EX-10.30


     

    


    Exhibit
      10.30


    


    


    LOAN
      AGREEMENT

    


    BY
      AND BETWEEN

    


    THE
      STATE OF NEW JERSEY,

    


    ACTING
      BY AND THROUGH THE NEW JERSEY

    DEPARTMENT
      OF ENVIRONMENTAL PROTECTION,

    


    AND

    


    MIDDLESEX
      WATER COMPANY

    


    


    


    


    


    DATED
      AS OF NOVEMBER 1, 2006

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    


    TABLE
      OF CONTENTS

    


    

      

        
          	 	
                  Page

                
	
                  ARTICLE
                    I

                
	 	 
	
                  DEFINITIONS

                
	 	 
	
                  SECTION
                    1.01. Definitions

                	
                  2

                
	 	 
	
                  ARTICLE
                    II

                
	 	 
	
                  REPRESENTATIONS
                    AND COVENANTS OF BORROWER

                
	 	 
	
                  SECTION
                    2.01. Representations of Borrower

                	
                  6

                
	
                  SECTION
                    2.02. Particular Covenants of
                    Borrower

                	
                  9

                
	 	 
	
                  ARTICLE
                    III

                
	 	 
	
                  LOAN
                    TO BORROWER; AMOUNTS PAYABLE; GENERAL
                    AGREEMENTS

                
	 	 
	
                  SECTION
                    3.01. Loan; Loan Term

                	
                  14

                
	
                  SECTION
                    3.02. Disbursement of Loan
                    Proceeds

                	
                  14

                
	
                  SECTION
                    3.03. Amounts Payable

                	
                  15

                
	
                  SECTION
                    3.04. Unconditional Obligations

                	
                  16

                
	
                  SECTION
                    3.05. Loan Agreement to Survive
                    Loan

                	
                  16

                
	
                  SECTION
                    3.06. Disclaimer of Warranties and
                    Indemnification

                	
                  16

                
	
                  SECTION
                    3.07. Option to Prepay Loan
                    Repayments

                	
                  17

                
	
                  SECTION
                    3.08. Priority of Loan and Trust
                    Loan

                	
                  17

                
	
                  SECTION
                    3.09. Approval of the New Jersey State
                    Treasurer

                	
                  18

                
	 	 
	
                  ARTICLE
                    IV

                
	 	 
	
                  ASSIGNMENT
                    OF LOAN AGREEMENT AND BORROWER BOND

                
	 	 
	
                  SECTION
                    4.01. Assignment and Transfer by
                    State

                	
                  19

                
	
                  SECTION
                    4.02. Assignment by Borrower

                	
                  19

                
	 	 
	
                  ARTICLE
                    V

                
	 	 
	
                  EVENTS
                    OF DEFAULT AND REMEDIES

                
	 	 
	
                  SECTION
                    5.01. Events of Default

                	
                  20

                
	
                  SECTION
                    5.02. Notice of Default

                	
                  21

                
	
                  SECTION
                    5.03. Remedies on Default

                	
                  21

                
	
                  SECTION
                    5.04. Attorneys' Fees and Other
                    Expenses

                	
                  21

                
	
                  SECTION
                    5.05. Application of Moneys

                	
                  21

                


        

      

    

    


    
      
        
          
          

        

        
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              SECTION
                5.06. No Remedy Exclusive; Waiver;
                Notice

            	
              21

            
	
              SECTION
                5.07. Retention of State's Rights

            	
              22

            
	 	 
	
              ARTICLE
                VI

            
	 	 
	
              MISCELLANEOUS

            
	 	 
	
              SECTION
                6.01. Notices

            	
              23

            
	
              SECTION
                6.02. Binding Effect

            	
              23

            
	
              SECTION
                6.03. Severability

            	
              23

            
	
              SECTION
                6.04. Amendments, Supplements and
                Modifications

            	
              23

            
	
              SECTION
                6.05. Execution in Counterparts

            	
              24

            
	
              SECTION
                6.06. Applicable Law and
                Regulations

            	
              24

            
	
              SECTION
                6.07. Consents and Approvals

            	
              24

            
	
              SECTION
                6.08. Captions

            	
              24

            
	
              SECTION
                6.09. Further Assurances

            	
              24

            


    

    


    
      
        
        

      

      
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    NEW
      JERSEY ENVIRONMENTAL INFRASTRUCTURE FUND LOAN AGREEMENT

    


    THIS
      LOAN AGREEMENT, made
      and
      entered into as of November 1, 2006, by and between THE STATE OF NEW JERSEY,
      acting by and through the New Jersey Department of Environmental Protection,
      and
      the Borrower (capitalized terms used in this Loan Agreement shall have, unless
      the context otherwise requires, the meanings ascribed thereto in Section 1.01
      hereof);

    


    WITNESSETH
      THAT:

    


    WHEREAS,
      the
      Borrower has, in accordance with the Regulations, made timely application to
      the
      State for a Loan to finance a portion of the Cost of the Project;

    


    WHEREAS,
      the
      State
      has approved the Borrower's application for a Loan from Federal Funds, if and
      when received by and available to the State, and moneys from repayments of
      loans
      previously made from such Federal Funds, in the amount of the loan commitment
      set forth in Exhibit A-2 attached hereto and made a part hereof to finance
      a
      portion of the Cost of the Project;

    


    WHEREAS,
      the
      New
      Jersey State Legislature has approved an appropriations act that authorizes
      an
      expenditure of said proceeds, Federal Funds or related moneys to finance a
      portion of the Cost of the Project; 

    


    WHEREAS,
      the
      Borrower, in accordance with the Business Corporation Law and all other
      applicable law, will issue a Borrower Bond to the State evidencing said Loan
      at
      the Loan Closing; and

    


    WHEREAS,
      in
      accordance with the New Jersey Environmental Infrastructure Trust Act, P.L.
      1985, c. 334, as amended, and the Regulations, the Borrower has been awarded
      a
      Trust Loan for a portion of the Cost of the Project plus, if applicable to
      the
      Borrower, capitalized interest on the Trust Loan, certain costs of issuance
      and
      bond insurance premium related thereto.

    


    NOW,
      THEREFORE, for
      and
      in consideration of the award of the Loan by the State, the Borrower agrees
      to
      complete the Project and to perform under this Loan Agreement in accordance
      with
      the conditions, covenants and procedures set forth herein and attached hereto
      as
      part hereof, as follows:

    


    
      
        
          
          

        

        
          
          

          
            

          

        

        
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    ARTICLE
      I

    


    DEFINITIONS

    


    SECTION
      1.01. Definitions.
      The
      following terms as used in this Loan Agreement shall, unless the context clearly
      requires otherwise, have the following meanings:

    


    "Administrative
      Fee"
      means an
      annual fee of up to one percent (1.0%) of the initial principal amount of the
      Loan or such lesser amount, if any, as may be authorized by any act of the
      New
      Jersey State Legislature and as the State may approve from time to
      time.

    


    "Authorized
      Officer"
      means,
      in the case of the Borrower, any person or persons authorized pursuant to a
      resolution of the board of directors of the Borrower to perform any act or
      execute any document relating to the Loan, the Borrower Bond or this Loan
      Agreement.

    


    "Borrower"
      means
      the corporation that is a party to and is described in Schedule A to this Loan
      Agreement, and its successors and assigns.

    


    "Borrower
      Bond"
      means
      the general obligation bond, note, debenture or other evidence of indebtedness
      authorized, executed, attested and delivered by the Borrower to the State and
      authenticated, if applicable, on behalf of the Borrower to evidence the Loan,
      a
      specimen of which is attached hereto as Exhibit D and made a part
      hereof.

    


    "Borrowers"
      means
      any other Local Government Unit or Private Entity (as such terms are defined
      in
      the Regulations) authorized to construct, operate and maintain Environmental
      Infrastructure Facilities that have entered into Loan Agreements with the State
      pursuant to which the State will make Loans to such recipients from Federal
      Funds.

    


    "Business
      Corporation Law"
      means
      the "New Jersey Business Corporation Act", constituting Chapter 263 of the
      Pamphlet Laws of 1968 of the State (codified at N.J.S.A. 14A:1-1 et
      seq.),
      as the
      same may from time to time be amended and supplemented.

    


    "Code"
      means
      the Internal Revenue Code of 1986, as the same may from time to time be amended
      and supplemented, including any regulations promulgated thereunder, any
      successor code thereto and any administrative or judicial interpretations
      thereof.

    


    "Cost"
      means
      those costs that are eligible, reasonable, necessary, allocable to the Project
      and permitted by generally accepted accounting principles, including Allowances
      and Building Costs (as defined in the Regulations), as shall be determined
      on a
      project-specific basis in accordance with the Regulations as set forth in
      Exhibit B hereto, as the same may be amended by subsequent eligible costs as
      evidenced by a certificate of an authorized officer of the State.

    


    “Department”
      means
      the
      New Jersey Department of Environmental Protection

    


    "Environmental
      Infrastructure Facilities"
      means
      Water Supply Facilities (as such term is defined in the
      Regulations).

    


    
      
        
          
          

        

        
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    "Environmental
      Infrastructure System"
      means
      the Environmental Infrastructure Facilities of the Borrower, including the
      Project, described in Exhibit A-1 attached hereto and made a part hereof for
      which the Borrower is borrowing the Loan under this Loan Agreement.

    


    "Event
      of Default"
      means
      any occurrence or event specified in Section 5.01 hereof.

    


    “Excess
      Project Funds” shall
      have the meaning set forth in Section 3.03A hereof.

    


    "Federal
      Funds"
      means
      those funds awarded to the State pursuant to the Clean Water Act (33 U.S.C.
      §1251 et
      seq.)
      or the
      Safe Drinking Water Act (42 U.S.C. §300f et
      seq.),
      as the
      same may from time to time be amended and supplemented.

    


    "Loan"
      means
      the loan made by the State to the Borrower to finance or refinance a portion
      of
      the Cost of the Project pursuant to this Loan Agreement. For all purposes of
      this Loan Agreement, the principal amount of the Loan at any time shall be
      the
      amount of the loan commitment set forth in Exhibit A-2 attached hereto and
      made
      a part hereof (such amount being also specified as the initial aggregate
      principal amount of the Borrower Bond) less any amount of such principal amount
      that has been repaid by the Borrower under this Loan Agreement and less any
      adjustment made for low bid or final building costs pursuant to the provisions
      of N.J.A.C. 7:22-3.26 and the appropriations act of the New Jersey State
      Legislature authorizing the expenditure of moneys to finance a portion of the
      Cost of the Project.

    


    "Loan
      Agreement"
      means
      this Loan Agreement, including the Exhibits attached hereto, as it may be
      supplemented, modified or amended from time to time in accordance with the
      terms
      hereof.

    


    "Loan
      Agreements"
      means
      any other loan agreements entered into by and between the State and one or
      more
      of the Borrowers pursuant to which the State will make Loans to such Borrowers
      from Federal Funds.

    


    "Loan
      Closing"
      means
      the date upon which the Borrower shall deliver its Borrower Bond, as previously
      authorized, executed, attested and, if applicable, authenticated, to the
      State.

    


    "Loan
      Repayments"
      means
      the sum of (i) the repayments of the principal amount of the Loan payable by
      the
      Borrower pursuant to Section 3.03(a) of this Loan Agreement and (ii) any late
      charges incurred hereunder, but shall not include the Administrative
      Fee.

    


    "Loan
      Term"
      means
      the term of this Loan Agreement provided in Sections 3.01 and 3.03 hereof and
      in
      Exhibit A-2 attached hereto and made a part hereof.

    


    "Loans"
      means
      the loans made by the State to the Borrowers under the Loan Agreements from
      Federal Funds.

    


    "Master
      Program Trust Agreement"
      means
      that certain Master Program Trust Agreement, dated as of November 1, 1995,
      by
      and among the Trust, the State, United States

    


    
      
        
          
          

        

        
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    Trust
      Company of New York, as Master Program Trustee thereunder, The Bank of New
      York
      (NJ), in several capacities thereunder, and First Fidelity Bank, N.A.
      (predecessor to Wachovia Bank, National Association), in several capacities
      thereunder, as supplemented by that certain Agreement of Resignation of Outgoing
      Master Program Trustee, Appointment of Successor Master Program Trustee and
      Acceptance Agreement, dated as of November 1, 2001, by and among United States
      Trust Company of New York, as Outgoing Master Program Trustee, State Street
      Bank
      and Trust Company, N.A. (predecessor to U.S. Bank Trust National Association),
      as Successor Master Program Trustee, and the Trust, as the same may be amended
      and supplemented from time to time in accordance with its terms.

    


    "Prime
      Rate"
      means
      the prevailing commercial interest rate announced by the Trustee from time
      to
      time in the State as its prime lending rate.

    


    "Project"
      means
      the Environmental Infrastructure Facilities of the Borrower described in Exhibit
      A-1 attached hereto and made a part hereof, which constitutes a project for
      which the State is permitted to make a loan to the Borrower pursuant to the
      Regulations, all or a portion of the Cost of which is financed or refinanced
      by
      the State through the making of the Loan under this Loan Agreement and which
      may
      be identified under either the Drinking Water or Clean Water Project Lists
      with
      the Project Number specified in Exhibit A-1 attached hereto.

    


    "Regulations"
      means
      the rules and regulations, as applicable, now or hereafter promulgated under
      N.J.A.C. 7:22-3 et
      seq.,
      7:22-4
et
      seq.,
      7:22-5
et
      seq.,
      7:22-9
et
      seq.
      and
      7:22-10 et
      seq.,
      as the
      same may from time to time be amended and supplemented.

    


    "State"
      means
      the State of New Jersey, acting, unless otherwise specifically indicated, by
      and
      through the Department, and its successors and assigns.

    


    "Trust"
      means
      the New Jersey Environmental Infrastructure Trust, a public body corporate
      and
      politic with corporate succession duly created and validly existing under and
      by
      virtue of P.L. 1985, c. 334, as amended (N.J.S.A. 58:11B-1 et
      seq.).

    


    "Trust
      Loan"
      means
      the loan made to the Borrower by the Trust pursuant to the Trust Loan
      Agreement.

    


    "Trust
      Loan Agreement"
      means
      the loan agreement by and between the Borrower and the Trust dated as of
      November 1, 2006 to finance or refinance a portion of the Cost of the
      Project.

    


    "Trustee"
      means,
      initially, U.S. Bank National Association, the Trustee appointed by the Trust
      and its successors as Trustee under the Bond Resolution, as provided in Article
      X of the Bond Resolution.

    


    (b) In
      addition to the capitalized terms defined in subsection (a) of this Section
      1.01, certain additional capitalized terms used in this Loan Agreement shall,
      unless the context clearly requires otherwise, have the meanings ascribed to
      such additional capitalized terms in Schedule
      A
      attached
      hereto and made a part hereof.

    


    
      
        
          
          

        

        
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    (c) Except
      as
      otherwise defined herein or where the context otherwise requires, words
      importing the singular number shall include the plural number and vice versa,
      and words importing persons shall include firms, associations, corporations,
      agencies and districts. Words importing one gender shall include the other
      gender.

     

     

     

     

    


    
      
        
          
          

        

        
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    ARTICLE
      II

    


    REPRESENTATIONS
      AND COVENANTS OF BORROWER

    


    SECTION
      2.01. Representations of Borrower.
      The
      Borrower represents for the benefit of the State as follows:

    


    (a) Organization
      and Authority.

    


    (i) The
      Borrower is a corporation duly created and validly existing under and pursuant
      to the Constitution and statutes of the State, including the Business
      Corporation Law.

    


    (ii) The
      acting officers of the Borrower who are contemporaneously herewith performing
      or
      have previously performed any action contemplated in this Loan Agreement either
      are or, at the time any such action was performed, were the duly appointed
      or
      elected officers of such Borrower empowered by applicable New Jersey law and,
      if
      applicable, authorized by resolution of the Borrower to perform such actions.
      To
      the extent any such action was performed by an officer no longer the duly acting
      officer of such Borrower, all such actions previously taken by such officer
      are
      still in full force and effect.

    


    (iii) The
      Borrower has full legal right and authority and all necessary licenses and
      permits required as of the date hereof to own, operate and maintain its
      Environmental Infrastructure System, to carry on its activities relating
      thereto, to execute, attest and deliver this Loan Agreement and the Borrower
      Bond, to authorize the authentication of the Borrower Bond, to sell the Borrower
      Bond to the State, to undertake and complete the Project and to carry out and
      consummate all transactions contemplated by this Loan Agreement.

    


    (iv) The
      proceedings of the Borrower's board of directors approving this Loan Agreement
      and the Borrower Bond, authorizing the execution, attestation and delivery
      of
      this Loan Agreement and the Borrower Bond, authorizing the sale of the Borrower
      Bond to the State, authorizing the authentication of the Borrower Bond on behalf
      of the Borrower and authorizing the Borrower to undertake and complete the
      Project, including, without limitation, the Borrower Bond Resolution
      (collectively, the "Proceedings"), have been duly and lawfully adopted in
      accordance with the Business Corporation Law and other applicable New Jersey
      law
      at a meeting or meetings that were duly called and held in accordance with
      the
      Borrower By-Laws and at which quorums were present and acting
      throughout.

    


    (v) By
      official action of the Borrower taken prior to or concurrent with the execution
      and delivery hereof, including, without limitation, the Proceedings, the
      Borrower has duly authorized, approved and consented to all necessary action
      to
      be taken by the Borrower for: (A) the execution, attestation, delivery and
      performance of this Loan Agreement and the transactions contemplated hereby;
      (B)
      the issuance of the

    


    
      
        
          
          

        

        
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    Borrower
      Bond and the sale thereof to the State upon the terms set forth herein; and
      (C)
      the execution, delivery and due performance of any and all other certificates,
      agreements and instruments that may be required to be executed, delivered and
      performed by the Borrower in order to carry out, give effect to and consummate
      the transactions contemplated by this Loan Agreement.

    


    (vi) This
      Loan
      Agreement and the Borrower Bond have each been duly authorized by the Borrower
      and duly executed, attested and delivered by Authorized Officers of the
      Borrower, and the Borrower Bond has been duly sold by the Borrower to the State,
      duly authenticated by the trustee or paying agent, if applicable, under the
      Borrower Bond Resolution and duly issued by the Borrower in accordance with
      the
      terms of the Borrower Bond Resolution; and assuming that the State has all
      the
      requisite power and authority to authorize, execute, attest and deliver, and
      has
      duly authorized, executed, attested and delivered, this Loan Agreement, and
      assuming further that this Loan Agreement is the legal, valid and binding
      obligation of the State, enforceable against the State in accordance with its
      terms, each of this Loan Agreement and the Borrower Bond constitutes a legal,
      valid and binding obligation of the Borrower, enforceable against the Borrower
      in accordance with its respective terms, except as the enforcement thereof
      may
      be affected by bankruptcy, insolvency or other laws or the application by a
      court of legal or equitable principles affecting creditors' rights; and the
      information contained under "Description of Loan" in Exhibit A-2 attached hereto
      and made a part hereof is true and accurate in all respects.

    


    (b) Full
      Disclosure.
      There
      is no fact that the Borrower has not disclosed to the State in writing on the
      Borrower's application for the Loan or otherwise that materially adversely
      affects or (so far as the Borrower can now foresee) that will materially
      adversely affect the properties, activities, prospects or condition (financial
      or otherwise) of the Borrower or its Environmental Infrastructure System, or
      the
      ability of the Borrower to make all Loan Repayments or otherwise to observe
      and
      perform its duties, covenants, obligations and agreements under this Loan
      Agreement and the Borrower Bond.

    


    (c) Pending
      Litigation.
      There
      are no proceedings pending or, to the knowledge of the Borrower, threatened
      against or affecting the Borrower in any court or before any governmental
      authority or arbitration board or tribunal that, if adversely determined, would
      materially adversely affect (i) the undertaking or completion of the Project,
      (ii) the properties, activities, prospects or condition (financial or otherwise)
      of the Borrower or its Environmental Infrastructure System, (iii) the ability
      of
      the Borrower to make all Loan Repayments, (iv) the authorization, execution,
      attestation or delivery of this Loan Agreement or the Borrower Bond, (v) the
      issuance of the Borrower Bond and the sale thereof to the State, (vi) the
      adoption of the Borrower Bond Resolution, or (vii) the Borrower's ability
      otherwise to observe and perform its duties, covenants, obligations and
      agreements under this Loan Agreement and the Borrower Bond, which proceedings
      have not been previously disclosed in writing to the State either in the
      Borrower's application for the Loan or otherwise.

    


    (d) Compliance
      with Existing Laws and Agreements.
      (i) The
      authorization, execution, attestation and delivery of this Loan Agreement and
      the Borrower Bond by the

    


    
      
        
          
          

        

        
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    Borrower,
      (ii) the authentication of the Borrower Bond by the trustee or paying agent
      under the Borrower Bond Resolution, as the case may be, and the sale of the
      Borrower Bond to the State, (iii) the adoption of the Borrower Bond Resolution,
      (iv) the observation and performance by the Borrower of its duties, covenants,
      obligations and agreements hereunder and thereunder, (v) the consummation of
      the
      transactions provided for in this Loan Agreement, the Borrower Bond Resolution
      and the Borrower Bond, and (vi) the undertaking and completion of the Project
      will not (A) other than the lien, charge or encumbrance created hereby, by
      the
      Borrower Bond, by the Borrower Bond Resolution and by any other outstanding
      debt
      obligations of the Borrower that are at parity with the Borrower Bond as to
      lien
      on, and source and security for payment thereon from, the revenues of the
      Borrower's Environmental Infrastructure System, result in the creation or
      imposition of any lien, charge or encumbrance upon any properties or assets
      of
      the Borrower pursuant to, (B) result in any breach of any of the terms,
      conditions or provisions of, or (C) constitute a default under, any existing
      resolution, outstanding debt or lease obligation, trust agreement, indenture,
      mortgage, deed of trust, loan agreement or other instrument to which the
      Borrower is a party or by which the Borrower, its Environmental Infrastructure
      System or any of its properties or assets may be bound, nor will such action
      result in any violation of the provisions of the charter or other document
      pursuant to which the Borrower was established or any laws, ordinances,
      injunctions, judgments, decrees, rules, regulations or existing orders of any
      court or governmental or administrative agency, authority or person to which
      the
      Borrower, its Environmental Infrastructure System or its properties or
      operations is subject.

    


    (e) No
      Defaults.
      No
      event has occurred and no condition exists that, upon the authorization,
      execution, attestation and delivery of this Loan Agreement and the Borrower
      Bond, the issuance of the Borrower Bond and the sale thereof to the State,
      the
      adoption of the Borrower Bond Resolution or the receipt of the amount of the
      Loan, would constitute an Event of Default hereunder. The Borrower is not in
      violation of, and has not received notice of any claimed violation of, any
      term
      of any agreement or other instrument to which it is a party or by which it,
      its
      Environmental Infrastructure System or its properties may be bound, which
      violation would materially adversely affect the properties, activities,
      prospects or condition (financial or otherwise) of the Borrower or its
      Environmental Infrastructure System or the ability of the Borrower to make
      all
      Loan Repayments, to pay all other amounts due hereunder or otherwise to observe
      and perform its duties, covenants, obligations and agreements under this Loan
      Agreement and the Borrower Bond.

    


    (f) Governmental
      Consent.
      The
      Borrower has obtained all permits and approvals required to date by any
      governmental body or officer for the authorization, execution, attestation
      and
      delivery of this Loan Agreement and the Borrower Bond, for the issuance of
      the
      Borrower Bond and the sale thereof to the State, for the adoption of the
      Borrower Bond Resolution, for the making, observance and performance by the
      Borrower of its duties, covenants, obligations and agreements under this Loan
      Agreement and the Borrower Bond and for the undertaking or completion of the
      Project and the financing or refinancing thereof, including, but not limited
      to,
      if required, the approval by the New Jersey Board of Public Utilities (the
      "BPU") of the issuance by the Borrower of the Borrower Bond to the State and
      any
      other approvals required therefor by the BPU; and the Borrower has complied
      with
      all applicable provisions of law requiring any notification, declaration, filing
      or registration with any governmental body or officer in connection with the
      making, observance and performance by the Borrower of its duties,

    


    
      
        
          
          

        

        
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    covenants,
      obligations and agreements under this Loan Agreement and the Borrower Bond
      or
      with the undertaking or completion of the Project and the financing or
      refinancing thereof. No consent, approval or authorization of, or filing,
      registration or qualification with, any governmental body or officer that has
      not been obtained is required on the part of the Borrower as a condition to
      the
      authorization, execution, attestation and delivery of this Loan Agreement and
      the Borrower Bond, the issuance of the Borrower Bond and the sale thereof to
      the
      State, the undertaking or completion of the Project or the consummation of
      any
      transaction herein contemplated.

    


    (g) Compliance
      with Law.
      The
      Borrower:

    


    (i) is
      in
      compliance with all laws, ordinances, governmental rules and regulations to
      which it is subject, the failure to comply with which would materially adversely
      affect (A) the ability of the Borrower to conduct its activities or to undertake
      or complete the Project, (B) the ability of the Borrower to make the Loan
      Repayments and to pay all other amounts due hereunder, or (C) the condition
      (financial or otherwise) of the Borrower or its Environmental Infrastructure
      System; and

    


    (ii) has
      obtained all licenses, permits, franchises or other governmental authorizations
      presently necessary for the ownership of its properties or for the conduct
      of
      its activities that, if not obtained, would materially adversely affect (A)
      the
      ability of the Borrower to conduct its activities or to undertake or complete
      the Project, (B) the ability of the Borrower to make the Loan Repayments and
      to
      pay all other amounts due hereunder, or (C) the condition (financial or
      otherwise) of the Borrower or its Environmental Infrastructure
      System.

    


    (h) Use
      of
      Proceeds.
      The
      Borrower will apply the proceeds of the Loan from the State as described in
      Exhibit B attached hereto and made a part hereof (i) to finance or refinance
      a
      portion of the Cost of the Borrower's Project; and (ii) where applicable, to
      reimburse the Borrower for a portion of the Cost of the Borrower's Project,
      which portion was paid or incurred in anticipation of reimbursement by the
      State
      and is eligible for such reimbursement under and pursuant to the Regulations,
      the Code and any other applicable law. All of such costs constitute Costs for
      which the State is authorized to make Loans to the Borrower pursuant to the
      Regulations.

    


    SECTION
      2.02. Particular Covenants of
      Borrower.

    


    (a) Promise
      to Pay.
      The
      Borrower unconditionally promises, in accordance with the terms of and to the
      extent provided in the Borrower Bond Resolution, to make punctual payment of
      the
      principal of the Loan and the Borrower Bond and all other amounts due under
      this
      Loan Agreement and the Borrower Bond according to their respective
      terms.

    


    (b) Performance
      Under Loan Agreement; Rates.
      The
      Borrower covenants and agrees (i) to comply with all applicable State and
      federal laws, rules and regulations in the performance of this Loan Agreement;
      (ii) to maintain its Environmental Infrastructure System in good repair and
      operating condition; (iii) to cooperate with the State in the observance and
      performance of

    


    
      
        
          
          

        

        
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    the
      respective duties, covenants, obligations and agreements of the Borrower and
      the
      State under this Loan Agreement; and (iv) to establish, levy and collect rents,
      rates and other charges for the products and services provided by its
      Environmental Infrastructure System, which rents, rates and other charges shall
      be at least sufficient to comply with all covenants pertaining thereto contained
      in, and all other provisions of, any bond resolution, trust indenture or other
      security agreement, if any, relating to any bonds, notes or other evidences
      of
      indebtedness issued or to be issued by the Borrower, including without
      limitation rents, rates and other charges, together with other available moneys,
      sufficient to pay the principal of and Interest on the Borrower Bond, plus
      all
      other amounts due hereunder.

    


    (c) Revenue
      Obligation; No Prior Pledges.
      The
      Borrower shall not be required to make payments under this Loan Agreement except
      from the revenues of its Environmental Infrastructure System and from such
      other
      funds of such Environmental Infrastructure System legally available therefor
      and
      from any other sources pledged to such payment pursuant to subsection (a) of
      this Section 2.02. In no event shall the Borrower be required to make payments
      under this Loan Agreement from any revenues or receipts not derived from its
      Environmental Infrastructure System or pledged pursuant to subsection (a) of
      this Section 2.02. Except for (i) loan repayments required with respect to
      the
      Trust Loan, (ii) the debt service on any future bonds or notes of the Borrower
      issued at parity with the Borrower Bond under the Borrower Bond Resolution,
      and
      (iii) the debt service on any bonds, notes or evidences of indebtedness of
      the
      Borrower at parity with the Borrower Bond under the Borrower Bond Resolution
      and
      currently outstanding or issued on the date hereof, the revenues derived by
      the
      Borrower from its Environmental Infrastructure System, after the payment of
      all
      costs of operating and maintaining the Environmental Infrastructure System,
      are
      and will be free and clear of any pledge, lien, charge or encumbrance thereon
      or
      with respect thereto prior to, or of equal rank with, the obligation of the
      Borrower to make Loan Repayments under this Loan Agreement and the Borrower
      Bond, and all corporate or other action on the part of the Borrower to that
      end
      has been and will be duly and validly taken.

    


    (d) Completion
      of Project and Provision of Moneys Therefor.
      The
      Borrower covenants and agrees (i) to exercise its best efforts in accordance
      with prudent environmental infrastructure utility practice to complete the
      Project and to accomplish such completion on or before the estimated Project
      completion date set forth in Exhibit G hereto and made a part hereof; (ii)
      to
      comply with the terms and provisions contained in Exhibit G hereto; and (iii)
      to
      provide from its own fiscal resources all moneys, in excess of the total amount
      of loan proceeds it receives under the Loan and Trust Loan, required to complete
      the Project.

    


    (e) See
      Section 2.02(e) as set forth in Schedule A attached hereto, made a part hereof
      and incorporated in this Section 2.02(e) by reference as if set forth in full
      herein.

    


    (f) Reserved.

    


    (g) Operation
      and Maintenance of Environmental Infrastructure System.
      The
      Borrower covenants and agrees that it shall, in accordance with prudent
      environmental infrastructure utility practice, (i) at all times operate the
      properties of its Environmental Infrastructure System and any business in
      connection therewith in an efficient manner, (ii)

    


    
      
        
          
          

        

        
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    maintain
      its Environmental Infrastructure System in good repair, working order and
      operating condition, and (iii) from time to time make all necessary and proper
      repairs, renewals, replacements, additions, betterments and improvements with
      respect to its Environmental Infrastructure System so that at all times the
      business carried on in connection therewith shall be properly and advantageously
      conducted.

    


    (h) Records
      and Accounts.
      The
      Borrower shall keep accurate records and accounts for its Environmental
      Infrastructure System (the "System Records") separate and distinct from its
      other records and accounts (the "General Records"). Such System Records shall be
      audited annually by an independent certified public accountant, which may be
      part of the annual audit of the General Records of the Borrower. Such System
      Records and General Records shall be made available for inspection by the State
      at any reasonable time upon prior written notice, and a copy of such annual
      audit(s) therefor, including all written comments and recommendations of such
      accountant, shall be furnished to the State within 150 days of the close of
      the
      fiscal year being so audited or, with the consent of the State, such additional
      period as may be provided by law.

    


    (i) Inspections;
      Information.
      The
      Borrower shall permit the State and any party designated by the State, at any
      and all reasonable times during construction of the Project and thereafter
      upon
      prior written notice, to examine, visit and inspect the property, if any,
      constituting the Project and to inspect and make copies of any accounts, books
      and records, including (without limitation) its records regarding receipts,
      disbursements, contracts, investments and any other matters relating thereto
      and
      to its financial standing, and shall supply such reports and information as
      the
      State may reasonably require in connection therewith.

    


    (j) Insurance.
      The
      Borrower shall maintain or cause to be maintained, in force, insurance policies
      with responsible insurers or self-insurance programs providing against risk
      of
      direct physical loss, damage or destruction of its Environmental Infrastructure
      System at least to the extent that similar insurance is usually carried by
      utilities constructing, operating and maintaining Environmental Infrastructure
      Facilities of the nature of the Borrower's Environmental Infrastructure System,
      including liability coverage, all to the extent available at reasonable cost
      but
      in no case less than will satisfy all applicable regulatory
      requirements.

    


    (k) Cost
      of Project.
      The
      Borrower certifies that the building cost of the Project, as listed in Exhibit
      B
      hereto and made a part hereof, is a reasonable and accurate estimation thereof,
      and it will supply to the State a certificate from a licensed professional
      engineer authorized to practice in the State stating that such building cost
      is
      a reasonable and accurate estimation and that the useful life of the Project
      exceeds the maturity date of the Borrower Bond.

    


    (l) Delivery
      of Documents.
      Concurrently with the delivery of this Loan Agreement (as previously authorized,
      executed and attested) at the Loan Closing, the Borrower will cause to be
      delivered to the State each of the following items:

    


    (i) an
      opinion of the Borrower's bond counsel substantially in the form of Exhibit
      E
      hereto; provided, however, that the State may permit portions of such opinion
      to
      be rendered by general counsel to the Borrower and may permit variances in
      such
      opinion from the form set forth in Exhibit E if such variances are acceptable
      to
      the State;

    


    
      
        
          
          

        

        
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    (ii) counterparts
      of this Loan Agreement as previously executed and attested by the parties
      hereto;

    


    (iii) copies
      of
      those resolutions finally adopted by the board of directors of the Borrower
      and
      requested by the State, including, without limitation, (A) the resolution of
      the
      Borrower authorizing the execution, attestation and delivery of this Loan
      Agreement, (B) the Borrower Bond Resolution, as amended and supplemented as
      of
      the date of the Loan Closing, authorizing the execution, attestation,
      authentication, sale and delivery of the Borrower Bond to the State, (C) the
      resolution of the Borrower confirming the details of the sale of the Borrower
      Bond to the State, each of said resolutions of the Borrower being certified
      by
      an Authorized Officer of the Borrower as of the date of the Loan Closing, (D)
      the resolution of the BPU approving the issuance by the Borrower of the Borrower
      Bond to the State and setting forth any other approvals required therefor by
      the
      BPU, if applicable, and (E) any other Proceedings; and

    


    (iv) the
      certificates of insurance coverage as required pursuant to the terms of Section
      3.06(c) hereof and such other certificates, documents, opinions and information
      as the State may require in Exhibit F hereto, if any.

    


    (m) Execution
      and Delivery of Borrower Bond.
      Concurrently with the delivery of this Loan Agreement at the Loan Closing,
      the
      Borrower shall also deliver to the State the Borrower Bond, as previously
      executed, attested and, if applicable, authenticated.

    


    (n) Notice
      of Material Adverse Change.
      The
      Borrower shall promptly notify the State of any material adverse change in
      the
      properties, activities, prospects or condition (financial or otherwise) of
      the
      Borrower or its Environmental Infrastructure System, or in the ability of the
      Borrower to make all Loan Repayments and otherwise to observe and perform its
      duties, covenants, obligations and agreements under this Loan Agreement and
      the
      Borrower Bond.

    


    (o) Continuing
      Representations.
      The
      representations of the Borrower contained herein shall be true at the time
      of
      the execution of this Loan Agreement and at all times during the term of this
      Loan Agreement.

    


    (p) Additional
      Covenants and Requirements.
      (i) No
      later than the Loan Closing and, if necessary, in connection with the making
      of
      the Loan, additional covenants and requirements have been included in Exhibit
      F
      hereto and made a part hereof. Such covenants and requirements may include,
      but
      need not be limited to, the maintenance of specified levels of Environmental
      Infrastructure System rates, the issuance of additional debt of the Borrower
      and
      the transfer of revenues and receipts from the Borrower's Environmental
      Infrastructure System. The Borrower agrees to observe and comply with each
      such
      additional covenant and requirement, if any, included in Exhibit F hereto.
      (ii)
      Additional defined terms, covenants, representations and requirements have
      been
      included in Schedule A attached hereto and made a part hereof. Such additional
      defined terms, covenants, representations and requirements are incorporated
      in
      this Loan Agreement by reference thereto as if set forth in full herein and
      the

    


    
      
        
          
          

        

        
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    Borrower
      hereby agrees to observe and comply with each such additional term, covenant,
      representation and requirement included in Schedule A as if the same were set
      forth in its entirety where reference thereto is made in this Loan
      Agreement.

    


     

     

     

     

     

    


    
      
        
          
          

        

        
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    ARTICLE
      III

    


    LOAN
      TO BORROWER; AMOUNTS PAYABLE; GENERAL AGREEMENTS

    


    SECTION
      3.01. Loan; Loan Term.
      The
      State hereby agrees to make the Loan as described in Exhibit A-2 hereof and
      to
      disburse proceeds of the Loan to the Borrower in accordance with Section 3.02
      and Exhibit C hereof, and the Borrower hereby agrees to borrow and accept the
      Loan from the State upon the terms set forth in Exhibit A-2 attached hereto
      and
      made a part hereof; provided, however, that the State shall be under no
      obligation to make the Loan if (a) at the Loan Closing, the Borrower does not
      deliver to the State a Borrower Bond and such other documents required under
      Section 2.02(l) hereof, or (b) an Event of Default has occurred and is
      continuing under this Loan Agreement. Although the State intends to disburse
      proceeds of the Loan to the Borrower at the times and up to the amounts set
      forth in Exhibit C to pay a portion of the Cost of the Project, due to
      unforeseen circumstances there may not be sufficient Federal Funds on deposit
      on
      any date to make the disbursement in such amount. Nevertheless, the Borrower
      agrees that the aggregate principal amount set forth in Exhibit A-2 hereto
      shall
      constitute the initial principal amount of the Loan (as the same may be adjusted
      downward in accordance with the definition thereof), and the State shall have
      no
      obligation thereafter to loan any additional amounts to the
      Borrower.

    


    The
      Borrower shall have no legal or equitable interest in the Federal Funds received
      by and available to the State or in moneys from repayments of loans previously
      made from Federal Funds by the State.

    


    The
      Borrower shall use the proceeds of the Loan strictly in accordance with Section
      2.01(h) hereof.

    


    The
      payment obligations created under this Loan Agreement and the obligations to
      pay
      the principal of and other amounts due under the Borrower Bond are each direct,
      general, irrevocable and unconditional obligations of the Borrower payable
      from
      any source legally available to the Borrower in accordance with the terms of
      and
      to the extent provided in the Borrower Bond Resolution.

    


    SECTION
      3.02. Disbursement of Loan Proceeds.
      (a) The
      State shall disburse Federal Funds earmarked for the Loan to the Borrower in
      accordance with the terms hereof. Before each and every disbursement of the
      proceeds of the Loan by the State to the Borrower, the Borrower shall in
      accordance with the procedures set forth in the Regulations submit to the State
      a requisition executed by an Authorized Officer of the Borrower.

    


    (b) The
      State
      shall not be under any obligation to disburse any Loan proceeds to the Borrower
      under this Loan Agreement, unless:

    


    (i) the
      Loan
      Closing shall have occurred on the date established therefor by the
      State;

    


    
      
        
          
          

        

        
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    (ii) there
      shall be Federal Funds available from time to time to fund the Loan, as
      determined solely by the State;

    


    (iii) in
      accordance with the "New Jersey Environmental Infrastructure Trust Act", P.L.
      1985, c. 334, as amended (N.J.S.A. 58:11B-1 et
      seq.),
      and
      the Regulations, the Borrower shall have timely applied for, shall have been
      awarded and, prior to or simultaneously with the Loan Closing, shall have closed
      a Trust Loan for a portion of the Allowable Costs (as defined in such
      Regulations) of the Project in an amount not in excess of the amount of
      Allowable Costs of the Project financed by the Loan from the State, plus the
      amount of: (i) capitalized interest during the Project construction period,
      if
      any, (ii) the cost of funding reserve capacity for the Project, if any, as
      well
      as that portion of the Debt Service Reserve Fund (as defined in the Trust Loan
      Agreement) attributable to the cost of funding such reserve capacity for the
      Project, and (iii) certain issuance expenses related thereto, including, if
      applicable, a municipal bond insurance policy premium;

    


    (iv) the
      Borrower shall have on hand moneys to pay for the greater of (A) that portion
      of
      the total cost of the Project that is not eligible to be funded from the Loan
      or
      the Trust Loan, or (B) that portion of the total cost of the Project that
      exceeds the actual amounts of the loan commitments made by the State and the
      Trust, respectively, for the Loan and the Trust Loan; and

    


    (v) no
      Event
      of Default nor any event that, with the passage of time or service of notice
      or
      both, would constitute an Event of Default shall have occurred and be continuing
      hereunder.

    


    SECTION
      3.03. Amounts Payable.
      (a) The
      Borrower shall repay the Loan at zero-interest in principal installments payable
      to the Trustee semiannually on the Principal Payment Dates, in accordance with
      the schedule set forth in Exhibit A-2 attached hereto and made a part hereof,
      as
      the same may be amended or modified by the State, in particular, without
      limitation, to make any adjustments to the amount of the Loan in accordance
      with
      the definition thereof; provided, however, that the amount of any reduction in
      the principal amount of the Loan pursuant to N.J.A.C. 7:22-3.26 shall be
      credited to the principal payments set forth in Exhibit A-2 in inverse order
      of
      their maturity. The obligations of the Borrower under the Borrower Bond shall
      be
      deemed to be amounts payable under this Section 3.03. Each payment made to
      the
      Trustee pursuant to the Borrower Bond shall be deemed to be a credit against
      the
      corresponding obligation of the Borrower under this Section 3.03, and any such
      payment made to the Trustee shall fulfill the Borrower's obligation to pay
      such
      amount hereunder and under the Borrower Bond. Each payment made to the Trustee
      pursuant to this Section 3.03 shall be applied to the principal of the
      Loan.

    


    (b) In
      addition to the principal payments on the Loan required by subsection (a) of
      this Section 3.03, the Borrower shall pay a late charge for any such payment
      that is received by the Trustee later than the tenth (10th) day following its
      due date in an amount equal to the greater of twelve percent (12%) per annum
      or
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    such
      late
      payment from its due date to the date actually paid; provided, however, that
      such late charge payable on the Loan shall not be in excess of the maximum
      interest rate permitted by law.

    


    (c) In
      addition to the Loan Repayments payable under subsections (a) and (b) of this
      Section 3.03, the Borrower shall pay one-half of the Administrative Fee, if
      any,
      to the Trustee semiannually on each Principal Payment Date, commencing with
      the
      first Principal Payment Date subsequent to the Loan Closing.

    


    SECTION
      3.03A. Amounts on Deposit in Project Loan Account after Completion of Draw
      Schedule. (a)
      If,
      on the date which is one hundred eighty (180) days following the final date
      for
      which a disbursement of Loan proceeds is scheduled to be made pursuant to
      Exhibit C hereto, any amounts remain on deposit in the Borrower’s Project Loan
      Account, the Borrower must provide to the Trust and the Department a certificate
      of an Authorized Officer of the Borrower (i) stating that the Borrower has
      not
      yet completed the Project, (ii) stating that the Borrower intends to complete
      the Project, (iii) setting forth the amount of remaining Loan Proceeds required
      to complete the Project, and (iv) providing a revised draw schedule, in a form
      similar to Exhibit C hereto and approved by the Department.

    


    (b) If,
      on
      the date which is one hundred eighty (180) days following the final date for
      which a disbursement of Loan proceeds is scheduled to be made pursuant to a
      revised draw schedule certified to the Trust and the Department in accordance
      with Section 3.03A(a) hereof, any amounts remain on deposit in the Borrower’s
      Project Loan Account, the Borrower must provide to the Trust and the Department
      a certificate of an Authorized Officer of the Borrower (i) stating that the
      Borrower has not yet completed the Project, (ii) stating that the Borrower
      intends to complete the Project, (iii) setting forth the amount of remaining
      Loan Proceeds required to complete the Project, and (iv) providing a revised
      draw schedule, in a form similar to Exhibit C hereto and approved by the
      Department.

    


    (c) If
      the
      Borrower fails to provide the certificate described in paragraphs (a) or (b)
      of
      this Section 3.03A, when due, or if such certificate states that the Borrower
      does not require all or any portion of the amount on deposit in the Project
      Loan
      Account to complete the Project, such amounts on deposit in the Project Loan
      Account which are not certified by an Authorized Officer of the Borrower as
      being required to complete the Project (“Excess Project Funds”) shall be applied
      as follows:

    


    (i) If
      the
      Excess Project Funds are less than or equal to the greater of (A) $250,000
      or
      (B) the amount of Loan Repayments due from the Borrower to the Trust in the
      next
      succeeding calendar year, the Excess Project Funds shall be applied by the
      Trust
      toward the Borrower’s obligation to make the Loan Repayments next coming due;
      or

    


    (ii) If
      the
      Excess Project Funds are greater than the greater of (A) $250,000 or (B) the
      amount of Loan Repayments due from the Borrower to the Trust in the next
      succeeding calendar year, the Excess Project Funds shall be applied by the
      Trust
      as a prepayment of the Borrower’s Loan Repayments, and shall be applied to the
      principal payments (including premium, if any) on the Loan in inverse order
      of
      their maturity.

    


    
      
        
          
          

        

        
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    SECTION
      3.04. Unconditional Obligations.
      The
      obligation of the Borrower to make the Loan Repayments and all other payments
      required hereunder and the obligation to perform and observe the other duties,
      covenants, obligations and agreements on its part contained herein shall be
      absolute and unconditional, and shall not be abated, rebated, set-off, reduced,
      abrogated, terminated, waived, diminished, postponed or otherwise modified
      in
      any manner or to any extent whatsoever while any Loan Repayments remain unpaid,
      for any reason, regardless of any contingency, act of God, event or cause
      whatsoever, including (without limitation) any acts or circumstances that may
      constitute failure of consideration, eviction or constructive eviction, the
      taking by eminent domain or destruction of or damage to the Project or
      Environmental Infrastructure System, commercial frustration of the purpose,
      any
      change in the laws of the United States of America or of the State or any
      political subdivision of either or in the rules or regulations of any
      governmental authority, any failure of the State to perform and observe any
      agreement, whether express or implied, or any duty, liability or obligation
      arising out of or connected with the Project or this Loan Agreement, or any
      rights of set-off, recoupment, abatement or counterclaim that the Borrower
      might
      otherwise have against the State, the Trustee or any other party or parties;
      provided, however, that payments hereunder shall not constitute a waiver of
      any
      such rights. The Borrower shall not be obligated to make any payments required
      to be made by any other Borrowers under separate Loan Agreements.

    


    SECTION
      3.05. Loan Agreement to Survive Loan.
      The
      Borrower acknowledges that its duties, covenants, obligations and agreements
      set
      forth in Sections 3.06(a) and (b) hereof shall survive the payment in full
      of
      the Loan.

    


    SECTION
      3.06. Disclaimer of Warranties and
      Indemnification.
      (a) The
      Borrower acknowledges and agrees that: (i) the State does not make any warranty
      or representation, either express or implied, as to the value, design,
      condition, merchantability or fitness for particular purpose or fitness for
      any
      use of the Environmental Infrastructure System or the Project or any portions
      thereof or any other warranty or representation with respect thereto; (ii)
      in no
      event shall the State or its agents be liable or responsible for any incidental,
      indirect, special or consequential damages in connection with or arising out
      of
      this Loan Agreement or the Project or the existence, furnishing, functioning
      or
      use of the Environmental Infrastructure System or the Project or any item or
      products or services provided for in this Loan Agreement; and (iii) to the
      fullest extent permitted by law, the Borrower shall indemnify and hold the
      State
      harmless against, and the Borrower shall pay any and all, liability, loss,
      cost,
      damage, claim, judgment or expense of any and all kinds or nature and however
      arising and imposed by law, which the State may sustain, be subject to or be
      caused to incur by reason of any claim, suit or action based upon personal
      injury, death or damage to property, whether real, personal or mixed, or upon
      or
      arising out of contracts entered into by the Borrower, the Borrower's ownership
      of the Environmental Infrastructure System or the Project, or the acquisition,
      construction or installation of the Project.

    


    (b) It
      is
      mutually agreed by the Borrower and the State that the State and its
      commissioners, officers, agents, servants or employees shall not be liable
      for,
      and shall be indemnified and saved harmless by the Borrower in any event from,
      any action performed under this Loan Agreement and any claim or suit of
      whatsoever nature, except in the event of loss or damage resulting from their
      own negligence or willful misconduct.

    


    
      
        
          
          

        

        
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    (c) In
      connection with its obligation to provide the insurance required under Section
      2.02(j) hereof: (i) the Borrower shall include, or cause to be included, the
      State and its employees and officers as additional "named insureds" on (A)
      any
      certificate of liability insurance procured by the Borrower (or other similar
      document evidencing the liability insurance coverage procured by the Borrower)
      and (B) any certificate of liability insurance procured by any contractor or
      subcontractor for the Project, and from the later of the date of the Loan
      Closing or the date of the initiation of construction of the Project until
      the
      date the Borrower receives the written certificate of Project completion from
      the State, the Borrower shall maintain said liability insurance covering the
      State and said employees and officers in good standing; and (ii) the Borrower
      shall include the State as an additional "named insured" on any certificate
      of
      insurance providing against risk of direct physical loss, damage or destruction
      of the Environmental Infrastructure System, and during the Loan Term the
      Borrower shall maintain said insurance covering the State in good
      standing.

    


    The
      Borrower shall provide the State with a copy of each of any such original,
      supplemental, amendatory or reissued certificates of insurance (or other similar
      documents evidencing the insurance coverage) required pursuant to this Section
      3.06(c).

    


    SECTION
      3.07. Option to Prepay Loan Repayments.
The
      Borrower may prepay the Loan Repayments, in whole or in part, upon not less
      than
      ninety (90) days' prior written notice to the State; provided, however, that,
      with respect to any prepayment other than those required by Section 3.03A
      hereof, any such full or partial prepayment may only be made (i) if the Borrower
      is not then in arrears on its Trust Loan, (ii) if the Borrower is
      contemporaneously making a full or partial prepayment of the Trust Loan such
      that, after the prepayment of the Loan and the Trust Loan, the Trust gives
      its
      consent required under Section 3.07(iii) of the Trust Loan Agreement, and (iii)
      upon the prior written approval of the State. Prepayments shall be applied
      to
      the principal payments on the portion of the Loan to be prepaid in inverse
      order
      of their maturity.

    


    SECTION
      3.08. Priority of Loan and Trust Loan.
      (a) The
      Borrower hereby agrees that, to the extent allowed by law, including, without
      limitation, the appropriations act of the New Jersey State Legislature
      authorizing the expenditure of Trust bond proceeds to finance a portion of
      the
      Cost of the Project, or the Borrower Bond Resolution, any loan repayments then
      due and payable on the Borrower's Trust Loan, including, without limitation,
      any
      administrative fees and any late payment charges then due and payable under
      the
      Trust Loan Agreement, shall be satisfied by the Borrower before any Loan
      Repayments then due and payable hereunder on the Loan shall be satisfied by
      the
      Borrower.

    


    (b) The
      Borrower hereby acknowledges that in the event the Borrower fails or is unable
      to pay promptly to the Trust in full any loan repayments on the Trust Loan,
      then
      any Loan Repayments paid by the Borrower on the Loan under this Loan Agreement
      and received by the Trustee during the time of any such loan repayment
      deficiency under the Trust Loan Agreement shall be applied by the Trustee
first
      to
      satisfy such Trust Loan Agreement loan repayment deficiency as a credit against
      the obligations of the Borrower to make loan repayments of that portion of
      interest under the Trust Loan Agreement that is allocable to the interest
      payable on the Trust Bonds (as defined in the Trust Loan Agreement) and to
      make
      payments of that portion of interest under the bond or note issued by the
      Borrower to the Trust that is allocable to the interest

    


    
      
        
          
          

        

        
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    payable
      on the Trust Bonds, second,
      to the
      extent available, to make loan repayments of principal under the Trust Loan
      Agreement and payments of principal on the bond or note issued by the Borrower
      to the Trust pursuant to the Trust Loan Agreement, third,
      to the
      extent available, to the payment of the administrative fee payable under the
      Trust Loan Agreement and to make payments of that portion of interest under
      the
      bond or note issued by the Borrower to the Trust that is allocable to the
      administrative fee payable under the Trust Loan Agreement, fourth,
      to the
      extent available, to the payment of late charges payable under the Trust Loan
      Agreement and to make payments of that portion of interest under the bond or
      note issued by the Borrower to the Trust that is allocable to the late charges
      payable under the Trust Loan Agreement, and finally,
      to the
      extent available, to make Loan Repayments on the Loan.

    


    (c) The
      Borrower hereby further acknowledges that any Loan Repayments paid by the
      Borrower on the Loan under this Loan Agreement shall be applied according to
      the
      provisions of the Master Program Trust Agreement.

    


    SECTION
      3.09. Approval of the New Jersey State
      Treasurer.
      The
      Borrower and the State hereby acknowledge that prior to or simultaneously with
      the Loan Closing the New Jersey State Treasurer, in satisfaction of the
      requirements of Section 9a of the Act, issued the “Certificate of the New Jersey
      State Treasurer Regarding the Approval of the Trust Loan and the Fund Loan” (the
“Treasurer’s Certificate”). Pursuant to the terms of the Treasurer’s
      Certificate, the New Jersey State Treasurer approved the Loan and the terms
      and
      conditions thereof as established by the provisions of this Loan
      Agreement.

    


    


    
      
        
          
          

        

        
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    ARTICLE
      IV

    


    ASSIGNMENT
      OF LOAN AGREEMENT AND BORROWER BOND

    


    SECTION
      4.01. Assignment and Transfer by
      State.
      The
      Borrower hereby approves and consents to any assignment or transfer of this
      Loan
      Agreement and the Borrower Bond that the State deems to be necessary in
      connection with the environmental infrastructure loan program of the State
      under
      the Regulations.

    


    SECTION
      4.02. Assignment by Borrower.
      Neither
      this Loan Agreement nor the Borrower Bond may be assigned by the Borrower for
      any reason, unless the following conditions shall be satisfied: (i) the State
      shall have approved said assignment in writing; (ii) the assignee shall have
      expressly assumed in writing the full and faithful observance and performance
      of
      the Borrower's duties, covenants, obligations and agreements under this Loan
      Agreement and, to the extent permitted under applicable law, the Borrower Bond;
      and (iii) immediately after such assignment, the assignee shall not be in
      default in the observance or performance of any duties, covenants, obligations
      or agreements of the Borrower under this Loan Agreement or the Borrower
      Bond.

    


    
      
        
          
          

        

        
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    ARTICLE
      V

    


    EVENTS
      OF DEFAULT AND REMEDIES

    


    SECTION
      5.01. Events of Default.
      If any
      of the following events occur, it is hereby defined as and declared to be and
      to
      constitute an "Event of Default":

    


    (a) failure
      by the Borrower to pay, or cause to be paid, any Loan Repayment required to
      be
      paid hereunder when due, which failure shall continue for a period of fifteen
      (15) days;

    


    (b) failure
      by the Borrower to make, or cause to be made, any required payments of
      principal, redemption premium, if any, and interest on any bonds, notes or
      other
      obligations of the Borrower issued under the Borrower Bond Resolution (other
      than the Loan and the Borrower Bond) or otherwise secured by all or a portion
      of
      the property pledged under the Borrower Bond Resolution, after giving effect
      to
      the applicable grace period;

    


    (c) failure
      by the Borrower to pay, or cause to be paid, any late charges incurred hereunder
      or any portion thereof when due or to observe and perform any duty, covenant,
      obligation or agreement on its part to be observed or performed under this
      Loan
      Agreement, other than as referred to in subsection (a) of this Section 5.01
      or
      other than the obligations of the Borrower contained in Section 2.02(d)(ii)
      hereof and in Exhibit F hereto, which failure shall continue for a period of
      thirty (30) days after written notice, specifying such failure and requesting
      that it be remedied, is given to the Borrower by the State, unless the State
      shall agree in writing to an extension of such time prior to its expiration;
      provided, however, that if the failure stated in such notice is correctable
      but
      cannot be corrected within the applicable period, the State may not unreasonably
      withhold its consent to an extension of such time up to 120 days from the
      delivery of the written notice referred to above if corrective action is
      instituted by the Borrower within the applicable period and diligently pursued
      until the Event of Default is corrected;

    


    (d) any
      representation made by or on behalf of the Borrower contained in this Loan
      Agreement, or in any instrument furnished in compliance with or with reference
      to this Loan Agreement or the Loan, is false or misleading in any material
      respect;

    


    (e) a
      petition is filed by or against the Borrower under any federal or state
      bankruptcy or insolvency law or other similar law in effect on the date of
      this
      Loan Agreement or thereafter enacted, unless in the case of any such petition
      filed against the Borrower such petition shall be dismissed within thirty (30)
      days after such filing and such dismissal shall be final and not subject to
      appeal; or the Borrower shall become insolvent or bankrupt or shall make an
      assignment for the benefit of its creditors; or a custodian (including, without
      limitation, a receiver, liquidator or trustee) of the Borrower or any of its
      property shall be appointed by court order or take possession of the Borrower
      or
      its property or assets if such order remains in effect or such possession
      continues for more than thirty (30) days;

    


    (f) the
      Borrower shall generally fail to pay its debts as such debts become due;
      and

    


    
      
        
          
          

        

        
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    (g) failure
      of the Borrower to observe or perform such additional duties, covenants,
      obligations, agreements or conditions as are required by the State and specified
      in Exhibit F attached hereto and made a part hereof.

    


    SECTION
      5.02. Notice of Default.
      The
      Borrower shall give the State prompt telephonic notice of the occurrence of
      any
      Event of Default referred to in Section 5.01(d) or (e) hereof and of the
      occurrence of any other event or condition that constitutes an Event of Default
      at such time as any senior administrative or financial officer of the Borrower
      becomes aware of the existence thereof.

    


    SECTION
      5.03. Remedies on Default.
      Whenever an Event of Default referred to in Section 5.01 hereof shall have
      occurred and be continuing, the State shall have the right to take whatever
      action at law or in equity may appear necessary or desirable to collect the
      amounts then due and thereafter to become due hereunder or to enforce the
      observance and performance of any duty, covenant, obligation or agreement of
      the
      Borrower hereunder.

    


    In
      addition, if an Event of Default referred to in Section 5.01(a) hereof shall
      have occurred and be continuing, the State shall, to the extent allowed by
      applicable law, have the right to declare all Loan Repayments and all other
      amounts due hereunder (including, without limitation, payments under the
      Borrower Bond) to be immediately due and payable, and upon notice to the
      Borrower the same shall become due and payable without further notice or
      demand.

    


    SECTION
      5.04. Attorneys' Fees and Other
      Expenses.
      The
      Borrower shall on demand pay to the State the reasonable fees and expenses
      of
      attorneys and other reasonable expenses (including, without limitation, the
      reasonably allocated costs of in-house counsel and legal staff) incurred by
      the
      State in the collection of Loan Repayments or any other sum due hereunder or
      in
      the enforcement of the observation or performance of any other duties,
      covenants, obligations or agreements of the Borrower upon an Event of
      Default.

    


    SECTION
      5.05. Application of Moneys.
      Any
      moneys collected by the State pursuant to Section 5.03 hereof shall be applied
      (a) first
      to pay
      any attorneys' fees or other fees and expenses owed by the Borrower pursuant
      to
      Section 5.04 hereof, (b) second,
      to the
      extent available, to pay principal due and payable on the Loan, (c) third,
      to the
      extent available, to pay any other amounts due and payable hereunder, and (d)
      fourth,
      to the
      extent available, to pay principal on the Loan and other amounts payable
      hereunder as such amounts become due and payable.

    


    SECTION
      5.06. No Remedy Exclusive; Waiver;
      Notice.
      No
      remedy herein conferred upon or reserved to the State is intended to be
      exclusive, and every such remedy shall be cumulative and shall be in addition
      to
      every other remedy given under this Loan Agreement or now or hereafter existing
      at law or in equity. No delay or omission to exercise any right, remedy or
      power
      accruing upon any Event of Default shall impair any such right, remedy or power
      or shall be construed to be a waiver thereof, but any such right, remedy or
      power may be exercised from time to time and as often as may be deemed
      expedient. In order to entitle the State to exercise any remedy reserved to
      it
      in this Article V, it shall not be necessary to give any notice other than
      such
      notice as may be required in this Article V.

    


    
      
        
          
          

        

        
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    SECTION
      5.07. Retention of State's Rights.
      Notwithstanding any assignment or transfer of this Loan Agreement pursuant
      to
      the provisions hereof, or anything else to the contrary contained herein, the
      State shall have the right upon the occurrence of an Event of Default to take
      any action, including (without limitation) bringing an action against the
      Borrower at law or in equity, as the State may, in its discretion, deem
      necessary to enforce the obligations of the Borrower to the State pursuant
      to
      Section 5.03 hereof.

     

     

    


    
      
        
          
          

        

        
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    ARTICLE
      VI

    


    MISCELLANEOUS

    


    SECTION
      6.01. Notices.
      All
      notices, certificates or other communications hereunder shall be sufficiently
      given and shall be deemed given when hand delivered or mailed by registered
      or
      certified mail, postage prepaid, to the Borrower at the address specified in
      Exhibit A-1 attached hereto and made a part hereof and to the State and the
      Trustee at the following addresses:

    


    (a)     State:

    


    New
      Jersey Department of Environmental Protection

    Municipal
      Finance and Construction Element

    401
      East
      State Street - 3rd Floor

    Trenton,
      New Jersey 08625-0425

    Attention:
      Assistant Director

    


    New
      Jersey Department of the Treasury

    Office
      of
      Public Finance

    State
      Street Square - 5th Floor

    Trenton,
      New Jersey 08625-0002

    Attention:
      Director

    


    (b)     Trustee:

    


    U.S.
      Bank
      National Association

    21
      South
      Street, 3rd
      Floor

    Morristown,
      New Jersey 07960

    Attention:
      Corporate Trust Department

    


    Any
      of
      the foregoing parties may designate any further or different addresses to which
      subsequent notices, certificates or other communications shall be sent by notice
      in writing given to the others.

    


    SECTION
      6.02. Binding Effect.
      This
      Loan Agreement shall inure to the benefit of and shall be binding upon the
      State
      and the Borrower and their respective successors and assigns.

    


    SECTION
      6.03. Severability.
      In the
      event any provision of this Loan Agreement shall be held illegal, invalid or
      unenforceable by any court of competent jurisdiction, such holding shall not
      invalidate, render unenforceable or otherwise affect any other provision
      hereof.

    


    SECTION
      6.04. Amendments, Supplements and
      Modifications.
      This
      Loan Agreement may not be amended, supplemented or modified without the prior
      written consent of the State and the Borrower.

    


    
      
        
          
          

        

        
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    SECTION
      6.05. Execution in Counterparts.
      This
      Loan Agreement may be executed in several counterparts, each of which shall
      be
      an original and all of which shall constitute but one and the same
      instrument.

    


    SECTION
      6.06. Applicable Law and Regulations.
      This
      Loan Agreement shall be governed by and construed in accordance with the laws
      of
      the State, including the Regulations, which Regulations are, by this reference
      thereto, incorporated herein as part of this Loan Agreement.

    


    SECTION
      6.07. Consents and Approvals.
      Whenever the written consent or approval of the State shall be required under
      the provisions of this Loan Agreement, such consent or approval may only be
      given by the State.

    


    SECTION
      6.08. Captions.
      The
      captions or headings in this Loan Agreement are for convenience only and shall
      not in any way define, limit or describe the scope or intent of any provisions
      or sections of this Loan Agreement.

    


    SECTION
      6.09. Further Assurances.
      The
      Borrower shall, at the request of the State, authorize, execute, attest,
      acknowledge and deliver such further resolutions, conveyances, transfers,
      assurances, financing statements and other instruments as may be necessary
      or
      desirable for better assuring, conveying, granting, assigning and confirming
      the
      rights, security interests and agreements granted or intended to be granted
      by
      this Loan Agreement and the Borrower Bond.

    


    


    
      
        
          
            


          

          
          

        

        
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    IN
      WITNESS WHEREOF, the
      State
      and the Borrower have caused this Loan Agreement to be executed, sealed and
      delivered as of the date first above written.

    


    
      	 	
              THE
                STATE OF NEW JERSEY,

            
	 	
              ACTING
                BY AND THROUGH THE

            
	 	
              NEW
                JERSEY DEPARTMENT OF

            
	 	
              ENVIRONMENTAL
                PROTECTION

            
	 	 	 
	
              [SEAL]

            	 	 
	 	 	 
	 	
              /s/
                

            	
              Lisa
                P. Jackson

            
	
              ATTEST:

            	 	
              Lisa
                P. Jackson

            
	 	 	
              Commissioner,
                Department of

            
	 	 	
              Environmental
                Protection

            


    

    


    /s/
      Stanley V. Cach, Jr.

    Stanley
      V. Cach, Jr. P.E., P.P.

    Assistant
      Director,

    Municipal
      Finance and Construction Element,

    Department
      of Environmental Protection

    


    


    
      	 	
              MIDDLESEX
                WATER COMPANY

            
	 	 	 
	
              [SEAL]

            	 	 
	 	 	 
	 	
              /s/

            	
              Dennis
                W. Doll

            
	
              ATTEST:

            	 	
              Authorized
                Officer

            
	 	 	 


    

    


    


    /s/
      Kenneth
      J. Quinn

    Authorized
      Officer

     

     

    G-1