ex10-34.htm


    Exhibit
10.34

    


    


    


    


    


    


    


    


    


    


    


    


    LOAN
AGREEMENT

    


    BY
AND BETWEEN

    


    NEW
JERSEY ENVIRONMENTAL INFRASTRUCTURE TRUST

    


    AND

    


    MIDDLESEX
WATER COMPANY

    


    


    


    


    


    


    


    


    


    


    DATED
AS OF NOVEMBER 1, 2008

    



    
      
         


      

      
         


        
          

        

      

      
         


      

    


    TABLE
OF CONTENTS

    
      
        	 
      	
                Page

              
	 
      	 
      
	
                ARTICLE
      I

              
	 
      	 
      
	
                DEFINITIONS

              
	 
      	 
      
	
                SECTION
      1.01.  Definitions

              	
                2

              
	 
      	 
      
	
                ARTICLE
      II

              
	 
      	 
      
	
                REPRESENTATIONS
      AND COVENANTS OF BORROWER

              
	 
      	 
      
	
                SECTION
      2.01.  Representations of Borrower

              	
                7

              
	
                SECTION
      2.02.  Particular Covenants of Borrower

              	
                11

              
	 
      	 
      
	
                ARTICLE
      III

              
	 
      	 
      
	
                LOAN
      TO BORROWER; AMOUNTS PAYABLE; GENERAL AGREEMENTS

              
	 
      	 
      
	
                SECTION
      3.01.  Loan; Loan Term

              	
                20

              
	
                SECTION
      3.02.  Disbursement of Loan Proceeds

              	
                20

              
	
                SECTION
      3.03.  Amounts Payable

              	
                21

              
	
                SECTION
      3.03A. Amounts on Deposit in Project Loan
      Account after Completion of Project Draws

              	
                22

              
	
                SECTION
      3.04.  Unconditional Obligations

              	
                23

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

              	
                24

              
	
                SECTION
      3.06.  Disclaimer of Warranties and
    Indemnification

              	
                24

              
	
                SECTION
      3.07.  Option to Prepay Loan Repayments

              	
                25

              
	
                SECTION
      3.08.  Priority of Loan and Fund Loan

              	
                26

              
	
                SECTION
      3.09.  Approval of the New Jersey State
Treasurer

              	
                26

              
	 
      	 
      
	
                ARTICLE
      IV

              
	 
      	 
      
	
                ASSIGNMENT
      OF LOAN AGREEMENT AND BORROWER BOND

              
	 
      	 
      
	
                SECTION
      4.01.  Assignment and Transfer by Trust

              	
                27

              
	
                SECTION
      4.02.  Assignment by Borrower

              	
                27

              
	 
      	 
      
	
                ARTICLE
      V

              
	 
      	 
      
	
                EVENTS
      OF DEFAULT AND REMEDIES

              
	 
      	 
      
	
                SECTION
      5.01.  Events of Default

              	
                28

              
	
                SECTION
      5.02.  Notice of Default

              	
                29

              
	
                SECTION
      5.03.  Remedies on Default

              	
                29

              


      




    
      
        
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                SECTION
      5.04.  Attorneys' Fees and Other Expenses

              	
                29

              
	
                SECTION
      5.05.  Application of Moneys

              	
                29

              
	
                SECTION
      5.06.  No Remedy Exclusive; Waiver; Notice

              	
                30

              
	
                SECTION
      5.07.  Retention of Trust's Rights

              	
                30

              
	 
      	 
      
	
                ARTICLE
      VI

              
	 
      	 
      
	
                MISCELLANEOUS

              
	 
      	 
      
	
                SECTION
      6.01.  Notices

              	
                31

              
	
                SECTION
      6.02.  Binding Effect

              	
                31

              
	
                SECTION
      6.03.  Severability

              	
                31

              
	
                SECTION
      6.04.  Amendments, Supplements and Modifications

              	
                31

              
	
                SECTION
      6.05.  Execution in Counterparts

              	
                32

              
	
                SECTION
      6.06.  Applicable Law and Regulations

              	
                32

              
	
                SECTION
      6.07.  Consents and Approvals

              	
                32

              
	
                SECTION
      6.08.  Captions

              	
                32

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

              	
                32

              
	
                SECTION
      6.10.  Further Assurances

              	
                32

              
	 
      	 
      


      

      


      
        	 
      	 
      	 
      
	
                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

              
	 
      	 
      	 
      
	
                EXHIBIT
      H

              	
                Form
      of Continuing Disclosure Agreement

              	
                H-1

              


      

    


    
      
        
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    NEW
JERSEY ENVIRONMENTAL INFRASTRUCTURE TRUST LOAN AGREEMENT

    


    THIS LOAN AGREEMENT, made and
entered into as of this November 1, 2008, by and between the NEW JERSEY
ENVIRONMENTAL INFRASTRUCTURE TRUST, a public body corporate and politic with
corporate succession, and the Borrower (capitalized terms used in this Loan
Agreement shall have, unless the context otherwise requires, the meanings set
forth in said Section 1.01);

    


    WITNESSETH
THAT:

    


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

    


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

    


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

    


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

    


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

    


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

    


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


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    ARTICLE
I

    


    DEFINITIONS

    


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

    


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

    


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

    


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

    


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

    


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

    


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

    


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

    


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

    


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


    
      
         


      

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

    


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

    


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

    


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

    


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

    


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

    


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

    


    "Fund Loan" means the loan
made to the Borrower by the State, acting by and through the Department,
pursuant to the Fund Loan Agreement dated as of November 1, 2008 by and between
the Borrower and the State, acting by and through the Department, to finance or
refinance a portion of the Costs of the Project.

    


    "Fund Loan Agreement" means
the loan agreement dated as of November 1, 2008 by and between the Borrower and
the State, acting by and through the Department, regarding the terms and
conditions of the Fund Loan.

    


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

    


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

    


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


    
      
         


      

      
        -3-

        
          

        

      

      
         


      

    


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

    


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

    


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

    


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

    


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

    


    "Loans" means the loans made
by the Trust to the Borrowers under the Loan Agreements from moneys on deposit
in the Project Fund, excluding the Project Loan Account.

    


    "Master Program Trust
Agreement" means that certain Master Program Trust Agreement, dated as of
November 1, 1995, by and among the Trust, the State, United States Trust Company
of New York, as Master Program Trustee thereunder, The Bank of New York (NJ), in
several capacities thereunder, and First Fidelity Bank, N.A. (predecessor to
Wachovia Bank, National Association), in several capacities thereunder, as
supplemented by that certain Agreement of Resignation of Outgoing Master Program
Trustee, Appointment of Successor Master Program Trustee and Acceptance
Agreement, dated as of November 1, 2001, by and among United States Trust
Company of New York, as Outgoing Master Program Trustee, State Street Bank and
Trust Company, N.A. (predecessor to U.S. Bank Trust National Association), as
Successor Master Program Trustee, and the Trust, as the same may be amended and
supplemented from time to time in accordance with its terms.

    


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

    


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

    


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

    


    "Project" means the
Environmental Infrastructure Facilities of the Borrower described in Exhibit A-1
attached hereto and made a part hereof, which constitutes a project for which
the Trust is permitted to make a loan to the Borrower pursuant to the Act, the
Regulations and the


    
      
         


      

      
        -4-

        
          

        

      

      
         


      

    


    Bond
Resolution, all or a portion of the Costs of which is financed or refinanced by
the Trust through the making of the Loan under this Loan Agreement and which may
be identified under either the Drinking Water or Clean Water Project Lists with
the Project Number specified in Exhibit A-1 attached hereto.

    


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

    


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

    


    "Regulations" means the rules
and regulations, as applicable, now or hereafter promulgated under N.J.A.C.
7:22-3 et seq., 7:22-4
et seq., 7:22-5 et seq., 7:22-6 et seq., 7:22-7 et seq., 7:22-8 et seq., 7:22-9 et seq. and 7:22-10 et seq., as the same may from
time to time be amended and supplemented.

    


    "State" means the State of New
Jersey.

    


    "Trust" means the New Jersey
Environmental Infrastructure Trust, a public body corporate and politic with
corporate succession duly created and validly existing under and by virtue of
the Act.

    


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

    


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

    


    "Trustee" means, initially,
The Bank of New York Mellon, 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.


    
      
         


      

      
        -5-

        
          

        

      

      
         


      

    


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

    


    



    
      
         


      

      
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    ARTICLE
II

    


    REPRESENTATIONS
AND COVENANTS OF BORROWER

    


    SECTION
2.01.  Representations of Borrower.  The Borrower
represents for the benefit of the Trust, the Trustee and the holders of the
Trust Bonds as follows:

    


    (a)           Organization and
Authority.

    


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

    

    


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

    

    


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

    

    


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

    

    


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

    


    
      
         


      

      
        -7-

        
          

        

      

      
         


      

    


    
      	
               
      

            	
              Borrower
      Bond and the sale thereof to the Trust upon the terms set forth herein;
      (C) the approval of the inclusion, if such inclusion is deemed necessary
      in the sole discretion of the Trust, in the Preliminary Official Statement
      and the Official Statement of all statements and information relating to
      the Borrower set forth in "APPENDIX B" thereto (the "Borrower Appendices")
      and any amendment thereof or supplement thereto; and (D) the execution,
      delivery and due performance of any and all other certificates, agreements
      and instruments that may be required to be executed, delivered and
      performed by the Borrower in order to carry out, give effect to and
      consummate the transactions contemplated by this Loan Agreement,
      including, without limitation, the designation of the Borrower Appendices
      portion of the Preliminary Official Statement, if any, as "deemed final"
      for the purposes and within the meaning of Rule 15c2-12 ("Rule 15c2-12")
      of the Securities and Exchange Commission ("SEC") promulgated under the
      Securities Exchange Act of 1934, as amended or supplemented, including any
      successor regulation or statute
thereto.

            


    

    


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

    

    


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

    


    (c)           Pending
Litigation.  There are no proceedings pending or, to the
knowledge of the Borrower, threatened against or affecting the Borrower in any
court or before any governmental authority or arbitration board or tribunal
that, if adversely determined, would materially adversely affect (i) the
undertaking or completion of the Project, (ii) the properties, activities,
prospects or condition (financial or otherwise) of the Borrower or its
Environmental


    
      
         


      

      
        -8-

        
          

        

      

      
         


      

    


    Infrastructure
System, (iii) the ability of the Borrower to make all Loan Repayments or any
other payments required under this Loan Agreement, (iv) the authorization,
execution, attestation or delivery of this Loan Agreement or the Borrower Bond,
(v) the issuance of the Borrower Bond and the sale thereof to the Trust, (vi)
the adoption of the Borrower Bond Resolution, or (vii) the Borrower's ability
otherwise to observe and perform its duties, covenants, obligations and
agreements under this Loan Agreement and the Borrower Bond, which proceedings
have not been previously disclosed in writing to the Trust either in the
Borrower's application for the Loan or otherwise.

    


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

    


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


    
      
         


      

      
        -9-

        
          

        

      

      
         


      

    


    (f)           Governmental
Consent.  The Borrower has obtained all permits and approvals
required to date by any governmental body or officer for the authorization,
execution, attestation and delivery of this Loan Agreement and the Borrower
Bond, for the issuance of the Borrower Bond and the sale thereof to the Trust,
for the adoption of the Borrower Bond Resolution, for the making, observance and
performance by the Borrower of its duties, covenants, obligations and agreements
under this Loan Agreement and the Borrower Bond and for the undertaking or
completion of the Project and the financing or refinancing thereof, including,
but not limited to, if required, the approval by the New Jersey Board of Public
Utilities (the "BPU") of the issuance by the Borrower of the Borrower Bond to
the Trust, as required by Section 9a of the Act, and any other approvals
required therefor by the BPU; and the Borrower has complied with all applicable
provisions of law requiring any notification, declaration, filing or
registration with any governmental body or officer in connection with the
making, observance and performance by the Borrower of its duties, covenants,
obligations and agreements under this Loan Agreement and the Borrower Bond or
with the undertaking or completion of the Project and the financing or
refinancing thereof.  No consent, approval or authorization of, or
filing, registration or qualification with, any governmental body or officer
that has not been obtained is required on the part of the Borrower as a
condition to the authorization, execution, attestation and delivery of this Loan
Agreement and the Borrower Bond, the issuance of the Borrower Bond and the sale
thereof to the Trust, the undertaking or completion of the Project or the
consummation of any transaction herein contemplated.

    


    (g)           Compliance with
Law.  The Borrower:

    


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

    

    


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

    

    


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


    
      
         


      

      
        -10-

        
          

        

      

      
         


      

    


    


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

    


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

    


    SECTION 2.02.  Particular
Covenants of Borrower.

    


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

    


    (b)           Performance Under Loan
Agreement; Rates.  The Borrower covenants and agrees (i) to
comply with all applicable State and federal laws, rules and regulations in the
performance of this Loan Agreement; (ii) to maintain its Environmental
Infrastructure System in good repair and operating condition; (iii) to cooperate
with the Trust in the observance and performance of the respective duties,
covenants, obligations and agreements of the Borrower and the Trust under this
Loan Agreement; and (iv) to establish, levy and collect rents, rates and other
charges for the products and services provided by its Environmental
Infrastructure System, which rents, rates and other charges shall be at least
sufficient to comply with all covenants pertaining thereto contained in, and all
other provisions of, any bond resolution, trust indenture or other security
agreement, if any, relating to any bonds, notes or other evidences of
indebtedness issued or to be issued by the Borrower, including without
limitation rents, rates and other charges, together with other available moneys,
sufficient to pay the principal of and Interest on the Borrower Bond, plus all
other amounts due hereunder.

    


    (c)           Borrower Bond; No Prior
Liens. Except for (i) the Borrower Bond, (ii) any bonds or notes at
parity with the Borrower Bond and currently outstanding or issued on the date
hereof, (iii) any future bonds or notes of the Borrower issued under the
Borrower Bond Resolution at parity with the Borrower Bond, and (iv) any
Permitted Encumbrances (as defined in the Borrower Bond Resolution), the assets
of the Borrower that are subject to the Borrower Bond


    
      
         


      

      
        -11-

        
          

        

      

      
         


      

    


    Resolution
are and will be free and clear of any pledge, lien, charge or encumbrance
thereon or with respect thereto prior to, or of equal rank with, the Borrower
Bond, and all corporate or other action on the part of the Borrower to that end
has been and will be duly and validly taken.

    


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

    


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

    


    (f)           Exclusion of Interest from
Federal Gross Income and Compliance with Code.

    


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

    

    


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

    

    


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

    

    


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

    


    
      
         


      

      
        -12-

        
          

        

      

      
         


      

    


    
      	
               
      

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

            


    

    


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

    

    


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

    

    


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

    

    


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

    

    


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

    

    


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

    

    


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

    

    


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

    


    
      
         


      

      
        -13-

        
          

        

      

      
         


      

    


    
      	
               
      

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

            


    

    


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

    

    


    
      (xiv)    The
Borrower shall, within 30 days of date the Borrower concludes that no additional
proceeds of the Loan will be required to pay costs of the Project, provide to
the Trust a certificate of the Borrower evidencing such
conclusion.

    

    


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

    


    (g)           Operation and Maintenance of
Environmental Infrastructure System.  The Borrower covenants
and agrees that it shall, in accordance with prudent environmental
infrastructure utility practice, (i) at all times operate the properties of its
Environmental Infrastructure System and any business in connection therewith in
an efficient manner, (ii) maintain its Environmental Infrastructure System in
good repair, working order and operating condition, and (iii) from time to time
make all necessary and proper repairs, renewals, replacements, additions,
betterments and improvements with respect to its Environmental Infrastructure
System so that at all times the business carried on in connection therewith
shall be properly and advantageously conducted.

    


    (h)           Records and
Accounts.


    
      
         


      

      
        -14-

        
          

        

      

      
         


      

    

     

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

    


    
      (ii)    Within 30
days following receipt of any Loan proceeds, including without limitation the
“Allowance for Administrative Costs” or the “Allowance for Planning and Design”
set forth in Exhibit B hereto, the Borrower shall allocate such proceeds to an
expenditures in a manner that satisfies the requirements of Treasury Regulation
§1.148-6(d) and transmit a copy of each such allocation to the
Trust.  No portion of the Allowance for Administrative Costs will be
allocated to a cost other than a cost described in N.J.A.C. 7:22-5.11(a) 3, 4 or
6.  No portion of the Allowance for Planning and Design will be
allocated to a cost other than a cost described N.J.A.C. 7:22-5.12, or other
costs of the Borrower’s Environmental Infrastructure System which are "capital
expenditures," within the meaning of Treasury Regulations
§1.150-1.  The Borrower shall retain records of such allocations for
at least until the date that is three years after the scheduled maturity date of
the Trust Bonds.  The Borrower shall make such records available to
the Trust within 15 days of any request by the Trust.

    

    


    
      (iii)    Unless
otherwise advised in writing by the Trust, in furtherance of the covenant of the
Borrower contained in subsection (f) of this Section 2.02 not to cause the Trust
Bonds to be arbitrage bonds, the Borrower shall keep, or cause to be kept,
accurate records of each investment it makes in any "nonpurpose investment"
acquired with, or otherwise allocated to, "gross proceeds" of the Trust Bonds
not held by the Trustee and each "expenditure" it makes allocated to "gross
proceeds" of the Trust Bonds.  Such records shall include the purchase
price, including any constructive "payments" (or in the case of a "payment"
constituting a deemed acquisition of a "nonpurpose investment" (e.g., a
"nonpurpose investment" first allocated to "gross proceeds" of the Trust Bonds
after it is actually acquired because it is deposited in a sinking fund for the
Trust Bonds)), the "fair market value" of the "nonpurpose investment" on the
date first allocated to the "gross proceeds" of the Trust Bonds, nominal
interest rate, dated date, maturity date, type of property, frequency of
periodic payments, period of compounding, yield to maturity, amount actually or
constructively received on disposition (or in the case of a "receipt"
constituting a deemed disposition of a "nonpurpose investment" (e.g., a
"nonpurpose investment" that ceases to be allocated to the "gross proceeds" of
the Trust Bonds because it is removed from a sinking fund for the Trust Bonds)),
the "fair market value" of the "nonpurpose investment" on the date it ceases to
be allocated to the "gross proceeds" of the Trust Bonds, the purchase date and
disposition date of the "nonpurpose investment" and evidence of the "fair market
value" of such property on the purchase date and disposition date (or deemed
purchase or disposition date) for each such "nonpurpose 

      
 

      
        
          
             


          

          
            -15-

            
              

            

          

          
             


          

        

      

      


    

    
      	
               
      

            	
              investment".  The
      purchase date, disposition date and the date of determination of "fair
      market value" shall be the date on which a contract to purchase or sell
      the "nonpurpose investment" becomes binding, i.e., the trade date rather
      than the settlement date.  For purposes of the calculation of
      purchase price and disposition price, brokerage or selling commissions,
      administrative expenses or similar expenses shall not increase the
      purchase price of an item and shall not reduce the amount actually or
      constructively received upon disposition of an item, except to the extent
      such costs constitute "qualified administrative
  costs".

            


    

    


    
      (iv)    Within
thirty (30) days of the last day of the fifth and each succeeding fifth "bond
year" (which, unless otherwise advised by the Trust, shall be the five-year
period ending on the date five years subsequent to the date immediately
preceding the date of issuance of the Trust Bonds and each succeeding fifth
"bond year") and within thirty (30) days of the date the last bond that is part
of the Trust Bonds is discharged (or on any other periodic basis requested in
writing by the Trust), the Borrower shall (A) calculate, or cause to be
calculated, the "rebate amount" as of the "computation date" or "final
computation date" attributable to any "nonpurpose investment" made by the
Borrower and (B) remit the following to the Trust:  (1) an amount of
money that when added to the "future value" as of the "computation date" of any
previous payments made to the Trust on account of rebate equals the "rebate
amount", (2) the calculations supporting the "rebate amount" attributable to any
"nonpurpose investment" made by the Borrower allocated to "gross proceeds" of
the Trust Bonds, and (3) any other information requested by the Trust relating
to compliance with Section 148 of the Code (e.g., information related to any
"nonpurpose investment" of the Borrower for purposes of application of the
"universal cap").

    

    


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

    


    (vi)           From
time to time as directed by the Trust, the Borrower shall provide to the Trust a
written report demonstrating compliance by the Borrower with the provisions of
Section 2.02(f) of this Loan Agreement, each such written report to be submitted
by the Borrower to the Trust in the form of a full and complete written response
to a questionnaire provided by the Trust to the Borrower.  Each such
questionnaire shall be provided by the Trust to the Borrower not less than
fourteen (14) days prior to the date established by the Trust for receipt from
the Borrower of the full and complete written response to the
questionnaire.


    
      
         


      

      
        -16-

        
          

        

      

      
         


      

    


    


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

    


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

    


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

    


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

     

    
      (i)           an
opinion of the Borrower's bond counsel substantially in the form of Exhibit E
hereto; provided, however, that the Trust may permit portions of such opinion to
be rendered by general counsel to the Borrower and may permit variances in such
opinion from the form set forth in Exhibit E if, in the opinion of the Trust,
such variances are not to the material detriment of the interests of the holders
of the Trust Bonds;

      


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

      


      (iii)           copies
of those resolutions finally adopted by the board of directors of the Borrower
and requested by the Trust, including, without limitation, (A) the resolution of
the Borrower authorizing the execution, attestation and delivery of this Loan
Agreement, (B) the Borrower Bond Resolution, as amended and supplemented as of
the date of the Loan Closing, authorizing the execution, attestation,
authentication, sale and delivery of the Borrower Bond to the Trust, (C) the
resolution of the Borrower, if any, confirming the details of the sale of the
Borrower Bond to the Trust, (D) the resolution of the
Borrower,


    


    
      
         


      

      
        -17-

        
          

        

      

      
         


      

    


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

      


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

      


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


    (m)           Execution and Delivery of
Borrower Bond.  Concurrently with the delivery of this Loan
Agreement at the Loan Closing, the Borrower shall also deliver to the Trust the
Borrower Bond, as previously executed, attested and, if applicable,
authenticated, upon the receipt of a written certification of the Trust that a
portion of the net proceeds of the Trust Bonds shall be deposited in the Project
Loan Account simultaneously with the delivery of the Borrower Bond.

    


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

    


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

    


    (p)           Continuing Disclosure
Covenant.  To the extent that the Trust, in its sole
discretion, determines, at any time prior to the termination of the Loan Term,
that the Borrower is a material "obligated person", as the term "obligated
person" is defined in Rule 15c2-12, with materiality being determined by the
Trust pursuant to criteria established, from time to time, by the Trust in its
sole discretion and set forth in a bond resolution or official statement of the
Trust, the Borrower hereby covenants that it will authorize and provide to the
Trust, for inclusion in any preliminary official statement or official statement
of the Trust, all statements and information relating to the Borrower deemed
material by the Trust for the purpose of satisfying Rule 15c2-12 as well as Rule
10b-5 promulgated pursuant to the Securities Exchange Act of 1934, as amended or
supplemented, including any successor regulation or statute thereto ("Rule


      
        
           


        

        
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    10b-5"),
including certificates and written representations of the Borrower evidencing
its compliance with Rule 15c2-12 and Rule 10b-5; and the Borrower hereby further
covenants that the Borrower shall execute and deliver the Continuing Disclosure
Agreement, in substantially the form attached hereto as Exhibit H, with such
revisions thereto prior to execution and delivery thereof as the Trust shall
determine to be necessary, desirable or convenient, in its sole discretion, for
the purpose of satisfying Rule 15c2-12 and the purposes and intent thereof, as
Rule 15c2-12, its purposes and intent may hereafter be interpreted from time to
time by the SEC or any court of competent jurisdiction; and pursuant to the
terms and provisions of the Continuing Disclosure Agreement, the Borrower shall
thereafter provide on-going disclosure with respect to all statements and
information relating to the Borrower in satisfaction of the requirements set
forth in Rule 15c2-12 and Rule 10b-5, including, without limitation, the
provision of certificates and written representations of the Borrower evidencing
its compliance with Rule 15c2-12 and Rule 10b-5.

    


    (q)           Additional Covenants and
Requirements.  (i) No later than the Loan Closing and, if
necessary, in connection with the Trust's issuance of the Trust Bonds or the
making of the Loan, additional covenants and requirements have been included in
Exhibit F hereto and made a part hereof.  Such covenants and
requirements may include, but need not be limited to, the maintenance of
specified levels of Environmental Infrastructure System rates, the issuance of
additional debt of the Borrower, the use by or on behalf of the Borrower of
certain proceeds of the Trust Bonds as such use relates to the exclusion from
gross income for federal income tax purposes of the interest on any Trust Bonds,
the transfer of revenues and receipts from the Borrower's Environmental
Infrastructure System, compliance with Rule 15c2-12, Rule 10b-5 and any other
applicable federal or State securities laws, and matters in connection with the
appointment of the Trustee under the Bond Resolution and any successors
thereto.  The Borrower hereby agrees to observe and comply with each
such additional covenant and requirement, if any, included in Exhibit F
hereto.  (ii) Additional defined terms, covenants, representations and
requirements have been included in Schedule A attached
hereto and made a part hereof.  Such additional defined terms,
covenants, representations and requirements are incorporated in this Loan
Agreement by reference thereto as if set forth in full herein and the Borrower
hereby agrees to observe and comply with each such additional term, covenant,
representation and requirement included in Schedule A as if the
same were set forth in its entirety where reference thereto is made in this Loan
Agreement.

    



    
      
         


      

      
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    ARTICLE
III

    


    LOAN
TO BORROWER; AMOUNTS PAYABLE; GENERAL AGREEMENTS

    


    SECTION 3.01.  Loan; Loan
Term.  The Trust hereby agrees to make the Loan as described in
Exhibit A-2 hereof and to disburse proceeds of the Loan to the Borrower in
accordance with Section 3.02 and Exhibit C hereof, and the Borrower hereby
agrees to borrow and accept the Loan from the Trust upon the terms set forth in
Exhibit A-2 attached hereto and made a part hereof; provided, however, that the
Trust shall be under no obligation to make the Loan if (a) at the Loan Closing,
the Borrower does not deliver to the Trust a Borrower Bond and such other
documents required under Section 2.02(l) hereof, or (b) an Event of Default has
occurred and is continuing under the Bond Resolution or this Loan
Agreement.  Although the Trust intends to disburse proceeds of the
Loan to the Borrower at the times and up to the amounts set forth in Exhibit C
to pay a portion of the Costs of the Project, due to unforeseen circumstances
there may not be a sufficient amount on deposit in the Project Fund on any date
to make the disbursement in such amount.  Nevertheless, the Borrower
agrees that the amount actually deposited in the Project Loan Account at the
Loan Closing plus the Borrower's allocable share of (i) certain costs of
issuance and underwriter's discount for all Trust Bonds issued to finance the
Loan; (ii) capitalized interest during the Project construction period, if
applicable; and (iii) that portion of the Debt Service Reserve Fund (to the
extent the Trust establishes a Debt Service Reserve Fund pursuant to the Bond
Resolution) attributable to the cost of funding reserve capacity for the
Project, if applicable, shall constitute the initial principal amount of the
Loan (as the same may be adjusted downward in accordance with the definition
thereof), and neither the Trust nor the Trustee shall have any obligation
thereafter to loan any additional amounts to the Borrower.

    


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

    


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

    


    SECTION 3.02.  Disbursement
of Loan Proceeds.  (a) The Trustee, as the agent of the Trust,
shall disburse the amounts on deposit in the Project Loan Account to the
Borrower upon receipt of a requisition executed by an Authorized Officer of the
Borrower, and approved by the Trust, in a form meeting the requirements of
Section 5.02(3) of the Bond Resolution.

    


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

    


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

    


    
      
         


      

      
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      (ii)           in
accordance with the Bond Act, and the Regulations, the Borrower shall have
timely applied for, shall have been awarded and, prior to or simultaneously with
the Loan Closing, shall have closed a Fund Loan for a portion of the Allowable
Costs (as defined in such Regulations) of the Project in an amount not in excess
of the amount of Allowable Costs of the Project financed by the Loan from the
Trust;

      


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

      


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

      


      SECTION 3.03.  Amounts
Payable.  (a) The Borrower shall repay the Loan in installments
payable to the Trustee as follows:

      


      (i)           the
principal of the Loan shall be repaid annually on the Principal Payment Dates,
in accordance with the schedule set forth in Exhibit A-2 attached hereto and
made a part hereof, as the same may be amended or modified by any credits
applicable to the Borrower as set forth in the Bond Resolution;

      


      (ii)           the
Interest Portion described in clause (i) of the definition thereof shall be paid
semiannually on the Interest Payment Dates, in accordance with the schedule set
forth in Exhibit A-2 attached hereto and made a part hereof, as the same may be
amended or modified by any credits applicable to the Borrower as set forth in
the Bond Resolution; and

      


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

      


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

    

    
 

    
      
         


      

      
        -21-

        
          

        

      

      
         


      

    


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

    


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

    


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

    


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

    


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

    


    SECTION 3.03A.  Amounts on
Deposit in Project Loan Account after Completion of Project
Draws.  (a) If, on the date which is thirty (30) 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 thirty (30) 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


    
      
         


      

      
        -22-

        
          

        

      

      
         


      

    


    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,
on the date which the Borrower has completed the Project, any amounts remain on
deposit in the Borrower’s Project Loan Account, the Borrower must within thirty
(30) days following such date provide to the Trust and the Department a
certificate (i) stating that the Project is complete and (ii) setting forth the
remaining costs, if any, of the Project for which a disbursement of Loan will be
required.

    


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

    


    (i)           If
Trust Bonds can be redeemed within sixty (60) days of the date the Borrower is
required to provide the certificate described in paragraphs (a), (b) or (c) of
this Section 3.03A, the Excess Project Funds shall be used by the Trust within
such sixty (60) day period to redeem Trust Bonds, including payment of any
pre-payment premium.  The Trust Bonds shall be redeemed in inverse
order of their maturity.  The amount of any maturity redeemed shall
not exceed the same proportion as the Loan bears to all Loans made from proceeds
of the Trust Bonds rounded down to whole denominations or any integral
multiple.  The aggregate amount of Trust Bonds so redeemed shall not
be less than the amount of nonqualified bonds allocable to the Borrower under
Treasury Regulations §1.142-12.  The Excess Project Funds used to
redeem Trust Bonds shall be applied by the Trust as a prepayment of the
Borrower’s Loan Repayments with respect to the redeemed bonds.  Any
excess shall be held by Trust invested at a yield which does not exceed the
yield on the Trust Bonds.

    


    (ii)           If
Trust Bonds can not be redeemed within sixty (60) days of the date the Borrower
is required to provide the certificate described in paragraphs (a), (b) or (c)
of this Section 3.03A, the Trust shall, within such sixty (60) day period, (A)
deposit all of the Excess Project Funds in a defeasance escrow established to
defease Trust Bonds in inverse order of their maturity, in the same proportion
as the Loan bears to all Loans made from proceeds of the Trust Bonds, (B)
provide the notice to the Internal Revenue Service required pursuant to Treasury
Regulations §1.142-2(c)(2), or any successor income tax regulations, and (C)
apply the Excess Project Funds as a prepayment of the Borrower’s Loan Repayments
for the defeased Trust Bonds.  The aggregate amount of Trust Bonds so
defeased shall not be less than the amount of nonqualified bonds allocable to
the Borrower under Treasury Regulations §1.142-12.

    


    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


    
      
         


      

      
        -23-

        
          

        

      

      
         


      

    


    whatsoever
while any Trust Bonds remain outstanding or any Loan Repayments remain unpaid,
for any reason, regardless of any contingency, act of God, event or cause
whatsoever, including (without limitation) any acts or circumstances that may
constitute failure of consideration, eviction or constructive eviction, the
taking by eminent domain or destruction of or damage to the Project or
Environmental Infrastructure System, commercial frustration of the purpose, any
change in the laws of the United States of America or of the State or any
political subdivision of either or in the rules or regulations of any
governmental authority, any failure of the Trust or the Trustee to perform and
observe any agreement, whether express or implied, or any duty, liability or
obligation arising out of or connected with the Project, this Loan Agreement or
the Bond Resolution, or any rights of set-off, recoupment, abatement or
counterclaim that the Borrower might otherwise have against the Trust, the
Trustee or any other party or parties; provided, however, that payments
hereunder shall not constitute a waiver of any such rights.  The
Borrower shall not be obligated to make any payments required to be made by any
other Borrowers under separate Loan Agreements or the Bond
Resolution.

    


    The Borrower acknowledges that payment
of the Trust Bonds by the Trust, including payment from moneys drawn by the
Trustee from the Debt Service Reserve Fund (to the extent the Trust establishes
a Debt Service Reserve Fund pursuant to the Bond Resolution), does not
constitute payment of the amounts due under this Loan Agreement and the Borrower
Bond.  If at any time the amount in the Debt Service Reserve Fund
shall be less than the Debt Service Reserve Requirement as the result of any
transfer of moneys from the Debt Service Reserve Fund to the Debt Service Fund
(as all such terms are defined in the Bond Resolution) as the result of a
failure by the Borrower to make any Trust Bond Loan Repayments required
hereunder, the Borrower agrees to replenish (i) such moneys so transferred and
(ii) any deficiency arising from losses incurred in making such transfer as the
result of the liquidation by the Trust of Investment Securities (as defined in
the Bond Resolution) acquired as an investment of moneys in the Debt Service
Reserve Fund, by making payments to the Trust in equal monthly installments for
the lesser of six (6) months or the remaining term of the Loan at an interest
rate to be determined by the Trust necessary to make up any loss caused by such
deficiency.

    


    The Borrower acknowledges that payment
of the Trust Bonds from moneys that were originally received by the Trustee from
repayments by the Borrowers of loans made to the Borrowers by the State, acting
by and through the Department, pursuant to loan agreements dated as of November
1, 2008 by and between the Borrowers and the State, acting by and through the
Department, to finance or refinance a portion of the Costs of the Environmental
Infrastructure Facilities of the Borrowers, and which moneys were upon such
receipt by the Trustee deposited in the Trust Bonds Security Account (as defined
in the Bond Resolution), does not constitute payment of the amounts due under
this Loan Agreement and the Borrower Bond.

    


    SECTION 3.05.  Loan
Agreement to Survive Bond Resolution and Trust Bonds.  The
Borrower acknowledges that its duties, covenants, obligations and agreements
hereunder shall survive the discharge of the Bond Resolution applicable to the
Trust Bonds and shall survive the payment of the principal and redemption
premium, if any, of and the interest on the Trust Bonds until the Borrower can
take no action or fail to take any action that could adversely affect the
exclusion from gross income of the interest on the Trust Bonds for purposes of
federal


    
      
         


      

      
        -24-

        
          

        

      

      
         


      

    


    income
taxation, at which time such duties, covenants, obligations and agreements
hereunder shall, except for those set forth in Sections 3.06(a) and (b) hereof,
terminate.

    


    SECTION 3.06.  Disclaimer
of Warranties and Indemnification.  (a) The Borrower
acknowledges and agrees that (i) neither the Trust nor the Trustee makes any
warranty or representation, either express or implied, as to the value, design,
condition, merchantability or fitness for particular purpose or fitness for any
use of the Environmental Infrastructure System or the Project or any portions
thereof or any other warranty or representation with respect thereto; (ii) in no
event shall the Trust or the Trustee or their respective agents be liable or
responsible for any incidental, indirect, special or consequential damages in
connection with or arising out of this Loan Agreement or the Project or the
existence, furnishing, functioning or use of the Environmental Infrastructure
System or the Project or any item or products or services provided for in this
Loan Agreement; and (iii) to the fullest extent permitted by law, the Borrower
shall indemnify and hold the Trust and the Trustee harmless against, and the
Borrower shall pay any and all, liability, loss, cost, damage, claim, judgment
or expense of any and all kinds or nature and however arising and imposed by
law, which the Trust and the Trustee may sustain, be subject to or be caused to
incur by reason of any claim, suit or action based upon personal injury, death
or damage to property, whether real, personal or mixed, or upon or arising out
of contracts entered into by the Borrower, the Borrower's ownership of the
Environmental Infrastructure System or the Project, or the acquisition,
construction or installation of the Project.

    


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

    


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

    


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


    
      
         


      

      
        -25-

        
          

        

      

      
         


      

    


    insurance
providing against risk of direct physical loss, damage or destruction of the
Environmental Infrastructure System, and during the Loan Term the Borrower shall
maintain said insurance covering the Trust in good standing.

    


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

    


    SECTION 3.07.  Option to
Prepay Loan Repayments.  The Borrower may prepay the Trust Bond
Loan Repayments, in whole or in part (but if in part, in the amount of $100,000
or any integral multiple thereof), upon prior written notice to the Trust and
the Trustee not less than ninety (90) days in addition to the number of days'
advance notice to the Trustee required for any optional redemption of the Trust
Bonds, and upon payment by the Borrower to the Trustee of amounts that, together
with investment earnings thereon, will be sufficient to pay the principal amount
of the Trust Bond Loan Repayments to be prepaid plus the Interest Portion
described in clause (ii) of the definition thereof on any such date of
redemption; provided, however, that, with respect to any prepayment other than
those required by Section 3.03A hereof, any such full or partial prepayment may
only be made (i) if the Borrower is not then in arrears on its Fund Loan, (ii)
if the Borrower is contemporaneously making a full or partial prepayment of the
Fund Loan such that, after the prepayment of the Loan and the Fund Loan, the
Trust, in its sole discretion, determines that the interests of the owners of
the Trust Bonds are not adversely affected by such prepayments, and (iii) upon
the prior written approval of the Trust.  In addition, if at the time
of such prepayment the Trust Bonds may only be redeemed at the option of the
Trust upon payment of a premium, the Borrower shall add to its prepayment of
Trust Bond Loan Repayments an amount, as determined by the Trust, equal to such
premium allocable to the Trust Bonds to be redeemed as a result of the
Borrower's prepayment.  Prepayments shall be applied first to the
Interest Portion that accrues on the portion of the Loan to be prepaid until
such prepayment date as described in clause (ii) of the definition thereof and
then to principal payments (including premium, if any) on the Loan in inverse
order of their maturity.

    


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


    
      
         


      

      
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    Administrative
Fee, fourth, to the
extent available, to pay any late charges hereunder, fifth, to the extent
available, to satisfy the repayment of the Borrower's Fund Loan under its
related loan agreement therefor, and finally, to the extent
available, to satisfy the repayment of the administrative fee under any such
related loan agreement.

    


    (c)           The
Borrower hereby further acknowledges that any loan repayments paid by the
Borrower on its Fund Loan under the related loan agreement therefor shall be
applied according to the provisions of the Master Program Trust
Agreement.

    


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

    


    



    
      
         


      

      
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    ARTICLE
IV

    


    ASSIGNMENT
OF LOAN AGREEMENT AND BORROWER BOND

    


    SECTION 4.01.  Assignment
and Transfer by Trust.  (a) The Borrower hereby expressly
acknowledges that, other than the provisions of Section 2.02(d)(ii) hereof, the
Trust's right, title and interest in, to and under this Loan Agreement and the
Borrower Bond have been assigned to the Trustee as security for the Trust Bonds
as provided in the Bond Resolution, and that if any Event of Default shall
occur, the Trustee or any Bond Insurer (as such term may be defined in the Bond
Resolution), if applicable, pursuant to the Bond Resolution, shall be entitled
to act hereunder in the place and stead of the Trust.  The Borrower
hereby acknowledges the requirements of the Bond Resolution applicable to the
Trust Bonds and consents to such assignment and appointment.  This
Loan Agreement and the Borrower Bond, including, without limitation, the right
to receive payments required to be made by the Borrower hereunder and to compel
or otherwise enforce observance and performance by the Borrower of its other
duties, covenants, obligations and agreements hereunder, may be further
transferred, assigned and reassigned in whole or in part to one or more
assignees or subassignees by the Trustee at any time subsequent to their
execution without the necessity of obtaining the consent of, but after giving
prior written notice to, the Borrower.

    


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

    


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

    


    SECTION 4.02.  Assignment
by Borrower.  Neither this Loan Agreement nor the Borrower Bond
may be assigned by the Borrower for any reason, unless the following conditions
shall be satisfied:  (i) the Trust and the Trustee shall have approved
said assignment in writing; (ii) the assignee shall have expressly assumed in
writing the full and faithful observance and performance of the Borrower's
duties, covenants, obligations and agreements under this Loan Agreement and, to
the extent permitted under applicable law, the Borrower Bond; (iii) immediately
after such assignment, the assignee shall not be in default in the observance or
performance of any duties, covenants, obligations or agreements of the Borrower
under this Loan Agreement or the Borrower Bond; and (iv) the Trust shall have
received an opinion of Bond Counsel to the effect that such assignment will not
adversely affect the security of the holders of the Trust Bonds or the exclusion
of the interest on the Trust Bonds from gross income for purposes of federal
income taxation under Section 103(a) of the Code.


    
      
         


      

      
        -28-

        
          

        

      

      
         


      

    


    ARTICLE
V

    


    EVENTS
OF DEFAULT AND REMEDIES

    


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

    


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

    


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

    


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

    


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

    


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

    


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


    
      
         


      

      
        -29-

        
          

        

      

      
         


      

    


    


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

    


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

    


    SECTION 5.03.  Remedies on
Default.  Whenever an Event of Default referred to in Section
5.01 hereof shall have occurred and be continuing, the Borrower acknowledges the
rights of the Trustee and of any Bond Insurer to direct any and all remedies in
accordance with the terms of the Bond Resolution, and the Borrower also
acknowledges that the Trust shall have the right to take, or to direct the
Trustee to take, any action permitted or required pursuant to the Bond
Resolution and to take whatever other action at law or in equity may appear
necessary or desirable to collect the amounts then due and thereafter to become
due hereunder or to enforce the observance and performance of any duty,
covenant, obligation or agreement of the Borrower hereunder.

    


    In addition, if an Event of Default
referred to in Section 5.01(a) hereof shall have occurred and be continuing, the
Trust shall, to the extent allowed by applicable law and to the extent and in
the manner set forth in the Bond Resolution, have the right to declare, or to
direct the Trustee to declare, all Loan Repayments and all other amounts due
hereunder (including, without limitation, payments under the Borrower Bond)
together with the prepayment premium, if any, calculated pursuant to Section
3.07 hereof to be immediately due and payable, and upon notice to the Borrower
the same shall become due and payable without further notice or
demand.

    


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

    


    SECTION 5.05.  Application
of Moneys.  Any moneys collected by the Trust or the Trustee
pursuant to Section 5.03 hereof shall be applied (a) first to pay any attorneys'
fees or other fees and expenses owed by the Borrower pursuant to Section 5.04
hereof, (b) second, to
the extent available, to pay the Interest Portion then due and payable, (c)
third, to the extent
available, to pay the principal due and payable on the Loan, (d) fourth, to the extent
available, to pay the Administrative Fee, any late charges incurred hereunder or
any other amounts due and payable under this Loan Agreement, and (e) fifth, to the extent
available, to pay the Interest Portion and the principal on the Loan and other
amounts payable hereunder as such amounts become due and
payable.


    
      
         


      

      
        -30-

        
          

        

      

      
         


      

    


    


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

    


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


    
      
         


      

      
        -31-

        
          

        

      

      
         


      

    


    ARTICLE
VI

    


    MISCELLANEOUS

    


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

    


    (a)           Trust:

    


    New Jersey Environmental
Infrastructure Trust

    P.O. Box 440

    Trenton, New
Jersey  08625

    Attention:  Executive
Director

    


    (b)           Trustee:

    


    The Bank of New York
Mellon

    385 Rifle Camp Road

    West Paterson, New
Jersey  07424

    Attention:  Corporate Trust
Department

    


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

    


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

    


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

    


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


    
      
         


      

      
        -32-

        
          

        

      

      
         


      

    


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

    


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

    


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

    


    SECTION 6.07.  Consents and
Approvals.  Whenever the written consent or approval of the
Trust shall be required under the provisions of this Loan Agreement, such
consent or approval may only be given by the Trust unless otherwise provided by
law or by rules, regulations or resolutions of the Trust or unless expressly
delegated to the Trustee and except as otherwise provided in Section 6.09
hereof.

    


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

    


    SECTION 6.09.  Benefit of
Loan Agreement; Compliance with Bond Resolution.  This Loan
Agreement is executed, among other reasons, to induce the purchase of the Trust
Bonds.  Accordingly, all duties, covenants, obligations and agreements
of the Borrower herein contained are hereby declared to be for the benefit of
and are enforceable by the Trust, the holders of the Trust Bonds and the
Trustee.  The Borrower covenants and agrees to observe and comply
with, and to enable the Trust to observe and comply with, all duties, covenants,
obligations and agreements contained in the Bond Resolution.

    


    SECTION 6.10.  Further
Assurances.  The Borrower shall, at the request of the Trust,
authorize, execute, attest, acknowledge and deliver such further resolutions,
conveyances, transfers, assurances, financing statements and other instruments
as may be necessary or desirable for better assuring, conveying, granting,
assigning and confirming the rights, security interests and agreements granted
or intended to be granted by this Loan Agreement and the Borrower
Bond.


    
      
         


      

      
        -33-

        
          

        

      

      
         


      

    


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

    


    
      
        
          	 
      	 
      	
                  NEW
      JERSEY ENVIRONMENTAL

                
	 
      	 
      	
                  INFRASTRUCTURE
      TRUST

                
	 
      	 
      	 
      	 
      
	
                  [SEAL]

                	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	
                  By:

                	/s/
      Robert A. Briant, Sr.
	
                  ATTEST:

                	 
      	 
      	
                  Robert
      A. Briant, Sr.

                
	 
      	 
      	 
      	
                  Chairman

                
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	/s/
      Gerald T. Keenan	 
      	 
      	 
      
	
                  Gerald
      T. Keenan

                	 
      	 
      	 
      
	
                  Secretary

                	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	
                  MIDDLESEX
      WATER COMPANY

                
	
                  [SEAL]

                	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	
                  By:

                	/s/
      A. Bruce O’Connor
	
                  ATTEST:

                	 
      	 
      	
                  A.
      Bruce O’Connor

                
	 
      	 
      	 
      	
                  VP
      & Chief Financial Officer

                
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	/s/
      Kenneth J. Quinn	 
      	 
      	 
      
	
                  Kenneth
      J. Quinn

                	 
      	 
      	 
      
	
                  VP,
      Secretary & 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.

    


    “Bond Resolution” means the
“Environmental Infrastructure Trust Bond Resolution, Series 2008A”, as adopted
by the Board of Directors of the Trust on or about September 16, 2008,
authorizing the issuance of the Trust Bonds, and all further amendments and
supplements thereto adopted in accordance with the provisions
thereof.

    


    “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
indenture detailing the terms of the Borrower Bond, dated as of November 1, 2008
and entitled “THIRTY-SEVENTH SUPPLEMENTAL INDENTURE”, pursuant to which the
Borrower Bond has been issued.

    


    “Interest Payment Dates” means
February 1 and August 1 of each year, commencing on August 1, 2009.

    


    “Loan” means the loan made by
the Trust 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 amount of the Loan at any time shall be the initial
aggregate principal amount of the Borrower Bond (which amount equals the amount
actually deposited in the Project Loan Account at the Loan Closing plus the
Borrower's allocable share of certain costs of issuance and underwriter's
discount for all Trust Bonds issued to finance the Loan), less any amount of
such principal amount that has been repaid by the Borrower under this Loan
Agreement and less any adjustment made pursuant to the provisions of the Bond
Resolution, including, without limitation, Section 5.02(4) thereof, N.J.A.C.
7:22-4.26 and the appropriations act of the State Legislature authorizing the
expenditure of Trust Bond proceeds to finance a portion of the Cost of the
Project.

    


    “Principal Payment Dates”
means August 1 of each year, commencing on August 1, 2010.

    



    
      
         


      

      
        S-1

        
          

        

      

      
         


      

    


    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 Trust,
and, in any event, shall not permit a Disposition unless the following
conditions are met:  (i) 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; and (ii) the Trust shall by appropriate
action determine, in its sole discretion, that such sale, lease, abandonment or
other disposition will not adversely affect (A) the Trust's ability to meet its
duties, covenants, obligations and agreements under the Bond Resolution, (B) the
value of this Loan Agreement or the Borrower Bond as security for the payment of
Trust Bonds and the interest thereon, or (C) the excludability from gross income
for federal income tax purposes of the interest on Trust Bonds then outstanding
or that could be issued in the future.

    


    SECTION
2.02(f)(x)

    


    The
Borrower will not have a reserve or replacement fund (within the meaning of
Section 148(d)(1) of the Code) allocable to the Borrower Bond evidencing the
Loan.

    



    
      
         


      

      
        S-2

        
          

        

      

      
         


        
          Middlesex
Water Company

          1225001-011

        

      

    


    EXHIBIT
A-1

    


    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, 12, 16 and 20-inch diameter water mains will be
relined.  The project will occur in the City of South Amboy, and
Woodbridge Township.

    


    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.

    



    
      
         


      

      
        S-3

        
          

        

      

      
         


      

    


    EXHIBIT
A-2

    


    Description of
Loan

    


    See
Exhibit A-2 to Specimen Borrower Bond (Exhibit D hereto)

    



    
      
         


      

      
        A-2-1

        
          

        

      

      
         


      

    


    EXHIBIT
B

    


    


    Basis for Determination of
Allowable Project Costs

    



    
      
         


      

      
        B-1

        
          

        

      

      
         


        
          Middlesex
Water Company

          1225001-011

        

      

    


    EXHIBIT
B

    


    Basis for the Determination
of Allowable 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.

    


    


    


    

      
        
           


        

        
          Page 1 of
3

          
            

          

        

        
           


          
            Middlesex
Water Company

            1225001-011

          

        

      



    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

            


    

    


    
      
      

    


    
      
         


      

      
        Page 2 of
3

        
          

        

      

      
         


        
          Middlesex
Water Company

          1225001-011

        

      

    


    


     

    the
borrower in connection with, and as a condition precedent to, the inclusion
of the
project of the borrower in the 2008 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 2008 Financing Program of the Trust,
the DEP Loan Surcharge or Loan Origination Fee represents a program expense of
the 2008 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.                                                                                           

    


    


    


    


    
 


    
      
         


      

      
        Page 3 of
3

        
          

        

      

      
         


      

    


    EXHIBIT
C

    


    


    Estimated Disbursement
Schedule

    



    
      
         


      

      
        C-1

        
          

        

      

      
         


        
          Middlesex
Water Company

          1225001-011

        

      

    


    EXHIBIT
C

    


    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

                	 
	
                  2008

                	
                  November

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

                	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
      	
                  December

                	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
      	 
      	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
                  2009

                	
                  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

                	 	 	93,750	 	 	 	93,750	 	 	 	 	 	 	 	187,500	 
	 
      	
                  October

                	 	 	93,750	 	 	 	93,750	 	 	 	 	 	 	 	187,500	 
	 
      	 
      	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
      	
                  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 2008 Financing Program.

    


    


    
 

    


    


    


    
 

    


    


    Page 1 of 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


    
      
         


      

      
        G-1

        
          

        

      

      
         


        
          Middlesex
Water Company

          1225001-011

        

      

    


    


    EXHIBIT
G

    


    General Administrative and
Special Requirements

    


    The
following General Administrative Requirements are applicable to this
Loan.  The listing of these requirements does not limit, or otherwise
alter, the project sponsor’s obligations under the Federal Safe Drinking Water
Act, the New Jersey Safe Drinking Water 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 N.J.A.C. 7.10-11,
“Standards for Construction of Public Community Systems”.

    


    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.

    


    
 

    


    


    Page 1 of 3


    
      
         


      

      
        
        

        
          

        

      

      
         


        
          Middlesex
Water Company

          1225001-011

        

      

    


    


    
      
        	
                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."

    


    


    
      	
              4.

            	
              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.

    


    


    
 

    


    


    


    Page 2 of 3


    
      
         


      

      
        
        

        
          

        

      

      
         


        
          Middlesex
Water Company

          1225001-011

        

      

    


    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, 2008

               

            
	
              BID
      RECEIPT:

            	 
      
	 
      	 
      
	
              Clean
      and Line Water Mains

            	
              January
      20, 2009

            
	 
      	 
      
	
              AWARD:

            	 
      
	 
      	 
      
	
              Clean
      and Line Water Mains

            	
              February
      20, 2009

            
	 
      	 
      
	
              ISSUANCE OF NOTICE TO
      PROCCED:

            	 
      
	 
      	 
      
	
              Clean
      and Line Water Mains

            	
              March
      27, 2009

            
	 
      	 
      
	
              COMPLETION OF
      CONSTRUCTION:

            	 
      
	 
      	 
      
	
               Clean
      and Line Water Mains

            	
              October
      27, 2009

            
	 
      	 
      
	
              INITATION OF
      OPERATION:

            	 
      
	 
      	 
      
	
               Clean
      and Line Water Mains

            	
              October
      27, 2009

            
	 
      	 
      
	
              CERTIFICATION OF
      PROJECT:

            	 
      
	 
      	 
      
	
              Clean
      and Line Water Mains

            	
              October
      27, 2010

            
	 
      	 
      


    

    


    


    Page 3 of
3

    



    
      
         


      

      
        
        

        
          

        

      

      
         


      

    


    EXHIBIT
H

    


    


    Form of Continuing
Disclosure Agreement

     

     

     

     

    H-1