REGISTRATION RIGHTS AGREEMENT

This REGISTRATION RIGHTS AGREEMENT (this Agreement) is entered into as of February 10, 2006, by and among Basin Water, Inc., a California corporation (the Company), and the undersigned holder of Warrants (Warrants) to purchase up to an aggregate of Four Hundred Thousand (400,000) shares of Common Stock, (the Warrant Shares).

RECITALS

WHEREAS, pursuant to a Subordinated Note with Warrants Purchase Agreement, dated as of February 10, 2006 (the Purchase Agreement) among the Company and Aqua America, Inc. (Aqua), the Company issued the Warrants to Aqua;

WHEREAS, under the terms of the Note issued to Aqua pursuant to the Purchase Agreement, interest on the Note may be payable to Aqua in shares of Common Stock (the Interest Payment Shares);

WHEREAS, to induce Aqua to enter into the Purchase Agreement, the Company desires to grant Aqua certain rights to cause the Company to register the Warrant Shares and the Interest Payment Shares; and

WHEREAS, Aqua and the Company hereby agree that this Agreement shall govern the rights of Aqua to cause the Company to register the Warrant Shares and/or the Interest Payment Shares and certain other matters as set forth herein.

NOW, THEREFORE, in consideration of the premises and the mutual promises set forth in this Agreement;

THE PARTIES HEREBY AGREE AS FOLLOWS:

1. Registration Rights.

1.1 Definitions. For purposes of this Agreement:

(a) The term Act means the Securities Act of 1933, as amended.

(b) The term Common Stock means the Companys common shares, no par value.

(c) The term Form S-3 means such form under the Act as in effect on the date hereof or any registration form under the Act subsequently adopted by the SEC that permits inclusion or incorporation of substantial information by reference to other documents filed by the Company with the SEC.

(d) The term Holder means any person owning or having the right to acquire Registrable Securities or any assignee thereof in accordance with Section 1.11 hereof.

(e) The term Initial Offering means the Companys first firm commitment underwritten public offering of its Common Stock under the Act.

(f) The term 1934 Act means the Securities Exchange Act of 1934, as amended.

(g) The terms register, registered, and registration refer to a registration effected by preparing and filing a registration statement or similar document in compliance with the Act, and the declaration or ordering of effectiveness of such registration statement or document.

(h) The term Registrable Securities means (i) the Warrant Shares, (ii) the Interest Payment Shares and (iii) any Common Stock of the Company issued as (or issuable upon the conversion or exercise of any warrant, right or other security that is issued as) a dividend or other distribution with respect to, or in exchange for, or in replacement of the shares referenced in (i) and (ii) above, excluding in all cases, however, (A) any Registrable Securities sold by a person in a transaction in which his rights under this Section 1 are not assigned, (B) any securities previously registered and sold or sold pursuant to Rule 144 of the Act, and (C) any securities eligible for sale under Rule 144 of the Act.

(i) The number of shares of Registrable Securities outstanding shall be determined by the number of shares of Common Stock outstanding that are, and the number of shares of Common Stock issuable pursuant to then exercisable or convertible securities that are, Registrable Securities.

(j) The term SEC means the Securities and Exchange Commission.

1.2 Demand Registration.

(a) Subject to the conditions of this Section 1.2, if the Company shall receive at any time after the earlier of (i) three (3) years after the date of this Agreement and (ii) six (6) months after the effective date of the Initial Offering, a written request from the Holders of in excess of fifty percent (50%) of the Registrable Securities then outstanding (the Initiating Holders) that the Company file a registration statement under the Act covering the registration of Registrable Securities with an anticipated offering price (net of underwriting discounts and commissions) of at least $4,000,000, then the Company shall, within thirty (30) days of the receipt thereof, give written notice of such request to all Holders, and subject to the limitations of this Section 1.2, use commercially reasonable efforts to effect, as soon as practicable, the registration under the Act of all Registrable Securities that the Holders request to be registered in a written request received by the Company within twenty (20) days of the mailing of the Companys notice pursuant to this Section 1.2(a).

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