**Exhibit4.1**

 

AMERICAN STATES WATER COMPANY

 

AND

 

CHASE MANHATTAN BANK AND TRUST COMPANY, NATIONAL ASSOCIATION

 

TRUSTEE

 

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INDENTURE

 

Dated as of December 1, 1998

 

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DEBT SECURITIES

 

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PARTIALCROSS-REFERENCE TABLE

 
| **Indenture Section** | ** ** | **TIA  Section**             |
|-----------------------|------------|------------------------------|
| 2.04                  |       | 317(b)                       |
| 2.05                  |       | 312(a)                       |
| 2.10                  |       | 316(a) (last  sentence) |
| 4.04                  |       | 314(a)(4)                    |
| 4.05                  |       | 314(a)(1)                    |
| 6.04                  |       | 316(a)(1)(B)                 |
| 6.05                  |       | 316(a)(1)(A)                 |
| 6.07                  |       | 317(a)(1)                    |
| 7.04                  |       | 315(b)                       |
| 7.05                  |       | 313(a)                       |
| 7.05                  |       | 313(d)                       |
| 7.07                  |       | 310(a), 310(b)               |
| 7.10                  |       | 310(b)(1)                    |
| 8.02                  |       | 310(a), 310(b)               |
| 9.04                  |       | 316(c)                       |
| 10.01                 |       | 318(a)                       |
| 10.02                 |       | 313(c)                       |
| 10.03                 |       | 314(c)(1)                    |
|                  |       | 314(c)(2)                    |
| 10.04                 |       | 314(e)                       |

 

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**TABLE OF CONTENTS**

 
| ** **          | ** **                              | **Page** |
|---------------------|-----------------------------------------|----------|
| ** **          | ** **                              |
| ARTICLE 1           | - DEFINITIONS                           | 1        |
|                |                                    |
| SECTION  1.01  | Definitions                             | 1        |
| SECTION  1.02  | Other  Definitions                      | 1        |
| SECTION  1.03  | Rules of  Construction             | 1        |
|                |                                    |
| ARTICLE  2          | -THE  SECURITIES                        | 2        |
|                |                                    |
| SECTION   2.01 | Issuable  in Series                     | 2        |
| SECTION   2.02 | Execution  and Authentication           | 2        |
| SECTION   2.03 | Securities  Agents                      | 3        |
| SECTION   2.04 | Paying  Agent to Hold Money in Trust    | 3        |
| SECTION   2.05 | Securityholder  Lists                   | 3        |
| SECTION   2.06 | Transfer  and Exchange                  | 3        |
| SECTION   2.07 | Replacement  Securities                 | 3        |
| SECTION   2.08 | Outstanding  Securities                 | 3        |
| SECTION   2.09 | Discounted  Securities                  | 4        |
| SECTION   2.10 | Treasury  Securities                    | 4        |
| SECTION   2.11 | Global  Securities                      | 4        |
| SECTION   2.12 | Temporary  Securities                   | 4        |
| SECTION   2.13 | Cancellation                            | 4        |
| SECTION   2.14 | Defaulted  Interest                     | 4        |
|                |                                    |
| ARTICLE  3          | -  REDEMPTION                           | 4        |
|                |                                    |
| SECTION   3.01 | Notices  to Trustee                     | 4        |
| SECTION   3.02 | Selection  of Securities to Be Redeemed | 4        |
| SECTION   3.03 | Notice  of Redemption                   | 5        |
| SECTION   3.04 | Effect  of Notice of Redemption         | 5        |
| SECTION   3.05 | Payment  of Redemption Price            | 5        |
| SECTION   3.06 | Securities  Redeemed in Part            | 5        |
|                |                                    |
| ARTICLE 4           | - COVENANTS                             | 5        |
|                |                                    |
| SECTION  4.01  | Certain Definitions                     | 5        |
| SECTION   4.02 | Payment  of Securities                  | 5        |
| SECTION   4.03 | Overdue  Interest                       | 5        |
| SECTION   4.04 | No  Lien Created, etc.                  | 5        |
| SECTION   4.05 | Compliance  Certificate                 | 6        |
| SECTION   4.06 | SEC  Reports                            | 6        |
|                |                                    |
| ARTICLE  5          | -  SUCCESSORS                           | 6        |
|                |                                    |
| SECTION   5.01 | When  Company May Merge, etc.      | 6        |
|                |                                    |
| ARTICLE  6          | -  DEFAULTS AND REMEDIES                | 6        |
|                |                                    |
| SECTION   6.01 | Events  of Default                      | 6        |
| SECTION   6.02 | Acceleration                            | 7        |
| SECTION   6.03 | Other  Remedies                         | 7        |
| SECTION   6.04 | Waiver  of Past Defaults                | 7        |
| SECTION   6.05 | Control  by Majority                    | 7        |
| SECTION   6.06 | Limitation  on Suits                    | 7        |
| SECTION   6.07 | Collection  Suit by Trustee             | 7        |
| SECTION   6.08 | Priorities                              | 8        |
|                |                                    |
| ARTICLE  7          | -  TRUSTEE                              | 8        |
|                |                                    |
| SECTION   7.01 | Rights  of Trustee                      | 8        |
| SECTION   7.02 | Individual  Rights of Trustee           | 8        |
| SECTION   7.03 | Trustee’s  Disclaimer              | 8        |
| SECTION   7.04 | Notice  of Defaults                     | 9        |
| SECTION   7.05 | Reports  by Trustee to Holders          | 9        |
| SECTION   7.06 | Compensation  and Indemnity             | 9        |
| SECTION   7.07 | Replacement  of Trustee                 | 9        |
| SECTION   7.08 | Successor  Trustee by Merger, etc.      | 9        |
| SECTION   7.09 | Trustee’s  Capital and Surplus     | 10       |
|                |                                    |
| ARTICLE  8          | -  DISCHARGE OF INDENTURE               | 10       |
|                |                                    |
| SECTION   8.01 | Defeasance                              | 10       |
| SECTION   8.02 | Conditions  to Defeasance               | 10       |
|                     |                                         |          |  |

 

i

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**TABLE OF CONTENTS**

(continued)

 
|                 |                                                | **Page** |
|----------------------|-----------------------------------------------------|----------|
| ** **           |                                                |     |
| SECTION   8.03  | Application  of Trust Money                         | 10       |
| SECTION   8.04  | Repayment  to Company                               | 10       |
|                 |                                                |
| ARTICLE  9           | -  AMENDMENTS                                       | 11       |
|                 |                                                |
| SECTION   9.01  | Without  Consent of Holders                         | 11       |
| SECTION   9.02  | With  Consent of Holders                            | 11       |
| SECTION   9.03  | Compliance  with Trust Indenture Act                | 11       |
| SECTION   9.04  | Effect  of Consents                                 | 11       |
| SECTION   9.05  | Notation  on or Exchange of Securities              | 11       |
| SECTION   9.06  | Trustee  Protected                                  | 11       |
|                 |                                                |
| ARTICLE  10          | -  MISCELLANEOUS                                    | 12       |
|                 |                                                |
| SECTION   10.01 | Trust  Indenture Act                                | 12       |
| SECTION   10.02 | Notices                                             | 12       |
| SECTION   10.03 | Certificate  and Opinion as to Conditions Precedent | 12       |
| SECTION   10.04 | Statements  Required in Certificate or Opinion      | 12       |
| SECTION   10.05 | Rules by  Company and Agents                   | 12       |
| SECTION   10.06 | Legal  Holidays                                     | 12       |
| SECTION   10.07 | No  Recourse Against Others                         | 13       |
| SECTION   10.08 | Counterparts                                        | 13       |
| SECTION  10.09  | Governing Law                                       | 13       |
|                      |                                                     |          |  |

 

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INDENTURE dated as of December 1,1998 between AMERICAN STATES WATER COMPANY, a California corporation (“Company”),and CHASE MANHATTAN BANK AND TRUST COMPANY, NATIONAL ASSOCIATION, a nationalbanking association, as trustee (“Trustee”).

 

Each party agrees as followsfor the benefit of the Holders of the Company’s debt securities issued underthis Indenture:

 

**ARTICLE 1**- **DEFINITIONS**

 

**SECTION  1.01****           ****Definitions**.

 

“Affiliate” means any persondirectly or indirectly controlling or controlled by or under direct or indirectcommon control with the Company (other than any trust or other entity subjectto the Employee Retirement Income Security Act of 1974, as amended from time totime and any successor statute).

 

“Agent” means any Registrar,Transfer Agent or Paying Agent with respect to the Securities.

 

“Board” means the Board ofDirectors of the Company or any authorized committee of the Board.

 

“Company” means the partynamed as such above until a successor replaces it and thereafter means thesuccessor.

 

“Default” means any eventwhich is, or after notice or passage of time would be, an Event of Default.

 

“Discounted Security” means aSecurity where the amount of principal due upon acceleration is less than thestated principal amount.

 

“Holder” or “Securityholder”means the person in whose name a Security is registered as to principal andinterest by the Registrar.

 

“Indenture” means thisIndenture and any Securities Resolution as amended or supplemented from time totime.

 

“Officer” means the Chairman,the President, the Chief Financial Officer, any Executive Vice-President, anySenior Vice-President, any Vice-President, the Treasurer, the Secretary, anyAssistant Treasurer, or any Assistant Secretary of the Company.

 

“Officers’ Certificate” meansa certificate signed by two Officers or by an Officer.

 

“Opinion of Counsel” means awritten opinion from legal counsel who is reasonably acceptable to theTrustee.  The counsel may be an employeeof or counsel to the Company or the Trustee.

 

“principal” of a debtsecurity means the principal of the security plus the premium, if and whenapplicable, on the security.

 

“SEC” means the Securitiesand Exchange Commission.

 

“Securities” means the debtsecurities issued under this Indenture.

 

“Securities Resolution” meansa resolution authorizing a series of Securities adopted by the Board.

 

“series” means a series ofSecurities or the Securities of the series.

 

“TIA” means the TrustIndenture Act of 1939 (15 U.S. Code Section 77aaa-77bbbb) as in effect onthe date shown above.

 

“Trustee” means the partynamed as such above until a successor replaces it and thereafter means thesuccessor.

 

“Trust Officer” means theChairman of the Board, the President or any other officer or assistant officerof the Trustee assigned by the Trustee to administer its corporate trustmatters.

 

“United States” means theUnited States of America, its territories and possessions and other areassubject to its jurisdiction.

 

**SECTION  1.02****           ****OtherDefinitions.**

 
| **Term**                                      | ** ** | **Defined in Section** |
|-----------------------------------------------|------------|------------------------|
| “Indenture”                         |       | 6.01                   |
| “Bankruptcy Law”                    |       | 6.01                   |
| “Custodian”                         |       | 6.01                   |
| “Event of Default”                  |       | 10.06                  |
| “Legal Holiday”                     |       | 4.01                   |
| “Lien”                              |       | 2.03                   |
| “Paying Agent”                      |       | 2.03                   |
| “Registrar”                         |       | 4.01                   |
| “Subsidiary”                        |       | 2.03                   |
| “Transfer Agent”                    |       | 3.02                   |
| “U.S. Government “Obligations” |       | 4.01                   |
| “Voting Stock”                      |       | 4.01                   |
| “Yield to Maturity”                 |       | 7.02                   |

 

**SECTION  1.03****           ****Rules ofConstruction.**

 

Unless the context otherwiserequires:

 

(1)  aterm has the meaning assigned to it;

 

1

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(2)  anaccounting term not otherwise defined has the meaning assigned to it inaccordance with generally accepted accounting principles in the United States;

 

(3) generally accepted accounting principles are those applicable from time totime;

 

(4) all terms used in this Indenture that are defined by the TIA, defined by TIAreference to another statute or defined by SEC rule under the TIA have themeanings assigned to them by such definitions;

 

(5)  “or”is not exclusive; and

 

(6) words in the singular include the plural, and in the plural include thesingular.

 

**ARTICLE 2**-**THE SECURITIES**

 

**SECTION  2.01****           ****Issuablein Series.**

 

The aggregate principalamount of Securities that may be issued under this Indenture is unlimited.  The Securities may be issued from time totime in one or more series.  Each seriesshall be created by a Securities Resolution or a supplemental indenture thatestablishes the terms of the series, which may include the following:

 

(1)     the title of the series;

 

(2)     the aggregate principalamount of the series;

 

(3)     the interest rate or rates,if any, or method of calculating the interest rate or rates;

 

(4)     the date from which interestwill accrue;

 

(5)     the record dates for interestpayable on Securities;

 

(6)     the dates when principal andinterest are payable;

 

(7)     the manner of payingprincipal and interest;

 

(8)     the places where principaland interest are payable;

 

(9)     the Registrar, Transfer Agentand Paying Agent;

 

(10)   the terms of any mandatory oroptional redemption by the Company or by the Holder;

 

(11)   the denominations in whichSecurities are issuable;

 

(12)   whether and upon what termsSecurities may be exchanged;

 

(13)   the terms on which Securitiesmay be converted;

 

(14)   whether any Securities willbe represented by a Security in global form and the terms of any globalSecurity;

 

(15)   if amounts of principal orinterest may be determined by reference to an index, formula or other method,the manner for determining such amounts;

 

(16)   provisions for electronicissuance of Securities or for Securities in uncertificated form;

 

(17)   the amount or portion ofprincipal payable upon acceleration of a Discounted Security;

 

(18)   any Events of Default orcovenants in addition to or in lieu of those set forth in this Indenture;

 

(19)   whether and upon what termsSecurities may be defeased;

 

(20)   the form of the Securities;

 

(21)   any terms that may be requiredby or advisable under U.S. or other applicable laws; and

 

(22)   any other terms notinconsistent with this Indenture.

 

All Securities of one seriesneed not be issued at the same time and, unless otherwise provided in theSecurities Resolution or supplemental indenture for such series, a series maybe reopened for issuances of additional Securities of such series.

 

**SECTION  2.02****           ****Executionand Authentication.**

 

Two Officers shall sign theSecurities by manual or facsimile signature. The Company’s seal shall be reproduced on the Securities.

 

If an Officer whose signatureis on a Security no longer holds that office at the time the Security isauthenticated or delivered, the Security shall nevertheless be valid.

 

A Security shall not be validuntil the Security is authenticated by the manual signature of the Registrar.The signature shall be conclusive evidence that the Security has beenauthenticated under this Indenture.

 

Each Security shall be datedthe date of its authentication.

 

Securities may have notations,legends or endorsements required by law, stock exchange rule, agreement orusage.

 

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In the event Securities areissued in electronic or other uncertificated form, such Securities may bevalidly issued without the signatures or seal contemplated by this Section 2.02.

 

**SECTION  2.03****           ****SecuritiesAgents.**

 

The Company shall maintain anoffice or agency where Securities may be authenticated (“Registrar”), whereSecurities may be presented for registration of transfer or for exchange (“TransferAgent”) and where Securities may be presented for payment (“Paying Agent”).  Whenever the Company must issue or deliverSecurities pursuant to this Indenture, the Registrar shall authenticate theSecurities at the Company’s request contained in an Officer’s Certificatedelivered to the Registrar.  The TransferAgent shall keep a register of the Securities and of their transfer andexchange.

 

The Company may appoint morethan one Registrar, Transfer Agent or Paying Agent for a series.  The Company shall notify the Trustee of thename and address of any Agent not a party to this Indenture. If the Companyfails to maintain a Registrar, Transfer Agent or Paying Agent for a series, theTrustee shall act as such.

 

**SECTION  2.04****           ****PayingAgent to Hold Money in Trust**.

 

The Company shall requireeach Paying Agent for a series other than the Trustee to agree in writing thatthe Paying Agent will hold in trust for the benefit of the persons entitledthereto all money held by the Paying Agent for the payment of principal of or intereston the series, and will notify the Trustee of any default by the Company inmaking any such payment.

 

While any such defaultcontinues, the Trustee may require a Paying Agent to pay all money so held byit to the Trustee.  The Company at anytime may require a Paying Agent to pay all money held by it to the Trustee upondelivery to the Paying Agent of an Officer’s Certificate so stating.  Upon payment over to the Trustee of all moneyheld by it in trust, the Paying Agent shall have no further liability for themoney.

 

If the Company or anAffiliate acts as Paying Agent for a series, it shall segregate and hold as aseparate trust fund all money held by it as Paying Agent for the series.

 

**SECTION  2.05****           **S**ecurityholderLists**.

 

The Trustee shall preserve inas current a form as is reasonably practicable the most recent list availableto it of the names and addresses of Securityholders.  If the Trustee is not the Transfer Agent, theCompany shall furnish, or cause the Registrar to furnish, to the Trustee semiannuallyand at such other times as the Trustee may reasonably request a list in suchform and as of such date as the Trustee may reasonably require of the names andaddresses of Holders.

 

**SECTION  2.06****           ****Transferand Exchange**.

 

Where Securities of a seriesare presented to the Transfer Agent with a request to register a transfer or toexchange them for an equal principal amount of Securities of otherdenominations of the series, the Transfer Agent shall register the transfer ormake the exchange if its requirements for such transactions are met.  The Transfer Agent need not exchange orregister the transfer of any Security or portion of a Security selected forredemption. Also, it need not exchange or register the transfer of anySecurities for a period of 15 days before a selection of Securities to beredeemed.

 

The Transfer Agent mayrequire a Holder to pay a sum sufficient to cover any taxes imposed on atransfer or exchange.

 

**SECTION  2.07****           ****ReplacementSecurities.**

 

If the Holder of a Securityclaims that it has been lost, destroyed or wrongfully taken, then, in theabsence of notice to the Company or the Trustee that the Security has beenacquired by a bona fide purchaser, the Company shall issue a replacementSecurity if the Company and the Trustee receive:

 

(1)     evidence satisfactory to themof the loss, destruction or taking;

 

(2)     an indemnity bondsatisfactory to them; and

 

(3)     payment of a sum sufficientto cover their expenses and any taxes for replacing the Security.

 

Every replacement Security isan additional obligation of the Company.

 

**SECTION  2.08****           ****OutstandingSecurities.**

 

The Securities outstanding atany time are all the Securities authenticated by the Registrar except for thosecancelled by it, those delivered to it for cancellation, and those described inthis Section as not outstanding.

 

If a Security is replacedpursuant to Section 2.07, it ceases to be outstanding unless the Trusteeand the Company receive proof satisfactory to them that the replaced Securityis held by a bona fide purchaser.

 

If Securities are consideredpaid under Section 4.02, they cease to be outstanding and interest on themceases to accrue.

 

A Security does not cease tobe outstanding because the Company or an Affiliate holds the Security.

 

**SECTION  2.09****           ****DiscountedSecurities.**

 

In determining whether theHolders of the required principal amount of Securities have concurred in anydirection, waiver or consent, the principal amount of a Discounted Securityshall be the amount of principal that would be due as of the date of suchdetermination if payment of the Security were accelerated on that date.

 

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**SECTION  2.10****           ****TreasurySecurities.**

 

In determining whether theHolders of the required principal amount of Securities have concurred in anydirection, waiver or consent, Securities owned by the Company or an Affiliateshall be disregarded, except that for the purposes of determining whether theTrustee shall be protected in relying on any such direction, waiver or consent,only Securities which the Trustee knows are so owned shall be so disregarded.

 

**SECTION  2.11****           ****GlobalSecurities.**

 

If the Securities Resolutionor supplemental indenture so provides, the Company may issue some or all of theSecurities of a series in temporary or permanent global form.  A global Security may be in registered form,in bearer form with or without coupons or in uncertificated form.  A global Security shall represent that amountof Securities of a series as specified in the global Security or as endorsedthereon from time to time.  At theCompany’s request, the Registrar shall endorse a global Security to reflect theamount of any increase or decrease in the Securities represented thereby.

 

The Company may issue aglobal Security only to a depository designated by the Company.  A depository may transfer a global Securityonly as a whole to its nominee or to a successor depository.

 

The Securities Resolution orsupplemental indenture may establish, among other things, the manner of payingprincipal and interest on a global Security and whether and upon what terms abeneficial owner of an interest in a global Security may exchange such interestfor definitive Securities.

 

The Company, an Affiliate,the Trustee and any Agent shall not be responsible for any acts or omissions ofa depository, for any depository records of beneficial ownership interests orfor any transactions between the depository and beneficial owners.

 

**SECTION  2.12****           ****TemporarySecurities.**

 

Until definitive Securitiesof a series are ready for delivery, the Company may use temporary Securities.Temporary Securities shall be substantially in the form of definitiveSecurities but may have variations that the Company considers appropriate fortemporary Securities. Temporary Securities may be in global form.  Without unreasonable delay, the Company shalldeliver definitive Securities in exchange for temporary Securities.  Until so exchanged, the temporary Securitiesare entitled to the same benefits under this Indenture as definitiveSecurities.

 

**SECTION  2.13****           ****Cancellation.**

 

The Company at any time maydeliver Securities to the Registrar for cancellation.  The Transfer Agent and the Paying Agent shallforward to the Registrar any Securities surrendered to them for payment,exchange or registration of transfer. The Registrar shall cancel all Securities surrendered for payment,registration of transfer, exchange or cancellation which have been received byit. The Registrar shall destroy cancelled Securities unless the Companyotherwise directs.

 

Unless the SecuritiesResolution or supplemental indenture otherwise provides, the Company may notissue new Securities to replace Securities that the Company has paid or thatthe Company has delivered to the Registrar for cancellation.

 

**SECTION  2.14****           ****DefaultedInterest.**

 

If the Company defaults in apayment of interest on Securities, it need not pay the defaulted interest toHolders on the regular record date.  TheCompany may fix a special record date for determining Holders entitled toreceive defaulted interest or the Company may pay defaulted interest in anyother lawful manner.

 

**ARTICLE 3**- **REDEMPTION**

 

**SECTION  3.01****           ****Noticesto Trustee.**

 

Securities of a series thatare redeemable before maturity shall be redeemable in accordance with theirterms and, unless the Securities Resolution or supplemental indenture otherwiseprovides, in accordance with this Article.

 

In the case of a redemptionby the Company, the Company shall notify the Trustee and the Transfer Agent ofthe redemption date and the principal amount of Securities to be redeemed.  The Company shall notify the Trustee andTransfer Agent at least 45 days before the redemption date unless a shorternotice is satisfactory to the Trustee.

 

If the Company is required toredeem Securities, it may reduce the principal amount of Securities required tobe redeemed to the extent it is permitted a credit by the terms of theSecurities and it notifies the Trustee of the amount of the credit and thebasis for it.  If the reduction is basedon a credit for acquired or redeemed Securities that the Company has not previouslydelivered to the Registrar for cancellation, the Company shall deliver theSecurities at the same time as the notice.

 

**SECTION  3.02****           ****Selectionof Securities to Be Redeemed.**

 

If less than all theSecurities of a series are to be redeemed, the Trustee shall select theSecurities to be redeemed by a method the Trustee considers fair andappropriate, which shall reflect any method required by applicable law or stockexchange regulations. The Trustee shall make the selection from the outstandingSecurities of the series not previously called for redemption.  The Trustee may select for redemptionportions of the principal of Securities having denominations larger than theminimum denomination for the series. Securities and portions thereof selectedfor redemption shall be in amounts equal to the minimum denomination for theseries or an integral multiple thereof. Provisions of this Indenture that apply to Securities called forredemption also apply to portions of Securities called for redemption.  At least 20 days before a redemption date,the Trustee shall notify the Company, the Registrar, the Transfer Agent andeach Paying Agent of the Securities to be redeemed and, if a Security is to beredeemed only in part, the principal amount thereof so to be redeemed.

 

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**SECTION  3.03****           ****Noticeof Redemption**.

 

At least 20 days but not morethan 60 days before a redemption date, the Company shall mail a notice ofredemption by first-class mail to each Holder whose Securities are to beredeemed.

 

A notice shall identify theSecurities of the series to be redeemed and shall state:

 

(1)     the redemption date;

 

(2)     the redemption price;

 

(3)     the name and address of thePaying Agent;

 

(4)     that Securities called forredemption, in whole or in part, must be surrendered to the Paying Agent tocollect the redemption price; and

 

(5)     that interest on Securities,or portions thereof, called for redemption ceases to accrue on and after theredemption date.

 

At the Company’s writtenrequest, the Trustee shall give the notice of redemption in the Company’s nameand at its expense.

 

**SECTION  3.04****           ****Effectof Notice of Redemption.**

 

Except as provided below,once notice of redemption is given, Securities called for redemption become dueand payable on the redemption date at the redemption price stated in thenotice.

 

A notice of redemption mayprovide that it is subject to the occurrence of any event before the date fixedfor such redemption as described in such notice (“Conditional Redemption”), andsuch notice of Conditional Redemption shall be of no effect unless all suchconditions to the redemption have occurred on or before such date or have beenwaived by the Company in its sole discretion.

 

**SECTION  3.05****           ****Paymentof Redemption Price**.

 

On or before the redemptiondate, the Company shall deposit with the Paying Agent money sufficient to paythe redemption price of and accrued interest, if any, on all Securities to beredeemed on that date.

 

When the Holder of a Securitysurrenders it for redemption in accordance with the redemption notice, theCompany shall pay, or cause the Paying Agent to pay, to the Holder on theredemption date the redemption price and accrued interest, if any, to suchdate, except that the Company will pay any such interest (except defaultedinterest) to Holders on the record date (as such term is defined in theapplicable Securities Resolution) if the redemption date occurs on an interestpayment date (as such term is defined in the applicable Securities Resolution).

 

**SECTION  3.06****           ****SecuritiesRedeemed in Part.**

 

Upon surrender of a Securitythat is redeemed in part, the Company shall deliver or cause the Transfer Agentto deliver to the Holder a new Security of the same series equal in principalamount to the unredeemed principal amount of the Security surrendered.

 

**ARTICLE 4**- **COVENANTS**

 

**SECTION  4.01****           ****CertainDefinitions.**

 

“Lien” means any mortgage,pledge, security interest or lien.

 

“Subsidiary” means acorporation a majority of whose Voting Stock is owned by the Company or aSubsidiary.

 

“Voting Stock” means capitalstock having voting power under ordinary circumstances to elect directors.

 

“Yield to Maturity” means theyield to maturity on a Discounted Security at the time of its issuance or atthe most recent

 

determination of interest onthe Discounted Security.

 

**SECTION  4.02****           ****Paymentof Securities.**

 

The Company shall pay theprincipal of and interest on a series in accordance with the terms of theSecurities for the series and this Indenture. Principal and interest on a series shall be considered paid on the datedue if the Paying Agent for the series holds on that date money sufficient topay all principal and interest then due on the series.

 

**SECTION  4.03****           ****OverdueInterest.**

 

Unless the SecuritiesResolution or supplemental indenture otherwise provides, the Company shall payinterest on overdue principal of a Security of a series at the rate (or Yieldto Maturity in the case of a Discounted Security) borne by the series; it shallpay interest on overdue installments of interest at the same rate or Yield toMaturity to the extent lawful.

 

**SECTION  4.04****           ****No LienCreated, etc.**

 

This Indenture and theSecurities do not create a Lien, charge or encumbrance on any property of theCompany or any Subsidiary.

 

**SECTION  4.05****           ****ComplianceCertificate**.

 

          The Companyshall deliver to the Trustee, within 120 days after the end of each fiscal yearof the Company, a brief certificate signed on its behalf by the principalexecutive officer, principal financial officer or principal accounting officerof the Company, as to the signer’s knowledge of the Company’s compliance withall conditions and covenants under this Indenture as of the end of such fiscalyear (determined without regard to any period of grace or requirement of noticeprovided herein).

 

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Any other obligor on theSecurities also shall deliver to the Trustee such a certificate similarlysigned as to its compliance with this Indenture within 120 days after the endof each of its fiscal years.

 

**SECTION  4.06****           ****SECReports.**

 

The Company shall file withthe Trustee, within 15 days after the Company is required to file the same withthe SEC, copies of the annual reports and of the information, documents, andother reports (or such portions of the foregoing as the SEC may prescribe)which the Company is required to file with the SEC pursuant to Section 13or 15(d) of the Securities Exchange Act of 1934.

 

Any other obligor on theSecurities shall do likewise as to the above items which it is required to filewith the SEC pursuant to those Sections.

 

**ARTICLE 5**- **SUCCESSORS**

 

**SECTION  5.01****           ****WhenCompany May Merge, etc.**

 

The Company shall not consolidatewith or merge into, or transfer all or substantially all of its assets to, anyperson unless:

 

(1)     the person is organized underthe laws of the United States or a State thereof;

 

(2)     the person assumes bysupplemental indenture all the obligations of the Company under this Indentureand the

 

(3)     Securities; and

 

(4)     immediately after thetransaction no Default exists.

 

The successor shall besubstituted for the Company, and thereafter all obligations of the Companyunder this Indenture and the Securities shall terminate.

 

**ARTICLE 6**- **DEFAULTS AND REMEDIES**

 

**SECTION  6.01****           ****Eventsof Default.**

 

An “Event of Default” on aseries occurs if:

 

(1)     the Company defaults in anypayment of interest on any Securities of the series when the same becomes dueand payable and the Default continues for a period of 60 days;

 

(2)     the Company defaults in thepayment of the principal of any Securities of the series when the same becomesdue and payable at maturity or upon redemption, acceleration or otherwise andthe Default continues for a period of three business days;

 

(3)     the Company defaults in thepayment or satisfaction of any sinking fund obligation with respect to anySecurities of a series as required by the Securities Resolution or supplementalindenture establishing such series and the Default continues for a period ofthree business days;

 

(4)     the Company defaults in theperformance of any of its other agreements applicable to the series and theDefault continues for 90 days after the notice specified below;

 

(5)     the Company pursuant to orwithin the meaning of any Bankruptcy Law:

 

(A)  commences a voluntary case,

 

(B)   consents to the entry of anorder for relief against it in an involuntary case,

 

(C)   consents to the appointmentof a Custodian for it or for all or substantially all of its property, or

 

(D)  makes a general assignmentfor the benefit of its creditors;

 

(6)     a court of competentjurisdiction enters an order or decree under any Bankruptcy Law that:

 

(A)  is for relief against theCompany in an involuntary case,

 

(B)   appoints a Custodian for theCompany or for all or substantially all of its property, or

 

(C)   orders the liquidation of theCompany; and the order or decree remains unstayed and in effect for 60 days; or

 

(7)     any other Event of Defaultprovided for in the series occurs.

 

The term “Bankruptcy Law”means Title 11, U.S. Code or any similar Federal or State law for the relief ofdebtors.  The term “Custodian” means anyreceiver, trustee, assignee, liquidator or a similar official under anyBankruptcy Law.

 

A Default under clause (4) isnot an Event of Default until the Trustee or the Holders of at least 33-1/3% inprincipal amount of the series notify the Company of the Default and the Companydoes not cure the Default within the time specified after receipt of thenotice. The notice must specify the Default, demand that it be remedied andstate that the notice is a “Notice of Default.” If Holders notify the Company of a Default, they shall notify theTrustee at the same time.

 

Thefailure to redeem any Security subject to a Conditional Redemption is not anEvent of Default if any event on which such redemption is so conditioned doesnot occur and is not waived before the scheduled redemption date.

 

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A Default on any series ofSecurities shall not constitute a Default on any other series unless soprovided in such other series.

 

**SECTION  6.02****           ****Acceleration**.

 

If an Event of Default occursand is continuing on a series, the Trustee by notice to the Company, or theHolders of at least 33- 1/3% in principal amount of the series by notice to theCompany and the Trustee, may declare the principal of and accrued interest onall the Securities of the series to be due and payable immediately.  Discounted Securities may provide that theamount of principal due upon acceleration is less than the stated principalamount.

 

The Holders of a majority inprincipal amount of the series by notice to the Trustee may rescind anacceleration and its consequences if the rescission would not conflict with anyjudgment or decree and if all existing Events of Default on the series havebeen cured or waived except nonpayment of principal or interest that has becomedue solely because of the acceleration.

 

**SECTION  6.03****           ****OtherRemedies.**

 

If an Event of Default occursand is continuing on a series, the Trustee may pursue any available remedy tocollect principal or interest then due on the series, to enforce theperformance of any provision applicable to the series, or otherwise to protectthe rights of the Trustee and Holders of the series.

 

The Trustee may maintain aproceeding even if it does not possess any of the Securities or does notproduce any of them in the proceeding.  Adelay or omission by the Trustee or any Securityholder in exercising any rightor remedy accruing upon an Event of Default shall not impair the right orremedy or constitute a waiver of or acquiescence in the Event of Default.  All remedies are cumulative to the extentpermitted by law.

 

**SECTION  6.04****           ****Waiverof Past Defaults.**

 

Unless the SecuritiesResolution or supplemental indenture otherwise provides, the Holders of amajority in principal amount of a series by notice to the Trustee may waive anexisting Default or Event of Default on the series and its consequences except:

 

(1)     an Event of Default underclauses (1), (2) or (3) of Section 6.01, or

 

(2)     a Default in respect of aprovision that under Section 9.02 cannot be amended without the consent ofeach Securityholder affected.

 

**SECTION  6.05****           ****Controlby Majority.**

 

The Holders of a majority inprincipal amount of a series may direct the time, method and place ofconducting any proceeding for any remedy available to the Trustee, or ofexercising any trust or power conferred on the Trustee, with respect to theseries. However, the Trustee may refuse to follow any direction that conflictswith law or this Indenture.

 

**SECTION  6.06****           ****Limitationon Suits.**

 

A Securityholder of a seriesmay pursue a remedy with respect to the series only if:

 

(1)     the Holder gives to theTrustee notice of a continuing Event of Default on the series;

 

(2)     the Holders of at least33-1/3% in principal amount of the series make a request to the Trustee topursue the remedy;

 

(3)     such Holder or Holders offerto the Trustee indemnity satisfactory to the Trustee against any loss,liability or expense;

 

(4)     the Trustee does not complywith the request within 60 days after receipt of the request and the offer ofindemnity; and

 

(5)     during such 60-day period theHolders of a majority in principal amount of the series do not give the Trusteea direction inconsistent with such request.

 

A Securityholder may not usethis Indenture to prejudice the rights of another Securityholder or to obtain apreference or priority over another Securityholder.

 

Notwithstanding any otherprovision in this Indenture, the Holder of any Security shall have the right,which is absolute and unconditional, to receive payment of the principal and(except as contemplated by Section 2.14) interest on such Security on therespective stated maturities expressed in such Security and to institute suitfor the enforcement of any such payment, and such rights shall not be impairedwithout the consent of such Holder.

 

**SECTION  6.07****           ****CollectionSuit by Trustee.**

 

If an Event of Default inpayment of interest, principal or sinking fund payment specified in Section 6.01(1),(2) or (3) occurs and is continuing on a series, the Trustee mayrecover judgment in its own name and as trustee of an express trust against theCompany for the whole amount of principal and interest remaining unpaid on theseries.

 

**SECTION  6.08****           ****Priorities.**

 

If the Trustee collects anymoney for a series pursuant to this Article, it shall pay out the money in thefollowing order:

 

First:  to the Trustee for amounts due under Section 7.06;

 

Second:  to Securityholders of the series for amountsdue and unpaid for principal and interest, ratably, without reference orpriority of any kind, according to the amounts due and payable for principaland interest, respectively; and

 

Third:  to the Company.

 

----

 

The Trustee may fix a paymentdate for any payment to Securityholders.

 

**ARTICLE 7**- **TRUSTEE**

 

**SECTION  7.01****           ****Rightsof Trustee.**

 

(1)     The Trustee may rely on anydocument believed by it to be genuine and to have been signed or presented bythe proper person.  The Trustee need notinvestigate any fact or matter stated in the document.

 

(2)     Before the Trustee acts orrefrains from acting, it may require an Officers’ Certificate or an Opinion ofCounsel.  The Trustee shall not be liablefor any action it takes or omits to take in good faith in reliance on theCertificate or Opinion.

 

(3)     The Trustee may act throughagents and shall not be responsible for the misconduct or negligence of anyagent appointed with due care, unless such Agent is affiliated with theTrustee.

 

(4)     The Trustee shall not beliable for any action it takes or omits to take in good faith in accordancewith a direction received by it pursuant to Section 6.05.

 

(5)     The Trustee may refuse toperform any duty or exercise any right or power which it reasonably believesmay expose it to any loss, liability or expense unless it receives indemnitysatisfactory to it against such loss, liability or expense.

 

(6)     The Trustee shall not beliable for interest on any money received by it except as the Trustee may agreewith the Company.  Money held in trust bythe Trustee need not be segregated from other funds except to the extentrequired by law.

 

(7)     The Trustee shall have noduty with respect to a Default unless it has actual knowledge of the Default.

 

(8)     The Trustee shall not beliable for any action it takes or omits to take in good faith which it believesto be authorized and within its powers.

 

(9)     Any Agent shall have the samerights and be protected to the same extent as if it were Trustee.

 

(10)   The right of the Trustee toperform any discretionary act specified in or contemplated by this Indentureshall not be construed as a duty.

 

(11)   The Trustee shall not berequired to expend or risk its own funds or otherwise incur any financialliability in the performance of any of its duties hereunder, or in the exerciseof any of its rights and powers.

 

(12)   The Trustee may consult withcounsel (who may be counsel for the Company or for the Holders), and with otherexperts, and the written advice or opinion of such counsel or other expertsshall be full and complete authorization and protection in respect of anyaction taken, suffered, or omitted by it hereunder in good faith and inreliance thereon.

 

(13)   Any request or direction ofthe Company mentioned herein shall be sufficiently evidenced by a written ordersigned in the name of the Company by any Officer of the Company and deliveredto the Trustee or by resolution duly adopted by the Board.

 

(14)   Whether or not thereinexpressly provided, every provision of this Indenture relating to the conductor affecting the liability of or affording protection to the Trustee shall besubject to the provisions of this Section.

 

(15)   Except during the continuanceof an Event of Default, the Trustee undertakes to perform such duties and onlysuch duties as are specifically set forth in this Indenture, and no impliedcovenants or obligations shall be read into this Indenture against the Trustee.

 

**SECTION  7.02****           ****IndividualRights of Trustee.**

 

The Trustee in its individualor any other capacity may become the owner or pledgee of Securities and mayotherwise deal with the Company or an Affiliate with the same rights it wouldhave if it were not Trustee.  Any Agentmay do the same with like rights.

 

The Trustee is herebyauthorized to act as trustee under that certain indenture between SouthernCalifornia Water Company and the Trustee, dated September 1, 1993 (the “1993Indenture”) notwithstanding any provisions of this Indenture or the 1993Indenture affecting the relative rights of holders of securities issued undersuch indentures to payment thereon and to security given to secure suchpayment.  Subject to the acceptance ofappointment by a successor trustee under Section 7.07 of this Indentureand/or Section 7.07 of the 1993 Indenture, as applicable, the Trustee isfurther authorized to resign from either or both of its appointments as Trusteehereunder and as trustee under the 1993 Indenture in the event that the Trusteedetermines in good faith that its performance hereunder or thereunder subjectsthe Trustee to a conflict of interest.

 

**SECTION  7.03****           ****Trustee’sDisclaimer.**

 

The Trustee makes norepresentation as to the validity or adequacy of this Indenture or theSecurities;it shall not be accountable for the Company’s use of the proceedsfrom the Securities; it shall not be responsible for any statement in theSecurities; it shall not be responsible for any overissue; it shall not beresponsible for determining whether the form and terms of any Securities wereestablished in conformity with this Indenture; and it shall not be responsiblefor determining whether any Securities were issued in accordance with thisIndenture.

 

**SECTION  7.04****           ****Noticeof Defaults.**

 

If a Default occurs and is continuingon a series and if it is actually known to the Trustee, the Trustee shall maila notice of the Default within 90 days after it occurs to Holders of Securitiesof the series.  Except in the case of aDefault in payment on a series, the Trustee may withhold the notice if and solong as a committee of its Trust Officers in good faith determines thatwithholding the notice is in the interest of Holders of the series.

 

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**SECTION  7.05****           ****Reportsby Trustee to Holders.**

 

Any report required by TIA Section 313(a) tobe mailed to Securityholders shall be mailed by the Trustee on or before June 30of each year.

 

A copy of each report at thetime of its mailing to Securityholders shall be filed with the SEC and eachstock exchange on which any Securities are listed.  The Company shall notify the Trustee when anySecurities are listed on a stock exchange. The Trustee shall send a copy of each such report to the Company.

 

**SECTION  7.06****           ****Compensationand Indemnity.**

 

The Company shall pay to theTrustee from time to time reasonable compensation for its services.  The Trustee’s compensation shall not belimited by any law on compensation of a trustee of an express trust.  The Company shall reimburse the Trustee uponrequest for all reasonable out-of-pocket expenses incurred by it in connectionwith this Indenture.  Such expenses shallinclude the reasonable compensation and expenses of the Trustee’s agents andcounsel.

 

The Company shall indemnifythe Trustee and each of the Trustee’s directors, officers, employees, agents,successors and assigns against any loss or liability incurred in connectionwith the exercise or performance of the powers or duties as Trustee, Registrar,Transfer Agent or Paying Agent.  TheTrustee shall notify the Company promptly of any claim for which it may seekindemnity. The Company shall defend the claim and the Trustee shall cooperatein the defense.  The Trustee may haveseparate counsel, reasonably acceptable to the Company, and the Company shallpay the reasonable fees and expenses of such counsel.

 

The Company need notreimburse any expense or indemnify against any loss or liability incurred bythe Trustee through negligence or willful misconduct.

 

To secure the Company’spayment obligations in this Section, the Trustee shall have a lien prior to theSecurities on all money or property held or collected by the Trustee, exceptthat held in trust to pay principal or interest on particular Securities.  Such lien shall survive the removal orresignation of the Trustee for such period as any amount shall remain due andpayable to the Trustee (including any successor Trustee).

 

**SECTION  7.07****           ****Replacementof Trustee.**

 

A resignation or removal ofthe Trustee and appointment of a successor Trustee shall become effective only upon thesuccessor Trustee’s acceptance of appointment as providedin this Section.

 

The Trustee may resign by sonotifying the Company.  The Holders of amajority in principal amount of the Securities may remove the Trustee by sonotifying the Trustee and may appoint a successor Trustee with the Company’sconsent.

 

The Company may remove theTrustee if:

 

(1)     the Trustee fails to complywith TIA Section 310(a) or TIA Section 310(b) or with Section 7.09;

 

(2)     the Trustee is adjudged abankrupt or an insolvent;

 

(3)     a Custodian or other publicofficer takes charge of the Trustee or its property;

 

(4)     the Trustee becomes incapableof acting; or

 

(5)     an event of the kinddescribed in Section 6.01(5) or (6) occurs with respect to theTrustee.

 

The Company also may removethe Trustee with or without cause if the Company so notifies the Trustee 30days in advance and if no Default occurs during the 30-period.

 

If the Trustee resigns or isremoved or if a vacancy exists in the office of Trustee for any reason, theCompany shall promptly appoint a successor Trustee.

 

If a successor Trustee doesnot take office within 30 days after the retiring Trustee resigns or isremoved, the retiring Trustee, the Company or the Holders of a majority inprincipal amount of the Securities may petition any court of competentjurisdiction for the appointment of a successor Trustee.

 

If the Trustee fails tocomply with TIA Section 310(a) or TIA Section 310(b) orwith Section 7.09, any Securityholder may petition any court of competentjurisdiction for the removal of the Trustee and the appointment of a successorTrustee.

 

A successor Trustee shalldeliver a written acceptance of its appointment to the retiring Trustee and tothe Company.  Thereupon the resignationor removal of the retiring Trustee shall become effective, and the successorTrustee shall have all the rights, powers and duties of the Trustee under thisIndenture.  The successor Trustee shallmail a notice of its succession to Holders. The retiring Trustee shall promptlytransfer all property held by it as Trustee to the successor Trustee, subjectto the lien provided for in Section 7.06.

 

**SECTION  7.08****           ****SuccessorTrustee by Merger, etc**.

 

If the Trustee consolidates,merges or converts into, or transfers all or substantially all of its corporatetrust business to, another corporation, the successor corporation without anyfurther act shall be the successor Trustee.

 

**SECTION  7.09****           ****Trustee’sCapital and Surplus.**

 

The Trustee at all timesshall have a combined capital and surplus of at least $50,000,000 as set forthin its most recent published report of condition; provided, however, that theinitial Trustee hereunder shall have a combined capital and surplus of at least$10,000,000 and shall be a wholly owned subsidiary of a bank with combinedcapital and surplus of at least $50,000,000.

 

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**ARTICLE 8**- **DISCHARGE OF INDENTURE**

 

**SECTION  8.01****           ****Defeasance.**

 

Securities of a series may bedefeased in accordance with their terms and, unless the Securities Resolutionor supplemental indenture otherwise provides, in accordance with this Article.

 

The Company at any time mayterminate as to a series all of its obligations under this Indenture, the Securities of aseries and any related coupons (“legal defeasance option”).  The Company at any time may terminate as to aseries its obligations, if any, under any restrictive covenants which may beapplicable to a particular series (“covenant defeasance option”). However, inthe case of the legal defeasance option, the Company’s obligations in Sections2.03, 2.04, 2.05, 2.06, 2.07, 7.06, 7.07 and 8.04 shall survive until theSecurities of the series are no longer outstanding; thereafter the Company’sobligations in Section 7.06 shall survive.

 

The Company may exercise itslegal defeasance option notwithstanding its prior exercise of its covenantdefeasance option.  If the Companyexercises its legal defeasance option, a series may not be accelerated becauseof an Event of Default.  If the Companyexercises its covenant defeasance option, a series may not be accelerated byreference to any restrictive covenants which may be applicable to a particularseries so defeased under the terms of the series.

 

TheTrustee upon request shall acknowledge in writing the discharge of thoseobligations that the Company terminates.

 

**SECTION  8.02****           ****Conditionsto Defeasance.**

 

The Company may exercise asto a series its legal defeasance option or its covenant defeasance option if:

 

(1)     the Company irrevocablydeposits in trust with the Trustee or another trustee money or U.S. GovernmentObligations;

 

(2)     the Company delivers to theTrustee a certificate from a nationally recognized firm of independentaccountants expressing their opinion that the payments of principal andinterest when due on the deposited U.S. Government Obligations withoutreinvestment plus any deposited money without investment will provide cash atsuch times and in such amounts as will be sufficient to pay principal andinterest when due on all the Securities of the series to maturity orredemption, as the case may be;

 

(3)     immediately after the depositno Default exists;

 

(4)     the deposit does notconstitute a default under any other agreement binding on the Company;

 

(5)     the deposit does not cause theTrustee to have a conflicting interest under TIA Section 310(a) orTIA Section 310(b) as to another series;

 

(6)     the Company delivers to theTrustee an Opinion of Counsel to the effect that Holders of the series will notrecognize income, gain or loss for Federal income tax purposes as a result ofthe defeasance; and

 

(7)     91 days pass after thedeposit is made and during the 91-day period no Default specified in Section 6.01(4) or(5) occursthat is continuing at the end of the period.

 

Before or after a deposit theCompany may make arrangements satisfactory to the Trustee for the redemption ofSecurities at a future date in accordance with Article 3.

 

“U.S. Government Obligations”means direct obligations of the United States which have the full faith andcredit of the United States pledged for payment and which are not callable atthe issuer’s option, or certificates representing an ownership interest in suchobligations.

 

**SECTION  8.03****           ****Applicationof Trust Money.**

 

The Trustee shall hold intrust money or U.S. Government Obligations deposited with it pursuant to Section 8.02.  It shall apply the deposited money and themoney from U.S. Government Obligations through the Paying Agent and inaccordance with this Indenture to the payment of principal and interest onSecurities of the defeased series.

 

**SECTION  8.04****           ****Repaymentto Company**.

 

The Trustee and the PayingAgent shall promptly turn over to the Company upon written request any money orsecurities held by them at any time in excess of amounts required under theterms of the Securities Resolution to be held by them.

 

The Trustee and the PayingAgent shall pay to the Company upon request any money held by them for thepayment of principal or interest that remains unclaimed for one year.  After payment to the Company, Securityholdersentitled to the money must look to the Company for payment as unsecured generalcreditors unless an abandoned property or similar law designates anotherperson.

 

**ARTICLE 9**- **AMENDMENTS**

 

**SECTION  9.01****           ****WithoutConsent of Holders.**

 

The Company and the Trusteemay amend this Indenture and the Securities without the consent of anySecurityholder:

 

(1)     to cure any ambiguity,omission, defect or inconsistency;

 

(2)     to comply with Article 5;

 

(3)     to provide that specificprovisions of this Indenture shall not apply to a series not previously issued;

 

----

 

(4)     to create a series andestablish its terms;

 

(5)     to provide for a separateTrustee for one or more series;

 

(6)     to make any change that doesnot materially adversely affect the rights of any Securityholder under thisIndenture or the Securities; or

 

(7)     to make any change that maybe necessary to comply with the TIA.

 

**SECTION  9.02****           ****WithConsent of Holders**.

 

Unless the SecuritiesResolution otherwise provides, the Company and the Trustee may amend thisIndenture and the Securities with the written consent of the Holders of amajority in principal amount of the Securities of all series affected by theamendment voting as one class.  However,without the consent of each Securityholder affected, an amendment under this Section maynot:

 

(1)     reduce the amount ofSecurities whose Holders must consent to an amendment;

 

(2)     reduce the interest on orchange the time for payment of interest on any Security;

 

(3)     change the dates on whichprincipal and interest on any Security are payable;

 

(4)     change the times at whichprincipal or sinking fund payments are payable pursuant to, or the amounts ofprincipal or sinking fund payments subject to, provisions, if any, relating tomandatory redemption;

 

(5)     reduce the principal of anynon-Discounted Security or reduce the amount of principal of any DiscountedSecurity that would be due upon an acceleration thereof; or

 

(6)     make any change in Section 6.04or 9.02, except to increase the amount of Securities whose Holders must consentto an amendment or waiver or to provide that other provisions of this Indenturecannot be amended or waived without the consent of each Securityholder affectedthereby.

 

An amenment applicable solelyto one or more series, or a provision included solely for the benefit of one ormore series, does not affect Securityholders of any other series.

 

Securityholders need notconsent to the exact text of a proposed amendment or waiver; it is sufficientif they consent to the substance thereof.

 

**SECTION  9.03****           ****Compliancewith Trust Indenture Act.**

 

Every amendment pursuant to Section 9.01or 9.02 shall be set forth in a supplemental indenture that complies with theTIA as then in effect.

 

**SECTION  9.04****           ****Effectof Consents.**

 

An amendment or waiverbecomes effective in accordance with its terms and thereafter binds everySecurityholder entitled to consent to it.

 

A consent to an amendment orwaiver by a Holder of a Security is a continuing consent by the Holder andevery subsequent Holder of a Security that evidences the same debt as theconsenting Holder’s Security.  Any Holderor subsequent Holder may revoke the consent as to his Security if the Trusteereceives notice of the revocation before the amendment or waiver becomeseffective.

 

The Company may fix a recorddate for the determination of Holders entitled to give a consent.  The record date shall not be less than 10 normore than 60 days prior to the first written solicitation of Securityholders.

 

**SECTION  9.05****           ****Notationon or Exchange of Securities.**

 

The Company or the Trusteemay place an appropriate notation about an amendment or waiver on any Securitythereafter authenticated.  The Companymay issue in exchange for affected Securities new Securities that reflect theamendment or waiver.

 

**SECTION  9.06****           ****TrusteeProtected.**

 

The Trustee need not sign anysupplemental indenture that adversely affects its rights.

 

**ARTICLE 10**- **MISCELLANEOUS**

 

**SECTION  10.01****        ****Trust Indenture Act.**

 

The provisions of TIASections 310 through 317 that impose duties on any person (including theprovisions automatically deemed included herein unless expressly excluded bythis Indenture) are a part of and govern this Indenture, whether or notexpressly set forth herein.

 

If any provision of thisIndenture limits, qualifies or conflicts with another provision which isrequired to be included in this Indenture by the TIA, the required provisionshall control.

 

**SECTION  10.02****        ****Notices.**

 

Any notice by one party toanother is duly given if in writing and delivered in person, sent by facsimiletransmission confirmed by mail or mailed by first-class mail to the other’saddress shown below:

 

Company:American States Water Company

 

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630East Foothill Boulevard

SanDimas, California  91773

 

Attention:   Chief Financial Officer

 

Trustee:ChaseManhattan Bank and Trust Company, National Association

101 California Street, Suite 2725

San Francisco, California 94111

 

Attention:  Paula Oswald

 

A party by notice to theother parties may designate additional or different addresses for subsequentnotices. Any notice mailed to a Securityholder shall be mailed to his addressshown on the register kept by the Transfer Agent.  Failure to mail a notice to a Securityholderor any defect in a notice mailed to a Securityholder shall not affect thesufficiency of the notice mailed to other Securityholders or the sufficiency ofany published notice.

 

If a notice is mailed in themanner provided above within the time prescribed, it is duly given, whether ornot the addressee receives it.

 

If the Company mails a noticeto Securityholders, it shall mail a copy to the Trustee and each Agent at thesame time.

 

If in the Company’s opinionit is impractical to mail a notice required to be mailed or to publish a noticerequired to be published, the Company may give such substitute notice as theTrustee approves. Failure to publish a notice as required or any defect in itshall not affect the sufficiency of any mailed notice.

 

All notices shall be in theEnglish language, except that any published notice may be in an officiallanguage of the country of publication.

 

A “notice” includes anycommunication required by this Indenture.

 

**SECTION  10.03****        **Certificate and Opinion as toConditions **Precedent.**

 

Upon any request orapplication by the Company to the Trustee to take any action under thisIndenture, the Company shall if so requested furnish to the Trustee:

 

(1)     an Officers’ Certificatestating that, in the opinion of the signers, all conditions precedent, if any,provided for in this Indenture relating to the proposed action have beencomplied with; and

 

(2)     an Opinion of Counsel statingthat, in the opinion of such counsel, all such conditions precedent, if any,have been complied with.

 

**SECTION  10.04****        **S**tatementsRequired in Certificate or Opinion.**

 

Each certificate or opinionwith respect to compliance with condition or covenant provided for in thisIndenture shall include:

 

(1)     a statement that the personmaking such certificate or opinion has read such covenant or condition;

 

(2)     a brief statement as to thenature and scope of the examination or investigation upon which the statementsor opinions contained in such certificate or opinion are based;

 

(3)     as to each certificate, astatement that, in the opinion of such person, he has made such examination orinvestigation as is necessary to enable him to express an informed opinion asto whether or not such covenant or condition has been complied with; and

 

(4)     a statement as to whether ornot, in the opinion of such person, such condition or covenant has beencomplied with.

 

**SECTION  10.05****        ****Rules by Company and Agents.**

 

The Company may makereasonable rules for action by or at a meeting of Securityholders.  An Agent may make reasonable rules andset reasonable requirements for its functions.

 

**SECTION  10.06****        ****Legal Holidays.**

 

A “Legal Holiday” is aSaturday, a Sunday or a day on which banking institutions in California or NewYork are not required to be open.  If apayment date is a Legal Holiday at a place of payment, unless the SecuritiesResolution otherwise provides, payment may be made at that place on the nextsucceeding day that is not a Legal Holiday, and no interest shall accrue forthe intervening period.

 

**SECTION  10.07****        ****No Recourse Against Others.**

 

A director, officer, employeeor shareholder, as such, of the Company shall not have any liability for anyobligations of the Company under the Securities or the Indenture or for anyclaim based on, in respect of or by reason of such obligations or theircreation.  Each Securityholder byaccepting a Security waives and releases all such liability.  The waiver and release are part of theconsideration for the issue of the Securities.

 

**SECTION  10.08****        ****Counterparts.**

 

This Indenture may beexecuted by the parties in counters, each of which shall be an original, butall of such counterparts shall together constitute one and the same instrument.

 

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**SECTION  10.09****        ****Governing Law.**

 

The laws of the State ofCalifornia shall govern this Indenture and the Securities, unless federal lawgoverns.

 

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| SIGNATURES                           |   |
|--------------------------------------|--------|
|                                 |   |
| AMERICAN  STATES WATER COMPANY       |   |
|                                 |   |
|                                 |   |
| By  /s/ McClellan Harris III         |   |
| McClellan  Harris III                |   |
| Chief  Financial Officer             |   |
| Vice  President - Finance            |   |
| Treasurer  and Corporate             |   |
| Secretary                            |   |
|                                 |   |
|                                 |   |
| CHASE  MANHATTAN BANK AND            |   |
| TRUST  COMPANY, NATIONAL ASSOCIATION |   |
|                                 |   |
|                                 |   |
| By  /s/ Paula Oswald                 |   |
| Paula  Oswald                        |   |
| Assistant  Vice President            |   |

 

1

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**FIRSTSUPPLEMENTAL INDENTURE**

 

This FIRST SUPPLEMENTALINDENTURE, is dated as of July 31, 2009 (this “**SupplementalIndenture**”) between American States Water Company, a corporationduly organized and existing under the laws of the State of California(hereinafter called the “**Company**”), andThe Bank of New York Mellon Trust Company, N.A. (formerly known as The Bank ofNew York Trust Company, N.A.), as successor to JPMorgan Chase Bank, NationalAssociation (formerly Chase Manhattan Bank and Trust Company, NationalAssociation, and then J.P. Morgan Trust Company, National Association), asTrustee (hereinafter called the “**Trustee**”).

 

**RECITALS**

 

**WHEREAS**, the Company and the Trustee haveexecuted and delivered an Indenture dated as of December 1, 1998 (the “**Original Indenture**”) providing, among other things, for theissuance from time to time by the Company of its debt securities in one or moreseries as provided in the Original Indenture;

 

**WHEREAS**, the Original Indenture permits theCompany and the Trustee to amend the Original Indenture to make any change thatdoes not materially affect the rights of any Securityholder or the Securitieswithout the consent of the Securityholders;

 

**WHEREAS**, the Company has duly authorized theexecution and delivery of this Supplemental Indenture; and

 

**WHEREAS**, all things necessary to make thisSupplemental Indenture a valid agreement of the Company, in accordance with itsterms, have been done.

 

**NOW,THEREFORE, THIS SUPPLEMENTAL INDENTURE WITNESSETH:**

 

For and in considerationof the premises, it is mutually covenanted and agreed as follows:

 

1.             *Original Indenture Terms*. All terms used in this Supplemental Indenture which are defined in the OriginalIndenture shall have the meanings assigned to them in the OriginalIndenture.  Except as otherwise set forthin any supplemental indenture or Securities Resolution, all references in theOriginal Indenture to “this Indenture” (and indirect references such as “hereunder,”“hereby” and “herein”) shall be deemed to be references to the OriginalIndenture as amended by this Supplemental Indenture with respect to allSecurities issued after July 31, 2009.

 

2.             *Modification of Terms*. The Original Indenture is hereby amended as follows with respect to allSecurities issued after July 31, 2009:

 

(a)           The definition of “Officer” in Section 1.01 ofthe Original Indenture is amended to read in its entirety as follows:

 

**“Officer”** means the Chief Executive Officer, the President, theChief Financial Officer, the Chief Operating Officer, any Executive VicePresident, any Senior Vice President, any Vice President, the Treasurer, anyAssistant Treasurer, the Secretary, any Assistant Secretary, the Controller orany Assistant Controller of the Company.

 

(b)           The definition of “Opinion of Counsel” in Section 1.01of the Original Indenture is amended to read in its entirety as follows:

 

**“Opinionof Counsel”** meansa written opinion from legal counsel who is reasonably acceptable to theTrustee.  The counsel may be an employeeof or counsel to the Company.

 

(c)           Section 2.02 of the Original Indenture is amendedby adding the following paragraph at the end of Section 2.02:

 

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Priorto authenticating such Securities, the Trustee shall receive an Opinion ofCounsel stating that:

 

(1)           The form and terms of such Securities have beenestablished in conformity with the provisions of this Indenture;

 

(2)           Such Securities, when authenticated and delivered bythe Trustee and issued by the Company in the manner and subject to anyconditions specified in such Opinion of Counsel, will constitute valid andbinding obligations of the Company enforceable in accordance with their terms,except as the enforceability thereof may be limited by bankruptcy, insolvency,reorganization, moratorium, or other laws relating to or affecting creditors’rights and by general principles of equity; and

 

(3)           All conditions precedent to the execution and deliveryby the Company of such Securities have been complied with.

 

(d)           Section 4.06 of the Original Indenture is amendedby adding the following paragraph at the end of Section 4.06:

 

Deliveryof such reports, information and documents to the Trustee is for informationalpurposes only and the Trustee’s receipt of such shall not constituteconstructive notice of any information contained therein or determinable frominformation contained therein, including the Company’s compliance with any ofits covenants hereunder (as to which, subject to Section 7.01(a), theTrustee is entitled to conclusively rely exclusively on Officers’Certificates).

 

(e)           Section 7.01 of the Original Indenture is amendedto read in its entirety as follows:

 

(a)           Except during the continuance of an Event of Default,

 

(1)           the Trustee undertakes to perform such duties and onlysuch duties as are specifically set forth in this Indenture, and no impliedcovenants or obligations shall be read into this Indenture against the Trustee;and

 

(2)           in the absence of bad faith on its part, the Trusteemay conclusively rely, as to the truth of the statements and the correctness ofthe opinions expressed therein, upon certificates or opinions furnished to theTrustee and conforming to the requirements of this Indenture; but in the caseof any such certificates or opinions which by any provision hereof arespecifically required to be furnished to the Trustee, the Trustee shall beunder a duty to examine the same to determine whether or not they conform tothe requirements of this Indenture (but need not confirm or investigate theaccuracy of mathematical calculations or other facts stated therein).

 

(b)           In case an Event of Default has occurred and iscontinuing, the Trustee shall exercise such of the rights and powers vested init by this Indenture, and use the same degree of care and skill in theirexercise, as a prudent person would exercise or use under the circumstances inthe conduct of his or her own affairs.

 

(c)           No provision of this Indenture shall be construed torelieve the Trustee from liability for its own negligent action, its ownnegligent failure to act, or its own willful misconduct, except that:

 

(1)           This Subsection shall not be construed to limit theeffect of Subsection (a) of this Section 7.01;

 

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(2)           The Trustee shall not be liable for any error ofjudgment made in good faith by a Trust Officer unless it shall be proved thatthe Trustee was negligent in ascertaining the pertinent facts;

 

(3)           The Trustee shall not be liable with respect to any actiontaken or omitted to be taken by it in good faith in accordance with thedirection of the Holders of a majority in principal amount of the OutstandingSecurities of any series relating to the time, method and place of conductingany proceeding for any remedy available to the Trustee, or exercising any trustor power conferred upon the Trustee, under this Indenture with respect to theSecurities of such series; and

 

(4)           No provision of this Indenture shall require theTrustee to expend or risk its own funds or otherwise incur any financialliability in the performance of any of its duties hereunder, or in the exerciseof any of its rights or powers.

 

(d)           The Trustee shall have the following additionalrights:

 

(1)           The Trustee may rely on any document believed by it tobe genuine and to have been signed or presented by the proper person.  The Trustee need not investigate any fact ormatter stated in the document.

 

(2)           Before the Trustee acts or refrains from acting, itmay require an Officers’ Certificate or an Opinion of Counsel.  The Trustee shall not be liable for anyaction it takes or omits to take in good faith in reliance on the Certificateor Opinion.

 

(3)           The Trustee may act through agents and shall not beresponsible for the misconduct or negligence of any agent appointed with duecare, unless such Agent is affiliated with the Trustee.

 

(4)           The Trustee may refuse to perform any duty or exerciseany right or power which it reasonably believes may expose it to any loss,liability or expense unless it receives indemnity satisfactory to it againstsuch loss, liability or expense.

 

(5)           The Trustee shall not be liable for interest on anymoney received by it except as the Trustee may agree with the Company.  Money held in trust by the Trustee need notbe segregated from other funds except to the extent required by law.

 

(6)           The Trustee shall have no duty with respect to aDefault unless it has actual knowledge of the Default.

 

(7)           The Trustee shall not be liable for any action ittakes or omits to take in good faith which it believes to be authorized andwithin its powers.

 

(8)           Any Agent shall have the same rights and be protectedto the same extent as if it were Trustee.

 

(9)           The right of the Trustee to perform any discretionaryact specified in or contemplated by this Indenture shall not be construed as aduty.

 

(10)         Any request or direction of the Company mentionedherein shall be sufficiently evidenced by a written order signed in the name ofthe Company by any Officer of the Company and delivered to the Trustee or byresolution duly adopted by the Board.

 

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(11)         The Trustee shall not be deemed to have notice of anyDefault or Event of Default unless a Trust Officer has actual knowledge thereofor unless written notice of any event which is in fact such a default isreceived by the Trustee at the Corporate Trust Office of the Trustee, and suchnotice references the Securities and this Indenture.

 

(12)         In no event shall the Trustee be responsible or liablefor any failure or delay in the performance of its obligations hereunderarising out of or caused by, directly or indirectly, forces beyond its control,including, without limitation strikes, work stoppages, accidents, acts of waror terrorism, civil or military disturbances, nuclear or natural catastrophesor acts of God, and interruptions, loss or malfunctions of utilities,communications or computer (software and hardware) services; it beingunderstood that the Trustee shall use reasonable efforts which are consistentwith accepted practices in the banking industry to resume performance as soonas practicable under the circumstances.

 

(e)           Whether or not therein expressly so provided, everyprovision of this Indenture relating to the conduct or affecting the liabilityof or affording protection to the Trustee shall be subject to the provisions ofthis Section 7.01.

 

(f)            Section 7.02 of the Original Indenture is amendedto read in its entirety as follows:

 

The Trustee in its individual or any other capacitymay become the owner or pledgee of Securities and may otherwise deal with theCompany or an Affiliate with the same rights it would have if it were notTrustee.  Any Agent may do the same withlike rights.

 

The Trustee is hereby authorized to act as trusteeunder that certain indenture between Golden State Water Company (formerly knownas Southern California Water Company) and the Trustee, dated September 1,1993, as supplemented (the “1993 Indenture”), notwithstanding any provisions ofthis Indenture or the 1993 Indenture affecting the relative rights of holdersof securities issued under such indentures to payment thereon and to securitygiven to secure such payment.  Subject tothe acceptance of appointment by a successor trustee under Section 7.07 ofthis Indenture and/or Section 7.07 of the 1993 Indenture, as applicable,the Trustee is further authorized to resign from either or both of itsappointments as Trustee hereunder and as trustee under the 1993 Indenture inthe event that the Trustee determines in good faith that its performancehereunder or thereunder subjects the Trustee to a conflict of interest.

 

(g)           Section 7.06 of the Original Indenture is amendedby adding the following paragraph at the end of Section 7.06:

 

Whenthe Trustee incurs expenses or renders services in connection with an Event ofDefault specified in Section 6.01(5) or Section 6.01(6), theexpenses (including the reasonable charges and expenses of its counsel) and thecompensation for the services are intended to constitute expenses ofadministration under any applicable Federal or state bankruptcy, insolvency orother similar law.

 

(h)           Section 9.06 of the Original Indenture is amendedby adding the following paragraph at the end of Section 9.06:

 

Inexecuting any supplemental indenture, the Trustee will receive, and (subject toSection 9.01) will be fully protected in relying upon, an Officers’Certificate and an Opinion of Counsel stating that the execution of suchsupplemental indenture is authorized or permitted by this Indenture.

 

(i)            Section 10.02 of the Original Indenture isamended to read in its entirety as follows:

 

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Anynotice by one party to another is duly given if in writing and delivered inperson, sent by facsimile or electronic transmission and confirmed by mail ormailed by first-class mail to the other’s address shown below:

 
| Company:                                                   | American States Water  Company          |   |
|------------------------------------------------------------|-----------------------------------------|--------|
|                                                       | 630 East Foothill  Boulevard            |   |
|                                                       | San Dimas, California  91773            |   |
|                                                       | Attention: Chief  Financial Officer     |   |
|                                                       |                                    |   |
| Trustee:  The Bank of New York Mellon Trust  Company, |                                    |
| N.A.                                                       |                                    |   |
|                                                       | 700 South Flower Street, Suite 500 |   |
|                                                       | Los Angeles, CA 90017                   |   |
|                                                       | Attention: Corporate Trust Department   |   |

 

Aparty by notice to the other parties may designate additional or differentaddresses for subsequent notices.

 

Anynotice mailed to a Securityholder shall be mailed to the address of theSecurityholder shown on the register kept by the Transfer Agent.  Failure to mail a notice to a Securityholderor any defect in a notice mailed to a Securityholder shall not affect thesufficiency of the notice mailed to other Securityholders or the sufficiency ofany published notice.

 

If anotice is mailed in the manner provided above within the time prescribed, it isduly given, whether or not the addressee receives it.

 

If theCompany mails a notice to Securityholders, it shall mail a copy to the Trusteeand each Agent at the same time.

 

If in the Company’sopinion it is impractical to mail a notice required to be mailed or to publisha notice required to be published, the Company may give such substitute noticeas the Trustee approves.  Failure to publisha notice as required or any defect in it shall not affect the sufficiency ofany mailed notice.

 

Allnotices shall be in the English language, except that any published notice maybe in an official language of the county of publication.

 

A “notice”includes any communication required by this Indenture.

 

3.             *Continued Applicability*. Except as specifically amended, supplemented or deleted by thisSupplemental Indenture, all provisions of the Original Indenture shall beapplicable for all purposes with respect to the Securities issued after July 31,2009, and the Original Indenture, as supplemented and amended hereby, is herebyratified, confirmed and approved with respect to all Securities issued and tobe issued thereunder.  The OriginalIndenture as supplemented and amended by this Supplemental Indenture shall beconstrued as one and the same instrument.

 

4.            *Counterparts*.  ThisSupplemental Indenture may be executed by the parties in counterparts, each ofwhich shall be an original, but all of such counterparts shall togetherconstitute one and the same instrument.

 

5.             *Trustee Disclaimer*.  The Trusteehas not investigated any fact or matter stated in the Recitals.    

 

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**INWITNESS WHEREOF**,the parties hereto have caused this Supplemental Indenture to be duly executedas of the day and year first above written.

 

 
|       | **AMERICAN STATES**                                  |
|------------|------------------------------------------------------|
|       | **WATER COMPANY**                                    |
|       |                                                 |   |
|       |                                                 |   |
|       | By:                                                  | /s/ Robert J. Sprowls |
|       |                                                 | Name: | Robert J. Sprowls |
|       |                                                 | Title: | President and Chief |
|       |                                                 |   | Executive Officer |
|       |                                                 |   |
|       |                                                 |   |
| ** ** | **THE BANK OF NEW YORK MELLON  TRUST COMPANY, N.A.** |
| ** ** | ** **                                           |
|       |                                                 |   |
|       | By:                                                  | /s/ Raymond Torres |
|       |                                                 | Name: | Raymond Torres |
|       |                                                 | Title: | Senior Associate |

 

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