EX-10.31


    Exhibit
      10.31

    


    


    


    


    


    LOAN
      AGREEMENT

    


    BY
      AND BETWEEN

    


    NEW
      JERSEY ENVIRONMENTAL INFRASTRUCTURE TRUST

    


    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

            	
              7

            
	
              SECTION
                2.02. Particular Covenants of
                Borrower

            	
              11

            
	 	 
	
              ARTICLE
                III

            
	 	 
	
              LOAN
                TO BORROWER; AMOUNTS PAYABLE; GENERAL
                AGREEMENTS

            
	 	 
	
              SECTION
                3.01. Loan; Loan Term

            	
              20

            
	
              SECTION
                3.02. Disbursement of Loan
                Proceeds

            	
              20

            
	
              SECTION
                3.03. Amounts Payable

            	
              21

            
	
              SECTION
                3.04. Unconditional Obligations

            	
              22

            
	
              SECTION
                3.05. Loan Agreement to Survive Bond Resolution and
                Trust Bonds

            	
              23

            
	
              SECTION
                3.06. Disclaimer of Warranties and
                Indemnification

            	
              23

            
	
              SECTION
                3.07. Option to Prepay Loan
                Repayments

            	
              24

            
	
              SECTION
                3.08. Priority of Loan and Fund
                Loan

            	
              25

            
	
              SECTION
                3.09. Approval of the New Jersey State
                Treasurer

            	
              25

            
	 	 
	
              ARTICLE
                IV

            
	 	 
	
              ASSIGNMENT
                OF LOAN AGREEMENT AND BORROWER BOND

            
	 	 
	
              SECTION
                4.01. Assignment and Transfer by
                Trust

            	
              27

            
	
              SECTION
                4.02. Assignment by Borrower

            	
              27

            
	 	 
	
              ARTICLE
                V

            
	 	 
	
              EVENTS
                OF DEFAULT AND REMEDIES

            
	 	 
	
              SECTION
                5.01. Events of Default

            	
              28

            
	
              SECTION
                5.02. Notice of Default

            	
              29

            
	
              SECTION
                5.03. Remedies on Default

            	
              29

            
	
              SECTION
                5.04. Attorneys' Fees and Other
                Expenses

            	
              29

            


    


    
      
        
        

      

      
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              SECTION
                5.05. Application of Moneys

            	
              29

            
	
              SECTION
                5.06. No Remedy Exclusive; Waiver;
                Notice

            	
              30

            
	
              SECTION
                5.07. Retention of Trust's Rights

            	
              30

            
	 	 	 
	
              ARTICLE
                VI

            
	 	 	 
	
              MISCELLANEOUS

            
	 	 	 
	
              SECTION
                6.01. Notices

            	
              31

            
	
              SECTION
                6.02. Binding Effect

            	
              31

            
	
              SECTION
                6.03. Severability

            	
              31

            
	
              SECTION
                6.04. Amendments, Supplements and
                Modifications

            	
              31

            
	
              SECTION
                6.05. Execution in Counterparts

            	
              32

            
	
              SECTION
                6.06. Applicable Law and
                Regulations

            	
              32

            
	
              SECTION
                6.07. Consents and Approvals

            	
              32

            
	
              SECTION
                6.08. Captions

            	
              32

            
	
              SECTION
                6.09. Benefit of Loan Agreement; Compliance with Bond
                Resolution

            	
              32

            
	
              SECTION
                6.10. Further Assurances

            	
              32

            
	 	 	 


    

    


    
      
        
        

      

      
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    NEW
      JERSEY ENVIRONMENTAL INFRASTRUCTURE TRUST LOAN AGREEMENT

    


    THIS
      LOAN AGREEMENT,
      made
      and entered into as of this November 1, 2006, by and between the NEW JERSEY
      ENVIRONMENTAL INFRASTRUCTURE TRUST, a public body corporate and politic with
      corporate succession, and the Borrower (capitalized terms used in this Loan
      Agreement shall have, unless the context otherwise requires, the meanings set
      forth in said Section 1.01);

    


    WITNESSETH
      THAT:

    


    WHEREAS,
      the
      Trust, in accordance with the Act, the Bond Resolution and a financial plan
      approved by the State Legislature in accordance with Sections 22 and 22.1 of
      the
      Act, will issue its Trust Bonds on or prior to the Loan Closing for the purpose
      of making the Loan to the Borrower and the Loans to the Borrowers from the
      proceeds of the Trust Bonds to finance a portion of the Costs of Environmental
      Infrastructure Facilities; 

    


    WHEREAS,
      the
      Borrower has, in accordance with the Act and the Regulations, made timely
      application to the Trust for a Loan to finance a portion of the Costs of the
      Project;

    


    WHEREAS,
      the
      State Legislature, in accordance with Sections 20 and 20.1 of the Act, has
      in
      the form of an appropriations act approved a project priority list that includes
      the Project and that authorizes an expenditure of proceeds of the Trust Bonds
      to
      finance a portion of the Costs of the Project;

    


    WHEREAS,
      the
      Trust has approved the Borrower's application for a Loan from available proceeds
      of the Trust Bonds to finance a portion of the Costs of the
      Project;

    


    WHEREAS,
      in
      accordance with the applicable Bond Act (as defined in the Fund Loan Agreement),
      and the Regulations, the Borrower has been awarded a Fund Loan for a portion
      of
      the Costs of the Project; and

    


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

    


    NOW,
      THEREFORE,
      for and
      in consideration of the award of the Loan by the Trust, 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. (a)
      The
      following terms as used in this Loan Agreement shall, unless the context clearly
      requires otherwise, have the following meanings:

    


    "Act"
      means
      the "New Jersey Environmental Infrastructure Trust Act", constituting Chapter
      334 of the Pamphlet Laws of 1985 of the State (codified at N.J.S.A. 58:11B-1
      et
      seq.),
      as the
      same may from time to time be amended and supplemented.

    


    "Administrative
      Fee"
      means
      that portion of Interest on the Loan or Interest on the Borrower Bond payable
      hereunder as an annual fee of up to four-tenths of one percent (.40%) of the
      initial principal amount of the Loan or such lesser amount, if any, as may
      be
      authorized by any act of the State Legislature and as the Trust 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.

    


    "Bond
      Counsel"
      means a
      law firm appointed or approved by the Trust, as the case may be, having a
      reputation in the field of municipal law whose opinions are generally acceptable
      by purchasers of municipal bonds.

    


    "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 Trust and,
      if applicable, authenticated 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 Trust
      pursuant to which the Trust will make Loans to such recipients from moneys
      on
      deposit in the Project Fund, excluding the Project Loan Account.

    


    "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.


    
      
        
        

      

      
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    "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 Trust.

    


    "Debt
      Service Reserve Fund"
      means
      the Debt Service Reserve Fund as defined in the Bond Resolution.

    


    “Department”
      means
      the
      New Jersey Department of Environmental Protection.

    


    "Environmental
      Infrastructure Facilities"
      means
      Wastewater Treatment Facilities, Stormwater Management Facilities or Water
      Supply Facilities (as such terms are defined in the Regulations).

    


    "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.

    


    "Fund
      Loan" means
      the
      loan made to the Borrower by the State, acting by and through the Department,
      pursuant to the Fund Loan Agreement dated as of November 1, 2006 by and between
      the Borrower and the State, acting by and through the Department, to finance
      or
      refinance a portion of the Costs of the Project. 

    


    "Fund
      Loan Agreement" means
      the
      loan agreement dated as of November 1, 2006 by and between the Borrower and
      the
      State, acting by and through the Department, regarding the terms and conditions
      of the Fund Loan.

    


    "Interest
      on the Loan"
      or
"Interest
      on the Borrower Bond"
      means
      the sum of (i) the Interest Portion, (ii) the Administrative Fee, and (iii)
      any
      late charges incurred hereunder.

    


    "Interest
      Portion"
      means
      that portion of Interest on the Loan or Interest on the Borrower Bond payable
      hereunder that is necessary to pay the Borrower's proportionate share of
      interest on the Trust Bonds (i) as set forth in Exhibit A-2 hereof under the
      column heading entitled "Interest", or (ii) with respect to any prepayment
      of
      Trust Bond Loan Repayments in accordance with Section 3.07 or 5.03 hereof,
      to
      accrue on any principal amount of Trust Bond Loan Repayments to the date of
      the
      optional redemption or acceleration, as the case may be, of the Trust Bonds
      allocable to such prepaid or accelerated Trust Bond Loan Repayment.

    


    "Loan"
      means
      the loan made by the Trust to the Borrower to finance or refinance a portion
      of
      the Costs of the Project pursuant to this Loan Agreement.


    
      
        
        

      

      
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    "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 and of the Bond Resolution.

    


    "Loan
      Agreements"
      means
      any other loan agreements entered into by and between the Trust and one or
      more
      of the Borrowers pursuant to which the Trust will make Loans to such Borrowers
      from moneys on deposit in the Project Fund, excluding the Project Loan Account,
      financed with the proceeds of the Trust Bonds.

    


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

    


    "Loan
      Repayments"
      means
      the sum of (i) Trust Bond Loan Repayments, (ii) the Administrative Fee, and
      (iii) any late charges incurred hereunder.

    


    "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 Trust to the Borrowers under the Loan Agreements from
      moneys on deposit in the Project Fund, excluding the Project Loan
      Account.

    


    "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 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.

    


    "Official
      Statement"
      means
      the Official Statement relating to the issuance of the Trust Bonds.

    


    "Preliminary
      Official Statement"
      means
      the Preliminary Official Statement relating to the issuance of the Trust
      Bonds.

    


    "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 Trust is permitted to make a loan to the Borrower pursuant to the
      Act,
      the Regulations and the


    
      
        
        

      

      
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    Bond
      Resolution, all or a portion of the Costs of which is financed or refinanced
      by
      the Trust 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.

    


    "Project
      Fund"
      means
      the Project Fund as defined in the Bond Resolution.

    


    "Project
      Loan Account"
      means
      the project loan account established on behalf of the Borrower in the Project
      Fund in accordance with the Bond Resolution to finance all or a portion of
      the
      Costs of the Project.

    


    "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.,
      7:22-6
et
      seq.,
      7:22-7
et
      seq.,
      7:22-8
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.

    


    "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 the Act.

    


    "Trust
      Bond Loan Repayments"
      means
      the repayments of the principal amount of the Loan plus the payment of any
      premium associated with prepaying the principal amount of the Loan in accordance
      with Section 3.07 hereof plus the Interest Portion.

    


    "Trust
      Bonds"
      means
      bonds authorized by Section 2.03 of the Bond Resolution, together with any
      refunding bonds authenticated, if applicable, and delivered pursuant to Section
      2.04 of the Bond Resolution, in each case issued in order to finance (i) the
      portion of the Loan deposited in the Project Loan Account, (ii) the portion
      of
      the Loans deposited in the balance of the Project Fund, (iii) any capitalized
      interest related to such bonds, (iv) a portion of the costs of issuance related
      to such bonds, and (v) that portion of the Debt Service Reserve Fund, if any,
      allocable to the Loan or Loans, as the case may be, a portion of which includes
      the funding of reserve capacity, if applicable, for the Environmental
      Infrastructure Facilities of the Borrower or Borrowers, as the case may be,
      or
      to refinance any or all of the above.

    


    "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 Trust, the Trustee and the holders
      of
      the Trust Bonds 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 State 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 Trust, 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 Trust, 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 State 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 Trust upon the terms set forth herein; (C)
      the
      approval of the inclusion, if such inclusion is deemed necessary in the sole
      discretion of the Trust, in the Preliminary Official Statement and the Official
      Statement of all statements and information relating to the Borrower set forth
      in "APPENDIX B" thereto (the "Borrower Appendices") and any amendment thereof
      or
      supplement thereto; and (D) 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,
      including, without limitation, the designation of the Borrower Appendices
      portion of the Preliminary Official Statement, if any, as "deemed final" for
      the
      purposes and within the meaning of Rule 15c2-12 ("Rule 15c2-12") of the
      Securities and Exchange Commission ("SEC") promulgated under the Securities
      Exchange Act of 1934, as amended or supplemented, including any successor
      regulation or statute thereto.

    


    (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 Trust,
      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 Trust 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 Trust, enforceable against the Trust 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 Trust 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 and any other payments
      required under this Loan Agreement 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


    
      
        
        

      

      
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    Infrastructure
      System, (iii) the ability of the Borrower to make all Loan Repayments or any
      other payments required under this Loan Agreement, (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 Trust, (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 Trust 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 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 Trust, (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 Trust,
      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.


    
      
        
        

      

      
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    (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 Trust, 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 Trust, as
      required by Section 9a of the Act, 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, 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 Trust, 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 Trust as described in
      Exhibit B attached hereto and made a part hereof (i) to finance or refinance
      a
      portion of the Costs of the Borrower's Project; and (ii) where applicable,
      to
      reimburse the Borrower for a portion of the Costs of the Borrower's Project,
      which portion was paid or incurred in anticipation of reimbursement by the
      Trust
      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 Trust is authorized to make Loans to the Borrower pursuant to the
      Act
      and the Regulations.


    
      
        
        

      

      
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    (i) Official
      Statement.
      The
      descriptions and information set forth in the Borrower Appendices, if any,
      contained in the Official Statement relating to the Borrower, its operations
      and
      the transactions contemplated hereby, as of the date of the Official Statement,
      were and, as of the date of delivery hereof, are true and correct in all
      material respects, and did not and do not contain any untrue statement of a
      material fact or omit to state a material fact that is necessary to make the
      statements contained therein, in light of the circumstances under which they
      were made, not misleading.

    


    (j) Preliminary
      Official Statement.
      As of
      the date of the Preliminary Official Statement, the descriptions and information
      set forth in the Borrower Appendices, if any, contained in the Preliminary
      Official Statement relating to the Borrower, its operations and the transactions
      contemplated hereby (i) were "deemed final" by the Borrower for the purposes
      and
      within the meaning of Rule 15c2-12 and (ii) were true and correct in all
      material respects, and did not contain any untrue statement of a material fact
      or omit to state a material fact necessary to make the statements contained
      therein, in light of the circumstances under which they were made, not
      misleading.

    


    SECTION
      2.02. Particular Covenants of
      Borrower.

    


    (a) Promise
      to Pay.
      The
      Borrower unconditionally and irrevocably promises, in accordance with the terms
      of and to the extent provided in the Borrower Bond Resolution, to make punctual
      payment of the principal and redemption premium, if any, of the Loan and the
      Borrower Bond, the Interest on the Loan, the Interest on 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 Trust in the observance and
      performance of the respective duties, covenants, obligations and agreements
      of
      the Borrower and the Trust 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) Borrower
      Bond; No Prior Liens.
      Except
      for (i) the Borrower Bond, (ii) any bonds or notes at parity with the Borrower
      Bond and currently outstanding or issued on the date hereof, (iii) any future
      bonds or notes of the Borrower issued under the Borrower Bond Resolution at
      parity with the Borrower Bond, and (iv) any Permitted Encumbrances (as defined
      in the Borrower Bond Resolution), the assets of the Borrower that are subject
      to
      the Borrower Bond


    
      
        
        

      

      
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    Resolution
      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 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 Fund 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) Exclusion
      of Interest from Federal Gross Income and Compliance with Code.

    


    (i) The
      Borrower covenants and agrees that it shall not take any action or omit to
      take
      any action that would result in the loss of the exclusion of the interest on
      any
      Trust Bonds now or hereafter issued from gross income for purposes of federal
      income taxation as that status is governed by Section 103(a) of the
      Code.

    


    (ii) The
      Borrower shall not directly or indirectly use or permit the use of any proceeds
      of the Trust Bonds (or amounts replaced with such proceeds) or any other funds
      or take any action or omit to take any action that would cause the Trust Bonds
      (assuming solely for this purpose that the proceeds of the Trust Bonds loaned
      to
      the Borrower represent all of the proceeds of the Trust Bonds) to be "arbitrage
      bonds" within the meaning of Section 148(a) of the Code.

    


    (iii) The
      Borrower shall not directly or indirectly use or permit the use of any proceeds
      of the Trust Bonds to pay the principal of or the interest or redemption premium
      on or any other amount in connection with the retirement or redemption of any
      issue of state or local governmental obligations ("refinancing of
      indebtedness"), unless the Borrower shall (A) establish to the satisfaction
      of
      the Trust, prior to the issuance of the Trust Bonds, that such refinancing
      of
      indebtedness will not adversely affect the exclusion from gross income for
      federal income tax purposes of the interest on the Trust Bonds, and (B) provide
      to the Trust an opinion of Bond Counsel to that effect in form and substance
      satisfactory to the Trust.

    


    (iv) The
      Borrower shall not directly or indirectly use or permit the use of any proceeds
      of the Trust Bonds to reimburse the Borrower for an expenditure with respect
      to
      Costs of the Borrower's Project paid by the Borrower prior to the issuance
      of
      the Trust Bonds, unless (A) the allocation by the Borrower of the proceeds
      of
      the Trust Bonds to reimburse such expenditure complies with the requirements
      of
      Treasury Regulations §1.150-2 necessary to enable the reimbursement allocation
      to be treated as an expenditure of the proceeds of the Trust Bonds for purposes
      of applying Sections 103 and 141-150,


    
      
        
        

      

      
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    inclusive,
      of the Code, or (B) such proceeds of the Trust Bonds will be used for
      refinancing of indebtedness that was used to pay Costs of the Borrower's Project
      or to reimburse the Borrower for expenditures with respect to Costs of the
      Borrower's Project paid by the Borrower prior to the issuance of such
      indebtedness in accordance with a reimbursement allocation for such expenditures
      that complies with the requirements of Treasury Regulations
§1.150-2.

    


    (v) The
      Borrower shall not directly or indirectly use or permit the use of any proceeds
      of the Trust Bonds to pay any Costs of the Borrower's Project that does not
      constitute a "capital expenditure" within the meaning of Treasury Regulations
      §1.150-1.

    


    (vi) The
      Borrower shall not use the proceeds of the Trust Bonds (assuming solely for
      this
      purpose that the proceeds of the Trust Bonds loaned to the Borrower represent
      all of the proceeds of the Trust Bonds) in any manner that would cause the
      Trust
      Bonds to be considered "federally guaranteed" within the meaning of Section
      149(b) of the Code or "hedge bonds" within the meaning of Section 149(g) of
      the
      Code.

    


    (vii) The
      Borrower shall not issue any debt obligations that (A) are sold at substantially
      the same time as the Trust Bonds and finance or refinance the Loan made to
      the
      Borrower, (B) are sold pursuant to the same plan of financing as the Trust
      Bonds
      and finance or refinance the Loan made to the Borrower, and (C) are reasonably
      expected to be paid out of substantially the same source of funds as the Trust
      Bonds and finance or refinance the Loan made to the Borrower.

    


    (viii) Neither
      the Borrower nor any "related party" (within the meaning of Treasury Regulations
      §1.150-1) shall purchase Trust Bonds in an amount related to the amount of the
      Loan.

    


    (ix) The
      Borrower will not issue or permit to be issued obligations that will constitute
      an "advance refunding" of the Borrower Bond within the meaning of Section
      149(d)(5) of the Code without the express written consent of the Trust, which
      consent may only be delivered by the Trust after the Trust has received notice
      from the Borrower of such contemplated action no later than sixty (60) days
      prior to any such contemplated action, and which consent is in the sole
      discretion of the Trust.

    


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

    


    (xi) No
      "gross
      proceeds" of the Trust Bonds held by the Borrower (other than amounts in a
      "bona
      fide debt service fund") will be held in a "commingled fund" (as such terms
      are
      defined in Treasury Regulations §1.148-1(b)).

    


    (xii) Based
      upon all of the objective facts and circumstances in existence on the date
      of
      issuance of the Trust Bonds used to finance the Project, (A) within six months
      of the date of issuance of the Trust Bonds used to finance the Project, the
      Borrower will


    
      
        
        

      

      
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    incur
      a
      substantial binding obligation to a third party to expend on the Project at
      least five percent (5%) of the "net sale proceeds" (within the meaning of
      Treasury Regulations §1.148-1) of the Loan used to finance the Project (treating
      an obligation as not being binding if it is subject to contingencies within
      the
      control of the Borrower, the Trust or a "related party" (within the meaning
      of
      Treasury Regulations §1.150-1)), (B) completion of the Project and the
      allocation to expenditures of the "net sale proceeds" of the Loan used to
      finance the Project will proceed with due diligence, and (C) all of the proceeds
      of the Loan used to finance the Project (other than amounts deposited into
      the
      Debt Service Reserve Fund allocable to that portion of the Loan used to finance
      reserve capacity, if any) and investment earnings thereon will be spent prior
      to
      the period ending three (3) years subsequent to the date of issuance of the
      Trust Bonds used to finance the Project. Accordingly, the proceeds of the Loan
      deposited in the Project Loan Account used to finance the Project will be
      eligible for the 3-year arbitrage temporary period since the expenditure test,
      time test and due diligence test, as set forth in Treasury Regulations
§1.148-2(e)(2), will be satisfied.

    


    (xiii) The
      weighted average maturity of the Loan does not exceed 120% of the average
      reasonably expected economic life of the Project financed or refinanced with
      the
      Loan, determined in the same manner as under Section 147(b) of the Code.
      Accordingly, the term of the Loan will not be longer than is reasonably
      necessary for the governmental purposes of the Loan within the meaning of
      Treasury Regulations §1.148-1(c)(4).

    


    For
      purposes of this subsection and subsection (h) of this Section 2.02, quoted
      terms shall have the meanings given thereto by Section 148 of the Code,
      including, particularly, Treasury Regulations §§1.148-1 through 1.148-11,
      inclusive, as supplemented or amended, to the extent applicable to the Trust
      Bonds, and any successor Treasury Regulations applicable to the Trust
      Bonds.

    


    (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) 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.

    


    (i) 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 Trust
      at any reasonable time upon


    
      
        
        

      

      
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    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 Trust within 150 days of the close of the fiscal year being so audited
      or,
      with the consent of the Trust, such additional period as may be provided by
      law.

    


    (ii) Unless
      otherwise advised in writing by the Trust, in furtherance of the covenant of
      the
      Borrower contained in subsection (f) of this Section 2.02 not to cause the
      Trust
      Bonds to be arbitrage bonds, the Borrower shall keep, or cause to be kept,
      accurate records of each investment it makes in any "nonpurpose investment"
      acquired with, or otherwise allocated to, "gross proceeds" of the Trust Bonds
      not held by the Trustee and each "expenditure" it makes allocated to "gross
      proceeds" of the Trust Bonds. Such records shall include the purchase price,
      including any constructive "payments" (or in the case of a "payment"
      constituting a deemed acquisition of a "nonpurpose investment" (e.g., a
      "nonpurpose investment" first allocated to "gross proceeds" of the Trust Bonds
      after it is actually acquired because it is deposited in a sinking fund for
      the
      Trust Bonds)), the "fair market value" of the "nonpurpose investment" on the
      date first allocated to the "gross proceeds" of the Trust Bonds, nominal
      interest rate, dated date, maturity date, type of property, frequency of
      periodic payments, period of compounding, yield to maturity, amount actually
      or
      constructively received on disposition (or in the case of a "receipt"
      constituting a deemed disposition of a "nonpurpose investment" (e.g., a
      "nonpurpose investment" that ceases to be allocated to the "gross proceeds"
      of
      the Trust Bonds because it is removed from a sinking fund for the Trust Bonds)),
      the "fair market value" of the "nonpurpose investment" on the date it ceases
      to
      be allocated to the "gross proceeds" of the Trust Bonds, the purchase date
      and
      disposition date of the "nonpurpose investment" and evidence of the "fair market
      value" of such property on the purchase date and disposition date (or deemed
      purchase or disposition date) for each such "nonpurpose investment". The
      purchase date, disposition date and the date of determination of "fair market
      value" shall be the date on which a contract to purchase or sell the "nonpurpose
      investment" becomes binding, i.e., the trade date rather than the settlement
      date. For purposes of the calculation of purchase price and disposition price,
      brokerage or selling commissions, administrative expenses or similar expenses
      shall not increase the purchase price of an item and shall not reduce the amount
      actually or constructively received upon disposition of an item, except to
      the
      extent such costs constitute "qualified administrative costs".

    


    (iii) Within
      thirty (30) days of the last day of the fifth and each succeeding fifth "bond
      year" (which, unless otherwise advised by the Trust, shall be the five-year
      period ending on the date five years subsequent to the date immediately
      preceding the date of issuance of the Trust Bonds and each succeeding fifth
      "bond year") and within thirty (30) days of the date the last bond that is
      part
      of the Trust Bonds is discharged (or on any other periodic basis requested
      in
      writing by the Trust), the Borrower shall (A) calculate, or cause to be
      calculated, the "rebate amount" as of the "computation date" or "final
      computation date" attributable to any "nonpurpose investment" made by the
      Borrower and (B) remit the following to the Trust: (1) an amount of money that
      when added to the "future value" as of the "computation date" of any previous
      payments made to the Trust on account of rebate equals the "rebate amount",
      (2)
      the calculations


    
      
        
        

      

      
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    supporting
      the "rebate amount" attributable to any "nonpurpose investment" made by the
      Borrower allocated to "gross proceeds" of the Trust Bonds, and (3) any other
      information requested by the Trust relating to compliance with Section 148
      of
      the Code (e.g., information related to any "nonpurpose investment" of the
      Borrower for purposes of application of the "universal cap").

    


    (iv) The
      Borrower covenants and agrees that it will account for "gross proceeds" of
      the
      Trust Bonds, investments allocable to the Trust Bonds and expenditures of "gross
      proceeds" of the Trust Bonds in accordance with Treasury Regulations §1.148-6.
      All allocations of "gross proceeds" of the Trust Bonds to expenditures will
      be
      recorded on the books of the Borrower kept in connection with the Trust Bonds
      no
      later than 18 months after the later of the date the particular Costs of the
      Borrower's Project is paid or the date the portion of the project financed
      by
      the Trust Bonds is placed in service. All allocations of proceeds of the Trust
      Bonds to expenditures will be made no later than the date that is 60 days after
      the fifth anniversary of the date the Trust Bonds are issued or the date 60
      days
      after the retirement of the Trust Bonds, if earlier. Such records and accounts
      will include the particular Cost paid, the date of the payment and the party
      to
      whom the payment was made.

    


    (i) Inspections;
      Information.
      The
      Borrower shall permit the Trust and the Trustee and any party designated by
      any
      of such parties, 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 Trust and the Trustee 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) Costs
      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 Trust 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 Trust and the Trustee each of the following
      items:


    
      
        
        

      

      
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    (i) an
      opinion of the Borrower's bond counsel substantially in the form of Exhibit
      E
      hereto; provided, however, that the Trust 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, in the opinion of the Trust,
      such variances are not to the material detriment of the interests of the holders
      of the Trust Bonds;

    


    (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 Trust, 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 Trust, (C) the
      resolution of the Borrower, if any, confirming the details of the sale of the
      Borrower Bond to the Trust, (D) the resolution of the Borrower, if any,
      declaring its official intent to reimburse expenditures for the Costs of the
      Project from the proceeds of the Trust Bonds, each of said resolutions of the
      Borrower being certified by an Authorized Officer of the Borrower as of the
      date
      of the Loan Closing, (E) the resolution of the BPU approving the issuance by
      the
      Borrower of the Borrower Bond to the Trust and setting forth any other approvals
      required therefor by the BPU, if applicable, and (F) any other
      Proceedings;

    


    (iv) if
      the
      Loan is being made to reimburse the Borrower for all or a portion of the Costs
      of the Borrower's Project or to refinance indebtedness or reimburse the Borrower
      for the repayment of indebtedness previously incurred by the Borrower to finance
      all or a portion of the Costs of the Borrower's Project, an opinion of Bond
      Counsel, in form and substance satisfactory to the Trust, to the effect that
      such reimbursement or refinancing will not adversely affect the exclusion from
      gross income for federal income tax purposes of the interest on the Trust Bonds;
      and

    


    (v) the
      certificates of insurance coverage as required pursuant to the terms of Section
      3.06(d) hereof and such other certificates, documents, opinions and information
      as the Trust 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 Trust the Borrower Bond, as previously
      executed, attested and, if applicable, authenticated, upon the receipt of a
      written certification of the Trust that a portion of the net proceeds of the
      Trust Bonds shall be deposited in the Project Loan Account simultaneously with
      the delivery of the Borrower Bond.

    


    (n) Notice
      of Material Adverse Change.
      The
      Borrower shall promptly notify the Trust 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


    
      
        
        

      

      
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    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) Continuing
      Disclosure Covenant.
      To the
      extent that the Trust, in its sole discretion, determines, at any time prior
      to
      the termination of the Loan Term, that the Borrower is a material "obligated
      person", as the term "obligated person" is defined in Rule 15c2-12, with
      materiality being determined by the Trust pursuant to criteria established,
      from
      time to time, by the Trust in its sole discretion and set forth in a bond
      resolution or official statement of the Trust, the Borrower hereby covenants
      that it will authorize and provide to the Trust, for inclusion in any
      preliminary official statement or official statement of the Trust, all
      statements and information relating to the Borrower deemed material by the
      Trust
      for the purpose of satisfying Rule 15c2-12 as well as Rule 10b-5 promulgated
      pursuant to the Securities Exchange Act of 1934, as amended or supplemented,
      including any successor regulation or statute thereto ("Rule 10b-5"), including
      certificates and written representations of the Borrower evidencing its
      compliance with Rule 15c2-12 and Rule 10b-5; and the Borrower hereby further
      covenants that the Borrower shall execute and deliver the Continuing Disclosure
      Agreement, in substantially the form attached hereto as Exhibit H, with such
      revisions thereto prior to execution and delivery thereof as the Trust shall
      determine to be necessary, desirable or convenient, in its sole discretion,
      for
      the purpose of satisfying Rule 15c2-12 and the purposes and intent thereof,
      as
      Rule 15c2-12, its purposes and intent may hereafter be interpreted from time
      to
      time by the SEC or any court of competent jurisdiction; and pursuant to the
      terms and provisions of the Continuing Disclosure Agreement, the Borrower shall
      thereafter provide on-going disclosure with respect to all statements and
      information relating to the Borrower in satisfaction of the requirements set
      forth in Rule 15c2-12 and Rule 10b-5, including, without limitation, the
      provision of certificates and written representations of the Borrower evidencing
      its compliance with Rule 15c2-12 and Rule 10b-5.

    


    (q) Additional
      Covenants and Requirements.
      (i) No
      later than the Loan Closing and, if necessary, in connection with the Trust's
      issuance of the Trust Bonds or 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, the use by or on behalf of
      the
      Borrower of certain proceeds of the Trust Bonds as such use relates to the
      exclusion from gross income for federal income tax purposes of the interest
      on
      any Trust Bonds, the transfer of revenues and receipts from the Borrower's
      Environmental Infrastructure System, compliance with Rule 15c2-12, Rule 10b-5
      and any other applicable federal or State securities laws, and matters in
      connection with the appointment of the Trustee under the Bond Resolution and
      any
      successors thereto. The Borrower hereby 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


    
      
        
        

      

      
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    incorporated
      in this Loan Agreement by reference thereto as if set forth in full herein
      and
      the 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
      Trust
      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 Trust upon the terms set forth in Exhibit A-2 attached hereto
      and
      made a part hereof; provided, however, that the Trust shall be under no
      obligation to make the Loan if (a) at the Loan Closing, the Borrower does not
      deliver to the Trust 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 the Bond Resolution or this Loan Agreement. Although the Trust
      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 Costs of the Project,
      due to unforeseen circumstances there may not be a sufficient amount on deposit
      in the Project Fund on any date to make the disbursement in such amount.
      Nevertheless, the Borrower agrees that the amount actually deposited in the
      Project Loan Account at the Loan Closing plus the Borrower's allocable share
      of
      (i) certain costs of issuance and underwriter's discount for all Trust Bonds
      issued to finance the Loan; (ii) capitalized interest during the Project
      construction period, if applicable; and (iii) that portion of the Debt Service
      Reserve Fund attributable to the cost of funding reserve capacity for the
      Project, if applicable, shall constitute the initial principal amount of the
      Loan (as the same may be adjusted downward in accordance with the definition
      thereof), and neither the Trust nor the Trustee shall have any obligation
      thereafter to loan any additional amounts to the Borrower.

    


    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 the Borrower Bond, Interest on the Borrower Bond 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
      Trustee, as the agent of the Trust, shall disburse the amounts on deposit in
      the
      Project Loan Account to the Borrower upon receipt of a requisition executed
      by
      an Authorized Officer of the Borrower, and approved by the Trust, in a form
      meeting the requirements of Section 5.02(3) of the Bond Resolution.

    


    (b) The
      Trust
      and Trustee shall not be required to disburse any Loan proceeds to the Borrower
      under this Loan Agreement, unless:

    


    (i) the
      proceeds of the Trust Bonds shall be available for disbursement, as determined
      solely by the Trust;


    
      
        
        

      

      
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    (ii) in
      accordance with the Bond Act, 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 Fund 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
      Trust;

    


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

    


    (iv) 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 in installments payable to the Trustee as
      follows:

    


    (i) the
      principal of the Loan shall be repaid annually 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 any credits
      applicable to the Borrower as set forth in the Bond Resolution;

    


    (ii) the
      Interest Portion described in clause (i) of the definition thereof shall be
      paid
      semiannually on the Interest 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 any credits applicable to the Borrower as set forth
      in
      the Bond Resolution; and

    


    (iii) the
      Interest Portion described in clause (ii) of the definition thereof shall be
      paid upon the date of optional redemption or acceleration, as the case may
      be,
      of the Trust Bonds allocable to any prepaid or accelerated Trust Bond Loan
      Repayment.

    


    The
      obligations of the Borrower under the Borrower Bond shall be deemed to be
      amounts payable under this Section 3.03. Each Loan Repayment, whether satisfied
      through a direct payment by the Borrower to the Trustee or (with respect to
      the
      Interest Portion) through the use of Trust Bond proceeds and income thereon
      on
      deposit in the Interest Account (as defined in the Bond Resolution) to pay
      interest on the Trust Bonds, shall be deemed to be a credit against the
      corresponding obligation of the Borrower under this Section 3.03 and 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 first
      to the
      Interest Portion then due and payable, second
      to the
      principal of the Loan then due and payable, third
      to the
      payment of the Administrative Fee, and finally
      to the
      payment of any late charges hereunder.


    
      
        
        

      

      
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    (b) The
      Interest on the Loan described in clause (iii) of the definition thereof shall
      (i) consist of a late charge for any Trust Bond Loan Repayment that is received
      by the Trustee later than the tenth (10th) day following its due date and (ii)
      be payable immediately thereafter in an amount equal to the greater of twelve
      percent (12%) per annum or the Prime Rate plus one half of one percent per
      annum
      on such late payment from its due date to the date it is actually paid;
      provided, however, that the rate of Interest on the Loan, including, without
      limitation, any late payment charges incurred hereunder, shall not exceed the
      maximum interest rate permitted by law.

    


    (c) The
      Borrower shall receive, as a credit against its semiannual payment obligations
      of the Interest Portion, the amounts certified by the Trust pursuant to Section
      5.10 of the Bond Resolution. Such amounts shall represent the Borrower's
      allocable share of the interest earnings on certain funds and accounts
      established under the Bond Resolution, calculated in accordance with Section
      5.10 of the Bond Resolution.

    


    (d) In
      accordance with the provisions of the Bond Resolution, the Borrower shall
      receive, as a credit against its Trust Bond Loan Repayments, the amounts set
      forth in the certificate of the Trust filed with the Trustee pursuant to Section
      5.02(4) of the Bond Resolution.

    


    (e) The
      Interest on the Loan described in clause (ii) of the definition thereof shall
      be
      paid by the Borrower in the amount of one-half of the Administrative Fee, if
      any, to the Trustee on each Interest Payment Date, commencing with the first
      Interest Payment Date subsequent to the Loan Closing.

    


    (f) The
      Borrower hereby agrees to pay to the Trust at the Loan Closing a “Security
      Review Fee” in the amount necessary to reimburse the Trust for all of its costs
      and expenses incurred in connection with reviewing the additional security
      securing the Trust Loan as set forth in Exhibit F hereto, if any, including
      without limitation the fees and expenses of any professional advisers hired
      by
      the Trust in connection therewith.

    


    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


    
      
        
        

      

      
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    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.

    


    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 Trust Bonds remain outstanding
      or 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
      Trust or the Trustee to perform and observe any agreement, whether express
      or
      implied, or any duty, liability or obligation arising out of or connected with
      the Project, this Loan Agreement or the Bond Resolution, or any rights of
      set-off, recoupment, abatement or counterclaim that the Borrower might otherwise
      have against the Trust, 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 or the Bond
      Resolution.

    


    The
      Borrower acknowledges that payment of the Trust Bonds by the Trust, including
      payment from moneys drawn by the Trustee from the Debt Service Reserve Fund,
      does not constitute payment of the amounts due under this Loan Agreement and
      the
      Borrower Bond. If at any time the amount in the Debt Service Reserve Fund shall
      be less than the Debt Service


    
      
        
        

      

      
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    Reserve
      Requirement as the result of any transfer of moneys from the Debt Service
      Reserve Fund to the Debt Service Fund (as all such terms are defined in the
      Bond
      Resolution) as the result of a failure by the Borrower to make any Trust Bond
      Loan Repayments required hereunder, the Borrower agrees to replenish (i) such
      moneys so transferred and (ii) any deficiency arising from losses incurred
      in
      making such transfer as the result of the liquidation by the Trust of Investment
      Securities (as defined in the Bond Resolution) acquired as an investment of
      moneys in the Debt Service Reserve Fund, by making payments to the Trust in
      equal monthly installments for the lesser of six (6) months or the remaining
      term of the Loan at an interest rate to be determined by the Trust necessary
      to
      make up any loss caused by such deficiency.

    


    The
      Borrower acknowledges that payment of the Trust Bonds from moneys that were
      originally received by the Trustee from repayments by the Borrowers of loans
      made to the Borrowers by the State, acting by and through the Department,
      pursuant to loan agreements dated as of November 1, 2006 by and between the
      Borrowers and the State, acting by and through the Department, to finance or
      refinance a portion of the Costs of the Environmental Infrastructure Facilities
      of the Borrowers, and which moneys were upon such receipt by the Trustee
      deposited in the Trust Bonds Security Account (as defined in the Bond
      Resolution), does not constitute payment of the amounts due under this Loan
      Agreement and the Borrower Bond.

    


    SECTION
      3.05. Loan Agreement to Survive Bond Resolution and Trust
      Bonds. The
      Borrower acknowledges that its duties, covenants, obligations and agreements
      hereunder shall survive the discharge of the Bond Resolution applicable to
      the
      Trust Bonds and shall survive the payment of the principal and redemption
      premium, if any, of and the interest on the Trust Bonds until the Borrower
      can
      take no action or fail to take any action that could adversely affect the
      exclusion from gross income of the interest on the Trust Bonds for purposes
      of
      federal income taxation, at which time such duties, covenants, obligations
      and
      agreements hereunder shall, except for those set forth in Sections 3.06(a)
      and
      (b) hereof, terminate.

    


    SECTION
      3.06. Disclaimer of Warranties and Indemnification.
(a)
      The
      Borrower acknowledges and agrees that (i) neither the Trust nor the Trustee
      makes 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 Trust or the Trustee or their respective
      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 Trust and the
      Trustee 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 Trust and the Trustee 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.


    
      
        
        

      

      
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    (b) It
      is
      mutually agreed by the Borrower, the Trust and the Trustee that the Trust and
      its 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. It is further agreed that the Trustee and its directors,
      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 pursuant to this Loan Agreement, except in the event of loss or damage
      resulting from their own negligence or willful misconduct.

    


    (c) The
      Borrower and the Trust agree that all claims shall be subject to and governed
      by
      the provisions of the New Jersey Contractual Liability Act, N.J.S.A. 59:13-1
      et
      seq.
      (except
      for N.J.S.A. 59:13-9 thereof), although such Act by its express terms does
      not
      apply to claims arising under contract with the Trust.

    


    (d) 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
      Trust and its directors, 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 Trust, the Borrower shall maintain said liability insurance
      covering the Trust and said directors, employees and officers in good standing;
      and (ii) the Borrower shall include the Trust 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 Trust in
      good
      standing.

    


    The
      Borrower shall provide the Trust 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(d).

    


    SECTION
      3.07. Option to Prepay Loan Repayments.
The
      Borrower may prepay the Trust Bond Loan Repayments, in whole or in part (but
      if
      in part, in the amount of $100,000 or any integral multiple thereof), upon
      prior
      written notice to the Trust and the Trustee not less than ninety (90) days
      in
      addition to the number of days' advance notice to the Trustee required for
      any
      optional redemption of the Trust Bonds, and upon payment by the Borrower to
      the
      Trustee of amounts that, together with investment earnings thereon, will be
      sufficient to pay the principal amount of the Trust Bond Loan Repayments to
      be
      prepaid plus the Interest Portion described in clause (ii) of the definition
      thereof on any such date of redemption; 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 Fund Loan, (ii) if the Borrower is contemporaneously making
      a
      full or partial prepayment of the Fund Loan such that, after the prepayment
      of
      the Loan and the Fund Loan, the Trust, in its sole discretion, determines that
      the interests of the owners of the Trust Bonds are not adversely affected by
      such


    
      
        
        

      

      
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    prepayments,
      and (iii) upon the prior written approval of the Trust. In addition, if at
      the
      time of such prepayment the Trust Bonds may only be redeemed at the option
      of
      the Trust upon payment of a premium, the Borrower shall add to its prepayment
      of
      Trust Bond Loan Repayments an amount, as determined by the Trust, equal to
      such
      premium allocable to the Trust Bonds to be redeemed as a result of the
      Borrower's prepayment. Prepayments shall be applied first to the Interest
      Portion that accrues on the portion of the Loan to be prepaid until such
      prepayment date as described in clause (ii) of the definition thereof and then
      to principal payments (including premium, if any) on the Loan in inverse order
      of their maturity.

    


    SECTION
      3.08. Priority of Loan and Fund Loan.
(a)
      The
      Borrower hereby agrees that, to the extent allowed by law or the Borrower Bond
      Resolution, any Loan Repayments then due and payable on the Loan shall be
      satisfied by the Borrower before any loan repayments on the Borrower's Fund
      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 Trust Bond Loan Repayments under this
      Loan Agreement when due, then any (i) Administrative Fee paid hereunder, (ii)
      late charges paid hereunder, and (iii) loan repayments paid by the Borrower
      on
      its Fund Loan under the related loan agreement therefor, any of which payments
      shall be received by the Trustee during the time of any such Trust Bond Loan
      Repayment deficiency, shall be applied by the Trustee first
      to
      satisfy such Trust Bond Loan Repayment deficiency as a credit against the
      obligations of the Borrower to make payments of the Interest Portion under
      the
      Loan and the Borrower Bond, second,
      to the
      extent available, to make Trust Bond Loan Repayments of principal hereunder
      and
      payments of principal under the Borrower Bond, third,
      to the
      extent available, to pay the Administrative Fee, fourth,
      to the
      extent available, to pay any late charges hereunder, fifth,
      to the
      extent available, to satisfy the repayment of the Borrower's Fund Loan under
      its
      related loan agreement therefor, and finally,
      to the
      extent available, to satisfy the repayment of the administrative fee under
      any
      such related loan agreement.

    


    (c) The
      Borrower hereby further acknowledges that any loan repayments paid by the
      Borrower on its Fund Loan under the related loan agreement therefor 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 Trust 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 Trust.
(a)
      The
      Borrower hereby expressly acknowledges that, other than the provisions of
      Section 2.02(d)(ii) hereof, the Trust's right, title and interest in, to and
      under this Loan Agreement and the Borrower Bond have been assigned to the
      Trustee as security for the Trust Bonds as provided in the Bond Resolution,
      and
      that if any Event of Default shall occur, the Trustee or any Bond Insurer (as
      such term may be defined in the Bond Resolution), if applicable, pursuant to
      the
      Bond Resolution, shall be entitled to act hereunder in the place and stead
      of
      the Trust. The Borrower hereby acknowledges the requirements of the Bond
      Resolution applicable to the Trust Bonds and consents to such assignment and
      appointment. This Loan Agreement and the Borrower Bond, including, without
      limitation, the right to receive payments required to be made by the Borrower
      hereunder and to compel or otherwise enforce observance and performance by
      the
      Borrower of its other duties, covenants, obligations and agreements hereunder,
      may be further transferred, assigned and reassigned in whole or in part to
      one
      or more assignees or subassignees by the Trustee at any time subsequent to
      their
      execution without the necessity of obtaining the consent of, but after giving
      prior written notice to, the Borrower.

    


    The
      Trust
      shall retain the right to compel or otherwise enforce observance and performance
      by the Borrower of its duties, covenants, obligations and agreements under
      Section 2.02(d)(ii) hereof; provided, however, that in no event shall the Trust
      have the right to accelerate the Borrower Bond in connection with the
      enforcement of Section 2.02(d)(ii) hereof.

    


    (b) The
      Borrower hereby approves and consents to any assignment or transfer of this
      Loan
      Agreement and the Borrower Bond that the Trust deems to be necessary in
      connection with any refunding of the Trust Bonds or the issuance of additional
      bonds under the Bond Resolution or otherwise, all in connection with the pooled
      loan program of the Trust.

    


    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 Trust
      and the Trustee 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; (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; and (iv) the Trust shall have received an opinion of
      Bond
      Counsel to the effect that such assignment will not adversely affect the
      security of the holders of the Trust Bonds or the exclusion of the interest
      on
      the Trust Bonds from gross income for purposes of federal income taxation under
      Section 103(a) of the Code.


    
      
        
        

      

      
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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 Trust Bond 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, the Administrative Fee or 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
      Trustee, unless the Trustee 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
      Trustee 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 Trust and specified
      in Exhibit F attached hereto and made a part hereof.

    


    SECTION
      5.02. Notice of Default. The
      Borrower shall give the Trustee and the Trust 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 Borrower acknowledges the rights of the Trustee and of any
      Bond Insurer to direct any and all remedies in accordance with the terms of
      the
      Bond Resolution, and the Borrower also acknowledges that the Trust shall have
      the right to take, or to direct the Trustee to take, any action permitted or
      required pursuant to the Bond Resolution and to take whatever other 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 Trust shall, to the extent allowed by
      applicable law and to the extent and in the manner set forth in the Bond
      Resolution, have the right to declare, or to direct the Trustee to declare,
      all
      Loan Repayments and all other amounts due hereunder (including, without
      limitation, payments under the Borrower Bond) together with the prepayment
      premium, if any, calculated pursuant to Section 3.07 hereof 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 Trust or the Trustee 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 either of them in the collection of Trust Bond 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 Trust or the Trustee 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 the Interest Portion then due and payable, (c)
third,
      to the
      extent available, to pay the principal due and payable on the Loan, (d)
fourth,
      to the
      extent available, to pay the Administrative Fee, any late charges incurred
      hereunder or any other amounts due and payable under this Loan Agreement, and
      (e) fifth,
      to the
      extent available, to pay the Interest Portion and the principal on the Loan
      and
      other amounts payable hereunder as such amounts become due and
      payable.


    
      
        
        

      

      
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    SECTION
      5.06. No Remedy Exclusive; Waiver; Notice.
No
      remedy
      herein conferred upon or reserved to the Trust or the Trustee 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 Trust or the Trustee 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.

    


    SECTION
      5.07. Retention of Trust's Rights. Notwithstanding
      any assignment or transfer of this Loan Agreement pursuant to the provisions
      hereof or of the Bond Resolution, or anything else to the contrary contained
      herein, the Trust 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 Trust may, in its discretion,
      deem necessary to enforce the obligations of the Borrower to the Trust 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 Trust and the
      Trustee at the following addresses:

    


    
      	 	
              (a)

            	
              Trust:

            


    

    


    New
      Jersey Environmental Infrastructure Trust

    P.O.
      Box
      440

    Trenton,
      New Jersey 08625

    Attention:
      Executive 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 Trust
      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.
      Except
      as otherwise provided in this Section 6.04, this Loan Agreement may not be
      amended, supplemented or modified without the prior written consent of the
      Trust
      and the Borrower and without the satisfaction of all conditions set forth in
      Section 11.12 of the Bond Resolution. Notwithstanding the conditions set forth
      in Section 11.12 of the Bond Resolution, (i) Section 2.02(p) hereof may be
      amended, supplemented or modified upon the written consent of the Trust and
      the
      Borrower and without the consent of the Trustee, any Bond Insurer or any holders
      of the Trust Bonds, and (ii) Exhibit H hereto may be amended, supplemented
      or
      modified prior to the execution and delivery thereof as the Trust, in its sole
      discretion, shall determine to be necessary, desirable or convenient for the
      purpose of satisfying Rule 15c2-12 and the purpose and intent thereof as Rule
      15c2-12, its purpose and intent may hereafter be interpreted from time to time
      by the SEC or any


    
      
        
        

      

      
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    court
      of
      competent jurisdiction, and such amendment, supplement or modification shall
      not
      require the consent of the Borrower, the Trustee, any Bond Insurer or any
      holders of the Trust Bonds.

    


    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 Act and 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 Trust shall be required under the
      provisions of this Loan Agreement, such consent or approval may only be given
      by
      the Trust unless otherwise provided by law or by rules, regulations or
      resolutions of the Trust or unless expressly delegated to the Trustee and except
      as otherwise provided in Section 6.09 hereof.

    


    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. Benefit of Loan Agreement; Compliance with Bond
      Resolution. This
      Loan
      Agreement is executed, among other reasons, to induce the purchase of the Trust
      Bonds. Accordingly, all duties, covenants, obligations and agreements of the
      Borrower herein contained are hereby declared to be for the benefit of and
      are
      enforceable by the Trust, the holders of the Trust Bonds and the Trustee. The
      Borrower covenants and agrees to observe and comply with, and to enable the
      Trust to observe and comply with, all duties, covenants, obligations and
      agreements contained in the Bond Resolution.

    


    SECTION
      6.10. Further Assurances. The
      Borrower shall, at the request of the Trust, 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
      Trust
      and the Borrower have caused this Loan Agreement to be executed, sealed and
      delivered as of the date first above written.

    


    
      	 	
              NEW
                JERSEY ENVIRONMENTAL

            
	 	
              INFRASTRUCTURE
                TRUST

            
	 	 	 
	
              [SEAL]

            	 	 
	 	 	 
	 	
              /s/

            	
              Robert
                A. Briant, Sr.

            
	
              ATTEST:

            	 	
              Robert
                A. Briant, Sr.

            
	 	 	
              Chairman

            


    

    


    


    /s/
      Eileen
      Swan

    Eileen
      Swan

    Secretary

    


    


    
      	 	
              MIDDLESEX
                WATER COMPANY

            
	
              [SEAL]

            	 	 
	 	 	 
	 	 	 
	 	
              /s/
                

            	
              Dennis
                W. Doll

            
	
              ATTEST:

            	 	
              Authorized
                Officer

            


    

    


    


    


    /s/
      Kenneth
      J. Quinn

    Authorized
      Officer

    
H-1