exhibit101-101508.htm


    
      

    

    EXHIBIT
10.1 

    
      

    

     

    
 

    
      LOAN AGREEMENT

       

      BETWEEN

       

      PENNSYLVANIA
ECONOMIC DEVELOPMENT FINANCING AUTHORITY

       

      (THE
"ISSUER")

       

      AND

       

      THE
YORK WATER COMPANY

       

      (THE
"COMPANY")

       

      DATED
AS OF OCTOBER 1, 2008

      


      


      



      
        
          
             

          

           


        

        
          
          

          
            

          

        

        
           


        

      


      TABLE OF
CONTENTS

       

      ARTICLE I
DEFINITIONS AND CERTAIN RULES OF INTERPRETATION

      SECTION 1.1.
Definitions.

      SECTION 1.2.
Certain Rules of Interpretation. 

       

      ARTICLE II
REPRESENTATIONS

      SECTION 2.1.
Representations and Findings of Issuer. 

      SECTION 2.2.
Representations by the Company.

       

      ARTICLE III THE
PROJECT 

      SECTION 3.1.
Acquisition and Construction. 

      SECTION 3.2.
Construction Fund.

      SECTION 3.3.
Establishment of Completion Date. 

       

      ARTICLE IV LOAN AND
REPAYMENT; OPERATION OF PROJECT 

      SECTION 4.1. Loan
of Bond Proceeds.

      SECTION 4.2.
Repayment of Loan. 

      SECTION 4.3.
Operation.

      SECTION 4.4.
Insurance. 

      SECTION 4.5.
Maintenance and Repair. 

      SECTION 4.6. Right
to Discontinue Operation of Project. 

      SECTION 4.7.
Insurance and Condemnation Awards. 

      SECTION 4.8.
Workers' Compensation Coverage. 

      SECTION 4.9. Taxes,
Claims for Labor and Materials, Compliance with Laws. 

      SECTION 4.10.
Issuer's Limited Liability. 

      SECTION 4.11. Right
of Inspection. 

       

      ARTICLE V ISSUANCE
OF BONDS; SECURITY; INVESTMENTS 

      SECTION 5.1.
Issuance of Bonds.

      SECTION 5.2.
Security for the Bonds.

      SECTION 5.3.
Reserved.

      SECTION 5.4.
Investment of Funds.

       

      ARTICLE VI COMPANY
OBLIGATIONS; PROVISIONS FOR PAYMENT; COVENANTS

      SECTION 6.1.
Company Approval of Issuance of Bonds.

      SECTION 6.2.
Refunding of Bonds. 

      SECTION 6.3.
Redemption of Bonds.

      SECTION 6.4.
Installment Loan Payments. 

      SECTION 6.5.
Administrative Expenses. 

      SECTION 6.6.
Payments to Issuer and Local IDA. 

      SECTION 6.7.
Obligations of the Company Absolute and Unconditional. 

      SECTION 6.8. Option
to Prepay Amounts Under Loan Agreement in Certain Events. 

      SECTION 6.9.
Company's Performance Under Indenture.

      SECTION 6.10.
Covenants Regarding Tax Exemption. 

      SECTION 6.11. Bonds
Purchased in Lieu of Redemption. 

      SECTION 6.12.
Nondiscrimination – Sexual Harassment. 

       

      ARTICLE VII
PARTICULAR AGREEMENTS 

      SECTION 7.1.
Indemnified Party's Release and Indemnification Provisions. 

      SECTION 7.2.
Maintenance of Corporate Existence. 

      SECTION 7.3.
Financial Information. 

      SECTION 7.4.
Agreement of Issuer Not to Assign or Pledge. 

      SECTION 7.5.
Reference to Bonds Ineffective after Bonds Paid. 

      SECTION 7.6.
Assignment, Sale or Lease of Project. 

      SECTION 7.7.
Amendment of Loan Agreement or Indenture. 

      SECTION 7.8. Waiver
of Vendor’s Lien. 

      SECTION 7.9.
Limitations on Indebtedness. 

      SECTION 7.10.
Limitation on Liens. 

      SECTION 7.11.
Dividends, Stock Purchases. 

      SECTION 7.12.
Termination of Pension Plans. 

       

      ARTICLE VIII EVENTS
OF DEFAULT AND REMEDIES 

      SECTION 8.1.
Defaults and Remedies. 

      SECTION 8.2.
Annulment of Acceleration. 

      SECTION 8.3.
Agreement to Pay Attorneys’ Fees and Expenses.

      SECTION 8.4.
General Enforcement Provisions. 

      SECTION 8.5. Notice
of Default. 

      SECTION 8.6.
Unassigned Issuer’s Rights. 

       

      ARTICLE IX
MISCELLANEOUS 

      SECTION 9.1. Term
of Loan Agreement. 

      SECTION 9.2.
Notices.

      SECTION 9.3.
Benefit of Parties. 

      SECTION 9.4.
Severability. 

      SECTION 9.5.
Counterparts. 

      SECTION 9.6.
Captions. 

      SECTION 9.7. Law
Governing Construction of Loan Agreement.

      SECTION 9.8.
Payments on Non-Business Days. 

      SECTION 9.9.
Payments to be Sufficient to Meet DTC Requirements. 

      SECTION 9.10.
Reserved. 

      SECTION 9.11.
Limitation of Liability; No Personal Liability. 

       

      EXHIBIT A – Project
Description

      EXHIBIT B –
Nondiscrimination/Sexual Harassment Clause

      



      
        
          
             

          

           


        

        
          
          

          
            

          

        

        
           


        

      


      LOAN
AGREEMENT

      


      This Loan Agreement dated as of October
1, 2008, between the Pennsylvania Economic Development Financing Authority (the
"Issuer"), a public instrumentality of the Commonwealth of Pennsylvania (the
"Commonwealth") and a public body corporate and politic organized and existing
under the Pennsylvania Economic Development Financing Law, as amended (the
"Act") of the Commonwealth, and The York Water Company, a Pennsylvania
corporation (the "Company"),

      


      WITNESSETH:

      


      WHEREAS, the Act declares that there is
a critical need for the production of water suitable for public use and
consumption, that in order to insure continuing supplies of water resources at
reasonable rates, it is necessary to provide additional means of financing
projects directed to such production, and that to protect the health, safety and
general welfare of the people of the Commonwealth and to further encourage
economic development and efficiency within the Commonwealth by providing basic
services and facilities, it is necessary to provide additional or alternative
means of financing facilities for the furnishing of water; and

      


      WHEREAS, the Issuer is authorized to
enter into agreements providing for the loan financing of "projects" within the
meaning of the Act that promote any of the public purposes set forth in the Act;
and

      


      WHEREAS, the Issuer has determined to
issue $15,000,000 aggregate principal amount of its Exempt Facilities Revenue
Bonds, Series 2008B (The York Water Company Project) (the "Bonds") to provide
funds to loan to the Company for the financing of (i) a portion of the Company’s
2008 Capital Budget, including, but not limited to the design, acquisition,
construction, improvement, extension, renovation, equipping and installation of
(a) various structures, including distribution buildings, booster stations,
pumping stations, and various plant and ancillary buildings, (b) spillway
upgrades, standpipes, transmission and distribution mains, service lines,
meters, fire hydrants, water treatment, pumping and purification equipment, and
(c) various other capital improvements, replacements and equipment for the
Company’s water system located throughout York County and Adams County,
Pennsylvania, and (ii) the payment of all or a portion of the costs of issuance
of the Bonds (the "Project"); and

      


      WHEREAS, the Issuer will enter into
this Loan Agreement with the Company, under the terms of which the Company will
agree to repay the loan of the proceeds of the Bonds by paying to the Issuer
moneys sufficient to pay the principal of, and premium (if any) and interest on
the Bonds as the same become due and payable and to pay certain administrative
expenses in connection with the Bonds; and

      


      WHEREAS, as security for the payment of
said Bonds, the Issuer will assign and pledge to Manufacturers and Traders Trust
Company, as trustee (the "Trustee") under the terms of the Trust Indenture dated
as of October 1, 2008 (the "Indenture") certain rights, title and interest of
the Issuer in (i) this Loan Agreement (except for the indemnification
rights and expense reimbursement rights contained herein), and (ii) all
amounts on deposit from time to time in the various funds created in, and
subject to the conditions set forth in, the Indenture; and

      


      NOW THEREFORE, in consideration of the
covenants and agreements herein made, and subject to the conditions herein set
forth, the Issuer and the Company, intending to be legally bound, covenant and
agree as follows:

      


      ARTICLE
I

       

      DEFINITIONS
AND CERTAIN RULES OF INTERPRETATION

       

      SECTION
1.1. Definitions.

       

      All words and terms as used in this
Loan Agreement shall have the same meanings given such words and terms in the
Indenture, unless the context or use clearly indicates another or different
meaning or intent.  In addition, the terms defined in the recitals to
this Loan Agreement shall have the meanings set forth therein and the following
words and terms as used in this Loan Agreement shall have the following
meanings, unless the context or use clearly indicates another or different
meaning or intent:

      


      "Bond Resolution" means the resolution
of the governing body of the Issuer adopted on September 10, 2008, authorizing
the issuance of the Bonds.

      


      "Capitalized Lease" shall mean any
lease, the obligation for Rentals with respect to which is required to be
capitalized on a balance sheet of the lessee in accordance with generally
accepted accounting principles.

      


      "Capitalized Rentals" shall mean as of
the date of any determination the amount at which the aggregate Rentals due and
to become due under all Capitalized Leases under which the Company is a lessee
would be reflected as a liability on a balance sheet of the
Company.

      


      "Consolidated Current Assets" and
"Consolidated Current Liabilities" shall mean such assets and liabilities of the
Company and its subsidiaries on a consolidated basis as shall be determined in
accordance with generally accepted accounting principles to constitute current
assets and current liabilities, respectively.

      


      "Costs of Issuance" means all costs and
expenses incurred by the Issuer, the Local IDA or the Company in connection with
the issuance and sale of the Bonds, including without limitation (i) fees
and expenses of accountants, attorneys, engineers, credit enhancers and
financial advisors, (ii) materials, supplies, and printing and engraving
costs, (iii) recording and filing fees, (iv) rating agency fees, (v)
the initial and first year's annual fees and expenses (including, without
limitation, counsel fees and expenses) of the Trustee, (vi) any
underwriters' discount or fee and expenses and (vii) the Issuer's issuance
fee and administrative and overhead expenses as provided in Section 6.6 of
this Loan Agreement.

      


      "Department" means the Department of
Community and Economic Development of the Commonwealth.

      


      "Default" shall mean any event or
condition, the occurrence of which would, with the lapse of time or the giving
of notice, or both, constitute an Event of Default as defined in
Section 8.1 hereof.

      


      "Disqualified Contractor" means a
Person which has been suspended or debarred by the Commonwealth under its
Contractor Responsibility Program, Management Directive 215.9, as amended or
replaced by a successive directive rule, regulation or statute from time to time
or has been convicted by a court of competent jurisdiction of a crime for which
a term of imprisonment of one year or more could have been imposed, and any
Person controlled by a Person which has been so suspended, debarred or
convicted.

      


      "Environmental Legal Requirement" shall
mean any applicable law relating to public health, safety or the environment,
including, without limitation, relating to releases, discharges or emissions to
air, water, land or groundwater, to the withdrawal or use of groundwater, to the
use and handling of polychlorinated biphenyls or asbestos, to the disposal,
treatment, storage or management of solid or hazardous wastes or to exposure to
toxic or hazardous materials, to the handling, transportation, discharge or
release of gaseous or liquid substances and any regulation, order, notice or
demand issued pursuant to such statute or ordinance, in each case applicable to
the Property of the Company or the operation, construction or modification of
any thereof, including without limitation the following: the Clean Air Act, the
Federal Water Pollution Control Act, the Safe Drinking Water Act, the Toxic
Substances Control Act, the Comprehensive Environmental Response Compensation
and Liability Act as amended by the Superfund Amendments and Reauthorization Act
of 1986, the Resource Conservation and Recovery Act as amended by the Solid and
Hazardous Waste Amendments of 1984, the Occupational Safety and Health Act, the
Emergency Planning and Community Right-to-Know Act of 1986, the Solid Waste
Disposal Act, the Pennsylvania Safe Drinking Water Act and any other state
statutes addressing similar matters, and any state statute providing for
financial responsibility for cleanup or other actions with respect to the
release or threatened release of hazardous substances and any state nuisance
statute.

      


      "Excepted Encumbrances" shall mean any
of the following:

      


      (a) liens for
taxes, assessments or governmental charges not delinquent and liens for workers'
compensation awards and similar obligations not delinquent and undetermined
liens or charges incidental to construction;

       

      (b) any liens
securing Indebtedness neither assumed nor guaranteed by the Company on which it
customarily pays interest, existing in or relating to real estate acquired by
the Company for transmission, distribution or right-of-way
purposes;

       

      (c) easements
or reservations in any Property of the Company created for the purpose of roads,
railroads, railroad side tracks, water and gas transmission and distribution
mains, conduits, water power rights of the Commonwealth of Pennsylvania or
others, building and use restrictions and defects of title to, or leases of, any
parts of the Property of the Company which do not in the opinion of the
Company's counsel materiality impair the use of the Property as an entirety in
the operation of the business of the Company;

       

      (d) undetermined
liens and charges incidental to current construction, including mechanics',
laborers', materialmen's and similar liens not delinquent;

       

      (e) any
obligations or duties affecting the Property of the Company to any municipality
or public authority with respect to any franchise, grant, license, permit or
certificate;

       

      (f) rights
reserved to or vested in any municipality or public authority to control or
regulate any Property of the Company or to use such Property in a manner which
does not materially impair the use of such Property for the purposes for which
it is held by the Company; or

       

      (g) judgments
in course of appeal or otherwise in contest and secured by sufficient bond or
security.

       

      "Excepted Property" shall mean (a)
cash, bonds, stocks, obligations and other Securities; (b) choses in action,
accounts and bills receivable, judgments and other evidences of Indebtedness and
contracts, leases and operating agreements; (c) stock in trade, merchandise,
equipment, apparatus, materials or supplies manufactured or acquired for the
purpose of sale and/or resale in the usual course of business or consumable in
the operation of any of the Properties of the Company or held for the purpose of
repairing or replacing (in whole or in part) any rolling stock, business, motor
coaches, trucks, automobiles or other vehicles or aircraft; (d) timber, gas,
oil, minerals (including developed and undeveloped natural gas reserves and
natural gas in underground storage or otherwise), mineral rights and royalties;
(e) materials or products generated, manufactured, produced or purchased by the
Company for sale, distribution or use in the ordinary course of its business;
(f) rolling stock, buses, motor coaches, trucks, automobiles and other vehicles
and all aircraft; and (g) the Company's franchise to be a
corporation.

      


      "Funded Debt" of any Person shall mean
(a) all Indebtedness for borrowed money or which has been incurred in connection
with the acquisition of assets in each case having a final maturity of one or
more than one year from the date of origin thereof (or which is renewable or
extendible at the option of the obligor for a period or periods more than one
year from the date of origin), including all payments in respect thereof that
are required to be made within one year from the date of any determination of
Funded Debt, whether or not included in Consolidated Current Liabilities, (b)
all Capitalized Rentals, and (c) all Guaranties of Indebtedness of
others.

      


      "Guaranties" by any Person shall mean
all obligations (other than endorsements in the ordinary course of business of
negotiable instruments for deposit or collection) of such Person guaranteeing or
in effect, guaranteeing any Indebtedness, dividend or other obligation, of any
other Person (the "primary obligor") in any manner, whether directly or
indirectly, including, without limitation, all obligations incurred through an
agreement, contingent or otherwise, by such Person: (a) to purchase such
Indebtedness or obligation or any Property or assets constituting security
therefor, (b) to advance or supply funds (1) for the purchase or payment of such
Indebtedness or obligation, (2) to maintain working capital or other balance
sheet condition or, otherwise to advance or make available funds for the
purchase or payment of such Indebtedness or obligation, or (c) to lease Property
or to purchase Securities or other Property or services primarily for the
purpose of assuring the owner of such Indebtedness or obligation of the ability
of the primary obligor to make payment of the Indebtedness or obligation, or (d)
otherwise to assure the owner of the Indebtedness or obligation of the primary
obligor against loss in respect thereof.  For the purposes of all
computations made under this Agreement, a Guaranty in respect of any
Indebtedness for borrowed money shall be deemed to be Indebtedness equal to the
principal amount of such Indebtedness for borrowed money which has been
guaranteed, and a Guaranty in respect of any other obligation or liability or
any dividend shall be deemed to be Indebtedness equal to the maximum aggregate
amount of such obligation, liability or dividend.

      


      "Indebtedness" of any Person shall mean
and include all obligations of such Person which in accordance with generally
accepted accounting principles shall be classified upon a balance sheet of such
Person as liabilities of such Person, and in any event shall include all (a)
obligations of such Person for borrowed money or which has been incurred in
connection with the acquisition of Property or assets, (b) obligations secured
by any lien or other charge upon Property or assets owned by such Person, even
though such Person has not assumed or become liable for the payment of such
obligations, (c) obligations created or arising under any conditional sale or
other title retention agreement with respect to Property acquired by such
Person, notwithstanding the fact that the rights and remedies of the seller,
lender or lessor under such agreement in the event of default are limited to
repossession or sale of Property, and (d) Capitalized Rentals under any
Capitalized Lease.  For the purpose of computing the "Indebtedness" of
any Person, there shall be excluded any particular Indebtedness to the extent
that, upon or prior to the maturity thereof, there shall have been deposited
with the proper depositary in trust the necessary funds (or evidences of such
Indebtedness, if permitted by the instrument creating such Indebtedness) for the
payment, redemption or satisfaction of such Indebtedness; and thereafter such
funds and evidences of Indebtedness so deposited shall not be included in any
computation of the assets of such Person.

      


      "Indemnified Parties" means the Issuer,
the Trustee, the Paying Agent and any of their respective officers, directors,
members, commissioners, employees, agents, servants and any other person acting
for or on behalf of the Issuer, the Trustee or the Paying Agent.

      


      "Inducement Resolution" means the
resolution of the governing body of the Issuer  adopted on May 23,
2008 granting initial approval of the financing of the Project.

      


      "Installment Loan Payment(s)" means
payments required to be made by the Company to pay the Debt Service on the
Bonds, as provided for in Section 6.4(b), (c), (d) and (f) of this Loan
Agreement, including the principal of, premium, if any (whether at stated
maturity, upon redemption prior to stated maturity, or upon acceleration of
stated maturity), and interest on the Bonds when due.

      


      "Loan Agreement" means this Loan
Agreement, and all amendments and supplements hereto.

      


      "Local IDA" means the York County
Industrial Development Authority, a governmental entity of the Commonwealth in
its capacity as an applicant sponsor for the Project.

      


      "Plant Account" shall mean the plant
account under the Pennsylvania Public Utilities Commission Uniform System of
Accounts for Water Utilities dated November 21, 1946, as the same may be amended
from time to time.

      


      "Person" means an individual, a
corporation, a partnership, an association, a joint stock company, a trust, any
unincorporated organization, a governmental body or a political subdivision, a
municipal corporation, public corporation or any other group or organization of
individuals.

      


      "Project" means the facilities
described in the recitals hereto and Exhibit A to this Loan
Agreement, as amended from time to time as provided herein, and which are being
financed with the proceeds of the Bonds and an equity contribution from the
Company.

      


      "Project Costs" means all costs
incurred by the Company, whether before or after issuance of the Bonds, with
respect to the acquisition, construction and installation of the Project,
including but not limited to, the following items:

      


      (i) Obligations
incurred or assumed for labor, materials and equipment (including obligations
payable to the Company for expenditures made or costs incurred by the
Company);

       

      (ii) Costs of
any performance, payment, or surety bonds and insurance deemed necessary or
appropriate by the Company;

       

      (iii) Costs of
engineering and other services, including the costs incurred or assumed for
preliminary design and development, surveys, estimates and plans and
specifications, and for supervising construction and performing all other duties
required by or consequent upon proper construction;

       

      (iv) Costs
which the Company shall be required to pay under the terms of any contract or
contracts in connection with the construction, acquisition and installation of
the Project;

       

      (v) Amounts
which are required to be paid for taxes, assessments and other similar charges
payable during the period of construction;

       

      (vi) Expenses
incurred in seeking to enforce any remedy against any contractor, subcontractor
or other provider of labor, materials, equipment or services, in respect of any
default, breach or dispute relating to the Project;

       

      (vii) Sums
required to reimburse the Company for advances made for any of the above items,
and for any other costs incurred for work done or caused to be done by the
Company which are properly chargeable to the Project;

       

      (viii) Capitalized
interest with respect to the Project;

       

      (ix) To the
extent authorized by the Act, costs of all other items related to the
acquisition, construction and installation of the Project; and

       

      (x) All Costs
of Issuance.

       

      "Property" shall mean any interest in
any kind of property or asset, whether real, personal or mixed, or tangible or
intangible.

      


      "Rentals" shall mean and include all
fixed rents (including as such all payments which the lessee is obligated to
make to the lessor on termination of the lease or surrender of the Property)
payable by the Company, as lessee or sublessee under a lease of real or personal
property, but shall be exclusive of any amounts required to be paid by the
Company (whether or not designated as rents or additional rents) on account of
maintenance, repairs, insurance, taxes and similar charges.  Fixed
rents under any so-called "percentage leases" shall be computed solely on the
basis of the minimum rents, if any, required to be paid by the lessee regardless
of sales volume or gross revenues.

      


      "Seasonal Indebtedness" as of the date
of any determination thereof shall mean (a) all Indebtedness for money borrowed
other than Funded Debt and (b) Guaranties of Seasonal Indebtedness of
others.

      


      "Security" or "Securities" shall have
the same meaning as in Section 2(1) of the Securities Act of 1933, as
amended.

      


      "Unassigned Issuer's Rights" means all
of the rights of the Issuer to receive insurance under Section 4.4 hereof, to
inspect the Project under Section 4.11 hereof, to receive payments and to be
reimbursed for attorney's and other fees and expenses under Sections 6.6 and 8.3
hereof, to be held harmless and indemnified under Section 7.1 hereof, to receive
information under Section 7.3, and, to the extent provided in this Agreement, to
give or withhold consent to or approval of amendments, modifications, and
terminations of this Agreement.

      


      "Voting Stock" shall mean Securities of
any class or classes, the holders of which are ordinarily, in the absence of
contingencies, entitled to elect a majority of the corporate directors (or
Persons performing similar functions).

      


      SECTION
1.2. Certain Rules of
Interpretation.

       

      (a) The
definitions set forth in Article I and in the Indenture shall be equally
applicable to both the singular and plural forms of the terms therein defined
and shall cover all genders.

       

      (B) "Herein,"
"hereby," "hereunder," "hereof," "hereinbefore," "hereinafter" and other
equivalent words refer to this Loan Agreement and not solely to the particular
Article, Section or Subdivision hereof in which such word is used.

       

      (c) Reference
herein to an article number (e.g.,
Article IV) or a section number (e.g.,
Section 6.2) shall be construed to be a reference to the designated article
number or section number hereof unless the context or use clearly indicates
another or different meaning or intent.

       

      (d) Words of
the masculine gender shall mean and include correlative words of the feminine
and neuter genders and words importing the singular number shall mean and
include the plural number and vice versa.

       

      (e) Words
importing persons shall include firms, associations, partnerships (including
limited partnerships), trusts, corporations and other legal entities, including
public bodies, as well as natural persons.

       

      (f) Any
headings preceding the text of the several Articles and Sections of this Loan
Agreement, and any table of contents appended to copies hereof, shall be solely
for convenience of reference and shall not constitute a part of this Loan
Agreement, nor shall they affect its meaning, construction or
effect.

       

      (g) References
to statutes or regulations are to be construed as including all statutory or
regulatory provisions consolidating, amending or replacing the statute or
regulation referred to; and references to agreements and other contractual
instruments shall be deemed to include any exhibits and appendices attached
thereto and all amendments, supplements and other modifications to such
instruments, but only to the extent such amendments, supplements and other
modifications are not prohibited by the terms of this Loan
Agreement.

       

      (h) Whenever
in this Loan Agreement, the Issuer, the Company or the Trustee is named or
referred to, it shall include, and shall be deemed to include, its respective
successors and assigns whether so expressed or not.  All of the
covenants, stipulations, obligations and agreements by or on behalf of, and
other provisions for the benefit of, the Issuer, the Company and the Trustee
contained in this Loan Agreement shall inure to the benefit of such respective
successors and assigns, bind and shall, inure to the benefit of any officer,
board, commission, authority, agency or instrumentality to whom or to which
there shall be transferred by or in accordance with law any right, power or duty
of the Issuer or of its successors or assigns, the possession of which is
necessary or appropriate in order to comply with any such covenants,
stipulations, obligations, agreements or other provisions of this Loan
Agreement.

       

      (i) Every
"request," "order," "demand," "application," "appointment," "notice,"
"statement," "certificate," "consent," "direction" or similar action hereunder
by persons referred to herein shall, unless the form thereof is specifically
provided, be in writing and signed by an Authorized Representative of the person
giving it.

       

      ARTICLE
II

       

      REPRESENTATIONS

       

      SECTION
2.1. Representations and Findings
of Issuer.

       

      The Issuer hereby confirms its findings
and represents that:

      


      (a) Organization.  The
Issuer is a public body corporate and politic established in the Commonwealth
pursuant to the laws of the Commonwealth including the Act.  Under the
Act, the Issuer has the power to enter into the Indenture, this Loan Agreement
and the Underwriting Agreement and to carry out its obligations thereunder and
hereunder and to issue the Bonds to finance all or a portion of the Project
Costs.

       

      (b) Pending
Litigation.  To the knowledge of the Issuer, there are no
actions, suits, proceedings, inquiries or investigations pending or threatened
against or affecting the Issuer in any court or before any governmental
authority or arbitration board or tribunal, which involve the possibility of
materially and adversely affecting the transactions contemplated by the
Financing Documents or which, in any way, would adversely affect the validity or
enforceability of the Financing Documents or the ability of the Issuer to
perform its obligations under the Financing Documents.

       

      (c) Economic
Findings.  Based on representations and information furnished
to the Issuer by or on behalf of the Company and the Local IDA, the Issuer has
found that the Company is engaged in industrial, commercial and/or specialized
activities in the Commonwealth requiring substantial capital and creating or
maintaining substantial employment opportunities, that the Company’s operations
contribute to economic growth and the creation or maintenance of employment
opportunities in the Commonwealth, that the Company is financially responsible
to assume its obligations prescribed by this Loan Agreement and the Act and that
the Project will constitute facilities for the furnishing of water within the
meaning of Section 142(a)(4) of the Code.

       

      (d) Public Purpose
Findings.  Based on representations and information furnished
to the Issuer by or on behalf of the Company, the Issuer has found that (i) the
Project will promote the health, safety and general welfare of the people of the
Commonwealth and the public purposes of the Act by alleviating unemployment and
maintaining employment at a high level and creating and developing business
opportunities in the Commonwealth and aiding in the provision of water; (ii) the
interests in land and other property which is part of the Project is located
within the boundaries of the Commonwealth, which organized the Issuer; and (iii)
the Project will constitute a "project" within the meaning of the
Act.

       

      (e) Private Activity Bond
Allocations.  The Issuer has received a Preliminary Allocation
of the tax-exempt private activity bond authority of the Commonwealth in an
aggregate amount at least equal to the aggregate principal amount of the Bonds
from the Department which certifies the preliminary approval of such allocation
for the Project as required by Section 146 of the
Code.  Simultaneously with the issuance of the Bonds, the Issuer shall
request a Final Allocation from the Department which request will automatically
convert the Preliminary Allocation to a Final Allocation of the Commonwealth's
private activity bond authority to the Project.

       

      (f) Project
Approvals.  The Project has been approved by (1) the Local IDA,
(2) the Governor or Lieutenant Governor of the Commonwealth as the "applicable
elected representative," as that term is defined under the Code, of the Issuer
after a public hearing held upon reasonable public notice, as required by the
Code, and (3) the Issuer by adoption of resolutions including the Bond
Resolution as required by the Act.

       

      (g) No Other
Pledges.  The Issuer has not and will not pledge the income and
Revenues derived from this Loan Agreement or its other interests in this Loan
Agreement or the Indenture other than pursuant to and as set forth in the
Indenture.

       

      (h) No
Conflicts.  The execution, delivery and performance by the
Issuer of this Loan Agreement and the Indenture and the issuance of the Bonds
will not conflict with or create a breach of or default under the Act or other
applicable law or any agreement or instrument to which the Issuer is a party or
by which it is bound.

       

      (i) Agreements Are Legal and
Authorized.  The adoption of the Bond Resolution, the issuance
and sale of the Bonds and the execution and delivery by the Issuer of the
Financing Documents, and the compliance by the Issuer with all of the provisions
of each thereof and of the Bonds, (i) are within the powers and authority
of the Issuer, (ii) have been done in full compliance with the provisions
of the Act, are legal and will not conflict with or constitute on the part of
the Issuer a violation of or a breach of or default under, or result in the
creation of any lien, charge or encumbrance upon any property of the Issuer
(other than as contemplated by this Loan Agreement and the Indenture) under the
provisions of, any by-law or other agreement or instrument to which the Issuer
is a party or by which the Issuer is bound, or any license, judgment, decree,
law, statute, order, rule or regulation of any court or governmental agency or
body having jurisdiction over the Issuer or any of its activities or properties
and (iii) have been duly authorized by all necessary action on the part of
the Issuer.

       

      (j) Governmental
Consents.  Neither the nature of the Issuer nor any of its
activities or properties, nor any relationship between the Issuer and any other
Person, nor any circumstance in connection with the offer, issue, sale or
delivery of any of the Bonds is such as to require the consent, approval or
authorization of, or the filing, registration or qualification with, any
governmental authority on the part of the Issuer in connection with the
execution, delivery and performance of the Financing Documents or the offer,
issue, sale or delivery of the Bonds, other than those already obtained as of
the Issue Date; provided, however, no representation is made herein as to
compliance with the securities or "blue sky" laws of any
jurisdiction.

       

      (k) No
Defaults.  No event has occurred and no condition exists with
respect to the Issuer which would constitute an "Event of Default" as defined in
the Indenture or which, with the lapse of time or with the giving of notice or
both, would become an "Event of Default" under the Indenture.

       

      (l) Limited
Obligations.  The Bonds shall be limited obligations of the
Issuer and shall be payable by the Issuer solely out of the
Revenues.  The Bonds shall never be payable out of any other funds of
the Issuer except the Revenues.  Neither the faith and credit nor the
taxing power of the Commonwealth, the Issuer, or any other political
corporation, subdivision or agency thereof is pledged to the payment of the
principal of and premium, if any, or interest on such Bonds.

       

      (m) Requirements
Satisfied.  All requirements and conditions specified in the
Act and all other laws and regulations applicable to the adoption of the Bond
Resolution, the execution and delivery of this Loan Agreement and the Indenture,
and the issuance and delivery of the Bonds will be fulfilled prior to the
initial delivery of the Bonds to the purchasers thereof.

       

      SECTION
2.2. Representations by the
Company.

       

      The Company makes the following
representations as the basis for the undertakings on its part herein
contained:

      


      (a) Corporate Organization and
Power.  The Company (i) is a corporation duly organized,
validly existing and in good standing under the laws of the Commonwealth, and
(ii) has all requisite power and authority and all necessary licenses and
permits to own and operate its properties and to carry on its business as now
being conducted and as presently proposed to be conducted.

       

      (b) Pending
Litigation.  Except as set forth in the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 2008, there are no actions,
suits, proceedings, inquiries or investigations pending, or to the knowledge of
the Company threatened, against or affecting the Company in any court or before
any governmental authority or arbitration board or tribunal which involve the
possibility of materially and adversely affecting the transactions contemplated
by the Financing Documents or which, in any way, would adversely affect the
validity or enforceability of the Bonds or the Financing Documents or the legal
ability of the Company to perform its obligations under this Loan
Agreement.

       

      (c) Agreements Are Valid and
Authorized.  The execution and delivery by the Company of this
Loan Agreement and the compliance by the Company with all of the provisions
hereof (i) are within the corporate power of the Company, (ii) will
not conflict with or result in any breach of any of the provisions of, or
constitute a default under, any material agreement, charter document, by-law or
other material instrument to which the Company is a party or by which it may be
bound, or any license, judgment, decree, law, statute, order, rule or regulation
of any court or governmental agency or body having jurisdiction over the Company
or any of its activities or properties, and (iii) have been duly authorized
by all necessary action on the part of the Company.  This Agreement,
upon the due execution and delivery thereof by the Company and the Issuer, will
be a valid and binding obligation of the Company enforceable in accordance with
its terms, except as limited by bankruptcy, insolvency, reorganization,
moratorium or other laws or equitable principles of general application relating
to or affecting the enforcement of creditors' rights generally.

       

      (d) Governmental
Consents.  No actions by the Company in connection with the
execution, delivery and performance by the Company of this Loan Agreement is
such as to require the consent, approval or authorization of, or the filing,
registration or qualification with, any governmental authority on the part of
the Company, other than those already obtained as of the Issue Date; provided,
however, no representation is made herein as to compliance with the securities
or "blue sky" laws of any jurisdiction.

       

      (e) No
Defaults.  No event has occurred and no condition exists with
respect to the Company  that would constitute an "Event of Default"
under the Indenture or which, with the lapse of time or with the giving of
notice or both, would become an "Event of Default" under the
Indenture.

       

      (f) Tax
Documents.  The representations and statements made by the
Company in the Tax Documents are true and correct.

       

      (g) Project
Benefits.  The acquisition, construction, development, design,
equipping, testing and installing of the Project, as provided under this Loan
Agreement, will promote the employment and the health, safety and general
welfare of the residents of the Commonwealth by promoting the continuation and
expansion of gainful employment opportunities for such residents, will aid in
the provision of water, and will not cause, directly or indirectly, the removal,
either in whole or in part, of a plant, facility or establishment from one area
of the Commonwealth to another.  The Plant and other fixed property
which is part of the Project is located within the boundaries of the
Commonwealth and has a substantial connection with the
Commonwealth.  The Project is a "project" within the meaning of the
Act and will be operated as such.  The Project consists of land or
property of a character subject to allowance for depreciation under Section 167
of the Code and constitutes "facilities for the furnishing of water" within the
meaning of Section 142(a)(4) of the Code.

       

      (h) Operation of
Project.  The Company presently intends to use or operate the
Project (or cause the Project to be operated) in a manner consistent with the
Act for the provision and supply of water until the date on which the Bonds have
been fully paid and knows of no reason why the Project will not be so used or
operated.

       

      (i) Tax
Information.  The information furnished by the Company and used
by the Issuer in preparing the tax certificate and information return pursuant
to the Code is accurate and complete in all material respects as of the date of
original issuance and delivery of the Bonds.  The proceeds of the
Bonds will not exceed the Project Costs.  The Costs of Issuance
financed with proceeds of the Bonds, including any bond discount on the sale of
the Bonds, will not exceed 2% of the proceeds of the Bonds.

       

      (j) Commencement of
Project.  Prior to the adoption of the Inducement Resolution,
no properties included in the Project, that are to be financed with the proceeds
of the Bonds, had been acquired by the Company or any Related Person (as defined
in the Code), and no physical work on the Project had been commenced by the
Company or any Related Person, except to the extent permitted in such Inducement
Resolution.

       

      (k)           Disqualified
Contractors.  The Company is not a Disqualified
Contractor.

      


      ARTICLE
III

       

      THE
PROJECT

       

      SECTION
3.1. Acquisition and
Construction.

       

      The Company (a) has acquired, or has
the requisite legal power to acquire, all interests in land required for
construction of the Project, and shall construct, install, equip and improve the
Project with all reasonable dispatch and in accordance with the description
thereof in Exhibit A attached hereto and
applicable law, (b) shall procure or cause to be procured all permits and
licenses necessary for the prosecution of the work, and (c) shall pay when due
all costs and expenses incurred in connection with that acquisition,
construction, installation, equipment and improvement from funds made available
therefor in accordance with this Loan Agreement or otherwise.  The
Company will revise Exhibit A and such
supplemental information from time to time as necessary to reflect material
additions to, deletions from and changes in the Project and will notify the
Issuer and the Trustee in writing of such modifications so that the Issuer and
the Trustee will be able to ascertain the nature, location and estimated cost of
the Project.  It is understood that the Project is the property of the
Company and that any contracts made by the Company with respect thereto and any
work to be done on the Project is to be done by the Company in its own behalf
and not as agent or contractor for the Issuer or the Trustee.

      


      In the event that Exhibit A hereto is to be
amended or supplemented in accordance with the provisions of Section 9.3 of
the Indenture, the Issuer will enter into, and will instruct the Trustee to
consent to, an amendment of or supplement to Exhibit A hereto upon receipt
by the Issuer and Trustee of:

      


      (i) a
certificate of an Authorized Company Representative describing in detail the
proposed changes; and

       

      (ii) a copy of
the proposed form of amendment or supplement to Exhibit A hereto and such
other documents, certificates and showings as may be required by counsel
rendering the opinion in clause (iii) of this paragraph; and

       

      (iii) an
opinion of Bond Counsel to the effect that such amendment complies with the
requirements of this Section 3.1, is in proper form for execution and
delivery by the Issuer and will not adversely affect the validity of the Bonds
or the exemption from federal income taxes of the interest thereon.

       

      The Company recognizes that since the
Project has been or will be acquired, constructed and equipped by the Company
and by contractors and suppliers selected by the Company in accordance with the
plans and specifications, the Issuer makes no representation or warranty,
express or implied, with respect to the merchantability, condition or
workmanship of any part of the Project or its suitability for the Company's
purposes or the extent to which proceeds derived from the sale of the Bonds will
pay the costs to be incurred in connection therewith.

      


      SECTION
3.2. Construction
Fund.

       

      The Construction Fund shall be drawn on
and used by the Company to pay the Costs of Issuance of the Bonds to the extent
not paid from the settlement account pursuant to Section 2.1 of the
Indenture and to pay other Project Costs when due and payable.

      


      Moneys in the Construction Fund shall
be disbursed to the Company, or such other Person as may be designated, on
requisitions substantially in the form of Exhibit C to the Indenture
signed by the Authorized Company Representative and delivered to the Trustee,
stating with respect to each payment to be made:

      


      (i) The
amount and general purpose of such disbursement; and

       

      (ii) That each
obligation mentioned therein (i) has been properly incurred, (ii) is a proper
charge against the Construction Fund in accordance with the provisions of this
Loan Agreement, the Tax Documents and the Indenture, and (iii) has not been the
basis of any previous requisition.

       

      The Trustee shall rely fully on any
such requisition delivered pursuant to this Section and shall not be required to
make any investigation in connection therewith.

      


      All moneys remaining in the
Construction Fund after all Project Costs have been paid or provided for shall
at the written direction of the Company be used in accordance with
Section 3.3 hereof.

      


      If moneys in the Construction Fund are
not sufficient to pay all Project Costs, the Company nonetheless shall complete
the Project in accordance with Exhibit A attached hereto (as
revised and amended in accordance with this Loan Agreement) and shall pay all
such additional Project Costs.  The Company shall not be entitled to
any reimbursement for any such additional Project Costs from the Issuer, the
Trustee, or any Registered Owner; nor shall it be entitled to any abatement,
diminution or postponement of the Installment Loan Payments or other amounts
payable hereunder.

      


      SECTION
3.3. Establishment of Completion
Date.

       

      As soon as practicable after the
completion of construction of the Project, the Company shall furnish to the
Trustee a certificate signed by an Authorized Company Representative stating (i)
that construction of the Project described in Exhibit A hereto (as revised
and amended in accord with this Loan Agreement) has been completed, and (ii) any
portion of the Project Costs which has not yet then been paid.  Such
certificate may state that it is given without prejudice to any rights against
third parties which exist at the date of such certificate or which may
subsequently come into being.

      


      Moneys (including investment proceeds)
remaining in the Construction Fund on the date of such certificate may be used,
at the written direction of an Authorized Company Representative for the
payment, in accordance with the provisions of this Loan Agreement, of any
Project Costs not then paid as specified in such certificate.  The
Company agrees that any moneys (including investment proceeds) remaining in the
Construction Fund on the date of the aforesaid certificate and not so set aside
for the payment of such Project Costs shall be transferred or disbursed in
accordance with Section 1.142-2 of the Regulations, or any successor thereto and
that the Company shall give specific instructions to the Trustee as to the
transfer or disbursement of such funds and certify that such transfer or
disbursement complies with the provisions of Section 1.142-2 of the Regulations
or any successor thereto at such time.  The Company acknowledges that
these provisions generally require that a portion of the Bonds be redeemed, or
defeased to the first call date (with appropriate notice to the Internal Revenue
Service), within 90 days of the earlier of (i) the date on which the Company
determines that the Project will not be completed or (ii) the date on which the
Project is Placed-in-Service (as defined in the Tax Agreement).

      


      ARTICLE
IV

       

      LOAN
AND REPAYMENT; OPERATION OF PROJECT

       

      SECTION
4.1. Loan of Bond
Proceeds.

       

      To provide funds for the financing of
Costs of Issuance and Project Costs, the Issuer will issue the Bonds upon the
terms and conditions contained in this Loan Agreement and the Indenture and will
loan the proceeds thereof to the Company by causing the Bond proceeds to be
applied as provided in Article V hereof.  The Company shall pay
all Costs of completing the Project to the extent that such Costs exceed the
loan proceeds, including interest earnings, available therefor.

      


      SECTION
4.2. Repayment of
Loan.

       

      The Company will repay the loan of the
Bond proceeds by making the payments required by Article VI
hereof.

      


      SECTION
4.3. Operation.

       

      The Company shall acquire, construct,
install, operate and maintain the Project in such manner as to comply in all
material respects with the Act and all applicable requirements of federal, state
and local laws and the regulations, rules and orders of any federal, state or
local agency, board, commission or court having jurisdiction over the Project or
the operation thereof, including without limitation applicable zoning, planning,
building and environmental laws, regulations, rules and orders; provided that
the Company shall be deemed in compliance with this Section so long as it is
acting with due diligence to correct any violations of any of the foregoing or
contesting in good faith any such requirement by appropriate legal
proceedings.  The Company shall pay all costs and expenses of
operation and maintenance of the Project, including all applicable
taxes.  During such period as the Project is operated in accordance
with the provisions of this Loan Agreement, the Company will, within the design
capabilities thereof, cause the Project to be operated and maintained in
accordance with all applicable, valid and enforceable rules and regulations;
provided, that the Company reserves the right to contest in good faith any such
rules or regulations or the application thereof to the Project.  It is
understood and agreed that the Issuer shall have no duties or responsibilities
whatsoever with respect to the operation or maintenance of the Project, or the
performance of the Project for its designed purposes.

      


      SECTION
4.4. Insurance.

       

      Subject to the provisions of
Section 4.6 hereof, the Company agrees to maintain, or cause to be
maintained, all necessary insurance with respect to the Project in accordance
with its customary insurance practices and the practices of Persons operating
similar facilities, which may include self-insurance.  All costs of
maintaining insurance with respect to the Project shall be paid by the Company,
and the Issuer and the Trustee shall have no obligation or liability in this
regard.  All general liability insurance policies relating to the
Project site or facilities shall name the Authority and the Trustee as
additional insureds as their interests may appear.

      


      SECTION
4.5. Maintenance and
Repair.

       

      Subject to the provisions of
Section 4.6 hereof, the Company agrees that it will (i) maintain, or
cause to be maintained, the Project and all of its other properties in as
reasonably safe condition as its operations shall permit and (ii) maintain,
or cause to be maintained, the Project and all of its other properties in good
repair and in good operating condition, ordinary wear and tear excepted, making
from time to time all necessary repairs thereto and renewals and replacements
thereof material to the integrity of the water system or to the provision of
adequate service to the Company's customers.  All costs of operating
and maintaining the Project and all of its other properties shall be paid by the
Company, and the Issuer shall have no obligation or liability in this
regard.

      


      SECTION
4.6. Right to Discontinue
Operation of Project.

       

      Although the Company intends to
operate, or cause to be operated, the Project for its designed purposes until
the date on which no Bonds are Outstanding, subject to the provisions of Section
6.10 hereof, the Company is not required by this Loan Agreement to operate, or
cause to be operated, any portion of the Project after the Company shall deem in
its sole discretion that such continued operation is not advisable and in such
event it is not prohibited by this Loan Agreement from selling, leasing or
retiring all or any such portion of the Project.  Subject to the
provisions of Section 6.10 hereof, the net proceeds from such sale, lease
or other disposition, if any, shall belong to, and may be used for any lawful
purpose by, the Company.  Upon discontinuance of operation of the
Project in accordance with this Section 4.6, the Company shall be
discharged from its obligations to insure, maintain and repair the Project or to
cause the Project to be insured, maintained and repaired as set forth in
Sections 4.4 and 4.5 hereof.

      


      SECTION
4.7. Insurance and Condemnation
Awards.

       

      Subject to the provisions of
Sections 4.4 and 6.10 hereof, the net proceeds of any insurance or
condemnation award as a result of the destruction or condemnation of the Project
or any portion thereof shall belong to, and may be used for any lawful purpose
by, the Company.

      


      SECTION
4.8. Workers' Compensation
Coverage.

       

      Throughout the term of this Loan
Agreement, the Company shall comply, or cause compliance, with applicable
workers' compensation laws of the Commonwealth.

      


      SECTION
4.9. Taxes, Claims for Labor and
Materials, Compliance with Laws.

       

      (a) The
Company will promptly pay and discharge all lawful taxes, assessments and
governmental charges or levies imposed upon the Company or upon or in respect of
all or any part of the Property or business of the Company, all trade accounts
payable in accordance with usual and customary business terms, and all claims
for work, labor or materials, which if unpaid might become a lien or charge upon
any Property of the Company including the Installment Loan Payments; provided
the Company shall not be required to pay any such tax, assessment, charge, levy,
account payable or claim if (1) the validity, applicability or amount thereof is
being contested in good faith by appropriate actions or proceedings which will
prevent the forfeiture or sale of any Property of the Company or any material
interference with the use thereof by the Company, and (2) the Company shall set
aside on its books, reserves deemed by it to be adequate with respect
thereto.

       

      (b) The
Company will promptly comply with all laws, ordinances or governmental rules and
regulations to which it is subject, including without limitation, the
Occupational Safety and Health Act of 1970, the Employees Retirement Income
Security Act of 1974, as amended, and all Environmental Legal Requirements, the
violation of which would materially and adversely affect the Properties,
business, prospects, profits or condition (financial or otherwise) of the
Company or would result in any lien or charge upon any Property of the Company,
subject, however, to the Company's right to contest in good faith the
application of any such laws, rules or regulations to the Company or its
operations so long as such contest does not result in a material threat to the
operation of the Company's water system or its ability to make the payments due
hereunder.

       

      SECTION
4.10. Issuer's Limited
Liability.

       

      It is recognized that the Issuer's only
source of funds with which to carry out its commitments under the Bonds or this
Loan Agreement will be from the proceeds from the sale of the Bonds, the
Installment Loan Payments, or from any available income or earnings derived
therefrom, or from any funds which otherwise might be made available by the
Company; and it is expressly agreed that the Issuer shall have no liability,
obligation, or responsibility with respect to this Loan Agreement or the Project
except to the extent of funds available from such sources.  If, for
any reason, the proceeds from the sale of the Bonds are not sufficient to pay
all the costs of completing the acquisition, construction and installation of
the Project, the Company shall complete the acquisition, construction and
installation of the Project, and the Company shall pay such costs from its own
funds, but it shall not be entitled to reimbursement therefor, or to any
diminution in or postponement of any payments required to be made by the Company
hereunder.

      


      SECTION
4.11. Right of
Inspection.

       

      Subject to reasonable security and
safety regulations and upon reasonable notice, the Issuer and the Trustee, and
their respective agents and representatives, shall have the right during normal
business hours to inspect the Project and the books and records of the Company
pertaining to the Project; provided, however, that this right is subject to
federal, state and local laws and regulations applicable to the site of the
Project.  The right of access hereby reserved to the Issuer and the
Trustee may be exercised only after such agent or representative shall have
executed release of liability and secrecy agreements (to the extent permitted by
law, in the case of an Issuer representative) if requested by the Company in the
form then currently used by the Company, and nothing contained in this Section
or in any other provision of this Loan Agreement shall be construed to entitle
the Issuer or the Trustee to any information or inspection involving the
confidential expertise of the Company.

      


      ARTICLE
V

       

      ISSUANCE
OF BONDS; SECURITY; INVESTMENTS

       

      SECTION
5.1. Issuance of
Bonds.

       

      In order to provide funds to finance
the acquisition, construction and installation of the Project, the Issuer,
concurrently with the execution of this Loan Agreement, will sell, issue and
deliver to the initial purchasers thereof the Bonds, all in accordance with the
Indenture.  The Issuer will thereupon cause the accrued interest, if
any, received upon the delivery of the Bonds to be deposited in the Debt Service
Fund and the balance of the proceeds received from the sale of the Bonds to be
deposited in the Construction Fund.

      


      SECTION
5.2. Security for the
Bonds.

       

      The obligations of the Company under
this Loan Agreement, including specifically the obligation to pay Installment
Loan Payments and Administrative Expenses and its obligations under
Article VI hereof shall be direct general obligations of the
Company.  Prior to or simultaneously with the issuance of the Bonds,
the Issuer will assign to the Trustee under the terms of the Indenture all of
the Issuer's right, title, and interest in and to this Loan Agreement including
specifically the Installment Loan Payments but excepting all Unassigned Issuer's
Rights.

      


      SECTION
5.3. Reserved.

       

      SECTION
5.4. Investment of
Funds.

       

      The Issuer hereby gives its express
written authority to the Company as provided in the Indenture to direct the
investment of the Construction Fund, Debt Service Fund or any other Fund held by
the Trustee pursuant to the Indenture.

      


      ARTICLE
VI

       

      COMPANY
OBLIGATIONS; PROVISIONS FOR PAYMENT; COVENANTS

       

      SECTION
6.1. Company Approval of Issuance
of Bonds.

       

      The governing body of the Issuer has
adopted the Bond Resolution authorizing the execution of this Loan Agreement and
the Indenture and the issuance of the Bonds.  The Company hereby
approves the Bond Resolution and the Indenture.  It is hereby agreed
that the foregoing approval of the Bond Resolution and the Indenture constitutes
the acknowledgment and agreement of the Company that the Bonds, when issued,
sold and delivered as provided in the Bond Resolution and the Indenture, will be
issued in accordance with and in compliance with this Loan Agreement,
notwithstanding any other provisions of this Loan Agreement or any other
contract or agreement to the contrary.  Any Registered Owner is
entitled to rely fully and unconditionally on the foregoing
approval.  Notwithstanding any provisions of this Loan Agreement or
any other contract or agreement to the contrary, the Company's approval of the
Bond Resolution and the Indenture shall be the Company's agreement that all
covenants and provisions in this Loan Agreement and the Indenture affecting the
Company shall, upon the delivery of the Bonds and the Indenture, become valid
and binding covenants and obligations of the Company so long as the Bonds,
premium, if any, and the interest thereon are outstanding and
unpaid.  Particularly, the obligation of the Company to pay, promptly
when due, all Installment Loan Payments specified in this Loan Agreement and the
Indenture shall be absolute and unconditional, and said obligation may be
enforced as provided in this Loan Agreement and the Indenture.

      


      SECTION
6.2. Refunding of
Bonds.

       

      After the issuance of any Bonds, the
Issuer shall not refund any of the Bonds or change or modify the Bonds in any
way, except as provided for in the Indenture, without the prior written approval
of an Authorized Company Representative; nor shall the Issuer redeem any Bonds
prior to the maturity date except upon the written request of an Authorized
Company Representative, unless such redemption is required or permitted by the
Indenture without such request.

      


      SECTION
6.3. Redemption of
Bonds.

       

      The Issuer, upon the written request of
the Company (and provided that the affected Bonds are subject to redemption
prior to maturity at the option of the Issuer or the Company, and provided that
such request is received in sufficient time prior to the date upon which such
redemption is proposed), shall promptly take or cause to be taken all action
that may be necessary under the applicable redemption provisions to effect such
redemption prior to maturity, to the full extent of funds either made available
for such purpose by the Company or already on deposit in the Debt Service Fund
and available for such purpose.  The redemption of any Outstanding
Bonds prior to maturity at any time shall not relieve the Company of its
absolute and unconditional obligation to pay each remaining Installment Loan
Payment with respect to any Outstanding Bonds, as specified in the
Indenture.  If a redemption of Bonds is required pursuant to the
provisions of the Indenture, the Company agrees as provided herein to promptly
make Installment Loan Payments sufficient to pay the principal of, premium, if
any, and interest on the Bonds due on such redemption date.

      


      SECTION
6.4. Installment Loan
Payments.

       

      (a) The
Company hereby covenants and agrees to make the Installment Loan Payments, as
hereinafter provided in subsections (b), (c), (d) and (f) of this Section,
to the Trustee, on behalf of the Issuer, in accordance with this Loan
Agreement.

       

      (b) The
Company shall make Installment Loan Payments, subject to the limitations of
subsection (e) below of this Loan Agreement, in immediately available funds
directly to the Trustee for deposit in the Debt Service Fund at least three
Business Days before each day on which any payment of Debt Service shall become
due (whether at maturity or upon redemption or acceleration or otherwise) in an
amount which, together with other money held by the Trustee under the Indenture
and available therefor, will enable the Trustee to make such payment in full
when due.

       

      (c) In the
event the Company should fail to make any of the payments required in this
Section, the item or installment so in default shall continue as an obligation
of the Company until the amount in default shall have been fully paid, and the
Company agrees to pay the same with interest thereon, to the extent permitted by
law, from the date when such payment was due as provided in the
Indenture.

       

      (d) If,
subsequent to a date on which the Company is obligated to pay the Installment
Loan Payments (subject to the provisions of Article X of the Indenture),
losses (net of gains) shall be incurred in respect of any investments, or any
other event has occurred causing the money in the Debt Service Fund, together
with any other money then held by the Trustee and available for the purpose, to
be less than the amount sufficient at the time of such occurrence or other event
to pay, in accordance with the provisions of the Indenture, all Debt Service due
and payable or to become due and payable, the Trustee shall notify the Company
of such fact and thereafter the Company, as and when required for purposes of
such Debt Service Fund, shall pay in immediately available funds to the Trustee
for deposit in the Debt Service Fund the amount of any such
deficiency.

       

      (e) Notwithstanding
the foregoing, it is the intention of the parties hereto to conform strictly to
the usury laws now in force in the Commonwealth, and any provision for any
payment contained herein and in the Bonds shall be held to be subject to
reduction to the amount allowed under said usury laws as now or hereafter
construed by the courts having jurisdiction.

       

      (f) The
Company further agrees that in the event payment of the principal of and the
interest on the Bonds is accelerated upon the occurrence of an Event of Default
under the Indenture, all amounts payable under Section 6.4(b) for the
remainder of the term hereof (other than interest not yet due) shall be
immediately due and payable.

       

      (g) Any
amount held in the Debt Service Fund on any payment date specified in
subsection (b) above and not previously credited against Installment Loan
Payments or designated for payments due on particular Bonds, shall be credited
against the Installment Loan Payments required to be made by the Company on such
date.

       

      SECTION
6.5. Administrative
Expenses.

       

      The Company shall pay, or cause to be
paid, an amount equal to the reasonable fees and charges of the Trustee for
services rendered as Trustee under the Indenture and its reasonable expenses
incurred as Trustee under the Indenture, including reasonable fees and expenses
of its counsel.  The Trustee's right to receive its reasonable fees,
charges and expenses hereunder shall be secured by a lien on moneys held by it
in the Debt Service Fund and, upon an Event of Default hereunder, the Trustee
shall have a right of payment prior to the payment of the owners of the Bonds as
provided in Section 8.11 of the Indenture.

      


      SECTION
6.6. Payments to Issuer and Local
IDA.

       

      The Company shall pay or cause to be
paid all of the Issuer's and Local IDA's reasonable, actual out-of-pocket
expenses and costs in connection with the issuance of the Bonds, including,
without limitation, all financing, legal, printing, and other expenses and all
Costs of Issuance incurred in issuing the Bonds (including the fees and expenses
of bond counsel and the Issuer's financial advisor) and the Issuer's fee of .20%
of the principal amount of the Bonds for issuing the Bonds, less an application
fee of $0.  Also, in the future the Company shall pay to the Issuer
upon receipt of statements therefor from time to time, such amounts as are
necessary to pay or reimburse the Issuer for its reasonable and necessary
expenses and costs attributable to the Bonds and the Project, including an
annual audit/service fee.

      


      SECTION
6.7. Obligations of the Company
Absolute and Unconditional.

       

      The obligations of the Company to make
the payments required and to perform the covenants contained in
Sections 6.4, 6.5, 6.6, 6.10, 7.1 and 8.3 and to perform and observe the
other agreements on its part contained herein shall be absolute and
unconditional and shall not be subject to diminution by set-off, counterclaim,
abatement or otherwise.  Until payment of all Debt Service relating to
the Bonds has been made, the Company (a) will not suspend or discontinue
any payments provided for in this Loan Agreement, except to the extent the same
have been prepaid, (b) will perform and observe all its other agreements
contained herein, and (c) except as provided in Section 9.1, will not
terminate this Loan Agreement for any cause, including, without limiting the
generality of the foregoing, any acts or circumstances that may constitute
failure of consideration, sale, loss, eviction or constructive eviction,
destruction of or damage to the Project, commercial frustration of purpose, any
change in the tax or other laws of the United States of America or of the
Commonwealth or any political subdivision of either, or any failure of the
Issuer to perform and observe any agreement, whether express or implied, or any
duty, liability or obligation arising out of or in connection herewith or with
the Indenture.  Nothing contained in this Section shall be construed
to release the Issuer from the performance of any of the agreements on its part
herein contained and in the event the Issuer shall fail to perform any such
agreement on its part, the Company may take such action as the Company may deem
necessary to perform or compel performance, provided that no such action shall
violate the agreements on the part of the Company contained in this Loan
Agreement or postpone or diminish the amounts required to be paid by the Company
pursuant to this Loan Agreement.  Upon the issuance and delivery of
the Bonds to the initial purchasers thereof, the Company shall have received,
and the Issuer shall have given, full and complete consideration for the
Company's obligation hereunder to make Installment Loan Payments.

      


      SECTION
6.8. Option to Prepay Amounts
Under Loan Agreement in Certain Events.

       

      The Company shall have, and is hereby
granted, the option to prepay the amounts required to be paid by the Company
under Section 6.4(b) in whole or in part and to direct the Trustee to
redeem the Bonds in whole or in part, as the case may be, if the Company
determines to exercise any optional redemption rights under the terms of the
Bonds or if any of the events described in Article V of the Indenture requiring
the redemption of Bonds shall have occurred.  The Company may at any
time deliver money, and/or Government Obligations, to the Trustee with
instructions to the Trustee to hold such money, and/or Government Obligations,
pursuant to Article X of the Indenture in connection with a discharge of
the Indenture.  The Issuer agrees that, at the request at any time of
the Company, it will cooperate with the Company to cause the Bonds or any
portion thereof to be redeemed, or to cause the Indenture to be discharged, to
the extent permitted by the Indenture.

      


      SECTION
6.9. Company's Performance Under
Indenture.

       

      The Company agrees to do and perform
all acts and things contemplated in the Indenture to be done or performed by it
and to not interfere with the exercise of the power and authority granted to the
Trustee in the Indenture.  The Company further agrees to aid in
furnishing any documents, certificates or opinions that may be required under
the Indenture.

      


      SECTION
6.10. Covenants Regarding Tax
Exemption.

       

      It is the intention of the Company and
the Issuer that the interest on the Bonds be excludable from the gross income of
the holders thereof for federal income tax purposes by reason of
Section 103(a) of the Code, except for any Bond for any period that such
Bond is owned by a person who is a "substantial user" of the Project or a
"related person" within the meaning of Section 147(a) of the Code, and that
substantially all of the proceeds of the Bonds will be used to provide
facilities for the furnishing of water within the meaning of
Section 142(a)(4) of the Code and any Regulations promulgated with respect
thereto.  To that end, the Company and the Issuer (to the extent
reasonably within the control of the Issuer) covenant with each other to refrain
from any action which would adversely affect, or to take such action to assure,
the treatment of the Bonds as obligations described in Section 103(a) of
the Code, the interest on which is not includable in the gross income of the
holders thereof (other than the income of a "substantial user" of the Project or
a "related person" within the meaning of Section 147(a) of the Code) for
purposes of federal income taxation. None of the covenants and agreements herein
contained shall require either the Company or the Issuer to enter an appearance
or intervene in any administrative, legislative or judicial proceeding in
connection with any changes in applicable laws, rules or regulations or in
connection with any decisions of any court or administrative agency or other
governmental body affecting the taxation of interest on the Bonds.

      


      SECTION
6.11. Bonds Purchased in Lieu of
Redemption.

       

      Pursuant to Section 5.6 of the
Indenture, the Company is given the right to purchase Bonds in lieu of
redemption, provided that Bonds so purchased shall be retired and not
remarketed.

      


      SECTION
6.12. Nondiscrimination – Sexual
Harassment.

       

      The Company hereby accepts and agrees
to be bound by the Nondiscrimination – Sexual Harassment clause set forth in
Exhibit B attached
hereto.

      


      ARTICLE
VII

       

      PARTICULAR
AGREEMENTS

       

      SECTION
7.1. Indemnified Party's Release
and Indemnification Provisions.

       

      The Company agrees, whether or not the
transactions contemplated by this Loan Agreement and the Indenture shall be
consummated:

      


      (a) to pay,
and save the Indemnified Parties harmless against liability for the payment of,
all reasonable out-of-pocket expenses arising in connection with said
contemplated transactions, including the reasonable fees and expenses of counsel
to the Indemnified Parties; and

       

      (b) to
defend, protect, indemnify and save the Indemnified Parties harmless from and
against all liability, losses, damages, costs, reasonable expenses (including
reasonable counsel fees), taxes, causes of action, suits, claims, demands and
judgments of any nature or form, by or on behalf of any Person arising in any
manner from the transactions of which this Loan Agreement or the Indenture is a
part or arising in any manner in connection with the Project or the financing or
refinancing of the Project, and, without limiting the generality of the
foregoing, arising from (i) the issuance, offering, sale, or delivery of
the Bonds, the Indenture, the Underwriting Agreement and this Loan Agreement and
the obligations imposed on the Issuer hereby and thereby and the Trustee's
performance of its obligations under the Indenture; or the design, construction,
installation, operation, use, occupancy, maintenance, or ownership of the
Project; (ii) any written statements or representations made or given by
the Company or any of its officers or employees to the Indemnified Parties or
any underwriters or purchasers of any of the Bonds, with respect to the Issuer,
the Company, the Project, the Bonds or the Underwriting Agreement, including,
but not limited to, statements or representations of facts, financial
information, or corporate affairs; (iii) damage to property or any injury
to or death of any person that may be occasioned by any cause whatsoever
pertaining to the Project; (iv) any breach or default on the part of the
Company in the performance of any of its obligations under this Loan Agreement;
(v) any violation of contract, agreement or restriction by the Company
relating to the Project; or (vi) any violation of law, ordinance or
regulation by or permitted by the Company affecting the Project or any part
thereof or the ownership or occupancy or use thereof.

       

      In the event that any action or
proceeding is brought against any Indemnified Party by reason of any such claim,
such action or proceeding shall be defended against by counsel to the Company,
unless the Indemnified Party shall determine, upon advice of counsel to the
Indemnified Party, that the Indemnified Party's interests conflict with the
interests of Company, in which event the Indemnified Party may select its own
counsel.  In the event such defense is by counsel to the Indemnified
Party on behalf of the Indemnified Party, the Company shall indemnify the
Indemnified Party for reasonable costs of counsel to the Indemnified Party
allocated to such defense and charged to the Indemnified Party.  The
Company, upon notice from the Indemnified Party, shall resist and defend such an
action or proceeding on behalf of the Indemnified Party.  The
Indemnified Party shall provide the Company prompt written notice of any claim
or suit with respect to which it has a right of indemnity hereunder, but the
failure to provide such notice shall not limit or impair the rights of any
Indemnified Party hereunder except to the extent that such failure causes actual
damage or loss to the Company.  The Indemnified Party shall, at the
Company's expense, provide all reasonable assistance requested by the Company in
its defense and/or settlement of any such claim or suit.  Neither
party shall settle or pay any such claim or suit without the prior written
consent of the other party, which shall not be unreasonably
withheld.

      


      The provisions of this Section shall
not apply to any claim or liability to the extent resulting from the Indemnified
Party's acts of gross negligence, bad faith, fraud or deceit or for any claim or
liability which the Company was not given the opportunity to contest (except as
set forth in the preceding paragraph), due to the gross negligence of the
Indemnified Party.

      


      The Company also agrees to pay the
expenses (including reasonable attorneys' fees) of any Indemnified Party in
enforcing this Section 7.1.  The provisions of this Section shall
survive the payment of the Bonds, the termination of this Loan Agreement, the
termination of the Indenture, and, as to the Trustee, the removal or resignation
of the Trustee.

      


      SECTION
7.2. Maintenance of Corporate
Existence.

       

      The Company agrees that during the term
of this Loan Agreement it will maintain its corporate existence, will not
dissolve or otherwise dispose of all or substantially all of its assets and will
not consolidate with or merge into another corporation; provided, however, that
the Company may, without violating the agreement contained in this Section,
consolidate with or merge into another corporation, or sell or otherwise
transfer to another corporation all or substantially all of its assets as an
entirety and thereafter dissolve, if (a) the Issuer consents in writing,
(b) the surviving, resulting or transferee corporation, as the case may be,
assumes in a writing delivered to the Trustee all of the obligations of the
Company herein and under the Tax Documents, is duly qualified to do business in
the Commonwealth, (c) at the time of such consolidation or merger and after
giving effect thereto, no Default or Event of Default shall have occurred and be
continuing, (d) after giving effect to such consolidation or merger the
surviving corporation would be permitted to incur at least $1.00 of additional
Funded Debt under the provisions of Section 7.9 hereof, and (e) the
provisions of Section 7.6 are satisfied.

      


      SECTION
7.3. Financial
Information.

       

      The Company will keep proper books of
record and account in which full and correct entries will be made of all
dealings or transactions of or in relation to the business and affairs of the
Company, in accordance with generally accepted accounting principles
consistently maintained (except for changes disclosed in the financial
statements furnished pursuant to this Section 7.3 and concurred in by the
independent public accountants referred to herein), and will furnish to the
Trustee and upon request, to the Issuer:

      


      (a) Quarterly
Statements.  As soon as available and in any event within 45
days after the end of each quarterly fiscal period (except the last) of each
fiscal year, duplicate copies of:

       

      (i) a
consolidated balance sheet of the Company as of the close of such quarter
setting forth in comparative form the consolidated figures for the year end or
annual period of the preceding fiscal year,

       

      (ii) consolidated
statements of income and shareholders' investment of the Company for such
quarterly period, setting forth in comparative form the consolidated figures for
the corresponding period of the preceding fiscal year, and

       

      (iii) consolidated
statements of cash flows of the Company for the portion of the fiscal year
ending with such quarter, setting forth in comparative form the consolidated
figures for the corresponding period of the preceding fiscal year,

       

      all in
reasonable detail and certified as complete and correct, by an authorized
financial officer of the Company;

      


      (b) Annual
Statements.  As soon as available and in any event within 120
days after the close of each fiscal year of the Company, duplicate copies
of:

       

      (i) a
consolidated balance sheet of the Company as of the close of such fiscal
year,

       

      (ii) consolidated
statements of income and shareholders' investment and cash flows of the Company
for such fiscal year,

       

      in each
case setting forth in comparative form the consolidated figures for the
preceding fiscal year, all in reasonable detail and accompanied by an opinion
thereon of a firm of independent public accountants of recognized national
standing selected by the Company to the effect that the consolidated financial
statements have been prepared in accordance with generally accepted accounting
principles consistently applied (except for changes in application in which such
accountants concur) and present fairly, in all material respects, the financial
condition of the Company and that the examination of such accountants in
connection with such financial statements has been made in accordance with
generally accepted auditing standards and accordingly, includes such tests of
the accounting records and such other auditing procedures as were considered
necessary in the circumstances;

      


      (c) Audit
Reports.  Promptly upon receipt thereof, one copy of each
interim or special audit made by independent accountants of the books of the
Company;

       

      (d) SEC and Other
Reports.  Promptly upon their becoming available, one copy of
each financial statement, report, notice or proxy statement sent by the Company
to stockholders generally and of each regular or periodic report, and any
registration statement or prospectus filed by the Company with any securities
exchange or the Securities and Exchange Commission or any successor agency, and
copies of any orders in any proceedings substantially affecting the financial
condition of the Company to which the Company is a party, issued by any
governmental agency, Federal or state, having jurisdiction over the
Company;

       

      (e) Officers'
Certificates.  Within the periods provided in paragraphs (a)
and (b) above, a certificate of an authorized financial officer of the Company
stating that he has reviewed the provisions of this Agreement and setting forth:
(1) the information and computations (in sufficient detail) required in order to
establish whether the Company was in compliance with the requirements of
Sections 7.9 through 7.12, inclusive, at the end of the period covered by the
financial statements then being furnished, and (2) whether there existed as of
the date of such financial statements and whether, to the best of his knowledge,
there exists on the date of the certificate or existed at any time during the
period covered by such financial statements any Default or Event of Default and,
if any such condition or event exists on the date of the certificate, specifying
the nature and period of existence thereof and the action the Company is taking
and proposes to take with respect thereto.

       

      To the extent not furnished pursuant to
the foregoing provisions of this Section 7.3, the Company agrees to furnish
to the Issuer and Trustee, copies of the annual financial statements and other
information filed with Nationally Recognized Municipal Securities Information
Repositories pursuant to the Company's continuing disclosure undertaking
referred to in the Underwriting Agreement.  Such statements and other
information shall be filed with the Authority and the Trustee within ten (10)
days of the filings made pursuant to such continuing disclosure
undertaking.

      


      SECTION
7.4. Agreement of Issuer Not to
Assign or Pledge.

       

      Except for the assignment and pledge
described in the Indenture, the Issuer agrees that it will not attempt to
further assign, pledge, transfer or convey its interest in or create any
assignment, pledge, lien, charge or encumbrance of any form or nature with
respect to the rights and interests herein described.

      


      SECTION
7.5. Reference to Bonds
Ineffective after Bonds Paid.

       

      Upon payment of all Debt Service due
relating to the Bonds, and payment of all fees and charges of the Issuer and the
Trustee, all as provided in Article X of the Indenture, all references herein to
the Bonds and the Trustee shall be ineffective and neither the Issuer, the
Trustee nor the holders of any of the Bonds shall thereafter have any rights
hereunder and the Company shall have no further obligation hereunder, saving and
excepting those that shall have theretofore vested and remain unsatisfied and
any right of the Issuer or the Trustee to indemnification under Section 7.1
and payment of fees under Section 8.3, which rights shall survive the
payment of all Debt Service due relating to the Bonds and the termination of
this Loan Agreement and the Indenture.

      


      SECTION
7.6. Assignment, Sale or Lease of
Project.

       

      (a) The
Company shall not assign this Loan Agreement or any interest of the Company
herein, either in whole or in part, without the prior written consent of the
Trustee, which consent shall be given if the following conditions are
fulfilled:

       

      (i) The
assignee assumes in writing all of the obligations of the Company
hereunder;

       

      (ii) The
assignee provides the Trustee with an opinion of counsel satisfactory to the
Trustee to the effect that neither the validity nor the enforceability of this
Loan Agreement shall be adversely affected by such assignment;

       

      (iii) The
Project shall continue in the opinion of Bond Counsel to be a "project" as such
term is defined in the Act after such assignment;

       

      (iv) Such
assignment shall not, in the opinion of Bond Counsel, have an adverse effect on
the exclusion from gross income for federal income tax purposes of interest on
the Bonds; and

       

      (v) The
assignee shall not be a Disqualified Contractor.

       

      (vi) Consent
by the Issuer, which consent shall not be unreasonably withheld.

       

      (b) The
Company may, subject to the provisions of Section 6.10, lease the Project, in
whole or in part, to one or more other Persons, provided that:

       

      (i) No such
lease shall relieve the Company from its obligations under this Loan
Agreement;

       

      (ii) In
connection with any such lease the Company shall retain such rights of interests
as will permit it to comply with its obligations under this Loan
Agreement;

       

      (iii) No such
lease shall impair materially the accomplishment of the purposes of the Act to
be accomplished by operation of the Project as herein provided;

       

      (iv) Any such
lease shall require the lessee to operate the Project as a "project" under the
Act as long as the Bonds are outstanding;

       

      (v) In the
case of a lease to a new lessee or an assignment of an existing lease to a new
lessee of substantially all of the Project, such new lessee shall have been
approved by the Issuer (such approval not to be unreasonably withheld);
and

       

      (vi) The
lessees under any such leases, shall be subject to the applicable terms and
conditions of Section 6.10.

       

      (c) The
Company shall not sell, assign or otherwise dispose of (whether in one
transaction or in a series of transactions) its interest in the Project or any
material portion thereof, other than is permitted by Section 7.6(a) and other
than leases permitted under Section 7.6(b) or undertake or permit the
demolition or removal of the Project or any material portion thereof without the
prior written consent of the Issuer; provided that the Company shall be
permitted to sell, transfer, assign or otherwise dispose of or remove any
portion of the Project which is retired or replaced in the ordinary course of
business.

       

      SECTION
7.7. Amendment of Loan Agreement
or Indenture.

       

      No amendment, change, addition to, or
waiver of any of the provisions of this Loan Agreement or the Indenture shall be
made except pursuant to Article IX and Article XI of the
Indenture.

      


      SECTION
7.8. Waiver of Vendor’s
Lien.

       

      Notwithstanding anything in this Loan
Agreement to the contrary, it is the intention of the parties hereto that no
vendor’s lien and/or privilege, mortgage, resolutory condition, right of
rescission or stipulation for the benefit of a third party shall be created by
execution of this Loan Agreement, and if any such lien, privilege, condition, or
benefit should be deemed to have been created by execution of this Loan
Agreement, they are expressly released, renounced, waived and abandoned by the
parties hereto.

      


      SECTION
7.9. Limitations on
Indebtedness.

       

      (a) The
Company will not have outstanding, or in any manner be liable in respect of, any
Indebtedness, except the following:

       

      (i) current
operating liabilities and current or other obligations (other than for borrowed
money) incurred in the ordinary course of business;

       

      (ii) Seasonal
Indebtedness, provided that such Seasonal Indebtedness has not existed for a
period of at least 30 consecutive days in the twelve preceding months;
and

       

      (iii) Funded
Debt (including the Bonds) in an amount not in excess of 60% of the Plant
Account on the books of the Company at any one time outstanding.

       

      (b) The
renewal, extension or refunding of any Funded Debt issued or incurred in
accordance with the limitations of this Section 7.9 shall constitute the
issuance of additional Funded Debt, which is, in turn, subject to the
limitations of the applicable provisions of this Section 7.9, but any
Indebtedness paid or defeased from the proceeds of additional Funded Debt may be
excluded from outstanding Indebtedness for purposes of this
Section 7.9.

       

      (c) Subject
to compliance with this Section 7.9, nothing contained in this Agreement shall
prohibit the Company from having the Issuer issue in the future additional
series of bonds or incurring other types of Funded Debt.

       

      SECTION
7.10. Limitation on
Liens.

       

      (a) The
Company will not create or incur, or suffer to be incurred or to exist, any
mortgage, pledge, security interest, encumbrance, lien or charge of any kind on
its Property or assets, whether now owned or hereafter acquired, or upon any
income or profits therefrom, or transfer any Property for the purpose of
subjecting the same to the payment of obligations in priority to the payment of
its or their general creditors, or acquire or agree to acquire any Property or
assets upon conditional sales agreements or other title retention devices,
except Excepted Encumbrances; provided, however, that this requirement shall not
be applicable to, nor prevent:

       

      (i) the
pledging by the Company of its assets as security for the payment of any tax,
assessment or other similar charge demanded of the Company by any governmental
authority or public body as long as the Company in good faith contests its
liability to pay the same, or as security to be deposited with any governmental
authority or public body for any purpose at any time required by law or,
governmental regulation as a condition to the transaction of any business or the
exercise of any privilege, license or right; or

       

      (ii) the
pledging by the Company of any assets for the purpose of securing a stay or
discharge or for any other purpose in the course of any legal proceeding in
which the Company is a party; or

       

      (iii) making
good faith deposits in connection with tenders, contracts or leases to which the
Company is a party; or

       

      (iv) the
pledging by the Company of its revenues to the Pennsylvania Infrastructure
Investment Authority pursuant to that certain Loan Agreement dated as of
August 24, 1999 in order to secure a loan in the original aggregate
principal amount of $800,000 made by such Authority to the Company, such loan
having an outstanding principal balance of approximately $475,118 as of June 30,
2008.

       

      (b) In the
event any Property or assets of the Company are subject to a lien or charge not
otherwise permitted by Section 7.10(a) above, the Company will make effective
provision whereby the Bonds shall (so long as any other Indebtedness shall be so
secured) be secured (along with any other Indebtedness similarly entitled to be
equally and ratably secured) by a direct lien (on all the Property, other than
Excepted Property, owned by the Company just prior to the time such other lien
shall have become a lien on any of the Property of the Company) prior to the
lien or liens securing any and all such other
Indebtedness.  Compliance with the provisions of this paragraph shall
not be deemed to constitute a waiver of, or consent to, any violation of Section
7.10(a).

       

      (c) The
Company covenants that, so long as any Bonds shall be outstanding under the
Indenture, if, upon any consolidation or merger of the Company with or into any
other corporation, or upon any sale or conveyance of all or substantially all of
the Property of the Company as an entirety, or upon any acquisition by the
Company of the Property of another corporation substantially as an entirety or
upon any merger of any other corporation into the Company, any of the Property
(other than Excepted Property) owned by the Company just prior thereto, would
thereupon become subject to any lien (other than Excepted Encumbrances), the
Company, prior to such consolidation, merger, sale, conveyance or acquisition,
will take appropriate action whereby the Bonds shall (so long as such Property
shall be subject to such lien) be secured (along with any other Indebtedness
similarly entitled to be equally and ratably secured) by a direct lien on such
portion of the Property of the Company prior to all other liens, other than
Excepted Encumbrances and other than any liens existing thereon just prior to
such consolidation, merger, sale, conveyance or acquisition.

       

      (d) Any
mortgage created pursuant to the requirements of paragraphs (b) or (c) above
shall contain reasonable and customary provisions for the enforcement of the
lien thereby created and for the release of, or substitution for, the Property
so mortgaged.  Such direct lien shall be evidenced by an appropriate
instrument or instruments executed and delivered to the Trustee.

       

      SECTION
7.11. Dividends, Stock
Purchases.

       

      The Company will not, except as
hereinafter provided:

      


      (a) Declare
or pay any dividends, either in cash or Property, on any shares of its capital
stock of any class (except dividends or other distributions payable solely in
shares of capital stock of the Company, including the portion of dividends
reinvested in shares of the Company’s common capital stock under the Company’s
Optional Dividend Reinvestment Plan); or

       

      (b) Directly
or indirectly, purchase, redeem or retire any shares of its capital stock of any
class or any warrants, rights or options to purchase or acquire any shares of
its capital stock (other than in exchange for or out of the net proceeds to the
Company from the substantially concurrent issue or sale of other shares of
capital stock of the Company or warrants, rights or options to purchase or
acquire any shares of its capital stock); or

       

      (c) Make any
other payment or distribution, either directly or indirectly, in respect of its
capital stock; or

       

      (d) Make any
payment, distribution, conveyance or transfer of any Property to any subsidiary
or affiliate;

       

      (such
declarations or payments of dividends, purchases, redemptions or retirements of
capital stock and warrants, rights or options, and all such other distributions,
conveyances and transfers being herein collectively called "Restricted
Payments"), if after giving effect thereto the aggregate amount of Restricted
Payments made during the period from and after December 31, 1982 to and
including the date of the making of the Restricted Payment in question, would
exceed the sum of (1) $1,500,000 plus (2) earned surplus of the Company, on a
non-consolidated basis, accumulated after December 31, 1982, determined without
any deduction on account of such Restricted Payments, provided, however, that
notwithstanding the foregoing, in no event shall the Company make any
distribution, conveyance or transfer to any subsidiary or affiliate of any
Property constituting the Plant Account.

      


      The Company will not declare any
dividend which constitutes a Restricted Payment payable more than 60 days after
the date of declaration thereof.

      


      For the purposes of this Section 7.11,
the amount of any Restricted Payment declared, paid or distributed in Property
of the Company shall be deemed to be the greater of the book value or fair
market value (as determined in good faith by the Board of Directors of the
Company) of such Property at the time of the making of the Restricted Payment in
question.

      


      SECTION
7.12. Termination of Pension
Plans.

       

      The Company will not permit any
employee benefit plan maintained by it to be terminated in a manner which could
result in the imposition of a lien on any Property of the Company pursuant to
Section 4068 of the Employee Retirement Income Security Act of 1974, as
amended.

      


      ARTICLE
VIII

       

      EVENTS
OF DEFAULT AND REMEDIES

       

      SECTION
8.1. Defaults and
Remedies.

       

      (a) The
Company is advised and recognizes that the Issuer will assign all of its right,
title, and interest in and to all of the Installment Loan Payments required to
be made pursuant to this Loan Agreement, and the right to receive and collect
same, to the Trustee under the Indenture.  All rights of the Issuer
(other than Unassigned Issuer’s Rights) against the Company arising under this
Loan Agreement or the Indenture may be enforced by the Trustee, or the
Registered Owners of the Bonds, to the extent provided in the Indenture, without
making the Issuer a party.

       

      (b) The
following shall constitute an "Event of Default" hereunder:

       

      (i) Payment
of any Installment Loan Payment is not made when due and payable and such
failure shall continue for one Business Day; or

       

      (ii) Payment
of any amount due under this Loan Agreement other than Installment Loan Payments
is not made when due and payable and such failure shall continue for fifteen
(15) Business Days after the Trustee shall have given written notice to the
Company specifying such default; or

       

      (iii) Failure
to pay the principal of or interest on any Indebtedness of the Company for
borrowed money, as and when the same shall become due and payable by the lapse
of time, by declaration, by call for redemption or otherwise, and such default
shall continue beyond the period of grace, if any, allowed with respect thereto;
or

       

      (iv) Default
or the happening of any event shall occur under any indenture, agreement, or
other instrument under which any Indebtedness of the Company for borrowed money
may be issued and such default or event shall continue for a period of time
sufficient to permit the acceleration of the maturity of any Indebtedness of the
Company outstanding thereunder; or

       

      (v) Default
shall occur in the observance or performance of any covenant or agreement
contained in Sections 7.9 through 7.12 hereof;

       

      (vi) Subject
to Section 7.1(c) of the Indenture relating to force majeure, failure by the
Company to observe or perform any other covenant, condition or agreement on its
part to be observed or performed under the Indenture or the Loan Agreement,
other than as referred to in subsections (i) through (v) inclusive above, for a
period of 60 days after written notice, specifying such failure and requesting
that it be remedied, is given to the Company by the Issuer or the Trustee;
provided, however, that if the failure stated in the notice is such that can be
remedied but not within such 60-day period, it shall not constitute an Event of
Default if the default, in the judgment of the Trustee in reliance upon advice
of counsel, is correctable without material adverse effect on the Bondholders
and if corrective action is instituted by the Company, within such period and is
diligently pursued until the default is remedied; or

       

      (vii) Final
judgment or judgments for the payment of money aggregating in excess of $250,000
is or are outstanding against the Company or against any Property or assets of
the Company and any one of such judgments has remained unpaid, unvacated,
unbonded or unstayed by appeal or otherwise for a period of 60 days from the
date of its entry; or

       

      (viii) The
occurrence of an Event of Default under the Indenture.

       

      (c) Upon the
occurrence of an Event of Default, the Trustee (or in the case of an Event of
Default arising out of Unassigned Issuer’s Rights, the Issuer) shall have the
power to proceed with any right or remedy granted by the Constitution and laws
of the Commonwealth, as it may deem best, including without limitation any suit,
action or special proceeding in equity or at law, including mandamus
proceedings, for the specific performance of any agreement, obligation or
covenant contained herein or for the enforcement of any proper legal or
equitable remedy as the Trustee shall deem most effectual to protect the rights
of the Registered Owners, including without limitation, acceleration of all
amounts payable hereunder; provided, however, any such proceedings shall be
subject to the provisions of Section 7.1(c) of the Indenture relating to
force majeure.  Upon the occurrence of an Event of Default under
Section 7.1(a)(ii) of the Indenture and upon the occurrence of any other
Event of Default under the Indenture pursuant to the terms of which the Trustee
shall have declared the Bonds immediately due and payable, then all payments
required to be made by the Company under Section 6.4(b) (other than
interest not yet accrued) shall become immediately due and payable.

       

      (d) Any
amounts collected for non-payment of amounts described in Section 6.4
hereof pursuant to actions taken under this Section shall be paid into the Debt
Service Fund and applied in accordance with the provisions of the
Indenture.

       

      SECTION
8.2. Annulment of
Acceleration.

       

      If, in compliance with the requirements
of Section 7.2 of the Indenture, the Trustee shall annul an acceleration
declared due to any Event of Default under the Indenture, such annulment shall
be deemed to also rescind any acceleration of all payments required under
Section 6.4.  In case of any such annulment, or in case any
proceeding taken by the Trustee on account of any such Event of Default shall
have been discontinued or abandoned or determined adversely, then and in every
such case the Issuer, the Company, the Trustee and the Registered Owners shall
be restored to their former positions and rights hereunder, but no such
annulment shall extend to any subsequent or other Event of Default or impair any
right consequent thereon.

      


      SECTION
8.3. Agreement to Pay Attorneys’
Fees and Expenses.

       

      In the event the Company should default
under any of the provisions of this Loan Agreement and the Issuer or the Trustee
should employ attorneys or incur other expenses for the collection of payments
required hereunder or the enforcement of performance or observance of any
obligation or agreement on the part of the Company herein contained, the Company
agrees that it will upon demand therefore pay to the Issuer or the Trustee the
reasonable fees and expenses of such attorneys and such other expenses so
incurred by the Issuer or the Trustee.

      


      SECTION
8.4. General Enforcement
Provisions.

       

      (a) The terms
of this Loan Agreement may be enforced as to one or more breaches either
separately or cumulatively.

       

      (b) No remedy
conferred upon or reserved to the Issuer, the Trustee, or the Registered Owners
of the Bonds in this Loan Agreement is intended to be exclusive of any other
available remedy or remedies, but each and every such remedy shall be cumulative
and shall be in addition to every other remedy now or hereafter existing at law
or in equity or by statute.  No delay or omission to exercise any
right or power accruing upon any default, omission, or failure of performance
hereunder shall impair any such right or power or shall be construed to be a
waiver thereof, but any such right and power may be exercised from time to time
and as often as may be deemed expedient.  In the event any provision
contained in this Loan Agreement should be breached by the Company and
thereafter duly waived, such waiver shall be limited to the particular breach so
waived and shall not be deemed to waive any other breach of this Loan
Agreement.  No waiver by any party of any breach by any other party of
any of the provisions of this Loan Agreement shall be construed as a waiver of
any subsequent breach, whether of the same or of a different provision of this
Loan Agreement.

       

      SECTION
8.5. Notice of
Default.

       

      The Company shall notify the Trustee
and the Issuer in writing immediately if it becomes aware of the occurrence of
any Event of Default hereunder or of any fact, condition or event which, with
the giving of notice or passage of time or both, would become an Event of
Default.

      


      SECTION
8.6. Unassigned Issuer’s
Rights.

       

                 Notwithstanding
any other provision hereof, upon the occurrence of an Event of Default arising
out of Unassigned Issuer’s Rights, the Issuer reserves the right to exercise or
refrain from exercising remedies under the Loan Agreement with respect to such
Event of Default and such Event of Default may not be waived or annulled without
the prior written consent of the Issuer.

      


      ARTICLE
IX

       

      MISCELLANEOUS

       

      SECTION
9.1. Term of Loan
Agreement.

       

      Subject to all provisions hereof which
expressly state that the same shall survive termination hereof, this Loan
Agreement shall terminate when payment of all Debt Service relating to the Bonds
shall have been made and all fees, indemnities, expenses and charges of the
Issuer and the Trustee have been fully paid or provision satisfactory to such
parties made for such payment.

      


      SECTION
9.2. Notices.

       

      All notices, approvals, consents,
requests and other communications hereunder shall be in writing and shall be
deemed to have been given when delivered by hand or overnight courier service or
mailed by first class registered or certified mail, return receipt requested,
postage prepaid, or sent by telecopy and addressed as follows:

      


      (a) to the
Company, to:

       

      The York Water Company

      130 East Market Street

      P.O. Box 15089

      York, PA  17405

      Attention:  President

      Telecopy No. (717)
852-0058

      


      (b) to the
Issuer, to:

       

      Department of Community and Economic
Development

      Pennsylvania Economic Development
Finance Authority

      Center for Private Financing –
Commonwealth Keystone Building

      400 North Street, 4th
Floor

      Harrisburg, PA 17120

      Attention:  Secretary

      Telecopy No.  (717)
787-0879

      


      (c) to the
Trustee, to:

       

      Manufacturers and Traders Trust
Company

      213 Market Street

      Harrisburg,
PA  17101

      Attn:  Corporate Trust
Department

      Telecopy No. (717)
231-2615

      


      A
duplicate copy of each notice, approval, consent, request or other communication
given hereunder by the Issuer, the Company or the Trustee to any one of the
others shall also be given to all of the others at the address furnished from
time to time.  The Issuer, the Company and the Trustee may, by notice
given hereunder, designate any further or different addresses to which
subsequent notices, approvals, consents, requests or other communications shall
be sent or persons to whose attention the same shall be directed.

      


      SECTION
9.3. Benefit of
Parties.

       

      This Loan Agreement is made for the
exclusive benefit of the Issuer, the Trustee, the Registered Owners, the
Beneficial Owners, the Company, and their respective successors and assigns
herein permitted, and not for any other third party or parties; and nothing in
this Loan Agreement, expressed or implied, is intended to confer upon any party
or parties other than the Issuer, the Trustee, the Registered Owners, the
Beneficial Owners, the Company, and their respective successors and assigns
herein permitted, any rights or remedies under or by reason of this Loan
Agreement.

      


      SECTION
9.4. Severability.

       

      If any provision hereof shall be held
invalid or unenforceable by any court of competent jurisdiction, such holding
shall not invalidate or render unenforceable any other provision
hereof.

      


      SECTION
9.5. Counterparts.

       

      This Loan Agreement may be executed in
any number of counterparts, each of which shall be deemed to be an original, but
all of which together shall constitute one and the same instrument.

      


      SECTION
9.6. Captions.

       

      The captions and headings herein are
for convenience only and in no way define, limit or describe the scope or intent
of any provisions hereof.

      


      SECTION
9.7. Law Governing Construction
of Loan Agreement.

       

      This Loan Agreement shall be governed
by, and construed in accordance with, the laws of the Commonwealth.

      


      SECTION
9.8. Payments on Non-Business
Days.

       

      If any payment required hereunder is
due on a date that is not a Business Day, payment shall be made on the next
succeeding Business Day with the same force and effect as if made on the date
fixed for such payment, and no interest shall accrue on such amount for the
period after such date.

      


      SECTION
9.9. Payments to be Sufficient to
Meet DTC Requirements.

       

      The Company hereby acknowledges that
the Bonds are intended to be issued in book-entry form through DTC and that DTC
has certain timing requirements and notice requirements.  The Company
hereby agrees to make payments and give notices in a manner sufficient to comply
from time to time with the DTC requirements, for so long as the Bonds are in
book-entry form at DTC.

      


      SECTION
9.10. Reserved.

       

      SECTION
9.11. Limitation of Liability; No
Personal Liability.

       

      (a) In the
exercise of the powers of the Issuer or the Trustee hereunder or under the
Indenture, including without limitation the application of moneys and the
investment of funds, neither the Issuer or the Trustee nor their members,
directors, officers, employees, attorneys or agents shall be accountable to the
Company for any action taken or omitted by any of them in good faith and without
gross negligence and with the belief that it is authorized or within the
discretion or rights or powers conferred.  The Issuer and the Trustee
and their members, directors, officers, employees, attorneys and agents shall be
protected in acting upon any paper or document believed to be genuine, and any
of them may conclusively rely upon the advice of counsel and may (but need not)
require further evidence of any fact or matter before taking any
action.  In the event of any default by the Issuer hereunder, the
liability of the Issuer to the Company shall be enforceable only out of the
Issuer’s interest under this Loan Agreement and there shall be no other recourse
for damages by the Company against the Issuer, its members, directors, officers,
employees, attorneys and agents, or any of the property now or hereafter owned
by it or them.  All covenants, obligations and agreements of the
Issuer contained in this Loan Agreement or the Indenture shall be effective to
the extent authorized and permitted by applicable law.  No such
covenant, obligation or agreement shall be deemed to be a covenant, obligation
or agreement of any present or future member, director, officer, employee,
attorney or agent of the Issuer, and no official executing the Bonds shall be
liable personally on the Bonds or be subject to any personal liability or
accountability by reason of the issuance thereof or by reason of the covenants,
obligations or agreements of the Issuer contained in this Loan Agreement or the
Indenture.

       

      (b) No claim
shall be made by the Company or any of the Company’s affiliates against the
Issuer or the Trustee or any of their affiliates, directors, employees,
attorneys or agents for any special, indirect, consequential or punitive damages
in respect of any breach or wrongful conduct (whether or not the claim therefore
is based on contract, tort or duty imposed by law), in connection with, arising
out of or in any way related to the transactions contemplated by this Loan
Agreement, the Indenture or the other financing arrangements entered into in
connection with the Project, or any act or omission or event occurring in
connection therewith; and the Company hereby waives, releases and agrees not to
sue upon any such claim for any such damages, whether or not accrued and whether
or not known or suspected to exist in its favor.

       


      
        
          
             

          

           


        

        
          
          

          
            

          

        

        
           


        

      


      IN WITNESS WHEREOF, the Issuer and the
Company have caused this Loan Agreement to be executed in their respective names
by their authorized officers or representatives and their respective seals to be
affixed hereto and have caused its execution hereof to be attested by its
authorized officer, all as of the date first above written.

       

       

      
        
          	 	
                  
                    PENNSYLVANIA
      ECONOMIC DEVELOPMENT FINANCING
      AUTHORITY

                  

                	 
	Attest:	 	 	 
	
                  By:/s/Craig S.
    Petrasic

                	
                  By:
      

                	/s/Stephen M. Drizos	 
	Craig
      S. Petrasic	 	Stephen
      M. Drizos	 
	Assistant
      Secretary	 	Executive
      Director	 
	 	 	 	 


        



      
        
          	 	THE
      YORK WATER COMPANY	 
	
                  Attest: 

                	 	 	 
	
                  By:/s/Bonnie J.
    Rexroth

                	
                  By: 

                	/s/Jeffrey R. Hines	 
	Bonnie
      J. Rexroth 	 	Jeffrey
      R. Hines	 
	Assistant
      Secretary 	 	President
      and Chief Executive Officer	 
	 	 	 	 


        

      

       


      
        
          
             

          

           


        

        
          
          

          
            

          

        

        
           


        

      


      EXHIBIT
A

      


      PROJECT
DESCRIPTION

      


      


      The Project consists of the financing
of (i) a portion of the Company’s 2008 Capital Budget, including, but not
limited to the design, acquisition, construction, improvement, extension,
renovation, equipping and installation of (a) various structures, including
distribution buildings, booster stations, pumping stations, and various plant
and ancillary buildings, (b) spillway upgrades, standpipes, transmission and
distribution mains, service lines, meters, fire hydrants, water treatment,
pumping and purification equipment, and (c) various other capital improvements,
replacements and equipment for the Company’s water system located throughout
York County and Adams County, Pennsylvania.

      



      
        
          
             

          

           


        

        
          
          

          
            

          

        

        
           


        

      


      EXHIBIT
B

      


      NONDISCRIMINATION/SEXUAL
HARASSMENT CLAUSE

      


      During the term of the Loan Agreement,
the Company agrees as to itself and each person controlling, controlled by or
under common control with the Company (each, a "Contractor") as
follows:

      


      1. In the
hiring of any employee(s) for the manufacture of supplies, performance of work,
or any other activity required under the contract or any subcontract, the
Contractor, subcontractor, or any person acting on behalf of the Contractor or
subcontractor shall not, by reason of gender, race, creed, or color,
discriminate against any citizen of this Commonwealth who is qualified and
available to perform the work to which the employment relates.

       

      2. Neither
the Contractor nor any subcontractor nor any person on their behalf shall in any
manner discriminate against or intimidate any employee involved in the
manufacture or supplies, the performance of work, or any other activity required
under the contract on account of gender, race, creed, or color.

       

      3. Contractors
and subcontractors shall establish and maintain a written sexual harassment
policy and shall inform their employees of this policy.  The policy
must contain a notice that sexual harassment will not be tolerated and employees
who practice it will be disciplined.

       

      4. Contractors
shall not discriminate by reason of gender, race, creed, or color against any
subcontractor or supplier who is qualified to perform the work to which the
contracts relate.

       

      5. The
Contractor of each subcontractor shall furnish all necessary employment
documents and records to and permit access to their books, records, and accounts
by the contracting agency and the Bureau of Contract Administration and Business
Development, for purposes of investigation, to ascertain compliance with
provisions of this Nondiscrimination/Sexual Harassment Clause.  If the
Contractor or any subcontractor does not possess documents or records reflecting
the necessary information requested, the Contractor or subcontractor shall
furnish such information on reports forms supplied by the contracting agency or
the Bureau of Contract Administration and Business Development.

       

      6. The
Contractor shall include the provisions of this Nondiscrimination/Sexual
Harassment Clause in every subcontract so that such provisions will be binding
upon each subcontractor.

       

      7. The
Commonwealth may cancel or terminate the contract, and all money due or to
become due under the contract may be forfeited for a violation of the terms and
conditions of this Nondiscrimination/Sexual Harassment Clause.  In
addition, the agency may proceed with debarment or suspension and may place the
Contractor in the Contractor Responsibility file.