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Tolling And Standstill Agreement - SOUTHWEST WATER CO - 8-14-2000

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					EXHIBIT 10.7 TOLLING AND STANDSTILL AGREEMENT This Tolling and Standstill Agreement ("Agreement") is made and entered as of June 20, 2000, by and between Suburban Water Systems ("Suburban"), and Aerojet-General Corporation ("Aerojet"), who may be referred to collectively as the "Parties". I. RECITALS WHEREAS, as the result of the discovery of contaminated groundwater in the Main San Gabriel Valley Groundwater Basin (the "Basin"), a critical source of drinking water for San Gabriel Valley residents, the United States Environmental Protection Agency (EPA) placed four areas of the Basin on the National Priorities List; and WHEREAS, Suburban owns and operates drinking water extraction wells in the Basin; and WHEREAS, Suburban asserts that it has incurred costs and suffered damages as a result of the groundwater contamination in the Basin; and WHEREAS, Suburban has identified Aerojet and others as parties who may have caused or contributed to the groundwater contamination in the Basin; and WHEREAS, Suburban and Aerojet wish to enter into a tolling and standstill agreement with respect to any claims the Parties may have arising from the groundwater contamination existing in the Basin; THEREFORE, the Parties, for good and sufficient consideration hereto acknowledged, agree as follows: II. TOLLING AGREEMENT In accordance with this agreement Aerojet hereby agrees to toll the running of any statutes of limitation and any other statute, law, rule of principle of equity with

similar effect (collectively "Statutes of Limitation") with respect to any and all rights, claims, causes of action, counterclaims, third party claims, cross claims and defenses Suburban may have or wish to assert against Aerojet which are alleged to have occurred as the result of a release or releases of substances, including the perchlorate ion and NDMA, which originated in any part from property in the Basin which Aerojet has currently or formerly used or owned that have impacted or threaten to impact Suburban's right and ability to extract groundwater from the Basin (the "Claims"). With respect to contaminants other than the perchlorate ion or NDMA, Aerojet is tolling the running of the Statute of Limitations only with respect to its several share of alleged claims or damage in proportion of its percentage contribution to said claims or damage, as shown by the evidence. This Agreement shall commence on June 20, 2000, and continue until such time as this Agreement is terminated pursuant to paragraph VI of this Agreement (the "Tolling Period"). Aerojet agrees that the Tolling Period shall be excluded from all computations of any limitations period applicable to the Claims. Aerojet agrees that it shall waive and shall not plead, assert, or otherwise raise any Statute of Limitation or any other time related defense otherwise applicable to the Claims, to the extent such limitations period or other time related defense is tolled by this Agreement, as a bar to or other limitation on any Claim. III. NO WAIVER The Parties, and each of them, do not waive and expressly reserve any and all rights, claims, causes of action, counterclaims, cross claims, third- party claims, and/or defenses, including but not limited to, any statute of limitation, except as to the Tolling Period. This Agreement has no effect on any and all rights, claims, causes of action, counterclaims, cross claims, third party claims, or defenses already barred, tolled, or otherwise extinguished as of June 20, 2000.

similar effect (collectively "Statutes of Limitation") with respect to any and all rights, claims, causes of action, counterclaims, third party claims, cross claims and defenses Suburban may have or wish to assert against Aerojet which are alleged to have occurred as the result of a release or releases of substances, including the perchlorate ion and NDMA, which originated in any part from property in the Basin which Aerojet has currently or formerly used or owned that have impacted or threaten to impact Suburban's right and ability to extract groundwater from the Basin (the "Claims"). With respect to contaminants other than the perchlorate ion or NDMA, Aerojet is tolling the running of the Statute of Limitations only with respect to its several share of alleged claims or damage in proportion of its percentage contribution to said claims or damage, as shown by the evidence. This Agreement shall commence on June 20, 2000, and continue until such time as this Agreement is terminated pursuant to paragraph VI of this Agreement (the "Tolling Period"). Aerojet agrees that the Tolling Period shall be excluded from all computations of any limitations period applicable to the Claims. Aerojet agrees that it shall waive and shall not plead, assert, or otherwise raise any Statute of Limitation or any other time related defense otherwise applicable to the Claims, to the extent such limitations period or other time related defense is tolled by this Agreement, as a bar to or other limitation on any Claim. III. NO WAIVER The Parties, and each of them, do not waive and expressly reserve any and all rights, claims, causes of action, counterclaims, cross claims, third- party claims, and/or defenses, including but not limited to, any statute of limitation, except as to the Tolling Period. This Agreement has no effect on any and all rights, claims, causes of action, counterclaims, cross claims, third party claims, or defenses already barred, tolled, or otherwise extinguished as of June 20, 2000. 2 IV. STANDSTILL AGREEMENT Suburban agrees to refrain from filing a lawsuit against Aerojet based on or arising out of the Claims until such time as this Agreement is terminated. V. PARTIES COVERED In addition to Suburban and Aerojet, this Agreement shall inure to the benefit of, and be binding upon, any and all parent companies, subsidiary companies, holding companies, affiliates, corporate predecessors or corporate successors, officers, directors, agents or representatives of each of the Parties. VI. TERMINATION Either Aerojet or Suburban may withdraw from the Agreement by giving at least 30 days advanced written notice. The 30 days advanced written notice will begin to run upon receipt of notice by certified mail, return receipt requested, to the following: NOTICES TO SUBURBAN: Daniel N. Evans Vice President, CFO Suburban Water Systems 1211 E Center Court Drive Covina, CA 91724-3603 WITH A COPY TO: Mary Hulett Ragsdale Liggett 2840 Plaza Place, Suite 400 Raleigh, NC 27612 NOTICES TO AEROJET:

IV. STANDSTILL AGREEMENT Suburban agrees to refrain from filing a lawsuit against Aerojet based on or arising out of the Claims until such time as this Agreement is terminated. V. PARTIES COVERED In addition to Suburban and Aerojet, this Agreement shall inure to the benefit of, and be binding upon, any and all parent companies, subsidiary companies, holding companies, affiliates, corporate predecessors or corporate successors, officers, directors, agents or representatives of each of the Parties. VI. TERMINATION Either Aerojet or Suburban may withdraw from the Agreement by giving at least 30 days advanced written notice. The 30 days advanced written notice will begin to run upon receipt of notice by certified mail, return receipt requested, to the following: NOTICES TO SUBURBAN: Daniel N. Evans Vice President, CFO Suburban Water Systems 1211 E Center Court Drive Covina, CA 91724-3603 WITH A COPY TO: Mary Hulett Ragsdale Liggett 2840 Plaza Place, Suite 400 Raleigh, NC 27612 NOTICES TO AEROJET: Robert Anderson Vice President, Deputy General Counsel Aerojet-General Corporation P.O. Box 13222 Sacramento, CA 95813-6000 WITH A COPY TO: Peter R. Taft Munger, Tolles & Olson 355 S. Grand St. 35/th/ Floor Los Angeles, CA 90071 3 VII. EXCLUSIVE AGREEMENT No other agreement, expressed or implied, oral or written, has been made by and among Suburban, on the one hand, and Aerojet, on the other hand, concerning tolling any applicable statute of limitations or suspending any litigation based on or arising out of the claims. This Agreement is executed without reliance and promise, warranty, or representation by any party or any representative of any party other than those expressly contained in this Agreement. This Agreement may be amended only by a written instrument signed by the Parties. VIII. NO ADMISSION The Parties agree that the sole purpose of the Agreement is to toll any applicable statutes of limitation or other

VII. EXCLUSIVE AGREEMENT No other agreement, expressed or implied, oral or written, has been made by and among Suburban, on the one hand, and Aerojet, on the other hand, concerning tolling any applicable statute of limitations or suspending any litigation based on or arising out of the claims. This Agreement is executed without reliance and promise, warranty, or representation by any party or any representative of any party other than those expressly contained in this Agreement. This Agreement may be amended only by a written instrument signed by the Parties. VIII. NO ADMISSION The Parties agree that the sole purpose of the Agreement is to toll any applicable statutes of limitation or other time related defense and to forestall imminent litigation with regard to the Claims. The execution of this Agreement shall in no way operate as an admission of liability or responsibility by the Parties. Additionally, nothing contained in this Agreement shall be admissible as evidence in any court, administrative, or alternative dispute resolution proceeding, except as to the issue of the tolling of any statute of limitation or any other time related defense. IX. CONSTRUCTION This Agreement shall be construed and interpreted according to the laws of the State of California. X. COUNTERPARTS This Agreement may be executed in counterparts, and the counterparts, when fully executed by each of the Parties, shall constitute one and the same Agreement. Signatures sent by fax shall be deemed originals and treated in all respects as originals. 4 XI. AUTHORITY The persons executing this Agreement represent and warrant that they each have the express authority, right and power to execute this Agreement and to bind the party on whose behalf they sign. 5 SIGNATURES
Dated: June 20, 2000 ------------/s/ DANIEL N. EVANS ---------------------------Suburban Water Systems /s/ PETER R. TAFT ---------------------------Aerojet-General Counsel

Dated: June 20, 2000 -------------

6 EXHIBIT 10.11A FIRST AMENDMENT TO CREDIT AGREEMENT THIS FIRST AMENDMENT TO CREDIT AGREEMENT (this "Amendment"), dated as of June 30, 2000, is entered into between BANK OF AMERICA, N.A. ("Bank"), and SOUTHWEST WATER COMPANY, a Delaware corporation ("Borrower"). RECITAL A. Borrower and Bank have previously entered into that certain Credit Agreement dated as of July 30, 1999 (the "Credit Agreement"), pursuant to which Bank has made certain loans and financial accommodations available to

XI. AUTHORITY The persons executing this Agreement represent and warrant that they each have the express authority, right and power to execute this Agreement and to bind the party on whose behalf they sign. 5 SIGNATURES
Dated: June 20, 2000 ------------/s/ DANIEL N. EVANS ---------------------------Suburban Water Systems /s/ PETER R. TAFT ---------------------------Aerojet-General Counsel

Dated: June 20, 2000 -------------

6 EXHIBIT 10.11A FIRST AMENDMENT TO CREDIT AGREEMENT THIS FIRST AMENDMENT TO CREDIT AGREEMENT (this "Amendment"), dated as of June 30, 2000, is entered into between BANK OF AMERICA, N.A. ("Bank"), and SOUTHWEST WATER COMPANY, a Delaware corporation ("Borrower"). RECITAL A. Borrower and Bank have previously entered into that certain Credit Agreement dated as of July 30, 1999 (the "Credit Agreement"), pursuant to which Bank has made certain loans and financial accommodations available to Borrower. Terms used herein without definition shall have the meanings ascribed to them in the Credit Agreement. B. Borrower and Bank wish to (i) to increase the Revolving Commitment as set forth in the Credit Agreement from $4,000,000 to $7,000,000, and (ii) allow additional debts to be incurred by Borrower under Section 6.02 of the Credit Agreement. C. Bank is willing to amend the Credit Agreement under the terms and conditions set forth in this Amendment. Borrower is entering into this Amendment with the understanding and agreement that, except as specifically provided herein, none of Bank's rights or remedies as set forth in the Credit Agreement is being waived or modified by the terms of this Amendment. AGREEMENT NOW, THEREFORE, in consideration of the foregoing and the mutual covenants herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows: 1. Amendments to Credit Agreement. (a) Throughout the Credit Agreement, references to "Reference Rate" are hereby amended to read "Prime Rate". (b) The definition of "Revolving Commitment" as set forth in Section 1.01 of the Credit Agreement, the amount "$4,000,000" is hereby amended to read $7,000,000." (c) Exhibit A to the Credit Agreement, the form of "Revolving Note", is hereby replaced in its entirety with Exhibit A attached hereto, and any and all references to the "Revolving Note" in the Credit Agreement shall be references to the Revolving Note as amended hereby.

SIGNATURES
Dated: June 20, 2000 ------------/s/ DANIEL N. EVANS ---------------------------Suburban Water Systems /s/ PETER R. TAFT ---------------------------Aerojet-General Counsel

Dated: June 20, 2000 -------------

6 EXHIBIT 10.11A FIRST AMENDMENT TO CREDIT AGREEMENT THIS FIRST AMENDMENT TO CREDIT AGREEMENT (this "Amendment"), dated as of June 30, 2000, is entered into between BANK OF AMERICA, N.A. ("Bank"), and SOUTHWEST WATER COMPANY, a Delaware corporation ("Borrower"). RECITAL A. Borrower and Bank have previously entered into that certain Credit Agreement dated as of July 30, 1999 (the "Credit Agreement"), pursuant to which Bank has made certain loans and financial accommodations available to Borrower. Terms used herein without definition shall have the meanings ascribed to them in the Credit Agreement. B. Borrower and Bank wish to (i) to increase the Revolving Commitment as set forth in the Credit Agreement from $4,000,000 to $7,000,000, and (ii) allow additional debts to be incurred by Borrower under Section 6.02 of the Credit Agreement. C. Bank is willing to amend the Credit Agreement under the terms and conditions set forth in this Amendment. Borrower is entering into this Amendment with the understanding and agreement that, except as specifically provided herein, none of Bank's rights or remedies as set forth in the Credit Agreement is being waived or modified by the terms of this Amendment. AGREEMENT NOW, THEREFORE, in consideration of the foregoing and the mutual covenants herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows: 1. Amendments to Credit Agreement. (a) Throughout the Credit Agreement, references to "Reference Rate" are hereby amended to read "Prime Rate". (b) The definition of "Revolving Commitment" as set forth in Section 1.01 of the Credit Agreement, the amount "$4,000,000" is hereby amended to read $7,000,000." (c) Exhibit A to the Credit Agreement, the form of "Revolving Note", is hereby replaced in its entirety with Exhibit A attached hereto, and any and all references to the "Revolving Note" in the Credit Agreement shall be references to the Revolving Note as amended hereby. (d) In clause (iii) of Section 6.02(f) of the Agreement, the words "including $4,000,000 of unsecured debt of the Borrower to Mellon" are amended to read "including $7,000,000 of unsecured debt of the Borrower to Mellon."

(c) In clause (v) of Section 6.02(f) of the Credit Agreement, the amount $20,000,000 is amended to read

EXHIBIT 10.11A FIRST AMENDMENT TO CREDIT AGREEMENT THIS FIRST AMENDMENT TO CREDIT AGREEMENT (this "Amendment"), dated as of June 30, 2000, is entered into between BANK OF AMERICA, N.A. ("Bank"), and SOUTHWEST WATER COMPANY, a Delaware corporation ("Borrower"). RECITAL A. Borrower and Bank have previously entered into that certain Credit Agreement dated as of July 30, 1999 (the "Credit Agreement"), pursuant to which Bank has made certain loans and financial accommodations available to Borrower. Terms used herein without definition shall have the meanings ascribed to them in the Credit Agreement. B. Borrower and Bank wish to (i) to increase the Revolving Commitment as set forth in the Credit Agreement from $4,000,000 to $7,000,000, and (ii) allow additional debts to be incurred by Borrower under Section 6.02 of the Credit Agreement. C. Bank is willing to amend the Credit Agreement under the terms and conditions set forth in this Amendment. Borrower is entering into this Amendment with the understanding and agreement that, except as specifically provided herein, none of Bank's rights or remedies as set forth in the Credit Agreement is being waived or modified by the terms of this Amendment. AGREEMENT NOW, THEREFORE, in consideration of the foregoing and the mutual covenants herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows: 1. Amendments to Credit Agreement. (a) Throughout the Credit Agreement, references to "Reference Rate" are hereby amended to read "Prime Rate". (b) The definition of "Revolving Commitment" as set forth in Section 1.01 of the Credit Agreement, the amount "$4,000,000" is hereby amended to read $7,000,000." (c) Exhibit A to the Credit Agreement, the form of "Revolving Note", is hereby replaced in its entirety with Exhibit A attached hereto, and any and all references to the "Revolving Note" in the Credit Agreement shall be references to the Revolving Note as amended hereby. (d) In clause (iii) of Section 6.02(f) of the Agreement, the words "including $4,000,000 of unsecured debt of the Borrower to Mellon" are amended to read "including $7,000,000 of unsecured debt of the Borrower to Mellon."

(c) In clause (v) of Section 6.02(f) of the Credit Agreement, the amount $20,000,000 is amended to read $26,000,000." 2. Effectiveness of this Amendment. Bank must have received the following items, in form and content acceptable to Bank, before this Amendment is effective and before Bank is required to extend any credit to Borrower as provided for by this Amendment. (a) Amendment. This Amendment fully executed in a sufficient number of counterparts for distribution to Bank and Borrower. (b) Authorizations. Evidence that the execution, delivery and performance by Borrower and each guarantor or subordinating creditor of this Amendment and any instrument or agreement required under this Amendment have been duly authorized.

(c) In clause (v) of Section 6.02(f) of the Credit Agreement, the amount $20,000,000 is amended to read $26,000,000." 2. Effectiveness of this Amendment. Bank must have received the following items, in form and content acceptable to Bank, before this Amendment is effective and before Bank is required to extend any credit to Borrower as provided for by this Amendment. (a) Amendment. This Amendment fully executed in a sufficient number of counterparts for distribution to Bank and Borrower. (b) Authorizations. Evidence that the execution, delivery and performance by Borrower and each guarantor or subordinating creditor of this Amendment and any instrument or agreement required under this Amendment have been duly authorized. (c) Representations and Warranties. The representations and warranties set forth in the Credit Agreement must be true and correct. (d) First Amended and Restated Promissory Note. The First Amended and Restated Revolving Note substantially in the form of Exhibit A, attached hereto, with any appropriate insertions and duly executed by Borrower. (f) Other Required Documentation. All other documents and legal matters in connection with the transactions contemplated by this Amendment shall have been delivered or executed or recorded and shall be in form and substance satisfactory to Bank. 3. Representations and Warranties. The Borrower represents and warrants as follows: (a) Authority. The Borrower has the requisite corporate power and authority to execute and deliver this Amendment and to perform its obligations hereunder and under the Loan Documents (as amended or modified hereby) to which it is a party. The execution, delivery and performance by the Borrower of this Amendment and the performance by Borrower of each Loan Document (as amended or modified hereby) to which it is a party have been duly approved by all necessary corporate action of Borrower and no other corporate proceedings on the part of Borrower are necessary to consummate such transactions. (b) Enforceability. This Amendment has been duly executed and delivered by the Borrower. This Amendment and each Loan Document (as amended or modified hereby) is the legal, valid and binding obligation of Borrower, enforceable against Borrower in accordance with its terms, and is in full force and effect. (c) Representations and Warranties. The representations and warranties contained in each Loan Document (other than any such representations or warranties that, by their 2

terms, are specifically made as of a date other than the date hereof) are correct on and as of the date hereof as though made on and as of the date hereof. (d) No Default. No event has occurred and is continuing that constitutes an Event of Default. 4. Choice of Law. The validity of this Amendment, its construction, interpretation and enforcement, the rights of the parties hereunder, shall be determined under, governed by, and construed in accordance with the internal laws of the State of California governing contracts only to be performed in that State. 5. Counterparts. This Amendment may be executed in any number of counterparts and by different parties and separate counterparts, each of which when so executed and delivered, shall be deemed an original, and all of which, when taken together, shall constitute one and the same instrument. Delivery of an executed counterpart of a signature page to this Amendment or the Consent by telefacsimile shall be effective as delivery of a manually executed counterpart of this Amendment or such Consent.

terms, are specifically made as of a date other than the date hereof) are correct on and as of the date hereof as though made on and as of the date hereof. (d) No Default. No event has occurred and is continuing that constitutes an Event of Default. 4. Choice of Law. The validity of this Amendment, its construction, interpretation and enforcement, the rights of the parties hereunder, shall be determined under, governed by, and construed in accordance with the internal laws of the State of California governing contracts only to be performed in that State. 5. Counterparts. This Amendment may be executed in any number of counterparts and by different parties and separate counterparts, each of which when so executed and delivered, shall be deemed an original, and all of which, when taken together, shall constitute one and the same instrument. Delivery of an executed counterpart of a signature page to this Amendment or the Consent by telefacsimile shall be effective as delivery of a manually executed counterpart of this Amendment or such Consent. 6. Due Execution. The execution, delivery and performance of this Amendment are within the power of Borrower, have been duly authorized by all necessary corporate action, have received all necessary governmental approval, if any, and do not contravene any law or any contractual restrictions binding on Borrower. 7. Reference to and Effect on the Loan Documents. (a) Upon and after the effectiveness of this Amendment, each reference in the Credit Agreement to "this Agreement", "hereunder", "hereof" or words of like import referring to the Credit Agreement, and each reference in the other Loan Documents to "the Credit Agreement", "thereof" or words of like import referring to the Credit Agreement, shall mean and be a reference to the Credit Agreement as modified and amended hereby. (b) Except as specifically amended above, the Credit Agreement and all other Loan Documents, are and shall continue to be in full force and effect and are hereby in all respects ratified and confirmed and shall constitute the legal, valid, binding and enforceable obligations of Borrower to Bank. (c) The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of Bank under any of the Loan Documents, nor constitute a waiver of any provision of any of the Loan Documents. (d) To the extent that any terms and conditions in any of the Loan Documents shall contradict or be in conflict with any terms or conditions of the Credit Agreement, after giving effect to this Amendment, such terms and conditions are hereby deemed modified or amended accordingly to reflect the terms and conditions of the Credit Agreement as modified or amended hereby. 3 8. Ratification. Borrower hereby restates, ratifies and reaffirms each and every term and condition set forth in the Credit Agreement, as amended hereby, and the Loan Documents effective as of the date hereof. 9. Estoppel. To induce Bank to enter into this Amendment and to continue to make advances to Borrower under the Credit Agreement, Borrower hereby acknowledges and agrees that, after giving effect to this Amendment, as of the date hereof, there exists no Event of Default and no right of offset, defense, counterclaim or objection in favor of Borrower as against Bank with respect to the Obligations. 10. Acknowledgment and Agreement re Section 6.02(i) of the Suburban Loan Document. The parities hereto agree and acknowledge that, notwithstanding the lead-in paragraph of Section 6.02 of the Suburban Loan Document, subsection (i) thereof (Debt) limits only Debt of Suburban and not Debt of Southwest. [Signature page follows] 4

8. Ratification. Borrower hereby restates, ratifies and reaffirms each and every term and condition set forth in the Credit Agreement, as amended hereby, and the Loan Documents effective as of the date hereof. 9. Estoppel. To induce Bank to enter into this Amendment and to continue to make advances to Borrower under the Credit Agreement, Borrower hereby acknowledges and agrees that, after giving effect to this Amendment, as of the date hereof, there exists no Event of Default and no right of offset, defense, counterclaim or objection in favor of Borrower as against Bank with respect to the Obligations. 10. Acknowledgment and Agreement re Section 6.02(i) of the Suburban Loan Document. The parities hereto agree and acknowledge that, notwithstanding the lead-in paragraph of Section 6.02 of the Suburban Loan Document, subsection (i) thereof (Debt) limits only Debt of Suburban and not Debt of Southwest. [Signature page follows] 4

IN WITNESS WHEREOF, the parties have entered into this Amendment as of the date first above written. "Borrower" SOUTHWEST WATER COMPANY, a Delaware corporation
By: /s/ THOMAS C. TEKULVE --------------------Name: Thomas C. Tekulve Title: Vice President - Finance

By: /s/ ANTON C. GARNIER ---------------------Name: Anton C. Garnier Title: President

"BANK" BANK OF AMERICA, N.A., A National Association
By: /s/ DEBORAH L. MILLER --------------------Name: Deborah L. Miller Title: Senior Vice President

5 EXHIBIT A FIRST AMENDED AND RESTATED REVOLVING NOTE
$7,000,000 Costa Mesa, California June 30, 2000

FOR VALUE RECEIVED, the undersigned SOUTHWEST WATER COMPANY, a

IN WITNESS WHEREOF, the parties have entered into this Amendment as of the date first above written. "Borrower" SOUTHWEST WATER COMPANY, a Delaware corporation
By: /s/ THOMAS C. TEKULVE --------------------Name: Thomas C. Tekulve Title: Vice President - Finance

By: /s/ ANTON C. GARNIER ---------------------Name: Anton C. Garnier Title: President

"BANK" BANK OF AMERICA, N.A., A National Association
By: /s/ DEBORAH L. MILLER --------------------Name: Deborah L. Miller Title: Senior Vice President

5 EXHIBIT A FIRST AMENDED AND RESTATED REVOLVING NOTE
$7,000,000 Costa Mesa, California June 30, 2000

FOR VALUE RECEIVED, the undersigned SOUTHWEST WATER COMPANY, a

Delaware corporation ("Borrower") promises to pay to the order of BANK OF AMERICA, N.A. ("Bank") at its office at 675 Anton Blvd., Costa Mesa, California, or at such other place as the holder hereof may designate, in lawful money of the United States of America and in immediately available funds, the principal sum of Seven Million Dollars ($7,000,000), or so much thereof as may be advanced and be outstanding, with interest thereon, to be computed on each advance from the date of its disbursement (computed on the basis of a 360-day year and actual days elapsed, which results in more interest than if a 365-day year were used) either (i) at a fluctuating rate per annum equal to the Prime Rate minus one quarter (0.25) of a percentage point in effect from time to time, or (ii) at an optional rate per annum determined by Bank to be one and one-quarter (1.25%) percentage points above Bank's IBOR in effect on the first day of the applicable IBOR Rate Term. When interest is determined in relation to the Prime Rate, each change in the rate of interest hereunder shall become effective on the opening of business on the day specified in the public announcement of a change in Bank's Prime Rate. With respect to each IBOR option selected hereunder, Bank is hereby authorized to note the date, principal amount, interest rate and applicable IBOR Rate Term thereto and any payments made thereon on Bank's books and records (either manually or by electronic entry) and/or on any schedule attached to this Note, which notations shall be prima facie evidence of the accuracy of the information noted. This Note amends, restates in its entirety, and replaces that certain Revolving Note dated as of July 30, 1999 in the original amount of Four Million Dollars

EXHIBIT A FIRST AMENDED AND RESTATED REVOLVING NOTE
$7,000,000 Costa Mesa, California June 30, 2000

FOR VALUE RECEIVED, the undersigned SOUTHWEST WATER COMPANY, a

Delaware corporation ("Borrower") promises to pay to the order of BANK OF AMERICA, N.A. ("Bank") at its office at 675 Anton Blvd., Costa Mesa, California, or at such other place as the holder hereof may designate, in lawful money of the United States of America and in immediately available funds, the principal sum of Seven Million Dollars ($7,000,000), or so much thereof as may be advanced and be outstanding, with interest thereon, to be computed on each advance from the date of its disbursement (computed on the basis of a 360-day year and actual days elapsed, which results in more interest than if a 365-day year were used) either (i) at a fluctuating rate per annum equal to the Prime Rate minus one quarter (0.25) of a percentage point in effect from time to time, or (ii) at an optional rate per annum determined by Bank to be one and one-quarter (1.25%) percentage points above Bank's IBOR in effect on the first day of the applicable IBOR Rate Term. When interest is determined in relation to the Prime Rate, each change in the rate of interest hereunder shall become effective on the opening of business on the day specified in the public announcement of a change in Bank's Prime Rate. With respect to each IBOR option selected hereunder, Bank is hereby authorized to note the date, principal amount, interest rate and applicable IBOR Rate Term thereto and any payments made thereon on Bank's books and records (either manually or by electronic entry) and/or on any schedule attached to this Note, which notations shall be prima facie evidence of the accuracy of the information noted. This Note amends, restates in its entirety, and replaces that certain Revolving Note dated as of July 30, 1999 in the original amount of Four Million Dollars ($4,000,000), made by Borrower payable to the order of Bank, pursuant to that certain Credit Agreement dated as of July 30, 1999 between Borrower and Bank. A. DEFINITIONS: As used herein, the following terms shall have the meanings set forth after each: 1. "Business Day" means any day except a Saturday, Sunday or any other day designated as a holiday under Federal or California statute or regulation, or for amounts bearing interest at an offshore rate, a Business Day is any day except a Saturday, Sunday or any other day designated as a holiday under Federal or California statute or regulation on which Bank is open for business in California and dealing in offshore dollars. 2. "IBOR Rate Portion" means a portion of the principal amount outstanding under this Note which is bearing interest at a rate related to IBOR. No IBOR Rate Portion shall be less than Two Hundred Fifty Thousand Dollars ($250,000). 3. "IBOR Rate Term" means a period commencing on a Business Day and continuing for no shorter than one (1) month and no longer than six (6) months, as designated 6

by Borrower, during which all or a portion of the outstanding principal balance of this Note bears interest determined in relation to Bank's IBOR; provided however, that no IBOR Rate Term shall extend beyond the scheduled Maturity Date hereof. The last day of the interest period will be determined by Bank using the offshore dollar inter-bank market. If any IBOR Rate Term would end on a day which is not a Business Day, then such IBOR Rate Term shall be extended to the next succeeding Business Day. 4. "IBOR Rate" means the interest rate determined by the following formula, rounded upward, if necessary, to the nearest 1/100 of one percent. (All amounts in the calculation will be determined by Bank as of the first day of the interest period.) IBOR Rate = IBOR Base Rate

by Borrower, during which all or a portion of the outstanding principal balance of this Note bears interest determined in relation to Bank's IBOR; provided however, that no IBOR Rate Term shall extend beyond the scheduled Maturity Date hereof. The last day of the interest period will be determined by Bank using the offshore dollar inter-bank market. If any IBOR Rate Term would end on a day which is not a Business Day, then such IBOR Rate Term shall be extended to the next succeeding Business Day. 4. "IBOR Rate" means the interest rate determined by the following formula, rounded upward, if necessary, to the nearest 1/100 of one percent. (All amounts in the calculation will be determined by Bank as of the first day of the interest period.) IBOR Rate = IBOR Base Rate (1.00 - Reserve Percentage) (a) "IBOR Base Rate" means the interest rate at which Bank's Grand Cayman Branch, Grand Cayman, British West Indies, would offer U.S. dollar deposits for the applicable interest period to other major banks in the offshore dollar inter-bank market. (b) "Reserve Percentage" means the total of the maximum reserve percentages for determining the reserves to be maintained by member banks of the Federal Reserve System for Eurocurrency Liabilities, as defined in Federal Reserve Board Regulation D, rounded upward to the nearest 1/100 of one percent. The percentage will be expressed as a decimal, and will include, but not be limited to, marginal, emergency, supplemental, special, and other reserve percentages. 5. "Prime Rate" means the rate of interest publicly announced from time to time by Bank in San Francisco, California, as its Prime Rate. The Prime Rate is set by Bank based on various factors, including Bank's costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans. Bank may price loans to its customers at, above or below the Prime Rate. B. INTEREST: 1. Payment of Interest. Interest accrued on this Note shall be payable on the first day of each month, commencing July 1, 2000. 2. Selection of Interest Rate Options. At any time any portion of this Note bears interest determined in relation to Bank's IBOR, it may be continued by Borrower at the end of the IBOR Rate Term applicable thereto so that all or a portion thereof bears interest determined in relation to the Prime Rate or in relation to Bank's IBOR for a new IBOR Rate Term designated by Borrower. At any time any portion of this Note bears interest determined in relation to the Prime Rate, Borrower may convert all or a portion thereof so that it bears interest determined in relation to Bank's IBOR for a IBOR Rate Term designated by Borrower. At the time each advance is requested hereunder or Borrower wishes to select the IBOR option for all or a portion of the outstanding principal balance hereof, and at the end of each IBOR Rate Term, Borrower shall give Bank notice specifying (a) the interest rate option 7

selected by Borrower, (b) the principal amount subject thereto, and (c) if the IBOR option is selected, the length of the applicable IBOR Rate Term. Any such notice may be given by telephone so long as, with respect to each IBOR selection, such notice is given to Bank prior to 10:00 a.m., California time, on the first day of the IBOR Rate Term. For each IBOR option requested hereunder, Bank will quote the applicable IBOR Rate to Borrower at approximately 10:00 a.m., California time, on the first day of the IBOR Rate Term. If Borrower does not immediately accept the rate quoted by Bank, any subsequent acceptance by Borrower shall be subject to a re-determination by Bank of the applicable IBOR Rate; provided however, that if Borrower fails to accept any such rate by 11:00 a.m., California time, on the Business Day such quotation is given, then the quoted rate shall expire and Bank shall have no obligation to permit a IBOR option to be selected on such day. If no specific designation of interest is made at the time any advance is requested hereunder or at the end of any IBOR Rate Term, Borrower shall be deemed to have made a Prime Rate interest selection for such advance or the principal amount to which such

selected by Borrower, (b) the principal amount subject thereto, and (c) if the IBOR option is selected, the length of the applicable IBOR Rate Term. Any such notice may be given by telephone so long as, with respect to each IBOR selection, such notice is given to Bank prior to 10:00 a.m., California time, on the first day of the IBOR Rate Term. For each IBOR option requested hereunder, Bank will quote the applicable IBOR Rate to Borrower at approximately 10:00 a.m., California time, on the first day of the IBOR Rate Term. If Borrower does not immediately accept the rate quoted by Bank, any subsequent acceptance by Borrower shall be subject to a re-determination by Bank of the applicable IBOR Rate; provided however, that if Borrower fails to accept any such rate by 11:00 a.m., California time, on the Business Day such quotation is given, then the quoted rate shall expire and Bank shall have no obligation to permit a IBOR option to be selected on such day. If no specific designation of interest is made at the time any advance is requested hereunder or at the end of any IBOR Rate Term, Borrower shall be deemed to have made a Prime Rate interest selection for such advance or the principal amount to which such IBOR Rate Term applied. 3. Additional IBOR Provisions. (a) If Bank at any time shall determine that for any reason adequate and reasonable means do not exist for ascertaining Bank's IBOR, then Bank shall promptly give notice thereof to Borrower. If such notice is given and until such notice has been withdrawn by Bank, than (i) no new IBOR option may be selected by Borrower, and (ii) any portion of the outstanding principal balance hereof which bears interest determined in relation to Bank's IBOR, subsequent to the end of the IBOR Rate Term applicable thereto, shall bear interest determined in relation to the Prime Rate. (b) If any law, treaty, rule, regulation or determination of a court or governmental authority or any change therein or in the interpretation or application thereof (each, a "Change in Law") shall make it unlawful for Bank (i) to make IBOR options available hereunder, or (ii) to maintain interest rates based on Bank's IBOR, then in the former event, any obligation of Bank to make available such unlawful IBOR options shall immediately be cancelled, and in the latter event, any such unlawful IBOR-based interest rates then outstanding shall be converted, at Bank's option, so that interest on the portion of the outstanding principal balance subject thereto is determined in relation to the Prime Rate; provided however, that if any such Change in Law shall permit any IBOR-based interest rates to remain in effect until the expiration of the IBOR Rate Term applicable thereto, then such permitted IBOR-based interest rates shall continue in effect until the expiration of such IBOR Rate Term. Upon the occurrence of any of the foregoing events, Borrower shall pay to Bank immediately upon demand such amounts as may be necessary to compensate Bank for any fines, fees, charges, penalties or other costs incurred or payable by Bank as a result thereof and which are attributable to any IBOR options made available to Borrower hereunder, and any reasonable allocation made by Bank among its operations shall be conclusive and binding upon Borrower. (c) If any Change in Law or compliance by Bank with any request or directive (whether or not having the force of law) from any central bank or other governmental authority shall: (i) subject Bank to any tax, duty or other charge with respect to any IBOR options, or change the basis of taxation of payments to Bank of principal, interest, fees or any other amount payable hereunder (except for changes in the rate of tax on the overall net income of Bank); or 8

(ii) impose, modify or hold applicable any reserve, special deposit, compulsory loan or similar requirement against assets held by, deposits or other liabilities in or for the account of advances or loans by, or any other acquisition of funds by any office of Bank; or (iii) impose on Bank any other condition; and the result of any of the foregoing is to increase the cost to Bank of making, renewing or maintaining any IBOR options hereunder and/or to reduce any amount receivable by Bank in connection therewith, then in any such case, Borrower shall pay to Bank immediately upon demand such amounts as may be necessary to compensate Bank for any additional costs incurred by Bank and/or reductions in amounts received by Bank

(ii) impose, modify or hold applicable any reserve, special deposit, compulsory loan or similar requirement against assets held by, deposits or other liabilities in or for the account of advances or loans by, or any other acquisition of funds by any office of Bank; or (iii) impose on Bank any other condition; and the result of any of the foregoing is to increase the cost to Bank of making, renewing or maintaining any IBOR options hereunder and/or to reduce any amount receivable by Bank in connection therewith, then in any such case, Borrower shall pay to Bank immediately upon demand such amounts as may be necessary to compensate Bank for any additional costs incurred by Bank and/or reductions in amounts received by Bank which are attributable to such IBOR options. In determining which costs incurred by Bank and/or reductions in amounts received by Bank are attributable to any IBOR options made available to Borrower hereunder, any reasonable allocation made by Bank among its operations shall be conclusive and binding upon Borrower. 4. Default Interest. During the continuance of an Event of Default, the outstanding principal balance of this Note shall bear interest until paid in full at an increased rate per annum (computed on the basis of a 360-day year and actual days elapsed, which results in more interest than if a 365-day year were used) equal to two percent (2%) above the rate of interest from time to time applicable to this Note. C. BORROWING AND REPAYMENT: 1. Borrowing and Repayment. Borrower may from time to time during the term of this Note borrow, partially or wholly repay its outstanding borrowings, and re-borrow, subject to all of the limitations, terms and conditions of this Note and of any document executed in connection with or governing this Note; provided however, that the total outstanding borrowings under this Note shall not at any time exceed the principal amount stated above. The unpaid principal balance of this obligation at any time shall be the total amounts advanced hereunder by the holder hereof less the amount of principal payments made hereon by or for Borrower, which balance may be endorsed hereon from time to time by the holder. The outstanding principal balance of this Note shall be due and payable in full on the "Maturity Date" (as defined in the Credit Agreement). 2. Advances. Advances hereunder, to the total amount of the principal sum stated above, may be made by the holder at the oral or written request of (a) Anton C. Garnier, Peter J. Moerbeek, Thomas C. Tekulve or Leslie Ward-Cline, any one acting alone, who are authorized to request advances and direct the disposition of any advances until written notice of the revocation of such authority is received by the holder at the office designated above, or (b) any person, with respect to advances deposited to the credit of any account of Borrower with the holder, which advances, when so deposited, shall be conclusively presumed to have been made to or for the benefit of Borrower regardless of the fact that persons other than those authorized to request advances may have authority to draw against such account. The holder shall have no obligation to determine whether any person requesting an advance is or has been authorized by Borrower. 9 3. Application of Payments. Each payment made on this Note shall be credited first, to any interest then due and second, to the outstanding principal balance hereof. Unless instructed otherwise by Borrower, all payments credited to principal shall be applied first, to the outstanding principal balance of this Note which bears interest determined in relation to the Prime Rate, if any, and second, to the outstanding principal balance of this Note which bears interest determined in relation to Bank's IBOR, with such payments applied to the oldest IBOR Rate Term first. 4. Prepayment. (a) Prime Rate. Borrower may prepay principal on any portion of this Note which bears interest determined in relation to the Prime Rate at any time, in any amount and without penalty. (b) IBOR. Each prepayment of an IBOR Rate Portion, whether voluntary, by reason of acceleration or otherwise, will be accompanied by the amount of accrued interest on the amount prepaid, and a prepayment fee as described below. A "prepayment" is a payment of an amount on a date earlier

3. Application of Payments. Each payment made on this Note shall be credited first, to any interest then due and second, to the outstanding principal balance hereof. Unless instructed otherwise by Borrower, all payments credited to principal shall be applied first, to the outstanding principal balance of this Note which bears interest determined in relation to the Prime Rate, if any, and second, to the outstanding principal balance of this Note which bears interest determined in relation to Bank's IBOR, with such payments applied to the oldest IBOR Rate Term first. 4. Prepayment. (a) Prime Rate. Borrower may prepay principal on any portion of this Note which bears interest determined in relation to the Prime Rate at any time, in any amount and without penalty. (b) IBOR. Each prepayment of an IBOR Rate Portion, whether voluntary, by reason of acceleration or otherwise, will be accompanied by the amount of accrued interest on the amount prepaid, and a prepayment fee as described below. A "prepayment" is a payment of an amount on a date earlier than the scheduled payment date for such amount as required by this Agreement. The prepayment fee shall be equal to the amount (if any) by which: (i) the additional interest which would have been payable during the interest period on the amount prepaid had it not been prepaid, exceeds (ii) the interest which would have been recoverable by Bank by placing the amount prepaid on deposit in the domestic certificate of deposit market, the eurodollar deposit market, or other appropriate money market selected by Bank for a period starting on the date on which it was prepaid and ending on the last day of the interest period for such Portion (or the scheduled payment date for the amount prepaid, if earlier). Bank will have no obligation to accept an election of an IBOR Rate Portion if any of the following described events has occurred and is continuing: (i) Dollar deposits in the principal amount, and for periods equal to the IBOR Rate Term, of an IBOR Rate Portion are not available in the offshore dollar inter-bank market; or (ii) the IBOR Rate does not accurately reflect the cost of an IBOR Rate Portion. Borrower acknowledges that prepayment of such amount may result in Bank incurring additional costs, expenses and/or liabilities, and that it is difficult to ascertain the full extent of such costs, expenses and/or liabilities. Borrower, therefore, agrees to pay the above-described prepayment fee and agrees that said amount represents a reasonable estimate of the prepayment costs, expenses and/or liabilities of Bank. If Borrower fails to pay any prepayment fee when due, the amount of such prepayment fee shall thereafter bear interest until paid at a rate per annum two percent (2%) above the Prime Rate in effect from time to time (computed on the basis of a 360-day year, actual days elapsed). 10

D. EVENTS OF DEFAULT: This Note is made pursuant to and is subject to the terms and conditions of that certain Credit Agreement between Borrower and Bank dated as of July 30, 1999, as amended from time to time, including, without limitation, those terms relating to arbitration of Disputes (the "Credit Agreement"). Any default in the payment or performance of any obligation under this Note, or any defined event of default under the Credit Agreement, shall constitute an "Event of Default" under this Note. E. MISCELLANEOUS: 1. Remedies. Upon the occurrence of any Event of Default, the holder of this Note, at the holder's option, without notice upon the occurrence of an Event of Default pursuant to Section 7.01(g) of the Credit Agreement, and with notice upon the occurrence of any other Event of Default, may declare all sums of principal and interest

D. EVENTS OF DEFAULT: This Note is made pursuant to and is subject to the terms and conditions of that certain Credit Agreement between Borrower and Bank dated as of July 30, 1999, as amended from time to time, including, without limitation, those terms relating to arbitration of Disputes (the "Credit Agreement"). Any default in the payment or performance of any obligation under this Note, or any defined event of default under the Credit Agreement, shall constitute an "Event of Default" under this Note. E. MISCELLANEOUS: 1. Remedies. Upon the occurrence of any Event of Default, the holder of this Note, at the holder's option, without notice upon the occurrence of an Event of Default pursuant to Section 7.01(g) of the Credit Agreement, and with notice upon the occurrence of any other Event of Default, may declare all sums of principal and interest outstanding hereunder to be immediately due and payable without presentment, demand, protest or notice of dishonor, all of which are expressly waived by Borrower, and the obligation, if any, of the holder to extend any further credit hereunder shall immediately cease and terminate. Borrower shall pay to the holder immediately upon demand the full amount of all payments, advances, charges, costs and expenses, including reasonable attorneys' fees (to include outside counsel fees and all allocated costs of the holder's in-house counsel), incurred by the holder in connection with the enforcement of the holder's rights and/or the collection of any amounts which become due to the holder under this Note, and the prosecution or defense of any action in any way related to this Note, including without limitation, any action for declaratory relief, and including any of the foregoing incurred in connection with any bankruptcy proceeding relating to Borrower. 2. Obligations Joint and Several. Should more than one person or entity sign this Note as a Borrower, the obligations of each such Borrower shall be joint and several. 3. Governing Law. This Note shall be governed by and construed in accordance with the laws of the State of California, except to the extent Bank has greater rights or remedies under Federal law, whether as a national bank or otherwise, in which case such choice of California law shall not be deemed to deprive Bank of any such rights and remedies as may be available under Federal law. 4. Defined Terms. All capitalized terms not herein defined shall have the meanings given to them in the Credit Agreement. 11

"Borrower" SOUTHWEST WATER COMPANY, a Delaware corporation
By:/s/ ANTON C GARNIER -------------------Anton C. Garnier President & CEO By:/s/ THOMAS C. TEKULVE ---------------------Thomas C. Tekulve Vice President - Finance

12

EXHIBIT 10.13C THIRD AMENDMENT TO

"Borrower" SOUTHWEST WATER COMPANY, a Delaware corporation
By:/s/ ANTON C GARNIER -------------------Anton C. Garnier President & CEO By:/s/ THOMAS C. TEKULVE ---------------------Thomas C. Tekulve Vice President - Finance

12

EXHIBIT 10.13C THIRD AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT THIS THIRD AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT (the "Amendment"), dated as of July 19, 2000, is entered into between MELLON BANK, N.A. a national association ("Bank"), and SOUTHWEST WATER COMPANY, a Delaware corporation ("Borrower"). RECITAL A. Borrower and Bank have previously entered into that certain Amended and Restated Credit Agreement dated as of December 23, 1997, as amended by that certain First Amendment to Amended and Restated Credit Agreement dated as of September 1, 1998 and that certain Second Amendment to Amended and Restated Credit Agreement dated as of September 29, 1999 (collectively, the "Credit Agreement"), pursuant to which Bank has made certain loans and financial accommodations available to Borrower. Terms used herein without definition shall have the meanings ascribed to them in the Credit Agreement. B. Borrower and Bank wish to amend the Credit Agreement (i) to increase the Revolving Commitment from $4,000,000 to $7,000,000, and (ii) to increase the amount of Debt that Borrower is permitted to exist or incur. C. Bank is willing to amend the Credit Agreement under the terms and conditions set forth in this Amendment. Borrower is entering into this Amendment with the understanding and agreement that, except as specifically provided herein, none of Bank's rights or remedies as set forth in the Credit Agreement is being waived or modified by the terms of this Amendment. NOW, THEREFORE, in consideration of the foregoing and the mutual covenants herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows: 1. Amendments to Credit Agreement. (a) The definition of "Revolving Commitment" as set forth in Section 1.01 of the Credit Agreement is hereby amended to read in its entirety as follows: "'Revolving Commitment': The amount of $7,000,000 as such amount may be reduced pursuant to Section 2.01 (c)."

EXHIBIT 10.13C THIRD AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT THIS THIRD AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT (the "Amendment"), dated as of July 19, 2000, is entered into between MELLON BANK, N.A. a national association ("Bank"), and SOUTHWEST WATER COMPANY, a Delaware corporation ("Borrower"). RECITAL A. Borrower and Bank have previously entered into that certain Amended and Restated Credit Agreement dated as of December 23, 1997, as amended by that certain First Amendment to Amended and Restated Credit Agreement dated as of September 1, 1998 and that certain Second Amendment to Amended and Restated Credit Agreement dated as of September 29, 1999 (collectively, the "Credit Agreement"), pursuant to which Bank has made certain loans and financial accommodations available to Borrower. Terms used herein without definition shall have the meanings ascribed to them in the Credit Agreement. B. Borrower and Bank wish to amend the Credit Agreement (i) to increase the Revolving Commitment from $4,000,000 to $7,000,000, and (ii) to increase the amount of Debt that Borrower is permitted to exist or incur. C. Bank is willing to amend the Credit Agreement under the terms and conditions set forth in this Amendment. Borrower is entering into this Amendment with the understanding and agreement that, except as specifically provided herein, none of Bank's rights or remedies as set forth in the Credit Agreement is being waived or modified by the terms of this Amendment. NOW, THEREFORE, in consideration of the foregoing and the mutual covenants herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows: 1. Amendments to Credit Agreement. (a) The definition of "Revolving Commitment" as set forth in Section 1.01 of the Credit Agreement is hereby amended to read in its entirety as follows: "'Revolving Commitment': The amount of $7,000,000 as such amount may be reduced pursuant to Section 2.01 (c)." (b) Clause (iii) of Section 6.02(f) of the Credit Agreement is hereby amended and restated in its entirety to read as follows: (iii) Debts, revolving lines of credit and lease obligations of Borrower existing as of, and disclosed to Bank prior to, the date of this Agreement (including $7,000,000 of unsecured debt of Borrower to Bank of America, $4,000,000 of unsecured debt of Suburban to Bank of America and $4,000,000 of unsecured debt of NMUI to First Security Bank),"

"(c) Clause (v) of Section 6.02(f) of the Credit Agreement is hereby amended and restated in its entirety to read as follow: "(v)" unsecured funded bank debt not to exceed an aggregate of $26,000,000 at any time (including, without limitation, unsecured funded bank debt incurred pursuant to the Loan Documents and the Suburban Loan Documents and unsecured funded bank debt to Bank of America as described in clause (iii) above)." "(d) Exhibit A to the Credit Agreement, the form of "Revolving Note" is hereby replaced in its entirety with

"(c) Clause (v) of Section 6.02(f) of the Credit Agreement is hereby amended and restated in its entirety to read as follow: "(v)" unsecured funded bank debt not to exceed an aggregate of $26,000,000 at any time (including, without limitation, unsecured funded bank debt incurred pursuant to the Loan Documents and the Suburban Loan Documents and unsecured funded bank debt to Bank of America as described in clause (iii) above)." "(d) Exhibit A to the Credit Agreement, the form of "Revolving Note" is hereby replaced in its entirety with Exhibit A attached hereto and any and all references to the "Revolving Note" in the Credit Agreement shall be a reference to the "Revolving Note" in the Credit Agreement shall be a reference to the Revolving Note as amended hereby. 2. Effectiveness of this Amendment. Bank must have received the following items, in form and content acceptable to Bank, before this Amendment is effective and before Bank is required to extend any credit to Borrower as provided for by this Amendment. (a) Amendment. This Amendment fully executed in a sufficient number of counterparts for distribution to Bank and Borrower. (b) Authorizations. Evidence that the execution, delivery and performance by Borrower and each guarantor or subordinating creditor of this Amendment and any instrument or agreement required under this Amendment have been duly authorized. (c) Representations and Warranties. The representations and warranties set forth in the Credit Agreement must be true and correct. (d) Third Amended and Restated Promissory Note. The Third Amended and Restated Line of Credit Note substantially in the form of Exhibit A, attached hereto, with any appropriate insertions and duly executed by Borrower. (e) Bank of America, N.A. and Borrower Amendment. Execution and delivery of the Bank of America, N. A. and Borrower Amendment, which includes the same increases in the Revolving Commitment an the amount of Debt the Borrower is permitted to exist or incur as stated in this Amendment. (f) Other Required Documentation. All other documents and legal matters in connection with the transactions contemplated by this Amendment shall have been delivered or executed or recorded and shall be in form and substance satisfactory to Bank. 3. Amendment Fee. Borrower shall pay to Bank an amendment fee in the amount of Seven Thousand Five Hundred Dollars ($7,500) for the processing and approval of this Amendment, which fee will be fully earned on the date of this Amendment. 4. Representations and Warranties. The Borrower represents and warrants as follows: 2 (a) Authority. The Borrower has the requisite corporate power and authority to execute and deliver this Amendment and to perform its obligations hereunder and under the Loan Documents (as amended or modified hereby) to which it is a party. The execution, delivery and performance by the Borrower of this Amendment and the performance by Borrower of each Loan Document (as amended or modified hereby) to which it is a party have been duly approved by all necessary corporate action of Borrower and no other corporate proceedings on the part of Borrower are necessary to consummate such transactions. (b) Enforceability. This Amendment has been duly executed and delivered by the Borrower. This Amendment and each Loan Document (as amended or modified hereby) is the legal, valid and binding obligation of Borrower, enforceable against Borrower in accordance with its terms, and is in full force and effect. (c) Representations and Warranties. The representations and warranties contained in each Loan Document (other

(a) Authority. The Borrower has the requisite corporate power and authority to execute and deliver this Amendment and to perform its obligations hereunder and under the Loan Documents (as amended or modified hereby) to which it is a party. The execution, delivery and performance by the Borrower of this Amendment and the performance by Borrower of each Loan Document (as amended or modified hereby) to which it is a party have been duly approved by all necessary corporate action of Borrower and no other corporate proceedings on the part of Borrower are necessary to consummate such transactions. (b) Enforceability. This Amendment has been duly executed and delivered by the Borrower. This Amendment and each Loan Document (as amended or modified hereby) is the legal, valid and binding obligation of Borrower, enforceable against Borrower in accordance with its terms, and is in full force and effect. (c) Representations and Warranties. The representations and warranties contained in each Loan Document (other than any such representations or warranties that, by their terms, are specifically made as of a date other than the date hereof) are correct on and as of the date hereof as though made on and as of the date hereof. (d) No Default. No event has occurred and is continuing that constitutes an Event of Default. 5. Choice of Law. The validity of this Amendment, its construction, interpretation and enforcement, the rights of the parties hereunder, shall be determined under, governed by, and construed in accordance with the internal laws of the State of California governing contracts only to be performed in that State. 6. Counterparts. This Amendment may be executed in any number of counterparts and by different parties and separate counterparts, each of which when so executed and delivered, shall be deemed an original, and all of which, when taken together, shall constitute one and the same instrument. Delivery of an executed counterpart of a signature page to this Amendment or the Consent by telefacsimile shall be effective as delivery of a manually executed counterpart of this Amendment or such Consent. 7. Due Execution. The execution, delivery and performance of this Amendment are within the power of Borrower, have been duly authorized by all necessary corporate action, have received all necessary governmental approval, if any, and do not contravene any law or any contractual restrictions binding on Borrower. 8. Reference to and Effect on the Loan Documents. (a) Upon and after the effectiveness of this Amendment, each reference in the Credit Agreement to "this Agreement", "hereunder", "hereof" or words of like import referring to the Credit Agreement, and each reference in the other Loan Documents to "the Credit Agreement", "thereof" or words of like import referring to the Credit Agreement, shall mean and be a reference to the Credit Agreement as modified and amended hereby. 3

(b) Except as specifically amended above, the Credit Agreement and all other Loan Documents, are and shall continue to be in full force and effect and are hereby in all respects ratified and confirmed and shall constitute the legal, valid, binding and enforceable obligations of Borrower to Bank. (c) The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of Bank under any of the Loan Documents, nor constitute a waiver of any provision of any of the Loan Documents. (d) To the extent that any terms and conditions in any of the Loan Documents shall contradict or be in conflict with any terms or conditions of the Credit Agreement, after giving effect to this Amendment, such terms and conditions are hereby deemed modified or amended accordingly to reflect the terms and conditions of the Credit Agreement as modified or amended hereby. 9. Ratification. Borrower hereby restates, ratifies and reaffirms each and every term and condition set forth in the Credit Agreement, as amended hereby, and the Loan Documents effective as of the date hereof. 10. Estoppel. To induce Bank to enter into this Amendment and to continue to make advances to Borrower under the Credit Agreement, Borrower hereby acknowledges and agrees that, after giving effect to this

(b) Except as specifically amended above, the Credit Agreement and all other Loan Documents, are and shall continue to be in full force and effect and are hereby in all respects ratified and confirmed and shall constitute the legal, valid, binding and enforceable obligations of Borrower to Bank. (c) The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of Bank under any of the Loan Documents, nor constitute a waiver of any provision of any of the Loan Documents. (d) To the extent that any terms and conditions in any of the Loan Documents shall contradict or be in conflict with any terms or conditions of the Credit Agreement, after giving effect to this Amendment, such terms and conditions are hereby deemed modified or amended accordingly to reflect the terms and conditions of the Credit Agreement as modified or amended hereby. 9. Ratification. Borrower hereby restates, ratifies and reaffirms each and every term and condition set forth in the Credit Agreement, as amended hereby, and the Loan Documents effective as of the date hereof. 10. Estoppel. To induce Bank to enter into this Amendment and to continue to make advances to Borrower under the Credit Agreement, Borrower hereby acknowledges and agrees that, after giving effect to this Amendment, as of the date hereof, there exists no Event of Default and no right of offset, defense, counterclaim or objection in favor of Borrower as against Bank with respect to the Obligations. 11. Acknowledgment and Agreement pertaining to Section 6.02(f)(v) of the Southwest Water Company Amended and Restated Credit Agreement Dated December 23, 1997, as amended from time to time (collectively the "Southwest Credit Agreement") and Section 6.02(i)(iv) of the Suburban Water Systems Credit Agreement dated December 23, 1997, as amended from time to time, (collectively the "Suburban Credit Agreement". Pursuant to sections 6.02(f)(v) and 6.02(i)(iv) of the Southwest Credit Agreement and the Suburban Credit Agreement, respectively, the Bank hereby consents to the increase in Debt which the Borrower is permitted to exist or incur, as described herein. [Signatures set forth on next page] 4

IN WITNESS WHEREOF, the parties have entered into this Amendment as of the date first above written. "Borrower" SOUTHWEST WATER COMPANY, a Delaware corporation
By: /s/ Thomas C. Tekulve -----------------------Name: Thomas C. Tekulve Title: Vice President - Finance

By: /s/ Anton C. Garnier ------------------------Name: Anton C. Garnier Title: President

"BANK" MELLON BANK, N.A., a national association

IN WITNESS WHEREOF, the parties have entered into this Amendment as of the date first above written. "Borrower" SOUTHWEST WATER COMPANY, a Delaware corporation
By: /s/ Thomas C. Tekulve -----------------------Name: Thomas C. Tekulve Title: Vice President - Finance

By: /s/ Anton C. Garnier ------------------------Name: Anton C. Garnier Title: President

"BANK" MELLON BANK, N.A., a national association
By: /s/ Garry Handelman -----------------------Name: Garry Handelman Title: Vice President

5 EXHIBIT A Form of Revolving Note [See Attached.] 6 EXHIBIT A SOUTHWEST WATER COMPANY SECOND AMENDED AND RESTATED PROMISSORY NOTE $7,000,000.00 July 19, 2000 West Covina, California FOR VALUE RECEIVED, SOUTHWEST WATER COMPANY, a Delaware corporation (the "Borrower"), promises to pay to the order of MELLON BANK, N.A. (the "Bank") on the Maturity Date (as defined in the Credit Agreement referred to below) the principal amount of Seven Million Dollars ($7,000,000.00), or, if less, the aggregate amount of Revolving Loans (as defined in the Credit Agreement referred to below) made by the Bank to the Borrower pursuant to the Credit Agreement referred to below outstanding on the Maturity Date. The Borrower also promises to pay interest on the unpaid principal amount hereof from the date hereof until paid at the rates and at the times which shall be determined in accordance with the provisions of the Credit Agreement.

EXHIBIT A Form of Revolving Note [See Attached.] 6 EXHIBIT A SOUTHWEST WATER COMPANY SECOND AMENDED AND RESTATED PROMISSORY NOTE $7,000,000.00 July 19, 2000 West Covina, California FOR VALUE RECEIVED, SOUTHWEST WATER COMPANY, a Delaware corporation (the "Borrower"), promises to pay to the order of MELLON BANK, N.A. (the "Bank") on the Maturity Date (as defined in the Credit Agreement referred to below) the principal amount of Seven Million Dollars ($7,000,000.00), or, if less, the aggregate amount of Revolving Loans (as defined in the Credit Agreement referred to below) made by the Bank to the Borrower pursuant to the Credit Agreement referred to below outstanding on the Maturity Date. The Borrower also promises to pay interest on the unpaid principal amount hereof from the date hereof until paid at the rates and at the times which shall be determined in accordance with the provisions of the Credit Agreement. All unpaid amounts of principal and interest shall be due and payable in full on the Maturity Date. All payments of principal and interest in respect of this Note shall be made in lawful money of the United States of America in same day funds at the office of the Bank located at Loan Administration - 199-5220, P.O. Box 7777- W7715, Philadelphia, Pennsylvania 19175-7715 or at such other place as shall be designated in writing for such purpose in accordance with the terms of the Credit Agreement. Until notified of the transfer of this Note, the Borrower shall be entitled to deem the Bank or such person who has been so identified by the transferor in writing to the Borrower as the holder of this Note, as the owner and holder of this Note. Each of the Bank and any subsequent holder of this Note agrees that before disposing of this Note or any part hereof, it will make a notation hereon of all principal payments previously made hereunder and of the date to which interest hereon has been paid on the schedule attached hereto, if any; provided, however, that the failure to make notation of any payment made on this Note shall not limit or otherwise affect the obligation of the Borrower hereunder with respect to payments of principal or interest on this Note. This Note is referred to in, and is entitled to the benefits of, the Amended and Restated Credit Agreement dated as of December 23, 1997, as amended from time to time (the "Credit Agreement") between the Borrower and the Bank. The Credit Agreement, among other things, (i) provides for the making of advances (the "Loans") by the Bank to the Borrower from time to time in an aggregate amount not to exceed at any time outstanding the U.S. dollar amount first above mentioned, the indebtedness of the Borrower resulting from each such Loan being evidenced by this Note, and (ii) contains provisions for acceleration of the maturity hereof upon

the happening of certain stated events and also for prepayments on account of principal hereof prior to the maturity hereof upon the terms and conditions therein specified. The terms of this Note are subject to amendment only in the manner provided in the Credit Agreement. No reference herein to the Credit Agreement and no provision of this Note or the Credit Agreement shall alter or impair the obligation of the Borrower, which is absolute and unconditional, to pay the principal of and interest on this Note at the place, at the respective times, and in the currency herein prescribed.

EXHIBIT A SOUTHWEST WATER COMPANY SECOND AMENDED AND RESTATED PROMISSORY NOTE $7,000,000.00 July 19, 2000 West Covina, California FOR VALUE RECEIVED, SOUTHWEST WATER COMPANY, a Delaware corporation (the "Borrower"), promises to pay to the order of MELLON BANK, N.A. (the "Bank") on the Maturity Date (as defined in the Credit Agreement referred to below) the principal amount of Seven Million Dollars ($7,000,000.00), or, if less, the aggregate amount of Revolving Loans (as defined in the Credit Agreement referred to below) made by the Bank to the Borrower pursuant to the Credit Agreement referred to below outstanding on the Maturity Date. The Borrower also promises to pay interest on the unpaid principal amount hereof from the date hereof until paid at the rates and at the times which shall be determined in accordance with the provisions of the Credit Agreement. All unpaid amounts of principal and interest shall be due and payable in full on the Maturity Date. All payments of principal and interest in respect of this Note shall be made in lawful money of the United States of America in same day funds at the office of the Bank located at Loan Administration - 199-5220, P.O. Box 7777- W7715, Philadelphia, Pennsylvania 19175-7715 or at such other place as shall be designated in writing for such purpose in accordance with the terms of the Credit Agreement. Until notified of the transfer of this Note, the Borrower shall be entitled to deem the Bank or such person who has been so identified by the transferor in writing to the Borrower as the holder of this Note, as the owner and holder of this Note. Each of the Bank and any subsequent holder of this Note agrees that before disposing of this Note or any part hereof, it will make a notation hereon of all principal payments previously made hereunder and of the date to which interest hereon has been paid on the schedule attached hereto, if any; provided, however, that the failure to make notation of any payment made on this Note shall not limit or otherwise affect the obligation of the Borrower hereunder with respect to payments of principal or interest on this Note. This Note is referred to in, and is entitled to the benefits of, the Amended and Restated Credit Agreement dated as of December 23, 1997, as amended from time to time (the "Credit Agreement") between the Borrower and the Bank. The Credit Agreement, among other things, (i) provides for the making of advances (the "Loans") by the Bank to the Borrower from time to time in an aggregate amount not to exceed at any time outstanding the U.S. dollar amount first above mentioned, the indebtedness of the Borrower resulting from each such Loan being evidenced by this Note, and (ii) contains provisions for acceleration of the maturity hereof upon

the happening of certain stated events and also for prepayments on account of principal hereof prior to the maturity hereof upon the terms and conditions therein specified. The terms of this Note are subject to amendment only in the manner provided in the Credit Agreement. No reference herein to the Credit Agreement and no provision of this Note or the Credit Agreement shall alter or impair the obligation of the Borrower, which is absolute and unconditional, to pay the principal of and interest on this Note at the place, at the respective times, and in the currency herein prescribed. The Borrower promises to pay all costs and expenses, including reasonable attorneys' fees, incurred in the collection and enforcement of this Note. The Borrower hereby consents to renewals and extensions of time at or after the maturity hereof, without notice, and hereby waives diligence, presentment, protest, demand and notice of every kind and, to the full extent permitted by law, the right to plead any statute of limitations as a defense to any demand hereunder. This Note amends and restates in its entirety that certain Amended and Restated Promissory Note dated as of September 29, 1999 in the amount of Four Million Dollars ($4,000,000) made by Borrower payable to the

the happening of certain stated events and also for prepayments on account of principal hereof prior to the maturity hereof upon the terms and conditions therein specified. The terms of this Note are subject to amendment only in the manner provided in the Credit Agreement. No reference herein to the Credit Agreement and no provision of this Note or the Credit Agreement shall alter or impair the obligation of the Borrower, which is absolute and unconditional, to pay the principal of and interest on this Note at the place, at the respective times, and in the currency herein prescribed. The Borrower promises to pay all costs and expenses, including reasonable attorneys' fees, incurred in the collection and enforcement of this Note. The Borrower hereby consents to renewals and extensions of time at or after the maturity hereof, without notice, and hereby waives diligence, presentment, protest, demand and notice of every kind and, to the full extent permitted by law, the right to plead any statute of limitations as a defense to any demand hereunder. This Note amends and restates in its entirety that certain Amended and Restated Promissory Note dated as of September 29, 1999 in the amount of Four Million Dollars ($4,000,000) made by Borrower payable to the order of Bank pursuant to the Credit Agreement. IN WITNESS WHEREOF, the Borrower has caused this Notice to be executed and delivered by its duly authorized officers, as of the date and the place first above-written. SOUTHWEST WATER COMPANY By:______________________________ Name: Thomas C. Tekulve Title: Vice President - Finance By:______________________________ Name: Anton C. Garnier Title: President

TRANSACTIONS ON NOTE
Amount of Loan Made -------Amount of Principal Paid -------------Interest Paid Through ------Principal Balance ------Notation Made By ------

Interest Paid ------------

ARTICLE 5

PERIOD TYPE FISCAL YEAR END PERIOD START PERIOD END CASH SECURITIES RECEIVABLES ALLOWANCES INVENTORY CURRENT ASSETS PP&E DEPRECIATION

6 MOS DEC 31 2000 JAN 01 2000 JUN 30 2000 954,000 0 16,976,000 (1,265,000) 0 22,297,000 174,691,000 47,346,000

TRANSACTIONS ON NOTE
Amount of Loan Made -------Amount of Principal Paid -------------Interest Paid Through ------Principal Balance ------Notation Made By ------

Interest Paid ------------

ARTICLE 5

PERIOD TYPE FISCAL YEAR END PERIOD START PERIOD END CASH SECURITIES RECEIVABLES ALLOWANCES INVENTORY CURRENT ASSETS PP&E DEPRECIATION TOTAL ASSETS CURRENT LIABILITIES BONDS PREFERRED MANDATORY PREFERRED COMMON OTHER SE TOTAL LIABILITY AND EQUITY SALES TOTAL REVENUES CGS TOTAL COSTS OTHER EXPENSES LOSS PROVISION INTEREST EXPENSE INCOME PRETAX INCOME TAX INCOME CONTINUING DISCONTINUED EXTRAORDINARY CHANGES NET INCOME EPS BASIC EPS DILUTED

6 MOS DEC 31 2000 JAN 01 2000 JUN 30 2000 954,000 0 16,976,000 (1,265,000) 0 22,297,000 174,691,000 47,346,000 166,052,000 21,662,000 28,000,000 0 514,000 65,000 41,382,000 166,052,000 47,176,000 47,176,000 35,694,000 42,276,000 20,000 62,000 1,761,000 3,222,000 1,289,000 1,933,000 0 0 0 1,933,000 0.30 0.28

ARTICLE 5

PERIOD TYPE FISCAL YEAR END PERIOD START PERIOD END CASH SECURITIES RECEIVABLES ALLOWANCES INVENTORY CURRENT ASSETS PP&E DEPRECIATION TOTAL ASSETS CURRENT LIABILITIES BONDS PREFERRED MANDATORY PREFERRED COMMON OTHER SE TOTAL LIABILITY AND EQUITY SALES TOTAL REVENUES CGS TOTAL COSTS OTHER EXPENSES LOSS PROVISION INTEREST EXPENSE INCOME PRETAX INCOME TAX INCOME CONTINUING DISCONTINUED EXTRAORDINARY CHANGES NET INCOME EPS BASIC EPS DILUTED

6 MOS DEC 31 2000 JAN 01 2000 JUN 30 2000 954,000 0 16,976,000 (1,265,000) 0 22,297,000 174,691,000 47,346,000 166,052,000 21,662,000 28,000,000 0 514,000 65,000 41,382,000 166,052,000 47,176,000 47,176,000 35,694,000 42,276,000 20,000 62,000 1,761,000 3,222,000 1,289,000 1,933,000 0 0 0 1,933,000 0.30 0.28