM, IF ANY, PAYABLE HEREON AND THEREON, ARE LIMITED OBLIGATIONS OF THE ISSUER AND ARE PAYABLE SOLELY (i) FROM PAYMENTS OR PREPAYMENTS TO BE MADE UNDER THE LOAN AGREEMENT, (ii) FROM CERTAIN MONEYS HELD BY THE BOND TRUSTEE UNDER THE BOND INDENTURE, AND (iii) FROM THE INCOME FROM THE TEMPORARY INVESTMENT OF ANY OF THE FOREGOING. This Series ____ Bond is registered on the Bond Register and may be transferred by the registered owner hereof at the written request of such registered owner in person or by his duly authorized attorney, but only in the manner, subject to the limitations and upon the payment of the charges provided in the Bond Indenture, and upon surrender and cancellation of this Series ____ Bond. Upon such transfer, a new fully registered bond or bonds of the same Subseries and maturity and of authorized denominations for the same aggregate principal amount shall be issued to the transferee in exchange therefor. The person in whose name this Series ____ Bond is registered shall be deemed and regarded as the absolute owner hereof for the purpose of receiving payment of, or on account of, the principal, premium, if any, and interest due hereon and for all other purposes, and neither the Issuer nor the Bond Trustee shall be affected by any notice to the contrary. If any Bond is transferred or exchanged on the Bond Register by the Bond Trustee after notice of the optional redemption of such Bond has been given, the Bond Trustee shall attach a copy of such notice to the Bond issued in connection with such transfer or exchange. The Bonds are issuable only as registered Bonds in Authorized Denominations of $5,000 and any integral multiple in excess thereof. Redemption Mandatory Sinking Fund Redemptions Without Premium. The Bonds shall be subject to mandatory redemption and payment prior to maturity at a redemption price equal to the principal amount thereof plus accrued interest to the redemption date, without premium. Pursuant to Section 4.2 of the Loan Agreement, the Borrower shall deposit in the Bond Sinking Fund a sum that, together with all amounts then on deposit in the Bond Sinking Fund and then available for the redemption of the Bonds, shall be sufficient to redeem (after credit as provided below) the following principal amounts of Bonds on the following sinking fund payment dates: A-3  ________ 1 Principal of the Year Amount *Final Maturity On or before the thirtieth (30th) day prior to any sinking fund payment date, the Bond Trustee shall proceed to select for redemption (by lot in such manner as the Bond Trustee may determine), from all Outstanding Bonds subject to mandatory sinking fund redemption on such date, an aggregate principal amount of such Bonds equal to the amount required to be on deposit in the Bond Sinking Fund with respect to such Bonds on such sinking fund payment date, and shall call such Bonds or portions thereof in Authorized Denominations for redemption from the sinking fund on such sinking fund payment date and give notice of such call. At the option of the Borrower, to be exercised by delivery of a Written Request of the Borrower to the Bond Trustee on or before the sixtieth (60th) day next preceding any sinking fund payment date, it may (i) deliver to the Bond Trustee for cancellation Bonds or portions thereof in Authorized Denominations of the maturity relating to such sinking fund payment date in any aggregate principal amount desired by the Borrower, or (ii) specify a principal amount of Bonds or portions thereof in Authorized Denominations or the maturity relating to such sinking fund payment date which prior to said date have been purchased or redeemed (otherwise than through the operation of the Sinking Fund) and cancelled by the Bond Trustee at the request of the Borrower and not theretofore applied as a credit against any sinking fund payment. Each such Bond or portion thereof so delivered or previously redeemed shall be credited by the Bond Trustee at one hundred percent (100%) of the principal amount thereof against the obligation of the Issuer on such sinking fund payment date with respect to Bonds of such maturity. Any excess shall be credited against the next sinking fund payment relating to the Bonds of such maturity. In the event the Borrower shall avail itself of the provisions of clause (i) of the second sentence of this paragraph, the Written Request shall be accompanied by the Bonds or portions thereof to be cancelled. Optional Redemption. This Series ____ Bond is not redeemable at the option of the Borrower or the Issuer [prior to maturity] [prior to _______ 1, ____]. This Series ____ Bond may be redeemed in whole or in part at the option of the Issuer (upon the direction of the Borrower on any date on or after _______ 1, ____ at a redemption price equal to ____% of the principal amount redeemed plus accrued interest to the redemption date. Any Bonds which are Borrower Bonds are subject to redemption in whole or in part (in an Authorized Denomination) prior to their Maturity Date at the option of the Issuer upon direction of the Borrower out of amounts deposited in the Redemption Fund by the Borrower, in whole or in part (and if in part, in an Authorized Denomination) on any Business Day while such A-4 Bonds are Borrower Bonds at a redemption price equal to 100% of the principal amount thereof plus accrued interest, if any, to the redemption date. [INSERT ADDITIONAL REDEMPTION PROVISIONS] Purchase in Lieu of Redemption. In lieu of an optional redemption and cancellation of Bonds, Bonds may be purchased by the Borrower for its own account and either (i) cancelled, or (ii) remarketed. Notice and selection of Bonds being purchased pursuant to the provisions of Section 5.3 of the Bond Indenture shall be given/selected in the same manner as the notice and selection of Bonds called for optional redemption; provided, that the notice provided for in Section 5.4 of the Bond Indenture shall be modified as necessary to reflect a purchase in lieu of redemption. Notice of Redemption. Except as hereinafter provided, a copy of the notice of the call for any such redemption identifying the Bonds to be redeemed shall be given by first class mail, postage prepaid, to the registered owners of Bonds to be redeemed at their addresses as shown on the Bond Register not less than 30 days prior to the redemption date. Except for mandatory Bond Sinking Fund redemptions, prior to the date that the redemption notice is first given as aforesaid, funds shall be placed with the Bond Trustee to pay such Bonds, any premium thereon and accrued interest thereon to the redemption date, or such notice shall state that any redemption is conditional on such funds being deposited with the Bond Trustee on the redemption date and that a failure to make such deposit shall not constitute an event of default under the Bond Indenture. Failure to give notice in the manner prescribed hereunder with respect to any Bond, or any defect in such notice, shall not affect the validity of the proceedings for redemption for any Bond with respect to which notice was properly given. Upon the happening of the above conditions and if sufficient moneys are on deposit with the Bond Trustee on the applicable redemption date to redeem the Bonds to be redeemed and to pay interest due thereon and premium, if any, the Bonds thus called shall not after the applicable redemption date bear interest, be protected by the Bond Indenture or be deemed to be outstanding under the provisions of the Bond Indenture. The Bond Trustee shall redeem, in the manner provided in the Bond Indenture, such an aggregate principal amount of such Bonds at the principal amount thereof plus accrued interest to the redemption date and unpaid thereon and premium, if any, as will exhaust as nearly as practicable such funds. At the direction of the Borrower, such funds may be invested in United States Government Obligations until needed for redemption payout. If any Bond is transferred or exchanged on the Bond Register by the Bond Registrar after notice has been given calling such Bond for redemption, the Bond Registrar will attach a copy of such notice to the Bond issued in connection with such transfer. Selection of Bonds. In the event that less than all of the Outstanding Bonds or portions thereof shall be redeemed, the maturities of the Bonds to be redeemed shall be designated by the Borrower and, if not so designated, the Bonds to be redeemed shall be redeemed in inverse order of maturity. If less than all Bonds or portions thereof of a single maturity are to be redeemed, they shall be selected by lot in such manner as the Bond Trustee may determine pursuant to the Bond Indenture. A-5  In case a Bond is of a denomination larger than an Authorized Denomination, a portion of such Bond may be redeemed, but Bonds shall be redeemed only in the principal amount of an Authorized Denomination each or any integral multiple thereof. Upon surrender of any Bond for redemption in part only, the Issuer shall execute and the Bond Trustee shall authenticate and deliver to the owner thereof, at the expense of the Borrower, a new Bond or Bonds of the same maturity of Authorized Denominations in an aggregate principal amount equal to the unredeemed portion of the Bond surrendered. Except as otherwise provided in the Bond Indenture, on or before the Business Day prior to the redemption date specified in the notice of redemption, an amount of money which together with all amounts then on deposit in the Bond Sinking Fund or Redemption Fund, as appropriate and available for redemption of the Bonds shall be sufficient to redeem all Bonds called for redemption at the appropriate redemption price, including accrued interest to the date fixed for redemption, shall be paid to the Bond Trustee for deposit in the Bond Sinking Fund or Redemption Fund, as appropriate. On the redemption date the principal amount of each Bond to be redeemed, together with the accrued interest thereon to such date and redemption premium, if any, shall become due and payable; and from and after such date, notice having been given and the deposit having been made in accordance with the provisions of Article V of the Bond Indenture, then, notwithstanding that any Bonds called for redemption shall not have been surrendered, no further interest shall accrue on any such Bonds. From and after such date of redemption (such notice having been given and such deposit having been made), the Bonds to be redeemed shall not be deemed to be Outstanding, and the Issuer shall be under no further liability in respect thereof. All or any portion of the Bonds are subject to advance defeasance by depositing with the Bond Trustee cash and/or Government Obligations (as such term is defined in the Bond Indenture) in an amount, together with the income or increment to accrue thereon, without consideration of any reinvestment thereof, and any uninvested cash, sufficient to pay or redeem (when redeemable) and discharge the indebtedness on all Bonds outstanding under the Bond Indenture at or before their respective maturity dates. All or any portion of the Bonds are also subject to advance defeasance of the Bond Indenture by depositing with the Bond Trustee cash and/or Government Obligations (as such term is defined in the Bond Indenture) in an amount, without consideration of any income or increment to accrue thereon, sufficient to pay or redeem (when redeemable) and discharge the indebtedness on all or a portion of the Bonds outstanding under the Bond Indenture at or before their respective maturity dates, it being understood that the investment income on such Government Obligations may be used for any other purpose under the Act. Upon such payment or provision therefor, together with all other payments required under the Bond Indenture, the Bond Indenture may be discharged with respect to such Bonds in accordance with the provisions thereof, but the Issuer shall remain the obligor on such Bonds, although the owners thereof and the owner hereof shall be entitled to payment solely out of such cash and funds received from such Government Obligations deposited with the Bond Trustee. None of the Bonds outstanding under the Bond Indenture may be refunded as aforesaid nor may the Bond Indenture be discharged if under any circumstances such refunding would result in the loss of any exemption for purposes of federal income taxation to which interest on such Bonds would otherwise be entitled. As a condition precedent to the advance refunding of any Bonds outstanding hereunder, the Bond Trustee shall receive an Opinion of Bond Counsel to A-6 the effect that any exclusion from gross income of interest on such tax-exempt Bonds would not be adversely affected by reason of such refunding. The owner of this Series ____ Bond shall have no right to enforce the provisions of the Bond Indenture or to institute action to enforce the covenants therein, or to take any action with respect to any event of default under the Bond Indenture, or to institute, appear in or defend any suit or other proceedings with respect thereto, except as provided in the Bond Indenture. In certain events, on the conditions, in the manner and with the effect set forth in the Bond Indenture, the principal of all Bonds of all Series issued under the Bond Indenture and then outstanding may become or may be declared due and payable before the stated maturity thereof, together with interest accrued thereon. Modifications or alterations of the Bond Indenture, or of any supplements thereto, may be made only to the extent and in the circumstances permitted by the Bond Indenture. No recourse shall be had for the payment of the principal of or premium or interest on any of the Bonds or for any claim based thereon or upon any obligation, covenant or agreement in the Bond Indenture contained, against any past, present or future officer, director, member, employee or agent of the Issuer, or any incorporator, officer, director, member, trustee, employee or agent of any successor corporation or body politic, as such, either directly or through the Issuer or any successor corporation or body politic, under any rule of law or equity, statute or constitution or by the enforcement of any assessment or penalty or otherwise, and all such liability of any such incorporators, officers, directors, trustees, members, employees or agents, as such, is hereby expressly waived and released as a condition of and consideration for the execution of the Bond Indenture and the issuance of the Bonds. It is hereby certified that all conditions, acts and things required to exist, happen and be performed under the Act and under the Bond Indenture precedent to and in the issuance of this Series ____ Bond, exist, have happened and have been performed, and that the issuance, authentication and delivery of this Series ____ Bond have been duly authorized by a resolution of the Issuer duly adopted. This Series ____ Bond shall not be valid or become obligatory for any purpose or be entitled to any security or benefit under the Bond Indenture until the certificate of authentication hereon shall have been duly executed by the Bond Trustee. A-7  IN WITNESS WHEREOF, as provided by the Act, the Issuer has caused this Series ____ Bond to be executed in its name and on its behalf by the manual or facsimile signature of the Chairman of its Board of County Commissioners and by the manual or facsimile signature of its Clerk, and its facsimile seal to be hereunto affixed, all as of the dated date specified above. OKALOOSA COUNTY, FLORIDA, as Issuer By: Chairman, Board of County Commissioners ATTEST: By: Clerk A-8  CERTIFICATE OF AUTHENTICATION This Series ____ Bond is one of the Bonds described in the within-mentioned Bond Indenture. Authentication Date: ________________ _____________________________, as Bond Trustee By: Authorized Signatory A-9  Unless this certificate is presented by an authorized representative of The Depository Trust Company to the Issuer or its agent for registration of transfer, exchange or payment, and any certificate issued is registered in the name of Cede & Co. or such other name as requested by the authorized representative of The Depository Trust Company and any payment is made to Cede & Co., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL since the registered owner hereof, Cede & Co., has an interest herein. ASSIGNMENT FOR VALUE RECEIVED, the undersigned sells, assigns and transfers unto Insert Social Security or Other Identifying Number of Assignee (Name and Address of Assignee) the within Bond and does hereby irrevocably constitute and appoint ________________ _____________________________, as attorneys to register the transfer of the said Bond on the books kept for registration thereof with full power of substitution in the premises. Dated: Signature Guaranteed: (Authorized Officer) signature must be NOTICE: The signature to this assignment guaranteed by an institution which is a must correspond with the name as it appears participant in the Securities Transfer Agent upon the face of the within Bond in every Medallion Program (STAMP) or similar particular, without alteration or enlargement or program. any change whatever. A-10  EXHIBIT B FORM OF REQUISITION FROM [EXPENSE FUND] [PROJECT FUND] REQUISITION NO. ___ Pursuant to Section [3.1/3.2] of the Bond Trust Indenture dated as of April 1, 2014 by and between ______________________, as bond trustee (the "Bond Trustee") and Okaloosa County, Florida (the "Issuer"), the undersigned __________ of Auburn Water System, Inc. (the "Borrower") hereby requests and authorizes the Bond Trustee to pay to the Borrower or to the person(s) listed on the Disbursement Schedule hereto, from the moneys deposited in the [Expense Fund/Project Fund], the aggregate sum of $__________ to pay such person(s) or to reimburse the Borrower for the advances, payments and expenditures made by it in connection with the items listed on the Disbursement Schedule. [INSERT INFORMATION REQUIRED BY SECTION 3.2 (paragraphs (a) through (c)) WITH RESPECT TO REQUISITIONS FROM THE PROJECT FUND]: In connection with the foregoing request and authorization, the undersigned hereby certifies that the obligations on the attached Disbursement Schedule have been incurred by the Borrower and are presently due and payable and that each item thereof is a necessary [cost of issuance/cost of the Project] and is a proper charge against the [Expense Fund/Project Fund] and has not been paid previously from the [Expense Fund/Project Fund]. This statement and all exhibits hereto, including the Disbursement Schedule, shall be conclusive evidence of the facts and statements set forth herein and shall constitute full warrant, protection and authority to the Bond Trustee for its actions taken pursuant hereto. Dated: __________, _____ AUBURN WATER SYSTEM, INC. By: Its: B-1  DISBURSEMENT SCHEDULE Payee Purpose Amount B-2