Unassociated Document


    
      
        

      

    

    
      Exhibit 10.33

      
 

      LOAN
AGREEMENT

      


      BY
AND BETWEEN

      


      THE
STATE OF NEW JERSEY,

      


      ACTING
BY AND THROUGH THE NEW JERSEY

      DEPARTMENT
OF ENVIRONMENTAL PROTECTION,

      


      AND

      


      MIDDLESEX
WATER COMPANY

      


      


      DATED
AS OF NOVEMBER 1, 2007


      
        
           


        

        
           


          
            

          

        

        
           


        

      


      TABLE
OF CONTENTS

      


      
        	 
      	 
      	 
      	 
      	
                Page

              
	
                ARTICLE
      I

              
	 
      	 
      	 
      	 
      	 
      
	
                DEFINITIONS

              
	 
      	 
      	 
      	 
      	 
      
	
                SECTION
      1.01.

              	 
      	
                Definitions

              	 
      	
                2

              
	 
      	 
      	 
      	 
      	 
      
	
                ARTICLE
      II

              
	 
      	 
      	 
      	 
      	 
      
	
                REPRESENTATIONS
      AND COVENANTS OF BORROWER

              
	 
      	 
      	 
      	 
      	 
      
	
                SECTION
      2.01.

              	 
      	
                Representations
      of Borrower

              	 
      	
                6

              
	
                SECTION
      2.02.

              	 
      	
                Particular
      Covenants of Borrower

              	 
      	
                9

              
	 
      	 
      	 
      	 
      	 
      
	
                ARTICLE
      III

              
	 
      	 
      	 
      	 
      	 
      
	
                LOAN
      TO BORROWER; AMOUNTS PAYABLE; GENERAL AGREEMENTS

              
	 
      	 
      	 
      	 
      	 
      
	
                SECTION
      3.01.

              	 
      	
                Loan;
      Loan Term

              	 
      	
                13

              
	
                SECTION
      3.02.

              	 
      	
                Disbursement
      of Loan Proceeds

              	 
      	
                13

              
	
                SECTION
      3.03.

              	 
      	
                Amounts
      Payable

              	 
      	
                14

              
	
                SECTION
      3.03A.

              	 
      	
                Amounts on Deposit in Project Loan
      Account after Completion of Draw Schedule

              	 
      	
                15

              
	
                SECTION
      3.04.

              	 
      	
                Unconditional
      Obligations

              	 
      	
                15

              
	
                SECTION
      3.05.

              	 
      	
                Loan
      Agreement to Survive Loan

              	 
      	
                16

              
	
                SECTION
      3.06.

              	 
      	
                Disclaimer
      of Warranties and Indemnification

              	 
      	
                16

              
	
                SECTION
      3.07.

              	 
      	
                Option
      to Prepay Loan Repayments

              	 
      	
                17

              
	
                SECTION
      3.08.

              	 
      	
                Priority
      of Loan and Trust Loan

              	 
      	
                17

              
	
                SECTION
      3.09.

              	 
      	
                Approval
      of the New Jersey State Treasurer

              	 
      	
                18

              
	 
      	 
      	 
      	 
      	 
      
	
                ARTICLE
      IV

              
	 
      	 
      	 
      	 
      	 
      
	
                ASSIGNMENT
      OF LOAN AGREEMENT AND BORROWER BOND

              
	 
      	 
      	 
      	 
      	 
      
	
                SECTION
      4.01.

              	 
      	
                Assignment
      and Transfer by State

              	 
      	
                19

              
	
                SECTION
      4.02.

              	 
      	
                Assignment
      by Borrower

              	 
      	
                19

              
	 
      	 
      	 
      	 
      	 
      
	
                ARTICLE
      V

              
	 
      	 
      	 
      	 
      	 
      
	
                EVENTS
      OF DEFAULT AND REMEDIES

              
	 
      	 
      	 
      	 
      	 
      
	
                SECTION
      5.01.

              	 
      	
                Events
      of Default

              	 
      	
                20

              
	
                SECTION
      5.02.

              	 
      	
                Notice
      of Default

              	 
      	
                21

              
	
                SECTION
      5.03.

              	 
      	
                Remedies
      on Default

              	 
      	
                21

              
	
                SECTION
      5.04.

              	 
      	
                Attorneys'
      Fees and Other Expenses

              	 
      	
                21

              


      

       

      
        
           


        

        
          - i
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                SECTION
      5.05.

              	 
      	
                Application
      of Moneys

              	 
      	
                21

              
	
                SECTION
      5.06.

              	 
      	
                No
      Remedy Exclusive; Waiver; Notice

              	 
      	
                21

              
	
                SECTION
      5.07.

              	 
      	
                Retention
      of State's Rights

              	 
      	
                23

              
	 
      	 
      	 
      	 
      	 
      
	
                ARTICLE
      VI

              
	 
      	 
      	 
      	 
      	 
      
	
                MISCELLANEOUS

              
	 
      	 
      	 
      	 
      	 
      
	
                SECTION
      6.01.

              	 
      	
                Notices

              	 
      	
                23

              
	
                SECTION
      6.02.

              	 
      	
                Binding
      Effect

              	 
      	
                23

              
	
                SECTION
      6.03.

              	 
      	
                Severability

              	 
      	
                23

              
	
                SECTION
      6.04.

              	 
      	
                Amendments,
      Supplements and Modifications

              	 
      	
                23

              
	
                SECTION
      6.05.

              	 
      	
                Execution
      in Counterparts

              	 
      	
                25

              
	
                SECTION
      6.06.

              	 
      	
                Applicable
      Law and Regulations

              	 
      	
                25

              
	
                SECTION
      6.07.

              	 
      	
                Consents
      and Approvals

              	 
      	
                25

              
	
                SECTION
      6.08.

              	 
      	
                Captions

              	 
      	
                25

              
	
                SECTION
      6.09.

              	 
      	
                Further
      Assurances

              	 
      	
                25

              
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	
                SCHEDULE
      A

              	 
      	
                Certain
      Additional Loan Agreement Provisions

              	 
      	
                S-1

              
	 
      	 
      	 
      	 
      	 
      
	
                EXHIBIT
      A

              	 
      	
                (1)
      Description of Project and Environmental Infrastructure
    System

              	 
      	
                A-1-1

              
	 
      	 
      	
                (2)
      Description of Loan

              	 
      	
                A-2-1

              
	 
      	 
      	 
      	 
      	
                 
      

              
	
                EXHIBIT
      B

              	 
      	
                Basis
      for Determination of Allowable Project Costs

              	 
      	
                B-1

              
	 
      	 
      	 
      	 
      	 
      
	
                EXHIBIT
      C

              	 
      	
                Estimated
      Disbursement Schedule

              	 
      	
                C-1

              
	 
      	 
      	 
      	 
      	
                 
      

              
	
                EXHIBIT
      D

              	 
      	
                Specimen
      Borrower Bond

              	 
      	
                D-1

              
	 
      	 
      	 
      	 
      	
                 
      

              
	
                EXHIBIT
      E

              	 
      	
                Opinions
      of Borrower's Bond and General Counsels

              	 
      	
                E-1

              
	 
      	 
      	 
      	 
      	 
      
	
                EXHIBIT
      F

              	 
      	
                Additional
      Covenants and Requirements

              	 
      	
                F-1

              
	 
      	 
      	 
      	 
      	 
      
	
                EXHIBIT
      G

              	 
      	
                General
      Administrative Requirements for the State

              	 
      	 
      
	 
      	 
      	
                Environmental
      Infrastructure Financing Program

              	 
      	
                G-1

              


      

       

      
        
           


        

        
          - ii
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      NEW
JERSEY ENVIRONMENTAL INFRASTRUCTURE FUND LOAN AGREEMENT

      


      THIS LOAN AGREEMENT, made and
entered into as of November 1, 2007, by and between THE STATE OF NEW JERSEY,
acting by and through the New Jersey Department of Environmental Protection, and
the Borrower (capitalized terms used in this Loan Agreement shall have, unless
the context otherwise requires, the meanings ascribed thereto in Section 1.01
hereof);

      


      WITNESSETH
THAT:

      


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

      


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

      


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

      


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

      


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

      


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


      
        
           


        

        
           


          
            

          

        

        
           


        

      


      ARTICLE
I

      


      DEFINITIONS

      


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

      


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

      


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

      


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

      


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

      


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

      


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

      


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

      


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

      


      “Department” means the New
Jersey Department of Environmental Protection

      


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


      
        
           


        

        
          -2-

          
            

          

        

        
           


        

      

      


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

      


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

      


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

      


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

      


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

      


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

      


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

      


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

      


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

      


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

      


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

      


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

      


        
          
             


          

          
            -3-

            
              

            

          

          
             


          

        

      

       

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

       

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

      


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

      


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

      


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

      


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

      


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

      


      "Trust Loan Agreement" means
the loan agreement by and between the Borrower and the Trust dated as of
November 1, 2007 to finance or refinance a portion of the Cost of the
Project.

      


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

      


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


      
        
           


        

        
          -4-

          
            

          

        

        
           


        

      

       

      (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.


      
        
           


        

        
          -5-

          
            

          

        

        
           


        

      


      ARTICLE
II

      


      REPRESENTATIONS
AND COVENANTS OF BORROWER

      


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

      


      (a)           Organization and
Authority.

      
 

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

      


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

      


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

      


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

      


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

      


        
          
             


          

          
            -6-

            
              

            

          

          
             


          

        

      

       

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

      


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

      


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

      


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

      


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


      


        
          
             


          

          
            -7-

            
              

            

          

          
             


          

        

      

       

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

      


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

      


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

       

      
        
          
          

        

        
          -8-

          
            

          

        

        
          
          

        

      

       

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

      


      (g)           Compliance with
Law.  The Borrower:

      


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

      


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

      


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

      


      SECTION 2.02.  Particular
Covenants of Borrower.

      


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

      


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

      


        
          
             


          

          
            -9-

            
              

            

          

          
             


          

        

      

       

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

      


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

      


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

      


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

      


      (f)           Reserved.

      


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

      


        
          
             


          

          
            -10-

            
              

            

          

          
             


          

        

      

       

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

      


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

      


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

      


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

      


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

      


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

      


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


      
        
           


        

        
          -11-

          
            

          

        

        
           


        

      

      


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

      


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

      


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

      


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

      


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

      


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

      


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

      


        
          
             


          

          
            -12-

            
              

            

          

          
             


          

        

      

       

      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.


      ARTICLE
III

      


      LOAN
TO BORROWER; AMOUNTS PAYABLE; GENERAL AGREEMENTS

      


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

      


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

      


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

      


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

      


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

      


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

      


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


      
        
           


        

        
          -13-

          
            

          

        

        
           


        

      

      


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

      


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

      


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

      


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

      


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

      


      (b)           In
addition to the principal payments on the Loan required by subsection (a) of
this Section 3.03, the Borrower shall pay a late charge for any such payment
that is received by the Trustee later than the tenth (10th) day following its
due date in an amount equal to the greater of twelve percent (12%) per annum or
the Prime Rate plus one half of one percent per annum on 

      


        
          
             


          

          
            -14-

            
              

            

          

          
             


          

        

      

       

      such late
payment from its due date to the date actually paid; provided, however, that
such late charge payable on the Loan shall not be in excess of the maximum
interest rate permitted by law.

      


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

      


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

      


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

      


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


      


        
          
             


          

          
            -15-

            
              

            

          

          
             


          

        

      

       

      Infrastructure
System, commercial frustration of the purpose, any change in the laws of the
United States of America or of the State or any political subdivision of either
or in the rules or regulations of any governmental authority, any failure of the
State to perform and observe any agreement, whether express or implied, or any
duty, liability or obligation arising out of or connected with the Project or
this Loan Agreement, or any rights of set-off, recoupment, abatement or
counterclaim that the Borrower might otherwise have against the State, the
Trustee or any other party or parties; provided, however, that payments
hereunder shall not constitute a waiver of any such rights.  The
Borrower shall not be obligated to make any payments required to be made by any
other Borrowers under separate Loan Agreements.

          


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

      


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

      


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

      


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

       

      
        
          
             


          

          
            -16-

            
              

            

          

          
             


          

        

      

       

      Borrower
shall include the State as an additional "named insured" on any certificate of
insurance providing against risk of direct physical loss, damage or destruction
of the Environmental Infrastructure System, and during the Loan Term the
Borrower shall maintain said insurance covering the State in good
standing.
    

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

              


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

      


      SECTION 3.08.  Priority of
Loan and Trust Loan.  (a) The Borrower hereby agrees that, to
the extent allowed by law, including, without limitation, the appropriations act
of the New Jersey State Legislature authorizing the expenditure of Trust bond
proceeds to finance a portion of the Cost of the Project, or the Borrower Bond
Resolution, any loan repayments then due and payable on the Borrower's Trust
Loan, including, without limitation, any administrative fees and any late
payment charges then due and payable under the Trust Loan Agreement, shall be
satisfied by the Trustee before any Loan Repayments then due and payable
hereunder on the Loan shall be satisfied by the Trustee.  The Borrower
agrees not to interfere with any such action by the Trustee.

      


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

      


        
          
             


          

          
            -17-

            
              

            

          

          
             


          

        

      

       

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

      


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

      


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

       

      
        
           


        

        
          -18-

          
            

          

        

        
           


        

      


      ARTICLE
IV

      


      ASSIGNMENT
OF LOAN AGREEMENT AND BORROWER BOND

      


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

      


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


      
        
           


        

        
          -19-

          
            

          

        

        
           


        

      


      ARTICLE
V

      


      EVENTS
OF DEFAULT AND REMEDIES

      


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

      


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

      


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

      


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

      


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

      


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

      


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


      
        
           


        

        
          -20-

          
            

          

        

        
           


        

      

      


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

      


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

      


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

      


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

      


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

      


      SECTION 5.05.  Application
of Moneys.  Any moneys collected by the State pursuant to
Section 5.03 hereof shall be applied (a) first to pay any attorneys'
fees or other fees and expenses owed by the Borrower pursuant to Section 5.04
hereof, (b) second, to
the extent available, to pay principal due and payable on the Loan (to the
extent permitted by Section 3.08(b) hereof, (c) third, to the extent
available, to pay any other amounts due and payable hereunder, and (d) fourth, to the extent
available, to pay principal on the Loan and other amounts payable hereunder as
such amounts become due and payable.

      


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


      
        
           


        

        
          -21-

          
            

          

        

        
           


        

      

      


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


      
        
           


        

        
          -22-

          
            

          

        

        
           


        

      


      ARTICLE
VI

      


      MISCELLANEOUS

      


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

      


      (a)           State:

      


      New
Jersey Department of Environmental Protection

      Municipal
Finance and Construction Element

      401 East
State Street – 3rd Floor

      Trenton,
New Jersey  08625-0425

      Attention:  Assistant
Director

      


      New
Jersey Department of the Treasury

      Office of
Public Finance

      State
Street Square – 5th Floor

      Trenton,
New Jersey  08625-0002

      Attention:  Director

      


      (b)           Trustee:

      


      U.S. Bank
National Association

      21 South
Street, 3rd
Floor

      Morristown,
New Jersey  07960

      Attention:  Corporate
Trust Department

      


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

      


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

      


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

      


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


      
        
           


        

        
          -23-

          
            

          

        

        
           


        

      

      


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

      


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

      


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

      


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

      


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


      
        
           


        

        
          -24-

          
            

          

        

        
           


        

      


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

      


      
        	 
      	 
      	
                THE
      STATE OF NEW JERSEY,

              	 
	 
      	 
      	
                ACTING
      BY AND THROUGH THE

              	 
	 
      	 
      	
                NEW
      JERSEY DEPARTMENT OF

              	 
	 
      	 
      	
                ENVIRONMENTAL
      PROTECTION

              	 
	 
      	 
      	 
      	 
      	 
	
                [SEAL]

              	 
      	 
      	 
      	 
	 
      	 
      	 
      	 
      	 
	 
      	 
      	
                By:

              	
                /s/ Lisa P. Jackson

              	 
	
                ATTEST:

              	 
      	 
      	
                Lisa
      P. Jackson

              	 
	 
      	 
      	 
      	
                Commissioner,
      Department of

              	 
	 
      	 
      	 
      	
                Environmental
      Protection

              	 
	 
      	 
      	 
      	 
      	 
	
                /s/ Stanley V. Cach

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

              	 
      	 
      	 
      	 
	
                Assistant
      Director,

              	 
      	 
      	 
      	 
	
                Municipal
      Finance and Construction Element,

              	 
      	 
      	 
      	 
	
                Department
      of Environmental Protection

              	 
      	 
      	 
      	 
	 
      	 
      	 
      	 
      	 
	 
      	 
      	 
      	 
      	 
	 
      	 
      	 
      	 
      	 
	 
      	 
      	
                MIDDLESEX
      WATER COMPANY

              	 
	 
      	 
      	 
      	 
      	 
	
                [SEAL]

              	 
      	 
      	 
      	 
	 
      	 
      	 
      	 
      	 
	 
      	 
      	
                By:

              	
                /s/ Dennis W. Doll

              	 
	 
      	 
      	 
      	
                Dennis
      W. Doll

              	 
	
                ATTEST:

              	 
      	 
      	
                President
      and Chief Executive Officer

              	 
	 
      	 
      	 
      	 
      	 
	 
      	 
      	 
      	 
      	 
	 
      	 
      	 
      	 
      	 
	 
      	 
      	 
      	 
      	 
	
                /s/ Kenneth J. Quinn

              	 
      	 
      	 
      	 
	
                Kenneth
      J. Quinn

              	 
      	 
      	 
      	 
	
                Vice
      President, General Counsel

              	 
      	 
      	 
      	 
	
                Secretary
      and Treasurer

              	 
      	 
      	 
      	 


      

       

      [Signature
Page]

       

      
        
           


        

        
           


          
            

          

        

        
           


        

      


      SCHEDULE
A

      


      Certain Additional Loan
Agreement Provisions

      


      In addition to the terms defined in
subsection (a) of Section 1.01 of this Loan Agreement, 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 this Schedule A.

      


      Additional
Definitions:

      


      “Borrower” means Middlesex
Water Company, a corporation duly created and validly existing under the laws of
the State of New Jersey.

      


      “Borrower Bond Resolution”
means the indenture of the Borrower entitled “INDENTURE OF MORTGAGE” dated as of
April 1, 1927, as amended and supplemented from time to time, in particular by a
supplemental indenture detailing the terms of the Borrower Bond dated as of
October 15, 2007 and entitled “THIRTY-FOURTH SUPPLEMENTAL INDENTURE”, pursuant
to which the Borrower Bond has been issued.

      


      “Principal Payment Dates”
means February 1 and August 1 of each year, commencing on August 1,
2008.

      


      


      SECTION
2.02(e):

      


      Disposition of Environmental
Infrastructure System.  The Borrower shall not permit the
disposition of all or substantially all of its Environmental Infrastructure
System, directly or indirectly, including, without limitation, by means of sale,
lease, abandonment, sale of stock, statutory merger or otherwise (collectively,
a "Disposition"), except on ninety (90) days' prior written notice to the State,
and, in any event, shall not permit a Disposition unless the Borrower shall, in
accordance with Section 4.02 hereof, assign this Loan Agreement and the Borrower
Bond and its rights and interests hereunder and thereunder to the purchaser or
lessee of the Environmental Infrastructure System, and such purchaser or lessee
shall assume all duties, covenants, obligations and agreements of the Borrower
under this Loan Agreement and the Borrower Bond.

      


      In addition to the terms defined in
subsection (a) of Section 1.01 of this Loan Agreement, 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 this Schedule A.

       

      
        
           


        

        
          S-1

          
            

          

        

        
           


        

      


      Middlesex
Water Company

      1225001-010

      


      EXHIBIT
A-1

      


      Description of Project and
Environmental Infrastructure System

      


      
        	
                1)

              	
                Name
      and Address of Local Unit:

              


      

      


      Middlesex
Water Company

      1500
Ronson Road

      Iselin,
New Jersey 08830-0452

      


      Attention:
Ronald F. Williams P.E. Vice President - Operations

      


      
        	
                2)  

              	
                Description of the
      Project:

              


      

      


      The
proposed project will involve cleaning/relining and spot replacement of water
mains, hydrants, service lines, and valves.  Approximately forty five
thousand  feet of 4, 6, 8, 10 and 12-inch diameter water mains will be
relined.  The project will occur in the City of South Amboy, and
Woodbridge Townships.

      


      
        	
                3)

              	
                Description
      of the Water Supply System:

              


      

      


      The
Middlesex Water Company is an investor-owned water utility that provides water
service to retail customers primarily in eastern Middlesex
County.  Water services are now furnished to approximately 58,000
retail customers located in an area of approximately 55 square miles of New
Jersey in Woodbridge Township, the Boroughs of Metuchen and Carteret, portions
of Edison Township and the Borough of South Plainfield and the City of South
Amboy in Middlesex County, and a portion of the Township of Clark in Union
County.

      


      The
Middlesex Water Company obtains water from both surface and groundwater sources;
however, the principal source of supply is the Delaware and Raritan Canal, owned
by the State of New Jersey and operated as a water resource by the New Jersey
Water Supply Authority.


      
        
           


        

        
          A-1-1

          
            

          

        

        
           


        

      


      EXHIBIT
A-2

      


      Description of
Loan

      


      See
Schedule to Specimen Borrower Bond (Exhibit D hereto)



      
        
           


        

        
          A-2-1

          
            

          

        

        
           


        

      


      Middlesex
Water Company

      1225001-010

      


      EXHIBIT
B

      


      Basis for Determination of
Allowable Project Costs

      


      The
determination of the costs allowable for assistance from the New Jersey
Environmental Infrastructure Financing Program is presented below.

      


      
        	
                Cost
      Classification

              	 	
                Application
      Amount

              	 	 	
                Allowable
      Costs

              	 
	
                1.  Administrative
      Expenses

              	 	$	89,100	 	 	$	89,100	 
	
                2.  Other
      Costs

              	 	 	0	 	 	 	0	 
	
                3.  Engineering
      Fees

              	 	 	160,000	 	 	 	160,000	 
	
                4.  Building
      Costs

              	 	 	2,970,000	 	 	 	2,970,000	 
	
                5.  Contingencies

              	 	 	148,500	 	 	 	148,500	 
	
                6.  Allowance
      for Planning and design

              	 	 	132,400	 	 	 	132,400	 
	
                7.  Sub-total

              	 	 	3,500,000	 	 	 	3,500,000	 
	
                8.  DEP
      Fee

              	 	 	 	 	 	 	70,000	 
	
                9.  Total
      Project Costs

              	 	 	 	 	 	$	3,570,000	 


      

      


      As a
result of the review by the New Jersey Department of Environmental Protection,
various line items may have been revised resulting in a change of the allowable
costs for this project. The basis for the determination of the allowable costs
is as follows:

      


      
        	
                1.

              	
                Administrative
      Expenses

              


      

      


      The total
amount requested on the application was $89,100.  The amount requested
is for water main cleaning/relining.  The allowable administrative
expenses are authorized to be three percent of the allowable building costs.
Therefore, the total amount for this line item is $2,970,000 x 0.03 =
$89,100.

      


      Allowable
Administrative Expenses are $89,100.

      


      
        	
                3.

              	
                Engineering
      Fees

              


      

      


      The
amount requested for this line item on the application was
$160,000.

      This
amount is for engineering services for this project and the full amount
is

      allowable.

      


      Allowable
Engineering Fees are $160,000.


      
        
           


        

        
          B-1

          
            

          

        

        
           


        

      


      Middlesex
Water Company

      1225001-010

      


      
        	
                4.

              	
                Building
      Costs

              


      

      


      The total
amount requested for this line item was $2,970,000. The allowable cost analysis
(as per N.J.A.C. 7:22-5.8) has determined that the entire amount requested for
this line item is allowable. Therefore, the Allowable Cost Ratio (ACR) is one
(1.0). In addition the project does not provide any reserve capacity. Therefore,
the Reserve Capacity Cost Ratio (RCCR) is one (1.0). Thus, the entire requested
amount is allowable.

      


      Allowable
Building Costs are $2,970,000.

      


      
        	
                5.

              	
                Contingencies

              


      

      


      The total
amount requested on the application was $148,500. The allowable amount for this
line item is five percent of the allowable building costs. Therefore, the total
allowable cost for this line item is $2,970,000 x 0.05 = $148,500 .

      


      Allowable
Contingencies are $148,500.

      


      6.           Allowance
for Planning and Design

      


      The total
amount requested for this line item was $132,400 .  The allowable
amount for this line item based on an allowable building cost
is:  $250,000+($2,970,000 - $1,000,000) x 0.12= $486,400. However, the
applicant has requested  $132,400 for this line item.

      


      Allowance
for Planning and Design for this project is $132,400.

      


      
        	
                7.

              	
                Sub-total

              


      

      


      The
subtotal for project costs applied for is 3,500,000. The actual cost was
adjusted to  $3,500,000.

      


      Therefore,
the Sub-total is $3,500,000.

      


      
        	
                8.

              	
                DEP
      Fee

              


      

      


      DEP Fee =
$3,500,000 x 2% = $70,000

      


      This item
represents the DEP Loan Surcharge or Loan Origination Fee imposed by DEP as a
portion of the cost of the project of the borrower.  This DEP Loan
Surcharge or Loan Origination Fee is a portion of the cost of the project that
has been incurred for engineering and environmental services provided by DEP
for


      
        
           


        

        
          B-2

          
            

          

        

        
           


        

      


      Middlesex
Water Company

      1225001-010

      


      the
borrower in connection with, and as a condition precedent to, the inclusion
of

      the
project of the borrower in the 2007 Financing Program of the
Trust.  As a portion of the cost of the borrower’s project that
represents a condition precedent to the inclusion of the borrower’s project in
the 2007 Financing Program of the

      Trust,
the DEP Loan Surcharge or Loan Origination Fee represents a program expense of
the 2007 Financing Program of the Trust and will be financed for the borrower as
part of the Trust loan made by the Trust to the borrower from the proceeds of
the Trust bonds, the Trust shall direct the trustee for the Trust bonds to
transfer to DEP from the Project Fund the DEP Loan Surcharge or Loan Origination
Fee allocable to the borrower.  The DEP’s authority to assess
a  Loan Surcharge or Loan Origination Fee was established pursuant to
P.L. 2002, c.34 approved on July 1, 2002.

      


      
        	
                9.  

              	
                Total Project
      Costs:

              


      

      


      The total
project costs are $3,570,000

      


      I.  Disbursement
to Borrower is: $3,500,000.

       

                          Fund
Share is $1,750,000.

       

                          Trust
Share is $1,750,000.

      


      II.
Disbursement to DEP is $70,000.


      
        
           


        

        
          B-3

          
            

          

        

        
           


        

      


      Middlesex
Water Company

      1225001-010

      


      EXHIBIT
C

      


      Estimated Disbursement
Schedule

      


      The
following is a schedule of the estimated disbursements for this loan.
Disbursements to the project sponsor for any given month shall not exceed the
amounts indicated below plus any undisbursed amount from the previous
months.

      


      
        	
                Year

              	
                Month

              	 	
                Fund
      Share Borrower Disbursement

              	 	 	
                Trust
      Share Borrower Disbursement

              	 	 	
                Trust
      Share DEP Disbursement

              	 	 	
                Total

              	 
	
                2007

              	
                November

              	 	$	0	 	 	$	0	 	 	$	*70,000	 	 	$	*70,000	 
	 
      	
                November

              	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
      	
                December

              	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
      	 
      	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                2008

              	
                January

              	 	 	0	 	 	 	0	 	 	 	 	 	 	 	0	 
	 
      	
                February

              	 	 	0	 	 	 	0	 	 	 	 	 	 	 	0	 
	 
      	
                March

              	 	 	262,500	 	 	 	262,500	 	 	 	 	 	 	 	525,000	 
	 
      	
                April

              	 	 	225,000	 	 	 	225,000	 	 	 	 	 	 	 	450,000	 
	 
      	
                May

              	 	 	275,000	 	 	 	275,000	 	 	 	 	 	 	 	550,000	 
	 
      	
                June

              	 	 	275,000	 	 	 	275,000	 	 	 	 	 	 	 	550,000	 
	 
      	
                July

              	 	 	225,000	 	 	 	225,000	 	 	 	 	 	 	 	450,000	 
	 
      	
                August

              	 	 	300,000	 	 	 	300,000	 	 	 	 	 	 	 	600,000	 
	 
      	
                September

              	 	 	187,500	 	 	 	187,500	 	 	 	 	 	 	 	375,000	 
	 
      	 
      	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
      	
                TOTAL

              	 	$	1,750,000	 	 	$	1,750,000	 	 	$	*70,000	 	 	$	3,570,000	 


      

       

      
 

      *This is
the DEP loan origination fee.  No action is required on the part of
the borrower.

      The trust
will make a single transfer to DEP, through the Trust’s Trustee, on behalf of
all of the Borrowers in 2007 Financing Program.

       

      
        
           


        

        
          C-1

          
            

          

        

        
           


        

      


      EXHIBIT
D

      


      Specimen Borrower
Bond

       

      
        
           


        

        
          D-1

          
            

          

        

        
           


        

      


      EXHIBIT
E


      


      Opinions of Borrower's Bond
and General Counsels

       

      
        
           


        

        
          E-1

          
            

          

        

        
           


        

      


      EXHIBIT
F

      


      Additional Covenants and
Requirements

      


      None.

       

      
        
           


        

        
          F-1

          
            

          

        

        
           


        

      


      EXHIBIT
G

      


      General
Administrative Requirements for the

      State Environmental
Infrastructure Financing Program

      


      


      General Administrative and
Special Requirements

      


      The
following General Administrative Requirements are applicable to this Loan. These
requirements do not limit, or otherwise alter, the project sponsor’s obligations
under the Safe Drinking Water Act and its amendments, the New Jersey Water
Pollution Control Act, the State rules under N.J.A.C. 7:22, the
Fund and Trust Loan Agreements, or the Special Requirements.  The
Special Requirements specific to this project are found in this Exhibit after
the listing of General Administrative Requirements.

      


      
        	
                1.

              	
                Operation and
      Maintenance Manual (O&M
Manual):

              


      

      


      During
construction (i.e., prior to initiation of operation), the project sponsor shall
certify to the Trust, in the case of a Trust Loan, and to the New Jersey
Department of Environmental Protection (Department), in the case of a Fund Loan,
that a final Plan of Operation, and an O&M Manual have been developed for
the project.

      


      
        	
                2.

              	
                Project
      Performance:

              


      

      


      The
project sponsor shall comply with the project performance provisions of N.J.A.C. 7:22-3.30
and 7:22-4.30.  As a minimum, unless further specified, the project
performance standards shall consist of the effluent discharge standards in the
NJPDES permit (if applicable) and the design criteria in the Department approved
Engineer’s Technical Design Report for the project.

      


      
        	
                3.

              	
                Flood
      Insurance:

              


      

      


      The
project sponsor shall acquire or have the construction contractor acquire, as
appropriate flood insurance made available under the National Flood
Insurance

      Act of
1968, as amended.  Insurance coverage shall begin with the period
of

      construction
and continue for the entire useful life of the facility.  The
insurance shall be in an amount at least equal to the allowable improvements or
the maximum limit of coverage made available to the project sponsor under the
National Flood Insurance Act, whichever is less.  The project sponsor
must comply with this requirement prior to the release of the initial payment
for construction work.


      
        
           


        

        
          G-1

          
            

          

        

        
           


        

      


      
        	
                4.

              	
                Audit:

              


      

      


      The
project sponsor shall have an annual financial audit performed if the project
sponsor expended $500,000 or more in State and/or Federal financial assistance
during the project sponsor’s fiscal year. The audit shall be performed in
accordance with the Single Audit Act, Federal OMB Circular No. A-133, and State
Policy OMB Circular 04-04-OMB. Copies of all audit reports must be submitted to
the New Jersey Department of Environmental Protection, Office of Audit, P.O. Box
402, Trenton, New Jersey 08625.

      


      If the
project sponsor expended less than $500,000 in State and/or Federal financial
assistance within their fiscal year, but expend $100,000 or more in State and/or
Federal financial assistance within their fiscal year, the project sponsor shall
have either a financial statement audit performed in accordance with Government
Auditing Standards (Yellow Book) or a program-specific audit performed in
accordance with the Act, Amendments, OMB Circular No. A-133 Revised and State
policy.

      


      Program-specific
audits in accordance with OMB Circular No. A-133 Revised can be elected when a
project sponsor expends Federal or State financial assistance under only one
Federal or State program and the Federal or State program's laws, regulations,
or grant agreements do not require a financial statement audit of the
grantee.

      


      


      
        	
                5.

              	
                Socially and
      Economically Disadvantaged Individuals Utilization
      Plan:

              


      

      


      The
project sponsor shall ensure that the contractor provides a Socially and
Economically Disadvantaged Individuals (SED) Utilization Plan in accordance with
N.J.A.C.
7:22-9.1 et seq. which outlines the entire contract work, each significant
segment of the contract on which SEDs will or may participate and a description
of how SEDs will be contracted.  This plan shall be submitted no later
than 30 days after the contract award.


      
        
           


        

        
          G-2

          
            

          

        

        
           


        

      


      SPECIAL
REQUIREMENTS

      Project
Schedule:

      


      The
project sponsor unit shall expeditiously initiate and complete the project in
accordance with the project schedule, which was submitted as part of the loan
application and is repeated below.  Failure to promptly initiate and
complete the project may result in the imposition of sanctions under N.J.A.C.  7:22-3.40
through 3.44 and N.J.A.C.  7:22-4.40 through 4.44.  In
addition, failure to promptly award all sub agreement(s) for building the
project within 12 months of the date of this loan may result in limitation of
allowable costs as provided by N.J.A.C. 7:22-5.4(d)
5.This limitation on allowable costs incurred under contracts awarded after 12
months from the date of this loan are unallowable unless a special extension has
been granted by the Department, in the case of a Fund Loan, and the Trust, in
the case of a Trust Loan.

      


      
        	
                 EVENT

              	
                DATE

              
	
                 
      

              	 
      
	
                ADVERTISEMENT:

              	 
      
	
                 
      

              	 
      
	
                Clean
      and Line Water Mains

              	
                December
      19, 2007

              
	 	 
	
                BID
      RECEIPT:

              	
                 
      

              
	
                 
      

              	
                 
      

              
	
                Clean
      and Line Water Mains

              	
                January
      19, 2008

              
	
                 
      

              	
                 
      

              
	
                AWARD:

              	
                 
      

              
	
                 
      

              	
                 
      

              
	
                Clean
      and Line Water Mains

              	
                February
      19, 2008

              
	
                 
      

              	
                 
      

              
	
                ISSUANCE OF NOTICE TO
      PROCCED:

              	
                 
      

              
	
                 
      

              	
                 
      

              
	
                Clean
      and Line Water Mains

              	
                March
      27, 2008

              
	
                 
      

              	
                 
      

              
	
                COMPLETION OF
      CONSTRUCTION:

              	
                 
      

              
	
                 
      

              	
                 
      

              
	
                 Clean
      and Line Water Mains

              	
                September
      27, 2008

              
	
                 
      

              	
                 
      

              
	
                INITATION OF
      OPERATION:

              	
                 
      

              
	
                 
      

              	
                 
      

              
	
                 Clean
      and Line Water Mains

              	
                September
      27, 2008

              
	
                 
      

              	
                 
      

              
	
                CERTIFICATION OF
      PROJECT:

              	
                 
      

              
	
                 
      

              	
                 
      

              
	
                Clean
      and Line Water Mains

              	
                September
      27, 2009

              


      

    

     

     

    G-3